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Tech stock sell-off: ‘The reaction has been aggressive,’ DocuSign CEO says

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Docusign CEO Dan Springer joins Yahoo Finance Live to discuss company earnings, the tech stock sell-off, the company’s partnership expansion with Microsoft, and the outlook for the labor market.

Video Transcript

BRIAN SOZZI: DocuSign remains confident in its strategy and path to becoming a $5 billion revenue company despite macro challenges leading to an earnings miss in its latest quarter. Joining us now is DocuSign CEO Dan Springer. Dan, good to see you here this morning.

Look, the stock was sold pretty aggressively on Friday. We're seeing it down close to 10% here in the early going. Are you surprised by the market's reaction? And what's your message to investors here?

DAN SPRINGER: Yeah, absolutely. I think there's sort of two components. There has been a very broad tech selloff that we've seen, and a repricing, if you will. And to the question of whether I'm surprised or not, the magnitude is surprise me. I do think valuations were high, you know, for tech and software. But it does feel to me that the reaction has been aggressive relative to what I've seen, you know, in terms of headwinds for tech overall.

From a DocuSign standpoint, we have an additional challenge in that we came out with guidance last week was to have lower growth than we had previously forecast. And so I think, from the standpoint of the impact to our stock, it's understandable that would have an impact. In the same vein, it does seem like an aggressive reaction. And we believe, you know, that's an aggressive reaction and that we will bounce back.

BRIAN SOZZI: Dan, you talked at length on the earnings call about DocuSign having lost a lot of longtime employees. Now, why do you think they are leaving? And what impact has that had on the organization?

DAN SPRINGER: Well, the thing we talked about specifically was around folks in our field organization, where there's been, across tech, dramatic attrition and churn within sales organizations. And some of that, I think, is because coming out of the pandemic, for DocuSign, it got more difficult. We had that incredible tailwind of the pandemic that drove our already strong growth machine to a higher growth machine.

And I think that led its employees-- well, I would characterize it more as newer employees as opposed to more veteran employees-- that were impacted by that, because they just hadn't seen that experience before. And I think, across tech, we're seeing the same phenomenon. When I talk to other CEOs, they're saying the dissatisfaction that people generally had coming out of COVID, which made things so difficult for everyone, tech or not in tech, was exacerbated by the fact that valuations came down.

And people said, I'm sort of getting less compensation because of the equity piece as well. And now that people are seeing, you know, the recessionary concerns from a global macro, which is leading, you know, some pullback we've been hearing different folks in this last earnings season talk about, I think it just makes people think they want to do something different. So I think that's something we're gonna probably continue to see as we all work through these changes.

- We saw some updates on the bookings, particularly here in this most recent quarter and going forward. You've got this new partnership with Microsoft, of course. I wonder-- and because it's been a partnership that's been around-- how much flowthrough, in terms of new clients, have you seen from that historically? What's the forecast that you kind of bake in to the outlook from here on a partnership like that has a major kind of cloud and just even collaborative suite and portfolio of clients already that has happened, too?

DAN SPRINGER: Yeah, yeah. We think it's a significant opportunity for us, Brian. I mean, the history is, of course, Microsoft was-- back in the day, when we were a private company, an investor in DocuSign. And I had a wonderful opportunity to get to know Satya over the years because of the partnership.

But I would say that our go-to-market partnership was not meaningful before this recent announcement. And they have a program that we're now really thrilled to be part of, where we partner on our integrations. But, importantly, their field has an incentive to become commissioned by selling DocuSign products. And we didn't have that before. So having the folks that are in the Azure world pushing DocuSign, we think, will be really meaningful for, particularly, our enterprise customers globally.

JULIE HYMAN: Hey, Dan, it's Julie here just trying to understand a little bit more as to what you guys are seeing out there because, coming back to the sort of billings idea here, is it that existing clients are pulling back on the services that they pay for from you? Is it that they are canceling in some cases? Are they trading down to other products? What exactly is happening?

DAN SPRINGER: Yeah. Well, so first of all, we do have, as we said, 1.24 million customers. So it's difficult to sort of describe the enormity of that customer base in one. But I would tell you that my perspective at the macro, what's happening within our customer base, is a couplefold.

First thing is we're adding lots of new customers. And we had 67,000 new customers in the first quarter. And the core penetration is still very, very light in this $50 billion Agreement Cloud TAM. So I think the answer is strong new customer adds have continued over the last several quarters. And we expect that to continue going forward.

Second component is how much people spend with DocuSign. And what we saw, there was a lot of sort of what we call pull-forward of demand, including some one-time use cases that occurred through the pandemic. And while I think we had some understanding of that, I think the piece that I missed was the magnitude that that pull-forward would have in the year after we saw that tailwind go away.

And what we're fundamentally seeing from customers is they're saying, I love DocuSign. Very few customers, you know, as a percentage, leave DocuSign. And what they're saying is, I'm not gonna grow at the same rates I was growing before. I'm just growing at smaller transactions.

So if you look at the sort of number of deals we do with the base, right, large growing impact for new customers. But within our base of customers, the number of transactions is not changing. What's happening is they're just doing smaller, incremental add-ons. And that's fundamentally the phenomenon in the market for us.

JULIE HYMAN: Aside from sort of looking at headcount and assessing expenses, is there anything strategically that you are changing, Dan?

DAN SPRINGER: Yeah, I think the biggest opportunity for us, and the biggest requirement for us, is to sort of reinvent the way we think about our go-to-market. And we've talked about this. We've brought in scaled leadership. You know, DocuSign had years and years of growth with a fantastic team. And we needed to augment it.

As I've said before very clearly, I was too slow, coming out of the pandemic, to see the need to more aggressively augment people with more seasoned scale. As we went from a billion to a $2 billion company in, you know, sort of 18, 19 months, that's a lot of growth. And we did need to augment that team.

So we brought in a new head of worldwide field ops in Steve Shute. We brought in new leaders now for our North American Commercial SMD and just announced enterprise leaders. So I think the number one thing for us is to bring in that scaled leadership that has sort of seen this level, you know, of size before and scale before.

And then, we do have some work we want to do on that way we really drive that core adoption and core success for our customers, which leads to that upsell and growth. We've done that model traditionally for years. As we grew, you know, a public company now just over four years, we've had very substantial and significant growth consistently across the years with that core model. And we've got to get that model tuned and right to drive the next growth ahead.

BRIAN SOZZI: Dan, if the market is going to punish your stock like it has after the past two quarters, and you have a-- I think many would agree you have a strong technology, a strong leadership position in that market. You have a $5 billion revenue target out there. Why not consider going private again before any more value comes off of the company?

DAN SPRINGER: Well, you know, when you think about concepts about that structure, you know, of the entity that's not my biggest focus. My biggest focus is making sure we're taking care of customers, taking care of employees, so that we can have fantastic growth and returns for our shareholders, whoever the shareholders might be. But, today, we're a public company. And I have an important fiduciary responsibility to do what I think is best for our investors.

I don't have any point of view that's particularly personal or strong that says we should be structured in a particular way. I just want to look at what I think, again, is best for all of those constituents, primary, you know, being the shareholders. So if that becomes the option that's most attractive for them, I'd be absolutely open to doing that.

Once you take your company public, I think, as a CEO, you have to say, that is a primary responsibility I have, and not make it sort of a personal choice, but make it the choice that's optimal for the entity.

- Dan, as always, great to get some of your time out of your busy schedule, and we appreciate you joining us this morning. CEO of DocuSign, Dan Springer, thanks again.

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