What changed in this filing

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Item 1A. Risk Factors

2024-12-05 compared with 2024-08-28 · 24 added, 22 removed, 552 unchanged (8% of the section changed)

36 unchanged sentences

These problems may be caused by a variety of factors, including infrastructure and software or code changes, vendor issues, software and system defects, human error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues.

All of these issues may result in increased operational costs, delays in new feature rollouts, customer loss, reputational damage, and legal or regulatory liability, including liability under customer contracts or for losses suffered by our customers.

Such issues have, and may in the future, result in certain parties having unauthorized access to data.

Such issues have, and may in the future, result in certain parties having unauthorized access to data, which could increase the scope of our liability.

For example, in November 2023, we discovered that an issue in our product affecting certain customers resulted in document notifications and PDF documents being sent to unintended recipients within the same organization.

5 unchanged sentences

Our insurance policies, including our errors and omissions insurance, may be inadequate or may not be available in the future on acceptable terms, or at all, to protect against claims and other legal actions arising from breaches of our contracts, disruptions in our service, including those caused by cybersecurity incidents, failures or disruptions to our infrastructure, catastrophic events and disasters, or otherwise.

In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.

In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly.

We depend on data centers and other infrastructure operated by third parties, as well as internet availability, and any disruption in these operations could adversely affect our business and operating results.

116 unchanged sentences

The use of new and evolving technologies in our offerings at Workday, including AI, may result in reputational harm and increased litigation, and adversely affect our operating results.

We are increasingly building AI into Workday’s core and specific offerings.

We are increasingly building AI into the Workday product suite.

As with many cutting-edge innovations, these technologies can present new risks and challenges.

5 unchanged sentences

Our developers are also experimenting with the use of large language models provided by third parties for domain-specific use cases, and at this stage the line between developers and deployers of these technologies, including their respective responsibilities and liabilities, remains largely unclear.

Our failure to accurately identify and address our responsibilities and liabilities in this uncertain environment, and adequately address relevant ethical and social issues that may arise with such technologies and use cases, as well as failure by others in our industry, or actions taken by our customers, employees, or end users (including misuse of these technologies), could negatively affect the adoption of our solutions and subject us to reputational harm, regulatory action, or litigation, which may harm our financial condition and operating results.

Any failure to accurately identify and address our responsibilities and liabilities in this uncertain environment, and adequately address relevant ethical and social issues that may arise with such technologies and use cases, as well as failure by others in our industry, or actions taken by our customers, employees, or end users (including misuse of these technologies), could negatively affect the adoption of our offerings and subject us to reputational harm, regulatory action, or litigation, which may harm our financial condition and operating results.

We already are defending against a lawsuit alleging that our products and services enable discrimination, and although we believe that such claims lack merit, and the majority of the claims have been dismissed, legal proceedings can be lengthy, expensive, and disruptive to our operations and customers (particularly where, as in the present litigation, the plaintiff may seek to also litigate against certain of Workday’s customers).

14 unchanged sentences

If we are unable to provide new features, enhancements to user experience, and modifications in a timely and cost-effective manner that achieve market acceptance, align with customer expectations, and that keep pace with rapid technological developments and changing regulatory landscapes, it may negatively impact our customer renewal rates, limit the market for our solutions, or impair our ability to attract new customers and our business and operating results could be adversely affected.

For example, AI is propelling advancements in technology, but if we fail to innovate and keep up with advancements in AI technology, if Workday AI solutions fail to operate as expected or do not meet customer expectations, or if we do not have sufficient access to development resources and the technologies required to build and improve our applications, such as the datasets required to train our AI models, our business and reputation may be harmed.

If we fail to develop and maintain widespread positive awareness of our brand, our business may suffer.

164 unchanged sentences

Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims.

Some of our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Some of our applications include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License.

Our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Our applications include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License.

Few terms used in open source licenses have been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our applications.

7 unchanged sentences

Unfavorable laws, regulations, interpretive positions, or standards governing new and evolving technologies that we incorporate into our products and services, including those involving AI uses, could result in significant cost and compliance challenges and adversely affect our business and operating results.

Some of our products and services, such as Workday’s People Experience, Talent Optimization, and Financial product suites, currently utilize or will utilize new and evolving technologies such as AI.

Many of our products and services currently utilize or will utilize new and evolving technologies such as AI.

The overall regulatory environment governing these types of technologies is likely to evolve as government interest in these technologies increases.

4 unchanged sentences

governmental and regulatory agencies, and various U.S.

states and other foreign jurisdictions are applying, or are considering applying, their cybersecurity and data protection laws to AI and its uses or are considering general legal frameworks for AI and its uses, such as the EU AI Act.

states and other foreign jurisdictions are applying, or are considering applying, their cybersecurity, data protection, and product safety laws to AI and its uses or are considering general legal frameworks for AI and its uses, such as the EU AI Act.

Any failure by us to comply with applicable laws, regulations, guidance, or other rules could result in costly litigation, penalties, or fines.

11 unchanged sentences

Our contracts with federal, state, local, and foreign government entities are subject to various procurement regulations and other requirements relating to their formation, administration, and performance, which could adversely impact our business and operating results.

Government certification requirements applicable to our platform, including FedRAMP, may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the full or revised certification.

These laws and regulations provide public sector customers various with rights, many of which are not typically found in commercial contracts.

Government certification requirements applicable to our platform may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the authorization to use or certification.

These laws and regulations provide public sector customers with various rights, many of which are not typically found in commercial contracts.

For example, some federal contracts provide for delays, interruptions, or termination by the government at any time, with or without cause, which can adversely affect our business and operating results and impact other existing or prospective government contracts.

Additionally, we have obtained authorization under FedRAMP, which allows us to enter into the U.S.

Additionally, we have obtained authorization under FedRAMP, which allows us to participate in the U.S.

federal government market.

1 unchanged sentence

federal government customers.

In addition, some customers may rely on our authorization under FedRAMP to help satisfy their own legal and regulatory compliance requirements and our failure to maintain FedRAMP authorization may result in a breach under public sector contracts obtained on the basis of such authorization.

This could subject us to liability, result in reputational harm, and adversely impact our financial condition or operating results.

In addition, some customers may rely on our authorization under FedRAMP to help satisfy their own legal and regulatory compliance requirements.

If we fail to maintain FedRAMP authorization, we may fail to retain existing customers or attract new customers that rely on our authorization under FedRAMP, which could subject us to liability, result in reputational harm, and adversely impact our financial condition or operating results.

We may be subject to additional audits and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunding or suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business.

37 unchanged sentences

Additionally, in April 2022, we entered into a 2022 Credit Agreement which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion.

As of July 31, 2024, we had no outstanding revolving loans under the 2022 Credit Agreement.

As of October 31, 2024, we had no outstanding revolving loans under the 2022 Credit Agreement.

We may incur substantial additional debt in the future, some of which may be secured debt.

37 unchanged sentences

Our Co-Founders have control over key decision making as a result of their control of a majority of our voting stock.

As of July 31, 2024, our Co-Founder and CEO Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 43 million shares of Class B common stock and 1 million shares of Class A common stock.

As of July 31, 2024, our Co-Founder and Executive Chair, Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.4 million shares of Class A common stock.

As of October 31, 2024, our Co-Founder and CEO Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 43 million shares of Class B common stock and 0.4 million shares of Class A common stock.

As of October 31, 2024, our Co-Founder and Executive Chair, Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.4 million shares of Class A common stock.

In addition, Mr.

15 unchanged sentences

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.

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, 2024.

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.

27 unchanged sentences

We may not realize the anticipated long-term stockholder value of our share repurchase programs.

In February 2024, the Board of Directors authorized the February 2024 Share Repurchase Program under which we may repurchase up to $500 million of our Class A common stock, and in August 2024, the Board of Directors authorized the August 2024 Share Repurchase Program under which we may repurchase up to an additional $1.0 billion of our Class A common stock.

The February 2024 Share Repurchase Program has a term of 18 months and the August 2024 Share Repurchase Program has no expiration date, but the programs may be modified, suspended, or terminated at any time.

Such repurchases may be made through open market transactions, including through the use of trading plans intended to qualify under Rule 10b5-1, through privately negotiated transactions, or by other means, in accordance with applicable securities laws and other restrictions.

In February 2024, our Board of Directors authorized a program under which we were authorized to repurchase up to $500 million of our outstanding shares of Class A common stock.

As of October 31, 2024, we had completed the repurchase authorization under this program.

In August 2024, our Board of Directors authorized the August 2024 Share Repurchase Program under which we may repurchase up to an additional $1.0 billion of our outstanding shares of Class A common stock.

Such repurchases may be made through open market transactions, including through the use of trading plans intended to qualify under Rule 10b5-1, through privately negotiated transactions, or by other means, in each case in accordance with applicable securities laws and other restrictions.

The August 2024 Share Repurchase Program has no expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price.

44 unchanged sentences

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 1A. Risk Factors