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 2021 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 2021 Annual
Report on Form 10-K. Our fiscal year ends January 31.

Executive overview of first quarter results

Overview

DocuSign accelerates the process of doing business for companies and simplifies
life for their customers and employees. We accomplish this by transforming the
foundational element of business: the agreement.

We offer the world's #1 e-signature solution as the core part of our broader
software suite for automating the agreement process, which we call the DocuSign
Agreement Cloud. It is designed to allow companies of all sizes and across all
industries to quickly and easily make nearly every agreement, approval process
or transaction digital. It provides comprehensive functionality across
e-signature and addresses the broader agreement process. As a result,
over 980,000 customers and hundreds of millions of users worldwide utilize
DocuSign to create, upload and send documents for multiple parties to sign
electronically. The DocuSign Agreement Cloud allows users to complete approvals,
agreements and transactions faster by building end-to-end processes. DocuSign
eSignature integrates with popular business apps, and our functionality can also
be embedded using our API. Finally, the DocuSign Agreement Cloud allows our
customers to automate and streamline their business-critical workflows to save
time and money, while staying secure and legally compliant.

We generally offer access to our platform on a subscription basis with prices
based on the functionality our customers require and the quantity of Envelopes
provisioned. Similar to the physical envelopes historically used to mail paper
documents, an Envelope is a digital container used to send one or more documents
for signature or approval to one or more recipients. Our customers have the
flexibility to put a large number of documents in an Envelope. For a number of
use cases, such as buying a home, multiple Envelopes are used over the course of
the process. To drive customer reach and adoption, we also offer for free
certain limited-time or feature-constrained versions of our platform.
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We generate substantially all our revenue from sales of subscriptions, which
accounted for 96% and 95% of our revenue in the three months ended April 30,
2021 and 2020. Our subscription fees include the use of our software suite 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
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 the three months ended April 30,
2021 and 2020. We anticipate continuing to invest in customer success through
our professional services offerings as we believe it plays an important role in
accelerating our customers' deployment of our software suite, which helps drive
customer retention and expansion of the use of the DocuSign Agreement Cloud.

We offer subscriptions to our software suite to enterprise businesses,
commercial businesses and very small businesses ("VSBs"), which we define as
companies with fewer than 10 employees and includes professionals, sole
proprietorships and individuals. We sell to customers through multiple channels.
Our go-to-market strategy relies on our direct sales force and partnerships to
sell to enterprises and commercial businesses and our web-based self-service
channel to sell to VSBs, which we believe is the most cost-effective way to
reach our smallest customers. We offer more than 350 off-the-shelf, prebuilt
integrations with the applications that many of our customers already
use-including those offered by Google, Microsoft, NetSuite, Oracle, Salesforce,
SAP, SAP SuccessFactors and Workday-so that they can create, sign, send and
manage agreements from directly within these applications. We have a diverse
customer base spanning various industries and countries 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 e-signature solutions to commercial
businesses and VSBs, and later expanded our focus to target enterprise
customers. To demonstrate this growth over time, the number of our customers
with greater than $300,000 in annual contract value (measured in billings) has
increased from approximately 30 customers as of January 31, 2013 to 673
customers as of April 30, 2021. Each of our customer types has a different
purchasing pattern. VSBs tend to become customers quickly with very little to no
direct sales or customer support interaction 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.

COVID-19 Update

The COVID-19 pandemic has spread across the world including the United States,
where we are headquartered and the majority of our workforce is located. The
pandemic and the public health measures taken in response to it have adversely
affected workforces, organizations, customers, economies, and financial markets
globally, leading to an economic downturn and increased market volatility. We
are continuing to monitor the actual and potential effects of the pandemic
across our business. Because these effects are dependent on highly uncertain
future developments - including the duration, spread and severity of the
pandemic, the actions taken to contain the virus, the distribution of vaccines,
and how quickly and to what extent normal economic and operating conditions can
or will resume - they are extremely difficult to predict. While our revenue,
billings and earnings are relatively predictable as a result of our
subscription-based business model, the effects of the COVID-19 pandemic may not
be fully reflected in our results of operations until future periods.

Since March 2020, we have taken a number of precautionary measures to ensure the
health and safety of our employees, partners and customers. DocuSign has shifted
to a largely remote work environment, providing nearly all employees the
opportunity to work from home until at least October 4, 2021. We have suspended
all business travel other than for essential functions. We have cancelled or
replaced planned events, such as our Momentum conferences, with virtual-only
experiences. We have incurred expenses to support our employees working from
home, including reimbursements for home office equipment and a stipend for other
qualifying expenses, as well as expenses associated with planning and risk
mitigation for potential and actual reopening of our offices, and may incur
similar expenses in the future. The impact of these and any other operational
changes we may implement is uncertain, but as of the date of this filing they
have not materially affected our ability to maintain operations.

We have experienced a substantial increase in overall demand for our products,
particularly DocuSign eSignature, as the shift to remote, digital business
operations has caused more organizations to adopt or expand their use of digital
agreements. This acceleration of the digital transformation of agreements has
resulted in growth in our customer base and a significant increase in customer
spending across almost all industries and regions we serve.

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We believe that businesses that have shifted to digital agreement processes will
not return to manual ones. However, if our expectations are incorrect, and if
demand for our products decreases as the COVID-19 pandemic lessens in severity
and businesses resume in-person operations, our business could suffer. See the
section below titled "  Risk Factors    "   for further discussion of the
potential impact of the COVID-19 pandemic, including the conclusion or tapering
of the pandemic, on our business, financial condition and results of operations.

Financial results for the three months ended April 30, 2021 and 2020

                                                   Three Months Ended April 30,
(in thousands)                                         2021                   2020
Total revenue                               $       469,078                $ 297,017
Total costs and expenses                            479,815                  338,870
Total stock-based compensation expense               81,136                   53,551
Loss from operations                                (10,737)                 (41,853)
Net loss                                             (8,354)                 (47,804)
Net cash provided by operating activities           135,597                 

59,144

Purchases of property and equipment                 (12,596)                

(26,389)

Cash, cash equivalents, restricted cash and investments were $ 875.8 million from April 30, 2021.

Key factors affecting our performance

We believe that our future performance will depend on many factors, including the following:

Growing Customer Base

We are highly focused on continuing to acquire new customers to support our
long-term growth. We have invested, and expect to continue to invest, heavily in
our sales and marketing efforts to drive customer acquisition. As of April 30,
2021, we had a total of over 980,000 customers, including over 135,000
enterprise and commercial customers, compared to over 660,000 customers and over
85,000 enterprise and commercial customers as of April 30, 2020. We define a
customer as a separate and distinct buying entity, such as a company, an
educational or government institution, or a distinct business unit of a large
company that has an active contract to access our software suite. We define
enterprise customers as companies generally included in the Global 2000. We
define commercial customers to include both mid-market companies, which includes
companies outside the Global 2000 that have greater than 250 employees, and
small-to-medium-sized businesses, which are companies with between 10 and 249
employees, in each case excluding any enterprise customers. We refer to total
customers as all enterprises, commercial businesses and VSBs.

We believe that our ability to increase the number of customers using our
software suite, 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 software
suite, 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.

Maintain and extend contracts with existing businesses and commercial customers

Many of our customers have increased spend with us as they have expanded their
use of our offerings in both existing and new use cases across their front or
back office operations. Our enterprise and commercial customers may start with
just one use case and gradually implement additional use cases across their
organization once they see the benefits of our software suite. Several of our
largest enterprise customers have deployed our software suite for hundreds of
use cases across their organizations. We believe there is significant expansion
opportunity with our customers following their initial adoption of our software
suite.

Increase in international income

Our international revenue represented 21% and 18% of our total revenue during the three months ended April 30, 2021 and 2020.

                                       25
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We started our international selling efforts in English-speaking common law
countries, such as Canada, the United Kingdom and Australia, where we were able
to leverage our core technologies due to similar approaches to e-signature in
these jurisdictions and the United States ("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 have Standards-Based Signature ("SBS")
technology tailored for electronic IDentification, Authentication and
trust Services ("eIDAS"). SBS supports signatures that involve digital
certificates, including those specified in the European Union's ("EU") eIDAS
regulations for advanced and qualified electronic signatures. In addition, to
follow longstanding tradition in Japan, we enable signers to upload and apply
their personal eHanko stamp to represent their signatures on an agreement.

We plan to increase our international revenue by leveraging and continuing to
expand the investments we have already made in our technology, direct sales
force and strategic partnerships, as well as helping existing U.S.-based
customers manage agreements across their international businesses. We have
experienced increased demand in Latin America and are expanding 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.

Investing for growth

We believe that our market opportunity is large, and we plan to invest to
continue to support further growth. This includes expanding our sales headcount
and increasing our marketing initiatives. We also plan to continue to invest in
expanding the functionality of our software suite and underlying infrastructure
and technology to meet the needs of our customers across industries. Our
acquisitions of Seal Software and Liveoak Technologies, intended to bring
additional functionality to our DocuSign Agreement Cloud and further expand our
eNotary offerings, as well as the continuous development of new features
internally, are examples of our commitment to investing for ongoing growth.

Components of the results of operations

Returned

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
                              suite and our technical infrastructure and access to customer support,
                              which includes phone or email support. We typically invoice customers
                              in advance on an annual basis. We recognize subscription revenue
                              ratably over the term of the contract

subscription period starting on

                              the date access to our software suite is provided.
Professional Services and     Professional services revenue includes fees associated with new
Other Revenue                 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.

                                       26
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Cost of income

Cost of subscription revenues The cost of subscription revenues mainly includes expenses related to

                              hosting our software suite 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 parties

                              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 Cost of professional services and other revenue consists primarily of
and Other Revenue             personnel costs for our professional services delivery team,
                              travel-related costs and allocated overhead costs.


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 suite 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 expenses.

Selling and Marketing Expense  Selling 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
                               selling and marketing expense to continue to increase in absolute
                               dollars as we enhance our product offerings and implement marketing
                               strategies.
Research and Development       Research and development expense consists primarily of personnel costs.
Expense                        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 are awaiting research

                               and development expense to increase in 

absolute dollars as we invest in

                               the enhancement of our software suite.
General and Administrative     General and administrative expense consists primarily of
Expense                        employee-related costs for those employees providing administrative
                               services such as legal, human resources,

related to information technologies

                               to internal systems, accounting and finance. These expenses also
                               include certain third-party consulting services, certain facilities
                               costs and allocated overhead costs. We expect general and
                               administrative expense to increase in

absolute dollars to support the

                               overall growth of our operations.



Interest Expense

Interest expense is primarily comprised of contractual interest expense, discount amortization and the amortization of debt issuance costs on our convertible senior notes (the “Notes”).

Interest income and other income, net

Interest and other income, net, consists primarily of interest earned on our cash, cash equivalents and investments, changes in the fair value of our strategic investments and gains and losses on foreign exchange transactions.

                                       27
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Provision for income taxes

Our provision for income taxes consists primarily of income taxes in certain
foreign jurisdictions where we conduct business, and tax benefits arising from
deductions for stock-based compensation. We have a valuation allowance against
our U.S. consolidated group and certain foreign deferred tax assets. We expect
to maintain this valuation allowance for the foreseeable future or until it
becomes more likely than not that the benefit of these U.S. and foreign deferred
tax assets will be realized by way of expected future taxable income.

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Discussion of the results of operations

The following table summarizes our historical consolidated statements of
operations data:
                                                        Three Months Ended April 30,
                                                                                               As % of                                 As % of
(in thousands)                                                               2021              revenue               2020              revenue
Revenue:
Subscription                                                             $ 451,935                   96  %       $ 280,922                   95  %
Professional services and other                                             17,143                    4             16,095                    5
Total revenue                                                              469,078                  100            297,017                  100
Cost of revenue:
Subscription                                                                78,071                   17             52,010                   18
Professional services and other                                             27,171                    5             22,022                    7
Total cost of revenue                                                      105,242                   22             74,032                   25
Gross profit                                                               363,836                   78            222,985                   75
Operating expenses:
Sales and marketing                                                        239,119                   51            171,793                   58
Research and development                                                    85,416                   18             54,234                   18
General and administrative                                                  50,038                   11             38,811                   13
Total operating expenses                                                   374,573                   80            264,838                   89
Loss from operations                                                       (10,737)                  (2)           (41,853)                 (14)
Interest expense                                                            (1,672)                   -             (7,560)                  (3)
Interest income and other income, net                                        6,037                    1              3,742                    2
Loss before provision for income taxes                                      (6,372)                  (1)           (45,671)                 (15)
Provision for income taxes                                                   1,982                    1              2,133                    1
Net loss                                                                 $  (8,354)                  (2) %       $ (47,804)                 (16) %


The following discussion and analysis covers the three months ended. April 30, 2021, compared to the same period in 2020, unless otherwise indicated.

Revenue
                                                              Three Months Ended
                                                                   April 30,                 2021 versus
(in thousands, except for percentages)                          2021                 2020        2020
Revenue:
Subscription                                                          $  451,935            $   280,922                   61  %
Professional services and other                                           17,143                 16,095                    7  %
Total revenue                                                         $  469,078            $   297,017                   58  %



Subscription revenue increased by $171.0 million, or 61%, in the three months
ended April 30, 2021. Due to the COVID-19 pandemic, there has been a shift to
remote digital business operations that has led to an increase in demand for our
solutions. This resulted in a higher growth in our customer base and a
significant increase in customer spending across almost all industries and
regions we serve.

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. We expect subscription revenue to continue to increase as we
offer new functionality, attract new customers and fully realize the potential
of our acquisitions in our product offerings. We continue to monitor the
COVID-19 pandemic in fiscal 2022 and its impact on the economy, the digital
transformation of business and demand for our solutions.

Professional services and other income edged up in the quarter ended April 30, 2021.

                                       29
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Cost of revenues and gross margin

                                                              Three Months 

Finished

                                                                   April 

30,

(in thousands, except for percentages)                          2021                 2020    2021 versus 2020
Cost of revenue:
Subscription                                                          $   78,071            $        52,010                   50    %
Professional services and other                                           27,171                     22,022                   23    %
Total cost of revenue                                                 $  105,242            $        74,032                   42    %
Gross margin:
Subscription                                                                  83  %                      81  %                 2  pts
Professional services and other                                              (58) %                     (37) %               (21) pts
Total gross margin                                                            78  %                      75  %                 3  pts



Cost of subscription revenue increased $26.1 million, or 50%, in the three
months ended April 30, 2021, primarily driven by higher costs to support our
growing customer base and the impact of the Seal acquisition. Significant
increases consisted of:
?$9.7 million in personnel costs and $2.2 million in stock-based compensation
expense primarily due to higher headcount, including the addition of Seal
employees, and annual merit increases;
?$6.2 million in operating costs to support our platform and the growth in our
revenue, including increases in subscription reseller fees, hosting costs and
authentication and processing fees; and
?$5.3 million in depreciation and amortization, which reflects the impact of
higher data center and capitalized software assets as well as the higher
existing technology intangible assets from the Seal acquisition.

Increased cost of professional services and other revenues $ 5.1 million, or 23%, during the three months ended April 30, 2021, primarily due to an increase in personnel costs due to increased headcount, including the addition of Seal employees to our workforce, and annual merit increases.

Sales and Marketing
                                                              Three Months Ended
                                                                   April 30,
(in thousands, except for percentages)                          2021                 2020    2021 versus 2020
Sales and marketing                                                   $  239,119            $       171,793                   39  %
Percentage of revenue                                                         51  %                      58  %



Sales and marketing expenses increased $67.3 million, or 39%, in the three
months ended April 30, 2021, primarily driven by investments in workforce and
technology infrastructure to support the significant increase in demand due to
the acceleration of the digital transformation of agreements. Significant
increases consisted of:
?$40.8 million in personnel costs and $13.5 million in stock-based compensation
expense due to higher headcount, annual merit increases, the addition of Seal
employees to our workforce, higher commissions in line with higher sales and
higher taxes on employee stock transactions; and
?$10.9 million in marketing and advertising expense, primarily due to higher
spend on online advertising platforms to help capture the increased market
interest in our product offering as a result of the shift to COVID-19 remote
work environment.

Research and Development
                                                              Three Months Ended
                                                                   April 30,
(in thousands, except for percentages)                          2021                 2020    2021 versus 2020
Research and development                                              $   85,416            $        54,234                   57  %
Percentage of revenue                                                         18  %                      18  %



Research and development expenses increased $31.2 million, or 57%, in the three
months ended April 30, 2021, primarily due to investments in workforce and
technology infrastructure to support growth. Personnel costs increased by $19.2
million and stock-based compensation by $8.6 million due to higher headcount,
the addition of Seal and Liveoak employees to our workforce and annual merit
increases.

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General and Administrative
                                                               Three Months Ended
                                                                    April 30,
(in thousands, except for percentages)                           2021                 2020    2021 versus 2020
General and administrative                                             $   50,038            $        38,811                   29  %
Percentage of revenue                                                          11  %                      13  %



General and administrative expenses increased $11.2 million or 29%, in the three
months ended April 30, 2021, primarily due to investments in workforce and
technology infrastructure to support growth. Personnel costs increased by $6.3
million and stock-based compensation by $2.0 million due to higher headcount and
the impact of annual merit increases.

Other Income and Expense
                                                              Three Months Ended
                                                                   April 30,
(in thousands, except for percentages)                          2021                 2020    2021 versus 2020
Interest expense                                                      $    1,672            $        7,560                   (78) %
Percentage of revenue                                                          -  %                     (3)  %

Interest income                                                       $    1,126                     3,381                   (67) %
Foreign currency gain (loss)                                                 266                      (545)                      NM
Fair value adjustments to strategic investments                            5,119                         -                   100  %
Other                                                                       (474)                      906                       NM
Interest income and other income, net                                 $    6,037                     3,742                    61  %
Percentage of revenue                                                          1  %                      2   %



Interest expense decreased by $5.9 million in the three months ended April 30,
2021 primarily due to lower amortization expense under ASU 2020-06 effective
February 1, 2021.
Interest income and other income, net, for the three months ended April 30, 2021
included $5.1 million adjustments to fair value of certain strategic investments
resulting from observable price changes that occurred during the quarter.
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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 April 30, 2021, we had $780.6
million in cash and cash equivalents and short-term investments. We also had
$94.9 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 through debt
financings.

In September 2018, we issued and sold $ 575.0 million a total principal amount of 0.5% of senior convertible bonds maturing in 2023 (“2023 bonds”). In January 2021, we issued and sold $ 690.0 million in total capital of 0% of Senior Convertible Bonds maturing in 2024 (“2024 Bonds”, and with the 2023 Bonds, the “Bonds”). A portion of the proceeds from the 2024 tickets was used to redeem
$ 460.0 million in total capital of the 2023 Bonds.

In January 2021 we entered into a $500.0 million credit facility, which may be
increased by an additional $250.0 million subject to customary terms and
conditions. The credit facility is available until January 11, 2026 to optimize
our capital structure and strengthen our balance sheet. There were no
outstanding borrowings under the credit facility as of April 30, 2021.

Further details on these transactions are described in Note 7 to the condensed consolidated financial statements, included in Part I, Item 1 of this Form 10-Q.

We were in compliance with all debt covenants at April 30, 2021.

We believe our existing cash, cash equivalents and marketable securities will be
sufficient to meet our working capital and capital expenditures needs over at
least the next 12 months. While we have generated positive cash flows from
operations in recent years, we have generated losses from operations in the past
as reflected in our accumulated deficit of $1.4 billion as of April 30, 2021. We
may not achieve profitability in the foreseeable future due to the investments
we intend to make and may require additional capital resources to execute
strategic initiatives to grow our business.

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 or in
accounts receivable until cash is collected. Accordingly, collections from our
customers have a material impact on our cash flows from operating activities.
Our accounts receivable decreased by $73.2 million in the three months ended
April 30, 2021, compared to a decrease of $17.2 million in the three months
ended April 30, 2020, which resulted in a $56.0 million increase in cash
provided by operating activities year over year. 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
contract liabilities increased by $51.6 million in the three months ended
April 30, 2021, compared to an increase of $44.6 million in the three months
ended April 30, 2020. The year over year increase contributed an additional $7.1
million to cash provided by operating activities.

Our future capital requirements will depend on many factors including our growth
rate, customer retention and expansion, tax withholding obligations related to
settlement of our RSUs, the timing and extent of spending to support our efforts
to develop our software suite, the expansion of sales and marketing activities
and the continuing market acceptance of our software suite. 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.

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Cash flow

The following table summarizes our cash flows for the periods indicated:

                                                                   Three Months Ended April 30,
(in thousands)                                                       2021                   2020
Net cash provided by (used in):
Operating activities                                          $       135,597          $    59,144
Investing activities                                                  (70,506)             169,668
Financing activities                                                 (112,954)             (25,498)

Effect of foreign exchange on cash, cash equivalents and restricted cash

                                                           779               (2,280)

Net change in cash, cash equivalents and restricted cash $ (47,084) $ 201,034

Cash flow from operating activities

Cash provided by operating activities was $135.6 million and $59.1 million for
the three months ended April 30, 2021 and 2020. The improvement of $76.5
million, as compared to prior year, was primarily the result of increased sales
and the related cash collections, partially offset by higher operating costs
from increased headcount and to support growth.

Cash flow from investing activities

For the three months ended April 30, 2021, the net cash used in investing activities of $ 70.5 million was mainly motivated by $ 57.4 million net purchases of securities and $ 12.6 million Purchases of goods and equipment.

For the three months ended April 30, 2020, cash provided by investing activities
of $169.7 million was primarily driven by $199.1 million from maturities and
sales of marketable securities, partially offset by $26.4 million purchases of
property and equipment.

Cash flow from financing activities

For the three months ended April 30, 2021, cash used in financing activities of
$113.0 million was primarily driven by $76.3 million in net payments related to
our equity plans, as compared to $25.5 million in the prior year for similar
activities. We also used $36.7 million for repayments of our 2023 Notes.

Obligations and commitments

Our principal contractual obligations and commitments consist of obligations
under the Notes (including principal and coupon interest), operating leases, as
well as noncancelable contractual commitments that primarily relate to cloud
infrastructure support and sales and marketing activities. Refer to   Note 7
and   Note 8   to the Condensed Consolidated Financial Statements, included in

Part I, point 1 of this 10-Q form, for our leases and other commitments.

We do not have a special purpose entity and we do not enter into off-balance sheet financing agreements.

Critical accounting conventions and estimates

We prepare our financial statements in accordance with U.S. generally accepted
accounting principles ("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, valuation of acquired intangible assets in business combinations
and income taxes.

There have been no material changes to our accounting policies and critical estimates as described in our 2021 Annual Report on Form 10-K.

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Recent accounting positions

Refer to Note 1 to our consolidated financial statements included elsewhere in
this Quarterly Report on Form 10-Q for recently issued accounting pronouncements
not yet adopted as of the date of this report.

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Non-GAAP financial measures and other key indicators

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.

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, amortization of
debt discount and issuance costs, acquisition-related expenses, fair value
adjustments to strategic investments 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.

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 is a key metric to measure our periodic performance. Given that most of
our customers pay in annual installments one year in advance, but we typically
recognize a majority of the related revenue ratably over time, we use billings
to measure and monitor our ability to provide our business with the working
capital generated by upfront payments from our customers.

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Reconciliation of gross margin and gross margin:

                                                                           Three Months Ended
                                                                               April 30,
(in thousands)                                                                       2021                 2020
GAAP gross profit                                                               $   363,836          $   222,985
Add: Stock-based compensation                                                        11,553                7,989
Add: Amortization of acquisition-related intangibles                                  3,171                1,348
Add: Employer payroll tax on employee stock transactions                              2,774                1,036

Non-GAAP gross profit                                                           $   381,334          $   233,358
GAAP gross margin                                                                        78  %                75  %
Non-GAAP adjustments                                                                      3  %                 4  %
Non-GAAP gross margin                                                                    81  %                79  %

GAAP subscription gross profit                                                  $   373,864          $   228,912
Add: Stock-based compensation                                                         6,018                3,864
Add: Amortization of acquisition-related intangibles                                  3,171                1,348
Add: Employer payroll tax on employee stock transactions                              1,442                  535

Non-GAAP subscription gross profit                                              $   384,495          $   234,659
GAAP subscription gross margin                                                           83  %                81  %
Non-GAAP adjustments                                                                      2  %                 3  %
Non-GAAP subscription gross margin                                                       85  %                84  %

GAAP professional services and other gross loss                                 $   (10,028)         $    (5,927)
Add: Stock-based compensation                                                         5,535                4,125
Add: Employer payroll tax on employee stock transactions                              1,332                  501

Non-GAAP professional services and other gross loss                             $    (3,161)         $    (1,301)
GAAP professional services and other gross margin                                       (58) %               (37) %
Non-GAAP adjustments                                                                     40  %                29  %
Non-GAAP professional services and other gross margin                                   (18) %                (8) %



Reconciliation of operating profit and operating margin:

                                                                           Three Months Ended
                                                                               April 30,
(in thousands)                                                                       2021                 2020
GAAP loss from operations                                                       $   (10,737)         $   (41,853)
Add: Stock-based compensation                                                        81,136               53,551
Add: Amortization of acquisition-related intangibles                                  6,529                4,259
Add: Employer payroll tax on employee stock transactions                             16,283                6,548
Add: Acquisition-related expenses                                                         -                  694
Non-GAAP income from operations                                                 $    93,211          $    23,199
GAAP operating margin                                                                    (2) %               (14) %
Non-GAAP adjustments                                                                     22  %                22  %
Non-GAAP operating margin                                                                20  %                 8  %



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Reconciliation of net income (loss):

                                                                           Three Months Ended
                                                                               April 30,
(in thousands)                                                                       2021                 2020
GAAP net loss                                                                   $    (8,354)         $   (47,804)
Add: Stock-based compensation                                                        81,136               53,551
Add: Amortization of acquisition-related intangibles                                  6,529                4,259
Add: Employer payroll tax on employee stock transactions                             16,283                6,548
Add: Acquisition-related expenses                                                         -                  694
Add: Amortization of debt discount and issuance costs                                 1,319                6,842
Less: Fair value adjustments to strategic investments                                (5,119)                   -
Non-GAAP net income                                                             $    91,794          $    24,090


Calculation of free cash flow:

                                                                     Three Months Ended
                                                                         April 30,
(in thousands)                                                                 2021                 2020
Net cash provided by operating activities                                 $   135,597          $    59,144
Less: Purchases of property and equipment                                     (12,596)             (26,389)
Non-GAAP free cash flow                                                   $   123,001          $    32,755
Net cash (used in) provided by investing activities                       $   (70,506)         $   169,668
Net cash used in financing activities                                     $ 

(112,954) (25,498) $



Computation of billings:
                                                                     Three Months Ended
                                                                         April 30,
(in thousands)                                                                 2021                 2020
Revenue                                                                   $   469,078          $   297,017
Add: Contract liabilities and refund liability, end of period                 857,969              568,544

Less: Contractual liability and reimbursement liability, start of period

                                                                       (800,940)            (522,201)

Add: Contractual assets and unbilled receivables, start of period

                                                            21,021               15,082
Less: Contract assets and unbilled accounts receivable, end
of period                                                                     (19,737)             (16,390)

Non-GAAP billings                                                         $   527,391          $   342,052



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