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DocuSign (DOCU +17%) is making a big move following its Q4 (Jan) report last night. The e-signature/contract creation giant reported a modest EPS beat with upside margins. Revenue rose 9.0% yr/yr to $776.3 mln, which was better than analyst expectations and also DOCU's strongest yr/yr growth in six quarters. It was not all good news as DOCU guided Q1 (Apr) and FY26 revs below expectations. But we do not think investors are worried because DOCU tends to be conservative.

• In terms of key operating metrics, billings is a closely watched number. Billings in Q4 accelerated to +11% yr/yr from +9% in Q3 to $923.2 mln, well above the $870-880 mln prior guidance. We think the strong billings number is more than offsetting any concerns about the guidance. Following a fairly downbeat billings number in Q2 (Jul), we think investors are happy to see billings bounce back in Q3 and then accelerate in Q4.
• An important catalyst for the strong billings has been early success with its recently-launched Intelligent Agreement Management (IAM) platform. The Docusign IAM platform is a significant departure from its past approach of only offering standalone products. This platform combines current products (eSignature, CLM) with new platform services, including Docusign Maestro.
• DOCU launched IAM to SMB and mid-market customers in the US, Canada and Australia in early June 2024, then to enterprise customers at the beginning of December 2024. In Q4, just the second quarter post-launch, IAM represented a high-single-digit percentage of in-quarter deal volume for the direct channel and over 20% of direct new customer deals. Customer demand continues to exceed expectations. IAM has quickly become the fastest-growing new product in DocuSign's history.
• International growth is a key goal for DOCU. Intl revs grew 12% in Q4 and represented 28% of total revenue. DOCU says its international business, which is still growing faster on a relative basis, encountered growth headwinds in FY25. The good news is that DOCU sees the Q4 launch of IAM outside of North America as creating a significant opportunity. Although it is still early for IAM internationally, Q4 IAM deal volume in Europe and Latin America combined were up 6x from Q3.

DOCU's fairly modest Q4 EPS upside and downside guidance do not seem to warrant such a big move in the stock today. However, DOCU's billings metric seems to matter to investors more than it does for other companies. Also, the stock has been weak lately, so sentiment was running low. Taking a step back, it is clear that DOCU's US business has finally started to reaccelerate and it is really being fueled by the IAM launch, which sounds like it is off to a great start and that is getting investors excited.

And it's not just the SMB/mid-market, the potential within the enterprise market looks robust and it is just getting started. DocuSign was struggling following its pandemic-era fueled growth when digital documents were all the rage. But it now seems to finally be regaining its footing. We also still think DOCU is a possible acquisition target at some point.