BusinessWire

Okta Announces Strong Second Quarter Results

  • Increases revenue and operating profit outlook for fiscal 2021
  • Q2 revenue grew 43% year-over-year; subscription revenue grew 44% year-over-year
  • Remaining performance obligations, or subscription revenue backlog, grew 56% year-over-year

SAN FRANCISCO--(BUSINESS WIRE)--Okta, Inc. (NASDAQ: OKTA), the leading independent provider of identity for the enterprise, today announced financial results for its second quarter ended July 31, 2020.


The three mega-trends that have been driving our business for the past several years - the adoption of cloud and hybrid IT, digital transformation, and zero trust security - are all being accelerated globally by the current environment,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “These trends are reflected in our strong second quarter results and reflect the work that Okta is doing to help organizations around the world accelerate their adoption and deployment of cloud applications, and remote access, and re-imagine their digital customer experiences. As part of this process, organizations are re-evaluating their roadmap to modernize their identity systems and Okta’s platform is the linchpin of the new cloud technology stack. We believe that the world will not return to the pre-COVID work environment and Okta is committed to helping our customers on their journeys.”

Second Quarter Fiscal 2021 Financial Highlights:

  • Revenue: Total revenue was $200.4 million, an increase of 43% year-over-year. Subscription revenue was $190.7 million, an increase of 44% year-over-year.
  • Remaining Performance Obligations (RPO): RPO was $1.43 billion, an increase of 56% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $684.5 million, up 48% compared to the second quarter of fiscal 2020.
  • Calculated Billings: Total calculated billings were $198.1 million, an increase of 27% year-over-year.
  • GAAP Operating Loss: GAAP operating loss was $45.4 million, or 22.6% of total revenue, compared to $43.6 million, or 31.0% of total revenue, in the second quarter of fiscal 2020.
  • Non-GAAP Operating Income/Loss: Non-GAAP operating income was $6.5 million, or 3.2% of total revenue, compared to a non-GAAP operating loss of $9.9 million, or 7.1% of total revenue, in the second quarter of fiscal 2020.
  • GAAP Net Loss: GAAP net loss was $60.1 million, compared to $43.0 million in the second quarter of fiscal 2020. GAAP net loss per share was $0.48, compared to $0.37 in the second quarter of fiscal 2020.
  • Non-GAAP Net Income/Loss: Non-GAAP net income was $9.9 million, compared to a non-GAAP net loss of $5.2 million in the second quarter of fiscal 2020. Non-GAAP basic net income per share was $0.08, compared to a non-GAAP basic net loss per share of $0.05 in the second quarter of fiscal 2020. Non-GAAP diluted net income per share was $0.07, compared to a non-GAAP diluted net loss per share of $0.05 in the second quarter of fiscal 2020.
  • Cash Flow: Net cash provided by operations was $10.9 million, or 5.5% of total revenue, compared to net cash provided by operations of $1.1 million, or 0.8% of total revenue, in the second quarter of fiscal 2020. Free cash flow was $6.9 million, or 3.4% of total revenue, compared to negative $4.3 million, or 3.1% of total revenue, in the second quarter of fiscal 2020.
  • Cash, cash equivalents, and short-term investments were $2.5 billion at July 31, 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:

We are pleased with our continued execution and excellent second quarter results,” said Bill Losch, Chief Financial Officer of Okta. “We believe it’s prudent to continue to expect some near-term economic uncertainty as the business impacts stemming from the pandemic further unfold; however, our strong first half results give us confidence in raising our fiscal year 2021 outlook for both revenue and profitability.”

For the third quarter of fiscal 2021, the Company expects:

  • Total revenue of $202 million to $203 million, representing a growth rate of 32% to 33% year-over-year
  • Non-GAAP operating loss of $3.0 million to $2.0 million
  • Non-GAAP net loss per share of $0.02 to $0.01, assuming weighted shares outstanding of approximately 129 million

For the full year fiscal 2021, the Company now expects:

  • Total revenue of $800 million to $803 million, representing a growth rate of 37% year-over-year
  • Non-GAAP operating loss of $13.0 million to $11.0 million
  • Non-GAAP net loss per share of $0.03 to $0.01, assuming weighted shares outstanding of approximately 127 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 its most directly comparable GAAP measure because certain items are out of Okta’s control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP operating loss and non-GAAP net loss per share is not available without unreasonable effort.

Conference Call Information:

Okta will host a live video webcast at 2:00 p.m. Pacific Time on August 27, 2020 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 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. 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. 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 provider of identity for the enterprise. The Okta Identity Cloud enables organizations to securely connect the right people to the right technologies at the right time. With over 6,500 pre-built integrations to applications and infrastructure providers, Okta customers can easily and securely use the best technologies for their business. Over 8,950 organizations, including Engie, JetBlue, Nordstrom, Takeda Pharmaceutical, Teach for America, T-Mobile 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
July 31,

Six Months Ended
July 31,

 

2020

 

2019

2020

 

2019

Revenue:

 

 

 

 

 

 

Subscription

$

 

 

190,689

 

 

$

 

132,494

 

$

 

364,470

 

 

$

 

249,657

 

Professional services and other

 

 

9,757

 

 

 

7,986

 

 

18,835

 

 

 

16,046

 

Total revenue

 

 

200,446

 

 

 

140,480

 

 

383,305

 

 

 

265,703

 

Cost of revenue:

 

 

 

 

 

 

Subscription(1)

 

 

39,501

 

 

 

27,917

 

 

76,658

 

 

 

52,457

 

Professional services and other(1)

 

 

11,646

 

 

 

10,863

 

 

22,975

 

 

 

21,418

 

Total cost of revenue

 

 

51,147

 

 

 

38,780

 

 

99,633

 

 

 

73,875

 

Gross profit

 

 

149,299

 

 

 

101,700

 

 

283,672

 

 

 

191,828

 

Operating expenses:

 

 

 

 

 

 

Research and development(1)

 

 

53,866

 

 

 

40,045

 

 

102,360

 

 

 

74,077

 

Sales and marketing(1)

 

 

98,322

 

 

 

78,385

 

 

202,365

 

 

 

160,497

 

General and administrative(1)

 

 

42,499

 

 

 

26,887

 

 

76,534

 

 

 

52,653

 

Total operating expenses

 

 

194,687

 

 

 

145,317

 

 

381,259

 

 

 

287,227

 

Operating loss

 

 

(45,388

)

 

 

(43,617

)

 

(97,587

)

 

 

(95,399

)

Interest expense

 

 

(16,931

)

 

 

(4,304

)

 

(27,695

)

 

 

(8,545

)

Interest income and other, net

 

 

3,960

 

 

 

3,464

 

 

8,859

 

 

 

6,364

 

Loss on early extinguishment of debt

 

 

(2,174

)

 

 

 

 

(2,174

)

 

 

 

Interest and other, net

 

 

(15,145

)

 

 

(840

)

 

(21,010

)

 

 

(2,181

)

Loss before benefit from income taxes

 

 

(60,533

)

 

 

(44,457

)

 

(118,597

)

 

 

(97,580

)

Benefit from income taxes

 

 

(433

)

 

 

(1,477

)

 

(835

)

 

 

(2,634

)

Net loss

$

 

 

(60,100

)

 

$

 

(42,980

)

$

 

(117,762

)

 

$

 

(94,946

)

 

 

 

 

 

 

 

Net loss per share, basic and diluted

$

 

 

(0.48

)

 

$

 

(0.37

)

$

 

(0.94

)

 

$

 

(0.83

)

 

 

 

 

 

 

 

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

 

 

126,319

 

 

 

115,033

 

 

124,922

 

 

 

114,042

 

 

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

Three Months Ended
July 31,

Six Months Ended
July 31,

2020

2019

2020

2019

Cost of subscription revenue

$

 

5,164

$

3,111

$

9,139

$

5,533

Cost of professional services and other

 

2,000

 

1,873

3,811

3,392

Research and development

 

14,953

9,082

26,888

15,428

Sales and marketing

 

13,165

9,236

24,325

16,022

General and administrative

 

13,112

7,972

21,959

13,584

Total stock-based compensation expense

$

48,394

$

31,274

$

86,122

$

53,959

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

 

 

 

July 31,

 

January 31,

 

 

2020

 

2020

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

957,234

 

 

$

520,048

 

Short-term investments

 

1,557,279

 

 

882,976

 

Accounts receivable, net of allowances

 

110,540

 

 

130,115

 

Deferred commissions

 

37,808

 

 

33,636

 

Prepaid expenses and other current assets

 

44,074

 

 

32,950

 

Total current assets

 

2,706,935

 

 

1,599,725

 

Property and equipment, net

 

63,406

 

 

53,535

 

Operating lease right-of-use assets

 

157,781

 

 

125,204

 

Deferred commissions, noncurrent

 

86,556

 

 

77,874

 

Intangible assets, net

 

30,031

 

 

32,529

 

Goodwill

 

48,023

 

 

48,023

 

Other assets

 

22,283

 

 

18,505

 

Total assets

 

$

3,115,015

 

 

$

1,955,395

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

4,726

 

 

$

3,837

 

Accrued expenses and other current liabilities

 

54,803

 

 

36,887

 

Accrued compensation

 

39,227

 

 

40,300

 

Convertible senior notes, net

 

43,578

 

 

100,703

 

Deferred revenue

 

391,246

 

 

365,236

 

Total current liabilities

 

533,580

 

 

546,963

 

Convertible senior notes, net, noncurrent

 

1,689,438

 

 

837,002

 

Operating lease liabilities, noncurrent

 

189,208

 

 

154,511

 

Deferred revenue, noncurrent

 

5,574

 

 

6,214

 

Other liabilities, noncurrent

 

12,018

 

 

5,361

 

Total liabilities

 

2,429,818

 

 

1,550,051

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock

 

 

 

 

Class A common stock

 

12

 

 

11

 

Class B common stock

 

1

 

 

1

 

Additional paid-in capital

 

1,498,549

 

 

1,105,564

 

Accumulated other comprehensive income

 

5,521

 

 

892

 

Accumulated deficit

 

(818,886

)

 

(701,124

)

Total stockholders’ equity

 

685,197

 

 

405,344

 

Total liabilities and stockholders' equity

 

$

3,115,015

 

 

$

1,955,395

 

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

 

Six Months Ended July 31,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net loss

$

(117,762

)

 

$

(94,946

)

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

 

 

 

Stock-based compensation

86,106

 

 

53,959

 

Depreciation, amortization and accretion

12,691

 

 

7,916

 

Amortization of debt discount and issuance costs

26,330

 

 

8,113

 

Amortization of deferred commissions

18,077

 

 

13,192

 

Deferred income taxes

(1,915

)

 

(3,057

)

Non-cash charitable contributions

2,417

 

 

652

 

Loss on early extinguishment of debt

2,174

 

 

 

Other, net

1,435

 

 

84

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

18,626

 

 

4,459

 

Deferred commissions

(30,332

)

 

(21,372

)

Prepaid expenses and other assets

(7,622

)

 

1,534

 

Operating lease right-of-use assets

8,972

 

 

6,189

 

Accounts payable

810

 

 

1,368

 

Accrued compensation

15,045

 

 

4,717

 

Accrued expenses and other liabilities

(3,131

)

 

1,304

 

Operating lease liabilities

(7,663

)

 

(159

)

Deferred revenue

25,369

 

 

36,175

 

Net cash provided by operating activities

49,627

 

 

20,128

 

Cash flows from investing activities:

 

 

 

Capitalization of internal-use software costs

(2,326

)

 

(1,330

)

Purchases of property and equipment

(10,669

)

 

(9,917

)

Purchases of securities available for sale and other

(1,029,281

)

 

(237,693

)

Proceeds from maturities and redemption of securities available for sale

280,395

 

 

136,344

 

Proceeds from sales of securities available for sale and other

89,620

 

 

17,329

 

Purchases of intangible assets

 

 

(8,500

)

Payments for business acquisition, net of cash acquired

 

 

(44,223

)

Net cash used in investing activities

(672,261

)

 

(147,990

)

Cash flows from financing activities:

 

 

 

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

1,135,418

 

 

 

Payments for repurchases of convertible senior notes

(181

)

 

 

Proceeds from hedges related to convertible senior notes

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

27,517

 

 

27,453

 

Proceeds from shares issued in connection with employee stock purchase plan

12,821

 

 

9,005

 

Other, net

 

 

(126

)

Net cash provided by financing activities

1,061,247

 

 

36,332

 

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

578

 

 

(1,187

)

Net increase (decrease) in cash, cash equivalents and restricted cash

439,191

 

 

(92,717

)

Cash, cash equivalents and restricted cash at beginning of period

531,953

 

 

311,215

 

Cash, cash equivalents and restricted cash at end of period

$

971,144

 

 

$

218,498

 

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 and amortization of acquired intangibles.

 

Three Months Ended
July 31,

 

Six Months Ended
July 31,

 

2020

 

2019

 

2020

 

2019

Gross profit

$

149,299

 

 

$

101,700

 

 

$

283,672

 

 

$

191,828

 

Add:

 

 

 

 

 

 

 

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

7,164

 

 

4,984

 

 

12,950

 

 

8,925

 

Amortization of acquired intangibles

1,594

 

 

1,785

 

 

3,187

 

 

2,548

 

Non-GAAP gross profit

$

158,057

 

 

$

108,469

 

 

$

299,809

 

 

$

203,301

 

Gross margin

74

%

 

72

%

 

74

%

 

72

%

Non-GAAP gross margin

79

%

 

77

%

 

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
July 31,

Six Months Ended
July 31,

 

2020

 

2019

2020

 

2019

Operating loss

$

(45,388

)

 

$

(43,617

)

$

(97,587

)

 

$

(95,399

)

Add:

 

 

 

 

 

 

Stock-based compensation expense(1)

48,394

 

 

31,274

 

86,122

 

 

53,959

 

Non-cash charitable contributions

1,881

 

 

652

 

2,417

 

 

652

 

Amortization of acquired intangibles

1,594

 

 

1,785

 

3,187

 

 

2,548

 

Acquisition-related expenses(2)

 

 

 

 

 

3,449

 

Non-GAAP operating income (loss)

$

6,481

 

 

$

(9,906

)

$

(5,861

)

 

$

(34,791

)

Operating margin

(23

)%

 

(31

)%

(25

)%

 

(36

)%

Non-GAAP operating margin

3

%

 

(7

)%

(2

)%

 

(13

)%

(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.

Non-GAAP Net Income (Loss) and Non-GAAP Net Margin

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-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment of debt.

 

Three Months Ended
July 31,

 

Six Months Ended
July 31,

 

2020

 

2019(1)

 

2020

 

2019(1)

Net loss

$

(60,100

)

 

$

(42,980

)

 

$

(117,762

)

 

$

(94,946

)

Add:

 

 

 

 

 

 

 

Stock-based compensation expense(2)

48,394

 

 

31,274

 

 

86,122

 

 

53,959

 

Non-cash charitable contributions

1,881

 

 

652

 

 

2,417

 

 

652

 

Amortization of acquired intangibles

1,594

 

 

1,785

 

 

3,187

 

 

2,548

 

Acquisition-related expenses(3)

 

 

 

 

 

 

3,449

 

Amortization of debt discount and debt issuance costs(4)

15,973

 

 

4,088

 

 

26,330

 

 

8,113

 

Loss on early extinguishment of debt(5)

2,174

 

 

 

 

2,174

 

 

 

Non-GAAP net income (loss)

$

9,916

 

 

$

(5,181

)

 

$

2,468

 

 

$

(26,225

)

Net margin

(30

)%

 

(31

)%

 

(31

)%

 

(36

)%

Non-GAAP net margin

5

%

 

(4

)%

 

1

%

 

(10

)%

(1)

Prior periods have been adjusted to conform to the current presentation. See footnotes (4) and (5) for additional details.

(2)

See table in footnote (1) to the condensed consolidated statements of operations above for breakdown of stock-based compensation expense by line item.

(3)

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

(4)

Amortization of debt issuance costs is an adjustment to non-GAAP net income (loss), effective the three and six months ended July 31, 2020. Debt issuance costs included are $0.8 million and $1.4 million for the three and six months ended July 31, 2020, respectively, and $0.3 million and $0.6 million for the three and six months ended July 31, 2019, respectively.

(5)

Loss on early extinguishment of debt is calculated inclusive of write-offs of debt issuance costs, effective the three and six months ended July 31, 2020. The amounts of these write-offs are $1.0 million for the three and six months ended July 31, 2020, respectively, and nil for the three and six months ended July 31, 2019, respectively.

Non-GAAP Net Income (Loss) per share, basic and diluted

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 the Company’s note hedge and capped call agreements on convertible senior notes outstanding, which fully reduced the potential dilutive effect of the convertible senior notes outstanding.


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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