10-Q 1 docu-20240430.htm 10-Q docu-20240430
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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 April 30, 2024
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)
______________________________________
Delaware91-2183967
(State or Other Jurisdiction of Incorporation)(I.R.S. Employer Identification Number)
221 Main St.Suite 1550San FranciscoCalifornia94105
(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 classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareDOCUThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 204,716,354 shares of common stock, par value $0.0001, outstanding at May 31, 2024.



DOCUSIGN, INC.
TABLE OF CONTENTS

Docusign, Inc. | 2025 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, our anticipated future products and product strategy, our 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, uncertainty about the interest rate environment, 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 successfully execute our go-to-market and sales strategy for our IAM platform; 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. | 2025 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)April 30, 2024January 31, 2024
Assets
Current assets
Cash and cash equivalents$817,388 $797,060 
Investments—current269,400 248,402 
Accounts receivable, net of allowance for doubtful accounts of $5,890 and $5,499 as of April 30, 2024 and January 31, 2024
306,152 439,299 
Contract assets—current12,319 15,922 
Prepaid expenses and other current assets84,540 66,984 
Total current assets1,489,799 1,567,667 
Investments—noncurrent139,108 121,977 
Property and equipment, net255,736 245,173 
Operating lease right-of-use assets119,997 123,188 
Goodwill352,450 353,138 
Intangible assets, net46,206 50,905 
Deferred contract acquisition costs—noncurrent415,739 409,627 
Other assets—noncurrent107,654 99,615 
Total assets$2,926,689 $2,971,290 
Liabilities and Equity
Current liabilities
Accounts payable$17,700 $19,029 
Accrued expenses and other current liabilities99,177 104,037 
Accrued compensation153,932 195,266 
Contract liabilities—current1,313,227 1,320,059 
Operating lease liabilities—current20,925 22,230 
Total current liabilities1,604,961 1,660,621 
Contract liabilities—noncurrent23,840 21,980 
Operating lease liabilities—noncurrent117,444 120,823 
Deferred tax liability—noncurrent18,037 16,795 
Other liabilities—noncurrent25,407 21,332 
Total liabilities1,789,689 1,841,551 
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of April 30, 2024 and January 31, 2024
  
Common stock, $0.0001 par value; 500,000 shares authorized, 204,701 shares outstanding as of April 30, 2024; 500,000 shares authorized, 205,326 shares outstanding as of January 31, 2024
20 21 
Treasury stock, at cost: 26 shares as of April 30, 2024; 18 shares as of January 31, 2024
(2,670)(2,164)
Additional paid-in capital2,950,081 2,821,461 
Accumulated other comprehensive loss(24,910)(19,360)
Accumulated deficit(1,785,521)(1,670,219)
Total stockholders’ equity
1,137,000 1,129,739 
Total liabilities and equity$2,926,689 $2,971,290 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Docusign, Inc. | 2025 Form 10-Q | 4


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
Three Months Ended April 30,
(in thousands, except per share data)20242023
Revenue:
Subscription$691,483 $639,307 
Professional services and other18,157 22,081 
Total revenue709,640 661,388 
Cost of revenue:
Subscription126,602 108,942 
Professional services and other22,844 27,545 
Total cost of revenue149,446 136,487 
Gross profit560,194 524,901 
Operating expenses:
Sales and marketing281,644 280,605 
Research and development134,320 115,364 
General and administrative92,478 104,811 
Restructuring and other related charges29,124 28,772 
Total operating expenses537,566 529,552 
Income (loss) from operations22,628 (4,651)
Interest expense(144)(1,966)
Interest income and other income, net14,109 12,245 
Income before provision for income taxes36,593 5,628 
Provision for income taxes2,833 5,089 
Net income$33,760 $539 
Net income per share attributable to common stockholders:
Basic$0.16 $0.00 
Diluted$0.16 $0.00 
Weighted-average shares used in computing net income per share:
Basic205,870 202,631 
Diluted209,896 208,071 
Comprehensive income:
Foreign currency translation gain (loss), net of tax$(4,301)$431 
Unrealized gains (losses) on investments, net of tax(1,249)648 
Other comprehensive income (loss)(5,550)1,079 
Comprehensive income$28,210 $1,618 
Stock-based compensation expense included in costs and expenses:
Cost of revenue—subscription$14,181 $11,357 
Cost of revenue—professional services and other4,702 6,730 
Sales and marketing46,271 45,326 
Research and development44,202 35,997 
General and administrative28,520 40,342 
Restructuring and other related charges4,628 4,954 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Docusign, Inc. | 2025 Form 10-Q | 5


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at January 31, 2024205,326 $21 $2,821,461 $(2,164)$(19,360)$(1,670,219)$1,129,739 
Exercise of stock options55 — 634 — — — 634 
Settlement of restricted stock units2,088 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan(796)— (44,845)(506)— — (45,351)
Employee stock purchase plan564 — 20,190 — — — 20,190 
Repurchases of common stock(2,536)(1)— — — (149,062)(149,063)
Employee stock-based compensation— — 152,641 — — — 152,641 
Net income— — — — — 33,760 33,760 
Other comprehensive loss, net— — — — (5,550)— (5,550)
Balances at April 30, 2024204,701 $20 $2,950,081 $(2,670)$(24,910)$(1,785,521)$1,137,000 
Balances at January 31, 2023201,904 $20 $2,240,732 $(1,785)$(22,996)$(1,598,684)$617,287 
Exercise of stock options15 — 127 — — — 127 
Settlement of restricted stock units1,144 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan(415)— (22,834)(242)— — (23,076)
Employee stock purchase plan420 — 18,390 — — — 18,390 
Repurchases of common stock(709)— — — — (40,472)(40,472)
Settlement of capped calls, net of related costs— — 23,688 — — — 23,688 
Employee stock-based compensation— — 151,930 — — — 151,930 
Net income— — — — — 539 539 
Other comprehensive income, net— — — — 1,079 — 1,079 
Balances at April 30, 2023202,359 $20 $2,412,033 $(2,027)$(21,917)$(1,638,617)$749,492 

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


Docusign, Inc. | 2025 Form 10-Q | 6


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended April 30,
(in thousands)20242023
Cash flows from operating activities:
Net income$33,760 $539 
Adjustments to reconcile net income provided by operating activities:
Depreciation and amortization24,506 22,867 
Amortization of deferred contract acquisition and fulfillment costs54,212 48,230 
Amortization of debt discount and transaction costs138 1,246 
Non-cash operating lease costs4,878 5,980 
Stock-based compensation expense142,504 144,706 
Deferred income taxes1,477 1,623 
Other1,472 (831)
Changes in operating assets and liabilities:
Accounts receivable130,639 108,281 
Prepaid expenses and other current assets(17,061)(16,803)
Deferred contract acquisition and fulfillment costs(63,072)(56,526)
Other assets1,917 (7,661)
Accounts payable(1,163)(9,021)
Accrued expenses and other liabilities(3,480)1,095 
Accrued compensation(45,048)(21,582)
Contract liabilities(4,973)18,287 
Operating lease liabilities(5,880)(6,795)
Net cash provided by operating activities254,826 233,635 
Cash flows from investing activities:
Purchases of marketable securities(119,638)(53,830)
Maturities of marketable securities82,114 80,699 
Purchases of strategic and other investments(500) 
Purchases of property and equipment(22,753)(19,057)
Net cash provided by (used in) investing activities(60,777)7,812 
Cash flows from financing activities:
Repurchases of common stock(149,062)(40,472)
Settlement of capped calls, net of related costs 23,688 
Payment of tax withholding obligation on net RSU settlement and ESPP purchase(41,637)(22,637)
Proceeds from exercise of stock options635 127 
Proceeds from employee stock purchase plan20,190 18,390 
Net cash used in financing activities(169,874)(20,904)
Effect of foreign exchange on cash, cash equivalents and restricted cash(2,915)1,011 
Net increase in cash, cash equivalents and restricted cash21,260 221,554 
Cash, cash equivalents and restricted cash at beginning of period (1)
801,499 723,201 
Cash, cash equivalents and restricted cash at end of period (1)
$822,759 $944,755 
(1) $5.4 million and $4.4 million of restricted cash was included in Prepaid expenses and other current assets and Other assets—noncurrent at April 30, 2024 and January 31, 2024. $4.3 million and $1.3 million of restricted cash was included in Prepaid expenses and other current assets and in Other assets—noncurrent at April 30, 2023 and January 31, 2023.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Docusign, Inc. | 2025 Form 10-Q | 7


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
Three Months Ended April 30,
(in thousands)20242023
Supplemental disclosure:
Cash paid for interest$ $93 
Cash paid for operating lease liabilities7,689 10,861 
Cash paid for income taxes3,875 765 
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities$2,416 $2,727 
Operating lease right-of-use assets exchanged for lease obligations1,837  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Docusign, Inc. | 2025 Form 10-Q | 8


DOCUSIGN, INC.
Index for Notes to the Condensed Consolidated Financial Statements

Docusign, Inc. | 2025 Form 10-Q | 9


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”, “Docusign”, 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 offers solutions that address agreement workflows and digital transformation. Docusign’s core offerings, including the world’s leading electronic signature and contract lifecycle management (“CLM”) products, allow organizations to boost productivity, accelerate contract review cycles, and transform agreement data into insights and actions while providing a better experience for their customers. Additionally, Docusign has introduced its Intelligent Agreement Management (“IAM”) platform, enabling organizations to create, commit to, and manage agreements, 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 2024 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, 2024 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended April 30, 2024 are not necessarily indicative of the results to be expected for the year ending January 31, 2025.

Our fiscal year ends on January 31. References to fiscal 2025, for example, are to the fiscal year ending January 31, 2025.

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 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 2024 Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.


Docusign, Inc. | 2025 Form 10-Q | 10


Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which enhances disclosures required for operating segments. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for annual filings for the Company’s fiscal year beginning February 1, 2024, and interim filings for the fiscal year beginning February 1, 2025, and should be applied on a retrospective basis to all periods presented. We are currently evaluating the effect of adopting ASU 2023-07 on our financial statement disclosures.

In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retrospective basis. We are currently evaluating the effect of adopting ASU 2023-09 on our income tax disclosures.

In March 2024, the SEC adopted the final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires registrants to provide certain climate-related information in their registration statements and annual reports. As it pertains to the financial statements, the final rules require the financial statement footnotes to include certain disclosures regarding the amounts of expenses (or capitalized costs) incurred that relate to severe weather events and other natural conditions, as well as other disclosures regarding the material impact on financial estimates and assumptions of severe weather events and other natural conditions or disclosed targets or disclosed targets or transition plans. It also requires disclosure of financial statement amounts related to carbon offsets and renewable energy credits. The disclosure requirements will be phased in beginning with our annual filing for the fiscal year ending January 31, 2026. In April 2024, the SEC issued an order staying these rules pending the completion of judicial review of litigation challenging the validity of the rules. We are currently evaluating the disclosure impact of adoption of the standard on our consolidated financial statements.

We have not adopted accounting pronouncements during the three months ended April 30, 2024.

Note 2. Revenue

Subscription revenue is recognized over time and accounted for approximately 97% of our revenue in each of the three month periods ended April 30, 2024 and 2023.

Performance Obligations

As of April 30, 2024, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $2.2 billion. We expect to recognize 56% of the transaction price allocated to remaining performance obligations within the 12 months following April 30, 2024 in our condensed consolidated statement of operations and comprehensive income.

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 $12.3 million and $15.9 million as of April 30, 2024 and January 31, 2024. 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 payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the three months ended April 30, 2024 and 2023, we recognized revenue of $563.3 million and $510.5 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.

Docusign, Inc. | 2025 Form 10-Q | 11


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 April 30,
(in thousands)20242023
U.S.$512,726 $493,058 
International196,914 168,330 
Total revenue$709,640 $661,388

Note 3. Fair Value Measurements
The following table summarizes our financial assets that are measured at fair value on a recurring basis:
April 30, 2024
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$337,891 $ $ $337,891 
Level 2:
Cash equivalents(1)
Commercial paper25,046  (6)25,040 
Available-for-sale securities
Commercial paper64,466  (129)64,337 
Corporate notes and bonds304,672 4 (1,538)303,138 
U.S. governmental securities41,122 1 (90)41,033 
Level 2 total435,306 5 (1,763)433,548 
Total$773,197 $5 $(1,763)$771,439 
January 31, 2024
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$298,517 $ $ $298,517 
Level 2:
Cash equivalents(1)
Commercial paper43,845  (9)43,836 
U.S. government agency securities9,968  (1)9,967 
Available-for-sale securities
Commercial paper42,958 2 (25)42,935 
Corporate notes and bonds299,166 262 (670)298,758 
U.S. governmental securities28,752  (66)28,686 
Level 2 total424,689 264 (771)424,182 
Total$723,206 $264 $(771)$722,699 

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of April 30, 2024 and January 31, 2024, in addition to cash of $454.5 million and $444.8 million.

Docusign, Inc. | 2025 Form 10Q | 12


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 April 30, 2024, by remaining contractual maturities, were as follows (in thousands):
Due in one year or less$269,400 
Due in one to two years139,108 
$408,508 

As of April 30, 2024 and January 31, 2024, 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 April 30, 2024 and January 31, 2024.

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:
(in thousands)April 30, 2024January 31, 2024
Computer and network equipment$141,464 $142,241 
Software, including capitalized software development costs195,390 168,584 
Furniture and office equipment18,135 18,196 
Leasehold improvements58,047 58,230 
413,036 387,251 
Less: Accumulated depreciation(261,585)(244,270)
151,451 142,981 
Work in progress104,285 102,192 
     Total$255,736 $245,173 

Depreciation and amortization expense associated with property and equipment was $19.8 million and $17.8 million for the three months ended April 30, 2024 and 2023. This included amortization expense related to capitalized internally developed software costs of $11.7 million and $6.8 million for the three months ended April 30, 2024 and 2023.

For the three months ended April 30, 2024 and 2023, we capitalized $24.7 million and $21.7 million of internally developed software, including $8.6 million and $6.8 million of capitalized stock-based compensation expense in the three months ended April 30, 2024 and 2023.

Docusign, Inc. | 2025 Form 10-Q | 13


Note 5. Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:
Three Months Ended April 30,
(in thousands)20242023
Deferred Contract Acquisition Costs:
Beginning balance$409,658 $355,389 
Additions to deferred contract acquisition costs52,088 43,239 
Amortization of deferred contract acquisition costs(44,400)(35,746)
Cumulative translation adjustment(1,603)826 
Ending balance$415,743 $363,708 
Deferred Contract Fulfillment Costs:
Beginning balance$22,525 $21,076 
Additions to deferred contract fulfillment costs10,984 13,287 
Amortization of deferred contract fulfillment costs(9,812)(12,484)
Cumulative translation adjustment(150)166 
Ending balance$23,547 $22,045 

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.

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 2023 Notes and 2024 Notes were extinguished, and all outstanding amounts were repaid in full during the third and fourth quarters of fiscal 2024, respectively. We repaid in cash $37.1 million and $689.9 million in aggregate principal amount of the 2023 Notes and 2024 Notes.

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 April 30,
(in thousands)20242023
Contractual interest expense$ $357 
Amortization of transaction costs 1,109 
Total$ $1,466 

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. 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. All remaining Capped Calls associated with the 2023 Notes and 2024 Notes expired during the third and fourth quarters of fiscal 2024, respectively.
Docusign, Inc. | 2025 Form 10-Q | 14



Impact on Net Income 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. In the three months ended April 30, 2023, the Capped Calls were excluded from the calculation of diluted earnings per share, as they were antidilutive.

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 April 30, 2024. As of April 30, 2024, 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 April 30, 2024, we had unused letters of credit outstanding totaling $1.3 million, the majority of which are associated with our various operating leases.

We have entered into certain noncancelable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of April 30, 2024, our future noncancelable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:
Fiscal Period:Amount (in thousands)
2025, remainder$37,798 
202655,097 
20278,820 
20281,663 
20291,138 
Thereafter484 
Total$105,000 

We entered into agreements with public cloud computing service providers with minimum commitments through fiscal 2027 and 2028. As of April 30, 2024 our remaining commitments under these agreements are $17.3 million and $108.4 million respectively, which are excluded from the table above.

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 April 30, 2024, and January 31, 2024. 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.
Docusign, Inc. | 2025 Form 10-Q | 15



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. 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 then-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.

Eight 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; 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; on March 7, 2024, in the Delaware Court of Chancery, captioned Roy v. Alhadeff, et al., Case No. C.A. 2024-0223-PAF; on April 9, 2024, in the U.S. District Court for the Northern District of California, captioned Alexander v. Springer, et al., Case No. 3:24-cv-02139; on April 11, 2024, in the Delaware Court of Chancery, captioned Ingrao v. Beer, et al., Case No. C.A. 2024-0382-PAF; and on May 28, 2024, in the Delaware Court of Chancery, captioned Jordan v. Springer, et al., Case No. C.A. 2024-0564-PAF. 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, then-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, gross mismanagement, 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 first 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 most recent case in the Northern District of California (Alexander) was also related to the other derivative suits and assigned to the same judge, and subsequently consolidated with Lapin and Votto and stayed by order of the court on May 8, 2024. 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. On May 28, 2024, plaintiff filed a notice seeking to voluntarily dismiss the Delaware Court of Chancery Pottetti action. An order of dismissal has not yet issued. Similar to the stay in Pottetti, we anticipate seeking a stay of the newly filed suits (Roy, Ingrao, and Jordan) in light of the securities class action, such that no response to the complaints would 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.
Docusign, Inc. | 2025 Form 10-Q | 16


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. The Court of Chancery dismissed the case after Mr. Springer withdrew his motion for attorneys’ fees earlier this year.

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, including his attorneys’ fees from the Delaware litigation. The arbitration hearing for this case took place from March 11-15, 2024, and the parties have completed post-hearing briefings. A final order from the arbitrator is expected on or before July 12, 2024.

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 April 30, 2024, 47.0 million shares of our common stock were available for issuance under the 2018 Plan.

Restricted Stock Units

Restricted stock unit (“RSU”) activity for the three months ended April 30, 2024 was as follows:
(in thousands, except per share data)Number of UnitsWeighted-Average Grant Date Fair Value
Unvested at January 31, 202426,700 $60.70 
Granted1,192 54.47 
Vested(2,136)73.52 
Canceled(1,469)64.35 
Unvested at April 30, 202424,287 $58.79 

As of April 30, 2024, our total unrecognized compensation cost related to RSUs was $1.0 billion. We expect to recognize this expense over the remaining weighted-average period of approximately 2.88 years.

As of April 30, 2024, the grant date fair value of unvested RSUs subject to market-based and performance-based vesting conditions (“PSU”) was $116.6 million. The number of RSUs granted or canceled included in the table above reflects shares that could be eligible to vest at 100% of target for PSUs and includes adjustments for over or under achievement for PSUs granted in prior periods.

Stock Options

Option activity for the three months ended April 30, 2024 was as follows:
(in thousands, except years and per share data)Number of OptionsWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Term (Years)Aggregate Intrinsic Value
Outstanding at January 31, 2024, all vested and exercisable1,385 $17.39 2.63$60,117 
Exercised(56)11.43 
Outstanding at April 30, 2024, all vested and exercisable1,329 $17.64 2.48$51,643 

As of April 30, 2024, there was no remaining unrecognized compensation cost related to stock option grants.

Docusign, Inc. | 2025 Form 10-Q | 17


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 April 30, 2024, 12.1 million shares of our common stock were reserved for issuance under the ESPP.

Compensation expense related to the ESPP was $3.0 million and $4.2 million for the three months ended April 30, 2024 and 2023.

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.

During the three months ended April 30, 2024, we repurchased and cancelled 2.5 million shares of common stock at an average price of $58.78 per share, for an aggregate amount of $149.1 million. During the three months ended April 30, 2023, we repurchased and cancelled 0.7 million shares of common stock at an average price of $57.06 per share, for an aggregate amount of $40.5 million.

Note 9. Restructuring and Other Related Charges

2024 Restructuring Plan

During the first quarter of fiscal 2024, our 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.

2025 Restructuring Plan

During the first quarter of fiscal 2025, our board of directors authorized a restructuring plan (the “2025 Restructuring Plan”) designed to strengthen and support our financial and operational efficiency while continuing to invest in product and related initiatives. We incurred costs associated with the 2025 Restructuring Plan related to employee termination benefits and other costs mainly in the first quarter of fiscal 2025 and expect that the execution of the 2025 Restructuring Plan will be substantially complete by the end of the second quarter of fiscal 2025.

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

For the three months ended April 30, 2024, restructuring and other related charges were $29.1 million for employee termination benefits, including stock-based compensation expense of $4.6 million. For the three months ended April 30, 2023, restructuring and other related charges were $28.8 million, and primarily composed of $27.7 million for employee termination benefits, which included stock-based compensation expense of $5.0 million.

Restructuring liability activities during the three months ended April 30, 2024:
(in thousands)January 31, 2024AccrualsCash PaymentsApril 30, 2024
2024 Restructuring Plan
Other122  (122) 
Total$122 $ $(122)$ 
2025 Restructuring Plan
Employee termination benefits$ $24,413 $(22,255)$2,158 
Total$ $24,413 $(22,255)$2,158 


Docusign, Inc. | 2025 Form 10-Q | 18


Note 10. Net Income per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net income per share attributable to common stockholders for periods presented:
Three Months Ended April 30,
(in thousands, except per share data)20242023
Numerator:
Net income attributable to common stockholders, basic$33,760 $539 
Add: Interest expense on convertible senior notes 357 
Net income attributable to common stockholders, diluted$33,760 $896 
Denominator:
Weighted-average common shares outstanding, basic205,870 202,631 
Effect of dilutive securities4,026 5,440 
Weighted-average common shares outstanding, diluted209,896 208,071 
Net income per share attributable to common stockholders:
Basic$0.16 $0.00 
Diluted$0.16 $0.00 

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 April 30,
(in thousands)20242023
RSUs4,480 7,191 
ESPP114 35 
Total antidilutive securities4,594 7,226 

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 provision was $2.8 million and $5.1 million for the three months ended April 30, 2024 and 2023, respectively. The change was primarily due to the decrease of the annual effective tax rate driven by the increase of the forecasted annual pretax earnings.While annual pretax earnings are expected to increase, our income tax provision is expected to remain relatively flat as we have net operating losses and research tax credits in the U.S. to offset an increase in our U.S. tax liability.

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. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that during fiscal year 2025, sufficient positive evidence may become available to allow us to reach a conclusion that some portion of or the entire U.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of material U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense estimated to be $750 million to $850 million in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change based on the level of sustained U.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded stock price, market acceptance for our products and solutions offerings such as our new IAM platform, and macroeconomic conditions, among other factors.

Docusign, Inc. | 2025 Form 10-Q | 19


As of April 30, 2024, our gross unrecognized tax benefits totaled $62.7 million, excluding related accrued interest and penalties, of which $10.8 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.

Note 12. Subsequent Events

On May 5, 2024, Docusign agreed to acquire DocuSmart, Inc. d/b/a Lexion ("Lexion") pursuant to an Agreement and Plan of Merger by and among Docusign, Lexion, Laser Merger Sub, Inc. and Fortis Advisors LLC as stockholders' representative ("Merger Agreement"). The Merger Agreement provides for the acquisition of all outstanding equity interests of Lexion in exchange for consideration of approximately $165 million in cash, subject to adjustments. In connection with the acquisition, we also issued to certain Lexion employees RSUs which will vest subject to each employee’s respective continued employment. Lexion offers an AI-powered contract management platform which features intelligent contract repository and agreement workflow automation and reporting. The acquisition closed on May 31, 2024. Given the timing of the completion of the acquisition, we are currently in the process of valuing the assets acquired and liabilities assumed in the acquisition. As a result, we are unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed and other disclosures.

In May 2024, our board of directors authorized an increase to our existing stock repurchase program for an additional amount of up to $1.0 billion of our outstanding common stock. The program has no minimum purchase commitment and no mandated end date. The repurchase program may be suspended or discontinued at any time at our discretion. The timing and amount of any repurchased common stock will be determined by management based on its evaluation of market conditions and other factors.

Docusign, Inc. | 2025 Form 10-Q | 20


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 2024 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 2024 Annual Report on Form 10-K. Our fiscal year ends January 31.

Executive Overview of First Quarter Results

Overview

Docusign offers solutions that address agreement workflows and digital transformation. Docusign’s core offerings, including the world’s leading electronic signature and CLM products, allow organizations to boost productivity, accelerate contract review cycles, and transform agreement data into insights and actions, while providing a better experience for their customers. Additionally, Docusign has introduced its IAM platform, enabling organizations to create, commit to, and manage agreements, from virtually anywhere in the world, securely. As a result, over 1.5 million customers and more than a billion users worldwide utilize our platform to accelerate and simplify the process of doing business.

Historically, we have primarily offered access to our products on a subscription basis with prices based on the functionality our customers require and the quantity of Envelopes required by our customers. 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.

In addition, we expect to offer our new IAM platform on a user-based subscription basis. The subscription offerings are anticipated to have multiple pricing tiers as well as specialized packages for specific user personas and end markets beginning with sales and customer experience. The rollout of the platform and additional pricing model is expected to occur gradually starting fiscal 2025 across customer segments and geographies. As a result, we currently expect eSignature to continue to represent the majority of our revenue for the foreseeable future.

We generate substantially all our revenue from sales of subscriptions, which accounted for 97% of our revenue in each of the three month periods ended April 30, 2024 and 2023. 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 each of the three months ended April 30, 2024 and 2023. 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 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 April 30, 2024, we had a total of over 1.5 million customers, including approximately 248,000 enterprise and commercial customers, compared to over 1.4 million customers and approximately 220,000 enterprise and commercial customers as of April 30, 2023. We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract to access our products.

Docusign, Inc. | 2025 Form 10-Q | 21


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 sales, partners to sell to our customers, and digital self-serve. We offer more than 900 active partner integrations with the applications that many of our customers already use so that they can create, commit and manage agreements directly within these applications. We have a diverse customer base spanning across virtually all industries and around the world with no significant customer concentration. No single customer accounted for more than 10% of total revenue in any of the 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 was 1,059 customers as of April 30, 2024 compared to 1,063 customers as of April 30, 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 Months Ended April 30, 2024 and 2023

Three Months Ended April 30,
(in thousands)20242023
Total revenue$709,640 $661,388 
Total costs and expenses687,012 666,039 
Total stock-based compensation expense142,504 144,706 
Income (loss) from operations22,628 (4,651)
Net income33,760 539 
Net cash provided by operating activities254,826 233,635 
Purchases of property and equipment(22,753)(19,057)

Cash, cash equivalents, restricted cash and investments were $1.2 billion as of April 30, 2024.

Key Factors Affecting Our Performance

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

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 and expand our product solutions.

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

Growing Customer Base

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.

Docusign, Inc. | 2025 Form 10-Q | 22


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.

Increasing International Revenue
    
Our international revenue represented 28% of total revenue in the three months ended April 30, 2024 compared to 25% of total revenue in the three months ended April 30, 2023.

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 focusing 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.

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.

Docusign, Inc. | 2025 Form 10-Q | 23


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 ExpenseSales 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 ExpenseResearch 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 ExpenseGeneral 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 ChargesRestructuring 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

In fiscal 2024, interest expense consisted primarily of contractual interest expense and amortization of debt issuance costs on our Notes. The Notes were extinguished during fiscal year 2024. In fiscal 2025, interest expense consists primarily of commitment fees on the undrawn balance of our revolving credit facility and the amortization of the associated issuance costs.

Docusign, Inc. | 2025 Form 10-Q | 24


Interest Income and Other Income, Net

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

Provision for Income Taxes

Our provision for income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business and U.S. income taxes from a tax law change related to mandatory capitalization of research and development expenses for tax years starting January 1, 2022. 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. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that during fiscal year 2025, sufficient positive evidence may become available to allow us to reach a conclusion that some portion of or the entire U.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of material U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense estimated to be $750 million to $850 million in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change based on the level of sustained U.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded stock price, market acceptance for our products and solutions offerings such as our new IAM platform, and macroeconomic conditions, among other factors.

Discussion of Results of Operations

The following table summarizes our historical consolidated statements of operations data:
Three Months Ended April 30,
(in thousands, except percentages)2024As % of revenue2023As % of revenue
Revenue:
Subscription$691,483 97 %$639,307 97 %
Professional services and other18,157 22,081 
Total revenue709,640 100 661,388 100 
Cost of revenue:
Subscription126,602 18 108,942 16 
Professional services and other22,844 27,545 
Total cost of revenue149,446 21 136,487 21 
Gross profit560,194 79 524,901 79 
Operating expenses:
Sales and marketing281,644 40 280,605 42 
Research and development134,320 19 115,364 17 
General and administrative92,478 13 104,811 16 
Restructuring and other related charges29,124 28,772 
Total operating expenses537,566 76 529,552 80 
Income (loss) from operations22,628 (4,651)(1)
Interest expense(144)— (1,966)— 
Interest income and other income, net14,109 12,245 
Income before provision for income taxes36,593 5,628 
Provision for income taxes2,833 — 5,089 
Net income$33,760 %$539 — %

Docusign, Inc. | 2025 Form 10-Q | 25


The following discussion and analysis is for the three months ended April 30, 2024, compared to the same period in 2023, unless otherwise stated.

Revenue
Three Months Ended April 30,
2024 versus 2023
(in thousands, except for percentages)20242023
Revenue:
Subscription$691,483 $639,307 %
Professional services and other18,157 22,081 (18)%
Total revenue$709,640 $661,388 %

Subscription revenue increased by $52.2 million, or 8%, in the three months ended April 30, 2024. The increase was primarily due to the expansion of revenue from existing customers and the addition of new customers, as well as an increase in sales to our commercial and enterprise customers through our direct and indirect go-to-market initiatives. We continue to invest in a variety of customer programs and initiatives, which, along with expanded customer use cases, have helped increase our subscription revenue over time.

Cost of Revenue and Gross Margin
Three Months Ended April 30,2024 versus 2023
(in thousands, except for percentages)20242023
Cost of revenue:
Subscription$126,602 $108,942 16 %
Professional services and other22,844 27,545 (17)%
Total cost of revenue$149,446 $136,487 %
Gross margin:
Subscription82 %83 %(1) pts
Professional services and other(26)%(25)%(1)pts
Total gross margin79 %79 %— pts

Cost of subscription revenue increased by $17.7 million, or 16%, in the three months ended April 30, 2024, primarily driven by higher costs to support our growing customer base.

Increases in the three months ended April 30, 2024, primarily consisted of:
$10.0 million in information technology costs, including a $7.6 million increase in hosting costs as we transition from on-premise storage to cloud storage to support future growth; and
$5.3 million in personnel costs due to annual salary increases and higher headcount as a result of internal reorganization in our platform and customer support organization.

Sales and Marketing
Three Months Ended April 30,2024 versus 2023
(in thousands, except for percentages)20242023
Sales and marketing$281,644 $280,605 — %
Percentage of revenue40 %42 %

Sales and marketing expenses remained relatively flat in the three months ended April 30, 2024. We continued to invest in our marketing efforts, resulting in a slight increase in marketing expenses. Specifically, our spending on customer events increased to support the launch of our IAM platform, which was mostly offset by decreases in paid advertising. Additionally, personnel costs decreased due to lower headcount driven by the implementation of the FY2025 Restructuring Plan, which was partially offset by an increase in commissions in line with increased sales.



Docusign, Inc. | 2025 Form 10-Q | 26


Research and Development
Three Months Ended April 30,2024 versus 2023
(in thousands, except for percentages)20242023
Research and development$134,320 $115,364 16 %
Percentage of revenue19 %17 %

Research and development expenses increased by $19.0 million, or 16%, in the three months ended April 30, 2024, primarily due to investments in our workforce to drive product innovation. Increases in the three months ended April 30, 2024, primarily consisted of $9.0 million in personnel costs due to annual salary increases in addition to rising headcount and an $8.2 million increase in stock-based compensation expense due to annual merit increases.

General and Administrative
Three Months Ended April 30,2024 versus 2023
(in thousands, except for percentages)20242023
General and administrative$92,478 $104,811 (12)%
Percentage of revenue13 %16 %

General and administrative expenses decreased by $12.3 million, or 12%, in the three months ended April 30, 2024 primarily due to an $11.8 million decrease in stock-based compensation expense. Stock-based compensation expense for the three months ended April 30, 2023 included additional charges related to an executive transition.

Liquidity and Capital Resources

Our principal sources of liquidity were cash, cash equivalents and investments, as well as cash generated from operations. As of April 30, 2024, we had $1.1 billion in cash and cash equivalents and short-term investments. We also had $139.1 million in long-term investments that provide additional capital resources. We finance our operations primarily through payments by our customers for use of our product offerings and related services, and we have additional borrowing capacity available from our credit facility.

In January 2021, we entered into a $500.0 million credit facility, as amended in May 2023, which may be increased by an additional $250.0 million subject to customary terms and conditions. The credit facility is available until January 11, 2026, to optimize our capital structure and strengthen our balance sheet. There were no outstanding borrowings under the credit facility as of April 30, 2024, and we were in compliance with related covenants as of April 30, 2024.

We believe that our sources of liquidity, including our cash, cash equivalents and investments, and expected future operating cash flows, and borrowing capacity available to us from our credit facility, are adequate to meet our potential cash commitments as well as meet our working capital and capital expenditures needs for the foreseeable future, including upcoming maturities of our contractual obligations over the next 12 months.

Our future capital requirements will depend on many factors including our growth rate, customer retention and expansion, inflation, tax withholding obligations related to settlement of our RSUs, the timing and extent of spending to support our efforts to develop our software platform, the expansion of sales and marketing activities and the continuing market acceptance of our software platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Our principal contractual obligations and commitments consist of obligations under operating leases, as well as noncancelable contractual commitments that primarily relate to cloud infrastructure support and sales and marketing activities. Refer to Note 7 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.

We do not have any special purpose entities and we do not engage in off-balance sheet financing arrangements.

Docusign, Inc. | 2025 Form 10-Q | 27


Additionally, in May 2024, we agreed to acquire Lexion pursuant to an Agreement and Plan of Merger in exchange for consideration of approximately $165 million in cash. The acquisition closed on May 31, 2024.

In addition to our contractual commitments, our board of directors has authorized a stock repurchase program, which commenced in March 2022 and does not have an expiration date. During the three months ended April 30, 2024, we repurchased 2.5 million shares of common stock for $149.1 million through our stock repurchase program. Subsequently, in May 2024, our board of directors authorized an increase to our existing stock repurchase program for an additional amount of up to $1 billion of our common stock. The program has no minimum purchase and no mandated end date. The repurchase program may be suspended or discontinued at any time at our discretion. We expect that our existing sources of liquidity, including our existing cash, cash equivalents and investments, expected future operating cash flows, and borrowing capacity of our credit facility, will finance the repurchase of common stock at management’s discretion. The timing and amount of any repurchases of common stock will be determined by management based on its evaluation of market conditions and other factors.

Cash Flows

The following table summarizes our cash flows for the periods indicated:
Three Months Ended April 30,
(in thousands)20242023
Net cash provided by (used in):
Operating activities$254,826 $233,635 
Investing activities$(60,777)$7,812 
Financing activities(169,874)(20,904)
Effect of foreign exchange on cash, cash equivalents and restricted cash(2,915)1,011 
Net change in cash, cash equivalents and restricted cash$21,260 $221,554 

Cash Flows from Operating Activities

Cash provided by operating activities was $254.8 million in the three months ended April 30, 2024. Our primary sources of cash provided by operating activities were billings and the related cash collections in addition to interest income due to higher interest rates. Our primary uses of cash include the payment of employee salaries and benefits, including the payment of termination benefits under the 2025 Restructuring Plan implemented in the first quarter of fiscal 2025, in addition to vendor payments.

Cash provided by operating activities was $233.6 million for the three months ended April 30, 2023. Our primary sources of cash provided by operating activities were billings and the related cash collections in addition to interest income due to favorable interest rates. Our primary uses of cash include payment of employee salaries and benefits, including the payment of termination benefits under the 2024 Restructuring Plan implemented in the first quarter of fiscal 2024.

Cash Flows from Investing Activities

For the three months ended April 30, 2024, net cash used in investing activities of $60.8 million was primarily driven by $37.5 million net purchases of marketable securities and $22.8 million in purchases of property and equipment as we continued to support operations at our data centers and invest in capitalized software development projects.

For the three months ended April 30, 2023, cash provided by investing activities of $7.8 million was primarily driven by $26.9 million net maturities of marketable securities, which was partially offset by $19.1 million in purchases of property and equipment as we continued to support operations at our data centers and invest in capitalized software development projects.

Cash Flows from Financing Activities

For the three months ended April 30, 2024, cash used in financing activities of $169.9 million was primarily driven by $149.1 million to repurchase 2.5 million shares of common stock at an average price of $58.78 per share through our stock repurchase program, and $20.8 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.

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For the three months ended April 30, 2023, cash used in financing activities of $20.9 million was primarily driven by $40.5 million to repurchase 0.7 million shares of common stock at an average price of $57.06 per share through our stock repurchase program, and $4.1 million payments for tax withholding on share settlements, net of proceeds associated with equity plans. We also received $23.7 million in connection with the settlement of our Capped Calls in relation to our 2023 Notes.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
The critical accounting estimates, assumptions and judgments that we believe to have the most significant impact on our consolidated financial statements are revenue recognition, deferred contract acquisition costs, stock-based compensation, income taxes and loss contingencies.
    
There have been no material changes to our critical accounting policies and estimates as described in our fiscal 2024 Annual Report on Form 10-K.

Recent Accounting Pronouncements

Refer to Note 1 in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this report.

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Non-GAAP Financial Measures and Other Key Metrics

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

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We present these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. However, these non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin and non-GAAP net income: We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, fair value adjustments to strategic investments, acquisition-related expenses, lease-related impairment and lease-related charges, restructuring and other related charges, and, as applicable, other special items. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods. In addition to these exclusions, we subtract an assumed provision for income taxes to calculate non-GAAP net income. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. For fiscal 2024 and fiscal 2025, we have determined the projected non-GAAP tax rate to be 20%.

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

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

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Reconciliation of gross profit (loss) and gross margin:
Three Months Ended April 30,
(in thousands)20242023
GAAP gross profit$560,194 $524,901 
Add: Stock-based compensation18,883 18,087 
Add: Amortization of acquisition-related intangibles2,070 2,403 
Add: Employer payroll tax on employee stock transactions1,023 675 
Add: Lease-related impairment and lease-related charges— 429 
Non-GAAP gross profit$582,170 $546,495 
GAAP gross margin78.9 %79.4 %
Non-GAAP adjustments3.1 %3.2 %
Non-GAAP gross margin82.0 %82.6 %
GAAP subscription gross profit$564,881 $530,365 
Add: Stock-based compensation14,181 11,357 
Add: Amortization of acquisition-related intangibles2,070 2,403 
Add: Employer payroll tax on employee stock transactions792 466 
Add: Lease-related impairment and lease-related charges— 299 
Non-GAAP subscription gross profit$581,924 $544,890 
GAAP subscription gross margin81.7 %83.0 %
Non-GAAP adjustments2.5 %2.2 %
Non-GAAP subscription gross margin84.2 %85.2 %
GAAP professional services and other gross loss$(4,687)$(5,464)
Add: Stock-based compensation4,702 6,730 
Add: Employer payroll tax on employee stock transactions231 209 
Add: Lease-related impairment and lease-related charges— 130 
Non-GAAP professional services and other gross profit$246 $1,605 
GAAP professional services and other gross margin(25.8)%(24.7)%
Non-GAAP adjustments27.2 %32.0 %
Non-GAAP professional services and other gross margin1.4 %7.3 %

Reconciliation of income (loss) from operations and operating margin:
Three Months Ended April 30,
(in thousands)20242023
GAAP income (loss) from operations$22,628 $(4,651)
Add: Stock-based compensation137,876 139,752 
Add: Amortization of acquisition-related intangibles4,699 5,032 
Add: Employer payroll tax on employee stock transactions6,404 4,184 
Add: Acquisition-related expenses1,358 — 
Add: Restructuring and other related charges29,124 28,772 
Add: Lease-related impairment and lease-related charges— 2,676 
Non-GAAP income from operations$202,089 $175,765 
GAAP operating margin3.2 %(0.7)%
Non-GAAP adjustments25.3 %27.3 %
Non-GAAP operating margin28.5 %26.6 %

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Reconciliation of net income:
Three Months Ended April 30,
(in thousands)20242023
GAAP net income$33,760 $539 
Add: Stock-based compensation137,876 139,752 
Add: Amortization of acquisition-related intangibles4,699 5,032 
Add: Employer payroll tax on employee stock transactions6,404 4,184 
Add: Acquisition-related expenses1,358 — 
Add: Restructuring and other related charges29,124 28,772 
Add: Amortization of debt discount and issuance costs— 1,604 
Add: Fair value adjustments to strategic investments— 119 
Add: Lease-related impairment and lease-related charges— 2,676 
Add: Income tax effect of non-GAAP adjustments(40,378)(32,464)
Non-GAAP net income$172,843 $150,214 

Computation of free cash flow:
Three Months Ended April 30,
(in thousands)20242023
Net cash provided by operating activities$254,826 $233,635 
Less: Purchases of property and equipment(22,753)(19,057)
Non-GAAP free cash flow$232,073 $214,578 
Net cash provided by (used in) investing activities$(60,777)$7,812 
Net cash used in financing activities$(169,874)$(20,904)

Computation of billings:
Three Months Ended April 30,
(in thousands)20242023
Revenue$709,640 $661,388 
Add: Contract liabilities and refund liability, end of period1,340,680 1,210,965 
Less: Contract liabilities and refund liability, beginning of period(1,343,792)(1,191,269)
Add: Contract assets and unbilled accounts receivable, beginning of period20,189 16,615 
Less: Contract assets and unbilled accounts receivable, end of period(17,179)(22,936)
Non-GAAP billings$709,538 $674,763 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

As of April 30, 2024, we had cash, cash equivalents and investments totaling $1.2 billion, which consisted primarily of bank deposits, money market funds, commercial paper, corporate notes and bonds and U.S. Treasury and government agency securities. Interest-earning instruments carry a degree of interest rate risk. Our investment portfolio is composed of highly rated securities and limits the amount of credit exposure to any one issuer. A hypothetical 100 basis point increase in interest rates would result in an approximate $2.9 million decrease of the fair value of our investment portfolio as of April 30, 2024. Such losses would only be realized if we sold the investments prior to maturity. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Additionally, our revolving credit facility, which is undrawn as of April 30, 2024,
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can be borrowed based on floating interest rate indexes, thus exposing us to potential interest rate fluctuations should we decide to access the facility.

Foreign Currency Exchange Risk

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of April 30, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of April 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified by Securities and Exchange Commission (“SEC”) rules and forms and (b) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding any required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) under the Exchange Act during the first quarter of fiscal 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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 then-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.

Eight 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; 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; on March 7, 2024, in the Delaware Court of Chancery, captioned Roy v. Alhadeff, et al., Case No. C.A. 2024-0223-PAF; on April 9, 2024, in the U.S. District Court for the Northern District of California, captioned Alexander v. Springer, et al., Case No. 3:24-cv-02139; on April 11, 2024, in the Delaware Court of Chancery, captioned Ingrao v. Beer, et al., Case No. C.A. 2024-0382-PAF; and on May 28, 2024, in the Delaware Court of Chancery, captioned Jordan v. Springer, et al., Case No. C.A. 2024-0564-PAF. 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, then-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, gross mismanagement, 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 first 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 most recent case in the Northern District of California (Alexander) was also related to the other derivative suits and assigned to the same judge, and subsequently consolidated with Lapin and Votto and stayed by order of the court on May 8, 2024. 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. On May 28, 2024, plaintiff filed a notice seeking to voluntarily dismiss the Delaware Court of Chancery Pottetti action. An order of dismissal has not yet issued. Similar to the stay in Pottetti, we anticipate seeking a stay of the newly filed suits (Roy, Ingrao, and Jordan) in light of the securities class action, such that no response to the complaints would 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
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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. The Court of Chancery dismissed the case after Mr. Springer withdrew his motion for attorneys’ fees earlier this year.

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, including his attorneys’ fees from the Delaware litigation. The arbitration hearing for this case took place from March 11-15, 2024, and the parties have completed post-hearing briefings. A final order from the arbitrator is expected on or before July 12, 2024.

ITEM 1A. RISK FACTORS

Risk Factors Summary

These summary risks provide an overview of many of the risks we are exposed to in the normal course of our business. As a result, the following summary risks do not contain all the information that may be important to you, and you should read them together with the more detailed discussion of risks set forth following this section under the heading “Risk Factors,” and with the other information in this Quarterly Report on Form 10-Q. Additional risks beyond those discussed below in “Risk Factors” or elsewhere in this Quarterly Report on Form 10-Q that we do not currently anticipate or that we currently deem immaterial could have an adverse effect on our business, results of operations, financial condition or prospects, and could cause the trading price of our common stock to decline.

These risks include, but are not limited to, the following:

Business and Industry Risks
Any decrease in adoption of our eSignature product, without a corresponding increase in our other products.
Any inability to attract new customers and retain and expand sales to existing customers.
Our inability to compete in an evolving and highly competitive market.
Our systems and security measures being compromised or subject to data breaches, cyberattacks or other malicious activity.
Any real or perceived improper use of, disclosure of, or access to sensitive customer data.
Our IAM platform, products, and solutions not evolving to meet the needs of our customers or failing to achieve market acceptance.
Any inability to manage our growth effectively.
An over-estimation of the size of our total addressable market.
Any interruption or delay in performance from our technical operations infrastructure, co-located data centers and third-party cloud providers.
Any loss of highly skilled personnel, including our management team or other key employees, or inability to attract, integrate and retain such employees necessary to support our business.
Our inability to maintain successful relationships with our strategic partners or to establish and maintain relationships with partners that provide complementary technology.
Any inability to effectively develop and expand our marketing and sales capabilities.

Financial Risks, including Taxation
Any fluctuations in our financial results or failure to meet expectations of securities analysts or investors.
Our long and unpredictable sales cycles, which often require considerable time and expense.
The delay in reflecting downturns or upturns in sales contracts in our operating results due to recognition of subscription revenue.
Any failure to forecast our revenue accurately, or failure to match our expenditures with corresponding revenue.
Any inability to achieve or sustain profitability in the future.
Any operational challenges in connection with our current or future international operations.
A lack of additional capital or the availability to use it on reasonable terms to support business growth and objectives.
Any limits on business flexibility and access to capital due to substantial indebtedness.
Any limits on our ability to use our net operating loss carryforwards to offset future taxable income.

Legal and Regulatory Risks
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Any actual or perceived failure to comply with laws and regulations affecting our business.
Legal proceedings against us by third parties for various claims, including any current or future legal proceedings.
Any failure to adequately protect our proprietary rights, including intellectual property rights.
The implementation of AI in our business and challenges with properly governing its use.

Risks Related to our Common Stock
Any volatility in the market price of our common stock.

General Risks
Unfavorable conditions in our industry or the global economy or reductions in information technology spending.
Natural catastrophic events and man-made problems, including the effects of climate change.

Risk Factors

Our business involves significant risks, some of which are described below. You should carefully consider the following risks, together with all the other information in this Quarterly Report on Form 10-Q, including in the preceding Risk Factors Summary, and our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Business and Industry Risks

We derive a majority of our revenue from our eSignature product, and slower or declining adoption of our eSignature product, without a corresponding increase in the use of our other products and solutions, could cause our operating results to suffer.

Sales of subscriptions to our eSignature product account for substantially all of our subscription revenue and are the source of substantially all of our professional services revenue. Although we continue to add to our suite of products and solutions for automating the agreement process, we expect that we will be substantially dependent on our eSignature product to generate revenue for the foreseeable future. As a result, our operating results could suffer due to:

any decline in demand for our eSignature product;
the failure of our eSignature product to maintain market acceptance;
the market for electronic signatures failing to grow, or growing more slowly than we expect;
new products and technologies from our competitors that replace or represent an improvement over our eSignature product;
new technological innovations or standards that our eSignature product does not address;
changes in regulations;
sensitivity to our current or future pricing;
our inability to release enhanced versions of our eSignature product on a timely basis; and
macro- and micro-economic factors, including inflation, changes in interest rates, increased debt and equity market volatility, actual or perceived instability in the global banking sector, and the impact of regional or global conflicts or other public health crises.

We have experienced, and may continue to experience, declines and fluctuations in the demand for our eSignature product due to a number of factors, including changing patterns of customer adoption and retention, shifts in customer spending levels, a highly competitive market, and general economic and global market conditions. We will need to maintain or increase sales of subscriptions to our eSignature product, in addition to increasing the usage and adoption of our other product offerings, in order to support our growth and operating objectives. If customer adoption and expansion of our eSignature product falls below our expectations, our business, financial condition, and operating results would be adversely affected.

If we are unable to attract new customers and retain and expand sales to existing customers, our revenue growth will be adversely affected.

To increase our revenue, we must continue to grow our customer base. As our market matures, product and service offerings evolve, and competitors introduce lower cost and/or differentiated products or solutions that compete or are perceived to compete with our products and solutions, our ability to attract new customers could be impaired. This may be especially challenging where organizations have already invested significantly in an existing solution. If our pricing is not competitive or we cannot attract new customers and subsequently maintain and expand those customer relationships, our business and operating results may be harmed.
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Our ability to increase our revenue also depends on our ability to expand the sales of our products and solutions to, and renew subscriptions with, existing customers and their organizations. Our existing customers, especially our enterprise customers, must increase their use of our products and solutions by purchasing new products, additional subscriptions and our enhanced products and solutions. We may also, from time to time, invest in products and functionalities to diversify our sales and marketing strategy. If these or other efforts to attract new customers or expand sales to our existing customers are not successful, our business, operating results and financial condition may suffer.

Moreover, a majority of our subscription contracts are for one year. Our customers have no obligation to renew their subscriptions and we cannot guarantee that our customers will renew their subscriptions with us for a similar or greater contract period or on the same or more favorable terms. Our renewal and expansion rates may decline or fluctuate as a result of a number of factors, including customer spending levels, customer dissatisfaction, decreases in the number of users with our customers, changes in the type and size of our customers, pricing, competitive conditions, customer attrition and general economic and global market conditions, including as a result of inflation, changes in interest rates, actual or perceived instability in the global banking sector, increased debt and equity market volatility and the impact of regional or global conflicts or other public health crises. If our customers do not renew their subscriptions for our products and solutions or if they reduce their subscription amounts at the time of renewal, our revenue will decline, and our business will suffer.

The market in which we participate is evolving and highly competitive, which may negatively affect our ability to add new customers, retain existing customers and grow our business.

Our products and solutions address a market that is evolving and highly competitive. We have customers in a wide variety of industries, including real estate, financial services, insurance, manufacturing, and healthcare and life sciences. We intend to continue to expand our sales efforts internationally, where many countries may have less familiarity with and acceptance of e-signature products. It is difficult to predict customer demand for our products and solutions, customer retention and expansion rates, the size and growth rate of the market for agreement automation, the entry of competitive products or the success of existing competitive products. We expect that we will continue to need intensive sales efforts to educate prospective customers, particularly enterprise and commercial customers and international customers, about the uses and benefits of our products and solutions. Additionally, we face competition from different companies depending on the product or solution. For example, our primary global e-signature competitor is currently Adobe Sign. We also face competition from a select number of vendors that focus on specific industries, geographies or product areas such as contract lifecycle management and advanced contract analytics. As we attempt to sell our products and solutions to new and existing customers, we must convince them that our products and solutions are superior to the solutions that their organizations have used in the past.

Many of our competitors have longer operating histories than us, significantly greater financial, technical, marketing and other resources, stronger brand and customer recognition, larger intellectual property portfolios and broader global distribution. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Our competitors may also offer lower pricing than we do or bundle certain competing products and services at a lower price. Further, we could lose customers if our competitors develop new competitive products and solutions, acquire competitive products, reduce prices, form strategic alliances with other companies, are acquired by third parties with greater resources or develop and market new technologies that render our existing or future products less competitive, unmarketable or obsolete. For example, disruptive technologies such as generative AI may fundamentally alter the market for our services in unpredictable ways and reduce customer demand. If we are unable to effectively compete, our business, operating results and financial condition would be harmed.

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Our systems and security measures have been, and may in the future be, compromised or subject to data breaches, cyberattacks, or other malicious activity, which could result in customers reducing or stopping their use of our products, our reputation being harmed, and significant liabilities and adverse effects on our operating results and financial condition.

Our operations involve the storage and transmission of customer data, personal data and other sensitive information, and our corporate environment contains important company data and/or business records, employee data and data from partner, vendor or other relationships, as well as a wide variety of our own internal company, partner and employee information. Our employees, service providers and third parties often work on a remote or hybrid arrangement basis, which may involve relying on less secure systems and may increase the risk of cybersecurity related incidents. We cannot guarantee these private work environments and electronic connections to our work environment have the same robust security measures as those deployed in our physical offices. We also rely on third-party and public-cloud infrastructure, and we depend in part on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of customer data. Our ability to monitor our third-party service providers’ data security is limited and any breach of our providers’ security measures may result in unauthorized access to, or misuse, loss or destruction of, our and our customers’ data.

While we have security measures in place designed to protect our production and development environment and other systems, maintain the integrity of customer, company, partner and employee information, and prevent data loss, misappropriation and other security breaches and incidents, we have faced security incidents in the past that did not have a material impact on our operations. In these cases, upon detection, we took prompt action to prevent any additional unauthorized access, put further security controls in place and worked with law enforcement agencies, when appropriate. These efforts may not completely eliminate potential risks from such incidents. Furthermore, there can be no assurance that there will be no impact to our operations from these or similar incidents in the future. Despite our prevention and response efforts, any security incident or breach, even if immaterial and properly addressed, could result in negative publicity, loss of customers, damage to our reputation and could impair our sales and harm our business.

Like other organizations providing valuable technology and services, we are subject to increasing cyberattacks from malicious third parties using a wide variety of tactics. The frequency and sophistication of such threats continues to increase and often becomes further heightened in connection with geopolitical tensions. In addition, we face increased risk to maintain the performance, reliability, security and availability of our products and technical infrastructure to the satisfaction of our customers. Advances in technology and the increasing sophistication of attackers have led to more frequent and effective cyberattacks, including advanced persistent threats by state-sponsored actors, cyberattacks relying on complex social engineering or “phishing” tactics, ransomware attacks and other methods including credential stuffing and account takeover attacks, denial or degradation of service attacks, malicious code (e.g., viruses and worms), and many other techniques that may lead to the loss, theft or misuse of personal, corporate or financial information, fraudulent payments and identity theft. If bad actors gain improper access to our systems or databases or those of our partners, service providers, and other third parties who have access to our data, they may be able to steal, publish, delete, copy, unlawfully or fraudulently use or modify data, including personal information and/or blackmail us to pay a ransom.

If our security measures, or the security measures of our partners, service providers, or customers, are compromised, our reputation could be damaged, our ability to attract and retain customers could be adversely affected, we could be subject to negative publicity, increased costs to remedy any problems and otherwise respond to any incident, monetary and other losses for us or our customers, identity theft for our customers, the inability to expand our business, additional scrutiny, restrictions, fines or penalties from regulatory or governmental authorities, loss of customers and customer confidence in our services, ongoing regulatory oversight, assessments and audits, exposure to civil litigation, and/or a breach of our contracts with third parties, all of which could expose us to significant liability and harm our business, financial condition, and operating results.

Despite significant efforts to identify vulnerabilities and create security barriers to such threats, it is virtually impossible for us, our service providers, our partners and our customers to entirely mitigate these risks. Further, we could be forced to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs, investigating and remediating any information security vulnerabilities, complying with data breach notification obligations and applicable laws, and defending against and resolving legal and regulatory claims, all of which could divert resources and the attention of our management and key personnel away from our business operations and materially and adversely affect our business, financial condition, and operating results. In July 2023, the Securities and Exchange Commission (the “SEC”) also adopted a new cybersecurity rule (effective in December 2023) requiring companies subject to SEC reporting requirements to formally report material cyber security incidents, where failure to report may result in the SEC imposing injunctions, fines and other penalties. Additionally, there can be no assurance that any limitations of liability provisions in our contracts would be enforceable or adequate in the event of a security breach or would otherwise protect us from any such liabilities or damages with respect to any particular claim.

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We also cannot be sure that our existing general liability insurance coverage, our cybersecurity coverage, and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that insurers will not deny coverage as to any future claim. Security breaches may result in increased costs for such insurance as well. One or more large, successful claims against us in excess of our available insurance coverage, or changes in our insurance policies, including premium increases or large deductible or coinsurance requirements, could have an adverse effect on our business, operating results and financial condition.

We obtain and process a large amount of sensitive customer data. Any actual or perceived improper use of, disclosure of, or access to such data could harm our reputation, as well as have an adverse effect on our business.

We receive, store and process personal information and other data from and about our customers, employees, partners and service providers. In addition, customers use our products and solutions to obtain and store personal information, health information (including protected health information) and personal financial information. Our handling of data is thus subject to a variety of laws and regulations around the world, including regulation by various government agencies, such as the respective Data Protection Authorities of the United Kingdom and other EU member states who enforce the General Data Protection Regulation, the U.S. Federal Trade Commission (the “FTC”), the U.S. Department of Health and Human Services Office for Civil Rights (the “OCR”), the California Privacy Protection Agency, and other various state, local and foreign agencies and other authorities, such as each U.S. state’s attorney general. Our data handling also is subject to contractual obligations and industry standards.

We have internal and publicly posted policies, notices, and other related documentation regarding our collection, data categorization or identification, processing, use, disclosure, deletion and security of information. Although we endeavor to comply with our policies and documentation, we may at times fail to do so or be accused of having failed to do so. The publication of our privacy notices and other related documentation that provide commitments about data privacy and security can subject us to potential actions if they are found to be non-compliant, deceptive, unfair, or otherwise misrepresent our actual practices, which could materially and adversely affect our business, financial condition and results of operations.

We are subject to various evolving laws and regulations governing our use of our business data. For more information on these laws and regulations, see the risk factor “We are subject to laws and regulations affecting our business, including those related to e-signature, marketing, advertising, privacy, data protection and information security. Our actual or perceived failure to comply with laws or regulations could harm our business. Complying with laws and regulations, in particular those related to privacy and data protection, could also result in additional costs and liabilities to us or inhibit sales of our software.” If we are not able to comply with these laws or regulations or if we become liable under these evolving laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain solutions, which would negatively affect our business, operating results and financial condition. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business and operating results.

Additionally, any failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security, may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our customers and partners to lose trust in us, which could have an adverse effect on our reputation and business.

If our IAM platform, products, and solutions do not evolve to meet the needs of our customers or fail to achieve sufficient market acceptance, our financial results and competitive position will suffer.

We spend substantial amounts of time and money to research, develop and enhance our existing products, add new offerings, incorporate additional functionality, and solve new use cases to meet our customers’ rapidly evolving demands. Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of our customers and potential customers is essential to our business. If we are unable to develop products and solutions internally due to a lack of research and development resources, we may be forced to rely on acquisitions to expand into certain markets or technologies, which can be costly. When we develop or acquire new or enhanced products and solutions, we typically incur expenses and expend resources upfront to develop, market, promote and sell them. For example, in April 2024, we launched our new IAM platform. When we introduce new or enhanced products and solutions, they must achieve high levels of market acceptance to justify the amount of our investment in developing or acquiring them and bringing them to market.

Our platform, products, solutions or enhancements to our existing products and solutions could also fail to attain sufficient market acceptance for many reasons, including:

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failure to predict market demand for particular features or functions, or to timely meet demand;
defects, errors or failures in our platform, products, and solutions;
negative publicity about their performance or effectiveness;
changes in applicable legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our products and solutions;
delays in releasing our products and solutions to the market;
negative customer perception of our IAM platform or new products and solutions;
inability to effectively execute our go-to-market and sales-directed strategies for our IAM platform, including the implementation of additional pricing models for products or enhancements; and
introduction or anticipated introduction of competing products by our competitors.

For example, we have made, and intend to continue making, significant investments in our platform and developing products that incorporate AI, and while we believe that such platform and new products will drive future growth of our business, the development of such new features involves significant risks and costs, and there is no guarantee that any such offerings will ultimately be successful. If the release of these or other new and enhanced products, solutions or functionalities as part of our platform do not meet customer needs or if our customers do not accept them, our business, operating results and financial condition would be harmed. The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred.

Our prior rapid growth may not be indicative of our future growth.

While we’ve previously experienced periods of rapid growth, we expect that, in the future, as our revenue increases, our revenue growth rate could decline as the scale of our business increases. For example, while we experienced an increase in paying customers and revenue in the past, in part due to macro-economic conditions, including the COVID-19 pandemic, there is no assurance that we will experience a continued increase in paying customers or that new or existing customers will utilize our products at similar levels. Additionally, future revenue growth rates may fail to meet the expectations of investors or securities analysts, particularly if measured against previous periods of accelerated revenue growth such as those experienced during the earlier phases of the COVID-19 pandemic and the resulting increased adoption of remote work and reduced seasonality experienced during such periods.

We believe that future growth of our revenue depends on a number of factors, including our ability to:

price our products and solutions effectively so that we are able to attract and retain customers;
attract new customers, increase our existing customers’ use of our products and solutions and provide our customers with excellent customer support;
expand our product offerings for our customers, including our ability to successfully implement such product offerings and ensure successful adoption of new or enhanced product offerings by our customers;