But at the same point in time, we need to be efficient and productive with the assets that we have. And so I really am proud of the team for embracing that. And so I don’t think no investment, I would say, philosophy changes from our part. But I would just say a little bit maybe kind of more executed focus on that for us and we were able to show some pretty good performance, I think, this quarter and I’m really proud of the team for that level of execution.
Josh Baer: Thank you.
Allan Thygesen: Yes, I would just echo, if I can just echo Blake’s point that the entire management team, not just like is very focused on this balance that he referenced. We absolutely want to free up capital and that is a team effort to look everywhere in the company to free up resources where we can then invest more particularly on the product side. We did some of that earlier this year, as you know, but it’s an ongoing continuous effort, not just a onetime thing, and I think that’s reflected in the results.
Operator: Thank you. Our next question is from Brent Thill with Jefferies. Please proceed with your question.
Luv Sodha: Hi. This is Luv Sodha on for Brent Thill. Thank you, Allan and Blake for taking my questions. Maybe first, just wanted to ask, obviously, you’re guiding to 7% year-over-year billings growth for fiscal ’24. I guess I know you’re not guiding to fiscal ’25 just yet, but how should we think of the growth trajectory for next year, especially as you come through some kind of trough on the NRR side?
Blake Grayson: Sure. So I’ll take a stab at that. I’m really proud of the progress we’ve made in a short period of time. When I say that, I mean across our business, both in just operational efficiency but also accelerating product evolution and innovation. In Q3, particularly, we improved operating margins, we generated significant free cash flow. And I think we’re evolving our mind-set across the company. As I mentioned earlier on the question that was just asked before this, in terms of our long-term approach, we’re going to balance driving durable long-term growth with operating efficiency. Top of our priority is to make the right strategic investments to drive business momentum and, frankly, to billings, which is, I think, what you’re referring to in the coming years.
And it doesn’t happen overnight, especially at the business of the scale. But we believe we have the right product and go-to-market focus and we’ve got a good leadership team in place to make that happen. And you alluded to this, but given that we’re still working through our planning and forecasting process for next year. We’ll provide our standard formal fiscal year ’25 outlook in our Q4 earnings call three months from now. But as you think about next year, I imagine you want to consider the Q4 exit rate trends as you think about next year and at the same time, we believe there’s further opportunity to drive improved efficiency. In our existing business and our operating expenses and then also taking into account historical seasonality changes as we go from Q4 to Q1 with fewer days in the quarter and things like that, just all kind of the basics that you would want to pay attention to.
But other than that, we’ll provide our full year — our fiscal ’25 formal guidance in our next quarter’s call.
Luv Sodha: Got it. And one quick follow-up, if I may. Just wanted to ask about your philosophy around stock-based compensation? Thank you.
Blake Grayson: Sure. So I mean I think the philosophy on stock-based comp is generally you want to be able to provide the incentive and the ability to attract and retain the best talent possible to allow us to reach the aspirations for growth that we want to get to. I know that I think our stock-based comp as a percentage of revenue in the current quarter I think was 23%. I think that was up slightly year-over-year from ’22. I would say that the driver of the increase is really most about the new management team. So it’s driven by the executive comp that drove that year-over-year increase, not necessarily the other part of the company. I think that, for us, it’s something we’re slightly above our peer average, and so it’s something that we are paying attention to.
But it’s a balanced approach, again, right? We want to be able to attract and retain the right people for the job that — so we can get into this next chapter of growth for DocuSign. But it is something we pay attention to and are looking at.
Luv Sodha: Thanks.
Allan Thygesen: Yes, I would just add, we have that. We discussed that topic with the Board and the Compensation Committee and we will share our longer-term plans, but our goal, as Blake said is to manage it down over time without fundamentally disrupting our ability to execute. It was necessary to attract a new management team and to rebalance our employees following the stock decline, but I think we think we’re in a more normalized set now, and we should be able to manage to something more towards the benchmarks.
Luv Sodha: Perfect. Thank you.
Operator: Thank you. Our next question is from Brad Sills with Bank of America. Please proceed with your question.
