What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-09-03 compared with 2021-06-04 · 136 added, 86 removed, 294 unchanged (43% of the section changed)

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Our fiscal year ends January 31.

Executive Overview of First Quarter Results

Executive Overview of Second Quarter Results

DocuSign accelerates the process of doing business for companies and simplifies life for their customers and employees.

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It provides comprehensive functionality across e-signature and addresses the broader agreement process.

As a result, over 980,000 customers and hundreds of millions of users worldwide utilize DocuSign to create, upload and send documents for multiple parties to sign electronically.

As a result, over one million customers and one billion users worldwide utilize DocuSign to create, upload and send documents for multiple parties to sign electronically.

The DocuSign Agreement Cloud allows users to complete approvals, agreements and transactions faster by building end-to-end processes.

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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.

For a number of

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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 96% and 95% of our revenue in the three months ended April 30, 2021 and 2020.

We generate substantially all our revenue from sales of subscriptions, which accounted for 96% and 95% of our revenue in the three months and the six months ended July 31, 2021 and 2020.

Our subscription fees include the use of our software suite and access to customer support.

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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 months ended April 30, 2021 and 2020.

Professional services and other revenue accounted for the remainder of total revenue in the three and six months ended July 31, 2021 and 2020.

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’ deployment of our software suite, which helps drive customer retention and expansion of the use of the DocuSign Agreement Cloud.

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We focused initially on selling our e-signature solutions to commercial businesses and VSBs, and later expanded our focus to target enterprise customers.

To demonstrate this growth over time, the number of our customers with greater than $300,000 in annual contract value (measured in billings) has increased from approximately 30 customers as of January 31, 2013 to 673 customers as of April 30, 2021.

Each of our customer types has a different purchasing pattern.

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COVID-19 Update

The COVID-19 pandemic has spread across the world including the United States , where we are headquartered and the majority of our workforce is located.

The pandemic and the public health measures taken in response to it have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility.

We are continuing to monitor the actual and potential effects of the pandemic across our business.

Because these effects are dependent on highly uncertain future developments — including the duration, spread and severity of the pandemic, the actions taken to contain the virus, the distribution of vaccines, and how quickly and to what extent normal economic and operating conditions can or will resume — they are extremely difficult to predict.

While our revenue, billings and earnings are relatively predictable as a result of our subscription-based business model, the effects of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods.

Since March 2020, we have taken a number of precautionary measures to ensure the health and safety of our employees, partners and customers.

DocuSign has shifted to a largely remote work environment, providing nearly all employees the opportunity to work from home until at least October 4, 2021.

We have suspended all business travel other than for essential functions.

We have cancelled or replaced planned events, such as our Momentum conferences, with virtual-only experiences.

We have incurred expenses to support our employees working from home, including reimbursements for home office equipment and a stipend for other qualifying expenses, as well as expenses associated with planning and risk mitigation for potential and actual reopening of our offices, and may incur similar expenses in the future.

The COVID-19 pandemic continues to have large-scale, rapidly shifting effects on workforces, organizations, customers, economies and financial markets globally, contributing to increased market volatility.

We are continuing to monitor the effects of the pandemic across our business.

These effects are dependent on highly uncertain future developments, including the duration, spread and severity of the pandemic, the emergence of coronavirus variants, the actions undertaken to contain the virus or mitigate its impacts, the speed and breadth of vaccination progress, vaccine efficacy against COVID-19 variants, current or future travel restrictions and how quickly and to what extent normal global economic and operating conditions can or will resume , all of which are highly uncertain and cannot be accurately predicted.

While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the effects of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods.

During the pandemic, we have taken a number of precautionary measures to ensure the health and safety of our employees, partners and customers, including by shifting to a largely remote work environment, imposing work-related travel restrictions for all employees and shifting most planned customer, partner and investor events to virtual-only formats.

We have incurred expenses to support our employees working from home, including reimbursements for home office equipment and a stipend for other qualifying expenses, as well as expenses associated with planning and risk mitigation for reopening of our offices and resumption of in-person business activities, and may incur similar expenses in the future.

The impact of these and any other operational changes we may implement is uncertain, but as of the date of this filing they have not materially affected our ability to maintain operations.

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This acceleration of the digital transformation of agreements has resulted in growth in our customer base and a significant increase in customer spending across almost all industries and regions we serve.

We believe that businesses that have shifted to digital agreement processes will not return to manual ones.

However, if our expectations are incorrect, and if demand for our products decreases as the COVID-19 pandemic lessens in severity and businesses resume in-person operations, our business could suffer.

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While we have experienced a significant increase in paying customers and revenue due to the pandemic, there is no assurance that we will experience a continued increase in paying customers or that new or existing customers will continue to utilize our products at similar levels after the COVID-19 pandemic has tapered globally.

As vaccinations become widely available and the pandemic wanes, this may result in a decline in paying customers once individuals are no longer working or attending school from home and/or their priorities change.

As the pandemic continued in 2021, the rate of vaccinations and emerging COVID-19 variants have had variable impacts on different regions of the world and areas of the economy.

This has caused and may continue to cause new, existing and potential customers to experience rapidly changing conditions and disruptions to their businesses.

This may result in differing levels of demand for our products as our customers’ priorities, resources, financial conditions and economic outlook change, which could adversely affect or increase the volatility of our financial results.

See the section below titled “ Risk Factors” for further discussion of the potential impact of the COVID-19 pandemic, including the conclusion or tapering of the pandemic, on our business, financial condition and results of operations.

Financial Results for the Three Months Ended April 30, 2021 and 2020

Three Months Ended April 30,

Financial Results for the Three and Six Months Ended July 31, 2021 and 2020

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

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Purchases of property and equipment (15,938) (18,362) (28,534) (44,751)

Cash, cash equivalents, restricted cash and investments were $875.8 million as of April 30, 2021 .

Cash, cash equivalents, restricted cash and investments were $887.2 million as of July 31, 2021 .

Key Factors Affecting Our Performance

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We have invested, and expect to continue to invest, heavily in our sales and marketing efforts to drive customer acquisition.

As of April 30, 2021, we had a total of over 980,000 customers, including over 135,000 enterprise and commercial customers, comp ared to over 660,000 customers and over 85,000 enterprise and commercial customers as of April 30, 2020.

As of July 31, 2021, we had a total of over 1,053,000 customers, including over 148,000 enterprise and commercial customers, comp ared to almost 750,000 customers and over 95,000 enterprise and commercial customers as of July 31, 2020.

We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution or a distinct business unit of a large company that has an active contract to access our software suite.

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We believe there is significant expansion opportunity with our customers following their initial adoption of our software suite.

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Increasing International Revenue

Our international revenue represented 21% and 18% of our total revenue in the three months ended April 30, 2021 and 2020.

Our international revenue represented 22% and 19% of our total revenue in both the three months and the six months ended July 31, 2021 and 2020.

We started our international selling efforts in English-speaking common law countries, such as Canada, the United Kingdom and Australia, where we were able to leverage our core technologies due to similar approaches to e-signature in these jurisdictions and the United States (“U.S.”).

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As such, these allocated overhead costs are reflected in each cost of revenue and operating expense category.

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Cost of Revenue

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Our operating expenses consist of selling and marketing, research and development and general and administrative expenses.

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, our investments in growth and other factors.

Selling and Marketing Expense

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General and Administrative Expense General 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 and allocated overhead costs.

These expenses also include certain third-party consulting services, certain facilities costs, allocated overhead costs, and impairment of operating lease right-of-use assets.

We expect general and administrative expense to increase in absolute dollars to support the overall growth of our operations.

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Interest expense consists primarily of contractual interest expense, amortization of discount and amortization of debt issuance costs on our Convertible Senior Notes (the “ Notes”).

Interest income and other income, net

Interest income and other income, 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.

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.

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Provision for income taxes

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and foreign deferred tax assets will be realized by way of expected future taxable income.

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Discussion of Results of Operations

The following table summarizes our historical consolidated statements of operations data:

Three Months Ended April 30,

(in thousands) 2021 As % of revenue 2020 As % of revenue

Three Months Ended July 31, Six Months Ended July 31,

(in thousands, except percentages) 2021 As % of revenue 2020 As % of revenue 2021 As % of revenue 2020 As % of revenue

Subscription $ 492,758 96 % $ 323,643 95 % $ 944,693 96 % $ 604,565 95 %

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Interest expense (1,669) — (7,684) (2) (3,341) — (15,244) (2)

Interest income and other income, net 6,037 1 3,742 2

Interest income and other income (expense), net (1,063) (1) 2,601 — 4,974 — 6,343 —

Loss before provision for income taxes (25,343) (5) (63,718) (19) (31,715) (3) (109,389) (19)

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Net loss $ (25,501) (5) % $ (64,560) (19) % $ (33,855) (3) % $ (112,364) (19) %

The following discussion and analysis is for the three months ended April 30, 2021, compared to the same period in 2020, unless otherwise stated.

Three Months Ended April 30, 2021 versus 2020

Amortization of finite-lived intangible assets was as follows:

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

Cost of subscription revenue $ 3,328 $ 3,132 $ 6,500 $ 4,480

Sales and marketing 3,333 4,284 6,691 7,195

Total $ 6,661 $ 7,416 $ 13,191 $ 11,675

The following discussion and analysis is for the three and six months ended July 31, 2021, compared to the same period in 2020, unless otherwise stated.

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Total revenue $ 511,844 $ 342,209 50 % $ 980,923 $ 639,226 53 %

Subscription revenue increased by $171.0 million, or 61%, in the three months ended April 30, 2021.

Due to the COVID-19 pandemic, there has been a shift to remote digital business operations that has led to an increase in demand for our solutions.

This resulted in a higher growth in our customer base and a significant increase in customer spending across almost all industries and regions we serve.

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Subscription revenue increased by $169.1 million, or 52%, in the three months ended July 31, 2021 and by $340.1 million, or 56%, in the six months ended July 31, 2021.

The increase was primarily due to a combination of the acquisition of new customers and upsells to our existing customer base.

This growth was mainly driven by an increase in sales to our mid-market and enterprise customers through our direct and indirect sales channels.

We continue to invest in a variety of customer programs and initiatives, which, along with expanded customer use cases, have helped increase our subscription revenue over time.

We expect subscription revenue to continue to increase as we offer new functionality, attract new customers and fully realize the potential of our acquisitions in our product offerings.

We continue to monitor the COVID-19 pandemic in fiscal 2022 and its impact on the economy, the digital transformation of business and demand for our solutions.

Professional services and other revenue had a slight increase in the three months ended April 30, 2021.

We expect subscription revenue to continue to increase as existing customers increase their usage across their organizations while we offer new functionality, attract new customers and fully realize the potential of our acquisitions in our product offerings.

We continue to monitor the COVID-19 pandemic in fiscal 2022 and its impact on the economy, the digital transformation of business and customer demand for our solutions.

Cost of Revenue and Gross Margin

Three Months Ended April 30, 2021 versus 2020

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Gross margin:

Subscription 83 % 81 % 2 pts

Professional services and other (58) % (37) % (21) pts

Total gross margin 78 % 75 % 3 pts

Cost of subscription revenue increased $26.1 million, or 50%, in the three months ended April 30, 2021, primarily driven by higher costs to support our growing customer base and the impact of the Seal acquisition.

Significant increases consisted of:

▪ $9.7 million in personnel costs and $2.2 million in stock-based compensation expense primarily due to higher headcount, including the addition of Seal employees, and annual merit increases;

Subscription 83 % 80 % 3 pts 83 % 81 % 2 pts

Professional services and other (54) % (39) % (15) pts (56) % (38) % (18) pts

Total gross margin 78 % 74 % 4 pts 78 % 74 % 4 pts

Cost of subscription revenue increased $19.7 million, or 30%, in the three months ended July 31, 2021 and $45.8 million, or 39%, in the six months ended July 31, 2021, primarily driven by higher costs to support our growing customer base.

Increases in the three months ended July 31, 2021 primarily consisted of:

▪ $5.7 million in personnel costs and $2.5 million in stock-based compensation driven by higher headcount and annual salary increases;

▪ $5.3 million in operating costs due to higher costs to support our platform and the growth in our revenue, including increases in subscription reseller fees, hosting costs and authentication and processing fees.

Increases in the six months ended July 31, 2021 primarily consisted of:

▪ $15.3 million in personnel costs and $4.7 million in stock-based compensation driven by higher headcount and annual salary increases;

▪ $11.5 million in operating costs to support our platform and the growth in our revenue, including increases in subscription reseller fees, hosting costs and authentication and processing fees;

▪ $5.3 million in depreciation and amortization, which reflects the impact of higher data center and capitalized software assets as well as the higher existing technology intangible assets from the Seal acquisition.

Cost of professional services and other revenue increased $5.1 million, or 23%, in the three months ended April 30, 2021, primarily due to an increase in personnel costs driven by higher headcount, including the addition of Seal employees to our workforce, and annual merit increases.

▪ $9.9 million in depreciation and amortization, which reflects the impact of higher data center and capitalized software assets as well as the higher existing technology intangible assets from acquisitions.

Cost of professional services and other revenue increased $3.4 million, or 13%, in the three months ended July 31, 2021 and $8.6 million, or 18%, in the six months ended July 31, 2021, primarily due to an increase in personnel costs driven by higher headcount and annual salary increases.

Sales and Marketing

Three Months Ended April 30, 2021 versus 2020

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Percentage of revenue 51 % 57 % 51 % 57 %

Sales and marketing expenses increased $67.3 million, or 39%, in the three months ended April 30, 2021, primarily driven by investments in workforce and technology infrastructure to support the significant increase in demand due to the acceleration of the digital transformation of agreements.

Significant increases consisted of:

▪ $40.8 million in personnel costs and $13.5 million in stock-based compensation expense due to higher headcount, annual merit increases, the addition of Seal employees to our workforce, higher commissions in line with higher sales and higher taxes on employee stock transactions;

▪ $10.9 million in marketing and advertising expense, primarily due to higher spend on online advertising platforms to help capture the increased market interest in our product offering as a result of the shift to COVID-19 remote work environment.

Sales and marketing expenses increased $67.4 million, or 35%, in the three months ended July 31, 2021 and $134.7 million, or 37%, in the six months ended July 31, 2021, primarily driven by investments in workforce and

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technology support to accommodate the significant increase in demand due to the acceleration of the digital transformation of agreements.

Increases in the three months ended July 31, 2021 primarily consisted of:

▪ $33.8 million in personnel costs and $14.6 million in stock-based compensation due to higher headcount, annual salary increases, higher commissions in line with higher sales and higher payroll taxes;

▪ $12.8 million in marketing and advertising expense due to higher spend on online advertising platforms to help capture the increased market interest in our product offering.

Increases in the six months ended July 31, 2021 primarily consisted of:

▪ $74.6 million in personnel costs and $28.1 million in stock-based compensation due to higher headcount, annual salary increases, higher commissions in line with higher sales and higher payroll taxes;

▪ $23.7 million in marketing and advertising expense due to higher spend on online advertising platforms to help capture the increased market interest in our product offering.

Research and Development

Three Months Ended April 30, 2021 versus 2020

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Percentage of revenue 18 % 19 % 18 % 18 %

Research and development expenses increased $31.2 million, or 57%, in the three months ended April 30, 2021, primarily due to investments in workforce and technology infrastructure to support growth.

Personnel costs increased by $19.2 million and stock-based compensation by $8.6 million due to higher headcount, the addition of Seal and Liveoak employees to our workforce and annual merit increases.

Research and development expenses increased $30.9 million, or 48%, in the three months ended July 31, 2021 and $62.0 million, or 53%, in the six months ended July 31, 2021, primarily due to investments in workforce and technology support to accommodate growth.

Personnel costs and stock-based compensation increased $15.5 million and $11.5 million in the three months ended July 31, 2021 and $34.8 million and $20.1 million in the six months ended July 31, 2021, due to higher headcount and annual salary increases.

The increase in the six months ended July 31, 2021 also reflects the impact of the addition of Seal and Liveoak employees to our workforce.

General and Administrative

Three Months Ended April 30, 2021 versus 2020

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Percentage of revenue 13 % 15 % 12 % 15 %

General and administrative expenses increased $11.2 million or 29%, in the three months ended April 30, 2021, primarily due to investments in workforce and technology infrastructure to support growth.

Personnel costs increased by $6.3 million and stock-based compensation by $2.0 million due to higher headcount and the impact of annual merit increases.

General and administrative expenses increased $12.2 million, or 24%, in the three months ended July 31, 2021 and $23.4 million, or 26%, in the six months ended July 31, 2021, primarily due to investments in workforce and technology support to accommodate growth.

Personnel costs and stock-based compensation increased $2.9 million and $2.2 million in the three months ended July 31, 2021 and $9.8 million and $4.2 million in the six months ended July 31, 2021, due to higher headcount and the impact of annual salary increases.

The expense for the three and six months ended July 31, 2021 also includes $3.9 million impairment of operating lease right-of-use assets.

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Other Income and Expense

Three Months Ended April 30, 2021 versus 2020

Three Months Ended July 31, 2021 versus 2020 Six Months Ended July 31, 2021 versus 2020

(in thousands, except for percentages) 2021 2020 2021 2020

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Interest income $1,194 $1,825 (35) % $2,320 $5,206 (55) %

Foreign currency gain (loss) 266 (545) NM

Foreign currency gain (loss) (1,738) 1,425 NM (1,473) 880 NM

Fair value adjustments to strategic investments — — — % 5,270 — — %

Other (519) (649) (20) % (1,143) 257 NM

Interest income and other income, net $ 6,037 3,742 61 %

Interest income and other income (expense), net $(1,063) $2,601 (141) % $4,974 $6,343 (22) %

Percentage of revenue (1) % — % — % 1 %

Interest expense decreased by $5.9 million in the three months ended April 30, 2021 primarily due to lower amortization expense under ASU 2020-06 effective February 1, 2021.

Interest income and other income, net, for the three months ended April 30, 2021 included $5.1 million adjustments to fair value of certain strategic investments resulting from observable price changes that occurred during the quarter.

Interest expense decreased by $6.0 million in the three months ended July 31, 2021 and $11.9 million in the six months ended July 31, 2021, primarily due to lower amortization expense under ASU 2020-06 effective February 1, 2021.

Interest income and other income, net, for the six months ended July 31, 2021 included $5.3 million adjustments to fair value of certain strategic investments resulting from observable price changes that occurred during the quarter.

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Liquidity and Capital Resources

Our principal sources of liquidity were cash, cash equivalents and investments as well as cash generated from operations.

As of April 30, 2021, we had $780.6 million in cash and cash equivalents and short-term investments.

As of July 31, 2021, we had $822.9 million in cash and cash equivalents and short-term investments.

We also had $64.1 million in long-term investments that provide additional capital resources.

We finance our operations primarily through payments by our customers for use of our product offerings and related services and through debt financings.

In September 2018, we issued and sold $575.0 million in aggregate principal amount of 0.5% Convertible Senior Notes due 2023 ("2023 Notes").

In January 2021, we issued and sol d $690.0 million in aggregate principal amount of 0% Convertible Senior Notes due 2024 ("2024 Notes", and together with the 2023 Notes, the “Notes”).

A portion of the 2024 Notes proceeds was used to repurchase $460.0 million in aggregate principal amount of the 2023 Notes.

In September 2018, we issued and sold $575.0 million in aggregate principal amount of 0.5% Convertible Senior Notes due 2023, of which $521.7 million has been settled as of July 31, 2021.

In January 2021, we issued and sol d $690.0 million in aggregate principal amount of 0% Convertible Senior Notes due 2024.

In January 2021 we entered into a $500.0 million credit facility, which may be increased by an additional $250.0 million subject to customary terms and conditions.

The credit facility is available until January 11, 2026, to optimize our capital structure and strengthen our balance sheet.

There were no outstanding borrowings under the credit facility as of April 30, 2021 .

There were no outstanding borrowings under the credit facility as of July 31, 2021 .

Further details of these transactions are described in Note 6 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.

We were in compliance with all debt covenants at April 30, 2021 .

We were in compliance with all debt covenants at July 31, 2021 .

We believe our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditures needs over at least the next 12 months.

While we have generated positive cash flows from operations in recent years, we have generated losses from operations in the past as reflected in our accumulated deficit of $1.4 billion as of April 30, 2021.

We may not achieve profitability in the foreseeable future due to the investments we intend to make and may require additional capital resources to execute strategic initiatives to grow our business.

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Accordingly, collections from our customers have a material impact on our cash flows from operating activities.

Our accounts receivable decreased by $73.2 million in the three months ended April 30, 2021, compared to a decrease of $17.2 million in the three months ended April 30, 2020, which resulted in a $56.0 million increase in cash provided by operating activities year over year.

Our accounts receivable decreased by $38.8 million in the six months ended July 31, 2021, compared to a decrease of $25.2 million in the six months ended July 31, 2020, which resulted in a $13.6 million increase in cash provided by operating activities year over year.

Contract liabilities consist of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy.

Our contract liabilities increased by $51.6 million in the three months ended April 30, 2021, compared to an increase of $44.6 million in the three months ended April 30, 2020.

Our contract liabilities increased by $136.6 million in the six months ended July 31, 2021, compared to an increase of $107.5 million in the six months ended July 31, 2020.

The year over year increase contributed an additional $29.1 million to cash provided by operating activities.

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If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

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The following table summarizes our cash flows for the periods indicated:

Three Months Ended April 30,

Six Months Ended July 31,

(in thousands) 2021 2020

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Cash Flows from Operating Activities

Cash provided by operating activities was $135.6 million and $59.1 million for the three months ended April 30, 2021 and 2020.

The improvement of $76.5 million, as compared to prior year, was primarily the result of increased sales and the related cash collections, partially offset by higher operating costs from increased headcount and to support growth.

Cash provided by operating activities was $313.3 million and $177.3 million for the six months ended July 31, 2021 and 2020.

The improvement of $136.0 million compared to the prior year, was primarily the result of increased sales and the related cash collections, partially offset by higher operating costs to support growth and increased headcount.

Cash Flows from Investing Activities

For the three months ended April 30, 2021, net cash used in investing activities of $70.5 million was primarily driven by $57.4 million net purchases of marketable securities and $12.6 million purchases of property and equipment.

For the three months ended April 30, 2020 , cash provided by investing activities of $169.7 million was primarily driven by $199.1 million from maturities and sales of marketable securities, partially offset by $26.4 million purchases of property and equipment.

For the six months ended July 31, 2021, net cash used in investing activities of $104.9 million was primarily driven by $69.5 million net purchases of marketable securities, $28.5 million purchases of property and equipment, and $6.4 million cash paid for acquisitions.

For the six months ended July 31, 2020 , cash provided by investing activities of $90.4 million was primarily driven by $318.7 million from maturities and sales of marketable securities, partially offset by $180.4 million paid for acquisitions, net of cash acquired, and $44.8 million purchases of property and equipment.

Cash Flows from Financing Activities

For the three months ended April 30, 2021, cash used in financing activities of $113.0 million was primarily driven by $76.3 million in net payments related to our equity plans, as compared to $25.5 million in the prior year for similar activities.

For the six months ended July 31, 2021, cash used in financing activities of $255.3 million was primarily driven by $193.6 million in net payments related to our equity plans, as compared to $107.2 million in the prior year for similar activities.

We also used $61.7 million for repayments of our 2023 Notes.

Obligations and Commitments

Our principal contractual obligations and commitments consist of obligations under the Notes (including principal and coupon interest), operating leases, as well as noncancelable contractual commitments that primarily relate to cloud infrastructure support and sales and marketing activities .

Refer to Note 7 and Note 8 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q, for our leases and other commitments.

Our principal contractual obligations and commitments consist of obligations under the Notes (including principal and coupon interest), operating leases, as well as noncancellable contractual commitments that primarily relate to cloud infrastructure support and sales and marketing activities .

Refer to Note 6 and Note 7 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.

We do not have any special purpose entities and we do not engage in off-balance sheet financing arrangements.

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There have been no material changes to our critical accounting policies and estimates as described in our 2021 Annual Report on Form 10-K.

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Recent Accounting Pronouncements

Refer to Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this report.

Refer to Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Non-GAAP Financial Measures and Other Key Metrics

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Non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin and non-GAAP net income :

We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, acquisition-related expenses, fair value adjustments to strategic investments and, as applicable, other special items.

The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business.

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Given that most of our customers pay in annual installments one year in advance, but we typically recognize a majority of the related revenue ratably over time, we use billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.

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| 2022 Form 10Q | 36

Reconciliation of gross profit and gross margin:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

23 unchanged sentences

Reconciliation of income (loss) from operations and operating margin:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Acquisition-related expenses 221 6,932 387 7,626

Impairment of operating lease right-of-use assets 3,892 — 3,892 —

Non-GAAP income from operations $ 99,707 $ 33,739 $ 193,085 $ 56,938

2 unchanged sentences

Non-GAAP operating margin 19 % 10 % 20 % 9 %

DocuSign, Inc.

| 2022 Form 10Q | 37

Reconciliation of net income (loss):

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

6 unchanged sentences

Fair value adjustments to strategic investments (151) — (5,270) —

Impairment of operating lease right-of-use assets 3,892 — 3,892 —

Non-GAAP net income $ 97,940 $ 34,756 $ 189,901 $ 58,846

Computation of free cash flow:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

Computation of billings:

Three Months Ended April 30,

Three Months Ended July 31, Six Months Ended July 31,

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Contract assets and unbilled accounts receivable, end of period (18,067) (20,395) (18,067) (20,395)

Contract assets and unbilled accounts receivable by acquisitions — 6,589 — 6,589

Contract liabilities and refund liability contributed by acquisitions — (9,344) — (9,344)

Non-GAAP billings $ 595,371 $ 405,695 $ 1,122,763 $ 747,747

DocuSign, Inc.

| 2022 Form 10Q | 38

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 2. Management’s Discussion and Analysis