管理層發言
Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's Third Quarter Fiscal Year 2026 Earnings Conference Call. As a reminder, this call is being recorded and will be available for replay from the Investor Relations section of the website following the call. I will now pass the call over to Matt Sonefeldt, Head of Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, and welcome to DocuSign's Q3 Fiscal 2026 Earnings Call. Joining me on today's call are DocuSign's CEO, Allan Thygesen; and CFO, Blake Grayson. The press release announcing our third quarter fiscal 2026 results was issued earlier today and is posted on our Investor Relations website, along with a published version of our prepared remarks. Before we begin, let me remind everyone that some of our statements on today's call are forward-looking, including any statements regarding future performance. We believe our assumptions and expectations related to these forward-looking statements are reasonable, but they are subject to known and unknown risks and uncertainties that may cause our actual results or performance to be materially different. In particular, our expectations regarding factors affecting customer demand and adoption are based on our best estimates at this time and are therefore subject to change. Please read and consider the risk factors in our filings with the SEC, together with the content of this call. Any forward-looking statements are based on our assumptions and expectations to date. And except as required by law, we assume no obligation to update these statements in light of future events or new information. During this call, we will present GAAP and non-GAAP financial measures. In addition, we provide non-GAAP weighted average share count and information regarding free cash flows and billings. These non-GAAP measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. For information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's earnings press release, which can be found on our website at investor.docusign.com. I'd now like to turn the call over to Allan.
Thank you, Matt, and good afternoon, everyone. Q3 was a standout quarter for DocuSign. We delivered one of the higher growth quarters over the past 2 years, driven by continued customer investment in core products and the Intelligent Agreement Management, or IAM, platform. Revenue was $818 million, up 8% year-over-year, and billings were $829 million, up 10% year-over-year. Our ongoing commitment to operational efficiency once again delivered strong profitability, with a non-GAAP operating margin of 31%. Free cash flow grew 25% year-over-year to $263 million and a 32% margin, supporting $215 million in share repurchases, our largest quarterly buyback to date. We're executing effectively across our 3 strategic pillars: meeting growing demand for DocuSign IAM and eSignature with an improving go-to-market motion, maintaining the rapid pace of platform evolution and AI innovation, and driving greater operational efficiency. We remain focused on our long-term goal to deliver sustainable, profitable double-digit growth. Let's start with our go-to-market motion, which has been instrumental in driving IAM's growth across commercial and enterprise customer segments. By the end of Q3, more than 25,000 paying direct and digital customers had adopted IAM, up from more than 10,000 in April. We remain on pace for IAM to represent a low double-digit percentage of recurring revenue at year-end. We're also encouraged by the early strong retention rates in our first IAM renewal cohorts as well as the continued trend of IAM customers increasing their eSignature usage after moving to the IAM platform. IAM is a system of record that enables customers of all sizes to ingest a vast, complex body of agreements into a single repository, build agreement workflows that operate at scale, and take action on high-accuracy insights from agreement data. IAM builds on a track record of enterprise customers working with DocuSign to realize a 75% faster contracting cycle and an 81% improvement in document turnaround time. That value resonates with customers across all segments. One of DocuSign's top 10 customers became our second largest this quarter through a multimillion-dollar commitment to IAM. In the commercial space, Perceptyx, which provides an AI-powered employee experience platform, generates new documents in 99% less time, while the administrative offices in San Miguel County in Colorado have cut agreement finalization time by 96%. The broader eSignature business also performed well in Q3. Dollar net retention improved by 2 percentage points year-over-year to 102%, continuing to benefit from steady demand and sales-driven execution. eSignature customers continue to increase overall usage, with utilization rates at multi-year highs and consistent positive growth in envelopes sent. New York Life, the largest neutral life insurance company in the U.S., streamlined critical end-to-end workflows for agents and millions of policyholders by integrating eSignature with Salesforce, and now has 65% of all customer agreements signed within just a few hours. DocuSign CLM remains a top choice for enterprise customers with sophisticated workflows, and it will become even more valuable as we integrate CLM with DocuSign Navigator, our intelligent repository and other IAM features. In Q3, DocuSign was also named a leader in the Gartner Magic Quadrant for CLM for the sixth year in a row. Also, international revenue showed sustained growth and is now approximately 30% of our overall business for the first time. Our sales efforts continue to support international expansion, and in Q3, we hosted Momentum events for customers and partners in Sydney, Singapore, and Tokyo. This year's Momentum series drew 3x as many attendees in 2024, reflecting growing interest in IAM. Across all segments and geographies, we're deepening our solution-selling motion. Greater engagement and stronger customer relationships help deliver the business resilience and consistency we've seen over the last 2 quarters. Turning to product innovation, we're rapidly adding new features to IAM, as DocuSign matures from a single product company into the category-leading platform in agreement management. Earlier this week, we launched Agreement Desk, an internal central workspace that keeps teams aligned so agreements are processed faster, and our first AI contract agents are now in beta. Agreement management is a $2 trillion global market problem, and over the past 18 months, we've helped tens of thousands of customers begin to solve it. From the beginning, a key part of our IAM platform vision has involved combining a decade of in-house AI experience with leading third-party innovation. We believe IAM excels in several key areas. First, unmatched proprietary data. Models trained on the best data deliver the best, most accurate results to customers. One of DocuSign's biggest differentiators is our enormous library of consented, private agreements, covering a wide variety of contract types, clauses, customer segments, languages, and verticals. We estimate that by training IAM on this rich body of private data, we can achieve a 15 percentage point improvement in precision and recall compared to models trained on public contract data. On a 100-point scale, a 15-point jump in accuracy is a game-changer, especially when managing business-critical workflows and legal contracts. When customers adopt IAM, their eSignature documents are automatically available in Navigator, and they can include virtually any other agreements as well. To date, we have approximately 150 million opted-in customer agreements ingested into Navigator, including 20 million in October alone, which is up approximately 140% over the past 2 quarters. Our average new IAM customer has over 5,000 active contracts. Second, an unrivaled ecosystem. DocuSign has more than 1,000 third-party integrations and enterprise-ready APIs that connect the agreement process directly into the core business systems that customers already use. In Q3, we expanded our ecosystem by adding new AI tools and platforms. At our annual DocuSign Discover developer conference in October, we announced that IAM will be available in ChatGPT and can also connect to Anthropic Claude, Gemini Enterprise, GitHub Copilot, Copilot Studio, and Agentforce, all using the Model Context Protocol, or MCP, server that's currently in beta. At Discover, we also launched APIs that enable customers to connect Navigator and Maestro to third-party systems and proprietary internal apps. In October, at Dreamforce, we received a Salesforce Partner Innovation Award in the tech category for our DocuSign for Agentforce solution, which accelerates deal velocity by surfacing agentic action and AI-powered agreement insights inside of Agentforce. The expansion of our ecosystem partnerships and native integrations reinforces our position as the essential agreement layer across the enterprise. And third, trustworthy AI at an enterprise scale. Our largest customers have millions of agreements in Navigator, and our AI models are designed to handle hundreds of millions of agreements efficiently. In addition to scalability, customers tell us that trust is paramount when deploying AI to manage sensitive agreement information. In a recent DocuSign survey, 70% of professionals said they trust a dedicated enterprise contract AI solution over a general-purpose model for handling agreements. IAM draws on DocuSign's years-long track record of delivering highly secure solutions for some of the world's most security-conscious companies and meeting stringent standards of compliance, data security, and privacy protection. In Q3, IAM achieved FedRAMP Moderate and GovRAMP authorization, and we expanded our identity portfolio by launching CLEAR and Risk-Based Verification. For 2 years in a row, Newsweek has named DocuSign the most trustworthy software company in the U.S. In closing, our innovation is turning into outcomes for our commercial enterprise customers, who are realizing IAM's growing value in boosting productivity, saving time and money, and transforming their businesses. We're honored that in Q3, DocuSign's AI innovation garnered recognition on the 2025 Fortune Future 50 list, which celebrates companies with the greatest long-term growth prospects, and the Inc. Power Partners Awards for companies that have proven track records supporting entrepreneurs and helping startups grow. I'd like to thank the entire DocuSign team for their commitment to putting our nearly 1.8 million customers first as we drive the evolution of the category-leading intelligent agreement management platform. IAM Momentum continues to build, and we are focused on pursuing the vast opportunity ahead. With that, let me turn it over to Blake.
Thanks, Allan, and good afternoon, everyone. Q3 results demonstrated another quarter of resiliency, with consistent overall growth in IAM demand momentum. We also continued to generate strong operating profitability and cash flow and translated that performance into our single largest quarterly dollar buyback in the company's history. In Q3, total revenue was $818 million, up 8% year-over-year, and subscription revenue was $801 million, up 9% year-over-year. Revenue outperformance was driven by modest sales strength. Q3 billings were $829 million, up 10% year-over-year. Revenue and billings had small foreign currency benefits of approximately 50 basis points year-over-year. Billings outperformance was primarily driven by 2 elements. The first was renewal timing and early renewal strength, which drove slightly more than half of the outperformance in Q3. Similar to Q2, we saw slightly higher early renewals than forecasted. Importantly, the quality of those early renewals continued to improve year-over-year, as a percentage of early renewals with expansion grew and the share of early renewals that were flat declined. The second element was a collection of smaller impacts, including a small shift in payment frequency to annual bookings performance and slight FX favorability. When removing the impact from timing relative to our forecast, billings growth for Q3 was approximately 8% year-over-year. As a reminder, we also saw elevated early renewal activity in the second half of fiscal 2025, creating a more difficult year-over-year billings comparison in Q3 and Q4 of this year. A consistent theme in our quarterly billings results has been that renewal timing can create significant variability in billings as a reporting metric. This quarter, we are previewing 3 future disclosure updates that will take effect in our Q4 2026 earnings call in March. These updates reflect investor feedback, and our primary goals are to provide better transparency in measuring both our long-term growth rate and IAM's role as a growth driver, as well as to focus on the underlying dynamics of growth in our business rather than those affected by timing. Please see Slide 28 in our Q3 earnings deck for a full summary of the changes. First, at the end of every fiscal year, starting this Q4 2026, we will disclose annual recurring revenue, or ARR, including historical data for recent years. We will also provide full-year ARR growth guidance for fiscal 2027, which we will update quarterly during our first, second, and third quarters. Second, we will also introduce IAM as a percentage of ARR as a quarterly reporting metric beginning in Q4 of 2026. Consistent with the approach in fiscal 2026, we will also provide guidance in fiscal 2027 for the approximate year-end IAM percentage of ARR to create greater transparency into IAM's anticipated contribution to total growth. Finally, as previously discussed, we will no longer report billings in fiscal 2027. This quarter will be the last quarter we provide billings guidance, and Q4 of 2026 will be the last quarter we report non-GAAP billings and reconciliations in earnings materials and SEC filings. We believe replacing billings as a reporting metric with ARR metrics will improve investor understanding of how DocuSign is managing its long-term growth trajectory and minimize quarter-to-quarter timing volatility in our reporting. One question we anticipate is why not report ARR on a quarterly basis? The reason is that our quarterly net new ARR, as it is relatively small compared to our book of business, is subject to timing volatility similar or even more pronounced than quarterly billings and can be highly volatile on a year-over-year basis. For example, in fiscal 2026, we are forecasting to add approximately $240 million in net new subscription revenue or around $60 million on average per quarter. With that small of an absolute figure, slight timing fluctuations on deals can have large growth rate impacts. Similar to billings, these timing fluctuations can detract from the insight that ARR provides along with our aspiration to focus on accelerating our long-term growth. Our goal through providing annual ARR guidance, updated each quarter, along with quarterly IAM disclosures, is to provide a full transparent picture of that growth. In Q3, we continued to see a strong and resilient business. The dollar net retention rate or DNR was 102%, up from 100% in the prior year and consistent with the 102% in Q2 of fiscal 2026. DNR stability is supported by improving consumption, a measure of envelope utilization, which is among the highest levels we have seen since early fiscal 2022. Also, the volume of envelopes sent in Q3 continued to increase at a consistent year-over-year rate as compared to prior quarters. The fundamentals in our business remain solid. For IAM, in Q3, we surpassed 25,000 direct and digital customers on our IAM platform, up from 10,000, which we shared in April. We continue to be encouraged by IAM customers' financial profile, with the first early renewal cohorts showing a gross retention rate several percentage points higher than our corporate average. We remain on track for IAM to contribute a low double-digit percentage share of the subscription book of business exiting Q4. For the first time, international revenue reached approximately 30% of total revenue and grew 14% year-over-year, accelerating slightly from the prior quarter. In Q3, total customers grew 9% year-over-year, ending the quarter at nearly 1.8 million. Growth in customers spending over $300,000 annually accelerated to 8% year-over-year to 1,165 in Q3. This is the highest quarterly growth in over 2 years for this metric, as the solution-selling motion with larger customers continues to improve following Q1's go-to-market changes. Turning to our financials, our focus on operating efficiency continued to yield strong results this quarter. Non-GAAP gross margin for Q3 was 81.8%, down 70 basis points versus the prior year due primarily to the cloud migration transition costs we've discussed throughout the year. We delivered non-GAAP operating income in Q3 of $257 million. Operating margin was 31.4%, up nearly 2 percentage points versus last year, mostly attributable to higher revenue, continued cost discipline, and some savings from one-time expense items. We had approximately 1.5 percentage points of margin benefit from one-time and timing-related savings in Q3, without which our operating margin would have been approximately 30%. We ended Q3 with 6,940 employees, up modestly versus 6,838 at fiscal 2025 year-end. This reflects our measured approach to hiring in fiscal 2026 to support our strategic initiatives while maintaining efficiency. In Q3, we generated $263 million of free cash flow, a 32% margin, up over 4 percentage points versus the prior year. This strength was better than we expected, driven primarily by higher-than-expected collections efficiency, higher in-quarter billings, and lower expenses. Our balance sheet is strong. We ended the quarter with approximately $1 billion of cash, cash equivalents, and investments. We have no debt on the balance sheet. In Q3, we increased the pace of our buyback activity and repurchased $215 million in shares. This is our single largest quarterly dollar buyback in the company's history as we redeployed the majority of our quarterly free cash flow to shareholders. We will continue to opportunistically repurchase shares with over $1 billion in remaining buyback authorization. While the pace of this activity may fluctuate quarter-to-quarter, share repurchases underscore our commitment to returning excess capital to shareholders. Non-GAAP diluted EPS for Q3 was $1.01, up from $0.90 last year. GAAP diluted EPS was $0.40 versus $0.30 last year. With that, let me turn to guidance. For the fourth quarter and fiscal year 2026, we expect total revenue of $825 million to $829 million in Q4 or a 7% year-over-year increase at the midpoint and $3.208 billion to $3.212 billion for fiscal 2026 or an 8% year-over-year increase at the midpoint. Of this, we expect subscription revenue of $808 million to $812 million in Q4 or a 7% year-over-year increase at the midpoint and $3.140 billion to $3.144 billion for fiscal 2026 or an 8% year-over-year increase at the midpoint. For billings, we expect $992 million to $1.002 billion in Q4 or an 8% growth rate year-over-year at the midpoint and $3.379 billion to $3.389 billion for fiscal 2026 or growth of 9% year-over-year at the midpoint. Our updated full-year top line guidance reflects the following dynamics present in our business and the external environment: For full-year revenue, the annual guidance midpoint is increasing by $15 million from last quarter's full-year guidance. The majority of the increase is driven by Q3 outperformance and the expectation that some of these trends will continue to the fiscal year-end. For full-year billings, the annual guidance midpoint is increasing by $44 million from last quarter's full-year guidance. This increase reflects a portion of the non-timing impact from Q3 business strength. As a reminder, both full-year revenue and billings have hard year-over-year comparisons against last year's higher volume of early renewals, particularly in the second half of the year. Revenue growth also has a hard year-over-year comparison against strength from last year's PLG initiatives, including high volumes of digital customers adding envelope capacity as a result of improved self-service flows as described a year ago. For profitability, we expect non-GAAP gross margin to be between 80.8% and 81.2% for Q4 and between 81.7% and 81.8% for fiscal 2026. We expect non-GAAP operating margin to reach 28.3% to 28.7% for Q4 and 29.8% to 29.9% for fiscal 2026. For the full year, we included the following 2 considerations in our non-GAAP profitability guidance: For gross margin, we expect approximately 1 percentage point of headwind year-over-year from our ongoing cloud data center migration efforts in Q4. For full-year fiscal 2026, we expect our top-line strength and continued cost discipline to partially offset cloud migration costs and expect approximately a 50 basis point year-over-year decline on margins. We continue to expect a gradual easing in migration cost impacts in fiscal 2027 and beyond. For operating margins, we expect to achieve flat year-over-year operating margins for fiscal 2026, a strong reflection of our continued cost discipline. This strength offsets the margin pressures we've described throughout the year, including the impact of cloud migration, the shift of some roles to cash compensation from equity, and the comp against one-time professional fee savings last year in Q2 of 2025. In Q4, we also have a small timing-related headwind from one-time costs pushed to Q4 from Q3. As a reminder, in Q3, we had approximately 1.5 percentage points of margin benefit from one-time and timing-related savings. We expect non-GAAP fully diluted weighted average shares outstanding of 203 million to 208 million for Q4 and 208 million to 211 million for fiscal 2026. Please see the modeling consideration slides in our Q3 earnings deck for a full summary of guidance context. In summary, this quarter highlighted DocuSign's commitment to our core strategic priorities and operational road map, driving product innovation, enhancing our go-to-market motions, and continuously improving efficiencies across the business. Our focus on both consistent growth and financial discipline will remain the guidepost for maximizing customer, employee, and shareholder value. That concludes our prepared remarks. With that, operator, let's open the call for questions.
分析師問答
Our first question comes from Jake Roberge with William Blair.
Nice to see the billings strength and continued expectation for that to accelerate this year. As you start to transition to ARR, should we expect that ARR is seeing a fairly similar reacceleration that we're seeing with billings on a full-year basis? Or would there be any puts or takes that we should be thinking about around that metric moving forward?
Why don't you take that one, Blake.
Sure. Yes. Thanks for the question, Jake. So we're not disclosing ARR yet. We'll do that when we get to the March call. I think that the way to think about it for us is what our trajectory is, as you heard us talk about billings growth, excluding from the early's component as well, and that's a good proxy for trajectory for our business. But I think for us, we're really excited about the opportunity with both the combination of expansion opportunities with IAM, but then also with gross retention improvements in our core business as well to really drive that ARR number forward for us into FY '27 and into beyond. But we'll talk more about that when we get to March.
Go ahead. No, I was just going to say that I want to emphasize that we're running the business on ARR now. And so we wanted to move to a place where we're sharing with you how we run the business. And so that's the spirit which you should take this. I think it's the right long-term metric for the company, and we look forward to sharing that with you as we go forward.
That's helpful. And then great to see IAM crossing that 25,000 customer mark. Could you talk more about what you're seeing with the early renewal cohorts? It sounds like retention has been strong. But for customers that may have initially started with only a portion of their base on IAM, are you starting to see those customers shift to broader and wider IAM deployments on renewal?
Yes. Overall, we're happy with the early results. We launched IAM in June of last year for commercial customers in North America and Australia. These are the cohorts that are renewing now, and we expanded internationally into the enterprise sector toward the end of last year. The early indicators are very positive. They renew at higher rates than our traditional signed business. We will monitor this closely. Regarding expansion, I don't have additional details at this time, but you will see it reflected in our future projections for ARR. We are optimistic that IAM will continue to grow steadily within companies over time. Smaller companies have less expansion potential, but with larger companies, when deployed in individual departments or divisions, the opportunities for expansion are greater. Overall, we feel very good about both the initial sale and the adoption and follow-up.
Our next question comes from Tyler Radke with Citi.
Yes, we have great momentum with IAM, serving 25,000 customers. The Navigator product, in particular, is seeing a strong volume of agreements. I have a broader question for you, Allan. How do you view the potential use cases and future monetization opportunities? Is the volume of agreements with Navigator continuing to grow? How do you envision customers using it in the next year or two, and what are the long-term monetization strategies for DocuSign?
Certainly. I want to highlight a few points. Firstly, Navigator is a core capability of our IAM platform. It supports numerous functions thanks to its intelligent repository. For instance, it allows for obligation management and various data extractions, in addition to providing automated notifications and functioning for agents. Navigator is essential to our platform and isn't monetized separately; it's a crucial part of IAM, giving DocuSign a unique competitive edge. Although there is a lot of discussion in the industry regarding LLM models, we have gained significantly from the substantial capital investments and improvements in LLM technology over the past two and a half years. I'm proud to be leading DocuSign during this period. Moreover, we have the opportunity to train on exclusive, consented private agreements that are not accessible to the public, which enables us to achieve higher accuracy rates. When we combine this with our advantages in workflow and reputation, it positions us very well, with Navigator being a key component. However, we integrate its monetization within the platform rather than independently.
Yes. That's helpful. And a follow-up for Blake. Good to see the billings upside this quarter, and I think trailing 12-month billings accelerated. As we look at the subscription revenue guide for Q4, the growth is a little bit below where you guided Q3. And I guess just given that you're going to be transitioning to ARR next quarter, how would you sort of characterize the underlying growth of the business? Has it been steady? Is it accelerating? Maybe you're just adding in a bit more prudence in Q4 because of macro go-to-market changes? Just help us understand kind of the puts and takes on that.
Our revenue is projected to grow in Q4, but this rate is slightly slower than in Q3. There are two main reasons for this, neither of which is particularly concerning. First, in Q3, we experienced some additional early components that positively impacted our revenue, leading to a bit of acceleration. Secondly, looking back at Q4 of last year, we had a significant revenue growth of 9%. During that time, we introduced several new features, particularly on the PLG side, which contributed to a revenue boost. Notably, our revenue accelerated by more than 100 basis points from Q3 to Q4 last year. Therefore, I encourage you to pay attention to the challenging year-over-year comparison, as it helps explain the anticipated deceleration from Q3 to Q4.
Our next question comes from Mark Murphy with JPMorgan.
Congratulations on a strong performance. You mentioned consistent growth in envelopes sent, and you highlighted that utilization rates have reached multi-year highs. I'm curious if you could help us understand this better. For example, are the envelopes sent growing in the mid-single digits or high single digits? Additionally, do you have any insights into where the utilization rates currently stand? Should we interpret this as customers using more of what they paid for, which might indicate healthy upsell and expansion opportunities for ARR in the future? Or is there another perspective we should consider?
Let me take a moment to address that, and Allan can add to it. While we do not provide specific growth figures for envelope sent by verticals, I can say that we have experienced very consistent year-over-year growth in envelope sent over the past five quarters, which is encouraging. This reflects the resilience of our business. Regarding utilization, it is currently higher than last year. This is partly due to timing; for example, if a customer is using 80% of their agreement and that rises to 85%, it indicates a positive trend for us. However, the timing of billing opportunities and new contracts is dependent on each customer's business needs. Overall, as utilization rates increase, it signifies positive developments for our company. I'm genuinely optimistic about this, although the timing can vary based on individual customer circumstances.
Yes. And I would just add, historically, that's obviously been a key performance metric for our signed business, and we continue to keep a very close eye on it. Sellers certainly track it. But we now have a much broader portfolio of stuff to follow up on. So as we build that momentum with more envelope volume utilization, we don't just go back to them and say, 'Hey, would you like some more envelopes?' We go to them and say, 'Would you like to deploy in new agreement workflows? Would you like to consider this in other parts of the business? Would you like to learn what's in all your agreements and make that information conveniently available in the apps that you care about?' And that's just a much broader proposition and opportunity for upsell than we've historically had.
Okay. And then as a quick follow-up, I think you mentioned that the AI contract agents are in beta. Are you able to give any kind of sneak peek of what you're engineering there? What kind of usage scenarios you're imagining? I think we're trying to figure out if you're going to target procurement or sales workloads or take it broader and then would they review contracts or generate clauses? Or is there some other kind of automation that you're going to do? And if you're not able to speak to that now, I think we understand that as well, but I thought I'd ask anyway.
Yes, we are launching several relatively simple workflows, as expected. We wouldn't want to automate the most complex, high variability workflows. These workflows apply to sales, HR, and procurement use cases, similar to our IAM platform and Signature platform. I think it's still early to discuss this in detail, but we are in the initial stages of enterprise evaluations. We believe that many contractual workflows will eventually be automated with agents, and we aim to be at the forefront of this trend, which is why we are emphasizing our efforts. Additionally, we are collaborating with various chat platforms that often prompt agent actions, and they are eager to partner with us. We recently announced a partnership with OpenAI at our developer conference last month, and since then, others in the industry have reached out to us. Agreements are a critical data source affecting many workflows within companies, and DocuSign is well-positioned to assist with the automation goals of many businesses. While it is still early, we are excited about our role in becoming a system of action for agreements.
Our next question comes from Kirk Materne with Evercore ISI.
Yes, this is Peter Burkly on for Kirk. Strong quarter in the large customer segment, that $300,000-plus ACV customer group, I think it was the strongest growth in 8 or 10 quarters. Just curious if you could discuss how much of that's being driven by IAM adoption at the enterprise level versus just more broadly a stronger go-to-motion at this point in time versus maybe a year ago?
Yes, it's both. So we continue to see strength with customers who are just expanding their eSignature usage. And at the same time, we're now starting to see some nice enterprise wins with IAM, and both contribute nicely to the momentum in the $300,000 segment.
Helpful. Maybe just a quick follow-up on IAM. IAM has been in the enterprise market for a few quarters now. Just curious if there's any learnings or any thoughts on the go-to-market playbook as you head into fiscal '27?
Yes. Look, it's still early days. I want to emphasize that it's a multiyear journey for us or indeed any company undertaking this transformation. We've made some really nice early wins, and it's nice to be able to see that continued progression. So we've got significant work going on, on the innovation side in terms of scaling our enterprise feature set and access control extensibility. And on the go-to-market side, as you asked, key focus areas for next year include sort of complementing our traditional land and expand motion across departments with more of a top-down platform executive upsell, and we do that, but I think we can get better. We want to lean into both our ISV partnerships where we're already starting to see some nice progress and perhaps even more importantly, our system integrator partnerships. Historically, for DocuSign, that's been predominantly a CLM activity, but now it's literally the whole company that has leaned in, and we're seeing a lot of inbound interest from the SI partners in partnering with us because we have such a unique and broad proposition. And then lastly, on the pricing and packaging side, we've gotten questions on past calls. You will not be surprised to learn that as we move up from a lower friction model in the commercial space where simplicity is key to the enterprise, we are testing a more of a platform pricing model with tokens. It's being very well received. And so I think you should expect to see us move in that direction more publicly. And that gives us just a lot more flexibility as we continue to layer in new capability and new value into IAM.
Our next question comes from Brent Thill with Jefferies.
Allan, I know your long-term aspiration is double-digit growth. You're obviously knocking on the door. But what do you think it needs to take from here for you to continue to sustain or get to double-digit growth from your side? Are there a couple of ingredients that you think still have to trigger before you can hit that mark?
We are making significant progress, and I'm proud of the team. The two main factors are what you would expect: retention and new expansion bookings. We are continuing to improve on retention, and I believe there is still potential for growth in that area. For new expansion bookings, we are seeing progress, especially driven by IAM. I'm confident that these two factors will help us achieve our goals. So, we are focused on it.
Okay. Blake, good to see the record buyback, I guess, may play devil's advocate in the age of AI, why not lean a little harder into M&A? And is there anything you need to do to kind of help Allan's vision of that double-digit growth even if it's inorganic?
Yes. Absolutely. It's something we talk about actively at DocuSign. It's a subject that on the outside, it may not sound like because we don't do an acquisition every quarter. But for us, it's something we talk about actively. We're looking for those companies and those assets that can help propel us forward, whether that's through elements of retention or expansion for us. And I think that again, we're super active about it. It is one of the reasons why we do keep the optionality on our balance sheet, right, for those opportunities as they present themselves to us, we look at a lot. We have a high bar for those acquisition conversations. But it is something that Allan and I and the team, I would say, actively talk about probably more than people think.
Yes. I feel very positive about our organic growth trajectory and the innovation that our teams are driving. We have the resources and a solid go-to-market model, and we want to explore strategic opportunities where we can add value. The Lexion acquisition has been fantastic for DocuSign, enhancing our product roadmap, especially in workflow and AI. The Agreement Desk product we just launched this week was inspired by an earlier Lexion product and led by the Lexion founders. This has been an excellent deal in every regard: product, technology, team, and we've also gained a good number of customers who are performing well. Overall, it has been exceptional. If we can find more opportunities like that, we will and we are actively looking. However, as you may know, there are certain aspects that are currently a bit inflated.
I guess the message is that you just keep leaning in the buyback until you find something you like and then you can balance and so you can do both.
Yes. I mean we take capital allocation here really seriously, which is when we generate excess capital, we have opportunities to redeploy that. For right now, the buyback, we think, is a great opportunity to do that with the kind of forward-looking outcomes that we think we can go after. At the same point in time, if we find those opportunities to deploy that capital to an M&A opportunity that helps do that for us as well, we'll absolutely consider it. So capital allocation for us is a topic that Allan and I talk about quite often.
Our next question comes from Scott Berg with Needham.
Nice quarter. Just one question for me, and I don't know maybe this is a question for Allan, is on the AI contract agents. Super interesting. I think legal contracts are one of the best use cases for these LLM technologies for all the probably inherent reasons we all know here on the call. But as we think about your customers and where they are, I guess, awareness for agents, and I'm sure it's new to them and how we think about maybe budget procurement. Is this something that you think can have a meaningful impact to some of your momentum in fiscal '27? Or is this more of a maybe a fiscal '28 opportunity as they test and trial next year and probably try to get some budgets after that?
I don't think it's a huge contributor to our financial momentum next year. But enterprise software is a multiyear roadmap endeavor and people want to know there with somebody who can deliver for them not just now but years to come. And so it's very important to provide visibility to what they can do when they are ready. And I've no doubt we'll have a number of trials, but I don't think it will be financially meaningful, but it's certainly strategic.
Our next question comes from Brad Sills with Bank of America.
Maybe a go-to-market question with regards to IAM. Allan, you talked about how you're seeing progress with HR and procurement departments. Is that the primary land in the departmental sale in those 2 legal? I'm just curious if the sales audience and the large enterprise really kind of centers around those 3 departments. And curious how well prepared you feel the go-to-market is to address those?
I would slightly revise the statement. I would highlight four main use cases for us: sales, procurement, HR, and customer experience. These can be seen as business-to-consumer type flows such as banking onboarding, and we are experiencing demand in all these areas. From a maturity standpoint, we have maintained a strong position for quite some time, particularly in sales and customer experience applications. However, there is now significant interest in procurement and HR as well. In procurement, these processes are often high-value, low-headcount, complex, and under-supported, leading to a strong desire for solutions that increase efficiency and unlock value from already negotiated agreements. On the HR front, these processes are similar to business-to-consumer flows but focus on hiring rather than selling, and they tend to lack integration. Many HR departments are eager for streamlined processes. We have established several partnerships in the ISV space, including recent collaborations with Dayforce and Smart Recruiters, to enhance the efficiency of candidate onboarding. These are the four key areas we will highlight at our upcoming conference in the spring. To provide some context on the evolution of IAM, when we first launched, we introduced a range of horizontal platform capabilities, with Navigator being a prime example of our intelligent repository. This year, we completed our suite of agreement-related workflows with additions like Agreement Desk. Looking ahead to next year, we aim to offer fully integrated end-to-end functional workflow suites that are cohesive and comprehensive, particularly in these four areas. We are already beginning to package these solutions, which will continue to improve and become more refined, driving growth in IAM.
That's great. That's great. And maybe, Blake, one for you, if I could, please. Any observations on the macro? Any changes to the backdrop, whether it's regards to envelope volumes or signings? There's some moving parts in the SMB right now. So just curious if you've seen any difference there between SMB, commercial, and enterprise your envelope and signing activity?
Sure. I would say there's nothing significant that we've noticed in the business in Q3, and that trend has remained stable for us over the last four or five quarters. Consumption usage trends are consistent, and we're experiencing strong year-over-year growth across most verticals. That said, companies are still carefully evaluating their spending and individuals in my position at various companies want to ensure they are receiving maximum value. However, one of the major advantages of our diverse customer base is the consistent resiliency we’ve observed, which I find very encouraging. We'll see how the macroeconomic situation unfolds over time, but so far, we haven't encountered any notable issues or concerns.
Our next question comes from Josh Baer with Morgan Stanley.
This is Lucas Cerisola on for Josh Baer. Congrats on a great quarter. Could you give us some more color on the 25,000 IAM customers, specifically how many are new to DocuSign versus existing eSign customers?
Yes, there are over 25,000 customers in our direct to digital business, which mostly consists of existing eSign customers who upgrade to IAM. We also bring on some new customers directly to IAM, but the majority comes from our installed base. This gives us a significant advantage. We currently have nearly 1.8 million customers paying us monthly. Regarding our direct customer base, we have about 270,000 active customers served by our sales teams. There is still plenty of room for growth, and we benefit from being a well-established, trusted vendor with many existing agreements. Therefore, engaging with us on IAM is much easier than if we were a new vendor. While we have considerable opportunity ahead, most of the growth is driven by our existing customers, as many companies are already our clients.
Got it. That's super helpful. And one more. Could you talk about hiring expectations for the year ahead? What should headcount growth look like? And what areas are you investing in aside from IAM and then within IAM?
Yes, I’ll go first and Blake can join in as well. We expect modest growth in headcount. While we are optimistic about our growth opportunities, we want to maintain the efficiency gains we've achieved. There may be some reallocation within the company, particularly in areas like product and security where we plan to invest more. However, I don't expect our overall headcount to increase significantly. We're being careful and investing thoughtfully in areas that provide the best returns over time. Blake, I’m not sure...
Yes. I'd just say we're quite thoughtful about it. I think we've added over the past year just over 200 net kind of headcount to DocuSign. So we're hiring across all of our locations. The vast majority of those folks, we tend to add a little bit more in our lower-cost locations as well. So like Allan said, we're trying to be very methodical and very thoughtful about our hiring needs to make sure that we can support this business. But also we made a lot of hard choices to get to the efficiency gains that we've done over the past few years, and we're not just going to give those up either. And so I think that it's that balanced view that I think is the right path for us.
Our next question comes from Patrick Walravens with Citizens.
This is Austin Cole on for Pat. Allan, you called out one of DocuSign's top 10 customers becoming the second largest customer this quarter through IAM. I just wanted to give the opportunity if there's anything to call out on that; expansion sounded pretty significant. What do they see in IAM? And is it kind of Navigator where they're getting most of the unlock or anything else there that would be helpful.
Yes, it is Navigator, but it's Navigator Plus. They are utilizing many of their pre-signature workflows with our milestone agreement capabilities, which I believe is becoming an increasingly strong aspect of our offering. I mentioned Agreement Desk; we also launched Agreement Prep, a complete system for creating templates and standard agreements that can be deployed, which is a common scenario in contexts such as B2B sales and vendor management. I am quite optimistic about the potential for expansion from our eSign base, as there are numerous avenues we can explore with IAM. That was a significant win, but there are several others. Some customers fully integrate our offerings; for example, we talked about ServiceTitan in the last call, and they are implementing us across a wide range of functions. We appreciate that. Ultimately, we aim to be utilized across all functions, as that aligns with our platform strategy.
Our next question comes from Alex Zukin with Wolfe Research.
I have two quick questions. Regarding the impact of early renewals on billings this quarter, how much of that involved IAM in the discussions about upselling specifically? Is there a shift now toward the installed base adopting that SKU instead of just new customers? I also have a quick follow-up.
The majority of our early renewals still come from our core business and core product. We have a substantial portfolio that renews regularly. IAM plays a role in some early renewals, but what matters most to me is that we are engaging with customers who are expanding. Expansion can come from IAM, but it also comes from eSign, which we are observing. I'm very excited about the overall concept of expansion. I believe there is significant value in IAM that customers will recognize and want to adopt over time. From an IAM perspective, our installed base is our primary focus. While we are acquiring new customers for IAM, we have established relationships with existing customers who trust DocuSign and understand our offerings. This positions us uniquely to leverage those relationships for business growth.
Perfect. And then I guess Blake, just for you a follow-up. And this is a little bit more nuanced on the billings. But if I look at the delta between the implied Q4 billings guide, from kind of last quarter to this quarter. It looks like it went up from 7.5% to the new to 8%. So that 0.5 point, how much of that raise is truly operational outperformance versus kind of core FX and maybe other onetime non-core factors? And how should we think about the underlying kind of run rate billings growth, excluding early renewal timing or duration in FX for Q4?
Yes. Regarding the full-year guidance, we've increased our billings forecast by approximately $44 million, which is about $5 million more than the outperformance we observed against the midpoint in Q3. We are leveraging some of that operational performance to adjust our Q4 expectations based on what we discussed regarding the full year compared to Q3 from our previous quarter. We're noticing improvements in the core business. In terms of understanding the underlying growth rate of billings, excluding early renewals, this is a key reason we're making the adjustments for FY '27 that we're discussing. If we look at Q3, there was roughly a 10% growth in billings, but only about 8% when excluding the early renewal component's outperformance. Early renewals will always be part of our billings, representing a consistent percentage. The important question for us is whether we are expanding these early renewals. Sometimes we may have flat cases, but we want to ensure we focus our efforts in Q4 on those opportunities. If we proceed with early renewals, it may indicate that a customer has increased demand, and we need to consider how we can assist them, potentially including discussions about an IAM upgrade. However, it's essential to note that the timing of early renewals can be quite volatile, and we've experienced that trend every quarter. Therefore, trying to assess its impact for Q4 in guidance can be a bit more complex. I hope that description of Q3 provides some guidance on the direction you're looking for.
This now concludes our question-and-answer session. I would like to turn the call back over to Allan for closing comments.
Thank you, operator. Thank you to all who joined today's call. So in closing, I want to thank the entire DocuSign team for their commitment to putting our customers first and delivering on demand for better solutions to the agreement management problem. DocuSign's business is both resilient and at the leading edge of AI development, and we'll continue to manage the company to realize our long-term potential. Thanks for your time, and we look forward to engaging with you next quarter.
Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.