10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File Number: 001-38465

______________________________________

DOCUSIGN, INC.

(Exact name of registrant as specified in its charter)

______________________________________

Delaware			91-2183967
(State or Other Jurisdictions of Incorporation)			(I.R.S. Employer Identification Number)
221 Main St.	Suite 1550	San Francisco	California	94105
(Address of Principal Executive Offices)				(Zip Code)

(415) 489-4940

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DOCU	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐	Large accelerated filer	☐	Accelerated filer
☒	Non-accelerated filer	☐	Smaller reporting company
☒	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No ☒

The registrant has 176.0 million shares of common stock, par value $0.0001, outstanding at August 31, 2019.

DOCUSIGN, INC.

TABLE OF CONTENTS

	Note Regarding Forward-Looking Statements
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of July 31, 2019 and January 31, 2019	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and the Six Months Ended July 31, 2019 and 2018	6
	Condensed Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the Three and the Six Months Ended July 31, 2019 and 2018	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2019 and 2018	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 6.	Exhibits	73
	Exhibit Index	74
Signatures		75

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

▪ our ability to effectively sustain and manage our growth and future expenses, and our ability to achieve and maintain future profitability;

▪ our ability to attract new customers and to maintain and expand our existing customer base;

▪ our ability to scale and update our software suite to respond to customers’ needs and rapid technological change;

▪ the effects of increased competition on our market and our ability to compete effectively;

▪ our ability to expand use cases within existing customers and vertical solutions;

▪ our ability to expand our operations and increase adoption of our software suite internationally;

▪ our ability to strengthen and foster our relationship with developers;

▪ our ability to expand our direct sales force, customer success team and strategic partnerships around the world;

▪ our ability to successfully integrate SpringCM's operations;

▪ our ability to implement our plans, forecasts and other expectations with respect to SpringCM's business;

▪ our ability to realize the anticipated benefits of the acquisition of SpringCM, including the possibility that the expected benefits from the acquisition will not be realized or will not be realized within the expected time period;

▪ our ability to maintain, protect and enhance our brand;

▪ the sufficiency of our cash and cash equivalents to satisfy our liquidity needs;

▪ our failure or the failure of our software suite of services to comply with applicable industry standards, laws and regulations;

▪ our ability to maintain, protect and enhance our intellectual property;

▪ our ability to successfully defend litigation against us;

▪ our ability to attract large organizations as users;

▪ our ability to maintain our corporate culture;

▪ our ability to offer high-quality customer support;

▪ our ability to hire, retain and motivate qualified personnel;

▪ our ability to identify targets for, execute on and realize the benefits of potential acquisitions;

▪ our ability to estimate the size and potential growth of our target market; and

▪ our ability to maintain proper and effective internal controls.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this

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Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.

4

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOCUSIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)	July 31, 2019			January 31, 2019
Assets
Current assets
Cash and cash equivalents	$	224,290		$	517,811
Investments—current	525,963			251,203
Restricted cash	133			367
Accounts receivable	138,652			174,548
Contract assets—current	15,548			10,616
Prepaid expense and other current assets	38,907			29,976
Total current assets	943,493			984,521
Investments—noncurrent	180,146			164,220
Property and equipment, net	92,078			75,832
Operating lease right-of-use assets	137,292			—
Goodwill	195,427			195,225
Intangible assets, net	65,070			74,203
Deferred contract acquisition costs—noncurrent	124,434			112,583
Other assets—noncurrent	23,896			8,833
Total assets	$	1,761,836		$	1,615,417
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	23,452		$	19,590
Accrued expenses	34,227			21,755
Accrued compensation	79,980			77,553
Contract liabilities—current	402,734			381,060
Operating lease liabilities—current	17,193			—
Deferred rent—current	—			2,452
Other liabilities—current	16,563			13,903
Total current liabilities	574,149			516,313
Convertible senior notes, net	451,934			438,932
Contract liabilities—noncurrent	7,784			7,712
Operating lease liabilities—noncurrent	150,493			—
Deferred rent—noncurrent	—			24,195
Deferred tax liability—noncurrent	4,270			4,207
Other liabilities—noncurrent	6,527			9,696
Total liabilities	1,195,157			1,001,055
Commitments and contingencies (Note 11)
Stockholders' equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2019 and January 31, 2019	—			—
Common stock, $0.0001 par value; 500,000 shares authorized, 175,953 shares outstanding as of July 31, 2019; 500,000 shares authorized, 169,303 shares outstanding as of January 31, 2019	18			17
Additional paid-in capital	1,612,786			1,545,088
Accumulated other comprehensive loss	(2,945		)	(1,965		)
Accumulated deficit	(1,043,180		)	(928,778		)
Total stockholders' equity	566,679			614,362
Total liabilities and stockholders' equity	$	1,761,836		$	1,615,417

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except per share data)	2019			2018			2019			2018
Revenue:
Subscription	$	220,811		$	158,461		$	422,269		$	306,659
Professional services and other	14,801			8,583			27,305			16,193
Total revenue	235,612			167,044			449,574			322,852
Cost of revenue:
Subscription	39,472			23,057			72,591			55,495
Professional services and other	21,704			13,304			40,604			39,160
Total cost of revenue	61,176			36,361			113,195			94,655
Gross profit	174,436			130,683			336,379			228,197
Operating expenses:
Sales and marketing	150,886			103,779			280,822			294,864
Research and development	47,517			33,773			84,700			104,643
General and administrative	40,755			30,851			78,016			133,968
Total expenses	239,158			168,403			443,538			533,475
Loss from operations	(64,722		)	(37,720		)	(107,159		)	(305,278		)
Interest expense	(7,273		)	(47		)	(14,429		)	(240		)
Interest income and other income, net	4,531			2,998			9,748			770
Loss before provision for income taxes	(67,464		)	(34,769		)	(111,840		)	(304,748		)
Provision for income taxes	1,168			1,945			2,514			2,653
Net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39	)	$	(0.22	)	$	(0.66	)	$	(3.01	)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	175,389			166,084			173,773			102,284
Other comprehensive income (loss):
Foreign currency translation losses, net of tax	$	(45	)	$	(3,085	)	$	(1,676	)	$	(5,413	)
Unrealized gains on investments, net of tax	358			—			696			—
Other comprehensive income (loss)	313			(3,085		)	(980		)	(5,413		)
Comprehensive loss	$	(68,319	)	$	(39,799	)	$	(115,334	)	$	(312,814	)
Stock-based compensation expense included in costs and expenses:
Cost of revenue—subscription	$	3,115		$	1,588		$	5,397		$	11,543
Cost of revenue—professional services	4,821			2,822			8,261			18,867
Sales and marketing	25,942			16,791			44,044			129,272
Research and development	11,963			7,359			19,280			54,627
General and administrative	9,951			11,605			21,081			95,650

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)

	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
(in thousands)	Shares		Amount
Balances at April 30, 2019	173,628		$	17	$	1,575,471		$	(3,258	)	$	(974,548	)	$	597,682
Exercise of stock options	1,235		—		10,194			—			—			10,194
Settlement of RSUs	1,681		1		(1		)	—			—			—
Tax withholding on RSU settlement	(591	)	—		(29,841		)	—			—			(29,841		)
Employee stock-based compensation expense	—		—		56,928			—			—			56,928
Non-employee stock-based compensation expense	—		—		35			—			—			35
Net loss	—		—		—			—			(68,632		)	(68,632		)
Other comprehensive income, net	—		—		—			313			—			313
Balances at July 31, 2019	175,953		$	18	$	1,612,786		$	(2,945	)	$	(1,043,180	)	$	566,679

	Redeemable Convertible Preferred Stock					Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(in thousands)	Shares		Amount			Shares	Amount
Balances at April 30, 2018	100,226		$	547,854		36,776	$	4	$	438,200	$	1,075		$	(773,007	)	$	(333,728	)
Exercise of stock options	—		—			324	—		2,503		—			—			2,503
Employee stock-based compensation expense	—		—			—	—		40,380		—			—			40,380
Non-employee stock-based compensation expense	—		—			—	—		113		—			—			113
Issuance of common stock in connection with initial public offering, net of offering costs	—		—			19,314	2		525,297		—			—			525,299
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	(100,226	)	(547,854		)	100,350	10		547,844		—			—			547,854
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	—		—			—	—		848		—			—			848
Exercise of warrants	—		—			22	—		—		—			—			—
Net loss	—		—			—	—		—		—			(36,714		)	(36,714		)
Other comprehensive loss, net	—		—			—	—		—		(3,085		)	—			(3,085		)
Balances at July 31, 2018	—		$	—		156,786	$	16	$	1,555,185	$	(2,010	)	$	(809,721	)	$	743,470

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Continued) (Unaudited)

	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
(in thousands)	Shares		Amount
Balances at January 31, 2019	169,303		$	17	$	1,545,088		$	(1,965	)	$	(928,778	)	$	614,362
Exercise of stock options	3,869		—		42,448			—			—			42,448
Settlement of RSUs	4,144		1		(1		)	—			—			—
Tax withholding on RSU settlement	(1,594	)	—		(85,978		)	—			—			(85,978		)
Employee stock purchase plan	231		—		10,563			—			—			10,563
Employee stock-based compensation expense	—		—		100,597			—			—			100,597
Non-employee stock-based compensation expense	—		—		69			—			—			69
Net loss	—		—		—			—			(114,354		)	(114,354		)
Cumulative impact of Topic 842 adoption	—		—		—			—			(48		)	(48		)
Other comprehensive loss, net	—		—		—			(980		)	—			(980		)
Balances at July 31, 2019	175,953		$	18	$	1,612,786		$	(2,945	)	$	(1,043,180	)	$	566,679

	Redeemable Convertible Preferred Stock					Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(in thousands)	Shares		Amount			Shares	Amount
Balances at January 31, 2018	100,226		$	547,501		35,700	$	4	$	160,265		$	3,403		$	(502,320	)	$	(338,648	)
Exercise of stock options	—		—			1,400	—		10,318			—			—			10,318
Employee stock-based compensation expense	—		—			—	—		310,133			—			—			310,133
Non-employee stock-based compensation expense	—		—			—	—		833			—			—			833
Accretion of preferred stock	—		353			—	—		(353		)	—			—			(353		)
Issuance of common stock in connection with initial public offering, net of offering costs	—		—			19,314	2		525,297			—			—			525,299
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	(100,226	)	(547,854		)	100,350	10		547,844			—			—			547,854
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	—		—			—	—		848			—			—			848
Exercise of warrants	—		—			22	—		—			—			—			—
Net loss	—		—			—	—		—			—			(307,401		)	(307,401		)
Other comprehensive loss, net	—		—			—	—		—			(5,413		)	—			(5,413		)
Balances at July 31, 2018	—		$	—		156,786	$	16	$	1,555,185		$	(2,010	)	$	(809,721	)	$	743,470

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended July 31,
(in thousands)	2019			2018
Cash flows from operating activities:
Net loss	$	(114,354	)	$	(307,401	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	24,261			15,681
Amortization of deferred contract acquisition and fulfillment costs	31,149			19,146
Amortization of debt discount and transaction costs	13,002			—
Non-cash operating lease costs	8,863			—
Stock-based compensation expense	98,063			309,959
Deferred income taxes	28			(12		)
Other	(2,371		)	(875		)
Changes in operating assets and liabilities
Accounts receivable	35,896			15,385
Contract assets	(4,905		)	1,149
Prepaid expenses and other current assets	(3,157		)	(3,406		)
Deferred contract acquisition and fulfillment costs	(48,439		)	(30,339		)
Other assets	959			1,335
Accounts payable	1,588			(5,034		)
Accrued expenses	12,439			2,306
Accrued compensation	2,427			360
Contract liabilities	21,746			19,503
Operating lease liabilities	(7,198		)	—
Other liabilities	2,063			(69		)
Net cash provided by operating activities	72,060			37,688
Cash flows from investing activities:
Purchases of marketable securities	(530,886		)	—
Maturities of marketable securities	244,449			—
Purchases of strategic investments	(15,500		)	—
Purchases of property and equipment	(29,791		)	(10,520		)
Net cash used in investing activities	(331,728		)	(10,520		)
Cash flows from financing activities:
Proceeds from issuance of common stock in initial public offering, net of underwriting commissions	—			529,305
Payment of tax withholding obligation on RSU settlement	(85,978		)	—
Proceeds from exercise of stock options	42,448			10,318
Proceeds from employee stock purchase plan	10,563			—
Payment of deferred offering costs	—			(3,522		)
Net cash provided by (used in) financing activities	(32,967		)	536,101
Effect of foreign exchange on cash, cash equivalents and restricted cash	(1,120		)	(1,543		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(293,755		)	561,726
Cash, cash equivalents and restricted cash at beginning of period	518,178			257,436
Cash, cash equivalents and restricted cash at end of period	$	224,423		$	819,162

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)

	Six Months Ended July 31,
(in thousands)	2019		2018
Supplemental disclosure:
Cash paid for interest	$	1,414	$	204
Cash paid for operating lease liabilities	10,984		—
Cash paid for taxes	1,109		2,001
Non-cash investing and financing activities:
Property and equipment in accounts payable and other accrued liabilities	$	4,046	$	2,100
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	—		547,854
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	—		848
Preferred stock accretion	—		353
Deferred offering costs accrued and unpaid	—		169
Operating lease right-of-use assets exchanged for lease obligations	53,754		—
Derecognition of build-to-suit lease	2,479		—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DOCUSIGN, INC.

Index for Notes to the Condensed Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies	12
Note 2	Revenue and Performance Obligations	15
Note 3	Fair Value Measurements	15
Note 4	Property and Equipment, Net	17
Note 5	Acquisition of SpringCM Inc.	17
Note 6	Goodwill and Intangible Assets, Net	19
Note 7	Contract Balances	20
Note 8	Deferred Contract Acquisition and Fulfillment Costs	20
Note 9	Convertible Senior Notes	21
Note 10	Leases	23
Note 11	Commitments and Contingencies	24
Note 12	Stockholders' Equity	24
Note 13	Net Loss Per Share Attributable to Common Stockholders	26
Note 14	Income Taxes	27
Note 15	Geographic Information	27

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DOCUSIGN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.    Summary of Significant Accounting Policies

Organization and Description of Business

DocuSign, Inc. (“we,” “our” or “us”) was incorporated in the State of Washington in April 2003. We merged with and into DocuSign, Inc., a Delaware corporation, in March 2015.

We provide a platform that enables businesses of all sizes to digitally prepare, execute and act on agreements, thereby simplifying and accelerating the process of doing business.

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include the accounts of DocuSign, Inc. and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Our condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2019 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the six months ended July 31, 2019 are not necessarily indicative of the results to be expected for the year ending January 31, 2020.

Our fiscal year ends on January 31. References to fiscal 2020, for example, are to the fiscal year ending January 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include those related to the allocation of revenue between recognized and deferred amounts, allowance for bad debts, goodwill, intangible assets, deferred contract acquisition costs, customer benefit period, fair value of financial instruments, valuation of stock-based compensation, valuation of common stock, fair value of the liability and equity components of the convertible notes, whether an arrangement is or contains a lease, the discount rate used for operating leases, and the valuation allowance for deferred income taxes.

Significant Accounting Policies

Other than described below, there have been no changes to our significant accounting policies described in our 2019 Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes.

Leases

Leases arise from contractual obligations that convey the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We determine whether an arrangement is or contains a lease at inception, based on whether there is an identified asset and whether we control the use of the identified asset throughout the period of use. At lease commencement date, we determine lease classification between finance and operating, allocate the

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consideration to the lease and nonlease components and recognize a right-of-use asset and corresponding lease liability for each lease component. A right-of-use asset represents our right to use an underlying asset and a lease liability represents our obligation to make payments during the lease term.

The lease liability is initially measured as the present value of the remaining lease payments over the lease term. The discount rate used to determine the present value is our incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. We estimate our incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments to lessors and lease incentives. Our operating lease right-of-use assets and liabilities recognized at February 1, 2019, the adoption date, were based on the present value of lease payments over the remaining lease term as of that date, using the incremental borrowing rate as of that date.

We elected the practical expedients to not recognize right-of-use assets and liabilities for leases with a term of twelve months or less and to not separate nonlease components from the associated lease components for our office leases and certain other asset classes. The total consideration includes fixed payments and contractual escalation provisions. We are responsible for maintenance, insurance, property taxes and other variable payments, which are expensed as incurred. Our leases include options to renew or terminate. We include the option to renew or terminate in our determination of the lease term when the option is deemed to be reasonably assured to be exercised. 

Operating leases are classified in "Operating lease right-of-use assets", "Operating lease liabilities—current", and "Operating lease liabilities—noncurrent" on our condensed consolidated balance sheets. Operating lease expense is recognized on a straight-line basis over the expected lease term and included in "Loss from operations" in our condensed consolidated statements of operations and comprehensive loss.

Strategic Investments

Our strategic investments consist of non-marketable equity investments in privately-held companies in which we do not have a controlling interest or significant influence. We have elected to apply the measurement alternative for equity investments that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when event or circumstance indicates a decline in value has occurred.

In March 2019, we purchased equity investments in privately-held companies totaling $15.5 million that were classified in "Other assets—noncurrent" on our condensed consolidated balance sheets. As there have been no material observable price changes, we have not recorded any adjustments resulting from observable price changes for identical or similar investments or impairment charges for any of our equity investments in privately-held companies in the six months ended July 31, 2019. We had no such investments as of January 31, 2019.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued accounting standards update ("ASU") No. 2016-02, Leases (Topic 842), which supersedes current guidance related to accounting for leases. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASU makes 16 technical corrections to the new lease standard and other accounting topics, alleviating unintended consequences from applying the new standard. It does not make any substantive changes to the core provisions or principles of the new standard. In July 2018, the FASB also issued ASU No. 2018-11, Leases (Topic 842). The ASU provides (1) an optional transition method that entities can use when adopting the standard and (2) a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met.

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The standard is effective for public entities for annual and interim reporting periods beginning after December 15, 2018. We adopted the new standard as of February 1, 2019, and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit as of the adoption date. We elected the optional transition approach to not apply Topic 842 in the comparative periods presented. We elected the practical expedient to use hindsight when determining the lease term and the package of practical expedients to not reassess whether existing contracts contain leases, the lease classification for existing leases and whether existing initial direct costs meet the new definition. The adoption of Topic 842 resulted in the recognition of total right-of-use assets of $93.9 million and total lease liabilities of $121.8 million as of adoption date, with the most significant impact related to our office space leases. Additionally, we derecognized $26.6 million in deferred rent and $2.5 million related to the build-to-suit asset and liability upon adoption of this standard pursuant to the transition guidance provided for build-to-suit leases. The adoption of Topic 842 did not have a material impact to the consolidated statements of operations or statements of cash flows.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). As the amendment only relates to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The standard is effective for annual and interim reporting periods beginning after December 15, 2018 for all entities. The amendment is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Early adoption is permitted. The adoption of the standard did not have an impact on our consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASU aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. The ASU is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted, including in an interim period, but not before an entity adopts the topic 606 revenue guidance. The adoption of the standard did not have a material impact on our consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies, corrects errors in and makes improvements to several topics in the FASB Accounting Standard Codification. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance of the ASU. Amendments that do have transition guidance are effective for public business entities for annual periods beginning after December 15, 2018. The adoption of the standard did not have a material impact on our consolidated financial statements.

Other Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to eliminate inconsistencies and provide clarifications to the transition requirements of ASU No. 2016-13. The updates to the standard are effective for interim and annual periods beginning after December 15, 2019. We are evaluating the impact of the adoption of the ASUs on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

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In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

Note 2.    Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 94% and 95% for the three months ended July 31, 2019 and 2018, and 94% and 95% of our revenue for the six months ended July 31, 2019 and 2018.

The typical subscription term is one to three years. Most of our subscription contracts are noncancelable over the contractual term. Customers typically have the right to terminate their contracts for cause, if we fail to perform. As of July 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $628.6 million, which consists of both billed and unbilled consideration that we expect to recognize as subscription revenue. We expect to recognize 53% of the transaction price in the twelve months following July 31, 2019, in our consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

We elected to apply the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with a contract term of one year or less. In addition, we do not disclose the transaction price related to revenue from professional services, training services and web revenue as revenue from these sources is recognized within one year.

Note 3.    Fair Value Measurements

We carry certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities;
Level 2	Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
Level 3	Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability.

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The following table summarizes our financial assets that are measured at fair value on a recurring basis during the period:

	July 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	95,787	$	—	$	—		$	95,787
Level 2:
Available-for-sale securities
Commercial paper	41,197		45		(2		)	41,240
Corporate notes and bonds	351,691		835		(68		)	352,458
U.S. Treasury securities	174,897		172		(31		)	175,038
U.S. government agency securities	137,369		63		(59		)	137,373
Level 2 total	705,154		1,115		(160		)	706,109
Total	$	800,941	$	1,115	$	(160	)	$	801,896
	January 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	350,063	$	—	$	—		$	350,063
Level 2:
Cash equivalents
Commercial paper	76,828		—		(11		)	76,817
Corporate notes and bonds	2,998		—		—			2,998
U.S. government agency securities	6,491		—		—			6,491
Available-for-sale securities
Commercial paper	86,655		4		(21		)	86,638
Corporate notes and bonds	287,496		389		(105		)	287,780
U.S. Treasury securities	4,982		—		(1		)	4,981
U.S. government agency securities	36,021		7		(4		)	36,024
Level 2 total	501,471		400		(142		)	501,729
Total	$	851,534	$	400	$	(142	)	$	851,792

Money market funds consist of cash equivalents with original maturities of three months or less at the date of purchase. We use quoted prices in active markets for identical assets or liabilities to determine the fair value of our Level 1 investments in money market funds. The fair value of our Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs.

The fair value of our available-for-sale marketable securities as of July 31, 2019, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less	$	525,963
Due in one to two years	180,146
	$	706,109

As of July 31, 2019, we had a total of 168 available-for-sale securities, none of which were considered to be other-than-temporarily impaired.

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Convertible Senior Notes

As of July 31, 2019, the estimated fair value of our 0.5% Convertible Senior Notes (the "Notes") with aggregate principal amount of $575.0 million was $605.8 million. We estimated the fair value based on the quoted market prices in an inactive market on the last trading day of the reporting period (Level 2). The Notes are recorded at face value less unamortized debt discount and transaction costs as "Convertible senior notes, net" on our consolidated balance sheets. Refer to Note 9 for further information.

Note 4.    Property and Equipment, Net

Property and equipment consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Computer and network equipment	$	62,751		$	55,233
Software, including capitalized software development costs	31,435			27,959
Furniture and office equipment	11,982			9,511
Leasehold improvements	48,109			41,464
	154,277			134,167
Less: Accumulated depreciation	(73,942		)	(66,479		)
	80,335			67,688
Work in progress	11,743			8,144
	$	92,078		$	75,832

Depreciation expense associated with property and equipment was $7.9 million and $5.3 million for the three months ended July 31, 2019 and 2018, and $15.1 million and $11.5 million for the six months ended July 31, 2019 and 2018.

As of January 31, 2019, leasehold improvements include $2.5 million related to the fair value of the Israel leased space that was recorded under the build-to-suit lease guidance. Upon adoption of Topic 842 on February 1, 2019, we derecognized the build-to-suit asset and recognized an operating right-of-use asset for the related lease within the condensed consolidated balance sheet as of July 31, 2019. Refer to Note 1 for additional information.

Note 5. Acquisition of SpringCM Inc.

On September 4, 2018, we completed the acquisition of SpringCM Inc. ("SpringCM"), a cloud-based document generation and contract lifecycle management software company based in Chicago, Illinois. With the addition of SpringCM's capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow, the deal further accelerates the broadening of our solution beyond e-signature to the rest of the agreement process—from preparing to signing, acting-on and managing agreements. Under the terms of the merger agreement, we acquired SpringCM for approximately $218.8 million in cash, excluding cash acquired, working capital and transaction cost adjustments. Of the cash paid at closing, $8.2 million will be held in escrow for an 18-month period after closing to secure our indemnification rights under the merger agreement.

Additionally, we granted certain continuing employees of SpringCM restricted stock units ("RSUs") with a service and performance conditions covering up to 0.5 million shares with grant date fair value of $26.5 million that will be accounted for as a post-acquisition compensation expense over the vesting period. The performance-based condition will be satisfied upon SpringCM meeting certain revenue targets and will impact the quantity of shares that will vest. As of July 31, 2019, the performance-based condition was considered probable of meeting the minimum target.

We accounted for the transaction as a business combination using the acquisition method of accounting. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Fair values were determined using the valuation performed by management. Excess purchase price consideration was recorded as goodwill and is primarily attributable to the assembled workforce and expanded market opportunities when integrating SpringCM’s capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow with our other offerings. 

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We engaged third party valuation specialists to aid our analysis of the fair value of the acquired intangibles. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of management and not those of any third party.

The fair values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches. The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition:

(in thousands)	September 4, 2018
Cash and cash equivalents	$	6,950
Accounts receivable and other assets	10,542
Property and equipment	6,108
Goodwill	159,097
Intangible assets	73,000
Contract liabilities	(9,973		)
Other liabilities	(12,948		)
Deferred tax liability	(7,047		)
	$	225,729

None of the goodwill recognized upon acquisition is deductible for U.S. federal income tax purposes.

The estimated useful lives, primarily based on the expected period of benefit to us, and fair values of the identifiable intangible assets at acquisition date were as follows:

(in thousands, except years)	Estimated Fair Value		Expected Useful Life
Existing technology	$	11,900	3 years
Customer relationships—subscription	54,200		9 years
Backlog—subscription	6,400		2 years
Tradenames / trademarks	500		1 year
Total preliminary intangible assets	$	73,000

In the year ended January 31, 2019, we incurred acquisition costs of $1.8 million. These costs included legal, accounting fees and other costs directly related to the acquisition and are classified within operating expenses in our condensed consolidated statements of operations.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on February 1, 2017. It includes pro forma adjustments related to the amortization of acquired intangible assets, stock-based compensation expense, professional services revenue and contract acquisitions costs adjustments under the new revenue recognition standard, and contract liabilities fair value adjustment. The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2017, or of future results of operations:

(in thousands, except per share data)	Three Months Ended July 31, 2018			Six Months Ended July 31, 2018
Revenue	$	175,066		$	337,710
Net loss	(44,448		)	(325,090		)
Net loss per share attributable to common stockholders, basic and diluted	(0.27		)	(3.18		)

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Note 6.    Goodwill and Intangible Assets, Net

The changes in the carrying amount of goodwill for the six months ended July 31, 2019, were as follows (in thousands):

Balance at January 31, 2019	$	195,225
Cumulative translation adjustment	202
Balance at July 31, 2019	$	195,427

Intangible assets consisted of the following:

		As of July 31, 2019							As of January 31, 2019
(in thousands)	Weighted-average Remaining Useful Life (Years)	Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net		Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net
Existing technology	2.1	$	31,594	$	(23,112	)	$	8,482	$	31,594	$	(20,747	)	$	10,847
Tradenames / trademarks	0.6	2,419		(2,223		)	196		2,419		(1,858		)	561
Customer contracts & related relationships	7.9	65,782		(15,148		)	50,634		65,782		(11,168		)	54,614
Certifications	1.1	6,917		(5,538		)	1,379		6,917		(4,846		)	2,071
Maintenance contracts & related relationships	0.9	1,498		(1,254		)	244		1,498		(1,104		)	394
Backlog—Subscription	1.2	6,400		(2,905		)	3,495		6,400		(1,304		)	5,096
	6.6	$	114,610	$	(50,180	)	64,430		$	114,610	$	(41,027	)	73,583
Cumulative translation adjustment							640							620
Total							$	65,070						$	74,203

Amortization of finite-lived intangible assets for the three and six months ended July 31, 2019 and 2018, was as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
Cost of subscription revenue	$	1,381	$	1,003	$	3,008	$	2,671
Sales and marketing	3,039		765		6,145		1,530
Total	$	4,420	$	1,768	$	9,153	$	4,201

As of July 31, 2019, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows, excluding cumulative translation adjustment (in thousands):

Fiscal 2020, remainder	$	8,564
Fiscal 2021	13,818
Fiscal 2022	8,370
Fiscal 2023	6,023
Fiscal 2024	6,023
Thereafter	21,632
Total	$	64,430

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Note 7.    Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $16.8 million and $11.9 million as of July 31, 2019 and January 31, 2019, of which $1.3 million was noncurrent and included within "Other assets—noncurrent" on our consolidated balance sheets as of both periods. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2019 and 2018, we recognized revenue of $265.7 million and $157.3 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules. We record accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days.

Note 8.    Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition costs:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	115,985		$	77,344
Additions to deferred contract acquisition costs	39,879			29,662
Amortization of deferred contract acquisition costs	(26,929		)	(18,223		)
Cumulative translation adjustment	(1,394		)	—
Ending balance	$	127,541		$	88,783

	July 31,
(in thousands)	2019		2018
Deferred contract acquisition costs, current	$	3,107	$	2,584
Deferred contract acquisitions costs, noncurrent	124,434		86,199
Total	$	127,541	$	88,783

The following table represents our contract fulfillment costs, which include third-party service fees:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	3,432		$	3,316
Additions to deferred contract fulfillment costs	8,560			677
Amortization of deferred contract fulfillment costs	(4,220		)	(923		)
Ending balance	$	7,772		$	3,070

	July 31,
(in thousands)	2019		2018
Deferred contract fulfillment costs, current	$	4,600	$	913
Deferred contract fulfillment costs, noncurrent	3,172		2,157
Total	$	7,772	$	3,070

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Current deferred contract acquisition and fulfillment costs are included in "Prepaid expense and other current assets" and noncurrent costs are included in "Other assets—noncurrent" on our consolidated balance sheets.

Note 9.    Convertible Senior Notes

In September 2018, we issued $575.0 million aggregate principal amount of 0.5% Convertible Senior Notes due in 2023, including the initial purchasers’ exercise in full of their option to purchase an additional $75.0 million principal amount of the Notes, in a private placement to qualified institutional buyers in an offering exempt from registration under the Securities Act. The net proceeds from the issuance of the Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs.

The Notes are governed by an indenture (the “Indenture”) between us, as the issuer, and U.S. Bank National Association, as trustee. The Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of our unsecured indebtedness then existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The Indenture does not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The Notes mature on September 15, 2023, unless earlier repurchased or redeemed by us or earlier converted in accordance with their terms prior to the maturity date. Interest is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.

The Notes have an initial conversion rate of 13.9860 shares of our common stock per $1,000 principal amount of Notes, which is equal to an initial conversion price of approximately $71.50 per share of our common stock and is subject to adjustment in some events. Following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, we will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or during the related redemption period in certain circumstances. Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” per the Indenture, holders of the Notes may require us to repurchase for cash all or a portion of their Notes at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest.

On or after June 15, 2023, until the close of business on September 13, 2023, holders may convert all or any portion of their Notes at any time regardless of whether the conditions set forth below have been met. Upon conversion, holders will receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

Holders of the Notes may convert all or any portion of their Notes at any time prior to the close of business on June 14, 2023, in integral multiples of $1,000 principal amount, only under the following circumstances:

• During any fiscal quarter commencing after the fiscal quarter ending on January 31, 2019 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• During the 5-business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price as defined in the Indenture per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

• If we call any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

• Upon the occurrence of specified corporate events described in the Indenture.

We may redeem for cash or shares all or any portion of the Notes, at our option, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, beginning on or after September 20, 2021 if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day.

As of July 31, 2019, the conditions allowing holders of the Notes to convert have not been met and therefore the Notes are not yet convertible.

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We account for the Notes as separate liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows using a discount rate of 6% based on comparable convertible transactions for similar companies. The carrying amount of the equity component representing the conversion option was $134.7 million and was calculated by deducting the carrying value of the liability component from the principal amount of the Notes as a whole. This difference represents a debt discount that is amortized to interest expense over the term of the Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocate transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the liability component were $10.9 million and are being amortized to interest expense using the effective interest method over the term of the Notes. Transaction costs attributable to the equity component were $3.3 million and are netted with the equity component of the Notes in stockholders’ equity.

The net carrying value of the liability component of the Notes was as follows:

(in thousands)	July 31, 2019
Principal	$	575,000
Less: unamortized debt discount	(113,845		)
Less: unamortized transaction costs	(9,221		)
Net carrying amount	$	451,934

The net carrying amount of the equity component of the Notes was as follows:

(in thousands)	July 31, 2019
Proceeds allocated to the conversion option (debt discount)	$	134,667
Less: transaction costs	(3,336		)
Net carrying amount	$	131,331

The interest expense recognized related to the Notes was as follows:

(in thousands)	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Contractual interest expense	$	719	$	1,429
Amortization of debt discount	6,058		12,028
Amortization of transaction costs	490		974
Total	$	7,267	$	14,431

Capped Calls

In connection with the offering of the Notes, we entered into privately-negotiated capped call transactions ("Capped Calls") with certain counterparties. The Capped Calls each have an initial strike price of approximately $71.50 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $110.00 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 8.0 million shares of common stock. The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Call transactions are considered indexed to our own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $67.6 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.

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Impact on Earnings Per Share

The Notes will not have an impact on our diluted earnings per share until the average market price of our common stock exceeds the cap price of $110.00 per share, as we intend and have the ability to settle the principal amount of the Notes in cash upon conversion. We are required under the treasury stock method to compute the potentially dilutive shares of common stock related to the Notes for periods we report net income. However, upon conversion, there will be no economic dilution from the Notes until the average market price of our common stock exceeds the cap price of $110.00 per share, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the cap price. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive under the treasury stock method.

Note 10. Leases

We lease office space and equipment under non-cancelable operating lease agreements that expire at various dates through February 2032. As of July 31, 2019, we have no finance leases.

The following table is a summary of our operating lease costs, (in thousands):

	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Operating lease cost	$	6,625	$	12,331
Short-term lease cost	172		441
Variable lease cost and other, net	138		187
Total lease cost	$	6,935	$	12,959

Future lease payments as of July 31, 2019, were as follows (in thousands):

Fiscal 2020, remainder	$	11,227
Fiscal 2021	26,340
Fiscal 2022	27,291
Fiscal 2023	27,697
Fiscal 2024	27,784
Thereafter	79,339
Total undiscounted cash flows	$	199,678
Less imputed interest	(31,992		)
Present value of lease liabilities	$	167,686
Weighted average remaining term (years)	8.2
Weighted average discount rate	4.4		%

The future minimum annual lease payments as of January 31, 2019, related to the outstanding lease agreements were as follows (in thousands):

Fiscal 2020	$	22,198
Fiscal 2021	22,617
Fiscal 2022	22,556
Fiscal 2023	23,173
Fiscal 2024	23,373
Thereafter	34,634
Total minimum lease payments	$	148,551

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Note 11.    Commitments and Contingencies

As of July 31, 2019, we had unused letters of credit outstanding associated with our various operating leases totaling $9.8 million.

We have entered into certain noncancelable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of July 31, 2019, our noncancelable contractual obligations with a remaining term of more than one year were as follows (in thousands):

Fiscal 2020, remainder	$	4,322
Fiscal 2021	10,987
Fiscal 2022	9,379
Fiscal 2023	898
Fiscal 2024	943
Thereafter	4,555
Total	$	31,084

Indemnification

We enter into indemnification provisions under our agreements with customers and other companies in the ordinary course of business, including business partners, contractors and parties performing our research and development. Pursuant to these arrangements, we agree to indemnify and defend the indemnified party for certain claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of our activities. The duration of these indemnification agreements is generally perpetual. The maximum potential amount of future payments we could be required to make under these indemnifications is not determinable. Historically, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these indemnification agreements is not material as of July 31, 2019, and January 31, 2019. We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

We have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.

Claims and Litigation

From time to time, we may be subject to legal proceedings, claims and litigations made against us in the ordinary course of business. We believe the final outcome of these matters will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. In June 2011, RMail Limited, RPost Communications Limited and RPost Holdings filed a complaint against us for patent infringement in the U.S. District Court for the Eastern District of Texas. In October 2012, RPost Holdings Inc. and RPost Communications Limited filed another patent infringement complaint against us in the same court. In August 2019, subsequent to quarter end, we and such RPost entities entered into a settlement agreement, and both cases were dismissed. The settlement amount, included in Other liabilities—current as of July 31, 2019, was not material to our financial statements.

Note 12. Stockholders' Equity

Equity Incentive Plans

We maintain three stock-based compensation plans: the 2018 Equity Incentive Plan (the "2018 Plan"), the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and the Amended and Restated 2003 Stock Plan (the “2003 Plan”).

Our board of directors adopted, and our stockholders approved, the 2018 Plan during the year ended January 31, 2019. The 2018 Plan went into effect in April 2018 upon the effectiveness of our IPO Registration Statement. This plan serves as a successor to the 2011 Plan and 2003 Plan and provides for the grant of stock-based awards to our employees, directors and consultants. No additional awards under the 2011 Plan or 2003 Plan were made as of the effective date of the 2018 Plan. Outstanding awards under these two plans continue to be subject to the terms and conditions of the respective plans.

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Shares available for grant under the 2011 Plan that were reserved but not issued as of the effective date of the 2018 Plan were added to the reserves of the 2018 Plan. Any shares subject to outstanding awards originally granted under the 2011 Plan that: (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award shall become available for future issuance pursuant to the 2018 Plan. As of July 31, 2019, 24.3 million shares were available for future issuance under the 2018 Plan.

The number of shares reserved under the 2018 Plan will automatically increase on the first day of each fiscal year, starting on February 1, 2019, and continuing through February 1, 2028, in an amount equal to (i) 5% of the total number of shares of our capital stock outstanding on January 31st of the preceding fiscal year or (ii) a lesser number of shares as determined by our board of directors or a committee thereof. Pursuant to this automatic increase, the Compensation Committee of our board of directors approved an increase of 8.5 million shares reserved for issuance effective on February 1, 2019.

Stock Options

Option activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share and years data)	Number of Options Outstanding		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 31, 2019	13,648		$	12.27	5.38	$	507,371
Options exercised	(3,869	)	9.86
Options canceled/expired	(27	)	17.67
Outstanding at July 31, 2019	9,752		$	13.22	5.28	$	375,487
Vested and expected to vest at July 31, 2019	9,653		$	13.17	5.26	$	372,090
Exercisable at July 31, 2019	8,518		$	12.57	4.97	$	333,456

As of July 31, 2019, our total unrecognized compensation cost related to stock option grants was $8.8 million. We expect to recognize this expense over the remaining weighted-average period of approximately 1.4 years.

RSUs

Substantially all the RSUs that we have issued through January 31, 2018, vest upon the satisfaction of both service-based and performance-based vesting conditions. The service-based condition is typically satisfied over a four-year service period. The performance-based condition related to these awards was satisfied upon the effectiveness of our IPO Registration Statement on April 26, 2018. On that date we recorded a cumulative stock-based compensation expense of $262.8 million using the accelerated attribution method for all the RSUs with the service condition fully satisfied. Majority of RSUs granted after January 31, 2018, vest on the satisfaction of a service-based condition only. From time to time, we also grant RSUs that are subject to performance-based or market-based vesting conditions. The performance-based conditions will be satisfied if our financial performance meets certain operating targets. The market-based conditions will be satisfied if certain milestones based on our common stock price or total shareholder return are met. As of July 31, 2019, we had 0.3 million unvested RSUs subject to performance-based conditions for which the performance condition was deemed probable as of period end and 0.2 million unvested RSUs subject to market-based conditions.

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RSU activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share data)	Number of Units		Weighted-Average Grant Date Fair Value
Unvested at January 31, 2019	17,142		$	34.56
Granted	4,760		52.91
Vested	(4,180	)	26.07
Canceled	(1,283	)	37.52
Unvested at July 31, 2019	16,439		$	41.78

As of July 31, 2019, our total unrecognized compensation cost related to RSUs was $498.3 million. We expect to recognize this expense over the remaining weighted-average period of approximately 2.4 years.

2018 Employee Stock Purchase Plan

Our 2018 Employee Stock Purchase Plan (“2018 ESPP”) allows eligible employees to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase our common stock at a discounted price per share. The price at which common stock is purchased under the 2018 ESPP is equal to 85% of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. The 2018 ESPP provides for separate six-month offering periods that begin on September 15 and March 15 each year. The initial offering period ran from September 15, 2018, through March 14, 2019. In the six months ended July 31, 2019, 0.2 million shares of our common stock were purchased under the 2018 ESPP. Compensation expense related to the ESPP was $2.1 million and $4.0 million for the three and six months ended July 31, 2019.

The number of shares reserved under the 2018 ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2019 and continuing through February 1, 2028, in an amount equal to the lesser of (i) 1% of the total number of shares of our common stock outstanding on January 31 of the preceding fiscal year, (ii) 3.8 million shares, or (iii) a lesser number of shares determined by our board of directors. As of July 31, 2019, 5.3 million shares were reserved for future issuance under the 2018 ESPP.

Note 13.    Net Loss per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for periods presented:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except per share data)	2019			2018			2019			2018
Numerator:
Net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)
Less: preferred stock accretion	—			—			—			(353		)
Net loss attributable to common stockholders	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,754	)
Denominator:
Weighted-average common shares outstanding	175,389			166,084			173,773			102,284
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.39	)	$	(0.22	)	$	(0.66	)	$	(3.01	)

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Outstanding potentially dilutive securities that were excluded from the diluted per share calculations because they would have been antidilutive are as follows:

	July 31,
(in thousands)	2019	2018
Stock options	9,752	18,122
RSUs	15,893	18,908
ESPP	288	—
Total antidilutive securities	25,933	37,030

The table above does not include 0.5 million and 0.2 million RSUs outstanding as of July 31, 2019 and 2018, as these RSUs are subject to operating and stock price targets that were not considered to be met as of the reporting period.

Note 14.    Income Taxes

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our income tax provisions were $1.2 million and $1.9 million for the three months ended July 31, 2019 and 2018, and $2.5 million and $2.7 million for the six months ended July 31, 2019 and 2018. The provision was primarily driven by foreign tax expenses, resulting foreign earnings in certain foreign jurisdictions, partially offset by excess benefits from stock option settlements.

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for valuation allowances, on a quarterly basis. There is no corresponding income tax benefit recognized with respect to losses incurred and no corresponding income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in our effective tax rate. We maintain a valuation allowance against certain deferred tax assets, including all federal, state, and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results. In the event that we determine the deferred tax assets are realizable based on its assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

As of July 31, 2019, our gross unrecognized tax benefits totaled $10.9 million, excluding related accrued interest and penalties, all of which would impact the effective tax rate if recognized. Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

We are subject to taxation in the U.S. and various state and foreign jurisdictions. Earnings from international activities are subject to local country income tax. The material jurisdictions where we are subject to potential examination by taxing authorities include the U.S., California and Israel. We are currently under an income tax examination by the Israel Tax Authority for tax years 2013 through 2016. We are not currently under audit by the Internal Revenue Service or any similar taxing authority in any other material jurisdiction. We believe that adequate amounts have been reserved in all jurisdictions.

Note 15.    Geographic Information

We operate in one operating and one reportable segment as we only report financial information on an aggregate and consolidated basis to the Chief Executive Officer, who is our chief operating decision maker.

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Revenue by geography is generally based on the address of the customer as specified in our master subscription agreement. Revenue by geographic area were as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
U.S.	$	193,736	$	138,543	$	370,002	$	268,357
International	41,876		28,501		79,572		54,495
Total revenue	$	235,612	$	167,044	$	449,574	$	322,852

No single country other than the U.S. had revenue greater than 10% of total revenue for the three and six months ended July 31, 2019 and 2018.

Our property and equipment by geographic area were as follows:

(in thousands)	July 31, 2019		January 31, 2019
U.S.	$	76,349	$	60,625
International	15,729		15,207
Total property and equipment	$	92,078	$	75,832

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our 2019 Annual Report on Form 10-K.  As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q and in our 2019 Annual Report on Form 10-K. Our fiscal year ends January 31.

Executive Overview of Second Quarter Results

Overview

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.

As the core part of our broader software suite for automating the agreement process, we offer the world’s #1 e-signature solution. We call our suite 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 535,000 customers and hundreds of millions of 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. 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.

We offer access to our platform on a subscription basis and price such subscriptions based on the functionality required by our customers and the quantity of Envelopes provisioned. Similar to how physical agreements were mailed for signature in paper envelopes historically, an Envelope is a digital container used to send one or more documents for signature or approval to one or more recipients. Our customers have the flexibility to put a large number of documents in an Envelope. For a number of use cases, such as buying a home, multiple Envelopes are used over the course of the process. To drive customer reach and adoption, we also offer for free certain limited-time or feature-constrained versions of our platform.

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We generate substantially all our revenue from sales of subscriptions, which accounted for 94% and 95% for the three months ended July 31, 2019 and 2018, and 94% and 95% of our revenue for the six months ended July 31, 2019 and 2018. Our subscription fees include the use of our software suite 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.

We also generate revenue from professional and other non-subscription services, which consists primarily of fees associated with providing new customers deployment and integration services. Other revenue includes amounts derived from sales of on-premises solutions. Professional services and other revenue accounted for 6% and 5% of our revenue for the three months ended July 31, 2019 and 2018, and 6% and 5% for the six months ended July 31, 2019 and 2018. 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 to 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 very small businesses ("VSBs"), which include professionals, sole proprietorships 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 is the most cost-effective way to reach our smallest customers. We offer more than 300 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. No single customer accounted for more than 10% of total revenue for each of the three and six months ended July 31, 2019 and 2018.

We focused initially on selling our e-signature solutions to commercial businesses and VSBs. We later expanded our focus to target enterprise customers by adding our first enterprise sales professionals in the year ended January 31, 2011. In the year ended January 31, 2013, we began to gain meaningful traction selling into new enterprise accounts with aggregate ACV exceeding $5 million. To demonstrate this growth over time, the number of our customers with greater than $300,000 in ACV has increased from approximately 30 as of January 31, 2013 to 371 customers as of July 31, 2019. Each of our customer types have different purchasing patterns. VSBs tend to become customers quickly with very little to no direct interaction and generate smaller average contract values, while commercial and enterprise customers typically involve longer sales cycles, larger contract values and greater expansion opportunities for us.

Financial Results for the Three and Six Months Ended July 31, 2019:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
Total revenue	$	235,612		$	167,044		$	449,574		$	322,852
Total costs and expenses	300,334			204,764			556,733			628,130
Total stock-based compensation expense	55,792			40,165			98,063			309,959
Loss from operations	(64,722		)	(37,720		)	(107,159		)	(305,278		)
Net loss	(68,632		)	(36,714		)	(114,354		)	(307,401		)
Cash provided by operating activities	26,405			22,695			72,060			37,688
Capital expenditures	(14,554		)	(4,336		)	(29,791		)	(10,520		)

Cash, cash equivalents and investments were $930.4 million as of July 31, 2019.

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Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:

Growing Customer Base

We are highly focused on continuing to acquire new customers to support our long-term growth. We have invested, and expect to continue to invest, heavily in our sales and marketing efforts to drive customer acquisition. As of July 31, 2019, we had over 535,000 customers, including over 60,000 enterprise and commercial customers, as compared to over 425,000 customers and over 45,000 enterprise and commercial customers as of July 31, 2018. 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. We define enterprise customers as companies generally included in the Global 2000. We generally 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. VSBs include 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 on 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. Increasing awareness of our software suite, further developing our sales and marketing expertise and continuing to build features tuned to different industry needs 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 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 platform.

Increasing International Revenue

Our international revenue represented 18% and 17% of our total revenue for the three months ended July 31, 2019 and 2018, and 18% and 17% of our total revenue for the six months ended July 31, 2019 and 2018. We started our international selling efforts in English-speaking common law countries, such as Canada, the United Kingdom and Australia, as we were able to leverage our core technologies in these jurisdictions since they have a similar approach to e-signature as the United States ("U.S."). We have since made significant investments to be able to offer our solutions in select civil law countries. For example, in Europe, we have Standards-Based Signature technology tailored for electronic IDentification, Authentication and trust Services ("eIDAS"). 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. Additionally, we expect our strategic partnerships in key international markets, including our current relationships with SAP in Europe, to further grow.

Investing for Growth

We believe that our market opportunity is large, and we plan to invest to continue to support further growth. 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.

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Components of Results of Operations

Revenue

We derive revenue primarily from subscriptions and, to a lesser extent, professional services.

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. We typically invoice customers in advance on an annual basis. We recognized subscription revenue ratably over the term of the contract subscription period beginning on the date access to our software suite is provided, as long as all other revenue recognition criteria have been met.

Professional Services and Other Revenue. Professional services revenue includes fees associated with new customers requesting deployment and integration services. We price professional services on a time and materials basis and on a fixed fee basis. We generally have standalone value for our professional services and recognize revenue based on standalone selling price as services are performed or upon completion of services for fixed fee contracts. Other revenue includes amounts derived from sales of on-premises solutions.

Overhead Allocation

We allocate shared costs, such as facilities (including rent, utilities and depreciation on equipment shared by all departments), information technology, information security costs and recruiting to all departments based on headcount. As such, allocated shared costs are reflected in each cost of revenue and operating expense category.

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 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. We expect our cost of revenue to continue to increase in absolute dollar amounts as we invest in our business.

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.

Gross Profit and Gross Margin

Gross profit is total revenue less total cost of revenue. 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.

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. These expenses also include expenditures related to advertising, marketing, promotional events and brand awareness activities, as well as allocated overhead. 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. These expenses also include non-personnel costs, such as subcontracting, consulting and professional fees for third-party development resources and depreciation costs, as well as allocated overhead. Our research and development efforts focus on

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

Interest Expense

After the issuance of 0.5% Convertible Senior Notes in September 2018, which are due 2023 (the "Notes"), interest expense consists primarily of contractual interest expense, amortization of discount and amortization of debt issuance costs on our Notes. Prior to the issuance of the Notes, interest expense consisted primarily of commitment fees and amortization of costs related to our loan facility.

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 Income Taxes

Our provision for income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business and state minimum taxes in the U.S., as well as certain tax benefits arising from acquisitions. We have a valuation allowance against our U.S. deferred tax assets, including U.S. net operating loss carryforwards. We expect to maintain this valuation allowance for the foreseeable future or until it becomes more likely than not that the benefit of our U.S. deferred tax assets will be realized by way of expected future taxable income in the U.S.

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Discussion of Results of Operations

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

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
Revenue:
Subscription	$	220,811		$	158,461		$	422,269		$	306,659
Professional services and other	14,801			8,583			27,305			16,193
Total revenue	235,612			167,044			449,574			322,852
Cost of revenue:
Subscription	39,472			23,057			72,591			55,495
Professional services and other	21,704			13,304			40,604			39,160
Total cost of revenue	61,176			36,361			113,195			94,655
Gross profit	174,436			130,683			336,379			228,197
Operating expenses:
Sales and marketing	150,886			103,779			280,822			294,864
Research and development	47,517			33,773			84,700			104,643
General and administrative	40,755			30,851			78,016			133,968
Total expenses	239,158			168,403			443,538			533,475
Loss from operations	(64,722		)	(37,720		)	(107,159		)	(305,278		)
Interest expense	(7,273		)	(47		)	(14,429		)	(240		)
Interest income and other income, net	4,531			2,998			9,748			770
Loss before provision for income taxes	(67,464		)	(34,769		)	(111,840		)	(304,748		)
Provision for income taxes	1,168			1,945			2,514			2,653
Net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)

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The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue:

	Three Months Ended July 31,				Six Months Ended July 31,
	2019		2018		2019		2018
Revenue:
Subscription	94	%	95	%	94	%	95	%
Professional services and other	6		5		6		5
Total revenue	100		100		100		100
Cost of revenue:
Subscription	17		14		16		17
Professional services and other	9		8		9		12
Total cost of revenue	26		22		25		29
Gross profit	74		78		75		71
Operating expenses:
Sales and marketing	64		62		62		91
Research and development	20		20		19		33
General and administrative	17		19		18		42
Total expenses	101		101		99		166
Loss from operations	(27	)	(23	)	(24	)	(95	)
Interest expense	(3	)	—		(3	)	—
Interest income and other income, net	1		2		2		1
Loss before provision for income taxes	(29	)	(21	)	(25	)	(94	)
Provision for income taxes	—		1		—		1
Net loss	(29	)%	(22	)%	(25	)%	(95	)%

The following discussion and analysis are for the three and six months ended July 31, 2019, compared to the same periods in 2018, unless otherwise stated.

Revenue

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except for percentages)	2019		2018		% Change		2019		2018		% Change
Revenue:
Subscription	$	220,811	$	158,461	39	%	$	422,269	$	306,659	38	%
Professional services and other	14,801		8,583		72	%	27,305		16,193		69	%
Total revenue	$	235,612	$	167,044	41	%	$	449,574	$	322,852	39	%

Subscription Revenue

Subscription revenue increased $62.4 million, or 39%, in the three months ended July 31, 2019, and $115.6 million, or 38%, in the six months ended July 31, 2019. The increases were primarily attributable to higher subscription sales to new and existing customers and the addition of offerings related to SpringCM.

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 and attract new customers.

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Professional Services and Other Revenue

Professional services and other revenue increased by $6.2 million, or 72%, in the three months ended July 31, 2019, and $11.1 million, or 69%, in the six months ended July 31, 2019, primarily due to increased engagement of professional services to support our growing customer base and the addition of services from SpringCM.

Cost of Revenue and Gross Margin

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019			2018			% Change
Cost of revenue:
Subscription	$	39,472		$	23,057		71	%	$	72,591		$	55,495		31	%
Professional services and other	21,704			13,304			63	%	40,604			39,160			4	%
Total cost of revenue	$	61,176		$	36,361		68	%	$	113,195		$	94,655		20	%
Gross margin:
Subscription	82		%	85		%	(3	)pts	83		%	82		%	1	pts
Professional services and other	(47		)%	(55		)%	8	pts	(49		)%	(142		)%	93	pts
Total gross margin	74		%	78		%	(4	)pts	75		%	71		%	4	pts

Cost of Subscription Revenue

Cost of subscription revenue increased $16.4 million, or 71%, in the three months ended July 31, 2019, primarily due to:

▪ An increase of $8.8 million in operating costs to support our platform, the addition of SpringCM and higher data center costs; and

▪ An increase of $4.2 million in personnel costs primarily driven by increases in headcount and the addition of SpringCM employees.

Cost of subscription revenue increased $17.1 million, or 31%, in the six months ended July 31, 2019, primarily due to:

▪ An increase of $12.3 million in operating costs to support our platform and the addition of SpringCM; and

▪ An increase of $7.3 million in personnel costs primarily driven by increases in headcount.

These increases were partially offset by a decrease of $6.1 million in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO.

Cost of Professional Services and Other Revenue

Cost of professional services and other revenue increased $8.4 million, or 63%, in the three months ended July 31, 2019, primarily due:

▪ An increase of $3.4 million in personnel costs primarily related to the increased headcount in our professional services organization and the addition of SpringCM employees; and

▪ An increase of $2.0 million in stock-based compensation expense due to higher headcount.

Cost of professional services and other revenue increased $1.4 million, or 4%, in the six months ended July 31, 2019, primarily due to:

▪ An increase of $6.8 million in personnel costs primarily related to increased headcount in our professional services organization and the addition of SpringCM employees; and

▪ An increase of $2.7 million primarily related to the impact of the acquisition of SpringCM.

The increases in cost of professional services were partially offset by a decrease of $10.6 million in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO.

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Sales and Marketing

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019		2018		% Change
Sales and marketing	$	150,886		$	103,779		45	%	280,822		294,864		(5	)%
Percentage of revenue	64		%	62		%			62	%	91	%

Sales and marketing expenses increased $47.1 million, or 45%, in the three months ended July 31, 2019, primarily due to:

▪ An increase of $21.7 million in personnel costs driven by increased headcount, addition of SpringCM employees and higher commissions from higher sales;

▪ An increase of $9.2 million in stock-based compensation expense due to higher headcount;

▪ An increase of $5.7 million in allocated overhead due to higher allocated IT and facility costs;

▪ An increase of $4.2 million in marketing and advertising expense, primarily due to higher spend for online advertising campaigns; and

▪ An increase of $3.2 million in depreciation and amortization due to the amortization of certain intangible assets acquired in the SpringCM acquisition on September 4, 2018.

Sales and marketing expenses decreased $14.0 million, or 5%, in the six months ended July 31, 2019, primarily due to a decrease of $85.2 million in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO. This decrease was partially offset by:

▪ An increase of $40.3 million in personnel costs driven by increased headcount, addition of SpringCM employees, higher commissions in line with higher sales and headcount, as well as the employer portion of payroll taxes related to restricted stock unit ("RSU") settlements with no such expense in the prior year;

▪ An increase of $10.0 million in allocated overhead due to higher allocated IT and facility costs;

▪ An increase of $6.8 million in marketing and advertising expense, primarily due to higher spend for online advertising campaigns;

▪ An increase of $5.8 million in depreciation and amortization due to the amortization of the intangible assets acquired in the SpringCM acquisition on September 4, 2018; and

▪ An increase of $4.0 million in other expenses primarily due to higher spend on employee-related costs.

Research and Development

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019		2018		% Change
Research and development	$	47,517		$	33,773		41	%	84,700		104,643		(19	)%
Percentage of revenue	20		%	20		%			19	%	33	%

Research and development expenses increased $13.7 million, or 41%, in the three months ended July 31, 2019, primarily due to:

▪ An increase of $6.0 million in personnel costs due to increased headcount and the addition of SpringCM employees; and

▪ An increase of $4.6 million in stock-based compensation expense due to higher headcount.

Research and development expenses decreased $19.9 million, or 19%, in the six months ended July 31, 2019, primarily due to a decrease of $35.3 million in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO. This decrease was partially offset by:

▪ An increase of $9.7 million in personnel costs due to higher headcount and the addition of SpringCM employees; and

▪ An increase of $2.1 million in allocated overhead due to increased allocated IT and facility costs.

36

General and Administrative

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019		2018		% Change
General and administrative	$	40,755		$	30,851		32	%	78,016		133,968		(42	)%
Percentage of revenue	17		%	19		%			18	%	42	%

General and administrative expenses increased $9.9 million, or 32%, in the three months ended July 31, 2019, primarily due to:

▪ An increase of $4.6 million in professional fees, driven by RPost litigation and settlement expenses, partially offset by higher professional fees incurred in prior year as a newly public company; and

▪ An increase of $3.9 million in personnel costs due to higher headcount.

General and administrative expenses decreased $56.0 million, or 42%, in the six months ended July 31, 2019, primarily due to a decrease of $71.8 million in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO. This decrease was partially offset by:

▪ An increase of $7.6 million in personnel costs due to higher headcount and the employer portion of payroll taxes related to RSU settlements with no such expense in the prior year; and

▪ An increase of $5.5 million in litigation costs.

Interest expense

	Three Months Ended July 31,							Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change	2019		2018		% Change
Interest expense	$	(7,273	)	$	(47	)	NM	(14,429	)	(240	)	NM
Percentage of revenue	(3		)%	—		%		(3	)%	—	%

Interest expense increased by $7.2 million and $14.2 million in the three and six months ended July 31, 2019, due to interest expense and amortization of discount and transaction costs on our Notes issued in September 2018.

Interest Income and Other Income, Net

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019			2018			% Change
Interest income	$	3,940		$	2,936		34	%	7,618			3,384			125	%
Foreign currency gain (loss)	(837		)	159			NM		(1,261		)	2,338			NM
Other	1,428			(97		)	NM		3,391			(4,952		)	NM
Interest income and other income, net	$	4,531		$	2,998		51	%	$	9,748		$	770		NM
Percentage of revenue	1		%	2		%			2		%	1		%

Interest income and other income, net, increased by $1.5 million and $9.0 million, in the three and the six months ended July 31, 2019, primarily due to accretion on marketable securities and higher interest income on our cash and cash equivalents and on investments in marketable securities.

37

Provision for Income Taxes

	Three Months Ended July 31,								Six Months Ended July 31,
(in thousands, except for percentages)	2019			2018			% Change		2019		2018		% Change
Provision for income taxes	$	1,168		$	1,945		(40	)%	2,514		2,653		(5	)%
Percentage of revenue	—		%	1		%			—	%	1	%

Provision for income taxes decreased by $0.8 million, or 40%, in the three months ended July 31, 2019 and decreased $0.1 million, or 5%, in the six months ended July 31, 2019. The provision primarily consisted of foreign tax expenses, resulting from foreign earnings in certain foreign jurisdictions, partially offset by excess benefits from stock option settlements.

Liquidity and Capital Resources

Our principal sources of liquidity were cash and cash equivalents, investments and cash generated from operations. As of July 31, 2019, we had $750.3 million in cash and cash equivalents and short-term investments. We also had $180.1 million in long-term investments that provide additional capital resources.

We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditures needs over at least the next 12 months. While we generated positive cash flows from operations of $72.1 million in the six months ended July 31, 2019, we have generated losses from operations in the past as reflected in our accumulated deficit of $1.0 billion as of July 31, 2019. We expect to continue to incur operating losses for the foreseeable future due to the investments we intend to make and may require additional capital resources to execute strategic initiatives to grow our business.

We typically invoice our customers annually in advance. Therefore, a substantial source of our cash is from such invoices, which are included on our consolidated balance sheets as accounts receivable until collection and contract liabilities. Our accounts receivable decreased by $35.9 million in the six months ended July 31, 2019, compared to a decrease of $15.4 million in the six months ended July 31, 2018, which resulted in a $20.5 million increase in cash provided by operating activities. Accordingly, collections from our customers have a material impact on our cash flows from operating activities. Contract liabilities consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of July 31, 2019, we had contract liabilities of $410.5 million, compared to $388.8 million as of January 31, 2019. The increase in contract liabilities resulted in net cash provided by operating activities of $21.7 million. Therefore, our growth in billings to existing and new customers has a net beneficial impact on our cash flows from operating activities, after consideration of the impact on our accounts receivable.

Our future capital requirements will depend on many factors including our growth rate, customer retention and expansion, 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. We may in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

38

Cash Flows

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

	Six Months Ended July 31,
(in thousands)	2019			2018			$ Change
Net cash provided by (used in):
Operating activities	$	72,060		$	37,688		$	34,372
Investing activities	(331,728		)	(10,520		)	(321,208		)
Financing activities	(32,967		)	536,101			(569,068		)
Effect of foreign exchange on cash and cash equivalents	(1,120		)	(1,543		)	423
Net change in cash, cash equivalents and restricted cash	$	(293,755	)	$	561,726		$	(855,481	)

Cash Flows from Operating Activities

Cash provided by operating activities increased by $34.4 million for the six months ended July 31, 2019. This change was primarily due to a decrease of $193.0 million in net loss, partially offset by a decrease of $170.9 million in non-cash expenses. The decrease in non-cash expenses was primarily driven by a $211.9 million decrease in stock-based compensation expense as the six months ended July 31, 2018, included the cumulative catch‑up of stock‑based compensation expense on the effective date of our IPO. This decrease was partially offset by higher non-cash amortization expenses.

Net cash provided by operating assets and liabilities increased by $12.2 million driven by an increase of $20.5 million in cash provided from changes in accounts receivable and $16.8 million in cash provided from changes in accounts payable and accrued expenses driven by the timing of cash receipts and payments. These were partially offset by an increase of $18.1 million in cash used in deferred contract acquisition and fulfillment costs and $7.2 million in payments of operating lease liabilities.

Cash Flows from Investing Activities

Cash used in investing activities increased by $321.2 million in the six months ended July 31, 2019. We used $301.9 million to purchase marketable securities and other investments, net of maturities. The remainder of the increase in cash used in investing activities related to higher spend on purchases of property and equipment.

Cash Flows from Financing Activities

We used $33.0 million in financing activities in the six months ended July 31, 2019. In the comparative prior period, financing activities provided $536.1 million. We received $529.3 million of proceeds from issuance of common stock in our IPO, net of underwriting commissions, in the six months ended July 31, 2018. In the six months ended July 31, 2019, we used $86.0 million to remit tax withholding obligations on RSUs settled during the period with no such payment in the six months ended July 31, 2018. This was partially offset by $42.7 million increase in proceeds from exercise of stock options and employee stock purchase plan.

Contractual Obligations and Commitments

Our principal contractual obligations and commitments consist of obligations under the Notes (including principal and coupon interest), operating leases, as well as noncancelable contractual commitments that primarily relate to cloud infrastructure support and sales and marketing activities. Refer to Note 9 for more information on the Notes and Note 10 and Note 11 for all other commitments.

As of July 31, 2019, we had unused letters of credit outstanding associated with our various operating leases totaling $9.8 million.

39

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. 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.

There have been no material changes to our critical accounting policies and estimates as described in our 2019 Annual Report on Form 10-K.

Recent Accounting Pronouncements

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

40

Non-GAAP Financial Measures and Other Key Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting 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.

Non-GAAP gross profit, non-GAAP subscription gross profit, non-GAAP professional services and other gross profit, non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP operating margin and non-GAAP net income (loss): 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 from our convertible senior notes issued in September 2018, 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. We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods.

Free cash flows: We define free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment, for operational expenses, investment in our business and to make acquisitions. Free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

Billings: We define billings as total revenue plus the change in our contract liabilities and refund liability less contract assets and unbilled accounts receivable in a given period. Billings reflects sales to new customers plus subscription renewals and additional sales to existing customers. Only amounts invoiced to a customer in a given period are included in billings. We believe billings is a key metric to measure our periodic performance. Given that most of our customers pay in annual installments one year in advance, but we typically recognize a majority of the related revenue ratably over time, we use billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.

41

Reconciliation of gross profit and gross margin:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
GAAP gross profit	$	174,436		$	130,683		$	336,379		$	228,197
Add: Stock-based compensation	7,936			4,410			13,658			30,410
Add: Amortization of acquisition-related intangibles	1,381			1,003			3,008			2,671
Add: Employer payroll tax on employee stock transactions	541			—			1,193			—
Non-GAAP gross profit	$	184,294		$	136,096		$	354,238		$	261,278
GAAP gross margin	74		%	78		%	75		%	71		%
Non-GAAP adjustments	4		%	3		%	4		%	10		%
Non-GAAP gross margin	78		%	81		%	79		%	81		%
GAAP subscription gross profit	$	181,339		$	135,404		$	349,678		$	251,164
Add: Stock-based compensation	3,115			1,588			5,397			11,543
Add: Amortization of acquisition-related intangibles	1,381			1,003			3,008			2,671
Add: Employer payroll tax on employee stock transactions	211			—			432			—
Non-GAAP subscription gross profit	$	186,046		$	137,995		$	358,515		$	265,378
GAAP subscription gross margin	82		%	85		%	83		%	82		%
Non-GAAP adjustments	2		%	2		%	2		%	5		%
Non-GAAP subscription gross margin	84		%	87		%	85		%	87		%
GAAP professional services and other gross loss	$	(6,903	)	$	(4,721	)	$	(13,299	)	$	(22,967	)
Add: Stock-based compensation	4,821			2,822			8,261			18,867
Add: Employer payroll tax on employee stock transactions	330			—			761			—
Non-GAAP professional services and other gross loss	$	(1,752	)	$	(1,899	)	$	(4,277	)	$	(4,100	)
GAAP professional services and other gross margin	(47		)%	(55		)%	(49		)%	(142		)%
Non-GAAP adjustments	35		%	33		%	33		%	117		%
Non-GAAP professional services and other gross margin	(12		)%	(22		)%	(16		)%	(25		)%

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

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
GAAP operating loss	$	(64,722	)	$	(37,720	)	$	(107,159	)	$	(305,278	)
Add: Stock-based compensation	55,792			40,165			98,063			309,959
Add: Amortization of acquisition-related intangibles	4,420			1,768			9,153			4,201
Add: Employer payroll tax on employee stock transactions	3,864			—			9,619			—
Non-GAAP operating income (loss)	$	(646	)	$	4,213		$	9,676		$	8,882
GAAP operating margin	(27		)%	(23		)%	(24		)%	(95		)%
Non-GAAP adjustments	27		%	26		%	26		%	98		%
Non-GAAP operating margin	—		%	3		%	2		%	3		%

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Reconciliation of net income (loss):

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except per share data)	2019			2018			2019			2018
GAAP net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)
Add: Stock-based compensation	55,792			40,165			98,063			309,959
Add: Amortization of acquisition-related intangibles	4,420			1,768			9,153			4,201
Add: Employer payroll tax on employee stock transactions	3,864			—			9,619			—
Add: Amortization of debt discount and issuance costs	6,548			—			13,002			—
Non-GAAP net income	$	1,992		$	5,219		$	15,483		$	6,759

Computation of free cash flow:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
Net cash provided by operating activities	$	26,405		$	22,695		$	72,060		$	37,688
Less: purchase of property and equipment	(14,554		)	(4,336		)	(29,791		)	(10,520		)
Non-GAAP free cash flow	$	11,851		$	18,359		$	42,269		$	27,168
Net cash used in investing activities	$	(18,237	)	$	(4,336	)	$	(331,728	)	$	(10,520	)
Net cash provided by (used in) financing activities	$	(19,647	)	$	530,480		$	(32,967	)	$	536,101

Computation of billings:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands)	2019			2018			2019			2018
Revenue	$	235,612		$	167,044		$	449,574		$	322,852
Add: Contract liabilities and refund liability, end of period	412,953			300,426			412,953			300,426
Less: Contract liabilities and refund liability, beginning of period	(395,254		)	(293,667		)	(390,887		)	(282,943		)
Add: Contract assets and unbilled accounts receivable, beginning of period	16,810			14,555			13,436			16,899
Less: Contract assets and unbilled accounts receivable, end of period	(17,757		)	(16,196		)	(17,757		)	(16,196		)
Non-GAAP billings	$	252,364		$	172,162		$	467,319		$	341,038

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ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency exchange and interest rates.

Interest Rate Risk

As of July 31, 2019, we had cash, cash equivalents and investments of $930.4 million, which consisted primarily of bank deposits, money market funds, commercial paper, and corporate notes and bonds. Interest-earning instruments carry a degree of interest rate risk. Our investment portfolio is comprised of highly rated securities and limits the amount of credit exposure to any one issuer. A hypothetical 100 basis point increase or decrease in interest rates would result in an approximately $4.5 million decline or increase of the fair value of our investment portfolio as of July 31, 2019. Such losses would only be realized if we sold the investments prior to maturity. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

On September 18, 2018, we offered and issued $575.0 million aggregate principal amount of Notes. The Notes have fixed annual interest rate of 0.5%, and, therefore, we do not have economic interest rate exposure on the Notes. The fair value of the Notes changes when the market price of our stock fluctuates or interest rates change. However, we carry the Notes at face value less unamortized discount on our balance sheet and present the fair value for required disclosure purposes only.

Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar, and the functional currency of each of our subsidiaries is either its local currency or the U.S. dollar, depending on the circumstances. The assets and liabilities of each of our subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Operations accounts are translated using the average exchange rate for the relevant period. Decreases in the relative value of the U.S. dollar to other currencies may negatively affect revenue and other operating results as expressed in U.S. dollars. Foreign currency translation adjustments are accounted for as a component of "Accumulated other comprehensive loss" within "Stockholders' equity". Gains or losses due to transactions in foreign currencies are included in “Interest and other income, net” in our consolidated statements of operations and comprehensive loss. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on operating results.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of July 31, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.

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Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) under the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business, including legal proceedings with third parties asserting infringement of their intellectual property rights. We do not currently believe that these matters are likely to have a material adverse impact on our consolidated results of operations, cash flows, or our financial position.

In June 2011, RMail Limited, RPost Communications Limited and RPost Holdings filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas (RMail Limited, et al. v. DocuSign, Inc., et al., Case No. 2:10-cv-258-JRG). In October 2012, RPost Holdings Inc. and RPost Communications Limited filed another patent infringement complaint against us in the same court (RPost Holdings, Inc., et al. v. DocuSign, Inc., et al., Case No. 12-cv-683-JRG). In August 2019, we and such RPost entities entered into a settlement agreement and both cases were dismissed.

In future litigation it may be necessary, among other things, to defend ourselves or our users by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

ITEM 1A. RISK FACTORS

Our business involves significant risks, some of which are described below. You should carefully consider the following risks, together with all of the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Any of the following risks could have an adverse effect on our business, results of operations, financial condition or prospects, and could cause the trading price of our common stock to decline. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to Our Business and Industry

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

We began operations in 2003 and have experienced net losses since inception. We generated a net loss of $114.4 million and $307.4 million in the six months ended July 31, 2019 and 2018, and as of July 31, 2019, we had an accumulated deficit of $1.0 billion. We will need to generate and sustain increased revenue levels in future periods in order to become profitable and, even if we do, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to support further growth and further develop our platform. We also plan to continue to invest to expand the functionality of our platform to automate the agreement process, expand our infrastructure and technology to meet the needs of our customers, expand our sales headcount, increase our marketing activities and grow our international operations. We will also face increased compliance costs associated with growth, the expansion of our customer base and the costs of being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.

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The market for our e-signature solution—as the core part of our broader software suite for automating the agreement process—is relatively new and evolving. If the market does not develop further, develops more slowly, or in a way that we do not expect, our business will be adversely affected.

The market for our e-signature solution—as the core part of our broader software suite for automating the agreement process—is relatively new and evolving, which makes our business and future prospects difficult to evaluate. We have customers in a wide variety of industries, including real estate, financial services, insurance, manufacturing, and healthcare and life sciences. It is difficult to predict customer demand for our solutions, customer retention and expansion rates, the size and growth rate of the market, the entry of competitive products or the success of existing competitive products. We expect that we will continue to need intensive sales efforts to educate prospective customers, particularly enterprise and commercial customers, about the uses and benefits of our e-signature solutions. The size and growth of our addressable market depends on a number of factors, including businesses continuing to desire to differentiate themselves through e-signature solutions and other aspects of our software that automate the agreement process, as well as changes in the competitive landscape, technological changes, budgetary constraints of our customers, changes in business practices, changes in regulatory environment and changes in economic conditions. If businesses do not perceive the value proposition of our offerings, then a viable market for solutions may not develop further, or it may develop more slowly than we expect, either of which would adversely affect our business and operating results.

If we have overestimated the size of our total addressable market, our future growth rate may be limited.

We have estimated the size of our total addressable market based on data published by third parties and internally generated data and assumptions. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe our market size estimates are reasonable, such information is inherently imprecise. In addition, our projections, assumptions and estimates of opportunities within our market are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including but not limited to those described in this report. If this third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, our actual market may be more limited than our estimates. In addition, these inaccuracies or errors may cause us to misallocate capital and other critical business resources, which could harm our business. Even if our total addressable market meets our size estimates and experiences growth, we may not continue to grow our share of the market. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the estimates of our total addressable market included in this filing should not be taken as indicative of our ability to grow our business.

If we are unable to attract new customers, our revenue growth will be adversely affected.

To increase our revenue, we must continue to attract new customers and increase sales to new customers. As our market matures, product and service offerings evolve and competitors introduce lower cost and/or differentiated products or services that are perceived to compete with our solutions, our ability to sell subscriptions for our solutions could be impaired. As a result of these and other factors, we may be unable to attract new customers or increase sales to existing customers, which could have an adverse effect on our business, revenue, gross margins and other operating results, and accordingly on the value of our common stock.

If we are unable to retain customers at existing levels or sell additional functionality and services to our existing customers, our revenue growth will be adversely affected.

To increase our revenue, we must retain existing customers, convince them to expand their use of our products and services across their organizations and for a variety of use cases, and expand their subscriptions on terms favorable to us. Our ability to retain our customers and expand their subscriptions could be impaired for a variety of reasons, including the risks described herein. As a result, we may be unable to renew our agreements with existing customers or attract new business from existing customers on terms favorable or comparable to prior periods, which could have an adverse effect on our business, revenue, gross margins and other operating results, and accordingly on the value of our common stock.

Our future success also depends in part on our ability to sell additional functionality and services, more subscriptions or enhanced editions of our solutions to our existing customers. This may require more sophisticated and costly sales efforts that are targeted at larger enterprises and more senior management at our customers. Similarly, the rate at which our customers purchase new or enhanced solutions from us depends on a number of factors, including general economic conditions and customer reaction to pricing of this additional functionality and these services. If our efforts to sell additional functionality and services to our customers are not successful, our business and growth prospects may suffer.

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Our customers have no obligation to renew their subscriptions for our solutions after the expiration of their initial subscription period, and a majority of our subscription contracts were one year in duration in fiscal year 2019. In order for us to maintain or improve our results of operations, it is important that our customers renew their subscriptions with us when the existing subscription term expires on the same or more favorable terms. We cannot accurately predict renewal or expansion rates given the diversity of our customer base across industries and geographies and its range from enterprises to VSBs. Our renewal and expansion rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction with our solutions, decreases in the number of users at our customers, changes in the type and size of our customers, pricing changes, competitive conditions, the acquisition of our customers by other companies and general economic conditions. As a result, we cannot assure you that customers will renew or expand their subscriptions to our software suite. If our customers do not renew their subscriptions for our service or if they reduce their subscription amounts at the time of renewal, our revenue will decline, and our business will suffer. If our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts or investors, the price of our common stock could also be harmed.

We are dependent on our e-signature solutions, and a lack of continued adoption of our software suite could cause our operating results to suffer.

Sales of subscriptions to our software suite account for substantially all of our subscription revenue and are the source of substantially all of our professional services revenue. We expect that we will be substantially dependent on our e-signature solutions to generate revenue for the foreseeable future. As a result, our operating results could suffer due to:

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

▪ the failure of our e-signature solution to achieve continued market acceptance;

▪ the market for electronic signatures not continuing to grow, or growing more slowly than we expect;

▪ the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our e-signature solution;

▪ technological innovations or new standards that our e-signature solution does not address;

▪ changes in regulatory requirements;

▪ sensitivity to current or future prices offered by us or competing e-signature solutions; and

▪ our inability to release enhanced versions of our e-signature solution on a timely basis.

If the market for our e-signature solution grows more slowly than anticipated or if demand for our e-signature solution does not grow as quickly as anticipated, whether as a result of competition, pricing sensitivities, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environment, budgetary constraints of our customers or other factors, we may not be able to grow our revenue.

We face significant competition from both established and new companies offering e-signature solutions, which may have a negative effect on our ability to add new customers, retain existing customers and grow our business.

Our e-signature solutions address a market that is evolving and highly competitive. Our primary competition comes from companies that offer products and solutions that currently compete with some but not all of the functionality present in our software suite. Our solutions compete with similar offerings by others currently, and there may be an increasing number of similar solutions offered by additional competitors in the future. In particular, one or more global software companies may elect to include an electronic signature capability in their products. Our primary global competitor is currently Adobe Systems Incorporated, which began to offer an e-signature solution following its acquisition of EchoSign in 2011 (now known as Adobe Sign). We also face competition from a select number of niche vendors that focus on specific industries or geographies. In addition, our current and prospective customers may develop their own e-signature solutions in-house. The introduction of new technologies and the influx of new entrants into the market may intensify competition in the future, which could harm our business and our ability to increase revenues, maintain or increase customer renewals and maintain our prices.

Adobe has a longer operating history than us, as well as significant financial, technical, marketing and other resources, strong brand and customer recognition, a large intellectual property portfolio and broad global distribution and presence.

Many of our competitors have developed, or are developing, products that currently, or in the future are likely to, compete with some or all of our functionality. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Our competitors may also be able to offer products or functionality similar to ours at a more attractive price than we can by integrating or bundling such

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products with their other product offerings. Furthermore, our actual and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and offerings in the markets we address. Acquisitions and consolidation in our industry may provide our competitors with even more resources or may increase the likelihood of our competitors offering bundled or integrated products with which we cannot compete effectively.

Our current and potential competitors may also develop and market new technologies that render our existing or future products less competitive, unmarketable or obsolete. In addition, if these competitors develop products with similar or superior functionality to our solutions, we may need to decrease the prices for our solutions in order to remain competitive. If we are unable to maintain our current pricing due to competitive pressures, our margins will be reduced, and our operating results will be negatively affected.

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

Our revenue grew from $167.0 million in the three months ended July 31, 2018 to $235.6 million in the three months ended July 31, 2019. We expect that, in the future, as our revenue increases to higher levels, our revenue growth rate will decline. We also believe that growth of our revenue depends on a number of factors, including our ability to:

▪ price our e-signature solutions effectively so that we are able to attract and retain customers without compromising our profitability;

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

▪ expand our software suite to support “System of Agreement” for our customers;

▪ continue to introduce our e-signature solutions to new markets outside of the U.S.;

▪ successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our solutions; and

▪ increase awareness of our brand on a global basis.

We may not successfully accomplish any of these objectives. We expect to continue to expend substantial financial and other resources on:

▪ sales and marketing, including a significant expansion of our sales organization, particularly in the U.S.;

▪ our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures;

▪ product development, including investments in our product development team and the development of new products and new functionality for our existing solutions;

▪ acquisitions or strategic investments;

▪ international expansion; and

▪ general administration, including legal and accounting expenses.

In addition, our historical rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources. We have also experienced significant growth in the number of customers, users and transactions and the amount of data that our infrastructure supports. As we continue to grow, we may need to open new offices in the U.S. and internationally and hire additional personnel for those offices.

Finally, our organizational structure is becoming more complex as we add additional staff and acquire complementary companies, products and technologies. For example, on September 4, 2018, we acquired SpringCM Inc. 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. We will require capital expenditures and the allocation of valuable management resources to grow and change in these areas. In addition, if we are unable to effectively manage the growth of our business, the quality of our solutions may suffer, and we may be unable to address competitive challenges, which would adversely affect our overall business, operations and financial condition.

Our security measures have on occasion in the past been, and may in the future be, compromised or subject to cyberattacks, data breaches or cyber fraud. Consequently, our solutions may be perceived as not being secure. This may result in customers curtailing or ceasing their use of our solutions, our reputation being harmed, our incurring significant liabilities and adverse effects on our results of operations and growth prospects.

Our operations involve the storage and transmission of customer data, personal data and other sensitive information, and our corporate environment contains important company data and/or business records, employee data and data from partner,

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vendor or other relationships. Security incidents have occurred in the past, and may occur in the future, resulting in unauthorized access to, loss of or unauthorized disclosure of this information, regulatory enforcement actions, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales and harm our business. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of services have been and are expected to continue to be targeted. Advances in technology and the increasing sophistication of attackers have led to more frequent and effective cyberattacks, including through complex techniques involving social engineering or “phishing” attacks, credential stuffing and account takeover attacks, denial or degradation of service attacks, and other methods that may lead to the theft or misuse of personal or financial information, fraudulent payments and identity theft. In addition to traditional computer “hackers,” malicious code (such as viruses and worms), employee theft or misuse and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Despite significant efforts to create security barriers to such threats, it is virtually impossible for us, our service providers, our partners and our customers to entirely mitigate these risks. If our security measures, or the security measures of our service providers, partners or customers are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed, and we could incur significant liability. We have not always been able in the past and may be unable in the future to anticipate or prevent techniques used to obtain unauthorized access or to compromise our systems because they change frequently and are generally not detected until after an incident has occurred. In May 2017, a malicious third party gained temporary access to a separate, non-core system used for service-related announcements that contained a list of email addresses. We took immediate action to prevent unauthorized access to this system, put further security controls in place and worked with law enforcement agencies. Concerns regarding data privacy and security may cause some of our customers to stop using our solutions and fail to renew their subscriptions. This discontinuance in use or failure to renew could substantially harm our business, operating results and growth prospects. Further, as we rely on third-party and public-cloud infrastructure, we will depend in part on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of customer data. In addition, failures to meet customers’ expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers and grow our business. In addition, a cybersecurity event could result in significant increases in costs, including costs for remediating the effects of such an event, lost revenues due to decrease in customer trust and network downtime, increases in insurance coverage due to cybersecurity incidents and damages to our reputation because of any such incident.

Many U.S. 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. In addition, some of our customers contractually require notification of data security breaches. Security compromises experienced by our competitors, by our customers or by us may lead to public disclosures, which may lead to widespread negative publicity. Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively affect our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and operating results.

There can be no assurance that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition and results of operations.

We are subject to governmental regulation and other legal obligations, including those related to e-signature marketing, advertising, privacy, data protection and information security laws, and our actual or perceived failure to comply with such obligations could harm our business. Compliance with such laws could also result in additional costs and liabilities to us or inhibit sales of our software.

We receive, store and process personal information and other data from and about customers, in addition to our employees, partners and service providers. In addition, customers use our services to obtain and store personal identifiable information, personal health information and personal financial information. Our handling of data is thus subject to a variety of laws and regulations, including regulation by various government agencies, such as the U.S. Federal Trade Commission (the "FTC")

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and various state, local and foreign agencies and other authorities. Our data handling also is subject to contractual obligations and industry standards.

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of data relating to individuals and businesses, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. In the U.S., various laws, and regulations and agency rules and opinions apply to the collection, processing, disclosure and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm Leach Bliley Act and state laws relating to privacy and data security. We implement services that meet the technological requirements requested by our customers that would be subject to the Electronic Signatures in Global and National Commerce Act (the "ESIGN Act") in the United States, eIDAS in the European Union (the "EU") and similar U.S. state laws, particularly the Uniform Electronic Transactions Act (the "UETA"), which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. We are particularly reliant on the UETA and the ESIGN Act that together have solidified the legal landscape for use of electronic records and electronic signatures in commerce by confirming that electronic records and signatures carry the same weight and have the same legal effect as traditional paper documents and wet ink signatures. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data. The laws and regulations relating to privacy and data security are evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.

In the U.S., California enacted the California Consumer Privacy Act (the "CCPA") on June 28, 2018, which takes effect on January 1, 2020, and has been dubbed the first “GDPR-like” law in the U.S. (referring to the EU’s General Data Protection Regulation, described below). The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

In addition, many foreign countries and governmental bodies, including within the EU, have established or are in the process of establishing privacy and data security legal frameworks with which we, our customers, partners or our vendors must comply. In certain cases, these laws and regulations are more restrictive than those in the U.S. and apply broadly to the collection, use, storage, disclosure and security of various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses, on-line identifiers and in some jurisdictions, Internet Protocol ("IP") addresses. Such laws and regulations may be modified or subject to new or different interpretations, and new laws and regulations may be enacted in the future.

For example, the EU General Data Protection Regulation (the “GDPR”), which became effective in May 2018, imposes strict requirements related to processing the personal data of EU individuals and provides for robust regulatory enforcement and sanctions for non-compliance. EU data protection authorities will have the power to impose administrative fines for violations of the GDPR of up to a maximum of €20 million or 4% of the noncompliant company’s annual global turnover for the preceding financial year, whichever is higher, and violations of the GDPR may also lead to damages claims by data controllers and data subjects. Such penalties are in addition to any civil litigation claims by data controllers, data processors, customers and data subjects. The GDPR is likely to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process information about them. Although we are continuing to take steps to comply with applicable portions of the GDPR, the scope of many of the GDPR’s requirements remains unclear and regulatory guidance on several topics is still forthcoming. Therefore, we cannot assure you that such steps will be sufficient. In addition, it is unclear what the effect of the U.K.’s decision to leave the EU (“Brexit”) will have on the applicability of the GDPR with respect to U.K. individuals.

Additionally, in June 2016, United Kingdom voters approved Brexit, which could also lead to further legislative and regulatory changes regarding data protection in the United Kingdom.  In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the GDPR and how data transfers to and from the United Kingdom will be regulated. While the Data Protection Act of 2018, that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of

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data from the EEA to the United Kingdom will remain lawful under GDPR. We may incur liabilities, expenses, costs, and other operational losses under GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to comply with them.

The scope and interpretation of U.S. and foreign data protection laws are often uncertain and may be conflicting as a result of the rapidly evolving regulatory framework for privacy issues worldwide. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users. As a result of the laws that are or may be applicable to us, and due to the sensitive nature of the information we collect, we have implemented policies and procedures to preserve and protect our data and our customers’ data against loss, misuse, corruption, misappropriation caused by systems failures, unauthorized access or misuse. If our policies, procedures or measures relating to privacy, data protection, marketing or customer communications fail to comply with laws, regulations, policies, legal obligations or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties and negative publicity and could cause our application providers, customers and partners to lose trust in us, which could materially affect our business, operating results and financial condition.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may apply to us. Because the interpretation and application of privacy and data protection laws, regulations, rules and other standards are still uncertain, it is possible that these laws, rules, regulations and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our solutions. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business.

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. We expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, marketing, advertising, electronic signatures, consumer communications and information security in the U.S., the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business. Future laws, regulations, standards and other obligations or any changed interpretation of existing laws or regulations could impair our ability to develop and market new functionality and maintain and grow our customer base and increase revenue. Future restrictions on the collection, use, sharing or disclosure of data or additional requirements for express or implied consent of our customers, partners or end consumers for the use and disclosure of such information could require us to incur additional costs or modify our solutions, possibly in a material manner, and could limit our ability to develop new functionality.

If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain solutions, which would negatively affect our business, financial condition and results of operations. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business and operating results.

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors, our stock price and the value of your investment could decline.

Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful. In addition to the other risks described herein, factors that may affect our operating results include the following:

▪ fluctuations in demand for or pricing of our solutions;

▪ our ability to attract and retain customers;

▪ our ability to retain our existing customers at existing levels and expand of their usage of our solutions;

▪ customer expansion rates and the pricing and quantity of user subscriptions renewed;

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▪ timing of new subscriptions and payments;

▪ fluctuations in customer delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors;

▪ changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;

▪ potential and existing customers choosing our competitors’ products or developing their own e-signature solution in-house, or opting to use only the free version of our products;

▪ timing of new products, new product functionality and new customers;

▪ the collectability of receivables from customers and resellers, which may be hindered or delayed if these customers or resellers experience financial distress;

▪ delays in closing sales, including the timing of renewals, which may result in revenue being pushed into the next quarter, particularly because a large portion of our sales occur toward the end of each quarter;

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

▪ potential accelerations of prepaid expenses and deferred costs;

▪ the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses (including commissions and bonuses associated with performance);

▪ the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;

▪ the amount and timing of costs associated with recruiting, training and integrating new employees;

▪ impacts of acquisitions;

▪ issues relating to partnerships with third parties, product and geographic mix;

▪ general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;

▪ the impact of new accounting pronouncements;

▪ changes in the competitive dynamics of our market, including consolidation among competitors or customers;

▪ significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our solutions; and

▪ awareness of our brand on a global basis.

Any of the foregoing and other factors may cause our results of operations to vary significantly. In addition, we expect to incur significant additional expenses due to the increased costs of operating as a public company. If our quarterly results of operations 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 suits.

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

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. In addition, for these enterprise customers, the lengthy sales cycle for the evaluation and implementation of our solutions, which in certain implementations, particularly for highly regulated industries and customized applications, may also cause us to experience a delay between increasing operating expenses for such sales efforts and, upon successful sales, the generation of corresponding revenue. We are often required to spend significant time and resources to better educate and familiarize these potential customers with the value proposition of paying for our products and services. The length of our sales cycle for these customers, from initial evaluation to payment for our offerings is generally three to nine months but can vary substantially from customer to customer. As the purchase and deployment of our products can be dependent upon customer initiatives, infrequently, our sales cycle can extend to more than nine months. Customers often view a subscription to our products and services as a strategic decision and significant investment and, as a result, frequently require considerable time to evaluate, test and qualify our product offering prior to entering into or expanding a subscription. 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. Additional factors that may influence the length and variability of our sales cycle include:

▪ the effectiveness of our sales force, in particular new sales people as we increase the size of our sales force and train our new sales people to sell to enterprise customers that require more training;

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

▪ the obstacles placed by customers’ procurement process;

▪ economic conditions and other factors impacting customer budgets;

▪ the customer’s integration complexity;

▪ the customer’s familiarity with the e-signature process;

▪ customer evaluation of competing products during the purchasing process; and

▪ evolving customer demands.

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Given these factors, it is difficult to predict whether and when a sale will be completed, and when revenue from a sale will be recognized.

If we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.

Because our recent growth has resulted in the rapid expansion of our business and product offerings, we do not have a long history upon which to base forecasts of future revenues and operating results. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our stock price to decline.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations and changing customer needs, requirements or preferences, our products may become less competitive.

The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards and changing regulations, as well as changing customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we were unable to enhance our e-signature solutions or develop new solutions that keep pace with rapid technological and regulatory change, our business, results of operations and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.

If we fail to maintain our brand, our ability to expand our customer base will be impaired and our financial condition may suffer.

We believe that our maintaining the DocuSign brand is important to supporting continued acceptance of our existing and future solutions and, as a result, attracting new customers to our solutions and retaining existing customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successfully maintaining our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable and useful solutions to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to continue to develop new functionality and solutions and our ability to successfully differentiate our solutions from competitive products and services. Additionally, the performance of our partners may affect our brand and reputation if customers do not have a positive experience with our partners’ services. Brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer.

Many of our customers deploy our solutions globally, and therefore, must comply with certain legal and regulatory requirements in varying countries. If our solutions fail to meet such requirements, our business could incur significant liabilities.

Customers use our solutions globally to comply with certain safe harbors and legislation of the countries in which they transact business. For example, some of our customers rely on our certification under the Federal Risk and Authorization Management Program in the U.S. or FedRAMP and eIDAS in the European Union to help satisfy their own legal and regulatory compliance requirements. If our solutions are found by a court or regulatory body to be inadequate to meet a compliance requirement for which they are being used, we could be exposed to liability and documents executed through our solutions could in some instances be rendered unenforceable. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business and operating results.

Our sales to government entities and highly regulated organizations are subject to a number of challenges and risks.

We sell to U.S. federal, state and local, as well as foreign, governmental agency 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.

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Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we have attained the revised certification. Government demand and payment for our offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings.

Further, governmental and highly regulated entities may demand shorter subscription periods or other contract terms that differ from our standard arrangements, including terms that can lead those customers to obtain broader rights in our offerings than would be standard. Such entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners due to a default or for other reasons, and any such termination may adversely affect our reputation, business, results of operations and financial condition.

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

We price our subscriptions based on the number of users within an organization that use our software suite to send agreements digitally for signature or the number of Envelopes that such users are provisioned to send. We expect that we may need to change our pricing from time to time. As new or existing competitors introduce new products that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. We also must determine the appropriate price to enable us to compete effectively internationally. Moreover, mid- to large-size enterprises may demand substantial price discounts as part of the negotiation of sales contracts. As a result, we may be required or choose to reduce our prices or otherwise change our pricing model, which could adversely affect our business, operating results and financial condition.

Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our solutions.

Our ability to increase our customer base and achieve broader market acceptance of our e-signature solutions will depend to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force and strategic partners, both domestically and internationally. We also plan to dedicate significant resources to sales and marketing programs, including internet and other online advertising. 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. All of these efforts will require us to invest significant financial and other resources. In addition, the cost to acquire customers is high due to these marketing and sales efforts. Our business and operating results will be harmed if our efforts do not generate a correspondingly significant increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective.

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. We also are dependent on the continued service of our existing software engineers because of the complexity of our solutions. 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. The loss of one or more of our senior management or other key employees could harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees.

The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy.

To execute our business strategy, we must attract and retain highly qualified personnel. Competition for executive officers, software developers, sales personnel and other key employees in our industry is intense. In particular, we compete with many other companies for software developers with high levels of experience in designing, developing and managing cloud-based software, as well as for skilled sales and operations professionals. Many of the companies with which we compete for experienced personnel have greater resources than we do. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

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If our solutions do not achieve sufficient market acceptance, our financial results and competitive position will suffer.

We spend substantial amounts of time and money to research and develop and enhance versions of our existing software to incorporate additional functionality or other enhancements in order to meet our customers’ rapidly evolving demands. Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If we are unable to develop solutions internally due to a lack of other research and development resources, we may be forced to expand into a certain market or strategy through acquisitions. Acquisitions could be expensive, and we could be unsuccessful in integrating acquired technologies or businesses into our business. Thus, when we develop or acquire new or enhanced solutions, we typically incur expenses and expend resources upfront to develop, market, promote and sell the new offering. Therefore, when we develop or acquire and introduce new or enhanced products, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing or acquiring and bringing them to market. Further, we may make changes to our solutions that our customers do not like or find useful. Our new solutions or enhancements and changes to our existing solutions could fail to attain sufficient market acceptance for many reasons, including:

▪ failure to predict market demand accurately in terms of functionality and to supply solutions that meet this demand in a timely fashion;

▪ defects, errors or failures;

▪ negative publicity about their performance or effectiveness;

▪ changes in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our solutions;

▪ delays in releasing our new solutions or enhancements to the market; and

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

If our new solutions or enhancements and changes do not achieve adequate acceptance in the market, or if products and technologies developed by others achieve greater acceptance in the market, our business and operating results and our ability to generate revenues could be harmed. The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred in connection with the new solutions or enhancements.

If our solutions fail to perform properly due to defects or similar problems, and if we fail to develop enhancements to resolve any defect or other problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs.

Our operations are dependent upon our ability to prevent system interruption. The applications underlying our e-signature solutions are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems. We have from time to time found defects in our solutions and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our end-customers’ data. We may not be able to detect and correct defects or errors before implementing our solutions. Consequently, we or our customers may discover defects or errors after our solutions have been employed. We implement bug fixes and upgrades as part of our regularly scheduled system maintenance. If we do not complete this maintenance according to schedule or if customers are otherwise dissatisfied with the frequency and/or duration of our maintenance services and related system outages, customers could elect not to renew their subscriptions, or delay or withhold payment to us, or cause us to issue credits, make refunds or pay penalties.

The occurrence of any defects, errors, disruptions in service or other performance problems with our software, whether in connection with the day-to-day operation, upgrades or otherwise, could result in:

▪ loss of customers;

▪ lost or delayed market acceptance and sales of our solutions;

▪ delays in payment to us by customers;

▪ injury to our reputation and brand;

▪ legal claims, including warranty and service claims, against us;

▪ diversion of our resources, including through increased service and warranty expenses or financial concessions; and increased insurance costs.

The costs incurred in correcting any material defects or errors in our software or other performance problems may be substantial and could adversely affect our operating results.

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As a result of our customers’ increased usage of our e-signature solutions, we will need to continually improve our infrastructure to avoid service interruptions or slower system performance.

As usage of our e-signature solutions grows, we will need to devote additional resources to improving our computer network and our infrastructure in order to maintain the performance of our solutions. Any failure or delays in our computer systems could cause service interruptions or slower system performance. If sustained or repeated, these performance issues could reduce the attractiveness of our solutions to customers. These performance issues could result in lost customer opportunities and lower renewal rates, any of which could hurt our revenue growth, customer loyalty and reputation. We may need to incur significant additional costs to upgrade or expand our computer systems and architecture in order to accommodate increased demand for our solutions.

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

We currently serve our customers from third-party data center hosting facilities. Our customers need to be able to access our products at any time, without interruption or degradation of performance. In some cases, third-party cloud providers run their own platforms that we access, and we are, therefore, vulnerable to their service interruptions. We therefore depend, in part, on our third-party facility providers’ ability to protect these facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. In the event that our data center arrangements are terminated, or if there are any lapses of service or damage to a center, we could experience lengthy interruptions in our service as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery arrangements, including the existence of secondary data centers that become active during certain lapses of service or damage at a primary data center, our business could be harmed.

We designed our system infrastructure and procure and own or lease the computer hardware used for our services. 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 e-signature solutions. Any interruptions or delays in our service, whether or not caused by our products, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to decrease and/or our expenses to increase. 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.

The success of our business depends on customers’ continued and unimpeded access to our software suite on the internet.

Our customers must have internet access in order to use our software suite. Some providers may take measures that affect their customers’ ability to use our software suite, such as degrading the quality of the data packets we transmit over their lines, giving those packets lower priority, giving other packets higher priority than ours, blocking our packets entirely or attempting to charge their customers more for using our software suite.

In December 2010, the U.S. Federal Communications Commission (the "FCC") adopted net neutrality rules barring internet providers from blocking or slowing down access to online content, protecting services like ours from such interference. Recently, the FCC voted in favor of repealing the net neutrality rules, and it is currently uncertain how the U.S. Congress will respond to this decision. To the extent network operators attempt to interfere with our services, extract fees from us to deliver our solution or otherwise engage in discriminatory practices, our business could be adversely impacted. Within such a regulatory environment, we could experience discriminatory or anti-competitive practices that could impede our domestic and international growth, cause us to incur additional expense or otherwise negatively affect our business.

If we fail to offer high quality support, our business and reputation could suffer.

Our customers rely on our personnel for support of solutions. High-quality support is important for the renewal and expansion of our agreements with existing customers. The importance of high-quality support will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new software to existing and new customers could suffer and our reputation with existing or potential customers could be harmed.

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

As usage of our e-signature solutions grows and as customers use our solutions for more types of transactions, we will need to devote additional resources to improving our application architecture, integrating with third-party systems and maintaining infrastructure performance. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and professional services, to serve our growing customer base.

Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction. These issues could reduce the attractiveness of our solutions to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers, the issuance of service credits, or requested refunds, which could hurt our revenue growth and our reputation. Even if we are able to upgrade our systems and expand our staff, any such expansion will be expensive and complex, requiring management time and attention. We could also face inefficiencies or operational failures as a result of our efforts to scale our infrastructure. Moreover, there are inherent risks associated with upgrading, improving and expanding our systems infrastructure. We cannot be sure that the expansion and improvements to our systems infrastructure will be effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely affect our financial results.

Recent and future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our operating results and financial condition.

In September 2018, we acquired SpringCM. As part of our business strategy, we may in the future continue to seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions or the integration of the operations of acquired businesses may divert the attention of management and cause us to incur various expenses in identifying, investigating, pursuing and integrating suitable acquisitions, whether or not the acquisition purchases are completed. The failure to successfully integrate the operations, personnel or technologies of an acquired business could impact our ability to realize the full benefits of such an acquisition. If we are unable to achieve the anticipated strategic benefits of an acquisition, including our acquisition of SpringCM, or if the integration or the anticipated financial and strategic benefits, including any anticipated cost savings, revenue opportunities or operational synergies, of such an acquisition are not realized as rapidly as or to the extent anticipated by us, it could adversely affect our business, financial condition and results of operations, and could adversely affect the market price of our common stock

In addition, we have only limited experience in acquiring other businesses. We may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target. Any future acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. An acquisition may also negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition, any of which could cause our operating results, business and financial condition may suffer.

As of July 31, 2019, we had $260.5 million in goodwill and intangible assets, net of accumulated amortization, recorded on our balance sheet. We will incur expenses related to the amortization of intangible assets and we may in the future need to incur charges with respect to the impairment of goodwill or intangible assets, which could adversely affect our operating results.

If we are unable to maintain successful relationships with our partners, our business, results of operations and financial condition could be harmed.

In addition to our direct sales force and our website, we use strategic partners, such as global system integrators, value-added resellers and independent software vendors to sell our subscription offerings and related services. 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 related services, 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 related services may be harmed. Our partners may cease

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marketing our subscription offerings or related services with limited or no notice and with little or no penalty. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of our current and potential customers, as our partners may no longer facilitate the adoption of our solutions by potential customers. The loss of a substantial number of our partners, our possible inability to replace them, or the failure to recruit additional partners could harm our growth objectives and results of operations. 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 solutions or increased revenue.

We could incur substantial costs in protecting or defending our proprietary rights, and any failure to adequately protect our rights could impair our competitive position and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.

Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws and contractual provisions in an effort to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. While we have been issued patents in the U.S. and other countries and have additional patent applications pending, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Any of our patents, trademarks or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. There can be no guarantee that others will not independently develop similar products, duplicate any of our products or design around our patents. 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 services 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. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information may increase.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our solutions.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our solutions, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our solutions or injure our reputation. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property may be difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the U.S. and where mechanisms for enforcement of intellectual property rights may be weak. If we fail to meaningfully protect our intellectual property and proprietary rights, our business, operating results and financial condition could be adversely affected.

We are currently, and may in the future be, subject to legal proceedings and litigation, including intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business. Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.

The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual and proprietary rights. Companies in the software industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Our technologies may not be able to withstand any third-party claims or rights against their use. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Any litigation may also involve patent holding companies or other adverse patent owners that have no

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relevant product revenue and against which our patents may therefore provide little or no deterrence. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities covered by such intellectual property and may be unable to compete effectively. Any inability to license third-party technology in the future would have an adverse effect on our business or operating results and would adversely affect our ability to compete. We may also be contractually obligated to indemnify our customers in the event of infringement of a third party’s intellectual property rights. Responding to such claims, including those currently pending, regardless of their merit, can be time consuming, costly to defend in litigation and damage our reputation and brand.

We may be the subject of lawsuits that allege our solutions infringe the intellectual property rights of other companies. For example, in June 2011, RMail Limited, RPost Communications Limited and RPost Holdings filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas. In October 2012, RPost Holdings Inc. and RPost Communications Limited filed another patent infringement complaint against us in the same court. In August 2019, we and such RPost entities entered into a settlement agreement and both cases were dismissed.

A decision in favor of the plaintiffs in any future lawsuits, could subject us to significant liability for damages and our ability to develop and sell our products may be harmed. We also may be required to redesign our products, delay releases, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling our solutions. Requiring us to change one or more aspects of the way we deliver our solutions may harm our business. Lawsuits are time-consuming and expensive to resolve, and they divert management’s time and attention. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. We cannot predict the outcome of lawsuits and cannot 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.

We use open source software in our solutions. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products. 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. If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our software products, we may be required to re-engineer our products, discontinue the sale of our solutions or take other remedial actions.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, data protection and other losses.

We enter into indemnification provisions under our agreements with customers and other companies in the ordinary course of business, including business partners, contractors and parties performing our research and development. Pursuant to these arrangements, we agree to indemnify and defend the indemnified party for certain claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of our activities. Some of these indemnity agreements provide for uncapped liability for which we would be responsible, and some indemnity provisions survive termination or expiration of the applicable agreement. Large indemnity payments could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them and we may be required to cease use of certain functions of our software suite or services as a result of any such claims. In addition, our customer agreements generally include a warranty that the proper use of DocuSign by a customer in accordance with the agreement and applicable law will be sufficient to meet the definition of an “electronic signature” as defined in the ESIGN Act and eIDAS. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and 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 results of operations.

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Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for our solutions. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in the U.S. and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the U.S., Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business. To the extent our solutions are perceived by customers and potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Also, competitors, many of whom are larger and more established than we are, may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our solutions. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations and financial condition could be adversely affected.

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

As of January 31, 2019, we had accumulated federal and state net operating loss carryforwards of $1.1 billion and $463.8 million. Of total federal net operating losses, $105.8 million is carried forward indefinitely and is not limited to 80% of taxable income, and $612.8 million is carried forward indefinitely but is limited to 80% taxable income. The remaining federal and state net operating loss carryforwards will begin to expire in 2023 and 2022. As of January 31, 2019, we also had total foreign net operating loss carryforwards of $4.9 million, which do not expire under local law. We also have U.S. federal and state research tax credits of $23.6 million. The U.S. federal research tax credits will begin to expire in 2023.

These net operating loss and research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability. As of January 31, 2019, the deferred tax asset was offset by a valuation allowance; thus, there was no risk to the consolidated financial statements as of that date.

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

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.

Natural catastrophic events and man-made problems such as power disruptions, computer viruses, data security breaches, and terrorism may disrupt our business.

We rely heavily on our network infrastructure and information technology systems for our business operations. A disruption or failure of these systems in the event of online attack, earthquake, fire, terrorist attack, power loss, telecommunications failure or other similar catastrophic event could cause system interruptions, delays in accessing our service, reputational harm and loss of critical data or could prevent us from providing our solutions to our customers. A catastrophic event that results in the destruction or disruption of our data centers, or our network infrastructure or information technology systems, including any errors, defects or failures in third-party hardware, could affect our ability to conduct normal business operations and adversely affect our operating results.

In addition, as computer malware, viruses and computer hacking, fraudulent use attempts and phishing attacks have become more prevalent, we face increased risk from these activities to maintain the performance, reliability, security and availability of our solutions and related services and technical infrastructure to the satisfaction of our customers. Any such computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks or other data security breaches to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing customers and attract new customers.

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

A component of our growth strategy involves the further expansion of our operations and customer base internationally. In the six months ended July 31, 2019 total revenue generated from customers outside the U.S. was 18% of our total revenue. We currently have offices in the U.S., as well as Australia, Brazil, Canada, France, Germany, Ireland, Israel, Japan, Singapore, and United Kingdom. We are continuing to adapt to and develop strategies to address international markets but there is no guarantee that such efforts will have the desired effect. As of July 31, 2019, approximately 26% of our full-time employees were located outside of the U.S. We expect that our international activities will continue to grow over the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant management attention and financial resources. In connection with such expansion, we may face difficulties including costs associated with developing software and providing support in many languages, varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycles and difficulties in collecting accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability to operate, adverse tax events, reduced protection of intellectual property rights in some countries and a geographically and culturally diverse workforce and customer base. Failure to overcome any of these difficulties could negatively affect our results of operations.

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

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

▪ the need to adapt and localize our products for specific countries;

▪ greater difficulty collecting accounts receivable and longer payment cycles;

▪ potential changes in trade relations arising from policy initiatives implemented by the Trump administration, which has been critical of existing and proposed trade agreements;

▪ unexpected changes in laws, regulatory requirements, taxes or trade laws;

▪ more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe;

▪ differing labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the U.S., including deemed hourly wage and overtime regulations in these locations;

▪ challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;

▪ difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;

▪ increased travel, real estate, infrastructure and legal compliance costs associated with international operations;

▪ currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;

▪ limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;

▪ laws and business practices favoring local competitors or general preferences for local vendors;

▪ limited or insufficient intellectual property protection or difficulties enforcing our intellectual property;

▪ political instability or terrorist activities;

▪ exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, (the "FCPA"), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act, and similar laws and regulations in other jurisdictions; and

▪ adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.

Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer.

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Our international operations and recent U.S. federal tax legislation may subject us to potential adverse tax consequences.

We are expanding our international operations and staff to better support our growth into international markets. Our corporate structure and associated transfer pricing policies contemplate future growth into the international markets, and consider the functions, risks and assets of the various entities involved in the intercompany transactions. 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 the various jurisdictions, including the U.S., to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or to our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries which could have a material impact on us and the results of our operations.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"), that significantly reformed the Code. The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes additional limitations on the deductibility of interest, has both positive and negative changes to the utilization of future net operating loss carryforwards, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. In addition, the Tax Act creates new regimes that tax certain foreign-sourced earnings, referred to as the global intangible low-taxed income, and that tax certain related-party outbound payments, referred to as the base erosion anti-abuse tax. Our net deferred tax assets and liabilities and valuation allowance were revalued at the newly enacted U.S. corporate rate.

Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all, and our failure to raise capital when needed could harm our business, operating results and financial condition, and debt or equity issued to raise additional capital may reduce the value of our common stock.

We have funded our operations since inception primarily through equity financings and payments by our customers for use of our product offerings and related services. In addition, in September 2018, we offered and issued $575.0 million aggregate principal amount of 0.5% Convertible Senior Notes due 2023 (the “Notes”), including the initial purchasers’ exercise in full of their option to purchase up to an additional $75.0 million principal amount of Notes (“Debt Offering”). We cannot be certain when or if our operations will generate sufficient cash to fund our ongoing operations or the growth of our business.

We intend to continue to make investments to support our business and may require additional funds. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results and financial condition. Depending on the treatment of the currently outstanding Notes, or in the event that we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any future debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, 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. Because our decision to issue securities in the future offering will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interest.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.

Our solutions are subject to U.S. export controls, including the Export Administration Regulations and economic sanctions administered by the Office of Foreign Assets Control, and we incorporate encryption technology into certain of our solutions. These encryption products and the underlying technology may be exported outside of the U.S. only with the required export

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authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of an encryption registration.

Furthermore, our activities are subject to U.S. economic sanctions laws and regulations that prohibit the shipment of certain products and services without the required export authorizations, including to countries, governments and persons targeted by U.S. embargoes or sanctions. Additionally, the Trump administration has been critical of existing trade agreements and may impose more stringent export and import controls. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities even if the export license ultimately may be granted. While we take precautions to prevent our solutions from being exported in violation of these laws, including obtaining authorizations for our encryption products, implementing IP address blocking and screenings against U.S. government and international lists of restricted and prohibited persons, we cannot guarantee that the precautions we take will prevent violations of export control and sanctions laws. Violations of U.S. sanctions or export control laws can result in significant fines or penalties and possible incarceration for responsible employees and managers could be imposed for criminal violations of these laws.

We also note that if our strategic partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties. We presently incorporate export control compliance requirements to our strategic partner agreements; however, no assurance can be given that our strategic partners will be able to comply with such requirements.

Also, various countries, in addition to the U.S., 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 solutions or could limit our end-customers’ ability to implement our solutions in those countries. Changes in our solutions or future changes in export and import regulations may create delays in the introduction of our solutions in international markets, prevent our end-customers with international operations from deploying our solutions globally or, in some cases, prevent the export or import of our 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. Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls stemming from Trump administration policies, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential end-customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would adversely affect our business, operating results and prospects.

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have an adverse effect on our liquidity and operating results. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Furthermore, the TCJA, among other things, imposes a migration from a “worldwide” system of taxation to a territorial system. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform on holders of our common stock is uncertain and could be adverse.

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We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our offering and adversely affect our operating results.

An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the U.S. recently ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, which could have a material adverse impact on our business and operating results.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results.

Our sales contracts are primarily denominated in U.S. dollars, and therefore substantially all of our revenue is not subject to foreign currency risk. However, a strengthening of the U.S. dollar could increase the real cost of our offerings to our customers outside of the U.S., which could adversely affect our operating results. In addition, an increasing portion of our operating expenses is incurred, and an increasing portion of our assets is held outside the U.S. These operating expenses and assets are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our operating results could be adversely affected.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act, and other anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. As we increase our international sales and business and sales to the public sector, we may engage with business partners and third-party intermediaries to market our services and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.

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

Detecting, investigating and resolving actual or alleged violations can require a significant diversion of time, resources and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations and financial condition.

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Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.

U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board (the "FASB"), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.

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

We recognize revenue over the term of each of our contracts, which are typically one year in length but may be up to three years or longer in length. As a result, much of our revenue is generated from the recognition of contract liabilities from contracts entered into during previous periods. Consequently, a shortfall in demand for our solutions and professional services or a decline in new or renewed contracts in any one quarter may not significantly reduce our revenue for that quarter but could negatively affect our revenue in future quarters. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales contracts in any period, as revenue from new customers is recognized over the applicable term of their contracts.

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to allocation of revenue between recognized and deferred amounts, allowance for doubtful accounts, goodwill and intangible assets, fair value of financial instruments, valuation of stock-based compensation, valuation of warrant liabilities and the valuation allowance for deferred income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

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

As of July 31, 2019, we had $575.0 million (undiscounted) principal amount of indebtedness under our Notes. Our indebtedness may:

• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

• limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

• require us to use a substantial portion of our cash flow from operations to make debt service payments;

• limit our flexibility to plan for, or react to, changes in our business and industry;

• place us at a competitive disadvantage compared to our less leveraged competitors; and

• increase our vulnerability to the impact of adverse economic and industry conditions.

Further, the indenture governing the Notes does not restrict our ability to incur additional indebtedness and we and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in any future debt instruments existing at the time, some of which may be secured indebtedness.

Future indebtedness could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions.

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Any future indebtedness would likely contain a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our best interests. Our ability to meet those financial covenants can be affected by events beyond our control, and we may not be able to continue to meet those covenants. If we seek to enter into a credit facility, we may not be able to obtain debt financing on terms that are favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms that are satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.

We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls.

We need to continue to improve our internal systems, processes and controls to effectively manage our operations and growth. In addition, because we have acquired companies in the past and may continue to do so in the future, we will also need to expend resources to integrate the controls of these acquired entities with ours. We may not be able to successfully implement and scale improvements to our systems and processes in a timely or efficient manner or in a manner that does not negatively affect our operating results. For example, we may not be able to effectively monitor certain extraordinary contract requirements or provisions that are individually negotiated by our sales force as the number of transactions continues to grow. In addition, our systems and processes may not prevent or detect all errors, omissions or fraud. We may experience difficulties in managing improvements to our systems, processes and controls or in connection with third-party software, which could impair our ability to provide products or services to our customers in a timely manner, causing us to lose customers, limit us to smaller deployments of our products or increase our technical support costs.

Risks Related to Our Notes

We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Subject to certain conditions, holders of the Notes may require us to repurchase for cash all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, if a make-whole fundamental change (as defined in the indenture for the Notes) occurs prior to the maturity date of the Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Upon a conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted. 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 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. Our failure to repurchase the Notes at a time when the repurchase is required by the indenture governing the Notes or to pay cash upon conversion of the Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. 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.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the amounts payable under the Notes, and any future borrowings or other future indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not

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be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may still incur substantially more debt or take other actions that would diminish our ability to make payments on the Notes when due.

We and our subsidiaries may incur substantial additional debt in the future, some of which may be secured debt. We are not restricted under the terms of the indenture governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that could have the effect of diminishing our ability to make payments on the Notes when due. Furthermore, the indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes and the indenture. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders 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. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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

In connection with the Notes, we entered into capped call transactions with certain financial institutions (the "option counterparties”). The capped call transactions are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes, with such reduction and/or offset subject to a cap.

In connection with establishing their initial hedges of the capped call transactions, the option counterparties and/or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock. This activity could have increased (or reduced the size of any decrease in) the market price of our common stock or the Notes at that time.

In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions (and are likely to do so during any observation period related to a conversion of notes or following any repurchase of notes by us on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the price of our common stock or the Notes.

The potential effect, if any, of these transactions and activities on the price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

Conversion of the Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Notes. The Notes may become in the future convertible at the option of the holders of the Notes prior to June 15, 2023 under certain circumstances as provided in the indenture governing the Notes. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

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The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, (“ASC 470-20”). Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our condensed consolidated balance sheets, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes. We will report larger net losses or lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s non-convertible coupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the Notes.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile, and the value of our common stock may decline.

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:

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

▪ variance in our financial performance from expectations of securities analysts;

▪ changes in the prices of subscriptions to our solutions;

▪ changes in our projected operating and financial results;

▪ changes in laws or regulations applicable to our solutions;

▪ announcements by us or our competitors of significant business developments, acquisitions or new offerings;

▪ our involvement in any litigation;

▪ future sales of our common stock or other securities, by us or our stockholders, as well as the anticipation of lock-up releases;

▪ changes in senior management or key personnel;

▪ the trading volume of our common stock;

▪ changes in the anticipated future size and growth rate of our market; and

▪ general economic, regulatory and market conditions.

Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.

We have spent and anticipate spending substantial funds in connection with the tax liabilities on the settlement of the RSUs. The manner in which we fund these expenditures may have an adverse effect on our financial condition.

We anticipate that we will spend substantial funds to satisfy tax withholding and remittance obligations when we settle the RSUs granted by us. In the six months ended July 31, 2019 we expended $86.0 million to satisfy tax withholding and

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remittance obligations on RSUs that settled during the period. To settle these RSUs, we withheld shares and remitted income taxes on behalf of the holders at the applicable minimum statutory rates, which we refer to as a net settlement.

To fund these withholding and remittance obligations, we used a substantial portion of our existing cash.

If in the future we continue to satisfy the employee portion of payroll tax withholding obligations through net settlement, we would expect to use a substantial portion of our cash and cash equivalent balances, or alternately we may choose to sell equity or debt securities or borrow funds or rely on a combination of these alternatives. In the event that we sell equity securities and are unable to match successfully the proceeds to the amount of the tax liability, the newly issued shares may be dilutive, and such sale could also result in a decline of our stock price. In the event that we elect to satisfy tax withholding and remittance obligations in whole or in part by incurring debt, our interest expense and principal repayment requirements could increase significantly, which could have an adverse effect on our financial condition or results of operations.

Future sales of our common stock in the public market could cause the market price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.

Under our investors’ rights agreement, certain stockholders can require us to register shares owned by them for public sale in the U.S. In addition, we filed a registration statement to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods and the expiration or waiver of the market standoff agreements and lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the U.S. in the open market.

Future sales of shares of our common stock, particularly as lock-up restrictions end, may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. 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.

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.

Our stock price and trading volume is heavily influenced by the way analysts and investors interpret our financial information and other disclosures. If securities or industry analysts do not publish research or reports about our business, delay publishing reports about our business or publish negative reports about our business, regardless of accuracy, our stock price and trading volume could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. A limited number of analysts are currently covering our company. If the number of analysts that cover us declines, demand for our common stock could decrease and our common stock price and trading volume may decline.

Even if our common stock is actively covered by analysts, we do not have any control over the analysts or the measures that analysts or investors may rely upon to forecast our future results. Over-reliance by analysts or investors on any particular metric to forecast our future results may result in forecasts that differ significantly from our own.

In addition, as required by the new revenue recognition standards under ASC 606, we disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period. Market practices surrounding the calculation of this measure are still evolving. It is possible that analysts and investors could misinterpret our disclosure or that the terms of our customer contracts or other circumstances could cause our methods for preparing this disclosure to differ significantly from others, which could lead to inaccurate or unfavorable forecasts by analysts and investors.

Regardless of accuracy, unfavorable interpretations of our financial information and other public disclosures could have a negative impact on our stock price. If our financial performance fails to meet analyst estimates, for any of the reasons discussed above or otherwise, or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our stock price would likely decline.

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An active trading market for our common stock may not be sustained.

Our common stock is currently listed on the Nasdaq Global Select Market ("Nasdaq"), under the symbol “DOCU” and trades on that market. We cannot assure you that an active trading market for our common stock will be sustained.  Accordingly, we cannot assure you of the liquidity of any trading market, your ability to sell your shares of our common stock when desired, or the prices that you may obtain for your shares.

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Our executive officers, directors and current beneficial owners of 5% or more of our common stock beneficially own a significant percentage of our outstanding common stock. These persons, acting together, will be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.

We are an “emerging growth company” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We incurred, and expect to continue to incur, increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

As a public company, we incurred significant legal, accounting and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the year ending January 31, 2020. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC

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following the date we are no longer an “emerging growth company.” We are required to disclose significant changes made in our internal control procedures on a quarterly basis.

We have commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, and we may not be able to complete our evaluation, testing and any required remediation in a timely fashion. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. In addition, because we have acquired companies in the past and may continue to do so in the future, we will also need to expend resources to integrate the controls of these acquired entities with ours. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor 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 the Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

▪ 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;

▪ require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

▪ specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;

▪ establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

▪ establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

▪ prohibit cumulative voting in the election of directors;

▪ provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock;

▪ provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

▪ require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware or the U.S. federal district courts are the exclusive forums for substantially all disputes between us and our stockholders, which

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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. These choice of forum provisions, if permitted by applicable law, may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits. If a court were to find either exclusive-forum provision 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.

Our amended and restated certificate of incorporation further provides that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Recently, the Delaware Chancery Court issued an opinion invalidating such provision. In light of that recent decision, we will not attempt to enforce this provision of our amended and restated certificate of incorporation to the extent it is not permitted by applicable law. As a result, we may incur additional costs associated with resolving disputes that would otherwise be restricted by that provision in other jurisdictions, which could seriously harm our business.

ITEMS 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Use of Proceeds

On May 1, 2018, we completed our IPO, in which we issued and sold 19.3 million shares of common stock at a price to the public of $29.00 per share, including 3.3 million shares of common stock purchased by the underwriters from the full exercise of the over-allotment option and excluding shares of common stock sold in our IPO by certain of our existing stockholders. The offer and sale of all of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-223990), which was declared effective by the SEC on April 26, 2018.

There has been no material change in the planned use of our net IPO proceeds as described in our Prospectus.

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

ITEM 6. Exhibits

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

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EXHIBIT INDEX

Exhibit Number	Description	Form	File No.	Incorporated by Reference Exhibit	Filing Date
10.1#	Form of Performance Stock Unit Grant Notice under 2018 Equity Incentive Plan
10.2#	Amended and Restated Non-Employee Director Compensation Policy
31.1	Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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

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SIGNATURES

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.

Date: September 6, 2019

DOCUSIGN, INC.
By:	/s/ Daniel D. Springer
	Daniel D. Springer
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Michael J. Sheridan
	Michael J. Sheridan
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

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EX-10.1

Exhibit 10.1

DocuSign, Inc.

Performance Stock Unit Grant Notice

(2018 Equity Incentive Plan)

DocuSign, Inc. (the “Company”), pursuant to its 2018 Equity Incentive Plan (the “Plan”), hereby awards to Participant the number of performance-vested Restricted Stock Units (the “PSUs”) set forth below (the “Award”). The Award is subject to all of the terms and conditions of this Performance Stock Unit Grant Notice, the Performance Goals and Vesting Criteria set forth on Attachment I to this Grant Notice, and the PSU Terms and Conditions (collectively, including all attachments and exhibits, the “Award Agreement”) and the Plan.

Participant:

Date of Grant:

Vesting Commencement Date:

Target Number of PSUs Subject to Award:

Maximum Number of PSUs Subject to Award:

Vesting Schedule: As provided in the Performance Goals and Vesting Criteria set forth on Attachment I.

Issuance Schedule: If a PSU vests, the Company will deliver one share of Common Stock in settlement of each vested PSU as set forth in Section 6 of the PSU Terms and Conditions.

Additional Terms/Acknowledgements:

By electronically accepting this Award, Participant acknowledges and agrees that:

• Copies of this Award Agreement, the Plan, and the prospectus for the Plan are available on the Company’s internal or hosted web site, and may be viewed and printed by Participant.

• Participant is familiar with the terms and conditions of the Plan and this Award Agreement (including all attachments and exhibits) and has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and accepting the Award.

• With respect to the Award, the terms of the Award as set forth in this Award Agreement supersede any individually negotiated agreement you have with Company or an Affiliate and any generally applicable severance or change-in-control plan, policy, or practice, whether written or unwritten, of the Company or an Affiliate that would otherwise apply to the Award (“Separate Agreement”). As a condition to accepting your Award, you acknowledge that your Award is not subject to the terms of any Separate Agreement and is governed solely by this Award Agreement and the Plan.

• This Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of Common Stock pursuant to the Award and supersede all other oral and written agreements on that subject (including the terms of any Separate Agreement).

• All decisions or interpretations of the Board or the Stock Plan Administrator upon any questions arising under the Plan or this Award are binding, conclusive and final on Participant.

By electronically accepting this Award, Participant consents to receive all documents related to the Plan and the Award by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

If Participant has not actively rejected the Award within 90 days of the date the Company electronically delivers notice of the Award to Participant for acceptance, then Participant is deemed to have accepted the Award.

DocuSign, Inc.

By:___ __

    Signature

Title: _______ _ _________

Date:

Attachments:

Attachment I: Performance Goals and Vesting Criteria

Attachment II: PSU Terms and Conditions

Delivered Electronically:

2018 Equity Incentive Plan

Plan Prospectus

Attachment I

Performance Goals and Vesting Criteria

A.General

In order for any PSUs subject to the Award to vest and be earned, each of the Service Vesting Requirement and the Performance Goals as described herein must be satisfied. Any PSUs which may not potentially vest based on application of the Service Vesting Requirement and/or Performance Goals will be immediately forfeited. Certain capitalized terms used herein have the meanings set forth in Section I below, or if not defined herein, the meanings set forth in the Plan.

B.Service Vesting Requirement

Except as otherwise expressly provided in Sections F and G below, vesting of any portion of your Award is generally subject to your Continuous Service through [________] (the “Service Vesting Requirement”). If your Continuous Service terminates for any reason prior to your satisfaction of the Service Vesting Requirement, no portion of your Award is eligible to vest, and the PSUs subject to your Award will immediately terminate and be forfeited upon such termination of your Continuous Service.

C.Performance Goals

The number of PSUs subject to your Award that may vest will be determined by reference to the Company’s relative total shareholder return (“TSR”) over a three-year performance period from [________] through [________] (the “Performance Period”) as measured versus the TSR performance of the Nasdaq Composite Index (the “Index”) during the Performance Period. The number of PSUs subject to your Award that may vest will be determined by reference to the Company TSR as compared versus the Index TSR during the Performance Period as indicated in the chart below, with linear interpolation between the designated performance levels, subject to adjustment as provided herein (the “Performance Goals”).

Company TSR%	% Multiplier*	Payout Level
= < - 25 points versus Index TSR%	0%	0%
= - 25 points versus Index TSR%	50%	Threshold
= Index TSR%	100%	Target
= + 25 points versus Index TSR%	150%	150% Target
= or > + 50 points versus Index TSR%	200%	Maximum

*The Multiplier is applied to the Target Number of PSUs.

TSR will be calculated as provided in Section D below. If the Company’s TSR is less than -25 points as compared to the Index TSR during the Performance Period, no PSUs are eligible to vest. If the Company’s TSR is negative, the maximum number of PSUs that may vest is capped at 100% of the Target number of PSUs, regardless of the number of percentage points that the Company’s TSR may exceed the Index TSR. In all cases, the maximum number of PSUs that may vest is capped at 200% of the Target number of PSUs.

D.TSR Calculation Criteria:

For purposes of computing TSR, the stock price at the beginning of the Performance Period will be the based on the average closing price calculated over the 60 consecutive trading days ending on the date immediately prior to the start of the Performance Period, and the stock price at the end of the Performance Period will be the average closing price calculated over the 60 consecutive trading days ending on the last day of the Performance Period, adjusted for

stock splits or similar changes in capital structure. However, if a Change in Control occurs prior to expiration of the Performance Period, TSR will instead be measured through the date of the Change in Control in calculating the portion of your Award that may vest (See Section G.1).

E.Vesting Determination and Settlement Dates

No shares will be issued in settlement of your Award prior to the date of the Committee’s determination of the level of attainment of the Performance Goals and the number of your PSUs that will vest. In the absence of a Change in Control, as soon as practicable within the 60-day period following completion of the Performance Period, the Committee will determine the applicable Company TSR during the Performance Period as measured versus the TSR of the Index during the Performance Period and the applicable number of your PSUs that will vest, subject to your satisfaction of the Service Vesting Requirement. The date of the Committee’s determination is the “Determination Date.” Except as specifically provided below, shares of Common Stock will be issued in respect of the number of the PSUs that vest as soon as practicable within the 30-day period following such Determination Date. Any portion of the Award that does not vest on the Determination Date will immediately terminate and be forfeited on the Determination Date.

F.Impact of Qualifying Termination, Death or Disability

1.Pro-Rata Vesting in Connection with a Qualifying Termination Before Expiration of the Performance Period. Subject to Section F.2 below, following any Qualifying Termination of your employment that occurs prior to expiration of the Performance Period, the number of PSUs that will vest on the Determination Date will be a pro-rata portion of the number of PSUs that would have vested had you remained in Continuous Service through the last day of the Performance Period. Such pro-rata portion will be determined by taking the number of PSUs that would have vested based on the level of attainment of the Performance Goals had your remained in such continuous service through the last day of the Performance Period (the “Default Number of PSUs”) and multiplying it by the percentage determined by taking the number of calendar days of Continuous Service you completed during the Performance Period prior to the Qualifying Termination and dividing such number by the total number of calendar days in the Performance Period (the “Pro-Rata Reduction”). Any portion of the Award that does not vest on the Determination Date will immediately terminate and be forfeited on the Determination Date.

2.Impact of Qualifying Termination Followed By Change in Control. In the event your Qualifying Termination is followed by a Change in Control that precedes the scheduled end of the Performance Period, the number of PSUs that will vest upon the Change in Control will be determined on a pro-rata basis as calculated in Section F.1 above, except that a number of PSUs corresponding to the Change in Control Determined Units (as defined in Section G.1) will be substituted for the Default Number of PSUs in such formula before applying the Pro-Rata Reduction. Any portion of the Award that does not vest upon the Change in Control will immediately terminate and be forfeited on such date. If the Award is assumed, continued or substituted by the surviving corporation or the acquiring corporation in the Change in Control, shares of Common Stock will be issued on the scheduled expiration date of the Performance Period in settlement of the vested number of PSUs, without regard to your satisfaction of any “Change in Control Service Requirement” (as such term is defined below). Subject to satisfaction of the requirements set forth in Section H below, if in connection with such Change in Control the surviving corporation or the acquiring corporation will not assume, continue or substitute the Award on substantially the same terms and conditions as applicable prior to the Change in Control, shares of Common Stock will be issued immediately prior to the Change in Control in settlement of the vested number of PSUs.

G.     Impact of Change in Control.

1.Impact of Change in Control. In the event of a Change in Control that occurs before the scheduled end of the Performance Period, the number of PSUs that may potentially vest will be determined immediately by the Board as constituted immediately prior to the Change in Control based upon the Company’s TSR performance as measured versus the Index’ TSR performance during the portion of the Performance Period that precedes the effective date of the Change in Control (the “CIC Achievement Level”). For purposes of such determination, the Company's ending stock price will be the sale price of the shares of Common Stock in the Change in Control and the ending stock price of Index will be the Index closing stock price on the effective date of the Change in Control (such CIC Achievement Level determined number of PSUs are the “Change in Control Determined Units”). Any portion of the Award that does not vest based upon the CIC Achievement Level will immediately terminate and be forfeited upon the Change in Control.

2.Change in Control Continued Service Condition. In the event of a Change in Control that precedes the scheduled expiration date of the Performance Period where the surviving corporation or the acquiring corporation assumes, continues or substitutes the Award on substantially the same terms and conditions as in effect prior to the Change in Control, if you were not terminated in a Qualifying Termination prior to the Change in Control, you must remain in continuous service with the Company or an Affiliate through the scheduled expiration date of the Performance Period in order for the Change in Control Determined Units to vest (the “Change in Control Continued Service Requirement”), and the Change in Control Determined Units shall vest on the scheduled expiration date of the Performance Period. For the avoidance of doubt, in connection with any such assumption, continuation or substitution, the Change in Control Determined Units are automatically converted into a time-based vesting award and the performance goals shall no longer apply. Notwithstanding the foregoing, if you are terminated in a Qualifying Termination upon or at any time following the Change in Control, the Change in Control Continued Service Requirement will be waived and the Change in Control Determined Units will immediately vest on the date of such termination, but shares of Common Stock will not be issued in settlement of the Change in Control Determined Units until the scheduled expiration date of the Performance Period. In the event of a Change in Control where the surviving corporation or the acquiring corporation will not assume, continue or substitute the Award on substantially the same terms and conditions as in effect prior to the Change in Control, the Change in Control Determined Units will vest immediately prior to the Change in Control and, subject to satisfaction of the requirements set forth in Section H below, the shares of Common Stock will be issued in settlement of the vested Change in Control Determined Units immediately prior to the Change in Control. For purposes of this Agreement, if the Company is the surviving corporation or the acquiring corporation, if applicable, it shall be deemed to have assumed the Award in the Change in Control unless it takes explicit action to the contrary.

H.Application of Section 409A.

The Award is intended to be exempt from or comply with the requirements of Section 409A of the Code as providing for payment in the form of issuance of shares of Common Stock in settlement of any vested portion of the Award in all cases upon the earliest of the following Section 409A permitted payment dates or events: (i) the same taxable year as the scheduled expiration date of the Performance Period, or (ii) if the payment acceleration exemption permitted under Treasury Regulation 1.409A-3(j)(ix)(B) is available and elected, upon a Change in Control that is also a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as described in Code Section 409A(a)(2)(A)(iv) (a “409A CIC”). Accordingly, the following provisions shall apply and shall supersede anything to the contrary set forth herein, in the Agreement and in the Plan to the extent required for the Award to comply with the requirements of Section 409A of the Code. In a Change in Control the Award must be assumed, continued or substituted by the surviving corporation or the acquiring corporation and any shares of Common Stock scheduled to be issued upon the scheduled expiration date of the Performance Period may not be earlier issued in settlement of any Change in Control Determined Units upon the Change in Control unless the Change in Control is a 409A CIC and an exemption is available and elected under Treasury Regulation 1.409A-3(j)(ix)(B) or such earlier issuance of the shares of Common Stock is otherwise permitted by Section 409A of the Code. The Company retains the right to provide for earlier issuance of shares of Common Stock in settlement of any vested portion of the Award to the extent permitted by Section 409A of the Code.

I.Definitions

1.“Cause” means mean the occurrence of one or more of the following:

(a)Your willful and continued failure to perform the duties and responsibilities of your position after there has been delivered to you a written demand for performance from the Company which describes the basis for the Company’s belief that you have not substantially performed your duties and provides you with thirty (30) days to take corrective action;

(b)Any act of personal dishonesty taken by you in connection with your responsibilities as an employee of the Company with the intention or reasonable expectation that such action may result in substantial personal enrichment;

(c)Your conviction of, or plea of nolo contendere to, a felony;

(d)Your commission of any tortious act, unlawful act or malfeasance which causes or reasonably could cause (for example, if it became publicly known) material harm to the Company’s standing, condition or reputation;

(e)Any material breach by you of the provisions of the At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement or other improper disclosure of the Company’s confidential or proprietary information;

(f)A breach of any fiduciary duty owed to the Company by you that has or could reasonably be expected to have a material detrimental effect on the Company’s reputation or business; or

(g)Your (A) obstructing or impeding; (B) endeavoring to influence, obstruct or impede, or (C) failing to materially cooperate with, any investigation authorized by the Board or any governmental or self- regulatory entity (an “Investigation”). However, your failure to waive attorney-client privilege relating to communications with your own attorney in connection with an Investigation will not constitute “Cause.”

2.“Good Reason” for your resignation of employment will exist following the occurrence of any of the following without your express written consent:

(a)a material reduction in your base compensation, unless such reduction is made in connection

with a similar action affecting all senior executives;

(b)a material reduction in your duties or responsibilities, provided that neither a change in title, nor a change in your reporting relationships by virtue of the Company being acquired or made part of a larger entity (as, for example, where the Company becomes a subsidiary or operating unit of the acquiring corporation following a Change in Control) will be deemed a “material reduction” in and of itself unless your new duties and responsibilities are materially reduced from your prior duties and responsibilities; or

(c)a relocation of your principal place of employment to a place that increases your one-way commute by more than fifty (50) miles as compared to your then-current principal place of employment immediately prior to such relocation.

In order to resign for Good Reason, you must provide written notice to the Board within ninety (90) days after the first occurrence of the event giving rise to Good Reason setting forth the basis for your resignation, allow the Company at least thirty (30) days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, you must resign from all positions you then hold with the Company not later than thirty (30) days after the expiration of the cure period.

3.“Involuntary Termination” means your termination without Cause or resignation for Good Reason, in each case subject to the your provision to the Company following such termination of employment of an executed waiver and general release of claims in a form reasonably acceptable to the Company (the “Release”) no later than 60 days following such termination, and permitting such Release to become effective in accordance with its terms.

4.“Qualifying Termination” means a termination of your employment due to your death, Disability or an Involuntary Termination.

Attachment II

PSU Terms and Conditions

DocuSign, Inc. (the “Company”) has awarded you the number of performance-vested Restricted Stock Units indicated in the Grant Notice (the “Award”) pursuant to the Company’s 2018 Equity Incentive Plan (the “Plan”). The Grant Notice and these PSU Terms and Conditions (including all attachments and exhibits) are collectively referred to as the “Award Agreement”. Capitalized terms not explicitly defined in this Award Agreement will have the same meanings given to them in the Plan. In the event of any conflict between the terms and conditions in this Award Agreement and the Plan, the Plan will control.

The terms of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows:

1.Grant of the Award. This Award represents the right to be issued on a future date one (1) share of Common Stock for each PSU that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company, or a third party designated by the Company, for your benefit (the “Account”) the number of PSUs/shares of Common Stock subject to the Award. Except as otherwise provided herein, you will not be required to make any payment to the Company or an Affiliate (other than services to the Company or an Affiliate) with respect to your receipt of the Award, the vesting of the PSUs or the delivery of the underlying Common Stock to be issued in respect of the Award.

2.Vesting. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, the PSUs/shares of Common Stock credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock.

3.Number of Shares. The number of PSUs/shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. Any additional PSUs, shares, cash or other property that become subject to the Award pursuant to this Section 3, if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other PSUs and shares covered by your Award. Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section 3. Any fraction of a share will be rounded down to the nearest whole share.

4.Compliance. You may not be issued any Common Stock under your Award unless the shares of Common Stock underlying the PSUs are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulations governing the Award, including any U.S. and non-U.S. state, federal and local laws, and you will not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws and regulations.

5.Transfer Restrictions. Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5. For example, you may not use shares that may be issued in respect of your PSUs as security for a loan. The restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of your vested PSUs. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, will thereafter be entitled to receive any distribution of Common Stock to which you were entitled at the time of your death pursuant to this Award Agreement. In the absence of such a designation, your legal representative will be entitled to receive, on behalf of your estate, such Common Stock or other consideration.

(a)Death. Your Award is transferable by will and by the laws of descent and distribution. At your

death, vesting of your Award will cease and your executor or administrator of your estate will be entitled to receive, on behalf of your estate, any Common Stock or other consideration that vested but was not issued before your death.

(b)Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your right to receive the distribution of Common Stock or other consideration hereunder, pursuant to a domestic relations order, official marital settlement agreement or other divorce or separation instrument that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this Award with the Company’s General Counsel prior to finalizing the domestic relations order or marital settlement agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or marital settlement agreement.

6.Date of Issuance.

(a)The issuance of shares in respect of the PSUs is intended to be exempt from or comply with the requirements of Section 409A of the Code and will be construed and administered in such a manner. Subject to the satisfaction of any withholding obligation for Tax-Related Items (as defined in Section 10 below), in the event one or more PSUs vests, the Company will issue to you one (1) share of Common Stock for each PSU that vests on the applicable vesting date(s) provided in the Grant Notice (subject to any adjustment under Section 3 above, and subject to any different provisions in the Grant Notice). The issuance date determined by this paragraph is referred to as the “Original Issuance Date”.

(b)If the Original Issuance Date falls on a date that is not a business day, delivery will instead occur on the next following business day. In addition, if:

(i)the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Plan”)), and

(ii)either (1) withholding obligations for Tax-Related Items (as defined in Section 10 below) do not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the withholding obligation for Tax-Related Items (as defined in Section 10 below) by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 10 below (including but not limited to a commitment under a 10b5-1 Plan) and (C) not to permit you to pay the Tax-Related Items in cash or from other compensation otherwise payable to you by the Company (as defined in Section 10 below),

then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).

(c)The form of delivery of the shares of Common Stock in respect of your Award (e.g., a stock certificate or electronic entry evidencing such shares) will be determined by the Company.

7.Dividends. You will receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment; provided, however, that this sentence will not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you.

8.Restrictive Legends. The shares of Common Stock issued under your Award will be endorsed with appropriate legends as determined by the Company.

9.Responsibility for Taxes.

(a)You acknowledge that, regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. You further acknowledge that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of your PSUs, including, but not limited to, the grant of the PSUs, the vesting and settlement of the PSUs, the delivery or sale of any shares of Common Stock and the issuance of any dividends, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of your Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge and agree that you will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates for Tax-Related Items arising from your Award. Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to the relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactorily to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, you authorize the Company and/or the Employer, or their respective agents, at their discretion, to satisfy their withholding obligations with regard to all Tax-Related Items by: (i) withholding from your wages or any other cash compensation otherwise payable to you by the Company and/or Employer; (ii) causing you to tender a cash payment; (iii) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) (pursuant to this authorization and without further consent) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your PSUs to satisfy the Tax-Related Items and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax-Related Items directly to the Company and its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued to you pursuant to Section 6) equal to the amount of such Tax-Related Items; provided, however that if you are an Officer, then the Company will withhold a number of shares of Common Stock upon the relevant taxable or tax withholding event, as applicable, unless the use of such withholding method is not feasible under applicable tax or securities law or has materially adverse accounting consequences, in which case, the obligation for Tax-Related Items may be satisfied by one or a combination of methods (i)-(iii) above. Depending on the withholding method, the Company or the Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Common Stock equivalent. If the obligation for Tax-Related Items is satisfied by withholding in a number of shares of Common Stock, for tax purposes, you will be deemed to have been issued the full number of shares of Common Stock subject to the vested PSUs, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items. However, the Company does not guarantee that you will be able to satisfy the Tax-Related Items through any of the methods described in the preceding provisions and in all circumstances you remain responsible for timely and fully satisfying the Tax-Related Items.

(c)Unless the Tax-Related Items of the Company and any Affiliate are satisfied, the Company

will have no obligation to deliver to you any Common Stock or other consideration pursuant to this Award.

(d)In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.

10.Award not a Service Contract. Your Continuous Service with the Company, the Employer or any other Affiliate is not for any specified term and may be terminated by you or by the Company, the Employer or any other Affiliate at any time, for any reason, with or without cause and with or without notice.

11.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

12.Unsecured Obligation. Your Award is unfunded, and as a holder of a vested Award, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Award Agreement. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Award Agreement until such shares are issued to you pursuant to Section 6 of these PSU Terms and Conditions. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

13.Notices. Any notice or request required or permitted hereunder will be given in writing to each of the other parties hereto and will be deemed effectively given on the earlier of (i) the date of personal delivery, including delivery by express courier, or delivery via electronic means, or (ii) the date that is five (5) days after deposit in the United States Post Office (whether or not actually received by the addressee), by registered or certified mail with postage and fees prepaid, addressed to the Company at its primary executive offices, attention: Stock Plan Administrator, and addressed to you at your address as on file with the Company at the time notice is given.

14.Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.

15.Other Documents. You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.

16.Severability. If all or any part of this Award Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Award Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Award Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

17.Governing Law/Venue. The interpretation, performance and enforcement of this Award Agreement will be governed by the law of the State of Delaware without regard to that state’s conflicts of laws rules. For purposes of any action, lawsuit or other proceedings brought to enforce this Award Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts within San Francisco County, State of California, or the federal courts for the United States for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

18.Successors and Assigns. The rights and obligations of the Company under your Award will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns. All obligations of the Company under the Plan and this Award Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and assets of the Company.

***

These PSU Terms and Conditions will be deemed to be accepted by you upon the signing by you or otherwise by your acceptance of the Grant Notice to which it is attached.

EX-10.2

Exhibit 10.2

DOCUSIGN, INC.

Amended and Restated

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

Each member of the Board of Directors (the “Board”) of DocuSign, Inc. (the “Company”) who is a non- employee director of the Company (each such member, a “Non-Employee Director”) will receive the compensation described in this Amended and Restated Non-Employee Director Compensation Policy (the “Director Compensation Policy”) for his or her Board service.

The Director Compensation Policy may be amended or terminated at any time in the sole discretion of the Board or the Compensation Committee of the Board.

A Non-Employee Director may decline all or any portion of his or her compensation by giving notice to the Company prior to the date cash is to be paid or equity awards are to be granted, as the case may be.¹ 

Annual Cash Compensation

Each Non-Employee Director will receive the cash compensation set forth below for service on the Board. The annual cash compensation amounts will be payable in equal quarterly installments, in arrears following the end of each fiscal quarter in which the service occurred, pro-rated for any partial months of service. All annual cash fees are vested upon payment.

1.Annual Board Service Retainer:

a.All Eligible Directors: $33,500

b.Chairman or Lead Independent Director: $77,500 (in lieu of above)² 

2.Annual Committee Member Service Retainer:

a.Member of the Audit Committee: $10,000

b.Member of the Compensation Committee: $6,600

c.Member of the Nominating and Corporate Governance Committee: $4,000

3.Annual Committee Chair Service Retainer (in lieu of Committee Member Service Retainer):

a.Chairman of the Audit Committee: $20,000

b.Chairman of the Compensation Committee: $13,500

c.Chairman of the Nominating and Corporate Governance Committee: $7,800

Equity Compensation

Equity awards will be granted under the Company’s 2018 Equity Incentive Plan or any successor equity incentive plan (the “Plan”). All stock options granted under this policy will be Nonstatutory Stock Options (as defined in the Plan), with a term of ten years from the date of grant and an exercise price per share equal to 100% of the Fair Market Value (as defined in the Plan) of the underlying common stock of the Company on the date of grant.

(a)Automatic Equity Grants.

(i)Initial Grant for New Directors. Without any further action of the Board, each person who is elected or appointed for the first time to be a Non-Employee Director will automatically, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted a Restricted Stock Unit for a number of shares of common stock having a value of $400,000 (the “Initial Grant”). Each Initial Grant will vest in a series of 12 equal quarterly installments over the 3-year period measured from the date of grant.

(ii)Annual Grant. Without any further action of the Board, commencing in fiscal 2020 and each fiscal year thereafter at the close of business on the date of each Annual Meeting, each person who is then a Non-Employee Director will automatically be granted a Restricted Stock Unit to purchase a number of shares of

common stock having a value of $200,000 (the “Annual Grant”). Notwithstanding the foregoing, a director who is elected or appointed for the first time less than nine (9) months prior to the date such grants are made to executive officers or the date of such Annual Meeting shall not be eligible to receive such Annual Grant. Each Annual Grant will vest in a series of four successive equal quarterly installments over the one-year period measured from the date of grant.

(b)Vesting; Change of Control. All vesting is subject to the Non-Employee Director’s “Continuous Service” (as defined in the Plan) on each applicable vesting date. Notwithstanding the foregoing vesting schedules, for each Non-Employee Director who remains in Continuous Service with the Company until immediately prior to the closing of a “Change of Control” (as defined in the Plan), the shares subject to his or her then-outstanding equity awards that were granted pursuant to this policy will become fully vested immediately prior to the closing of such Change of Control. In addition, for the Annual Grants made in fiscal 2019, upon termination of Continuous Service for any reason, an additional 25% of the shares subject to such Restricted Stock Unit shall accelerate and vest.

(c)Calculation Value of a Restricted Stock Unit Award. The value of a restricted stock unit award to be granted under this policy will be determined based on the Fair Market Value per share on the grant date (as defined in the Plan).

(d)Remaining Terms. The remaining terms and conditions of each Restricted Stock Unit, including transferability, will be as set forth in the Company’s standard Restricted Stock Agreement, in the form adopted from time to time by the Board or Compensation Committee.

Expenses

The Company will reimburse Non-Employee Director for ordinary, necessary and reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in Board and committee meetings; provided, that the Non-Employee Director timely submit to the Company appropriate documentation substantiating such expenses in accordance with the Company’s travel and expense policy, as in effect from time to time.

_____________________________________________

¹This is included to allow a director who works for a fund to forfeit payments and avoid being deemed to have “constructively received” the payment for tax purposes (and be required to recognize the value as income for tax purposes) in a scenario where the director is obligated under a contractual obligation with the fund to disgorge such payments to the fund.

²Increase is effective on June 4, 2019.

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel D. Springer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DocuSign, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 6, 2019

By:	/s/ Daniel D. Springer
	Daniel D. Springer
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Sheridan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DocuSign, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 6, 2019

By:	/s/ Michael J. Sheridan
	Michael J. Sheridan
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel D. Springer, the Chief Executive Officer of DocuSign, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of DocuSign, Inc. for the fiscal quarter ended July 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of DocuSign, Inc. 

Date: September 6, 2019

By:	/s/ Daniel D. Springer
	Daniel D. Springer
	Chief Executive Officer
	(Principal Executive Officer)

I, Michael J. Sheridan, the Chief Financial Officer of DocuSign, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of DocuSign, Inc. for the fiscal quarter ended July 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of DocuSign, Inc.  

Date: September 6, 2019

By:	/s/ Michael J. Sheridan
	Michael J. Sheridan
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

XML

Goodwill and Intangible Assets, Net (Tables)

6 Months Ended

Jul. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of carrying amount of goodwill

The changes in the carrying amount of goodwill for the six months ended July 31, 2019, were as follows (in thousands):

Balance at January 31, 2019	$	195,225
Cumulative translation adjustment	202
Balance at July 31, 2019	$	195,427

Schedule of intangible assets

Intangible assets consisted of the following:

		As of July 31, 2019							As of January 31, 2019
(in thousands)	Weighted-average Remaining Useful Life (Years)	Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net		Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net
Existing technology	2.1	$	31,594	$	(23,112	)	$	8,482	$	31,594	$	(20,747	)	$	10,847
Tradenames / trademarks	0.6	2,419		(2,223		)	196		2,419		(1,858		)	561
Customer contracts & related relationships	7.9	65,782		(15,148		)	50,634		65,782		(11,168		)	54,614
Certifications	1.1	6,917		(5,538		)	1,379		6,917		(4,846		)	2,071
Maintenance contracts & related relationships	0.9	1,498		(1,254		)	244		1,498		(1,104		)	394
Backlog—Subscription	1.2	6,400		(2,905		)	3,495		6,400		(1,304		)	5,096
	6.6	$	114,610	$	(50,180	)	64,430		$	114,610	$	(41,027	)	73,583
Cumulative translation adjustment							640							620
Total							$	65,070						$	74,203

Schedule of amortization of finite-lived intangible assets

Amortization of finite-lived intangible assets for the three and six months ended July 31, 2019 and 2018, was as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
Cost of subscription revenue	$	1,381	$	1,003	$	3,008	$	2,671
Sales and marketing	3,039		765		6,145		1,530
Total	$	4,420	$	1,768	$	9,153	$	4,201

Schedule of future amortization of finite-lived intangibles

As of July 31, 2019, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows, excluding cumulative translation adjustment (in thousands):

Fiscal 2020, remainder	$	8,564
Fiscal 2021	13,818
Fiscal 2022	8,370
Fiscal 2023	6,023
Fiscal 2024	6,023
Thereafter	21,632
Total	$	64,430

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2019

Accounting Policies [Abstract]

Principles of Consolidation

Our condensed consolidated financial statements include the accounts of DocuSign, Inc. and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

Our condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2019 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the six months ended July 31, 2019 are not necessarily indicative of the results to be expected for the year ending January 31, 2020.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal 2020, for example, are to the fiscal year ending January 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include those related to the allocation of revenue between recognized and deferred amounts, allowance for bad debts, goodwill, intangible assets, deferred contract acquisition costs, customer benefit period, fair value of financial instruments, valuation of stock-based compensation, valuation of common stock, fair value of the liability and equity components of the convertible notes, whether an arrangement is or contains a lease, the discount rate used for operating leases, and the valuation allowance for deferred income taxes.

Leases

Leases arise from contractual obligations that convey the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We determine whether an arrangement is or contains a lease at inception, based on whether there is an identified asset and whether we control the use of the identified asset throughout the period of use. At lease commencement date, we determine lease classification between finance and operating, allocate the

consideration to the lease and nonlease components and recognize a right-of-use asset and corresponding lease liability for each lease component. A right-of-use asset represents our right to use an underlying asset and a lease liability represents our obligation to make payments during the lease term.

The lease liability is initially measured as the present value of the remaining lease payments over the lease term. The discount rate used to determine the present value is our incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. We estimate our incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments to lessors and lease incentives. Our operating lease right-of-use assets and liabilities recognized at February 1, 2019, the adoption date, were based on the present value of lease payments over the remaining lease term as of that date, using the incremental borrowing rate as of that date.

We elected the practical expedients to not recognize right-of-use assets and liabilities for leases with a term of twelve months or less and to not separate nonlease components from the associated lease components for our office leases and certain other asset classes. The total consideration includes fixed payments and contractual escalation provisions. We are responsible for maintenance, insurance, property taxes and other variable payments, which are expensed as incurred. Our leases include options to renew or terminate. We include the option to renew or terminate in our determination of the lease term when the option is deemed to be reasonably assured to be exercised. 

Operating leases are classified in "Operating lease right-of-use assets", "Operating lease liabilities—current", and "Operating lease liabilities—noncurrent" on our condensed consolidated balance sheets. Operating lease expense is recognized on a straight-line basis over the expected lease term and included in "Loss from operations" in our condensed consolidated statements of operations and comprehensive loss.

Strategic Investments

Our strategic investments consist of non-marketable equity investments in privately-held companies in which we do not have a controlling interest or significant influence. We have elected to apply the measurement alternative for equity investments that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when event or circumstance indicates a decline in value has occurred.

Recently Adopted Accounting Pronouncements and Other Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued accounting standards update ("ASU") No. 2016-02, Leases (Topic 842), which supersedes current guidance related to accounting for leases. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASU makes 16 technical corrections to the new lease standard and other accounting topics, alleviating unintended consequences from applying the new standard. It does not make any substantive changes to the core provisions or principles of the new standard. In July 2018, the FASB also issued ASU No. 2018-11, Leases (Topic 842). The ASU provides (1) an optional transition method that entities can use when adopting the standard and (2) a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met.

The standard is effective for public entities for annual and interim reporting periods beginning after December 15, 2018. We adopted the new standard as of February 1, 2019, and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit as of the adoption date. We elected the optional transition approach to not apply Topic 842 in the comparative periods presented. We elected the practical expedient to use hindsight when determining the lease term and the package of practical expedients to not reassess whether existing contracts contain leases, the lease classification for existing leases and whether existing initial direct costs meet the new definition. The adoption of Topic 842 resulted in the recognition of total right-of-use assets of $93.9 million and total lease liabilities of $121.8 million as of adoption date, with the most significant impact related to our office space leases. Additionally, we derecognized $26.6 million in deferred rent and $2.5 million related to the build-to-suit asset and liability upon adoption of this standard pursuant to the transition guidance provided for build-to-suit leases. The adoption of Topic 842 did not have a material impact to the consolidated statements of operations or statements of cash flows.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). As the amendment only relates to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The standard is effective for annual and interim reporting periods beginning after December 15, 2018 for all entities. The amendment is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Early adoption is permitted. The adoption of the standard did not have an impact on our consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASU aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. The ASU is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted, including in an interim period, but not before an entity adopts the topic 606 revenue guidance. The adoption of the standard did not have a material impact on our consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies, corrects errors in and makes improvements to several topics in the FASB Accounting Standard Codification. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance of the ASU. Amendments that do have transition guidance are effective for public business entities for annual periods beginning after December 15, 2018. The adoption of the standard did not have a material impact on our consolidated financial statements.

Other Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to eliminate inconsistencies and provide clarifications to the transition requirements of ASU No. 2016-13. The updates to the standard are effective for interim and annual periods beginning after December 15, 2019. We are evaluating the impact of the adoption of the ASUs on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

XML

Net Loss per Share Attributable to Common Stockholders - Antidilutive Securities (Details) - shares shares in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	25,933	37,030
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	9,752	18,122
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	15,893	18,908
ESPP
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	288	0

XML

Stockholders' Equity - Narrative (Details) shares in Thousands, $ in Thousands		3 Months Ended	6 Months Ended		12 Months Ended
	Apr. 26, 2018 USD ($)	Jul. 31, 2019 USD ($) plan shares	Jul. 31, 2019 USD ($) plan shares	Jul. 31, 2018 USD ($)	Jan. 31, 2019 shares	Feb. 01, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | plan		3	3
Unrecognized compensation cost, options | $		$ 8,800	$ 8,800
Employee stock purchase plan, compensation expense | $			$ 98,063	$ 309,959
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, remaining weighted-average period for recognition			1 year 4 months 24 days
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, remaining weighted-average period for recognition			2 years 4 months 24 days
Service period			4 years
Accelerated share based compensation expense | $	$ 262,800
Unvested subject to performance based conditions (in shares)		16,439	16,439		17,142
Shares granted (in shares)			4,760
Unrecognized compensation cost, RSUs | $		$ 498,300	$ 498,300
Performance-based Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested subject to performance based conditions (in shares)		300	300
Restricted Stock Units with Market-based Conditions
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested subject to performance based conditions (in shares)		200	200
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee stock purchase plan, shares purchased (in shares)			200
Employee stock purchase plan, compensation expense | $		$ 2,100	$ 4,000
2018 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserved for future issuance (in shares)		24,300	24,300
Annual increase in shares reserved, percentage of total shares			5.00%
Number of shares reserved for future issuance						8,500
2018 ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserved for future issuance (in shares)		5,300	5,300		3,800
Annual increase in shares reserved, percentage of total shares					1.00%
Employee contribution, maximum percentage of earnings					15.00%
Employee stock purchase plan, purchase price of common stock, percent of market price					85.00%
Employee stock purchase plan offering period			6 months

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Acquisition of SpringCM Inc. - Intangible Assets Acquired (Details) - SpringCM Inc. $ in Thousands	Sep. 04, 2018 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Fair Value	$ 73,000
Existing technology
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Fair Value	$ 11,900
Expected Useful Life	3 years
Customer relationships—subscription
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Fair Value	$ 54,200
Expected Useful Life	9 years
Backlog—subscription
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Fair Value	$ 6,400
Expected Useful Life	2 years
Tradenames / trademarks
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Fair Value	$ 500
Expected Useful Life	1 year

XML

Goodwill and Intangible Assets, Net - Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Amortization of finite-lived intangible assets	$ 4,420	$ 1,768	$ 9,153	$ 4,201
Cost of subscription revenue
Finite-Lived Intangible Assets [Line Items]
Amortization of finite-lived intangible assets	1,381	1,003	3,008	2,671
Sales and marketing
Finite-Lived Intangible Assets [Line Items]
Amortization of finite-lived intangible assets	$ 3,039	$ 765	$ 6,145	$ 1,530

XML

Summary of Significant Accounting Policies

6 Months Ended

Jul. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Organization and Description of Business

DocuSign, Inc. (“we,” “our” or “us”) was incorporated in the State of Washington in April 2003. We merged with and into DocuSign, Inc., a Delaware corporation, in March 2015.

We provide a platform that enables businesses of all sizes to digitally prepare, execute and act on agreements, thereby simplifying and accelerating the process of doing business.

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include the accounts of DocuSign, Inc. and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Our condensed consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2019 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the six months ended July 31, 2019 are not necessarily indicative of the results to be expected for the year ending January 31, 2020.

Our fiscal year ends on January 31. References to fiscal 2020, for example, are to the fiscal year ending January 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include those related to the allocation of revenue between recognized and deferred amounts, allowance for bad debts, goodwill, intangible assets, deferred contract acquisition costs, customer benefit period, fair value of financial instruments, valuation of stock-based compensation, valuation of common stock, fair value of the liability and equity components of the convertible notes, whether an arrangement is or contains a lease, the discount rate used for operating leases, and the valuation allowance for deferred income taxes.

Significant Accounting Policies

Other than described below, there have been no changes to our significant accounting policies described in our 2019 Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes.

Leases

Leases arise from contractual obligations that convey the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We determine whether an arrangement is or contains a lease at inception, based on whether there is an identified asset and whether we control the use of the identified asset throughout the period of use. At lease commencement date, we determine lease classification between finance and operating, allocate the

consideration to the lease and nonlease components and recognize a right-of-use asset and corresponding lease liability for each lease component. A right-of-use asset represents our right to use an underlying asset and a lease liability represents our obligation to make payments during the lease term.

The lease liability is initially measured as the present value of the remaining lease payments over the lease term. The discount rate used to determine the present value is our incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. We estimate our incremental borrowing rate based on the information available at lease commencement date for borrowings with a similar term. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments to lessors and lease incentives. Our operating lease right-of-use assets and liabilities recognized at February 1, 2019, the adoption date, were based on the present value of lease payments over the remaining lease term as of that date, using the incremental borrowing rate as of that date.

We elected the practical expedients to not recognize right-of-use assets and liabilities for leases with a term of twelve months or less and to not separate nonlease components from the associated lease components for our office leases and certain other asset classes. The total consideration includes fixed payments and contractual escalation provisions. We are responsible for maintenance, insurance, property taxes and other variable payments, which are expensed as incurred. Our leases include options to renew or terminate. We include the option to renew or terminate in our determination of the lease term when the option is deemed to be reasonably assured to be exercised. 

Operating leases are classified in "Operating lease right-of-use assets", "Operating lease liabilities—current", and "Operating lease liabilities—noncurrent" on our condensed consolidated balance sheets. Operating lease expense is recognized on a straight-line basis over the expected lease term and included in "Loss from operations" in our condensed consolidated statements of operations and comprehensive loss.

Strategic Investments

Our strategic investments consist of non-marketable equity investments in privately-held companies in which we do not have a controlling interest or significant influence. We have elected to apply the measurement alternative for equity investments that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when event or circumstance indicates a decline in value has occurred.

In March 2019, we purchased equity investments in privately-held companies totaling $15.5 million that were classified in "Other assets—noncurrent" on our condensed consolidated balance sheets. As there have been no material observable price changes, we have not recorded any adjustments resulting from observable price changes for identical or similar investments or impairment charges for any of our equity investments in privately-held companies in the six months ended July 31, 2019. We had no such investments as of January 31, 2019.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued accounting standards update ("ASU") No. 2016-02, Leases (Topic 842), which supersedes current guidance related to accounting for leases. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The ASU makes 16 technical corrections to the new lease standard and other accounting topics, alleviating unintended consequences from applying the new standard. It does not make any substantive changes to the core provisions or principles of the new standard. In July 2018, the FASB also issued ASU No. 2018-11, Leases (Topic 842). The ASU provides (1) an optional transition method that entities can use when adopting the standard and (2) a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met.

The standard is effective for public entities for annual and interim reporting periods beginning after December 15, 2018. We adopted the new standard as of February 1, 2019, and recognized a cumulative-effect adjustment to the opening balance of accumulated deficit as of the adoption date. We elected the optional transition approach to not apply Topic 842 in the comparative periods presented. We elected the practical expedient to use hindsight when determining the lease term and the package of practical expedients to not reassess whether existing contracts contain leases, the lease classification for existing leases and whether existing initial direct costs meet the new definition. The adoption of Topic 842 resulted in the recognition of total right-of-use assets of $93.9 million and total lease liabilities of $121.8 million as of adoption date, with the most significant impact related to our office space leases. Additionally, we derecognized $26.6 million in deferred rent and $2.5 million related to the build-to-suit asset and liability upon adoption of this standard pursuant to the transition guidance provided for build-to-suit leases. The adoption of Topic 842 did not have a material impact to the consolidated statements of operations or statements of cash flows.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). As the amendment only relates to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The standard is effective for annual and interim reporting periods beginning after December 15, 2018 for all entities. The amendment is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Early adoption is permitted. The adoption of the standard did not have an impact on our consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASU aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. The ASU is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted, including in an interim period, but not before an entity adopts the topic 606 revenue guidance. The adoption of the standard did not have a material impact on our consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies, corrects errors in and makes improvements to several topics in the FASB Accounting Standard Codification. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance of the ASU. Amendments that do have transition guidance are effective for public business entities for annual periods beginning after December 15, 2018. The adoption of the standard did not have a material impact on our consolidated financial statements.

Other Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to eliminate inconsistencies and provide clarifications to the transition requirements of ASU No. 2016-13. The updates to the standard are effective for interim and annual periods beginning after December 15, 2019. We are evaluating the impact of the adoption of the ASUs on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the ASU on our consolidated financial statements.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jul. 31, 2019	Jan. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares outstanding (in shares)	175,953,000	169,303,000

XML

Leases - Operating Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2019
Leases [Abstract]
Operating lease cost	$ 6,625	$ 12,331
Short-term lease cost	172	441
Variable lease cost and other, net	138	187
Total lease cost	$ 6,935	$ 12,959

XML

Convertible Senior Notes - Carrying Value of Liability Component (Details) - Convertible Senior Notes Due 2023 - Convertible Debt $ in Thousands	Jul. 31, 2019 USD ($)
Debt Instrument [Line Items]
Principal	$ 575,000
Less: unamortized debt discount	(113,845)
Less: unamortized transaction costs	(9,221)
Net carrying amount	$ 451,934

XML

Geographic Information (Tables)

6 Months Ended

Jul. 31, 2019

Segment Reporting [Abstract]

Revenues by geographic area

Revenue by geographic area were as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
U.S.	$	193,736	$	138,543	$	370,002	$	268,357
International	41,876		28,501		79,572		54,495
Total revenue	$	235,612	$	167,044	$	449,574	$	322,852

Property and equipment by geographic area

Our property and equipment by geographic area were as follows:

(in thousands)	July 31, 2019		January 31, 2019
U.S.	$	76,349	$	60,625
International	15,729		15,207
Total property and equipment	$	92,078	$	75,832

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Revenue and Performance Obligations - Remaining Performance Obligations (Details)	Jul. 31, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-31
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	53.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligations, period of recognition	1 year

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Stockholders' Equity

6 Months Ended

Jul. 31, 2019

Equity [Abstract]

Stockholders' Equity

Stockholders' Equity

Equity Incentive Plans

We maintain three stock-based compensation plans: the 2018 Equity Incentive Plan (the "2018 Plan"), the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and the Amended and Restated 2003 Stock Plan (the “2003 Plan”).

Our board of directors adopted, and our stockholders approved, the 2018 Plan during the year ended January 31, 2019. The 2018 Plan went into effect in April 2018 upon the effectiveness of our IPO Registration Statement. This plan serves as a successor to the 2011 Plan and 2003 Plan and provides for the grant of stock-based awards to our employees, directors and consultants. No additional awards under the 2011 Plan or 2003 Plan were made as of the effective date of the 2018 Plan. Outstanding awards under these two plans continue to be subject to the terms and conditions of the respective plans.

Shares available for grant under the 2011 Plan that were reserved but not issued as of the effective date of the 2018 Plan were added to the reserves of the 2018 Plan. Any shares subject to outstanding awards originally granted under the 2011 Plan that: (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award shall become available for future issuance pursuant to the 2018 Plan. As of July 31, 2019, 24.3 million shares were available for future issuance under the 2018 Plan.

The number of shares reserved under the 2018 Plan will automatically increase on the first day of each fiscal year, starting on February 1, 2019, and continuing through February 1, 2028, in an amount equal to (i) 5% of the total number of shares of our capital stock outstanding on January 31st of the preceding fiscal year or (ii) a lesser number of shares as determined by our board of directors or a committee thereof. Pursuant to this automatic increase, the Compensation Committee of our board of directors approved an increase of 8.5 million shares reserved for issuance effective on February 1, 2019.

Stock Options

Option activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share and years data)	Number of Options Outstanding		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 31, 2019	13,648		$	12.27	5.38	$	507,371
Options exercised	(3,869	)	9.86
Options canceled/expired	(27	)	17.67
Outstanding at July 31, 2019	9,752		$	13.22	5.28	$	375,487
Vested and expected to vest at July 31, 2019	9,653		$	13.17	5.26	$	372,090
Exercisable at July 31, 2019	8,518		$	12.57	4.97	$	333,456

As of July 31, 2019, our total unrecognized compensation cost related to stock option grants was $8.8 million. We expect to recognize this expense over the remaining weighted-average period of approximately 1.4 years.

RSUs

Substantially all the RSUs that we have issued through January 31, 2018, vest upon the satisfaction of both service-based and performance-based vesting conditions. The service-based condition is typically satisfied over a four-year service period. The performance-based condition related to these awards was satisfied upon the effectiveness of our IPO Registration Statement on April 26, 2018. On that date we recorded a cumulative stock-based compensation expense of $262.8 million using the accelerated attribution method for all the RSUs with the service condition fully satisfied. Majority of RSUs granted after January 31, 2018, vest on the satisfaction of a service-based condition only. From time to time, we also grant RSUs that are subject to performance-based or market-based vesting conditions. The performance-based conditions will be satisfied if our financial performance meets certain operating targets. The market-based conditions will be satisfied if certain milestones based on our common stock price or total shareholder return are met. As of July 31, 2019, we had 0.3 million unvested RSUs subject to performance-based conditions for which the performance condition was deemed probable as of period end and 0.2 million unvested RSUs subject to market-based conditions.

RSU activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share data)	Number of Units		Weighted-Average Grant Date Fair Value
Unvested at January 31, 2019	17,142		$	34.56
Granted	4,760		52.91
Vested	(4,180	)	26.07
Canceled	(1,283	)	37.52
Unvested at July 31, 2019	16,439		$	41.78

As of July 31, 2019, our total unrecognized compensation cost related to RSUs was $498.3 million. We expect to recognize this expense over the remaining weighted-average period of approximately 2.4 years.

2018 Employee Stock Purchase Plan

Our 2018 Employee Stock Purchase Plan (“2018 ESPP”) allows eligible employees to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase our common stock at a discounted price per share. The price at which common stock is purchased under the 2018 ESPP is equal to 85% of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. The 2018 ESPP provides for separate six-month offering periods that begin on September 15 and March 15 each year. The initial offering period ran from September 15, 2018, through March 14, 2019. In the six months ended July 31, 2019, 0.2 million shares of our common stock were purchased under the 2018 ESPP. Compensation expense related to the ESPP was $2.1 million and $4.0 million for the three and six months ended July 31, 2019.

The number of shares reserved under the 2018 ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2019 and continuing through February 1, 2028, in an amount equal to the lesser of (i) 1% of the total number of shares of our common stock outstanding on January 31 of the preceding fiscal year, (ii) 3.8 million shares, or (iii) a lesser number of shares determined by our board of directors. As of July 31, 2019, 5.3 million shares were reserved for future issuance under the 2018 ESPP.

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Deferred Contract Acquisition and Fulfillment Costs

6 Months Ended

Jul. 31, 2019

Revenue from Contract with Customer [Abstract]

Deferred Contract Acquisition and Fulfillment Costs

Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 94% and 95% for the three months ended July 31, 2019 and 2018, and 94% and 95% of our revenue for the six months ended July 31, 2019 and 2018.

The typical subscription term is one to three years. Most of our subscription contracts are noncancelable over the contractual term. Customers typically have the right to terminate their contracts for cause, if we fail to perform. As of July 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $628.6 million, which consists of both billed and unbilled consideration that we expect to recognize as subscription revenue. We expect to recognize 53% of the transaction price in the twelve months following July 31, 2019, in our consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

We elected to apply the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with a contract term of one year or less. In addition, we do not disclose the transaction price related to revenue from professional services, training services and web revenue as revenue from these sources is recognized within one year.

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $16.8 million and $11.9 million as of July 31, 2019 and January 31, 2019, of which $1.3 million was noncurrent and included within "Other assets—noncurrent" on our consolidated balance sheets as of both periods. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2019 and 2018, we recognized revenue of $265.7 million and $157.3 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules. We record accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days.

Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition costs:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	115,985		$	77,344
Additions to deferred contract acquisition costs	39,879			29,662
Amortization of deferred contract acquisition costs	(26,929		)	(18,223		)
Cumulative translation adjustment	(1,394		)	—
Ending balance	$	127,541		$	88,783

	July 31,
(in thousands)	2019		2018
Deferred contract acquisition costs, current	$	3,107	$	2,584
Deferred contract acquisitions costs, noncurrent	124,434		86,199
Total	$	127,541	$	88,783

The following table represents our contract fulfillment costs, which include third-party service fees:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	3,432		$	3,316
Additions to deferred contract fulfillment costs	8,560			677
Amortization of deferred contract fulfillment costs	(4,220		)	(923		)
Ending balance	$	7,772		$	3,070

	July 31,
(in thousands)	2019		2018
Deferred contract fulfillment costs, current	$	4,600	$	913
Deferred contract fulfillment costs, noncurrent	3,172		2,157
Total	$	7,772	$	3,070

Current deferred contract acquisition and fulfillment costs are included in "Prepaid expense and other current assets" and noncurrent costs are included in "Other assets—noncurrent" on our consolidated balance sheets.

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Property and Equipment, Net

6 Months Ended

Jul. 31, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

Property and equipment consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Computer and network equipment	$	62,751		$	55,233
Software, including capitalized software development costs	31,435			27,959
Furniture and office equipment	11,982			9,511
Leasehold improvements	48,109			41,464
	154,277			134,167
Less: Accumulated depreciation	(73,942		)	(66,479		)
	80,335			67,688
Work in progress	11,743			8,144
	$	92,078		$	75,832

Depreciation expense associated with property and equipment was $7.9 million and $5.3 million for the three months ended July 31, 2019 and 2018, and $15.1 million and $11.5 million for the six months ended July 31, 2019 and 2018.

As of January 31, 2019, leasehold improvements include $2.5 million related to the fair value of the Israel leased space that was recorded under the build-to-suit lease guidance. Upon adoption of Topic 842 on February 1, 2019, we derecognized the build-to-suit asset and recognized an operating right-of-use asset for the related lease within the condensed consolidated balance sheet as of July 31, 2019. Refer to Note 1 for additional information.

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018
Cash flows from operating activities:
Net loss	$ (114,354)	$ (307,401)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	24,261	15,681
Amortization of deferred contract acquisition and fulfillment costs	31,149	19,146
Amortization of debt discount and transaction costs	13,002	0
Non-cash operating lease costs	8,863
Stock-based compensation expense	98,063	309,959
Deferred income taxes	28	(12)
Other	(2,371)	(875)
Changes in operating assets and liabilities
Accounts receivable	35,896	15,385
Contract assets	(4,905)	1,149
Prepaid expenses and other current assets	(3,157)	(3,406)
Deferred contract acquisition and fulfillment costs	(48,439)	(30,339)
Other assets	959	1,335
Accounts payable	1,588	(5,034)
Accrued expenses	12,439	2,306
Accrued compensation	2,427	360
Contract liabilities	21,746	19,503
Operating lease liabilities	(7,198)	0
Other liabilities	2,063	(69)
Net cash provided by operating activities	72,060	37,688
Cash flows from investing activities:
Purchases of marketable securities	(530,886)	0
Maturities of marketable securities	244,449	0
Purchases of strategic investments	(15,500)	0
Purchases of property and equipment	(29,791)	(10,520)
Net cash used in investing activities	(331,728)	(10,520)
Cash flows from financing activities:
Proceeds from issuance of common stock in initial public offering, net of underwriting commissions	0	529,305
Proceeds from issuance of common stock in initial public offering, net of underwriting commissions	(85,978)	0
Payment of tax withholding obligation on RSU settlement	42,448	10,318
Proceeds from exercise of stock options	10,563	0
Payment of deferred offering costs	0	(3,522)
Net cash provided by (used in) financing activities	(32,967)	536,101
Effect of foreign exchange on cash, cash equivalents and restricted cash	(1,120)	(1,543)
Net increase (decrease) in cash, cash equivalents and restricted cash	(293,755)	561,726
Cash, cash equivalents and restricted cash at beginning of period	518,178	257,436
Cash, cash equivalents and restricted cash at end of period	224,423	819,162
Supplemental disclosure:
Cash paid for interest	1,414	204
Cash paid for operating lease liabilities	10,984
Cash paid for taxes	1,109	2,001
Non-cash investing and financing activities:
Property and equipment in accounts payable and other accrued liabilities	4,046	2,100
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	0	547,854
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	0	848
Preferred stock accretion	0	353
Deferred offering costs accrued and unpaid	0	$ 169
Operating lease right-of-use assets exchanged for lease obligations	53,754
Derecognition of build-to-suit lease	$ 2,479

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Current assets
Cash and cash equivalents	$ 224,290	$ 517,811
Investments—current	525,963	251,203
Restricted cash	133	367
Accounts receivable	138,652	174,548
Contract assets—current	15,548	10,616
Prepaid expense and other current assets	38,907	29,976
Total current assets	943,493	984,521
Investments—noncurrent	180,146	164,220
Property and equipment, net	92,078	75,832
Operating lease right-of-use assets	137,292
Goodwill	195,427	195,225
Intangible assets, net	65,070	74,203
Deferred contract acquisition costs—noncurrent	124,434	112,583
Other assets—noncurrent	23,896	8,833
Total assets	1,761,836	1,615,417
Current liabilities
Accounts payable	23,452	19,590
Accrued expenses	34,227	21,755
Accrued compensation	79,980	77,553
Contract liabilities—current	402,734	381,060
Operating lease liabilities—current	17,193
Deferred rent—current		2,452
Other liabilities—current	16,563	13,903
Total current liabilities	574,149	516,313
Convertible senior notes, net	451,934	438,932
Contract liabilities—noncurrent	7,784	7,712
Operating lease liabilities—noncurrent	150,493
Deferred rent—noncurrent		24,195
Deferred tax liability—noncurrent	4,270	4,207
Other liabilities—noncurrent	6,527	9,696
Total liabilities	1,195,157	1,001,055
Commitments and contingencies (Note 11)
Stockholders' equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2019 and January 31, 2019	0	0
Common stock, $0.0001 par value; 500,000 shares authorized, 175,953 shares outstanding as of July 31, 2019; 500,000 shares authorized, 169,303 shares outstanding as of January 31, 2019	18	17
Additional paid-in capital	1,612,786	1,545,088
Accumulated other comprehensive loss	(2,945)	(1,965)
Accumulated deficit	(1,043,180)	(928,778)
Total stockholders' equity	566,679	614,362
Total liabilities and stockholders' equity	$ 1,761,836	$ 1,615,417

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Leases - Future Lease Payments (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Future lease payments due:
Fiscal 2020, remainder	$ 11,227
Fiscal 2021	26,340
Fiscal 2022	27,291
Fiscal 2023	27,697
Fiscal 2024	27,784
Thereafter	79,339
Total undiscounted cash flows	199,678
Less imputed interest	(31,992)
Present value of lease liabilities	$ 167,686
Weighted average remaining term (years)	8 years 2 months 12 days
Weighted average discount rate	4.40%
Future minimum annual lease payments:
Fiscal 2020		$ 22,198
Fiscal 2021		22,617
Fiscal 2022		22,556
Fiscal 2023		23,173
Fiscal 2024		23,373
Thereafter		34,634
Total minimum lease payments		$ 148,551

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Convertible Senior Notes - Carrying Amount of Equity Component (Details) - Convertible Debt - Convertible Senior Notes Due 2023 $ in Thousands	Jul. 31, 2019 USD ($)
Debt Instrument [Line Items]
Proceeds allocated to the conversion option (debt discount)	$ 134,667
Less: transaction costs	(3,336)
Net carrying amount	$ 131,331

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Net Loss per Share Attributable to Common Stockholders (Tables)

6 Months Ended

Jul. 31, 2019

Earnings Per Share [Abstract]

Schedule of calculation of basic and diluted loss per share

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for periods presented:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except per share data)	2019			2018			2019			2018
Numerator:
Net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)
Less: preferred stock accretion	—			—			—			(353		)
Net loss attributable to common stockholders	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,754	)
Denominator:
Weighted-average common shares outstanding	175,389			166,084			173,773			102,284
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.39	)	$	(0.22	)	$	(0.66	)	$	(3.01	)

Schedule of antidilutive securities

Outstanding potentially dilutive securities that were excluded from the diluted per share calculations because they would have been antidilutive are as follows:

	July 31,
(in thousands)	2019	2018
Stock options	9,752	18,122
RSUs	15,893	18,908
ESPP	288	—
Total antidilutive securities	25,933	37,030

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Cash equivalents
Amortized Cost	$ 224,290	$ 517,811
Available-for-sale securities
Gross Unrealized Gains	1,115	400
Estimated Fair Value	706,109
Total
Amortized Cost	800,941	851,534
Gross Unrealized Losses	(160)	(142)
Estimated Fair Value	801,896	851,792
Level 2
Available-for-sale securities
Amortized Cost	705,154	501,471
Gross Unrealized Gains	1,115	400
Gross Unrealized Losses	(160)	(142)
Estimated Fair Value	706,109	501,729
Commercial paper | Level 2
Available-for-sale securities
Amortized Cost	41,197	86,655
Gross Unrealized Gains	45	4
Gross Unrealized Losses	(2)	(21)
Estimated Fair Value	41,240	86,638
Corporate notes and bonds | Level 2
Available-for-sale securities
Amortized Cost	351,691	287,496
Gross Unrealized Gains	835	389
Gross Unrealized Losses	(68)	(105)
Estimated Fair Value	352,458	287,780
U.S. Treasury securities | Level 2
Available-for-sale securities
Amortized Cost	174,897	4,982
Gross Unrealized Gains	172	0
Gross Unrealized Losses	(31)	(1)
Estimated Fair Value	175,038	4,981
U.S. government agency securities | Level 2
Available-for-sale securities
Amortized Cost	137,369	36,021
Gross Unrealized Gains	63	7
Gross Unrealized Losses	(59)	(4)
Estimated Fair Value	137,373	36,024
Money market funds | Level 1
Cash equivalents
Amortized Cost	95,787	350,063
Estimated Fair Value	$ 95,787	350,063
Commercial paper | Level 2
Cash equivalents
Amortized Cost		76,828
Gross Unrealized Losses		(11)
Estimated Fair Value		76,817
Corporate notes and bonds | Level 2
Cash equivalents
Amortized Cost		2,998
Estimated Fair Value		2,998
U.S. government agency securities | Level 2
Cash equivalents
Amortized Cost		6,491
Estimated Fair Value		$ 6,491

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Convertible Senior Notes

6 Months Ended

Jul. 31, 2019

Debt Disclosure [Abstract]

Convertible Senior Notes

Convertible Senior Notes

In September 2018, we issued $575.0 million aggregate principal amount of 0.5% Convertible Senior Notes due in 2023, including the initial purchasers’ exercise in full of their option to purchase an additional $75.0 million principal amount of the Notes, in a private placement to qualified institutional buyers in an offering exempt from registration under the Securities Act. The net proceeds from the issuance of the Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs.

The Notes are governed by an indenture (the “Indenture”) between us, as the issuer, and U.S. Bank National Association, as trustee. The Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of our unsecured indebtedness then existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The Indenture does not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by us or any of our subsidiaries. The Notes mature on September 15, 2023, unless earlier repurchased or redeemed by us or earlier converted in accordance with their terms prior to the maturity date. Interest is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.

The Notes have an initial conversion rate of 13.9860 shares of our common stock per $1,000 principal amount of Notes, which is equal to an initial conversion price of approximately $71.50 per share of our common stock and is subject to adjustment in some events. Following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, we will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or during the related redemption period in certain circumstances. Additionally, upon the occurrence of a corporate event that constitutes a “fundamental change” per the Indenture, holders of the Notes may require us to repurchase for cash all or a portion of their Notes at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest.

On or after June 15, 2023, until the close of business on September 13, 2023, holders may convert all or any portion of their Notes at any time regardless of whether the conditions set forth below have been met. Upon conversion, holders will receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

Holders of the Notes may convert all or any portion of their Notes at any time prior to the close of business on June 14, 2023, in integral multiples of $1,000 principal amount, only under the following circumstances:

• During any fiscal quarter commencing after the fiscal quarter ending on January 31, 2019 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• During the 5-business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price as defined in the Indenture per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

• If we call any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

• Upon the occurrence of specified corporate events described in the Indenture.

We may redeem for cash or shares all or any portion of the Notes, at our option, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, beginning on or after September 20, 2021 if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day.

As of July 31, 2019, the conditions allowing holders of the Notes to convert have not been met and therefore the Notes are not yet convertible.

We account for the Notes as separate liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows using a discount rate of 6% based on comparable convertible transactions for similar companies. The carrying amount of the equity component representing the conversion option was $134.7 million and was calculated by deducting the carrying value of the liability component from the principal amount of the Notes as a whole. This difference represents a debt discount that is amortized to interest expense over the term of the Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocate transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the liability component were $10.9 million and are being amortized to interest expense using the effective interest method over the term of the Notes. Transaction costs attributable to the equity component were $3.3 million and are netted with the equity component of the Notes in stockholders’ equity.

The net carrying value of the liability component of the Notes was as follows:

(in thousands)	July 31, 2019
Principal	$	575,000
Less: unamortized debt discount	(113,845		)
Less: unamortized transaction costs	(9,221		)
Net carrying amount	$	451,934

The net carrying amount of the equity component of the Notes was as follows:

(in thousands)	July 31, 2019
Proceeds allocated to the conversion option (debt discount)	$	134,667
Less: transaction costs	(3,336		)
Net carrying amount	$	131,331

The interest expense recognized related to the Notes was as follows:

(in thousands)	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Contractual interest expense	$	719	$	1,429
Amortization of debt discount	6,058		12,028
Amortization of transaction costs	490		974
Total	$	7,267	$	14,431

Capped Calls

In connection with the offering of the Notes, we entered into privately-negotiated capped call transactions ("Capped Calls") with certain counterparties. The Capped Calls each have an initial strike price of approximately $71.50 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $110.00 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 8.0 million shares of common stock. The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Call transactions are considered indexed to our own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $67.6 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.

Impact on Earnings Per Share

The Notes will not have an impact on our diluted earnings per share until the average market price of our common stock exceeds the cap price of $110.00 per share, as we intend and have the ability to settle the principal amount of the Notes in cash upon conversion. We are required under the treasury stock method to compute the potentially dilutive shares of common stock related to the Notes for periods we report net income. However, upon conversion, there will be no economic dilution from the Notes until the average market price of our common stock exceeds the cap price of $110.00 per share, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the cap price. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive under the treasury stock method.

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Acquisition of SpringCM Inc.

6 Months Ended

Jul. 31, 2019

Business Combinations [Abstract]

Acquisition of SpringCM Inc.

Acquisition of SpringCM Inc.

On September 4, 2018, we completed the acquisition of SpringCM Inc. ("SpringCM"), a cloud-based document generation and contract lifecycle management software company based in Chicago, Illinois. With the addition of SpringCM's capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow, the deal further accelerates the broadening of our solution beyond e-signature to the rest of the agreement process—from preparing to signing, acting-on and managing agreements. Under the terms of the merger agreement, we acquired SpringCM for approximately $218.8 million in cash, excluding cash acquired, working capital and transaction cost adjustments. Of the cash paid at closing, $8.2 million will be held in escrow for an 18-month period after closing to secure our indemnification rights under the merger agreement.

Additionally, we granted certain continuing employees of SpringCM restricted stock units ("RSUs") with a service and performance conditions covering up to 0.5 million shares with grant date fair value of $26.5 million that will be accounted for as a post-acquisition compensation expense over the vesting period. The performance-based condition will be satisfied upon SpringCM meeting certain revenue targets and will impact the quantity of shares that will vest. As of July 31, 2019, the performance-based condition was considered probable of meeting the minimum target.

We accounted for the transaction as a business combination using the acquisition method of accounting. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Fair values were determined using the valuation performed by management. Excess purchase price consideration was recorded as goodwill and is primarily attributable to the assembled workforce and expanded market opportunities when integrating SpringCM’s capabilities in document generation, redlining, advanced document management and end-to-end agreement workflow with our other offerings. 

We engaged third party valuation specialists to aid our analysis of the fair value of the acquired intangibles. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of management and not those of any third party.

The fair values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches. The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition:

(in thousands)	September 4, 2018
Cash and cash equivalents	$	6,950
Accounts receivable and other assets	10,542
Property and equipment	6,108
Goodwill	159,097
Intangible assets	73,000
Contract liabilities	(9,973		)
Other liabilities	(12,948		)
Deferred tax liability	(7,047		)
	$	225,729

None of the goodwill recognized upon acquisition is deductible for U.S. federal income tax purposes.

The estimated useful lives, primarily based on the expected period of benefit to us, and fair values of the identifiable intangible assets at acquisition date were as follows:

(in thousands, except years)	Estimated Fair Value		Expected Useful Life
Existing technology	$	11,900	3 years
Customer relationships—subscription	54,200		9 years
Backlog—subscription	6,400		2 years
Tradenames / trademarks	500		1 year
Total preliminary intangible assets	$	73,000

In the year ended January 31, 2019, we incurred acquisition costs of $1.8 million. These costs included legal, accounting fees and other costs directly related to the acquisition and are classified within operating expenses in our condensed consolidated statements of operations.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on February 1, 2017. It includes pro forma adjustments related to the amortization of acquired intangible assets, stock-based compensation expense, professional services revenue and contract acquisitions costs adjustments under the new revenue recognition standard, and contract liabilities fair value adjustment. The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2017, or of future results of operations:

(in thousands, except per share data)	Three Months Ended July 31, 2018			Six Months Ended July 31, 2018
Revenue	$	175,066		$	337,710
Net loss	(44,448		)	(325,090		)
Net loss per share attributable to common stockholders, basic and diluted	(0.27		)	(3.18		)

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Net Loss per Share Attributable to Common Stockholders

6 Months Ended

Jul. 31, 2019

Earnings Per Share [Abstract]

Net Loss per Share Attributable to Common Stockholders

Net Loss per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for periods presented:

	Three Months Ended July 31,						Six Months Ended July 31,
(in thousands, except per share data)	2019			2018			2019			2018
Numerator:
Net loss	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,401	)
Less: preferred stock accretion	—			—			—			(353		)
Net loss attributable to common stockholders	$	(68,632	)	$	(36,714	)	$	(114,354	)	$	(307,754	)
Denominator:
Weighted-average common shares outstanding	175,389			166,084			173,773			102,284
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.39	)	$	(0.22	)	$	(0.66	)	$	(3.01	)

Outstanding potentially dilutive securities that were excluded from the diluted per share calculations because they would have been antidilutive are as follows:

	July 31,
(in thousands)	2019	2018
Stock options	9,752	18,122
RSUs	15,893	18,908
ESPP	288	—
Total antidilutive securities	25,933	37,030

The table above does not include 0.5 million and 0.2 million RSUs outstanding as of July 31, 2019 and 2018, as these RSUs are subject to operating and stock price targets that were not considered to be met as of the reporting period.

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Deferred Contract Acquisition and Fulfillment Costs (Tables)

6 Months Ended

Jul. 31, 2019

Revenue from Contract with Customer [Abstract]

Deferred contract costs

The following table represents a rollforward of our deferred contract acquisition costs:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	115,985		$	77,344
Additions to deferred contract acquisition costs	39,879			29,662
Amortization of deferred contract acquisition costs	(26,929		)	(18,223		)
Cumulative translation adjustment	(1,394		)	—
Ending balance	$	127,541		$	88,783

	July 31,
(in thousands)	2019		2018
Deferred contract acquisition costs, current	$	3,107	$	2,584
Deferred contract acquisitions costs, noncurrent	124,434		86,199
Total	$	127,541	$	88,783

The following table represents our contract fulfillment costs, which include third-party service fees:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	3,432		$	3,316
Additions to deferred contract fulfillment costs	8,560			677
Amortization of deferred contract fulfillment costs	(4,220		)	(923		)
Ending balance	$	7,772		$	3,070

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Fair Value Measurements (Tables)

6 Months Ended

Jul. 31, 2019

Fair Value Disclosures [Abstract]

Summary of assets and liabilities measured at fair value on a recurring basis

The following table summarizes our financial assets that are measured at fair value on a recurring basis during the period:

	July 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	95,787	$	—	$	—		$	95,787
Level 2:
Available-for-sale securities
Commercial paper	41,197		45		(2		)	41,240
Corporate notes and bonds	351,691		835		(68		)	352,458
U.S. Treasury securities	174,897		172		(31		)	175,038
U.S. government agency securities	137,369		63		(59		)	137,373
Level 2 total	705,154		1,115		(160		)	706,109
Total	$	800,941	$	1,115	$	(160	)	$	801,896
	January 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	350,063	$	—	$	—		$	350,063
Level 2:
Cash equivalents
Commercial paper	76,828		—		(11		)	76,817
Corporate notes and bonds	2,998		—		—			2,998
U.S. government agency securities	6,491		—		—			6,491
Available-for-sale securities
Commercial paper	86,655		4		(21		)	86,638
Corporate notes and bonds	287,496		389		(105		)	287,780
U.S. Treasury securities	4,982		—		(1		)	4,981
U.S. government agency securities	36,021		7		(4		)	36,024
Level 2 total	501,471		400		(142		)	501,729
Total	$	851,534	$	400	$	(142	)	$	851,792

Fair value of available-for-sale marketable securities by remaining contractual maturities

The fair value of our available-for-sale marketable securities as of July 31, 2019, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less	$	525,963
Due in one to two years	180,146
	$	706,109

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Net Loss per Share Attributable to Common Stockholders - Narrative (Details) - shares shares in Millions	Jul. 31, 2019	Jul. 31, 2018
RSUs with vesting conditions
IPO, Sale of Stock [Line Items]
RSUs outstanding (in shares)	0.5	0.2

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Stockholders' Equity - Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jul. 31, 2019 USD ($) $ / shares shares	Jan. 31, 2019 USD ($) $ / shares shares
Number of Options Outstanding
Beginning balance (in shares) | shares	13,648
Options exercised (in shares) | shares	(3,869)
Options canceled/expired (in shares) | shares	(27)
Ending balance (in shares) | shares	9,752	13,648
Vested and expected to vest (in shares) | shares	9,653
Exercisable (in shares) | shares	8,518
Weighted-Average Exercise Price Per Share
Beginning balance (in usd per share) | $ / shares	$ 12.27
Options exercised (in usd per share) | $ / shares	9.86
Options canceled/expired (in usd per share) | $ / shares	17.67
Ending balance (in usd per share) | $ / shares	13.22	$ 12.27
Vested and expected to vest (in usd per share) | $ / shares	13.17
Exercisable (in usd per share) | $ / shares	$ 12.57
Weighted-Average Remaining Contractual Term
Balance	5 years 3 months 10 days	5 years 4 months 17 days
Vested and expected to vest	5 years 3 months 3 days
Exercisable	4 years 11 months 19 days
Aggregate Intrinsic Value
Balance | $	$ 375,487	$ 507,371
Vested and expected to vest | $	372,090
Exercisable | $	$ 333,456

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Acquisition of SpringCM Inc. - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019	Sep. 04, 2018
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Goodwill	$ 195,427	$ 195,225
SpringCM Inc.
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents			$ 6,950
Accounts receivable and other assets			10,542
Property and equipment			6,108
Goodwill			159,097
Intangible assets			73,000
Contract liabilities			(9,973)
Other liabilities			(12,948)
Deferred tax liability			(7,047)
Total assets acquired and liabilities assumed			$ 225,729

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Goodwill and Intangible Assets, Net - Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jan. 31, 2019
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	6 years 7 months 6 days
Estimated Fair Value	$ 114,610	$ 114,610
Accumulated Amortization	(50,180)	(41,027)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	64,430	73,583
Cumulative translation adjustment	640	620
Acquisition-related Intangibles, Net	$ 65,070	74,203
Existing technology
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	2 years 1 month 6 days
Estimated Fair Value	$ 31,594	31,594
Accumulated Amortization	(23,112)	(20,747)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 8,482	10,847
Tradenames / trademarks
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	18 days
Estimated Fair Value	$ 2,419	2,419
Accumulated Amortization	(2,223)	(1,858)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 196	561
Customer contracts & related relationships
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	7 years 10 months 24 days
Estimated Fair Value	$ 65,782	65,782
Accumulated Amortization	(15,148)	(11,168)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 50,634	54,614
Certifications
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	1 year 1 month 6 days
Estimated Fair Value	$ 6,917	6,917
Accumulated Amortization	(5,538)	(4,846)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 1,379	2,071
Maintenance contracts & related relationships
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	27 days
Estimated Fair Value	$ 1,498	1,498
Accumulated Amortization	(1,254)	(1,104)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 244	394
Backlog—Subscription
Finite-Lived Intangible Assets, Net [Abstract]
Weighted-average Remaining Useful Life (Years)	1 year 2 months 12 days
Estimated Fair Value	$ 6,400	6,400
Accumulated Amortization	(2,905)	(1,304)
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 3,495	$ 5,096

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Commitments and Contingencies - Future Purchase Obligations (Details) $ in Thousands	Jul. 31, 2019 USD ($)
Purchase Obligation, Fiscal Year Maturity [Abstract]
Fiscal 2020, remainder	$ 4,322
Fiscal 2021	10,987
Fiscal 2022	9,379
Fiscal 2023	898
Fiscal 2024	943
Thereafter	4,555
Total	$ 31,084

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Leases - Narrative (Details)	Jul. 31, 2019 contract
Leases [Abstract]
Number of lease contracts	0

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Convertible Senior Notes - Narrative (Details) $ / shares in Units, shares in Millions	1 Months Ended
	Sep. 30, 2018 USD ($) trading_day $ / shares shares	Jul. 31, 2019 USD ($)
Convertible Senior Notes Due 2023 | Convertible Debt
Debt Conversion [Line Items]
Aggregate principal amount of debt issued	$ 575,000,000.0	$ 575,000,000.0
Debt interest rate percentage		0.50%
Additional principal amount purchased	75,000,000.0
Proceeds from issuance of debt	$ 560,800,000
Conversion rate	0.013986
Conversion price (in usd per share) | $ / shares	$ 71.50
Percentage of principal amount redeemed	100.00%
Trading days | trading_day	20
Consecutive trading days | trading_day	30
Percentage of conversion price	130.00%
Equity component of conversion option		$ 134,667,000
Transaction costs attributable to liability component		10,900,000
Transaction costs attributable to equity components		$ 3,336,000
Capped Calls
Debt Conversion [Line Items]
Conversion price (in usd per share) | $ / shares	$ 71.50
Initial cap price (in usd per share) | $ / shares	$ 110.00
Shares covered by capped calls (in shares) | shares	8.0
Costs incurred for capped calls	$ 67,600,000
Conversion Covenant One | Convertible Senior Notes Due 2023 | Convertible Debt
Debt Conversion [Line Items]
Trading days | trading_day	20
Consecutive trading days | trading_day	30
Percentage of conversion price	130.00%
Conversion Covenant Two | Convertible Senior Notes Due 2023 | Convertible Debt
Debt Conversion [Line Items]
Trading days | trading_day	5
Consecutive trading days | trading_day	10
Percentage of conversion price	98.00%
Measurement Input, Discount Rate | Convertible Senior Notes Due 2023 | Convertible Debt
Debt Conversion [Line Items]
Discount rate		0.06

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Revenue:
Total revenue	$ 235,612	$ 167,044	$ 449,574	$ 322,852
Cost of revenue:
Total cost of revenue	61,176	36,361	113,195	94,655
Gross profit	174,436	130,683	336,379	228,197
Operating expenses:
Sales and marketing	150,886	103,779	280,822	294,864
Research and development	47,517	33,773	84,700	104,643
General and administrative	40,755	30,851	78,016	133,968
Total expenses	239,158	168,403	443,538	533,475
Loss from operations	(64,722)	(37,720)	(107,159)	(305,278)
Interest expense	(7,273)	(47)	(14,429)	(240)
Interest income and other income, net	4,531	2,998	9,748	770
Loss before provision for income taxes	(67,464)	(34,769)	(111,840)	(304,748)
Provision for income taxes	1,168	1,945	2,514	2,653
Net loss	$ (68,632)	$ (36,714)	$ (114,354)	$ (307,401)
Net loss per share attributable to common stockholders, basic and diluted	$ (0.39)	$ (0.22)	$ (0.66)	$ (3.01)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	175,389	166,084	173,773	102,284
Other comprehensive income (loss):
Foreign currency translation losses, net of tax	$ (45)	$ (3,085)	$ (1,676)	$ (5,413)
Unrealized gains on investments, net of tax	358	0	696	0
Other comprehensive income (loss)	313	(3,085)	(980)	(5,413)
Comprehensive loss	(68,319)	(39,799)	(115,334)	(312,814)
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense			98,063	309,959
Sales and marketing
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense	25,942	16,791	44,044	129,272
Research and development
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense	11,963	7,359	19,280	54,627
General and administrative
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense	9,951	11,605	21,081	95,650
Subscription
Revenue:
Total revenue	220,811	158,461	422,269	306,659
Cost of revenue:
Total cost of revenue	39,472	23,057	72,591	55,495
Subscription | Cost of revenue
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense	3,115	1,588	5,397	11,543
Professional services and other
Revenue:
Total revenue	14,801	8,583	27,305	16,193
Cost of revenue:
Total cost of revenue	21,704	13,304	40,604	39,160
Professional services and other | Cost of revenue
Stock-based compensation expense included in costs and expenses:
Stock-based compensation expense	$ 4,821	$ 2,822	$ 8,261	$ 18,867

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Fair Value Measurements

6 Months Ended

Jul. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We carry certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities;
Level 2	Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
Level 3	Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability.

The following table summarizes our financial assets that are measured at fair value on a recurring basis during the period:

	July 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	95,787	$	—	$	—		$	95,787
Level 2:
Available-for-sale securities
Commercial paper	41,197		45		(2		)	41,240
Corporate notes and bonds	351,691		835		(68		)	352,458
U.S. Treasury securities	174,897		172		(31		)	175,038
U.S. government agency securities	137,369		63		(59		)	137,373
Level 2 total	705,154		1,115		(160		)	706,109
Total	$	800,941	$	1,115	$	(160	)	$	801,896
	January 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Level 1:
Cash equivalents
Money market funds	$	350,063	$	—	$	—		$	350,063
Level 2:
Cash equivalents
Commercial paper	76,828		—		(11		)	76,817
Corporate notes and bonds	2,998		—		—			2,998
U.S. government agency securities	6,491		—		—			6,491
Available-for-sale securities
Commercial paper	86,655		4		(21		)	86,638
Corporate notes and bonds	287,496		389		(105		)	287,780
U.S. Treasury securities	4,982		—		(1		)	4,981
U.S. government agency securities	36,021		7		(4		)	36,024
Level 2 total	501,471		400		(142		)	501,729
Total	$	851,534	$	400	$	(142	)	$	851,792

Money market funds consist of cash equivalents with original maturities of three months or less at the date of purchase. We use quoted prices in active markets for identical assets or liabilities to determine the fair value of our Level 1 investments in money market funds. The fair value of our Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs.

The fair value of our available-for-sale marketable securities as of July 31, 2019, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less	$	525,963
Due in one to two years	180,146
	$	706,109

As of July 31, 2019, we had a total of 168 available-for-sale securities, none of which were considered to be other-than-temporarily impaired.

Convertible Senior Notes

As of July 31, 2019, the estimated fair value of our 0.5% Convertible Senior Notes (the "Notes") with aggregate principal amount of $575.0 million was $605.8 million. We estimated the fair value based on the quoted market prices in an inactive market on the last trading day of the reporting period (Level 2). The Notes are recorded at face value less unamortized debt discount and transaction costs as "Convertible senior notes, net" on our consolidated balance sheets. Refer to Note 9 for further information.

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Commitments and Contingencies

6 Months Ended

Jul. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As of July 31, 2019, we had unused letters of credit outstanding associated with our various operating leases totaling $9.8 million.

We have entered into certain noncancelable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of July 31, 2019, our noncancelable contractual obligations with a remaining term of more than one year were as follows (in thousands):

Fiscal 2020, remainder	$	4,322
Fiscal 2021	10,987
Fiscal 2022	9,379
Fiscal 2023	898
Fiscal 2024	943
Thereafter	4,555
Total	$	31,084

Indemnification

We enter into indemnification provisions under our agreements with customers and other companies in the ordinary course of business, including business partners, contractors and parties performing our research and development. Pursuant to these arrangements, we agree to indemnify and defend the indemnified party for certain claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of our activities. The duration of these indemnification agreements is generally perpetual. The maximum potential amount of future payments we could be required to make under these indemnifications is not determinable. Historically, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these indemnification agreements is not material as of July 31, 2019, and January 31, 2019. We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

We have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.

Claims and Litigation

From time to time, we may be subject to legal proceedings, claims and litigations made against us in the ordinary course of business. We believe the final outcome of these matters will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. In June 2011, RMail Limited, RPost Communications Limited and RPost Holdings filed a complaint against us for patent infringement in the U.S. District Court for the Eastern District of Texas. In October 2012, RPost Holdings Inc. and RPost Communications Limited filed another patent infringement complaint against us in the same court. In August 2019, subsequent to quarter end, we and such RPost entities entered into a settlement agreement, and both cases were dismissed. The settlement amount, included in Other liabilities—current as of July 31, 2019, was not material to our financial statements.

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Contract Balances

6 Months Ended

Jul. 31, 2019

Revenue from Contract with Customer [Abstract]

Contract Balances

Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 94% and 95% for the three months ended July 31, 2019 and 2018, and 94% and 95% of our revenue for the six months ended July 31, 2019 and 2018.

The typical subscription term is one to three years. Most of our subscription contracts are noncancelable over the contractual term. Customers typically have the right to terminate their contracts for cause, if we fail to perform. As of July 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $628.6 million, which consists of both billed and unbilled consideration that we expect to recognize as subscription revenue. We expect to recognize 53% of the transaction price in the twelve months following July 31, 2019, in our consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

We elected to apply the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with a contract term of one year or less. In addition, we do not disclose the transaction price related to revenue from professional services, training services and web revenue as revenue from these sources is recognized within one year.

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $16.8 million and $11.9 million as of July 31, 2019 and January 31, 2019, of which $1.3 million was noncurrent and included within "Other assets—noncurrent" on our consolidated balance sheets as of both periods. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2019 and 2018, we recognized revenue of $265.7 million and $157.3 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules. We record accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days.

Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition costs:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	115,985		$	77,344
Additions to deferred contract acquisition costs	39,879			29,662
Amortization of deferred contract acquisition costs	(26,929		)	(18,223		)
Cumulative translation adjustment	(1,394		)	—
Ending balance	$	127,541		$	88,783

	July 31,
(in thousands)	2019		2018
Deferred contract acquisition costs, current	$	3,107	$	2,584
Deferred contract acquisitions costs, noncurrent	124,434		86,199
Total	$	127,541	$	88,783

The following table represents our contract fulfillment costs, which include third-party service fees:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	3,432		$	3,316
Additions to deferred contract fulfillment costs	8,560			677
Amortization of deferred contract fulfillment costs	(4,220		)	(923		)
Ending balance	$	7,772		$	3,070

	July 31,
(in thousands)	2019		2018
Deferred contract fulfillment costs, current	$	4,600	$	913
Deferred contract fulfillment costs, noncurrent	3,172		2,157
Total	$	7,772	$	3,070

Current deferred contract acquisition and fulfillment costs are included in "Prepaid expense and other current assets" and noncurrent costs are included in "Other assets—noncurrent" on our consolidated balance sheets.

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Commitments and Contingencies (Tables)

6 Months Ended

Jul. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of noncancelable contractual obligations

As of July 31, 2019, our noncancelable contractual obligations with a remaining term of more than one year were as follows (in thousands):

Fiscal 2020, remainder	$	4,322
Fiscal 2021	10,987
Fiscal 2022	9,379
Fiscal 2023	898
Fiscal 2024	943
Thereafter	4,555
Total	$	31,084

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Summary of Significant Accounting Policies - Narrative (Details) - USD ($)	Jul. 31, 2019	Mar. 31, 2019	Feb. 01, 2019	Jan. 31, 2019
Accounting Policies [Abstract]
Equity investments in privately-held companies		$ 15,500,000		$ 0
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 137,292,000
Operating lease liabilities	167,686,000
Derecognition related to build-to-suit asset	(92,078,000)			$ (75,832,000)
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets			$ 93,900,000
Operating lease liabilities			121,800,000
Deferred rent			26,600,000
Israel Leased Property | Other Capitalized Property Plant and Equipment | Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Derecognition related to build-to-suit asset	$ 2,500,000
Derecognition related to build-to-suit liability			$ 2,500,000

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Fair Value Measurements - Fair Value of Available-for-Sale Marketable Securities by Remaining Contractual Maturities (Details) $ in Thousands	Jul. 31, 2019 USD ($)
Fair Value Disclosures [Abstract]
Due in one year or less	$ 525,963
Due in one to two years	180,146
Total available-for-sale securities	$ 706,109

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Leases (Tables)

6 Months Ended

Jul. 31, 2019

Leases [Abstract]

Operating lease costs

The following table is a summary of our operating lease costs, (in thousands):

	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Operating lease cost	$	6,625	$	12,331
Short-term lease cost	172		441
Variable lease cost and other, net	138		187
Total lease cost	$	6,935	$	12,959

Future lease payments

Future lease payments as of July 31, 2019, were as follows (in thousands):

Fiscal 2020, remainder	$	11,227
Fiscal 2021	26,340
Fiscal 2022	27,291
Fiscal 2023	27,697
Fiscal 2024	27,784
Thereafter	79,339
Total undiscounted cash flows	$	199,678
Less imputed interest	(31,992		)
Present value of lease liabilities	$	167,686
Weighted average remaining term (years)	8.2
Weighted average discount rate	4.4		%

Future minimum annual lease payments

The future minimum annual lease payments as of January 31, 2019, related to the outstanding lease agreements were as follows (in thousands):

Fiscal 2020	$	22,198
Fiscal 2021	22,617
Fiscal 2022	22,556
Fiscal 2023	23,173
Fiscal 2024	23,373
Thereafter	34,634
Total minimum lease payments	$	148,551

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Acquisition of SpringCM Inc. (Tables)

6 Months Ended

Jul. 31, 2019

Business Combinations [Abstract]

Schedule of assets acquired and liabilities assumed

The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition:

(in thousands)	September 4, 2018
Cash and cash equivalents	$	6,950
Accounts receivable and other assets	10,542
Property and equipment	6,108
Goodwill	159,097
Intangible assets	73,000
Contract liabilities	(9,973		)
Other liabilities	(12,948		)
Deferred tax liability	(7,047		)
	$	225,729

Schedule of identifiable intangible assets estimated useful lives

The estimated useful lives, primarily based on the expected period of benefit to us, and fair values of the identifiable intangible assets at acquisition date were as follows:

(in thousands, except years)	Estimated Fair Value		Expected Useful Life
Existing technology	$	11,900	3 years
Customer relationships—subscription	54,200		9 years
Backlog—subscription	6,400		2 years
Tradenames / trademarks	500		1 year
Total preliminary intangible assets	$	73,000

Schedule of unaudited pro forma results

The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2017, or of future results of operations:

(in thousands, except per share data)	Three Months Ended July 31, 2018			Six Months Ended July 31, 2018
Revenue	$	175,066		$	337,710
Net loss	(44,448		)	(325,090		)
Net loss per share attributable to common stockholders, basic and diluted	(0.27		)	(3.18		)

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Geographic Information

6 Months Ended

Jul. 31, 2019

Segment Reporting [Abstract]

Geographic Information

Geographic Information

We operate in one operating and one reportable segment as we only report financial information on an aggregate and consolidated basis to the Chief Executive Officer, who is our chief operating decision maker.

Revenue by geography is generally based on the address of the customer as specified in our master subscription agreement. Revenue by geographic area were as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
U.S.	$	193,736	$	138,543	$	370,002	$	268,357
International	41,876		28,501		79,572		54,495
Total revenue	$	235,612	$	167,044	$	449,574	$	322,852

No single country other than the U.S. had revenue greater than 10% of total revenue for the three and six months ended July 31, 2019 and 2018.

Our property and equipment by geographic area were as follows:

(in thousands)	July 31, 2019		January 31, 2019
U.S.	$	76,349	$	60,625
International	15,729		15,207
Total property and equipment	$	92,078	$	75,832

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018	Jan. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, net	$ 92,078		$ 92,078		$ 75,832
Depreciation expense	7,900	$ 5,300	15,100	$ 11,500
Computer and network equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	62,751		62,751		55,233
Software, including capitalized software development costs
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	31,435		31,435		27,959
Furniture and office equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	11,982		11,982		9,511
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	48,109		48,109		41,464
Property and equipment, excluding work in progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	154,277		154,277		134,167
Less: Accumulated depreciation	(73,942)		(73,942)		(66,479)
Property and equipment, net	80,335		80,335		67,688
Work in progress
Property, Plant and Equipment [Line Items]
Property and equipment, net	$ 11,743		$ 11,743		8,144
Israel Leased Property | Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, net					$ 2,500

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Acquisition of SpringCM Inc. - Pro Forma Results (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2018	Jul. 31, 2018
Business Acquisition, Pro Forma Information [Abstract]
Revenue	$ 175,066	$ 337,710
Net loss	$ (44,448)	$ (325,090)
Net loss per share attributable to common stockholders, basic and diluted (in usd per share)	$ (0.27)	$ (3.18)

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Goodwill and Intangible Assets, Net - Future Amortization (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Fiscal 2020, remainder	$ 8,564
Fiscal 2021	13,818
Fiscal 2022	8,370
Fiscal 2023	6,023
Fiscal 2024	6,023
Thereafter	21,632
Acquisition-related intangibles, net, excluding cumulative translation adjustment	$ 64,430	$ 73,583

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Geographic Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019 USD ($)	Jul. 31, 2018 USD ($)	Jul. 31, 2019 USD ($) segment	Jul. 31, 2018 USD ($)	Jan. 31, 2019 USD ($)
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of operating segments | segment			1
Number of reportable segments | segment			1
Total revenue	$ 235,612	$ 167,044	$ 449,574	$ 322,852
Total property and equipment	92,078		92,078		$ 75,832
U.S.
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	193,736	138,543	370,002	268,357
Total property and equipment	76,349		76,349		60,625
International
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	41,876	$ 28,501	79,572	$ 54,495
Total property and equipment	$ 15,729		$ 15,729		$ 15,207

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Net Loss per Share Attributable to Common Stockholders - Calculation of basic and diluted net loss per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Numerator:
Net loss	$ (68,632)	$ (36,714)	$ (114,354)	$ (307,401)
Less: preferred stock accretion	0	0	0	(353)
Net loss attributable to common stockholders	$ (68,632)	$ (36,714)	$ (114,354)	$ (307,754)
Denominator:
Weighted-average common shares outstanding (in shares)	175,389	166,084	173,773	102,284
Net loss per share attributable to common stockholders:
Basic and diluted (in usd per share)	$ (0.39)	$ (0.22)	$ (0.66)	$ (3.01)

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Label	Element	Value
Accounting Standards Update 2016-02 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (48,000)
Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (48,000)

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Property and Equipment, Net (Tables)

6 Months Ended

Jul. 31, 2019

Property, Plant and Equipment [Abstract]

Property and equipment

Property and equipment consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Computer and network equipment	$	62,751		$	55,233
Software, including capitalized software development costs	31,435			27,959
Furniture and office equipment	11,982			9,511
Leasehold improvements	48,109			41,464
	154,277			134,167
Less: Accumulated depreciation	(73,942		)	(66,479		)
	80,335			67,688
Work in progress	11,743			8,144
	$	92,078		$	75,832

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Income Taxes

6 Months Ended

Jul. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our income tax provisions were $1.2 million and $1.9 million for the three months ended July 31, 2019 and 2018, and $2.5 million and $2.7 million for the six months ended July 31, 2019 and 2018. The provision was primarily driven by foreign tax expenses, resulting foreign earnings in certain foreign jurisdictions, partially offset by excess benefits from stock option settlements.

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for valuation allowances, on a quarterly basis. There is no corresponding income tax benefit recognized with respect to losses incurred and no corresponding income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in our effective tax rate. We maintain a valuation allowance against certain deferred tax assets, including all federal, state, and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results. In the event that we determine the deferred tax assets are realizable based on its assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

As of July 31, 2019, our gross unrecognized tax benefits totaled $10.9 million, excluding related accrued interest and penalties, all of which would impact the effective tax rate if recognized. Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

We are subject to taxation in the U.S. and various state and foreign jurisdictions. Earnings from international activities are subject to local country income tax. The material jurisdictions where we are subject to potential examination by taxing authorities include the U.S., California and Israel. We are currently under an income tax examination by the Israel Tax Authority for tax years 2013 through 2016. We are not currently under audit by the Internal Revenue Service or any similar taxing authority in any other material jurisdiction. We believe that adequate amounts have been reserved in all jurisdictions.

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Convertible Senior Notes (Tables)

6 Months Ended

Jul. 31, 2019

Debt Disclosure [Abstract]

Schedule of convertible debt

The net carrying value of the liability component of the Notes was as follows:

(in thousands)	July 31, 2019
Principal	$	575,000
Less: unamortized debt discount	(113,845		)
Less: unamortized transaction costs	(9,221		)
Net carrying amount	$	451,934

The net carrying amount of the equity component of the Notes was as follows:

(in thousands)	July 31, 2019
Proceeds allocated to the conversion option (debt discount)	$	134,667
Less: transaction costs	(3,336		)
Net carrying amount	$	131,331

The interest expense recognized related to the Notes was as follows:

(in thousands)	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Contractual interest expense	$	719	$	1,429
Amortization of debt discount	6,058		12,028
Amortization of transaction costs	490		974
Total	$	7,267	$	14,431

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Contract Balances (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jan. 31, 2019
Revenue from Contract with Customer [Abstract]
Contract assets	$ 16.8		$ 11.9
Contract assets, noncurrent	1.3		$ 1.3
Revenue recognized that was included in contract liability balance at the beginning of the period	$ 265.7	$ 157.3
Payment term	30 days

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Acquisition of SpringCM Inc. - Narrative (Details) - SpringCM Inc. - USD ($) shares in Millions, $ in Millions		6 Months Ended	12 Months Ended
	Sep. 04, 2018	Jul. 31, 2019	Jan. 31, 2019
Business Acquisition [Line Items]
Cash paid, excluding cash acquired	$ 218.8
Portion of cash paid held in escrow	$ 8.2
Period of time held in escrow	18 months
Acquisition costs			$ 1.8
RSUs with vesting conditions
Business Acquisition [Line Items]
Shares granted to employees (in shares)		0.5
Unrecognized compensation cost, RSUs		$ 26.5

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Goodwill and Intangible Assets, Net - Goodwill (Details) $ in Thousands	6 Months Ended
	Jul. 31, 2019 USD ($)
Goodwill [Roll Forward]
Balance at January 31, 2019	$ 195,225
Cumulative translation adjustment	202
Balance at July 31, 2019	$ 195,427

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 1,168	$ 1,945	$ 2,514	$ 2,653
Uncertain tax benefits	$ 10,900		$ 10,900

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Stockholders' Equity - RSU Activity (Details) - RSUs shares in Thousands	6 Months Ended
	Jul. 31, 2019 $ / shares shares
Number of Units
Unvested at beginning of period (in shares) | shares	17,142
Granted (in shares) | shares	4,760
Vested (in shares) | shares	(4,180)
Canceled (in shares) | shares	(1,283)
Unvested at end of period (in shares) | shares	16,439
Weighted-Average Grant Date Fair Value
Unvested at beginning of period (in usd per share) | $ / shares	$ 34.56
Granted (in usd per share) | $ / shares	52.91
Vested (in usd per share) | $ / shares	26.07
Canceled (in usd per share) | $ / shares	37.52
Unvested at end of period (in usd per share) | $ / shares	$ 41.78

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Convertible Senior Notes - Interest Expense (Details) - Convertible Debt - Convertible Senior Notes Due 2023 - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2019
Debt Instrument [Line Items]
Contractual interest expense	$ 719	$ 1,429
Amortization of debt discount	6,058	12,028
Amortization of transaction costs	490	974
Total	$ 7,267	$ 14,431

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Deferred Contract Acquisition and Fulfillment Costs (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jan. 31, 2019	Jul. 31, 2018
Capitalized Contract Cost, Net [Roll Forward]
Amortization of deferred contract acquisition costs	$ (31,149)	$ (19,146)
Cumulative translation adjustment	(1,394)	0
Deferred contract acquisitions costs, noncurrent			$ 124,434	$ 112,583
Contract acquisition costs
Capitalized Contract Cost, Net [Roll Forward]
Beginning balance	115,985	77,344
Additions to deferred contract acquisition costs	39,879	29,662
Amortization of deferred contract acquisition costs	(26,929)	(18,223)
Ending balance	127,541	88,783
Deferred contract acquisition costs, current			3,107		$ 2,584
Deferred contract acquisitions costs, noncurrent			124,434		86,199
Total	115,985	77,344	127,541	115,985	88,783
Contract fulfillment costs
Capitalized Contract Cost, Net [Roll Forward]
Beginning balance	3,432	3,316
Additions to deferred contract acquisition costs	8,560	677
Amortization of deferred contract acquisition costs	(4,220)	(923)
Ending balance	7,772	3,070
Deferred contract acquisition costs, current			4,600		913
Deferred contract acquisitions costs, noncurrent			3,172		2,157
Total	$ 3,432	$ 3,316	$ 7,772	$ 3,432	$ 3,070

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Commitments and Contingencies - Narrative (Details) $ in Millions	Jul. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Letters of credit outstanding	$ 9.8

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Revenue and Performance Obligations

6 Months Ended

Jul. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue and Performance Obligations

Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 94% and 95% for the three months ended July 31, 2019 and 2018, and 94% and 95% of our revenue for the six months ended July 31, 2019 and 2018.

The typical subscription term is one to three years. Most of our subscription contracts are noncancelable over the contractual term. Customers typically have the right to terminate their contracts for cause, if we fail to perform. As of July 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $628.6 million, which consists of both billed and unbilled consideration that we expect to recognize as subscription revenue. We expect to recognize 53% of the transaction price in the twelve months following July 31, 2019, in our consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

We elected to apply the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with a contract term of one year or less. In addition, we do not disclose the transaction price related to revenue from professional services, training services and web revenue as revenue from these sources is recognized within one year.

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $16.8 million and $11.9 million as of July 31, 2019 and January 31, 2019, of which $1.3 million was noncurrent and included within "Other assets—noncurrent" on our consolidated balance sheets as of both periods. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2019 and 2018, we recognized revenue of $265.7 million and $157.3 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules. We record accounts receivable when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days.

Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition costs:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	115,985		$	77,344
Additions to deferred contract acquisition costs	39,879			29,662
Amortization of deferred contract acquisition costs	(26,929		)	(18,223		)
Cumulative translation adjustment	(1,394		)	—
Ending balance	$	127,541		$	88,783

	July 31,
(in thousands)	2019		2018
Deferred contract acquisition costs, current	$	3,107	$	2,584
Deferred contract acquisitions costs, noncurrent	124,434		86,199
Total	$	127,541	$	88,783

The following table represents our contract fulfillment costs, which include third-party service fees:

	Six Months Ended July 31,
(in thousands)	2019			2018
Beginning balance	$	3,432		$	3,316
Additions to deferred contract fulfillment costs	8,560			677
Amortization of deferred contract fulfillment costs	(4,220		)	(923		)
Ending balance	$	7,772		$	3,070

	July 31,
(in thousands)	2019		2018
Deferred contract fulfillment costs, current	$	4,600	$	913
Deferred contract fulfillment costs, noncurrent	3,172		2,157
Total	$	7,772	$	3,070

Current deferred contract acquisition and fulfillment costs are included in "Prepaid expense and other current assets" and noncurrent costs are included in "Other assets—noncurrent" on our consolidated balance sheets.

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Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Redeemable Convertible Preferred Stock
Beginning balance (in shares) at Jan. 31, 2018		35,700
Beginning balance at Jan. 31, 2018	$ (338,648)	$ 4	$ 160,265	$ 3,403	$ (502,320)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		1,400
Exercise of stock options	10,318		10,318
Employee stock-based compensation expense	310,133		310,133
Non-employee stock-based compensation expense	833		833
Accretion of preferred stock	(353)		(353)
Issuance of common stock in connection with initial public offering, net of offering costs (in shares)		19,314
Issuance of common stock in connection with initial public offering, net of offering costs	525,299	$ 2	525,297
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares)		100,350
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	547,854	$ 10	547,844
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	848		848
Exercise of warrants (in shares)		22
Exercise of warrants	0
Net loss	(307,401)				(307,401)
Other comprehensive income (loss), net	(5,413)			(5,413)
Ending balance (in shares) at Jul. 31, 2018		156,786
Ending balance at Jul. 31, 2018	743,470	$ 16	1,555,185	(2,010)	(809,721)
Beginning balance (in shares) at Jan. 31, 2018						100,226
Beginning balance at Jan. 31, 2018						$ 547,501
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of preferred stock	(353)					$ (353)
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares)						(100,226)
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering						$ (547,854)
Ending balance (in shares) at Jul. 31, 2018						0
Ending balance at Jul. 31, 2018						$ 0
Beginning balance (in shares) at Apr. 30, 2018		36,776
Beginning balance at Apr. 30, 2018	(333,728)	$ 4	438,200	1,075	(773,007)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		324
Exercise of stock options	2,503		2,503
Employee stock-based compensation expense	40,380		40,380
Non-employee stock-based compensation expense	113		113
Issuance of common stock in connection with initial public offering, net of offering costs (in shares)		19,314
Issuance of common stock in connection with initial public offering, net of offering costs	525,299	$ 2	525,297
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares)		100,350
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering	547,854	$ 10	547,844
Conversion of preferred stock warrant to common stock warrant in connection with initial public offering	848		848
Exercise of warrants (in shares)		22
Exercise of warrants	0
Net loss	(36,714)				(36,714)
Other comprehensive income (loss), net	(3,085)			(3,085)
Ending balance (in shares) at Jul. 31, 2018		156,786
Ending balance at Jul. 31, 2018	743,470	$ 16	1,555,185	(2,010)	(809,721)
Beginning balance (in shares) at Apr. 30, 2018						100,226
Beginning balance at Apr. 30, 2018						$ 547,854
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of preferred stock	0
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares)						(100,226)
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering						$ (547,854)
Ending balance (in shares) at Jul. 31, 2018						0
Ending balance at Jul. 31, 2018						$ 0
Beginning balance (in shares) at Jan. 31, 2019		169,303
Beginning balance at Jan. 31, 2019	$ 614,362	$ 17	1,545,088	(1,965)	(928,778)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	3,869	3,869
Exercise of stock options	$ 42,448		42,448
Settlement of RSUs (in shares)		4,144
Settlement of RSUs	0	$ 1	(1)
Tax withholding on RSU settlement (in shares)		(1,594)
Tax withholding on RSU settlement	(85,978)		(85,978)
Employee stock purchase plan (in shares)		231
Employee stock purchase plan	10,563		10,563
Employee stock-based compensation expense	100,597		100,597
Non-employee stock-based compensation expense	69		69
Net loss	(114,354)				(114,354)
Other comprehensive income (loss), net	(980)			(980)
Ending balance (in shares) at Jul. 31, 2019		175,953
Ending balance at Jul. 31, 2019	566,679	$ 18	1,612,786	(2,945)	(1,043,180)
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of preferred stock	0
Beginning balance (in shares) at Apr. 30, 2019		173,628
Beginning balance at Apr. 30, 2019	597,682	$ 17	1,575,471	(3,258)	(974,548)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		1,235
Exercise of stock options	10,194		10,194
Settlement of RSUs (in shares)		1,681
Settlement of RSUs	0	$ 1	(1)
Tax withholding on RSU settlement (in shares)		(591)
Tax withholding on RSU settlement	(29,841)		(29,841)
Employee stock-based compensation expense	56,928		56,928
Non-employee stock-based compensation expense	35		35
Net loss	(68,632)				(68,632)
Other comprehensive income (loss), net	313			313
Ending balance (in shares) at Jul. 31, 2019		175,953
Ending balance at Jul. 31, 2019	566,679	$ 18	$ 1,612,786	$ (2,945)	$ (1,043,180)
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of preferred stock	$ 0

XML

Cover Page - shares shares in Millions	6 Months Ended
	Jul. 31, 2019	Aug. 31, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 31, 2019
Document Transition Report	false
Entity File Number	001-38465
Entity Registrant Name	DOCUSIGN, INC.
Entity Central Index Key	0001261333
Current Fiscal Year End Date	--01-31
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	91-2183967
Entity Address, Address Line One	221 Main St.
Entity Address, Address Line Two	Suite 1550
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94105
City Area Code	415
Local Phone Number	489-4940
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	DOCU
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Small Business	false
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		176.0

XML

Leases

6 Months Ended

Jul. 31, 2019

Leases [Abstract]

Leases

Leases

We lease office space and equipment under non-cancelable operating lease agreements that expire at various dates through February 2032. As of July 31, 2019, we have no finance leases.

The following table is a summary of our operating lease costs, (in thousands):

	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
Operating lease cost	$	6,625	$	12,331
Short-term lease cost	172		441
Variable lease cost and other, net	138		187
Total lease cost	$	6,935	$	12,959

Future lease payments as of July 31, 2019, were as follows (in thousands):

Fiscal 2020, remainder	$	11,227
Fiscal 2021	26,340
Fiscal 2022	27,291
Fiscal 2023	27,697
Fiscal 2024	27,784
Thereafter	79,339
Total undiscounted cash flows	$	199,678
Less imputed interest	(31,992		)
Present value of lease liabilities	$	167,686
Weighted average remaining term (years)	8.2
Weighted average discount rate	4.4		%

The future minimum annual lease payments as of January 31, 2019, related to the outstanding lease agreements were as follows (in thousands):

Fiscal 2020	$	22,198
Fiscal 2021	22,617
Fiscal 2022	22,556
Fiscal 2023	23,173
Fiscal 2024	23,373
Thereafter	34,634
Total minimum lease payments	$	148,551

XML

Goodwill and Intangible Assets, Net

6 Months Ended

Jul. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net

The changes in the carrying amount of goodwill for the six months ended July 31, 2019, were as follows (in thousands):

Balance at January 31, 2019	$	195,225
Cumulative translation adjustment	202
Balance at July 31, 2019	$	195,427

Intangible assets consisted of the following:

		As of July 31, 2019							As of January 31, 2019
(in thousands)	Weighted-average Remaining Useful Life (Years)	Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net		Estimated Fair Value		Accumulated Amortization			Acquisition-related Intangibles, Net
Existing technology	2.1	$	31,594	$	(23,112	)	$	8,482	$	31,594	$	(20,747	)	$	10,847
Tradenames / trademarks	0.6	2,419		(2,223		)	196		2,419		(1,858		)	561
Customer contracts & related relationships	7.9	65,782		(15,148		)	50,634		65,782		(11,168		)	54,614
Certifications	1.1	6,917		(5,538		)	1,379		6,917		(4,846		)	2,071
Maintenance contracts & related relationships	0.9	1,498		(1,254		)	244		1,498		(1,104		)	394
Backlog—Subscription	1.2	6,400		(2,905		)	3,495		6,400		(1,304		)	5,096
	6.6	$	114,610	$	(50,180	)	64,430		$	114,610	$	(41,027	)	73,583
Cumulative translation adjustment							640							620
Total							$	65,070						$	74,203

Amortization of finite-lived intangible assets for the three and six months ended July 31, 2019 and 2018, was as follows:

	Three Months Ended July 31,				Six Months Ended July 31,
(in thousands)	2019		2018		2019		2018
Cost of subscription revenue	$	1,381	$	1,003	$	3,008	$	2,671
Sales and marketing	3,039		765		6,145		1,530
Total	$	4,420	$	1,768	$	9,153	$	4,201

As of July 31, 2019, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows, excluding cumulative translation adjustment (in thousands):

Fiscal 2020, remainder	$	8,564
Fiscal 2021	13,818
Fiscal 2022	8,370
Fiscal 2023	6,023
Fiscal 2024	6,023
Thereafter	21,632
Total	$	64,430

XML

Fair Value Measurements - Narrative (Details)	Jul. 31, 2019 USD ($) security	Sep. 30, 2018 USD ($)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of available-for-sale securities | security	168
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value of debt	$ 605,800,000
Convertible Debt | Convertible Senior Notes Due 2023
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt interest rate percentage	0.50%
Aggregate principal amount of debt issued	$ 575,000,000.0	$ 575,000,000.0

XML

Stockholders' Equity (Tables)

6 Months Ended

Jul. 31, 2019

Equity [Abstract]

Schedule of stock option activity

Option activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share and years data)	Number of Options Outstanding		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 31, 2019	13,648		$	12.27	5.38	$	507,371
Options exercised	(3,869	)	9.86
Options canceled/expired	(27	)	17.67
Outstanding at July 31, 2019	9,752		$	13.22	5.28	$	375,487
Vested and expected to vest at July 31, 2019	9,653		$	13.17	5.26	$	372,090
Exercisable at July 31, 2019	8,518		$	12.57	4.97	$	333,456

Schedule of RSU activity

RSU activity for the six months ended July 31, 2019, was as follows:

(in thousands, except per share data)	Number of Units		Weighted-Average Grant Date Fair Value
Unvested at January 31, 2019	17,142		$	34.56
Granted	4,760		52.91
Vested	(4,180	)	26.07
Canceled	(1,283	)	37.52
Unvested at July 31, 2019	16,439		$	41.78

XML

Revenue and Performance Obligations - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Disaggregation of Revenue [Line Items]
Remaining performance obligations	$ 628.6		$ 628.6
Subscription | Minimum
Disaggregation of Revenue [Line Items]
Contract term			1 year
Subscription | Maximum
Disaggregation of Revenue [Line Items]
Contract term			3 years
Product concentration risk | Revenue | Subscription
Disaggregation of Revenue [Line Items]
Concentration risk percentage	94.00%	95.00%	94.00%	95.00%