What changed in this filing

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Item 1A. Risk Factors

2021-09-03 compared with 2021-06-04 · 141 added, 77 removed, 674 unchanged (24% of the section changed)

18 unchanged sentences

▪ Our recent rapid growth may not be indicative of our future growth, and, if we continue to grow rapidly, we may not be able to manage our growth effectively.

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▪ Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales contracts are not immediately reflected in full in our operating results.

9 unchanged sentences

We cannot predict the full impact of the COVID-19 pandemic on our business, results of operations and financial condition.

The full impact of the continuing COVID-19 pandemic and related public health measures on our business will depend largely on future developments, including the duration and severity of the COVID-19 pandemic, which are highly uncertain and cannot be accurately predicted.

The full effects of the COVID-19 pandemic cannot be predicted as a result of uncertainties including the extent and rate of the ongoing spread of the virus, the emergence of potential variants of the virus, the deployment of vaccines worldwide, national, local and state governmental responses to the crisis including restrictions on travel and business activities, and the potential for additional peaks in infection rates in 2021.

The COVID-19 pandemic has created and is likely to continue to create significant uncertainty in global financial markets.

To date, due to the widespread shift by businesses to remote, web-enabled operations and digital agreements, we have experienced a substantial increase in overall demand for our products, in particular DocuSign eSignature.

Although this has resulted in a significant increase in customer spending across almost all industries and regions we serve, the growth we have experienced may not continue in future periods.

In addition,we have experienced slower growth or declining spending in certain industries most impacted by the pandemic, such as travel and hospitality.

As the pandemic continues, we may experience volatility in customer demand;

increased customer churn;

increases in late payment or non-payment by customers;

delayed purchasing decisions;

and increased pressure on pricing, discounts and payment terms, any of which could materially harm our business, results of operations, and overall financial performance.

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, providing almost all employees the opportunity to work remotely until at least October 4, 2021, limiting capacity at any of our offices which have reopened or may reopen during the pandemic’s duration, and shifting customer, partner and investor events to virtual-only formats.

However, there can be no assurance that these measures will be effective, or that we can adopt them without adversely affecting our business operations.

For example, our management team has been focusing additional time on planning for and mitigating the risks of the COVID-19 pandemic, including plans to reopen our offices, which may reduce the amount of time available for other initiatives.

Changes in our operations with respect to COVID-19 or employee illnesses resulting from the COVID-19 pandemic may result in inefficiencies or delays that cannot be fully mitigated through succession planning, employees working remotely or teleconferencing technologies.

These changes may also lead to inefficiencies of our employees, operational and cybersecurity risks and other circumstances which could have an adverse impact to our results of operations.

Finally, to the extent that the COVID-19 pandemic harms our business and results of operations, many of the other risks described in this “Risk Factors” section will be exacerbated.

The COVID-19 pandemic continues to evolve and the full impact of the pandemic on our business will depend largely on 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.

The pandemic has created and is likely to continue to create significant volatility in global financial markets.

Due to the widespread shift by businesses to remote, web-enabled operations and digital agreements, we have experienced a substantial increase in overall demand for our products, in particular DocuSign eSignature, since the beginning of the pandemic.

Although this resulted in a significant increase in customer spending across almost all industries and regions we serve, the growth we have experienced may not continue in future periods.

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.

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 our employees and shifting most planned customer, partner and investor events to virtual-only formats.

We may take additional measures in the future based on evolving conditions and applicable laws and regulations.

However, there can be no assurance that these measures will be effective, or that we can adopt them without adversely affecting our business operations and financial condition.

For example, our management team has been focusing additional time on planning for and mitigating the pandemic and its actual and potential effects on our business, including plans to reopen our offices and resume in-person business activities, which may reduce the amount of time available for other initiatives.

Changes in our operations in response to the pandemic may result in inefficiencies or delays that cannot be fully mitigated through succession planning, remote work arrangements or teleconferencing

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technologies.

These mitigation efforts may also lead to inefficiencies of our employees, operational and cybersecurity risks and other circumstances which could have an adverse impact to our results of operations and financial condition.

Finally, the effects of the COVID-19 pandemic also may heighten other risks, including significant volatility in global markets and the trading price of our common stock.

To the extent that the pandemic harms our business and results of operations, many of the other risks described in this “Risk Factors” section will be exacerbated.

We have a history of operating losses and may not achieve or sustain profitability in the future.

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

We generated a net loss of $8.4 million and $47.8 million in the three months ended April 30, 2021 and 2020, and as of April 30, 2021, we had an accumulated deficit of $1.4 billion.

We generated a net loss of $33.9 million and $112.4 million in the six months ended July 31, 2021 and 2020, and as of July 31, 2021, we had an accumulated deficit of $1.4 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.

6 unchanged sentences

As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful.

In addition to the other risks described herein, factors that may affect our operating results include the following:

▪ fluctuations in demand for or pricing of our products and solutions, including due to the COVID-19 pandemic;

In addition to the other risks described herein, factors that may affect our operating results or cause our financial results to fluctuate include the following:

▪ fluctuations in demand for or pricing of our products and solutions, including due to the COVID-19 pandemic and differing levels of demand for our products as our customers’ priorities, resources, financial conditions and economic outlook change;

▪ our ability to attract new customers;

4 unchanged sentences

▪ the timing and success of new product and service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation or new entrants among competitors, customers, or strategic partners ;

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

▪ rising inflation and our ability to control costs, including our operating expenses;

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

9 unchanged sentences

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 lawsuits.

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We derive a 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.

3 unchanged sentences

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

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

▪ macro- and micro-economic effects of the COVID-19 pandemic, including its effect on the pace of the digital transformation of business;

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

11 unchanged sentences

It is difficult to predict customer demand for our products and solutions, customer retention and expansion rates, the size and growth rate of the market for agreement automation, the entry of competitive products or the success of existing competitive products.

We expect that we will continue to need intensive sales efforts to educate prospective customers, particularly enterprise and commercial customers, about the uses and benefits of our products and solutions, and such sales efforts could be hindered by the current COVID-19 pandemic.

The size and growth of our addressable market depends on a number of factors, including our customers’ desire to differentiate themselves through e-signature solutions and other products and solutions that automate the agreement process, as well as changes in the competitive landscape, technological changes, budgetary constraints of our customers, changes in business practices, changes in regulations and changes in economic conditions.

2 unchanged sentences

To increase our revenue, we must continue to grow our customer base.

As our market matures, product and service offerings evolve, and competitors introduce lower cost and/or differentiated products or solutions that are perceived to compete with our products and solutions, our ability to attract new customers could be impaired.

As our market matures, product and service offerings evolve, and competitors introduce lower cost and/or differentiated products or solutions that compete or are perceived to compete with our products and solutions, our ability to attract new customers could be impaired.

This may be especially challenging where organizations have already invested significantly in an existing solution.

6 unchanged sentences

Our renewal and expansion rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction, decreases in the number of

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users at our customers, changes in the type and size of our customers, pricing, competitive conditions, customer attrition and general economic conditions, including as a result of the current COVID-19 pandemic.

1 unchanged sentence

The market in which we participate is highly competitive, which may negatively affect our ability to add new customers, retain existing customers and grow our business.

Our products and solutions address a market that is evolving and highly competitive.

The products and solutions in our products and solutions face competition from different companies depending on the product or solution.

Our products and solutions address a market that is evolving and highly competitive and face competition from different companies depending on the product or solution.

For example, our primary global e-signature competitor is currently Adobe Systems Incorporated.

17 unchanged sentences

Design and mechanical errors, spikes in usage volume and failure to follow system protocols and procedures could cause our systems to fail, resulting in interruptions in our products and solutions.

Any interruptions or delays in our service, whether or not caused by our products, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to decrease and/or our expenses to increase.

Any interruptions or delays in our service, whether or not caused by our products, whether as a result of third-party error, our own error, natural disasters, operational disruptions related to the COVID-19 pandemic or other public health crises, or security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to decrease and/or our expenses to increase.

Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.

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.

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

9 unchanged sentences

While these attempts had no impact on our operations, products or services, there can be no assurance that there will be no impact from these or similar incidents in the future.

Despite our prevention and response efforts, any security incident or breach, even if immaterial and properly addressed, could result in negative publicity, loss of customers, damage to our reputation and could impair our sales and harm our business.

Despite our prevention and response efforts, any security incident or breach, even if immaterial and properly addressed, could result in negative publicity, loss of customers and damage to our reputation and could impair our sales and harm our business.

Moreover, due to the ongoing COVID-19 pandemic, there is an increased risk that we may experience cybersecurity related incidents as a result of our employees, service providers and third parties working remotely on less secure systems during office closures or when access to facilities may be limited, including due to government mandated shelter-in-place orders.

Further, we may face additional security incidents in the future, resulting in unauthorized access to, loss of or unauthorized disclosure of sensitive and proprietary information of DocuSign or our customers, partners or employees, and such incidents may in the future result in regulatory enforcement actions, litigation (including a new private right of action under the California Consumer Privacy Act, as described in the risk factor below titled “We are subject to laws and regulations affecting our business, including those related to e-signature, marketing, advertising, privacy, data protection and information security.

Further, we may face additional security incidents in the future, resulting in unauthorized access to, loss of or unauthorized disclosure of sensitive and proprietary information of DocuSign or our customers, partners or employees, and such incidents may in the future result in regulatory enforcement actions, litigation (including a new private right of action under the California Consumer Privacy Act (the “CCPA”), as described in the risk factor below titled “We are subject to laws and regulations affecting our business, including those related to e-signature, marketing, advertising, privacy, data protection and information security.

Our actual or perceived failure to comply with laws or regulations could harm our business.

10 unchanged sentences

Security compromises experienced by our competitors, by our customers or by us may lead to public disclosures, which may lead to widespread negative publicity.

Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively affect our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and operating results.

Any security compromise in our industry, whether actual or perceived, could harm our

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reputation, erode customer confidence in the effectiveness of our security measures, negatively affect our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and operating results.

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.

5 unchanged sentences

As a result, when we introduce new or enhanced products and solutions, they must achieve high levels of market acceptance to justify the amount of our investment in developing or acquiring them and bringing them to market.

If the release of our new and enhanced products and solutions do not meet customer needs or if our customers do not accept them, our business, operating results and financial conditions would be harmed.

The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred.

New products and solutions or enhancements to our existing products and solutions could fail to attain sufficient market acceptance for many reasons, including:

5 unchanged sentences

▪ introduction or anticipated introduction of competing products by our competitors.

The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred.

Our sales cycle with enterprise and commercial customers can be long and unpredictable, and our sales efforts require considerable time and expense.

9 unchanged sentences

▪ the discretionary nature of purchasing and budget cycles and decisions;

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▪ the obstacles placed by customers’ procurement process;

7 unchanged sentences

We expect that, in the future, as our revenue increases, our revenue growth rate will decline as the scale of our business increases.

We also believe that the COVID-19 pandemic caused many businesses to accelerate the process of shifting to digital agreement processes, contributing to our significant revenue growth during the fiscal year ended January 31, 2021.

While we believe that once businesses have shifted to digital agreement processes they will not return to manual ones, we have no way of knowing how much of this growth will be permanent as the COVID-19 pandemic lessens in severity and businesses return to a more normalized, in-person work environment, nor whether demand for our products will remain strong.

While we believe that once businesses have shifted to digital agreement processes they will not return to manual ones, we have no way of knowing how much of this growth will be permanent or even indicative of future growth as the COVID-19 pandemic lessens in severity and businesses return to a more normalized, in-person work environment, nor whether demand for our products will remain strong.

For example, future period-over-period revenue growth rates, when compared against the third and fourth quarters of our fiscal year ended January 31, 2021 and the first and second quarters of our fiscal year ended January 31, 2022, may fail to meet the expectations of investors or securities analysts given the accelerated revenue growth experienced during such periods due to the COVID-19 pandemic and the resulting increased adoption of remote work and reduced seasonality experienced during such periods.

We believe that future growth of our revenue depends on a number of factors, including our ability to:

3 unchanged sentences

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

▪ mitigate and effectively manage the varying impacts of the COVID-19 pandemic, including its effect on the pace of the digital transformation of business;

▪ hire, maintain and train our employee base including our sales force, research and development teams and key employees;

12 unchanged sentences

Finally, our business is becoming more complex as we increase our product and solution offerings, add additional staff and acquire complementary companies, products and technologies.

In connection with this increased complexity, we are working to improve our operational, financial and management controls as well as our reporting systems and procedures, including streamlining or automating manual processes, all of which requires capital expenditures and management attention.

In connection with this increased complexity, we are working to improve our operational, financial and management controls as well as our reporting systems and

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procedures, including streamlining or automating manual processes, all of which requires capital expenditures and management attention.

Failure to effectively manage our growth could have an adverse effect on our business, operating results and financial condition.

28 unchanged sentences

▪ cause other unforeseen operating difficulties and expenditures.

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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.

4 unchanged sentences

We sell to U.S.

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

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

20 unchanged sentences

As use of our products and solutions grows and as customers use them for more types of transactions, we will need to devote additional resources to improving our application architecture, integrating with third-party systems and maintaining infrastructure performance.

In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and professional services, to serve our growing customer base.

In addition, we will need to appropriately scale our internal business systems

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and our services organization, including customer support and professional services, to serve our growing customer base.

Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction.

27 unchanged sentences

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.

Additionally, as the scale of our partnership efforts increases

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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.

23 unchanged sentences

We fund our operations through payments by our customers for use of our product offerings and related services.

In addition, as of April 30, 2021, we had issued and outstanding $78.3 million aggregate principal amount of 0.5% Convertible Senior Notes due 2023 (the “2023 Notes ” ), $690.0 million aggregate principal amount of 0.0% Convertible Senior Notes due 2024 (the “2024 Notes” and together with the 2023 Notes, the “Notes”) and available borrowing capacity of $500.0 million under our credit facility.

In addition, as of July 31, 2021, we had issued and outstanding $53.3 million aggregate principal amount of 0.5% Convertible Senior Notes due 2023 (the “2023 Notes ” ), $690.0 million aggregate principal amount of 0.0% Convertible Senior Notes due 2024 (the “2024 Notes” and together with the 2023 Notes, the “Notes”) and available borrowing capacity of $500.0 million under our credit facility.

We cannot be certain when or if our operations will generate sufficient cash to fund our ongoing operations or the growth of our business.

3 unchanged sentences

Additionally, the credit facility restricts our ability to pay dividends on common stock and the terms of any future debt could restrict our operations.

Further, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.

Further, if we issue additional equity securities, stockholders will

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experience dilution, and the new equity securities could have rights senior to those of our common stock.

If adequate funds are not available on acceptable terms when we require it, we may be unable to invest in future growth opportunities, which could harm our business, operating results and financial condition.

We have incurred substantial indebtedness that may decrease our business flexibility, access to capital and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results.

As of April 30, 2021, we had $78.3 million principal amount of indebtedness outstanding under our 2023 Notes, $690.0 million principal amount of indebtedness outstanding under our 2024 Notes and available borrowing capacity of $500.0 million under our credit facility .

We have incurred substantial indebtedness that may decrease our business flexibility and access to capital and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results.

As of July 31, 2021, we had $53.3 million principal amount of indebtedness outstanding under our 2023 Notes, $690.0 million principal amount of indebtedness outstanding under our 2024 Notes and available borrowing capacity of $500.0 million under our credit facility.

Our indebtedness may:

25 unchanged sentences

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances.

No assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information.

No assurance can be given that these agreements will be effective in controlling access to and distribution of our products

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and proprietary information.

Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our products and solutions.

4 unchanged sentences

We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property.

Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property may be difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for

enforcement of intellectual property rights may be weak.

If we fail to adequately protect our intellectual property and proprietary rights, our business, operating results and financial condition could be adversely affected.

21 unchanged sentences

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

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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.

4 unchanged sentences

Large indemnity payments could harm our business, operating and financial condition.

Although we normally

contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them and we may be required to cease use of certain functions of our products and solutions as a result of any such claims.

Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them and we may be required to cease use of certain functions of our products and solutions as a result of any such claims.

In addition, our customer agreements generally include a warranty that the proper use of DocuSign by a customer in accordance with the agreement and applicable law will be sufficient to meet the definition of an “electronic signature” as defined in the ESIGN Act and eIDAS.

16 unchanged sentences

In each of the years ended January 31, 2021, 2020 and 2019 total revenue generated from customers outside the U.S.

was 20% , 18% and 17% of our total revenue, respectively.

As of April 30, 2021, we have offices in 12 countries and approximately 30% of our full-time employees were located outside of the United States.

was 20% , 18% and 17% of our total revenue.

As of July 31, 2021, we have offices in 12 countries and approximately 30% of our full-time employees were located outside of the United States.

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.

1 unchanged sentence

Our current international operations and future initiatives involve a variety of risks, including:

▪ changes in a specific country’s or region’s political or economic conditions;

▪ changes in a specific country’s or region’s political or economic conditions, including the pace of the digital transformation of business in that country or region;

▪ exposure to regional public health issues, such as the COVID-19 pandemic, and to travel restrictions and other measures undertaken by governments in response to such issues;

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▪ the need to adapt and localize our products for specific countries, including providing customer support in different languages;

37 unchanged sentences

Risks Related to Governmental Regulation including Taxation

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The requirements of being a public company, including developing and maintaining proper and effective disclosure controls and procedures and internal control over financial reporting, may strain our resources and divert management’s attention away from other business concerns.

5 unchanged sentences

We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

To assist us in

complying with these requirements we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.

To assist us in complying with these requirements we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.

Despite significant investment, our current controls and any new controls that we develop may become inadequate because of changes in business conditions.

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In the United States, various laws, and regulations and agency rules and opinions apply to the collection, processing, disclosure and security of certain types of data, including:

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▪ The Electronic Signatures in Global and National Commerce Act (“ESIGN Act”) in the United States, eIDAS in the EU and similar U.S.

6 unchanged sentences

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

Additionally, the United Kingdom (“U.K.”) has implemented the Data Protection Act which is substantially similar to the GDPR and contains provisions, including UK-specific exceptions, for how GDPR is applied in the U.K.

The U.K.'s departure in January 2020 from the EU (commonly referred to as Brexit) has created uncertainty with regard to the requirements for data transfers between the U.K.

and the EU and other jurisdictions, and it is still unclear how the EU and U.K.

will reconcile data transfers from the European Economic Area to the U.K.

following “Brexit.” The GDPR also

imposes strict rules on the transfer of personal data out of the EU to the U.S..

will reconcile data transfers from the European Economic Area (the “EEA”) to the U.K.

following “Brexit.” For example, the EU has issued a draft adequacy decision for personal information transfers from the EEA to the U.K.

on February 19, 2021.

Although the European Data Protection Board (the “EDPB”) issued an opinion generally supportive of the draft adequacy decision, the EDPB urged further assessment of certain issues and continued monitoring of developments in U.K.

If this adequacy decision is not passed by the EU, it would require that companies implement protection measures such as Standard Contractual Clauses for data transfers between the EU and the U.K.

The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S, which is addressed further in the next paragraph.

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.

4 unchanged sentences

While the Court of Justice upheld the use of binding corporate rules as a valid data transfer mechanism, it further stated that reliance on binding corporate rules alone may not necessarily be sufficient in all circumstances and that supplemental measures may also be required to ensure an adequate level of protection by the importing jurisdiction.

As the EU data protection regulatory landscape continues to evolve following Schrems II, including harmonization of disparate guidance regarding supplemental measures amongst regional EU data protection authorities, we may need to implement additional or different supplemental measures to further enhance the security of data transferred out of the European Economic Area, which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business.

As the EU data protection regulatory landscape continues to evolve following Schrems II, including harmonization of disparate guidance regarding supplemental measures amongst regional EU data protection authorities, we may need to implement additional or different supplemental measures to further enhance the security of data transferred out of the EEA, which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business.

Additional changes to data protection laws or regulations in the EU 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 became enforceable by the California Attorney General on July 1, 2020, along with related regulations which came into force on August 14, 2020.

Additionally, although not effective until January 1, 2023, the California Privacy Rights Act (the “CPRA”), which expands upon the CCPA, was passed in the November 3, 2020 election.

The CCPA gives (and the CPRA will give) California residents expanded privacy rights, including the right to request correction, to access and deletion of their personal information, to opt out of certain personal information sharing, and to receive detailed information about how their personal information is processed.

▪ The CCPA took effect on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020, along with related regulations which came into force on August 14, 2020 and were most recently amended on March 15, 2021.

Additionally, the California Privacy Rights Act (the “CPRA”), which expands upon the CCPA and was passed in the November 3, 2020 election, creates obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023.

The CCPA requires (and the CPRA will require) covered companies to, among other things, provide new disclosures to California consumers and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information, expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared.

The CCPA and the CPRA provide 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.

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Additionally, the CCPA has prompted a number of proposals in the United States 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.

Two other states have recently passed personal information laws:

the Colorado Privacy Act, which goes in effect on July 1, 2023;

and Virginia’s Consumer Data Protection Act, which goes in effect on January 1, 2023.

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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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In addition, many foreign governments have established or are in the process of establishing privacy and data security legal frameworks with which we, our customers, partners or our vendors must comply, some of which are more restrictive than those in the United States and apply broadly to the collection, use, storage, disclosure and security of various types of data.

For example, some jurisdictions require that certain types of data be retained on servers within these jurisdictions.

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.

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

In addition, the increased attention focused

upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business.

In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business.

Any costs incurred as a result of this potential liability could harm our business and operating results.

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We may be subject to taxation in international jurisdictions with increasingly complex tax laws and precedents which could have an adverse effect on our liquidity and operating results.

The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of those jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of those jurisdictions, including the United States, to our international business

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activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

Tax authorities in the jurisdictions in which we operate may challenge our transfer pricing policies and intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.

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In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities.

We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.

We can be held liable for the

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corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.

While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

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The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control or are related in complex ways, including:

▪ the current COVID-19 pandemic and any associated economic downturn;

▪ the current COVID-19 pandemic, including its effects on customer demand for our solutions and the pace of the digital transformation of business;

▪ actual or anticipated fluctuations in our financial condition and operating results;

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▪ our involvement in any litigation;

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▪ future sales of our common stock or other securities by us or our stockholders;

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▪ changes in the political climate in the United States;

▪ terrorist attacks, natural disasters, public health crises (such as the current COVID-19 pandemic) or other such events impacting countries where we have operations;

▪ terrorist attacks, natural disasters, public health crises (such as the COVID-19 pandemic) or other such events impacting countries where we have operations;

▪ general economic, regulatory and market conditions.

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We also provide eligible employees with the opportunity to purchase shares of our common stock at a discounted price per share through our ESPP and 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, 2021, 8.1 million shares of our common stock are reserved for issuance under our ESPP and 43.1 million shares of our common stock are reserved and available for issuance under our 2018 Plan.

As of July 31, 2021, 8.1 million shares of our common stock are reserved for issuance under our ESPP and 42.2 million shares of our common stock are reserved and available for issuance under our 2018 Plan.

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

Under our investors’ rights agreement, certain stockholders can require us to register shares owned by them for public sale in the United States.

In addition, we filed a registration statement to register shares reserved for future issuance

under our equity compensation plans.

In addition, we filed a registration statement to register shares reserved for future issuance under our equity compensation plans.

As a result, subject to the satisfaction of applicable exercise periods and the expiration or waiver of the market standoff agreements and lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the United States in the open market.

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Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

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▪ authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights and preferences determined by our board of directors that may be senior to our common stock;

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Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

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Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision.

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Subject to certain conditions, holders of the Notes may require us to repurchase for cash all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the respective indentures governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid regular or special interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, if a make-whole fundamental change (as defined in the respective indentures for the Notes) occurs prior to the respective maturity

dates of the Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

In addition, if a make-whole fundamental change (as defined in the respective indentures for the Notes) occurs prior to the respective maturity dates of the Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

Upon a conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.

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General Risk Factors

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If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

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We rely heavily on our network infrastructure and information technology systems for our business operations.

A disruption or failure of these systems in the event of online attack, earthquake, fire, terrorist attack, public health crisis (such as the COVID-19 pandemic), power loss, telecommunications failure or other similar catastrophic event could cause system interruptions, delays in accessing our service, reputational harm and loss of critical data or could prevent

us from providing our products and solutions to our customers.

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.

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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).

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EXHIBIT INDEX

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* 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.

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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.

September 3, 2021

DOCUSIGN, INC.

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(Principal Accounting and Financial Officer)

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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