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Source: Media Outreach

Q3 revenue grew 61% year-over-year; subscription revenue grew 63% year-over-year
Remaining performance obligations (RPO) grew 49% year-over-year to $2.35 billion
Increases revenue and operating profit outlook for fiscal 2022
Okta and Okta (Auth0) Both Named as Leaders in 2021 Gartner® Magic Quadrant™ for Access Management; Okta positioned highest in Ability to Execute

SINGAPORE – Media OutReach – 2 December 2021 – Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its third quarter ended October 31, 2021.

“Our strong third quarter results reflect the continued shift to Identity-First architectures and the critical adoption of Zero Trust security environments, which are both propelling our market leading position,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “We’re maintaining the momentum of both Okta and Auth0 and are making great progress on the integration. We’re already seeing early success cross-selling into each other’s customer bases and are on our way to capturing more of the massive identity market faster together.”
Third Quarter Fiscal 2022 Financial Highlights:

Revenue: Total revenue was $351 million, an increase of 61% year-over-year. Subscription revenue was $337 million, an increase of 63% year-over-year. On an Okta standalone basis (excluding $46 million attributable to Auth0), total revenue grew 40%.
Remaining Performance Obligations (RPO): RPO, or subscription backlog, was $2.35 billion, an increase of 49% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.18 billion, up 57% compared to the third quarter of fiscal 2021.
Calculated Billings: Total calculated billings, net of acquired deferred revenue, was $389 million, an increase of 54% year-over-year. Calculated billings includes the effect of billings process improvements that were enacted at the end of the first quarter of fiscal 2022. Excluding these changes, calculated billings would have been $387 million, an increase of 53% year-over-year.
GAAP Operating Loss: GAAP operating loss was $199 million, or 57% of total revenue, compared to a GAAP operating loss of $52 million, or 24% of total revenue, in the third quarter of fiscal 2021.
Non-GAAP Operating Income/Loss: Non-GAAP operating loss was $10 million, or (3)% of total revenue, compared to non-GAAP operating income of $6 million, or 3% of total revenue, in the third quarter of fiscal 2021.
GAAP Net Loss: GAAP net loss was $221 million, compared to a GAAP net loss of $73 million in the third quarter of fiscal 2021. GAAP net loss per share was $1.44, compared to a GAAP net loss per share of $0.56 in the third quarter of fiscal 2021. GAAP net loss and GAAP net loss per share include $120 million and $0.78, respectively, attributable to Auth0 in the third quarter of fiscal 2022.
Non-GAAP Net Income/Loss: Non-GAAP net loss was $11 million, compared to non-GAAP net income of $6 million in the third quarter of fiscal 2021. Non-GAAP basic and diluted net loss per share was $0.07, compared to non-GAAP basic and diluted net income per share of $0.04 in the third quarter of fiscal 2021.
Cash Flow: Net cash provided by operations was $37 million, or 11% of total revenue, compared to net cash provided by operations of $43 million, or 20% of total revenue, in the third quarter of fiscal 2021. Free cash flow was $33 million, or 10% of total revenue, compared to $42 million, or 19% of total revenue, in the third quarter of fiscal 2021.
Cash, cash equivalents, and short-term investments were $2.48 billion at October 31, 2021.
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:
Okta’s financial outlook for the fourth quarter and full year fiscal 2022 includes the expected contribution from the acquisition of Auth0, net of purchase accounting adjustments.For the fourth quarter of fiscal 2022, the Company expects:
Total revenue of $358 million to $360 million, representing a growth rate of 53% year-over-year;
Non-GAAP operating loss of $35 million to $34 million; and
Non-GAAP net loss per share of $0.25 to $0.24, assuming weighted-average shares outstanding of approximately 154 million.
For the full year fiscal 2022, the Company now expects:
Total revenue of $1.275 billion to $1.277 billion, representing a growth rate of 53% year-over-year;
Non-GAAP operating loss of $85 million to $84 million; and
Non-GAAP net loss per share of $0.53 to $0.52, assuming weighted-average shares outstanding of approximately 147 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.

Gartner Magic Quadrant:
Finally, Okta is pleased to highlight its recognition as a Leader in the 2021 Gartner Magic Quadrant for Access Management. The report evaluated 12 vendors on 15 criteria and placed both Okta and Okta (Auth0) in the Leaders Quadrant. This marks the fifth consecutive year in which Okta has been named a Leader, and the first for Okta (Auth0). A complimentary version of the full report can be found here.

Conference Call Information:
Okta will host a live video webcast at 2:00 p.m. Pacific Time on December 1, 2021 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 conference call. The live video webcast of the conference call will be accessible from the Okta investor relations website at investor.okta.com.

Gartner Disclaimers:
GARTNER and MAGIC QUADRANT are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved. Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s Research & Advisory organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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 income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net margin, non-GAAP net income (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.

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 and expected benefits that will be derived from the Auth0 transaction. 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; our results of operations may fluctuate more than expected; there may be significant fluctuations in our results of operations and cash flows related to our revenue recognition or otherwise; 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; a network or data security incident that allows unauthorized access to our network or data or our customers’ data could damage our reputation; we could experience interruptions or performance problems associated with our technology, including a service outage; we may not be able to pay off our convertible senior notes when due; global economic conditions could deteriorate; 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. 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.

OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Revenue:

Subscription

$

336,702

$

206,743

$

879,881

$

571,213

Professional services and other

13,978

10,636

37,305

29,471

Total revenue

350,680

217,379

917,186

600,684

Cost of revenue:

Subscription(1)

91,048

44,762

227,903

121,420

Professional services and other(1)

18,626

12,146

49,000

35,121

Total cost of revenue

109,674

56,908

276,903

156,541

Gross profit

241,006

160,471

640,283

444,143

Operating expenses:

Research and development(1)

130,535

58,150

321,805

160,510

Sales and marketing(1)

203,878

109,812

548,749

312,177

General and administrative(1)

105,149

44,485

322,406

121,019

Total operating expenses

439,562

212,447

1,192,960

593,706

Operating loss

(198,556

)

(51,976

)

(552,677

)

(149,563

)

Interest expense

(23,144

)

(22,368

)

(68,776

)

(50,063

)

Interest income and other, net

1,056

1,878

7,622

10,737

Loss on early extinguishment and conversion of debt

(89

)

(179

)

(2,263

)

Interest and other, net

(22,088

)

(20,579

)

(61,333

)

(41,589

)

Loss before provision for (benefit from) income taxes

(220,644

)

(72,555

)

(614,010

)

(191,152

)

Provision for (benefit from) income taxes

667

209

(6,785

)

(626

)

Net loss

$

(221,311

)

$

(72,764

)

$

(607,225

)

$

(190,526

)

Net loss per share, basic and diluted

$

(1.44

)

$

(0.56

)

$

(4.17

)

$

(1.51

)

Weighted-average shares used to compute net loss per share, basic and diluted

153,756

128,813

145,782

126,222

(1) Amounts include stock-based compensation expense as follows (in thousands):

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Cost of subscription revenue

$

13,455

$

6,090

$

33,843

$

15,229

Cost of professional services and other

3,376

2,113

8,879

5,924

Research and development

56,573

17,546

129,998

44,434

Sales and marketing

39,248

14,368

101,602

38,693

General and administrative

43,133

13,535

133,289

35,494

Total stock-based compensation expense

$

155,785

$

53,652

$

407,611

$

139,774

OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

October 31,

January 31,

2021

2021

Assets

Current assets:

Cash and cash equivalents

$

372,372

$

434,607

Short-term investments

2,109,687

2,121,584

Accounts receivable, net of allowances

253,568

194,818

Deferred commissions

60,465

45,949

Prepaid expenses and other current assets

56,776

81,609

Total current assets

2,852,868

2,878,567

Property and equipment, net

60,751

62,783

Operating lease right-of-use assets

154,522

149,604

Deferred commissions, noncurrent

145,655

108,555

Intangible assets, net

336,354

27,009

Goodwill

5,401,343

48,023

Other assets

45,480

24,256

Total assets

$

8,996,973

$

3,298,797

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

11,547

$

8,557

Accrued expenses and other current liabilities

91,516

53,729

Accrued compensation

109,233

71,906

Convertible senior notes, net

15,956

908,684

Deferred revenue

759,914

502,738

Total current liabilities

988,166

1,545,614

Convertible senior notes, net, noncurrent

1,793,970

857,387

Operating lease liabilities, noncurrent

179,205

179,518

Deferred revenue, noncurrent

17,958

10,860

Other liabilities, noncurrent

33,119

11,375

Total liabilities

3,012,418

2,604,754

Stockholders’ equity:

Preferred stock

Class A common stock

15

12

Class B common stock

1

1

Additional paid-in capital

7,558,816

1,656,096

Accumulated other comprehensive income

404

5,390

Accumulated deficit

(1,574,681

)

(967,456

)

Total stockholders’ equity

5,984,555

694,043

Total liabilities and stockholders’ equity

$

8,996,973

$

3,298,797

OKTA, INC.
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

Nine Months Ended October 31,

2021

2020(1)

Cash flows from operating activities:

Net loss

$

(607,225

)

$

(190,526

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation

407,611

139,774

Depreciation, amortization and accretion

76,631

23,694

Amortization of debt discount and issuance costs

64,478

47,261

Amortization of deferred commissions

40,041

28,428

Deferred income taxes

(13,606

)

(2,414

)

Non-cash charitable contributions

5,649

4,662

Loss on early extinguishment and conversion of debt

179

2,263

(Gain) loss on strategic investments

(5,665

)

628

Other, net

(267

)

3,887

Changes in operating assets and liabilities:

Accounts receivable

(29,561

)

(10,547

)

Deferred commissions

(92,183

)

(51,837

)

Prepaid expenses and other assets

5,356

(6,794

)

Operating lease right-of-use assets

16,564

13,979

Accounts payable

(195

)

1,377

Accrued compensation

19,488

37,863

Accrued expenses and other liabilities

22,537

2,442

Operating lease liabilities

(17,280

)

(11,750

)

Deferred revenue

198,035

60,663

Net cash provided by operating activities

90,587

93,053

Cash flows from investing activities:

Capitalization of internal-use software costs

(2,348

)

(3,530

)

Purchases of property and equipment

(5,800

)

(11,297

)

Purchases of securities available for sale and other

(1,333,617

)

(1,845,958

)

Proceeds from maturities and redemption of securities available for sale

1,118,448

386,774

Proceeds from sales of securities available for sale and other

228,344

206,129

Payments for business acquisitions, net of cash acquired

(215,129

)

Net cash used in investing activities

(210,102

)

(1,267,882

)

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs

1,134,841

Payments for repurchases and conversions of convertible senior notes

(26

)

(447

)

Proceeds from hedges related to convertible senior notes

2

195,046

Payments for warrants related to convertible senior notes

(175,399

)

Purchases of capped calls related to convertible senior notes

(133,975

)

Proceeds from stock option exercises

41,054

33,570

Proceeds from shares issued in connection with employee stock purchase plan

17,417

12,821

Net cash provided by financing activities

58,447

1,066,457

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash

(494

)

121

Net decrease in cash, cash equivalents and restricted cash

(61,562

)

(108,251

)

Cash, cash equivalents and restricted cash at beginning of period

448,630

531,953

Cash, cash equivalents and restricted cash at end of period

$

387,068

$

423,702

(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 EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Gross profit

$

241,006

$

160,471

$

640,283

$

444,143

Add:

Stock-based compensation expense included in cost of revenue(1)

16,831

8,203

42,722

21,153

Amortization of acquired intangibles

11,335

1,593

23,056

4,780

Acquisition and integration-related expenses(2)

658

1,316

Non-GAAP gross profit

$

269,830

$

170,267

$

707,377

$

470,076

Gross margin

69

%

74

%

70

%

74

%

Non-GAAP gross margin

77

%

78

%

77

%

78

%

(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 Income (Loss) and Non-GAAP Operating Margin

We define Non-GAAP operating income (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 EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Operating loss

$

(198,556

)

$

(51,976

)

$

(552,677

)

$

(149,563

)

Add:

Stock-based compensation expense(1)

155,785

53,652

407,611

139,774

Non-cash charitable contributions

1,986

2,245

5,649

4,662

Amortization of acquired intangibles

21,204

1,593

42,795

4,780

Acquisition and integration-related expenses(2)

10,060

46,664

Non-GAAP operating income (loss)

$

(9,521

)

$

5,514

$

(49,958

)

$

(347

)

Operating margin

(57

)

%

(24

)

%

(60

)

%

(25

)

%

Non-GAAP operating margin

(3

)

%

3

%

(5

)

%

%

(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 Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

We define Non-GAAP net income (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.

We define Non-GAAP net income (loss) per share, basic, as Non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.

We define Non-GAAP net income (loss) per share, diluted, as Non-GAAP net income (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 income (loss) per share, diluted, includes the anti-dilutive impact of our note hedge and capped call agreements on convertible senior notes outstanding. Accordingly, we did not record any adjustments to Non-GAAP net income (loss) for the potential impact of the convertible senior notes outstanding under the if-converted method.

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Net loss

$

(221,311

)

$

(72,764

)

$

(607,225

)

$

(190,526

)

Add:

Stock-based compensation expense(1)

155,785

53,652

407,611

139,774

Non-cash charitable contributions

1,986

2,245

5,649

4,662

Amortization of acquired intangibles

21,204

1,593

42,795

4,780

Acquisition and integration-related expenses(2)

10,060

46,664

Amortization of debt discount and debt issuance costs

21,698

20,931

64,478

47,261

Loss on early extinguishment and conversion of debt

89

179

2,263

Non-GAAP net income (loss)

$

(10,578

)

$

5,746

$

(39,849

)

$

8,214

Net margin

(63

)

%

(33

)

%

(66

)

%

(32

)

%

Non-GAAP net margin

(3

)

%

3

%

(4

)

%

1

%

Weighted-average shares used to compute net loss per share, basic and diluted

153,756

128,813

145,782

126,222

Non-GAAP weighted-average effect of potentially dilutive securities

14,579

15,714

Non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, diluted

153,756

143,392

145,782

141,936

Net loss per share, basic and diluted

$

(1.44

)

$

(0.56

)

$

(4.17

)

$

(1.51

)

Non-GAAP net income (loss) per share, basic

$

(0.07

)

$

0.04

$

(0.27

)

$

0.07

Non-GAAP net income (loss) per share, diluted

$

(0.07

)

$

0.04

$

(0.27

)

$

0.06

(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.

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 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 EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Net cash provided by operating activities

$

37,120

$

43,426

$

90,587

$

93,053

Less:

Purchases of property and equipment

(1,766

)

(628

)

(5,800

)

(11,297

)

Capitalization of internal-use software costs

(1,970

)

(1,204

)

(2,348

)

(3,530

)

Free cash flow

$

33,384

$

41,594

$

82,439

$

78,226

Net cash provided by (used in) investing activities

$

101,459

$

(595,621

)

$

(210,102

)

$

(1,267,882

)

Net cash provided by financing activities

$

9,214

$

5,210

$

58,447

$

1,066,457

Free cash flow margin

10

%

19

%

9

%

13

%

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 EndedOctober 31,

Nine Months EndedOctober 31,

2021

2020

2021

2020

Total revenue

$

350,680

$

217,379

$

917,186

$

600,684

Add:

Deferred revenue, current (end of period)

759,914

424,765

759,914

424,765

Unbilled receivables, current (beginning of period)

3,409

2,113

2,604

1,026

Acquired unbilled receivables, current

2,327

Less:

Deferred revenue, current (beginning of period)

(721,808

)

(391,246

)

(502,738

)

(365,236

)

Unbilled receivables, current (end of period)

(5,085

)

(2,427

)

(5,085

)

(2,427

)

Acquired deferred revenue, current

(900

)

(61,422

)

Current calculated billings

386,210

250,584

1,112,786

658,812

Add:

Deferred revenue, noncurrent (end of period)

17,958

7,349

17,958

7,349

Less:

Deferred revenue, noncurrent (beginning of period)

(15,489

)

(5,574

)

(10,860

)

(6,214

)

Acquired deferred revenue, noncurrent

(4,817

)

Calculated billings

$

388,679

$

252,359

$

1,115,067

$

659,947

– Published and distributed with permission of Media-Outreach.com.