What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-25 compared with 2021-03-31 · 116 added, 133 removed, 360 unchanged (41% of the section changed)

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Executive Overview of Fiscal 2022 Results

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

We accomplish this by transforming the foundational element of business:

the agreement.

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We offer the world’s #1 e-signature solution as the core part of our broader software suite for automating the agreement process, which we call the DocuSign Agreement Cloud.

DocuSign offers the world’s leading electronic signature offering, enabling an agreement to be signed electronically on a wide variety of devices, from virtually anywhere in the world, securely.

This is the foundation of the DocuSign Agreement Cloud, which allows organizations to do business faster with less risk, lower costs, while providing better experiences for customers and employees.

We offer the world’s #1 e-signature product as the core part of our broader software platform that automates and connects the agreement process, which we call the DocuSign Agreement Cloud.

It is designed to allow companies of all sizes and across all industries to quickly and easily make nearly every agreement, approval process or transaction digital.

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

As a result, over 890,000 customers and hundreds of millions of users worldwide utilize DocuSign to create, upload and send documents for multiple parties to sign electronically.

It provides comprehensive functionality across DocuSign eSignature and addresses the broader agreement process.

As a result, over 1.1 million customers and more than a billion users worldwide utilize DocuSign to create, upload and send documents for multiple parties to sign electronically.

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

DocuSign eSignature integrates with popular business apps, and our functionality can also be embedded using our API.

The DocuSign Agreement Cloud integrates with popular business apps, and our functionality can also be embedded using our APIs.

Finally, the DocuSign Agreement Cloud allows our customers to automate and streamline their business-critical workflows to save time and money, while staying secure and legally compliant.

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We generate substantially all our revenue from sales of subscriptions, which accounted for 97%, 95% and 94% of our revenue in the years ended January 31, 2022, 2021 and 2020.

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

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

Subscriptions generally range from one to three years, and substantially all our multi-year customers pay in annual installments, one year in advance.

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Professional services and other revenue accounted for the remainder of total revenue.

We anticipate continuing to invest in customer success through our professional services offerings as we believe it plays an important role in accelerating our customers’ deployment of our software suite, which helps drive customer retention and expansion of the use of the DocuSign Agreement Cloud.

We offer subscriptions to our software suite to enterprise businesses, commercial businesses and VSBs, which we define as companies with fewer than 10 employees and includes professionals, sole proprietorships and individuals.

We anticipate continuing to invest in customer success through our professional services offerings as we

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believe it plays an important role in accelerating our customers’ deployment of our software platform, which helps drive customer retention and expansion of the use of the DocuSign Agreement Cloud.

We offer subscriptions to our software platform to businesses at all scales, from global enterprise down to local very small businesses (“VSBs”) (including professionals, sole proprietorships, nonprofits and individuals).

We sell to customers through multiple channels.

Our go-to-market strategy relies on our direct sales force and partnerships to sell to enterprises and commercial businesses and our web-based self-service channel to sell to VSBs, which we believe is the most cost-effective way to reach our smallest customers.

We offer more than 350 off-the-shelf, prebuilt integrations with the applications that many of our customers already use—including those offered by Google, Microsoft, NetSuite, Oracle, Salesforce, SAP, SAP SuccessFactors and Workday—so that they can create, sign, send and manage agreements from directly within these applications.

We have a diverse customer base spanning various industries and countries with no significant customer concentration.

We offer more than 400 off-the-shelf, prebuilt integrations with the applications that many of our customers already use—including those offered by Google, Microsoft, Oracle, Salesforce, SAP, and Workday—so that they can create, sign, send and manage agreements from directly within these applications.

We have a diverse customer base spanning across virtually all industries and around the world with no significant customer concentration.

No single customer accounted for more than 10% of total revenue in any of the years presented.

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

To demonstrate this growth over time, the number of our customers with greater than $300,000 in annual contract value (measured in billings) has increased from approximately 30 customers as of January 31, 2013 to 599 customers as of January 31, 2021.

The number of our customers with greater than $300,000 in annual contract value (measured in billings) has increased from 599 customers as of January 31, 2021 to 852 customers as of January 31, 2022.

Each of our customer types has a different purchasing pattern.

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COVID-19 Update

The COVID-19 pandemic has spread across the world and is particularly prevalent in the U.S., where we are headquartered and the majority of our workforce is located.

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

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

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

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

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

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

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

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

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

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

We have experienced a substantial increase in overall demand for our products, particularly DocuSign eSignature, as the shift to remote, digital business operations has caused more organizations to adopt or expand their use of digital agreements.

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

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

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

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

As the pandemic continued in 2022, 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.

While we experienced a significant increase in paying customers and revenue during the pandemic, we later experienced periods in which the urgency of customer demand slowed.

It can be difficult to predict customer demand, especially as our customers’ priorities, resources and economic outlook change, along with other shifting market conditions.

These shifts have occurred and may in the future occur more quickly than we anticipate.

Additionally, due to our subscription-based business model, the full effects of these changes may not be fully reflected in our results of operations until future periods.

If the COVID-19 pandemic continues to have a substantial impact on our employees’, partners’ or customers’ productivity or if the abatement of the pandemic results in decreased demand or a more challenging sales environment, our results of operations and overall financial performance may be harmed.

See Risk Factors for further discussion of the potential impact of the COVID-19 pandemic, including the impact to our business, financial condition and results of operations.

Financial Results for the Year Ended January 31, 2022

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Cash, cash equivalents, restricted cash and investments were $898.4 million as of January 31, 2022.

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Key Factors Affecting Our Performance

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

As of January 31, 2021, we had a total of over 890,000 customers, including over 120,000 enterprise and commercial customers, compared to over 585,000 customers and over 70,000 enterprise and commercial customers as of January 31, 2020.

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

As of January 31, 2022, we had a total of over 1.1 million customers, including over 170,000 enterprise and commercial customers, compared to over 890,000 customers and over 120,000 enterprise and commercial customers as of January 31, 2021.

We define enterprise customers as companies generally included in the Global 2000.

We define commercial customers to include both mid-market companies, which includes companies outside the Global 2000 that have greater than 250 employees, and small-to-medium-sized businesses (“SMBs”), which are companies with between 10 and 249 employees, in each case excluding any enterprise customers.

We define commercial customers to include both mid-market companies, which includes companies outside the Global 2000 that have greater than 250 employees, and SMBs, which are companies with between 10 and 249 employees, in each case excluding any enterprise customers.

We define VSBs as companies with fewer than 10 employees.

We refer to total customers as all enterprises, commercial businesses and VSBs.

We believe that our ability to increase the number of customers using our software suite, particularly the number of enterprise and commercial customers, is an indicator of our market penetration, the growth of our business and our potential future business opportunities.

By increasing awareness of our software suite, further developing our sales and

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marketing expertise and continuing to build features tuned to different industry needs, we have expanded the diversity of our customer base to include organizations of all sizes across nearly every industry.

We believe that our ability to increase the number of customers using our software platform, particularly the number of enterprise and commercial customers, is an indicator of our market penetration, the growth of our business and our potential future business opportunities.

By increasing awareness of our software platform, further developing our sales and marketing expertise and continuing to build features tuned to different industry needs, we have expanded the diversity of our customer base to include organizations of all sizes across nearly every industry.

Retaining and Expanding Contracts with Existing Enterprise and Commercial Customers

Many of our customers have increased spend with us as they have expanded their use of our offerings in both existing and new use cases across their front or back office operations.

Our enterprise and commercial customers may start with just one use case and gradually implement additional use cases across their organization once they see the benefits of our software suite.

Several of our largest enterprise customers have deployed our software suite for hundreds of use cases across their organizations.

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

Our enterprise and commercial customers may start with just one use case and gradually implement additional use cases across their organization once they see the benefits of our software platform.

Several of our largest enterprise customers have deployed our software platform for hundreds of use cases across their organizations.

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

Increasing International Revenue

Our international revenue represented 23%, 20% and 18% of our total revenue in each of the years ended January 31, 2022, 2021, and 2020, respectively.

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

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

We have since made significant investments to be able to offer our products in select civil law countries.

For example, in Europe, we have SBS technology tailored for eIDAS.

For example, in Europe, we offer Standards-Based Signature (“SBS”) technology tailored for eIDAS.

SBS supports signatures that involve digital certificates, including those specified in the EU’s eIDAS regulations for advanced and qualified electronic signatures.

In addition, to follow longstanding tradition in Japan, we enable signers to upload and apply their personal eHanko stamp to represent their signatures on an agreement.

We plan to increase our international revenue by leveraging and continuing to expand the investments we have already made in our technology, direct sales force and strategic partnerships, as well as helping existing U.S.-based customers manage agreements across their international businesses.

We have experienced tremendous growth in Latin America and are expanding our sales and marketing resources to capitalize on the potential growth of these markets.

We have experienced increased demand across multiple regions and are expanding our sales and marketing resources to capitalize on the potential growth of these markets.

Additionally, we expect to continue to develop and enhance our strategic partnerships in key international markets as we grow internationally.

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This includes expanding our sales headcount and increasing our marketing initiatives.

We also plan to continue to invest in expanding the functionality of our software suite and underlying infrastructure and technology to meet the needs of our customers across industries.

Our recent acquisitions of Seal Software and Liveoak Technologies, intended to bring additional functionality to our DocuSign Agreement Cloud and further expand our eNotary offerings, as well as the continuous development of new features internally, are examples of our commitment to investing for ongoing growth.

We also plan to continue to invest in expanding the functionality of our software platform and underlying infrastructure and technology to meet the needs of our customers across industries.

Our acquisitions, such as Seal Software and Liveoak Technologies, intend to bring additional functionality to our DocuSign Agreement Cloud offerings, as well as the continuous development of new features internally, are examples of our commitment to investing for ongoing growth.

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Components of Results of Operations

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Subscription Revenue

Subscription revenue consists of fees for the use of our software suite and our technical infrastructure and access to customer support, which includes phone or email support.

Subscription revenue consists of fees for the use of our software platform and our technical infrastructure and access to customer support, which includes phone or email support.

We typically invoice customers in advance on an annual basis.

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Other revenue includes amounts derived from sales of on-premises solutions.

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Overhead Allocation

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Cost of Revenue

Cost of Subscription Revenue Cost of subscription revenue primarily consists of expenses related to hosting our software suite and providing support.

These expenses consist of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs, as well as personnel costs for employees associated with our technical infrastructure, customer success and customer support.

Cost of Subscription Revenue

Cost of subscription revenue primarily consists of expenses related to hosting our software platform and providing support.

These expenses consist of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs, associated with our technical infrastructure, customer success and customer support.

These expenses also consist of software and maintenance costs, third-party hosting fees, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired intangible assets, credit card processing fees and allocated overhead costs.

Cost of Professional Services and Other Revenue Cost of professional services and other revenue consists primarily of personnel costs for our professional services delivery team, travel-related costs and allocated overhead costs.

Cost of Professional Services and Other Revenue

Cost of professional services and other revenue consists primarily of personnel costs for our professional services delivery team, travel-related costs and allocated overhead costs.

Gross Profit and Gross Margin

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Gross margin is gross profit expressed as a percentage of total revenue.

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

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

Operating Expenses

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

Selling and Marketing Expense

Selling and marketing expense consists primarily of personnel costs, including sales commissions.

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

As our revenues continue to increase, our operating expenses as a percentage of revenue may increase or decrease at different rates, driven by the timing of revenue recognition, the timing of hiring, our investments in growth and other factors.

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Sales and Marketing Expense

Sales and marketing expense consists primarily of personnel costs, including sales commissions.

These expenses also include expenditures related to advertising, marketing, promotional events and brand awareness activities, as well as allocated overhead costs.

We expect selling and marketing expense to continue to increase in absolute dollars as we enhance our product offerings and implement marketing strategies.

Research and Development Expense Research and development expense consists primarily of personnel costs.

We expect sales and marketing expense to continue to increase in absolute dollars as we enhance our product offerings and implement marketing strategies.

Research and Development Expense

Research and development expense consists primarily of personnel costs.

These expenses also include non-personnel costs, such as subcontracting, consulting and professional fees for third-party development resources, as well as allocated overhead costs.

Our research and development efforts focus on maintaining and enhancing existing functionality and adding new functionality.

We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our software suite.

General and Administrative Expense General and administrative expense consists primarily of employee-related costs for those employees providing administrative services such as legal, human resources, information technology related to internal systems, accounting and finance.

These expenses also include certain third-party consulting services, certain facilities costs and allocated overhead costs.

We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our software platform.

General and Administrative Expense

General and administrative expense consists primarily of employee-related costs for those employees providing administrative services such as legal, human resources, information technology related to internal systems, accounting and finance.

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

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

Interest Expense and Loss on Extinguishment

Interest Expense and Loss on Extinguishment of Debt

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

The loss on extinguishment of debt consists of the difference between the fair value and the net carrying value of our Notes at settlement.

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Interest Income and Other Income, Net

Interest income and other income, net , consists primarily of interest earned on our cash, cash equivalents and investments, as well as foreign currency transaction gains and losses.

Provision for (Benefit from) Income Taxes

Our provision for (benefit from) income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business, and tax benefits arising from deductions for stock-based compensation.

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

Provision for Income Taxes

Our provision for income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business, and tax benefits arising from deductions for stock-based compensation.

We have a valuation allowance against our U.S.

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Net loss $ (69,976) (3) % $ (243,267) (17) %

The following discussion and analysis are for the year ended January 31, 2021, compared to the same period in 2020, unless otherwise stated.

Discussion and analysis for the year ended January 31, 2020 compared to the same period ended January 31, 2019 may be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 31, 2020, filed with the Securities and Exchange Commission on March 27, 2020.

For a comparison of our results of operations for the fiscal years ended January 31, 2021 and 2020 see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 31, 2021.

Year Ended January 31, 2022 vs 2021

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Subscription revenue increased $655.9 million, or 47%, in the year ended January 31, 2022.

Due to the COVID-19 pandemic, there has been a shift to remote, digital business operations that has led to an acceleration of the digital transformation of agreements.

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

The increase was primarily due to the expansion of existing customers and the addition of new customers.

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

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

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

We continue to monitor the COVID-19 pandemic in fiscal 2022 and its impact on customer demand.

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Professional services and other revenue increased by $16.1 million, or 29%, in the year ended January 31, 2021, primarily driven by increased engagement of professional services to support our growing customer base and by the addition of Seal.

Cost of Revenue and Gross Margin

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Total gross margin 78 % 75 % 3 pts

Cost of subscription revenue increased $96.1 million, or 59% in the year ended January 31, 2021, primarily driven by higher costs to support our growing customer base and the impact of the addition of Seal.

Cost of subscription revenue increased $83.7 million, or 32% in the year ended January 31, 2022, primarily driven by higher costs to support our growing customer base.

Significant increases consisted of:

• $31.6 million in personnel costs and $7.9 million in stock-based compensation expense primarily due to higher headcount, including the addition of Seal employees, and annual merit increases;

• $12.5 million in third-party partner costs, $8.5 million in hosting costs and $6.9 million in authentication and processing fees to support the growth in our revenue;

• $13.0 million in depreciation and amortization, which reflects the higher existing technology intangible assets from the acquisition of Seal, as well as higher data center and capitalized software assets;

• $6.4 million in professional fees, mainly in third-party technical support and customer services.

Cost of professional service and other revenue increased $24.8 million, or 31%, in the year ended January 31, 2021 due to the increases of $20.7 million in personnel costs and $6.2 million in stock-based compensation expense primarily due to higher headcount, including the addition of Seal employees and annual merit increases.

We expect our cost of revenue to continue to increase in absolute dollar amounts as we invest in our business and support our growing customer usage and base.

• $28.1 million in personnel costs and $10.4 million in stock-based compensation expense primarily due to higher headcount, and annual merit increases;

• $9.2 million in hosting costs, $6.5 million in authentication and processing fees and $5.7 million in third-party partner costs to support the growth in our revenue;

• $15.6 million in depreciation and amortization, which reflects the impact of higher data center costs and capitalized software assets as well as the full-year effect of amortization related to technology intangible assets from certain acquisitions;

• $5.8 million due to higher information technology costs.

Cost of professional service and other revenue increased $18.7 million, or 18%, in the year ended January 31, 2022, due to the increases of $9.4 million in personnel costs and $5.5 million in stock-based compensation expense primarily due to higher headcount and annual salary increases.

Sales and Marketing

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Percentage of revenue 51 % 55 %

Sales and marketing expenses increased $207.2 million, or 35%, in the year ended January 31, 2021, primarily driven by higher costs to support the significant increase in demand due to the acceleration of the digital transformation of agreements.

Sales and marketing expenses increased $277.9 million, or 35%, in the year ended January 31, 2022, primarily driven by investments in workforce and technology support to accommodate the demand for our products and increased interest in digital transformation of agreements.

Significant increases consisted of:

• $131.7 million in personnel costs and $36.2 million in stock-based compensation expense due to higher headcount, including the addition of Seal employees, annual merit increases and higher commissions in line with higher sales and higher amortization of deferred contract acquisition costs;

• $29.0 million in marketing and advertising expense, primarily due to a $36.5 million increase in spending on online advertising platforms to help capture the increased market interest in our product offering as a result of the shift to COVID-19 remote work environment.

This was partially offset by $9.1 million decrease in spending on customer events and sponsorships as a result of COVID-19 driven event cancellations;

• $17.4 million in allocated overhead due to higher technology and facility costs;

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• $6.0 million in depreciation and amortization driven by higher fixed assets additions and certain intangible assets acquired in the Seal and Liveoak acquisitions.

These increases were partially offset by a decrease of $19.2 million in travel expenses due to travel restrictions resulting from the COVID-19 pandemic.

• $151.8 million in personnel costs and $55.7 million in stock-based compensation expense due to higher headcount, annual salary increases, higher commissions in line with higher sales and higher payroll taxes;

• $42.4 million in marketing and advertising expense, primarily due to a $36.1 million increase in spending on online advertising platforms to help capture the continued market interest in our product offering;

• $18.9 million due to higher information technology costs;

• $7.6 million in consulting fees to support our sales and marketing initiatives.

Research and Development

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Percentage of revenue 19 % 19 %

Research and development expenses increased $86.0 million, or 46%, in the year ended January 31, 2021, primarily driven by increases of:

• $56.2 million in personnel costs and $22.7 million in stock-based compensation expense due to higher headcount to support growth, the addition of Seal and Liveoak employees and the impact annual merit increases;

• $7.9 million in allocated overhead due to higher technology and facility costs.

These increases were partially offset by a decrease of $2.5 million in travel expenses due to travel restrictions resulting from the COVID-19 pandemic.

Research and development expenses increased $121.8 million, or 45%, in the year ended January 31, 2022, primarily due to investments in workforce and technology support to accommodate growth.

Personnel costs, stock-based

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compensation expense and information technology costs increased by $64.3 million, $42.6 million and $10.5 million during the year ended January 31, 2022 due to higher headcount and annual salary increases.

General and Administrative

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Percentage of revenue 11 % 13 %

General and administrative expenses increased $45.4 million, or 31%, in the year ended January 31, 2021, primarily due to increases of:

• $23.2 million in personnel costs and $7.5 million in stock-based compensation expense primarily due to higher headcount to support growth and the impact of annual merit increases;

• $5.2 million in allocated overhead due to higher technology and facility costs;

• $4.5 million in bad debt reserve.

General and administrative expenses increased $40.1 million, or 21%, in the year ended January 31, 2022, primarily due to investments in workforce and technology support to accommodate the operations and growth in our business.

Personnel costs and stock-based compensation expense increased $16.1 million and $7.5 million during the year ended January 31, 2022 due to higher headcount and the impact of annual salary increases.

The expense for the year ended January 31, 2022 also includes a $5.1 million impairment of operating lease right-of-use assets.

Other Income and (Expense)

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Percentage of revenue — % (2) %

Interest income $ 7,731 $ 16,214 (52) %

Foreign currency gain (loss) 1,936 (972) NM

Other (753) 3,965 NM

Interest income and other income, net $ 1,413 $ 8,914 (84) %

Percentage of revenue — % — %

Interest expense, consisting primarily of the contractual interest expense and amortization of debt discount and issuance costs on our 2023 Notes, which remained relatively flat year over year.

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We incurred a loss of $33.8 million upon the extinguishment of a portion of our 2023 Notes issued in September 2018.

Further details are described in Note 9 to the Consolidated Financial Statements.

Interest income and other income, net, decreased by $10.3 million in the year ended January 31, 2021, primarily due to lower interest income and higher amortization on our debt securities investments.

Interest expense decreased $24.4 million during the year ended January 31, 2022, primarily due to lower amortization expense under ASU 2020-06 effective February 1, 2021.

Further details of the ASU 2020-06 adoption are described in N ote 1 to the Consolidated Financial Statements.

During the year ended January 31, 2021, we incurred a loss of $33.8 million upon extinguishment of a portion of our 2023 Notes issued in September 2018.

During the year ended January 31, 2022, we continued to settle principal of the 2023 Notes.

No losses were incurred as a result of the ASU 2020-06 adoption.

See further details in Note 8 to the Consolidated Financial Statements.

Interest income and other income, net included $4.8 million adjustments to fair value of certain strategic investments resulting from observable price changes that occurred during the quarter ended April 30, 2021.

Provision for Income Taxes

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Percentage of revenue — % 1 %

Provision for income taxes increased by $9.0 million in the year ended January 31, 2021, primarily due to income taxes in certain foreign jurisdictions where we conduct business, including the impact of an intercompany IP transfer of $12.9 million offset by tax benefits arising from deductions for stock-based compensation.

Provision for income taxes decreased by $10.7 million in the year ended January 31, 2022, primarily due to the impact of non-recurring intercompany tax-related transactions related to historical acquisitions, including an intercompany IP transfer of $12.9 million in the year ended January 31, 2021.

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We also had $94.9 million in long-term investments that provide additional capital resources.

Since inception we have financed our operations primarily through equity financings and payments by our customers for use of our product offerings and related services.

Additionally, we have issued senior unsecured convertible notes for general corporate purposes and partial redemption of outstanding notes.

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

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

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

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

In September 2018, we issued and sold $575.0 million in aggregate principal amount of 0.5% Convertible Senior Notes due 2023, of which $537.9 million has been settled as of January 31, 2022 .

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

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

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

Our accounts receivable increased by $73.9 million in the year ended January 31, 2021 , compared to an increase of $63.3 million, excluding the impact from acquisitions, in the year ended January 31, 2020 , which resulted in a $10.6 million increase in cash used by operating activities year over year.

Our accounts receivable increased by $117.4 million in the year ended January 31, 2022 , compared to an increase of $73.9 million, excluding the impact from acquisitions, in the year ended January 31, 2021 , which resulted in a $43.5 million decrease in cash provided by operating activities year over year.

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

Our contract liabilities increased by $267.8 million, excluding the impact from acquisitions, in the year ended January 31, 2021, compared to an increase of $130.3 million in the year ended January 31, 2020.

The year over year increase contributed an additional $137.5 million to cash provided by operating activities.

Therefore, our growth in billings to existing and new customers has a material net beneficial impact on our cash flows from operating activities.

Our future capital requirements will depend on many factors including our growth rate, customer retention and expansion, tax withholding obligations related to settlement of our RSUs, the timing and extent of spending to support our efforts to develop our software suite, the expansion of sales and marketing activities and the continuing market acceptance of our software suite.

Our contract liabilities increased by $250.5 million in the year ended January 31, 2022, compared to an increase of $267.8 million, excluding the impact from acquisitions, in the year ended January 31, 2021.

The year over year decrease resulted in a $17.3 million increase in cash provided by operating activities.

Our future capital requirements will depend on many factors including our growth rate, customer retention and expansion, inflation, tax withholding obligations related to settlement of our RSUs, the timing and extent of spending to support our efforts to develop our software platform, the expansion of sales and marketing activities and the continuing market acceptance of our software platform.

We may in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights.

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Net change in cash, cash equivalents and restricted cash $ (56,657) $ 324,853

The following discussion and analysis are for the years ended January 31, 2021 and 2020, unless otherwise stated.

Cash Flows from Operating Activities

Cash provided by operating activities was $506.5 million and $297.0 million for the years ended January 31, 2022, and 2021.

The improvement of $181.3 million in cash flows provided by operating activities in the year ended January 31, 2021, as compared to prior year was primarily the result of increased sales and the related cash collections, partially offset by cash outflows from higher operating expenses driven by increased headcount.

Further, cash provided by operating activities for the fiscal year ended January 31, 2021 also was offset by $75.2 million pertaining to the repayment of 2023 Notes.

The year-over-year improvement of $209.5 million was primarily the result of increased sales and the related cash collections, partially offset by higher operating costs to support growth and increased headcount.

Cash Flows from Investing Activities

For the year ended January 31, 2022, cash used in investing activities of $162.9 million was primarily driven by $93.4 million net purchases of marketable securities, $61.4 million purchases of property and equipment as we continued to invest in data center build outs to support our growing operations and capitalized software development projects.

In addition, we used $6.4 million to pay for acquisitions.

For the year ended January 31, 2021, cash provided by investing activities of $81.2 million was primarily driven by $352.5 million net maturities and sales of marketable securities, of which $180.4 million was used to fund acquisitions.

We also paid $82.4 million for the purchases of property and equipment as we continued to invest in data center build outs to support our growing operations, capitalized software development projects, and completed several office build outs.

For the year ended January 31, 2020, cash used in investing activities of $321.5 million was primarily driven by $233.9 million net purchases of marketable securities, $72.0 million purchases of property and equipment, and $15.5 million purchases of securities in connection with strategic investments.

Cash Flows from Financing Activities

For the year ended January 31, 2021, cash used in financing activities of $59.0 million was primarily driven by $318.3 million net payments related to our equity plans.

This was partially offset by $261.8 million of net proceeds from the issuance of our 2024 Notes.

Further details of these transactions are described in Note 9 to the Consolidated Financial Statements.

For the year ended January 31, 2020, cash used in financing activities of $70.5 million was driven by net payments related to our equity plans.

For the year ended January 31, 2022, cash used in financing activities of $394.6 million was primarily driven by $316.7 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.

We also used $77.9 million for repayments of our 2023 Notes.

For the year ended January 31, 2021, cash used in financing activities of $59.0 million was primarily driven by $318.3 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.

This was partially offset by $261.8 million of net proceeds from the issuance of our 2024 Notes, described in Note 8 to the Consolidated Financial Statements.

Obligations and Commitments

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Our actual results could differ from these estimates.

The critical accounting estimates, assumptions and judgments that we believe to have the most significant impact on our consolidated financial statements are revenue recognition, deferred contract acquisition costs, stock-based compensation, business combinations and valuation of goodwill and other acquired intangible assets and income taxes.

The critical accounting estimates, assumptions and judgments that we believe to have the most significant impact on our consolidated financial statements are revenue recognition, deferred contract acquisition costs, stock-based compensation, business combinations, valuation of acquired intangible assets in business combinations and income taxes.

Revenue Recognition

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To determine the period of benefit, we evaluate the type of costs incurred, the nature of the related benefit, and the specific facts and circumstances of our arrangements.

The period of benefit for commissions paid for the acquisition of the initial subscription contract is determined by considering our customer life and the technological life of our software suite and related significant features.

The period of benefit for commissions on renewal subscription contracts is determined by considering the average contractual term for our renewal contracts.

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As additional information becomes available, we may revise our estimates.

Any revisions in the estimates of potential liabilities could

Any revisions in the estimates of potential liabilities could have a material impact on our operating results and financial position.

Further, until the final resolution of

DocuSign, Inc.| 2022 Form 10-K | 54

have a material impact on our operating results and financial position.

Further, until the final resolution of any such matter, there may be a loss exposure in excess of the liability recognized and such amount could be significant.

any such matter, there may be a loss exposure in excess of the liability recognized and such amount could be significant.

Recent Accounting Pronouncements

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We present these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

However, these non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results.

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

We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, acquisition-related expenses, loss on extinguishment of debt, tax impact related to an intercompany IP transfer, and, as applicable, other special items.

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

We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, acquisition-related expenses, loss on extinguishment of debt, fair value adjustments to strategic investments, impairment of operating lease right-of-use assets, tax impact related to an intercompany IP transfer and, as applicable, other special items.

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

When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants).

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Employer payroll tax on employee stock transactions 7,524 5,904 2,577

Acquisition-related expenses — — 108

Non-GAAP gross profit $ 1,718,455 $ 1,148,603 $ 767,603

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Employer payroll tax on employee stock transactions 3,821 3,042 1,523

Acquisition-related expenses — — 108

Non-GAAP professional services and other gross loss $ (21,681) $ (7,509) $ (6,569)

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Acquisition-related expenses 387 7,962 —

Impairment of operating lease right-of-use assets 5,099 — —

Non-GAAP income from operations $ 419,106 $ 180,644 $ 47,332

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Tax expense related to intercompany IP transfer (1)

Tax effect of the SpringCM acquisition (2)

Impairment of operating lease right-of-use assets 5,099 — —

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

Non-GAAP net income $ 410,842 $ 182,279 $ 58,871

(1) Represents net change in tax liabilities related to an intercompany IP transfer

(2) Represents a tax benefit related to the release of a portion of our deferred tax asset valuation allowance resulting from the SpringCM Acquisition

Computation of free cash flow:

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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-K

Item 7. Management’s Discussion and Analysis