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 October 31, 2022

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 Jurisdiction 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 Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 (§232.405 of this chapter) 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 the definitions 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 201,074,148 shares of common stock, par value $0.0001, outstanding at November 30, 2022.

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 October 31, 2022 and January 31, 2022	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended October 31, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 31, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	64
	Exhibit Index	65
Signatures		66

DocuSign, Inc. | 2023 Form 10Q | 2

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, that are based on our management's beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations are forward-looking statements. 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.

These risks and uncertainties include, among other things, risks related to our expectations regarding global macro-economic conditions, including the effects of inflation, rising and fluctuating interest rates and market volatility on the global economy; our ability to estimate the size and growth of our total addressable market, and the development of the market for our products, which is new and evolving; our ability to effectively sustain and manage our growth and future expenses, achieve and maintain future profitability, attract new customers and maintain and expand our existing customer base; our ability to effectively implement and execute our restructuring plan; the impact of the coronavirus pandemic (the “COVID-19 pandemic”) or its abatement, on our business, results of operations, financial condition, and future profitability and growth; the impact of the evolving COVID-19 pandemic on the businesses of our customers, partners and suppliers, and the economy; our ability to scale and update our platform to respond to customers’ needs and rapid technological change; the effects of increased competition in 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 platform internationally; our ability to strengthen and foster our relationships with developers; our ability to expand our direct sales force, customer success team and strategic partnerships around the world; the impact of any data breaches, cyberattacks or other malicious activity on our technology systems; our ability to identify targets for and execute potential acquisitions; our ability to successfully integrate the operations of businesses we may acquire, and to realize the anticipated benefits of such acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash, cash equivalents and capital resources to satisfy our liquidity needs; limitations on us due to obligations we have under our credit facility or other indebtedness; our failure or the failure of our software 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, including executive level management; our ability to successfully manage and integrate executive management transitions; uncertainties regarding the impact of general economic and market conditions, including as a result of regional and global conflicts or related government sanctions; our ability to successfully implement and maintain new and existing information technology systems, including our ERP system; and our ability to maintain proper and effective internal controls.

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. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.

DocuSign, Inc. | 2023 Form 10Q | 3

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOCUSIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)	October 31, 2022		January 31, 2022
Assets
Current assets
Cash and cash equivalents	$	632,620	$	509,059
Investments—current	342,730		293,763
Accounts receivable, net of allowance for doubtful accounts of $5,203 and $5,807 as of October 31, 2022 and January 31, 2022	422,612		440,950
Contract assets—current	13,609		12,588
Prepaid expenses and other current assets	68,814		63,236
Total current assets	1,480,385		1,319,596
Investments—noncurrent	129,783		94,938
Property and equipment, net	196,127		184,664
Operating lease right-of-use assets	92,155		126,021
Goodwill	352,423		355,058
Intangible assets, net	75,232		98,816
Deferred contract acquisition costs—noncurrent	329,958		311,835
Other assets—noncurrent	75,521		50,337
Total assets	$	2,731,584	$	2,541,265
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	47,176	$	52,804
Accrued expenses and other current liabilities	96,227		91,377
Accrued compensation	146,297		160,163
Convertible senior notes—current	36,921		—
Contract liabilities—current	1,088,197		1,029,891
Operating lease liabilities—current	34,713		37,404
Total current liabilities	1,449,531		1,371,639
Convertible senior notes, net—noncurrent	684,861		718,487
Contract liabilities—noncurrent	15,242		16,725
Operating lease liabilities—noncurrent	81,237		126,340
Deferred tax liability—noncurrent	10,400		9,316
Other liabilities—noncurrent	21,807		23,255
Total liabilities	2,263,078		2,265,762
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of October 31, 2022 and January 31, 2022	—		—
Common stock, $0.0001 par value; 500,000 shares authorized, 201,069 shares outstanding as of October 31, 2022; 500,000 shares authorized, 198,834 shares outstanding as of January 31, 2022	20		20
Treasury stock, at cost: 10 and 7 shares as of October 31, 2022 and January 31, 2022	(1,785)		(1,532)
Additional paid-in capital	2,108,062		1,720,013
Accumulated other comprehensive loss	(34,244)		(4,809)
Accumulated deficit	(1,603,547)		(1,438,189)
Total stockholders’ equity	468,506		275,503
Total liabilities and stockholders' equity	$	2,731,584	$	2,541,265

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

DocuSign, Inc. | 2023 Form 10Q | 4

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands, except per share data)	2022		2021		2022		2021
Revenue:
Subscription	$	624,055	$	528,573	$	1,798,500	$	1,473,266
Professional services and other	21,408		16,890		57,839		53,119
Total revenue	645,463		545,463		1,856,339		1,526,385
Cost of revenue:
Subscription	102,524		84,579		315,614		247,105
Professional services and other	27,018		31,396		83,048		87,892
Total cost of revenue	129,542		115,975		398,662		334,997
Gross profit	515,921		429,488		1,457,677		1,191,388
Operating expenses:
Sales and marketing	313,783		275,619		938,062		777,110
Research and development	115,934		102,603		354,693		282,670
General and administrative	85,553		54,624		224,587		168,314
Restructuring and other related charges	28,082		—		28,082		—
Total operating expenses	543,352		432,846		1,545,424		1,228,094
Loss from operations	(27,431)		(3,358)		(87,747)		(36,706)
Interest expense	(1,456)		(1,485)		(4,737)		(4,826)
Interest income and other income (expense), net	820		(940)		(2,827)		4,034
Loss before provision for (benefit from) income taxes	(28,067)		(5,783)		(95,311)		(37,498)
Provision for (benefit from) income taxes	1,799		(107)		7,006		2,033
Net loss	$	(29,866)	$	(5,676)	$	(102,317)	$	(39,531)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.15)	$	(0.03)	$	(0.51)	$	(0.20)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	201,393		197,597		200,569		195,996
Other comprehensive loss:
Foreign currency translation loss, net of tax	$	(6,787)	$	(4,720)	$	(23,641)	$	(6,142)
Unrealized losses on investments, net of tax	(3,011)		(415)		(5,794)		(711)
Other comprehensive loss	(9,798)		(5,135)		(29,435)		(6,853)
Comprehensive loss	$	(39,664)	$	(10,811)	$	(131,752)	$	(46,384)
Stock-based compensation expense included in costs and expenses
Cost of revenue—subscription	$	11,665	$	8,095	$	35,272	$	21,652
Cost of revenue—professional services and other	6,767		7,270		18,327		19,250
Sales and marketing	57,925		49,663		166,574		134,720
Research and development	35,506		30,074		108,689		76,811
General and administrative	23,384		14,338		58,314		38,103
Restructuring and other related charges	5,590		—		5,590		—

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

DocuSign, Inc. | 2022 Form 10Q | 5

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
(in thousands)	Shares	Amount
Balances at July 31, 2022	200,771	$	20	$	1,968,852	$	(1,648)	$	(24,446)	$	(1,535,647)	$	407,131
Exercise of stock options	36	—		383		—		—		—		383
Settlement of restricted stock units and employee stock purchase plan	733	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units	—	—		(21,470)		(137)		—		—		(21,607)
Employee stock purchase plan	270	—		12,375		—		—		—		12,375
Repurchases of common stock	(741)	—		—		—		—		(38,034)		(38,034)
Employee stock-based compensation	—	—		147,922		—		—		—		147,922
Net loss	—	—		—		—		—		(29,866)		(29,866)
Other comprehensive loss, net	—	—		—		—		(9,798)		—		(9,798)
Balances at October 31, 2022	201,069	$	20	$	2,108,062	$	(1,785)	$	(34,244)	$	(1,603,547)	$	468,506
Balances at July 31, 2021	196,467	$	20	$	1,611,897	$	(1,219)	$	3,246	$	(1,402,068)	$	211,876
Settlement of convertible senior notes due in 2023	32	—		(32)		—		—		—		(32)
Exercise of stock options	357	—		9,358		—		—		—		9,358
Settlement of restricted stock units and employee stock purchase plan	767	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan	—	—		(106,098)		(313)		—		—		(106,411)
Employee stock purchase plans	131	—		22,910		—		—		—		22,910
Employee stock-based compensation	—	—		112,679		—		—		—		112,679
Net loss	—	—		—		—		—		(5,676)		(5,676)
Other comprehensive loss, net	—	—		—		—		(5,135)		—		(5,135)
Balances at October 31, 2021	197,754	$	20	$	1,650,714	$	(1,532)	$	(1,889)	$	(1,407,744)	$	239,569

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

DocuSign, Inc. | 2022 Form 10Q | 6

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Continued)

	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
(in thousands)	Shares	Amount
Balances at January 31, 2022	198,834	$	20	$	1,720,013	$	(1,532)	$	(4,809)	$	(1,438,189)	$	275,503
Exercise of stock options	755	—		11,009		—		—		—		11,009
Settlement of restricted stock units and employee stock purchase plan	2,081	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan	—	—		(68,826)		(253)		—		—		(69,079)
Employee stock purchase plan	534	—		36,526		—		—		—		36,526
Repurchases of common stock	(1,135)	—		—		—		—		(63,041)		(63,041)
Employee stock-based compensation	—	—		409,340		—		—		—		409,340
Net loss	—	—		—		—		—		(102,317)		(102,317)
Other comprehensive loss, net	—	—		—		—		(29,435)		—		(29,435)
Balances at October 31, 2022	201,069	$	20	$	2,108,062	$	(1,785)	$	(34,244)	$	(1,603,547)	$	468,506
Balances at January 31, 2021	192,807	$	19	$	1,702,254	$	(1,048)	$	4,964	$	(1,380,452)	$	325,737
Cumulative impact of Accounting Standards Update 2020-06 adoption	—	—		(86,144)		—		—		12,239		(73,905)
Settlement of convertible senior notes due in 2023	619	1		(757)		—		—		—		(756)
Exercise of stock options	1,468	—		21,176		—		—		—		21,176
Settlement of restricted stock units and employee stock purchase plan	2,586	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan	—	—		(333,991)		(484)		—		—		(334,475)
Employee stock purchase plan	264	—		46,077		—		—		—		46,077
Charitable donation of common stock	10	—		3,000		—		—		—		3,000
Employee stock-based compensation	—	—		299,099		—		—		—		299,099
Net loss	—	—		—		—		—		(39,531)		(39,531)
Other comprehensive loss, net	—	—		—		—		(6,853)		—		(6,853)
Balances at October 31, 2021	197,754	$	20	$	1,650,714	$	(1,532)	$	(1,889)	$	(1,407,744)	$	239,569

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

DocuSign, Inc. | 2022 Form 10Q | 7

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended October 31,
(in thousands)	2022		2021
Cash flows from operating activities:
Net loss	$	(102,317)	$	(39,531)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	63,976		61,163
Amortization of deferred contract acquisition and fulfillment costs	134,381		100,759
Amortization of debt discount and transaction costs	3,725		3,848
Non-cash operating lease costs	20,468		20,176
Stock-based compensation expense	392,765		290,536
Deferred income taxes	3,045		(2,360)
Other	13,540		5,598
Changes in operating assets and liabilities:
Accounts receivable	18,338		17,969
Prepaid expenses and other current assets	(7,593)		(12,890)
Deferred contract acquisition and fulfillment costs	(161,620)		(147,946)
Other assets	(15,707)		(11,290)
Accounts payable	(1,739)		6,703
Accrued expenses and other liabilities	873		11,886
Accrued compensation	(15,827)		(22,781)
Contract liabilities	56,824		161,047
Operating lease liabilities	(33,430)		(24,212)
Net cash provided by operating activities	369,702		418,675
Cash flows from investing activities:
Cash paid for acquisition, net of acquired cash	—		(6,388)
Purchases of marketable securities	(402,249)		(302,762)
Sales of marketable securities	—		3,070
Maturities of marketable securities	311,769		193,071
Purchases of strategic and other investments	(3,625)		(750)
Purchases of property and equipment	(53,590)		(43,926)
Net cash used in investing activities	(147,695)		(157,685)
Cash flows from financing activities:
Repayments of convertible senior notes	(16)		(64,835)
Repurchases of common stock	(63,041)		—
Payment of tax withholding obligation on net RSU settlement and ESPP purchase	(67,120)		(323,109)
Proceeds from exercise of stock options	11,009		21,176
Proceeds from employee stock purchase plan	36,526		46,077
Net cash used in financing activities	(82,642)		(320,691)
Effect of foreign exchange on cash, cash equivalents and restricted cash	(14,652)		(2,472)
Net increase (decrease) in cash, cash equivalents and restricted cash	124,713		(62,173)
Cash, cash equivalents and restricted cash at beginning of period (1)	509,679		566,336
Cash, cash equivalents and restricted cash at end of period (1)	$	634,392	$	504,163

(1) $1.8 million of restricted cash was included in Other assets—noncurrent at October 31, 2022. $0.6 million of restricted cash was included in both Prepaid expenses and other current assets and Other assets—noncurrent at January 31, 2022. $0.3 million of restricted cash was included in Prepaid expenses and other current assets at October 31, 2021, and in Other assets—noncurrent at January 31, 2021.

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

DocuSign, Inc. | 2022 Form 10Q | 8

DOCUSIGN, INC.

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

	Nine Months Ended October 31,
(in thousands)	2022		2021
Supplemental disclosure:
Cash paid for interest	$	185	$	349
Cash paid for operating lease liabilities	28,063		30,178
Cash paid for income taxes	5,630		5,637
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities	$	726	$	9,128
Operating lease right-of-use assets exchanged for lease obligations	930		—
Fair value of shares issued as part of the repayments of convertible senior notes	2		142,501

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

DocuSign, Inc. | 2022 Form 10Q | 9

DOCUSIGN, INC.

Index for Notes to the Condensed Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies	11
Note 2	Revenue	12
Note 3	Fair Value Measurements	13
Note 4	Property and Equipment, Net	14
Note 5	Deferred Contract Acquisition and Fulfillment Costs	15
Note 6	Debt	15
Note 7	Commitments and Contingencies	17
Note 8	Stockholders' Equity	18
Note 9	Restructuring and Other Related Charges	20
Note 10	Net Loss Per Share Attributable to Common Stockholders	20
Note 11	Income Taxes	20

DocuSign, Inc. | 2022 Form 10Q | 10

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”, “us”, or “Company”) 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, sign, act on and manage agreements, thereby simplifying and accelerating the process of doing business.

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include those of DocuSign, Inc. and our subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying 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 U.S. 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 fiscal 2022 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, 2022 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended October 31, 2022 are not necessarily indicative of the results to be expected for the year ending January 31, 2023.

Our fiscal year ends on January 31. References to fiscal 2023, for example, are to the fiscal year ending January 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the condensed consolidated financial statements and notes thereto.

Significant items subject to such estimates and assumptions made by management include, but are not limited to, the determination of:

•the average period of benefit associated with deferred contract acquisition costs and fulfillment costs;

•the valuation of strategic investments;

•the fair value of certain stock awards issued;

•the fair value of convertible notes;

•the useful life and recoverability of long-lived assets;

•the discount rate used for operating leases; and

•the recognition, measurement and valuation of deferred income taxes.

The COVID-19 pandemic and related developments have created and may continue to create significant uncertainty in global financial markets, which may decrease technology spending, depress demand for our products and harm our business and results of operations. As of the date of issuance of the financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities, except for certain subleases that resulted in impairment losses of $3.9 million on operating lease right-of-use assets recorded during the nine months ended October 31, 2021. These estimates may change as new events occur and additional information is obtained, which could be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

DocuSign, Inc. | 2022 Form 10Q | 11

Significant Accounting Policies

There have been no changes to our significant accounting policies described in our fiscal 2022 Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

Note 2. Revenue

Subscription revenue is recognized over time and accounted for approximately 97% of our revenue for both the three and nine months ended October 31, 2022 and 2021.

Performance Obligations

As of October 31, 2022, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $1.7 billion. We expect to recognize 58% of the transaction price allocated to remaining performance obligations within the 12 months following October 31, 2022 in our condensed consolidated statement of operations and comprehensive loss.

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 fully invoiced to our customers where there remains a performance obligation, typically for our multi-year arrangements. Total contract assets were $13.6 million and $12.6 million as of October 31, 2022 and January 31, 2022. The change in contract assets reflects the difference in timing between the satisfaction of our 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 nine months ended October 31, 2022 and 2021, we recognized revenue of $951.2 million and $730.7 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.

Geographic Information

Revenue by geography is based on the address of the customer as specified in our master subscription agreements with our customers. Revenue by geographic area was as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2022		2021		2022		2021
U.S.	$	488,280	$	417,296	$	1,401,355	$	1,183,601
International	157,183		128,167		454,984		342,784
Total revenue	$	645,463	$	545,463	$	1,856,339	$	1,526,385

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Note 3. Fair Value Measurements

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

	October 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds	$	2,941	$	—	$	—	$	2,941
Level 2:
Cash equivalents(1)
Commercial paper	24,901		—		(15)		24,886
Available-for-sale securities
Commercial paper	126,481		—		(762)		125,719
Corporate notes and bonds	323,071		—		(5,930)		317,141
Municipal notes and bonds	7,976		—		(107)		7,869
U.S. governmental securities	22,311		—		(527)		21,784
Level 2 total	504,740		—		(7,341)		497,399
Total	$	507,681	$	—	$	(7,341)	$	500,340
	January 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds	$	110,716	$	—	$	—	$	110,716
Level 2:
Cash equivalents(1)
Commercial paper	3,499		—		—		3,499
Available-for-sale securities
Commercial paper	126,371		1		(175)		126,197
Corporate notes and bonds	243,840		—		(1,296)		242,544
U.S. governmental securities	20,036		—		(76)		19,960
Level 2 total	393,746		1		(1,547)		392,200
Total	$	504,462	$	1	$	(1,547)	$	502,916

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of October 31, 2022 and January 31, 2022, in addition to cash of $604.8 million and $394.9 million.

We use quoted prices in active markets for identical assets to determine the fair value of our Level 1 investments. 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 Level 3 investments is determined based on an income approach using unobservable inputs.

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The fair value of our available-for-sale securities as of October 31, 2022, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less	$	342,730
Due in one to two years	129,783
	$	472,513

As of October 31, 2022 and January 31, 2022, securities in an unrealized loss position were, individually and in aggregate, not material. An allowance for credit losses was deemed unnecessary for these securities, given the extent of the unrealized loss positions as well as the issuers' high credit ratings and consistent payment history.

We had no liabilities measured at fair value on a recurring basis as of October 31, 2022 and January 31, 2022.

Convertible Senior Notes

We estimated the fair value of the convertible senior notes 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—noncurrent” on our condensed consolidated balance sheets. Refer to Note 6 for further information.

(in thousands)	October 31, 2022		January 31, 2022
0.5% Convertible Senior Notes due in 2023
Aggregate principal amount	$	37,083	$	37,099
Fair value amount	36,816		65,440
0% Convertible Senior Notes due in 2024
Aggregate principal amount	$	690,000	$	690,000
Fair value amount	649,152		656,363

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:

(in thousands)	October 31, 2022		January 31, 2022
Computer and network equipment	$	133,346	$	127,799
Software, including capitalized software development costs	84,508		82,537
Furniture and office equipment	20,721		20,939
Leasehold improvements	79,013		79,811
	317,588		311,086
Less: Accumulated depreciation	(202,897)		(170,261)
	114,691		140,825
Work in progress	81,436		43,839
Total	$	196,127	$	184,664

Depreciation and amortization expense associated with property and equipment was $16.4 million and $14.2 million for the three months ended October 31, 2022 and 2021, and $48.2 million and $42.0 million for the nine months ended October 31, 2022 and 2021. This included amortization expense related to capitalized internally-developed software costs of $4.1 million and $2.5 million for the three months ended October 31, 2022 and 2021, and $13.9 million and $6.6 million for the nine months ended October 31, 2022 and 2021.

For the three months ended October 31, 2022 and 2021, we capitalized $20.7 million and $9.5 million of internally developed software, including $6.1 million and $2.5 million of capitalized stock-based compensation expense in the three months ended October 31, 2022 and 2021. For the nine months ended October 31, 2022 and 2021, we

DocuSign, Inc. | 2023 Form 10Q | 14

capitalized $47.7 million and $26.6 million of internally developed software, including $13.8 million and $6.7 million of capitalized stock-based compensation expense in the nine months ended October 31, 2022 and 2021.

Note 5. Deferred Contract Acquisition and Fulfillment Costs

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

	Nine Months Ended October 31,
(in thousands)	2022		2021
Deferred Contract Acquisition Costs:
Beginning balance	$	315,158	$	262,519
Additions to deferred contract acquisition costs	127,071		124,688
Amortization of deferred contract acquisition costs	(99,535)		(82,043)
Cumulative translation adjustment	(8,001)		(2,312)
Ending balance	$	334,693	$	302,852
Deferred Contract Fulfillment Costs:
Beginning balance	$	19,088	$	12,506
Additions to deferred contract fulfillment costs	34,548		23,258
Amortization of deferred contract fulfillment costs	(34,846)		(18,695)
Cumulative translation adjustment	(1,088)		—
Ending balance	$	17,702	$	17,069

Note 6. Debt

Convertible Senior Notes

In September 2018, we issued $575.0 million in aggregate principal amount of the 0.5% Convertible Senior Notes due in 2023 (“2023 Notes”). The net proceeds from the issuance of the 2023 Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs. Based upon the reported sales price of our common stock, the 2023 Notes became convertible on August 1, 2020 and continued to be convertible through July 31, 2022. During the three months ended October 31, 2022, the 2023 Notes did not meet the conversion terms and are not convertible.

In January 2021, we issued $690.0 million in aggregate principal amount of the 0% Convertible Senior Notes due in 2024 (“2024 Notes,” and together with the 2023 Notes, the “Notes”). The net proceeds from the issuance of the 2024 Notes were $677.3 million after deducting the initial purchasers’ discounts and transaction costs. As of October 31, 2022, the conversion conditions for the 2024 Notes described in our fiscal 2022 Annual Report on Form 10-K were not met.

Conversions of the 2023 Notes

In the three months ended October 31, 2022, we did not receive conversion notices on our 2023 Notes. Settlements were immaterial during the nine months ended October 31, 2022. The 2023 Notes are within one year of maturity and are therefore classified as current liability in our consolidated balance sheets as of October 31, 2022.

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The net carrying amounts of the Notes were as follows:

(in thousands)	October 31, 2022		January 31, 2022
2023 Notes:
Principal	$	37,083	$	37,099
Less: unamortized transaction costs	(162)		(303)
Net carrying value of current and noncurrent liability component	$	36,921	$	36,796
2024 Notes:
Principal	$	690,000	$	690,000
Less: unamortized transaction costs	(5,138)		(8,309)
Net carrying value of noncurrent liability component	$	684,862	$	681,691

The effective interest rate on the 2023 Notes was 1.0%. The effective interest rate on the 2024 notes was 0.6%. Interest expense recognized related to the Notes was as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2022		2021		2022		2021
Contractual interest expense	$	46	$	41	$	139	$	143
Amortization of transaction costs	1,105		1,116		3,309		3,432
Total	$	1,151	$	1,157	$	3,448	$	3,575

Capped Calls

To minimize the potential economic dilution to our common stock upon conversion of the Notes, we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain counterparties.

The material terms of the capped call transactions were as follows:

(in thousands, except per share amounts)	2023 Notes		2024 Notes
Aggregate cost of capped calls	$	67,563	$	31,395
Initial strike price per share (1)	$	71.50	$	420.24
Initial cap price per share (1)	$	110.00	$	525.30
Shares of our common stock covered by the capped calls (1)	8,042		1,642

(1) Subject to adjustments for certain events, such as merger events and tender offers, and anti-dilution adjustments

Impact on Loss Per Share

In periods when we have net income, the shares of our common stock subject to the Notes outstanding during the period are included in our diluted earnings per share under the if-converted method. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive.

Upon conversion, there will be no economic dilution from the Notes unless the market price of our common stock exceeds the cap prices listed above in the Capped Calls section, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the cap price. As of October 31, 2022, the market price of our common stock did not exceed the $110.00 per share cap price associated with the 2023 Notes nor the $525.30 cap price associated with the 2024 Notes; therefore, the Notes would not have caused economic dilution if converted.

Revolving Credit Facility

In January 2021, we entered into a credit agreement with a syndicate of banks. The credit agreement extended a senior secured revolving credit facility (the “Credit Facility”) to us in an aggregate principal amount of $500.0 million, which amount may be increased by an additional $250.0 million subject to the terms of the credit agreement. We may use the proceeds of future borrowings under the credit facility to finance working capital, for capital expenditures and for other general corporate purposes, including permitted acquisitions.

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The Credit Facility matures in January 2026 and requires us to comply with customary affirmative and negative covenants. We were in compliance with all covenants as of October 31, 2022. As of October 31, 2022, there were no outstanding borrowings under the Credit Facility. The Credit Facility is subject to customary fees for loan facilities of this type, including ongoing commitment fees at a rate between 0.25% and 0.30% per annum on the daily undrawn balance.

Note 7. Commitments and Contingencies

As of October 31, 2022, we had outstanding unused letters of credit associated with our various operating leases totaling $5.3 million.

We have entered into certain noncancellable 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 October 31, 2022, the future noncancellable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:

Fiscal Period:	Amount (in thousands)
2023, remainder	$	16,522
2024	47,669
2025	25,138
2026