DocuSign Inc at UBS Global TMT Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : So with that, why don't we get started? Maybe to you, Dan. Obviously, you don't need to rehash everything you went through on the earnings call. But as you've had a couple of days to reflect and talk to investors (inaudible) and analysts and employees. Anything -- any misperceptions you'd love to address or just broader incremental observations worth making beyond those that you made on the earnings call?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : And we'll bring both of those up in this conversation. But maybe even before I do that, Dan, if you don't mind, I'll ask you about something that's moving your stock today, and that is -- it feels, officially, you can make it so that, in fact, you stepped in and acquired DocuSign shares yourself as a -- I'm sure a signal of your faith in the story. Do you want to just address what was the motivation to do that?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Up 11, just to be clear. 11%.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Well, definitely, Dan, that gesture was noted by many. I appreciate it. So maybe I'll ask you, you and Cynthia, just one question on sort of the slope at which you're coming off the peak. And I think everybody listening in right now is incredibly sympathetic that it's very hard to go through a pull-through like that, pull forward I should say, and super accurately manage the other side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2021 / 8:00PM, DOCU.OQ - DocuSign Inc at UBS Global TMT Conference (Virtual) So everybody gets that it's super tough. But I guess the piece that I would love a little bit more clarity on is sort of the why-now part where you use language like rapid change and markedly different. And that sounds like there must have been some external catalysts to sort of suddenly cause the demand to change quickly? And I'm wondering what that thing was because if it was merely a return to work, you would think that, that would have tripled in a little bit more gradually rather than being sudden? So that's the only thing on the events that I'd love to press you a little bit on if you've got any added comments.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : And Cynthia and Dan, this is a hard question to answer, I know. But if the phenomenon that I take from your comments is that due to increased adoption and usage, your customers essentially somewhat overbought envelope capacity. How long do you think it will take for the excess capacity, so to speak, to burn off so we can get back to a normal upsell expansion cadence? Maybe that's a hard timing question to answer.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : So then, practically, how do you execute on -- how do you shift focus back to, as Cynthia said in an earlier meeting that I sat in on, from demand capture more towards demand generation? Like practically, how do you make that happen?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : So it doesn't sound like what you're suggesting is the fix necessarily involves hiring a ton of new sales reps. It's more directing their efforts differently. So I take it, this is not acting as a catalyst to dramatically change your sales rep headcount plans that you have for next year. Is that the correct interpretation?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : That's what I meant. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2021 / 8:00PM, DOCU.OQ - DocuSign Inc at UBS Global TMT Conference (Virtual)

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : And Dan, is it assuming that the issues we're talking about are a little bit more U.S.-centric where you probably saw the sharpest demand pull forward. Do the events that you took us through, does it make you want to lean in a little -- even more to the international opportunity where you're not fighting against those same issues? Maybe you could respond, Dan, as to whether this quarter changed your perception of the weight that you want DocuSign to put on the international side?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : And maybe I'll ask a similar question actually around the -- whether it shifts your focus at all around the CLM or Agreement Cloud. That part of the business understandably got sort of lost in the shuffle on the earnings call, given that there is so much to talk about. But I think that -- correct me if I'm wrong, but I think the correct interpretation is the issues that happened in the eSignature business where you have this incredible demand pull forward. And then you and Cynthia have had to sort of manage off the peak is not what you've seen in the CLM business. So I don't think these issues relate to the CLM business, correct? And are the events that you discussed recently, does it -- on the margin change your emphasis focus need to invest on the CLM side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2021 / 8:00PM, DOCU.OQ - DocuSign Inc at UBS Global TMT Conference (Virtual)

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Very good. And one final question around how the recent events might on the margin shift your focus a little bit. Dan, it relates to M&A. And you and I had this conversation after the last earnings call, but I thought it was insightful and I wanted to sort of bring it to the broader audience. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2021 / 8:00PM, DOCU.OQ - DocuSign Inc at UBS Global TMT Conference (Virtual) But just to give you the parallel, Zoom obviously saw an even more pronounced pull forward and an even sharper deceleration. So almost an exaggerated case. And obviously, we know that one way that they've tried to deal with this decel in their core business is to acquire adjacent growth drivers. So they obviously made an attempt to buy Five9 to broaden out their portfolio. So when you're experiencing a slightly more modest version of this, how are you thinking about the desire to acquire new growth levers, Dan?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Okay. Great. On the competitive front, I certainly, in my work, haven't heard anything to suggest that the events of the last, call it, 3 or 4 months, have anything to do with share shifts between yourself and Adobe. But I'd just love to ask you anyway. And I guess, part 2 of that question, and I know you can't, and it's unfair to ask you to opine on Adobe's business, but they're going to report next week. And I guess an obvious question is, is there any reason to think that they would be able to sort of dodge these issues easily? I suspect no, but maybe you have a perspective?

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Got it. Well, Dan, you said that would be a nothing answer, but actually that was actually quite meaty. So thank you.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. Thank you both for that. And I think maybe in our last 5 minutes, I'll -- Dan, I'll shift away a little bit to Cynthia. So you're off the hook now. Maybe a couple of questions for Cynthia on the financials. Cynthia, one of the observations I made to you in our conversation after the earnings call, and I think you've taken the question a couple of times, so I thought it might be appropriate to bring it online here. And that is the 4Q billings guide requires similar sequential growth of about $95 million, as you did in the last fourth quarter. So I guess through a skeptics lens, that looks tough because it was a party last year, and it feels like it's a little tougher now. But maybe there's something in that comparison, that's not fair. So it's maybe a good one to ask you to set the record straight on that sequential billings compare.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Okay. And maybe I'll end with a question on margin, Cynthia. You didn't provide formal guidance on margins for next year, but it was abundantly clear from your comments that we should not expect margins next year to be at the 19% to 21% level that you've guided to this year? Maybe you could just frame what sort of the 2 or 3 biggest margin variables are for next year. So at least we can keep them in mind as we model out your earnings.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Makes sense. Well, thank you for that. Why don't we wrap there. It's been a a good long day for most of our investors. Thank you, all the UBS clients, for listening in. And most importantly, Dan, Cynthia and Annie, thanks for taking time to explain the story. I think this discussion actually helped a lot. And if we don't have a chance to speak over the next coming weeks, happy holidays to all of you.

Question: Karl Emil Keirstead - UBS Investment Bank, Research Division - Analyst : Yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 08, 2021 / 8:00PM, DOCU.OQ - DocuSign Inc at UBS Global TMT Conference (Virtual)