What changed in this filing

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Item 1. Financial Statements

2023-05-25 compared with 2022-11-29 · 141 added, 190 removed, 547 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands)

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Current assets:

19 unchanged sentences

Operating lease liabilities 95,008 91,343

Debt, current — 1,222,443

Total current liabilities 4,044,089 4,628,166

16 unchanged sentences

(in thousands, except per share data)

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Subscription services $ 1,527,909 $ 1,272,076

18 unchanged sentences

(1) Costs and expenses include share-based compensation expenses as follows:

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Costs of subscription services $ 29,262 $ 26,230

8 unchanged sentences

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Net income (loss) $ 136 $ ( 102,173 )

2 unchanged sentences

Net change in unrealized gains (losses) on available-for-sale debt securities 6,066 ( 8,924 )

Net change in unrealized gains (losses) on cash flow hedges 57,483 25,389 125,923 38,316

Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $ 2,077 and $ 0 , respectively

( 15,709 ) 46,246

Other comprehensive income (loss) ( 10,401 ) 35,400

4 unchanged sentences

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Common stock:

1 unchanged sentence

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 2 2

Settlement of convertible senior notes 1 — 1 —

Balance, end of period 261 253

4 unchanged sentences

Exercise of convertible senior notes hedges — 119

Settlement of convertible senior notes ( 39 ) — ( 40 ) ( 2 )

Cumulative effect of accounting changes — — — ( 219,702 )

Balance, end of period 9,195,197 7,596,787

10 unchanged sentences

Net income (loss) 136 ( 102,173 )

Cumulative effect of accounting changes — — — 136,032

Balance, end of period ( 3,111,198 ) ( 2,846,758 )

Total stockholders’ equity $ 5,941,863 $ 4,780,807

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Common stock (in shares):

3 unchanged sentences

Purchase of treasury stock from the exercise of convertible senior notes hedges — ( 1 )

Other — 43 — 125

Balance, end of period 260,408 253,679

3 unchanged sentences

(in thousands)

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Cash flows from operating activities:

7 unchanged sentences

Other ( 37,588 ) 709

Changes in operating assets and liabilities, net of business combinations:

Changes in operating assets and liabilities:

Trade and other receivables, net 473,315 462,964

11 unchanged sentences

Capital expenditures, excluding owned real estate projects ( 58,776 ) ( 58,750 )

Business combinations, net of cash acquired — ( 60,645 ) — ( 739,865 )

Purchase of other intangible assets ( 9,500 ) —

1 unchanged sentence

Sales and maturities of non-marketable equity and other investments — 7,066

Other — — — 1

Net cash provided by (used in) investing activities ( 712,976 ) ( 1,470,741 )

11 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Supplemental cash flow data:

3 unchanged sentences

Purchases of property and equipment, accrued but not paid 54,479 119,007

As of October 31,

As of April 30,

Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:

20 unchanged sentences

All such adjustments are of a normal, recurring nature.

The results of operations for the three and nine months ended October 31, 2022, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2023.

The results of operations for the three months ended April 30, 2023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2024.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on February 27, 2023.

Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgements, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

For revenue recognition, examples of significant estimates, judgements, and assumptions include the identification of distinct performance obligations and the assessment of the standalone selling price for each performance obligation identified.

Other significant estimates, judgements, and assumptions include, but are not limited to, the determination of the period of benefit for deferred commissions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments.

Significant estimates, judgements, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments.

Actual results could differ from those estimates, judgements, and assumptions, and such differences could be material to our condensed consolidated financial statements.

In February 2023, we completed an assessment of the useful lives of our data center equipment, including servers, network equipment, and integrated complete server and network racks.

Due to advances in technology, as well as investments in software that increased efficiencies in how we operate our data center equipment, we determined we should increase the estimated useful lives of data center equipment from 3 years to 5 years.

This change in accounting estimate was effective beginning fiscal 2024.

Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $ 30 million for the three months ended April 30, 2023 .

Segment Information

1 unchanged sentence

Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by a chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance.

For the nine months ended October 31, 2022, both our Co-Chief Executive Officer and Chairman, Aneel Bhusri, and our Co-Chief Executive Officer, Chano Fernandez, together serve as our CODM.

For the three months ended April 30, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting.

Our CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

5 unchanged sentences

Our deposits exceed federally insured limits.

No customer individually accounted for more than 10% of trade and other receivables, net as of October 31, 2022, or January 31, 2022.

No customer individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2022, or 2021.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2022, or 2021.

No customer individually accounted for more than 10% of trade and other receivables, net as of April 30, 2023, or January 31, 2023.

No customer individually accounted for more than 10% of total revenues during the three months ended April 30, 2023 or 2022.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three months ended April 30, 2023 or 2022.

In order to reduce the risk of down-time of our cloud applications, we have established data centers in various geographic regions.

3 unchanged sentences

In addition, we rely upon third-party hosted infrastructure partners globally, including Amazon Web Services (“AWS”), Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services.

Given this, any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.

Given this, any disruption of or interference at our hosted infrastructure partners may impact our operations and our business could be adversely impacted.

We are also exposed to concentration of risk in our equity investments portfolio, which consists of marketable equity investments and non-marketable equity investments measured using the measurement alternative.

As of both October 31, 2022, and January 31, 2022, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts.

Prior to the adoption of the new standard, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date.

We early adopted ASU No.

2021-08 on a prospective basis effective February 1, 2022.

The adoption had no impact on our condensed consolidated financial statements during the three and nine months ended October 31, 2022, and any financial impact will be dependent on the magnitude and nature of future business combinations.

As of both April 30, 2023, and January 31, 2023, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

Recently Issued Accounting Pronouncements

Debt Securities

As of October 31, 2022, debt securities consisted of the following (in thousands):

As of April 30, 2023, debt securities consisted of the following (in thousands):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value

18 unchanged sentences

Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.

As of October 31, 2022, and January 31, 2022, the fair value of debt securities in an unrealized loss position was $ 3.5 billion and $ 1.5 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months.

As of April 30, 2023, and January 31, 2023, the fair value of debt securities in an unrealized loss position was $ 3.0 billion and $ 3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months.

We did not recognize any credit or non-credit related losses related to our debt securities during the periods presented.

We sold $ 20 million of debt securities during the three months ended October 31, 2022, and we did not have any sales of debt securities during the three months ended October 31, 2021.

We sold $ 48 million and $ 10 million of debt securities during the nine months ended October 31, 2022, and 2021, respectively.

The realized gains and losses from the sales were immaterial.

We sold $ 12 million of debt securities during the three months ended April 30, 2023, and the realized gains and losses from the sales were immaterial.

We did not have any sales of debt securities during the three months ended April 30, 2022.

Equity Investments

Equity investments consisted of the following (in thousands):

Condensed Consolidated Balance Sheets Location October 31, 2022 January 31, 2022

Condensed Consolidated Balance Sheets Location April 30, 2023 January 31, 2023

Money market funds Cash and cash equivalents $ 486,603 $ 902,226

3 unchanged sentences

Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Net realized gains (losses) recognized on equity investments sold (1)

$ 4,514 $ 11,759 $ ( 365 ) $ 4,236

Net unrealized gains (losses) recognized on equity investments held as of the end of the period ( 8,068 ) ( 8,488 )

5 unchanged sentences

The carrying values for our non-marketable equity investments are summarized below (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Total initial cost $ 217,333 $ 206,833

1 unchanged sentence

Carrying value $ 269,622 $ 261,922

During the three months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 2 million, impairment losses of $ 2 million, and a gain of $ 4 million upon exiting a non-marketable equity investment.

During the three months ended October 31, 2021, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 20 million and a non-cash gain of $ 12 million related to our acquisition of Zimit.

During the nine months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 8 million, impairment losses of $ 10 million, and a net loss of $ 2 million upon exiting a non-marketable equity investment.

During the nine months ended October 31, 2021, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 34 million, impairment losses of $ 2 million, and a non-cash gain of $ 12 million related to our acquisition of Zimit.

During the three months ended April 30, 2023, and 2022, we recorded impairment losses of $ 3 million and $ 14 million, respectively.

During the three months ended April 30, 2023, we recorded no upward adjustments to the carrying value of non-marketable equity investments and $ 3 million in the three months ended April 30, 2022.

Marketable Equity Investments

1 unchanged sentence

The carrying values for our marketable equity investments are summarized below (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Total initial cost $ 33,718 $ 38,449

2 unchanged sentences

$ 65,624 $ 80,766

During the three months ended October 31, 2022, and 2021, we did no t sell any marketable equity investments.

During the nine months ended October 31, 2022, and 2021, we sold marketable equity investments for proceeds of $ 5 million and $ 17 million, respectively, with corresponding net realized gains of $ 1 million and losses of $ 6 million, respectively.

For the marketable equity investments held as of the end of each period, we recorded no material unrealized net gains or losses during the three months ended October 31, 2022, and we recorded net losses of $ 7 million during the three months ended October 31, 2021.

During the nine months ended October 31, 2022, and 2021, we recorded unrealized net losses of $ 17 million and gains of $ 91 million, respectively, on marketable equity investments held as of the end of each period.

During the three months ended April 30, 2023, we sold marketable equity investments for proceeds of $ 10 million with an immaterial corresponding realized gain.

During the three months ended April 30, 2022, we sold marketable equity investments for proceeds of $ 5 million with corresponding realized gains of $ 1 million.

During the three months ended April 30, 2023, and 2022, we recorded unrealized losses of $ 5 million and gains of $ 3 million, respectively, on marketable equity investments held as of the end of each period.

Fair Value Measurements

We use a fair value hierarchy that requires we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

We use a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

4 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of October 31, 2022 (in thousands):

Level 1 Level 2 Level 3 Total

29 unchanged sentences

Deferred Costs

Deferred costs, which consist of deferred sales commission s, were $ 531 million and $ 494 million as of October 31, 2022, and January 31, 2022, respectively.

Amortization expense for the deferred costs was $ 45 million and $ 36 million for the three months ended October 31, 2022, and 2021, respectively, and $ 127 million and $ 101 million for the nine months ended October 31, 2022, and 2021, respectively.

Deferred costs, which consist of deferred sales commission s, wer e $ 598 million and $ 612 million as of April 30, 2023, and January 31, 2023, respectively.

Amortization expense for the deferred costs was $ 49 million and $ 39 million for the three months ended April 30, 2023, and 2022, respectively.

There was no impairment loss in relation to the costs capitalized for the periods presented.

1 unchanged sentence

Property and equipment, net consisted of the following (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Computers, equipment, and software $ 1,316,567 $ 1,286,540

6 unchanged sentences

Property and equipment, net $ 1,218,117 $ 1,201,254

Depre ciation expense totaled $ 69 million and $ 66 million for the three months ended October 31, 2022, and 2021, respectively, and $ 207 million and $ 194 million for the nine months ended October 31, 2022, and 2021, respectively.

Depre ciation expense totaled $ 48 million and $ 67 million for the three months ended April 30, 2023, and 2022, respectively .

Acquisition-Related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Developed technology $ 342,700 $ 342,700

5 unchanged sentences

Acquisition-related intangible assets, net $ 284,261 $ 305,465

Amortization expense related to acquisition-related intangible assets was $ 21 million and $ 19 million for the three months ended October 31, 2022, and 2021, respectively, and $ 64 million and $ 57 million for the nine months ended October 31, 2022, and 2021, respectively.

As of October 31, 2022, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):

Amortization expense related to acquisition-related intangible assets was $ 21 million and $ 22 million for the three months ended April 30, 2023, and 2022, respectively.

As of April 30, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):

Fiscal Period:

3 unchanged sentences

Other noncurrent assets consisted of the following (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Non-marketable equity and other investments $ 271,122 $ 263,485

Derivative assets 71,482 16,618

Technology patents and other intangible assets, net 28,621 20,534

Prepayments for goods and services 23,373 23,466

Derivative assets 22,441 21,757

Net deferred tax assets 9,567 12,650

3 unchanged sentences

Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis.

As of October 31, 2022, the future estimated amortization expense was as follows (in thousands):

As of April 30, 2023, the future estimated amortization expense was as follows (in thousands):

Fiscal Period:

11 unchanged sentences

Cash flow hedges are recorded on the Condensed Consolidated Balance Sheets at fair value.

Cash flows from such forward contracts are classified as operating activities.

Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.

Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings.

As of October 31, 2022, we estimate that $ 39 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of October 31, 2022, and January 31, 2022, the notional values of the cash flow hedges that we held to buy U.S.

As of April 30, 2023, we estimate that $ 56 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of April 30, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 1.9 billion and $ 1.7 billion, respectively.

The notional values of the cash flow hedges that we held to sell U.S.

dollars in exchange for other currencies were $ 365 million and $ 355 million as of October 31, 2022, and January 31, 2022, respectively.

dollars in exchange for other currencies were $ 336 million and $ 324 million as of April 30, 2023, and January 31, 2023, respectively.

All contracts had maturities of less than 47 months.

3 unchanged sentences

These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations.

Cash flows from such forward contracts are classified as operating activities.

As of October 31, 2022, and January 31, 2022, the notional values of the non-designated hedges that we held to buy U.S.

Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.

As of April 30, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 65 million and $ 235 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S.

1 unchanged sentence

The fair values of outstanding derivative instruments were as follows (in thousands):

Condensed Consolidated Balance Sheets Location October 31, 2022 January 31, 2022

Condensed Consolidated Balance Sheets Location April 30, 2023 January 31, 2023

Derivative assets:

11 unchanged sentences

The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in thousands):

Three Months Ended October 31,

Revenues Costs and Expenses Income Tax Revenues Costs and Expenses Income Tax

Total $ 1,599,103 $ 1,625,424 $ 52,563 $ 1,327,263 $ 1,303,318 $ 2,090

Gains (losses) related to cash flow hedges 5,647 ( 11,852 ) ( 3,220 ) ( 3,847 ) — —

Nine Months Ended October 31,

Revenues Costs and Expenses Income Tax Revenues Costs and Expenses Income Tax

Total $ 4,569,558 $ 4,702,800 $ 59,021 $ 3,762,657 $ 3,778,145 $ ( 2,623 )

Gains (losses) related to cash flow hedges 5,985 ( 18,636 ) ( 3,220 ) ( 4,996 ) — —

Gains (losses) associated with cash flow hedges were as follows (in thousands):

Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Condensed Consolidated Statements of Operations Location 2023 2022

Total Gains (losses) related to cash flow hedges Total Gains (losses) related to cash flow hedges

Revenues $ 1,684,312 $ 16,326 $ 1,434,657 $ ( 1,157 )

Costs and expenses 1,704,112 ( 698 ) 1,507,500 ( 829 )

Pre-tax gains (losses) associated with cash flow hedges were as follows (in thousands):

Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations Three Months Ended April 30,

Gains (losses) recognized in OCI Net change in unrealized gains (losses) on cash flow hedges $ 1,996 $ 44,260

1 unchanged sentence

Gains (losses) reclassified from AOCI into income (effective portion) Costs and expenses ( 698 ) ( 829 )

Gains (losses) reclassified from AOCI into income (effective portion) Income Tax ( 3,220 ) — ( 3,220 ) —

Gains (losses) associated with non-designated hedges were as follows (in thousands):

Condensed Consolidated Statements of Operations Location Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Condensed Consolidated Statements of Operations Location Three Months Ended April 30,

Gains (losses) related to non-designated hedges Other income (expense), net $ 2,434 $ 3,966

3 unchanged sentences

We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

As of October 31, 2022, information related to these offsetting arrangements was as follows (in thousands):

As of April 30, 2023, information related to these offsetting arrangements was as follows (in thousands):

Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Net Assets Exposed

17 unchanged sentences

Outstanding debt consisted of the following (in thousands):

October 31, 2022 January 31, 2022

2027 Notes $ 1,000,000 $ —

April 30, 2023 January 31, 2023

2027 Notes $ 1,000,000 $ 1,000,000

1 unchanged sentence

2032 Notes 1,250,000 1,250,000

Term loan under the 2020 Credit Agreement — 693,750

Total principal amount 3,000,000 3,000,000

1 unchanged sentence

Net carrying amount 2,976,889 2,975,934

debt, current — ( 1,222,443 )

Debt, noncurrent $ 2,976,889 $ 2,975,934

As of October 31, 2022, the future principal payments for the outstanding debt were as follows (in thousands):

As of April 30, 2023, the future principal payments for the outstanding debt were as follows (in thousands):

Fiscal Period:

Remainder of 2024 $ —

2028 1,000,000

Thereafter 2,000,000

1 unchanged sentence

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 (“2027 Notes”), $ 750 million aggregate principal amount of 3.700 % notes due April 1, 2029 (“2029 Notes”), and $ 1.25 billion aggregate principal amount of 3.800 % notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”).

Interest is payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2022.

Interest is payable semi-annually in arrears on April 1 and October 1 of each year, which commenced in October 2022.

The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday.

2 unchanged sentences

The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions.

As of October 31, 2022, we were in compliance with all covenants associated with the Senior Notes.

As of April 30, 2023, we were in compliance with all covenants associated with the Senior Notes.

We incurred debt discount and issuance costs of approximately $ 27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes.

1 unchanged sentence

The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67 %, 3.82 %, and 3.90 %, respectively.

As of October 31, 2022, the total estimated fair value of the Senior Notes was $ 2.7 billion.

As of April 30, 2023, the total estimated fair value of the Senior Notes was $ 2.8 billion.

The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.

3 unchanged sentences

Concurrently with entering into the 2022 Credit Agreement, we paid off the remaining principal balance of $ 694 million on the term loan under the 2020 Credit Agreement and terminated the revolving credit facility under the 2020 Credit Agreement, which had no outstanding balance.

The modification to our revolving credit facility and extinguishment of the term loan under the 2020 Credit Agreement did not have a material impact to our Condensed Consolidated Statements of Operations for the nine months ended October 31, 2022.

As of October 31, 2022, we had no outstanding revolving loans under the 2022 Credit Agreement.

As of April 30, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.

The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid.

The revolving loans under the 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000 % to 0.500 % or a secured overnight financing rate (“SOFR”) rate plus 10 basis points, plus a margin of 0.750 % to 1.500 %, with such margin being determined based on our consolidated leverage ratio or debt rating.

The revolving loans under the 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000 % to 0.500 % or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750 % to 1.500 %, with such margin being determined based on our consolidated leverage ratio or debt rating.

We are also obligated to pay an ongoing commitment fee on undrawn amounts.

2 unchanged sentences

The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at our election for a certain period following an acquisition.

As of October 31, 2022, we were in compliance with all covenants.

As of April 30, 2023, we were in compliance with all covenants.

Convertible Senior Notes

1 unchanged sentence

The 2022 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 0.25 % on April 1 and October 1 of each year.

During the three months ended October 31, 2022, the 2022 Notes were converted by note holders, and we repaid the $ 1.15 billion principal balance in cash.

We also distributed approximately 0.6 million shares of our Class A common stock to note holders during the three months ended October 31, 2022, which represents the conversion value in excess of the principal amount.

During the third quarter of fiscal 2023, the 2022 Notes were converted by note holders, and we repaid the $ 1.15 billion principal balance in cash.

We also distributed approximately 0.6 million shares of our Class A common stock to note holders during fiscal 2023, which represented the conversion value in excess of the principal amount.

In connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions (“Purchased Options”) which gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes, approximately 7.8 million shares of our Class A common stock for $ 147.10 per share.

During the three months ended October 31, 2022, we received approximately 0.6 million shares of our Class A common stock from the exercise of the Purchased Options, which offset economic dilution to our Class A common stock upon conversion of the 2022 Notes.

These shares are held as treasury stock as of October 31, 2022.

During the third quarter of fiscal 2023, we received approximately 0.6 million shares of our Class A common stock from the exercise of the Purchased Options, which offset the economic dilution to our Class A common stock upon conversion of the 2022 Notes.

These shares were recorded as Treasury stock on the Condensed Consolidated Balance Sheets.

The Purchased Options were separate transactions and were not part of the terms of the 2022 Notes, and expired on October 1, 2022.

In connection with the issuance of the 2022 Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.8 million shares over 60 scheduled trading days beginning in January 2023 of our Class A common stock at an exercise price of $ 213.96 per share.

If the Warrants are not exercised on their exercise dates, they will expire.

The Warrants will be net share settled, and the resulting number of shares of our common stock we will issue depends on the daily volume-weighted average stock prices over the 60 scheduled trading day period beginning on the first expiration date of the Warrants.

If the market value per share of our Class A common stock exceeds the applicable exercise price of the Warrants, the Warrants will have a dilutive effect on our earnings per share, assuming that we are profitable.

The Warrants are separate transactions and are not part of the terms of the 2022 Notes or the Purchased Options.

The proceeds from the sale of the Warrants were recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets.

In connection with the issuance of the 2022 Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.8 million shares of our Class A common stock over 60 scheduled trading days beginning in January 2023 at an exercise price of $ 213.96 per share.

During the first quarter of fiscal 2024, the Warrants fully expired without exercise.

Interest Expense on Debt

The following table sets forth total interest expense recognized related to our debt (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Contractual interest expense $ 27,563 $ 11,385

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We have entered into operating lease agreements for our office space, data centers, and other property and equipment.

Operating lease right-of-use assets w ere $ 268 million and $ 248 million as of October 31, 2022, and January 31, 2022, respectively, and operating lease liabilities were $ 286 million an d $ 263 million as of October 31, 2022, and January 31, 2022, respectively.

Operating lease right-of-use assets were $ 255 million and $ 249 million as of April 30, 2023, and January 31, 2023, respectively, and operating lease liabilities were $ 278 million and $ 273 million as of April 30, 2023, and January 31, 2023, respectively.

We have also entered into finance lease agreements for other property and equipment.

As of October 31, 2022, and January 31, 2022, finance leases were not material.

As of April 30, 2023, and January 31, 2023, finance leases were not material.

The components of operating lease expense were as follows (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Operating lease cost $ 28,460 $ 23,644

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Supplemental cash flow information related to our operating leases was as follows (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Cash paid for operating lease liabilities $ 28,410 $ 25,658

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Other information related to our operating leases was as follows:

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

Weighted average remaining lease term (in years) 5 5

Weighted average discount rate 2.98 % 2.79 %

As of October 31, 2022, maturities of operating lease liabilities were as follows (in thousands):

As of April 30, 2023, maturities of operating lease liabilities were as follows (in thousands):

Fiscal Period:

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Total operating lease liabilities $ 278,023

As of October 31, 2022 , we have additional operating leases for data centers that had not yet commenced with total undiscounted lease payments of $ 52 million.

As of April 30, 2023 , we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $ 50 million.

These operating leases will commence in fiscal 2024 and fiscal 2025, with lease terms ranging from five to six years .

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Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities.

During the nine months ended October 31, 2022, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.

During the three months ended April 30, 2023, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Legal Matters

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These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

In our opinion, as of October 31, 2022, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

In our opinion, as of April 30, 2023, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

Stockholders’ Equity

As of October 31, 2022, there were 202 million shares of Class A common stock, net of treasury stock, and 55 million shares of Class B common stock outstanding.

As of April 30, 2023, there were 206 million shares of Class A common stock, net of treasury stock, and 55 million shares of Class B common stock outstanding.

The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

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Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.

Share Repurchase Program

In November 2022, our Board of Directors authorized the repurchase of up to $ 500 million of our outstanding shares of Class A common stock (the “Share Repurchase Program”).

We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions.

The timing and total amount of stock repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

There were no shares repurchased during the three months ended April 30, 2023.

As of April 30, 2023 , we were authorized to purchase a remaining $ 425 million of our outstanding shares of Class A common stock under the Share Repurchase Program.

Employee Equity Plans

On June 22, 2022, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30 million shares for issuance.

In June 2022, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30 million shares for issuance.

The 2022 Plan serves as the successor to our 2012 Equity Incentive Plan (“2012 Plan” and, together with the 2022 Plan, “Stock Plans”).

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Prior awards granted under the 2012 Plan continue to be subject to the terms and provisions of the 2012 Plan.

As of October 31, 2022, we had 29 million shares of Class A common stock available for future grants.

On June 22, 2022, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan (“ESPP”).

As of April 30, 2023, we had 21 million shares of Class A common stock available for future grants.

In June 2022, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan (“ESPP”).

Under the ESPP, eligible employees are granted options to purchase shares at the lower of 85 % of the fair market value of the stock at the time of grant or 85 % of the fair market value at the time of exercise.

Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively.

Pursuant to the terms of the ESPP, the share reserve increased by 2 million shares on March 31, 2022.

As of October 31, 2022, 5 million shares of Class A common stock were available for issuance under the ESPP.

As of April 30, 2023, 5 million shares of Class A common stock were available for issuance under the ESPP.

Restricted Stock Units

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RSUs generally vest over four years .

A summary of information related to RSU activity during the nine months ended October 31, 2022, is as follows (in thousands, except per share data):

RSU activity during the three months ended April 30, 2023, was as follows (in thousands, except per share data):

Number of Shares Weighted-Average Grant Date Fair Value

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RSUs forfeited ( 210 ) 261.42

Balance as of October 31, 2022 14,637 209.18

As of October 31, 2022, there was a total of $ 2.3 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

Performance-Based Restricted Stock Units

During fiscal 2022, 0.4 million shares of performance-based restricted stock units (“PRSUs”) were granted to employees below the level of vice president that included both service conditions and performance conditions related to company-wide goals.

These performance conditions were met and the PRSUs vested on March 15, 2022.

During the nine months ended October 31, 2022, we recognized $ 16 million in compensation cost related to these PRSUs.

We did no t grant any company-wide PRSUs in fiscal 2023.

Balance as of April 30, 2023 18,701 199.83

As of April 30, 2023, there was a total of $ 2.8 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

Market-Based Restricted Stock Units

In December 2022, 0.3 million shares of market-based RSUs were granted to our newly appointed Co-CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”).

We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions:

(i) expected volatility of 40 %, (ii) risk-free interest rate of 4 %, and (iii) total performance period of six years .

The weighted-average grant date fair value of the PVU Award was $ 124.80 per share.

We recognize expense for the PVU Award over the requisite service period of five years using the accelerated attribution method.

Provided that the requisite service is rendered, the total fair value of the PVU Award at the date of grant is recognized as compensation expense even if the market condition is not achieved.

However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.

As of April 30, 2023, there was a total of $ 30 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately five years .

Stock Options

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Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five years .

A summary of information related to stock option activity during the nine months ended October 31, 2022, is as follows (in millions, except number of shares which are reflected in thousands and per share data):

Stock option activity during the three months ended April 30, 2023, was as follows (in thousands, except aggregate intrinsic value, which is reflected in millions and per share data):

Outstanding Stock Options Weighted-Average Exercise Price Aggregate Intrinsic Value

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Stock options canceled — —

Balance as of October 31, 2022 130 32.20 16

Vested and expected to vest as of October 31, 2022 130 32.20 16

Exercisable as of October 31, 2022 130 32.16 16

As of October 31, 2022, unrecognized compensation cost related to unvested stock options was not material.

Balance as of April 30, 2023 106 29.22 17

Vested and expected to vest as of April 30, 2023 106 29.22 17

Exercisable as of April 30, 2023 106 29.22 17

As of April 30, 2023, there was no unrecognized compensation cost related to unvested stock options .

Unearned Revenue and Performance Obligations

Subscription services revenues o f $ 1.2 billion and $ 1.0 billion were recognized during the three months ended October 31, 2022, and 2021, respectively, that were included in the unearned revenue balances as of July 31, 2022 , and 2021 , respectively.

Subscription services revenues of $ 2.7 billion and $ 2.2 billion were recognized during the nine months ended October 31, 2022, and 2021, respectively, that were included in the unearned revenue balances as of January 31, 2022, and 2021, respectively.

Professional services revenues recognized in the same periods from unearned revenue balances at the beginning of the respective periods were not material.

Subscription services revenues of $ 1.3 billion and $ 1.1 billion were recognized during the three months ended April 30, 2023, and 2022, respectively, that were included in the unearned revenue balances as of January 31, 2023, and 2022, respectively.

Professional services revenues recognized in t he same periods from unearned revenue balances at the beginning of the respective periods were not material.

Transaction Price Allocated to the Remaining Performance Obligations

As of October 31, 2022, approximately $ 14.1 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

As of April 30, 2023, approximate ly $ 16.7 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenues on approximately $ 9.8 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Revenues from remaining performance obligations for professional services contracts as of October 31, 2022, were not material.

Revenues from remaining performance obligations for professional services contracts as of April 30, 2023, were not material.

Other Income (Expense), Net

Other income (expense), net consisted of the following (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Interest income $ 62,695 $ 4,007

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For further information, see Note 3, Investments .

We reported an income tax provision of $ 59 million and an income tax benefit of $ 3 million for the nine months ended October 31, 2022, and 2021, respectively.

The income tax provision for the nine months ended October 31, 2022, was primarily attributable to a taxable gain recognized from integrating intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to capitalized research and development expenditures.

The income tax benefit for the nine months ended October 31, 2021, was primarily attributable to excess tax benefit from stock option deductions in foreign jurisdictions, reversal of previously accrued tax liabilities upon favorable tax audit results, and amortization of intangibles from business combinations.

The 2017 Tax Cuts and Jobs Act requires research and development expenditures incurred for the tax year beginning after December 31, 2021, to be capitalized and amortized ratably over five years for domestic research and fifteen years for international research.

The mandatory capitalization requirement has no material impact to our fiscal 2023 income tax provision due to our tax attributes carryover and full valuation allowance position.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act (“IRA”) of 2022, which, among other things, implemented a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy.

We evaluated the provisions of the IRA and do not expect any material impact to our fiscal 2023 income tax provision.

We reported an income tax provision of $ 7 million and $ 9 million for the three months ended April 30, 2023, and 2022, respectively.

The income tax provision for the three months ended April 30, 2023, was primarily attributable to income tax expenses in profitable foreign jurisdictions and an increase in U.S.

taxes due to capitalized research and development expenditures.

The income tax provision for the three months ended April 30, 2022, was primarily attributable to a taxable gain recognized from an intercompany sale of intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to capitalized research and development expenditures.

We are subject to income tax audits in the U.S.

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The realization of net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets.

As of October 31, 2022, we continue to maintain a full valuation allowance on our deferred tax assets in certain jurisdictions.

As of April 30, 2023, we continue to maintain a full valuation allowance on our deferred tax assets in certain jurisdictions.

Net Income (Loss) Per Share

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As the liquidation and dividend rights are identical, the net income (loss) is allocated on a proportionate basis.

The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income (loss) per share of Class B common stock does not assume the conversion of those shares.

Basic and diluted net loss per share was the same for the three and nine months ended October 31, 2022, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Basic and diluted net income (loss) per share was the same for the three months ended April 30, 2023, and April 30, 2022.

For the three months ended April 30, 2022, potentially dilutive securities were excluded from the computation of diluted net income (loss) per share calculations because the impact of including them would have been anti-dilutive.

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Class A Class B Class A Class B Class A Class B Class A Class B

Three Months Ended April 30,

Class A Class B Class A Class B

Net income (loss) per share, basic:

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Dilutive effect of share-based awards 2,551 — — —

Dilutive effect of warrants related to the issuance of convertible senior notes — — 1,359 — — — 1,113 —

Weighted-average shares outstanding, diluted 261,371 54,633 196,466 55,277

Net income (loss) per share, diluted $ 0.00 $ 0.00 $ ( 0.41 ) $ ( 0.41 )

The computation of diluted net income (loss) per share does not include the effect of the following potential weighted-average shares of common stock.

The computation of diluted net income (loss) per share does not include the effect of the following potentially outstanding weighted-average shares of common stock.

The effects of these potentially outstanding shares were not included in the calculation of diluted net income (loss) per share because the effect would have been anti-dilutive (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

Shares related to outstanding share-based awards 3,909 13,654

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The following table sets forth revenues by geographic area (in thousands):

Three Months Ended October 31, Nine Months Ended October 31,

2022 2021 2022 2021

Three Months Ended April 30,

United States $ 1,263,965 $ 1,075,045

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Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in thousands):

October 31, 2022 January 31, 2022

April 30, 2023 January 31, 2023

United States $ 1,173,390 $ 1,206,486

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Total long-lived assets $ 1,472,776 $ 1,450,532

Subsequent Events

Share Repurchase Program

In November 2022, our Board of Directors authorized the repurchase of up to $ 500 million of our outstanding shares of Class A common stock (the “Share Repurchase Program”).

We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The Share Repurchase Program will have a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

RSU Vesting Date Modification

In November 2022, we modified the vesting date of all unvested RSU awards from the 15th to the 5th of each month.

The change will impact awards vesting after December 31, 2022, and will result in an acceleration of share-based compensation expense of approximately $ 30 million in the fourth quarter of fiscal 2023.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995.

All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, business strategy and plans, and objectives for future operations, are forward-looking statements.

All statements contained in this report other than statements of historical fact, including statements regarding our future financial condition and operating results, business strategy and plans, and objectives for future operations, are forward-looking statements.

The words “ believe, ” “ may, ” “ will, ” “ estimate, ” “ continue, ” “ anticipate, ” “ intend, ” “ expect, ” “ seek, ” “ plan, ” and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations, beliefs, and projections about future events, conditions, and trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives, and financial needs.

These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control, including those arising from the impact of recent macroeconomic events, inflation, and the coronavirus ( “ COVID-19 ” ) pandemic, as well as those described in the “ Risk Factors ” section, which we encourage you to read carefully.

These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control, such as those arising from the impact of recent macroeconomic events, including inflation, increased interest rates, instability in the global banking system, and the remaining effects of the coronavirus ( “ COVID-19 ” ) pandemic, as well as those described in the “ Risk Factors ” section, which we encourage you to read carefully.

Moreover, we operate in a very competitive and rapidly changing environment.

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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.

What changed 10-Q

Item 1. Financial Statements