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, 2023

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 203,933,894 shares of common stock, par value $0.0001, outstanding at November 30, 2023.

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, 2023 and January 31, 2023	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended October 31, 2023 and 2022	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 31, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	63
Item 5.	Other Information	64
Item 6.	Exhibits	64
	Exhibit Index	65
Signatures		66

DocuSign, Inc. | 2024 Form 10-Q | 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, 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, objectives for future operations, and the impact of such assumptions on our financial condition and results of 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.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: our expectations regarding global macro-economic conditions, including the effects of inflation, rising and fluctuating interest rates, instability in the global banking sector, and market volatility on the global economy; our ability to estimate the size and growth of our total addressable market; our ability to compete effectively in an evolving and competitive market; the impact of any data breaches, cyberattacks or other malicious activity on our technology systems; our ability to effectively sustain and manage our growth and future expenses and achieve and maintain future profitability; our ability to attract new customers and maintain and expand our existing customer base; our ability to effectively implement and execute our restructuring plans; our ability to scale and update our platform to respond to customers’ needs and rapid technological change, including our ability to successfully incorporate generative artificial intelligence into our existing and future products; 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 retain our direct sales force, customer success team and strategic partnerships around the world; our ability to identify targets for and execute potential acquisitions and to successfully integrate and 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 ability to realize the anticipated benefits of our stock repurchase program; 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; 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. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time. 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 Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.

DocuSign, Inc. | 2024 Form 10-Q | 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, 2023		January 31, 2023
Assets
Current assets
Cash and cash equivalents	$	1,188,578	$	721,895
Investments—current	401,639		309,771
Accounts receivable, net of allowance for doubtful accounts of $7,075 and $6,011 as of October 31, 2023 and January 31, 2023	360,456		516,914
Contract assets—current	19,381		12,437
Prepaid expenses and other current assets	72,629		69,987
Total current assets	2,042,683		1,631,004
Investments—noncurrent	55,448		186,049
Property and equipment, net	230,963		199,892
Operating lease right-of-use assets	126,198		141,493
Goodwill	351,493		353,619
Intangible assets, net	55,605		70,280
Deferred contract acquisition costs—noncurrent	383,205		350,899
Other assets—noncurrent	92,032		79,484
Total assets	$	3,337,627	$	3,012,720
Liabilities and Equity
Current liabilities
Accounts payable	$	14,787	$	24,393
Accrued expenses and other current liabilities	99,642		100,987
Accrued compensation	159,381		163,133
Convertible senior notes—current	689,111		722,887
Contract liabilities—current	1,204,599		1,172,867
Operating lease liabilities—current	21,701		24,055
Total current liabilities	2,189,221		2,208,322
Contract liabilities—noncurrent	22,069		16,925
Operating lease liabilities—noncurrent	124,551		141,348
Deferred tax liability—noncurrent	17,160		10,723
Other liabilities—noncurrent	19,593		18,115
Total liabilities	2,372,594		2,395,433
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, 2023 and January 31, 2023	—		—
Common stock, $0.0001 par value; 500,000 shares authorized, 203,922 shares outstanding as of October 31, 2023; 500,000 shares authorized, 201,904 shares outstanding as of January 31, 2023	20		20
Treasury stock, at cost: 18 shares as of October 31, 2023; 10 shares as of January 31, 2023	(2,164)		(1,785)
Additional paid-in capital	2,693,124		2,240,732
Accumulated other comprehensive loss	(28,487)		(22,996)
Accumulated deficit	(1,697,460)		(1,598,684)
Total stockholders’ equity	965,033		617,287
Total liabilities and equity	$	3,337,627	$	3,012,720

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

DocuSign, Inc. | 2024 Form 10-Q | 4

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands, except per share data)	2023		2022		2023		2022
Revenue:
Subscription	$	682,352	$	624,055	$	1,991,026	$	1,798,500
Professional services and other	18,069		21,408		58,470		57,839
Total revenue	700,421		645,463		2,049,496		1,856,339
Cost of revenue:
Subscription	114,227		102,524		339,354		315,614
Professional services and other	28,418		27,018		85,360		83,048
Total cost of revenue	142,645		129,542		424,714		398,662
Gross profit	557,776		515,921		1,624,782		1,457,677
Operating expenses:
Sales and marketing	292,473		313,783		867,916		938,062
Research and development	136,640		115,934		387,964		354,693
General and administrative	108,215		85,553		316,910		224,587
Restructuring and other related charges	710		28,082		30,293		28,082
Total operating expenses	538,038		543,352		1,603,083		1,545,424
Income (loss) from operations	19,738		(27,431)		21,699		(87,747)
Interest expense	(1,577)		(1,456)		(5,135)		(4,737)
Interest income and other income (expense), net	17,673		820		47,373		(2,827)
Income (loss) before provision for (benefit from) income taxes	35,834		(28,067)		63,937		(95,311)
Provision for (benefit from) income taxes	(2,971)		1,799		17,198		7,006
Net income (loss)	$	38,805	$	(29,866)	$	46,739	$	(102,317)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.19	$	(0.15)	$	0.23	$	(0.51)
Diluted	$	0.19	$	(0.15)	$	0.23	$	(0.51)
Weighted-average shares used in computing net income (loss) per share:
Basic	204,456		201,393		203,609		200,569
Diluted	208,054		201,393		208,317		200,569
Comprehensive income (loss):
Foreign currency translation loss, net of tax	$	(10,029)	$	(6,787)	$	(7,523)	$	(23,641)
Unrealized gains (losses) on investments, net of tax	1,078		(3,011)		2,032		(5,794)
Other comprehensive loss	(8,951)		(9,798)		(5,491)		(29,435)
Comprehensive income (loss)	$	29,854	$	(39,664)	$	41,248	$	(131,752)
Stock-based compensation expense included in costs and expenses:
Cost of revenue—subscription	$	13,705	$	11,665	$	38,143	$	35,272
Cost of revenue—professional services and other	7,343		6,767		21,359		18,327
Sales and marketing	53,715		57,925		150,604		166,574
Research and development	48,310		35,506		129,458		108,689
General and administrative	36,337		23,384		111,271		58,314
Restructuring and other related charges	8		5,590		4,996		5,590

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

DocuSign, Inc. | 2024 Form 10-Q | 5

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
(in thousands)	Shares	Amount
Balances at July 31, 2023	203,197	$	20	$	2,530,532	$	(2,027)	$	(19,536)	$	(1,661,230)	$	847,759
Exercise of stock options	693	—		12,375		—		—		—		12,375
Settlement of restricted stock units and employee stock purchase plan	2,130	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan	(752)	—		(33,673)		(137)		—		—		(33,810)
Employee stock purchase plan	419	—		14,603		—		—		—		14,603
Repurchases of common stock	(1,765)	—		—		—		—		(75,035)		(75,035)
Employee stock-based compensation	—	—		169,287		—		—		—		169,287
Net income	—	—		—		—		—		38,805		38,805
Other comprehensive loss, net	—	—		—		—		(8,951)		—		(8,951)
Balances at October 31, 2023	203,922	$	20	$	2,693,124	$	(2,164)	$	(28,487)	$	(1,697,460)	$	965,033
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 and employee stock purchase plan	—	—		(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

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

DocuSign, Inc. | 2024 Form 10-Q | 6

DOCUSIGN, INC.

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

	Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
(in thousands)	Shares	Amount
Balances at January 31, 2023	201,904	$	20	$	2,240,732	$	(1,785)	$	(22,996)	$	(1,598,684)	$	617,287
Exercise of stock options	769	—		13,207		—		—		—		13,207
Settlement of restricted stock units and employee stock purchase plan	5,415	—		—		—		—		—		—
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan	(1,947)	—		(98,533)		(379)		—		—		(98,912)
Employee stock purchase plan	839	—		32,993		—		—		—		32,993
Repurchases of common stock	(3,058)	—		—		—		—		(145,515)		(145,515)
Settlement of capped calls, net of related costs	—	—		23,688		—		—		—		23,688
Employee stock-based compensation	—	—		481,037		—		—		—		481,037
Net income	—	—		—		—		—		46,739		46,739
Other comprehensive loss, net	—	—		—		—		(5,491)		—		(5,491)
Balances at October 31, 2023	203,922	$	20	$	2,693,124	$	(2,164)	$	(28,487)	$	(1,697,460)	$	965,033
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

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

DocuSign, Inc. | 2024 Form 10-Q | 7

DOCUSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended October 31,
(in thousands)	2023		2022
Cash flows from operating activities:
Net income (loss)	$	46,739	$	(102,317)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	71,429		63,976
Amortization of deferred contract acquisition and fulfillment costs	147,781		134,381
Amortization of debt discount and transaction costs	3,722		3,725
Non-cash operating lease costs	16,499		20,468
Stock-based compensation expense	455,831		392,765
Deferred income taxes	7,265		3,045
Other	(1,353)		13,540
Changes in operating assets and liabilities:
Accounts receivable	152,902		18,338
Prepaid expenses and other current assets	(7,957)		(7,593)
Deferred contract acquisition and fulfillment costs	(176,510)		(161,620)
Other assets	(14,019)		(15,707)
Accounts payable	(9,089)		(1,739)
Accrued expenses and other liabilities	2,372		873
Accrued compensation	(4,368)		(15,827)
Contract liabilities	36,876		56,824
Operating lease liabilities	(19,292)		(33,430)
Net cash provided by operating activities	708,828		369,702
Cash flows from investing activities:
Purchases of marketable securities	(203,346)		(402,249)
Maturities of marketable securities	251,517		311,769
Purchases of strategic and other investments	(520)		(3,625)
Purchases of property and equipment	(70,277)		(53,590)
Net cash used in investing activities	(22,626)		(147,695)
Cash flows from financing activities:
Repayments of convertible senior notes	(37,083)		(16)
Repurchases of common stock	(145,515)		(63,041)
Settlement of capped calls, net of related costs	23,688		—
Payment of tax withholding obligation on net RSU settlement and ESPP purchase	(98,296)		(67,120)
Proceeds from exercise of stock options	13,207		11,009
Proceeds from employee stock purchase plan	32,994		36,526
Net cash used in financing activities	(211,005)		(82,642)
Effect of foreign exchange on cash, cash equivalents and restricted cash	(4,897)		(14,652)
Net increase in cash, cash equivalents and restricted cash	470,300		124,713
Cash, cash equivalents and restricted cash at beginning of period (1)	723,201		509,679
Cash, cash equivalents and restricted cash at end of period (1)	$	1,193,501	$	634,392

(1) $4.9 million and $1.3 million of restricted cash was included in Prepaid expenses and other current assets and Other assets—noncurrent at October 31, 2023 and January 31, 2023. $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 Prepaid expenses and other current assets and in Other assets—noncurrent at January 31, 2022.

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

DocuSign, Inc. | 2024 Form 10-Q | 8

DOCUSIGN, INC.

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

	Nine Months Ended October 31,
(in thousands)	2023		2022
Supplemental disclosure:
Cash paid for interest	$	185	$	185
Cash paid for operating lease liabilities	27,115		28,063
Cash paid for income taxes	8,747		5,630
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities	$	1,318	$	726
Operating lease right-of-use assets exchanged for lease obligations	1,573		930
Fair value of shares issued as part of the repayments of convertible senior notes	—		2

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

DocuSign, Inc. | 2024 Form 10-Q | 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	19
Note 9	Restructuring and Other Related Charges	20
Note 10	Net Income (Loss) Per Share Attributable to Common Stockholders	21
Note 11	Income Taxes	21

DocuSign, Inc. | 2024 Form 10-Q | 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.

DocuSign is the global leader in the eSignature category. We offer products that address broader agreement workflows, and digital transformation, including the world’s leading electronic signature product, enabling agreements to be signed electronically on a wide variety of devices, from virtually anywhere in the world, securely.

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 2023 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, 2023 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, 2023 are not necessarily indicative of the results to be expected for the year ending January 31, 2024.

Our fiscal year ends on January 31. References to fiscal 2024, for example, are to the fiscal year ending January 31, 2024.

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 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;

•the recognition and measurement of loss contingencies; and

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

Significant Accounting Policies

There have been no changes to our significant accounting policies described in our fiscal 2023 Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

DocuSign, Inc. | 2024 Form 10-Q | 11

Note 2. Revenue

Subscription revenue is recognized over time and accounted for approximately 97% of our revenue in each of the three and nine month periods ended October 31, 2023 and 2022.

Performance Obligations

As of October 31, 2023, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $2.0 billion. Beginning in the third quarter of fiscal 2024, we are including two immaterial international subsidiaries to our remaining performance obligations disclosure. We expect to recognize 58% of the transaction price allocated to remaining performance obligations within the 12 months following October 31, 2023 in our condensed consolidated statement of operations and comprehensive income (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 invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $19.4 million and $12.4 million as of October 31, 2023 and January 31, 2023. 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 nine months ended October 31, 2023 and 2022 we recognized revenue of $1.1 billion and $951.2 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)	2023		2022		2023		2022
U.S.	$	515,050	$	488,280	$	1,516,092	$	1,401,355
International	185,371		157,183		533,404		454,984
Total revenue	$	700,421	$	645,463	$	2,049,496	$	1,856,339

DocuSign, Inc. | 2024 Form 10-Q | 12

Note 3. Fair Value Measurements

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

	October 31, 2023
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds	$	697,467	$	—	$	—	$	697,467
Level 2:
Cash equivalents(1)
Commercial paper	26,950		—		(5)		26,945
U.S. governmental securities	38,784		—		—		38,784
Available-for-sale securities
Commercial paper	96,544		—		(37)		96,507
Corporate notes and bonds	257,224		—		(2,074)		255,150
U.S. governmental securities	105,680		—		(250)		105,430
Level 2 total	525,182		—		(2,366)		522,816
Total	$	1,222,649	$	—	$	(2,366)	$	1,220,283
	January 31, 2023
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds	$	133,009	$	—	$	—	$	133,009
Level 2:
Cash equivalents(1)
Commercial paper	9,992		—		(2)		9,990
Available-for-sale securities
Commercial paper	85,957		—		(258)		85,699
Corporate notes and bonds	367,930		101		(3,771)		364,260
Municipal notes and bonds	7,983		—		(65)		7,918
U.S. governmental securities	38,344		4		(405)		37,943
Level 2 total	510,206		105		(4,501)		505,810
Total	$	643,215	$	105	$	(4,501)	$	638,819

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of October 31, 2023 and January 31, 2023, in addition to cash of $425.4 million and $578.9 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 values of our available-for-sale securities as of October 31, 2023, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less	$	401,639
Due in one to two years	55,448
	$	457,087

DocuSign, Inc. | 2024 Form 10-Q | 13

As of October 31, 2023 and January 31, 2023, 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, 2023 and January 31, 2023.

Convertible Senior Notes

We estimated the fair value based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last 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—current” on our condensed consolidated balance sheets. Refer to Note 6 for further information.

(in thousands)	October 31, 2023		January 31, 2023
0.5% Convertible Senior Notes due in 2023
Aggregate principal amount	$	—	$	37,083
Fair value amount	—		38,981
0% Convertible Senior Notes due in 2024
Aggregate principal amount	$	690,000	$	690,000
Fair value amount	680,326		655,666

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:

(in thousands)	October 31, 2023		January 31, 2023
Computer and network equipment	$	139,680	$	138,869
Software, including capitalized software development costs	158,923		114,524
Furniture and office equipment	18,091		20,897
Leasehold improvements	57,716		73,415
	374,410		347,705
Less: Accumulated depreciation	(228,522)		(210,781)
	145,888		136,924
Work in progress	85,075		62,968
Total	$	230,963	$	199,892

Depreciation and amortization expense associated with property and equipment was $18.6 million and $16.4 million for the three months ended October 31, 2023 and 2022, and $56.8 million and $48.2 million for the nine months ended October 31, 2023 and 2022. This included amortization expense related to capitalized internally-developed software costs of $9.5 million and $4.1 million for the three months ended October 31, 2023 and 2022, and $25.1 million and $13.9 million for the nine months ended October 31, 2023 and 2022.

For the three months ended October 31, 2023 and 2022, we capitalized $26.5 million and $20.7 million of internally developed software, including $8.8 million and $6.1 million of capitalized stock-based compensation expense in the three months ended October 31, 2023 and 2022. For the nine months ended October 31, 2023 and 2022, we capitalized $70.4 million and $47.7 million of internally developed software, including $22.5 million and $13.8 million of capitalized stock-based compensation expense in the nine months ended October 31, 2023 and 2022.

DocuSign, Inc. | 2024 Form 10-Q | 14

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)	2023		2022
Deferred Contract Acquisition Costs:
Beginning balance	$	355,389	$	315,158
Additions to deferred contract acquisition costs	143,321		127,071
Amortization of deferred contract acquisition costs	(114,151)		(99,535)
Cumulative translation adjustment	(1,212)		(8,001)
Ending balance	$	383,347	$	334,693
Deferred Contract Fulfillment Costs:
Beginning balance	$	21,076	$	19,088
Additions to deferred contract fulfillment costs	33,189		34,548
Amortization of deferred contract fulfillment costs	(33,630)		(34,846)
Cumulative translation adjustment	(268)		(1,088)
Ending balance	$	20,367	$	17,702

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 were convertible through July 31, 2022. Subsequently, the 2023 Notes became convertible at the option of the holders at any time on or after June 15, 2023, until the close of business on September 13, 2023. We have not received conversion notices on our 2023 Notes in the nine months ending October 31, 2023.

We repaid in cash $37.1 million in aggregate principal amount of the 2023 Notes on their maturity date, September 15, 2023.

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. The 2024 Notes became convertible at the option of the holders at any time on or after October 15, 2023 and will remain convertible until the close of business on January 11, 2024. As a result, the 2024 Notes were convertible as of October 31, 2023. We have not received conversion notices on our 2024 Notes in the nine months ending October 31, 2023.

DocuSign, Inc. | 2024 Form 10-Q | 15

Net Carrying Amounts of the Liability Components

As of January 31, 2023, the 2023 Notes were within one year of maturity and were therefore classified as current liabilities in our consolidated balance sheets. The 2023 Notes matured September 15, 2023. As of October 31, 2023 and January 31, 2023, the 2024 Notes are within one year of maturity and are therefore classified as current liabilities in our consolidated balance sheets. The 2024 Notes mature January 15, 2024. The net carrying amounts of the Notes were as follows:

(in thousands)	October 31, 2023		January 31, 2023
2023 Notes:
Principal	$	—	$	37,083
Less: unamortized transaction costs	—		(118)
Net carrying value of liability component	$	—	$	36,965
2024 Notes:
Principal	$	690,000	$	690,000
Less: unamortized transaction costs	(889)		(4,078)
Net carrying value of liability component	$	689,111	$	685,922

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)	2023		2022		2023		2022
Contractual interest expense	$	22	$	46	$	425	$	139
Amortization of transaction costs	1,089		1,105		3,308		3,309
Total	$	1,111	$	1,151	$	3,733	$	3,448

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)	2024 Notes
Aggregate cost of capped calls	$	31,395
Initial strike price per share (1)	$	420.24
Initial cap price per share (1)	$	525.30
Shares of our common stock covered by the capped calls (1)	1,642

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

In the first quarter of fiscal 2024, we unwound $23.7 million of the Capped Calls in relation to our 2023 Notes and received cash from the counterparties. During three months ended October 31, 2023, the remaining associated Capped Calls expired.

Impact on Net Income (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, 2023, the market price of our common stock did not exceed the $525.30 cap price associated with the 2024 Notes; therefore, the Notes would not have caused economic dilution if converted.

DocuSign, Inc. | 2024 Form 10-Q | 16

Revolving Credit Facility

In January 2021, we entered into a credit agreement, as subsequently amended in May 2023, 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.

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, 2023. As of October 31, 2023, 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, 2023, we had unused letters of credit outstanding totaling $2.3 million, the majority of which are associated with our various operating leases.

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, 2023, our 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)
2024, remainder	$	14,014
2025	55,600
2026	41,485
2027	5,865
2028	1,663
Thereafter	1,622
Total	$	120,249

In May 2022, we entered into an agreement with a public cloud computing service provider. Under the agreement, our minimum commitment is $175.0 million through fiscal 2028. As of October 31, 2023, the remaining commitment, which is excluded from the table above, was $138.4 million.

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 claims 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 indemnification clauses or agreements 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 October 31, 2023, and January 31, 2023. 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 litigation made against us in the ordinary course of business. Legal costs associated with litigation are expensed as incurred. We believe the final outcome of these matters, including the case described below, will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

DocuSign, Inc. | 2024 Form 10-Q | 17

DocuSign, Inc. Securities Litigation and Related Derivative Litigation

On February 8, 2022, a putative securities class action was filed in the U.S. District Court for the Northern District of California, captioned Weston v. DocuSign, Inc., et al., Case No. 3:22-cv-00824, naming DocuSign and certain of our current and former officers as defendants. An amended complaint was filed on July 8, 2022. As amended, the suit purports to allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, based on allegedly false and misleading statements about our business and prospects during the course of the COVID-19 pandemic. As amended, the suit is purportedly brought on behalf of purchasers of our securities between June 4, 2020 and June 9, 2022. Our motion to dismiss the case at the pleading stage was denied by the U.S. District Court on April 18, 2023 and the suit is now proceeding.

An earlier action alleging similar claims against the same defendants, captioned Collins v. DocuSign, Inc., et al., Case No. 3:22-cv-00851, filed in the Eastern District of New York and subsequently transferred to the Northern District of California, was voluntarily dismissed on February 14, 2022.

Four putative shareholder derivative cases have been filed containing allegations based on or similar to those in the securities class action (Weston). The cases were filed on May 17, 2022, in the U.S. District Court for the District of Delaware, captioned Pottetti v. Springer, et al., Case No. 1:22-cv-00652; on May 19, 2022 in the U.S. District Court for the Northern District of California, captioned Lapin v. Springer, et al., Case No. 3:22-cv-02980; on May 20, 2022, in the U.S. District Court for the Northern District of California, captioned Votto v. Springer, et al., Case No. 3:22-cv-02987; and on September 20, 2022 in the U.S. District Court for the Northern District of California, captioned Fox v. Springer, et al., Case No. 3:22-cv-05343. Each case is allegedly brought on the Company’s behalf. The suits name the Company as a nominal defendant and, depending on the particular case, the members of our board of directors or, in certain instances, current or former officers, as defendants. While the complaints vary, they are based largely on the same underlying allegations as the securities class action suit described above (Weston), as well as, in certain instances, alleged insider trading. Collectively, these lawsuits purport to assert claims for, among other things, breach of fiduciary duty, aiding and abetting such breach, corporate waste, unjust enrichment, and under Sections 10(b) and 21D of the Securities Exchange Act of 1934. The complaints seek to recover unspecified damages and other relief on the Company’s behalf. By court order dated July 19, 2022, the two cases in the Northern District of California (Lapin and Votto) have been consolidated and stayed in light of the securities class action and no response to the complaints in the action will be due unless and until the stay is lifted. The third case in the Northern District of California (Fox) was related to the other derivative suits and assigned to the same judge, and was similarly stayed by order of the court on December 2, 2022. The Delaware suit (Pottetti) was voluntarily dismissed on September 1, 2022, and then re-filed in the Delaware Court of Chancery on September 22, 2022, under the caption Pottetti v. Springer, et al., Case No. C.A. 2022-0852-PAF. The Delaware Court of Chancery issued an order on September 30, 2022 staying the action in light of the securities class action and no response to the complaint will be due unless and until the stay is lifted.

DocuSign Civil Litigation

On October 25, 2022, an action was filed in the Delaware Court of Chancery, captioned Daniel D. Springer v. Mary Agnes Wilderotter and DocuSign, Inc., Civil Action No. 2022-0963-LWW, concerning Mr. Springer’s resignation from our board of directors. Mr. Springer’s complaint sought relief determining that he did not resign from his position on our board of directors and remains a director, and for an award of attorneys’ fees and costs associated with the civil action. To avoid the cost and distraction of further litigation with Mr. Springer, the Company offered to stipulate to entry of judgment in favor of Mr. Springer as to his disputed resignation and his status as a member of our board of directors. Following our offer, on January 11, 2023, the Chancery Court issued an order declaring and confirming that (i) Mr. Springer has not resigned from the board of directors and (ii) Mr. Springer is currently a member of the board of directors. Mr. Springer subsequently filed a motion seeking payment of his attorneys’ fees. DocuSign has opposed this motion, which remains pending before the Delaware Court of Chancery.

In addition, on January 26, 2023, Mr. Springer delivered a demand for arbitration before JAMS, a private alternative dispute resolution firm, captioned Daniel D. Springer v. DocuSign, Inc. and Mary Agnes Wilderotter. In the demand, Mr. Springer alleges that he was wrongfully terminated as Chief Executive Officer; asserts related claims against DocuSign and Ms. Wilderotter, including defamation, withholding promised compensation and breach of contract; and seeks unspecified damages and other relief. DocuSign has engaged legal counsel to defend the matter, and on March 10, 2023, submitted a motion to dismiss several of the causes of action asserted in the demand. Mr. Springer opposed the motion, which was granted in part and denied in part. Fact discovery is substantially completed, and the arbitration hearing is scheduled to occur in March 2024.

DocuSign, Inc. | 2024 Form 10-Q | 18

Note 8. 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 and the Amended and Restated 2003 Stock Plan.

As of October 31, 2023, 35.7 million shares of our common stock were available for issuance under the 2018 Plan.

Restricted Stock Units

Restricted stock unit (“RSU”) activity for the nine months ended October 31, 2023 was as follows:

(in thousands, except per share data)	Number of Units	Weighted-Average Grant Date Fair Value
Unvested at January 31, 2023	17,621	$	81.30
Granted	18,095	54.50
Vested	(5,929)	83.90
Canceled	(2,191)	88.83
Unvested at October 31, 2023	27,596	$	62.58

As of October 31, 2023, the grant date fair value of unvested RSUs subject to market-based and performance-based vesting conditions was $117.9 million.

As of October 31, 2023, our total unrecognized compensation cost related to RSUs was $1.3 billion. We expect to recognize this expense over the remaining weighted-average period of approximately 3.2 years.

Stock Options

Option activity for the nine months ended October 31, 2023 was as follows:

(in thousands, except years and per share data)	Number of Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 31, 2023, all vested and exercisable	2,228	$	17.11	3.60	$	96,839
Exercised	(769)	17.18
Canceled/expired	(3)	17.48
Outstanding at October 31, 2023, all vested and exercisable	1,456	$	17.07	2.80	$	31,677

As of October 31, 2023, there was no remaining unrecognized compensation cost related to stock option grants.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of our common stock at a discounted price, normally through payroll deductions, subject to the terms of the ESPP and applicable law. As of October 31, 2023, 10.6 million shares of our common stock were reserved for issuance under the ESPP.

Compensation expense related to the ESPP was $4.2 million and $5.4 million for the three months ended October 31, 2023 and 2022, and $12.8 million and $17.3 million for the nine months ended October 31, 2023 and 2022.

Stock Repurchase Program

In March 2022, our board of directors authorized a stock repurchase program of up to $200.0 million of our outstanding common stock. Subsequently, in September 2023, our board of directors authorized an increase to its existing stock repurchase program for an additional amount of up to $300.0 million of our outstanding common stock.

DocuSign, Inc. | 2024 Form 10-Q | 19

During the three months ended October 31, 2023, we repurchased and cancelled 1.8 million shares of common stock at an average price of $42.48 per share, for an aggregate amount of $75.0 million. During the nine months ended October 31, 2023, we repurchased and cancelled 3.1 million shares of common stock at an average price of $47.57 per share, for an aggregate amount of $145.5 million.

During the three months ended October 31, 2022, we repurchased and cancelled 0.7 million shares of common stock at an average price of $51.28 per share, for an aggregate amount of $38.0 million. During the nine months ended October 31, 2022, we repurchased and cancelled 1.1 million shares of common stock at an average price of $55.52 per share, for an aggregate amount of $63.0 million.

Note 9. Restructuring and Other Related Charges

2023 Restructuring Plan

During fiscal 2023, the board of directors authorized a restructuring plan (the “2023 Restructuring Plan”) in response to changing economic conditions and in an effort to reduce our operational costs and improve our organizational efficiency. As of the fourth quarter of fiscal 2023, the 2023 Restructuring Plan had been substantially completed.

2024 Restructuring Plan

During the first quarter of fiscal 2024, the board of directors authorized a restructuring plan (the “2024 Restructuring Plan”) designed to support our growth, scale and profitability objectives. We incurred costs associated with the 2024 Restructuring Plan related to employee termination benefits and other costs mainly in the first quarter of fiscal 2024. As of the second quarter of fiscal 2024, the 2024 Restructuring Plan had been substantially completed.

These amounts are recorded to the Restructuring and other related charges within our consolidated statements of operations and comprehensive income (loss) as they are incurred.

For the three months ended October 31, 2023 restructuring and other related charges were $0.7 million. For the nine months ended October 31, 2023, restructuring and other related charges were $30.3 million and were primarily composed of $28.7 million for employee termination benefits, including stock-based compensation expense of $5.0 million. For the three and nine months ended October 31, 2022, restructuring and other related charges were $28.1 million, and primarily composed of $27.0 million for employee termination benefits, which included stock-based compensation expense of $5.6 million.

Restructuring liability activities during the nine months ended October 31, 2023:

(in thousands)	January 31, 2023		Accruals		Cash Payments		October 31, 2023
2023 Restructuring Plan
Employee termination benefits	$	384	$	1,640	$	(1,455)	$	569
Other	158		20		(178)		—
Total	$	542	$	1,660	$	(1,633)	$	569
2024 Restructuring Plan
Employee termination benefits	$	—	$	21,837	$	(21,798)	$	39
Other	—		1,548		(1,426)		122
Total	$	—	$	23,385	$	(23,224)	$	161

DocuSign, Inc. | 2024 Form 10-Q | 20

Note 10. Net Income (Loss) per Share Attributable to Common Stockholders

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

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands, except per share data)	2023		2022		2023		2022
Numerator:
Net income (loss) attributable to common stockholders, basic	$	38,805	$	(29,866)	$	46,739	$	(102,317)
Add: Interest expense on convertible senior notes	22		—		425		—
Net income (loss) attributable to common stockholders, diluted	$	38,827	$	(29,866)	$	47,164	$	(102,317)
Denominator:
Weighted-average common shares outstanding, basic	204,456		201,393		203,609		200,569
Effect of dilutive securities	3,598		—		4,708		—
Weighted-average common shares outstanding, diluted	208,054		201,393		208,317		200,569
Net income (loss) per share attributable to common stockholders:
Basic	$	0.19	$	(0.15)	$	0.23	$	(0.51)
Diluted	$	0.19	$	(0.15)	$	0.23	$	(0.51)

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

	Three Months Ended October 31,		Nine Months Ended October 31,
(in thousands)	2023	2022	2023	2022
RSUs	22,913	15,201	13,045	15,201
Stock options	—	2,340	—	2,340
ESPP	—	551	—	551
Convertible senior notes	—	2,161	—	2,161
Total antidilutive securities	22,913	20,253	13,045	20,253

Note 11. Income Taxes

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate as prescribed under Accounting Standards Codification (“ASC”) 740, “Income Taxes”, 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, which results in a provision or benefit from income taxes in current or subsequent quarters. There were no material discrete items in the quarter.

Our income tax benefit and income tax provision was $3.0 million and $1.8 million for the three months ended October 31, 2023 and 2022, respectively. The income tax benefit of $3.0 million for the three months ended October 31, 2023 is primarily due to changes in the forecasted annual effective tax rate. Our income tax provision was $17.2 million and $7.0 million for the nine months ended October 31, 2023 and 2022, respectively. The increase in income tax expense in the current year is a result of higher pre-tax income and limitations on net operating losses allowed to reduce taxable income.

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. We maintain a valuation allowance against certain deferred tax assets, including all U.S. consolidated group deferred tax assets and certain foreign deferred tax assets as a result of our history of losses in the U.S. and certain foreign jurisdictions, and the variability and uncertainty of our operating results. In the event we determine our deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

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As of October 31, 2023, our gross unrecognized tax benefits totaled $57.0 million, excluding related accrued interest and penalties, of which $10.5 million 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 material changes to our gross unrecognized tax benefits within the next 12 months.

We are subject to taxation in the U.S. and various foreign jurisdictions. Our tax years from inception in 2003 through October 31, 2023 remain subject to examination by U.S. and California taxing authorities, as well as taxing authorities in various other state and foreign jurisdictions. We are under examination by the Irish Revenue Commissioners for the period February 1, 2020 through January 31, 2021. We are not under examination in any other material jurisdictions. We believe that adequate amounts have been reserved in all jurisdictions.

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 condensed 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 fiscal 2023 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 fiscal 2023 Annual Report on Form 10-K. Our fiscal year ends January 31.

Executive Overview of Third Quarter Results

Overview

DocuSign is the global leader in the eSignature category. We offer products that address broader agreement workflows and digital transformation, including the ability for agreements to be signed electronically on a wide variety of devices, from virtually anywhere in the world, securely. DocuSign’s product offerings, which includes DocuSign eSignature, allow organizations to do business faster with less risk and lower costs, while providing better experiences for customers and employees. As a result, over 1.4 million customers and more than a billion users worldwide utilize DocuSign to prepare, sign, act on, and manage their agreements electronically.

We generally offer access to our products on a subscription basis with prices based on the functionality our customers require and the quantity of Envelopes provisioned. Similar to the physical envelopes historically used to mail paper documents, 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.

We generate substantially all our revenue from sales of subscriptions, which accounted for 97% of our revenue in each of the three and nine month periods ended October 31, 2023 and 2022. Our subscription fees include the use of our products 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 the remainder of total revenue in the three and nine months ended October 31, 2023 and 2022. 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’ adoption of our products, which helps drive customer retention and expansion.

We offer subscriptions to our products to businesses at all scales, from global enterprise down to local, very small businesses (“VSBs”). We have an omnichannel go-to-market approach that consists of direct, partners to sell to our customers, and digital self-serve. We offer more than 400 off-the-shelf, prebuilt integrations with the applications that many of our customers already use—including those offered by Google, Microsoft, Oracle, Salesforce, SAP, and ServiceNow—so that they can create, sign, send and manage agreements directly within these applications. We have a

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diverse customer base spanning across virtually all industries and around the world with no significant customer concentration. No single customer accounted for more than 10% of total revenue in any of the periods presented.

We focused initially on selling our products to commercial businesses and VSBs, and later expanded our focus to target enterprise customers. The number of our customers with greater than $300,000 in annualized contract value has decreased from 1,052 customers as of October 31, 2022 to 1,051 customers as of October 31, 2023. Each of our customer types has a different purchasing pattern. VSBs typically become customers by quickly utilizing our digital and self-serve channels 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 Nine Months Ended October 31, 2023 and 2022

	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Total revenue	$	700,421	$	645,463	$	2,049,496	$	1,856,339
Total costs and expenses	680,683		672,894		2,027,797		1,944,086
Total stock-based compensation expense	159,418		140,837		455,831		392,766
Income (loss) from operations	19,738		(27,431)		21,699		(87,747)
Net income (loss)	38,805		(29,866)		46,739		(102,317)
Net cash provided by operating activities	264,177		52,537		708,828		369,702
Purchases of property and equipment	(23,841)		(16,477)		(70,277)		(53,590)

Cash, cash equivalents, restricted cash and investments were $1.7 billion as of October 31, 2023.

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 in our go-to-market efforts involving an omnichannel approach that consists of direct sales, partner-assisted sales and digital self-service purchasing. As of October 31, 2023, we had a total of over 1.4 million customers, including approximately 233,000 enterprise and commercial customers, compared to over 1.3 million customers and approximately 202,000 enterprise and commercial customers as of October 31, 2022. We define enterprise customers as companies generally included in the Global 2000. We define commercial customers to include both mid-market companies, which includes companies outside the Global 2000 that have greater than 250 employees, and medium-sized businesses (“SMBs”) which are companies with between 10 and 249 employees, in each case excluding any enterprise customers. We define VSBs as companies with fewer than 10 employees. We refer to total customers as all enterprises, commercial businesses and VSBs.

We believe that our ability to increase the number of customers using our products, particularly the number of enterprise and commercial customers, is an indicator of our market penetration, the growth of our business and our potential future business opportunities. By increasing awareness of our products, further developing our sales and marketing expertise and continuing to build features tuned to different industry needs, we have expanded the diversity of our customer base to include organizations of all sizes across nearly every industry.

Retaining and Expanding Contracts with Existing Enterprise and Commercial Customers

Many of our customers have increased spend with us as they have expanded their use of our offerings in both existing and new use cases across their front or back office operations. Our enterprise and commercial customers may start with just one use case and gradually implement additional use cases across their organization once they see the benefits of our products. Several of our largest enterprise customers have deployed our software platform for hundreds of use cases across their organizations. We believe there is significant expansion opportunity with our customers following their initial adoption of our software platform.

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Increasing International Revenue

Our international revenue represented 26% of total revenue in each of the three and nine months ended October 31, 2023 compared to 24% and 25% of total revenue in the three and nine months ended October 31, 2022.

We started our international selling efforts in English-speaking common law countries, such as Canada, the UK and Australia, where we were able to leverage our core technologies due to similar approaches to electronic signature in these jurisdictions and the U.S. We have since made significant investments to be able to offer our products in select civil law countries. For example, in Europe, we offer Standards-Based Signature (“SBS”) technology tailored for the European Union’s (“EU”) electronic Identification, Authentication and Trust Services (“eIDAS”) regulations. SBS supports signatures that involve digital certificates, including those specified in the EU’s eIDAS regulations for advanced and qualified electronic signatures.

We believe there is a substantial opportunity for us to increase our international customer base by leveraging and expanding investments in our technology, direct sales force and strategic partnerships around the world, as well as helping existing U.S.-based customers manage agreements across their international businesses. We have experienced increased demand across multiple regions and are expanding our sales and marketing resources to capitalize on the potential growth of these markets. Additionally, we expect to continue to develop and enhance our strategic partnerships in key international markets as we grow internationally.

Investing for Growth

We believe that our market opportunity is large, and we plan to invest to support further growth. This includes optimizing our go-to-market efforts to focus on attractive growth opportunities and investing in research and development to drive product innovation and meet customer needs at scale. We also continue to assess and evaluate strategic acquisitions and investments. As we focus on infrastructure and technology that best serve our customers across industries, we will prioritize initiatives that accelerate our product capabilities.

We believe these collective activities will help us retain and expand within our current customers’ organizations and attract new customers.

Components of Results of Operations

Revenue

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

Subscription Revenue

Subscription revenue consists of fees for the use of our software platform and our technical infrastructure and access to customer support, which includes phone or email support. We typically invoice customers annually in advance. We recognize subscription revenue ratably over the term of the contract subscription period beginning on the date access to our software platform is provided.

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

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Cost of Revenue

Cost of Subscription Revenue

Cost of subscription revenue primarily consists of expenses related to hosting our software platform and providing support. These expenses consist of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with our technical infrastructure, customer success and customer support. These expenses also consist of software and maintenance costs, third-party hosting fees, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired intangible assets, credit card processing fees and allocated overhead costs.

Cost of Professional Services and Other Revenue

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

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 platform support and professional services team, stock-based compensation expenses, amortization of costs associated with capitalized internal use software and acquired intangible assets and allocated overhead costs.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring and other related charges. As our revenues continue to increase, our operating expenses as a percentage of revenue may increase or decrease at different rates, driven by the timing of revenue recognition, the timing of hiring, our investments in growth and other factors.

Sales and Marketing Expense	Sales and marketing expense consists primarily of personnel costs, including sales commissions. These expenses also include expenditures related to advertising, marketing, promotional events and brand awareness activities, as well as allocated overhead costs. We expect sales and marketing expense to continue to increase in absolute dollars as we enhance our product offerings and implement marketing strategies.
Research and Development Expense	Research and development expense consists primarily of personnel costs. These expenses also include non-personnel costs, such as subcontracting, consulting and professional fees for third-party development resources, as well as allocated overhead costs. Our research and development efforts focus on maintaining and enhancing existing functionality and adding new functionality. We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our software platform.
General and Administrative Expense	General and administrative expense consists primarily of employee-related costs for those employees providing administrative services such as legal, human resources, information technology related to internal systems, accounting and finance. These expenses also include certain third-party consulting services, certain facilities costs, allocated overhead costs, and lease-related charges. We expect general and administrative expense to increase in absolute dollars to support the overall growth of our operations.
Restructuring and Other Related Charges	Restructuring and other related charges consist primarily of costs associated with restructuring plans approved by our board of directors. In connection with these restructuring actions or other exit actions, which were undertaken to improve operating margin and support our growth, scale and profitability objectives, we recognize costs related to termination benefits for former employees whose positions were eliminated, the write-off of facility-related balances, and other costs.

Interest Expense

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

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Interest Income and Other Income (Expense), Net

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

Provision for (Benefit from) Income Taxes

Our provision for (benefit from) income taxes consists of income taxes in the U.S. and certain foreign jurisdictions where we conduct business, and tax benefits arising from deductions for stock-based compensation. We have a valuation allowance against our U.S. consolidated group and certain foreign deferred tax assets. We expect to maintain this valuation allowance for the foreseeable future or until it becomes more likely than not that the benefit of these U.S. and foreign deferred tax assets will be realized by way of expected future taxable income.

Discussion of Results of Operations

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

	Three Months Ended October 31,								Nine Months Ended October 31,
(in thousands, except percentages)	2023		As % of revenue		2022		As % of revenue		2023		As % of revenue		2022		As % of revenue
Revenue:
Subscription	$	682,352	97	%	$	624,055	97	%	$	1,991,026	97	%	$	1,798,500	97	%
Professional services and other	18,069		3		21,408		3		58,470		3		57,839		3
Total revenue	700,421		100		645,463		100		2,049,496		100		1,856,339		100
Cost of revenue:
Subscription	114,227		16		102,524		16		339,354		17		315,614		17
Professional services and other	28,418		4		27,018		4		85,360		4		83,048		4
Total cost of revenue	142,645		20		129,542		20		424,714		21		398,662		21
Gross profit	557,776		80		515,921		80		1,624,782		79		1,457,677		79
Operating expenses:
Sales and marketing	292,473		42		313,783		49		867,916		42		938,062		51
Research and development	136,640		20		115,934		18		387,964		19		354,693		19
General and administrative	108,215		15		85,553		13		316,910		15		224,587		12
Restructuring and other related charges	710		—		28,082		4		30,293		2		28,082		1
Total operating expenses	538,038		77		543,352		84		1,603,083		78		1,545,424		83
Income (loss) from operations	19,738		3		(27,431)		(4)		21,699		1		(87,747)		(4)
Interest expense	(1,577)		—		(1,456)		—		(5,135)		—		(4,737)		—
Interest income and other income (expense), net	17,673		2		820		—		47,373		2		(2,827)		(1)
Income (loss) before provision for (benefit from) income taxes	35,834		5		(28,067)		(4)		63,937		3		(95,311)		(5)
Provision for (benefit from) income taxes	(2,971)		(1)		1,799		1		17,198		1		7,006		1
Net income (loss)	$	38,805	6	%	$	(29,866)	(5)	%