10-Q 1 docu-20220731.htm 10-Q docu-20220731
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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 July 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
Commission File Number: 001-38465
______________________________________
DOCUSIGN, INC.
(Exact name of registrant as specified in its charter)
______________________________________
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 200,779,249 shares of common stock, par value $0.0001, outstanding at August 31, 2022.



DOCUSIGN, INC.
TABLE OF CONTENTS
Item 2.

DocuSign, Inc. | 2023 Form 10Q | 2


NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management's beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.

These risks and uncertainties include, among other things, risks related to our expectations regarding the impact of the coronavirus pandemic (the “COVID-19 pandemic”), including the easing of related regulations and measures as the pandemic and its related effects begin to abate or have abated, on our business, results of operations, financial condition, and future profitability and growth; our expectations regarding the impact of the evolving COVID-19 pandemic on the businesses of our customers, partners and suppliers, and the economy, as well as the macro- and micro-effects of the pandemic and differing levels of demand for our products as our customers’ priorities, resources, financial conditions and economic outlook change; global macro-economic conditions, including the effects of inflation, rising interest rates and market volatility on the global economy; our ability to estimate the size of our total addressable market, and the development of the market for our products, which is new and evolving; our ability to effectively sustain and manage our growth and future expenses, achieve and maintain future profitability, attract new customers and maintain and expand our existing customer base; our ability to scale and update our platform to respond to customers’ needs and rapid technological change; the effects of increased competition in our market and our ability to compete effectively; our ability to expand use cases within existing customers and vertical solutions; our ability to expand our operations and increase adoption of our platform internationally; our ability to strengthen and foster our relationships with developers; our ability to expand our direct sales force, customer success team and strategic partnerships around the world; the impact of any data breaches, cyberattacks or other malicious activity on our technology systems; our ability to identify targets for and execute potential acquisitions; our ability to successfully integrate the operations of businesses we may acquire, and to realize the anticipated benefits of such acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash, cash equivalents and capital resources to satisfy our liquidity needs; limitations on us due to obligations we have under our credit facility or other indebtedness; our failure or the failure of our software to comply with applicable industry standards, laws and regulations; our ability to maintain, protect and enhance our intellectual property; our ability to successfully defend litigation against us; our ability to attract large organizations as users; our ability to maintain our corporate culture; our ability to offer high-quality customer support; our ability to hire, retain and motivate qualified personnel, including executive level management; our ability to successfully manage and integrate executive management transitions; our ability to estimate the size and potential growth of our target market; uncertainties regarding the impact of general economic and market conditions, including as a result of regional and global conflicts or related government sanctions; our ability to successfully implement and maintain new and existing information technology systems, including our ERP system; and our ability to maintain proper and effective internal controls.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.
DocuSign, Inc. | 2023 Form 10Q | 3


PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)July 31, 2022January 31, 2022
Assets
Current assets
Cash and cash equivalents$637,186 $509,059 
Investments—current357,539 293,763 
Accounts receivable, net of allowance for doubtful accounts of $5,749 and $5,807 as of July 31, 2022 and January 31, 2022
339,528 440,950 
Contract assets—current9,387 12,588 
Prepaid expenses and other current assets79,142 63,236 
Total current assets1,422,782 1,319,596 
Investments—noncurrent133,238 94,938 
Property and equipment, net186,229 184,664 
Operating lease right-of-use assets100,481 126,021 
Goodwill353,326 355,058 
Intangible assets, net81,246 98,816 
Deferred contract acquisition costs—noncurrent322,695 311,835 
Other assets—noncurrent67,349 50,337 
Total assets$2,667,346 $2,541,265 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$44,449 $52,804 
Accrued expenses and other current liabilities90,756 91,377 
Accrued compensation149,761 160,163 
Contract liabilities—current1,073,800 1,029,891 
Operating lease liabilities—current43,479 37,404 
Total current liabilities1,402,245 1,371,639 
Convertible senior notes, net—noncurrent720,677 718,487 
Contract liabilities—noncurrent14,630 16,725 
Operating lease liabilities—noncurrent90,479 126,340 
Deferred tax liability—noncurrent10,323 9,316 
Other liabilities—noncurrent21,861 23,255 
Total liabilities2,260,215 2,265,762 
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2022 and January 31, 2022
  
Common stock, $0.0001 par value; 500,000 shares authorized, 200,771 shares outstanding as of July 31, 2022; 500,000 shares authorized, 198,834 shares outstanding as of January 31, 2022
20 20 
Treasury stock, at cost: 8 and 7 shares as of July 31, 2022 and January 31, 2022
(1,648)(1,532)
Additional paid-in capital1,968,852 1,720,013 
Accumulated other comprehensive loss(24,446)(4,809)
Accumulated deficit(1,535,647)(1,438,189)
Total stockholders’ equity
407,131 275,503 
Total liabilities and stockholders' equity$2,667,346 $2,541,265 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2023 Form 10Q | 4


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Three Months Ended July 31,Six Months Ended July 31,
(in thousands, except per share data)2022202120222021
Revenue:
Subscription$605,194 $492,758 $1,174,445 $944,693 
Professional services and other16,990 19,086 36,431 36,230 
Total revenue622,184 511,844 1,210,876 980,923 
Cost of revenue:
Subscription107,931 84,455 213,090 162,526 
Professional services and other28,773 29,325 56,030 56,497 
Total cost of revenue136,704 113,780 269,120 219,023 
Gross profit485,480 398,064 941,756 761,900 
Operating expenses:
Sales and marketing323,582 262,372 624,279 501,491 
Research and development126,532 94,651 238,759 180,067 
General and administrative76,456 63,652 139,034 113,690 
Total operating expenses526,570 420,675 1,002,072 795,248 
Loss from operations(41,090)(22,611)(60,316)(33,348)
Interest expense(1,632)(1,669)(3,281)(3,341)
Interest income and other income (expense), net1,003 (1,063)(3,647)4,974 
Loss before provision for income taxes(41,719)(25,343)(67,244)(31,715)
Provision for income taxes3,359 158 5,207 2,140 
Net loss$(45,078)$(25,501)$(72,451)$(33,855)
Net loss per share attributable to common stockholders, basic and diluted$(0.22)$(0.13)$(0.36)$(0.17)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted200,618 195,996 200,150 195,183 
Other comprehensive loss:
Foreign currency translation loss, net of tax$(5,029)$(2,058)$(16,854)$(1,422)
Unrealized losses on investments, net of tax(369)(54)(2,783)(296)
Other comprehensive loss(5,398)(2,112)(19,637)(1,718)
Comprehensive loss$(50,476)$(27,613)$(92,088)$(35,573)
Stock-based compensation expense included in costs and expenses
Cost of revenue—subscription$12,994 $7,539 $23,607 $13,557 
Cost of revenue—professional services and other6,478 6,446 11,560 11,980 
Sales and marketing61,218 46,921 108,649 85,057 
Research and development40,978 26,275 73,183 46,737 
General and administrative19,539 12,778 34,931 23,764 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2022 Form 10Q | 5


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at April 30, 2022199,920 $20 $1,835,187 $(1,648)$(19,048)$(1,465,562)$348,949 
Exercise of stock options540 — 8,689 — — — 8,689 
Settlement of restricted stock units705 — — — — — — 
Tax withholding on net share settlement of restricted stock units— — (21,953)— — — (21,953)
Repurchases of common stock(394)— — — — (25,007)(25,007)
Employee stock-based compensation— — 146,929 — — — 146,929 
Net loss— — — — — (45,078)(45,078)
Other comprehensive loss, net— — — — (5,398)— (5,398)
Balances at July 31, 2022200,771 $20 $1,968,852 $(1,648)$(24,446)$(1,535,647)$407,131 
Balances at April 30, 2021194,734 $19 $1,615,646 $(1,219)$5,358 $(1,376,567)$243,237 
Settlement of convertible senior notes due in 2023234 1 (279)— — — (278)
Exercise of stock options624 — 5,202 — — — 5,202 
Settlement of restricted stock units865 — — — — — — 
Tax withholding on net share settlement of restricted stock units— — (114,481)— — — (114,481)
Charitable donation of common stock10 — 3,000 — — — 3,000 
Employee stock-based compensation— — 102,809 — — — 102,809 
Net loss— — — — — (25,501)(25,501)
Other comprehensive loss, net— — — — (2,112)— (2,112)
Balances at July 31, 2021196,467 $20 $1,611,897 $(1,219)$3,246 $(1,402,068)$211,876 

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


DocuSign, Inc. | 2022 Form 10Q | 6


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Continued)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at January 31, 2022198,834 $20 $1,720,013 $(1,532)$(4,809)$(1,438,189)$275,503 
Exercise of stock options719 — 10,626 — — — 10,626 
Settlement of restricted stock units and employee stock purchase plan1,347 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (47,357)(116)— — (47,473)
Employee stock purchase plan265 — 24,151 — — — 24,151 
Repurchases of common stock(394)— — — — (25,007)(25,007)
Employee stock-based compensation— — 261,419 — — — 261,419 
Net loss— — — — — (72,451)(72,451)
Other comprehensive loss, net— — — — (19,637)— (19,637)
Balances at July 31, 2022200,771 $20 $1,968,852 $(1,648)$(24,446)$(1,535,647)$407,131 
Balances at January 31, 2021192,807 $19 $1,702,254 $(1,048)$4,964 $(1,380,452)$325,737 
Cumulative impact of Accounting Standards Update 2020-06 adoption— — (86,144)— — 12,239 (73,905)
Settlement of convertible senior notes due in 2023586 1 (725)— — — (724)
Exercise of stock options1,112 — 11,818 — — — 11,818 
Settlement of restricted stock units1,820 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (227,894)(171)— — (228,065)
Employee stock purchase plan132 — 23,167 — — — 23,167 
Charitable donation of common stock10 — 3,000 — — — 3,000 
Employee stock-based compensation— — 186,421 — — — 186,421 
Net loss— — — — — (33,855)(33,855)
Other comprehensive loss, net— — — — (1,718)— (1,718)
Balances at July 31, 2021196,467 $20 $1,611,897 $(1,219)$3,246 $(1,402,068)$211,876 

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

DocuSign, Inc. | 2022 Form 10Q | 7


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended July 31,
(in thousands)20222021
Cash flows from operating activities:
Net loss$(72,451)$(33,855)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization42,444 40,997 
Amortization of deferred contract acquisition and fulfillment costs89,575 63,476 
Amortization of debt discount and transaction costs2,482 2,593 
Non-cash operating lease costs13,466 13,649 
Stock-based compensation expense251,930 181,095 
Deferred income taxes3,068 (1,250)
Other8,099 2,439 
Changes in operating assets and liabilities:
Accounts receivable101,422 38,840 
Prepaid expenses and other current assets(16,028)(10,367)
Deferred contract acquisition and fulfillment costs(108,315)(95,418)
Other assets(7,255)(3,856)
Accounts payable(4,687)(9,443)
Accrued expenses and other liabilities2,967 17,022 
Accrued compensation(14,019)(13,047)
Contract liabilities41,814 136,624 
Operating lease liabilities(17,347)(16,233)
Net cash provided by operating activities317,165 313,266 
Cash flows from investing activities:
Cash paid for acquisition, net of acquired cash (6,388)
Purchases of marketable securities(296,293)(185,628)
Sales of marketable securities 3,002 
Maturities of marketable securities190,179 113,171 
Purchases of strategic and other investments(2,625)(500)
Purchases of property and equipment(37,113)(28,534)
Net cash used in investing activities(145,852)(104,877)
Cash flows from financing activities:
Repayments of convertible senior notes(16)(61,714)
Repurchases of common stock(25,007) 
Payment of tax withholding obligation on net RSU settlement and ESPP purchase(43,857)(228,575)
Proceeds from exercise of stock options10,626 11,818 
Proceeds from employee stock purchase plan24,151 23,167 
Net cash used in financing activities(34,103)(255,304)
Effect of foreign exchange on cash, cash equivalents and restricted cash(8,040)(563)
Net increase (decrease) in cash, cash equivalents and restricted cash129,170 (47,478)
Cash, cash equivalents and restricted cash at beginning of period (1)
509,679 566,336 
Cash, cash equivalents and restricted cash at end of period (1)
$638,849 $518,858 
(1) $1.7 million of restricted cash was included in Other assets—noncurrent at July 31, 2022. $0.6 million of restricted cash was included in both Prepaid expenses and other current assets and Other assets—noncurrent at January 31, 2022. $0.3 million of restricted cash was included in Prepaid expenses and other current assets at July 31, 2021, and in Other assets—noncurrent at January 31, 2021.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2022 Form 10Q | 8


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
Six Months Ended July 31,
(in thousands)20222021
Supplemental disclosure:
Cash paid for interest$93 $223 
Cash paid for operating lease liabilities20,851 20,352 
Cash paid for income taxes4,035 4,310 
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities$8,862 $7,500 
Fair value of shares issued as part of the repayments of convertible senior notes2 133,288 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
DocuSign, Inc. | 2022 Form 10Q | 9


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

DocuSign, Inc. | 2022 Form 10Q | 10


DOCUSIGN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Organization and Description of Business

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

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

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include those of DocuSign, Inc. and our subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our fiscal 2022 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2022 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended July 31, 2022 are not necessarily indicative of the results to be expected for the year ending January 31, 2023.

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

Use of Estimates

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

Significant items subject to such estimates and assumptions made by management include, but are not limited to, the determination of:
the average period of benefit associated with deferred contract acquisition costs and fulfillment costs;
the valuation of strategic investments;
the fair value of certain stock awards issued;
the fair value of convertible notes;
the useful life and recoverability of long-lived assets;
the discount rate used for operating leases; and
the recognition, measurement and valuation of deferred income taxes.

The COVID-19 pandemic and related developments have created and may continue to create significant uncertainty in global financial markets, which may decrease technology spending, depress demand for our products and harm our business and results of operations. As of the date of issuance of the financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities, except for certain subleases that resulted in impairment losses of $5.1 million on operating lease right-of-use assets recorded during the year ended January 31, 2022, $3.9 million of which was recognized during the three months ended July 31, 2021. These estimates may change as new events occur and additional information is obtained, which could be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Significant Accounting Policies
DocuSign, Inc. | 2022 Form 10Q | 11



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

Note 2. Revenue

Subscription revenue is recognized over time and accounted for approximately 97% and 96% of our revenue for the three and six months ended July 31, 2022 and 2021.

Performance Obligations
    
As of July 31, 2022, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $1.7 billion. We expect to recognize 57% of the transaction price allocated to remaining performance obligations within the 12 months following July 31, 2022 in our condensed consolidated statement of operations and comprehensive loss.

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been fully invoiced to our customers where there remains a performance obligation, typically for our multi-year arrangements. Total contract assets were $9.4 million and $12.6 million as of July 31, 2022 and January 31, 2022. The change in contract assets reflects the difference in timing between the satisfaction of our remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2022 and 2021, we recognized revenue of $763.1 million and $595.4 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

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

Geographic Information

Revenue by geography is based on the address of the customer as specified in our master subscription agreements with our customers. Revenue by geographic area was as follows:
Three Months Ended July 31,Six Months Ended July 31,
(in thousands)2022202120222021
U.S.$468,622 $397,882 $913,075 $766,305 
International153,562 113,962 297,801 214,618 
Total revenue$622,184 $511,844 $1,210,876 $980,923

DocuSign, Inc. | 2022 Form 10Q | 12


Note 3. Fair Value Measurements
The following table summarizes our financial assets that are measured at fair value on a recurring basis:
July 31, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$5,554 $ $ $5,554 
Level 2:
Cash equivalents(1)
Commercial paper4,997  (3)4,994 
Available-for-sale securities
Commercial paper165,351  (730)164,621 
Corporate notes and bonds294,479 28 (3,256)291,251 
Municipal notes and bonds7,969  (38)7,931 
U.S. governmental securities27,303  (329)26,974 
Level 2 total500,099 28 (4,356)495,771 
Total$505,653 $28 $(4,356)$501,325 
January 31, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$110,716 $ $ $110,716 
Level 2:
Cash equivalents(1)
Commercial paper3,499   3,499 
Available-for-sale securities
Commercial paper126,371 1 (175)126,197 
Corporate notes and bonds243,840  (1,296)242,544 
U.S. governmental securities20,036  (76)19,960 
Level 2 total393,746 1 (1,547)392,200 
Total$504,462 $1 $(1,547)$502,916 

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of July 31, 2022 and January 31, 2022, in addition to cash of $626.6 million and $394.9 million.

We use quoted prices in active markets for identical assets to determine the fair value of our Level 1 investments. The fair value of our Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs. The fair value of our Level 3 investments is determined based on an income approach using unobservable inputs.

The fair value of our available-for-sale securities as of July 31, 2022, by remaining contractual maturities, were as follows (in thousands):
Due in one year or less$357,539 
Due in one to two years133,238 
$490,777 

DocuSign, Inc. | 2023 Form 10Q | 13


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

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

Convertible Senior Notes

We estimated the fair value of the convertible senior notes based on the quoted market prices in an inactive market on the last trading day of the reporting period (Level 2). The Notes are recorded at face value less unamortized debt discount and transaction costs as “Convertible senior notes, net—noncurrent” on our condensed consolidated balance sheets. Refer to Note 6 for further information.

(in thousands)July 31, 2022January 31, 2022
0.5% Convertible Senior Notes due in 2023
Aggregate principal amount$37,083 $37,099 
Fair value amount42,096 65,440 
0% Convertible Senior Notes due in 2024
Aggregate principal amount$690,000 $690,000 
Fair value amount635,897 656,363 

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:
(in thousands)July 31, 2022January 31, 2022
Computer and network equipment$134,851 $127,799 
Software, including capitalized software development costs87,615 82,537 
Furniture and office equipment20,763 20,939 
Leasehold improvements79,661 79,811 
322,890 311,086 
Less: Accumulated depreciation(194,941)(170,261)
127,949 140,825 
Work in progress58,280 43,839 
     Total$186,229 $184,664 

Depreciation and amortization expense associated with property and equipment was $16.1 million and $14.3 million for the three months ended July 31, 2022 and 2021, and $31.8 million and $27.8 million for the six months ended July 31, 2022 and 2021. This included amortization expense related to capitalized internally-developed software costs of $5.5 million and $2.4 million for the three months ended July 31, 2022 and 2021, and $9.8 million and $4.1 million for the six months ended July 31, 2022 and 2021.

For the three months ended July 31, 2022 and 2021, we capitalized $16.6 million and $9.3 million of internally developed software, including $4.9 million and $2.2 million of capitalized stock-based compensation expense in the three months ended July 31, 2022 and 2021. For the six months ended July 31, 2022 and 2021, we capitalized $27.0 million and $17.1 million of internally developed software, including $7.7 million and $4.2 million of capitalized stock-based compensation expense in the six months ended July 31, 2022 and 2021.

DocuSign, Inc. | 2023 Form 10Q | 14


Note 5. Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:
Six Months Ended July 31,
(in thousands)20222021
Deferred Contract Acquisition Costs:
Beginning balance$315,158 $262,519 
Additions to deferred contract acquisition costs82,237 83,600 
Amortization of deferred contract acquisition costs(65,309)(53,250)
Cumulative translation adjustment(5,064)(332)
Ending balance$327,022 $292,537 
Deferred Contract Fulfillment Costs:
Beginning balance$19,088 $12,506 
Additions to deferred contract fulfillment costs26,078 11,731 
Amortization of deferred contract fulfillment costs(24,266)(10,116)
Cumulative translation adjustment(849) 
Ending balance$20,051 $14,121 

Note 6. Debt

Convertible Senior Notes

In September 2018, we issued $575.0 million in aggregate principal amount of the 0.5% Convertible Senior Notes due in 2023 (“2023 Notes”). The net proceeds from the issuance of the 2023 Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs. Based upon the reported sales price of our common stock, the 2023 Notes became convertible on August 1, 2020 and continued to be convertible through July 31, 2022

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

Conversions of the 2023 Notes

In the three months ended July 31, 2022, we did not receive conversion notices on our 2023 Notes. Settlements were immaterial during the six months ended July 31, 2022.

The net carrying amounts of the Notes were as follows:
(in thousands)July 31, 2022January 31, 2022
2023 Notes:
Principal$37,083 $37,099 
Less: unamortized transaction costs(209)(303)
Net carrying value of current and noncurrent liability component$36,874 $36,796 
2024 Notes:
Principal$690,000 $690,000 
Less: unamortized transaction costs(6,197)(8,309)
Net carrying value of noncurrent liability component$683,803 $681,691 
DocuSign, Inc. | 2023 Form 10Q | 15



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 July 31,Six Months Ended July 31,
(in thousands)2022202120222021
Contractual interest expense$46 $66 $92 $102 
Amortization of transaction costs1,103 1,135 2,204 2,316 
Total$1,149 $1,201 $2,296 $2,418 

Capped Calls

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

The material terms of the capped call transactions were as follows:
(in thousands, except per share amounts)2023 Notes2024 Notes
Aggregate cost of capped calls$67,563 $31,395 
Initial strike price per share (1)
$71.50 $420.24 
Initial cap price per share (1)
$110.00 $525.30 
Shares of our common stock covered by the capped calls (1)
8,042 1,642 
(1) Subject to adjustments for certain events, such as merger events and tender offers, and anti-dilution adjustments

Impact on Loss Per Share

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

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

Revolving Credit Facility

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

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 July 31, 2022. As of July 31, 2022, there were no outstanding borrowings under the Credit Facility. The Credit Facility is subject to customary fees for loan facilities of this type, including ongoing commitment fees at a rate between 0.25% and 0.30% per annum on the daily undrawn balance.

Note 7. Commitments and Contingencies

As of July 31, 2022, we had outstanding unused letters of credit associated with our various operating leases totaling $6.3 million.

We have entered into certain noncancellable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of July 31, 2022, the future noncancellable minimum payments due under these contractual obligations with a remaining
DocuSign, Inc. | 2023 Form 10Q | 16


term of more than one year were as follows:
Fiscal Period:Amount (in thousands)
2023, remainder$21,956 
202444,951 
202525,456 
202611,762 
20274,899 
Thereafter3,284 
Total$112,308 

In May 2022, the Company entered into an agreement with a public cloud computing service provider. Under the agreement, the minimum commitment is $175.0 million through fiscal 2028. As of July 31, 2022, the remaining commitment was $170.0 million. The remaining commitment is 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 July 31, 2022, and January 31, 2022. We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

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

Claims and Litigation

From time to time, we may be subject to legal proceedings, claims and litigation made against us in the ordinary course of business. We believe the final outcome of these matters will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

DocuSign, Inc. Securities Litigation and Related Derivative Litigation

On February 8, 2022, a putative securities class action was filed in the U.S. District Court for the Northern District of California, captioned Weston v. DocuSign, Inc., et al., Case No. 3:22-cv-00824, naming DocuSign and certain of our current and former officers as defendants. An amended complaint was filed on July 8, 2022. As amended, the suit purports to allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 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 response to the amended complaint is due on September 16, 2022, and we believe its allegations are devoid of merit.

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.

Three putative shareholder derivative cases have been filed containing allegations based on or similar to those in the securities class action. The cases were filed on May 17, 2022, in the U.S. District Court for the District of Delaware, captioned Potteti 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 N