DocuSign, Inc. Common Stock 2027 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, and welcome to DocuSign's second quarter of fiscal year 2027 earnings conference call. Joining me on today's call are DocuSign CEO, Allan Thygesen, and CFO, Blake Grayson. A press release announcing our second quarter of fiscal 2027 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 our pace of innovation and customer 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 obligations to update these statements in the 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 counts and information regarding free cash flow and ARR. 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. With that, I would like to turn the call over to Allan.

Thank you, Gary, and good afternoon, everyone. Q2 capped a strong first half of execution. We delivered further on our roadmap to accelerate innovation in our Intelligent Agreement Management, or IAM, platform. We unlocked even greater customer value within IAM and further extended IAM's functionality into the tools where our customers work while driving efficiency as we scale. Our platform strategy is working, as reflected in IAM now accounting for 15.1% of total ARR, up from 12.6% in Q1. We generated strong financial results in the second quarter with $876 million in revenue, up 9% year-over-year, and a 32% operating margin, and approximately $300 million in free cash flow that helped support over $300 million of share repurchases in Q2.

As reflected in our increased ARR guidance for fiscal year 2027, we believe we are well-positioned for continued execution in the second half of this year and beyond. I will review our product innovation and go-to-market highlights for the quarter, and then Blake will review our Q2 financial performance and updated guidance. We will then take your questions. Building on the foundational strength of our market-leading eSignature offering, IAM is uniquely able to aggregate, analyze, and unlock the value of an organization's agreement data to improve business decisioning. Point solutions and standalone AI tools cannot address the breadth of this challenge securely and at scale the way DocuSign IAM can. Customers have now ingested more than 300 million documents through IAM's Agreement Manager. And we are scaling IAM efficiently.

As we outlined in a new series of blog posts, IAM's AI-native architecture is processing workloads at significantly lower marginal costs than offerings that route to external LLMs. This is the key reason we were able to significantly increase cumulative documents ingested in IAM sequentially in Q2 while maintaining high gross margins over the same period. Since our last call, we launched key products and integrations that strengthen IAM across every step of the agreement life cycle, from new AI Assistant and agentic capabilities, extending IAM into additional surfaces where customers work, and increasing the functional specialization of the platform. Taken together, they signal how IAM is delivering more customer value and shifting from managing agreements to acting on them across every function that touches a contract. in August, we launched AI Assistant and agentic capabilities that help organizations unlock greater value and accelerate workflow automation.

IAM's new agentic features include an AI Assistant that powers contract analysis and redlining and triggers agentic workflows, pre-built agents for common use cases, including document intake and vendor renewal, an Agent Studio where customers can build, govern, and deploy custom agents for specialized uses like executing business playbooks, compliance auditing, and evaluating vendor pricing, and the ability to embed agents directly into IAM's workflow builder for end-to-end agreement management. This powerful agentic suite is adding value for business out of the gate. In user testing, the AI Assistant cuts the time it takes for customers to summarize, review, and finalize agreements, like NDAs, in half. DocuSign continues to make IAM available across an ecosystem of partners to meet customers where they work via the DocuSign MCP Server, the agreement layer for agentic enterprise.

In June, we announced the general availability of the DocuSign app for the Slack marketplace, providing agentic contract workflows directly in Slack, as well as an integration with Perplexity to help teams automate contracting workflows and facilitating collaboration across their business partners. in August, we also added Google Cloud's Gemini Enterprise for Legal. These are in addition to existing connectors with Anthropic, Gemini, OpenAI, and Microsoft Copilot. While still early, MCP adoption continues to ramp with cumulative active accounts more than quadrupling during the quarter. DocuSign as the agreement layer will be open to every agent at the end of this month when DocuSign's MCP server goes GA. Additionally, we are bringing contract lifecycle management into the AI age with the general availability of IAM Agreement Manager's integration into DocuSign CLM.

All CLM customers can now leverage a single AI-driven repository for eSign and CLM to unify fragmented data, expand access to agreements and its associated data, and reduce manual processes and implementation costs. Further, this integration connects CLM's robust workflow capabilities with IAM's next-generation functionality, including AI-powered search and extractions, MCP connectivity to external AI platforms, and IAM's new agentic suite. It is one more step towards expanding IAM further into our existing enterprise base, and customer reception has been highly encouraging. in Q2, we made AI-assisted web forms generally available, enabling users to transform static documents into interactive, shareable forms. The ability to unlock hundreds of millions of legacy documents and their associated data is a game changer, especially for document-intensive industries like financial services, government, and healthcare. Our strategy is resonating with customers and prospects across both direct and digital channels.

Our direct sales teams executed well in the quarter, with IAM exhibiting strength across all of our geographic regions and customer segments. Here are a few examples of customer wins in Q2. Salesforce is deploying IAM as a trusted system of record for agreements, turning key agreement data into actionable signals that guide decisions. Oppenheimer is using IAM to streamline onboarding, build AI-powered workflows, and empower advisors to provide a world-class customer experience to the firm's wealth management clients. SailPoint, a leader in adaptive identity security, is deploying IAM across its organization to accelerate sales contract processing and gain greater visibility into the business. Upstart, an AI lending company, is automating customer and borrower workflows to reduce onboarding timelines from months to weeks and accelerate time to revenue.

Optimizely, a leading digital experience platform that helps companies build, manage, and test their websites, is adopting DocuSign IAM to streamline sales agreements and accelerate quote to revenue. IAM's Agreement Desk provides a shared collaborative workspace where teams can review, redline, and approve contracts faster. HydroCorp, a leading provider of water safety compliance services, has adopted IAM for sales, integrated with Salesforce, to eliminate manual handoffs and accelerate sales processes. The time required to prepare a new contract has decreased from 2 to 3 hours to 20 minutes. These examples all demonstrate how DocuSign is reaching across industries and customer sizes to deliver value and transform businesses across the global economy. We are excited about the potential we have in front of us. In closing, we are executing on our strategy.

We're accelerating our pace of innovation with efficiency and delivering customer value within our platform and through our integration partners while delivering strong financial results. I'm proud of the DocuSign team's commitment to our mission. By increasing our fiscal year 2027 ARR guidance and IAM's contribution to it, we enter the second half of the year on the front foot, and we're confident in our ability to execute further on our strategy. With that, I'll turn the call over to Blake.