Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's Second Quarter Fiscal 2021 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. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now pass the call over to Annie Leschin, Head of Investor Relations. Please go ahead.

Thank you operator. Good afternoon everyone. Welcome to DocuSign's second quarter fiscal year 2021 earnings conference call. On the call with me today, we have DocuSign’s CEO, Dan Springer; and CFO, Mike Sheridan. The press release announcing our second quarter results was issued earlier today and is posted on our Investor Relations website. Before we get started, I’d like to let everyone know that we plan to participate virtually in several events in the upcoming week. First, the DA Davidson’s 19th Annual & Software Internet Conference on September 9th, the Citi’s 2020 Global Technology Conference on September 10th, the Deutsche Bank Technology Conference on September 14 and Jefferies Virtual Software Conference on September 15. As other events come up, we will make additional announcements. 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 around the impact of COVID-19 pandemic on our business, financial condition and results of operation are 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 employees stock transaction, amortization of acquired intangible assets, amortization of debt discount and issuance costs from our notes, acquisition related expenses and as applicable other special items. In addition, we provide non-GAAP weighted average share count and information regarding free cash flows and billings. These non-GAAP measures are not intended to be considered in isolation from or 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 information and most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release, which can be found on our website at investor.docusign.com. Now, I'd like to turn the call over to Dan. Dan?

Thanks Annie. Good afternoon, everyone, and welcome to our second quarter earnings call for fiscal 2021. I appreciate everyone joining us today and I would like to cover four key areas of the business with you. The evolution of COVID-19 and the impact we are seeing on our business, the essential role that eSignature and the Agreement Cloud continue to play in the digital transformation of our customer’s businesses around the world, our recent acquisition to accelerate the opportunity in remote on-line notary and a few additions to the Board and executive team, including Mike Sheridan's new international leadership role. So let’s start with the evolving dynamics of the pandemic. It would be an understatement to say that we’re all still experiencing significant changes in the way that we work and live as a result of COVID-19. We’re seeing it with our more than 5000 employees around the world as we don’t expect to return to an office environment until June of next year. As a team, we’re focused on helping each other adapt to these changing circumstances and to balance the myriad demands on our collective time. We’re seeing it with our customers too. I spoke last quarter about how so many of them faced a sudden need to transition to remote work when the pandemic first hit. Today, that need has evolved from an initial crisis response to a business necessity. And because Agreements are central to doing business, the need to agree electronically and remotely has never been stronger. This is causing greater adoption of our offerings, something we believe will persist beyond the crisis, because in our experience it’s very rare to see anyone go back to paper once they’ve gone digital. The upside of all this is that DocuSign is becoming an increasingly essential Cloud…

Thanks, Dan. And good afternoon, everyone. Before I get into my comments on the corner quarter, I'd like to thank Dan and the board for entrusting me with my new role as President of International. We have a great strength in our international operations today, has achieved impressive growth over the last several years. I look forward to working with this great team to expand upon the success. I also want to welcome and congratulate Cynthia Gaylor as our new CFO. As Dan mentioned, he and I have had the opportunity over the last couple of years to work with Cynthia as a board member. And during that time, she has become very familiar with DocuSign’s financial operations. I am confident that Cynthia will hit the ground running as she joins the team. Turning to our Q2 results, strong sales led by our eSignature solutions were over 61% year-over-year increase in billings to $406 million. This also drove a 45% year-over-year increase in total revenue to $342 million in the second quarter. Subscription revenue increased 47% year-over-year to $324 million. We saw particular strength outside the U.S. as total International revenue grew over 59% year-over-year to $67 million. This quarter, we added over 88,000 new customers, of those, over 10,000 were direct customers, an increase of 55% year-over-year. This brings our total customer base to nearly 749,000 worldwide with over 99,000 direct customers. Strong eSignature expansions and upsells into our existing customer base led to a record dollar net retention rate of 120% in the quarter. Customers with ACVs greater than $300,000 grew 41% year-over-year, to a total of 520 customers. Total non-GAAP gross margin for the second quarter was 78%, consistent with a year ago. Subscription gross margin was 83% compared with 84% a year ago. Margins were impacted…

[Operator Instructions] Your first question comes from line of Sterling Auty with JPMorgan. Please proceed with your question.

Yes, thanks. Hi, guys. First, Mike, congratulations on the promotion and running International. If Cynthia's there, congratulations on the new role as CFO. Just on the idea of International Mike, maybe you can give us an update on the status of where the go-to-market, the percentage of revenue coming from International and what investments are necessary to drive that business going forward?

Yes, thanks Sterling. A couple of things. I would say that if you look at the scale of International today, it's over $200 million in revenue. And the team is executing very well. I just reported a 59% year-over-year increase in revenues. So there's definitely growth already being achieved. If you think about that scale, it's similar to what DocuSign was about five years ago when I joined DocuSign. At that time, DocuSign was also a very rapidly growing organization. So as we've looked at many of the challenges that we needed to deal with at that stage of the total company, are showing themselves in our International region. So much of the work that I'm going to be doing is going to look a lot like the work that we've been working on over the last several years as we scale the whole business. I think what really makes this work is in my role as CFO, I've worked on so many of the very same kinds of issues. I've developed strong relationships with the executive staff in headquarters, as well as the leaders across the globe. So we have a lot of foundation in terms of what the nature of the investments are going to be. I think we're tracking well. I think a lot of what we're seeing is that the structure of our International operations today look like what they were when we formed them, four or five, six years ago, which is direct line reporting into headquarters, which is appropriate. But I think what I can bring is a greater focus into that area where I can work with the executive members as well as the regional leaders to figure out how they work together across those reporting lines to figure out what are the right in region investments and structures that that can drive that growth further?

Right. And then one quick follow up in terms of the gross margin, specifically subscription gross margin, comments on kind of where we are in the scale. And what we should expect trend wise from that line going forward?

Yes, so the guidance that I provided shows that they're going to, for the, for the period of time to the end of this fiscal year stay in those high 70s to low 80 kind of range. There was one impact in Q2 that related to our acquisition of Seal, which had an impact on the margin that was slightly dilutive as we anticipated. The other impact on margins right now is that as I mentioned, we have pretty significant increases in our transaction volumes. And so we're continuing to build out our infrastructure, data center infrastructure and other to ensure that we kind of keep our SLAs tracking as we're, as we're consuming those greater transaction volumes. So we're absorbing those into the existing margins, but I think they're going to be stable at that level to the end of the fiscal year.

Great, thank you.

Your next question comes from line of Stan Zlotsky with Morgan Stanley. Please proceed with your question.

Perfect. Thank you so much, and congratulations on a very strong quarter. From my end, the thing that I wanted to dig into is, what are you seeing as far as the pull through of the rest of the DocuSign suite with into your existing installed base of eSignature customers, so things like you know your SpringCM CLM product, Seal and then I have a quick follow up.

Yes. So, Stan, I think what we're seeing is sort of what we talked about last quarter, continue the dramatic pull from our customers and prospects for eSignature with a very high, you know, enablement time, very quick ROI, and just the need for people to take that first step into the Agreement Cloud. And as most people do enter into Agreement Cloud is to eSignature. That's been the -- that's the headline story. And if we look at our growth, it's been more significant in the traditional aspects of our business than any other part. And we're very clear, when we go to our field, we say that you have to when you talk to customers and you talk to prospects, you start off every conversation with DocuSign Agreement Cloud Company, let me tell you how we're going to help you prepare, sign, act on and manage your agreement. And if that individual says to you, yes, I’d like to buy some eSignature to get started right now, the only appropriate answer is yes sir, or yes ma'am. I'm happy to sell you some eSignature. And that's what we're going to continue to do through this period of time. We want to really support what the customers are needing. But at the same time, as I mentioned up front, we're seeing a lot of people saying the concept of the Agreement Cloud is really something they're embracing. And they're saying we'd love to figure out a way to broaden the relationship with DocuSign. We believe that things like DocuSign CLM, which is the with the SpringCM product, we've turned it into here, will continue to be strong, we see a lot of demand, we're building a lot of pipe for it. And the customers that we're bringing in right now, 88,000, new customers, many of those will be prospects for CLM in the future. But we believe that the sales cycle there will always be a little bit longer, they're more complex. Usually there's a services component, right? So it has to be a statement of work calculated and done. And a lot of times I think we're seeing CIOs and CFOs at our customers today are saying I want to do that. But right now I need to get these signature pieces enabled. Let's do that now and as we get later into the year and more settled and settle down in their company is where I think we'll see increased demand and pull through of those other components.

Perfect. That makes a lot of sense. And maybe one for Mike. Mike, congratulations on the promotion to lead International. And just on the quarter, net revenue retention, obviously very impressive 120% result. How should we think about net revenue retention moving forward versus your more traditional 112 to 119 range? That's it for me. Thank you.

Yes. Thanks, Dan. Yes, we obviously for the last couple of quarters have been at the higher end of that range. Actually, this quarter, we exceeded it a little bit. I'm not going to update a guidance range for it. We will be upgrading that guidance range when we provide guidance for fiscal 2022. But with that said, I think what we've seen in these recent quarters in terms of growth strengthening around $1 net retention and our ability to upsell into our installed base should keep us on the higher half of that range.

All right, perfect. Thank you so much.

Your next question comes from line of Alex Zukin with RBC. Please proceed with your question.

Hey guys, thanks for taking my questions, congratulations all around, and the quarter and the promotions, etcetera. I guess maybe just two from me, first one for Dan. Dan, are trends, [we'll be talking about] [ph] trends on kind of a monthly basis and linearity both on kind of the mid-market at the enterprise. Do you feel like around even engagement are you -- are we past the kind of momentum and now you're starting to see more returns normal adoption or, or is it still - are trends still accelerating?

So in terms of two things, one is, we have sort of a linearity and we do a lot of our forecasting. We've looked at how quarters build across the month. And the one thing I would tell you in the last couple of quarters, we've seen some I would call positive trend where we are having less of a back end, wait to our quarter. And I would say that, you'd expect that of course, to be on our web and mobile business, which tend to have relatively even linearity, right. Whereas an enterprise of course, it had the biggest back waiting in the quarter. But we're seeing it across the board, even with the enterprise, more evenness. I think some of that is execution on our part. I think we're putting a lot of focus on thinking about monthly closes versus just quarterly closes. But I would also tell you that I believe in the marketplace, we're just seeing demand being stronger, and so people are coming to us through all parts of the quarter, just trying to get deals done. So we're probably seeing some positivity there. But that's the -- I don't think there's been a dramatic change and I don't think we see anything in the way we're forecasting. Michael, if you see something different, feel free to share it. But, I think we're not seeing a lot of a lot of dramatic change, just a slight improvement in that, and that gives us more predictability as we look through the quarter.

Got it. And then maybe for Mike, you look at the billings growth of the first half is nothing short of extraordinary. I don't think anybody would kind of speak otherwise around that. The guidance for the second half does look like a pretty different type of growth trajectory. So I guess the obvious question is, is there any pull in activities that you saw around large enterprise deals and kind of this quarter in the first half, because I would assume that, you're now getting into your big enterprise renewal conversations in the second half and period, and that should actually, potentially drive even more, large deal conversations and be a net benefit, even more so for net expansion?

Yes, so I would say a couple things out there. I think in Q3 our guidance has billings growth year-over-year well into the 40 percentile. So I do feel like, we're off to a good start in Q3 and it's reflected in the guidance like we've talked about in the past. There's a lot of variables Dan alluded to it in his comments that we're subject to like everybody else. We're trying to figure them out real time. We feel very good about the second half. We guide what we can see we don't we don't guess, we always aspire for the highest level of growth we can accomplish, but I think the guidance is reasonably balanced and positive.

Perfect. Thank you guys.

Your next question comes from line of Rob Owens with Piper Sandler. Please proceed with your question.

Great, good afternoon, everybody. Wanted to drill down a little bit into the acquisitions. And I guess starting with Seal obviously; you've announced the big improvements to contract analytics and just wanted to know how far down the path you are at this point, how much raw R&D you're going to have to spend moving forward. And when, when it's going to kind of achieve your vision?

Well, I think when we talked about Seal starting off, I think the answer is there was only two parts to this. And we're still excited about both. One was this sort of intelligent insights, which is I think the core agreement analytics products that we've been partnering, you know, with CLM when they were a partner before the acquisition. And we continue to see that's going to be something that a lot of our customers are going to want to do. And we're very excited about that. And then the second piece was about integrating the Seal AI technology into our CLM offering. So as you saw, when the Gartner report came out on CLM, we were the only two companies that were in that upper right hand quadrant and we feel we had a fantastic entry with DocuSign CLM. And yet, we also felt internally, the place where we had the biggest improvement opportunity was to really integrate agreement analytics into that CLM product. And so that is the Second big piece. So on the first one Intelligent Insights, I think we're there. And it was a product that was fairly, close to standalone, there's some things we needed to do to make it DocuSign quality, let's call that, in terms of things like security and reliability, and we're still making investments on that front. But I would say we say that that product is pretty much ready for primetime and our people are now out aggressively selling that into our base. In terms of the integration with CLM. That's something that's still quarters away. We still have a lot of engineering and R&D work as you referred to it to make that the fulfill that promise we have for our CLM product, where it's going very well. I think we're highly confident, but we think that will be early next year before I can really put my hand on my heart and tell you that work is complete. And the DocuSign CLM product has a fully integrated advanced agreement analytics functionality, one that will allow us to be significantly stronger than other players in the market.

I guess quickly on the Liveoak acquisition, how much does that increment your TAM? And can you just speak to the broader opportunity there?

Yes, yes. So TAM is actually a really interesting topic within the notary space. We've taken a couple looks at it, we've looked at other reports. We're basically saying, we think this approaches about a billion dollars. So if you look at this, and you think about it in the construct of a $25 billion, TAM for eSignature, it's not a dramatic increase. But it's a really nice piece. And the bigger side of it for us is, so many of our customers have said to us, we really would love to have a notary capability. And particularly for those larger customers that have what we call first party notary, they already have a notary capability in their business. They really are excited to integrate this into their offering. We see that a lot with the financial institutions who have been pushing us. So as much as anything, this is like a feature enhancement that we think we’ll have a nice, billion bucks. That's not a bad increment to go after. But it's not it's not like sort of a earth shattering change in our business. We look at this as a really nice tuck-in that our customers are asking for. And this good piece for us to go after. And then, it opens the opportunity to go after the third party notary space. And we have 10 people tend to think about that the individual notaries that are driving around for people to do real estate transactions, and we would love to then really transform that business as well as so many customers have come to us and said in the past, that would be a great opportunity for DocuSign to make their lives a little more agreeable.

Great. Thank you very much.

Your next question comes from line of Pat Walravens with JMP Securities. Please proceed with your question.

Oh, great. Thank you. And congratulations, Mike. I love the move from the financial role to the operating role. That's awesome. So here's my question for you, Dan. And I've asked a bunch of CEOs this question this quarter, which is how do you make DocuSign, the best place to work when everybody is working from home?

If I had the answer to that one, I would be selling it in a lot of different ways that for sure. But I can tell you this, the good news is because we had built such a such a strong culture and that's why our Glassdoor scores are so high, and we do so well on those, you know, Best Places to Work surveys, and why our own surveys our employee engagement so high is because we built a fantastic culture where people really believe in our values, and fundamentally, they're excited to work in a place that puts customer success as our top priority even above our financial results. And people get excited about the pride they have for working here. None of that has changed. Well, it's harder to have those personal connections to people, when we don't have people coming into the office. And each day that goes by a bigger percentage of DocuSign owners have never met personally, one of their colleagues. We're about to cross over $1,000 DocuSigners that have joined since we were doing remote office work. So it's going to get tougher and tougher. And I think the real answer is increased communications, we are looking at changing up the mix of communications. And some of the things are harder. But I'll tell you something else, some of the things are better. I'll just give you one example, Pat. So in the past, we have an event called discovering DocuSign, where we would invite people and they join shortly after the join to Seattle is where the company was founded. And we met with a bunch of other new DocuSigners. And we had different executives come in and talk to them about the company over a couple days. I didn't get to attend that very often, just because my schedule and what I need, I couldn't always be there. In fact, I started to be there less and less. Now that we do that as a remote event, I’m there every time. So every new DocuSign employee could be a good thing or bad thing depending how you look at it Pat. But they get an opportunity to meet Dan Springer. And we get created, create a connection, and quite a few of them send me emails right afterwards. And we've now built a different kind of connection. So it's remote, but we're figuring out creative ways to find different communication styles and techniques to put us into a place where I think we can continue to this a place for people to do the work their lives. But it's ever -- this is not one that's going to over quickly. We're going to have to continue to be creative to do if we want to continue to earn that great relationship we have at our employees.

Thanks Dan.

Your next question comes from line of Walter Pritchard with Citi .Please proceed with your question.

Hi. Couple of questions on the sales and marketing side. Your growth in spending there has been decelerating over the last three quarters. And understanding there's expenses like T&E and so forth are not part of that. How are -- what are you doing to build sales capacity over the next six months? And how do you think about driving sales once we get into the situation where maybe people here are on fire and COVID is at least, we work through it being more of a normalized situation as opposed to the situation we're in right now?

Yes. So couple of things. I would say capacity, we are continuing to expand our capacity pretty aggressively. As you saw from the hiring statistics that I had mentioned. We're now over 5000 employees, year-over-year growth 44%, substantial amount of that is in our go-to-market organization, not just on sales capacity, of course marketing capacity as well and customer success capacity. And so, we are endeavoring to stay ahead of the trends that we're seeing. We're working to see the demand data very carefully to try to forecast trends and get ahead of that with capacity across the business. In terms of what will we anticipate post-COVID? I don't know that anybody have a great answer for that. It is our view that as we work through these difficult time so, there is a greater awareness of the need to digitize the business. And we believe that's going to be staying even after things returned to whatever normal look like in the future. So, we do believe that we're entering into a period of a "new normal". It doesn't necessarily mean that the highs of any particular quarter going to sustain forever. But at the same time, we don't see trends that things are going to return to the way they looked and trended pre-COVID. So we're designing the business. We're designing our marketing activities and our sales activities to stay on top of that as possible.

Okay. Thank you.

Your next question comes from line of Koji Ikeda with Oppenheimer. Please proceed with your question.

Okay. Thanks for taking my question. Nice quarter guys. Congrats to Mike on your new role and congrats Cynthia on your new role too. Just one question from me. On the sales process, we're just thinking that now most of the role has been operating in this new pandemic environment for a while. Have your sales conversation changed significantly? Are you thinking customers taking a set back now and looking at how to optimized workflows more strategically, which could result in more platform type conversations for you? Or maybe even broader adoption across the organization, the starting point for implementing DocuSign?

Yes. Koji, its really interesting question. One thing that's always hard in answering a question around sort of more kind of shifts like that is what's behind? Is it maturation of our business? Is it related to COVID etcetera? My view is from a COVID standpoint, as the nature of your question is we went through a period of time where people just got very focused six months ago on -- we need to get things up and going quickly. We need to work in a remote environment. And with certain use cases that we can't run our business, we can't figure them out. So it was not about that that naval gazing and deep thought about their processes. It’s about getting some of these primarily eSignature workflows in place. And while I think there is still some of that for sure that has definitely calm down. And I think the number of people that are rushing to us saying, I need to make a quick adjustment to be able to deal with like this. They haven't got it done by now. And they miss that window. We are seeing now as people saying, wow, this is fantastic. There more place where I could leverage this in my business. And we're looking at expansion as we talked about of use cases within our base to more and more places that as I said before. We only think they would have gotten there eventually. It just accelerated those. And we're continuing to see that acceleration of those workflows into DocuSign, because they realized how beneficial they are to their business. From the standpoint to that more platform thinking, I don't know that I would say, I seen that increase and I don't know if I say this increase would be due to the COVID. The natural maturation for a lot of folks with us around the Agreement Cloud opportunity is as they start hearing us described this future. They say while I could see you as a more strategic part of my sort of IT infrastructure and my business process infrastructure. And so I think that's occurring more and more. But I think that's more to do with the fact that we're just getting bigger and having larger relationships with companies as we scale. You look at that number of customers above $300,000 which is just sort of one minute [ph] that keeps growing substantially. And so I think that's driving it more than a COVID reaction. But again, it's hard to sort of separate out each of those components. But that would be my view.

Great. Thanks for taking my question. Appreciate it.

Your next question comes from line of Taylor McGinnis with Deutsche Bank. Please proceed with your question.

Yes. Hi. Thanks so much for taking my question. And congrats again on a really strong quarter. So net retention rates have been really strong the last couple quarters. But I believe so far that's largely been driven by eSignature related expansions. So, I'm just curious what kind of levels you think net retention could hit one things like SpringCM or the broader Agreement Cloud start to become larger contributors? Or maybe anything that you can just share on what those deal expansions have look like so far, when they include those products relative to just eSignature?

Hi, Taylor. Yes, couple of things. One, if you look at the scale of our eSignature business compared to the scale of the CLM, and the data analytics or agreements -- sorry, agreement analytics businesses, eSignature is dramatically larger. So that statistic is going to largely succeed or not succeed based upon our success in eSignature, our upsells or volume expansions and all of those things. That is not to say that the Agreement Cloud expansions are not important. They are. But that is a much longer term trajectory before you'll start to see them have a meaningful movement in a broader statistic like that. So as we talked about those businesses and how they're growing and the comments that Dan made, I think those are all critical. But in terms of the near term quarter-to-quarter impact on something like dollar net retention, eSignature volumes are just going to overwhelm it. So you won't see it so much statistic like that.

Got it. That makes a ton of sense. And then my last question is, I thought the inflection in international growth was really interesting. So just curious if there was any catalysts in the demand environment there that drove that or if you guys made any changes on the go-to-market front? Or if there was any just -- if there was anything to call it in particular?

I think Mike's involvement in international, Taylor; it's clearly been the driver in the increased growth there. And around the company, we couldn't be more excited that he's off to such a good start. From your sense about the market, and I think it's mostly Mike's execution. But for your sense about the market, I don't think we have seen anything different. We have seen different levels of success in different geographies. It was phenomenal for us to be able to say that every single geography that we have was above plan in the quarter. And we're in a bunch of geographies. So that's pretty impressive. I would tell you, there's some markets that I was going to point, to one that was particularly strong, I would say LATAM, and our Brazil team crushed it. But if I said to the area where I saw the most improvement, because we've been crushing it there for a while, I'd say was Europe. And I think, again, with tongue out of my cheek, I'll say, I do think, Mike, leadership in Europe has helped us perform a little better there and execute better. And it's big reason. We're so excited for this broader expansion of his role to all of international. But I also do think that we saw some positive demand characteristics across Europe as well. So those are the my observations and Mike, I don't know if you have anything different you're seeing.

Yes. I would add, I think a couple of things. One is going back to the capacity question earlier; we have been building international capacity. And as we see some of that capacity get through their ramp, we're starting to see better productivity. That's a contributor. I think the pandemic impact is a global impact. We're seeing that. And remember our international business in terms of scale isn't as large as the overall. So having a higher percentage on a smaller scale is also a factor.

Awesome. Thanks.

Your next question comes from line of Rishi Jaluria with Research Analysts. Proceed with your question.

Hi, this is Rishi Jaluria from D.A. Davidson. Thanks so much for taking my questions. And congrats to both Mike and Cynthia on your new roles. Wanted to start by talking about the Liveoak acquisition. Maybe just from out from a technology perspective, I know you can do a video through that. Are there plans to kind of integrate that with other solutions out there especially in this environment with so many people using tools like Zoom to start, so that it's very natively integrated like you've been doing with the core DocuSign eSignature product for so long. And then alongside on Liveoak, I see on their kind of customer base, lot of financial services and real estate, so, some of your strongest verticals. But do you see other verticals where there's potential to expand the solution into? And then I've got a follow up.

Sure. Yes. So a couple thoughts there. First off, I think you hit the nail on the head that this opportunity for this collaboration, leveraging things like video conferencing, it's a broad opportunity, and we're going to continue to be an open system for sure. And in fact, Eric, Eric, on the CEO of Zoom, and I had a conversation about this. He is super excited, as are we to expand our partnership and include their platform. So obviously fantastically successful to sort of leverage that into integration with DocuSign for these kinds of program. We believe the Liveoak guys have built some really nice tools. And I mentioned some of those in my prepared remarks, but around really driving that collaboration. So to use your example of financial services, if you're doing -- an opening of an account, and say you're a large bank sort of like a Bank of America scale, customer of ours, and you used to have a lot of people opening accounts in your branches, and now your branches are closed, you need to rapidly adapt and be able to do that in a remote setting. But then we think we're really excited about, once you've done that in the remote setting, that's valuable. Even in a post COVID world, you can tell your customers, you don't have to cut the branch to open that account. You can if you want like, but we also have this remote opportunity. And the same worker, whether they're sitting in the branch or sitting in a call center can do that activity for you. We think that's super powerful. So we really want to build that out as an internal offering. And we think notary is just one of the components of it, but we believe that's going to continue to be a foundation for other people building on top of it, as you mentioned. In terms of other industries, financial services is a big one. But we can see this having a big impact in Telecom. We see there's a lot of opportunity in healthcare Life Sciences, where people are going to want to have -- we talked about telehealth a little bit on the call, and some folks doing that. We think leveraging those same technologies to improve that experience for folks is a big one. So we do think this will be broad based. But you're absolutely right, financial services, a strength of theirs I would argue, a focus of theirs and a strength of ours is the place we're probably going to see the most initial focus on our joint efforts.

Great. That's really helpful. And then just kind of a little bit of a financial question. But -- we've seen contract lengths kind of ticked down a little bit, which is, I think, to be expected in this environment. Just mechanically, how should it be thinking about the potential headwinds that might have on future cash flow? Thanks.

Hi. Yes, a couple things, I don't -- on the cash flow piece of it, even on multiyear contracts, we build those annually. So we wouldn't anticipate that it would really have an impact on trends around cash flow. In terms of the contract length, you're right, it did tick down slightly to the 17 months, last quarter, I think was 18 months. And so what we're seeing in our bookings is we do have some waiting coming in on small to mid that's having some impact. And we're also seeing some larger enterprises as everybody's navigating through the current economic situation, being a little more conservative in terms of the length of contracts that they're signing up to. They're not massive changes, but those are kind of the two things that are affecting that statistic.

Wonderful. Thank you guys.

Your next question comes from the line of Kirk Materne with Evercore ISI. Please proceed with your question.

Thanks. And congrats on the quarter and on the new roles for Mike and Cynthia. Dan, I wanted to ask a question. Obviously, you guys have signed up a tremendous amount of new customers this year. And when you think about those customers, renewing, hopefully in a year from now, or maybe even sooner, is there a cadence when if they didn't want to discuss sort of the broader Agreement Cloud that they start thinking about it, meaning, when you think about 12 months from now and you have all these new customers, you just signed up. I'm just kind of curious, historically, what you've seen in terms of the cadence, whether it's been six, nine, 12, 18 months. And I guess, when you go back into those accounts, is it the same person? Or is your account manager, you really need to navigate the organization to maybe sell a little bit higher when you start talking about the Agreement Cloud. I'm just kind of curious about how that maybe plays out in your mind over the next year or two? Thanks.

Yes. So it's a good question. And as you might imagine, the first answer is it depends, right? It depends a lot on the size of the customer and the vertical for sure. But I'll try to give you some again higher level; we'll call them averages to give you some perspective about it. In general, customers come in and they sign up. And there's some process before adoption happens. Is one of the reasons you've heard Mike talk a lot about our investments in customer success, the faster we get people to adopt, they quickly get that strong ROI people get from DocuSign, and then they start looking for more opportunities to grow. And so, what we tend to find is on the smaller customers, they're there within a month. We adopted it going quickly. And some of the larger enterprise customers, it might be several months, because they have like a program manager that gets involved, right? There's a lot of process that occurs. And so that's probably the biggest determinant of why there's variability in that time. And then once people start adopting, and driving the success of those first use cases, the next biggest determinant on the timing is how much they bought. So some people had that initial land that was quite small, it was conservative, then before they get to the end of the year, they're coming back and they're buying more if they implement that first project effectively as most do. Some people have said, we want to be aspirational in our first buy. They might be in a situation. They might also do a multiyear contract if it's an enterprise player, but they might do a three-year buy, and they won't be talking to us for two years. Right? So there's a…

That's very helpful. And if I guess, just one other follow up. Obviously, incredible growth this year, you're much bigger company; you're going cash flow at a faster rate. Does that change any of the way you think about M&A or some of the things you might have had five years from now maybe pulling those forward in terms of either it sounds like Mike going international, sounds like you're speeding that process up? Or is there anything I guess from a balance sheet perspective that really changes just given the kind of growth you've had, and frankly, the higher free cash flow that you're now generating?

Yes. Nothing from me that's in a significant way. One of the things we started doing acquisitions two years ago, when we announced SpringCM and sort of the newer DocuSign, or at least within my time here coming up on four years, was saying, hey, guys, we're not going to become some massive acquisition machine. We want to do as smart deals that we can digest effectively. We want to have a very high batting average on successful deals. We've now done our third deal. To be honest, I would have thought we might have been a little bit of a wait before the third deal. The deal was not very large for bringing in the notary capability with Liveoak. But I feel good about the deal sizes we're doing. It's true with our balance sheet, we could probably open ourselves up to much larger deals economically, but we don't really think about it economically. We think about it from a customer success standpoint, what are our customers want, and fulfilling our vision of the Agreement Cloud. And one of the things that's tricky is, when turns up all the companies in the broadly defined Agreement Cloud, there aren't other DocuSign. There aren't other very large players. So I don't think there's a sort of a population of big deals that we would see at this point in time is being in that Agreement Cloud vision. Is it possible over time continue to grow and expand and become more expansionary than the Agreement Cloud, and then therefore look at maybe more significant size deals, I wouldn't rule that out. But as I look into what's visible, I feel really good about the strategy we have right now. The deals we're doing, I think, are high quality. They're on strategy for us. And I think if we look out into the possible future deals, they'll probably be more in that ballpark of size, because that's just the size of where companies are in the Agreement Cloud landscape. I don't know, Mike, if you have any different views, but I feel good about where we are right now.

Your next question comes from lines of Kash Rangan with Bank of America Merrill Lynch. Please proceed with your question.

Thank you very much. Congratulations in a superb quarter. You ramped up your Op margins, you ramp up your free cash flows, your sales productivity is, at least from what I can tell all time high. I'm curious to see if you can expand upon the things that helped sales productivity in the quarter whether you measure through the lens of billings or revenue. And how sustainable are these trends? And finally, does it change your view of the long term operating model to the upside?

Let me talk a little bit about the sales productivity side. And Mike, you can talk about if you're willing to change our long term operating model on the call. Kash, I'm not sure, but we'll see. Your outgoing time as CFO, -- Cynthia a gift. My perspective is that, I think the success we've had in terms of sales productivity is to be really clear. It's been the secondary goal. The primary goal has been growth. And we told you, we want to continue to invest to achieve the -- growth. Now at the scale we've achieved, because we feel we see opportunity for productivity improvement. I'll tell you, it's not our focus. Our focus is still on meeting this significant demand opportunity. But just with that scale, it's sort of just comes to us. So my view is that we haven't done anything dramatically differently there. There's been a little bit of a focus that I've been pushing on to that team, to say, let's think about overlays. Let's think about complexity. As we grow this business, make sure we don't get so much complexity in the business, that we lose our ability to simply execute. And so I think that focus there on sort of simplification is probably having a nice little positive impact. And then scale is the other aspect that's driving the productivity there. In terms of that impact on the long term model, my starting point would be, we kind of forecast that this was going to happen. I think it's playing out pretty much consistently with the long term model and the path that Mike had built, but I'll give him the option. to comment on that, if he sees it differently.

No. It just as a reminder, our long term operating margin model shows 20% to 25% over a roughly four year timeframe, and I think we're still tracking to that target with during that period of time. As we've always said, it's been a period where we anticipate an opportunity for high growth and we're going to continue to invest in all those drivers.

Your next question comes from line of Michael Turrin with Wells Fargo. Please proceed with your question.

Hey, thanks, and good afternoon. Certainly an impressive quarter. So congrats to the team from my end as well. Maybe another one on the execution side was hoping you could maybe compare and contrast the first half of the year given the bigger surge in demand you're seeing. We all saw a big shift and having to pivot over to remote work on the fly last quarter. Were there things you were able to improve internally here in Q2 as we settle into this new way of working that made the execution even better given the acceleration you're delivering here on some of the key metrics? Thank you.

And again, my point of view is I think we're continuing to execute. Well, I think it's harder, quite frankly, doing everything in a remote environment. And I think it's taxing on our people. It's harder work for all of us. And to be blunt about it, I think we mostly like to get back into a situation where we are mostly able to be in the office, I think, though the world's changed a little bit. We probably have in the longer run, highly productive system, where some people are increasing, they're a little bit of time out of the office, because we've shown that we can still be productive in that environment But from an efficiency standpoint, I think we'd actually be now even more efficient if we could be back in the office and have some of those collaboration benefits. From the standpoint of translate to the financial results, again, I don't think there's anything that's played out in these financials that I would say, accelerated efficiency, because of remote work. I suppose the only thing I would point to as sort of an obvious is that we don't have the T&E expense. And that has been somewhat of improvement. But we've actually spent some of those savings on other things, both funding growth, as well as supporting our employees in terms of things like helping them with a DocuSign cares program, helping them set up in a home office in a way that allows them to be productive at home. I don't have anything else about it. That would seem different to me from that standpoint. I don't know if you, Mike to add.

The only other thing I would mention is, we are learning as we go, we see things for example, like attrition rates that we plan and budget for. We were outperforming those. Our attrition is much better than what was planned. A, because I think people really like working for DocuSign and B, I think in the current environment, people aren't as mobile as they would be during the norm. We're seeing things like our spending related to paid time off, people aren't taking as much paid time off because of course they're working from home and that just doesn't make a lot of sense. There's not a lot of places to travel. So the endpoint there's a lot of the ins and outs that we're seeing in the model. So I think as we plan for fiscal 2022, and we're obviously entering that phase right now. You're right; there is a lot of learning going on. That's going to allow us I think to hit the mark in terms of how we should think about spending for the coming year.

Your next question comes from line of Shebly Seyrafi with FBN Securities. Please proceed with your question.

Yes. So thank you very much. So this is a quite an impressive report against a more difficult comparison. You accelerated your growth. And the acceleration was broad based. It was indirect. It was in web. It was international. And so my question is, how much of this acceleration was due to COVID? And how much was due to other factors like you've mentioned, increased demand seen in Europe?

Yes. I would say, Shebly, of course, we're looking as carefully as we can into the numbers to try to glean that out. I am comfortable saying the following. We came into the year with a fiscal plan. And with or without COVID, our performance is exceeding that plan across the globe. Obviously once you put the pandemic effect and work from home effect on top of that its generating these much higher growth numbers. But we were exceeding our plan results pre and post.

Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back to Mr. Dan Springer for closing remarks.

Thank you very much. And I really appreciate you all being here today. Its been the fantastic quarter. And we will look forward to seeing you, mostly likely seeing you through video in the coming months until we see you next quarter. And just then one last comment, I'd like to thank Mike again for his incredible leadership over five years of stewarding the financial ship here. And I can't tell you how excited I am to look forward as we built the international business together. Thank you all.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.