What changed in this filing

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Item 1A. Risk Factors

2021-12-06 compared with 2021-09-03 · 128 added, 115 removed, 700 unchanged (26% of the section changed)

31 unchanged sentences

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

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 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, including actions mandated by governments and health authorities and changing public health directives or restrictions, 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.

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

Although this contributed to growth in our customer base and increases in customer spending across industries and regions, the growth we experienced may not continue in future periods.

As the pandemic continued in 2021, the rate of vaccinations, emerging COVID-19 variants, and shifting governmental policies on vaccination mandates and other pandemic restrictions 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.

Additionally, as a service provider to U.S.

state and federal government agencies, we are subject to a variety of COVID-19 vaccination, testing, and related health and safety requirements, including the requirement that our U.S.-based employees be fully vaccinated against COVID-19 by January 4, 2022 absent a medical or religious exemption.

While we cannot predict the full impact these requirements may have on our business, our ability to retain or hire employees could be impacted;

we could be subject to litigation by employees;

we could incur additional costs of monitoring and compliance across our business;

and our business and results of operations could be harmed.

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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.

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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.

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 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.

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

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 generated a net loss of $39.5 million and $170.9 million in the nine months ended October 31, 2021 and 2020, and as of October 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.

7 unchanged sentences

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;

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

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

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

▪ our ability to continue operating remotely due to the COVID-19 pandemic and to adapt to “hybrid” work arrangements combining remote and in-office work;

▪ potential accelerations of prepaid expenses and deferred costs;

2 unchanged sentences

▪ issues relating to acquisitions and partnerships with third parties;

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▪ general economic, market and industry conditions, including resulting from the COVID-19 pandemic;

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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.

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If our pricing is not competitive or we cannot attract new customers and subsequently maintain and expand those customer relationships, our business and operating results may be harmed.

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Our ability to increase our revenue also depends on our ability to expand the sales of our products and solutions to, and renew subscriptions with, existing customers and their organizations.

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

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

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 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 COVID-19 pandemic.

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

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If we are unable to effectively compete, our business, operating results and financial condition would be harmed.

We depend on co-location data centers and third-party cloud providers, as well as our own technical operations infrastructure, to provide our products and solutions to our customers in a timely manner.

We depend on co-located data centers and third-party cloud providers, as well as our own technical operations infrastructure, to provide our products and solutions to our customers in a timely manner.

Interruptions or delays in performance of our products and solutions could result in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.

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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, 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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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.

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

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If our security measures, or the security measures of our service providers, partners or customers, are compromised, our reputation could be damaged, our ability to attract and retain customers could be adversely affected and our business may be harmed.

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and foreign laws and regulations require companies to provide notice of data security breaches and/or incidents involving certain types of personal data to individuals, the media, government authorities or other third parties.

1 unchanged sentence

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

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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.

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.

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.

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This is particularly true of DocuSign CLM and our other advanced offerings, where longer evaluation, testing and qualification processes often result in longer sales cycles than for our e-signature solutions.

The timing of our sales with our enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers.

The timing of our sales with our enterprise customers and related revenue recognition is difficult to predict because of the

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length and unpredictability of the sales cycle for these customers.

During the sales cycle, we expend significant time and money on sales and marketing and contract negotiation activities, which may not result in a sale.

2 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 and the first and second quarters of the fiscal year ended January 31, 2022.

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 and the first, second and third quarters of the fiscal year ended January 31, 2022.

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.

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, second and third 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;

▪ mitigate and effectively manage the varying impacts of the COVID-19 pandemic, including its effect on the pace of the digital transformation of business and the costs of monitoring and complying with evolving governmental mandates;

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

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▪ general administration, including legal and accounting expenses.

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In addition to growth in revenue, we have also experienced significant growth in the number of our customers and users, the number and complexity of the transactions we handle, and the amount of data that our infrastructure supports.

1 unchanged sentence

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

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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 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.

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▪ cause adverse tax consequences or unfavorable accounting treatment;

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▪ expose us to claims and disputes by third parties, including intellectual property claims and disputes;

3 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.

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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 sciences.

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

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

Sales to such entities are subject to a number of challenges and risks, including those related to the COVID-19 pandemic and our status as a service provider to U.S.

state and federal governmental agencies as discussed in the risk factor above titled “We cannot predict the full impact of the COVID-19 pandemic on our business, results of operations and financial condition.” Selling to such entities can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale.

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

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The effectiveness of our online advertising has varied over time and may vary in the future due to competition for key search terms, changes in search engine use and changes in the search algorithms used by major search engines.

If we cannot cost-effectively deploy our expanding sales force and use our marketing tools, or if we fail to promote our products and solutions efficiently and effectively, our ability to acquire new customers and our financial condition may suffer.

We may not be able to scale our business quickly enough to meet the growing needs of our customers and if we are not able to grow efficiently, our operating results could be harmed.

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

If we cannot cost-effectively deploy our expanding sales force and use our marketing

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

tools, or if we fail to promote our products and solutions efficiently and effectively, our ability to acquire new customers and our financial condition may suffer.

We may not be able to scale our business quickly enough to meet the growing needs of our customers and if we are not able to grow efficiently, our operating results could be harmed.

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.

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

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Our agreements with our partners are generally nonexclusive, meaning our partners may offer their customers products and services of several different companies, including products and services that compete with ours, or may themselves be or become competitors.

If our partners do not effectively market and sell our subscription offerings and solutions, choose to use greater efforts to market and sell their own products and services or those of our competitors, or fail to meet the needs of our customers, our ability to grow our business and sell our subscription offerings and solutions may be harmed.

If our partners do not effectively market and sell our subscription offerings and solutions, choose to use

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greater efforts to market and sell their own products and services or those of our competitors, or fail to meet the needs of our customers, our ability to grow our business and sell our subscription offerings and solutions may be harmed.

Our partners may cease marketing our subscription offerings or solutions with limited or no notice and with little or no penalty.

2 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

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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.

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

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

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

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

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

Unfavorable conditions in our industry or the global economy or reductions in information technology spending could limit our ability to grow our business and negatively affect our operating results.

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

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.

In addition, as of October 31, 2021, we had issued and outstanding $50.2 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

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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.

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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

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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 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 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.

As of October 31, 2021, we had $50.2 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:

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Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.

Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and solutions that compete with ours.

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precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and solutions that compete with ours.

Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our products may be unenforceable under the laws of jurisdictions outside the United States.

1 unchanged sentence

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

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and proprietary information.

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

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We may also determine that the most cost-effective way to resolve a dispute is to enter into a settlement agreement.

Litigation is inherently unpredictable and we cannot predict the timing, nature, controversy or outcome of lawsuits or assure you that the results of any of these actions will not have an adverse effect on our business, operating results or financial condition.

Litigation is inherently

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unpredictable and we cannot predict the timing, nature, controversy or outcome of lawsuits or assure you that the results of any of these actions will not have an adverse effect on our business, operating results or financial condition.

We use open source software in our products, which could subject us to litigation or other actions.

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

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

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require us to devote additional research and development resources to change our products.

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

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

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Any warranty or indemnification claim brought by our customers could result in damage to our reputation and harm our business and operating results.

We rely on the performance of highly skilled personnel, including our management and other key employees, and the loss of one or more of such personnel, or of a significant number of our team members, could harm our business.

Our success and future growth depend upon the continued services of our management team and other key employees.

From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business.

For example, on September 8, 2020, Cynthia Gaylor became our Chief Financial Officer and Michael Sheridan, our outgoing Chief Financial Officer, became President of International.

Our senior management and key employees are employed on an at-will basis.

We may terminate any employee’s employment at any time, with or without cause, and any employee may resign at any time, with or without cause.

If we lose one or more of our senior management or other key employees and are unable to find adequate replacements, or if we fail to attract, retain and motivate members of our senior management team and key employees, our business could be harmed.

We rely on the performance of highly skilled personnel, including our management and other key employees, and failure to attract or retain such employees could harm our business.

Our success and future growth depend upon the continued services of highly skilled personnel, including our management team and other key employees.

Changes in our management team resulting from the hiring or departure of executives and key employees from time to time could disrupt our business.

Our senior management and key employees are employed on an at-will basis, meaning that we may terminate their employment at any time, with or without cause, and they may resign at any time, with or without cause.

We also are dependent on the continued service of our existing software engineers because of the complexity of our products and solutions.

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locations) is intense, and many of the companies we compete with for experienced personnel have greater resources than we do.

Additionally, as a service provider to U.S.

While we cannot predict the full impact these requirements may have on our business, our ability to retain or hire employees could be impacted;

we could be subject to litigation by employees;

we could incur additional costs of monitoring and compliance across our business;

and our business and results of operations could be harmed.

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Our current operations are international in scope and we plan further geographic expansion, creating a variety of operational challenges.

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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.

As of October 31, 2021, we have offices in 13 countries and approximately 32% 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.

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

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

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• undergo a merger or consolidation or other transactions.

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Our credit facility also requires that our Consolidated Leverage Ratio (as defined in the credit facility) not exceed specified levels, or that our Consolidated Interest Coverage Ratio (as defined in the credit facility) be less than specified levels.

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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.

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If our management team or independent registered public accounting firm were to furnish an adverse report, or if it is determined that we have a material weakness or significant deficiency in our internal control over financial reporting, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation.

In addition, as a result of the COVID-19 pandemic, most of our employees (including those critical to maintaining an effective system of disclosure controls and internal control over financial reporting) are working, and are expected to continue to work for the near term, in a remote environment and not in the office environment from which they have historically performed their duties.

We have limited experience maintaining effective control systems with our employees working in remote environments, and risks that we have not contemplated may arise and result in our failure to maintain effective disclosure controls or internal control over financial reporting.

In addition, as a result of the COVID-19 pandemic, most of our employees (including those critical to maintaining an effective system of disclosure controls and internal control over financial reporting) are working and are expected to continue to work for the near term, in either a fully remote or a hybrid environment and not solely in the office environment from which they have historically performed their duties.

We have limited experience maintaining effective control systems with our employees working in remote or hybrid environments, and risks that we have not contemplated may arise and result in our failure to maintain effective disclosure controls or internal control over financial reporting.

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.

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

Complying with laws and regulations, in particular

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

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

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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.

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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 and were most recently amended on March 15, 2021.

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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.

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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.

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

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

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Additionally, any failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security, may result in governmental investigations and enforcement actions (including, for example, a ban by EU data protection authorities on the processing of EU personal data under the GDPR), litigation, fines and penalties or adverse publicity, and could cause our customers and partners to lose trust in us, which could have an adverse effect on our reputation and business.

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Many of our customers deploy our products and solutions globally, and our products and solutions must comply with certain legal and regulatory requirements in varying countries.

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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

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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.

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.

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

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

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

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

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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

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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.

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.

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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Similar rules may apply under state and foreign tax laws.

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Future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

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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, including its effects on customer demand for our solutions and the pace of the digital transformation of business;

▪ the 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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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 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.

As of October 31, 2021, 8.0 million shares of our common stock are reserved for issuance under our ESPP and 42.0 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.

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These sales also could cause the trading price of our common stock to decline and make it more difficult for you to sell shares of our common stock.

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If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline.

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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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federal district courts are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.

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that is governed by the internal affairs doctrine.

If a court were to find any of these exclusive-forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

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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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However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or pay cash with respect to Notes being converted.

In addition, our credit facility prohibits us from making any cash payments on the conversion or repurchase of the Notes if an event of default exists under the credit facility or if, after giving effect to such conversion or repurchase (and any additional indebtedness incurred in connection with such conversion or a repurchase), we would not be in pro forma compliance with our financial covenants under the credit facility.

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compliance with our financial covenants under the credit facility.

Further, our ability to repurchase or to pay cash upon conversion of the Notes may be limited by law, regulatory authority or agreements governing our future indebtedness.

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If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion of the Notes.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option.

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

The conditional conversion feature of the Notes may adversely affect our financial condition and operating results.

The conditional conversion feature of the 2023 Notes entitles (and equivalent features of the 2024 Notes may in future entitle) holders of the Notes to convert them at any time during specified periods at their option.

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

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

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

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Incorporated by Reference Exhibit Filing Date

Amended and Restated Non-Employee Director Compensation Policy

10.1 Separation Agreement and General Release of Claims, dated as of November 29, 2021, by and between the Company and Michael Sheridan

Filed herewith

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

Filed herewith

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

Filed herewith

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

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

Filed herewith

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

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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

December 3, 2021

DOCUSIGN, INC.

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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