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.
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.
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.
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.
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
OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
July 31, | | Six Months Ended
July 31, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue: | | | | | | | |
| Subscription | $ | 435,384 | | | $ | 303,121 | | | $ | 833,325 | | | $ | 543,179 | |
| Professional services and other | 16,423 | | | 12,379 | | | 33,425 | | | 23,327 | |
| Total revenue | 451,807 | | | 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 revenue | 137,694 | | | 101,106 | | | 268,859 | | | 167,229 | |
| Gross profit | 314,113 | | | 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 expenses | 522,175 | | | 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, net | 4,721 | | | 2,211 | | | 6,425 | | | 6,566 | |
| Loss on conversion of debt | — | | | (43) | | | — | | | (179) | |
| Interest and other, net | 1,806 | | | (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 taxes | 4,216 | | | (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 diluted | 157,400 | | | 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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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 development | 70,078 | | | 53,332 | | | 139,122 | | | 73,425 | |
| Sales and marketing | 38,982 | | | 41,288 | | | 78,784 | | | 62,354 | |
| General and administrative | 40,525 | | | 76,795 | | | 80,940 | | | 90,156 | |
| Total stock-based compensation expense | $ | 171,179 | | | $ | 187,714 | | | $ | 340,702 | | | $ | 251,826 | |
OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
| | | | | | | | | | | |
| | July 31, | | January 31, |
| 2022 | | 2022 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 216,022 | | | $ | 260,134 | |
| Short-term investments | 2,260,956 | | | 2,241,657 | |
| Accounts receivable, net of allowances | 323,377 | | | 397,509 | |
| Deferred commissions | 80,657 | | | 74,728 | |
| Prepaid expenses and other current assets | 64,490 | | | 66,605 | |
| Total current assets | 2,945,502 | | | 3,040,633 | |
| Property and equipment, net | 66,958 | | | 65,488 | |
| Operating lease right-of-use assets | 141,940 | | | 147,940 | |
| Deferred commissions, noncurrent | 191,309 | | | 191,029 | |
| Intangible assets, net | 281,470 | | | 316,968 | |
| Goodwill | 5,400,275 | | | 5,401,343 | |
| Other assets | 46,553 | | | 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 liabilities | 106,477 | | | 89,315 | |
| Accrued compensation | 87,094 | | | 143,805 | |
| Convertible senior notes, net | 5,209 | | | 16,194 | |
| Deferred revenue | 994,097 | | | 973,289 | |
| Total current liabilities | 1,236,585 | | | 1,242,806 | |
| Convertible senior notes, net, noncurrent | 2,190,110 | | | 1,815,714 | |
| | | |
| Operating lease liabilities, noncurrent | 158,577 | | | 170,611 | |
| Deferred revenue, noncurrent | 17,187 | | | 22,933 | |
| Other liabilities, noncurrent | 18,532 | | | 31,775 | |
| Total liabilities | 3,620,991 | | | 3,283,839 | |
| | | |
| | | |
| Stockholders’ equity: | | | |
| Preferred stock | — | | | — | |
| Class A common stock | 15 | | | 15 | |
| Class B common stock | 1 | | | 1 | |
| Additional paid-in capital | 7,607,382 | | | 7,749,716 | |
| Accumulated other comprehensive loss | (41,186) | | | (12,009) | |
| Accumulated deficit | (2,113,196) | | | (1,815,867) | |
| Total stockholders’ equity | 5,453,016 | | | 5,921,856 | |
| Total liabilities and stockholders' equity | $ | 9,074,007 | | | $ | 9,205,695 | |
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 compensation | 340,702 | | | 251,826 | |
| Depreciation, amortization and accretion | 59,748 | | | 44,903 | |
| Amortization of debt discount and issuance costs | 2,895 | | | 42,780 | |
| Amortization of deferred commissions | 39,537 | | | 25,135 | |
| | | |
| Deferred income taxes | 1,539 | | | (11,506) | |
| | | |
| Non-cash charitable contributions | 2,014 | | | 3,663 | |
| Loss on conversion of debt | — | | | 179 | |
| Gain on strategic investments | (1,965) | | | (5,271) | |
| Other, net | 461 | | | (290) | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | 74,015 | | | (14,798) | |
| Deferred commissions | (50,123) | | | (55,102) | |
| Prepaid expenses and other assets | (2,236) | | | 718 | |
| Operating lease right-of-use assets | 13,568 | | | 10,732 | |
| Accounts payable | 24,632 | | | (2,044) | |
| Accrued compensation | (55,219) | | | (6,507) | |
| Accrued expenses and other liabilities | 1,144 | | | 10,092 | |
| Operating lease liabilities | (12,807) | | | (13,489) | |
| Deferred revenue | 15,062 | | | 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 sale | 521,815 | | | 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 notes | 1 | | | 2 | |
| | | |
| | | |
| | | |
| | | |
| Proceeds from stock option exercises | 8,977 | | | 31,829 | |
| | | |
| Proceeds from shares issued in connection with employee stock purchase plan | 18,960 | | | 17,417 | |
| | | |
| | | |
| | | |
| Net cash provided by financing activities | 27,932 | | | 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 period | 272,656 | | | 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.
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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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 intangibles | 11,374 | | | 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 margin | 70 | % | | 68 | % | | 69 | % | | 70 | % |
| Non-GAAP gross margin | 77 | % | | 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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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 contributions | 633 | | | 1,639 | | | 2,014 | | | 3,663 | |
| Amortization of acquired intangibles | 21,244 | | | 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.
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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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 contributions | 633 | | | 1,639 | | | 2,014 | | | 3,663 | |
| Amortization of acquired intangibles | 21,244 | | | 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 diluted | 157,400 | | | 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, diluted | 157,400 | | | 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.
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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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, |
| 2022 | | 2021 | | 2022 | | 2021 |
| 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 Billings | 493,223 | | | 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 | |
Okta, Inc.
100 First St., Suite 600
San Francisco, CA 94105
888-722-7871
okta.com
August 26, 2022
J. Frederic Kerrest
via Email
Re: Your Sabbatical
Dear Frederic:
This letter (this “Agreement”) memorializes our agreement regarding your sabbatical with Okta, Inc. (the “Company”).
Your sabbatical will begin on November 1, 2022, and will continue through and including October 31, 2023 (such period, your “Sabbatical”). During your Sabbatical, you will remain an at-will employee of the Company but are not expected to and should not fulfill any of your regular duties as an employee. You will, however, continue to serve as Executive Vice Chairperson and a member of the Board of Directors of the Company (the “Board”). During your Sabbatical, you will cease to be paid your base salary and benefits, other than healthcare as described below. You also will not be eligible to earn your annual bonus during your Sabbatical; however, you will remain eligible to earn 75% of your fiscal 2023 annual bonus based on your service through the end of the fiscal quarter ending October 31, 2022, with any bonus to be earned based on actual performance and paid at the same time bonuses are paid to other senior executives of the Company, and you will likewise remain eligible for 25% of your fiscal 2024 annual bonus based on your expected partial-year service in fiscal year 2024 following your return.
You will not be eligible to be granted an equity award under the fiscal 2024 long-term incentive program. In the event you return to active employment at the end of your Sabbatical, you will be eligible to be granted an equity award under the fiscal 2025 long-term incentive program. During your Sabbatical, the vesting of your equity awards, including your stock options and restricted stock units, will be tolled; however, such equity awards will remain outstanding in accordance with their terms and will recommence vesting on their existing schedule, adjusted to reflect the tolling during your Sabbatical, upon your return to active employment following the completion of your Sabbatical. With respect to each of your awards under the Okta, Inc. 2009 Stock Plan (the “2009 Plan”), your Sabbatical shall constitute a bona fide leave of absence and shall not constitute a termination of Service, under Section 6(g) of the 2009 Plan. With respect to each of your awards under the Okta, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), your Sabbatical shall constitute an approved leave of absence and shall not constitute a termination of employment, under Section 17 of the 2017 Plan.
During your Sabbatical, you will continue to have access to your Company e-mail account, certain Company facilities and certain information systems of the Company, in each case, as determined necessary or appropriate by the Company. You will also retain your Company issued laptop. You agree to only access Company proprietary information to the extent necessary to fulfill any duties to the Company you perform during your Sabbatical. For the avoidance of doubt, during your Sabbatical, you will remain subject to, and hereby reaffirm your obligations under, the Proprietary Information and Inventions Agreement you previously entered into with the Company.
You agree to promptly notify the Chief Executive Officer of the Company in writing if you decide not to return to active employment at the end of your Sabbatical and, in any event, by September 30, 2023. If you do not return to active employment at the end of your Sabbatical for any reason other than your death, your employment will be deemed to have terminated on October 31, 2023. If you die during the Sabbatical, your employment will be deemed to have terminated on your date of death and your unvested equity awards will be treated in accordance with the Company’s Death Related Equity Acceleration Policy. If you terminate employment on October 31, 2023, other than as a result of your death, all of your unvested equity awards will thereupon be forfeited. As long as you continue your Board service, your vested stock options will remain outstanding and exercisable based on your service on the Board. Your equity awards are hereby deemed amended to the extent necessary to reflect the terms of this paragraph and the paragraph directly above.
You will continue to be eligible for health, dental and vision coverage during your Sabbatical, provided, that in the event you cease to be eligible to participate in the Company’s health, dental and/or vision plans as an employee during your Sabbatical, then if you or your covered dependents timely elect to receive continued healthcare coverage pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (together with any state equivalent thereof, “COBRA”), the Company will directly pay the COBRA premiums for you and/or your covered dependents through the earlier of (i) October 31, 2023 or (ii) the date you and your covered dependents are no longer eligible for COBRA coverage. Notwithstanding the foregoing, (i) if any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), under Treasury Regulation Section 1.409A-1(a)(5), or (ii) the Company is otherwise unable to continue to cover you under its group health plans without penalty under applicable law (including without limitation, Section 2716 of the Public Health Service Act), then, in either case, an amount equal to each remaining Company subsidy shall thereafter be paid to you in substantially equal monthly installments through October 31, 2023.
During and after your Sabbatical, you will continue to be subject to the terms and conditions of your proprietary information and inventions assignment agreement with the Company. Nothing in this letter agreement changes the nature of your at-will employment with the Company.
This Agreement constitutes the entire and exclusive agreement between the Company and you with respect to the subject matter hereof. This Agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company. This Agreement will be governed by California law, excluding laws relating to conflicts or choice of law. This Agreement has been duly authorized and approved by the Compensation Committee of the Company.
Please indicate your agreement to the terms of this Agreement by returning a signed copy of this letter agreement at your earliest convenience. If you have any questions, please contact me.
Very truly yours,
Okta, Inc.
/s/ Kristina Johnson
By: Kristina Johnson
ACCEPTED AND AGREED
/s/ J. Frederic Kerrest
J. Frederic Kerrest
Date: August 29, 2022