What changed in this filing

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Item 1A. Risk Factors

2020-09-04 compared with 2020-06-05 · 79 added, 95 removed, 671 unchanged (21% of the section changed)

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The COVID-19 pandemic has created and is likely to continue to create significant uncertainty in global financial markets, which may decrease overall technology spending and depress demand for our solutions.

In addition, the COVID-19 pandemic may disrupt our customers' or partners' operations, limiting their ability to pay for our solutions and adversely affecting our results of operations.

In addition, the COVID-19 pandemic may disrupt the operations of our customers or partners, limiting their ability to pay for our solutions and adversely affecting our results of operations.

We have undertaken measures to mitigate the effect of the COVID-19 pandemic on our business and to protect our employees, partners and customers, including by imposing travel restrictions for our employees, requiring almost all employees to work remotely until further notice, and shifting customer, partner and investor events to virtual-only formats.

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We began operations in 2003 and have experienced net losses since inception.

We generated a net loss of $47.8 million and $45.7 million in the three months ended April 30, 2020 and 2019, and as of April 30, 2020, we had an accumulated deficit of $1.2 billion.

We generated a net loss of $112.4 million and $114.4 million in the six months ended July 31, 2020 and 2019, and as of July 31, 2020, we had an accumulated deficit of $1.2 billion.

We will need to generate and sustain increased revenue levels in future periods to become profitable and, even if we do, we may not be able to maintain or increase our level of profitability.

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▪ our ability to control costs, including our operating expenses;

▪ our ability to continue operating remotely due to the COVID-19 pandemic;

▪ potential accelerations of prepaid expenses and deferred costs;

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▪ awareness of our brand on a global basis.

If our operating results fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action.

We derive a significant majority of our revenue from our e-signature solutions, and slower or declining adoption of our e-signature solutions, without a corresponding increase in the use of our other products and solutions, could cause our operating results to suffer.

Sales of subscriptions to our e-signature solutions account for substantially all of our subscription revenue and are the source of substantially all of our professional services revenue.

Although we continue to add to our suite of products and solutions

for automating the agreement process, we expect that we will be substantially dependent on our e-signature solutions to generate revenue for the foreseeable future.

Although we continue to add to our suite of products and solutions for automating the agreement process, we expect that we will be substantially dependent on our e-signature solutions to generate revenue for the foreseeable future.

As a result, our operating results could suffer due to:

▪ any decline in demand for our e-signature solutions;

▪ macro- and microeconomic effects of the COVID-19 pandemic;

▪ macro- and micro-economic effects of the COVID-19 pandemic;

▪ the failure of our e-signature solutions to maintain market acceptance;

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If the market does not develop further, develops more slowly, or in a way that we do not expect, our business will be adversely affected.

The market for our products and solutions — including our e-signature solution, which is the core part of our broader Agreement Cloud platform for automating the agreement process — is relatively new and evolving, which makes our business and future prospects difficult to evaluate.

The market for our products and solutions — including our e-signature solution, which is the core part of our broader DocuSign Agreement Cloud platform for automating the agreement process — is relatively new and evolving, which makes our business and future prospects difficult to evaluate.

We have customers in a wide variety of industries, including real estate, financial services, insurance, manufacturing, and healthcare and life sciences.

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Our customers have no obligation to renew their subscriptions and we cannot guarantee that our customers will renew their subscriptions with us for a similar or greater contract period or on the same or more favorable terms.

Our renewal and expansion rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction with our products and solutions, decreases in the number of users at our customers, changes in the type and size of our customers, pricing changes, competitive conditions, customer attrition and general economic conditions, including as a result of the current COVID-19 pandemic.

competitive conditions, customer attrition and general economic conditions, including as a result of the current COVID-19 pandemic.

If our customers do not renew their subscriptions for our products and solutions or if they reduce their subscription amounts at the time of renewal, our revenue will decline, and our business will suffer.

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As a result, we depend, in part, on our data center providers’ ability to protect these facilities against damage or interruption, including from natural disasters, power or telecommunications failures, criminal acts and similar events.

In the event that our data center arrangements are terminated, or if there are any lapses of service or damage to a data center, we could experience lengthy interruptions in our service as well as delays and additional expenses in arranging new facilities and services.

In the event that our data center arrangements are terminated, or if there are any lapses of service at or damage to a data center, we could experience lengthy interruptions in our service as well as delays and additional expenses in arranging new facilities and services.

Even with current and planned disaster recovery arrangements, including the existence of secondary data centers that become active during certain lapses of service or damage at a primary data center, our business could be harmed.

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These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause customers to fail to renew their subscriptions, any of which could adversely affect our business.

Our systems and security measures have on occasion in the past been, and may in the future be, compromised or subject to data breaches, cyberattacks or other malicious activity.

Our systems and security measures have been, and may in the future be, compromised or subject to data breaches, cyberattacks or other malicious activity.

Consequently, our products and solutions may be perceived as not being secure.

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Our operations involve the storage and transmission of customer data, personal data and other sensitive information, and our corporate environment contains important company data and/or business records, employee data and data from partner, vendor or other relationships, as well as a wide variety of our own internal company, partner and employee information.

other organizations providing valuable technology and services, we are subject to cyberattacks from malicious third parties using a wide variety of tactics, including credential stuffing and account takeover attacks, denial or degradation of service attacks, malicious code (e.g., viruses and worms), denial-of-service attacks and many other techniques.

Like other organizations providing valuable technology and services, we are subject to cyberattacks from malicious third parties using a wide variety of tactics, including credential stuffing and account takeover attacks, denial or degradation of service attacks, malicious code (e.g., viruses and worms), denial-of-service attacks and many other techniques.

While we have security measures in place designed to protect our production, development and other systems, maintain the integrity of customer, company, partner and employee information, and prevent data loss, misappropriation and other security breaches and incidents, we have faced security incidents in the past.

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There can be no assurance that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on

acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that insurers will not deny coverage as to any future claim.

We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that insurers will not deny coverage as to any future claim.

One or more large, successful claims against us in excess of our available insurance coverage, or changes in our insurance policies, including premium increases or large deductible or co-insurance requirements, could have an adverse effect on our business, operating results and financial condition.

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We spend substantial amounts of time and money to research, develop and enhance our existing products, add new offerings to our products and solutions for automating the agreement process, incorporate additional functionality, and solve new use cases to meet our customers’ rapidly evolving demands.

Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of our customers and potential customers is essential.

Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of our customers and potential customers is essential to our business.

If we are unable to develop products and solutions internally due to a lack of research and development resources, we may be forced to rely on acquisitions to expand into a certain markets or technologies, which can be costly.

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▪ attract new customers, increase our existing customers’ use of our products and solutions and provide our customers with excellent customer support;

▪ expand our Agreement Cloud offerings for our customers;

▪ expand our DocuSign Agreement Cloud offerings for our customers;

▪ continue to introduce our products and solutions to new markets outside of the United States;

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Because our recent growth has resulted in the rapid expansion of our business and product offerings, we do not have a long history upon which to base forecasts of future revenues and operating results.

Accordingly, we may be unable to prepare

accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors.

Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors.

If we do not address these risks successfully, our operating results could differ materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our stock price to decline.

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As part of our business strategy, we continually evaluate opportunities to acquire or invest in businesses, products or technologies that we believe could complement or expand our products and solutions, enhance our technical capabilities or otherwise offer growth opportunities.

For example, on September 4, 2018, we acquired SpringCM, a provider of cloud-based document generation and contract lifecycle management software, and on May 1, 2020, we acquired Seal Software Group Limited, a provider of contract analytics software.

For example, on September 4, 2018 we acquired SpringCM, a provider of cloud-based document generation and contract lifecycle management software, on May 1, 2020 we acquired Seal Software Group Limited, a provider of contract analytics software, and on July 6, 2020 we acquired Liveoak Technologies, Inc., a provider of secure agreement-collaboration and identity verification platform.

In the future, we may be unable to identify suitable acquisition candidates and, even if we do, we may not be able to complete desired acquisitions on favorable terms, if at all.

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Moreover, to pay for an acquisition or investment, we would have to use cash, incur debt and/or issue equity securities, each of which may affect our financial condition or the value of our common stock and (in the case of equity financing) could result in dilution to our stockholders.

The failure to successfully integrate the operations, personnel or technologies of an acquired business could impact our ability to realize the full benefits of such an acquisition.

In addition, a failure to successfully integrate the operations, personnel or technologies of an acquired business could impact our ability to realize the full benefits of such an acquisition.

Our limited experience acquiring companies increases these risks.

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federal, state and local, as well as foreign, government agencies, as well as to customers in highly regulated industries such as financial services, pharmaceuticals, insurance, healthcare and life sciences.

Sales to such entities are subject to a number of challenges and risks.

Sales to such entities are

subject to a number of challenges and risks.

Selling to such entities can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale.

These longer sale cycles make the timing of future revenue from these entities difficult to predict.

Further, government certification requirements may change, restricting our ability to sell into the government sector until we have met those revised requirements.

Government demand and payment for our offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays, including as a result of the COVID-19 pandemic, adversely affecting public sector demand for our products and solutions.

In addition, government agencies and entities in highly regulated industries may demand shorter subscription periods or other contract terms that differ from our standard arrangements, including terms that can lead those customers to obtain broader rights in our offerings than would be standard.

In addition, both government agencies and entities in highly regulated industries may demand shorter subscription periods or other contract terms that differ from our standard arrangements, including terms that can lead those customers to obtain broader rights in our offerings than would be standard.

Such agencies and entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners due to a default or for other reasons, and any such termination may adversely affect our business, operating results and financial condition.

We may need to reduce or change our pricing model to remain competitive.

We price our subscriptions for e-signature solutions based on the number of users within an organization that use our products and solutions to send agreements digitally for signature or the number of Envelopes that such users are provisioned to send.

We price our subscriptions for e-signature solutions based on the number of users within an organization who use our products and solutions to send agreements digitally for signature or the number of Envelopes that such users are provisioned to send.

We expect that we may need to change our pricing from time to time, including in connection with the launch of new or enhanced offerings for automating the agreement process.

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The applications underlying our products and solutions are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems.

We have from time to time found defects in our products and solutions and may discover additional defects in the future that could result in data unavailability,

unauthorized access to, loss, corruption or other harm to our customers’ data.

We have from time to time found defects in our products and solutions and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our customers’ data.

While we implement bug fixes and upgrades as part of our regularly scheduled system maintenance, we may not be able to detect and correct defects or errors before implementing our products and solutions.

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Even if we are successful in maintaining and recruiting new partners, we cannot assure you that these relationships will result in increased customer usage of our products and solutions or increased revenue.

Additionally, as the scale of our partnership efforts increases with our growth, the successful implementation of these relationships may become more time consuming, difficult and costly to realize which could negatively impact our business performance or our brand reputation.

Failure to establish and maintain relationships with partners that can provide complementary technology offerings and software integrations could limit our ability to grow our business.

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Our growth strategy includes expanding the use of our products and solutions through complementary technology offerings and software integrations, such as third-party APIs.

While we have established partnerships with providers of complementary offerings and software integrations, we cannot guarantee that we will be successful in maintaining these partnerships or establishing partnerships with additional providers.

In the future, third-party providers of complementary technology offerings and software integrations may decline to enter into, or may later terminate, relationships with us;

While we have established partnerships with providers of complementary offerings and software integrations, we cannot guarantee that we will be successful in continuing to maintain and scale these partnerships or establishing partnerships with additional providers as we grow.

In the future, third-

party providers of complementary technology offerings and software integrations may decline to enter into, or may later terminate, relationships with us;

change their features or platforms;

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alter the terms governing use of and access to their applications and APIs;

or implement other changes that could functionally limit or terminate our ability to use these third-party technology offerings and software integrations with our platform, which could negatively impact our offerings and harm our business.

or implement other changes that could functionally limit or terminate our ability to use these third-party technology offerings and software integrations with our platform, any of which could negatively impact our offerings and harm our business.

Further, these third-party providers may experience operational difficulties due to the current COVID-19 pandemic, which could limit or alter our ability to use these third-party technology offerings, which in turn could have an adverse impact on our result of operations.

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Complying with laws and regulations, in particular those related to privacy and data protection, could also result in additional costs and liabilities to us or inhibit sales of our software.

We receive, store and process personal information and other data from and about customers, in addition to our employees, partners and service providers.

We receive, store and process personal information and other data from and about customers, our employees, partners and service providers.

In addition, customers use our products and solutions to obtain and store personal identifiable information, personal health information (including protected health information) and personal financial information.

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We are particularly reliant on the UETA and the ESIGN Act, which together have solidified the legal landscape for use of electronic records and electronic signatures in commerce by confirming that electronic records and signatures carry the same weight and have the same legal effect as traditional paper documents and wet ink signatures.

▪ The EU General Data Protection Regulation (the “GDPR”), which became effective in May 2018, imposes strict requirements related to processing the personal data of EU individuals.

▪ The EU General Data Protection Regulation (the “GDPR”), that became effective in May 2018, imposes strict requirements related to processing the personal data of EU individuals.

EU data protection authorities have the power to impose administrative fines for violations of the GDPR of up to a maximum of €20 million or 4% of a noncompliant company’s annual global turnover for the preceding financial year, whichever is higher, and violations of the GDPR may also lead to damages claims by data controllers and data subjects.

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The GDPR imposes compliance burdens on us, including by mandating burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process information about them.

Additionally, the United Kingdom implemented the Data Protection Act effective in May 2018 and statutorily amended in 2019 that substantially implements the GDPR.

The United Kingdom's departure in January 2020 from the European Union (commonly referred to as Brexit) has created uncertainty with regard to the requirements for data transfers between the United Kingdom and the EU and other jurisdictions it is still unclear whether transfer of data from the European Economic Area to the United Kingdom will remain lawful under GDPR following “Brexit.” The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States.

Additionally, the United Kingdom (“UK”) implemented the Data Protection Act effective in May 2018 and statutorily amended in 2019, that substantially implements the GDPR and contains provisions, including UK-specific derogations, for how GDPR is applied in the UK.

The United Kingdom's planned departure in January 2020 from the European Union (commonly referred to as Brexit) has created uncertainty with regard to the requirements for data transfers between the UK and the EU and other jurisdictions, and it is still unclear whether the transfer of data from the European Economic Area to the UK will remain lawful under GDPR following “Brexit.” The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States.

These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.

In addition, these rules are consistently under scrutiny.

▪ The CCPA took effect on January 1, 2020 and will be enforceable by the California Attorney General six months after the publication of the final regulations or July 1, 2020.

▪ On July 16, 2020, the Court of Justice of the European Union (the “Court of Justice”) invalidated the European Union-United States (“EU-U.S.”) Privacy Shield on the grounds that the Privacy Shield failed to offer adequate protections to EU personal data transferred to the United States.

On August 10, 2020, the U.S.

Department of Commerce and the European Commission announced new discussions to evaluate the potential for an enhanced EU-U.S.

Privacy Shield framework to comply with the July 16 judgment of the Court of Justice.

We rely on approved Binding Corporate Rules as both a data processor and data controller, which provide an alternative to Privacy Shield certification for legalizing EU-U.S.

cross-border flows of personal data within and among DocuSign entities and systems, in compliance with GDPR and other applicable data protection laws.

Our SpringCM business, acquired in 2018, relied on the Privacy Shield at acquisition, but is expected to be included under our Binding Corporate Rules in the near-term.

We are therefore less affected by the court’s decision (and certain regulatory guidance issued in its wake) which has led to uncertainty regarding the legality of EU-U.S.

data flows in general and those conducted under the Privacy Shield in particular.

Additional changes to data protection laws or regulations in the European Union that limit or prevent transfers of personal data from the EU to the U.S.

could cause us to incur penalties under GDPR and could increase the cost and complexity of operating our business.

▪ The CCPA took effect on January 1, 2020 and is enforceable by the California Attorney General.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA provides for unlimited civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA may increase our compliance costs and potential liability, particularly in the event of a data breach.

The CCPA may regulate or impact our processing of personal information depending on the context.

It remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted.

▪ HIPAA in the United States (as amended and supplemented by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) imposes mandatory contractual terms and other obligations with respect to safeguarding the privacy, security and transmission of protected health information.

Given that CCPA enforcement began on July 1, 2020, it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted.

Additionally, the CCPA has prompted a number of proposals in the U.S.

for new federal and state-level privacy legislation that, if passed, could increase our potential liability, increase our compliance costs, and adversely affect our business.

▪ The Health Insurance Portability and Accountability Act (“HIPAA”) in the United States (as amended and supplemented by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) imposes mandatory contractual terms and other obligations with respect to safeguarding the privacy, security and transmission of protected health information.

We may function as a HIPAA business associate for certain of our customers and, as such, are subject to applicable privacy and data security requirements.

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Such laws and regulations may be modified or subject to new or different interpretations, and new laws and regulations may be enacted in the future.

We expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, marketing, advertising, electronic signatures, consumer communications and information security in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

We expect that new laws, regulations and industry standards will continue to be proposed and enacted relating to privacy, data protection, marketing, advertising, electronic signatures, consumer communications and information security in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

Future laws, regulations, standards and other obligations or any changed interpretation of existing laws or regulations could impair our ability to develop and market new functionality and maintain and grow our customer base and increase revenue.

Future restrictions on the collection, use, sharing or disclosure of data or additional requirements for express or implied consent of our customers, partners or end consumers for the use and disclosure of such information could require us to incur additional costs or modify our products and solutions, possibly in a material manner, and could limit our ability to develop new functionality.

If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability.

Future restrictions on the collection, use, sharing or disclosure of data or additional requirements for the express or implied consent of our customers, partners or end consumers for the use and disclosure of such information could require us to incur additional costs or modify our products and solutions, possibly in a material manner, and could limit our ability to develop new functionality.

If we are not able to comply with these laws or regulations or if we become liable under these evolving laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability.

This may require us to expend substantial resources or to discontinue certain solutions, which would negatively affect our business, operating results and financial condition.

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Many customers use our products and solutions globally to comply with safe harbors and other legislation in the countries in which they transact business.

For example, some of our customers rely on our certification under the FedRAMP and eIDAS in the EU to help satisfy their own legal and regulatory compliance requirements.

For example, some of our customers rely on our certifications under the Federal Risk and Authorization Management Program in the U.S.

and eIDAS in the EU to help satisfy their own legal and regulatory compliance requirements.

If a court or regulatory body determines that our products and solutions are inadequate to meet these requirements, documents executed through our products and solutions could, in some instances, be rendered unenforceable, resulting in potential loss of customers, liability under customer contracts, and brand and reputational damage.

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Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which our patents may therefore provide little or no deterrence.

If a third party is able to

obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities covered by such intellectual property and may be unable to compete effectively.

If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities covered by such intellectual property and may be unable to compete effectively.

Any inability to license third-party technology in the future would have an adverse effect on our business or operating results and would adversely affect our ability to compete.

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and RPost Communications Limited filed another patent infringement complaint against us in the same court.

In August 2019, we and such RPost entities entered into a settlement agreement and both cases were dismissed.

In August 2019, we and such collective RPost entities entered into a settlement agreement and both cases were dismissed.

A decision in favor of the plaintiffs in any future lawsuits could subject us to significant liability for damages and our ability to develop and sell our products may be harmed.

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As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software.

Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products.

Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote

additional research and development resources to change our products.

In addition, if we were to combine our proprietary software products with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software products.

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We are continuing to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect.

As of January 31, 2020, approximately 27% of our full-time employees were located outside of the United States.

As of July 31, 2020, approximately 28% of our full-time employees were located outside of the United States.

We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant management attention and financial resources.

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If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer.

Our international operations and recent U.S.

Our international operations and updates to U.S.

federal tax legislation may subject us to potential adverse tax consequences.

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Foreign governments also regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products and solutions or could limit our end-customers’ ability to implement our products and solutions in those countries.

Changes in our products and solutions or future changes in export and import regulations may create delays in the introduction of our products and

solutions in international markets, prevent our end-customers with international operations from deploying our products and solutions globally or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether.

Changes in our products and solutions or future changes in export and import regulations may create delays in the introduction of our products and solutions in international markets, prevent our end-customers with international operations from deploying our products and solutions globally or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether.

From time to time, various governmental agencies have proposed additional regulation of encryption technology, including the escrow and government recovery of private encryption keys.

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A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest.

The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have a material adverse impact on our business and operating results.

Any imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have a material adverse impact on our business and operating results.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

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The remaining federal and state net operating loss carryforwards will begin to expire in 2025 and 2021, respectively.

January 31, 2020, we also had total foreign net operating loss carryforwards of $16.6 million, which do not expire under local law.

As of January 31, 2020, we also had total foreign net operating loss carryforwards of $16.6 million, which do not expire under local law.

We also have total U.S.

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state research tax credits do not expire.

Under Sections 382 and 383 of the Code, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” An “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” An “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

Similar rules may apply under state tax laws.

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We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.

Significant assumptions and estimates used in preparing our consolidated financial statements include those related to allocation of revenue between recognized and deferred amounts, goodwill and intangible assets, fair value of financial instruments, valuation of stock-based compensation, and the valuation allowance for deferred income taxes.

Significant assumptions and estimates used in preparing our consolidated financial statements include those related to allocation of revenue between recognized and

deferred amounts, goodwill and intangible assets, fair value of financial instruments, valuation of stock-based compensation, and the valuation allowance for deferred income taxes.

Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

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A catastrophic event that results in the destruction or disruption of our data centers, or our network infrastructure or information technology systems, including any errors, defects or failures in third-party hardware, could affect our ability to conduct normal business operations and adversely affect our operating results.

In addition, as computer malware, viruses and computer hacking, fraudulent use attempts and phishing attacks have become more prevalent, we face increased risk from these activities to maintain the performance, reliability, security and availability

of our products and technical infrastructure to the satisfaction of our customers.

Any such computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks or other data security breaches to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing customers and attract new customers .

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Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

We have a currently effective Registration Statement on Form S-3 registering for sale approximately 247,030 shares of our common stock in connection with our acquisition of Liveoak.

We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

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Our ESPP provides eligible employees with the opportunity to purchase shares of our common stock at a discounted price per share.

As of April 30, 2020, 6,541,070 shares of our common stock are reserved for issuance under our ESPP.

Pursuant to our 2018 Plan, our management is authorized to grant stock options, restricted stock units and other equity awards to our

employees, directors and consultants.

As of April 30, 2020, 33,944,561 shares of our common stock are reserved and available for issuance under our 2018 Plan.

As of July 31, 2020, 6.5 million shares of our common stock are reserved for issuance under our ESPP.

Pursuant to our 2018 Plan, our management is authorized to grant stock options, restricted stock units and other equity awards to our employees, directors and consultants.

As of July 31, 2020, 32.1 million shares of our common stock are reserved and available for issuance under our 2018 Plan.

Additionally, the number of shares of our common stock reserved for issuance under our ESPP and 2018 Plan will automatically increase on February 1 of each year, through and including February 1, 2028, by 1% and 5%, respectively, of the total number of shares of our capital stock outstanding on January 31 of the preceding fiscal year, or a lesser number of shares determined by our board of directors.

60 unchanged sentences

If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

7 unchanged sentences

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than by paying cash in lieu of delivering any fractional share), we may settle all or a portion of our conversion obligation in cash, which could adversely affect our liquidity.

In addition, even if holders do not elect to convert their Notes, we could be required under applicable

accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The last reported sales price of our common stock was greater than or equal to 130% of the conversion price for at least 20 trading days during a period of 30 consecutive trading days ending on, and including, the last trading day of the three months ended July 31, 2020 and therefore the Notes became convertible on August 1, 2020 and continue to be convertible through October 31, 2020.

The capped call transactions may affect the value of the Notes and our common stock.

9 unchanged sentences

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Notes.

The Notes may become in the future convertible at the option of the holders of the Notes prior to June 15, 2023 under certain circumstances as provided in the indenture governing the Notes.

Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

Pursuant to the terms of the indenture governing the Notes, the Notes became convertible on August 1, 2020 and continue to be convertible through October 31, 2020.

Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our

common stock.

In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

7 unchanged sentences

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted loss per share except to the extent that the conversion value of the Notes exceeds their principal amount.

Under the treasury stock method, for diluted loss per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such

excess, if we elected to settle such excess in shares, are issued.

Under the treasury stock method, for diluted loss per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.

We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method.

If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted loss per share would be adversely affected.

ITEMS 2, 3, 4 and 5 are not applicable and have been omitted.

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

EXHIBIT INDEX

Exhibit Number Description Form File No.

Incorporated by Reference Exhibit Filing Date

2.1 Share Purchase Agreement dated as of February 26, 2020, by and among DocuSign, Inc., DocuSign International, Inc., Seal Software Group Limited and Fortis Advisors LLC, as the Shareholders' Representative

8-K 001-38465 2.1 February 28, 2020

3.1 Amended and Restated Bylaws of DocuSign, Inc.

8-K 001-38465 3.1 June 2, 2020

10.1# Non-Employee Director Compensation Policy

31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

# Indicates management contract or compensatory plan, contract or agreement

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DOCUSIGN, INC.

/s/ Daniel D.

Chief Executive Officer

(Principal Executive Officer)

/s/ Michael J.

Chief Financial Officer

(Principal Accounting and Financial Officer)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors