DocuSign Inc.

09/05/2025 | Press release | Distributed by Public on 09/05/2025 14:07

Quarterly Report for Quarter Ending July 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our fiscal 2025 Annual Report on Form 10-K. As discussed in the section titled "Note Regarding Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" under Part II, Item 1A in this Quarterly Report on Form 10-Q and in our fiscal 2025 Annual Report on Form 10-K. Our fiscal year ends January 31.
Executive Overview of SecondQuarter Results
Overview
Docusign solutions bring agreements to life, accelerating and simplifying the process of doing business. Docusign's core offerings - our IAM platform, the world's leading eSignature solution, and CLM solution - 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 of July 31, 2025, over 1.7 millioncustomers and more than a billionusers worldwide utilize Docusign to accelerate and simplify the process of doing business.
We generate substantially all our revenue from sales of subscriptions, which accounted for 98% of our revenue in each of the three and six months ended July 31, 2025, and 97% of our revenue in each of the three and six months ended July 31, 2024. Our subscription fees include the use of our products and access to customer support. Subscriptions generally range from one to three years, and substantially all our multi-year customers pay in annual installments, one year in advance.
We also generate revenue from professional and other non-subscription services, which consists primarily of fees associated with providing new customers 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 six months ended July 31, 2025 and 2024. We anticipate a greater focus on investing in customer success through our professional services offered by partners. We believe it plays an important role in accelerating our customers' adoption of our products, which helps drive customer retention and expansion.
One pillar of our long-term strategy is to evolve our go-to-market ("GTM") channels from the historically direct sales-driven approach. We are currently investing in three routes to market, including direct sales, partner-assisted sales, and digital self-service purchasing. We expect that Docusign's IAM platform will increasingly be offered across all three channels.
Weoffer subscriptions to our products to businesses at all scales, from global enterprises down to local, very small businesses ("VSBs"). We offer more than 1,000 active partner integrations with the applications that many of our customers already use so that they can create, commit and manage agreements directly within these applications. We have a diverse customer base spanning across virtually all industries and around the world with no significant customer concentration. No single customer accounted for more than 10% of total revenue in any of the periods presented.
We focused initially on selling our products to commercial businesses and VSBs and later expanded our focus to target enterprise customers. The number of our customers with greater than $300,000 in annualized contract value was 1,137 customers as of July 31, 2025 compared to 1,066 customers as of July 31, 2024. 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.
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Financial Results for the Three and Six Months Ended July 31, 2025 and 2024
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
Total revenue $ 800,636 $ 736,027 $ 1,564,290 $ 1,445,667
Total costs and expenses 735,409 678,226 1,438,808 1,365,238
Total stock-based compensation expense 160,538 164,656 306,134 307,160
Income from operations 65,227 57,801 125,482 80,429
Net income 62,970 888,211 135,057 921,971
Net cash provided by operating activities 246,073 220,208 497,512 475,034
Purchases of property and equipment (28,425) (22,280) (52,049) (45,033)
Cash, cash equivalents, restricted cash and investments were $1.1 billionas of July 31, 2025.
Key Factors Affecting Our Performance
We believe that our future performance will depend on many factors, including the following:
Investing for Growth
We believe that our market opportunity is large, and we plan to invest to support long-term growth. We have three growth pillars in our long-term strategy. The first is to accelerate product innovation through research and development investments for our IAM platform. We aim to deliver category-leading value in the agreement management market while evolving into a platform company. This includes supporting a community of developers, builders, and partners to create new solutions that extend the capabilities of our IAM platform.
The second growth pillar is to strengthen our omnichannel GTM by evolving our direct sales, partner, and digital e-commerce and self-service channels to better address customer needs. By optimizing these routes with a more efficient cost structure, we aim to target growth opportunities and expand our reach in the market.
Finally, our third growth pillar is to enhance operational and financial efficiency to scale effectively and sustainably. This includes prioritizing the infrastructure and technology investments that best serve our diverse customer base, as well as generating incremental revenue and growth with a lower cost profile. Additionally, we continue to evaluate strategic acquisitions and partnerships that align with our growth objectives and expand our product offerings.
We believe these combined efforts will strengthen our ability to retain and grow within our existing customer base, while also attracting new customers.
Growing Customer Base
As of July 31, 2025, we had a total of over 1.7 million customers, including over 271,000 small and medium-sized businesses ("SMBs"), mid-market companies, and large enterprise customers served by our direct sales force. We had approximately 1.6 million customers, including approximately 253,000 customers served by our direct sales force as of July 31, 2024.
We define enterprise customers as companies generally included in the Global 2000. We define mid-market customers as companies outside the Global 2000 that have more than 250 employees and define SMBs as companies with between 10 and 249 employees, in each case excluding any enterprise customers. We define VSBs as companies with fewer than 10 employees. VSBs are our most numerous group of customers, and we typically serve them through digital and self-service resources outside of our direct sales channels. We refer to total customers as all enterprises, mid-market, SMBs, and VSBs.
We believe that our ability to increase the number of customers using our products, particularly the number of enterprise and commercial customers, is an indicator of our market penetration, the growth of our business, and our potential future business opportunities. By increasing awareness of our products, further developing our sales and marketing expertise, and continuing to build features tuned to different industry needs, we have expanded the diversity of our customer base to include organizations of all sizes across nearly every industry.
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Increasing International Revenue
International revenue increased by 12% in the six months ended July 31, 2025, compared to the six months ended July 31, 2024. Additionally, our international revenue represented 29% of our total revenue in each of the three and six month periods ended July 31, 2025 compared to 28% in each of the three and six month periods ended July 31, 2024.
We started our international selling efforts in English-speaking common law countries, such as Canada, the UK and Australia, where we were able to leverage our core technologies due to similar approaches to electronic signature in these jurisdictions and the U.S. We have since made significant investments to be able to offer our products in select civil law countries. For example, in Europe, we offer Standards-Based Signature ("SBS") technology tailored for the European Union's ("EU") electronic Identification, Authentication and Trust Services ("eIDAS") regulations. SBS supports signatures that involve digital certificates, including those specified in the EU's eIDAS regulations for advanced and qualified electronic signatures.
We believe there is a substantial opportunity for us to increase our international customer base by leveraging and expanding investments in our technology, direct sales force, and strategic partnerships around the world, as well as helping existing U.S.-based customers manage agreements across their international businesses. We have experienced increased demand across multiple regions and are focusing our sales and marketing resources to capitalize on the potential growth of these markets. Additionally, we expect to continue to develop and enhance our strategic partnerships in key international markets as we grow internationally.
Components of Results of Operations
Revenue
We derive revenue primarily from the sale of subscriptions and, to a lesser extent, professional services.
Subscription Revenue
Subscription revenue consists of fees for the use of our software platform and our technical infrastructure and access to customer support, which includes phone or email support. We typically invoice customers annually in advance. We recognize subscription revenue ratably over the term of the contract subscription period beginning on the date access to our software platform is provided.
Professional Services and Other Revenue
Professional services revenue includes fees associated with new customers requesting deployment and integration services. We price professional services on a time and materials basis and on a fixed fee basis. We generally have standalone value for our professional services and recognize revenue based on standalone selling price as services are performed or upon completion of services for fixed fee contracts. Other revenue includes amounts derived from sales of on-premises solutions.
Overhead Allocation
We allocate shared overhead costs, such as facilities (including rent, utilities and depreciation on equipment shared by all departments), information technology, information security and recruiting costs to all departments based on headcount. As such, these allocated overhead costs are reflected in each cost of revenue and operating expense category.
Cost of Revenue
Cost of Subscription Revenue
Cost of subscription revenue primarily consists of expenses related to hosting our software platform and providing support. These expenses consist of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and other related costs associated with our technical infrastructure, customer success and customer support. These expenses also consist of software and maintenance costs, third-party hosting fees, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired intangible assets, credit card processing fees and allocated overhead costs.
Cost of Professional Services and Other Revenue
Cost of professional services and other revenue consists primarily of personnel costs for our professional services delivery team, travel-related costs and allocated overhead costs.
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Gross Profit and Gross Margin
Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors including our pricing, timing and amount of investment to maintain or expand our hosting capability, the growth of our software platform support and professional services team, stock-based compensation expenses, amortization of costs associated with capitalized internal use software and acquired intangible assets and allocated overhead costs.
Operating Expenses
Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring and other related charges. As our revenues continue to increase, our operating expenses as a percentage of revenue may increase or decrease at different rates, driven by the timing of revenue recognition, the timing of hiring, our investments in growth and other factors.
Sales and Marketing Expense
Sales and marketing expense consists primarily of personnel costs, including sales commissions. These expenses also include expenditures related to advertising, marketing, promotional events, and brand awareness activities, as well as allocated overhead costs. We expect sales and marketing expense to continue to increase in absolute dollars as we enhance our product offerings and implement marketing strategies.
Research and Development Expense Research and development expense consists primarily of personnel costs. These expenses also include non-personnel costs, such as subcontracting, consulting and professional fees for third-party development resources, as well as allocated overhead costs. Our research and development efforts focus on maintaining and enhancing existing functionality and adding new functionality. We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our software platform.
General and Administrative Expense
General and administrative expense consists primarily of employee-related costs for those employees providing administrative services such as legal, human resources, information technology related to internal systems, accounting, and finance. These expenses also include certain third-party consulting services, certain facilities costs, allocated overhead costs, and lease-related charges. We expect general and administrative expense to increase in absolute dollars to support the overall growth of our operations.
Restructuring and Other Related Charges Restructuring and other related charges consist primarily of costs associated with restructuring plans approved by our board of directors. In connection with these restructuring actions or other exit actions, which were undertaken to improve operating margin and support our growth, scale and profitability objectives, we recognize costs related to termination benefits for former employees whose positions were eliminated, the write-off of facility-related balances, and other costs.
Interest Expense
Interest expense consists primarily of commitment fees on the undrawn balance of our revolving credit facility and the amortization of the associated issuance costs.
Interest Income and Other Income, Net
Interest income and other income, net, consists primarily of interest earned on our cash, cash equivalents and investments, changes in fair value of our strategic investments and foreign currency transaction gains and losses.
Provision for Income Taxes
Our income tax provision consists primarily of U.S. federal, state and foreign income taxes. The difference between the effective tax rate and the federal statutory tax rate is primarily related to the U.S. federal research tax credit and discrete benefits from stock-based compensation.
On July 4, 2025, the OBBBA was enacted in the United States. The legislation includes significant tax law changes, including the restoration of immediate expensing for domestic research and development costs. The legislation has multiple effective dates with certain provisions effective in 2025 and others implemented through 2027. While we continue to evaluate the impact of the legislation taking effect in future years, the impact of changes effective during fiscal 2026 are included in our tax provision and have resulted in additional tax expense.
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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 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 released $837.7 million of our valuation allowance as a discrete tax benefit during the three and six months ended July 31, 2024. As of July 31, 2025, we continue to maintain valuation allowances related to certain federal deferred tax assets subject to limitation on use and our California and Ireland deferred tax assets. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
Discussion of Results of Operations
The following table summarizes our historical consolidated statements of operations data:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands, except percentages) 2025 As % of revenue 2024 As % of revenue 2025 As % of revenue 2024 As % of revenue
Revenue:
Subscription $ 784,388 98 % $ 717,366 97 % $ 1,530,590 98 % $ 1,408,849 97 %
Professional services and other 16,248 2 18,661 3 33,700 2 36,818 3
Total revenue 800,636 100 736,027 100 1,564,290 100 1,445,667 100
Cost of revenue:
Subscription 144,097 18 132,372 18 281,440 18 258,974 18
Professional services and other 21,366 3 23,093 3 41,292 3 45,937 3
Total cost of revenue 165,463 21 155,465 21 322,732 21 304,911 21
Gross profit 635,173 79 580,562 79 1,241,558 79 1,140,756 79
Operating expenses:
Sales and marketing 305,450 38 287,464 39 601,863 38 569,108 39
Research and development 169,630 21 147,571 20 329,077 21 281,891 20
General and administrative 94,866 12 87,129 12 185,136 12 179,607 12
Restructuring and other related charges - - 597 - - - 29,721 2
Total operating expenses 569,946 71 522,761 71 1,116,076 71 1,060,327 73
Income from operations 65,227 8 57,801 8 125,482 8 80,429 6
Interest expense (828) - (544) - (1,306) - (688) -
Interest income and other income, net 12,061 2 14,630 2 26,074 2 28,739 2
Income before provision for (benefit from) income taxes 76,460 10 71,887 10 150,250 10 108,480 8
Provision for (benefit from) income taxes 13,490 2 (816,324) (111) 15,193 1 (813,491) (57)
Net income $ 62,970 8 % $ 888,211 121 % $ 135,057 9 % $ 921,971 65 %
The following discussion and analysis is for the three and six months ended July 31, 2025, compared to the same period in 2024, unless otherwise stated.
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Revenue
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
Revenue:
Subscription $ 784,388 $ 717,366 9 % $ 1,530,590 $ 1,408,849 9 %
Professional services and other 16,248 18,661 (13) % 33,700 36,818 (8) %
Total revenue $ 800,636 $ 736,027 9 % $ 1,564,290 $ 1,445,667 8 %
Subscription revenueincreased by $67.0 million, or 9%, in the three months ended July 31, 2025 and by $121.7 million, or 9%, in the six months ended July 31, 2025. The increase was primarily due to the expansion of revenue from our commercial and enterprise accounts, as well as our digital channel. We continue to invest in a variety of customer programs and initiatives, which, along with expanded customer use cases, have helped increase our subscription revenue over time.
Cost of Revenue and Gross Margin
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
Cost of revenue:
Subscription $ 144,097 $ 132,372 9 % $ 281,440 $ 258,974 9 %
Professional services and other 21,366 23,093 (7) % 41,292 45,937 (10) %
Total cost of revenue $ 165,463 $ 155,465 6 % $ 322,732 $ 304,911 6 %
Gross margin:
Subscription 82 % 82 % - pts 82 % 82 % - pts
Professional services and other (31) % (24) % (7) pts (23) % (25) % 2 pts
Total gross margin 79 % 79 % - pts 79 % 79 % - pts
Cost of subscription revenueincreased by $11.7 million, or 9%, in the three months ended July 31, 2025 and by $22.5 million, or 9%, in the six months ended July 31, 2025, primarily driven by higher costs to support our growing customer base.
In both the three months and six months ended July 31, 2025, information technology costs, particularly hosting costs, increased as we continued our transition from co-located data centers to public cloud storage infrastructure to support future growth of our platform, including IAM. In the three months ended July 31, 2025, information technology costs increased by $7.7 million. In the six months ended July 31, 2025, information technology costs increased by $14.5 million. Additionally, in the six months ended July 31, 2025, partner and reseller fees and merchant processing fees increased by $5.5 million.
Sales and Marketing
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
Sales and marketing $ 305,450 $ 287,464 6 % $ 601,863 $ 569,108 6 %
Percentage of revenue 38 % 39 % 38 % 39 %
Sales and marketing expenses increased by $18.0 million, or 6%, in the three months ended July 31, 2025 and by $32.8 million, or 6%, in the six months ended July 31, 2025, primarily due to investments in our workforce.
Main drivers in the three months ended July 31, 2025, primarily consisted of:
•$23.5 million increase in personnel costs, primarily due to annual salary increases and higher headcount in addition to an increase in commissions as we continue our focus on expansion and driving customer acquisition; and
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•$9.7 million decrease in stock-based compensation expense mainly due to executive transitions that occurred in fiscal 2025.
Main drivers in the six months ended July 31, 2025, primarily consisted of:
•$31.8 million increase in personnel costs primarily due to annual salary increases and higher headcount in addition to an increase in commissions as we continue our focus on expansion and driving customer acquisition; and
•$9.9 million decrease in stock-based compensation expense mainly due to executive transitions that occurred in fiscal 2025.
Research and Development
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
Research and development $ 169,630 $ 147,571 15 % $ 329,077 $ 281,891 17 %
Percentage of revenue 21 % 20 % 21 % 20 %
Research and development expenses increased by $22.1 million, or 15%, in the three months ended July 31, 2025 and by $47.2 million, or 17%, in the six months ended July 31, 2025, primarily due to investments in our workforce to support product innovation, including our acquisition of Lexion.
Increases in the three months ended July 31, 2025, primarily consisted of:
•$12.8 million in personnel expense due to higher headcount; and
•$8.4 million in stock-based compensation due to annual merit increases and higher headcount.
Increases in the six months ended July 31, 2025, primarily consisted of:
•$24.9 million in personnel expense due to higher headcount, including our acquisition of Lexion, and higher incentive compensation driven by higher performance on certain company metrics; and
•$18.7 million in stock-based compensation expense due to annual merit increases and higher headcount.
General and Administrative
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
General and administrative $ 94,866 $ 87,129 9 % $ 185,136 $ 179,607 3 %
Percentage of revenue 12 % 12 % 12 % 12 %
General and administrative expenses increased by $7.7 million, or 9%, in the three months ended July 31, 2025, and $5.5 million, or 3%, in the six months ended July 31, 2025.
In the three months ended July 31, 2025, the increase primarily consisted of $8.6 million in professional fees and related expenses due to reduced litigation related expenses and receipt of insurance reimbursements for defense costs in the prior year.
In the six months ended July 31, 2025, the increase primarily consisted of a $5.2 million increase in personnel expense due to higher headcount and annual merit increases.
Restructuring and Other Related Charges
Restructuring and other related charges were $29.7 million in the six months ended July 31, 2024, due to the implementation of the 2025 Restructuring Plan. Restructuring costs consisted primarily of employee termination benefits, and the majority of costs were recognized in the first quarter of fiscal 2025.
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Provision for (Benefit from) Income Taxes
Three Months Ended July 31,
2025 versus 2024
Six Months Ended July 31,
2025 versus 2024
(in thousands, except for percentages) 2025 2024 2025 2024
Provision for (benefit from) income taxes $ 13,490 $ (816,324) (102) % $ 15,193 $ (813,491) (102) %
Percentage of revenue 2 % (111) % 1 % (57) %
Provision for income taxes increased by $829.8 million, or 102%, in the three months ended July 31, 2025, and $828.7 million, or 102% in the six months ended July 31, 2025. The increase is primarily attributable to the $837.7 million benefit recognized during the three and six months ended July 31, 2024 due to release of our U.S. federal and state valuation allowances, as well as higher profit before taxes in fiscal 2026 and higher effective tax rate in fiscal 2026 driven by the valuation allowance release and impacts of the OBBBA. These increases were partially offset by increased tax benefits related to stock-based compensation recognized in fiscal 2026.
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Liquidity and Capital Resources
Our principal sources of liquidity were cash, cash equivalents and investments, as well as cash generated from operations. As of July 31, 2025, we had $844.5 millionin cash and cash equivalents and short-term investments. We also had $208.9 million in long-term investments that provide additional capital resources. We finance our operations primarily through payments by our customers for use of our product offerings and related services, and we have additional borrowing capacity available from our credit facility.
In May 2025, we entered into an agreement with a syndicate of banks, which provides for a revolving credit facility in the aggregate principal amount of $750.0 million and may be increased by an additional $250.0 million subject to customary terms and conditions. The Credit Facility superseded and replaced the revolving credit facility that we previously entered into in January 2021. As of July 31, 2025, therewere no outstanding borrowings under the Credit Facility,and we were in compliance with related covenants. The Credit Facility matures in May 2030 and is available to optimize our capital structure and strengthen our balance sheet. Additional information has been included in Note 6to the Condensed Consolidated Financial Statements, included in Part I, Item 1of this Quarterly Report on Form 10-Q.
We believe that our sources of liquidity, including our cash, cash equivalents and investments, and expected future operating cash flows, and borrowing capacity available to us from our credit facility, are adequate to meet our potential cash commitments as well as meet our working capital and capital expenditure needs for the foreseeable future, including upcoming maturities of our contractual obligations over the next 12 months.
We typically invoice our customers annually in advance. Therefore, a substantial source of our cash is from such invoices, which are included on our consolidated balance sheets in contract liabilities until revenue is recognized and in accounts receivable until cash is collected. Accordingly, collections from our customers have a material impact on our cash flows from operating activities. Contract liabilities consist of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy.
Our future capital requirements will depend on many factors including our growth rate, customer retention and expansion, inflation, tax withholding obligations related to settlement of our RSUs, the timing and extent of spending to support our efforts to develop our software platform, the expansion of sales and marketing activities and the continuing market acceptance of our software platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.
Our principal contractual obligations and commitments consist of obligations under operating leases, as well as noncancelable contractual commitments that primarily relate to cloud infrastructure support and sales and marketing activities. Refer to Note 7to the Condensed Consolidated Financial Statements, included in Part I, Item 1of this Quarterly Report on Form 10-Q.
We do not have any special purpose entities, and we do not engage in off-balance sheet financing arrangements.
In addition to our contractual commitments, our board of directors has authorized a stock repurchase program, which commenced in March 2022. During the six months ended July 31, 2025, we repurchased 4.9 million shares of common stock for $384.9 million through our stock repurchase program. 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 the 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.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
Six Months Ended July 31,
(in thousands) 2025 2024
Net cash provided by (used in):
Operating activities $ 497,512 $ 475,034
Investing activities (55,377) (236,887)
Financing activities (496,855) (408,942)
Effect of foreign exchange on cash, cash equivalents and restricted cash 11,452 (2,677)
Net change in cash, cash equivalents and restricted cash $ (43,268) $ (173,472)
Cash Flows from Operating Activities
Cash provided by operating activities was $497.5 million in the six months ended July 31, 2025. 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 in addition to vendor payments.
Cash provided byoperating activities was $475.0 million for the six months ended July 31, 2024. Our primary sources of cash provided byoperating activities were billings and the related cash collections in addition to interest income. Our primary uses of cash include 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 millionin deferred compensation for key employees, which we paid into an escrow account.
Cash Flows from Investing Activities
For the six months ended July 31, 2025,net cash used in investing activities of $55.4 million was primarily driven by $52.0 millionin purchases of property and equipment as we continued to invest in capitalized software development projects and to support operations at our data centers.
For the six months ended July 31, 2024, net cash used ininvesting 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.
Cash Flows from Financing Activities
For the six months ended July 31, 2025, net cash used in financing activities of $496.9 million was primarily driven by $384.9 million to repurchase 4.9 million shares of common stock through our stock repurchase program and $108.8 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.
For the six months ended July 31, 2024, net 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 through our stock repurchase program, and $59.8 million payments for tax withholding on share settlements, net of proceeds associated with equity plans.
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Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
The critical accounting estimates, assumptions and judgments that we believe to have the most significant impact on our consolidated financial statements are revenue recognition, deferred contract acquisition costs, stock-based compensation, income taxes, loss contingencies, business combinations, and valuation of acquired intangible assets in business combinations.
There have been no material changes to our critical accounting policies and estimates as described in our fiscal 2025 Annual Report on Form 10-K.
Recent Accounting Pronouncements
Refer to Note 1 in the Notes to the Condensed Consolidated Financial Statementsin Part I, Item 1of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
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Non-GAAP Financial Measures and Other Key Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We present these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. However, these non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin and non-GAAP net income: We define these non-GAAP financial measures as the respective GAAP measures, excluding expenses related to stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, acquisition-related expenses, restructuring and other related charges, and, as applicable, other special items. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods. In addition to these exclusions, we subtract an assumed provision for income taxes to calculate non-GAAP net income. We utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. We have determined the projected non-GAAP tax rate to be 20% for fiscal 2025 and 21% for fiscal 2026 due to the impact of the OBBBA.
Free cash flow: We define free cash flow as net cash provided by operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash that is available (if any), after purchases of property and equipment, for operational expenses, investment in our business and to make acquisitions. Free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
Billings: We define billings as total revenues plus the change in our contract liabilities and refund liability less contract assets and unbilled accounts receivable in a given period. Billings reflects sales to new customers plus subscription renewals and additional sales to existing customers. Only amounts invoiced to a customer in a given period are included in billings. We believe billings can be used to measure our periodic performance, when taking into consideration the timing aspects of customer renewals, which represent a large component of our business. Given that most of our customers pay in annual installments one year in advance, but we typically recognize a majority of the related revenue ratably over time, we use billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.
Docusign, Inc. | 2026 Form 10-Q | 33
Reconciliation of gross profit (loss) and gross margin:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
GAAP gross profit $ 635,173 $ 580,562 $ 1,241,558 $ 1,140,756
Add: Stock-based compensation 18,592 20,591 35,496 39,474
Add: Employer payroll tax on employee stock transactions 1,575 816 3,448 1,839
Add: Amortization of acquisition-related intangibles 1,562 3,067 5,127 5,137
Non-GAAP gross profit $ 656,902 $ 605,036 $ 1,285,629 $ 1,187,206
GAAP gross margin 79.3 % 78.9 % 79.4 % 78.9 %
Non-GAAP adjustments 2.7 % 3.3 % 2.8 % 3.1 %
Non-GAAP gross margin 82.0 % 82.2 % 82.2 % 82.0 %
GAAP subscription gross profit $ 640,291 $ 584,994 $ 1,249,150 $ 1,149,875
Add: Stock-based compensation 14,425 15,593 27,421 29,774
Add: Employer payroll tax on employee stock transactions 1,220 595 2,665 1,387
Add: Amortization of acquisition-related intangibles 1,562 3,067 5,127 5,137
Non-GAAP subscription gross profit $ 657,498 $ 604,249 $ 1,284,363 $ 1,186,173
GAAP subscription gross margin 81.6 % 81.5 % 81.6 % 81.6 %
Non-GAAP adjustments 2.2 % 2.7 % 2.3 % 2.6 %
Non-GAAP subscription gross margin 83.8 % 84.2 % 83.9 % 84.2 %
GAAP professional services and other gross loss $ (5,118) $ (4,432) $ (7,592) $ (9,119)
Add: Stock-based compensation 4,167 4,998 8,075 9,700
Add: Employer payroll tax on employee stock transactions 355 221 783 452
Non-GAAP professional services and other gross profit (loss) $ (596) $ 787 $ 1,266 $ 1,033
GAAP professional services and other gross margin (31.5) % (23.8) % (22.5) % (24.8) %
Non-GAAP adjustments 27.8 % 28.0 % 26.3 % 27.6 %
Non-GAAP professional services and other gross margin (3.7) % 4.2 % 3.8 % 2.8 %
Reconciliation of income from operations and operating margin:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
GAAP income from operations $ 65,227 $ 57,801 $ 125,482 $ 80,429
Add: Stock-based compensation 160,538 164,448 306,134 302,324
Add: Employer payroll tax on employee stock transactions 8,048 4,772 20,307 11,176
Add: Amortization of acquisition-related intangibles 4,916 6,180 11,835 10,879
Add: Acquisition-related expenses - 3,358 - 4,716
Add: Restructuring and other related charges - 597 - 29,721
Non-GAAP income from operations $ 238,729 $ 237,156 $ 463,758 $ 439,245
GAAP operating margin 8.1 % 7.9 % 8.0 % 5.6 %
Non-GAAP adjustments 21.7 % 24.3 % 21.6 % 24.8 %
Non-GAAP operating margin 29.8 % 32.2 % 29.6 % 30.4 %
Docusign, Inc. | 2026 Form 10-Q | 34
Reconciliation of net income:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
GAAP net income $ 62,970 $ 888,211 $ 135,057 $ 921,971
Add: Stock-based compensation 160,538 164,448 306,134 302,324
Add: Employer payroll tax on employee stock transactions 8,048 4,772 20,307 11,176
Add: Amortization of acquisition-related intangibles 4,916 6,180 11,835 10,879
Add: Acquisition-related expenses - 3,358 - 4,716
Add: Restructuring and other related charges - 597 - 29,721
Add: Income tax and other tax adjustments (41,387) (866,572) (87,397) (906,950)
Non-GAAP net income $ 195,085 $ 200,994 $ 385,936 $ 373,837
Computation of free cash flow:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
Net cash provided by operating activities $ 246,073 $ 220,208 $ 497,512 $ 475,034
Less: Purchases of property and equipment (28,425) (22,280) (52,049) (45,033)
Non-GAAP free cash flow $ 217,648 $ 197,928 $ 445,463 $ 430,001
Net cash used in investing activities $ (30,452) $ (176,110) $ (55,377) $ (236,887)
Net cash used in financing activities $ (273,340) $ (239,068) $ (496,855) $ (408,942)
Computation of billings:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2025 2024 2025 2024
Revenue $ 800,636 $ 736,027 $ 1,564,290 $ 1,445,667
Add: Contract liabilities and refund liability, end of period 1,468,618 1,334,461 1,468,618 1,334,461
Less: Contract liabilities and refund liability, beginning of period (1,450,718) (1,340,680) (1,479,266) (1,343,792)
Add: Contract assets and unbilled accounts receivable, beginning of period 13,319 17,179 17,825 20,189
Less: Contract assets and unbilled accounts receivable, end of period (13,824) (17,461) (13,824) (17,461)
Add: Contract assets and unbilled accounts receivable by acquisitions - 53 - 53
Less: Contract liabilities and refund liability contributed by acquisitions - (5,071) - (5,071)
Non-GAAP billings $ 818,031 $ 724,508 $ 1,557,643 $ 1,434,046
Docusign, Inc. | 2026 Form 10-Q | 35
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