DOCU Q4 Earnings Transcript Notes


CEO Dan Springer on overarching business:

We gained new customers, we expanded our relationship with others and we saw a surge in adoption of our products as accelerating a trend already under way, the digital transformation of agreements. This transformation not only allows agreements to be prepared, signed, act on and managed from anywhere. It also allows greater speed and efficiency than manual paper-based processes……Ultimately, over the coming years, we think the trend will continue toward the option of doing anything from anywhere. We call the products and services supporting this trend the anywhere economy. We believe we’re a key pillar, and it’s only just beginning. You’ll hear more from us about this in the coming weeks.

So as we think about the future and our continued evolution into the agreement cloud company, we’re increasingly going to do so in the context of three primary goals. First, we want DocuSign to be the best way to agree to anything anywhere. We’ve recently made great **additions to our leading eSignature product with identity proofing, click wrap, electronic witnessing, and soon, remote online notary transactions….**For our second goal, we want to digitally transform the entire agreement process, pre and post signature. Over fiscal '21, we continue to **innovate in CLM and to integrate our acquisitions of Seal Software and Liveoak Technologies…….**Third, we want to continue ensuring that DocuSign is embedded in the applications where work and life happen. We already integrate with more than 350 apps, including recent integrations with Slack, Microsoft Teams and Workplace from Facebook.

CFO Cynthia Gaylor on 2020 Results (just a quick note on cash flows):

For the full year, operating cash flow more than doubled to $297 million or 20%, compared to $116 million or 12% a year ago. And free cash flow grew to $215 million or 15%, compared to $44 million or 4% in fiscal '20.


CEO Dan Springer on Docusign CLM:

And if you look at things like CLM, where there is a longer purchase sort of cycle, where people require a statement of work or professional services to implement, those **definitely were slowed through this year relative to where they were in the prior year.**Our view, though, coming out of fiscal-year '21, particularly coming out of Q4 here, is we’re seeing that – the build, the pipeline build again. And so we’re quite optimistic that we’re gonna see sort of that reacceleration that we saw a little over a year ago with CLM in particular.

CEO Dan Springer on Remote Notary:

so what we see right now is that we’ve gone through the beta, which we’ve been really pleased with, and we’re moving this month to get a sort of a limited release. We’re gonna be focused on financial services companies, the use cases. Remember, the first piece we’re coming out with is first-party notary. So that’s – which we think is the significantly larger part of the total market.
First-party is when companies have their own effective notary. So they’re actually notarizing documents with their end, usually, consumers with an in-house or internal notary. And then, third party, where people are using sort of a notary is coming to bring two people together that doesn’t work for either of them, which is a smaller part, we’ll have that by the end of the year out into release.

CEO Dan Springer on International Expansion:
Every single geography that we’re in outside of the U.S., and for that matter, the U.S., exceeded its plan. And it’s just, in my experience, that’s something that’s pretty special and pretty rare to happen……And so we don’t think there’s a particular type of geography, either the common law or civil law or sort of EMEA versus Asia Pac, we’re just seeing it across the board. ….**I think what’s happening here is that the U.S. business, when it was much smaller, grew at a higher rate. And so now, we’re seeing this happen in our international business…**I think we’re just realizing it’s a very large TAM opportunity outside of the U.S., and we’re starting to really hit that growth curve in the way we’d like to be hitting it, and we’re optimistic we’re gonna continue to see that through the year ahead.

CFO Cynthia Gaylor on Cash Flow and Impact into 2021:
On an adjusted basis, the cash flow was actually quite compelling. Even without the adjustment, we’re showing just a lot of leverage in the model, similar to the operating margin, right? Now we’ll continue to invest in growth.
So I wouldn’t anticipate anything in fiscal '22 out of the ordinary. My sense is we’ll continue to demonstrate that leverage. But if we can invest for growth, we will, and that’s one of the reasons we did the financing in January was really to give us that operating flexibility.

CEO Dan Springer on Competition and TAM:
We always say very aggressively, when we think about competition, we fundamentally think about paper, when we think about paper and manual processes.
We are so early into this game in terms of where the TAM is. The vast, vast majority of all of our growth is coming from new field expansion. From time to time, people want to upgrade. Particularly in signature, we’ll see that where someone will wanna move from a less advanced sort of smaller feature set provider.
But again, the bulk of us is building this new market.

CEO Dan Springer on “Phenominons” he expects to see in 2021:
I do believe we’re gonna see two phenomenon at a high level this year. One, a lot of people that kind of came to us last year and have been successful in adopting, they’re also gonna need to take a little bit of a breather because they’ve been going so fast in this remote setting, now they’re coming back onboard, and they’ve sort of put off a lot of other projects. So we have heard CIOs say that they’ve got a backlog now of things they need to get done because the pandemic made it very difficult for them to get certain projects done. And at the same time, I think we’re gonna see a lot of people who are saying, wow, I’m really glad I got started with the digital transformation, and I want more of it.
And so they’re gonna wanna accelerate even the expectations they may have had for that pace to change. So when you put all that mix together, it’s fairly complex, but it leaves us feeling we’re gonna have a considerable cross and up-sell opportunity this year, and those incremental customers, significant customer new adds that Cynthia talked about earlier, from last year, over the course of this year, particularly the second half of this year, when a lot of those renewals come up, should be a great cross-sell opportunity.

CEO Dan Springer on International Markets:
we will continually look at additional markets where we could have a bigger presence in those markets. Because of our web and mobile business, we sell well over 100 countries. But we have these eight focus countries that we’ve put most of our effort against, and we continue to think that’s the right strategy because there’s just a lot more growth in those markets. But over the course of this year, I would not be surprised to see us come forward and say another country or even two that we’re gonna sort of add to that list of the focus eight and start to go deeper.

CEO Dan Springer on Competition from Pure-Play CLMs:
Well, I think for us, the competitive situation, there’s a question earlier about competition, is quite different in a signature than it is in anything else, right? We have such a dramatic market share lead and, quite frankly, product capability lead in eSignature that it’s – there’s just – the competition, I said, is paper. It’s not that there aren’t other strong companies that are in the market, but just by the sheer size advantage that we have. And you heard us talk about this before, we spend more money on R&D than we think those folks have in revenue. So from that standpoint, it’s a very different dynamic, and we are one of the leaders in CLM, but there are other credible companies in the space.

CFO Cynthia Gaylor on Hiring for Growth:
And if you think about the last four quarters, in the first half of last year, the customer demand outstripped the capacity in the field, right? And so as we move through the year, we then accelerated hiring to really meet that customer demand and to set us up to continue to grow off a higher base coming into the year.
And so we’ll continue to make investments across the go-to-market in sales and success, as Dan had mentioned, but then also in R&D and continuing to innovate around the product portfolio, particularly across the Agreement Cloud