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Okta Announces Strong Third Quarter Results

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·25 min read
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  • Increases revenue and operating profit outlook for fiscal 2021

  • Q3 revenue grew 42% year-over-year; subscription revenue grew 43% year-over-year

  • Remaining performance obligations (RPO), or subscription revenue backlog, grew 53% year-over-year

  • Record quarterly operating and free cash flows

  • Appoints Board Member Mike Kourey to succeed Bill Losch, who is retiring, as Chief Financial Officer in March 2021

Okta, Inc. (NASDAQ: OKTA), the leading independent provider of identity for the enterprise, today announced financial results for its third quarter ended October 31, 2020.

"We are seeing the importance of a modern identity platform like the Okta Identity Cloud grow as businesses around the world accelerate their adoption of cloud-based applications and re-imagine their digital customer experiences," said Todd McKinnon, Chief Executive Officer and co-founder of Okta. "Our strong third quarter results reflect Okta's leading position in identity and access management and our continued ability to execute and drive industry-leading performance."

Third Quarter Fiscal 2021 Financial Highlights:

  • Revenue: Total revenue was $217.4 million, an increase of 42% year-over-year. Subscription revenue was $206.7 million, an increase of 43% year-over-year.

  • Remaining Performance Obligations (RPO): RPO was $1.58 billion, an increase of 53% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $753.2 million, up 46% compared to the third quarter of fiscal 2020.

  • Calculated Billings: Total calculated billings were $252.4 million, an increase of 44% year-over-year.

  • GAAP Operating Loss: GAAP operating loss was $52.0 million, or 23.9% of total revenue, compared to $45.7 million, or 29.9% of total revenue, in the third quarter of fiscal 2020.

  • Non-GAAP Operating Income/Loss: Non-GAAP operating income was $5.5 million, or 2.5% of total revenue, compared to a non-GAAP operating loss of $8.1 million, or 5.3% of total revenue, in the third quarter of fiscal 2020.

  • GAAP Net Loss: GAAP net loss was $72.8 million, compared to $63.5 million in the third quarter of fiscal 2020. GAAP net loss per share was $0.56, compared to $0.53 in the third quarter of fiscal 2020.

  • Non-GAAP Net Income/Loss: Non-GAAP net income was $5.7 million, compared to a non-GAAP net loss of $3.8 million in the third quarter of fiscal 2020. Non-GAAP basic and diluted net income per share was $0.04, compared to a non-GAAP basic and diluted net loss per share of $0.03 in the third quarter of fiscal 2020.

  • Cash Flow: Net cash provided by operations was $43.4 million, or 20.0% of total revenue, compared to net cash provided by operations of $10.6 million, or 7.0% of total revenue, in the third quarter of fiscal 2020. Free cash flow was $41.6 million, or 19.1% of total revenue, compared to $9.2 million, or 6.0% of total revenue, in the third quarter of fiscal 2020.

  • Cash, cash equivalents, and short-term investments were $2.50 billion at October 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 strong third quarter performance," said Bill Losch, Chief Financial Officer of Okta. "Our strong growth in RPO and revenue, and record cash flows, are evidence of our success with large enterprise customers and the continued secular tailwinds driving our business. We are confident in our ability to continue executing at a high level and thus are raising our fiscal year 2021 outlook for both revenue and profitability."

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

  • Total revenue of $221 million to $222 million, representing a growth rate of 32% to 33% year-over-year

  • Non-GAAP operating loss of $2.0 million to $1.0 million

  • Non-GAAP net loss per share of $0.02 to $0.01, assuming weighted shares outstanding of approximately 131 million

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

  • Total revenue of $822 million to $823 million, representing a growth rate of 40% year-over-year

  • Non-GAAP operating loss of $2.3 million to $1.3 million

  • Non-GAAP net income per share, diluted of $0.04 to $0.05, assuming weighted shares outstanding of approximately 143 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 income (loss) per share, diluted 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 income (loss) per share, diluted is not available without unreasonable effort.

Chief Financial Officer Transition:

Current Okta Board member and audit committee chair, Mike Kourey, will join Okta as Chief Financial Officer in March 2021. Kourey will succeed Bill Losch, who will be retiring after serving as CFO at Okta since 2013. Losch will continue in his current role through early March 2021 and the filing of Okta’s Form 10-K, and will remain an advisor to Okta through the end of the company’s first quarter of fiscal 2022. Kourey will report directly to Todd McKinnon, Okta’s Chief Executive Officer and co-founder, step down from the Audit Committee in connection with this transition, and will resign from Okta’s board when he assumes the CFO role.

"I want to thank Bill for his invaluable contribution to Okta from our early years to helping set the course to achieve over $1 billion in revenue next year," said McKinnon. "He’s been a fantastic leader, partner, and friend, and we are all going to sincerely miss him. We’re excited for the next chapter for Bill and wish him nothing but the best in his retirement next year.

"We couldn’t ask for a better successor than Mike, who has been an instrumental member of our board as audit committee chair over the past five years," continued McKinnon. "Mike’s career in technology, both as an executive leader and board member, is second to none. He brings decades of experience in scaling companies, which will be key as we position Okta to become the next iconic technology company."

Kourey joined Okta’s board as audit committee chair in 2015. Since early 2019, Kourey has served as the Chief Financial Officer of Vlocity Inc., a cloud software company that was acquired by Salesforce in June 2020. From 2015 to 2018, Kourey served as the Chief Financial Officer of Medallia, Inc., a cloud-based customer experience management company. Prior to Medallia, he served as a Partner at Khosla Ventures, a venture capital firm. Kourey also spent over 20 years in a variety of roles at Polycom, Inc., a communications solutions company, most recently as Chief Financial Officer. He previously served on the boards of RingCentral, Inc., Aruba Networks, Inc., Riverbed Technology, Inc. and other public and private companies. Kourey holds a Masters of Business Administration from Santa Clara University and a Bachelor of Science from University of California, Davis.

Conference Call Information:

Okta will host a live video webcast at 2:00 p.m. Pacific Time on December 2, 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 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. 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 9,400 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
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Revenue:

Subscription

$

206,743

$

144,517

$

571,213

$

394,174

Professional services and other

10,636

8,520

29,471

24,566

Total revenue

217,379

153,037

600,684

418,740

Cost of revenue:

Subscription(1)

44,762

30,124

121,420

82,581

Professional services and other(1)

12,146

10,700

35,121

32,118

Total cost of revenue

56,908

40,824

156,541

114,699

Gross profit

160,471

112,213

444,143

304,041

Operating expenses:

Research and development(1)

58,150

41,832

160,510

115,909

Sales and marketing(1)

109,812

87,224

312,177

247,721

General and administrative(1)

44,485

28,887

121,019

81,540

Total operating expenses

212,447

157,943

593,706

445,170

Operating loss

(51,976

)

(45,730

)

(149,563

)

(141,129

)

Interest expense

(22,368

)

(7,826

)

(50,063

)

(16,371

)

Interest income and other, net

1,878

4,982

10,737

11,346

Loss on early extinguishment and conversion of debt

(89

)

(14,572

)

(2,263

)

(14,572

)

Interest and other, net

(20,579

)

(17,416

)

(41,589

)

(19,597

)

Loss before provision for (benefit from) income taxes

(72,555

)

(63,146

)

(191,152

)

(160,726

)

Provision for (benefit from) income taxes

209

349

(626

)

(2,285

)

Net loss

$

(72,764

)

$

(63,495

)

$

(190,526

)

$

(158,441

)

Net loss per share, basic and diluted

$

(0.56

)

$

(0.53

)

$

(1.51

)

$

(1.37

)

Weighted-average shares used to compute net loss

per share, basic and diluted

128,813

118,976

126,222

115,598

(1)

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

Three Months Ended
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Cost of subscription revenue

$

6,090

$

3,604

$

15,229

$

9,137

Cost of professional services and other

2,113

1,900

5,924

5,292

Research and development

17,546

10,894

44,434

26,322

Sales and marketing

14,368

10,937

38,693

26,959

General and administrative

13,535

8,400

35,494

21,984

Total stock-based compensation expense

$

53,652

$

35,735

$

139,774

$

89,694

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

October 31,

January 31,

2020

2020

Assets

Current assets:

Cash and cash equivalents

$

409,769

$

520,048

Short-term investments

2,085,373

882,976

Accounts receivable, net of allowances

139,473

130,115

Deferred commissions

40,908

33,636

Prepaid expenses and other current assets

82,016

32,950

Total current assets

2,757,539

1,599,725

Property and equipment, net

62,405

53,535

Operating lease right-of-use assets

154,699

125,204

Deferred commissions, noncurrent

94,305

77,874

Intangible assets, net

28,953

32,529

Goodwill

48,023

48,023

Other assets

24,355

18,505

Total assets

$

3,170,279

$

1,955,395

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

5,114

$

3,837

Accrued expenses and other current liabilities

47,330

36,887

Accrued compensation

61,600

40,300

Convertible senior notes, net

35,131

100,703

Deferred revenue

424,765

365,236

Total current liabilities

573,940

546,963

Convertible senior notes, net, noncurrent

1,709,777

837,002

Operating lease liabilities, noncurrent

185,860

154,511

Deferred revenue, noncurrent

7,349

6,214

Other liabilities, noncurrent

12,705

5,361

Total liabilities

2,489,631

1,550,051

Stockholders’ equity:

Preferred stock

Class A common stock

12

11

Class B common stock

1

1

Additional paid-in capital

1,569,714

1,105,564

Accumulated other comprehensive income

2,571

892

Accumulated deficit

(891,650

)

(701,124

)

Total stockholders’ equity

680,648

405,344

Total liabilities and stockholders' equity

$

3,170,279

$

1,955,395

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Nine Months Ended

October 31,

2020

2019

Cash flows from operating activities:

Net loss

$

(190,526

)

$

(158,441

)

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

Stock-based compensation

139,774

89,691

Depreciation, amortization and accretion

23,694

12,336

Amortization of debt discount and issuance costs

47,261

15,653

Amortization of deferred commissions

28,428

20,541

Deferred income taxes

(2,414

)

(3,069

)

Non-cash charitable contributions

4,662

1,162

Loss on early extinguishment and conversion of debt

2,263

14,572

Other, net

4,515

84

Changes in operating assets and liabilities:

Accounts receivable

(10,547

)

(9,393

)

Deferred commissions

(51,837

)

(36,641

)

Prepaid expenses and other assets

(6,794

)

(1,518

)

Operating lease right-of-use assets

13,979

7,851

Accounts payable

1,377

1,962

Accrued compensation

37,863

17,352

Accrued expenses and other liabilities

2,442

4,017

Operating lease liabilities

(11,750

)

(4,128

)

Deferred revenue

60,663

58,737

Net cash provided by operating activities

93,053

30,768

Cash flows from investing activities:

Capitalization of internal-use software costs

(3,530

)

(2,659

)

Purchases of property and equipment

(11,297

)

(9,980

)

Purchases of securities available for sale and other

(1,845,958

)

(321,462

)

Proceeds from maturities and redemption of securities available for sale

386,774

244,393

Proceeds from sales of securities available for sale and other

206,129

17,329

Purchases of intangible assets

(8,500

)

Payments for business acquisition, net of cash acquired

(44,223

)

Net cash used in investing activities

(1,267,882

)

(125,102

)

Cash flows from financing activities:

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

1,134,841

1,040,760

Payments for repurchases of convertible senior notes

(447

)

(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

33,570

36,371

Proceeds from shares issued in connection with employee stock purchase plan

12,821

9,005

Other, net

(126

)

Net cash provided by financing activities

1,066,457

834,731

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

121

(241

)

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

(108,251

)

740,156

Cash, cash equivalents and restricted cash at beginning of period

531,953

311,215

Cash, cash equivalents and restricted cash at end of period

$

423,702

$

1,051,371

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
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Gross profit

$

160,471

$

112,213

$

444,143

$

304,041

Add:

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

8,203

5,504

21,153

14,429

Amortization of acquired intangibles

1,593

1,347

4,780

3,895

Non-GAAP gross profit

$

170,267

$

119,064

$

470,076

$

322,365

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
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Operating loss

$

(51,976

)

$

(45,730

)

$

(149,563

)

$

(141,129

)

Add:

Stock-based compensation expense(1)

53,652

35,735

139,774

89,694

Non-cash charitable contributions

2,245

510

4,662

1,162

Amortization of acquired intangibles

1,593

1,347

4,780

3,895

Acquisition-related expenses(2)

3,449

Non-GAAP operating income (loss)

$

5,514

$

(8,138

)

$

(347

)

$

(42,929

)

Operating margin

(24

)

%

(30

)

%

(25

)

%

(34

)

%

Non-GAAP operating margin

3

%

(5

)

%

%

(10

)

%

(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 and conversion of debt.

Three Months Ended
October 31,

Nine Months Ended
October 31,

2020

2019(1)

2020

2019(1)

Net loss

$

(72,764)

$

(63,495)

$

(190,526)

$

(158,441)

Add:

Stock-based compensation expense(2)

53,652

35,735

139,774

89,694

Non-cash charitable contributions

2,245

510

4,662

1,162

Amortization of acquired intangibles

1,593

1,347

4,780

3,895

Acquisition-related expenses(3)

3,449

Amortization of debt discount and debt issuance costs(4)

20,931

7,540

47,261

15,653

Loss on early extinguishment and conversion of debt(5)

89

14,572

2,263

14,572

Non-GAAP net income (loss)

$

5,746

$

(3,791)

$

8,214

$

(30,016)

Net margin

(33)

%

(41)

%

(32)

%

(38)

%

Non-GAAP net margin

3

%

(2)

%

1

%

(7)

%

(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 July 31, 2020. Debt issuance costs included are $0.9 million and $2.3 million for the three and nine months ended October 31, 2020, respectively, and $0.5 million and $1.1 million for the three and nine months ended October 31, 2019, respectively.

(5)

Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective July 31, 2020. The amounts of these write-offs are $0.1 million and $1.1 million for the three and nine months ended October 31, 2020, respectively, and $3.8 million for the three and nine months ended October 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. Accordingly, the Company 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 Ended
October 31,

Nine Months Ended
October 31,

2020

2019(1)

2020

2019(1)

Net loss

$

(72,764

)

$

(63,495

)

$

(190,526

)

$

(158,441

)

Add:

Stock-based compensation expense(2)

53,652

35,735

139,774

89,694

Non-cash charitable contributions

2,245

510

4,662

1,162

Amortization of acquired intangibles

1,593

1,347

4,780

3,895

Acquisition-related expenses(3)

3,449

Amortization of debt discount and debt issuance costs(4)

20,931

7,540

47,261

15,653

Loss on early extinguishment and conversion of debt(5)

89

14,572

2,263

14,572

Non-GAAP net income (loss)

$

5,746

$

(3,791

)

$

8,214

$

(30,016

)

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

128,813

118,976

126,222

115,598

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

143,392

118,976

141,936

115,598

Net loss per share, basic and diluted

$

(0.56

)

$

(0.53

)

$

(1.51

)

$

(1.37

)

Non-GAAP net income (loss) per share, basic(6)

$

0.04

$

(0.03

)

$

0.07

$

(0.26

)

Non-GAAP net income (loss) per share, diluted(6)

$

0.04

$

(0.03

)

$

0.06

$

(0.26

)

(1)

Prior periods have been adjusted to conform to the current presentation. See footnotes (4), (5) and (6) 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 July 31, 2020. Debt issuance costs included are $0.9 million and $2.3 million for the three and nine months ended October 31, 2020, respectively, and $0.5 million and $1.1 million for the three and nine months ended October 31, 2019, respectively.

(5)

Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective the three July 31, 2020. The amounts of these write-offs are $0.1 million and $1.1 million for the three and nine months ended October 31, 2020, respectively, and $3.8 million for the three and nine months ended October 31, 2019, respectively.

(6)

The total impact of the adjustments noted in footnotes (4) and (5) and for the periods noted in footnote (1) above on non-GAAP net income (loss) per share, basic and diluted is $0.04 and $0.04 for the three and nine months ended October 31, 2019, respectively.

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 and capitalized internal-use software costs. Free cash flow margin is calculated as free cash flow divided by total revenue.

Three Months Ended
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Net cash provided by operating activities

$

43,426

$

10,640

$

93,053

$

30,768

Less:

Purchases of property and equipment

(628

)

(63

)

(11,297

)

(9,980

)

Capitalization of internal-use software costs

(1,204

)

(1,329

)

(3,530

)

(2,659

)

Free cash flow

$

41,594

$

9,248

$

78,226

$

18,129

Net cash used in investing activities

$

(595,621

)

$

22,888

$

(1,267,882

)

$

(125,102

)

Net cash provided by financing activities

$

5,210

$

798,399

$

1,066,457

$

834,731

Free cash flow margin

19

%

6

%

13

%

4

%

Calculated Billings

We define Calculated Billings as total revenue plus the change in deferred revenue and less the change in unbilled receivables during the period.

Three Months Ended
October 31,

Nine Months Ended
October 31,

2020

2019

2020

2019

Total revenue

$

217,379

$

153,037

$

600,684

$

418,740

Add:

Unbilled receivables, current (beginning of period)

2,113

1,004

1,026

1,457

Deferred revenue, current (end of period)

424,765

306,743

424,765

306,743

Less:

Unbilled receivables, current (end of period)

(2,427

)

(1,028

)

(2,427

)

(1,028

)

Deferred revenue, current (beginning of period)

(391,246

)

(283,724

)

(365,236

)

(245,622

)

Current calculated billings

250,584

176,032

658,812

480,290

Add:

Deferred revenue, noncurrent (end of period)

7,349

7,013

7,349

7,013

Less:

Deferred revenue, noncurrent (beginning of period)

(5,574

)

(7,469

)

(6,214

)

(8,768

)

Calculated billings

$

252,359

$

175,576

$

659,947

$

478,535

View source version on businesswire.com: https://www.businesswire.com/news/home/20201202005306/en/

Contacts

Investor Contact:
Dave Gennarelli
investor@okta.com
415-851-4744

Media Contact:
Jenna Kozel
press@okta.com
415-418-9600