DocuSign, Inc. (DOCU) Q2 2019 Earnings Conference Call Transcript

DocuSign, Inc. (DOCU 0.10%)
Q2 2019 Earnings Conference Call
Sept. 5, 2018, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for joining DocuSign's second quarter fiscal 2019 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 listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad.

I will now pass the call over to Annie Leschin, Head of Investor Relations. Please go ahead.

Annie Leschin -- Vice President, Investor Relations

Thank you, operator. Good afternoon, everyone, and welcome to DocuSign's second quarter fiscal 2019 earnings conference call. On the call 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 the Investor Relations section of our website.

Before we get started, I'd like to let everyone know that we will be joining the JMP Software Walking Tour on September 25th in San Francisco and as other events happen, we will provide updates.

Now, let me remind everyone that the statements made on this call are forward-looking statements that are based on our beliefs and assumptions and on information currently available to management, including estimates and other statistical data made by independent parties and by us relating to the market size and growth and other data about our industry. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to differ materially from any future results, performance, or achievements, express or implied, by the forward-looking statements.

Further information on these risk and uncertainties is included in our prospectus previously filed with the SEC and additional information will be made available in our July 31, 2018 quarterly report on Form 10-Q and other filings with the SEC. You should not rely upon these forward-looking statements as predictions of future events. Forward-looking statements are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these statements or to update the reasons if actual results differ materially from those anticipated. I'd now like to turn the call over to Dan. Dan?

Daniel Springer -- Chief Executive Officer

Good afternoon, everyone, and thanks for joining us for our Q2 earnings call. I'd like to start by saying that it's been an exceptionally busy and successful quarter for the team here at DocuSign. We continue to demonstrate strong growth in our core business. We successfully closed the acquisition of SpringCM, which accelerates our vision to modernize the world's systems of agreement and finally, we showcased new innovation across our solution portfolio. I'm pleased to talk you through each of these today.

Starting with the numbers, let me share a quick view, then Mike will give you more detail shortly. All in, we had a strong quarter. Our revenues came in at $167 million, which translates into 33% year-over-year growth. We were again profitable on a non-GAAP basis and operating profit of $4 million for the quarter and we generated $18 million in free cash flow, doubling the level seen in Q1. Our growth continues to be driven by two primary factors -- acquiring new customers and growing usage within our existing customers across their lines of business.

At the end of Q2, we had almost 430,000 paying customers, an increase of 25,000 over the previous quarter. As I have said on previous calls and during the roadshow, this growth is not limited to the U.S. Our international business represented 17%of our overall revenue this quarter and it continues to be an area of significant focus for us.

Moving next to the acceleration of our System of Agreement strategy. The biggest news of the last few months was our acquisition of Chicago-based SpringCM. With this acquisition, we have a broader set of products to sell, additional technology to commercialize, and a team whose experience complements ours almost perfectly.

For those of you that may not have joined us on the call after the announcement, I wanted to share some more detail on the acquisition. As context, for more than 15 years, DocuSign has defined the e-signature category, a market that's grown into a $25 billion opportunity today. Along the way, we've also seen multiple opportunities, both before and after the e-signature takes place. All the way from generating agreements to signing them, acting on the terms, and managing agreements across the business.

What we found is that even with DocuSign in the middle, the rest of the agreement process still involves a complex mix of manual processes, as well as printing, scanning, faxing, FedExing, and wasted time and paper. We refer to this situation as a legacy system of agreement, which is what most companies have today. In the future, we believe every company will have a modern system of agreement that connects and automates all agreement processing. Our goal is to provide the digital platform of choice for that modernization.

Given our success digitally transforming the e-signature process, we believe we are well positioned to do the same for the rest of the agreement process. This is the central concept of our System of Agreement vision we announced in June. SpringCM dramatically accelerates our ability to realize that vision. As a leader in the document generation and contract lifecycle management space, SpringCM addresses several areas of our System of Agreement strategy, primarily in the prepare, act, and manage areas.

By bringing the company into the DocuSign fold, we get four important capabilities. The first is document generation. It allows the generation of an agreement from a library of approved templates and legal clauses. It then connects it to other systems like salesforce.com, to automatically fill in fields with customer and product information. The second is collaboration and redlining. It supports review, revision, and approval of an agreement's content with redlining, versioning, and activity tracking.

The third is agreement management. It provides a centralized repository for organizing and searching stored agreements. Even if the agreement files are images of text such as pdfs, SpringCM automatically scans the content so the full text can be searchable. Finally, the fourth capability from the acquisition is end-to-end agreement workflow. This moves an agreement through a series of activities before, during, and after signature. The activities can be within SpringCM or other systems, including salesforce.com or DocuSign. These technologies all drive automation of the agreement process beyond DocuSign's traditional focus on signing. Like DocuSign's original value proposition, they make the process digital, faster, easier, and much more cost-efficient.

And I should add that these technologies are not in a lab somewhere. They are in use today at more than 600 SpringCM customers, across the financial services, business services, technology, and public sector verticals. SpringCM achieved this success with just a small salesforce. With our much larger salesforce, our partnership, and the broader System of Agreement context, we believe we can substantially accelerate SpringCM's growth in enterprise, commercial, and SMB markets worldwide. We plan to talk more about SpringCM at Dreamforce at the end of September. So, look for more from us then.

Switching gears for the final part of my remarks, I wanted to highlight several recent innovations we introduced at our annual Momentum Conference earlier in the quarter. First, we announced responsive signing, a technology that automatically converts a pdf agreement into responsive html. This means we adapt how a document looks on differently sized devices, so an agreement is as easy to read on a phone as it is on a desktop.

We also announced Smart Section, which takes responsive signings to the next level by defining collapsible sections, page breaks, and custom formatting options. For complex agreements, Smart Section dramatically enhances the experience over static pdf. The third thing we announced is DocuSign for Salesforce CPQ. It connects CPQ data into DocuSign agreements directly from Salesforce. This is the latest in a long history of integration that we've done with Delta.

Finally, we announced a blockchain integration with which customers will optionally be able to record their DocuSigned agreement on the Ethereum blockchain. We are also now a part of two policy-and-standards-based organizations working to define best practices in the blockchain arena.

Now, before I turn it over to Mike, I do have one other development that I'd like to share. This time, in relation to our Head of Field Operations. After 6 years of leading our sales and customer operations, building out a world-class organization and putting in place a strong foundation for growth, Neil Hudspith has decided to keep his commitment to his wife that after a successful 40-year career, he would retire at the end of the year.

Neil will remain in his current role through the end of the fiscal year and then will work to create an ongoing consulting role going forward. It is really hard to put into words the contribution that Neil has made to this company. I truly believe we have built one of the strongest sales organizations in the software world and I want to sincerely thank Neil for his leadership here on behalf of the entire company, the management team, and the Board of Directors. With that, I'd now like to hand it over to Mike to walk through our financial performance and I'll be here for Q&A after that. Mike?

Michael Sheridan -- Chief Financial Officer

Thanks, Dan. Good afternoon, everyone. As a reminder, all of our financial results reflect the adoption of the 606 accounting standard for current and historical periods and our non-GAAP financials exclude stock-based compensation and amortization of intangibles. Our recent acquisition of SpringCM just closed yesterday, September 4th, so all of our Q2 results include DocuSign results only.

Halfway through fiscal 2019, we continue to execute against our financial objectives. We delivered a strong second quarter with healthy top line growth, positive free cash flow, and non-GAAP operating profitability. Total revenue grew 33% year-over-year to $167 million in the second quarter. Subscription revenue grew 35% year-over-year to $158 million, or 95% of total revenue, with strength across our geographical and vertical markets.

Billings grew 32% year-over-year to $172 million. We added approximately 25,000 new customers in the second quarter, bringing our total to 429,000 customers worldwide. This is a 28% increase over Q2 of fiscal '18. Of these, 49,000 customers are enterprise and commercial customers, reflecting a 36% increase over Q2 of fiscal '18.

Our net dollar retention of 115% in the quarter remains strong and in our historical range of 112% to 119%. Customers with ACV greater than $300,000 saw a 47% year-over-year increase to a total of 246 customers, which is another strong indication of our ongoing expanding success in our existing customer base.

International revenue climbed 34% year-over-year to $29 million in the second quarter and represented 17% of total revenue. Non-GAAP gross margin for the second quarter of fiscal 2019 increased to 81% from 79% in the second quarter of fiscal 2018. Non-GAAP subscription gross margin this quarter also expanded to 87% from 85% in the second quarter of fiscal 2018, as we continued to scale the business and drive efficiently.

Our focus on the e-signature category and our broader System of Agreement vision remains central to our strategy. As we've discussed, where we see increased opportunities in our core markets, we will invest to attract new customers and to maintain our leading market position. Given our strong performance in the first half of fiscal '19, we have pulled forward some sales capacity hires into Q2 that we had planned for later in the year, in order to speed our preparedness to pursue growth. Increases in R&D resulted from the addition of resources to strengthen our technology and expand our product portfolio.

In G&A, we maintained recent expense levels as a percentage of revenue now that we are a public company. In total, non-GAAP operating expenses climbed to $132 million, or 79% of total revenue, compared to $102 million or 81% of revenue for the second quarter of fiscal '18. We ended the quarter with 2,579 employees, a year-over-year increase of 25%. This led to non-GAAP operating margin of 3% in the second quarter of fiscal 2019, compared to a negative operating margin of 2% in Q2 of fiscal '18.

We achieved non-GAAP net income of $5 million, up from a net loss of $1 million a year ago. We achieved positive operating cash flow this quarter of $23 million, which is approximately 14% of total revenues. This compares to operating cash flows of $12 million in Q2 of last year. Free cash flow for Q2 was $18 million or approximately 11% of revenues, compared to $8 million or approximately 6% of revenues in Q2 of last year.

Finally, on our balance sheet, we ended the quarter with $819 million in cash, compared with $270 million at the end of the previous quarter, including the $525 million of net proceeds from our IPO. In the second half of 2019, we will utilize approximately $220 million of cash for the acquisition of SpringCM and based on current estimates, approximately $250 million on tax payments upon the settlement of RSUs in Q4.

Turning to our non-GAAP guidance for Q3 and fiscal 2019, as I mentioned, we closed our acquisition of SpringCM yesterday, September 4th. I will begin by sharing guidance that reflects our expectations for our combined results, including SpringCM. I will follow that with a breakout of SpringCM's expected contribution to Q3 and of fiscal year 2019.

So then for our combined results, we estimate revenue of $172 million to $175 million in Q3 and $683 million to $688 million for fiscal 2019. We estimate billings of $169 million to $179 million in Q3 and $732 million to $752 million for fiscal 2019. We are maintaining our guidance for gross margin at 78% to 81% for both Q3 and fiscal year 2019. In terms of operating expenses, we are increasing our guided ranges due to the addition of SpringCM. We currently anticipate sales and marketing to be 50% to 52% of revenues in Q3 and fiscal year 2019; R&D to be 17% to 19% for Q3 in fiscal '19, and G&A to be 11% to 13% for Q3 and fiscal '19.

For the remainder of this fiscal year, we estimate less than $500,000 per quarter of other non-operating expenses and we expect a tax provision of approximately $750,000 in each of Q3 and Q4. We expect fully diluted weighted average shares outstanding of 190 million to 195 million shares for Q3 and $160 million to $165 million for fiscal 2019. As I mentioned, these estimates include SpringCM. In Q3, we anticipate revenue of approximately $2 million to $4 million from SpringCM, most of which is subscription revenue after making all of the appropriate acquisition adjustments. We expect an increase to our operating loss in Q3 by roughly $5 million to $7 million from SpringCM. The majority of these costs relate to investments in sales and marketing and R&D.

For fiscal year 2019, we expect SpringCM to add about $7 million to $9 million in revenue and increase our operating loss by $9 million to $12 million. These increased costs from SpringCM also include approximately $3 million to $4 million of one-time integration costs that we expect to incur across the remainder of Q3 and Q4. And to be clear, those integration costs are included in the numbers I just summarized.

So, with half of fiscal 2019 behind us, we are very pleased with our performance to date and we are excited about the opportunities in front of us. With that, I'd like to open the call to questions.

Questions and Answers:

Operator

At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. One moment please, while we poll for questions.

Our first question comes from Sterling Auty, J.P. Morgan. Please proceed with your question.

Sterling Auty -- J.P. Morgan Securities -- Analyst

Yes, thanks. Hi, guys. I wanted to drill in on the larger customers, the 47% growth in customers over $100,000. Is there some commonality in terms of the expansion in terms of the use cases within those customers and is there anything that you've been able to do to maybe take some best practices from one set of customers to help with expansion and maybe cross-selling to other customers?

Michael Sheridan -- Chief Financial Officer

Sterling, I'll start and Dan, please jump in. So, first, it's a metric of customers that have exceeded $300,000 in ACV, not $100,000. And these are customers over their lifetime that have accumulated ACV to that point, as opposed to a new customer starting at that level. I just want to make sure everybody understands this statistic. That is a statistic that we will update each quarter because it's a good indication, in addition to our dollar net retention, that shows our success and our strategy of up-selling our existing install base.

Across that install base, we've talked about our expansion internationally, so it's pretty geographically dispersed. It's also well dispersed among verticals. We have some key verticals like financial services, like healthcare, and others into which there are specific capabilities that we have that can drive up-sells in those types of industries. And so, the number of use cases and the number of variables that lead to that success are very broad. So, those are my initial comments. Dan, I don't know what your additional thoughts are to that.

Daniel Springer -- Chief Executive Officer

No, I think you hit all the key points really well, Mike. My sense is it's not about a specific couple killer use cases or killer applications in certain verticals. Sterling, this is the continued expansion. If you think about our land and expansion strategy we've talked about in the past. This is the expand continuing to come to fruition across the board, so we feel really good about it.

Sterling Auty -- J.P. Morgan Securities -- Analyst

All right, great. Then, Dan, maybe one quick follow-up for you with Neil's announcement of his intention to retire. Is this something that you kind of knew ahead of time and were able to plan and there's some succession or was this a surprise? I just want to understand how this sets up to go through the transition.

Daniel Springer -- Chief Executive Officer

Absolutely. So, Neil and I started this conversation literally the day I joined over 18 months ago, as we plotted out the future of building the organization. So, not only has it been something we've been in constant communication about, but it's really been the focus of the organization we've built. For those of you that don't have experience with Neil in either his IBM career or Taleo, he has built fantastic sales organizations that are really built to last. We're excited that we have the capability in our organization today to continue to grow for years to come because of the way that he's really developed our organization. So, well planned, well thought through and I think setting us up for a fantastic future.

Sterling Auty -- J.P. Morgan Securities -- Analyst

Thank you.

Operator

Our next question comes from Keith Weiss, Morgan Stanley. Please proceed with your question.

Keith Weiss -- Morgan Stanley -- Analyst

Thanks for taking the question. Very nice quarter. Just a quick follow-on to Sterling's question. Is there going to be like a new head of field ops? Are you guys planning to replace that position or is there an existing structure of guys that are just going to take over the role and you don't need to replace that position specifically?

Daniel Springer -- Chief Executive Officer

Sure. So, as I sort of indicated in the previous part of the question, we've been planning for this for a while and really focused on investing in the talent that we think we need to grow the business going forward. So, at this point in time, we wanted to get out early with the announcement so that we would also have the opportunity to look externally to see if we want to augment the considerable talent we have in the field organization to date.

We think we've built an organization that has all the capability, all the talent we need for the growth going forward, but given the stature we've achieved as a company, we feel it's a pretty attractive place to work. We get a lot of inbound interest all the time. We think we'll probably get even more so now, so Neil and I are working to take a look at what's available from the outside and if we see an opportunity to enhance our field organization with an additional senior hire, which could be in a variety of different roles, we'll obviously take advantage of that opportunity.

If we determine that no, we have all the right positions in place now, then we'll go forward in that approach. But having almost half the year to work that through gives us the comfort that we'll have a great outcome.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. That's great, fellas. On SpringCM, I want to dig in a little further into that. Now that the acquisition is closed, you've had a little bit more time to take a look at the technology roadmap. Can you give us an update on how you're thinking about what you guys have been doing in the space and how that's going to integrate with SpringCM and how the broader products [inaudible] integrate into SpringCM and what's the timeframe we should be thinking about in terms of more of a platform of a joint solution between the two technology bases into the marketplace?

Daniel Springer -- Chief Executive Officer

Yeah, ability. I think the best way to think about the first part of your question is the System of Agreement model we laid out. If you think about back on the roadshow, we talked about the construct of the first place we would probably go to augment our four signature strengths is in the pre-agreement or prepare or what I'll call document generation space. And quite simply, that's because our customers were most frequently asking us for support in that area. So, we kind of knew that was where we were going to look first.

In this process, as we really discovered some of the capability that SpringCM had in both doc gen, but also in this manage or post-signature phase, we realized it was sort of a two-fer. That we could actually get faster traction against our strategic goals with an acquisition here and merging them into our business. So, that really was the plan all along. Focus on doc gen first and then the next phase was to move more into the manage. And we're able to make real traction in both of those areas with this acquisition.

In terms of your question around the timing and the integration into the platform, we will be announcing at Dreamforce opportunities where we can already, at the end of September, be in a position to have our sales teams selling the capability that SpringCM has. And we have some joint product development efforts which we'll be announcing at that timeframe to enhance across what DocuSign had and what SpringCM had separately.

But from a standpoint of when I think about that platform really coming together and thinking about that single experience for our customers, we're putting a lot of focus on a couple key milestones. One is that we have an event which is our global kickoff. And that's really where we roll out to our field sales organizations everything we want them to focus on for the year. That'll be in the beginning of March this year.

Then we have our Momentum Conference, which will be in June of this coming year, excuse me. Calendar year '19. Where we think about that opportunity to go and share with our customers all the new functionality and capability. So, those are the two places where I think you'll see milestones on that integration into one integrated platform.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. That's super helpful. And one last one for Mike. In terms of the guidance, it's very helpful to get the contribution from SpringCM in there on the revenue basis. That's negatively impacted by the deferred revenue purchase accounting, I'm assuming. Any color you could give us in terms of the positive impact would be on billings in Q3 and Q4 as you go back up that deferred revenue basis and keep going with Spring?

Michael Sheridan -- Chief Financial Officer

Yeah, Keith. It's a good question because you're correct. The revenue numbers I just gave you include the typical adjustments that you'll have in purchase accounting and I don't know the exact percentage, but generally somewhere around the 20%. We didn't break out separate billings guidance for Spring because it's not a big number and as you know, billings tend to be traditionally much more difficult to narrow in, so we didn't think that would be useful.

But you are correct that over time you would expect that the billings that aren't impacted by that "haircut" should outpace the revenue that we see over time in that initial year where that haircut applies.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. Thank you, guys.

Operator

Our next question comes from Walter Prichard of Citi. Please proceed with your question.

Matt Wells -- Citigroup Global Markets -- Analyst

Hi, this is Matt Wells on for Walter Prichard and thanks for taking my question. This is probably aimed more at Dan. At DocuSign Momentum, we heard integrators talk about healthy demand for products in the manage and post-signature space, such as you're partnership with Seal Search. Can you comment onto what extent these ancillary products contributed to growth in the quarter and how you're thinking about contribution from these products through fiscal '19 and beyond?

Daniel Springer -- Chief Executive Officer

Yeah, absolutely. So, Seal and some of the other manage partners you refer to are really important to the overall strategy of the System of Agreement and we continue to invest aggressively to manage those partnerships and help bring that functionality to our end customers on a broader System of Agreement solution. At the same time, from a financial standpoint, I would say the impact is still quite small.

If you think back to a conversation we had on the roadshow, where we talked about the signature side of our business as being the dramatic provider of our economic value to date, if you look at the ancillary products outside of DocuSign and outside of Search, they're going to be a pretty small contributor and not something we'd be in a position to sort of break out, both because of the small nature and then sort of, as Mike indicated as well, we expect those things to be more volatile and harder to exactly forecast.

Matt Wells -- Citigroup Global Markets -- Analyst

Thanks for answering the question.

Operator

Our next question comes from Karl Keirstead, Deutsche Bank. Please proceed with your question.

Karl Keirstead -- Deutsche Bank Securities -- Analyst

Thank you. Hey, Mike, a question for you on the billings guide. It looks like you've raised the full-year billings guide by $52 million. If given the answer you just gave, the billings contribution from Spring is actually not a big number, as you said, then that's a fairly substantial increase in your, call it core, DocuSign billings guidance, and I just wanted to ask you if you could talk through what's given you that added confidence to raise the full-year billings guide by that amount? And then I've got a follow-up.

Michael Sheridan -- Chief Financial Officer

You bet. So, Karl, two things. One, just to be clear, relative to the DocuSign contribution, I do agree that Spring is not a significant number relatively. However, it is still a contribution to that increase. Let's be clear, there is allowance in there for the Spring contribution. That, in addition to the fact that we've just had our first half year of performance in the fiscal year and as we move through that timeframe, of course we get more information and it provides us more comfort into getting a range into something that we see in the second half. So, really, I think earlier in the year giving full-year guidance is just a little more challenging than as we slip some quarters behind you within the period and those are the biggest contributions.

Karl Keirstead -- Deutsche Bank Securities -- Analyst

Got it. Then my follow-up, perhaps also to you Mike. Just on the number of enterprise commercial customers. It ended the quarter at 49,000. That's a fairly decent increase sequentially of I think 5,000. I think you added 2,000 in the April quarter and I think we all complained that it was small and your answer is that it's variable, so it feels like that answer was correct. But maybe you could just talk through why it would've jumped so nicely in Q2. That figure stood out to me. Thanks.

Michael Sheridan -- Chief Financial Officer

Yeah, and again, I agree, Karl. It can fluctuate and, in fact, if you look at the quarters preceding our fiscal Q1 that ended in April, they were more in the 3,000 to 4,000 range as well. So, I think Q2 is in line with what our sales engine has been able to accomplish. I think the key driver to it is we're continuing to see a lot of interest in the marketplace for our solution. I mentioned earlier that crosses geographies and it crosses verticals. And so underlying that customer growth, we're seeing really good bookings contribution across a wide variety as well.

Karl Keirstead -- Deutsche Bank Securities -- Analyst

Got it. Okay, thanks for that.

Operator

Our next question comes from Justin Furby, William Blair & Company. Please proceed with your question.

Justin Furby -- William Blair -- Analyst

Thanks, guys, and congrats. Maybe just a quick one for Dan and then a follow-up. One of the things that comes up with investors a fair amount is the potential for significant network effect, I think in this business, as you continue to scale out your user base at such a healthy rate. I guess I'm just wondering, Dan, if you can sort of high-level speak to that. Is that how you think about the business longer term and what sort of opportunities do you think it opens up?

Daniel Springer -- Chief Executive Officer

We don't traditionally think about a network effect in the way you think about like a K-factor in some consumer businesses. But if you look at our web and mobile business, it does have the potential for those characteristics, where more and more people, we have now hundreds of millions of folks who have been users or signers at DocuSign. There's an opportunity we can go back to them and market to them, potentially becoming paying customers. So, I think there's a phenomenon there.

I think of it less like a network effect than I think of about it as a concept of we get a lot of trials from people who have used our software. And so I think we're going to see that opportunity as we get bigger and bigger and the space gets larger and larger. There's more and more opportunity for us to go after that and mine it and we'll continue to build out the incredible organization strength we've built in our e-commerce and our web and mobile business and look at that to be a big factor of our growth going forward.

Justin Furby -- William Blair -- Analyst

Got it. That's helpful. Then maybe just with Dreamforce coming up, can you just remind us what the scope of the partnership is with Salesforce in terms of how big it is, what the growth trajectory of that looks like? Then separate, we're entering a big federal quarter and that's an emerging business. Can you just talk a little bit about some of the early success and what the pipeline looks like on the federal side? Thanks.

Daniel Springer -- Chief Executive Officer

Yeah, and actually I'll take them in reverse order. I just want to comment that one of the things that was really exciting for us about the Spring deal is that they were also fed-grant certified and it's an important vertical for them and we've had a lot of positive conversations here thinking about how we have an opportunity to go after that big opportunity that you just described more aggressively as a combined entity. Now that the deal's closed and we can really unleash that activity of our field organizations together, we're very bullish on it.

In terms of the Salesforce partnership and Dreamforce, Salesforce is one of our most important partnerships. They're a significant investor in the company. They've been a go-to-market partner; they've been a customer of ours; we're a customer of theirs. So, we're sort of a multi-faceted partnership. Much of our success to date has been through the AppExchange, where there are approximately 7,000 different folks who have downloaded us and made us one of the most valuable AppExchange companies for Salesforce overall on a dollar basis. So, really strong on that end.

One of the reasons document generation is really important to us is they've increasingly told us they see opportunity for us to do more in that side of the business. But I would also tell you that now that we're really deepening the relationship with Salesforce at multiple levels across executive relationship, selling teams, business development, etc., not to mention API and product integration work that we've done, we see there's more opportunity to go up the stack in and partner together on serving commercial enterprise customers as well. So, it really kind of is a firing-on-all-cylinders partnership and we are really looking forward to at the end of this month the opportunity to go to market with them together at Dreamforce.

Justin Furby -- William Blair -- Analyst

Got it. Thanks very much. Congrats again.

Operator

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

Kasthuri Rangan -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Congratulations on the quarter. I'm just curious, given the acquisition and the move up market to enterprise and with Neil's retiring from the company by the end of this year, as you have your visions of building a billion-dollar business potentially, how do you see the sales organization changing, the go-to-market strategy changing, the sales cycles changing, especially as you introduce new capabilities to the platform? Are you using this opportunity to reconfigure how you go to market? And congrats to Neil on his retirement.

Daniel Springer -- Chief Executive Officer

Yeah. I am sure he appreciates that. I will tell you that I don't see any significant change. And to your point about the move to enterprise, it's true if you think about the two factors that the last two questions Mike got about the number, the significant increase in the number of customers at over $300,000 as an indication of that and then the 5,000 customers in that segment. We're excited about that success, but this is a quarter that was really success across the board. If you look at each geography, if you look across the verticals, if you look across the segments, this was across the board. We hit it and are firing on all cylinders.

So, I don't think there's a sort of significant shift to a more enterprise focus, per se. We built this business initially on a traditional core commercial and a lot of the methodology in commercial, that sort of land-and-expand core approach, is what we're bringing into the enterprise as much as anything else. So, I don't see any high likelihood of a dramatic restructuring of the go-to-market organization. I feel like, particularly coming off a quarter like this, where we are hitting on all four quadrants, we're more likely to continue to go forward with a very similar structure and similar model because of that success today.

Kasthuri Rangan -- Bank of America Merrill Lynch -- Analyst

Could the business reaccelerate given everything that's going on at the company or you're just happy with how you go to market and the growth rate that you're able to benefit from with your current approach?

Daniel Springer -- Chief Executive Officer

So, Mike never lets me give guidance on things like acceleration, so I can't give you a specific comment to that, but I would tell you that the opportunity we see in the marketplace is significant. With a lot of things coming together like the System of Agreement vision, with both our software development, as well as the acquisition of Spring and seeing that really strong performance across all components of the go-to-market organization, it's clearly not out of reasonable expectations to see that we could find the opportunity to see accelerating growth in the quarters ahead.

Kasthuri Rangan -- Bank of America Merrill Lynch -- Analyst

Congrats, guys. Thank you.

Operator

As a reminder, we are now conducting a question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *1 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. One moment, please, while we poll for questions.

Our next question comes from Patrick Walravens, JMP Securities. Please proceed with your question.

Patrick Walravens -- JMP Securities -- Analyst

Great, thank you and congratulations. So, I can't believe we get to the end and I get to ask the blockchain question. So, Dan, why is blockchain important for DocuSign and how much demand is there really today for blockchain-based smart contracts?

Daniel Springer -- Chief Executive Officer

Pat, I think, and I feel badly because I know you wanted to ask how business was and I kind of answered that in the last one, so I apologize for taking your thunder there, but get us next time. My sense is blockchain is important in the long run. I don't think it's hugely important in the short run. We see a lot of our customers telling us that they're interested in blockchain, they want us to think about how solutions could make sense within our System of Agreement for blockchain, but the number of customers that are actually availing themselves of the opportunity to store in the blockchain their agreements is still very, very small.

And so I think if we look at it from a financial forecast standpoint over the next single-digit number of quarters, I think it will be still relatively small. But from a strategic standpoint, I think it would be a mistake for DocuSign, given the business we're in, not to be out ahead of blockchain and not working with our customers that are aggressively looking to figure out ways to do programs in the blockchain to partner with them. So, that's why we sort of amped up a little bit our focus there and our investment in the partnership network.

Patrick Walravens -- JMP Securities -- Analyst

All right. Great. Then if I can add one more, I think your results answer this question in one way, but I'd just love to hear your thoughts on what are you seeing competitively? What's going on with Adobe? What's going on with some of the smaller, more electronic signature only focused players?

Daniel Springer -- Chief Executive Officer

We've talked about the concept of competition before and you know our standard answers. Our primary competitor is paper and the manual processes that people have. I don't see that changing any time. We don't take other companies that play in our space as lightly. Most of my focus has been to make sure there's not a disruption, somewhat similar to your blockchain earlier, Pat, there's not some disruption that we miss where people come at our business from a different business model or different approach and we're not on top of it. When it comes to the core key signature-centric aspect of System of Agreement, we're in a very strong competitive position and we continue to see that in the results that we deliver.

Now, as we're really starting to get traction into the broader System of Agreement and some of those other components, where we're not by far the largest player in those spaces, I think we'll probably start to see some different dynamics. It's a little early to give you an indication on that, but I can tell you this, that we believe with the power of our leadership at what's at the center of the System of Agreement, we still believe that it's the signature and the investments we're making in the areas in the pre-agreement and the post-agreement, we think we will be a significant force in those other segments.

Patrick Walravens -- JMP Securities -- Analyst

Great. Thank you.

Operator

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

Daniel Springer -- Chief Executive Officer

I just want to say thank you all for joining us and we look forward to seeing you all soon. Thank you.

Operator

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

Duration: 45 minutes

Call participants:

Daniel Springer -- Chief Executive Officer

Michael Sheridan -- Chief Financial Officer

Annie Leschin -- Vice President, Investor Relations

Sterling Auty -- J.P. Morgan Securities -- Analyst

Keith Weiss -- Morgan Stanley -- Analyst

Matt Wells -- Citigroup Global Markets -- Analyst

Karl Keirstead -- Deutsche Bank Securities -- Analyst

Justin Furby -- William Blair -- Analyst

Kasthuri Rangan -- Bank of America Merrill Lynch -- Analyst

Patrick Walravens -- JMP Securities -- Analyst

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