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Okta Announces Second Quarter Fiscal Year 2023 Financial Results

·13 min read
  • 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--(BUSINESS WIRE)--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.

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

...