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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 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: • the continuing global economic and geopolitical volatility, the ongoing COVID-19 pandemic, the impact of inflation on our costs and on customer spending, 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;
• 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;
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• our substantial indebtedness may adversely affect our financial condition and operating results;
−Removed: • our convertible note hedge and warrant transactions may adversely affect the value of our Class A common stock;
• Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest sought by third parties difficult, thereby depressing the market price of our Class A common stock;
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Risks Related to Our Business and Industry
−Removed: 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 extent to which the continuing global economic and geopolitical volatility, the ongoing COVID-19 pandemic, the impact of inflation on our costs and on customer spending, 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.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets.
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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: Inflationary pressure may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity, and limits on our ability to access credit or otherwise raise capital.
In response to the concerns over inflation risk, the U.S.
−Removed: Federal Reserve raised interest rates in March and July 2022, and has signaled they expect additional rate increases throughout the year and into calendar year 2023.
+Added: Federal Reserve raised interest rates multiple times in 2022 and may continue to do so in the future.
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 such events, and the effectiveness of those actions.
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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.
−Removed: As of July 31, 2022, our offices have reopened and we have begun permitting travel and in-person events, taking into consideration government restrictions, employee safety, and health risks.
+Added: We have reopened our offices 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.
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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 recent macroeconomic events.
−Removed: In connection with recent macroeconomic events, we have experienced and may continue to experience 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.
+Added: In connection with recent macroeconomic events, we have experienced and may continue to experience delays in purchasing decisions from existing and prospective customers and a reduction in customer demand.
+Added: For example, in the early stages of the COVID-19 pandemic, we experienced a reduction in customer demand 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: 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: 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, including economic downturns or recessions.
While our subscription services revenues are relatively predictable in the near term as a result of our subscription-based business model, the effect of recent macroeconomic events may not be fully reflected in our operating results and overall financial performance until future periods.
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We depend on data centers and computing infrastructure operated by third parties, and any disruption in these operations could adversely affect our business and operating results.
−Removed: We host our applications and serve our customers from data centers located in the United States, Canada, and Europe.
+Added: We host our applications and serve our customers and users from data centers operated by third parties located in the United States, Canada, and Europe.
While we control and have access to our servers and all of the components of our network that are located in these data centers, we do not control certain aspects of these facilities, including their operation and security.
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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 recent macroeconomic factors.
−Removed: As market volatility continues with the ongoing COVID-19 pandemic and other macroeconomic factors, we may face additional challenges in recruiting and retaining qualified personnel.
+Added: As market volatility due to macroeconomic factors continues, we may face additional challenges in recruiting and retaining qualified personnel.
Additionally, job candidates may be threatened with legal action under agreements with their existing employers if we attempt to hire them, which could have an adverse effect on hiring and result in a diversion of our time and resources.
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Moreover, our hybrid work policies require significant action to preserve our culture.
−Removed: 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: As we continue to grow, 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.
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.
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Moreover, large customers, which are a primary focus of our sales efforts, have and may continue to request greater price concessions and delayed payment terms.
−Removed: As a result of the COVID-19 pandemic, some of our existing and potential customers deferred purchasing decisions, requested price concessions and delayed payment terms, and requested other terms and conditions.
−Removed: If these conditions were to return, whether as a result of a resurgence of COVID-19 or otherwise, we may be required to reduce our prices or accept onerous terms and conditions, including delayed payment terms, which could adversely affect our revenues, profitability, financial position, and cash flows in any given period.
−Removed: Restrictions on travel and in-person meetings have interrupted, and could continue to interrupt, our sales activity, and we cannot predict whether, for how long, or the extent to which the COVID-19 pandemic may continue to have an impact.
−Removed: 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: In the early stages of the COVID-19 pandemic, some of our existing and potential customers requested price concessions and delayed payment terms, as well as other terms and conditions that can impact our business and revenues.
+Added: If these conditions were to return, whether as a result of a resurgence of COVID-19 or due to macroeconomic conditions, we may be required to reduce our prices or accept onerous terms and conditions, including delayed payment terms, which could adversely affect our revenues, profitability, financial position, and cash flows in any given period.
+Added: Economic uncertainty and the risk or occurrence of global or domestic recessions can prompt existing and prospective customers to demand such concessions with increasing frequency and significance, and our competitors may become more likely to provide such concessions.
Attrition of key personnel at our customers has impacted and may continue to impact our direct sales efforts.
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If we are unable to successfully educate our customers on the benefits and features of our applications, or if our customers are aware of those benefits and features but do not use them, our customers may renew for fewer elements of our applications or on different pricing terms.
−Removed: Our customers’ renewal rates may also decline or fluctuate as a result of a number of other factors, including their level of satisfaction with our applications and pricing, their ability to continue their operations and spending levels, and the evolution of their business.
+Added: Our customers’ renewal rates may also decline or fluctuate as a result of a number of other factors, including their level of satisfaction with our applications and pricing, their ability to continue their operations and spending levels, reductions in their headcount, and the evolution of their business.
If our customers do not renew their subscriptions for our applications on similar pricing terms, our revenues may decline, and we may not be able to meet our revenue projections, which could negatively impact our business and the market price of our Class A common stock.
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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, as well as recent macroeconomic events, could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict.
+Added: As discussed above, the extent to which the ongoing COVID-19 pandemic, measures taken in response to the pandemic, global economic uncertainty, inflation, and other recent macroeconomic events, 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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However, 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.
−Removed: Moreover, the ongoing COVID-19 pandemic has made it more difficult to develop and maintain positive awareness of our brand.
−Removed: 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.
−Removed: 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.
+Added: As the restrictions due to the COVID-19 pandemic have decreased, 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 in the future delay certain corporate advertising programs.
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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: • the failure of strategic acquisitions to perform as expected or to meet financial projections;
+Added: • the failure of strategic acquisitions to perform as expected or to meet financial projections, which may be heightened due to recent macroeconomic events and market volatility;
• 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, 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, macroeconomic conditions, or events such as the Russia-Ukraine conflict.
+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, macroeconomic conditions, including recession, 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:
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and will therefore be denominated in local currencies.
−Removed: 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: Additionally, global events, as well as geopolitical developments such as the Russia-Ukraine conflict, fluctuating commodity prices, trade tariff developments, economic downturn, 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.
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.
−Removed: Although we have a hedging program to help mitigate some of this volatility and related risks, there can be no assurance that the hedging program will be effective in offsetting the adverse financial impacts that may result from unfavorable movements in foreign currency exchange rates, including any such movements caused by the COVID-19 pandemic.
+Added: Although we have a hedging program to help mitigate some of this volatility and related risks, there can be no assurance that the hedging program will be effective in offsetting the adverse financial impacts that may result from unfavorable movements in foreign currency exchange rates.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
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If our competitors’ products, services, or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected.
−Removed: In addition, our competitors may offer their products and services at a lower price, or, particularly during the ongoing COVID-19 pandemic, may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers.
+Added: In addition, our competitors may offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers in light of the challenging business environment created by the COVID-19 pandemic or recent macroeconomic conditions.
Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.
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However, we may not receive significant revenues from these investments for several years, if at all.
−Removed: Furthermore, the COVID-19 pandemic could have a continuing impact on our plans to offer certain new features, enhancements, and modifications of our applications in a timely manner, particularly if we experience impacts to productivity due to our employees or their family members experiencing health issues, or as our employees continue to work remotely, or if there are continuing delays in our hiring and onboarding of new employees.
+Added: Furthermore, macroeconomic conditions including the COVID-19 pandemic could have a continuing impact on our plans to offer certain new features, enhancements, and modifications of our applications in a timely manner, particularly if we experience impacts to productivity as our employees continue to work remotely pursuant to our hybrid work model, or if there are delays in our hiring and onboarding of new employees.
If we are unable to provide new features, enhancements, and modifications in a timely and cost-effective manner that achieve market acceptance or that keep pace with rapid technological developments and changing regulatory landscapes, our business and operating results could be adversely affected.
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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.
−Removed: 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.
−Removed: We are increasingly building AI into many of our offerings.
−Removed: 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.
−Removed: 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: A quickly evolving legal and regulatory environment may cause us to incur increased research and development costs, or divert resources from other development efforts, to address social and ethical issues related to machine learning and AI.
+Added: We are increasingly building machine learning and AI into many of our offerings.
+Added: As with many cutting-edge innovations, machine learning and AI present new risks and challenges, and existing laws and regulations may apply to us in new ways, the nature and extent of which are difficult to predict.
+Added: The risks and challenges presented by machine learning and AI could undermine public confidence in machine learning and AI, which could slow its adoption and affect our business.
+Added: We develop and offer machine learning products for use cases that could potentially impact human, civil, privacy, or employment rights and dignities.
+Added: Failure to adequately address ethical and social issues that may arise with such use cases could negatively affect the adoption of our solutions and subject us to reputational harm, regulatory action, or legal liability, which may harm our financial condition and operating results.
Potential government regulation related to AI ethics may also increase the burden and cost of research and development in this area.
−Removed: 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: For example, to demonstrate compliance with the New York City Automated Employment Decision Tools law, which will take effect January 1, 2023, customers may publicly disclose information, including the results of disparate impact analyses, about their use of our AI and machine learning products, subjecting us to reputational or business harm or legal liability.
+Added: Employees, customers, or customers’ employees who are dissatisfied with our public statements, policies, practices, or solutions related to the development and use of AI and machine learning may express opinions that could introduce reputational or business harm, or legal liability.
Our aspirations and disclosures related to environmental, social, and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.
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Standards for tracking and reporting ESG matters continue to evolve.
−Removed: 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: 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 or other regulatory bodies, 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.
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.
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damage our reputation and brand;
−Removed: 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: 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, or loss of revenues.
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.
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Our information systems may be compromised 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 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: 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, including those who appear to offer a solution to a vulnerability in exchange for some compensation, to sophisticated hacker organizations, including state-sponsored actors who may launch coordinated attacks, such as retaliatory cyber attacks stemming from the Russia-Ukraine conflict.
In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced other security events.
1 unchanged sentence
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.
−Removed: 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: 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, and because evidence of unauthorized activity may not have been captured or retained, or may be proactively destroyed by unauthorized actors, we may be unable to anticipate these attacks, assess the true impact they may have on our business and operations, or to implement adequate preventative measures.
Future cyber-attacks and other security events may have a significant or material impact on our business and operating results.
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As a result, our business faces current and prospective risks related to increased regulatory compliance costs, government enforcement actions and/or financial penalties for non-compliance, and reputational harm.
−Removed: For example, in July 2020, the Court of Justice of the EU invalidated a framework called Privacy Shield for companies to transfer data from the European Economic Area to the United States.
−Removed: This decision led to uncertainty about the legal requirements for transferring customer personal data to and from Europe, an integral process of our business that remains governed by, and subject to, GDPR requirements.
+Added: For example, in July 2020, the Court of Justice of the EU invalidated the Privacy Shield framework, which enabled companies to legally transfer data from the European Economic Area to the United States.
+Added: Executive Order has been issued that should lead to the development of a new EU-U.S.
+Added: Privacy Framework under which EU data can legally be transferred to the United States.
+Added: Until that framework is formally established, uncertainty may continue about the legal requirements for transferring customer personal data to and from Europe, an integral process of our business that remains governed by, and subject to, GDPR requirements.
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.
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For example, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020, and the California Privacy Rights Act (“CPRA”), which expands upon the CCPA, was passed in November 2020 and comes into effect on January 1, 2023, with a “lookback” period to January 1, 2022.
−Removed: The CCPA and CPRA give California consumers certain rights similar to those provided by the GDPR, and also provide for statutory damages or fines on a per violation basis that could be very large depending on the severity of the violation.
+Added: The CCPA and CPRA give California consumers, including employees, certain rights similar to those provided by the GDPR, and also provide for statutory damages or fines on a per violation basis that could be very large depending on the severity of the violation.
Other states have enacted, or are considering, privacy laws as well.
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In the event that portions of our proprietary software are determined to be impacted by an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services.
+Added: In addition, the open source license terms for future versions of open source software that we use might change, requiring us to pay for a commercial license or re-engineer all or a portion of our technologies.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software.
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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 July 31, 2022, we had federal and state net operating loss carryforwards due to prior period losses.
−Removed: If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2023 and 2043.
+Added: As of October 31, 2022, we had federal and state net operating loss carryforwards due to prior period losses.
+Added: If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2023 and fiscal 2043.
The federal net operating losses generated in and after fiscal 2018 do not expire and may be carried forward indefinitely.
−Removed: We also have federal research tax credit carryforwards, which if not utilized will begin to expire in fiscal 2023.
+Added: We also have federal research tax credit carryforwards, which if not utilized will expire between fiscal 2023 and fiscal 2043.
These net operating loss and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability.
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In addition, our future rate of growth is subject to a number of uncertainties, including general economic and market conditions, including those caused by the ongoing COVID-19 pandemic, as well as risks associated with growing companies in rapidly changing industries.
−Removed: Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, some of which may be magnified by the COVID-19 pandemic.
+Added: Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, some of which may be magnified by macroeconomic conditions and the COVID-19 pandemic.
As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected.
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It is difficult to predict customer and other user adoption rates and demand for our applications, the future growth rate and size of the cloud computing market for our services, or the entry of competitive applications.
−Removed: Moreover, it has been, and due to recent macroeconomic events, we expect it will continue to be even more difficult for us to forecast our operating results.
+Added: Moreover, it has been, and due to recent macroeconomic events, rising rates of inflation and related interest rate increases, and concerns about a possible recession, we expect it will continue to be even more difficult for us to forecast our operating results.
We plan our expense levels and investments on estimates of future revenues and anticipated rates of growth.
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Additionally, because much of our sales efforts are targeted at large enterprise customers, our sales cycles involve greater costs, longer sales cycles, the provision of greater levels of education regarding the use and benefits of our applications, less predictability in completing some of our sales, and varying deployment timeframes based on many factors including the number, type, and configuration of applications being deployed, the complexity, scale, and geographic dispersion of the customers’ business and operations, the number of integrations with other systems, and other factors, many of which are beyond our control.
−Removed: Our typical sales cycles are six to twelve months but can extend for eighteen months or more, including as a result of recent macroeconomic events, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt our applications beyond human capital management.
+Added: Our typical sales cycles are six to twelve months but can extend for eighteen months or more, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt our applications beyond human capital management.
+Added: Due to the uncertainty of the recent macroeconomic environment, we have started to see instances of increased scrutiny from existing and prospective customers and the lengthening of certain sales cycles, and expect this trend may continue.
Longer sales cycles could cause our operating and financial results to suffer in a given period.
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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 our 0.25% Convertible Senior Notes due October 1, 2022.
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.
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There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all.
−Removed: Our ability to pay cash upon conversion or repurchase of the 2022 Notes may be limited by law, regulatory authority, or agreements governing our future indebtedness and is dependent on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Any future debt may also contain limitations on our ability to pay cash upon a conversion request or repurchase upon a fundamental change.
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• limit our flexibility in planning for and reacting to changes in our business;
+Added: • increase our vulnerability to the impact of adverse economic conditions;
• negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business.
−Removed: Our 2022 Notes, Senior Notes, and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants.
+Added: Our Senior Notes and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants.
For example, our 2022 Credit Agreement includes a financial covenant that requires us to maintain a specific leverage ratio.
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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.
−Removed: Our convertible note hedge and warrant transactions may affect the value of our Class A common stock.
−Removed: In connection with the sale of our convertible notes, we entered into convertible note hedge transactions with institutions that we refer to as the option counterparties.
−Removed: We also entered into warrant transactions with the option counterparties pursuant to which we sold warrants for the purchase of our Class A common stock.
−Removed: The convertible note hedge transactions are expected to offset the potential dilution to our Class A common stock upon any conversion of the convertible notes.
−Removed: The warrant transactions could separately have a dilutive effect to the extent that the market price per share of our Class A common stock exceeds the exercise price of the relevant warrants.
−Removed: The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to the maturity of the convertible notes.
−Removed: This activity could suppress or inflate the market price of our Class A common stock.
−Removed: We will also be subject to the risk that these option counterparties may default under the convertible note hedge transactions.
−Removed: Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
−Removed: If one or more of the option counterparties to one or more of our convertible note hedge transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions.
−Removed: Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price of our Class A common stock during the related settlement period.
−Removed: In addition, upon a default by one of the option counterparties, we may suffer dilution with respect to our Class A common stock as well as adverse financial consequences.
We are subject to risks associated with our equity investments, including partial or complete loss of invested capital, and significant changes in the fair value of this portfolio could adversely impact our financial results.
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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.
+Added: Volatility in the global market conditions, including recent economic disruptions, inflation, and ongoing volatility in the public equity markets, may impact our equity investments.
This volatility could be material to our results in any given quarter and may cause our stock price to decline.
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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 July 31, 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 0.3 million shares of Class A common stock.
−Removed: As of July 31, 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.
+Added: As of October 31, 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 0.2 million shares of Class A common stock.
+Added: As of October 31, 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.
−Removed: Bhusri holds 0.1 million R SUs, which will be settled in an equivalent number of shares of Class A common stock.
+Added: Bhusri holds 0.1 million RSUs, which will be settled in an equivalent number of shares of Class A common stock.
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 IPO.
+Added: Duffield and Bhus ri 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 July 31, 2022.
+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 October 31, 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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The trading price of our Class A common stock has historically been volatile and could be subject to wide fluctuations in response to various factors such as those described below.
−Removed: 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, other macroeconomic factors, 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, inflationary pressures, recession, other macroeconomic factors, 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 and other macroeconomic factors, include:
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• any future issuances of our securities;
+Added: • the inability to execute on our Share Repurchase Program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuances of repurchases thereunder;
• environmental, social, governance, ethical, and other issues impacting our brand;
−Removed: • sales and purchases of any Class A common stock issued upon conversion of our convertible senior notes or in connection with the convertible note hedge and warrant transactions related to such convertible senior notes;
+Added: • sales and purchases of any Class A common stock issued in connection with the warrant transactions related to the 2022 Notes;
• our operating performance and the performance of other similar companies;
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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.
−Removed: 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.
+Added: Furthermore, the 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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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, the Russia-Ukraine conflict, and other macroeconomic factors, 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 and the full impact of such conditions can be difficult to predict.
+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, the Russia-Ukraine conflict, inflation, concerns of a domestic or global recession, and other macroeconomic factors, may continue to affect one or more of the sectors or countries in which we sell our applications.
+Added: These economic conditions have arisen and can arise suddenly and the full impact of such conditions can be difficult to predict.
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.
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Continued uncertainty and friction may result in regulatory, operational, and cost challenges to our UK and global operations.
−Removed: 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.
+Added: These adverse conditions have resulted and 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.
Any of these events would likely have an adverse effect on our business, operating results, and financial position.
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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.