EX-99.1 2 okta-7312022_ex991.htm EX-99.1 Document

Okta Announces Second Quarter Fiscal Year 2023 Financial Results
•Q2 revenue grew 43% year-over-year; subscription revenue grew 44% year-over-year
•Remaining performance obligations (RPO) grew 25% year-over-year to $2.79 billion; current remaining performance obligations (cRPO) grew 36% year-over-year to $1.50 billion


SAN FRANCISCO – August 31, 2022 – Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its second quarter ended July 31, 2022.

“Identity has become a critical component of every organization's strategy around zero trust security, digital transformation, and cloud adoption. These three mega trends continue to drive the identity market,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “Looking at the second half of the fiscal year, we’re focused on refining the go-to-market strategy for the combined Auth0 and Okta sales organization, strengthening our teams, and making strategic reductions to our spend to improve profitability.”

Second Quarter Fiscal 2023 Financial Highlights:
•Revenue: Total revenue was $452 million, an increase of 43% year-over-year. Subscription revenue was $435 million, an increase of 44% year-over-year.
•RPO: RPO, or subscription backlog, was $2.79 billion, an increase of 25% year-over-year. cRPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.50 billion, up 36% compared to the second quarter of fiscal 2022.
•Calculated Billings: Total calculated billings was $491 million, an increase of 36% year-over-year.
•GAAP Operating Loss: GAAP operating loss was $208 million, or 46% of total revenue, compared to a GAAP operating loss of $263 million, or 83% of total revenue, in the second quarter of fiscal 2022.
•Non-GAAP Operating Loss: Non-GAAP operating loss was $15 million, or 3% of total revenue, compared to non-GAAP operating loss of $25 million, or 8% of total revenue, in the second quarter of fiscal 2022.
•GAAP Net Loss: GAAP net loss was $210 million, compared to a GAAP net loss of $277 million in the second quarter of fiscal 2022. GAAP net loss per share was $1.34, compared to a GAAP net loss per share of $1.83 in the second quarter of fiscal 2022.
•Non-GAAP Net Loss: Non-GAAP net loss was $16 million, compared to non-GAAP net loss of $16 million in the second quarter of fiscal 2022. Non-GAAP basic and diluted net loss per share was $0.10, compared to non-GAAP basic and diluted net loss per share of $0.11 in the second quarter of fiscal 2022.
•Cash Flow: Net cash used in operations was $19 million, or (4)% of total revenue, compared to net cash used in operations of $3 million, or (1)% of total revenue, in the second quarter of fiscal 2022. Free cash flow was negative $24 million, or (5)% of total revenue, compared to negative $4 million, or (1)% of total revenue, in the second quarter of fiscal 2022.
•Cash, cash equivalents, and short-term investments were $2.48 billion at July 31, 2022.
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The section titled "Non-GAAP Financial Measures" below contains a description of the non-GAAP financial measures, and reconciliations between GAAP and non-GAAP information are contained in the tables below.
Financial Outlook:
For the third quarter of fiscal 2023, the Company expects:
•Total revenue of $463 million to $465 million, representing a growth rate of 32% to 33% year-over-year;
•Current RPO of $1.54 billion to $1.55 billion, representing a growth rate of 30% to 31% year-over-year;
•Non-GAAP operating loss of $37 million to $36 million; and
•Non-GAAP net loss per share of $0.25 to $0.24, assuming weighted-average shares outstanding of approximately 158 million.

For the full year fiscal 2023, the Company now expects:
•Total revenue of $1.812 billion to $1.820 billion, representing a growth rate of 39% to 40% year-over-year;
•Non-GAAP operating loss of $110 million to $105 million; and
•Non-GAAP net loss per share of $0.73 to $0.70, assuming weighted-average shares outstanding of approximately 157 million.

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.
Okta has not reconciled its expectations as to non-GAAP operating loss and non-GAAP net loss per share to their most directly comparable GAAP measures because certain items are out of Okta’s control or cannot be reasonably predicted. Accordingly, reconciliations for forward-looking non-GAAP operating loss and non-GAAP net loss per share are not available without unreasonable effort.

Webcast Information:
Okta will host a live video webcast at 2:00 p.m. Pacific Time on August 31, 2022 to discuss the results and outlook. The news release with the financial results will be accessible from the Company’s website at investor.okta.com prior to the webcast. The live video webcast will be accessible from the Okta investor relations website at investor.okta.com.

Supplemental Financial and Other Information:
Supplemental financial and other information can be accessed through the Company’s investor relations website at investor.okta.com.

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Non-GAAP Financial Measures:
This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net margin, non-GAAP net loss per share, basic and diluted, free cash flow, free cash flow margin, current calculated billings and calculated billings. Certain of these non-GAAP financial measures exclude stock-based compensation, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt. Non-GAAP financial measures reflect the adoption of ASU 2020-06 under the modified retrospective method as of February 1, 2022, as applicable.
Okta believes that non-GAAP financial information, when taken collectively with GAAP financial measures, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.
The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by the Company's management about which expenses are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.
Okta encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

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Forward-Looking Statements: This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, business strategy and plans, market trends and market size, opportunities and positioning. These forward-looking statements are based on current expectations, estimates, forecasts and projections. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," "shall" and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. For example, the market for our products may develop more slowly than expected or than it has in the past; there may be significant fluctuations in our results of operations and cash flows related to our revenue recognition or otherwise; we may not achieve expected synergies and efficiencies of operations between Okta and Auth0, and we may not be able to successfully integrate the companies; global economic conditions could worsen; a network or data security incident that allows unauthorized access to our network or data or our customers’ data could damage our reputation and cause us to incur significant costs; we could experience interruptions or performance problems associated with our technology, including a service outage; the impact of COVID-19, related public health measures and any associated economic downturn on our business and results of operations may be more than we expect; and we may not be able to pay off our convertible senior notes when due. Further information on potential factors that could affect our financial results is included in our most recent Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. The forward-looking statements included in this press release represent our views only as of the date of this press release and we assume no obligation and do not intend to update these forward-looking statements.
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About Okta
Okta is the leading independent identity provider. The Okta Identity Cloud enables organizations to securely connect the right people to the right technologies at the right time. With more than 7,000 pre-built integrations to applications and infrastructure providers, Okta provides simple and secure access to people and organizations everywhere, giving them the confidence to reach their full potential. More than 16,400 organizations, including JetBlue, Nordstrom, Siemens, Slack, Takeda, and Teach for America, trust Okta to help protect the identities of their workforces and customers.
Okta uses its investor.okta.com website as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings and public conference calls and webcasts.


Investor Contact:    
Dave Gennarelli
investor@okta.com

Media Contact:
Kyrk Storer
press@okta.com
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OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months Ended
July 31,		Six Months Ended
July 31,
 2022202120222021
Revenue:  
Subscription$435,384 $303,121 $833,325 $543,179 
Professional services and other16,423 12,379 33,425 23,327 
Total revenue451,807 315,500 866,750 566,506 
Cost of revenue:
Subscription(1)
116,342 84,457 227,218 136,855 
Professional services and other(1)
21,352 16,649 41,641 30,374 
Total cost of revenue137,694 101,106 268,859 167,229 
Gross profit314,113 214,394 597,891 399,277 
Operating expenses:  
Research and development(1)
155,836 122,407 317,487 191,270 
Sales and marketing(1)
264,653 198,350 517,126 344,871 
General and administrative(1)
101,686 157,077 211,029 217,257 
Total operating expenses522,175 477,834 1,045,642 753,398 
Operating loss(208,062)(263,440)(447,751)(354,121)
Interest expense(2,915)(22,872)(5,783)(45,632)
Interest income and other, net4,721 2,211 6,425 6,566 
Loss on conversion of debt — (43)— (179)
Interest and other, net1,806 (20,704)642 (39,245)
Loss before provision for (benefit from) income taxes(206,256)(284,144)(447,109)(393,366)
Provision for (benefit from) income taxes4,216 (7,462)6,076 (7,452)
Net loss$(210,472)$(276,682)$(453,185)$(385,914)
  
Net loss per share, basic and diluted$(1.34)$(1.83)$(2.89)$(2.72)
  
Weighted-average shares used to compute net loss per share, basic and diluted157,400 151,357 156,650 141,720 

(1) Amounts include stock-based compensation expense as follows (in thousands):
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Cost of subscription revenue$17,778 $13,138 $34,403 $20,388 
Cost of professional services and other 3,816 3,161 7,453 5,503 
Research and development70,078 53,332 139,122 73,425 
Sales and marketing38,982 41,288 78,784 62,354 
General and administrative40,525 76,795 80,940 90,156 
Total stock-based compensation expense$171,179 $187,714 $340,702 $251,826 
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OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 July 31,January 31,
20222022
Assets 
Current assets: 
Cash and cash equivalents$216,022 $260,134 
Short-term investments2,260,956 2,241,657 
Accounts receivable, net of allowances323,377 397,509 
Deferred commissions80,657 74,728 
Prepaid expenses and other current assets64,490 66,605 
Total current assets2,945,502 3,040,633 
Property and equipment, net66,958 65,488 
Operating lease right-of-use assets141,940 147,940 
Deferred commissions, noncurrent191,309 191,029 
Intangible assets, net281,470 316,968 
Goodwill5,400,275 5,401,343 
Other assets46,553 42,294 
Total assets$9,074,007 $9,205,695 
Liabilities and stockholders' equity 
Current liabilities: 
Accounts payable$43,708 $20,203 
Accrued expenses and other current liabilities106,477 89,315 
Accrued compensation87,094 143,805 
Convertible senior notes, net5,209 16,194 
Deferred revenue994,097 973,289 
Total current liabilities1,236,585 1,242,806 
Convertible senior notes, net, noncurrent2,190,110 1,815,714 
Operating lease liabilities, noncurrent158,577 170,611 
Deferred revenue, noncurrent17,187 22,933 
Other liabilities, noncurrent18,532 31,775 
Total liabilities3,620,991 3,283,839 
 
Stockholders’ equity:
Preferred stock— — 
Class A common stock15 15 
Class B common stock1 1 
Additional paid-in capital7,607,382 7,749,716 
Accumulated other comprehensive loss(41,186)(12,009)
Accumulated deficit(2,113,196)(1,815,867)
Total stockholders’ equity5,453,016 5,921,856 
Total liabilities and stockholders' equity$9,074,007 $9,205,695 

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OKTA, INC.
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Six Months Ended July 31,
 2022
2021(1)
Cash flows from operating activities:  
Net loss$(453,185)$(385,914)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation340,702 251,826 
Depreciation, amortization and accretion59,748 44,903 
Amortization of debt discount and issuance costs2,895 42,780 
Amortization of deferred commissions39,537 25,135 
Deferred income taxes1,539 (11,506)
Non-cash charitable contributions2,014 3,663 
Loss on conversion of debt— 179 
Gain on strategic investments(1,965)(5,271)
Other, net461 (290)
Changes in operating assets and liabilities:
Accounts receivable74,015 (14,798)
Deferred commissions(50,123)(55,102)
Prepaid expenses and other assets(2,236)718 
Operating lease right-of-use assets13,568 10,732 
Accounts payable24,632 (2,044)
Accrued compensation(55,219)(6,507)
Accrued expenses and other liabilities1,144 10,092 
Operating lease liabilities(12,807)(13,489)
Deferred revenue15,062 158,360 
Net cash provided by (used in) operating activities(218)53,467 
Cash flows from investing activities:
Capitalization of internal-use software costs(5,396)(378)
Purchases of property and equipment(7,493)(4,034)
Purchases of securities available for sale and other(571,081)(923,507)
Proceeds from maturities and redemption of securities available for sale521,815 763,607 
Proceeds from sales of securities available for sale and other— 906 
Purchases of intangible assets(2,497)(113)
Payments for business acquisitions, net of cash acquired(4,060)(148,042)
Net cash used in investing activities(68,712)(311,561)
Cash flows from financing activities:
Payments for conversions of convertible senior notes(6)(15)
Proceeds from hedges related to convertible senior notes1 2 
Proceeds from stock option exercises8,977 31,829 
Proceeds from shares issued in connection with employee stock purchase plan18,960 17,417 
Net cash provided by financing activities27,932 49,233 
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash(6,072)193 
Net decrease in cash, cash equivalents and restricted cash(47,070)(208,668)
Cash, cash equivalents and restricted cash at beginning of period272,656 448,630 
Cash, cash equivalents and restricted cash at end of period$225,586 $239,962 
(1) The condensed consolidated statement of cash flows for the prior period has been adjusted to conform to current period presentation.
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OKTA, INC.
Reconciliation of GAAP to Non-GAAP Data
(In thousands, except percentages and per share data)
(unaudited)

Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define Non-GAAP gross profit and Non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue, amortization of acquired intangibles and acquisition and integration-related expenses.
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Gross profit$314,113 $214,394 $597,891 $399,277 
Add:
Stock-based compensation expense included in cost of revenue(1)
21,594 16,299 41,856 25,891 
Amortization of acquired intangibles11,374 10,128 22,709 11,721 
Acquisition and integration-related expenses(2)
— 658 459 658 
Non-GAAP gross profit$347,081 $241,479 $662,915 $437,547 
Gross margin70 %68 %69 %70 %
Non-GAAP gross margin77 %77 %76 %77 %
(1) See table in footnote (1) to the condensed consolidated statements of operations above for breakdown of stock-based compensation expense by line item.
(2) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.
Non-GAAP Operating Loss and Non-GAAP Operating Margin
We define Non-GAAP operating loss and Non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles and acquisition and integration-related expenses.
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Operating loss$(208,062)$(263,440)$(447,751)$(354,121)
Add:
Stock-based compensation expense(1)
171,179 187,714 340,702 251,826 
Non-cash charitable contributions633 1,639 2,014 3,663 
Amortization of acquired intangibles21,244 19,998 42,449 21,591 
Acquisition and integration-related expenses(2)
— 29,550 6,555 36,604 
Non-GAAP operating loss$(15,006)$(24,539)$(56,031)$(40,437)
Operating margin(46)%(83)%(52)%(63)%
Non-GAAP operating margin(3)%(8)%(6)%(7)%
(1) See table in footnote (1) to the condensed consolidated statements of operations above for breakdown of stock-based compensation expense by line item.
(2) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.
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Non-GAAP Net Loss, Non-GAAP Net Margin and Non-GAAP Net Loss Per Share, Basic and Diluted
We define Non-GAAP net loss and Non-GAAP net margin as GAAP net loss and GAAP net margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt. Adjustments reflect the adoption of ASU 2020-06 under the modified retrospective method as of February 1, 2022, as applicable.
We define Non-GAAP net loss per share, basic, as Non-GAAP net loss divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.
We define Non-GAAP net loss per share, diluted, as Non-GAAP net loss divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted adjusted for the potentially dilutive effect of (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense, and (ii) convertible senior notes outstanding and related warrants. In addition, Non-GAAP net loss per share, diluted, includes the anti-dilutive impact of our note hedge and capped call agreements on convertible senior notes outstanding, as applicable. Accordingly, we did not record any adjustments to Non-GAAP net loss for the potential impact of the convertible senior notes outstanding under the if-converted method.
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Net loss$(210,472)$(276,682)$(453,185)$(385,914)
Add:
Stock-based compensation expense(1)
171,179 187,714 340,702 251,826 
Non-cash charitable contributions633 1,639 2,014 3,663 
Amortization of acquired intangibles21,244 19,998 42,449 21,591 
Acquisition and integration-related expenses(2)
— 29,550 6,555 36,604 
Amortization of debt discount and debt issuance costs(3)
1,446 21,449 2,895 42,780 
Loss on conversion of debt(3)
— 43 — 179 
Non-GAAP net loss$(15,970)$(16,289)$(58,570)$(29,271)
Net margin(47)%(88)%(52)%(68)%
Non-GAAP net margin(4)%(5)%(7)%(5)%
Weighted-average shares used to compute net loss per share, basic and diluted157,400 151,357 156,650 141,720 
Non-GAAP weighted-average effect of potentially dilutive securities — — — — 
Non-GAAP weighted-average shares used to compute non-GAAP net loss per share, diluted157,400 151,357 156,650 141,720 
Net loss per share, basic and diluted$(1.34)$(1.83)$(2.89)$(2.72)
Non-GAAP net loss per share, basic and diluted$(0.10)$(0.11)$(0.37)$(0.21)
(1) See table in footnote (1) to the condensed consolidated statements of operations above for breakdown of stock-based compensation expense by line item.
(2) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.
(3) Reflects the adoption of ASU 2020-06 under the modified retrospective method effective February 1, 2022.
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OKTA, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except percentages)
(unaudited)

Free Cash Flow and Free Cash Flow Margin
We define Free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment, net of sales proceeds, and capitalized internal-use software costs. Free cash flow margin is calculated as Free cash flow divided by total revenue.
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Net cash provided by (used in) operating activities$(19,049)$(2,608)$(218)$53,467 
Less:
Purchases of property and equipment(2,165)(775)(7,493)(4,034)
Capitalization of internal-use software costs(2,909)(368)(5,396)(378)
Free cash flow$(24,123)$(3,751)$(13,107)$49,055 
Net cash provided by (used in) investing activities$19,630 $(463,466)$(68,712)$(311,561)
Net cash provided by financing activities$22,550 $33,054 $27,932 $49,233 
Free cash flow margin(5)%(1)%(2)%9 %
Calculated Billings
We define Calculated Billings as total revenue plus the change in deferred revenue, net of acquired deferred revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.
Three Months Ended
July 31,		Six Months Ended
July 31,
2022202120222021
Total revenue$451,807 $315,500 $866,750 $566,506 
Add:
Deferred revenue, current (end of period)994,097 721,808 994,097 721,808 
Unbilled receivables, current (beginning of period)4,039 894 3,228 2,604 
Acquired unbilled receivables, current — 2,327 — 2,327 
Less:
Deferred revenue, current (beginning of period)(952,190)(613,167)(973,289)(502,738)
Unbilled receivables, current (end of period)(4,530)(3,409)(4,530)(3,409)
Acquired deferred revenue, current — (60,522)— (60,522)
Current Calculated Billings493,223 363,431 886,256 726,576 
Add:
Deferred revenue, noncurrent (end of period)17,187 15,489 17,187 15,489 
Less:
Deferred revenue, noncurrent (beginning of period)(19,074)(11,745)(22,933)(10,860)
Acquired deferred revenue, noncurrent— (4,817)— (4,817)
Calculated Billings$491,336 $362,358 $880,510 $726,388 
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