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Workday, Inc.

Workday, Inc.WDAYEarnings & Financial Report

Nasdaq · Information Technology · Application Software

Workday may refer to:Workday, Inc., a cloud-based business applications company A day in the workweek Working time, the period of time in a day spent at paid occupational labor

What changed in Workday, Inc.'s 10-K — 2022 vs 2023

Top changes in Workday, Inc.'s 2023 10-K

382 paragraphs added · 410 removed · 281 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Buoyed by the opportunities offered by our own technology, our talent strategy philosophy puts employees at the center of their own career and performance journey. A fundamental tenet of this approach is the belief that we should provide employees with the tools and framework to enable their careers, putting them in the driver’s seat.
Buoyed by the opportunities offered by our own technology, our talent philosophy puts employees at the center of their own career and performance journey. A fundamental tenet of this approach is the belief that we should provide employees with the tools and framework to enable their careers, putting them in the driver’s seat.
Planning: Solutions for the Offices of the CFO and CHRO In today’s dynamic business environment, businesses are continuously planning to model various scenarios and prepare to quickly respond to change. Workday provides an active planning process that can model across finance, workforce, sales, and operational data, helping organizations make more informed decisions and respond quickly to changing situations.
Planning: Solutions for the Offices of the CFO and CHRO In today’s dynamic business environment, businesses are continuously planning to model various scenarios and preparing to quickly respond to change. Workday provides an active planning process that can model across finance, workforce, sales, and operational data, helping organizations make more informed decisions and respond quickly to changing situations.
We encourage and support employee giving and volunteering through programs such as our charitable donation matching gift program, our paid time off benefit for employees to volunteer and give back to their communities, and our team volunteer experience, where employee teams of five or more can volunteer with a charity partner of their choice and receive a $5,000 grant.
We encourage and support employee giving and volunteering through programs such as our charitable donation matching gift program, our paid time off benefit for employees to volunteer and give back to their communities, and our team volunteer experience, where employee teams of five or more can volunteer with a charity partner of their choice and receive grants of up to $5,000.
Workday provides more than 9,500 organizations with software-as-a-service solutions to help solve some of today’s most complex business challenges, including supporting and empowering their workforce, managing their finances and spend in an ever-changing environment, and planning for the unexpected. Our purpose is to inspire a brighter work day for all.
Workday provides more than 10,000 organizations with software-as-a-service solutions to help solve some of today’s most complex business challenges, including supporting and empowering their workforce, managing their finances and spend in an ever-changing environment, and planning for the unexpected. Our purpose is to inspire a brighter work day for all.
Moreover, with our solution, professional services organizations can optimize and manage their client-facing projects. Product Development At Workday, innovation is a core value. Our culture encourages out-of-the-box thinking and creativity, which enables us to create applications designed to change the way people work.
Moreover, with W orkday’s solutions, professional services organizations can optimize and manage their client-facing projects. Product Development At Workday, innovation is a core value. Our culture encourages out-of-the-box thinking and creativity, which enables us to create applications designed to change the way people work.
Employees can take action to update their contributions, capabilities, career, and connections using the quick links provided in the dashboard. Health, Safety, and Wellbeing At Workday, we take a holistic approach to our employees’ wellbeing and have created wellbeing programs that focus on four core pillars: happiness, health, movement, and nutrition.
Employees can take action to update their contributions, capabilities, career, and connections using the quick links provided in the dashboard. 4 Table of Contents Health, Safety, and Wellbeing At Workday, we take a holistic approach to our employees’ wellbeing and have created wellbeing programs that focus on four core pillars: happiness, health, movement, and nutrition.
If we identify differences in pay, we research those differences and, if appropriate, take action (including making adjustments to employees’ pay when appropriate). 3 Table of Conten t s Belonging and Diversity We strive to be a workplace where all employees are valued for their unique perspectives and where we all collectively contribute to Workday’s success and innovation.
If we identify differences in pay, we research those differences and, if appropriate, take action (including making adjustments to employees’ pay, when appropriate). 3 Table of Contents Belonging and Diversity We strive to be a workplace where all employees are valued for their unique perspectives and where we all collectively contribute to Workday’s success and innovation.
Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance. 5 Table of Conten t s Competition The overall market for enterprise application software is rapidly evolving, highly competitive, and subject to changing technology, shifting customer needs, and frequent introductions of new products.
Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance. Competition The overall market for enterprise application software is rapidly evolving, highly competitive, and subject to changing technology, shifting customer needs, and frequent introductions of new products.
These laws and regulations, which may differ among jurisdictions, include, among others, those related to financial and other disclosures, accounting standards, privacy and data protection, intellectual property, corporate governance, tax, government contracting, trade, antitrust, employment, immigration and travel, import/export, and anti-corruption.
These laws and regulations, which may differ among jurisdictions, include, among others, those related to financial and other disclosures, accounting standards, privacy and data protection, intellectual property, AI ethics and machine learning, corporate governance, tax, government contracting, trade, antitrust, employment, immigration and travel, import/export, and anti-corruption.
We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions. These vendors include UKG Inc.
We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions.
Information contained on or accessible through any website reference herein is not part of, or incorporated by reference in, this Form 10-K, and the inclusion of such website addresses is as inactive textual references only. 7 Table of Conten t s
Information contained on or accessible through any website reference herein is not part of, or incorporated by reference in, this Form 10-K, and the inclusion of such website addresses is as inactive textual references only. 7 Table of Contents
Workday’s suite of financial management applications helps enable CFOs to maintain accounting information in the general ledger; manage core financial processes such as payables and receivables; identify real-time financial, operational, and management insights; improve financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across global finance operations.
Workday’s suite of financial management applications, built on a foundation with AI and ML at the core, helps enable CFOs to maintain accounting information in the general ledger; manage core financial processes such as payables and receivables; identify real-time financial, operational, and management insights; improve financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across global finance operations.
(formerly The Ultimate Software Group, Inc.); Automatic Data Processing, Inc.; Infor, Inc.; Ceridian HCM Holding Inc.; Microsoft Corporation; Anaplan, Inc.; and Coupa Software Inc. In addition, other cloud companies that provide services in different markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications.
These vendors include UKG Inc.; Automatic Data Processing, Inc.; Infor, Inc.; Ceridian HCM Holding Inc.; Microsoft Corporation; Anaplan, Inc.; and Coupa Software Inc. In addition, other cloud companies that provide services in different markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications.
Workday’s applications serve industries such as healthcare, higher education, and professional services. For example, Workday provides supply chain and inventory solutions to healthcare organizations, allowing them to purchase, stock, track, and replenish their inventory to help support patient care. In addition, higher education institutions can deploy our solution to manage the e nd-to-end student and faculty lifecycle .
For example, Workday provides supply chain and inventory solutions to healthcare organizations, allowing them to purchase, stock, track, and replenish their inventory to help support patient care. In addition, higher education institutions can deploy Workday’s solutions to manage the e nd-to-end student and faculty lifecycle .
To track progress and plan for the future, we use internally-developed products to bring diversity- and inclusion-related data into one centralized location and set our B&D strategy.
We have made significant progress towards our ongoing company commitments to B&D. To track progress and plan for the future, we use internally developed products to bring diversity- and inclusion-related data into one centralized location and set our B&D strategy.
Giving and Doing We believe that talent is everywhere, but opportunity is not. In support of our efforts to give back to the communities where we live and work, our employees donate time and expertise as mentors and volunteers to help close the skills gap.
Giving and Doing In support of our efforts to give back to the communities where we live and work, our employees donate time and expertise as mentors and volunteers to help close the skills gap.
Our marketing programs target senior business leaders, including CFOs, CHROs, and CIOs. As a core part of our sales and marketing strategy, we have developed a global ecosystem of partners to both broaden and complement our application offerings and to provide services that are outside of our area of focus.
As a core part of our sales and marketing strategy, we have developed a global ecosystem of partners to both broaden and complement our application offerings and to provide services that are outside of our area of focus.
Through this model, Workday customers are able to stay current as one Workday community all on the same version of software that features a unified data and security model and rich user experience. We sell our solutions worldwide primarily through direct sales.
To support this, Workday delivers weekly product updates in addition to major feature releases twice a year. Through this model, Workday customers are able to stay current as one Workday community all on the same version of software that features a unified data and security model and rich user experience. We sell our solutions worldwide primarily through direct sales.
Seasonality We have experienced seasonality in terms of when we enter into customer agreements for our services. Historically, we have signed a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each fiscal year due to large enterprise account buying patterns.
Historically, we have signed a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each fiscal year due to large enterprise account buying patterns.
Although we rely on intellectual property rights, including trade secrets, patents, copyrights, and trademarks, as well as contractual protections and controls to establish and protect our proprietary rights, we believe that factors such as the technological and creative skills of our personnel; creation of new products, features and functionality; and frequent enhancements to our applications are more essential to establishing and maintaining our technology leadership position.
Although we rely on intellectual property rights, including trade secrets, patents, copyrights, and trademarks, as well as contractual protections and controls to establish and protect our proprietary rights, we believe that factors such as the technological and creative skills of our personnel; creation of new products, features, and functionality; and frequent enhancements to our applications are more essential to establishing and maintaining our technology leadership position. 6 Table of Contents Governmental Regulation As a public company with global operations, we are subject to various federal, state, local, and foreign laws and regulations.
These relationships include software and technology partners, consulting and deployment service providers, business process outsourcing partners, and software partners of Workday Ventures, our strategic investment arm, who all help enable Workday to address the challenges our customers face while focusing on executing against our strategy.
These relationships include software and technology partners, consulting and deployment service providers, business process outsourcing partners, and software partners of Workday Ventures, our strategic investment arm, who all help enable Workday to address the challenges our customers face while focusing on executing against our strategy. 5 Table of Contents Seasonality We have experienced seasonality in terms of when we enter into customer agreements for our services.
Workday provides organizations with a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations. To support this, Workday delivers weekly product updates in addition to major feature releases twice a year.
Workday provides organizations with a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations.
Workday provides applications for analytics and reporting, including augmented analytics to surface insights to the line of business in simple-to-understand stories, machine learning to drive efficiency and automation, and benchmarks to compare performance against other organizations.
Workday provides applications for analytics and reporting, including augmented analytics to surface insights to the line of business in simple-to-understand stories, machine learning to drive efficiency and automation, and benchmarks to compare performance against other organizations. In addition, Workday enables the development of extension applications and integration tooling that can accommodate our customers’ unique ways of doing business.
As of January 31, 2022, women represented 41.2% of our global employees, and underrepresented minorities (defined as those who identify as Alaskan native, American Indian, Black, Latinx, Native Hawaiian, Other Pacific Islander, and/or two or more races) represent 13.7% of our U.S. employees.
As of January 31, 2023, women represented 42% of our global employees and 37% of our leadership positions globally, and underrepresented minorities (defined as those who identify as Alaskan native, American Indian, Black, Latinx, Native Hawaiian, Other Pacific Islander, and/or two or more races) represented 14% of our U.S. employees and 10% of our leadership positions in the U.S.
We also invest in leading workforce development organizations and provide direct training and employment opportunities for candidates facing barriers to employment through our Opportunity Onramps programs. On top of our strategic, company-led social impact and employee volunteerism efforts, we also believe that giving back is even more rewarding when people get to make an impact through their favorite causes.
On top of our strategic, company-led social impact and employee volunteerism efforts, we also believe that giving back is even more rewarding when people get to make an impact through their favorite causes.
Our Global Workplace Safety team supports the traditional corporate areas of employee health and safety and physical security for Workday on a global scale. From the workplace to work-related travel, we strive to keep our employees safe with programs including safety awareness training, emergency response protocols, and our ergonomics and life safety team programs.
From the workplace to work-related travel, we strive to keep our employees safe with programs including safety awareness training, emergency response protocols, and our ergonomics and life safety team programs.
For example, in fiscal 2022, we acquired Peakon ApS (“Peakon”), a continuous listening platform that captures real-time employee sentiment; Zimit, a configure, price, quote (“CPQ”) solution built for services industries; and VNDLY, a cloud-based external workforce and vendor management technology; and in fiscal 2020, we acquired Scout RFP (“Scout”), a strategic sourcing company.
We engage in acquisitions to augment our suite of applications, such as Peakon ApS (“Peakon”), a continuous listening platform that captures real-time employee sentiment; Zimit, a configure, price, quote (“CPQ”) solution built for services industries; and VNDLY, a cloud-based external workforce and vendor management technology.
We also have processes in place to make pay decisions based on internally consistent and fair criteria. Each year, we conduct a company-wide pay equity analysis to help ensure pay equity between men and women as well as a US-based analysis with respect to people of different races.
Each year, we conduct a company-wide pay equity analysis to help ensure pay equity between men and women as well as a US-based analysis with respect to employees of different ethnicities.
Analytics and Benchmarking and Workday Cloud Platform: Solutions for the Offices of the CIO, CFO, and CHRO In the changing world of work, Workday helps leaders make sense of the vast amount of data they collect enterprise-wide.
When combined with Workday’s financial management and HCM solutions, organizations are able to leverage real-time transactional data to dynamically adjust and recalibrate their plans. 2 Table of Contents Analytics and Benchmarking and Workday Cloud Platform: Solutions for the Offices of the CIO, CFO, and CHRO In the changing world of work, Workday helps leaders make sense of the vast amount of data they collect enterprise-wide.
To help keep health and mental wellness top of mind, we offer a series of programs and communications focused on mental health. These included tools and resources related to sleep, healthy eating, and mindfulness, as well as enhancements to our Employee Assistance Program to, among other things, facilitate access to mental health services.
These included tools and resources related to sleep, healthy eating, and mindfulness, as well as enhancements to our Employee Assistance Program to, among other things, facilitate access to mental health services. Our Global Workplace Safety team supports the traditional corporate areas of employee health and safety and physical security for Workday on a global scale.
Workday, the Workday logo, VIBE, Peakon, Zimit, VNDLY, Scout, and Opportunity Onramps are trademarks of Workday, Inc., which may be registered in the United States and elsewhere. Other trademarks, service marks, or trade names appearing in this report are the property of their respective owners.
The information on, or that can be accessed through, our website is not part of this report. Workday, the Workday logo, VIBE, Peakon, Zimit, VNDLY, and Opportunity Onramps are trademarks of Workday, Inc., which may be registered in the United States and elsewhere.
We also offer professional services, both directly and through our Workday Services Partners, to help customers deploy our solutions and continually adopt new capabilities. 1 Table of Conten t s To grow our unified suite of Workday applications, we primarily invest in research and development, but we also selectively acquire companies that are consistent with our design principles, existing product set, corporate strategy, and company culture.
With these initiatives, we expect that Workday customers will benefit from a robust ecosystem, helping deliver additional innovation and solutions. To grow our unified suite of Workday applications, we primarily invest in research and development, but we also selectively acquire companies that are consistent with our design principles, existing product set, corporate strategy, and company culture.
For a further discussion of the risks associated with government regulations that may materially impact us, see “Risk Factors” included in Part I, Item 1A of this report. Corporate Information We were incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware.
The costs to comply with these governmental regulations are not material to the understanding of our business. For a further discussion of the risks associated with government regulations that may materially impact us, see “Risk Factors” included in Part I, Item 1A of this report.
Our Commitment to Pay Parity We believe that all employees deserve to be paid fairly and equitably and be afforded an equal chance to succeed. We have a market-based pay structure that compares our roles to those of our peers in each region. This process helps ensure we pay according to the market value of the jobs we offer.
We have a market-based pay structure that compares our roles to those of our peers in each region. This process helps ensure we pay according to the market value of the jobs we offer. We also have processes in place to make pay decisions based on internally consistent and fair criteria.
Starting in the fourth quarter of fiscal 2022, we have extended our key employee cash bonus program to all employees not covered under an existing sales or customer experience incentive plan. Additionally, our total rewards package includes an employee stock purchase plan, healthcare and retirement benefits, paid time off, family leave, and other wellness programs.
Additionally, our total rewards package includes a cash bonus program, an employee stock purchase plan, healthcare and retirement benefits, paid time off, family leave, and other wellness programs.
Our core values continue to serve as our guide as we navigate recent events, such as the global pandemic and the social justice movement. As of January 31, 2022, our global workforce consisted of approximately 15,200 employees in 32 countries. We consider our relations with our employees to be very good.
As of January 31, 2023, our global workforce consisted of approximately 17,700 employees in 32 countries. We consider our relations with our employees to be very good.
Our principal executive offices are located at 6110 Stoneridge Mall Road, Pleasanton, California 94588, and our telephone number is (877) WORKDAY. Our website address is www.workday.com. The information on, or that can be accessed through, our website is not part of this report.
Corporate Information We were incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware. Our principal executive offices are located at 6110 Stoneridge Mall Road, Pleasanton, California 94588, and our telephone number is (877) WORKDAY. Our website address is www.workday.com.
We also use Workday Peakon Employee Voice to collect feedback in real time from our employees and turn that feedback into dialog and action. We receive data points from these surveys that help us identify actions to take to improve our company and our culture.
Workday leverages multiple communication channels to engage and inform employees, including company meetings, town halls, internal websites, and social collaboration tools. We also use Workday Peakon Employee Voice to collect feedback in real time from our employees and turn that feedback into dialog and action.
In addition, Workday enables the development of extension applications and integration tooling that can accommodate our customers’ unique ways of doing business. 2 Table of Conten t s Industries: Solutions for the Offices of the CIO, CFO, and CHRO Workday offers businesses flexible solutions to help them adapt to their industry-specific needs and respond to change.
Industries: Solutions for the Offices of the CIO, CFO, and CHRO Workday offers businesses flexible solutions to help them adapt to their industry-specific needs and respond to change. Workday’s applications serve industries such as healthcare, higher education, and professional services.
Communication and Engagement Our culture and how we treat people are paramount at Workday, and we believe that being transparent and facilitating information sharing are key to our success. Workday leverages multiple communication channels to engage and inform employees, including company meetings, town halls, internal websites, and social collaboration tools.
In fiscal 2023, we had a 100% completion rate for our annual Code of Conduct training. Communication and Engagement Our culture and how we treat people are paramount at Workday, and we believe that being transparent and facilitating information sharing are key to our success.
Learning and Development Our employees tell us they are most engaged when they are continuously being exposed to new things, empowered to build new skills, and able to make an impact. We offer a number of educational resources, development opportunities, and a support community to guide employees throughout their Workday careers, which we refer to as journeys.
We also invest in leading workforce development organizations who provide direct training and employment opportunities for candidates facing barriers to employment through our Opportunity Onramps programs. Learning and Development Our employees tell us they are most engaged when they are continuously being exposed to new things, empowered to build new skills, and able to make an impact.
These programs go beyond traditional medical benefits and wellness offerings and allow employees to focus on their chosen wellness goals as well as their mental health. 4 Table of Conten t s Specific to the COVID-19 pandemic, we continue to take precautions to help support the health and safety of the Workday community, including our employees.
These programs go beyond traditional medical benefits and wellness offerings and allow employees to focus on their chosen wellness goals as well as their mental health. In fiscal 2023, we transitioned to a hybrid work model to provide flexibility for our employees to work from home, while still bringing people together to foster collaboration and innovation.
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When combined with Workday’s financial management and HCM solutions, organizations are able to leverage real-time transactional data to dynamically adjust and recalibrate their plans.
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Workday embeds artificial intelligence (“AI”) and machine learning (“ML”) into the very core of our platform, enabling our applications to natively leverage AI and ML as part of the workflow. As a result, our AI and ML technology helps deliver better employee experiences, improve operational efficiencies, and provide insights for faster, data-driven decision-making.
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It also offers specialized benefits such as support for fertility options and new parents, as well as reimbursement of adoption costs.
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We also offer professional services, as do our Workday Services Partners, to help customers deploy our solutions and continually adopt new capabilities. 1 Table of Contents In fiscal 2023, we announced a new Industry Accelerator program that combines Workday partners, solutions, and services to help speed cloud transformation efforts initially targeted at banking, healthcare, insurance, and technology companies.
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In the wake of the COVID-19 pandemic, we felt that it was important for employees to have a safe, convenient way to access healthcare and have introduced a global virtual healthcare network and onsite healthcare resources, including COVID-19 vaccine and testing drive-thru clinics and flu shot clinics, in addition to expanded healthcare benefits.
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For example, our skills technology, built on an AI and ML foundation, helps organizations make the important shift to a skills-first approach, helping them prepare today for the jobs of tomorrow.
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Belonging and Diversity (“B&D”) plays an integral part in that as we aim to provide our employees with programs and resources that strengthen our culture and empower our communities. In support of our efforts, we have created our own unique approach to diversity called VIBE, which stands for Value Inclusion, Belonging, and Equity for all.
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Workday leverages AI and ML to assist in creating forecasts that incorporate historical and third-party data, like economic data and labor statistics.
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To further support equity in our workplace and in our communities, we have established four guiding principles: hiring and developing diverse talent; cultivating a culture of belonging; strengthening our communities; and building inclusive products and technology. We have made solid progress towards our ongoing company commitments that map to these global guiding principles.
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We also offer specialized benefits such as a holistic global mental and emotional health program, onsite and virtual healthcare resources, and support for fertility options and new parents, as well as reimbursement of adoption costs. Our Commitment to Pay Parity We believe that all employees deserve to be paid fairly and equitably and be afforded an equal chance to succeed.
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These begin right from the moment employees start at Workday, with Learning at Workday, journeys designed to help new employees onboard and get acquainted with our culture, business, and technology.
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Belonging and Diversity (“B&D”) helps us cultivate an equitable and inclusive environment for all. Whether it's through creating resources and initiatives that enable and strengthen our culture, building inclusive products and technology, or hiring and developing diverse talent, our vision is to Value Inclusion, Belonging, and Equity (“VIBE”) for all.
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These are complimented by Career Building at Workday, journeys designed to deepen expertise, grow capabilities, and make meaningful connections; Leading at Workday, journeys that help employees understand our leadership identity and prepare them to take on increasing leadership responsibilities; and The VIBE Way at Workday, journeys designed to equip and empower all employees with the tools and resources to incorporate VIBE into everything we do - from the language we use every day, to how we approach our work and each other, to the way we recruit and hire diverse talent at Workday.
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To continue to improve employee representation, in 2020, we declared a set of company commitments to increase our overall representation of Black and Latinx employees in the U.S. by 30% and to double the number of our Black and Latinx leaders in the U.S. by the end of calendar year 2023.
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As part of our support in fiscal 2022, we announced that the majority of employees will not be required to return to their Workday office before April 2022, introduced flexible work options, enhanced the healthcare resources provided to our employees, and offered new employees a $500 equipment stipend to enable them to have a comfortable work-from-home environment.
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We have successfully surpassed our overall representation goal and as of January 31, 2023, we are at 86% of our goal to double the number of Black and Latinx leaders in the U.S.
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Governmental Regulation As a public company with global operations, we are subject to various federal, state, local, and foreign laws and regulations.
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We believe that talent is everywhere, but opportunity is not. Skills, education, and experience are gained in a variety of ways that are often not recognized in the traditional recruiting process. Talent acquisition at Workday ensures there is intentionality about weaving VIBE throughout our hiring practices to ensure an inclusive and equitable experience for all.
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There is no assurance that existing or future laws and regulations applicable to our operations, products, and services will not have a material adverse effect on our business.
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Our employees have instant access to training via several industry-leading learning platforms, which provide our global workforce with convenient, timely access to content from subject matter experts. We offer a number of educational resources, development opportunities, and a support community to guide employees throughout their Workday careers.
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Presently, costs and accruals incurred to comply with these governmental regulations are not material to our financial condition or operating results. 6 Table of Conten t s Privacy and Data Protection Laws Our customers can use our applications to collect, use, and store personal data regarding a variety of individuals in connection with their operations, including but not limited to their employees, contractors, students, job applicants, customers, and suppliers.
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For example, we developed Career Hub which helps our employees share skills and interests and receive relevant connections, curated learning content, and recommended jobs to help them on their career journeys.
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National, state, and local governments and agencies in the countries in which we or our customers operate have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, transfer, processing, protection, and disclosure of personal data.
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Using machine learning, Career Hub provides workers with suggestions to grow their skills and capabilities and encourages them to build a plan as they explore opportunities for continued career development. Additionally, to foster a strong culture of compliance and ethics, we conduct annual compliance and ethics training of our Code of Conduct for all employees.
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Additionally, we may need to develop features, enhancements, or modifications to our products to help our customers comply with the privacy and data protection laws in their jurisdictions.
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Since we introduced Workday Peakon Employee Voice in fiscal 2022, we have had an average weekly participation rate of approximately 70% across our global employees, which reflects strong continuous participation by our employees. We receive data points from these surveys that help us identify actions to take to improve our company and our culture.
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The costs of compliance with and other burdens imposed by such laws, regulations, and standards, or any alleged or actual violation, may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties, or liabilities for noncompliance, slow the pace at which we close sales transactions, require us to divert development and other resources, or result in reputational harm or other adverse impacts to our business.
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We offer new remote-based employees a $300 equipment stipend to enable them to have a comfortable work-from-home environment. To help keep health and mental wellness top of mind, we offer a series of programs and communications focused on mental health.
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Moreover, if we or our sub-processors fail to report a data breach or other loss of data within timeframes mandated by law, we may be liable for certain fines, penalties, and other liabilities, and it may damage our reputation and brand.
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Our marketing programs largely target senior business leaders, including CFOs, CHROs, and CIOs. Our sales strategy also focuses on growing our relationships with our existing customers to expand the adoption of our suite of solutions over time.
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Other trademarks, service marks, or trade names appearing in this report are the property of their respective owners.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software, such as the Log4j vulnerability (as defined below), could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation.
To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software, such as the Log4j (as defined below) vulnerability, could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation.
Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines, or other action or liabilities, which could adversely affect our business and operating results.
Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines, or other action or liabilities, any of which could adversely affect our business and operating results.
In addition, such contracts may provide for delays, interruptions, or termination by the government at any time, without cause, which activities may adversely affect our business and operating results and impact other existing or prospective government contracts. Adverse litigation results could have a material adverse impact on our business.
In addition, such contracts may provide for delays, interruptions, or termination by the government at any time, without cause, which may adversely affect our business and operating results and impact other existing or prospective government contracts. Adverse litigation results could have a material adverse impact on our business.
If customers are not satisfied with the quality and timing of work performed by us or a third party or with the type of professional services or applications delivered, or if we or a third party have not fully delivered on certain commitments made to our customers, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction with our services could damage our ability to expand the applications subscribed to by our customers.
If customers are not satisfied with the quality and timing of work performed by us or a third party or with the type of professional services or applications delivered, or if we or a third party have not delivered on commitments made to our customers, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction with our services could damage our ability to expand the applications subscribed to by our customers.
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. Other states have enacted, or are considering, privacy laws as well. Furthermore, the U.S.
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. Furthermore, the U.S.
Our restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Our restated certificate of incorporation and our bylaws, to the fullest extent permitted by law, provide that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Bhusri holds 0.1 million restricted stock units (“RSUs”), which will be settled in an equivalent number of shares of Class A common stock. Further, Messrs.
Bhusri holds 0.1 million restricted stock units, which will be settled in an equivalent number of shares of Class A common stock. Further, Messrs.
Additionally, such issues may also result in vulnerabilities that could inadvertently result in unauthorized access to data. Furthermore, the availability or performance of our applications could also be adversely affected by our customers’ and other users’ inability to access the internet. For example, our customers and other users access our applications through their internet service providers.
Additionally, such issues have, and may in the future, result in vulnerabilities that could inadvertently result in unauthorized access to data. Furthermore, the availability or performance of our applications could also be adversely affected by our customers’ and other users’ inability to access the internet. For example, our customers and other users access our applications through their internet service providers.
We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, and storage of confidential, proprietary, and personal information to support our business operations. In the past several years, supply chain attacks have increased in frequency and severity.
We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, storage of confidential, proprietary, and personal information, and to support our business operations and the availability of our applications. In the past several years, supply chain attacks have increased in frequency and severity.
While we have patent applications pending in the United States and throughout the world, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties.
We have patent applications pending in the United States and throughout the world, but we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties.
Continued uncertainty and friction may result in regulatory, operational, and cost challenges to our UK and global operations. These adverse conditions could continue to result in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, customer bankruptcies, slower adoption of new technologies, and increased price competition.
Continued uncertainty and friction may result in regulatory, operational, and cost challenges to our UK and global operations. 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. Catastrophic or climate-related events may disrupt our business. Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, and Europe.
Any of these events would likely have an adverse effect on our business, financial condition, and operating results. Catastrophic or climate-related events may disrupt our business. Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, and Europe.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. For example, we acquired Scout in fiscal 2020 and Peakon, Zimit, and VNDLY in fiscal 2022.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. For example, we acquired Peakon, Zimit, and VNDLY in fiscal 2022.
In addition, our restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of Workday more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our dual class common stock structure, which provides our co-founders with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock; • our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; • when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock: ◦ certain amendments to our restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock; ◦ our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and ◦ vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only our chairman of the board, co-chief executive officers, co-presidents, or a majority of our Board of Directors are authorized to call a special meeting of stockholders; 30 Table of Conten t s • certain litigation against us can only be brought in Delaware; • we will have two classes of common stock until 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.
In addition, our restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of Workday more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our dual class common stock structure, which provides our Co-Founders with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock; • our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; • when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock: ◦ certain amendments to our restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock; ◦ our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and ◦ vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only our chairperson of the board, co-chief executive officers, co-presidents, or a majority of our Board of Directors are authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; 29 Table of Contents • we will have two classes of common stock until 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.
These problems may be caused by a variety of factors, including infrastructure 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.
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.
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.
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 came into effect on January 1, 2023, with a “lookback” period to January 1, 2022.
Additionally, job candidates may be threatened with legal action under agreements with their existing employers if we attempt to hire them, which could have a chilling effect on hiring and result in a diversion of our time and resources. We must also continue to retain and motivate existing employees through our compensation practices, company culture, and career development opportunities.
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. We must also continue to retain and motivate existing employees through our compensation practices, company culture, and career development opportunities.
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 January 31, 2022.
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 January 31, 2023.
We expect our operating expenses to increase in the future due to substantial investments we make to acquire new customers and develop our applications, anticipated increases in sales and marketing expenses, employee headcount growth expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect we may incur losses on a GAAP basis in the future.
We expect our operating expenses to increase in the future due to substantial investments we have made and continue to make to acquire new customers and develop our applications, anticipated increases in sales and marketing expenses, employee headcount growth expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect we may incur losses on a GAAP basis in the future.
This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions. Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with many customers.
This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions. 11 Table of Contents Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with many customers.
In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, insurrection, pandemics or other public health emergencies (including the ongoing COVID-19 pandemic), or the effects of climate change (such as drought, flooding, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and may endure system interruptions, delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results.
In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability (including the Russia-Ukraine conflict), war, terrorist attack, insurrection, pandemics or other public health emergencies (including the ongoing COVID-19 pandemic), or the effects of climate change (such as drought, flooding, heat waves, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and have, and may in the future, endure system interruptions, and may experience delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results.
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. 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.
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. 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.
As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.
As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally. In addition, Mr.
Our success will depend in part on our ability to manage this growth effectively and to scale our operations appropriately. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls as well as our reporting systems and procedures.
Our success will depend in part on our ability to manage this growth effectively, utilize our resources efficiently, and to scale our operations appropriately. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls as well as our reporting systems and procedures.
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: • the need to develop, localize, and adapt our applications and customer support for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses; • the need to successfully develop and execute on a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure; • stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor; • difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets; • difficulties in leveraging executive presence and company culture globally; • different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues; • new and different sources of competition; • potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights; • laws, customs, and business practices favoring local competitors; • restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes, and barriers or sanctions that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control; • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, and data protection laws and regulations; • increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity requirements; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • ensuring compliance with anti-corruption laws, including the Foreign Corrupt Practices Act and UK Bribery Act; • the effects of currency fluctuations on our revenues and expenses and customer demand for our services; • the cost and potential outcomes of any international claims or litigation; 17 Table of Conten t s • adverse tax consequences and tax rulings; and • unstable economic and political conditions.
We face other risks in doing business on a global scale that could adversely affect our business, including: • the need to develop, localize, and adapt our applications and customer support for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses; • the need to successfully develop and execute on a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure; • stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor; • difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets; • difficulties in leveraging executive presence and company culture globally; • different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues; • new and different sources of competition; • potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights; • laws, customs, and business practices favoring local competitors; • restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes, and barriers or sanctions, including due to the Russia-Ukraine conflict, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control; 12 Table of Contents • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, and data protection laws and regulations; • increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity requirements; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • ensuring compliance with anti-corruption laws, including the Foreign Corrupt Practices Act and United Kingdom (“UK”) Bribery Act; • the effects of currency fluctuations on our revenues and expenses and customer demand for our services; • the cost and potential outcomes of any international claims or litigation; • adverse tax consequences and tax rulings; and • unstable economic and political conditions.
These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows. 25 Table of Conten t s In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts.
These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows. 24 Table of Contents In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts.
Additional factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below: • our ability to attract new customers, customer renewal rates, the financial condition and creditworthiness of our customers, and the timing and rate at which we sign agreements with customers; • the addition or loss of large customers, including through acquisitions or consolidations; • regulatory compliance costs, including research and development costs incurred to add functionality to help our customers comply with evolving privacy and data security laws; • the timing of recognition of revenues and operating expenses, including expenses related to acquisitions and potential future charges for impairment of goodwill; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure; • network outages or security breaches; • general economic, market and geopolitical conditions, including the impact of the ongoing COVID-19 pandemic; • increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements; • the changes in payment terms and timing of customer payments and payment defaults by customers, including those impacted by the ongoing COVID-19 pandemic; • changes in our pricing policies or those of our competitors and the mix of applications sold during a period; • seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter; • the timing and success of new application and service introductions by us or our competitors; • changes in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners, and the impact of strategic partnerships, acquisitions, or equity investments; • expenses related to our real estate portfolio, including our leases and data center expansion; and • changes in laws and regulations that impact our business or reported financial results, including changes in accounting principles generally accepted in the United States.
Additional factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below: • our ability to attract new customers, customer renewal rates, the financial condition and creditworthiness of our customers, and the timing and rate at which we sign agreements with customers; • the addition or loss of large customers, including through acquisitions or consolidations; • regulatory compliance costs, including research and development costs incurred to add functionality to help our customers comply with evolving privacy and data security laws; • the timing of recognition of revenues and operating expenses, including expenses related to acquisitions and potential future charges for impairment of goodwill; 14 Table of Contents • the amount and timing of operating expenses related to organizational changes, employee matters, and the maintenance and expansion of our business, operations, and infrastructure; • network outages or security breaches; • general economic, market, and geopolitical conditions, including the impact of recent economic downturn, the COVID-19 pandemic, the Russia-Ukraine conflict, inflation, and rising interest rates; • increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements; • the changes in payment terms and timing of customer payments and payment defaults by customers, including those impacted by the recent macroeconomic conditions; • changes in our pricing policies or those of our competitors and the mix of applications sold during a period; • seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter; • the timing and success of new application and service introductions by us or our competitors; • changes in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners, and the impact of strategic partnerships, acquisitions, or equity investments; • expenses related to our real estate portfolio, including our leases and data center expansion; and • changes in laws and regulations that impact our business or reported financial results, including changes in accounting principles generally accepted in the United States.
Compliance with applicable laws and regulations regarding personal data may require changes in services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or greater difficulty competing with foreign-based firms which could adversely affect our business and operating results. 22 Table of Conten t s Any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand.
Compliance with applicable laws and regulations regarding personal data may require changes in services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or greater difficulty competing with foreign-based firms which could adversely affect our business and operating results. 21 Table of Contents Any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand.
Because we encounter long sales cycles when selling to large customers and we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
Risks Related to Financial Matters Because we encounter long sales cycles when selling to large customers and we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected. Additionally, our ability to accurately forecast our future rate of growth is limited.
As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected. 25 Table of Contents Additionally, our ability to accurately forecast our future rate of growth is limited.
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. 23 Table of Conten t s 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.
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. 22 Table of Contents 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.
As of January 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.
As of January 31, 2023, our Co-Founder, Co-CEO, and Chairperson 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.
Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers during the COVID-19 pandemic, or customer insolvencies resulting from severe economic hardship during the COVID-19 pandemic, could have an impact on our subscription services revenues in any given period.
Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers or customer insolvencies resulting from severe economic hardship, could have an impact on our subscription services revenues in any given period.
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. 11 Table of Conten t s 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.
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. 9 Table of Contents 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.
As of January 31, 2022, we had federal and state net operating loss carryforwards due to prior period losses. If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2023 and 2042.
As of January 31, 2023, we had federal and state net operating loss carryforwards due to prior period losses. If not utilized, the pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 2024 and fiscal 2044.
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.
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.
Failure to effectively manage growth could result in difficulty or delays in deploying products and services to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties, and any of these difficulties could adversely impact our business performance and operating results. 15 Table of Conten t s If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
Failure to effectively manage growth or efficiently utilize our resources could result in difficulty or delays in deploying products and services to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties, and any of these difficulties could adversely impact our business performance and operating results. 15 Table of Contents If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including: • inability to integrate the intellectual property, technology infrastructure, personnel, and operations of the acquired business, including difficulty in addressing security risks of the acquired business, or benefit from an acquisition in a profitable manner; • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty in leveraging the data of the acquired business if it includes personal data; • ineffective or inadequate controls, procedures, or policies at the acquired company and increased risk of non-compliance; • multiple product lines or service offerings as a result of our acquisitions that are offered, priced, and supported differently, as well as the potential for such acquired product lines and service offerings to impact the profitability of existing products; • the opportunity cost of diverting management and financial resources away from other products, services, and strategic initiatives; • difficulties and additional expenses associated with synchronizing product offerings, customer relationships, and contract portfolio terms and conditions between Workday and the acquired business; • unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters; • adverse effects on our brand or existing business relationships with business partners and customers as a result of the acquisition; • potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers; • inability to maintain relationships with key customers, suppliers, and partners of the acquired business; 16 Table of Conten t s • difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently; • lack of experience in new markets, products, or technologies; • difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific regulatory risks; • 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; • the failure of strategic acquisitions to perform as expected or to meet financial projections; and • use of substantial portions of our available cash to consummate the acquisition.
We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including: • inability to integrate the intellectual property, technology infrastructure, personnel, and operations of the acquired business, including difficulty in addressing security risks of the acquired business, or benefit from an acquisition in a profitable manner; • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty in leveraging the data of the acquired business if it includes personal data; • ineffective or inadequate controls, procedures, or policies at the acquired company and increased risk of non-compliance; • multiple product lines or service offerings as a result of our acquisitions that are offered, priced, and supported differently, as well as the potential for such acquired product lines and service offerings to impact the profitability of existing products; • the opportunity cost of diverting management and financial resources away from other products, services, and strategic initiatives; • difficulties and additional expenses associated with synchronizing product offerings, customer relationships, and contract portfolio terms and conditions between Workday and the acquired business; • unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters; • adverse effects on our brand or existing business relationships with business partners and customers as a result of the acquisition; • potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers; • inability to maintain relationships with key customers, suppliers, and partners of the acquired business; • difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently; • lack of experience in new markets, products, or technologies; • difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific regulatory risks; • 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; • 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; and • use of substantial portions of our available cash to consummate the acquisition. 17 Table of Contents In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually.
Incorrect or improper implementation or use of our applications could result in customer and user dissatisfaction and harm our business and operating results. 13 Table of Conten t s In order for our customers to successfully implement our applications, they need access to highly skilled and trained service professionals.
Incorrect or improper implementation or use of our applications could result in customer and user dissatisfaction and harm our business and operating results. In order for our customers to successfully implement our applications, they need access to highly skilled and trained service professionals.
We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology. For example, machine learning and artificial intelligence are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed.
We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology. For example, AI and ML are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed.
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.
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, our business and operating results could be adversely affected.
If the operations of these third parties are disrupted, including as a direct or indirect result of the ongoing COVID-19 pandemic, our own operations may suffer, which could adversely impact our operating results. In addition, we rely upon licensed third-party software to help improve our internal systems, processes, and controls.
If the operations of these third parties are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may suffer, which could adversely impact our operating results. In addition, we rely upon licensed third-party software to help improve our internal systems, processes, and controls.
Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment. 31 Table of Conten t s General Risk Factors Adverse economic conditions may negatively impact our business.
Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment. 30 Table of Contents General Risk Factors Adverse economic conditions may negatively impact our business.
We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions. These vendors include, without limitation: UKG Inc.
We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions.
Risks Related to Financial Matters Our historic revenue growth rates should not be viewed as indicative of our future performance. Our revenue growth rates have declined and may decline again in the future as the size of our customer base and market penetration increases.
Our historic revenue growth rates should not be viewed as indicative of our future performance. Our revenue growth rates have declined and may decline again in the future as the size of our customer base and market penetration increases.
Further, our current and future office environments or flexible work policies may not meet the expectations of our employees or prospective employees. If we fail to attract new personnel or to retain our current personnel, our business and future growth prospects could be adversely affected.
Further, our current and future office environments or our current hybrid work policies may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting. If we fail to attract new personnel or to retain our current personnel, our business and future growth prospects could be adversely affected.
Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services and technologies in connection with our products and services.
Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services, and technologies into our own products and services.
The federal net operating losses generated in and after fiscal 2018 do not expire and may be carried forward indefinitely. We also have federal research tax credit carryforwards, which if not utilized will begin to expire in fiscal 2023.
The federal net operating losses generated in and after fiscal 2018 do not expire and may be carried forward indefinitely. We also have federal research tax credit carryforwards, which if not utilized will expire between fiscal 2024 and fiscal 2044.
As of January 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 0.5 million shares of Class A common stock.
As of January 31, 2023, our Co-Founder and CEO Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 45 million shares of Class B common stock and 0.4 million shares of Class A common stock.
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. These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company.
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.
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.
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.
As discussed above, the extent to which the ongoing COVID-19 pandemic, the resulting global economic uncertainty, and measures taken in response to the pandemic could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict.
As discussed above, the extent to which global economic uncertainty, inflation, measures taken in response to the COVID-19 pandemic, 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.
As a result, a compromise of our applications or unauthorized access, acquisition, use, tampering, or destruction of this data, or unavailability of data, could expose us to regulatory actions, litigation, investigations, remediation and indemnity obligations, damage to our reputation and brand, supplemental disclosure obligations, loss of customer, consumer, and partner confidence in the security of our applications, destruction of information, an increase in our insurance premiums, loss of authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) or other authorizations, impairment to our business, and related fees, expenses, loss of revenues, and other potential liabilities.
As a result, a compromise of our applications or systems, or unauthorized access to, acquisition, use, tampering, release, alteration, theft, loss, or destruction of sensitive data, or unavailability of data or our applications, could disrupt our operations or impact the availability or performance of our applications; expose us and our customers to regulatory obligations and actions, litigation, investigations, remediation and indemnity obligations, or supplemental disclosure obligations; damage our reputation and brand; 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.
Because of the large amount of data that we collect and process in our systems, even if we do not experience a customer outage as a result of these issues, it is possible that these issues could result in significant disruption, data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant.
Because of the large amount of data that we collect and process in our systems, it is possible that these issues could result in significant disruption, data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant.
It is especially difficult to predict the impact on the global economic markets, which have been and will continue to be highly dependent upon the actions of governments, businesses, and other enterprises in response to the pandemic, the effectiveness of those actions, and vaccine availability, distribution, and adoption.
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.
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.
In addition, our future rate of growth is subject to a number of uncertainties, including general economic and market conditions, including those caused by recent economic downturn, as well as risks associated with growing companies in rapidly changing industries.
In addition, neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act.
In addition, neither the exclusive forum provision in our restated certificate of incorporation nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act.
Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit highly skilled employees, especially in the areas of product development, engineers with significant experience in designing and developing software and internet-related services, including in the areas of machine learning and artificial intelligence; for cybersecurity professionals; and for senior sales executives.
Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit and retain highly skilled employees, especially in the areas of product development, cybersecurity, senior sales executives, and engineers with significant experience in designing and developing software and internet-related services, including in the areas of AI and ML.
Any sustained adverse impacts from the continued spread of COVID-19 could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
Any sustained adverse impacts from these and other recent macroeconomic events could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
(formerly The Ultimate Software Group, Inc.), Automatic Data Processing, Inc., Infor, Inc., Ceridian HCM Holding Inc., Microsoft Corporation, Anaplan, Inc., and Coupa Software Inc. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances, and organic development.
These vendors include, without limitation: UKG Inc., Automatic Data Processing, Inc., Infor, Inc., Ceridian HCM Holding Inc., Microsoft Corporation, Anaplan, Inc., and Coupa Software Inc. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances, and organic development.
You should not consider our recent GAAP-profitability and growth in revenues as indicative of our future performance. We cannot ensure that we will continue to achieve GAAP profitability in the future or that, if we continue to be GAAP-profitable, we will sustain such profitability. We have substantial indebtedness which may adversely affect our financial condition and operating results.
You should not consider any prior period GAAP-profitability and growth in revenues as indicative of our future performance. We cannot ensure that we will achieve GAAP profitability in the future or that, if we become GAAP-profitable in a certain period, we will sustain such profitability. We have substantial indebtedness which may adversely affect our financial condition and operating results.
These facilities may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions (including shelter-in-place or similar orders), changes to legal or permitting requirements, and litigation to stop, limit or delay operation.
These facilities may also be subject to capacity constraints, financial difficulties, break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit or delay operation.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards, or expectations regarding the environmental impacts of our business.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards, or stakeholder expectations regarding climate change that may impact our business, financial condition, and operating results.
Risks Related to Cybersecurity, Data Privacy, and Intellectual Property If our security measures are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
Risks Related to Cybersecurity, Data Privacy, and Intellectual Property If our information technology systems are compromised or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, our operations may be disrupted, our applications may become unavailable, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
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.
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, renew on different pricing terms, or fail to renew, and market perceptions of our company and our applications may be impaired, and our reputation and brand may suffer.
From time to time, there may be changes in our executive management team and to other key employee roles resulting from organizational changes or the hiring or departure of executives or other employees, which could have a serious adverse effect on our business and operating results.
From time to time, there may be changes in our executive management team and to other key employee roles resulting from organizational changes or the hiring or departure of executives or other employees, which could disrupt our business, impact our ability to preserve our culture, negatively affect our ability to attract and retain personnel, or otherwise have a serious adverse effect on our business and operating results.
Additionally, during the ongoing COVID-19 pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk of cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks.
Additionally, remote work and resource access, including our hybrid work model, may result in an increased risk of cybersecurity-related events such as phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks.
We host our applications and serve our customers from data centers 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.
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.
We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and users, as well as our own needs, and to ensure that our services and solutions are accessible within an acceptable load time.
We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and users, as well as our own needs, and to ensure that our services and solutions are accessible within an acceptable load time. If we do not accurately predict our infrastructure requirements, we may experience service outages.
Additionally, we and our stakeholders increasingly expect to have a corporate culture that embraces diversity and inclusion, and any inability to attract and retain diverse and qualified personnel may harm our corporate culture and our business. Moreover, our flexible work policies require significant action to preserve culture with some of the employee base working remotely.
Additionally, we and our stakeholders increasingly expect to have a corporate culture that embraces diversity and inclusion, and any inability to attract and retain diverse and qualified personnel may harm our corporate culture and our business. Moreover, our hybrid work policies require significant action to preserve our culture.
Key cybersecurity risks range from viruses, worms, and other malicious software programs, phishing attacks or ransomware, to exploitation of software bugs or other defects, to “mega breaches” targeted against cloud services and other hosted software, any of which can result in disclosure of confidential information and intellectual property, defective products, production downtimes, reputational harm, compromised data, and an increase in costs to the business.
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.
In April 2020, we amended and restated our bylaws to provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”).
Our bylaws include a provision providing that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”).
From time to time, we may also change our pricing structure, which could adversely impact demand for our products. 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.
From time to time, we may also change our pricing structure, which could adversely impact demand for our products. Moreover, our customers have and may continue to request price concessions and delayed payment terms.
In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications. 31 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The market for skilled personnel in the software industry is very competitive, and we have seen these pressures increase significantly through the COVID-19 pandemic. As we are headquartered in the San Francisco Bay Area, we face intense competition among large and small firms in the Silicon Valley market.
The market for skilled personnel in the software industry is very competitive, and as we are headquartered in the San Francisco Bay Area, we face intense competition among large and small firms in the Silicon Valley market.
Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business. We may not realize the anticipated long-term stockholder value of our Share Repurchase Program.
Our stock price has been volatile in the past and may be subject to volatility in the future. 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.
Our stock price has been volatile in the past and may be subject to volatility in the future. 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, many of which are beyond our control.
In addition, our indebtedness could, among other things: • make it difficult for us to pay other obligations; • make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements, or other purposes; • adversely affect our liquidity and result in a material adverse effect on our financial position upon repayment of the indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes; • limit our flexibility in planning for and reacting to changes in our business; and • negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business. 27 Table of Conten t s Our Credit Agreement also imposes restrictions on us and requires us to maintain compliance with specified covenants, including a specific leverage ratio.
In addition, our indebtedness could, among other things: • make it difficult for us to pay other obligations; • make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements, or other purposes; • adversely affect our liquidity and result in a material adverse effect on our financial condition upon repayment of the indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes; • limit our flexibility in planning for and reacting to changes in our business; • increase our vulnerability to the impact of adverse economic conditions, including rising interest rates (which can make refinancing existing indebtedness more difficult or costly); and • negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business. 26 Table of Contents Our Senior Notes and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants.
If the perceived or actual value of our equity awards declines, or if the mix of equity and cash compensation that we offer is not sufficiently attractive, it may adversely affect our ability to recruit and retain highly skilled employees.
Job candidates and existing employees carefully consider the value of the equity awards they receive in connection with their employment. If the perceived or actual value of our equity awards declines, or if the mix of equity and cash compensation that we offer is not sufficiently attractive, it may adversely affect our ability to recruit and retain highly skilled employees.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The chart assumes $100 was invested at the close of market on January 31, 2017, in our Class A common stock, the S&P 500 Index, and the S&P 1500 Application Software Index, and assumes the reinvestment of any dividends.
The chart assumes $100 was invested at the close of market on January 31, 2018, in our Class A common stock, the S&P 500 Index, and the S&P 1500 Application Software Index, and assumes the reinvestment of any dividends.
Stockholders As of February 24, 2022, there were 16 stockholders of record of our Class A common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners, as well as 71 stockholders of record of our Class B common stock.
Stockholders As of February 23, 2023, there were 23 stockholders of record of our Class A common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners, as well as 68 stockholders of record of our Class B common stock.
For further information, see Note 11, Debt , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
All repurchases disclosed in this table were made pursuant to the publicly announced Share Repurchase Program. For further information, see Note 14, Stockholders’ Equity of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. ITEM 6. [Reserved] 35 Table of Contents
Removed
The stock price performance on the following graph is not necessarily indicative of future stock price performance. 34 Table of Conten t s Company/Index 1/31/2017 1/31/2018 1/31/2019 1/31/2020 1/31/2021 1/31/2022 Workday, Inc. $ 100.00 $ 144.29 $ 218.47 $ 222.20 $ 273.84 $ 304.50 S&P 500 Index 100.00 126.40 123.46 150.22 176.11 217.09 S&P 1500 Application Software Index 100.00 147.68 178.21 238.09 314.13 348.38 Recent Sales of Unregistered Securities During the three months ended January 31, 2022, we issued 109 shares of our unregistered Class A common stock to holders of our 2022 Notes upon settlement of conversion of an immaterial aggregate principal amount of such notes.
Added
The stock price performance on the following graph is not necessarily indicative of future stock price performance. 33 Table of Contents Company/Index 1/31/2018 1/31/2019 1/31/2020 1/31/2021 1/31/2022 1/31/2023 Workday, Inc. $ 100.00 $ 151.41 $ 154.00 $ 189.78 $ 211.04 $ 151.33 S&P 500 Index 100.00 97.68 118.84 139.32 171.75 157.60 S&P 1500 Application Software Index 100.00 120.67 161.22 212.71 235.90 191.10 Recent Sales of Unregistered Securities None. 34 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchases The table below sets forth information regarding our purchases of our Class A common stock during the three months ended January 31, 2023 (in thousands, except per share data): Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1) November 1, 2022 - November 30, 2022 — $ — — $ — December 1, 2022 - December 31, 2022 181 165.72 181 470,001 January 1, 2023 - January 31, 2023 269 165.76 269 425,334 Total 450 450 (1) In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock.
Removed
This share amount represents the conversion value of the 2022 Notes in excess of the principal amount converted. These shares of our Class A common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Added
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.
Removed
Additionally, in connection with our acquisition of VNDLY during the three months ended January 31, 2022, we agreed to issue 152,384 shares of our Class A common stock to certain key VNDLY employees (“VNDLY reserved shares”), with 50% of such shares to be issued following the first anniversary of the closing date of the acquisition and the remaining 50% to be issued following the second anniversary of the closing date, subject to service conditions.
Added
The timing and total amount of shares repurchased 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.
Removed
These shares of our Class A common stock will be issued in reliance on one or more of the following exemptions or exclusions from the registration requirements of the Securities Act: Section 4(a)(2) of the Securities Act, Regulation D promulgated under the Securities Act, and Regulation S promulgated under the Securities Act.
Removed
For further information, see Note 7, Business Combinations , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. 35 Table of Conten t s Purchases of Equity Securities by the Issuer and Affiliated Purchases The table below sets forth information regarding our purchases of our Class A common stock during the three months ended January 31, 2022.
Removed
The shares purchased represent the exercise of the convertible note hedges relating to the partial early conversion of the 2022 Notes. For further information, see Note 11, Debt , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs November 1, 2021 - November 30, 2021 — $ — — — December 1, 2021 - December 31, 2021 108 272.49 — — January 1, 2022 - January 31, 2022 — — — — Total 108 —

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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For contracts that contain multiple performance obligations, we assess each promise separately and allocate the transaction price on a relative standalone selling price basis. We apply significant judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
For contracts that contain multiple performance obligations, we assess each promise separately and allocate the transaction price on a relative standalone selling price (“SSP”) basis. We apply significant judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.
The table below includes our material contractual obligations, excluding imputed interest, as of January 31, 2022 (in thousands). For further information, see the associated Notes to Consolidated Financial Statements included in Part II, Item 8 of this report referenced in the table below.
The table below includes our material contractual obligations, excluding imputed interest, as of January 31, 2023 (in thousands). For further information, see the associated Notes to Consolidated Financial Statements included in Part II, Item 8 of this report referenced in the table below.
See “Results of Operations—Operating Expenses” and “Results of Operations—Operating Margin” for reconciliations from the most directly comparable GAAP financial measures, GAAP operating expenses, GAAP operating income (loss), and GAAP operating margin, to the non-GAAP financial measures, non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin, for fiscal 2022, 2021, and 2020.
See “Results of Operations—Operating Expenses” and “Results of Operations—Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating expenses, GAAP operating income (loss), and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin, for fiscal 2023, 2022, and 2021.
Contractual Obligations Our contractual obligations primarily consist of borrowings under our Credit Agreement, our convertible senior notes, leases for office space and co-location facilities for data center capacity, agreements for third-party hosted infrastructure platforms for business operations, and other purchase obligations entered into in the ordinary course of business.
Contractual Obligations Our contractual obligations primarily consist of borrowings under our Senior Notes, leases for office space and co-location facilities for data center capacity, agreements for third-party hosted infrastructure platforms for business operations, and other purchase obligations entered into in the ordinary course of business.
For the reasons set forth below, management believes that excluding the components provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business. • Share-Based Compensation Expenses.
For the reasons set forth below, we believe that excluding these components provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business. • Share-Based Compensation Expenses.
Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
In addition, we plan to continue to expand our ability to sell our applications globally, particularly in Europe and Asia-Pacific, by investing in product development and customer support to address the business needs of local markets, increasing our sales and marketing organizations, acquiring and leasing additional office space, and expanding our ecosystem of service partners to support local deployments.
In addition, we plan to continue to expand our ability to sell our applications globally, particularly in Europe and Asia-Pacific, by investing in product development and customer support to address the business needs of targeted local markets, increasing our sales organization and marketing programs, acquiring and leasing additional office space, and expanding our ecosystem of service partners to support local deployments.
The following discussion of our financial condition and results of operations covers fiscal 2022 and 2021 items and year-over-year comparisons between fiscal 2022 and 2021.
The following discussion of our financial condition and results of operations covers fiscal 2023 and 2022 items and year-over-year comparisons between fiscal 2023 and 2022.
In addition, other operating expenses include employer payroll tax-related items on employee stock transactions of $76 million, $51 million, and $55 million for fiscal 2022, 2021, and 2020, respectively. (2) See “Non-GAAP Financial Measures” below for further information.
In addition, other operating expenses include employer payroll tax-related items on employee stock transactions of $52 million, $76 million, and $51 million for fiscal 2023, 2022, and 2021, respectively. (2) See “Non-GAAP Financial Measures” below for further information.
Subscription services revenues are driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications. The mix of applications to which a customer subscribes can affect our financial performance due to price differentials in our applications.
Subscription services revenues are driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications. 37 Table of Contents The mix of applications to which each customer subscribes can affect our financial performance due to price differentials in our applications.
Although share-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude share-based compensation expenses to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies.
Although share-based compensation is an important aspect of the compensation of our employees and executives, we believe it is useful to exclude share-based compensation expenses to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies.
Discussions of fiscal 2020 items and year-over-year comparisons between fiscal 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, that was filed with the SEC on March 2, 2021.
Discussions of fiscal 2021 items and year-over-year comparisons between fiscal 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, that was filed with the SEC on February 28, 2022.
Liquidity and Capital Resources As of January 31, 2022, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $3.6 billion, which were primarily held for working capital purposes.
Liquidity and Capital Resources As of January 31, 2023, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $6.1 billion, which were primarily held for working capital purposes.
We use the non-GAAP financial measure of non-GAAP operating expenses to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance.
Non-GAAP Operating Expenses, Non-GAAP Operating Income (Loss), and Non-GAAP Operating Margin We use the non-GAAP financial measures of non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance.
Recent Accounting Pronouncements See Note 2, Accounting Standards and Significant Accounting Policies , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report for a full description of recent accounting pronouncements. 48 Table of Conten t s
Recent Accounting Pronouncements See Note 2, Accounting Standards and Significant Accounting Policies , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report for a full description of recent accounting pronouncements. 47 Table of Contents
We believe our investment in professional services, as well as partners building consulting practices around Workday, will drive additional customer subscriptions and continued growth in revenues.
We believe our investment in professional services, as well as partners building consulting practices around Workday and helping to deliver additional innovation and solutions, will drive additional customer subscriptions and continued growth in revenues.
We expect GAAP and non-GAAP product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies. Sales and Marketing GAAP operating expenses in sales and marketing were $1.5 billion for fiscal 2022, compared to $1.2 billion for fiscal 2021, an increase of $229 million, or 19%.
We expect GAAP and non-GAAP product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies. Sales and Marketing GAAP operating expenses in sales and marketing were $1.8 billion for fiscal 2023, compared to $1.5 billion for fiscal 2022, an increase of $386 million, or 26%.
We expect our business to continue to generate sufficient operating cash flows; however, if the COVID-19 pandemic worsens or is prolonged, our customers may request payment timing concessions, which could materially impact the timing and predictability of our operating cash flows in any given period.
We expect our business to continue to generate sufficient operating cash flows; however, if the economic uncertainty caused by recent macroeconomic events worsens or is prolonged, our customers may request payment timing concessions, which could materially impact the timing and predictability of our operating cash flows in any given period.
Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as a single performance obligation may require significant judgment that requires us to assess the nature of the promise and the value delivered to the customer. Our primary performance obligations consist of subscription services and professional services.
Our contracts with customers may include multiple promises to transfer services to a customer. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as a single performance obligation may require significant judgment that requires us to assess the nature of the promise and the value delivered to the customer.
Costs of professional services revenues consist primarily of employee-related expenses associated with these services, subcontractor expenses, and travel expenses. Product development . Product development expenses consist primarily of employee-related expenses. We continue to focus our product development efforts on adding new features and applications, increasing functionality, and enhancing the ease of use of our cloud applications. Sales and marketing.
Costs of professional services revenues consist primarily of employee-related expenses associated with these services, subcontractor expenses, and travel expenses. Product development expenses . Product development expenses consist primarily of employee-related expenses associated with our efforts to add new features and applications, increase functionality, and enhance the ease of use of our cloud applications. Sales and marketing expenses .
Cash used in investing activities also included capital expenditures of $264 million mainly for data center projects, the purchase of office space within our corporate headquarters of $171 million, purchases of non-marketable equity and other investments of $123 million, and the timing of purchases and maturities of marketable securities.
Cash used in investing activities also included capital expenditures of $264 million mainly for data center projects, the purchase of leased office space within our corporate headquarters from an affiliate of our Co-Founder and CEO Emeritus, David Duffield, of $171 million, purchases of non-marketable equity and other investments of $123 million, and a cash outflow from the timing of purchases and maturities of marketable securities of $55 million.
Non-marketable equity investments are valued using significant unobservable inputs or data in an inactive market. Valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data, and require our judgment due to the absence of market prices and an inherent lack of liquidity.
We adjust the carrying values of non-marketable equity investments based on both observable and unobservable inputs or data in an inactive market. Valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data, and require our judgment due to the absence of market prices and an inherent lack of liquidity.
Non-GAAP operating expenses in sales and marketing were $1.2 billion for fiscal 2022, compared to $995 million for fiscal 2021, an increase of $204 million, or 21%.
Non-GAAP operating expenses in sales and marketing were $1.6 billion for fiscal 2023, compared to $1.2 billion for fiscal 2022, an increase of $358 million, or 30%.
Subscription Revenue Backlog As of January 31, 2022, our total subscription revenue backlog was $12.8 billion, with $8.0 billion expected to be recognized in revenues over the next 24 months. As of January 31, 2021, our total subscription revenue backlog was $10.1 billion, with $6.5 billion expected to be recognized in revenues over the next 24 months.
Subscription Revenue Backlog As of January 31, 2023, our total subscription revenue backlog was $16.4 billion, with $9.7 billion expected to be recognized in revenues over the next 24 months. As of January 31, 2022, our total subscription revenue backlog was $12.8 billion, with $8.0 billion expected to be recognized in revenues over the next 24 months.
Reconciliations of our GAAP to non-GAAP operating income (loss) and operating margin were as follows (in thousands, except percentages): Year Ended January 31, 2022 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (116,450) $ 1,112,405 $ 153,749 $ 1,149,704 Operating margin (2.3) % 21.6 % 3.1 % 22.4 % Year Ended January 31, 2021 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (248,599) $ 1,004,854 $ 110,986 $ 867,241 Operating margin (5.8) % 23.3 % 2.6 % 20.1 % Year Ended January 31, 2020 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (502,230) $ 859,880 $ 126,816 $ 484,466 Operating margin (13.8) % 23.7 % 3.5 % 13.4 % (1) See “Non-GAAP Financial Measures” below for further information.
See “Non-GAAP Financial Measures” below for further information. 41 Table of Contents Reconciliations of our GAAP to non-GAAP operating income (loss) and operating margin were as follows (in thousands, except percentages): Year Ended January 31, 2023 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (222,200) $ 1,294,622 $ 137,214 $ 1,209,636 Operating margin (3.6) % 20.8 % 2.3 % 19.5 % Year Ended January 31, 2022 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (116,450) $ 1,112,405 $ 153,749 $ 1,149,704 Operating margin (2.3) % 21.6 % 3.1 % 22.4 % Year Ended January 31, 2021 GAAP Share-Based Compensation Expenses Other Operating Expenses Non-GAAP (1) Operating income (loss) $ (248,599) $ 1,004,854 $ 110,986 $ 867,241 Operating margin (5.8) % 23.3 % 2.6 % 20.1 % (1) See “Non-GAAP Financial Measures” below for further information.
Non-GAAP operating expenses in costs of subscription services were $656 million for fiscal 2022, compared to $514 million for fiscal 2021, an increase of $142 million, or 28%.
Non-GAAP operating expenses in costs of subscription services were $846 million for fiscal 2023, compared to $656 million for fiscal 2022, an increase of $190 million, or 29%.
Our cash equivalents and marketable securities are composed primarily of, in order from largest to smallest, commercial paper, U.S. treasury securities, money market funds, corporate bonds, U.S. agency obligations, and marketable equity investments.
Our cash equivalents and marketable securities are composed of, in order from largest to smallest, U.S. treasury securities, commercial paper, corporate bonds, U.S. agency obligations, money market funds, and marketable equity investments. We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock.
Any of these factors could harm our business, financial condition, and operating results. For further discussion of the potential impacts of the COVID-19 pandemic on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report.
For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report.
Our cash flows were as follows (in thousands): Year Ended January 31, 2022 2021 2020 Net cash provided by (used in): Operating activities $ 1,650,704 $ 1,268,441 $ 864,598 Investing activities (1,607,426) (1,241,624) (896,922) Financing activities 110,251 625,049 125,124 Effect of exchange rate changes (705) 1,334 (282) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 152,824 $ 653,200 $ 92,518 Operating Activities Cash provided by operating activities was $1.7 billion and $1.3 billion for fiscal 2022 and 2021, respectively.
Our cash flows fiscal 2023, 2022, and 2021 were as follows (in thousands): Year Ended January 31, 2023 2022 2021 Net cash provided by (used in): Operating activities $ 1,657,195 $ 1,650,704 $ 1,268,441 Investing activities (2,505,926) (1,607,426) (1,241,624) Financing activities 1,203,821 110,251 625,049 Effect of exchange rate changes (595) (705) 1,334 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 354,495 $ 152,824 $ 653,200 Operating Activities Cash provided by operating activities was $1.7 billion for both fiscal 2023 and 2022.
We satisfy these performance obligations over time as we transfer the promised services to our customers. Subscription services are made up of a daily requirement to deliver the service to the customer. Each day the delivery of the service provides value to the customer and each day represents a measure toward completion of the service.
Our primary performance obligations consist of subscription services and professional services. We satisfy these performance obligations over time as we transfer the promised services to our customers. Subscription services are made up of a daily requirement to deliver the service to the customer.
There was no change to the period of benefit during the periods presented. 47 Table of Conten t s Business Combinations, Goodwill, and Acquisition-Related Intangible Assets We allocate the purchase consideration of acquired companies to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess recorded to goodwill.
Business Combinations, Goodwill, and Acquisition-Related Intangible Assets We allocate the purchase consideration of acquired companies to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess recorded to goodwill.
Subscription services revenues were $4.5 billion for fiscal 2022, compared to $3.8 billion for fiscal 2021, an increase of $758 million, or 20%. The increase in subscription services revenues was primarily due to an increased number of customer contracts and strong customer renewals, with gross retention over 95%.
Subscription services revenues were $5.6 billion for fiscal 2023, compared to $4.5 billion for fiscal 2022, an increase of $1.0 billion, or 22%. The increase in subscription services revenues was primarily due to an increased number of customer contracts and strong customer renewals, with gross and net retention rates over 95% and over 100%, respectively.
Periodically, we review whether events or changes in circumstances have occurred that could impact the period of benefit. Any future changes in circumstances around the terms of our initial and renewal contracts, customer attrition, underlying technology life, and certain other factors may materially change the period of benefit and therefore the amortization amounts recognized on the Consolidated Statements of Operations.
Any future changes in circumstances around the terms of our initial and renewal contracts, customer attrition, underlying technology life, and certain other factors may materially change the period of benefit and therefore the amortization amounts recognized on the Consolidated Statements of Operations. There was no change to the period of benefit during the periods presented.
Sales commissions for new revenue contracts are capitalized and amortized on a straight-line basis over a period of benefit that we have determined to be five years. General and administrative .
Sales commissions for new revenue contracts are capitalized and amortized on a straight-line basis over a period of benefit that we have determined to be five years. General and administrative expenses . General and administrative expenses consist of employee-related expenses for finance and accounting, legal, HR, information systems personnel, professional fees, and other corporate expenses.
Investing Activities Cash used in investing activities for fiscal 2022 was $1.6 billion, which was primarily related to cash consideration for the acquisitions of VNDLY, Zimit, and Peakon, net of cash acquired, of $1.2 billion.
These payments were partially offset by proceeds of $116 million from sales of marketable and non-marketable securities. Cash used in investing activities for fiscal 2022 was $1.6 billion, which was primarily related to cash consideration for the acquisitions of VNDLY, Zimit, and Peakon, net of cash acquired, of $1.2 billion.
Costs of Subscription Services GAAP operating expenses in costs of subscription services were $796 million for fiscal 2022, compared to $612 million for fiscal 2021, an increase of $184 million, or 30%.
Costs of Subscription Services GAAP operating expenses in costs of subscription services were $1.0 billion for fiscal 2023, compared to $796 million for fiscal 2022, an increase of $216 million, or 27%.
We believe that non-GAAP operating expenses reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
We believe that these non-GAAP measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. 42 Table of Contents Our non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin exclude the components listed below.
The preparation of these consolidated financial statements requires us to make estimates, judgements, and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgements, and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgements, and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgements, and assumptions.
Sales commissions for new revenue contracts are capitalized and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors.
Deferred Commissions Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for new revenue contracts are capitalized and then amortized on a straight-line basis over a period of benefit that we have determined to be five years.
We expect GAAP and non-GAAP operating expenses in costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties. 41 Table of Conten t s Costs of Professional Services GAAP operating expenses in costs of professional services were $632 million for fiscal 2022, compared to $586 million for fiscal 2021, an increase of $46 million, or 8%.
We expect GAAP and non-GAAP operating expenses in costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties.
The increase in other income, net for fiscal 2022 compared to fiscal 2021 was primarily related to net gains of $124 million recognized on our equity investments, of which $83 million was due to an equity investment that completed its IPO during fiscal 2022.
Other income, net in fiscal 2022 was primarily due to gains of $144 million on our equity investments, the majority of which related to an equity investment that completed its IPO during the period, offset by interest expense of $17 million on our debt.
Professional services revenues were $592 million for fiscal 2022, compared to $530 million for fiscal 2021, an increase of $63 million, or 12%. The increase in professional services revenues was primarily due to Workday performing deployment and integration services for a greater number of customers.
Professional services revenues were $649 million for fiscal 2023, compared to $592 million for fiscal 2022, an increase of $56 million, or 9%. The increase in professional services revenues was primarily due to Workday performing deployment and integration services for higher valued contracts.
We expect capital expenditures will be approximately $475 million in fiscal 2023. This includes investments in our office facilities, corporate IT infrastructure, and customer data centers to support our continued growth.
These payments were partially offset by proceeds of $199 million from sales of marketable securities. We expect capital expenditures will be approximately $340 million in fiscal 2024. This includes investments in our office facilities, corporate IT infrastructure, and customer data centers to support our continued growth.
Subscription Revenue Backlog Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues that have not yet been recognized and includes billed and unbilled amounts.
As the Workday-related consulting practices of our partner firms continues to develop, we expect these partners to increasingly contract directly with our subscription customers. Subscription Revenue Backlog Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues that have not yet been recognized and includes billed and unbilled amounts.
We also evaluate the estimated remaining useful lives of acquisition-related intangible assets for changes in circumstances that warrant a revision to the remaining periods of amortization at least annually, or more frequently if significant events or circumstances indicate a change in expected use.
We also evaluate the estimated remaining useful lives of acquisition-related intangible assets for changes in circumstances that warrant a revision to the remaining periods of amortization at least annually, or more frequently if significant events or circumstances indicate a change in expected use. 46 Table of Contents Non-Marketable Equity Investments Non-marketable equity investments include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence.
Financing Activities For fiscal 2022, cash provided by financing activities was $110 million, which was primarily due to proceeds of $148 million from the issuance of common stock from employee equity plans, offset by payments of $38 million on the Term Loan.
For fiscal 2022, cash provided by financing activities was $110 million, which was primarily due to proceeds of $148 million from the issuance of common stock from employee equity plans, offset by payments of $38 million on the term loan under the 2020 Credit Agreement. 44 Table of Contents 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 increase in subscription revenue backlog during fiscal 2022 was primarily driven by the addition of new customers, expansion of our product offerings with existing customers, and the timing of renewals.
The increase in subscription revenue backlog during fiscal 2023 was primarily driven by the addition of new customers, expansion of our product offerings with existing customers, and the timing of renewals. Operating Expenses GAAP operating expenses were $6.4 billion for fiscal 2023, compared to $5.3 billion for fiscal 2022, an increase of $1.2 billion, or 23%.
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenues when, or as, we satisfy a performance obligation. 46 Table of Conten t s We believe the areas we apply the most critical judgements when determining revenue recognition relate to the identification of distinct performance obligations and the assessment of the standalone selling price (“SSP”) for each performance obligation identified.
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenues when, or as, we satisfy a performance obligation.
We regularly evaluate acquisition and investment opportunities in complementary businesses, employee teams, services, technologies, and intellectual property rights in an effort to expand our product and service offerings. For example, we acquired Peakon, Zimit, and VNDLY in fiscal 2022, and Scout in fiscal 2020. We expect to continue making such acquisitions and investments in the future.
We regularly evaluate acquisition and investment opportunities in complementary businesses, employee teams, services, technologies, and intellectual property rights in an effort to expand our product and service offerings.
Subscription services revenues primarily consist of fees that give our customers access to our cloud applications, which include related customer support. Professional services revenues include fees for deployment services, optimization services, and training. Subscription services revenues accounted for 88% of our total revenues during fiscal 2022, and represented 96% of our total unearned revenue as of January 31, 2022.
Components of Results of Operations Revenues We derive our revenues from subscription services and professional services. Subscription services revenues primarily consist of fees that give our customers access to our cloud applications, which include related customer support. Professional services revenues include fees for deployment services, optimization services, and training.
We expect GAAP and non-GAAP general and administrative expenses will continue to increase in absolute dollars as we further invest in our infrastructure and support our global expansion. 42 Table of Conten t s Operating Margin GAAP operating margin improved from (5.8)% for fiscal 2021 to (2.3)% for fiscal 2022.
We expect GAAP and non-GAAP general and administrative expenses will continue to increase in absolute dollars as we further invest in our infrastructure and support our global expansion.
Cash used in investing activities for fiscal 2021 was $1.2 billion, which was primarily comprised of a net cash outflow related to purchases and maturities of marketable securities of $930 million, capital expenditures for data center and office space projects of $253 million, and purchases of non-marketable investments of $67 million.
Investing Activities Cash used in investing activities for fiscal 2023 was $2.5 billion, which primarily resulted from purchases of marketable securities, net of maturities, of $2.2 billion using the proceeds from the Senior Notes offering, capital expenditures for data center and office space projects of $360 million, and purchases of non-marketable equity and other investments of $23 million.
The increase in costs of subscription services included increases of $91 million in employee-related expenses, including share-based compensation, due to higher average headcount, $37 million in depreciation expense related to equipment in our data centers, and $28 million in third-party expenses for hardware maintenance and data center capacity, offset by a decrease of $5 million related to the COVID-19 one-time employee bonus.
The increase in costs of subscription services included increases of $100 million in employee-related expenses, including share-based compensation, primarily due to higher headcount, $60 million in third-party expenses for hardware maintenance and data center capacity, and $23 million in facilities and IT-related expenses.
Additionally, there were increases of $59 million related to marketing programs, $51 million in professional services and subcontractor expenses, $44 million in third-party expenses for hardware maintenance and data center capacity, and $37 million in depreciation expense related to equipment in our data centers, offset by a decrease of $79 million related to the COVID-19 one-time employee bonus. 40 Table of Conten t s Reconciliations of our GAAP to non-GAAP operating expenses were as follows (in thousands): Year Ended January 31, 2022 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 795,854 $ (85,713) $ (54,551) $ 655,590 Costs of professional services 632,241 (113,443) (11,181) 507,617 Product development 1,879,220 (543,135) (32,935) 1,303,150 Sales and marketing 1,461,921 (215,692) (47,457) 1,198,772 General and administrative 486,012 (154,422) (7,625) 323,965 Total costs and expenses $ 5,255,248 $ (1,112,405) $ (153,749) $ 3,989,094 Year Ended January 31, 2021 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 611,912 $ (63,253) $ (34,799) $ 513,860 Costs of professional services 586,220 (101,869) (6,486) 477,865 Product development 1,721,222 (505,376) (27,567) 1,188,279 Sales and marketing 1,233,173 (202,819) (35,797) 994,557 General and administrative 414,068 (131,537) (6,337) 276,194 Total costs and expenses $ 4,566,595 $ (1,004,854) $ (110,986) $ 3,450,755 Year Ended January 31, 2020 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 488,513 $ (49,919) $ (40,326) $ 398,268 Costs of professional services 576,745 (80,401) (6,440) 489,904 Product development 1,549,906 (434,188) (30,684) 1,085,034 Sales and marketing 1,146,548 (176,758) (40,774) 929,016 General and administrative 367,724 (118,614) (8,592) 240,518 Total costs and expenses $ 4,129,436 $ (859,880) $ (126,816) $ 3,142,740 (1) Other operating expenses include amortization of acquisition-related intangible assets of $78 million, $60 million, and $72 million for fiscal 2022, 2021, and 2020, respectively.
Reconciliations of our GAAP to non-GAAP operating expenses were as follows (in thousands): Year Ended January 31, 2023 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 1,011,447 $ (106,119) $ (59,769) $ 845,559 Costs of professional services 703,731 (110,216) (6,678) 586,837 Product development 2,270,660 (618,973) (23,162) 1,628,525 Sales and marketing 1,848,093 (249,248) (42,490) 1,556,355 General and administrative 604,087 (210,066) (5,115) 388,906 Total costs and expenses $ 6,438,018 $ (1,294,622) $ (137,214) $ 5,006,182 39 Table of Contents Year Ended January 31, 2022 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 795,854 $ (85,713) $ (54,551) $ 655,590 Costs of professional services 632,241 (113,443) (11,181) 507,617 Product development 1,879,220 (543,135) (32,935) 1,303,150 Sales and marketing 1,461,921 (215,692) (47,457) 1,198,772 General and administrative 486,012 (154,422) (7,625) 323,965 Total costs and expenses $ 5,255,248 $ (1,112,405) $ (153,749) $ 3,989,094 Year Ended January 31, 2021 GAAP Operating Expenses Share-Based Compensation Expenses Other Operating Expenses (1) Non-GAAP Operating Expenses (2) Costs of subscription services $ 611,912 $ (63,253) $ (34,799) $ 513,860 Costs of professional services 586,220 (101,869) (6,486) 477,865 Product development 1,721,222 (505,376) (27,567) 1,188,279 Sales and marketing 1,233,173 (202,819) (35,797) 994,557 General and administrative 414,068 (131,537) (6,337) 276,194 Total costs and expenses $ 4,566,595 $ (1,004,854) $ (110,986) $ 3,450,755 (1) Other operating expenses include amortization of acquisition-related intangible assets of $86 million, $78 million, and $60 million for fiscal 2023, 2022, and 2021, respectively.
Non-GAAP operating expenses in costs of professional services were $508 million for fiscal 2022, compared to $478 million for fiscal 2021, an increase of $30 million, or 6%.
Non-GAAP operating expenses in costs of professional services were $587 million for fiscal 2023, compared to $508 million for fiscal 2022, an increase of $79 million, or 16%. The increase in costs of professional services included an increase of $56 million in employee-related expenses primarily due to higher headcount.
Non-GAAP operating expenses in general and administrative were $324 million for fiscal 2022, compared to $276 million for fiscal 2021, an increase of $48 million, or 17%.
Non-GAAP operating expenses in general and administrative were $389 million for fiscal 2023, compared to $324 million for fiscal 2022, an increase of $65 million, or 20%. The increase in general and administrative expenses included an increase of $43 million in employee-related expenses primarily due to higher headcount.
Operating Expenses GAAP operating expenses were $5.3 billion for fiscal 2022, compared to $4.6 billion for fiscal 2021, an increase of $689 million, or 15%, which was primarily related to an increase of $517 million in employee-related expenses, including share-based compensation, due to higher average headcount.
The increase in product development expenses included increases of $346 million in employee-related expenses, including share-based compensation, primarily due to higher headcount and $32 million in facilities and IT-related expenses. Non-GAAP operating expenses in product development were $1.6 billion for fiscal 2023, compared to $1.3 billion for fiscal 2022, an increase of $325 million, or 25%.
We expect GAAP and non-GAAP costs of professional services as a percentage of total revenues to continue to decline as we continue to rely on our service partners to deploy our applications and as the number of our customers continues to grow.
We expect GAAP and non-GAAP costs of professional services as a percentage of total revenues to continue to decline as we continue to rely on our service partners to deploy our applications and as the number of our customers continues to grow. 40 Table of Contents Product Development GAAP operating expenses in product development were $2.3 billion for fiscal 2023, compared to $1.9 billion for fiscal 2022, an increase of $391 million, or 21%.
General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources, information systems personnel, professional fees, and other corporate expenses. 39 Table of Conten t s Results of Operations Revenues Our total revenues were as follows (in thousands): Year Ended January 31, 2022 2021 2020 Subscription services $ 4,546,313 $ 3,788,452 $ 3,096,389 Professional services 592,485 529,544 530,817 Total revenues $ 5,138,798 $ 4,317,996 $ 3,627,206 Total revenues were $5.1 billion for fiscal 2022, compared to $4.3 billion for fiscal 2021, an increase of $821 million, or 19%.
Results of Operations Revenues Our total revenues for fiscal 2023, 2022, and 2021, were as follows (in thousands): Year Ended January 31, 2023 2022 2021 Subscription services $ 5,567,206 $ 4,546,313 $ 3,788,452 Professional services 648,612 592,485 529,544 Total revenues $ 6,215,818 $ 5,138,798 $ 4,317,996 38 Table of Contents Total revenues were $6.2 billion for fiscal 2023, compared to $5.1 billion for fiscal 2022, an increase of $1.1 billion, or 21%.
Non-GAAP operating expenses in product development were $1.3 billion for fiscal 2022, compared to $1.2 billion for fiscal 2021, an increase of $115 million, or 10%.
Non-GAAP operating expenses were $5.0 billion for fiscal 2023, compared to $4.0 billion for fiscal 2022, an increase of $1.0 billion, or 25%.
Despite the continuing uncertainty associated with the COVID-19 pandemic, we continue to achieve solid new subscription bookings as demand for our products remains strong, and we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy.
Despite the continuing uncertainty associated with these events, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their HR and finance digital transformation journeys.
As such, subscription services meet the criteria to be a series of distinct services.
Each day the delivery of the service provides value to the customer and each day represents a measure toward completion of the service. As such, subscription services meet the criteria to be a series of distinct services.
The increase in sales and marketing expenses included increases of $149 million in employee-related expenses, including share-based compensation, due to higher average headcount, and $59 million related to marketing programs, offset by decrease of $25 million related to the COVID-19 one-time employee bonus.
The increase in sales and marketing expenses included increases of $255 million in employee-related expenses, including share-based compensation, primarily due to higher headcount and $48 million related to marketing programs and $33 million in travel expenses partly driven by a return to in-person events.
The increase in costs of subscription services included increases of $66 million in employee-related expenses due to higher average headcount, $37 million in depreciation expense related to equipment in our data centers, and $28 million in third-party expenses for hardware maintenance and data center capacity, offset by a decrease of $5 million related to the COVID-19 one-time employee bonus.
The increase in costs of subscription services included increases of $81 million in employee-related expenses primarily due to higher headcount, $60 million in third-party expenses for hardware maintenance and data center capacity, and $23 million in facilities and IT-related expenses.
We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock. 44 Table of Conten t s We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our Revolving Credit Facility that provides for $750 million of unsecured financing, are sufficient to meet our working capital, capital expenditure, and debt repayment needs over the next 12 months.
We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, and debt repayment needs over the next 12 months. 43 Table of Contents Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the timing and costs associated with the construction or acquisition of additional facilities, and our investment and acquisition activities.
Financial Results Overview The following table provides an overview of our key metrics (in thousands, except percentages and headcount data): As of and for the Years Ended January 31, 2022 2021 $ Change % Change Total revenues $ 5,138,798 $ 4,317,996 $ 820,802 19 % Subscription services revenues $ 4,546,313 $ 3,788,452 $ 757,861 20 % Total subscription revenue backlog $ 12,806,855 $ 10,088,634 $ 2,718,221 27 % 24-month subscription revenue backlog $ 7,975,554 $ 6,526,074 $ 1,449,480 22 % GAAP operating income (loss) $ (116,450) $ (248,599) $ 132,149 (53) % Non-GAAP operating income (1) $ 1,149,704 $ 867,241 $ 282,463 33 % GAAP operating margin (2.3) % (5.8) % 4 % Non-GAAP operating margin (1) 22.4 % 20.1 % 2 % Operating cash flows $ 1,650,704 $ 1,268,441 $ 382,263 30 % Cash, cash equivalents, and marketable securities $ 3,644,161 $ 3,535,653 $ 108,508 3 % Headcount 15,204 12,524 2,680 21 % (1) See “Non-GAAP Financial Measures” below for further information. 38 Table of Conten t s Components of Results of Operations Revenues We derive our revenues from subscription services and professional services.
Financial Results Overview The following table provides an overview of our key metrics (in thousands, except percentages, basis points, and headcount data): As of and for the Years Ended January 31, 2023 2022 Change Total revenues $ 6,215,818 $ 5,138,798 21 % Subscription services revenues $ 5,567,206 $ 4,546,313 22 % GAAP operating income (loss) $ (222,200) $ (116,450) 91 % Non-GAAP operating income (1) $ 1,209,636 $ 1,149,704 5 % GAAP operating margin (3.6) % (2.3) % (130 bps) Non-GAAP operating margin (1) 19.5 % 22.4 % (290 bps) Operating cash flows $ 1,657,195 $ 1,650,704 0 % Total subscription revenue backlog $ 16,448,155 $ 12,806,855 28 % 24-month subscription revenue backlog $ 9,677,373 $ 7,975,554 21 % Cash, cash equivalents, and marketable securities $ 6,121,394 $ 3,644,161 68 % Headcount 17,744 15,204 17 % (1) See “Non-GAAP Financial Measures” below for further information.
Due to our ability to leverage the expanding partner ecosystem, we expect the rate of professional services revenue growth to decline over time and continue to be lower than subscription revenue growth. 37 Table of Conten t s Impact of the COVID-19 Pandemic The COVID-19 pandemic is having unpredictable impacts on global societies, economies, financial markets, and business practices.
Due to our ability to leverage the expanding partner ecosystem, we expect the rate of professional services revenue growth to decline over time and continue to be lower than subscription revenue growth. 36 Table of Contents Impact of Current Economic Conditions Recent macroeconomic events including higher inflation, the U.S.
As part of our strategy, we may enter into arrangements to acquire or invest in complementary businesses, services, technologies, or intellectual property rights in the future. We may also choose to seek additional debt or equity financing.
As part of our strategy, we may choose to seek additional debt or equity financing.
Our near-term revenues are relatively predictable as a result of our subscription-based business model. However, if the economic uncertainty increases, we may experience a negative impact on new business, customer renewals, sales and marketing efforts, revenue growth rates, customer deployments, customer solvency, product development, or other financial metrics, similar to what we experienced at the onset of the pandemic.
If the economic uncertainty continues, we may also experience a negative impact on customer renewals, sales and marketing efforts, revenue growth rates, customer deployments, customer collections, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results.
General and Administrative GAAP operating expenses in general and administrative were $486 million for fiscal 2022, compared to $414 million for fiscal 2021, an increase of $72 million, or 17%.
General and Administrative GAAP operating expenses in general and administrative were $604 million for fiscal 2023, compared to $486 million for fiscal 2022, an increase of $118 million, or 24%. The increase in general and administrative expenses included an increase of $96 million in employee-related expenses, including share-based compensation, primarily due to higher headcount.
The increase in sales and marketing expenses included increases of $130 million in employee-related expenses due to higher average headcount and $59 million related to marketing programs, offset by decrease of $25 million related to the COVID-19 one-time employee bonus.
The increase in sales and marketing expenses included increases of $227 million in employee-related expenses primarily due to higher headcount and $48 million related to marketing programs and $33 million in travel expenses partly driven by a return to in-person events.
These factors require significant judgment. If impairment indicators are identified, we will assess the severity and duration of the impairment.
These factors require significant judgment. If impairment indicators are identified, we will assess the severity and duration of the impairment. Change in Accounting Estimate 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.
Other Income (Expense), Net We had other income (expense), net of $133 million, $(27) million, and $20 million during fiscal 2022, 2021, and 2020, respectively.
Other Income (Expense), Net We had other income (expense), net of $(38) million, $133 million, and $(27) million during fiscal 2023, 2022, and 2021, respectively. Other expense, net in fiscal 2023 was primarily due to interest expense of $102 million on our debt primarily related to the Senior Notes and losses of $27 million on our equity investments.
Determination of Performance Obligations A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Our contracts with customers may include multiple promises to transfer services to a customer.
We believe the area we apply the most critical judgement when determining revenue recognition relates to the identification of distinct performance obligations. 45 Table of Contents Identification of Performance Obligations A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct.
Non-GAAP operating expenses were $4.0 billion for fiscal 2022, compared to $3.5 billion for fiscal 2021, an increase of $538 million, or 16%, which was primarily related to an increase of $385 million in employee-related expenses due to higher average headcount.
Costs of Professional Services GAAP operating expenses in costs of professional services were $704 million for fiscal 2023, compared to $632 million for fiscal 2022, an increase of $71 million, or 11%. The increase in costs of professional services included an increase of $48 million in employee-related expenses, including share-based compensation, primarily due to higher headcount.
For fiscal 2021, cash provided by financing activities was $625 million, which was primarily due to net proceeds of $748 million from borrowing on the Term Loan and $149 million from the issuance of common stock from employee equity plans, partially offset by the principal payment of $250 million in connection with the conversion of the 2020 Notes. 45 Table of Conten t s Our 2022 Notes are convertible at the option of the holders during the first quarter of fiscal 2023 since the trigger for early conversion was met.
Financing Activities For fiscal 2023, cash provided by financing activities was $1.2 billion, which was primarily due to proceeds of $3.0 billion from borrowings on the Senior Notes, net of debt discount of $22 million, and $152 million from the issuance of common stock from employee equity plans, offset by the principal payment of $1.15 billion in connection with the conversion of our 0.25% convertible senior notes (“2022 Notes”), repayment of the term loan under the credit agreement entered into in April 2020 (“2020 Credit Agreement”) of $694 million, and repurchases of common stock under the Share Repurchase Program of $75 million.
The increase in employee-related expenses also included $32 million for a performance-based cash bonus program that was expanded to all employees in the fourth quarter of fiscal 2022.
The increase in product development expenses included increases of $279 million in employee-related expenses primarily due to higher headcount, of which $62 million was related to the new performance-based cash bonus program, and $32 million in facilities and IT-related expenses.
The increase in employee-related expenses also included $32 million for a performance-based cash bonus program that was expanded to all employees in the fourth quarter of fiscal 2022.
Additionally, we incurred costs related to our performance-based cash bonus program that we introduced in the fourth quarter of fiscal 2022 for all employees not covered under an existing cash incentive plan (“performance-based cash bonus program”). This program replaced our performance based restricted stock unit (“PRSU”) bonus program, resulting in a net increase of $36 million.
Our measures of non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin meet the definition of a non-GAAP financial measure. Non-GAAP Operating Expenses, Non-GAAP Operating Income (Loss), and Non-GAAP Operating Margin Our non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin exclude the components listed below.
Non-GAAP Financial Measures Regulation S-K Item 10(e), “Use of non-GAAP financial measures in Commission filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margin meet the definition of non-GAAP financial measures.
The increase in product development expenses was primarily due to an increase of $169 million in employee-related expenses, including share-based compensation, due to higher average headcount, offset by a decrease of $31 million related to the COVID-19 one-time employee bonus.
The increase in GAAP operating expenses was primarily due to an increase of $845 million in employee-related expenses, including share-based compensation. The main driver for the increase in employee-related expenses was higher headcount. We also recognized $40 million of expense from the workforce realignment announced in the fourth quarter of fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+2 added−7 removed3 unchanged
As a result, our operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of January 31, 2022, our most significant currency exposures were the euro, British pound, Canadian dollar, and Australian dollar.
As a result, our operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of January 31, 2023, our most significant currency exposures were the euro, British pound, Canadian dollar, and Australian dollar.
Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we sell securities that decline in market value due to changes in interest rates.
Interest Rate Risk on our Investments We had cash, cash equivalents, and marketable securities totaling $3.6 billion and $3.5 billion as of January 31, 2022, and 2021, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, corporate bonds, commercial paper, money market funds, and marketable equity investments.
Interest Rate Risk on our Investments We had cash, cash equivalents, and marketable securities totaling $6.1 billion and $3.6 billion as of January 31, 2023, and 2022, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, corporate bonds, commercial paper, money market funds, and marketable equity investments.
An immediate increase of 100 basis points in interest rates would have resulted in an $11 million and $10 million market value reduction in our investment portfolio as of January 31, 2022, and 2021, respectively. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
An immediate increase of 100 basis points in interest rates would have resulted in a $29 million and $11 million market value reduction in our investment portfolio as of January 31, 2023, and 2022, respectively. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Our debt securities are classified as “available-for-sale.” When the fair value of the security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the impaired security, is recognized on the Consolidated Statements of Operations.
Further, since our debt securities are classified as “available-for-sale,” if the fair value of the security declines below its amortized cost basis, then any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the impaired security, is recognized on the Consolidated Statements of Operations.
For further discussion of the potential impacts of the COVID-19 pandemic on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report. Foreign Currency Exchange Risk We transact business globally in multiple currencies.
For further discussion of the potential impacts of these events on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report. Foreign Currency Exchange Risk We transact business globally in multiple currencies.
For further information, see Note 11, Debt , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. 50 Table of Conten t s
For further information, see Note 11, Debt , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report. 48 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The ongoing COVID-19 pandemic has resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Recent macroeconomic events have resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk.
The interest rate on the Term Loan was 1.30% and 1.38% as of January 31, 2022, and 2021, respectively. Because the interest rates applicable to borrowings under the Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.
Because the interest rates applicable to borrowings under the 2022 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.
The 2022 Notes have a fixed annual interest rate of 0.25%, and therefore we do not have economic interest rate exposure on the 2022 Notes. However, the value of the 2022 Notes is exposed to interest rate risk. Generally, the fair value of the 2022 Notes will increase as interest rates fall and decrease as interest rates rise.
Interest Rate Risk on our Debt The Senior Notes have fixed annual interest rates, and therefore we do not have economic interest rate exposure on these debt obligations. However, the fair values of the Senior Notes are exposed to interest rate risk.
Removed
Interest Rate Risk on our Debt In April 2020, we entered into a Credit Agreement pursuant to which the lenders extended to Workday a senior unsecured Term Loan in an aggregate principal amount of $750 million and an unsecured Revolving Credit Facility in an aggregate principal amount of $750 million.
Added
Generally, the fair values of the Senior Notes will increase as interest rates fall and decrease as interest rates rise.
Removed
The Term Loan and Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin that ranges from 0.000% to 0.625%, or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin that ranges from 1.000% to 1.625%.
Added
Borrowings under our 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.
Removed
The base rate is defined as the greatest of (i) Bank of America’s prime rate, (ii) the federal funds rate plus 0.50%, or (iii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market for a period of one month (but not less than zero) plus 1.00%.
Removed
Actual margins under either election will be based on our consolidated leverage ratio. As of January 31, 2022, and 2021, the Term Loan had a carrying value of $692 million and $729 million, respectively, and there were no outstanding borrowings under the Revolving Credit Facility.
Removed
A hypothetical immediate increase of 100 basis points in interest rates would not have had a significant impact on our results of operations. 49 Table of Conten t s In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022.
Removed
In addition, the fair value of the 2022 Notes is affected by our stock price. The carrying value of the 2022 Notes was $1.1 billion as of January 31, 2022, and 2021, and the estimated fair value of the 2022 Notes was $1.9 billion and $1.8 billion as of January 31, 2022, and 2021, respectively.
Removed
The estimated fair value was determined based on the quoted bid price of the 2022 Notes in an over-the-counter market as of the last trading day of each reporting period, which was $167.00 and $159.87, respectively.

Other WDAY 10-K year-over-year comparisons