Earnings Release

SAN FRANCISCO , Sept. 3, 2020 /PRNewswire/ -- DocuSign, Inc. (NASDAQ: DOCU), which offers the world's #1 eSignature solution as part of the DocuSign Agreement Cloud, today announced results for its fiscal quarter ended July 31, 2020 .

"In an accelerating digital world where business can be conducted from anywhere, the need to agree electronically and remotely has never been stronger, as shown in our 61% year-over-year billings growth," said Dan Springer , CEO of DocuSign . "We are just scratching the surface of our Agreement Cloud opportunity and believe we are increasingly becoming an essential cloud-software platform for organizations of all sizes."

Second Quarter Financial Highlights

Total revenue was $342.2 million , an increase of 45% year-over-year. Subscription revenue was $323.6 million , an increase of 47% year-over-year. Professional services and other revenue was $18.6 million , an increase of 25% year-over-year.

was , an increase of 45% year-over-year. Subscription revenue was , an increase of 47% year-over-year. Professional services and other revenue was , an increase of 25% year-over-year. Billings were $405.7 million , an increase of 61% year-over-year.

were , an increase of 61% year-over-year. GAAP gross margin was 74% in both comparative periods. Non-GAAP gross margin was 78% in both comparative periods.

was 74% in both comparative periods. Non-GAAP gross margin was 78% in both comparative periods. GAAP net loss per basic and diluted share was $0.35 on 185 million shares outstanding compared to $0.39 on 175 million shares outstanding in the same period last year.

was on 185 million shares outstanding compared to on 175 million shares outstanding in the same period last year. Non-GAAP net income per diluted share was $0.17 on 203 million shares outstanding compared to $0.01 on 189 million shares outstanding in the same period last year.

was on 203 million shares outstanding compared to on 189 million shares outstanding in the same period last year. Net cash provided by operating activities was $118.1 million compared to $26.4 million in the same period last year.

was compared to in the same period last year. Free cash flow was $99.8 million compared to $11.9 million in the same period last year.

was compared to in the same period last year. Cash, cash equivalents, restricted cash and investments were $740.6 million at the end of the quarter.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures and Other Key Metrics."

Operational and Other Financial Highlights

DocuSign Agreement Cloud 2020 Product Release 2. DocuSign introduced several new features and enhancements in the latest release to support customers in their digital transformations: DocuSign eSignature for Workplace from Facebook, which allows access to DocuSign eSignature via a chatbot within Facebook from Work; Workflow Templates for DocuSign CLM, which allows business users to quickly configure common contract processes such as approvals, signature, and routing; and enhancements to DocuSign ID Verification and DocuSign Click.

introduced several new features and enhancements in the latest release to support customers in their digital transformations: eSignature for Workplace from Facebook, which allows access to eSignature via a chatbot within Facebook from Work; Workflow Templates for CLM, which allows business users to quickly configure common contract processes such as approvals, signature, and routing; and enhancements to ID Verification and Click. Liveoak Technologies Acquisition. On July 7, 2020 , DocuSign announced its acquisition of Liveoak Technologies, Inc. in an all-stock transaction. For agreements that would normally require people to be physically present together, Liveoak enables the transaction to be done remotely via videoconferencing. The company's platform includes several other technologies specific to remote agreements, such as video identity verification, collaborative form-filling, an integration with DocuSign eSignature, and a detailed audit trail. DocuSign plans to leverage Liveoak's technology and expertise to accelerate the launch of DocuSign Notary, a new product for remote online notarization, where signers and the notary public are in different places. The beta release of DocuSign Notary is currently slated for November 2020 .

On , announced its acquisition of in an all-stock transaction. For agreements that would normally require people to be physically present together, Liveoak enables the transaction to be done remotely via videoconferencing. The company's platform includes several other technologies specific to remote agreements, such as video identity verification, collaborative form-filling, an integration with eSignature, and a detailed audit trail. plans to leverage Liveoak's technology and expertise to accelerate the launch of Notary, a new product for remote online notarization, where signers and the notary public are in different places. The beta release of Notary is currently slated for . CTO appointment. On August 25, 2020 , DocuSign announced Kamal Hathi as its new chief technology officer (CTO). Prior to joining DocuSign , Kamal was chief product and technology officer at Trader Interactive, a leading provider of online marketplaces and products serving the lifestyle vehicles and commercial equipment sector. Before that he spent more than two decades at Microsoft, most recently as GM for its SaaS analytics and business intelligence solution, Power BI. As CTO, Kamal will oversee the development and execution of DocuSign 's technology roadmap, including the expansion of the DocuSign Agreement Cloud.

Outlook

The company currently expects the following guidance:

? Quarter ending October 31, 2020 (in millions, except percentages):

Total revenue $358 to $362 Subscription revenue $343 to $347 Billings $380 to $390 Non-GAAP gross margin 78% to 80% Non-GAAP sales and marketing 46% to 48% Non-GAAP research and development 14% to 16% Non-GAAP general and administrative 9% to 11% Non-GAAP interest and other income (expense) $(1) to $1 Provision for income taxes $2 to $3 Non-GAAP diluted weighted-average shares outstanding 200 to 205

? Year ending January 31, 2021 (in millions, except percentages):

Total revenue $1,384 to $1,388 Subscription revenue $1,315 to $1,319 Billings $1,623 to $1,643 Non-GAAP gross margin 78% to 80% Non-GAAP sales and marketing 45% to 47% Non-GAAP research and development 14% to 16% Non-GAAP general and administrative 9% to 11% Non-GAAP interest and other income $4 to $6 Provision for income taxes $7 to $9 Non-GAAP diluted weighted-average shares outstanding 200 to 205

The company has not reconciled its expectations of non-GAAP financial measures to the corresponding GAAP measures because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Webcast Conference Call Information

The company will host a conference call on September 3, 2020 at 1:30 p.m. PT ( 4:30 p.m. ET ) to discuss its financial results. A live webcast of the event will be available on the DocuSign Investor Relations website at investor.docusign.com. A live dial-in will be available domestically at 877-407-0784 or internationally at 201-689-8560. A replay will be available domestically at 844-512-2921 or internationally at 412-317-6671 until midnight (ET) September 17, 2020 using the passcode 13708111.

About DocuSign

DocuSign helps organizations connect and automate how they prepare, sign, act on, and manage agreements. As part of the DocuSign Agreement Cloud, DocuSign offers eSignature, the world's #1 way to sign electronically on practically any device, from almost anywhere, at any time. Today, nearly 750,000 customers and hundreds of millions of users in over 180 countries use DocuSign to accelerate the process of doing business and to simplify people's lives.

For more information, visit www.docusign.com, call +1-877-720-2040, or follow @DocuSign on Twitter, LinkedIn, Facebook and Instagram.

Copyright 2020. DocuSign, Inc. is the owner of DOCUSIGN® and all its other marks (www.docusign.com/IP).

Investor Relations:

Annie Leschin

VP Investor Relations

investors@docusign.com

Media Relations:

Adrian Wainwright

Head of Communications

media@docusign.com

Forward-Looking Statements

This press release contains "forward-looking" statements that are based on our management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements in this press release include, among other things, statements under "Outlook" above and any other statements about expected financial metrics, such as revenue, billings, non-GAAP gross margin, non-GAAP diluted weighted-average shares outstanding, and non-financial metrics, such as customer growth, as well as statements related to our expectations regarding the benefits of the DocuSign Agreement Cloud and enhancements to it, additions to the Agreement Cloud suite of products, and the anticipated benefits of the acquisition and integration of Seal Software and Liveoak Technologies. They also include statements about our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations. These statements are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These risks include, among other things, risks related to the impact of the COVID-19 pandemic on our business, financial condition and results of operations as well as the businesses of our customers and partners and the economy as a whole; our ability to estimate the size of our total addressable market; 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 relationship with developers; our ability to expand our direct sales force, customer success team and strategic partnerships around the world; our ability to identify targets for, execute on, integrate the operations of and realize the anticipated benefits of potential acquisitions; our ability to maintain, protect and enhance our brand; the sufficiency of our cash and cash equivalents to satisfy our liquidity needs; 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; and our ability to maintain proper and effective internal controls. Additional risks and uncertainties that could affect our financial results are included in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K for the fiscal year ended January 31, 2020 filed on March 27, 2020 , our quarterly report on Form 10-Q for the quarter ended April 30, 2020 filed on June 5, 2020 , and other filings that we make from time to time with the with the Securities and Exchange Commission (the " SEC "). In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures and Other Key Metrics

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

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share: We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs from our convertible senior notes issued in September 2018 , acquisition-related expenses, and, as applicable, other special items. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and that do not correlate to the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods.

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

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

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

DOCUSIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



Three Months Ended

July 31 ,

Six Months Ended

July 31 , (in thousands, except per share data) 2020

2019

2020

2019 Revenue:













Subscription $ 323,643



$ 220,811



$ 604,565



$ 422,269

Professional services and other 18,566



14,801



34,661



27,305

Total revenue 342,209



235,612



639,226



449,574

Cost of revenue:













Subscription 64,730



39,472



116,740



72,591

Professional services and other 25,885



21,704



47,907



40,604

Total cost of revenue 90,615



61,176



164,647



113,195

Gross profit 251,594



174,436



474,579



336,379

Operating expenses:













Sales and marketing 194,992



150,886



366,785



280,822

Research and development 63,791



47,517



118,025



84,700

General and administrative 51,446



40,755



90,257



78,016

Total operating expenses 310,229



239,158



575,067



443,538

Loss from operations (58,635)



(64,722)



(100,488)



(107,159)

Interest expense (7,684)



(7,273)



(15,244)



(14,429)

Interest income and other income, net 2,601



4,531



6,343



9,748

Loss before provision for income taxes (63,718)



(67,464)



(109,389)



(111,840)

Provision for income taxes 842



1,168



2,975



2,514

Net loss $ (64,560)



$ (68,632)



$ (112,364)



$ (114,354)

Net loss per share attributable to common stockholders, basic

and diluted $ (0.35)



$ (0.39)



$ (0.61)



$ (0.66)

Weighted-average number of shares used in computing net loss

per share attributable to common stockholders, basic and

diluted 184,862



175,389



183,930



173,773

















Stock-based compensation expense included in costs and

expenses:













Cost of revenue—subscription $ 5,014



$ 3,115



$ 8,878



$ 5,397

Cost of revenue—professional services and other 5,225



4,821



9,350



8,261

Sales and marketing 32,305



25,942



56,970



44,044

Research and development 14,781



11,963



26,666



19,280

General and administrative 11,442



9,951



20,454



21,081



DOCUSIGN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands) July 31, 2020

January 31, 2020 Assets





Current assets





Cash and cash equivalents $ 404,262



$ 241,203

Investments—current 269,777



414,939

Restricted cash 280



280

Accounts receivable 224,502



237,841

Contract assets—current 17,044



12,502

Prepaid expenses and other current assets 52,158



37,125

Total current assets 968,023



943,890

Investments—noncurrent 66,265



239,729

Property and equipment, net 150,646



128,293

Operating lease right-of-use assets 168,313



149,833

Goodwill 349,254



194,882

Intangible assets, net 135,825



56,500

Deferred contract acquisition costs—noncurrent 198,325



153,333

Other assets—noncurrent 16,659



24,678

Total assets $ 2,053,310



$ 1,891,138

Liabilities and Stockholders' Equity





Current liabilities





Accounts payable $ 33,053



$ 28,144

Accrued expenses and other current liabilities 54,916



54,344

Accrued compensation 111,623



83,189

Contract liabilities—current 624,031



507,560

Operating lease liabilities—current 30,415



20,728

Total current liabilities 854,038



693,965

Convertible senior notes, net 479,105



465,321

Contract liabilities—noncurrent 11,837



11,478

Operating lease liabilities—noncurrent 177,862



162,432

Deferred tax liability—noncurrent 8,740



4,920

Other liabilities—noncurrent 19,837



6,695

Total liabilities 1,551,419



1,344,811

Stockholders' equity





Common stock 19



18

Additional paid-in capital 1,749,323



1,685,167

Accumulated other comprehensive income (loss) 2,098



(1,673)

Accumulated deficit (1,249,549)



(1,137,185)

Total stockholders' equity 501,891



546,327

Total liabilities and stockholders' equity $ 2,053,310



$ 1,891,138



DOCUSIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



Three Months Ended

July 31 ,

Six Months Ended

July 31 , (in thousands) 2020

2019

2020

2019 Cash flows from operating activities:













Net loss $ (64,560)



$ (68,632)



$ (112,364)



$ (114,354)

Adjustments to reconcile net to net cash used in operating activities













Depreciation and amortization 17,937



12,290



31,976



24,261

Amortization of deferred contract acquisition and fulfillment costs 23,834



16,889



45,194



31,149

Amortization of debt discount and transaction costs 6,942



6,548



13,784



13,002

Non-cash operating lease costs 6,795



4,735



13,119



8,863

Stock-based compensation expense 68,767



55,792



122,318



98,063

Deferred income taxes (180)



(24)



(284)



28

Other (997)



(1,260)



(493)



(2,371)

Changes in operating assets and liabilities













Accounts receivable 7,915



(21,518)



25,154



35,896

Contract assets 2,310



(2,204)



1,570



(4,905)

Prepaid expenses and other current assets 4,272



3,950



(5,388)



(3,157)

Deferred contract acquisition and fulfillment costs (51,377)



(27,952)



(92,414)



(48,439)

Other assets (4,768)



418



(6,132)



959

Accounts payable 8,829



1,306



6,275



1,588

Accrued expenses and other liabilities 12,626



9,792



11,710



14,502

Accrued compensation 24,401



22,296



22,865



2,427

Contract liabilities 62,892



17,472



107,486



21,746

Operating lease liabilities (7,504)



(3,493)



(7,098)



(7,198)

Net cash provided by operating activities 118,134



26,405



177,278



72,060

Cash flows from investing activities:













Cash paid for acquisition, net of acquired cash (180,370)



—



(180,370)



—

Purchases of marketable securities (11,667)



(155,675)



(11,667)



(530,886)

Sales of marketable securities —



—



28,986



—

Maturities of marketable securities 131,345



151,992



301,416



244,449

Purchases of strategic investments —



—



—



(15,500)

Purchases of other investments (241)



—



(3,241)



—

Purchases of property and equipment (18,362)



(14,554)



(44,751)



(29,791)

Net cash provided by (used in) investing activities (79,295)



(18,237)



90,373



(331,728)

Cash flows from financing activities:













Payment of tax withholding obligation on RSU settlement (87,137)



(29,841)



(133,860)



(85,978)

Proceeds from exercise of stock options 5,403



10,194



13,038



42,448

Proceeds from employee stock purchase plan —



—



13,590



10,563

Net cash used in financing activities (81,734)



(19,647)



(107,232)



(32,967)

Effect of foreign exchange on cash, cash equivalents and restricted

cash 4,920



(741)



2,640



(1,120)

Net increase (decrease) in cash, cash equivalents and restricted cash (37,975)



(12,220)



163,059



(293,755)

Cash, cash equivalents and restricted cash at beginning of period 442,517



236,643



241,483



518,178

Cash, cash equivalents and restricted cash at end of period $ 404,542



$ 224,423



$ 404,542



$ 224,423



DOCUSIGN, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)

Reconciliation of gross profit and gross margin:



Three Months Ended July

31,

Six Months Ended July

31, (in thousands) 2020

2019

2020

2019 GAAP gross profit $ 251,594



$ 174,436



$ 474,579



$ 336,379

Add: Stock-based compensation 10,239



7,936



18,228



13,658

Add: Amortization of acquisition-related intangibles 3,132



1,381



4,480



3,008

Add: Employer payroll tax on employee stock transactions 1,738



541



2,774



1,193

Non-GAAP gross profit $ 266,703



$ 184,294



$ 500,061



$ 354,238

GAAP gross margin 74 %

74 %

74 %

75 % Non-GAAP adjustments 4 %

4 %

4 %

4 % Non-GAAP gross margin 78 %

78 %

78 %

79 %















GAAP subscription gross profit $ 258,913



$ 181,339



$ 487,825



$ 349,678

Add: Stock-based compensation 5,014



3,115



8,878



5,397

Add: Amortization of acquisition-related intangibles 3,132



1,381



4,480



3,008

Add: Employer payroll tax on employee stock transactions 926



211



1,461



432

Non-GAAP subscription gross profit $ 267,985



$ 186,046



$ 502,644



$ 358,515

GAAP subscription gross margin 80 %

82 %

81 %

83 % Non-GAAP adjustments 3 %

2 %

2 %

2 % Non-GAAP subscription gross margin 83 %

84 %

83 %

85 %















GAAP professional services and other gross loss $ (7,319)



$ (6,903)



$ (13,246)



$ (13,299)

Add: Stock-based compensation 5,225



4,821



9,350



8,261

Add: Employer payroll tax on employee stock transactions 812



330



1,313



761

Non-GAAP professional services and other gross loss $ (1,282)



$ (1,752)



$ (2,583)



$ (4,277)

GAAP professional services and other gross margin (39) %

(47) %

(38) %

(49) % Non-GAAP adjustments 32 %

35 %

31 %

33 % Non-GAAP professional services and other gross margin (7) %

(12) %

(7) %

(16) %

Reconciliation of operating expenses:



Three Months Ended July

31,

Six Months Ended July

31, (in thousands) 2020

2019

2020

2019 GAAP sales and marketing $ 194,992



$ 150,886



$ 366,785



$ 280,822

Less: Stock-based compensation (32,305)



(25,942)



(56,970)



(44,044)

Less: Amortization of acquisition-related intangibles (4,284)



(3,039)



(7,195)



(6,145)

Less: Acquisition-related expenses (186)



—



(186)



—

Less: Employer payroll tax on employee stock transactions (3,958)



(1,577)



(6,867)



(3,928)

Non-GAAP sales and marketing $ 154,259



$ 120,328



$ 295,567



$ 226,705

GAAP sales and marketing as a percentage of revenue 57 %

64 %

57 %

62 % Non-GAAP sales and marketing as a percentage of revenue 45 %

51 %

46 %

50 %















GAAP research and development $ 63,791



$ 47,517



$ 118,025



$ 84,700

Less: Stock-based compensation (14,781)



(11,963)



(26,666)



(19,280)

Less: Employer payroll tax on employee stock transactions (2,019)



(1,026)



(3,565)



(2,176)

Non-GAAP research and development $ 46,991



$ 34,528



$ 87,794



$ 63,244

GAAP research and development as a percentage of revenue 19 %

20 %

18 %

19 % Non-GAAP research and development as a percentage of

revenue 14 %

15 %

14 %

14 %















GAAP general and administrative $ 51,446



$ 40,755



$ 90,257



$ 78,016

Less: Stock-based compensation (11,442)



(9,951)



(20,454)



(21,081)

Less: Acquisition-related expenses (6,746)



—



(7,440)



—

Less: Employer payroll tax on employee stock transactions (1,544)



(720)



(2,601)



(2,322)

Non-GAAP general and administrative $ 31,714



$ 30,084



$ 59,762



$ 54,613

GAAP general and administrative as a percentage of revenue 15 %

17 %

15 %

18 % Non-GAAP general and administrative as a percentage of

revenue 9 %

13 %

9 %

12 %

Reconciliation of income (loss) from operations and operating margin:



Three Months Ended July

31,

Six Months Ended July

31, (in thousands) 2020

2019

2020

2019 GAAP loss from operations $ (58,635)



$ (64,722)



$ (100,488)



$ (107,159)

Add: Stock-based compensation 68,767



55,792



122,318



98,063

Add: Amortization of acquisition-related intangibles 7,416



4,420



11,675



9,153

Add: Acquisition-related expenses 6,932



—



7,626



—

Add: Employer payroll tax on employee stock transactions 9,259



3,864



15,807



9,619

Non-GAAP income from operations $ 33,739



$ (646)



$ 56,938



$ 9,676

GAAP operating margin (17) %

(27) %

(16) %

(24) % Non-GAAP adjustments 27 %

27 %

25 %

26 % Non-GAAP operating margin 10 %

— %

9 %

2 %

Reconciliation of net income (loss) and net income (loss) per share, basic and diluted:



Three Months Ended

July 31 ,

Six Months Ended

July 31 , (in thousands, except per share data) 2020

2019

2020

2019 GAAP net loss $ (64,560)



$ (68,632)



$ (112,364)



$ (114,354)

Add: Stock-based compensation 68,767



55,792



122,318



98,063

Add: Amortization of acquisition-related intangibles 7,416



4,420



11,675



9,153

Add: Acquisition-related expenses 6,932



—



7,626



—

Add: Employer payroll tax on employee stock transactions 9,259



3,864



15,807



9,619

Add: Amortization of debt discount and issuance costs 6,942



6,548



13,784



13,002

Non-GAAP net income $ 34,756



$ 1,992



$ 58,846



$ 15,483

















Numerator:













Non-GAAP net income $ 34,756



$ 1,992



$ 58,846



$ 15,483

















Denominator:













Weighted-average common shares outstanding, basic 184,862



175,389



183,930



173,773

Effect of dilutive securities 18,547



13,952



16,247



15,516

Non-GAAP weighted-average common shares outstanding,

diluted 203,409



189,341



200,177



189,289

















GAAP net loss per share, basic and diluted $ (0.35)



$ (0.39)



$ (0.61)



$ (0.66)

Non-GAAP net income per share, basic 0.19



0.01



0.32



0.09

Non-GAAP net income per share, diluted 0.17



0.01



0.29



0.08



Computation of free cash flow:



Three Months Ended

July 31 ,

Six Months Ended

July 31 , (in thousands) 2020

2019

2020

2019 Net cash provided by operating activities $ 118,134



$ 26,405



$ 177,278



$ 72,060

Less: Purchases of property and equipment (18,362)



(14,554)



(44,751)



(29,791)

Non-GAAP free cash flow $ 99,772



$ 11,851



$ 132,527



$ 42,269

Net cash provided by (used in) investing activities $ (79,295)



$ (18,237)



$ 90,373



$ (331,728)

Net cash used in financing activities $ (81,734)



$ (19,647)



$ (107,232)



$ (32,967)



Computation of billings:



Three Months Ended

July 31 ,

Six Months Ended

July 31 , (in thousands) 2020

2019

2020

2019 Revenue $ 342,209



$ 235,612



$ 639,226



$ 449,574

Add: Contract liabilities and refund liability, end of period 638,790



412,953



638,790



412,953

Less: Contract liabilities and refund liability, beginning of

period (568,544)



(395,254)



(522,201)



(390,887)

Add: Contract assets and unbilled accounts receivable,

beginning of period 16,390



16,810



15,082



13,436

Less: Contract assets and unbilled accounts receivable, end of

period (20,395)



(17,757)



(20,395)



(17,757)

Add: Contract assets and unbilled accounts receivable by

acquisitions 6,589



—



6,589



—

Less: Contract liabilities and refund liability contributed by

acquisitions (9,344)



—



(9,344)



—

Non-GAAP billings $ 405,695



$ 252,364



$ 747,747



$ 467,319



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