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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________
FORM 10-Q
______________________________________

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
Commission File Number: 001-38465
______________________________________
DOCUSIGN, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Delaware 91-2183967
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification Number)
221 Main St. Suite 1550 San Francisco California 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 489-4940
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.0001 per share DOCU The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No 
The registrant has 185,164,889 shares of common stock, par value $0.0001, outstanding at August 31, 2020.



DOCUSIGN, INC.
TABLE OF CONTENTS

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations, and the impact of the ongoing coronavirus pandemic (the “COVID-19 pandemic”) on our financial conditions and results of operations are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to effectively sustain and manage our growth and future expenses, and our ability to achieve and maintain future profitability;
our expectations regarding the impact of the ongoing COVID-19 pandemic on our business, the businesses of our customers, partners and suppliers, and the economy;
our ability to attract new customers and to maintain and expand our existing customer base;
our ability to scale and update our software suite to respond to customers’ needs and rapid technological change;
the effects of increased competition on 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 software suite 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 and execute potential acquisitions;
our ability to successfully integrate the operations of businesses we may acquire, or to realize the anticipated benefits of such 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 suite of services 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;
our ability to estimate the size and potential growth of our target market; and
our ability to maintain proper and effective internal controls.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, such as the COVID-19 pandemic. Many of the risks and uncertainties are currently elevated by, and may or will continue to be elevated by, the current COVID-19 pandemic. It is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
3



The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.
4


PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DOCUSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data) July 31, 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 
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2020 and January 31, 2020
   
Common stock, $0.0001 par value; 500,000 shares authorized, 185,137 shares outstanding as of July 31, 2020; 500,000 shares authorized, 181,254 shares outstanding as of January 31, 2020
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 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
(in thousands, except per share data) 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 
Other comprehensive income (loss):
Foreign currency translation gain (loss), net of tax $ 8,714  $ (45) $ 3,525  $ (1,676)
Unrealized gains on investments, net of tax 87  358  246  696 
Other comprehensive income (loss) 8,801  313  3,771  (980)
Comprehensive loss $ (55,759) $ (68,319) $ (108,593) $ (115,334)
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 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity
(in thousands) Shares Amount
Balances at April 30, 2020 183,428  $ 18  $ 1,714,462  $ (6,703) $ (1,184,989) $ 522,788 
Exercise of stock options 460    5,403      5,403 
Settlement of RSUs 1,002  1  (1)      
Tax withholding on RSU settlement     (89,449)     (89,449)
Issuance of shares as consideration for acquisition 247    48,361      48,361 
Employee stock-based compensation     70,547      70,547 
Net loss         (64,560) (64,560)
Other comprehensive income, net       8,801    8,801 
Balances at July 31, 2020 185,137  $ 19  $ 1,749,323  $ 2,098  $ (1,249,549) $ 501,891 

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity
(in thousands) Shares Amount
Balances at April 30, 2019 173,628  $ 17  $ 1,575,471  $ (3,258) $ (974,548) $ 597,682 
Exercise of stock options 1,235    10,194      10,194 
Settlement of RSUs 1,090  1  (1)      
Tax withholding on RSU settlement     (29,841)     (29,841)
Employee stock-based compensation     56,963      56,963 
Net loss         (68,632) (68,632)
Other comprehensive income, net       313    313 
Balances at July 31, 2019 175,953  $ 18  $ 1,612,786  $ (2,945) $ (1,043,180) $ 566,679 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity
(in thousands) Shares Amount
Balances at January 31, 2020 181,254  $ 18  $ 1,685,167  $ (1,673) $ (1,137,185) $ 546,327 
Exercise of stock options 1,300    13,038      13,038 
Settlement of RSUs 2,080  1  (1)      
Tax withholding on RSU settlement     (136,172)     (136,172)
Employee stock purchase plan 256    13,590      13,590 
Issuance of shares as consideration for acquisition 247    48,361      48,361 
Employee stock-based compensation     125,340      125,340 
Net loss         (112,364) (112,364)
Other comprehensive income, net       3,771    3,771 
Balances at July 31, 2020 185,137  $ 19  $ 1,749,323  $ 2,098  $ (1,249,549) $ 501,891 

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity
(in thousands) Shares Amount
Balances at January 31, 2019 169,303  $ 17  $ 1,545,088  $ (1,965) $ (928,778) $ 614,362 
Exercise of stock options 3,869    42,448      42,448 
Settlement of RSUs 2,550  1  (1)      
Tax withholding on RSU settlement     (85,978)     (85,978)
Employee stock purchase plan 231    10,563      10,563 
Employee stock-based compensation     100,666      100,666 
Net loss         (114,354) (114,354)
Cumulative impact of Topic 842 adoption         (48) (48)
Other comprehensive loss, net       (980)   (980)
Balances at July 31, 2019 175,953  $ 18  $ 1,612,786  $ (2,945) $ (1,043,180) $ 566,679 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended July 31,
(in thousands) 2020 2019
Cash flows from operating activities:
Net loss $ (112,364) $ (114,354)
Adjustments to reconcile net to net cash used in operating activities
Depreciation and amortization 31,976  24,261 
Amortization of deferred contract acquisition and fulfillment costs 45,194  31,149 
Amortization of debt discount and transaction costs 13,784  13,002 
Non-cash operating lease costs 13,119  8,863 
Stock-based compensation expense 122,318  98,063 
Deferred income taxes (284) 28 
Other (493) (2,371)
Changes in operating assets and liabilities
Accounts receivable 25,154  35,896 
Contract assets 1,570  (4,905)
Prepaid expenses and other current assets (5,388) (3,157)
Deferred contract acquisition and fulfillment costs (92,414) (48,439)
Other assets (6,132) 959 
Accounts payable 6,275  1,588 
Accrued expenses and other liabilities 11,710  14,502 
Accrued compensation 22,865  2,427 
Contract liabilities 107,486  21,746 
Operating lease liabilities (7,098) (7,198)
Net cash provided by operating activities 177,278  72,060 
Cash flows from investing activities:
Cash paid for acquisition, net of acquired cash (180,370)  
Purchases of marketable securities (11,667) (530,886)
Sales of marketable securities 28,986   
Maturities of marketable securities 301,416  244,449 
Purchases of strategic investments   (15,500)
Purchases of other investments
(3,241)  
Purchases of property and equipment (44,751) (29,791)
Net cash provided by (used in) investing activities 90,373  (331,728)
Cash flows from financing activities:
Payment of tax withholding obligation on RSU settlement (133,860) (85,978)
Proceeds from exercise of stock options 13,038  42,448 
Proceeds from employee stock purchase plan 13,590  10,563 
Net cash used in financing activities (107,232) (32,967)
Effect of foreign exchange on cash, cash equivalents and restricted cash 2,640  (1,120)
Net increase (decrease) in cash, cash equivalents and restricted cash 163,059  (293,755)
Cash, cash equivalents and restricted cash at beginning of period 241,483  518,178 
Cash, cash equivalents and restricted cash at end of period $ 404,542  $ 224,423 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9


DOCUSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)
Six Months Ended July 31,
(in thousands) 2020 2019
Supplemental disclosure:
Cash paid for interest $ 1,438  $ 1,414 
Cash paid for operating lease liabilities 14,387  10,984 
Cash paid for income taxes 1,827  1,109 
Non-cash investing and financing activities:
Property and equipment in accounts payable and accrued expenses and other current liabilities $ 6,478  $ 4,046 
Operating lease right-of-use assets exchanged for lease obligations 27,569  53,754 
Derecognition of build-to-suit lease   2,479 
Fair value of shares issued as consideration for acquisition 48,361   
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10


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


11


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

Note 1. Summary of Significant Accounting Policies

Organization and Description of Business

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

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

Basis of Presentation and Principles of Consolidation

Our condensed consolidated financial statements include those of DocuSign, Inc. and our subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2020 Annual Report on Form 10-K.

Our condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and, in our opinion, include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations and cash flows. Our condensed consolidated balance sheet as of January 31, 2020 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the year ending January 31, 2021.

Our fiscal year ends on January 31. References to fiscal 2021, for example, are to the fiscal year ending January 31, 2021. Certain prior year amounts have been reclassified to conform to current year presentation. These amounts were not material to any of the periods presented.

Use of Estimates

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

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

The World Health Organization declared in March 2020 that the outbreak of the coronavirus disease named COVID-19 constitutes a pandemic. We have undertaken measures to protect our employees, partners and customers. There can be no assurance that these measures will be effective, however, or that we can adopt them without adversely affecting our business operations. In addition, the COVID-19 pandemic has created and may continue to create significant uncertainty in global financial markets, which may decrease technology spending, depress demand for our solutions and harm our business and results of operations. As of the date of issuance of the financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities.
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These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Significant Accounting Policies

There have been no changes to our significant accounting policies described in our 2020 Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes.

Concentration of Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. Although we deposit our cash with multiple financial institutions, the deposits, at times, may exceed federally insured limits. We have not experienced any losses on our deposits of cash and cash equivalents. Cash equivalents consist of money market funds which are invested through financial institutions in the U.S. Management believes that the institutions are financially stable and, accordingly, minimal credit risk exists.

We perform ongoing credit evaluations of our customers, do not require collateral and maintain allowances for potential credit losses on customers’ accounts using the expected loss model.

Investments

Investments in marketable securities consist of commercial paper, corporate notes and bonds, as well as U.S. Treasury and government agency securities. Management determines the appropriate classification of investments at the time of purchase and reevaluates such determination at each balance sheet date. Marketable securities are classified as available-for-sale and are carried at fair value in the consolidated balance sheet and are classified as short-term or long-term based on their remaining contractual maturities.

We evaluate our investments with unrealized loss positions at the individual security level to determine whether the unrealized loss was related to credit or noncredit factors. We consider whether a credit loss exists based on the extent of the unrealized loss position, any adverse conditions specifically related to the security or the issuer's operating environment, pay structure of the security, the issuer's payment history and any changes in the issuer's credit rating. Estimated credit losses are determined using a discounted cash flow model and recorded as an allowance, with changes in expected credit losses on our investments recorded in “Interest income and other income, net” in the consolidated statements of operations and comprehensive loss. Unrealized gains and losses related to noncredit factors are reflected in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

On February 1, 2020, we adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial InstrumentsCredit Losses (Topic 326). The Financial Accounting Standards Board (“FASB”) subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These updates change the impairment model for most financial assets and require the use of an expected loss model in place of the previously used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The effect of adopting ASU 2016-13 and ASU 2019-04 on our consolidated financial statements and related disclosures was not material for the six months ended July 31, 2020.

On February 1, 2020, we adopted ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The impact of prospectively adopting ASU 2018-15 on our consolidated financial statements was not material for the six months ended July 31, 2020.
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Other Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The update removes separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. Such convertible debt will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted. We are in the process of evaluating the impact of the adoption of the update on our consolidated financial statements.

Note 2. Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 95% and 94% of our revenue for the three months ended July 31, 2020 and 2019. It accounted for approximately 95% and 94% of our revenue for the six months ended July 31, 2020 and 2019.
        
As of July 31, 2020, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $849.0 million. We expect to recognize 54% of the transaction price allocated to remaining performance obligations within the 12 months following July 31, 2020, in our consolidated statement of operations and comprehensive loss.

Note 3. Fair Value Measurements
The following table summarizes our financial assets that are measured at fair value on a recurring basis:
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July 31, 2020
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds $ 297,234  $   $   $ 297,234 
Level 2:
Available-for-sale securities
Commercial paper 4,996  4    5,000 
Corporate notes and bonds 205,082  1,136  (12) 206,206 
U.S. Treasury securities 34,071  102    34,173 
U.S. government agency securities 90,524  162  (23) 90,663 
Level 2 total 334,673  1,404  (35) 336,042 
Total $ 631,907  $ 1,404  $ (35) $ 633,276 
January 31, 2020
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Level 1:
Cash equivalents(1)
Money market funds $ 165,424  $   $   $ 165,424 
Level 2:
Available-for-sale securities
Commercial paper 14,919  7  (1) 14,925 
Corporate notes and bonds 372,844  891  (31) 373,704 
U.S. Treasury securities 90,697  153  (1) 90,849 
U.S. government agency securities 175,086  153  (49) 175,190 
Level 2 total 653,546  1,204  (82) 654,668 
Total $ 818,970  $ 1,204  $ (82) $ 820,092 

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of July 31, 2020 and January 31, 2020, in addition to cash of $107.0 million and $75.8 million.

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

The fair value of our available-for-sale securities as of July 31, 2020, by remaining contractual maturities, were as follows (in thousands):
Due in one year or less $ 269,777 
Due in one to two years 66,265 
$ 336,042 

As of July 31, 2020, we had a total of 97 available-for-sale securities, with 17 securities in an unrealized loss position. An allowance for credit losses was deemed unnecessary for these securities, given the extent of the unrealized loss positions as well the issuers' high credit ratings and consistent payment history. As of January 31, 2020, we had 178 available-for-sale securities, none of which were considered to be other-than-temporarily impaired.

We had no liabilities measured at fair value on a recurring basis as of July 31, 2020 and January 31, 2020.
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Convertible Senior Notes

As of July 31, 2020 and January 31, 2020, the estimated fair value of our 0.5% Convertible Senior Notes (the “Notes”) with aggregate principal amount of $575.0 million was $1.7 billion and $743.5 million. We estimated the fair value based on the quoted market prices in an inactive market on the last trading day of the reporting period (Level 2). The Notes are recorded at face value less unamortized debt discount and transaction costs as “Convertible senior notes, net” on our consolidated balance sheets. Refer to Note 9 for further information.

Note 4. Property and Equipment, Net

Property and equipment consisted of the following:
(in thousands) July 31, 2020 January 31, 2020
Computer and network equipment $ 80,716  $ 66,937 
Software, including capitalized software development costs 39,387  33,373 
Furniture and office equipment 20,483  16,752 
Leasehold improvements 76,227  59,564 
216,813  176,626 
Less: Accumulated depreciation (99,837) (81,228)
116,976  95,398 
Work in progress 33,670  32,895 
$ 150,646  $ 128,293 

As of July 31, 2020 and January 31, 2020, work in progress consisted of capitalized costs of internally-developed software projects under development and data center build-out projects. As of January 31, 2020, work in progress also included office build out projects, most of which were completed as of July 31, 2020.

For the three months ended July 31, 2020 and 2019, we capitalized $6.8 million and $4.5 million of internally developed software, including $1.9 million and $1.2 million of capitalized stock-based compensation. For the six months ended July 31, 2020 and 2019, we capitalized $11.0 million and $10.4 million of internally developed software, including $2.9 million and $2.6 million of capitalized stock-based compensation.

Depreciation expense associated with property and equipment was $10.5 million and $7.9 million for the three months ended July 31, 2020 and 2019, and $20.3 million and $15.1 million for the six months ended July 31, 2020 and 2019.

Note 5. Acquisitions

Acquisition of Seal Software Group Limited

On May 1, 2020, we completed the acquisition of Seal Software Group Limited (“Seal”), a contract analytics and artificial intelligence (“AI”) technology provider headquartered in Walnut Creek, California. We expect to integrate Seal's technology comprehensively across the DocuSign Agreement Cloud to deliver increased functionality to companies using the Agreement Cloud to prepare, sign, act on and manage agreements. Under the terms of the purchase agreement, we paid $184.7 million in cash, net of cash acquired, transaction costs and working capital adjustments, for Seal’s outstanding stock.

Prior to the acquisition, we held a $15.0 million minority investment in Seal’s outstanding stock. As of the acquisition, the fair value of our minority interest, calculated as the difference between the total acquisition consideration and the portion attributable to third party Seal shareholders, approximated the carrying value.

Additionally, we granted certain continuing employees of Seal restricted stock units (“RSUs”) with service and performance conditions covering up to 0.1 million shares of our common stock with an aggregate grant date fair value of $11.4 million that will be accounted for as a post-acquisition compensation expense over the vesting period. The performance-based condition will be satisfied upon Seal meeting certain bookings targets for the year ended January 31, 2021. As of July 31, 2020, it was not probable that these targets would be met.

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We accounted for the transaction as a business combination using the acquisition method of accounting. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Fair values were determined using the income and cost approaches. Excess purchase price consideration was recorded as goodwill and is primarily attributable to the assembled workforce and expanded market opportunities when integrating Seal’s AI and analytics capabilities within our existing product offering. The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

The following table summarizes the preliminary acquisition date fair values of assets acquired and liabilities assumed at the date of acquisition:
(in thousands) May 1, 2020
Cash and cash equivalents $ 729 
Accounts receivable 9,654 
Contract assets 5,813 
Prepaid expense and other assets 7,204 
Property and equipment 915 
Goodwill 114,356 
Intangible assets 83,700 
Right-of-use Assets 3,130 
Accounts payable (854)
Accrued compensation (2,697)
Contract liabilities (7,745)
Accrued expenses and other liabilities (6,523)
Lease liabilities (3,126)
Deferred tax liability—noncurrent (4,103)
$ 200,453 

None of the goodwill recognized upon acquisition was deductible for U.K. or U.S. federal income tax purposes.

The estimated useful lives of intangible assets, primarily based on the expected period of benefit to us, and fair values of the identifiable intangible assets at acquisition date were as follows:
(in thousands, except years) Estimated Fair Value Expected Useful Life
Existing technology $ 37,400  5 years
Customer relationships—subscription 41,700  10 years
Backlog—subscription 4,600  2 years
Total intangible assets $ 83,700 

The results of operations of Seal, which were not material to our consolidated results of operations, were included in our consolidated statements from the acquisition date.

In the three and six months ended July 31, 2020, we incurred acquisition costs of $5.3 million and $6.0 million. These costs included legal, accounting fees and other costs directly related to the acquisition of Seal and are recognized within operating expenses in our condensed consolidated statements of operations.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on February 1, 2019. It includes pro forma adjustments related to the amortization of acquired intangible assets, share-based compensation expense, professional services revenue and contract acquisitions costs adjustments under the new revenue recognition standard, and contract liabilities fair value adjustment. The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2019, or of future results of operations:

17


Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2020 2019 2020 2019
Revenue $ 344,596  $ 241,548  $ 648,581  $ 459,566 
Net loss (58,422) (81,158) (118,425) (147,683)
Net loss per share attributable to common stockholders, basic and diluted (0.32) (0.46) (0.64) (0.85)

Acquisition of Liveoak Technologies, Inc.

On July 6, 2020, we completed the acquisition of Liveoak Technologies, Inc. (“Liveoak”), a virtual customer engagement and business platform based in Austin, Texas. The company’s platform includes several technologies specific to remote agreements, such as video conferencing, video identity verification, collaborative form-filling, an integration with DocuSign eSignature, and a detailed audit trail. The acquisition enables us 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 consideration to acquire Liveoak’s outstanding stock was $48.4 million, which consisted primarily of the fair value of our common stock issued and the fair value of stock options assumed. We recorded approximately $39.9 million of goodwill which is primarily attributed to the assembled workforce and expanded market opportunities for integrating Liveoak’s technology with our existing product offering.

The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date. None of the goodwill recognized upon acquisition was deductible for U.S. federal income tax purposes.

In the three and six months ended July 31, 2020, we incurred costs of $1.6 million directly related to the acquisition of Liveoak. These costs are recognized within operating expenses in our condensed consolidated statements of operations.

We included the results of operations of Liveoak in our condensed consolidated statements of operations from the acquisition date. These results were not material to our condensed consolidated statements of operations for the three and six months ended July 31, 2020.

Note 6. Goodwill and Intangible Assets, Net

The changes in the carrying amount of goodwill were as follows (in thousands):
Balance at January 31, 2020 $ 194,882 
Additions—Seal 114,356 
Additions—Liveoak 39,921 
Cumulative translation adjustment 95 
Balance at July 31, 2020 $ 349,254 

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Intangible assets consisted of the following:
As of July 31, 2020 As of January 31, 2020
(in thousands, except years) Weighted-average Remaining Useful Life (Years) Estimated Fair Value Accumulated Amortization Acquisition-related Intangibles, Net Estimated Fair Value Accumulated Amortization Acquisition-related Intangibles, Net
Existing technology 4.2 $ 72,994  $ (29,177) $ 43,817  $ 31,594  $ (25,164) $ 6,430 
Customer contracts & related relationships 8.4 110,082  (23,877) 86,205  65,782  (19,071) 46,711 
Other 1.5 22,534  (17,382) 5,152  17,234  (14,509) 2,725 
6.8 $ 205,610  $ (70,436) 135,174  $ 114,610  $ (58,744) 55,866 
Cumulative translation adjustment 651  634 
Total $ 135,825  $ 56,500 

Amortization of finite-lived intangible assets was as follows:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2020 2019 2020 2019
Cost of subscription revenue $ 3,132  $ 1,381  $ 4,480  $ 3,008 
Sales and marketing 4,284  3,039  7,195  6,145 
Total $ 7,416  $ 4,420  $ 11,675  $ 9,153 

As of July 31, 2020, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows:
Fiscal Period: Amount (in thousands)
2021, remainder $ 13,926 
2022 24,282 
2023 19,906 
2024 18,575 
2025 17,998 
Thereafter 40,487 
Total $ 135,174 

Note 7. Contract Balances

Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements. Total contract assets were $17.8 million and $13.4 million as of July 31, 2020 and January 31, 2020, of which $0.8 million and $0.9 million were noncurrent and included within Other assets—noncurrent on our condensed consolidated balance sheets. The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. For the six months ended July 31, 2020 and 2019, we recognized revenue of $375.8 million and $265.7 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

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

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Note 8. Deferred Contract Acquisition and Fulfillment Costs

The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:
Six Months Ended July 31,
(in thousands) 2020 2019
Deferred Contract Acquisition Costs
Beginning balance $ 155,697  $ 115,985 
Additions to deferred contract acquisition costs 80,836  39,879 
Amortization of deferred contract acquisition costs (36,528) (26,929)
Cumulative translation adjustment 677  (1,394)
Ending balance $ 200,682  $ 127,541 
Deferred Contract Fulfillment Costs
Beginning balance $ 8,218  $ 3,432 
Additions to deferred contract fulfillment costs 11,578  8,560 
Amortization of deferred contract fulfillment costs (8,666) (4,220)
Ending balance $ 11,130  $ 7,772 

Note 9. Senior Notes

In September 2018, we issued $575.0 million in aggregate principal amount of the Notes due in 2023, which included the initial purchasers’ exercise in full of their option to purchase an additional $75.0 million principal amount of the Notes, in a private placement to qualified institutional buyers in an offering exempt from registration under the Securities Act of 1933, as amended. The net proceeds from the issuance of the Notes were $560.8 million after deducting the initial purchasers’ discounts and transaction costs.

As of July 31, 2020, the conversion conditions described in our 2020 Annual Report on Form 10-K were met. The last reported sales price of our common stock was greater than or equal to 130% of the conversion price for at least 20 trading days during a period of 30 consecutive trading days ending on, and including, the last trading day of the three months ended July 31, 2020. The Notes therefore became convertible on August 1, 2020 and continue to be convertible through October 31, 2020.

The net carrying value of the liability component of the Notes was as follows:
(in thousands) July 31, 2020 January 31, 2020
Principal $ 575,000  $ 575,000 
Less: unamortized debt discount (88,710) (101,461)
Less: unamortized transaction costs (7,185) (8,218)
Net carrying amount $ 479,105  $ 465,321 

As of July 31, 2020 and January 31, 2020, the net carrying amount of the equity component of the Notes was $131.3 million, net of $3.3 million transaction costs.

The interest expense recognized related to the Notes was as follows:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2020 2019 2020 2019
Contractual interest expense $ 720  $ 719  $ 1,438  $ 1,429 
Amortization of debt discount 6,422  6,058  12,751  12,028 
Amortization of transaction costs 520  490  1,033  974 
Total $ 7,662  $ 7,267  $ 15,222  $ 14,431 

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Capped Calls

To minimize the potential economic dilution to our common stock upon conversion of the Notes, we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain counterparties and incurred costs of $67.6 million related to the transactions. The Capped Calls each have an initial strike price of approximately $71.50 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $110.00 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 8.0 million shares of common stock.

Impact on Loss Per Share

In periods when we have net income, the conversion premium on the Notes is included in our diluted earnings per share when the average market price of our common stock exceeds the initial conversion price of $71.50 per share, as we intend and have the ability to settle the principal amount of the Notes in cash upon conversion. We are required under the treasury stock method to compute the potentially dilutive shares of common stock related to the Notes for periods we report net income. However, upon conversion, there will be no economic dilution from the Notes unless the market price of our common stock exceeds the cap price of $110.00 per share, as exercise of the Capped Calls offsets any dilution from the Notes from the conversion price up to the cap price. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive.

Note 10. Leases

We lease offices under noncancelable operating lease agreements that expire at various dates through February 2032. As of July 31, 2020, we had no finance leases. Some operating leases contain escalation provisions for adjustments in the consumer price index.
        
The following table is a summary of our lease costs:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2020 2019 2020 2019
Operating lease cost $ 8,621  $ 6,625  $ 16,616  $ 12,331 
Short-term lease cost 298  172  463  441 
Total lease cost $ 8,919  $ 6,797  $ 17,079  $ 12,772 

Future lease payments under noncancelable operating leases as of July 31, 2020, were as follows:
Fiscal Period: Amount (in thousands)
2021, remainder $ 18,981 
2022 39,297 
2023 39,573 
2024 39,129 
2025 30,802 
Thereafter 72,852 
Total undiscounted cash flows $ 240,634 
Less: imputed interest (32,357)
Present value of lease liabilities $ 208,277 

The weighted average remaining lease term and discount rate for operating leases as of July 31, 2020 were 7.0 years and 4.3%.
Note 11. Commitments and Contingencies

As of July 31, 2020, we had unused letters of credit outstanding associated with our various operating leases totaling $9.4 million.

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We have entered into certain noncancelable contractual arrangements that require future purchases of goods and services. These arrangements primarily relate to cloud infrastructure support and sales and marketing activities. As of July 31, 2020, our future noncancelable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:
Fiscal Period: Amount (in thousands)
2021, remainder $ 7,941 
2022 16,619 
2023 3,505 
2024 2,883 
2025 1,844 
Thereafter 3,566 
Total $ 36,358 

Indemnification

We enter into indemnification provisions under our agreements with customers and other companies in the ordinary course of business, including business partners, contractors and parties performing our research and development. Pursuant to these arrangements, we agree to indemnify and defend the indemnified party for certain claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims because of our activities. The duration of these indemnification agreements is generally perpetual. The maximum potential amount of future payments we could be required to make under these indemnification clauses or agreements is not determinable. Historically, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these indemnification agreements is not material as of July 31, 2020, and January 31, 2020. We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

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

Claims and Litigation

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

Note 12. Stockholders' Equity

Equity Incentive Plans

We maintain three stock-based compensation plans: the 2018 Equity Incentive Plan (the “2018 Plan”), the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and the Amended and Restated 2003 Stock Plan (the “2003 Plan”).

The 2018 Plan serves as a successor to the 2011 Plan and 2003 Plan and provides for the grant of stock-based awards to our employees, directors and consultants. Shares available for grant under the 2011 Plan that were reserved but not issued as of the effective date of the 2018 Plan were added to the reserves of the 2018 Plan. No additional awards under the 2011 Plan or 2003 Plan have been made since the effective date of the 2018 Plan. Outstanding awards under these two plans continue to be subject to the terms and conditions of the respective plans.

As of July 31, 2020, 32.1 million shares of our common stock were available for issuance under the 2018 Plan.

The 2018 Plan provides that the number of shares reserved will automatically increase on the first day of each fiscal year, beginning on February 1, 2019, and ending on February 1, 2028, by 5% of the total number of shares of our capital stock outstanding on the immediately preceding January 31st  (or such lesser number of shares as our board of directors or a committee of our board of directors may approve). The most recent automatic increase of 9.1 million shares occurred on February 1, 2020.
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Stock Options
        
Option activity for the three months ended July 31, 2020 was as follows:
(in thousands, except years and per share data) Number of Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value
Outstanding at January 31, 2020 6,882  $ 14.39  5.38 $ 441,247 
Assumed 9  22.22 
Exercised (1,300) 9.97 
Canceled/expired (14) 18.25 
Outstanding at July 31, 2020 5,577  $ 15.42  5.46 $ 1,123,149 
Vested and expected to vest at July 31, 2020 5,566  $ 15.42  5.46 $ 1,120,956 
Exercisable at July 31, 2020 5,188  $ 15.27  5.38 $ 1,045,726 

As of July 31, 2020, our total unrecognized compensation cost related to stock option grants was $2.7 million. We expect to recognize this expense over the remaining weighted-average period of approximately 0.5 years.

RSUs

Restricted stock units (“RSUs”) granted under the 2018 Plan generally vest over a four-year period, either quarterly or with 25% vesting at the end of one year and the remainder quarterly thereafter. The majority of RSUs vest upon the satisfaction of a service-based vesting condition. From time to time, we also grant RSUs that are subject to either a performance-based or market-based vesting condition. The performance-based conditions will be satisfied upon satisfaction of certain financial performance targets. The market-based conditions will be satisfied if certain milestones based on our common stock price or relative total shareholder return are met.

RSU activity for the three months ended July 31, 2020 was as follows:
(in thousands, except per share data) Number of Units Weighted-Average Grant Date Fair Value
Unvested at January 31, 2020 13,859  $ 46.28 
Granted 3,415  132.12 
Vested (3,253) 38.73 
Canceled (671) $ 47.82 
Unvested at July 31, 2020 13,350  $ 70.00 

As of July 31, 2020, our total unrecognized compensation cost related to RSUs was $717.8 million. We expect to recognize this expense over the remaining weighted-average period of approximately 2.5 years.

2018 Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of our common stock at a discounted price by accumulating funds, normally through payroll deductions, of up to 15% of their earnings. The purchase price for common stock under the ESPP is equal to 85% of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods that begin in the first and third quarter of each year. In the six months ended July 31, 2020, 0.3 million shares of our common stock were purchased under the ESPP. Compensation expense related to the ESPP was $2.9 million and $2.1 million for the three months ended July 31, 2020 and 2019, and $4.8 million and $4.0 million for the six months ended July 31, 2020 and 2019.

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The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2019 and continuing through February 1, 2028, in an amount equal to the lesser of (i) 1% of the total number of shares of our common stock outstanding on January 31 of the preceding fiscal year, (ii) 3.8 million shares, or (iii) a lesser number of shares determined by our board of directors. As of July 31, 2020, 6.5 million shares of our common stock were reserved for issuance under the ESPP.

Note 13. Net Loss per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for periods presented:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands, except per share data) 2020 2019 2020 2019
Numerator:
Net loss attributable to common stockholders $ (64,560) $ (68,632) $ (112,364) $ (114,354)
Denominator:
Weighted-average common shares outstanding 184,862  175,389  183,930  173,773 
Net loss per share attributable to common stockholders:
Basic and diluted $ (0.35) $ (0.39) $ (0.61) $ (0.66)

Outstanding potentially dilutive securities that were excluded from the diluted per share calculations because they would have been antidilutive are as follows:
July 31,
(in thousands) 2020 2019
RSUs 13,350  15,893 
Stock options 5,577  9,752 
ESPP 227  288 
Convertible senior notes 5,390   
Total antidilutive securities 24,544  25,933 

Note 14. Income Taxes

Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our income tax provision was $0.8 million and $1.2 million for the three months ended July 31, 2020 and 2019. Our income tax provision was $3.0 million and $2.5 million for the six months ended July 31, 2020 and 2019. The overall increase in the tax provision was primarily driven by higher foreign tax expenses, resulting from higher year-over-year earnings in certain foreign jurisdictions as we continue to scale our foreign operations to support our ongoing international growth.

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for valuation allowances, on a quarterly basis. We maintain a valuation allowance against certain deferred tax assets, including all U.S. consolidated group deferred tax assets and certain foreign deferred tax assets as a result of our history of losses in the U.S. and certain foreign jurisdictions, and the variability and uncertainty of operating results. In the event we determine our deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

As of July 31, 2020, our gross unrecognized tax benefits totaled $14.9 million, excluding related accrued interest and penalties, of which $2.9 million would impact the effective tax rate if recognized. Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

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We are subject to taxation in the U.S. and various foreign jurisdictions. Our tax years from inception in 2003 through July 31, 2020 remain subject to examination by U.S. and California taxing authorities, as well as taxing authorities in various other state and foreign jurisdictions. We are under examination by the Israel Tax Authority for tax years 2015 through 2018. We are not under examination in any other material jurisdiction. We believe that adequate amounts have been reserved in all jurisdictions.

Note 15. Geographic Information

We operate in one operating segment and one reportable segment as we only report financial information on an aggregate and consolidated basis to the Chief Executive Officer, who is our chief operating decision maker.

Revenue by geography is based on the address of the customer as specified in our master subscription agreement. Revenue by geographic area was as follows:
Three Months Ended July 31, Six Months Ended July 31,
(in thousands) 2020 2019 2020 2019
U.S. $ 275,494  $ 193,736  $ 517,662  $ 370,002 
International 66,715  41,876  121,564  79,572 
Total revenue $ 342,209  $ 235,612  $ 639,226  $ 449,574 

No single country other than the U.S. had revenue greater than 10% of total revenue in the three and six months ended July 31, 2020 and 2019.

Our long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:
(in thousands) July 31, 2020 January 31, 2020
U.S. 216,110  $ 182,288 
International 102,849  95,838 
Total long-lived assets $ 318,959  $ 278,126