10-Q 1 docu-20221031.htm 10-Q docu-20221031
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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 October 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
Commission File Number: 001-38465
______________________________________
DOCUSIGN, INC.
(Exact name of registrant as specified in its charter)
______________________________________
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 201,074,148 shares of common stock, par value $0.0001, outstanding at November 30, 2022.



DOCUSIGN, INC.
TABLE OF CONTENTS
Condensed Consolidated Balance Sheets as of October 31, 2022 and January 31, 2022

DocuSign, Inc. | 2023 Form 10Q | 2


NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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


PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)October 31, 2022January 31, 2022
Assets
Current assets
Cash and cash equivalents$632,620 $509,059 
Investments—current342,730 293,763 
Accounts receivable, net of allowance for doubtful accounts of $5,203 and $5,807 as of October 31, 2022 and January 31, 2022
422,612 440,950 
Contract assets—current13,609 12,588 
Prepaid expenses and other current assets68,814 63,236 
Total current assets1,480,385 1,319,596 
Investments—noncurrent129,783 94,938 
Property and equipment, net196,127 184,664 
Operating lease right-of-use assets92,155 126,021 
Goodwill352,423 355,058 
Intangible assets, net75,232 98,816 
Deferred contract acquisition costs—noncurrent329,958 311,835 
Other assets—noncurrent75,521 50,337 
Total assets$2,731,584 $2,541,265 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$47,176 $52,804 
Accrued expenses and other current liabilities96,227 91,377 
Accrued compensation146,297 160,163 
Convertible senior notes—current36,921  
Contract liabilities—current1,088,197 1,029,891 
Operating lease liabilities—current34,713 37,404 
Total current liabilities1,449,531 1,371,639 
Convertible senior notes, net—noncurrent684,861 718,487 
Contract liabilities—noncurrent15,242 16,725 
Operating lease liabilities—noncurrent81,237 126,340 
Deferred tax liability—noncurrent10,400 9,316 
Other liabilities—noncurrent21,807 23,255 
Total liabilities2,263,078 2,265,762 
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of October 31, 2022 and January 31, 2022
  
Common stock, $0.0001 par value; 500,000 shares authorized, 201,069 shares outstanding as of October 31, 2022; 500,000 shares authorized, 198,834 shares outstanding as of January 31, 2022
20 20 
Treasury stock, at cost: 10 and 7 shares as of October 31, 2022 and January 31, 2022
(1,785)(1,532)
Additional paid-in capital2,108,062 1,720,013 
Accumulated other comprehensive loss(34,244)(4,809)
Accumulated deficit(1,603,547)(1,438,189)
Total stockholders’ equity
468,506 275,503 
Total liabilities and stockholders' equity$2,731,584 $2,541,265 

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


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
(in thousands, except per share data)2022202120222021
Revenue:
Subscription$624,055 $528,573 $1,798,500 $1,473,266 
Professional services and other21,408 16,890 57,839 53,119 
Total revenue645,463 545,463 1,856,339 1,526,385 
Cost of revenue:
Subscription102,524 84,579 315,614 247,105 
Professional services and other27,018 31,396 83,048 87,892 
Total cost of revenue129,542 115,975 398,662 334,997 
Gross profit515,921 429,488 1,457,677 1,191,388 
Operating expenses:
Sales and marketing313,783 275,619 938,062 777,110 
Research and development115,934 102,603 354,693 282,670 
General and administrative85,553 54,624 224,587 168,314 
Restructuring and other related charges28,082  28,082  
Total operating expenses543,352 432,846 1,545,424 1,228,094 
Loss from operations(27,431)(3,358)(87,747)(36,706)
Interest expense(1,456)(1,485)(4,737)(4,826)
Interest income and other income (expense), net820 (940)(2,827)4,034 
Loss before provision for (benefit from) income taxes(28,067)(5,783)(95,311)(37,498)
Provision for (benefit from) income taxes1,799 (107)7,006 2,033 
Net loss$(29,866)$(5,676)$(102,317)$(39,531)
Net loss per share attributable to common stockholders, basic and diluted$(0.15)$(0.03)$(0.51)$(0.20)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted201,393 197,597 200,569 195,996 
Other comprehensive loss:
Foreign currency translation loss, net of tax$(6,787)$(4,720)$(23,641)$(6,142)
Unrealized losses on investments, net of tax(3,011)(415)(5,794)(711)
Other comprehensive loss(9,798)(5,135)(29,435)(6,853)
Comprehensive loss$(39,664)$(10,811)$(131,752)$(46,384)
Stock-based compensation expense included in costs and expenses
Cost of revenue—subscription$11,665 $8,095 $35,272 $21,652 
Cost of revenue—professional services and other6,767 7,270 18,327 19,250 
Sales and marketing57,925 49,663 166,574 134,720 
Research and development35,506 30,074 108,689 76,811 
General and administrative23,384 14,338 58,314 38,103 
Restructuring and other related charges5,590  5,590  

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


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common StockAdditional Paid-In CapitalTreasury StockAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
(in thousands)SharesAmount
Balances at July 31, 2022200,771 $20 $1,968,852 $(1,648)$(24,446)$(1,535,647)$407,131 
Exercise of stock options36 — 383 — — — 383 
Settlement of restricted stock units and employee stock purchase plan733 — — — — — — 
Tax withholding on net share settlement of restricted stock units— — (21,470)(137)— — (21,607)
Employee stock purchase plan270 — 12,375 — — — 12,375 
Repurchases of common stock(741)— — — — (38,034)(38,034)
Employee stock-based compensation— — 147,922 — — — 147,922 
Net loss— — — — — (29,866)(29,866)
Other comprehensive loss, net— — — — (9,798)— (9,798)
Balances at October 31, 2022201,069 $20 $2,108,062 $(1,785)$(34,244)$(1,603,547)$468,506 
Balances at July 31, 2021196,467 $20 $1,611,897 $(1,219)$3,246 $(1,402,068)$211,876 
Settlement of convertible senior notes due in 202332 — (32)— — — (32)
Exercise of stock options357 — 9,358 — — — 9,358 
Settlement of restricted stock units and employee stock purchase plan767 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (106,098)(313)— — (106,411)
Employee stock purchase plans131 — 22,910 — — — 22,910 
Employee stock-based compensation— — 112,679 — — — 112,679 
Net loss— — — — — (5,676)(5,676)
Other comprehensive loss, net— — — — (5,135)— (5,135)
Balances at October 31, 2021197,754 $20 $1,650,714 $(1,532)$(1,889)$(1,407,744)$239,569 

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


DocuSign, Inc. | 2022 Form 10Q | 6


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Continued)
Common 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 options755 — 11,009 — — — 11,009 
Settlement of restricted stock units and employee stock purchase plan2,081 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (68,826)(253)— — (69,079)
Employee stock purchase plan534 — 36,526 — — — 36,526 
Repurchases of common stock(1,135)— — — — (63,041)(63,041)
Employee stock-based compensation— — 409,340 — — — 409,340 
Net loss— — — — — (102,317)(102,317)
Other comprehensive loss, net— — — — (29,435)— (29,435)
Balances at October 31, 2022201,069 $20 $2,108,062 $(1,785)$(34,244)$(1,603,547)$468,506 
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 2023619 1 (757)— — — (756)
Exercise of stock options1,468 — 21,176 — — — 21,176 
Settlement of restricted stock units and employee stock purchase plan2,586 — — — — — — 
Tax withholding on net share settlement of restricted stock units and employee stock purchase plan— — (333,991)(484)— — (334,475)
Employee stock purchase plan264 — 46,077 — — — 46,077 
Charitable donation of common stock10 — 3,000 — — — 3,000 
Employee stock-based compensation— — 299,099 — — — 299,099 
Net loss— — — — — (39,531)(39,531)
Other comprehensive loss, net— — — — (6,853)— (6,853)
Balances at October 31, 2021197,754 $20 $1,650,714 $(1,532)$(1,889)$(1,407,744)$239,569 

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

DocuSign, Inc. | 2022 Form 10Q | 7


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended October 31,
(in thousands)20222021
Cash flows from operating activities:
Net loss$(102,317)$(39,531)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization63,976 61,163 
Amortization of deferred contract acquisition and fulfillment costs134,381 100,759 
Amortization of debt discount and transaction costs3,725 3,848 
Non-cash operating lease costs20,468 20,176 
Stock-based compensation expense392,765 290,536 
Deferred income taxes3,045 (2,360)
Other13,540 5,598 
Changes in operating assets and liabilities:
Accounts receivable18,338 17,969 
Prepaid expenses and other current assets(7,593)(12,890)
Deferred contract acquisition and fulfillment costs(161,620)(147,946)
Other assets(15,707)(11,290)
Accounts payable(1,739)6,703 
Accrued expenses and other liabilities873 11,886 
Accrued compensation(15,827)(22,781)
Contract liabilities56,824 161,047 
Operating lease liabilities(33,430)(24,212)
Net cash provided by operating activities369,702 418,675 
Cash flows from investing activities:
Cash paid for acquisition, net of acquired cash (6,388)
Purchases of marketable securities(402,249)(302,762)
Sales of marketable securities 3,070 
Maturities of marketable securities311,769 193,071 
Purchases of strategic and other investments(3,625)(750)
Purchases of property and equipment(53,590)(43,926)
Net cash used in investing activities(147,695)(157,685)
Cash flows from financing activities:
Repayments of convertible senior notes(16)(64,835)
Repurchases of common stock(63,041) 
Payment of tax withholding obligation on net RSU settlement and ESPP purchase(67,120)(323,109)
Proceeds from exercise of stock options11,009 21,176 
Proceeds from employee stock purchase plan36,526 46,077 
Net cash used in financing activities(82,642)(320,691)
Effect of foreign exchange on cash, cash equivalents and restricted cash(14,652)(2,472)
Net increase (decrease) in cash, cash equivalents and restricted cash124,713 (62,173)
Cash, cash equivalents and restricted cash at beginning of period (1)
509,679 566,336 
Cash, cash equivalents and restricted cash at end of period (1)
$634,392 $504,163 
(1) $1.8 million of restricted cash was included in Other assets—noncurrent at October 31, 2022. $0.6 million of restricted cash was included in both Prepaid expenses and other current assets and Other assets—noncurrent at January 31, 2022. $0.3 million of restricted cash was included in Prepaid expenses and other current assets at October 31, 2021, and in Other assets—noncurrent at January 31, 2021.

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


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
Nine Months Ended October 31,
(in thousands)20222021
Supplemental disclosure:
Cash paid for interest$185 $349 
Cash paid for operating lease liabilities28,063 30,178 
Cash paid for income taxes5,630 5,637 
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities$726 $9,128 
Operating lease right-of-use assets exchanged for lease obligations930  
Fair value of shares issued as part of the repayments of convertible senior notes2 142,501 

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


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

DocuSign, Inc. | 2022 Form 10Q | 10


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

Note 1. Summary of Significant Accounting Policies

Organization and Description of Business

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

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

Basis of Presentation and Principles of Consolidation

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

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

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

Use of Estimates

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

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

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



DocuSign, Inc. | 2022 Form 10Q | 11


Significant Accounting Policies

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

Note 2. Revenue

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

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

Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been fully invoiced to our customers where there remains a performance obligation, typically for our multi-year arrangements. Total contract assets were $13.6 million and $12.6 million as of October 31, 2022 and January 31, 2022. The change in contract assets reflects the difference in timing between the satisfaction of our remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the nine months ended October 31, 2022 and 2021, we recognized revenue of $951.2 million and $730.7 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

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

Geographic Information

Revenue by geography is based on the address of the customer as specified in our master subscription agreements with our customers. Revenue by geographic area was as follows:
Three Months Ended October 31,Nine Months Ended October 31,
(in thousands)2022202120222021
U.S.$488,280 $417,296 $1,401,355 $1,183,601 
International157,183 128,167 454,984 342,784 
Total revenue$645,463 $545,463 $1,856,339 $1,526,385

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:
October 31, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds$2,941 $ $ $2,941 
Level 2:
Cash equivalents(1)
Commercial paper24,901  (15)24,886 
Available-for-sale securities
Commercial paper126,481  (762)125,719 
Corporate notes and bonds323,071  (5,930)317,141 
Municipal notes and bonds7,976  (107)7,869 
U.S. governmental securities22,311  (527)21,784 
Level 2 total504,740  (7,341)497,399 
Total$507,681 $ $(7,341)$500,340 
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 October 31, 2022 and January 31, 2022, in addition to cash of $604.8 million and $394.9 million.

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


DocuSign, Inc. | 2023 Form 10Q | 13


The fair value of our available-for-sale securities as of October 31, 2022, by remaining contractual maturities, were as follows (in thousands):
Due in one year or less$342,730 
Due in one to two years129,783 
$472,513 

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

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

Convertible Senior Notes

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

(in thousands)October 31, 2022January 31, 2022
0.5% Convertible Senior Notes due in 2023
Aggregate principal amount$37,083 $37,099 
Fair value amount36,816 65,440 
0% Convertible Senior Notes due in 2024
Aggregate principal amount$690,000 $690,000 
Fair value amount649,152 656,363 

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:
(in thousands)October 31, 2022January 31, 2022
Computer and network equipment$133,346 $127,799 
Software, including capitalized software development costs84,508 82,537 
Furniture and office equipment20,721 20,939 
Leasehold improvements79,013 79,811 
317,588 311,086 
Less: Accumulated depreciation(202,897)(170,261)
114,691 140,825 
Work in progress81,436 43,839 
     Total$196,127 $184,664 

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

For the three months ended October 31, 2022 and 2021, we capitalized $20.7 million and $9.5 million of internally developed software, including $6.1 million and $2.5 million of capitalized stock-based compensation expense in the three months ended October 31, 2022 and 2021. For the nine months ended October 31, 2022 and 2021, we
DocuSign, Inc. | 2023 Form 10Q | 14


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

Note 5. Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:
Nine Months Ended October 31,
(in thousands)20222021
Deferred Contract Acquisition Costs:
Beginning balance$315,158 $262,519 
Additions to deferred contract acquisition costs127,071 124,688 
Amortization of deferred contract acquisition costs(99,535)(82,043)
Cumulative translation adjustment(8,001)(2,312)
Ending balance$334,693 $302,852 
Deferred Contract Fulfillment Costs:
Beginning balance$19,088 $12,506 
Additions to deferred contract fulfillment costs34,548 23,258 
Amortization of deferred contract fulfillment costs(34,846)(18,695)
Cumulative translation adjustment(1,088) 
Ending balance$17,702 $17,069 

Note 6. Debt

Convertible Senior Notes

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

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

Conversions of the 2023 Notes

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

DocuSign, Inc. | 2023 Form 10Q | 15


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

The effective interest rate on the 2023 Notes was 1.0%. The effective interest rate on the 2024 notes was 0.6%. Interest expense recognized related to the Notes was as follows:
Three Months Ended October 31,Nine Months Ended October 31,
(in thousands)2022202120222021
Contractual interest expense$46 $41 $139 $143 
Amortization of transaction costs1,105 1,116 3,309 3,432 
Total$1,151 $1,157 $3,448 $3,575 

Capped Calls

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

The material terms of the capped call transactions were as follows:
(in thousands, except per share amounts)2023 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 October 31, 2022, the market price of our common stock did not exceed the $110.00 per share cap price associated with the 2023 Notes nor the $