Investing in our securities involves a high degree of risk.
−Removed: You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, before making an investment decision.
+Added: You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this report, before making an investment decision.
The risks and uncertainties described below are not the only ones we face.
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The below summary risks provide an overview of the material risks we are exposed to in the normal course of our business activities.
−Removed: The below summary risks do not contain all of the information that may be important to you, and you should read these together with the more detailed discussion of risks set forth following this section, as well as elsewhere in this Quarterly Report on Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below, or discussed elsewhere in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may apply to our activities or operations as currently conducted or as we may conduct them in the future, or to the markets in which we currently operate or may in the future operate.
+Added: The below summary risks do not contain all of the information that may be important to you, and you should read these together with the more detailed discussion of risks set forth following this section, as well as elsewhere in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below, or discussed elsewhere in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may apply to our activities or operations as currently conducted or as we may conduct them in the future, or to the markets in which we currently operate or may in the future operate.
Consistent with the foregoing, we are exposed to a variety of risks, including those associated with the following:
−Removed: • the ongoing COVID-19 pandemic, the resulting global economic volatility, and measures taken in response to the pandemic may materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time;
−Removed: • if our security measures or the security measures of our service partners are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities;
+Added: • the ongoing COVID-19 pandemic, the continuing global economic and geopolitical volatility, and measures taken in response to such events may materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time;
+Added: • if our information technology systems or the security measures of our service partners are compromised or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, our operations may be disrupted, our applications may become unavailable, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities;
• if we fail to properly manage our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties, experience service outages or delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our reputation and operating results may be adversely affected;
−Removed: • privacy concerns and evolving domestic or foreign laws and regulations may reduce the effectiveness of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results;
+Added: • privacy concerns and evolving domestic or foreign laws and regulations may reduce the adoption of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results;
+Added: • we may lose key employees or be unable to attract, train, and retain highly skilled employees, which may adversely affect our business and future growth prospects;
• the markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected;
• our quarterly results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control, and such fluctuations and related impacts to any earnings guidance we may issue from time to time, or any modification or withdrawal thereof, may negatively impact the value of our securities;
+Added: • our brand promotion activities may not generate the customer awareness or increased revenues we anticipate, and even if they do, any increase in revenues may not offset the significant expenses we incur in building our brand;
• if we are not able to realize a return on our current development efforts or offer new features, enhancements, and modifications to our products and services, our business and operating results could be adversely affected;
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• if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges;
−Removed: • we may lose key employees or be unable to attract, train and retain highly skilled employees, which may adversely affect our business and future growth prospects;
• if we cannot maintain our corporate culture, we may lose the innovation, teamwork, and passion that we believe contribute to our success, and our business may be harmed;
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Risks Related to Our Business and Industry
−Removed: The extent to which the ongoing COVID-19 pandemic, the resulting global economic volatility, and measures taken in response to the pandemic will continue to impact our business, financial condition, and operating results will depend on future developments, which are highly uncertain and difficult to predict.
−Removed: The COVID-19 pandemic has disrupted the U.S.
−Removed: and global economies and put unprecedented strain on governments, healthcare systems, educational institutions, businesses, and individuals around the world, the impact and duration of which is difficult to assess or predict.
−Removed: It is especially difficult to predict the impact on the global economic markets, which have been and will continue to be highly dependent upon the actions of governments, businesses, and other enterprises in response to the pandemic, the effectiveness of those actions, and vaccine availability, distribution, and adoption.
−Removed: As a result of the COVID-19 pandemic, the trading prices for our Class A common stock and the stock of other technology companies have been highly volatile, and such volatility may continue for the duration of and possibly beyond the COVID-19 pandemic.
−Removed: Any sustained adverse impacts from the continued spread of COVID-19 could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
−Removed: In response to COVID-19, as many other companies have done, we temporarily closed the majority of our global offices;
+Added: The extent to which the ongoing COVID-19 pandemic, the continuing global economic and geopolitical volatility, and measures taken in response to such events will continue to impact our business, financial condition, and operating results will depend on future developments, which are highly uncertain and difficult to predict.
+Added: The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets.
+Added: In addition, the Russian invasion of Ukraine in early fiscal 2023 has led to further economic disruption.
+Added: While we do not operate in Russia and while our extended workforce in Ukraine is not a material part of our workforce, the conflict has increased inflationary cost pressures and supply chain constraints which have negatively impacted the global economy.
+Added: In response to the concerns over inflation risk, the U.S.
+Added: Federal Reserve began to raise interest rates in March 2022 for the first time in over three years, and signaled they expect additional rate increases throughout the year.
+Added: It is especially difficult to predict the impact of such events on the global economic markets, which have been and will continue to be highly dependent upon the actions of governments, businesses, and other enterprises in response to the pandemic and macroeconomic events, and the effectiveness of those actions.
+Added: As a result of the COVID-19 pandemic and recent macroeconomic events, we have experienced volatility in the trading prices for our Class A common stock, and such volatility may continue in the long term.
+Added: Any sustained adverse impacts from the continued spread or resurgence of COVID-19 or due to recent macroeconomic events could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
+Added: At the beginning of the COVID-19 pandemic, we temporarily closed the majority of our global offices;
required most of our employees to work remotely;
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and postponed or canceled certain of our customer, industry, implementation partner, analyst, investor, and employee events, and converted other events to virtual-only experiences.
−Removed: If the pandemic persists, these precautionary measures could have increasingly negative effects on our employee productivity and morale, sales and marketing efforts, customer success efforts, and revenue growth rates or other financial metrics, or create operational or other challenges, any of which could adversely impact our business, financial condition, and operating results in any given period.
−Removed: During the second and third quarters of fiscal 2022, a limited number of employees returned to our offices in certain locations, taking into consideration government restrictions, employee safety, and health risks.
+Added: If we reinstate these measures due to a resurgence of COVID-19 or otherwise, these measures could have increasingly negative effects on our employee productivity and morale, sales and marketing efforts, customer success efforts, and revenue growth rates or other financial metrics, or create operational or other challenges, any of which could adversely impact our business, financial condition, and operating results in any given period.
+Added: As of April 30, 2022, most of our offices have reopened and we have begun permitting travel and in-person events, taking into consideration government restrictions, employee safety, and health risks.
Our approach may vary among geographies depending on appropriate health protocols, and may change at any time.
Additionally, our efforts to reopen our offices safely may not be successful, could expose our employees to health risks, and could involve additional costs or liability.
−Removed: While vaccines have become widely available in certain countries, and businesses and economies have reopened, the status of global economic recovery remains uncertain and unpredictable, and will be impacted by developments in the pandemic including any subsequent waves of outbreak or new variant strains of the COVID-19 virus which may require re-closures or other preventative measures.
−Removed: If the pandemic were to endure for the longer term, recession, depression or other sustained adverse market events may result.
−Removed: We may also continue to experience impacts to productivity and other operational and business impacts if our employees, executives, or their family members experience health issues, or if there are continued delays in our hiring and onboarding of new employees.
+Added: While vaccines have become widely available in certain countries, and businesses and economies have reopened, the status of global economic recovery remains uncertain and unpredictable, and will continue to be impacted by developments in the pandemic including any subsequent waves of outbreak or new variant strains of the COVID-19 virus which may require re-closures or other preventative measures.
The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may present risks for our real estate portfolio, as well as strategy, operational, talent recruiting and retention, and workplace culture challenges that may adversely affect our business.
−Removed: The COVID-19 pandemic could also impact our data center and computing infrastructure operations, including potential disruptions to, among other things, the supply chain required to maintain these systems, construction projects designed to expand our data center capacity, and primary vendors who provide critical products and services.
−Removed: Our future revenues rely on continued demand by existing customers and the acquisition of new customers.
+Added: The COVID-19 pandemic and recent macroeconomic events could also impact our data center and computing infrastructure operations, including potential disruptions to, among other things, the supply chain required to maintain these systems, construction projects designed to expand our data center capacity, and primary vendors who provide critical products and services.
+Added: Our future revenues rely on continued demand by existing customers and the acquisition of new customers who may be subject to labor shortages and global supply chain disruptions due to the COVID-19 pandemic and recent macroeconomic events.
During the COVID-19 pandemic, we experienced delays in purchasing decisions from prospective customers and a reduction in customer demand, particularly in the industries most impacted by the COVID-19 pandemic, such as travel and hospitality.
Similarly, we experienced a reduction in renewal rates, particularly within our subset of small and medium-sized planning customers, as well as reduced customer spend and delayed payments.
−Removed: If these conditions were to return, whether as a result of a resurgence of COVID-19 or otherwise, our business, financial condition, and operating results could be negatively impacted in future periods.
−Removed: In addition, some of our competitors may offer their products and services at a lower price, or may offer delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers.
−Removed: While our subscription services revenues are relatively predictable in the near term as a result of our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our operating results and overall financial performance until future periods.
−Removed: It is not possible for us to estimate the duration or magnitude of the adverse results of the COVID-19 pandemic and its effects on our business, financial condition, or operating results at this time, as the impact will depend on future developments, which are highly uncertain and difficult to predict.
−Removed: To the extent the COVID-19 pandemic adversely affects our business, financial condition, and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
+Added: Our business, financial condition, and operating results may be negatively impacted in future periods due to a resurgence of COVID-19 or on account of recent macroeconomic events.
+Added: While our subscription services revenues are relatively predictable in the near term as a result of our subscription-based business model, the effect of the COVID-19 pandemic and recent macroeconomic events may not be fully reflected in our operating results and overall financial performance until future periods.
+Added: It is not possible for us to estimate the duration or magnitude of the adverse results of the COVID-19 pandemic and recent macroeconomic events and their effect on our business, financial condition, or operating results at this time, as the impact will depend on future developments, which are highly uncertain and difficult to predict.
+Added: To the extent the COVID-19 pandemic and recent macroeconomic events adversely affect our business, financial condition, and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
If we fail to properly manage our technical operations infrastructure, experience service outages, undergo delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our reputation and operating results may be adversely affected.
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The owners of these data center facilities have limited or no obligation to renew their agreements with us on commercially reasonable terms, or at all.
−Removed: If we are unable to renew these agreements on commercially reasonable terms, or if any of these data center operators are acquired or cease to do business, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and experience possible service interruptions in connection with doing so.
−Removed: In addition, we also rely upon third-party hosted infrastructure partners globally, including Amazon Web Services, Microsoft Corporation, and Google LLC, to serve customers and operate certain aspects of our services, such as environments for development and testing, training, sales demonstrations, and production usage.
+Added: If we are unable to renew these agreements on commercially reasonable terms, or if any of these data center operators are acquired, cease to do business, or stop providing contracted services, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and experience possible service interruptions in connection with doing so.
+Added: In addition, we rely upon third-party hosted infrastructure partners globally, including AWS, Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services.
Any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.
Problems faced by these data center operators or hosted infrastructure partners, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers or other users.
−Removed: Furthermore, these data center operators or hosted infrastructure partners could decide to close their facilities, cease operations without adequate notice, or stop providing contracted services.
In addition, any financial difficulties, such as bankruptcy, faced by these data center operators, our hosted infrastructure partners, or any of the other service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict.
−Removed: These facilities may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions (including shelter-in-place or similar orders), changes to legal or permitting requirements, and litigation to stop, limit or delay operation.
+Added: These facilities may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit or delay operation.
Additionally, if these data center operators or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business.
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From time to time, there may be changes in our executive management team and to other key employee roles resulting from organizational changes or the hiring or departure of executives or other employees, which could have a serious adverse effect on our business and operating results.
−Removed: Moreover, if key personnel become ill due to the ongoing COVID-19 pandemic, we may not be able to manage our business effectively and, as a result, our business and operating results could be harmed.
To execute our growth plan, we must attract, train, and retain highly qualified personnel.
−Removed: In the technology industry, and particularly in the San Francisco Bay Area, the competition is intense for highly skilled employees, especially for engineers with significant experience in designing and developing software and internet-related services, including in the areas of machine learning and artificial intelligence;
+Added: Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit and retain highly skilled employees, especially in the areas of product development, engineers with significant experience in designing and developing software and internet-related services, including in the areas of machine learning and artificial intelligence;
for cybersecurity professionals;
and for senior sales executives.
+Added: The market for skilled personnel in the software industry is very competitive, and we have seen these pressures increase significantly through the COVID-19 pandemic.
+Added: As we are headquartered in the San Francisco Bay Area, we face intense competition among large and small firms in the Silicon Valley market.
In addition, the expansion of our sales infrastructure, both domestically and internationally, is necessary to grow our customer base and business.
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If the perceived or actual value of our equity awards declines, or if the mix of equity and cash compensation that we offer is not sufficiently attractive, it may adversely affect our ability to recruit and retain highly skilled employees.
−Removed: Our recruiting efforts may also be limited by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas (including during the ongoing COVID-19 pandemic).
−Removed: The challenges we face in recruiting and hiring qualified personnel may be compounded by a decreased willingness of candidates to leave their current employment due to various factors including economic uncertainty caused by the COVID-19 pandemic and uncertainty regarding immigration policies.
+Added: The challenges we face in recruiting and hiring qualified personnel may be compounded by a decreased willingness of candidates to leave their current employment due to various factors including economic uncertainty caused by the COVID-19 pandemic and other macroeconomic factors.
As the economic uncertainty related to the COVID-19 pandemic eases, we may face additional challenges in recruiting and retaining qualified personnel as other companies increase the pace of hiring.
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We believe that a critical component of our success has been our corporate culture, as reflected in our core values:
−Removed: employees, customer service, innovation, integrity, inclusion, fun, and profitability.
+Added: employees, customer service, innovation, integrity, fun, and profitability.
We also believe that our commitment to our corporate culture, as well as our commitment to building products and services that help provide our customers with information regarding their own workforce and corporate culture, is part of the reason why our customers choose us.
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Additionally, we and our stakeholders increasingly expect to have a corporate culture that embraces diversity and inclusion, and any inability to attract and retain diverse and qualified personnel may harm our corporate culture and our business.
−Removed: Moreover, the COVID-19 pandemic requires significant action to preserve culture with an employee base temporarily working remotely and facing unique personal and professional challenges.
−Removed: Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to achieve our corporate objectives, including our ability to quickly develop and deliver new and innovative products.
+Added: Moreover, our flexible work policies require significant action to preserve culture with some of the employee base working remotely.
+Added: Furthermore, we substantially grew our employee base in fiscal 2022, and we must be able to effectively integrate, develop, and motivate a large number of new employees, while maintaining the effectiveness of our business execution and the beneficial aspects of our corporate culture.
+Added: Any failure to maintain or adapt our culture could negatively affect our future success, including our ability to retain and recruit personnel and to achieve our corporate objectives, including our ability to quickly develop and deliver new and innovative products.
Our business could be adversely affected if our users are not satisfied with the deployment, training, and support services provided by us and our partners.
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Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and third parties provide a majority of deployment services for our customers.
−Removed: The work performed by us or these third parties that we rely on, including any work related to the on-site components of deployment services requested by a customer, might be adversely impacted directly or indirectly by the ongoing COVID-19 pandemic, including as a result of restrictions in accessing customer sites.
+Added: The work performed by us or these third parties that we rely on, including any work related to the on-site components of deployment services requested by a customer, might be adversely impacted directly or indirectly by the ongoing COVID-19 pandemic, including as a result of restrictions in accessing customer sites, and by increased attrition.
Additionally, if our customers’ personnel are unable to participate in deployment activities as a direct or indirect result of the ongoing COVID-19 pandemic, this could result in delays in customer go-live dates for our applications.
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Our sales force has historically met with our customers and potential customers face-to-face when selling our solutions, and while the majority of our deployment activities are completed remotely, many of our customers may prefer to have certain deployment activities such as project initiation and go-live activities completed on-site.
+Added: Attrition of key personnel at our customers has impacted and may continue to impact our direct sales efforts.
Furthermore, because our future revenue growth relies, in large part, on new customer acquisition, any inability of our sales force to establish relationships with potential customers during the current environment or prospects deferring buying decisions due to the economic uncertainty, is likely to have a negative impact on our future revenue growth and other financial measures.
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Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
−Removed: Our quarterly operating results, including our revenues, operating margin, profitability, cash flow, unearned revenue, and remaining performance obligations for subscription contracts, or backlog, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful.
+Added: Our quarterly operating results, including our revenues, subscription revenue backlog, operating margin, profitability, and cash flow, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful.
Accordingly, the results of any one quarter should not be relied upon as an indication of future performance.
Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business.
−Removed: As discussed above, the extent to which the ongoing COVID-19 pandemic, the resulting global economic uncertainty, and measures taken in response to the pandemic could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict.
−Removed: For example, beginning in March 2020, we began experiencing and continue to experience unfavorable impacts to our new subscription bookings, causing us to reduce our fiscal 2022 subscription revenue outlook.
+Added: As discussed above, the extent to which the ongoing COVID-19 pandemic, the resulting global economic uncertainty, and measures taken in response to the pandemic, as well as the Russia-Ukraine conflict, could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict.
Fluctuations in our quarterly results and related impacts to any earnings guidance we may issue from time to time, including any modification or withdrawal thereof, may negatively impact the value of our securities.
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• network outages or security breaches;
−Removed: • general economic, market and geopolitical conditions, including the impact of the ongoing COVID-19 pandemic;
+Added: • general economic, market, and geopolitical conditions, including the impact of the ongoing COVID-19 pandemic, the Russia-Ukraine conflict, inflation, and rising interest rates;
• increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;
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We have experienced rapid growth, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges.
−Removed: We have experienced rapid growth in our customers, headcount, and operations and anticipate that we will continue to expand our customer base, headcount, and operations, in particular, in connection with our publicly announced commitment to increase our workforce by more than 20% in our fiscal year 2022.
+Added: We have experienced rapid growth in our customers, headcount, and operations and anticipate that we will continue to expand our customer base, headcount, and operations.
This growth has placed, and future growth will place, a significant strain on our management, administrative, operational, and financial infrastructure.
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Moreover, the ongoing COVID-19 pandemic has made it more difficult to develop and maintain positive awareness of our brand.
−Removed: For example, we did not hold our two largest annual customer conferences for fiscal year 2021, Workday Rising and Workday Rising Europe, and we held a virtual event, Conversations for a Changing World, in place of Rising during fiscal year 2022.
−Removed: We have also transitioned Workday Elevate, our global event series, from an in-person to digital event experience.
−Removed: Our shift to virtual customer, industry, partner, analyst, investor and employee events may not be as successful or showcase our products as well, and ultimately generate lower levels of customer interest, opportunities, and leads.
+Added: For example, we held a virtual event, Conversations for a Changing World, in both fiscal 2021 and 2022, in place of our two largest annual customer conferences, Workday Rising and Workday Rising Europe.
+Added: We have returned to in-person events, but if due to a resurgence of COVID-19 or otherwise, we reinstate our shift to virtual customer, industry, partner, analyst, investor and employee events, these measures may not be as successful or showcase our products as well, and ultimately generate lower levels of customer interest, opportunities, and leads.
In addition, we have and may continue to delay certain corporate advertising programs.
These precautionary measures that have been adopted, particularly if extended for prolonged periods, could have increasingly negative effects on our ability to develop and maintain widespread positive awareness of our brand, which could harm our business, financial condition, and operating results.
−Removed: In addition, positions we take on environmental, social, governance (“ESG”), and ethical issues from time to time may impact our brand, reputation, or ability to attract or retain customers.
−Removed: Statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
−Removed: If we fail to successfully promote and maintain our brand, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our applications.
+Added: If we fail to successfully promote and maintain our brand, or we fail to expand awareness of our newer solutions or products, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our applications.
Additionally, the loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could significantly impair our ability to market our applications which, in turn, could have a negative impact on our revenues, reputation, and our ability to obtain new customers.
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We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities.
−Removed: For example, we acquired Adaptive Insights in fiscal 2019, Scout in fiscal 2020, and Peakon and Zimit in fiscal 2022.
+Added: For example, we acquired Scout in fiscal 2020 and Peakon, Zimit, and VNDLY in fiscal 2022.
The pursuit of acquisitions may divert the attention of management, disrupt ongoing business, and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
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We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:
−Removed: • inability to integrate or benefit from an acquisition in a profitable manner;
+Added: • inability to integrate the intellectual property, technology infrastructure, personnel, and operations of the acquired business, including difficulty in addressing security risks of the acquired business, or benefit from an acquisition in a profitable manner;
• acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated;
−Removed: • difficulty in integrating the intellectual property, technology infrastructure, and operations of the acquired business, including difficulty in addressing security risks of the acquired business;
−Removed: • difficulty in integrating and retaining the personnel of the acquired business, including integration of the culture of the acquired company with Workday;
• difficulty in leveraging the data of the acquired business if it includes personal data;
−Removed: • ineffective or inadequate controls, procedures, or policies at the acquired company;
+Added: • ineffective or inadequate controls, procedures, or policies at the acquired company and increased risk of non-compliance;
• multiple product lines or service offerings as a result of our acquisitions that are offered, priced, and supported differently, as well as the potential for such acquired product lines and service offerings to impact the profitability of existing products;
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• unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters;
−Removed: • adverse effects on our existing business relationships with business partners and customers as a result of the acquisition;
+Added: • adverse effects on our brand or existing business relationships with business partners and customers as a result of the acquisition;
• potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers;
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• the inability to obtain (or a material delay in obtaining) regulatory approvals necessary to complete transactions or to integrate operations, or potential remedies imposed by regulatory authorities as a condition to or following the completion of a transaction, which may include divestitures, ownership or operational restrictions or other structural or behavioral remedies;
−Removed: • use of resources that are needed in other parts of our business;
+Added: • the failure of strategic acquisitions to perform as expected or to meet financial projections;
• use of substantial portions of our available cash to consummate the acquisition.
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Our efforts to further expand internationally may not be successful in creating additional demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the markets we enter.
−Removed: Foreign regulations, including privacy and import/export regulations, are subject to change and uncertainty, including as a result of geopolitical developments, which may be amplified by the COVID-19 pandemic.
+Added: Foreign regulations, including privacy, data localization, and import/export regulations, are subject to change and uncertainty, including as a result of geopolitical developments, which may be amplified by the COVID-19 pandemic or events such as the Russia-Ukraine conflict.
In addition to navigating the challenges related to the ongoing COVID-19 pandemic in foreign jurisdictions, we face other risks in doing business on a global scale that could adversely affect our business, including:
−Removed: • the need to develop, localize, and adapt our applications for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses;
+Added: • the need to develop, localize, and adapt our applications and customer support for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses;
• the need to successfully develop and execute on a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;
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• laws, customs, and business practices favoring local competitors;
−Removed: • restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes, and barriers or sanctions that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control;
+Added: • restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes, and barriers or sanctions, including due to the Russia-Ukraine conflict, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control;
• compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, and data protection laws and regulations;
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Any of the above factors may negatively impact our ability to sell our applications and offer services globally, reduce our competitive position in foreign markets, increase our costs of global operations, and reduce demand for our applications and services from global customers.
−Removed: Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts outside the U.S.
−Removed: may be denominated in local currencies.
−Removed: Therefore, fluctuations in the value of the U.S.
−Removed: dollar and foreign currencies may impact our operating results when translated into U.S.
+Added: Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts may be outside the U.S.
+Added: and will therefore be denominated in local currencies.
+Added: Additionally, global events, as well as geopolitical developments such as the Russia-Ukraine conflict, fluctuating commodity prices, trade tariff developments, and inflation have caused, and may in the future cause, global economic uncertainty, and uncertainty about the interest rate environment, which could amplify the volatility of currency fluctuations.
+Added: Therefore, fluctuations in the value of foreign currencies may impact our operating results when translated into U.S.
Such fluctuations may also impact our ability to predict our future results accurately.
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This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions.
−Removed: Our primary competitors are Oracle Corporation and SAP SE, well-established providers of financial management and human capital management applications, which have long-standing relationships with many customers.
+Added: Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with many customers.
Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors.
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In addition, other cloud companies that provide services in different target markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications.
−Removed: As the market matures and as existing and new market participants introduce new types of technologies and different approaches that enable organizations to address their human capital management and financial needs, we expect this competition to intensify in the future.
+Added: As the market matures and as existing and new market participants introduce new types of technologies and different approaches that enable organizations to address their HCM and financial needs, we expect this competition to intensify in the future.
Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition, such as the merger between Kronos Incorporated and The Ultimate Software Group, Inc.
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If we are unsuccessful in establishing or maintaining our relationships with these third parties, or in monitoring the quality of their products or performance, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer.
−Removed: To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software, could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation.
+Added: To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software, such as the Log4j vulnerability (as defined below), could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation.
Furthermore, software may not continue to be available to us on commercially reasonable terms.
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We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology.
−Removed: For example, machine learning, artificial intelligence, and blockchain are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed.
+Added: For example, machine learning and artificial intelligence (“AI”) are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed.
Also, we may not be able to properly price our solutions in these new markets, which could negatively affect our ability to sell to customers.
Furthermore, customers in these new markets or of the new lines of business may demand more features and professional services, which may require us to devote even greater research and development, sales, support, and professional services resources to such customers.
−Removed: If we fail to generate adequate revenues from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business or financial condition.
+Added: If we fail to generate adequate revenues from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business, financial condition, and operating results.
+Added: Social and ethical issues relating to the use of new and evolving technologies, such as machine learning and AI, in our offerings may result in reputational harm and liability.
+Added: Social and ethical issues relating to the use of new and evolving technologies, such as machine learning and AI, in our offerings may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues.
+Added: We are increasingly building AI into many of our offerings.
+Added: As with many innovations, machine learning and AI present additional risks and challenges that could affect their adoption and therefore our business, operations, and results.
+Added: For example, the development of machine learning and AI present emerging ethical issues, and if we enable or offer solutions on this front that are controversial, due to their impact, or perceived impact, on human rights, privacy, employment, or in other social contexts, we may experience brand or reputational harm, competitive harm, or legal liability.
+Added: Potential government regulation related to AI ethics may also increase the burden and cost of research and development in this area.
+Added: Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI, which could slow adoption of AI in our products and services.
+Added: Our aspirations and disclosures related to environmental, social, and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.
+Added: The positions we take on ESG and ethical issues from time to time may impact our brand, reputation, or ability to attract or retain customers.
+Added: In particular, our brand and reputation are associated with our public commitments to environmental sustainability (including our science-based targets), equality, inclusivity, and ethical use, and any perceived changes in our dedication to these commitments could impact our relationships with potential and current customers, employees, stockholders, and other stakeholders.
+Added: These commitments reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
+Added: Our failure to accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance, and growth, and expose us to increased scrutiny from the investment community as well as enforcement authorities.
+Added: Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control.
+Added: Examples of such risks include:
+Added: • the availability and cost of low- or non-carbon-based energy sources;
+Added: • the evolving regulatory requirements affecting ESG standards or disclosures;
+Added: • the availability of suppliers that can meet our sustainability, diversity and other ESG standards;
+Added: • our ability to recruit, develop and retain diverse talent in our labor markets;
+Added: • the availability and cost of high-quality verified emissions reductions and renewable energy credits;
+Added: • the ability to renew existing or execute on new virtual power purchase agreements;
+Added: • the success of our organic growth and acquisitions or dispositions of businesses or operations.
+Added: Standards for tracking and reporting ESG matters continue to evolve.
+Added: In addition, our processes and controls may not always comply with evolving standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.
+Added: Further, we may rely on data provided by third parties to measure and report our ESG metrics and if the data input is incorrect or incomplete, our brand, reputation, and financial performance may be adversely affected.
+Added: If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, acquirer, or service provider could be negatively impacted.
+Added: Further, our failure or perceived failure to pursue or fulfill our goals and objectives or to satisfy various reporting standards on a timely basis, or at all, could have similar negative impacts or expose us to government enforcement actions and private litigation.
Risks Related to Cybersecurity, Data Privacy, and Intellectual Property
−Removed: If our security measures are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
−Removed: Our applications involve the storage and transmission of our customers’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, customers, and suppliers, as well as financial, accounting, health, and payroll data and other sensitive information.
−Removed: As a result, a compromise of our applications or unauthorized access, acquisition, use, or destruction of this data, or unavailability of data, could expose us to regulatory actions, litigation, investigations, remediation and indemnity obligations, damage to our reputation and brand, supplemental disclosure obligations, loss of customer, consumer, and partner confidence in the security of our applications, destruction of information, an increase in our insurance premiums, loss of authorization under the Federal Risk and Authorization Management Program ("FedRAMP") or other authorizations, impairment to our business, and resulting fees, expenses, loss of revenues, and other potential liabilities.
−Removed: We devote significant financial and personnel resources to implement and maintain security measures.
−Removed: While we have security measures in place that are designed to protect against these risks, preserve the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches, our security measures may be compromised as a result of intentional misconduct, including by computer hackers, employees, contractors, or vendors, as well as software bugs, human error, technical malfunctions, or other malfeasance.
−Removed: Cybersecurity threats and attacks are often targeted at companies such as ours and may take a variety of forms ranging from individuals or groups of hackers, including those who appear to offer a solution to a vulnerability, to sophisticated organizations, including state-sponsored actors.
+Added: If our information technology systems are compromised or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, our operations may be disrupted, our applications may become unavailable, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
+Added: Our applications involve the storage and transmission of our customers’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, customers, and suppliers, as well as financial, accounting, health, and payroll data.
+Added: Additionally, our operations and the availability of the services we provide customers also depend on our information technology systems.
+Added: As a result, a compromise of our applications or systems, or unauthorized access to, acquisition, use, tampering, release, alteration, theft, loss, or destruction of sensitive data, or unavailability of data, could disrupt our operations or impact the availability or performance of our applications;
+Added: expose us and our customers to regulatory obligations and actions, litigation, investigations, remediation and indemnity obligations, or supplemental disclosure obligations;
+Added: damage our reputation and brand;
+Added: or result in loss of customer, consumer, and partner confidence in the security of our applications, an increase in our insurance premiums, loss of authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) or other authorizations, impairment to our business, and other potential liabilities or related fees, expenses, loss of revenues.
+Added: The financial and personnel resources we employ to implement and maintain security measures, including our information security risk insurance policy, may not be sufficient to address our security needs.
+Added: The security measures we have in place that are designed to protect against security risks, preserve our operations and services and the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches, may be compromised by computer hackers, employees, contractors, or vendors, as well as software bugs, human error, technical malfunctions, or other malfeasance.
+Added: Cybersecurity threats and attacks are often targeted at companies such as ours and may take a variety of forms ranging from individuals or groups of security researchers and hackers, including those who appear to offer a solution to a vulnerability, to sophisticated organizations, including state-sponsored actors who may launch coordinated attacks, such as retaliatory cyber attacks stemming from the Russia-Ukraine conflict.
+Added: In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced other security events.
As our market presence grows, we may face increased risks of cybersecurity attack or other security threats.
−Removed: Key cybersecurity risks range from viruses, worms, and other malicious software programs, including phishing attacks or ransomware, to exploitation of software bugs or other defects, to “mega breaches” targeted against cloud services and other hosted software, any of which can result in disclosure of confidential information and intellectual property, defective products, production downtimes, reputational harm, compromised data, and an increase in costs to the business.
−Removed: As the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these attacks or to implement adequate preventative measures.
+Added: Key cybersecurity risks range from viruses, worms, ransomware, and other malicious software programs, to phishing attacks, to exploitation of software bugs or other defects, to targeted attacks against cloud services and other hosted software, any of which can result in a compromise of our applications or systems and the data we store or process, disclosure of Workday confidential information and intellectual property, production downtimes, reputational harm, and an increase in costs to the business.
+Added: As the techniques used to obtain unauthorized access or sabotage systems change frequently, are becoming increasingly sophisticated and complex, and generally are not identified until they are launched against a target, we may be unable to anticipate these attacks or to implement adequate preventative measures.
+Added: Future cyber-attacks and other security events may have a significant or material impact on our business and operating results.
There may also be attacks targeting any vulnerabilities in our applications, internally built infrastructure, enhancements, and updates to our existing offerings, or in the many different underlying networks and services that power the internet that our products depend on, most of which are not under our control or the control of our vendors, partners, or customers.
−Removed: Although we have developed systems and processes that are designed to protect our applications, systems, software and data, as well as customer data and other user data, and to prevent data loss and detect security breaches, there can be no assurance that such measures will be effective against all cybersecurity threats or perceived threats.
−Removed: For example, in April 2021, as a result of a security breach at a software provider, a malicious third party accessed the development environment of a company we had recently acquired, Peakon, and took a copy of Peakon’s source code.
+Added: Systems and processes designed to protect our applications, systems, software, and data, as well as customer data and other user data, and to prevent data loss and detect security breaches, may not be effective against all cybersecurity threats or perceived threats.
+Added: In April 2021, as a result of a security breach at a software provider, a malicious third party accessed the development environment of a company we had recently acquired, Peakon, and took a copy of Peakon’s source code.
We took immediate action to secure Peakon’s development environment and prevent any additional unauthorized access, as well as to confirm that no customer data had been accessed and that this incident had not impacted Workday’s production, development, or other environments or applications.
−Removed: Our response included engaging an external cybersecurity firm for forensic investigation and incident response, performing an internal incident investigation and code vulnerability review, alerting law enforcement, and engaging a third party to conduct a code review.
−Removed: These efforts may not be completely effective or eliminate potential risks from such incidents, however, and there can be no assurance that there will be no impact from this or similar incidents in the future.
+Added: This required us to engage an external cybersecurity firm for forensic investigation and incident response, perform an internal incident investigation and code vulnerability review, alert law enforcement, and engage a third party to conduct a code review, all of which caused expense and created business disruption.
+Added: These efforts may not be completely effective or eliminate potential risks from this and similar incidents.
+Added: In December 2021, a critical remote code execution (“RCE”) vulnerability was identified in the Apache Software Foundation’s Log4j software library (“Log4j”).
+Added: Log4j is an open source software broadly used in Java-based applications to log security and performance information.
+Added: According to public information, a bad actor can exploit the Log4j vulnerability to remotely access a vulnerable system, allowing the bad actor to then steal information, launch ransomware, or conduct other malicious activity.
+Added: We use Log4j in a number of our environments although to date we have found no indication that customer data or environments containing customer data have been affected.
+Added: This required us to identify, test, and deploy mitigation techniques and currently available remediation patches against this vulnerability in our environments, as well as to upgrade our firewalls and the Log4j library directly used by Workday, which caused expense and business disruption.
+Added: We expect the risk of additional vulnerabilities and potential attacks to continue for several months given the complexity of the situation and the widespread nature of the Log4j vulnerability.
Additionally, during the ongoing COVID-19 pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk of cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks.
−Removed: Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, as well as incorporated third-party products, services and technologies into our products and services.
−Removed: Although we devote significant resources to address any known security issues with respect to such acquisitions, partnerships, and incorporated technologies, we may still inherit additional risks when they are integrated within Workday.
+Added: Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services, and technologies into our own products and services.
+Added: Addressing security issues associated with acquisitions, partnerships, incorporated technologies, and our supply chain requires significant resources, and we may still inherit additional risks upon integration with or use by Workday.
In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of financial management, spend management, human capital management, planning, or analytics applications, or in cloud applications for enterprises in general.
−Removed: Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines, or other action or liabilities, which could adversely affect our business and operating results.
−Removed: In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced other security events.
−Removed: Future cyber-attacks and other security events may have a significant or material impact on our business and operating results.
−Removed: Privacy concerns, evolving regulation of cloud computing, cross-border data transfer, and other domestic or foreign laws and regulations may reduce the effectiveness of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results.
+Added: Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines, or other action or liabilities, any of which could adversely affect our business and operating results.
+Added: We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, storage of confidential, proprietary, and personal information, and to support our business operations and the availability of our applications.
+Added: In the past several years, supply chain attacks have increased in frequency and severity.
+Added: As we are both a provider and consumer of information systems and technology, we are at higher risk of being impacted either directly or indirectly by these attacks.
+Added: While we have implemented what we believe is an appropriate information security program with cybersecurity procedures, policies, practices, and controls, the control systems, cybersecurity program, infrastructure, physical facilities of, and personnel associated with third parties that we rely on are beyond our control.
+Added: Although we periodically conduct audits of some of our third parties vendors, we cannot guarantee the security of and may be unable to prevent security events impacting the information technology systems of third parties that are part of our supply chain or that provide valuable services to us, which could result in the unauthorized access to, acquisition, destruction, alteration, use, tampering, release, unavailability, theft or loss of confidential, proprietary, or personal data of Workday, our employees, our customers, or our third party partners, which could in turn disrupt our operations and ability to conduct our business or the availability of our applications, or otherwise adversely affect our business, operating results, reputation, or financial condition.
+Added: Privacy concerns, evolving regulation of cloud computing, cross-border data transfer, and other domestic or foreign laws and regulations may reduce the adoption of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results.
Legal requirements related to collecting, storing, handling, and transferring personal data are rapidly evolving at both the national and international level in ways that require our business to adapt to support customer compliance.
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Failure to comply with the GDPR data processing requirements by either ourselves or our subcontractors could lead to regulatory enforcement actions, which can result in monetary penalties of up to 4% of worldwide revenue, private lawsuits, reputational damage, and loss of customers.
+Added: The UK government is considering amending its data protection legislation.
+Added: If UK data protection changes significantly from EU norms, new data flow barriers could emerge, creating costs and complexity for companies.
Other countries such as Russia, China, and India have also passed or are considering passing laws imposing varying degrees of restrictive data residency requirements.
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These new technologies could subject us to additional litigation brought by private parties, which could be costly, time-consuming, and distracting to management and could result in substantial expenses and losses.
−Removed: In addition, as with many innovations, machine learning and artificial intelligence present additional risks and challenges that could affect their adoption and therefore our business.
−Removed: For example, the development of machine learning and artificial intelligence present emerging ethical issues, and if we enable or offer solutions on this front that are controversial, due to their impact, or perceived impact, on human rights, privacy, employment, or in other social contexts, we may experience brand or reputational harm, competitive harm, or legal liability.
−Removed: Also, our positions on social and ethical issues may impact our ability to attract or retain customers and other users.
−Removed: In particular, our brand and reputation are associated with our public commitments to sustainability, equality, inclusivity, accessibility, and ethical use, and any perceived changes in our dedication to these commitments could impact our relationships with potential and current customers and other users.
We are subject to risks related to government contracts and related procurement regulations, which may adversely impact our business and operating results.
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Adverse litigation results could have a material adverse impact on our business.
−Removed: We are regularly involved with claims, suits, purported class or representative actions, regulatory and government investigations, and other proceedings involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters.
−Removed: Such claims, suits, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, reputational harm, or other adverse consequences.
+Added: We are regularly involved with claims, suits, purported class or representative actions, and may be involved in regulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters.
+Added: Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, reputational harm, or other adverse consequences.
Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business.
The litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.
−Removed: A material adverse impact in our consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.
+Added: A material adverse impact in our condensed consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.
We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.
−Removed: As of October 31, 2021, we had federal and state net operating loss carryforwards due to prior period losses.
+Added: As of April 30, 2022, we had federal and state net operating loss carryforwards due to prior period losses.
If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2023 and 2043.
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Furthermore, our subscription-based model is largely based on the size of our customers’ employee headcount.
−Removed: Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers during the COVID-19 pandemic, or customer insolvencies resulting from severe economic hardship during the COVID-19 pandemic, could have an impact on our subscription services revenues in any given period.
+Added: Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers during the COVID-19 pandemic, or customer insolvencies resulting from severe economic hardship, could have an impact on our subscription services revenues in any given period.
Although we have downside protection in our customer agreements in the form of base minimums, should there be any prolonged decrease in our customers’ headcounts, we could experience reduced subscription services revenues upon renewal or potentially outside of the renewal period, which could materially impact our business and operating results in any given period.
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Furthermore, to the extent we are successful in increasing our customer base, we also expect to incur increased net losses in the acquisition period because costs associated with acquiring customers are generally incurred up front, while subscription services revenues are generally recognized ratably over the terms of the agreements, which are typically three years or longer.
−Removed: You should not consider our recent GAAP-profitability and growth in revenues as indicative of our future performance.
−Removed: We cannot ensure that we will continue to achieve GAAP profitability in the future or that, if we continue to be GAAP-profitable, we will sustain such profitability.
+Added: You should not consider any prior period GAAP-profitability and growth in revenues as indicative of our future performance.
+Added: We cannot ensure that we will achieve GAAP profitability in the future or that, if we become GAAP-profitable in a certain period, we will sustain such profitability.
We have substantial indebtedness which may adversely affect our financial condition and operating results.
−Removed: In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022.
−Removed: As a result of this offering, we incurred $1.15 billion principal amount of indebtedness, which we may be required to pay at maturity in 2022, or upon the occurrence of a fundamental change (as defined in the Indenture by and between us and Wells Fargo Bank, National Association, as Trustee).
−Removed: In addition, in April 2020, we entered into a credit agreement that provided for a term loan in an aggregate original principal amount of $750 million and a revolving credit facility in an aggregate principal amount of $750 million.
+Added: In September 2017, we completed an offering of $1.15 billion of our 0.25% Convertible Senior Notes due October 1, 2022.
+Added: In April 2022, we issued $3.0 billion aggregate principal amount of senior notes, consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027, $750 million aggregate principal amount of 3.700% notes due April 1, 2029, and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032.
+Added: Additionally, in April 2022, we entered into our 2022 Credit Agreement which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion.
We may incur substantial additional debt in the future, some of which may be secured debt.
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• negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business.
−Removed: Our Credit Agreement also imposes restrictions on us and requires us to maintain compliance with specified covenants, including a specific leverage ratio.
+Added: Our 2022 Notes, Senior Notes, and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants.
+Added: For example, our 2022 Credit Agreement includes a financial covenant that requires us to maintain a specific leverage ratio.
Our ability to comply with these covenants may be affected by events beyond our control.
If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
−Removed: Any required repayment of our debt under the Credit Agreement as a result of a fundamental change or other acceleration would lower our current cash on hand such that we would not have those funds available for use in our business.
+Added: Any required repayment of our debt as a result of a fundamental change or other acceleration would lower our current cash on hand such that we would not have those funds available for use in our business.
Our convertible note hedge and warrant transactions may affect the value of our Class A common stock.
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The capital markets for public offerings and acquisitions are dynamic and the likelihood of liquidity events for the companies we have invested in could deteriorate, which could result in a loss of all or a substantial part of our investment in these companies.
−Removed: In addition, our ability to realize gains on investments may be impacted by our contractual obligations to hold securities for a set period of time.
−Removed: For example, to the extent a company we have invested in undergoes an initial public offering, we may be subject to a lock-up agreement that restricts our ability to sell our securities for a period of time after the public offering or otherwise impedes our ability to mitigate market volatility in such securities.
Further, valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data.
−Removed: In addition, we may experience additional volatility to our statements of operations due to changes in market prices of our marketable equity investments, the valuation and timing of observable price changes or impairments of our non-marketable equity investments, including impairments to such investments due to the COVID-19 pandemic, and changes in the proportionate share of earnings and losses or impairment of our equity investments accounted for under the equity method.
+Added: In addition, we may experience additional volatility to our results of operations due to changes in market prices of our marketable equity investments and the valuation and timing of observable price changes or impairments of our non-marketable equity investments.
This volatility could be material to our results in any given quarter and may cause our stock price to decline.
+Added: In addition, our ability to mitigate this volatility and realize gains on investments may be impacted by our contractual obligations to hold securities for a set period of time.
+Added: For example, to the extent a company we have invested in undergoes an initial public offering (“IPO”), we may be subject to a lock-up agreement that restricts our ability to sell our securities for a period of time after the public offering or otherwise impedes our ability to mitigate market volatility in such securities.
Risks Related to Ownership of Our Class A Common Stock
Our Co-Founders have control over key decision making as a result of their control of a majority of our voting stock.
−Removed: As of October 31, 2021, our Co-Founder, Director, and Chairman Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 47 million shares of Class B common stock and 0.2 million shares of Class A common stock.
−Removed: As of October 31, 2021, our Co-Founder, Co-CEO, and Chairman Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.3 million shares of Class A common stock.
+Added: As of April 30, 2022, our Co-Founder and CEO Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 46 million shares of Class B common stock and 0.4 million shares of Class A common stock.
+Added: As of April 30, 2022, our Co-Founder, Co-CEO, and Chairman Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.3 million shares of Class A common stock.
In addition, Mr.
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Further, Messrs.
−Removed: Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our initial public offering.
+Added: Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our IPO.
Duffield and Bhusri have each initially designated the other as their respective proxies.
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Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share.
−Removed: Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of October 31, 2021.
+Added: Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of April 30, 2022.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr.
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These factors, as well as the volatility of our Class A common stock, could also impact the price of our convertible senior notes.
−Removed: Further, the trading price of our Class A common stock has fluctuated significantly and may continue to fluctuate as a result of the COVID-19 pandemic and associated economic downturn.
+Added: Further, the trading price of our Class A common stock has fluctuated significantly and may continue to fluctuate as a result of the COVID-19 pandemic and the Russia-Ukraine conflict, and associated economic downturn.
Additional risk factors that may affect the trading price of our securities, some of which are beyond our control and further magnified by the ongoing COVID-19 pandemic, include:
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• trading activity by directors, executive officers, and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
−Removed: • the exercise of rights held by certain of our stockholders, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders;
• the size of our market float and significant stock option exercises;
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◦ vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders;
−Removed: • only our chairman of the board, co-chief executive officers, president, or a majority of our Board of Directors are authorized to call a special meeting of stockholders;
+Added: • only our chairman of the board, co-chief executive officers, co-presidents, or a majority of our Board of Directors are authorized to call a special meeting of stockholders;
• certain litigation against us can only be brought in Delaware;
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In addition, Section 203 of the DGCL imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock, which may discourage, delay, or prevent a change in control of our company.
+Added: Furthermore, the fundamental change provisions of our 2022 Notes or change in control repurchase event provisions of our Senior Notes may delay or prevent a change in control of our company, because those provisions allow note holders to require us to repurchase such notes upon the occurrence of a fundamental change or change in control repurchase event.
These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company.
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or any action asserting a claim against us that is governed by the internal affairs doctrine.
−Removed: There is uncertainty as to whether a court would enforce this exclusive forum provision with respect to claims under the Securities Act of 1933, as amended (“Securities Act”).
+Added: There is uncertainty as to whether a court would enforce this exclusive forum provision with respect to claims under the Securities Act.
If a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
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Our business depends on the overall demand for enterprise software and on the economic health of our current and prospective customers.
−Removed: Any significant weakening of the economy in the United States or abroad, limited availability of credit, reduction in business confidence and activity, decreased government spending, or economic uncertainty, all of which are being impacted by the ongoing COVID-19 pandemic, and its effects such as unemployment, may continue to affect one or more of the sectors or countries in which we sell our applications.
−Removed: These economic conditions can arise suddenly, as did the conditions associated with the COVID-19 pandemic, and the full impact of such conditions can be difficult to predict.
−Removed: In addition, geopolitical and domestic political developments, such as existing and potential trade wars and other events beyond our control, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets, as has been the case with the COVID-19 pandemic.
+Added: Any significant weakening of the economy in the United States or abroad, limited availability of credit, reduction in business confidence and activity, decreased government spending, or economic uncertainty, all of which are being impacted by the ongoing COVID-19 pandemic and the Russia-Ukraine conflict, may continue to affect one or more of the sectors or countries in which we sell our applications.
+Added: These economic conditions can arise suddenly and the full impact of such conditions can be difficult to predict.
+Added: In addition, geopolitical and domestic political developments, such as existing and potential trade wars and other events beyond our control, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
Alternatively, a strong dollar could reduce demand for our applications and services in countries with relatively weaker currencies.
−Removed: Also, Brexit has created economic and political uncertainty.
−Removed: While the UK and the EU reached a Trade Cooperation Agreement in December 2020, the impact of Brexit depends on the implementation of this agreement, as well as the terms of the UK’s future trade agreements with other countries and such impact may not be fully realized for several years or more.
−Removed: This uncertainty may cause some of our customers or potential customers to curtail spending and may ultimately result in new regulatory, operational, and cost challenges to our UK and global operations.
+Added: The impact of Brexit on EU-UK political, trade, economic and diplomatic relations continues to be uncertain and such impact may not be fully realized for several years or more.
+Added: Continued uncertainty and friction may result in regulatory, operational, and cost challenges to our UK and global operations.
These adverse conditions could continue to result in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, customer bankruptcies, slower adoption of new technologies, and increased price competition.
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Catastrophic or climate-related events may disrupt our business.
−Removed: Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, Europe, and Asia.
+Added: Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, and Europe.
The west coast of the United States contains active earthquake zones and the southeast is subject to seasonal hurricanes or other extreme weather conditions.
−Removed: Additionally, we rely on internal technology systems, our website, and our network and third-party infrastructure and enterprise applications, which are located in a wide variety of regions, for our development, marketing, operational support, hosted services, and sales activities.
−Removed: In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, insurrection, pandemics or other public health emergencies (including the ongoing COVID-19 pandemic), or the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and may endure system interruptions, delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results.
+Added: Additionally, we rely on internal technology systems, our website, our network, and third-party infrastructure and enterprise applications, which are located in a wide variety of regions, for our development, marketing, operational support, hosted services, and sales activities.
+Added: In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability (including the Russia-Ukraine conflict), war, terrorist attack, insurrection, pandemics or other public health emergencies (including the ongoing COVID-19 pandemic), or the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and may endure system interruptions, delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.