DOCUSIGN INC

Previous wording

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, approximately 1.6 million customers andmore than a billion users worldwide utilize our platform to accelerate and simplify the process of doing business.

Current wording

Docusign offers solutions that address agreement workflows and digital transformation. Docusign’s core offerings, including our IAM platform, the world’s leading electronic signature, and CLM solutions, allow organizations to boost productivity, accelerate contract review cycles, and transform agreement data into insights and actions, while providing a better customer experience. For example, Docusign’s innovative IAM platform automates agreement workflows, uncovers actionable insights, and leverages AI capabilities, which enables organizations to create, commit to, and manage agreements, from virtually anywhere in the world, securely. As a result, over 1.6 million customers andmore than a billion users worldwide utilize our platform to accelerate and simplify the process of doing business.

Previous wording

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.

Current wording

Historically, we primarily offered access to our products on a subscription basis with prices based on the functionality 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 several 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.

Previous wording

In addition, we have begun offering our new IAM platform on a user-based subscription basis. The subscription offerings 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 began gradually in certain customer segments and geographies starting in the second quarter of fiscal 2025, and we plan to continue the platform rollout across additional segments and geographies. As a result, we currently expect eSignature to continue to represent the majority of our revenue for the foreseeable future.

Current wording

In the second quarter of fiscal 2025, we began offering the IAM platform on a user-based subscription basis in specific customer segments and geographies. The subscription offerings have multiple pricing tiers as well as specialized packages for specific user personas and end markets, beginning with sales and customer experience. While IAM platform subscriptions include our core products and solutions, including eSignature, we expect standalone eSignature to continue to represent the majority of our revenue for the foreseeable future as we continue to rollout IAM across additional segments and geographies.

Previous wording

We generate substantially all our revenue from sales of subscriptions, which accounted for 97% of our revenue in each of the three and six month periods ended July 31, 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.

Current wording

We generate substantially all our revenue from sales of subscriptions, which accounted for 97% of our revenue in each of the three and nine month periods ended October 31, 2024 and 2023. Our subscription fees include using 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.

Previous wording

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 and six months ended July 31, 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.

Current wording

We also generate revenue from professional and other non-subscription services, which consists primarily of fees associated with providing new customers with 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 and nine months ended October 31, 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.

Previous wording

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 July 31, 2024, we had a total of approximately 1.6 million customers, including approximately 253,000 enterprise and commercial customers, comp ared to over 1.4 million customers and approximately 226,000 enterprise and commercial customers as of July 31, 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.

Current wording

As of October 31, 2024, we had a total of over 1.6 million customers, including approximately 256,000 enterprise and commercial customers, comp ared to over 1.4 million customers and approximately 233,000 enterprise and commercial customers as of October 31, 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.

Previous wording

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.

Current wording

We offer subscriptions to our products to businesses at all scales, from global enterprise down to local, very small businesses (“VSBs”). 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.

Previous wording

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 1,066 customers as of July 31, 2024 compared to 1,047 customers as of July 31, 2023. Each of our customer types has a different purchasing pattern. VSBs typically become customers by quickly utilizing our digital and self-serve channels and generate smaller average contract values, while commercial and enterprise customers typically involve longer sales cycles, larger contract values and greater expansion opportunities for us.

Current wording

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 1,075 customers as of October 31, 2024 compared to 1,051 customers as of October 31, 2023. Each of our customer types has a different purchasing pattern. VSBs typically become customers by quickly utilizing our digital and self-serve channels and generate smaller average contract values, while commercial and enterprise customers typically involve longer sales cycles, larger contract values and greater expansion opportunities for us.

Previous wording

Financial Results for the Three and Six Months Ended July 31, 2024 and 2023

Current wording

Financial Results for the Three and Nine Months Ended October 31, 2024 and 2023

Previous wording

Cash, cash equivalents, restricted cash and investments were$1.0 billion as of July 31, 2024.

Current wording

Cash, cash equivalents, restricted cash and investments were$1.1 billion as of October 31, 2024.

Previous wording

Our international revenue represented 28% of total revenue in each of the three and six months ended July 31, 2024 compared to 26% of total revenue in each of the three and six months ended July 31, 2023.

Current wording

Our international revenue represented 28% of total revenue in each of the three and nine months ended October 31, 2024 compared to 26% of total revenue in each of the three and nine months ended October 31, 2023.

Previous wording

Our income tax benefit consists primarily of the release of a $837.7 million valuation allowance related to our U.S. deferred tax assets. We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. As of July 31, 2024, based on all available positive and negative evidence, having demonstrated sustained U.S. profitability, which is objective and verifiable, and taking into account anticipated future earnings, we have concluded it is more likely than not that our U.S. federal and states deferred tax assets will be realizable, with the exception of certain federal deferred tax assets subject to limitation on use and our California deferred tax assets. We continue to maintain a valuation allowance against these deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion.

Current wording

Our income tax benefit consists primarily of the release of a $831.4 million valuation allowance related to our U.S. deferred tax assets. We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. As of October 31, 2024, based on all available positive and negative evidence, having demonstrated sustained U.S. profitability, which is objective and verifiable, and taking into account anticipated future earnings, we have concluded it is more likely than not that our U.S. federal and states deferred tax assets will be realizable, with the exception of certain federal deferred tax assets subject to limitation on use and our California deferred tax assets. We continue to maintain a valuation allowance against these deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criterion.

Previous wording

The following discussion and analysis is for the three and six months ended July 31, 2024, compared to the same period in 2023, unless otherwise stated.

Current wording

The following discussion and analysis is for the three and nine months ended October 31, 2024, compared to the same period in 2023, unless otherwise stated.

Previous wording

Subscription revenue increased by $48.0 million, or 7%, in the three months ended July 31, 2024 and by $100.2 million, or 8%, in the six months ended July 31, 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.

Current wording

Subscription revenue increased by $52.3 million, or 8%, in the three months ended October 31, 2024 and by $152.5 million, or 8%, in the nine months ended October 31, 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.

Previous wording

Cost of subscription revenue increased by $16.2 million, or 14%, in the three months ended July 31, 2024 and by $33.8 million, or 15%, in the six months ended July 31, 2024, primarily driven by higher costs to support our growing customer base.

Current wording

Cost of subscription revenue increased by $20.4 million, or 18%, in the three months ended October 31, 2024 and by $54.2 million, or 16%, in the nine months ended October 31, 2024, primarily driven by higher costs to support our growing customer base.

Previous wording

•$11.2 million in information technology costs, including a $7.7 million increase in hosting costs as we transition from co-located data centers to public cloud storage infrastructure to support future growth; and

Current wording

•$10.4 million in information technology costs, including an $8.7 million increase in hosting costs as we transition from co-located data centers to public cloud storage infrastructure to support future growth; and

Previous wording

•$4.7 million in personnel costs due to higher headcount driven by additional hiring and the Lexion acquisition.

Current wording

•$4.5 million in personnel costs due to higher headcount.

Previous wording

•$21.2 million in information technology costs, including a $15.3 million increase in hosting costs as we transition from co-located data centers to public cloud infrastructure to support future growth; and

Current wording

•$31.6 million in information technology costs, including a $24.0 million increase in hosting costs as we transition from co-located data centers to public cloud infrastructure to support future growth; and

Previous wording

Cost of professional services revenue decreased by $6.3 million, or 21%, in the three months ended July 31, 2024, and by $11.0 million, or 19% in the six months ended July 31, 2024, primarily driven by lower headcount resulting in lower personnel costs and stock-based compensation expense for both the three months and six months ended July 31, 2024.

Current wording

Cost of professional services revenue decreased by $6.5 million, or 23%, in the three months ended October 31, 2024, and by $17.5 million, or 20% in the nine months ended October 31, 2024, primarily driven by lower headcount resulting in lower personnel costs and stock-based compensation expense. In the nine months ended October 31, 2024, stock-based compensation expense decreased by $6.9 million, and personnel costs decreased by $5.5 million.

Previous wording

Sales and marketing expenses decreased by $7.4 million, or 3%, in the three months ended July 31, 2024 and by $6.3 million, or 1%, in the six months ended July 31, 2024, primarily due to a decrease in marketing and advertising costs due to shifts in line with our go-to-market strategy.

Current wording

Sales and marketing expenses decreased by $1.9 million, or 1%, in the three months ended October 31, 2024 and by $8.2 million, or 1%, in the nine months ended October 31, 2024, primarily due to a decrease in marketing and advertising costs due to shifts in line with our go-to-market strategy.

Previous wording

Main drivers in the six months ended July 31, 2024, primarily consisted of:

Current wording

Main drivers in the nine months ended October 31, 2024, primarily consisted of:

Previous wording

•$10.1 million decrease in marketing and advertising, including a reduction in paid search, in line with cost efficiency measures, partially offset by

Current wording

•$12.3 million decrease in marketing and advertising, including a reduction in paid search, in line with cost efficiency measures; partially offset by

Previous wording

Research and development expenses increased by $11.6 million, or 9%, in the three months ended July 31, 2024 and by $30.6 million, or 12%, in the six months ended July 31, 2024, primarily due to investments in our workforce to drive product innovation. In the three months ended July 31, 2024, stock-based compensation increased $8.3 million due to executive transitions, annual merit increases, and higher headcount. In the six months ended July 31, 2024, stock-based compensation expense increased $16.5 million due to annual merit increases and executive transitions, and personnel expense increased $11.0 million due to rising headcount.

Current wording

Research and development expenses increased by $14.5 million, or 11%, in the three months ended October 31, 2024 and by $45.0 million, or 12%, in the nine months ended October 31, 2024, primarily due to investments in our workforce to drive product innovation.

Previous wording

General and administrative expenses decreased by $16.8 million, or 16%, in the three months ended July 31, 2024 and $29.1 million, or 14%, in the six months ended July 31, 2024.

Current wording

General and administrative expenses decreased by $10.7 million, or 10%, in the three months ended October 31, 2024 and $39.7 million, or 13%, in the nine months ended October 31, 2024.

Previous wording

Decreases in the six months ended July 31, 2024, primarily consisted of:

Current wording

Decreases in the three months ended October 31, 2024, primarily consisted of:

Previous wording

•$14.8 million in stock-based compensation expense mainly due to executive transitions that occurred in fiscal 2024; and

Current wording

•$20.0 million in stock-based compensation expense mainly due to executive transitions that occurred in fiscal 2024 and lower headcount; and

Previous wording

The decrease in the three months ended July 31, 2024, primarily consisted of $13.5 million in professional fees and related expenses, including release of litigation accruals and insurance reimbursements for defense costs.

Current wording

•$20.0 million in professional fees and related expenses, including release of litigation related accruals and receipt of insurance reimbursements for defense costs in the current year.

Previous wording

The change in income tax benefit for the three and six months ended July 31, 2024, was primarily due to the release of $837.7 million of our valuation allowance related to our U.S. deferred tax assets, as a discrete tax benefit during the three months ended July 31, 2024. As of July 31, 2024, based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of certain federal deferred tax assets subject to limitation on use and our California deferred tax assets. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis (see Note 13 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q for further details).

Current wording

The change in income tax expense for the three months ended October 31, 2024 was primarily due to a decrease in the discrete tax provision benefit that was recorded in the three months ended July 31, 2024 as well as changes in the forecasted annual effective tax rate. The change in income tax benefit for the nine months ended October 31, 2024 was primarily due to the release of $831.4 million of our valuation allowance related to our U.S. deferred tax assets. Based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of certain federal deferred tax assets subject to limitation on use and our California deferred tax assets. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis (see Note 13 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q for further details).

Previous wording

Our principal sources of liquidity were cash, cash equivalents and investments, as well as cash generated from operations. As of July 31, 2024, we had $938.4 million in cash and cash equivalents and short-term investments. We also had $102.5 millionin 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.

Current wording

Our principal sources of liquidity were cash, cash equivalents and investments, as well as cash generated from operations. As of October 31, 2024, we had $942.4 million in cash and cash equivalents and short-term investments. We also had $112.8 millionin 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.

Previous wording

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 July 31, 2024, and we were in compliance with related covenants as of July 31, 2024.

Current wording

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. As of October 31, 2024, there were no outstanding borrowings under the credit facility and we were in compliance with related covenants.

Previous wording

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 six months ended July 31, 2024, we repurchased 6.3 million shares of common stock for $350.8 million through our stock repurchase program. Included in the repurchase amount is the 1% excise tax as a result of the IRA. 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.

Current wording

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 nine months ended October 31, 2024, we repurchased 9.2 million shares of common stock for $523.7 million through our stock repurchase program. Included in the repurchase amount is the 1% excise tax as a result of the IRA. 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.

Previous wording

Cash provided by operating activities was $475.0 million in thesix months ended July 31, 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. Additionally, in connection with the acquisition of Lexion, we agreed to pay$19.1 million in deferred compensation for key employees, which we paid into an escrow account.

Current wording

Cash provided by operating activities was $709.4 million in thenine months ended October 31, 2024. Our primary sources of cash provided by operating activities were billings and the related cash collections in addition to interest income. 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. Additionally, in connection with the acquisition of Lexion, we agreed to pay$19.1 million in deferred compensation for key employees, which we paid into an escrow account.

Previous wording

Cash provided by operating activities was $444.7 million for thesix months ended July 31, 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.

Current wording

Cash provided by operating activities was $708.8 million for thenine months ended October 31, 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, in addition to vendor payments.

Previous wording

For the six months ended July 31, 2024, netcash used in investing activities of $236.9 million was primarily driven by the acquisition of Lexion, which totaled$143.6 million, net of cash acquired in addition to$47.6 million net purchases of marketable securities and $45.0 million in purchases of property and equipment as we continued to support operations at our data centers and invest in capitalized software development projects.

Current wording

For the nine months ended October 31, 2024, netcash used in investing activities of $280.6 million was primarily driven by the acquisition of Lexion, which totaled$143.6 million, net of cash acquired in addition to$67.7 million net purchases of marketable securities and $68.6 million in purchases of property and equipment as we continued to support operations at our data centers and invest in capitalized software development projects.

Previous wording

For the six months ended July 31, 2023, cash used in investing activities of $56.9 million was primarily driven by $10.4 million net purchases of marketable securities in addition to $46.4 million in purchases of property and equipment as wecontinued to support operations at our data centers and invest in capitalized software development projects.

Current wording

For the nine months ended October 31, 2023, net cash used in investing activities of $22.6 million was primarily driven by $70.3 million in purchases of property and equipment as wecontinued to support operations at our data centers and invest in capitalized software development projects. These cash outflows were partially offset by $48.2 million net maturities of marketable securities.

Previous wording

For the six months ended July 31, 2024, cash used in financing activities of $408.9 million was primarily driven by$349.1 million to repurchase 6.3 million shares of common stock at an average price of $55.02 per share through our stock repurchase program, and$59.8 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.

Current wording

For the nine months ended October 31, 2024, net cash used in financing activities of $607.3 million was primarily driven by$521.8 million to repurchase 9.2 million shares of common stock through our stock repurchase program, and$85.5 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.

Previous wording

For the six months ended July 31, 2023, cash used infinancing activities of $90.3 million was primarily driven by $70.5 million to repurchase 1.3 million shares of common stock at an average price of $54.51 per share through our stock repurchase program, and $43.5 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.

Current wording

For the nine months ended October 31, 2023, net cash used infinancing activities of $211.0 million was primarily driven by our stock repurchase program, payments related to our equity plans, and the maturity of our 2023 Notes. We used $145.5 million to repurchase 3.1 million shares of common stock through our stock repurchase program. In addition, we made $52.1 million payments for tax withholding on share settlements, net of proceeds associated with equity plans. We also fully repaid our 2023 Notes at maturity in September 2023 for$37.1 million. These cash outflows were partially offset by$23.7 million received in connection with the settlement of our Capped Calls in relation to our 2023 Notes.