Okta Announces Strong Fourth Quarter and Fiscal Year 2021 Results

Q4 revenue grew 40% year-over-year; subscription revenue grew 42% year-over-year
Fiscal year 2021 revenue totaled $835 million and grew 43% year-over-year; subscription revenue grew 44% year-over-year
Remaining performance obligations (RPO) grew 49% year-over-year to $1.80 billion
Signs definitive agreement to acquire Auth0

SAN FRANCISCO–(BUSINESS WIRE)–Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its fourth quarter and fiscal year ended January 31, 2021. The Company also announced it has entered into a definitive agreement to acquire Auth0, a leading identity platform for application teams, in a stock transaction valued at approximately $6.5 billion.

“Our relentless focus on execution and customer success drove strong fourth quarter financial results and capped another fantastic year of growth for Okta,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “The importance of identity and zero-trust security have only been elevated over the past year as companies around the world are accelerating their adoption of cloud and digital transformation projects. Okta’s unmatched identity platform is still in the early innings of a massive addressable market and we are incredibly excited about the opportunity for years to come.”

Fourth Quarter Fiscal 2021 Financial Highlights:

Revenue: Total revenue was $234.7 million, an increase of 40% year-over-year. Subscription revenue was $225.4 million, an increase of 42% year-over-year.
Remaining Performance Obligations (RPO): RPO, or subscription backlog, was $1.80 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 $841.8 million, up 42% compared to the fourth quarter of fiscal 2020.
Calculated Billings: Total calculated billings were $316.0 million, an increase of 40% year-over-year.
GAAP Operating Loss: GAAP operating loss was $54.6 million, or 23.3% of total revenue, compared to a GAAP operating loss of $44.7 million, or 26.7% of total revenue, in the fourth quarter of fiscal 2020.
Non-GAAP Operating Income/Loss: Non-GAAP operating income was $8.0 million, or 3.4% of total revenue, compared to a non-GAAP operating loss of $5.6 million, or 3.3% of total revenue, in the fourth quarter of fiscal 2020.
GAAP Net Loss: GAAP net loss was $75.8 million, compared to a GAAP net loss of $50.5 million in the fourth quarter of fiscal 2020. GAAP net loss per share was $0.58, compared to a GAAP net loss per share of $0.42 in the fourth quarter of fiscal 2020.
Non-GAAP Net Income/Loss: Non-GAAP net income was $8.0 million, compared to a non-GAAP net loss of $1.1 million in the fourth quarter of fiscal 2020. Non-GAAP basic and diluted net income per share was $0.06, compared to a non-GAAP basic and diluted net loss per share of $0.01 in the fourth quarter of fiscal 2020.
Cash Flow: Net cash provided by operations was $34.9 million, or 14.9% of total revenue, compared to net cash provided by operations of $24.8 million, or 14.8% of total revenue, in the fourth quarter of fiscal 2020. Free cash flow was $32.5 million, or 13.8% of total revenue, compared to $18.1 million, or 10.8% of total revenue, in the fourth quarter of fiscal 2020.
Cash, cash equivalents, and short-term investments were $2.56 billion at January 31, 2021.

Full Year Fiscal 2021 Financial Highlights:

Revenue: Total revenue was $835.4 million, an increase of 43% year-over-year. Subscription revenue was $796.6 million, an increase of 44% year-over-year.
Calculated Billings: Total calculated billings were $976.0 million, an increase of 39% year-over-year.
Operating Income/Loss: GAAP operating loss was $204.2 million, or 24.4% of total revenue, compared to a GAAP operating loss of $185.8 million, or 31.7% of total revenue for fiscal 2020. Non-GAAP operating income was $7.7 million, or 0.9% of total revenue, compared to a non-GAAP operating loss of $48.5 million, or 8.3% of total revenue for fiscal 2020.
Net Income/Loss: GAAP net loss was $266.3 million, compared to a GAAP net loss of $208.9 million for fiscal 2020. GAAP net loss per share was $2.09, compared to a GAAP net loss per share of $1.78 for fiscal 2020. Non-GAAP net income was $16.2 million, compared to a non-GAAP net loss of $31.1 million for fiscal 2020. Non-GAAP basic and diluted net income per share were $0.13 and $0.11, respectively, compared to a non-GAAP basic and diluted net loss per share of $0.27 for fiscal 2020.
Cash Flow: Net cash provided by operations was $128.0 million, or 15.3% of total revenue, compared to $55.6 million, or 9.5% of total revenue, for fiscal 2020. Free cash flow was $110.7 million, or 13.3% of total revenue, compared to $36.3 million, or 6.2% of total revenue, for fiscal 2020.

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:

“Fourth quarter results were strong across the board,” said Bill Losch, Chief Financial Officer of Okta. “We were particularly pleased with the continued strength in RPO, revenue, and cash flows, which reflects the success we’ve experienced with large enterprise customers. We believe that the secular tailwinds that have propelled our business over the past several years will continue into our fiscal year 2022 and we plan to invest appropriately to capitalize on the opportunity and further strengthen our competitive positioning.”

This financial outlook does not include any potential impact from the proposed acquisition of Auth0.

For the first quarter of fiscal 2022, the Company expects:

Total revenue of $237 million to $239 million, representing a growth rate of 30% to 31% year-over-year
Non-GAAP operating loss of $28.0 million to $27.0 million
Non-GAAP net loss per share of $0.21 to $0.20, assuming weighted-average shares outstanding of approximately 133 million

For the full year fiscal 2022, the Company expects:

Total revenue of $1.08 billion to $1.09 billion, representing a growth rate of 29% to 30% year-over-year
Non-GAAP operating loss of $61.0 million to $55.0 million
Non-GAAP net loss per share of $0.49 to $0.44, assuming weighted-average shares outstanding of approximately 135 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.

Proposed Acquisition of Auth0

In a separate press release today, Okta announced it has entered into a definitive agreement to acquire Auth0, a leading identity platform for application teams, in a stock transaction valued at approximately $6.5 billion based on a fixed number of Okta shares and an Okta share price of $276.21. Together, Okta and Auth0 address a broad set of identity use cases and the acquisition will accelerate the companies’ shared vision of enabling everyone to safely use any technology, shaping the future of identity on the internet. “Combining Auth0’s developer-centric identity platform with the Okta Identity Cloud will drive tremendous value for both current and future customers,” said Todd McKinnon, Chief Executive Officer and co-founder, Okta.

For additional details please refer to the separate press release distributed today, which can be found at investor.okta.com.

Conference Call Information:

Okta will host a live video webcast at 2:00 p.m. Pacific Time on March 3, 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.

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, amortization of debt discount and debt issuance costs, non-cash charitable contributions, amortization of acquired intangibles, acquisition-related expenses 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; and global economic conditions could deteriorate; the parties may not be able to satisfy the Auth0 transaction closing conditions in a timely fashion or at all, 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.

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 10,000 organizations, including JetBlue, Nordstrom, Siemens, Slack, T-Mobile, Takeda, Teach for America, and Twilio, 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.

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

	Three Months Ended January 31,						Twelve Months Ended January 31,
	2021			2020			2021			2020
Revenue:
Subscription	$	225,400		$	158,514		$	796,613		$	552,688
Professional services and other	9,340			8,813			38,811			33,379
Total revenue	234,740			167,327			835,424			586,067
Cost of revenue:
Subscription⁽¹⁾	48,675			33,864			170,095			116,445
Professional services and other⁽¹⁾	12,465			10,819			47,586			42,937
Total cost of revenue	61,140			44,683			217,681			159,382
Gross profit	173,600			122,644			617,743			426,685
Operating expenses:
Research and development⁽¹⁾	62,316			43,360			222,826			159,269
Sales and marketing⁽¹⁾	115,173			92,635			427,350			340,356
General and administrative⁽¹⁾	50,707			31,352			171,726			112,892
Total operating expenses	228,196			167,347			821,902			612,517
Operating loss	(54,596		)	(44,703		)	(204,159		)	(185,832		)
Interest expense	(22,597		)	(10,646		)	(72,660		)	(27,017		)
Interest income and other, net	2,154			5,743			12,891			17,089
Loss on early extinguishment and conversion of debt	—			—			(2,263		)	(14,572		)
Interest and other, net	(20,443		)	(4,903		)	(62,032		)	(24,500		)
Loss before provision for (benefit from) income taxes	(75,039		)	(49,606		)	(266,191		)	(210,332		)
Provision for (benefit from) income taxes	767			866			141			(1,419		)
Net loss	$	(75,806	)	$	(50,472	)	$	(266,332	)	$	(208,913	)

Net loss per share, basic and diluted	$	(0.58	)	$	(0.42	)	$	(2.09	)	$	(1.78	)

Weighted-average shares used to compute net loss per share, basic and diluted	130,138			121,562			127,212			117,221

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

	Three Months Ended January 31,				Twelve Months Ended January 31,
	2021		2020		2021		2020
Cost of subscription revenue	$	6,666	$	3,786	$	21,895	$	12,923
Cost of professional services and other	2,159		1,872		8,083		7,164
Research and development	18,836		11,361		63,270		37,683
Sales and marketing	15,109		11,118		53,802		38,077
General and administrative	13,637		8,793		49,131		30,777
Total stock-based compensation expense	$	56,407	$	36,930	$	196,181	$	126,624

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

	January 31,				January 31,
	2021				2020
Assets
Current assets:
Cash and cash equivalents		$	434,607		$	520,048
Short-term investments		2,121,584			882,976
Accounts receivable, net of allowances		194,818			130,115
Deferred commissions		45,949			33,636
Prepaid expenses and other current assets		81,609			32,950
Total current assets		2,878,567			1,599,725
Property and equipment, net		62,783			53,535
Operating lease right-of-use assets		149,604			125,204
Deferred commissions, noncurrent		108,555			77,874
Intangible assets, net		27,009			32,529
Goodwill		48,023			48,023
Other assets		24,256			18,505
Total assets		$	3,298,797		$	1,955,395
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	8,557		$	3,837
Accrued expenses and other current liabilities		53,729			36,887
Accrued compensation		71,906			40,300
Convertible senior notes, net		908,684			100,703
Deferred revenue		502,738			365,236
Total current liabilities		1,545,614			546,963
Convertible senior notes, net, noncurrent		857,387			837,002
Operating lease liabilities, noncurrent		179,518			154,511
Deferred revenue, noncurrent		10,860			6,214
Other liabilities, noncurrent		11,375			5,361
Total liabilities		2,604,754			1,550,051

Stockholders’ equity:
Preferred stock		—			—
Class A common stock		12			11
Class B common stock		1			1
Additional paid-in capital		1,656,096			1,105,564
Accumulated other comprehensive income		5,390			892
Accumulated deficit		(967,456		)	(701,124		)
Total stockholders’ equity		694,043			405,344
Total liabilities and stockholders’ equity		$	3,298,797		$	1,955,395

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

	Twelve Months Ended January 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(266,332	)	$	(208,913	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	196,181			126,624
Depreciation, amortization and accretion	36,865			17,815
Amortization of debt discount and issuance costs	68,424			25,892
Amortization of deferred commissions	39,661			28,588
Deferred income taxes	(1,182		)	(2,253		)
Non-cash charitable contributions	9,292			1,746
Loss on early extinguishment and conversion of debt	2,263			14,572
Other, net	5,537			(11		)
Changes in operating assets and liabilities:
Accounts receivable	(66,373		)	(37,515		)
Deferred commissions	(81,016		)	(61,224		)
Prepaid expenses and other assets	(13,174		)	(4,080		)
Operating lease right-of-use assets	19,053			12,951
Accounts payable	4,081			1,689
Accrued compensation	44,157			23,034
Accrued expenses and other liabilities	5,527			9,972
Operating lease liabilities	(17,150		)	(9,716		)
Deferred revenue	142,148			116,432
Net cash provided by operating activities	127,962			55,603
Cash flows from investing activities:
Capitalization of internal-use software costs	(4,159		)	(3,888		)
Purchases of property and equipment	(13,083		)	(15,442		)
Purchases of securities available for sale and other	(2,029,030		)	(999,387		)
Proceeds from maturities and redemption of securities available for sale	535,123			356,277
Proceeds from sales of securities available for sale and other	206,129			27,271
Purchases of intangible assets	(126		)	(8,589		)
Payments for business acquisition, net of cash acquired	—			(44,283		)
Net cash used in investing activities	(1,305,146		)	(688,041		)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs	1,134,841			1,040,660
Payments for repurchases of convertible senior notes	(446		)	(224,414		)
Proceeds from hedges related to convertible senior notes	195,046			405,851
Payments for warrants related to convertible senior notes	(175,399		)	(358,622		)
Purchases of capped calls related to convertible senior notes	(133,975		)	(74,094		)
Proceeds from stock option exercises, net of repurchases	45,620			45,363
Proceeds from shares issued in connection with employee stock purchase plan	25,911			18,767
Other, net	—			(126		)
Net cash provided by financing activities	1,091,598			853,385
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash	2,263			(209		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(83,323		)	220,738
Cash, cash equivalents and restricted cash at beginning of period	531,953			311,215
Cash, cash equivalents and restricted cash at end of period	$	448,630		$	531,953

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 and amortization of acquired intangibles.

	Three Months Ended January 31,						Twelve Months Ended January 31,
	2021			2020			2021			2020
Gross profit	$	173,600		$	122,644		$	617,743		$	426,685
Add:
Stock-based compensation expense included in cost of revenue⁽¹⁾	8,825			5,658			29,978			20,087
Amortization of acquired intangibles	1,593			1,593			6,373			5,488
Non-GAAP gross profit	$	184,018		$	129,895		$	654,094		$	452,260
Gross margin	74		%	73		%	74		%	73		%
Non-GAAP gross margin	78		%	78		%	78		%	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.

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-related expenses.

	Three Months Ended January 31,						Twelve Months Ended January 31,
	2021			2020			2021			2020
Operating loss	$	(54,596	)	$	(44,703	)	$	(204,159	)	$	(185,832	)
Add:
Stock-based compensation expense⁽¹⁾	56,407			36,930			196,181			126,624
Non-cash charitable contributions	4,630			584			9,292			1,746
Amortization of acquired intangibles	1,593			1,593			6,373			5,488
Acquisition-related expenses⁽²⁾	—			—			—			3,449
Non-GAAP operating income (loss)	$	8,034		$	(5,596	)	$	7,687		$	(48,525	)
Operating margin	(23		)%	(27		)%	(24		)%	(32		)%
Non-GAAP operating margin	3		%	(3		)%	1		%	(8		)%

⁽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⁾	We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental costs incurred.

Contacts

Investor Contact:
Dave Gennarelli

investor@okta.com
415-851-4744

Media Contact:
Jenna Kozel

press@okta.com
415-418-9600

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