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June 24, 2024

DocuSign Announces Major Restructuring Including Layoffs of 6% of Workforce

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Feb 7, 2024

DocuSign, the popular electronic signature company, announced a major restructuring plan on February 6th, 2024 including laying off approximately 6% of its workforce. The layoffs come amidst stalled talks of a potential $13 billion acquisition by private equity firms Bain Capital and Hellman & Friedman.

Background

DocuSign has been one of the highest profile “pandemic winners”, with its stock price skyrocketing over 350% from pre-COVID levels in early 2020 to a peak of nearly $300 per share in August 2021. The shutdown of offices and shift to remote work supercharged demand for DocuSign’s digital transaction management software.

However, as pandemic restrictions have eased, DocuSign has struggled to maintain its once rapid growth. After increasing revenue 49% in fiscal 2022, DocuSign forecast just 21% revenue growth for 2023. Disappointing guidance has lead to DocuSign’s stock declining over 75% from its all-time highs.

This slowing growth and falling stock price led DocuSign to explore its strategic options, including a potential sale to private equity firms. Reports emerged in late January that Bain Capital and Hellman & Friedman were interested in acquiring DocuSign for around $13 billion, a 35% premium over its market valuation at the time.

Restructuring Plan Details

With a sale now appearing unlikely, DocuSign instead announced a major “operational efficiency” restructuring plan in an attempt to reignite growth and profitability as a standalone public company. Key components include:

  • 6% Workforce Reduction: Laying off approximately 440 employees or 6% of its workforce. CEO Allan Thygesen stated this was a “very difficult decision”, but necessary to reduce operating expenses.

  • Organizational Changes: Eliminating some internal management layers to “move faster as one DocuSign”.

  • Real Estate Consolidation: Closing some global office locations and downsizing others for an estimated $65 million in annual real estate cost savings.

  • Increased Focus on Profitability: Accelerating path to achieve non-GAAP profit margins of 25-27% in fiscal 2026 (compared to 17% margins currently).

DocuSign estimates the restructuring plan will generate $100 million in annual cost savings by end of fiscal 2025. The company expects one-time charges of $25-35 million related to the layoffs and real estate consolidation.

Employee Impact

The 6% workforce reduction will impact approximately 440 of DocuSign’s 7,400 global employees. Layoffs appear to be impacting all areas of the business. Multiple employees across sales, engineering, product, and corporate functions have posted about being affected on LinkedIn.

It’s currently unclear if DocuSign’s Seattle headquarters, San Francisco office, or large Dublin engineering center have been disproportionately impacted. The company has not released details on locations of layoffs. DocuSign had approximately 1,500 local employees in the Seattle-metro area prior to cuts, representing about 20% of the worldwide staff.

Employees laid off are receiving severance packages based on tenure, consisting of:

  • 2 months base pay for less than 2 years tenure
  • 3 months base pay for 2-5 years tenure
  • 4 months base pay for 5+ years tenure

All stock awards will continue vesting through severance periods. Employees are also receiving company paid COBRA health insurance for the duration of severance. Outplacement services were offered as well.

Industry Impact

DocuSign dominates the $50 billion digital transaction management software market. However, the pandemic fueled explosion of electronic signatures shined a light on the category – bringing in a host of new competitors aiming to replicate DocuSign’s success. Heavyweights like Adobe Sign, Dropbox Sign, and Microsoft 365 have released signature products, along with many venture-backed startups.

Competitors will likely seek to capitalize on any DocuSign stumbles during this period of internal turmoil. Margins could get squeezed as rivals offer deep discounts and aggressive contract terms to lure away customers and talent. If the restructuring successfully reignites growth however, it may have the opposite effect – cementing DocuSign as the independent market leader and top acquisition target.

Across the broader software/SaaS sector, DocuSign’s substantial layoffs may indicate the tech downturn and slowing economy still has further to run. With even a top company like DocuSign cutting 20% of its salesforce, more industry layoffs could emerge in coming months. Valuations may stay compressed until macroeconomic uncertainty passes.

What’s Next

In the wake of stalled acquisition talks and with no buyer immediately on the horizon, DocuSign appears positioned to operate independently for at least the next year or two.

The success of the restructuring plan will determine what happens longer term. If DocuSign returns to robust topline growth and expands profit margins as targeted, it will likely regain Wall Street favor – providing management leverage to keep the company public. Investors would need to see tangible signs of acceleration before likely regaining confidence however.

If growth stagnates and cost cutting fails to substantially expand margins, takeover talks could get revisited fast. DocuSign would stand little chance fighting off interested parties while struggling operationally and facing shareholder pressure. The $13 billion proposed take-private price could even look generous if business fundamentals deteriorate.

While DocuSign laid off 6% of staff this week, the fate of the remaining 94% still hangs in the balance. For customers and employees alike, the coming year will prove pivotal.

Employees By Region # Employees % of Total
Americas 4,300 58%
EMEA 2,000 27%
APAC 1,100 15%
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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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