Earnings Call
Docusign, Inc. (DOCU)
Earnings Call Transcript - DOCU Q1 2023
Operator, Operator
Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's First Quarter Fiscal Year 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. 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 Roger Martin, Vice President of Finance. Please go ahead.
Roger Martin, VP of Finance
Thank you, operator. Good afternoon, and welcome to the DocuSign Q1 2023 earnings call. I'm Roger Martin, DocuSign's VP of Finance. Joining me on the call today are DocuSign's CEO, Dan Springer; and our CFO, Cynthia Gaylor. The press release announcing our first quarter results was issued earlier today and is posted on our Investor Relations website. Now let me remind everyone that some of our statements on today's call are forward-looking. 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 the pace of digital transformation and factors affecting customer demand, including as a result of the pandemic 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. Non-GAAP financial measures exclude stock-based compensation expenses, employer payroll tax on employee stock transactions, amortization of acquired intangible assets, amortization of debt discount and issuance costs from our notes, acquisition-related expenses, fair value adjustments to strategic investments, impairment of lease-related assets and, as applicable, other special items. In addition, we provide non-GAAP weighted average share count and information regarding free cash flow 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 these 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 Dan Springer.
Dan Springer, CEO
Thanks, Roger. Good afternoon, everyone, and thanks for joining our Q1 earnings call today. I want to begin by highlighting some of the quarter's results and then go into some important announcements we made around building a scaled organization and enhancing our DocuSign Agreement Cloud suite of products. DocuSign has begun the year delivering solid results. First quarter revenue was $589 million, representing 25% growth year-over-year. International revenue grew 43% year-over-year, making up 25% of total revenue versus 21% in Q1 of last year. Our billings grew 16% in the quarter, and we delivered dollar net retention of 114%, which is within our historical range. Lastly, we added nearly 67,000 new customers in Q1, an increase of 25% year-over-year, bringing our total to 1.24 million paying customers around the world. These results have required our team's unwavering commitment and flexibility as we are adapting our go-to-market strategy to the post-pandemic world. Our results also highlight our continued momentum in the digital transformation of Agreement workflows for businesses across the globe. However, we are experiencing many of the macro challenges that our peers are seeing, including inflationary concerns, a volatile workforce environment, and general global instability. We are ramping our execution and go-to-market capabilities as well as strengthening our leadership team for the growth opportunities ahead. The dynamic macro environment only highlights the need for digital investments like DocuSign, and we will continue to partner with our customers to advance their digital transformation journeys. We're confident in our strategy and path to becoming a $5 billion revenue company. DocuSign continues to be the clear market leader in the electronic signature space, and we are excited about our progress in defining the broader Agreement Cloud category as well. Our dedication to innovation and our investments in attracting high-caliber talent position us to build upon our leading market share. Our plan to scale is well underway, and we are encouraged by the early traction we are seeing. So the level of growth in certain areas is lower than our prior expectations. Let me share some of the specifics with you. In Q1, we made further progress in strengthening the foundation for our next phase of growth; building for scale and tackling the go-to-market challenges we've seen in recent quarters as we transition from the height of the pandemic. Last quarter, I shared that we would be bringing in a world-class sales and success leader, and I'm very pleased to note that we made an important hire with Steve Shute as our new President of Worldwide Field Operations. Also, as I mentioned last quarter, we onboarded a number of outstanding sales leaders in our North American commercial and SMB segments, who now have been in their seats for a quarter. Finally, we just hired a new North American enterprise team leader, rounding out our initiative to scale our go-to-market leadership. This seasoned team has hit the ground running, focused on recruiting, training and enablement, with a laser focus on driving DocuSign to $5 billion in revenue and beyond. We also bolstered a team in other key areas and just announced the appointment of Inhi Cho Suh from IBM, who will transition from being a DocuSign board member to becoming President of Product and Technology, where she will be instrumental in accelerating innovation within our Agreement Cloud; Jim Shaughnessy as Chief Legal Officer, previously in that role at Workday; and Jennifer Christie as Chief People Officer, formerly the CHRO of Twitter. In light of these key hires and with the team we now have in place, we are focused on a second-half growth plan that allows us to be successful despite some of the current macro headwinds and gives us a foundation for sustainable and predictable growth going into fiscal year 2024. I want to now turn to some noteworthy product callouts. The big announcement in Q1 was our launch of CLM Essentials, a new addition to our expanding family of contract lifecycle management products. It's a streamlined CLM solution focused on faster time to value and is built specifically for growing organizations to centralize and automate the creating, negotiating and secure storage of their contracts. Essentials also allows customers to easily accelerate contract work in the quote-to-cash process via deep integration with Salesforce. And as our customers' needs grow, there's a seamless upgrade path to our full CLM or CLM+ products. The other big area of innovation last quarter was in eSignature, where we continue to release a steady pace of features to further simplify and secure signature workflows. Our latest ID verification feature enables signers to verify their identity via trusted financial institutions like Bank of America, Chase, and Wells Fargo. This is a great example of how we're continuing our steady pace of innovation where it counts and leading our category as the name in eSignature. And that lead is reflected in our customer metrics. For example, we grew our customers with a greater than $300,000 ACV by 32% from a year ago, as our successes during the quarter demonstrate; we continue to see both growth and leadership in eSignature, as well as progress across the rest of the Agreement Cloud suite. So whether the customers are Fortune 500 or digital SMBs in our high-growth international markets like Germany or here in the US, we see the same land and expand opportunities. The lands tend to start with eSignature, but the expansions are quite varied. Let me share a couple of brief examples. One of the largest multinational payments corporations who has been a customer for over a decade has steadily and significantly expanded their use of eSignature over the last few quarters. Last quarter, the company deployed a new remote work request system with an eSignature to their over 60,000 global employees. This is aligned with their flexible work-from-home policy, which predates the pandemic. Additionally, this customer recently opened new employee health clinics within each of their main US office locations where they have turned to DocuSign for a streamlined process when using forms within the clinic operations. In Q1, we also saw the continued trend of deeper Agreement Cloud adoption. For example, one of the world's largest and most prestigious global consulting firms made the jump from being a long-time eSignature customer to implementing CLM+ globally. With this move, they can now build and execute standardized end-to-end agreement processes, have a centralized document repository with comprehensive metadata, and leverage our AI to identify risk levels in previously executed, as well as in-flight agreements. So, to summarize, we posted a solid first quarter for fiscal year 2023. We are beginning to see benefits from the optimizations we are making in our go-to-market motions post-pandemic and from our new scale, sales, and success leadership. While we continue to invest in our employee base to capitalize on the considerable opportunities ahead, we are moderating the tempo of our hiring plans to appropriately balance growth and profitability. With a $50 billion TAM, we have confidence in our business strategy and importantly, the outstanding team we have in place. As we work to build momentum amidst macro headwinds, we're seeing a steady stream of wins and increased interest from our partner ecosystem to build deeper relationships. Just this week, we announced that we are expanding our global strategic partnership with Microsoft to accelerate what we call anywhere work and reinforce the DocuSign Agreement Cloud as a preferred solution within the Microsoft AppSource. We have a deep relationship with Microsoft. We've been a long-standing customer and partner of DocuSign. We expect to continue to broaden these times and deliver a number of new integrations and capabilities across Microsoft's business solutions, including office, dynamics, and the power platform applications. So we have a vast market, industry-leading product portfolio, and a growing world-class team that is focused on driving both growth and margin expansion with discipline and operational excellence. Our plan to reignite enviable growth is underway and progressing. With these objectives plainly in sight, I'm as optimistic about the future as I've ever been. With that, I'd like to hand it over to Cynthia to walk through our results and outlook in greater detail.
Cynthia Gaylor, CFO
Great. Thanks, Dan, and good afternoon, everyone. Overall, we delivered a solid Q1 as we continue to focus on execution and delivering on our long-term strategy amid a more challenging macro environment. We made steady progress toward our operating and financial goals, added customers at a healthy pace, and expanded our international footprint. Let me review some key highlights within our Q1 results. Total revenue increased 25% year-over-year to $589 million and subscription revenue grew 26% year-over-year to $569 million. Our international revenue continued to outpace our domestic growth, with a 43% year-over-year increase to reach $144 million in the first quarter, contributing 25% to total revenue. While the strengthening US dollar caused some FX headwinds during the quarter, the impact to our results was not material. Customer growth remained strong, reflected in approximately 67,000 new customers in the quarter, bringing our total installed base to nearly 1.24 million customers worldwide at the end of Q1, a 25% increase compared to a year ago. This includes 12,000 additional direct customers, bringing our total direct customer base to 182,000, a 34% increase year-over-year. We saw customers with an annual spend greater than $300,000 grew 32% year-over-year to a total of 886 customers. We achieved 114% dollar net retention for the quarter, which is within our historic range of 112% to 119%. And while we have added customers at a steady tempo and they continue to expand their usage of DocuSign, they are expanding at a slower rate relative to their peak levels. Total non-GAAP gross margin for the first quarter was 81% in line with last year, while subscription gross margin was 84% compared with 85% a year ago. Q1 non-GAAP operating profit reached $102 million compared with $93 million last year. Non-GAAP operating margin was 17% compared to 20% last year. Non-GAAP net income for Q1 was $77 million compared with $92 million in the first quarter of last year. In light of consistent non-GAAP profits for the prior three years, as of Q1 fiscal 2023, we are including a non-GAAP tax rate in our non-GAAP net income calculation. For fiscal 2023, we are using a projected long-term non-GAAP tax rate of 20%, which reflects currently available information as well as other factors and assumptions. We ended the quarter with 7,642 employees, a 26% increase compared to last year. We exited Q1 with over $1 billion in cash, cash equivalents, restricted cash, and investments. Both operating cash flow and free cash flow reached all-time highs in Q1 with strong cash collections, building on our strong Q4 finish. Operating cash flow in the first quarter grew 45% year-over-year to $196 million or a 33% margin. This compares with $136 million or 29% in the same quarter a year ago. Free cash flow came in at $175 million or a 30% margin in the quarter compared to $123 million or 26% in the prior year, an increase of 42% over last year. We recently moved to accelerate our infrastructure migration to the cloud as we continue to scale our business and drive efficiency. This move will have minimal in-year financial impact and over time will shift our model away from capital-intensive physical data centers to a more flexible and sustainable model at scale. Now let me turn to guidance. As we've indicated, we are confident in our long-term opportunity and in our ability to add new customers and power their digital transformation across the Agreement Cloud with DocuSign. However, we are not immune to the macro challenges within our customers and peer space. As Dan discussed, we are focused on that, which is within our control, innovation across our product portfolio, and improving our go-to-market execution. While we have made considerable progress bringing in leaders with significant experience at scale, it's important to recognize that meaningful traction and better visibility will take multiple quarters. We have operating leverage in our business model and are committed to balancing growth with profitability while also exercising expense discipline. We remain on track to reach our long-term target operating margins. We will continue to make thoughtful and disciplined investments across the company, with a particular focus on our highest priorities, which will drive our growth and success over time. Specifically, in fiscal 2023, we are moderating our expenses and managing our hiring plans at a more measured pace, appropriately aligning our investments with the current climate and our growth. These elements have been incorporated in the current outlook. For the second quarter in fiscal year 2023, we anticipate total revenue of $600 million to $604 million in Q2 or growth of 17% to 18% year-over-year and $2.47 billion to $2.482 billion for fiscal 2023 or growth of 17% to 18% year-over-year. Of this, we expect subscription revenue of $583 million to $587 million in Q2 or a growth of 18% to 19% year-over-year and 2.394 billion to $2.406 billion for fiscal 2023 or growth of 18% year-over-year. For billings, we expect $599 million to $609 million in Q2, or growth of 1% to 2% year-over-year and $2.521 billion to $2.541 billion for fiscal 2023 or growth of 7% to 8% year-over-year. We expect non-GAAP gross margin to be 79% to 81% for both Q2 and fiscal 2023. We expect non-GAAP operating margin to be 16% to 18% for Q2 and fiscal 2023. We expect to see a de minimis amount of interest and other income, and we also expect a tax provision of approximately $7 million to $11 million for fiscal 2023. We expect fully diluted weighted average shares outstanding of $205 million to $210 million for both Q2 and fiscal 2023. In closing, while we are pleased with our Q1 performance, we also acknowledge the work ahead to reaccelerate our growth. The market opportunity is compelling. We have the leading product portfolio and an unwavering focus on driving sustainable growth at scale. We are in a strong position to execute on our go-to-market strategy that will deliver on our commitments to our customers while helping them transform their businesses across the Agreement Cloud. We are taking the necessary steps, and we are confident and energized by the plan we have in place. We're focused on execution and balancing growth with profitability as we partner with customers to transform how agreements are prepared, signed, acted upon and managed around the world. Thank you for joining us today.
Operator, Operator
Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question comes from Josh Baer with Morgan Stanley. Please proceed with your question.
Josh Baer, Analyst
Great, thank you. Appreciate the question. I wanted to get a better sense of the impact of both macro factors and normalization post-COVID on demand and competition, particularly in terms of what might be impacting the revised outlook. So first on competition, have you seen any changes in win rates or a need to discount pricing? Related to macro and COVID normalization, how would you characterize the pipeline? Is it healthy but deals are getting pushed due to macro factors, or do you see a weaker pipeline due to a gap in demand normalization post-pandemic? Thank you.
Dan Springer, CEO
So, a couple of different questions in there. Let me start with your first piece and trying to disaggregate, if you will, sort of global macroeconomic versus the post-pandemic impact to DocuSign. It's very difficult, as you would imagine, on a deal-by-deal basis to do that disaggregation. I believe the larger impact for us is coming off the sort of very aggressive buying that we had during COVID. But we also see, and as we talk to other peer software companies, they're reiterating, particularly in Europe, that there may be some impact there. So it's very difficult to really quantitatively disaggregate it, but I would say the most substantial piece is coming off the COVID high as opposed to the macroeconomic component. In terms of the competitive set, Cynthia and I do an assessment before every single earnings call, where we sit down with our competitive team and our pricing team, and we have not seen anything substantial that changes. Things are a little bit different in different markets. But in general, we're not seeing any change in terms of thinking about win rates or thinking about the average price that we are achieving. I am primarily talking about eSignature here, because it's the largest piece of our business substantially, but that's sort of the core analysis that we dive into. Regarding the pipeline, I’d say a couple of things. We have had a reasonable amount of churn and change in our field organization. Some of that is absolutely attributable to the so-called great resignation, consistent with what we're seeing in other software companies. We traditionally had very, very low attrition in our company, single-digit impact, but we're now sort of more at industry averages, we think. So that's been a big change for us. One of the challenges when you have turnover in the field is that it’s tougher to build pipeline. Most of our revenue in any given period doesn’t come from NewCo. Since articulated with very strong NewCo again, which I think is a good testimony to the strength of our business and the value proposition, the strength of our brand is really more on up-sell. Our field, whether that's CSMs or AEs, needs to be out with our customers and say, 'Hey, great, you've got good ROI from your first sort of use cases of DocuSign, let's expand into the next one.' What we're seeing is with that change in the team, that focus has been less on building pipeline. I would say that would be a factor in the change in guidance for billings that Cindy articulated. Hopefully, that got each of your questions covered.
Josh Baer, Analyst
Yes, thanks for the answers. I'll leave it there since that was three questions already. Thanks.
Operator, Operator
Thank you. Our next question comes from Brad Sills with Bank of America. Please proceed with your question.
Brad Sills, Analyst
Great. Thanks for taking my question, guys. I wanted to ask about some of the execution challenges that you kind of outlined earlier in the call. I think three quarters ago, when you embarked on this refocus on expansion activity, you outlined some steps being taken there and some changes in leadership. We're now two or three quarters into that. And it looks like this effort is turning out to be a bit more material than perhaps you thought initially. I guess my question is, what are some of the learnings as you pivoted back towards expansion? What's already working? And do you feel like you have the leadership in place now with these changes to be able to continue on that path to refocus on that expansion activity?
Dan Springer, CEO
Yes. First off, I would agree with the assessment that initially, I probably underestimated the impact in the post-COVID demand acceleration and maybe how dramatic that was. Clearly, we saw that the business growth rate practically doubled, and we doubled the size of the company in a relatively short period. It wasn't that we were unaware of the dramatic economics. I think we just didn't understand what portion of that would be one-time use cases and an acceleration where people bought extensively. So that the removal of that very strong tailwind felt like a headwind. That is absolutely a fair articulation of my misunderstanding of how dramatic that was. The second piece, while we talked about the need to enhance and augment the leadership we had for both the scale we've now achieved and for this new model going forward, it wasn't really until more recently that we started to bring in the new sales leadership and go-to-market leadership that we talked about earlier on the call. I'd associate it's still fairly early days for most of those leaders. The North American commercial and SMB leaders are just about a quarter in. Of course, Steve is just a number of weeks in, and the new enterprise leader hasn't begun yet. So I'd say it's still early in their tenure. In terms of lessons learned, it is the core thing that DocuSign had always done pre-pandemic—driving customer success and being focused on driving adoption and consumption of what people have purchased. We did have reasonable turnover in our field this last quarter, which means we are onboarding at a higher rate, leading to a lot of activity in onboarding and enablement. That, I think, is probably the biggest single contributor to why it’s going to take longer than we would have initially estimated to get back to the annual growth rates we'd like to see.
Brad Sills, Analyst
Thanks for that. And one more, if I may. I think you alluded to some early signs of perhaps a slowdown in Europe in particular. If you could just articulate a little bit on what you're seeing in the different regions—North America, Europe, Asia—with regard to demand, given all the moving parts of the macro. Thanks, again.
Dan Springer, CEO
Sure. Overall, international has continued to take share and now up to 25%. So we're pleased with the relative growth rate of international, and Europe is substantially the largest piece there. However, moving further east across Europe, we've seen some stalled and delayed deals as companies are being more prudent about the economy. That would be where we see the instability having the most impact, particularly in the German economy. I wouldn't say we've seen anything significant from the global unrest in other regions like LatAm or APJ. We just generally see across the board that companies are considering inflation and potential recession, becoming more cautious on their buying.
Operator, Operator
Thank you. Our next question comes from Karl Keirstead with UBS. Please proceed with your question.
Karl Keirstead, Analyst
Thank you, Cynthia. I think everybody just wants to stress test your billings guidance, to arrive at a viewpoint of how conservative it is. Your second-half billings guidance implies $1.31 billion or roughly $650 million in billings per quarter for Q3 and Q4. What assumptions are baked into that guidance? What are you assuming in terms of customer hesitation, sales productivity improvements in Q3 and Q4, just to better understand how conservative it is? Appreciate any color.
Cynthia Gaylor, CFO
Yes. Our guidance philosophy hasn't changed. We guide to what we see and the visibility we have, which isn't as much as we would like. That being said, the philosophy incorporates the risks and opportunities we're seeing in the business. A few of the things that Dan touched upon—bringing in new leaders, ramping field teams, looking at demand, use cases, opportunities within customers, and the macro environment—is baked into our current outlook for the back half of the year.
Operator, Operator
Thank you. Our next question is from Pat Walravens with JMP Securities. Please proceed with your question.
Pat Walravens, Analyst
Great. Thank you. If I may, I'll do one for each of you. Dan, why are so many of the reps quitting? I'm sure you've analyzed that. What are sort of the top two reasons? And then Cynthia, if you have 7% to 8% billings growth this year, doesn't that suggest that you would have sort of 7% to 8% revenue growth next year?
Dan Springer, CEO
I'll go in the order you put them out there, Pat. I'd say there are two things. One, and I do think the most substantial component for us and pretty much everyone I talked to in the software world is the construct that equity values are clearly down pretty much across the board with the reassessment of multiples. People have lived through tough years during COVID and are tired; they want to change. Many former DocuSign employees have said they love the culture and place but just want to try something new. That’s a top reason for leaving. Additionally, many that we hired during the dramatic COVID growth learned solely during that period when things were easier, so some have opted to explore other startups that guaranteed their first year's compensation to make a switch. That’s probably the two biggest drivers.
Cynthia Gaylor, CFO
And as for the back half of the year, we’re not guiding on next year at this point. We have new leaders in place, and we're ramping the go-to-market approach. The guidance reflects what we're seeing right now. I wouldn't say the mechanics suggest a clear correlation, as we are actively making investments to grow the top line.
Pat Walravens, Analyst
Okay. Thank you.
Operator, Operator
Thank you. Our next question comes from Jake Roberge with William Blair. Please proceed with your question.
Jake Roberge, Analyst
Hi. Thanks for taking my questions. I'm curious how the CLM solution has been tracking. I know you talked about some exciting new product launches. But is that solution seeing the same cross-sell headwinds that Signature is experiencing right now, or are you starting to see some better growth in that segment of the business?
Dan Springer, CEO
Yes, CLM has been a bright spot in Q1. We were over 100% of our growth goal there, as you may recall. Before the pandemic, CLM looked like it was picking up, but during the pandemic, it became tougher as people focused on shorter-term ROI wins with eSignature. Now we're seeing optimism for that segment, and our recent launch of CLM Essentials has already won dozens of customers. We're bullish about the momentum there.
Jake Roberge, Analyst
Great. Additionally, regarding international markets, how has your launch in Mexico tracked? Considering the moderation of sales investments you mentioned, will that mainly apply to international spending, or will it also affect the domestic market?
Dan Springer, CEO
Regarding international, yes, the impact from Eastern Europe is most affected by global unrest. As for Mexico, it's still very early for us there and wouldn’t have a meaningful impact on the overall international business in the short run. In terms of moderating investments, we anticipate that most moderation will happen in North America. We see continued growth in international as part of our plan to grow faster in those markets.
Operator, Operator
Thank you. Our next question comes from Tyler Radke with Citi. Please proceed with your question.
Tyler Radke, Analyst
Cynthia, you talked about lower visibility in your guidance. I'm curious what you're assuming for renewal rates and net retention. In the past, you've noted underestimating one-time use cases, so is there an expectation of higher churn or lower net revenue retention, particularly in the second half?
Cynthia Gaylor, CFO
We reported a 114 net retention, which is within the historic range. For Q2, we're expecting it to be around the low end of the historic range. Dollar net retention is more of a lagging than leading indicator, based on how it covers customers and how they expand over time. That metric includes churn. As I said, we are anticipating it around the low end of that historic range.
Tyler Radke, Analyst
Thank you. Lastly, Dan, you mentioned some of the go-to-market changes as you look to reaccelerate growth. Do you have a timeline in mind for when you think those changes will start to yield results? What do you expect the growth rate to look like post-pandemic?
Dan Springer, CEO
We haven’t published long-term growth rates, but we expect to see growth in absolute dollars picking up in the second half. We're making changes and as those transition occasions settle, we should see more progress. It's not prudent to give an exact date, but expect to gain momentum as we continue to navigate post-pandemic dynamics.
Alex Zukin, Analyst
I have two questions. I'm having trouble understanding the issues. Are most of the problems execution-driven rather than macro-oriented? Could you provide clarity on whether you're assuming sales cycles will lengthen or if retention rates will drop? Because there are domestic impacts that other companies are noting as well. Additionally, you mentioned the moderation in hiring but reaffirmed margin targets; can you explain where we may see variability there?
Cynthia Gaylor, CFO
We haven’t specifically seen elongated sales cycles. The largest factor impacting our guidance has been customers expanding at smaller rates than in the past. We're focused on the lands and expands, which means we're continuing to add customers, but they expand usage more slowly. We also have to manage the expenses appropriately given current market conditions. Our operating model can deliver the margins laid out even amid challenges.
Dan Springer, CEO
To fine-tune further, there's been a consistent push on acquisitions; however, our execution pathway remains firm, focusing on existing deals and making sure customers achieve the returns from those new launches. Changes in economic considerations are made, like lower deal sizes due to previous larger purchases. Hence our shifts align with maintaining efficiency while still qualifying our robust pipeline.
Rishi Jaluria, Analyst
I want to understand the mechanisms behind your Q2 billings guidance. With growth at just 1%, I noticed you're implying $0 in deferred revenue from Q1 to Q2. Can you elaborate on what assumptions are behind this guidance? Have there been any potential pull-forward of business impacting it? Also, on the geographical front, there’s been a notable slowdown domestically; explain the components in play that result in the US revenue growth being nearly flat.
Cynthia Gaylor, CFO
It's unusual for Q1 to Q2 to demonstrate flat revenue, however, billings do fluctuate quarter to quarter based on timing. While Q1 was appropriate and met our expectations, factors always influence Q2. The landscape is dynamic, and we are observing the trends continually, but timing discrepancies exist in how deals fall in or out of the quarter. We'd rather focus on adjusted forecasts based on the last four quarters to assess velocity and have a more conservative but realistic outlook.
Dan Springer, CEO
I would affirm Rishi's observations. While the one-time use cases have influenced results, they’re not the only variable at play. We've expanded rapidly, now capturing a higher share of customers but previously pushing hard during the pandemic; now customer demand seems steadier but less aggressive compared to prior peaks. The overall climate means we're adapting rather than losing ground. Many customers love what we offer, and they’re still adopting, though at a much more measured rate than before.
Shebly Seyrafi, Analyst
Could you describe what areas in field sales needed the most improvement? What actions do you anticipate Steve Shute will undertake?
Dan Springer, CEO
The primary needed improvement in field sales involves enhancing discipline around forecasting and planning to match our new larger scale. Our sales leadership was strong, but we expanded quickly, onboarding many new hires into a rapidly evolving environment. We’ve had to enable them effectively given the challenges they face post-COVID. Steve’s focus is on ingraining the DocuSign culture back into the new team while re-establishing key practices relating to customer engagement that we built in the earlier stages of our business. Thank you very much. To summarize, we're pleased with our Q1 performance but focusing on what we need to do for profitability and reigniting growth. We look forward to speaking with you all soon, and thank you for joining us.
Operator, Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.