DocuSign [DOCU] Conference call transcript for 2021 q1
2021-06-03 23:14:03
Fiscal: 2022 q1
Operator: Good afternoon, ladies and gentlemen. Thank you for joining DocuSign’s First Quarter Fiscal 2022 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 Annie Leschin, Head of Investor Relations. Please go ahead.
Annie Leschin: Thank you, operator. Good afternoon, everyone. Welcome to DocuSign’s first quarter fiscal 2022 earnings conference call. On the call today, we have DocuSign’s CEO, Dan Springer; and CFO, Cynthia Gaylor.
Dan Springer:Cynthia Gaylor: Thanks Dan, and good afternoon, everyone. We followed up an exceptional year in fiscal 2021 with an impressive start to fiscal 2022 driven by strong execution. Continued customer demand for our eSignature offerings led to notable top-line growth at scale. We demonstrated significant leverage in our business model with record operating margin and cash flow in the first quarter.
Operator: Thank you. Thank you. Our first question comes from Sterling Auty with JPMorgan. Please proceed with your question.
Sterling Auty: Yes. Thanks. So, on the international front, what are some of the takeaways that you learned in your rollout in the U.S. that you’ve been able to apply under Mike’s leadership in Europe that’s helping you accelerate the growth there?
Dan Springer: We talked about the fact that if you go back a few years to when the U.S. businesses the size of the international business, they looked quite a bit alike, Sterling, all sorts of dimensions, scale, the growth rates have been amazingly similar. I think the core things that I would point to is the focus on customer success for sure is the first piece. And we think we’ve really done a good job at helping the quality of our success organization internationally as a foundation really drives adoption. And as we’ve talked about before, when you get adoption right in a SaaS model, it’s really tees up the land and expand model. So, I would say the second piece is just that, the way we we’ve talked about we allocated our sales resources between those that are doing NewCo versus those that are selling to our install base to expansion sale. We followed that same model. And I think those two pieces are really what have driven that tremendous success. Now, if you talk about those numbers into the 80s for the growth, I don’t recall us ever having that in the U.S. So, I guess in some ways we taught ourselves so well internationally so that we’ve exceeded, the student has exceeded the master over that analogy goes from that standpoint. But those would be the themes that I would focus on.
Sterling Auty: Yes, exactly. That makes sense. And one quick follow-up, the call broke up on me a little bit during your prepared remarks, Dan, I didn’t hear any update kind of on the rollout of the notary solution. Can you give us just an update there?
Dan Springer: Absolutely, yes. We’re really excited that we’ve been able to rollout member that first party notary, which is the piece that we’re primarily focused on because our existing customers, large financial institutions, et cetera, that have a notary, sort of embedded in their business and they use their own notaries, that’s the bigger opportunity and that’s what we’re going after first. And that’s now released and we’ve had our first transactions occur. And we’re really thrilled to see that. So very early, we just sort of have that availability now for the market. And then the second piece that we’ll be working on over the rest of this year is third-party notary. And that’s the model where someone has an individual, third-party notary comes, or two people that need to notarize a transaction, but neither of them is a large institution that would have their own. So that’s the progress we’re really pleased.
Sterling Auty: Got it. Thank you.
Operator: Thank you. Our next question comes from Karl Keirstead with UBS. Please proceed with your question.
Karl Keirstead: Thank you, Cynthia, maybe this one for you. I just love to ask you about the billings’ seasonality this fiscal 2022. You did mention early renewals and expansions as a result of elevated consumption, which at first blush sounds a little bit like a pull forward into Q1. But then on the other hand, your 2Q guide is super strong, you raised the full year by way more than the Q1. So, it sounds like you are signaling strength throughout the year. So, I’m just wondering if you could comment on seasonality and whether it changed as a result of the Q1 performance.
Cynthia Gaylor: Sure. Thanks for that question. Yes, so I think on seasonality, we haven’t seen a big shift in seasonality. We did see a stronger than expected Q1 due to the things that you mentioned, mainly around customer consumption and how they are using the products. So, we were really encouraged by both the consumption metrics that we’re looking at, as well as the use cases that customers are using our product for. And so that’s reflected in both the performance for the quarter, but also the forward guide.
Karl Keirstead: Got it. Okay, great. Congrats on these numbers by the way.
Dan Springer: Thank you.
Operator: Thank you. Our next question comes from Alex Zukin with Wolfe Research. Please proceed with your question.
Alex Zukin: Hey guys, thanks for that. Dan, one of the fears, I think, people have had historically on DocuSign is that it’s just a COVID stock, you are going to start decelerating as you start seeing these tough comps. But I think some people forget that you are a capacity-based model. And therefore, if you are seeing these cohorts that you added last year grow at or above previous rates, which it seems like you are with the expanding dollar-based net expansion. You’re very well positioned to actually, grow right through this and be even better positioned on the other side. So, just talk through that, what you saw this quarter around the growth rate of those cohorts and kind of how your position going forward?
Dan Springer: Yes, Alex, to your point, I don’t know how people are missing it. You write about it in every report I see you make that point, which I appreciate by the way. So hopefully people will start to listen more to your insight. But I think you nailed it. I think that’s exactly what we’re seeing. We’re seeing that the phenomenon of that strong customer growth is why you see the net retention rate so high. It’s why you see to the last question from Karl, Cynthia was able to talk about such a strong guide at rates we had not achieved previously for COVID, from a billing standpoint and a revenue standpoint, because we have seen that underlying demand is so strong for the customers. And I really think the key to it is it’s what we talked about at the beginning of the call. So, the phenomenon that people, once they see the benefits of the digital transformation, particularly, around the agreement cloud from having an opportunity to grow their business with us, they don’t go back. In fact, they look for additional opportunities to expand. And so, I don’t think we don’t talk about the Q1 pull forward like it was some fixed amounts of pull forward that paid Peter, and takes from Paul. We look at it as it’s just an increasing demand, and it really goes back as you and I have talked about in the past. So, the TAM, we are still in the early days, even of just with eSignature business, our penetration is so low, but it’s a very, very large ocean from which we’re pulling forward that continued strong customer demand. So that’s how we look at it. I think it’s fairly straightforward.
Alex Zukin: That’s awesome. And then maybe just one, a quick one for Cynthia, dollar-based net expansion ticked up again to 125%. I know in the past you guys have been hesitant to call for a new range or a new normal, but any puts and takes on that figure, how we should think about it? And is any of that starting to be driven by CLM adoption, or is it still mostly the core use case?
Cynthia Gaylor: Yes, so I would say it’s mainly around the core use case, right. Remember the agreement cloud we’re very excited about the opportunity there, but it’s still very small from a dollar contribution perspective. So, a lot of that strengthened the net retention number is really around kind of the what I call retention economics in many ways, right, the expansion economics of the customer base and the cohort of how they are expanding and not just the cohort came over the last 12 months, but the existing cohorts who have continued to expand their usage of the product over time. And then on the first part of that question was around just the range. So, we would expect, as we said last quarter to throughout this year maintain at the high end or above the historical range, which had been 112% to 119% historically. So, we would expect to retain or to maintain high net retention rates kind of going through the year, but we’re not going to be guiding to that metric specifically.
Alex Zukin: Perfect. Congrats guys on a great quarter.
Cynthia Gaylor: Thank you.
Operator: Thank you. Our next question comes from Tyler Radke with Citi. Please proceed with your question.
Tyler Radke: Hey, thanks for taking my question. I’m curious just at a high level as you’re starting to see things get back to normal here in the U.S. and hopefully shortly overseas. What are you seeing just in terms of the evolution of the pipeline? And specifically, do you find that customers are looking at pursuing larger transactions, maybe more strategic transactions now that most of the COVID impacts are behind them. Just curious how you are seeing the pipeline evolves? Thank you.
Dan Springer: Yes, I’d say it’s sort of a tale of two products Tyler. If you think about the core signature business versus the rest of the Agreement Cloud, primarily CLM to the first part of that no change. I don’t think we’ve seen anything fundamentally different. And quite frankly, if you think about during COVID, we didn’t see the nature of the signature transactions different, they just were fast, right. And so, we saw again that acceleration occur. And as Cynthia pointed out, as we’re kind of rounding those quarters and in many ways, I think, starting to move into whatever the new normal will be. We’re still seeing accelerated rate of that customer demand. But I wouldn’t say the size of the transactions are bigger, I think we still land at about the same size. And I think our incremental expansions of the businesses they happen in the same increments, maybe just more of them are occurring across each time here. That’s how I think about it. With CLM, of course, it was dramatically different, right. So, it was some really nice demand was starting to build right before the pandemic. And those, what I would say are more strategic and more substantive transactions. They require usually a statement of work and sort of systems integrator work whether we do the services, is one of our wonderful SI partners. Those are, again by definition, I think a little more complex and the order size density bigger. Those slowed way down, right. People said during the pandemic, we need to focus on really fast ROI. And this is enabling people to deal with working remotely. Now, we see those starting to come back. And so, we see the pipeline starting to build, as we did actually starting in Q4, started more aggressively there. So those are demonstrably coming back. And I think those will be larger deal sizes that we would see. But they don’t cross over between signature at least you need to look at them in two separate sites.
Tyler Radke: Thanks. And just a quick follow-up for Cynthia. So, operating margins were really strong here in the quarter. Obviously, you saw quite a bit of revenue upside, but curious just on the hiring front or any other expense related things, if there was kind of some one-offs driving the strength in just kind of how you are thinking about the pace of hiring throughout the rest of the year? Thank you.
Cynthia Gaylor: Yes, the operating margin was pretty phenomenal at 20%. In some ways we would have liked to be able to invest more quickly into that growth and bring down that number. It’s just very difficult to do in quarter. So, we’re really looking through the year at ways to continue to invest for growth. And that’s embedded in the guide as well. So, I would say there was nothing in particular one-off other than the outperformance of the top-line, which pretty immediately drops to operating margin in quarter, but we will look to aggressively invest for the continued growth and the large opportunity ahead of us.
Tyler Radke: Thanks.
Operator: Thank you. Our next question comes from Stan Zlotsky with Morgan Stanley. Please proceed with your question.
Stan Zlotsky: Hey guys, good afternoon. And thank you for taking my question. I wanted to follow-up on something that now you guys mentioned a little bit ago, which is just the broader agreement cloud in SpringCM, right. It’s still small numbers and it’s not really material as far as driving the growth maybe even as the net revenue retention that you guys are seeing ticking up nicely. How are you thinking about when that could become big enough and material enough to really drive this recording now?
Cynthia Gaylor: So, I would say, we’re in the early innings, as Dan was talking about across the Agreement Cloud. And it’s a pretty nascent market, but there’s also just a ton of greenfield opportunities. So, we’re investing heavily both in our go-to-market strategy around that and in customer success, but also just on the product innovation. So, I would expect it to be a few years before it’s really a meaningful contributor. And when you think about kind of the results that we posted the last few quarters, they are primarily driven by eSignature. And just given the scale and the growth rate kind of on the core piece, it’s going to take a while for Agreement Cloud, even if it’s growing quickly within to really have be a meaningful contributor from a top-line perspective.
Stan Zlotsky: Got it. Got it. And also, I want to follow-up on Alex’s question earlier, which is on net revenue intention. I understand you guys are not – you’re not really moving out to the range that you normally talk about, but in a similar fashion, what would it take for you to move up that range, is it just yet consistency of seeing this 120-ish plus for x number of quarters? What will we have to think about as the milestone for you to start moving up that range?
Cynthia Gaylor: It’s a metric that we watch very closely, just given the consumption trends. And as we talked about the last few quarters, looking at kind of these new cohorts and how they are consuming and how they are expanding and then existing customers and kind of the more historical cohorts. So, we’re watching that closely. I wouldn’t anticipate guiding to a net retention range, but as I said, we would expect for the remainder of the year for it to remain above the historical range which the top end was 119. Just given the consumption trends we’re seeing, we would expect it to be above that high end of the range.
Stan Zlotsky: Got it. Thank you so much.
Operator: Thank you. Our next question comes from Scott Berg with Needham & Company. Please proceed with your question.
Scott Berg: Hi, everyone congrats on a fantastic quarter. And thanks for taking my questions. I guess I have two. The first one is as you look back over the last year and obviously you’ve seen – I’ll call it a rush in new business based on pandemic. But has that brought you into any new types of businesses or use cases that is probably, maybe not as well-known? I mean, I think, we all know what e-signature is for, obviously from a generic standpoint, we just didn’t know if you seeing like an activity somewhere new?
Dan Springer: Yes, I don’t think there’s anything substantial. There are a couple of things that were new, like, you think about the PPP loans, right. There’s a small little cottage industry that got built in supporting the banks. So, by definition, since that didn’t exist before that was new. But that’s really small piece of what we would do. I think you have to think about, just talk about we hit our one millionth customer. We’ve got a lot of customers. We’ve got a lot of industry coverage there. And I actually look at it this way and we sometimes say, we believe that every business eventually should use DocuSign. And that’s the kind of the way we think about the breadth. But I don’t look at sort of particular industries where we’ve not started that journey. I don’t think there’s big areas that you’ve mapped it out to say, we just haven’t been able to find a way to serve them because we do the front office and the back-office use cases. And every company sort of has employees as an internal operation and every company has customers, right. I guess a few Silicon Valley companies have potentially that. But other than that, pretty much everyone has customers. And so, from that standpoint, I think, we really look at it as we are everywhere and we’re going to be everywhere in the anywhere economy. And there hasn’t been a phenomenon that COVID, or anything else with change to sort of open up or introduce new areas. There’s international expansion into new geographies, for sure. But from a vertical standpoint I haven’t seen anything that feels fundamentally just a new thing going forward.
Cynthia Gaylor: And the one thing I would just add to that we have seen again, it’s spot on, there’s not kind of industries and verticals, and that’s one of the strengths of our business is that it’s so diversified across verticals and customer sizes. There hasn’t been some COVID-specific use cases that throughout the year, we’ve also seen translate into other new use cases, whether it’s in verticals or different markets. A good example of that would be PPP loans. Both last year and this year we saw quite a few loans. Some of that we’ll be turning into loan, forgiveness or other FinTech sort of used cases. And so, we have seen some of that, but we’re also seeing consumption into new use cases off the backs of that as an example.
Scott Berg: Got it very helpful. And then I guess from a brief follow-up perspective, your customer metrics and the quarter, obviously was very good and they show a level that’s still elevated versus the pre-pandemic level, even as we anniversary it. But how are sales cycles today compared to a year ago? Obviously, year ago, there was a rush to sign up and use your product, but today are the most recent sales cycles, more normalized what you’re used to seeing, or are you still seeing customers maybe speed through this process a little? Thank you.
Dan Springer: Yes, it’s actually something funny. Before each earnings call Cynthia and I spent time with the team talking about pricing and talking about just sort of the tenor in the market. We do that so that when we get questions like this with people like you, we’re able to give you the latest and greatest. And the pricing has been in a good way, boring as it has been for pretty much every quarter since we went public, but we haven’t seen a lot of change there. In terms of the deal cycle time, we definitely saw some shortened cycle times at the height of the pandemic where there were people who were calling us up, especially on the NewCo side. So, people, we didn’t have a previous relationship and they were really in a hurry. So, you go on DocuSign and that definitely reduce some cycle time, as well as some implementation time. I’d say that was probably reverted back to more normal. At this point we don’t have that, that sense of urgency to be deployed might’ve had. I wouldn’t say that was a significant portion of our business to play it out that way. And remember, in any given quarter, the amount of revenue that comes from new companies versus coming from our base NewCo is obviously very small. And we didn’t see that dramatic change in the existing customers because they were relatively quick in the cycle time for new use cases, you don’t have a contracting sort of NSA kind of requirements there. So, I think that there’s something there, I wouldn’t say it’s significant, but it has reverted to what it would have been before from a cycle time.
Scott Berg: Congrats. And thanks again.
Operator: Thank you. Our next question comes from Rishi Jaluria with RBC. Please proceed with your question.
Rishi Jaluria: Hey, Dan, Cynthia, Annie thanks so much for taking my questions. I wanted to go back to the previous question on customer adds. Because I think a lot of us are pleasantly surprised to see customer adds continuing to hit a record, even as we head into a post-pandemic future. But it looks like, especially on the mobile side, you had a really impressive record this quarter. Maybe could you give us a little bit of a sense of what is it that’s driving that, in spite of the fact that a lot of us would assume that urgency has maybe died down since before, is that a function of certain investments you’re making in the self-serve motion and the mobile channels or something else? And then I’ve got a follow-up on the large customers.
Dan Springer: Yes, I think you hit it really well. Yes, there was some perhaps unexpected strength as you said on that dimension, we’re obviously pleased by that strength. On the web and mobile side, I think, that there’s two things that we’ve done well, that’s allowed us to grow, and reach this goal that we set several years ago, hitting a million customers and primarily driven by that team. So that’s where the largest number of our customers exists. The first thing is, I think, we’re getting better and better at our online advertising. I think we built that as a key discipline to our long-term success. And I think that’s been a huge part of driving that. Second thing is, we’re continuing to innovate around our overall digital experience and that process by which people come through, they hit do a trial after they’ve put that on an online ad generally the most common way. And we take them through a trial process. They see the quality of our software. We make it easier and easier for them to become a customer, and that digital flow. I think it’s still a ton of work that we can be better at that, but we have made a lot of effort in the last 18 months there. And I think some of that is starting to pay off that has driven that. One last thing I’ll just add important to understand is really shout out for the web and mobile team. We look at their net ad, part of what’s net out of that is people upgrade, become direct customers. So, some of their most successful, actually almost all of their most successful customers we take them. We take them and we put them into our direct business. And so that’s a group that constantly has to replenish and grow and even faster rate to make up from the fact that we have what we call positive churn. We churn them out of web and mobile and churn them into the direct businesses to expand and take on more fulsome use of our platform with more advanced functionality. And so, from that standpoint I do think that that group, glad you pointed it out, has really been far for us.
Rishi Jaluria: Got it, that’s really helpful. And then just going to the 300,000 customer ads again, really impressive to see it hit it a record this quarter as well. Can you give some color on what’s driving that and generally is this existing direct customers that just expand usage of the entire Agreement Cloud or are you actually landing new logos at that level? Thanks.
Dan Springer: Yes. As is the case prior the vast, vast majority of both the 300,000 up are growth customers, as opposed to net new. It’s not that we’ve never had someone start there, but our land and expand model, we’re not really trying to go out and find that, because of our customer success orientation, we really believe the best way to build the long-term value, is to go out and start small, find some great use cases, deliver fantastic customer success, tremendous ROI, and grow the business and doing out, trying to get giant plans that are complex. I just don’t think that’s the model that really fits for the Agreement Cloud business. So that’s definitely the case. And in terms of the strength there, I mean, I think it’s highly correlated with the other key metrics that Cynthia is walking through. When you see a really high net retention rate, it means that the companies that were 250, a bunch of them grew, and they’re now at 300. So, there’s not any particular surprise there. It’s just a continued land and expand step that is a number that has some volatility. We know it go back and look over the quarters there are times when, because of the puts and takes for any individual accounts and the way they might be adding things. Sometimes someone does a one-time add to the pop-up over 300 and then they do that that one-time time use case they might’ve had, might pop-down below in the next quarter. So, we do think it’s important to look at that over time as opposed to any one quarter. But I think you’re going to see over time while we keep delivering that same fantastic customer success, we will see that number continue to scale for the reasons particularly.
Rishi Jaluria: All right. Wonderful. Thank you so much.
Operator: Thank you. Our next question comes from Kirk Materne with Evercore ISI. Please proceed with your question.
Kirk Materne: All right. Thanks very much. And I’ll echo the congrats on the quarter. Dan, I want to circle back on international. Obviously, it’s a huge TAM for you all. Are there any technological or regulatory hurdles that you need to clear in certain markets for the sort of adoption rate to kind of get to where you are say in the U.S. or more markets where you guys are bigger? And then I guess just as you and might think about it, given that this is something that would be sort of a global opportunity, how are you thinking about placing your bets in terms of making investments in certain regions? And are there regions where you think you’re just about to hit sort of a tipping point perhaps faster than others? I’m just trying to get a sense on, is there anything sort of putting a governor under growth and then how are you guys thinking about sort of your bets and your investments in certain places? Thanks.
Dan Springer: Yes, absolutely. So, couple of thoughts for you. The first is, I believe that at the sort of technological level, I don’t think there’s anything that we would point to. There are really important differences in legal frameworks. I mean, we talk a lot about the concept of the common law versus the civil law, legal frameworks, but we deal with these pretty much made the investments to enable the civil law countries, which are the mass majority of countries out there. So, we made those investments really several years ago. And I think we feel good about what we’ve done there. There is sort of data residency issue, if you want to consider that sort of a technical component. And it could be a governor to the extent that some geographies, certain institutions that say, we don’t want to let any data leave our national wall so to speak, most of the government clients feel that way, but sometimes you do see that with like large financial institutions or heavily regulated industries. And so sometimes there is complexity there, and that’s why we’ve been working Azure to have in both Canada and Australia sort of leveraging the public cloud and maintaining those testing that. Trying to determine is that really, enable us to grow faster. I think it’s an area we continue to be testing and working on. I wouldn’t say, yes, we found there’s a massive turbocharge there. But I think it is an area for continued investment in growth. That’s the only things I would sort of point to from either a technological or a legal framework. I do think there’s important things like market awareness, and obviously, particularly, because of our strengths in real estate early on DocuSign became more of a household name in the United States. We don’t have that in most of the countries. So that’s a big component. But I think we need to work on. And I think there’s other things that we still have big opportunity for us to sort of get our house in order of the way that we operate in certain other countries. And we feel more local. I think that’s another area that I’d say we sort of invest in. Wouldn’t exactly call it technological, but there’s sort of just a building the business the areas we’re heavily focused on. And in terms of the second half of your question, in terms of the markets, we’ve talked a lot about our focus eight, and those are the original eight countries over the last several years we’ve said are our primary focus areas in Europe, that’s the UK, Ireland, call one that France and Germany, in the Americas, that’s U.S., Canada, and then Brazil, which has been really entirety of our LATAM focus, then Australia, New Zealand we call that one country. And then finally Japan would be the focus eight countries we’re talking about. And I think now you’re going to see us talk about the investment in Mexico and thinking about, really thinking of that as regional, sort of Spanish speaking LATAM, although Mexico itself, we started in a few months later decided to dramatically increase our investment in terms of on the ground, because we’ve seen so much positive response there in Mexico itself. From a European standpoint, I think, we’ve always seen opportunity in Nordics, in Netherlands. We see more in Southern Europe. I think there’s opportunities in each of those geographies there. I don’t know that it will be massive sort of feet on the ground there, but you are going to see us do more in those areas. And then in Asia-Pac overall, we’re pleased with what we’ve got AMZ in Japan, very small presence in Singapore. And we’re starting to look at Southeast Asia as a really key investment area. In fact, Mike and I were literally this morning talking about that growth investment there and leveraging that small, small toe in the water we have to go after what we think could be a really attractive market opportunity. But that’s across thinking about Philippine, thinking about Thailand, thinking about what are those core countries in Southeast Asia that we think should fit well for DocuSign. So that’s how we’re thinking about the geographic footprint.
Kirk Materne: That’s super helpful. Thank you all.
Operator: Thank you. Thank you. Our next question comes from Brad Sills with Bank of America Securities. Please proceed with your question.
Brad Sills: Oh, great. Hey, thanks guys. And congrats on a nice quarter. I wanted to ask about an earlier comment you made Dan around Insight customers and how you feel that those use cases are extensible for future growth. Is that how we should think about the kind of evolution from customers towards the Agreement Cloud, maybe starting with CLM or Insight, get some use cases under their belt there and then graduate, if you will, into the broader Agreement Cloud or what do those cohort of customers say about the propensity to buy more?
Dan Springer: Yes, I mean, the way I look at it is still the tip of the sphere is going to be signature for sure. And part of it is what Cynthia was describing earlier, we didn’t have a much larger business there. And even though it’s still, as she said, very early innings we have such a substantive leadership position. And we just see so much opportunity to continue to land there. That will be our primary entry point, I think, to most companies. Then, as you indicated in your question Brad, we want to really open up the rest of the Agreement Cloud. And I do believe that areas today that we see is that natural extension second step, CLM and the advanced analytics will increasingly be some of one-two punch. One of our goals is to really integrate some of that field technology and that AI technology into our CLM solution. We feel for a lot particularly about mid-market and up customers. That’s going to be a key buying factor, is the idea that you have embedded fantastic analytic capability onto that CLM solution. And we’re seeing with the analytics on top of just Insight, even this fantastic new product we have called DocuSign Monitor, which is really a security product for people to understand what’s happening in their network by looking at how people are signing agreements with that. We’re seeing huge uptake from customers where they just want to understand more about the business, and our whole thesis around the Seal acquisition, the idea that companies can run their business better with a really thoughtful Agreement Cloud. They can be smarter about the way they grow and execute their core operations. So that is definitely how we think about it. And I think the number of use cases for your question continue to accelerate as people see the business value in the ROI from using our advanced analytics, particularly the AI aspect of our business.
Brad Sills: Thanks so much, Dan.
Operator: Thank you. Our next question comes from Bhavan Suri with William Blair. Please proceed with your question.
Jake Gariup: Hi everyone. This is Jake on for Bhavan. Just thinking out longer term, when we’re thinking about some of the recent additions to the Agreement Cloud, like notary, Seal Software, CLM, I’d love to hear about what could be the longest-term growth drivers, and if there’s anything that surprised you about initial customer adoption over the last several months? And just would love to hear any color on that.
Dan Springer: Well, I’ll give you my thoughts and then Cynthia can dive and give you a different perspective of your own favorites maybe you want to pick. I mean, I think that you got to look at TAM. I mean we we’re planning this for the long-term. And so even though I look at something like notary and I just have a huge amount of enthusiasm for it, I think, it’s in many ways an extension right, of signing type experience. And so, I think, it’s a special and really important opportunity to bring the joy that DocuSign has brought to signature world to extend that to notary. But I think the total TAM there, isn’t going to allow it to be a pillar. The same way that CLM is. I think CLM is going to be emerging software category within the Agreement Cloud that, several years from now, we’re going to look back and say someone would be crazy to have an eSignature solution. Today, if we look at it that way. I think we now will look at CLM and we get to that a few years down the road where people would be crazy not to be thinking about the way they manage their contracts across the business. That’s probably what I would pick as sort of the big winner, if you will, and what will contribute in the most substantial way to our growth over the long-term. Cynthia, if you have any updates different than that?
Cynthia Gaylor: I think that was fairly comprehensive Dan. And I’ll leave it at that on that one.
Jake Gariup: Great. Thanks for taking my question.
Operator: Thank you. Our next question will come from Pat Walravens with JMP Securities. Please proceed with your question.
Aaron Kimson: Hi, this is Aaron Kimson on for Pat. Congrats on the quarter. You mentioned that headcount grew 42% year-over-year. At a high level can you discuss what percentage of that was sales and customer success versus other functions? And then how the company is thinking about headcount growth going forward?
Dan Springer: Yes, I mean, I think, the simplest way to look at the distribution as you know headcount is by far are number one costs. So, if you take a look at how it played out in terms of the percentage of our revenue, a percentage of our revenue attributable to each of the buckets, you’ll see that sales and marketing and product engineering were by far the two groups that we’ve traditionally supported. And that will be the same thing in this quarter and then look forward across the year. Those are the core groups that I’d like to see the most headcount growth. And from a philosophy standpoint, I oftentimes talk about this concept of, we kind of have line functions and then we have functions that support this. And the support functions are just as important as the line function, but I really to scale our business need to scale the line function. So, we need to have a lot of fantastic engineers here building great software, because we’re a software company. And so, the number of engineers that we can grow that is a huge, important driver of our future growth. The same thing is true. If you think about our quarter carrying, AEs or our CSMs that are driving customer success, those are the functions that we really want to see the headcount growing. And people like me and Cynthia were overhead and we like ourselves fine, but we don’t need any more of us. One CFO is fine, CEO is fine, and we want to really focus ourselves on getting more leverage in those lines of operations.
Aaron Kimson: Very helpful. Thank you.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.
Dan Springer: Thank you all for joining us. You saw Annie at the top, she mentioned we’re going to be out in the market a little bit, I guess, virtually hopefully soon we’ll be out physically. But thank you for joining us. And we look forward to talking to you all next quarter. See you.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.
