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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________
FORM 10-Q
______________________________________

(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
Commission File Number: 001-38465
______________________________________
DOCUSIGN, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Delaware91-2183967
(State or Other Jurisdiction of Incorporation)(I.R.S. Employer Identification Number)
221 Main St.Suite 1550San FranciscoCalifornia94105
(Address of Principal Executive Offices) (Zip Code)
(415) 489-4940
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareDOCUThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒Large accelerated filer☐Accelerated filer
☐Non-accelerated filer☐Smaller reporting company
☐Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No ☒
The registrant has 203,205,081 shares of common stock, par value $0.0001, outstanding at August 31, 2023.


DOCUSIGN, INC.
TABLE OF CONTENTS

DocuSign, Inc. | 2024 Form 10-Q | 2

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, objectives for future operations, and the impact of such assumptions on our financial condition and results of operations are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: our expectations regarding global macro-economic conditions, including the effects of inflation, rising and fluctuating interest rates, instability in the global banking sector, and market volatility on the global economy; our ability to estimate the size and growth of our total addressable market; our ability to compete effectively in an evolving and competitive market; the impact of any data breaches, cyberattacks or other malicious activity on our technology systems; our ability to effectively sustain and manage our growth and future expenses and achieve and maintain future profitability; our ability to attract new customers and maintain and expand our existing customer base; our ability to effectively implement and execute our restructuring plans; our ability to scale and update our platform to respond to customers’ needs and rapid technological change; our ability to expand use cases within existing customers and vertical solutions; our ability to expand our operations and increase adoption of our platform internationally; our ability to strengthen and foster our relationships with developers; our ability to retain our direct sales force, customer success team and strategic partnerships around the world; our ability to identify targets for and execute potential acquisitions and to successfully integrate and realize the anticipated benefits of such acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash, cash equivalents and capital resources to satisfy our liquidity needs; limitations on us due to obligations we have under our credit facility or other indebtedness; our ability to realize the anticipated benefits of our stock repurchase program; our failure or the failure of our software to comply with applicable industry standards, laws and regulations; our ability to maintain, protect and enhance our intellectual property; our ability to successfully defend litigation against us; our ability to attract large organizations as users; our ability to maintain our corporate culture; our ability to offer high-quality customer support; our ability to hire, retain and motivate qualified personnel, including executive level management; our ability to successfully manage and integrate executive management transitions; uncertainties regarding the impact of general economic and market conditions, including as a result of regional and global conflicts; our ability to successfully implement and maintain new and existing information technology systems, including our ERP system; and our ability to maintain proper and effective internal controls.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time. It is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.
DocuSign, Inc. | 2024 Form 10-Q | 3

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)July 31, 2023January 31, 2023
Assets
Current assets
Cash and cash equivalents$1,017,778 $721,895 
Investments—current426,271 309,771 
Accounts receivable, net of allowance for doubtful accounts of $5,697 and $6,011 as of July 31, 2023 and January 31, 2023
414,740 516,914 
Contract assets—current16,188 12,437 
Prepaid expenses and other current assets81,492 69,987 
Total current assets1,956,469 1,631,004 
Investments—noncurrent85,202 186,049 
Property and equipment, net220,916 199,892 
Operating lease right-of-use assets131,341 141,493 
Goodwill353,345 353,619 
Intangible assets, net60,304 70,280 
Deferred contract acquisition costs—noncurrent369,749 350,899 
Other assets—noncurrent90,079 79,484 
Total assets$3,267,405 $3,012,720 
Liabilities and Equity
Current liabilities
Accounts payable$5,803 $24,393 
Accrued expenses and other current liabilities109,349 100,987 
Accrued compensation162,243 163,133 
Convertible senior notes—current725,105 722,887 
Contract liabilities—current1,208,411 1,172,867 
Operating lease liabilities—current23,053 24,055 
Total current liabilities2,233,964 2,208,322 
Contract liabilities—noncurrent21,839 16,925 
Operating lease liabilities—noncurrent130,746 141,348 
Deferred tax liability—noncurrent13,923 10,723 
Other liabilities—noncurrent19,174 18,115 
Total liabilities2,419,646 2,395,433 
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2023 and January 31, 2023
— — 
Common stock, $0.0001 par value; 500,000 shares authorized, 203,197 shares outstanding as of July 31, 2023; 500,000 shares authorized, 201,904 shares outstanding as of January 31, 2023
20 20 
Treasury stock, at cost: 15 shares as of July 31, 2023; 10 shares as of January 31, 2023
(2,027)(1,785)
Additional paid-in capital2,530,532 2,240,732 
Accumulated other comprehensive loss(19,536)(22,996)
Accumulated deficit(1,661,230)(1,598,684)
Total stockholders’ equity
847,759 617,287 
Total liabilities and equity$3,267,405 $3,012,720 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2024 Form 10-Q | 4

DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended July 31,Six Months Ended July 31,
(in thousands, except per share data)2023202220232022
Revenue:
Subscription$669,367 $605,194 $1,308,674 $1,174,445 
Professional services and other18,320 16,990 40,401 36,431 
Total revenue687,687 622,184 1,349,075 1,210,876 
Cost of revenue:
Subscription116,185 107,931 225,127 213,090 
Professional services and other29,397 28,773 56,942 56,030 
Total cost of revenue145,582 136,704 282,069 269,120 
Gross profit542,105 485,480 1,067,006 941,756 
Operating expenses:
Sales and marketing294,838 323,582 575,443 624,279 
Research and development135,960 126,532 251,324 238,759 
General and administrative103,884 76,456 208,695 139,034 
Restructuring and other related charges811 — 29,583 — 
Total operating expenses535,493 526,570 1,065,045 1,002,072 
Income (loss) from operations6,612 (41,090)1,961 (60,316)
Interest expense(1,592)(1,632)(3,558)(3,281)
Interest income and other income (expense), net17,455 1,003 29,700 (3,647)
Income (loss) before provision for income taxes22,475 (41,719)28,103 (67,244)
Provision for income taxes15,080 3,359 20,169 5,207 
Net income (loss)$7,395 $(45,078)$7,934 $(72,451)
Net income (loss) per share attributable to common stockholders:
Basic$0.04 $(0.22)$0.04 $(0.36)
Diluted$0.04 $(0.22)$0.04 $(0.36)
Weighted-average shares used in computing net income (loss) per share:
Basic203,703 200,618 203,177 200,150 
Diluted208,192 200,618 208,284 200,150 
Other comprehensive income (loss):
Foreign currency translation gain (loss), net of tax$2,075 $(5,029)$2,506 $(16,854)
Unrealized gains (losses) on investments, net of tax306 (369)954 (2,783)
Other comprehensive income (loss)2,381 (5,398)3,460 (19,637)
Comprehensive income (loss)$9,776 $(50,476)$11,394 $(92,088)
Stock-based compensation expense included in costs and expenses:
Cost of revenue—subscription$13,081 $12,994 $24,438 $23,607 
Cost of revenue—professional services and other7,286 6,478 14,016 11,560 
Sales and marketing51,563 61,218 96,889 108,649 
Research and development45,151 40,978 81,148 73,183 
General and administrative34,592 19,539 74,934 34,931 
Restructuring and other related charges34 — 4,988 — 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2024 Form 10-Q | 5

DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at April 30, 2023202,359 $20 $2,412,033 $(2,027)$(21,917)$(1,638,617)$749,492 
Exercise of stock options61 — 705 — — — 705 
Settlement of restricted stock units2,141 — — — — — — 
Tax withholding on net share settlement of restricted stock units(780)— (42,026)— — — (42,026)
Repurchases of common stock(584)— — — — (30,008)(30,008)
Employee stock-based compensation— — 159,820 — — — 159,820 
Net income— — — — — 7,395 7,395 
Other comprehensive income, net— — — — 2,381 — 2,381 
Balances at July 31, 2023203,197 $20 $2,530,532 $(2,027)$(19,536)$(1,661,230)$847,759 
Balances at April 30, 2022199,920 $20 $1,835,187 $(1,648)$(19,048)$(1,465,562)$348,949 
Exercise of stock options540 — 8,689 — — — 8,689 
Settlement of restricted stock units705 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (21,953)— — — (21,953)
Repurchases of common stock(394)— — — — (25,007)(25,007)
Employee stock-based compensation— — 146,929 — — — 146,929 
Net loss— — — — — (45,078)(45,078)
Other comprehensive loss, net— — — — (5,398)— (5,398)
Balances at July 31, 2022200,771 $20 $1,968,852 $(1,648)$(24,446)$(1,535,647)$407,131 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


DocuSign, Inc. | 2024 Form 10-Q | 6

DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Continued)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at January 31, 2023201,904 $20 $2,240,732 $(1,785)$(22,996)$(1,598,684)$617,287 
Exercise of stock options76 — 832 — — — 832 
Settlement of restricted stock units and employee stock purchase plan3,285 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan(1,195)— (64,860)(242)— — (65,102)
Employee stock purchase plan420 — 18,390 — — — 18,390 
Repurchases of common stock(1,293)— — — — (70,480)(70,480)
Settlement of capped calls, net of related costs— — 23,688 — — — 23,688 
Employee stock-based compensation— — 311,750 — — — 311,750 
Net income— — — — — 7,934 7,934 
Other comprehensive income, net— — — — 3,460 — 3,460 
Balances at July 31, 2023203,197 $20 $2,530,532 $(2,027)$(19,536)$(1,661,230)$847,759 
Balances at January 31, 2022198,834 $20 $1,720,013 $(1,532)$(4,809)$(1,438,189)$275,503 
Exercise of stock options719 — 10,626 — — — 10,626 
Settlement of restricted stock units and employee stock purchase plan1,347 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (47,357)(116)— — (47,473)
Employee stock purchase plan265 — 24,151 — — — 24,151 
Repurchases of common stock(394)— — — — (25,007)(25,007)
Employee stock-based compensation— — 261,419 — — — 261,419 
Net loss— — — — — (72,451)(72,451)
Other comprehensive loss, net— — — — (19,637)— (19,637)
Balances at July 31, 2022200,771 $20 $1,968,852 $(1,648)$(24,446)$(1,535,647)$407,131 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DocuSign, Inc. | 2024 Form 10-Q | 7

DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended July 31,
(in thousands)20232022
Cash flows from operating activities:
Net income (loss)$7,934 $(72,451)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization48,105 42,444 
Amortization of deferred contract acquisition and fulfillment costs98,382 89,575 
Amortization of debt discount and transaction costs2,495 2,482 
Non-cash operating lease costs11,731 13,466 
Stock-based compensation expense296,413 251,930 
Deferred income taxes3,420 3,068 
Other(782)8,099 
Changes in operating assets and liabilities:
Accounts receivable99,803 101,422 
Prepaid expenses and other current assets(14,420)(16,028)
Deferred contract acquisition and fulfillment costs(113,356)(108,315)
Other assets(8,433)(7,255)
Accounts payable(20,294)(4,687)
Accrued expenses and other liabilities10,164 2,967 
Accrued compensation(3,312)(14,019)
Contract liabilities40,458 41,814 
Operating lease liabilities(13,657)(17,347)
Net cash provided by operating activities444,651 317,165 
Cash flows from investing activities:
Purchases of marketable securities(174,372)(296,293)
Maturities of marketable securities164,017 190,179 
Purchases of strategic and other investments(120)(2,625)
Purchases of property and equipment(46,436)(37,113)
Net cash used in investing activities(56,911)(145,852)
Cash flows from financing activities:
Repayments of convertible senior notes— (16)
Repurchases of common stock(70,480)(25,007)
Settlement of capped calls, net of related costs23,688 — 
Payment of tax withholding obligation on net RSU settlement and ESPP purchase(62,681)(43,857)
Proceeds from exercise of stock options832 10,626 
Proceeds from employee stock purchase plan18,390 24,151 
Net cash used in financing activities(90,251)(34,103)
Effect of foreign exchange on cash, cash equivalents and restricted cash2,290 (8,040)
Net increase in cash, cash equivalents and restricted cash299,779 129,170 
Cash, cash equivalents and restricted cash at beginning of period (1)
723,201 509,679 
Cash, cash equivalents and restricted cash at end of period (1)
$1,022,980 $638,849 
(1) $5.2 million and $1.3 million of restricted cash was included in Prepaid expenses and other current assets and Other assets—noncurrent at July 31, 2023 and January 31, 2023. $1.7 million and $0.6 million of restricted cash was included in Prepaid expenses and other current assets and in Other assets—noncurrent at July 31, 2022, and January 31, 2022.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2024 Form 10-Q | 8

DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
Six Months Ended July 31,
(in thousands)20232022
Supplemental disclosure:
Cash paid for interest$93 $93 
Cash paid for operating lease liabilities19,475 20,851 
Cash paid for income taxes6,090 4,035 
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities$4,224 $8,862 
Fair value of shares issued as part of the repayments of convertible senior notes— 2 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2024 Form 10-Q | 9

DOCUSIGN, INC.
Index for Notes to the Condensed Consolidated Financial Statements

DocuSign, Inc. | 2024 Form 10-Q | 10

DOCUSIGN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Organization and Description of Business

DocuSign, Inc. (“we,” “our”, “us”, or “Company”) was incorporated in the State of Washington in April 2003. We merged with and into DocuSign, Inc., a Delaware corporation, in March 2015.

DocuSign is the global leader in the eSignature category. We offer products that address broader agreement workflows, and digital transformation, including the world’s leading electronic signature product, enabling agreements to be signed electronically on a wide variety of devices, from virtually anywhere in the world, securely.

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include those of DocuSign, Inc. and our subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our fiscal 2023 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2023 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended July 31, 2023 are not necessarily indicative of the results to be expected for the year ending January 31, 2024.

Our fiscal year ends on January 31. References to fiscal 2024, for example, are to the fiscal year ending January 31, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the condensed consolidated financial statements and notes thereto.

Significant items subject to such estimates and assumptions made by management include, but are not limited to, the determination of:
•the average period of benefit associated with deferred contract acquisition costs and fulfillment costs;
•the fair value of certain stock awards issued;
•the fair value of convertible notes;
•the useful life and recoverability of long-lived assets;
•the discount rate used for operating leases;
•the recognition and measurement of loss contingencies; and
•the recognition, measurement and valuation of deferred income taxes.

Significant Accounting Policies

There have been no changes to our significant accounting policies described in our fiscal 2023 Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

Note 2. Revenue

Subscription revenue is recognized over time and accounted for approximately 97% of our revenue in each of the three and six month periods ended July 31, 2023 and 2022.

DocuSign, Inc. | 2024 Form 10-Q | 11

Performance Obligations

As of July 31, 2023, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $1.9 billion. We expect to recognize 59% of the transaction price allocated to remaining performance obligations within the 12 months following July 31, 2023 in our condensed consolidated statement of operations and comprehensive income (loss).

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $16.2 million and $12.4 million as of July 31, 2023 and January 31, 2023. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2023 and 2022 we recognized revenue of $876.0 million and $763.1 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules. We record accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days.

Geographic Information

Revenue by geography is based on the address of the customer as specified in our master subscription agreements with our customers. Revenue by geographic area was as follows:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands)2023202220232022
U.S.$507,984 $468,622 $1,001,042 $913,075 
International179,703 153,562 348,033 297,801 
Total revenue$687,687 $622,184 $1,349,075 $1,210,876
DocuSign, Inc. | 2022 Form 10Q | 12

Note 3. Fair Value Measurements
The following table summarizes our financial assets that are measured at fair value on a recurring basis:
July 31, 2023
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$489,827 $— $— $489,827 
Level 2:
Cash equivalents(1)
U.S. governmental securities5,000 — — 5,000 
Available-for-sale securities
Commercial paper108,757 — (121)108,636 
Corporate notes and bonds315,384 — (2,836)312,548 
U.S. governmental securities90,774 (485)90,289 
Level 2 total519,915 — (3,442)516,473 
Total$1,009,742 $— $(3,442)$1,006,300 
January 31, 2023
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$133,009 $— $— $133,009 
Level 2:
Cash equivalents(1)
Commercial paper9,992 — (2)9,990 
Available-for-sale securities
Commercial paper85,957 — (258)85,699 
Corporate notes and bonds367,930 101 (3,771)364,260 
Municipal notes and bonds7,983 — (65)7,918 
U.S. governmental securities38,344 4 (405)37,943 
Level 2 total510,206 105 (4,501)505,810 
Total$643,215 $105 $(4,501)$638,819 

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of July 31, 2023 and January 31, 2023, in addition to cash of $523.0 million and $578.9 million.

We use quoted prices in active markets for identical assets to determine the fair value of our Level 1 investments. The fair value of our Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs.

The fair values of our available-for-sale securities as of July 31, 2023, by remaining contractual maturities, were as follows (in thousands):
Due in one year or less$426,271 
Due in one to two years85,202 
$511,473 

DocuSign, Inc. | 2024 Form 10-Q | 13

As of July 31, 2023 and January 31, 2023, securities in an unrealized loss position were, individually and in aggregate, not material. An allowance for credit losses was deemed unnecessary for these securities, given the extent of the unrealized loss positions as well as the issuers' high credit ratings and consistent payment history.

We had no liabilities measured at fair value on a recurring basis as of July 31, 2023 and January 31, 2023.

Convertible Senior Notes

We estimated the fair value based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last day of the reporting period (Level 2). The Notes are recorded at face value less unamortized debt discount and transaction costs as “Convertible senior notes—current” on our condensed consolidated balance sheets. Refer to Note 6 for further information.

(in thousands)July 31, 2023January 31, 2023
0.5% Convertible Senior Notes due in 2023
Aggregate principal amount$37,083 $37,083 
Fair value amount37,308 38,981 
0% Convertible Senior Notes due in 2024
Aggregate principal amount$690,000 $690,000 
Fair value amount672,791 655,666 

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:
(in thousands)July 31, 2023January 31, 2023
Computer and network equipment$133,289 $138,869 
Software, including capitalized software development costs147,285 114,524 
Furniture and office equipment16,402 20,897 
Leasehold improvements57,584 73,415 
354,560 347,705 
Less: Accumulated depreciation(214,690)(210,781)
139,870 136,924 
Work in progress81,046 62,968 
     Total$220,916 $199,892 

Depreciation and amortization expense associated with property and equipment was $20.3 million and $16.1 million for the three months ended July 31, 2023 and 2022, and $38.1 million and $31.8 million for the six months ended July 31, 2023 and 2022. This included amortization expense related to capitalized internally-developed software costs of $8.8 million and $5.5 million for the three months ended July 31, 2023 and 2022, and $15.6 million and $9.8 million for the six months ended July 31, 2023 and 2022.

For the three months ended July 31, 2023 and 2022, we capitalized $22.2 million and $16.6 million of internally developed software, including $6.9 million and $4.9 million of capitalized stock-based compensation expense in the three months ended July 31, 2023 and 2022. For the six months ended July 31, 2023 and 2022, we capitalized $43.9 million and $27.0 million of internally developed software, including $13.7 million and $7.7 million of capitalized stock-based compensation expense in the six months ended July 31, 2023 and 2022.

DocuSign, Inc. | 2024 Form 10-Q | 14

Note 5. Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:
Six Months Ended July 31,
(in thousands)20232022
Deferred Contract Acquisition Costs:
Beginning balance$355,389 $315,158 
Additions to deferred contract acquisition costs89,191 82,237 
Amortization of deferred contract acquisition costs(73,982)(65,309)
Cumulative translation adjustment2,113 (5,064)
Ending balance$372,711 $327,022 
Deferred Contract Fulfillment Costs:
Beginning balance$21,076 $19,088 
Additions to deferred contract fulfillment costs24,165 26,078 
Amortization of deferred contract fulfillment costs(24,400)(24,266)
Cumulative translation adjustment139 (849)
Ending balance$20,980 $20,051 

Note 6. Debt

Convertible Senior Notes

In September 2018, we issued $575.0 million in aggregate principal amount of the 0.5% Convertible Senior Notes due in 2023 (“2023 Notes”). The net proceeds from the issuance of the 2023 Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs. Based upon the reported sales price of our common stock, the 2023 Notes became convertible on August 1, 2020 and were convertible through July 31, 2022. Subsequently, the 2023 Notes became convertible at the option of the holders at any time on or after June 15, 2023, until the close of business on September 13, 2023. As a result, the 2023 Notes were convertible as of July 31, 2023. We have not received conversion notices on our 2023 Notes in the six months ending July 31, 2023.

In January 2021, we issued $690.0 million in aggregate principal amount of the 0% Convertible Senior Notes due in 2024 (“2024 Notes,” and together with the 2023 Notes, the “Notes”). The net proceeds from the issuance of the 2024 Notes were $677.3 million after deducting the initial purchasers’ discounts and transaction costs. As of July 31, 2023, the conversion conditions for the 2024 Notes described in our fiscal 2023 Annual Report on Form 10-K were not met.

Net Carrying Amounts of the Liability Components

The 2023 Notes and 2024 Notes are within one year of maturity and are therefore classified as current liabilities in our consolidated balance sheets as of July 31, 2023 and January 31, 2023. The 2023 Notes mature September 15, 2023, and the 2024 Notes mature January 15, 2024. The net carrying amounts of the Notes were as follows:
(in thousands)July 31, 2023January 31, 2023
2023 Notes:
Principal$37,083 $37,083 
Less: unamortized transaction costs(23)(118)
Net carrying value of liability component$37,060 $36,965 
2024 Notes:
Principal$690,000 $690,000 
Less: unamortized transaction costs(1,954)(4,078)
Net carrying value of liability component$688,046 $685,922 
DocuSign, Inc. | 2024 Form 10-Q | 15


The effective interest rate on the 2023 Notes was 1.0%. The effective interest rate on the 2024 notes was 0.6%. Interest expense recognized related to the Notes was as follows:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands)2023202220232022
Contractual interest expense$46 $46 $403 $92 
Amortization of transaction costs1,110 1,103 2,219 2,204 
Total$1,156 $1,149 $2,622 $2,296 

Capped Calls

To minimize the potential economic dilution to our common stock upon conversion of the Notes, we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain counterparties.

The material terms of the capped call transactions were as follows:
(in thousands, except per share amounts)2023 Notes2024 Notes
Aggregate cost of capped calls$4,357 $31,395 
Initial strike price per share (1)
$71.50 $420.24 
Initial cap price per share (1)
$110.00 $525.30 
Shares of our common stock covered by the capped calls (1)
519 1,642 
(1) Subject to adjustments for certain events, such as merger events and tender offers, and anti-dilution adjustments

In the first quarter of fiscal 2024, we unwound capped calls in relation to our 2023 Notes. In connection with the unwind transaction, we received cash totaling $23.7 million from the counterparties.

Impact on Net Income (Loss) Per Share

In periods when we have net income, the shares of our common stock subject to the Notes outstanding during the period are included in our diluted earnings per share under the if-converted method. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive.

Upon conversion, there will be no economic dilution from the Notes unless the market price of our common stock exceeds the cap prices listed above in the Capped Calls section, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the cap price. As of July 31, 2023, the market price of our common stock did not exceed the $110.00 per share cap price associated with the 2023 Notes nor the $525.30 cap price associated with the 2024 Notes; therefore, the Notes would not have caused economic dilution if converted.

Revolving Credit Facility

In January 2021, we entered into a credit agreement, as subsequently amended in May 2023, with a syndicate of banks. The credit agreement extended a senior secured revolving credit facility (the “Credit Facility”) to us in an aggregate principal amount of $500.0 million, which amount may be increased by an additional $250.0 million subject to the terms of the credit agreement. We may use the proceeds of future borrowings under the credit facility to finance working capital, for capital expenditures and for other general corporate purposes, including permitted acquisitions.

The Credit Facility matures in January 2026 and requires us to comply with customary affirmative and negative covenants. We were in compliance with all covenants as of July 31, 2023. As of July 31, 2023, there were no outstanding borrowings under the Credit Facility. The Credit Facility is subject to customary fees for loan facilities of this type, including ongoing commitment fees at a rate between 0.25% and 0.30% per annum on the daily undrawn balance.
DocuSign, Inc. | 2024 Form 10-Q | 16



Note 7. Commitments and Contingencies

As of July 31, 2023, we had unused letters of credit outstanding totaling $2.4 million, the majority of which are associated with our various operating leases.

We have entered into certain noncancellable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of July 31, 2023, our future noncancellable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:
Fiscal Period:Amount (in thousands)
2024, remainder$33,793 
202557,397 
202639,368 
20275,324 
20281,663 
Thereafter1,622 
Total$139,167 

In May 2022, we entered into an agreement with a public cloud computing service provider. Under the agreement, the minimum commitment is $175.0 million through fiscal 2028. As of July 31, 2023, the remaining commitment was $143.4 million. The remaining commitment is excluded from the table above.

Indemnification

We enter into indemnification provisions under our agreements with customers and other companies in the ordinary course of business, including business partners, contractors and parties performing our research and development. Pursuant to these arrangements, we agree to indemnify and defend the indemnified party for certain claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims because of our activities. The duration of these indemnification agreements is generally perpetual. The maximum potential amount of future payments we could be required to make under these indemnification clauses or agreements is not determinable. Historically, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these indemnification agreements is not material as of July 31, 2023, and January 31, 2023. We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

We have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.

Claims and Litigation

From time to time, we may be subject to legal proceedings, claims and litigation made against us in the ordinary course of business. Legal costs associated with litigation are expensed as incurred. We believe the final outcome of these matters, including the case described below, will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

DocuSign, Inc. Securities Litigation and Related Derivative Litigation

On February 8, 2022, a putative securities class action was filed in the U.S. District Court for the Northern District of California, captioned Weston v. DocuSign, Inc., et al., Case No. 3:22-cv-00824, naming DocuSign and certain of our current and former officers as defendants. An amended complaint was filed on July 8, 2022. As amended, the suit purports to allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, based on allegedly false and misleading statements about our business and prospects during the course of the COVID-19 pandemic. As amended, the suit is purportedly brought on behalf of purchasers of our securities between June 4, 2020 and June 9, 2022. Our motion to dismiss the case at the pleading stage was denied by the U.S. District Court on April 18, 2023 and the suit is now proceeding.
DocuSign, Inc. | 2024 Form 10-Q | 17


An earlier action alleging similar claims against the same defendants, captioned Collins v. DocuSign, Inc., et al., Case No. 3:22-cv-00851, filed in the Eastern District of New York and subsequently transferred to the Northern District of California, was voluntarily dismissed on February 14, 2022.

Four putative shareholder derivative cases have been filed containing allegations based on or similar to those in the securities class action (Weston). The cases were filed on May 17, 2022, in the U.S. District Court for the District of Delaware, captioned Pottetti v. Springer, et al., Case No. 1:22-cv-00652; on May 19, 2022 in the U.S. District Court for the Northern District of California, captioned Lapin v. Springer, et al., Case No. 3:22-cv-02980; on May 20, 2022, in the U.S. District Court for the Northern District of California, captioned Votto v. Springer, et al., Case No. 3:22-cv-02987; and on September 20, 2022 in the U.S. District Court for the Northern District of California, captioned Fox v. Springer, et al., Case No. 3:22-cv-05343. Each case is allegedly brought on the Company’s behalf. The suits name the Company as a nominal defendant and, depending on the particular case, the members of our board of directors or, in certain instances, current or former officers, as defendants. While the complaints vary, they are based largely on the same underlying allegations as the securities class action suit described above (Weston), as well as, in certain instances, alleged insider trading. Collectively, these lawsuits purport to assert claims for, among other things, breach of fiduciary duty, aiding and abetting such breach, corporate waste, unjust enrichment, and under Sections 10(b) and 21D of the Securities Exchange Act of 1934. The complaints seek to recover unspecified damages and other relief on the Company’s behalf. By court order dated July 19, 2022, the two cases in the Northern District of California (Lapin and Votto) have been consolidated and stayed in light of the securities class action and no response to the complaints in the action will be due unless and until the stay is lifted. The third case in the Northern District of California (Fox) was related to the other derivative suits and assigned to the same judge, and was similarly stayed by order of the court on December 2, 2022. The Delaware suit (Pottetti) was voluntarily dismissed on September 1, 2022, and then re-filed in the Delaware Court of Chancery on September 22, 2022, under the caption Pottetti v. Springer, et al., Case No. C.A. 2022-0852-PAF. The Delaware Court of Chancery issued an order on September 30, 2022 staying the action in light of the securities class action and no response to the complaint will be due unless and until the stay is lifted.

DocuSign Civil Litigation

On October 25, 2022, an action was filed in the Delaware Court of Chancery, captioned Daniel D. Springer v. Mary Agnes Wilderotter and DocuSign, Inc., Civil Action No. 2022-0963-LWW, concerning Mr. Springer’s resignation from our board of directors. Mr. Springer’s complaint sought relief determining that he did not resign from his position on our board of directors and remains a director, and for an award of attorneys’ fees and costs associated with the civil action. To avoid the cost and distraction of further litigation with Mr. Springer, the Company offered to stipulate to entry of judgment in favor of Mr. Springer as to his disputed resignation and his status as a member of our board of directors. Following our offer, on January 11, 2023, the Chancery Court issued an order declaring and confirming that (i) Mr. Springer has not resigned from the board of directors and (ii) Mr. Springer is currently a member of the board of directors. Mr. Springer subsequently filed a motion seeking payment of his attorneys’ fees. DocuSign has opposed this motion, which remains pending before the Delaware Court of Chancery.

In addition, on January 26, 2023, Mr. Springer delivered a demand for arbitration before JAMS, a private alternative dispute resolution firm, captioned Daniel D. Springer v. DocuSign, Inc. and Mary Agnes Wilderotter. In the demand, Mr. Springer alleges that he was wrongfully terminated as Chief Executive Officer; asserts related claims against DocuSign and Ms. Wilderotter, including defamation, withholding promised compensation and breach of contract; and seeks unspecified damages and other relief. DocuSign has engaged legal counsel to defend the matter, and on March 10, 2023, submitted a motion to dismiss several of the causes of action asserted in the demand. Mr. Springer opposed the motion, which was granted in part and denied in part. Discovery is ongoing.

Note 8. Stockholders' Equity

Equity Incentive Plans

We maintain three stock-based compensation plans: the 2018 Equity Incentive Plan (the “2018 Plan”), the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and the Amended and Restated 2003 Stock Plan (the “2003 Plan”).

As of July 31, 2023, 37.0 million shares of our common stock were available for issuance under the 2018 Plan.

DocuSign, Inc. | 2024 Form 10-Q | 18

Restricted Stock Units

Restricted stock unit (“RSU”) activity for the six months ended July 31, 2023 was as follows:
(in thousands, except per share data)Number of UnitsWeighted-Average Grant Date Fair Value
Unvested at January 31, 202317,621 $81.30 
Granted15,415 55.91 
Vested(3,661)91.45 
Canceled(1,566)95.56 
Unvested at July 31, 202327,809 $65.10 

As of July 31, 2023, the grant date fair value of unvested RSUs subject to market-based and performance-based vesting conditions was $119.6 million.

As of July 31, 2023, our total unrecognized compensation cost related to RSUs was $1.4 billion. We expect to recognize this expense over the remaining weighted-average period of approximately 3.3 years.

Stock Options
    
Option activity for the six months ended July 31, 2023 was as follows:
(in thousands, except years and per share data)Number of OptionsWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
Outstanding at January 31, 2023, all vested and exercisable2,228 $17.11 3.60$96,839 
Exercised(76)11.48 
Outstanding at July 31, 2023, all vested and exercisable2,152 $17.31 3.16$78,443 

As of July 31, 2023, there was no remaining unrecognized compensation cost related to stock option grants.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of our common stock at a discounted price, normally through payroll deductions, subject to the terms of the ESPP and applicable law. As of July 31, 2023, 11.0 million shares of our common stock were reserved for issuance under the ESPP.

Compensation expense related to the ESPP was $4.5 million and $6.9 million for the three months ended July 31, 2023 and 2022, and $8.7 million and $11.9 million for the six months ended July 31, 2023 and 2022.

Stock Repurchase Program

In March 2022, our board of directors authorized a stock repurchase program of up to $200.0 million of our outstanding common stock. During the three and six months ended July 31, 2022, we repurchased and cancelled 0.4 million shares of common stock at an average price of $63.52 per share, for an aggregate amount of $25.0 million.

During the three months ended July 31, 2023, we repurchased and cancelled 0.6 million shares of common stock at an average price of $51.42 per share, for an aggregate amount of $30.0 million. During the six months ended July 31, 2023, we repurchased and cancelled 1.3 million shares of common stock at an average price of $54.51 per share, for an aggregate amount of $70.5 million.

DocuSign, Inc. | 2024 Form 10-Q | 19

Note 9. Restructuring and Other Related Charges

2023 Restructuring Plan

During fiscal 2023, the board of directors authorized a restructuring plan (the “2023 Restructuring Plan”) in response to changing economic conditions and in an effort to reduce our operational costs and improve our organizational efficiency. As of the fourth quarter of fiscal 2023, the 2023 Restructuring Plan had been substantially completed.

2024 Restructuring Plan

During the first quarter of fiscal 2024, the board of directors authorized a restructuring plan (the “2024 Restructuring Plan”) designed to support our growth, scale and profitability objectives. We incurred costs associated with the 2024 Restructuring Plan related to employee termination benefits and other costs mainly in the first quarter of fiscal 2024. As of July 31, 2023, the 2024 Restructuring Plan was substantially completed.

These amounts are recorded to the Restructuring and other related charges within our consolidated statements of operations and comprehensive income (loss) as they are incurred.

For the three months ended July 31, 2023 restructuring and other related charges were $0.8 million. For the six months ended July 31, 2023, restructuring and other related charges were $29.6 million and were primarily composed of $28.0 million for employee termination benefits, including stock-based compensation expense of $5.0 million. There were no restructuring and other related charges in the three and six months ended July 31, 2022.

Restructuring liability activities during the six months ended July 31, 2023:
(in thousands)January 31, 2023AccrualsCash PaymentsJuly 31, 2023
2023 Restructuring Plan
Employee termination benefits$384 $1,499 $(1,000)$883 
Other158 20 (178)— 
Total$542 $1,519 $(1,178)$883 
2024 Restructuring Plan
Employee termination benefits$— $21,837 $(21,644)$193 
Other— 1,633 (1,416)217 
Total$— $23,470 $(23,060)$410 


DocuSign, Inc. | 2024 Form 10-Q | 20

Note 10. Net Income (Loss) per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net income (loss) per share attributable to common stockholders for periods presented:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands, except per share data)2023202220232022
Numerator:
Net income (loss) attributable to common stockholders, basic$7,395 $(45,078)$7,934 $(72,451)
Add: Interest expense on convertible senior notes46 — 403 — 
Net income (loss) attributable to common stockholders, diluted$7,441 $(45,078)$8,337 $(72,451)
Denominator:
Weighted-average common shares outstanding, basic203,703 200,618 203,177 200,150 
Effect of dilutive securities4,489 — 5,107 — 
Weighted-average common shares outstanding, diluted208,192 200,618 208,284 200,150 
Net income (loss) per share attributable to common stockholders:
Basic$0.04 $(0.22)$0.04 $(0.36)
Diluted$0.04 $(0.22)$0.04 $(0.36)

Outstanding potentially dilutive securities that were excluded from the diluted per share calculations because they would have been antidilutive are as follows:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands)2023202220232022
RSUs16,028 14,843 7,190 14,843 
Stock options— 2,377 — 2,377 
ESPP456 553 289 553 
Convertible senior notes— 2,161 — 2,161 
Total antidilutive securities16,484 19,934 7,479 19,934 

Note 11. Income Taxes

Our tax provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate as prescribed under Accounting Standards Codification (“ASC”) 740, “Income Taxes”, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. There were no material discrete items in the quarter.

Our income tax provision was $15.1 million and $3.4 million for the three months ended July 31, 2023 and 2022. Our income tax provision was $20.2 million and $5.2 million for the six months ended July 31, 2023 and 2022. The increase in income tax expense in the current year is a result of higher pre-tax income and limitations on net operating losses allowed to reduce taxable income.

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for valuation allowances, on a quarterly basis. We maintain a valuation allowance against certain deferred tax assets, including all U.S. consolidated group deferred tax assets and certain foreign deferred tax assets as a result of our history of losses in the U.S. and certain foreign jurisdictions, and the variability and uncertainty of our operating results. In the event we determine our deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

As of July 31, 2023, our gross unrecognized tax benefits totaled $51.0 million, excluding related accrued interest and penalties, of which $11.3 million would impact the effective tax rate if recognized. Our policy is to account for interest
DocuSign, Inc. | 2024 Form 10-Q | 21

and penalties related to uncertain tax positions as a component of income tax provision. We do not expect material changes to our gross unrecognized tax benefits within the next 12 months.

We are subject to taxation in the U.S. and various foreign jurisdictions. Our tax years from inception in 2003 through July 31, 2023 remain subject to examination by U.S. and California taxing authorities, as well as taxing authorities in various other state and foreign jurisdictions. We are under examination by the Irish Revenue Commissioners for the period February 1, 2020 through January 31, 2021. We are not under examination in any other material jurisdictions. We believe that adequate amounts have been reserved in all jurisdictions.

Note 12. Subsequent Events

In September 2023, our board of directors authorized an increase to its existing stock repurchase program for an additional amount of up to $300.0 million of our outstanding common stock. The program has no minimum purchase commitment and no mandated end date. The repurchase program may be suspended or discontinued at any time at our discretion. The timing and the amount of any repurchased common stock will be determined by management based on its evaluation of market conditions and other factors.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our fiscal 2023 Annual Report on Form 10-K. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q and in our fiscal 2023 Annual Report on Form 10-K. Our fiscal year ends January 31.

Executive Overview of Second Quarter Results

Overview

DocuSign is the global leader in the eSignature category. We offer products that address broader agreement workflows and digital transformation, including the ability for agreements to be signed electronically on a wide variety of devices, from virtually anywhere in the world, securely. DocuSign’s product offerings, which includes DocuSign eSignature, allow organizations to do business faster with less risk and lower costs, while providing better experiences for customers and employees. As a result, over 1.4 million customers and more than a billion users worldwide utilize DocuSign to prepare, sign, act on, and manage their agreements electronically.

We generally offer access to our products on a subscription basis with prices based on the functionality our customers require and the quantity of Envelopes provisioned. Similar to the physical envelopes historically used to mail paper documents, an Envelope is a digital container used to send one or more documents for signature or approval to one or more recipients. Our customers have the flexibility to put a large number of documents in an Envelope. For a number of use cases, such as buying a home, multiple Envelopes are used over the course of the process. To drive customer reach and adoption, we also offer for free certain limited-time or feature-constrained versions of our platform.

We generate substantially all our revenue from sales of subscriptions, which accounted for 97% of our revenue in each of the three and six month periods ended July 31, 2023 and 2022. Our subscription fees include the use of our products and access to customer support. Subscriptions generally range from one to three years, and substantially all our multi-year customers pay in annual installments, one year in advance.

We also generate revenue from professional and other non-subscription services, which consists primarily of fees associated with providing new customers deployment and integration services. Other revenue includes amounts derived from sales of on-premises solutions. Professional services and other revenue accounted for the remainder of total revenue in the three and six months ended July 31, 2023 and 2022. We anticipate continuing to invest in customer success through our professional services offerings as we believe it plays an important role in accelerating our customers’ adoption of our products, which helps drive customer retention and expansion.

DocuSign, Inc. | 2024 Form 10-Q | 22

We offer subscriptions to our products to businesses at all scales, from global enterprise down to local, very small businesses (“VSBs”). We have an omnichannel go-to-market approach that consists of direct, digital self-serve and partners to sell to our customers. We offer more than 400 off-the-shelf, prebuilt integrations with the applications that many of our customers already use—including those offered by Google, Microsoft, Oracle, Salesforce, SAP, and ServiceNow—so that they can create, sign, send and manage agreements directly within these applications. We have a diverse customer base spanning across virtually all industries and around the world with no significant customer concentration. No single customer accounted for more than 10% of total revenue in any of the periods presented.

We focused initially on selling our products to commercial businesses and VSBs, and later expanded our focus to target enterprise customers. The number of our customers with greater than $300,000 in annualized contract value has increased from 992 customers as of July 31, 2022 to 1,047 customers as of July 31, 2023. Each of our customer types has a different purchasing pattern. VSBs typically become customers by quickly utilizing our digital and self-serve channels and generate smaller average contract values, while commercial and enterprise customers typically involve longer sales cycles, larger contract values and greater expansion opportunities for us.

Financial Results for the Three and Six Months Ended July 31, 2023 and 2022

Three Months Ended July 31,Six Months Ended July 31,
(in thousands)2023202220232022
Total revenue$687,687 $622,184 $1,349,075 $1,210,876 
Total costs and expenses681,075 663,274 1,347,114 1,271,192 
Total stock-based compensation expense151,707 141,207 296,413 251,930 
Income (loss) from operations6,612 (41,090)1,961 (60,316)
Net income (loss)7,395 (45,078)7,934 (72,451)
Net cash provided by operating activities211,016 120,879 444,651 317,165 
Purchases of property and equipment(27,379)(15,404)(46,436)(37,113)

Cash, cash equivalents, restricted cash and investments were $1.5 billion as of July 31, 2023.

Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:

Growing Customer Base

We are highly focused on continuing to acquire new customers to support our long-term growth. We have invested, and expect to continue to invest in our go-to-market efforts involving an omnichannel approach that consists of direct sales, partner-assisted sales and digital self-service purchasing. As of July 31, 2023, we had a total of over 1.4 million customers, including approximately 226,000 enterprise and commercial customers, compared to over 1.2 million customers and approximately 191,000 enterprise and commercial customers as of July 31, 2022. We define enterprise customers as companies generally included in the Global 2000. We define commercial customers to include both mid-market companies, which includes companies outside the Global 2000 that have greater than 250 employees, and medium-sized businesses (“SMBs”) which are companies with between 10 and 249 employees, in each case excluding any enterprise customers. We define VSBs as companies with fewer than 10 employees. We refer to total customers as all enterprises, commercial businesses and VSBs.

We believe that our ability to increase the number of customers using our products, particularly the number of enterprise and commercial customers, is an indicator of our market penetration, the growth of our business and our potential future business opportunities. By increasing awareness of our products, further developing our sales and marketing expertise and continuing to build features tuned to different industry needs, we have expanded the diversity of our customer base to include organizations of all sizes across nearly every industry.

DocuSign, Inc. | 2024 Form 10-Q | 23

Retaining and Expanding Contracts with Existing Enterprise and Commercial Customers
    
Many of our customers have increased spend with us as they have expanded their use of our offerings in both existing and new use cases across their front or back office operations. Our enterprise and commercial customers may start with just one use case and gradually implement additional use cases across their organization once they see the benefits of our products. Several of our largest enterprise customers have deployed our software platform for hundreds of use cases across their organizations. We believe there is significant expansion opportunity with our customers following their initial adoption of our software platform.

Increasing International Revenue
    
Our international revenue represented 26% of total revenue in each of the three and six months ended July 31, 2023 and 25% of total revenue in each of the three and six months ended July 31, 2022.

We started our international selling efforts in English-speaking common law countries, such as Canada, the UK and Australia, where we were able to leverage our core technologies due to similar approaches to electronic signature in these jurisdictions and the U.S. We have since made significant investments to be able to offer our products in select civil law countries. For example, in Europe, we offer Standards-Based Signature (“SBS”) technology tailored for the European Union’s (“EU”) electronic Identification, Authentication and Trust Services (“eIDAS”) regulations. SBS supports signatures that involve digital certificates, including those specified in the EU’s eIDAS regulations for advanced and qualified electronic signatures.
    
We believe there is a substantial opportunity for us to increase our international customer base by leveraging and expanding investments in our technology, direct sales force and strategic partnerships around the world, as well as helping existing U.S.-based customers manage agreements across their international businesses. We have experienced increased demand across multiple regions and are expanding our sales and marketing resources to capitalize on the potential growth of these markets. Additionally, we expect to continue to develop and enhance our strategic partnerships in key international markets as we grow internationally.

Investing for Growth

We believe that our market opportunity is large, and we plan to invest to support further growth. This includes optimizing our go-to-market efforts to focus on attractive growth opportunities and investing in research and development to drive product innovation and meet customer needs at scale. We also continue to assess and evaluate strategic acquisitions and investments. As we focus on infrastructure and technology that best serve our customers across industries, we will prioritize initiatives that accelerate our product capabilities.

We believe these collective activities will help us retain and expand within our current customers’ organizations and attract new customers.

DocuSign, Inc. | 2024 Form 10-Q | 24

Components of Results of Operations

Revenue

We derive revenue primarily from the sale of subscriptions and, to a lesser extent, professional services.

Subscription Revenue
Subscription revenue consists of fees for the use of our software platform and our technical infrastructure and access to customer support, which includes phone or email support. We typically invoice customers annually in advance. We recognize subscription revenue ratably over the term of the contract subscription period beginning on the date access to our software platform is provided.
Professional Services and Other Revenue
Professional services revenue includes fees associated with new customers requesting deployment and integration services. We price professional services on a time and materials basis and on a fixed fee basis. We generally have standalone value for our professional services and recognize revenue based on standalone selling price as services are performed or upon completion of services for fixed fee contracts. Other revenue includes amounts derived from sales of on-premises solutions.

Overhead Allocation

We allocate shared overhead costs, such as facilities (including rent, utilities and depreciation on equipment shared by all departments), information technology, information security and recruiting costs to all departments based on headcount. As such, these allocated overhead costs are reflected in each cost of revenue and operating expense category.

Cost of Revenue

Cost of Subscription Revenue
Cost of subscription revenue primarily consists of expenses related to hosting our software platform and providing support. These expenses consist of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with our technical infrastructure, customer success and customer support. These expenses also consist of software and maintenance costs, third-party hosting fees, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired intangible assets, credit card processing fees and allocated overhead costs.
Cost of Professional Services and Other Revenue
Cost of professional services and other revenue consists primarily of personnel costs for our professional services delivery team, travel-related costs and allocated overhead costs.

Gross Profit and Gross Margin

Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors including our pricing, timing and amount of investment to maintain or expand our hosting capability, the growth of our software platform support and professional services team, stock-based compensation expenses, amortization of costs associated with capitalized internal use software and acquired intangible assets and allocated overhead costs.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring and other related charges. As our revenues continue to increase, our operating expenses as a percentage of revenue may increase or decrease at different rates, driven by the timing of revenue recognition, the timing of hiring, our investments in growth and other factors.

DocuSign, Inc. | 2024 Form 10-Q | 25

Sales and Marketing ExpenseSales and marketing expense consists primarily of personnel costs, including sales commissions. These expenses also include expenditures related to advertising, marketing, promotional events and brand awareness activities, as well as allocated overhead costs. We expect sales and marketing expense to continue to increase in absolute dollars as we enhance our product offerings and implement marketing strategies.
Research and Development ExpenseResearch and development expense consists primarily of personnel costs. These expenses also include non-personnel costs, such as subcontracting, consulting and professional fees for third-party development resources, as well as allocated overhead costs. Our research and development efforts focus on maintaining and enhancing existing functionality and adding new functionality. We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our software platform.
General and Administrative ExpenseGeneral and administrative expense consists primarily of employee-related costs for those employees providing administrative services such as legal, human resources, information technology related to internal systems, accounting and finance. These expenses also include certain third-party consulting services, certain facilities costs, allocated overhead costs, and lease-related charges. We expect general and administrative expense to increase in absolute dollars to support the overall growth of our operations.
Restructuring and Other Related ChargesRestructuring and other related charges consist primarily of costs associated with restructuring plans approved by our board of directors. In connection with these restructuring actions or other exit actions, which were undertaken to improve operating margin and support our growth, scale and profitability objectives, we recognize costs related to termination benefits for former employees whose positions were eliminated, the write-off of facility-related balances, and other costs.

Interest Expense

Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our Notes.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net, consists primarily of interest earned on our cash, cash equivalents and investments, changes in fair value of our strategic investments and foreign currency transaction gains and losses.

Provision for Income Taxes

Our provision for income taxes consists of income taxes in the U.S. and certain foreign jurisdictions where we conduct business, and tax benefits arising from deductions for stock-based compensation. We have a valuation allowance against our U.S. consolidated group and certain foreign deferred tax assets. We expect to maintain this valuation allowance for the foreseeable future or until it becomes more likely than not that the benefit of these U.S. and foreign deferred tax assets will be realized by way of expected future taxable income.

DocuSign, Inc. | 2024 Form 10-Q | 26

Discussion of Results of Operations

The following table summarizes our historical consolidated statements of operations data:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands, except percentages)2023As % of revenue2022As % of revenue2023As % of revenue2022As % of revenue
Revenue:
Subscription$669,367 97 %$605,194 97 %$1,308,674 97 %$1,174,445 97 %
Professional services and other18,320 3 16,990 3 40,401 3 36,431 3 
Total revenue687,687 100 622,184 100 1,349,075 100 1,210,876 100 
Cost of revenue:
Subscription116,185 17 107,931 17 225,127 17 213,090 18 
Professional services and other29,397 4 28,773 5 56,942 4 56,030 4 
Total cost of revenue145,582 21 136,704 22 282,069 21 269,120 22 
Gross profit542,105 79 485,480 78 1,067,006 79 941,756 78 
Operating expenses:
Sales and marketing294,838 43 323,582 52 575,443 43 624,279 52 
Research and development135,960 20 126,532 20 251,324 19 238,759 20 
General and administrative103,884 15 76,456 13 208,695 15 139,034 11 
Restructuring and other related charges811 — — — 29,583 2 — — 
Total operating expenses535,493 78 526,570 85