Okta Announces Record Fourth Quarter and Fiscal Year 2019 Financial Results

Fiscal year 2019 revenue totaled $399 million, growing 56%
year-over-year; subscription revenue grew 57% year-over-year
Q4 revenue totaled $115 million, growing 50% year-over-year;
subscription revenue grew 53% year-over-year
Q4 operating cash flow margin improved 860 basis points
year-over-year; free cash flow margin improved 690 basis points
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 fourth
quarter and fiscal year ended January 31, 2019.

“We’re pleased to close out a strong fourth quarter and fiscal year
thanks to our relentless execution and focus on customer success, which
is demonstrated by 53% subscription revenue growth and 50% growth in
customers with over $100,000 annual recurring revenue in Q4,” said Todd
McKinnon, CEO of Okta. “Large customers are increasingly turning to Okta
as the identity standard for both their workforce and customers. The
Okta Identity Cloud is uniquely positioned to both help organizations
realize their digital transformation initiatives and adopt a Zero Trust
security posture. We are seeing Okta’s early platform investments paying
off and we’ll continue to make investments there and in the Okta
Integration Network to capture the immense opportunity ahead.”

Fourth Quarter Fiscal 2019 Financial Highlights:

Revenue: Total revenue was $115.5 million, an increase of 50%
year-over-year. Subscription revenue was $108.5 million, an increase
of 53% year-over-year.
Operating Loss: GAAP operating loss was $27.7 million, or 24.0%
of total revenue, compared to $23.7 million, or 30.8% of total
revenue, in the fourth quarter of fiscal 2018. Non-GAAP operating loss
was $4.9 million, or 4.3% of total revenue, compared to $9.1 million,
or 11.9% of total revenue, in the fourth quarter of fiscal 2018.
Net Loss: GAAP net loss was $30.8 million, compared to $23.0
million in the fourth quarter of fiscal 2018. GAAP net loss per share
was $0.28, compared to $0.23 in the fourth quarter of fiscal 2018.
Non-GAAP net loss was $4.4 million, compared to $8.5 million in the
fourth quarter of fiscal 2018. Non-GAAP net loss per share was $0.04,
compared to $0.08 in the fourth quarter of fiscal 2018.
Cash Flow: Net cash provided by operations was $10.1 million,
or 8.8% of total revenue, compared to cash provided by operations of
$0.2 million, or 0.2% of total revenue, in the fourth quarter of
fiscal 2018. Free cash flow was positive $4.8 million, or 4.1% of
total revenue, compared to negative $2.2 million, or negative 2.8% of
total revenue, in the fourth quarter of fiscal 2018.
Cash, cash equivalents and short-term investments were $563.8
million as of January 31, 2019.

Full Year Fiscal 2019 Financial Highlights:

Revenue: Total revenue was $399.3 million, an increase of 56%
year-over-year. Subscription revenue was $370.9 million, an increase
of 57% year-over-year.
Operating Loss: GAAP operating loss was $119.6 million, or
30.0% of total revenue, compared to $111.9 million for fiscal year
2018, or 43.6% of total revenue. Non-GAAP operating loss was $41.5
million, or 10.4% of total revenue, compared to $61.2 million for
fiscal year 2018, or 23.9% of total revenue.
Net Loss: GAAP net loss was $125.5 million, compared to $109.8
million for fiscal 2018. GAAP net loss per share was $1.17, compared
to $1.32 for fiscal year 2018. Non-GAAP net loss was $34.1 million,
compared to $59.2 million for fiscal year 2018. Non-GAAP net loss per
share was $0.32, compared to $0.71 for fiscal year 2018.
Cash Flow: Net cash provided by operations was $15.2 million,
compared to net cash used in operations of $25.2 million for fiscal
year 2018. Free cash flow was negative $6.8 million, or 1.7% of total
revenue, compared to negative $37.2 million, or 14.5% of total
revenue, for fiscal year 2018.

The section titled “Non-GAAP Financial Measures” below contains a
description of the non-GAAP financial measures and reconciliations
between historical GAAP and non-GAAP information are contained in the
tables below.

Financial Outlook:

For the first quarter of fiscal 2020, the Company currently expects:

Total revenue of $116 to $117 million, representing a growth rate of
39% to 40% year-over-year
Non-GAAP operating loss of $26.5 to $25.5 million
Non-GAAP net loss per share of $0.22 to $0.21, assuming shares
outstanding of approximately 112 million

For the full year fiscal 2020, the Company expects:

Total revenue of $530 to $535 million, representing a growth rate of
33% to 34% year-over-year
Non-GAAP operating loss of $69.0 to $63.0 million
Non-GAAP net loss per share of $0.53 to $0.48, assuming shares
outstanding of approximately 115 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
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 conference call and live webcast for analysts and
investors at 2:00 p.m. Pacific Time on March 7, 2019. The news release
with the financial results will be accessible from the Company’s website
at investor.okta.com prior to the conference call. Interested parties
can access the call by dialing (800) 458-4121 or (323) 794-2093 and
using the passcode 6514234.

A live webcast of the conference call will be accessible from the Okta
investor relations website at investor.okta.com. A telephonic replay of
the conference call will be available through March 21, 2019 and may be
accessed by dialing (888) 203-1112 or (719) 457-0820 and using the
passcode 6514234.

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 loss per share, free cash flow, current calculated
billings and calculated billings. The accompanying tables present and
define calculated billings consistent with ASC 606. Certain of these
non-GAAP financial measures exclude stock-based compensation,
amortization of debt discount, charitable contributions, and
amortization of intangible assets.

Okta believes that non-GAAP financial information, when taken
collectively, 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 and income 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 and income 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.

Please see the reconciliation tables at the end of this release for the
reconciliation of GAAP and non-GAAP results.

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 and market positioning. These
forward-looking statements are made as of the date they were first
issued and were based on current expectations, estimates, forecasts and
projections as well as the beliefs and assumptions of management. 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 or the
negative of these terms and similar expressions are intended to identify
these forward-looking statements. Forward-looking statements are subject
to a number of risks and uncertainties, many of which involve factors or
circumstances that are beyond Okta’s control. Okta’s actual results
could differ materially from those stated or implied in forward-looking
statements due to a number of factors, including but not limited to,
risks detailed in the Company’s filings and reports with the Securities
and Exchange Commission (SEC), including our Form 10-Q for the fiscal
quarter ended October 31, 2019, as well as other filings and reports
that may be filed by the Company from time to time with the SEC. In
particular, the following factors, among others, could cause results to
differ materially from those expressed or implied by such
forward-looking statements: the market for our products may develop more
slowly than expected or than it has in the past; quarterly and annual
operating results may fluctuate more than expected; variations related
to our revenue recognition may cause significant fluctuations in our
results of operations and cash flows; assertions by third parties that
we violate their intellectual property rights could substantially harm
our business; any unreleased products, features or functionality
referenced in this or other presentations, press releases or public
statements are not currently available and may not be delivered on time
or at all; a network or data security incident that allows unauthorized
access to our network or data or our customers’ data could harm our
reputation, create additional liability and adversely impact our
financial results; the risk of interruptions or performance problems,
including a service outage, associated with our technology; intense
competition in our market; weakened global economic conditions may
adversely affect our industry; the risk of losing key employees; changes
in foreign exchange rates; general political or destabilizing events,
including war, conflict or acts of terrorism; our ability to
successfully identify and integrate acquisitions, strategic investments,
partnerships or alliances; our ability to pay off our convertible senior
notes when due; and other risks and uncertainties. Past performance is
not necessarily indicative of future results. The forward-looking
statements included in this press release represent Okta’s views as of
the date of this press release. The Company anticipates that subsequent
events and developments will cause its views to change. Okta undertakes
no intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. These forward-looking statements should not be relied upon as
representing Okta’s views as of any date subsequent to the date of this
press release.

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
6,000 pre-built integrations to applications and infrastructure
providers, Okta customers can easily and securely use the best
technologies for their business. Over 6,100 organizations,
including 20th Century Fox, JetBlue, Nordstrom, Slack, Teach for America
and Twilio, trust Okta to help protect the identities of their
workforces and customers.


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

	Three Months Ended						Twelve Months Ended
	January 31,						January 31,
	2019			2018			2019			2018
				As Adjusted ⁽¹⁾						As Adjusted⁽¹⁾

Revenue:
Subscription	$	108,462		$	70,963		$	370,855		$	236,422
Professional services and other	7,009			6,089			28,399			20,125
Total revenue	115,471			77,052			399,254			256,547
Cost of revenue:
Subscription ⁽²⁾	21,546			15,080			77,354			52,481
Professional services and other⁽²⁾	9,840			7,407			36,067			28,274
Total cost of revenue	31,386			22,487			113,421			80,755
Gross profit	84,085			54,565			285,833			175,792
Operating expenses:
Research and development ⁽²⁾	30,031			19,349			102,385			70,821
Sales and marketing ⁽²⁾	62,552			44,259			227,960			165,020
General and administrative ⁽²⁾	19,237			14,670			75,110			51,803
Total operating expenses	111,820			78,278			405,455			287,644
Operating loss	(27,735		)	(23,713		)	(119,622		)	(111,852		)
Other income (expense), net	(1,210		)	810			(5,892		)	1,682
Loss before provision for (benefit from) income taxes	(28,945		)	(22,903		)	(125,514		)	(110,170		)
Provision for (benefit from) income taxes	1,866			142			(17		)	(321		)
Net loss	$	(30,811	)	$	(23,045	)	$	(125,497	)	$	(109,849	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.28	)	$	(0.23	)	$	(1.17	)	$	(1.32	)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	110,223			100,969			107,504			83,004

___________________________________
⁽¹⁾		The condensed consolidated statement of operations for the prior periods presented above have been adjusted to reflect the adoption of ASC 606.
⁽²⁾		Amounts include share-based compensation expense as follows (in thousands):

	Three Months Ended				Twelve Months Ended
	January 31,				January 31,
	2019		2018		2019		2018

Cost of subscription revenue	$	2,024	$	1,437	$	7,837	$	4,600
Cost of professional services and other revenue	1,706		951		4,983		3,137
Research and development	6,866		5,194		22,642		18,107
Sales and marketing	7,064		3,952		22,916		13,242
General and administrative	4,761		3,034		17,942		10,774
Total share-based compensation expense	$	22,421	$	14,568	$	76,320	$	49,860


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

	January 31, 2019			January 31, 2018
	January 31, 2019			As Adjusted ⁽¹⁾

Assets
Current assets:
Cash and cash equivalents	$	298,394		$	127,949
Short-term investments	265,374			101,765
Accounts receivable, net of allowances of $2,098 and $1,472	91,926			52,248
Deferred commissions	24,185			17,755
Prepaid expenses and other current assets	29,451			17,781
Total current assets	709,330			317,498
Property and equipment, net	52,921			12,540
Deferred commissions, noncurrent	54,812			40,755
Intangible assets, net	13,897			11,761
Goodwill	18,089			6,282
Other assets	15,286			10,427
Total assets	$	864,335		$	399,263
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	17,212		$	9,566
Accrued expenses and other current liabilities	9,959			6,187
Accrued compensation	19,770			12,374
Convertible senior notes, net	271,628			—
Deferred revenue	245,622			159,816
Total current liabilities	564,191			187,943
Deferred revenue, noncurrent	8,768			4,963
Other liabilities, noncurrent	38,999			7,017
Total liabilities	611,958			199,923
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—
Class A common stock	10			7
Class B common stock	1			3
Additional paid-in capital	744,896			565,653
Accumulated other comprehensive income (loss)	(319		)	391
Accumulated deficit	(492,211		)	(366,714		)
Total stockholders’ equity	252,377			199,340
Total liabilities and stockholders’ equity	$	864,335		$	399,263

⁽¹⁾

The condensed consolidated balance sheet for the prior period has
been adjusted to reflect the adoption of ASC 606.


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

	Year Ended January 31,
	2019			2018
	2019			As Adjusted ⁽¹⁾
Cash flows from operating activities:
Net loss	$	(125,497	)	$	(109,849	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation	76,320			49,860
Depreciation, amortization and accretion	8,001			7,001
Amortization of debt discount and issuance costs	14,279			—
Amortization of deferred commissions	20,852			15,180
Deferred income taxes	(765		)	(534		)
Write-off of intangible assets	—			1,114
Non-cash charitable contributions	1,008			708
Other	640			719
Changes in operating assets and liabilities, net of business combination:
Accounts receivable	(39,682		)	(18,321		)
Deferred commissions	(41,342		)	(26,986		)
Prepaid expenses and other assets	(11,624		)	(9,400		)
Accounts payable	675			3,505
Accrued compensation	7,429			3,582
Accrued expenses and other liabilities	15,575			521
Deferred revenue	89,303			57,660
Net cash provided by (used in) operating activities	15,172			(25,240		)
Cash flows from investing activities:
Capitalization of internal-use software costs	(2,851		)	(5,431		)
Purchases of property and equipment	(19,811		)	(6,550		)
Proceeds from sales of property and equipment	740			—
Purchases of securities available for sale	(631,488		)	(129,086		)
Proceeds from maturities of securities available for sale	298,650			39,825
Proceeds from sales of securities available for sale	173,072			1,538
Payments for business acquisition, net of cash acquired	(15,632		)	—
Net cash used in investing activities	(197,320		)	(99,704		)
Cash flows from financing activities:
Proceeds from initial public offering, net of underwriters’ discounts and commissions	—			199,948
Proceeds from issuance of convertible senior notes, net of issuance costs	334,980			—
Purchase of convertible senior notes hedge	(80,040		)	—
Proceeds from issuance of warrants related to convertible notes	52,440			—
Payments of deferred offering costs	—			(4,038		)
Proceeds from stock option exercises, net of repurchases	36,861			33,646
Proceeds from issuance of convertible redeemable preferred stock, net of issuance costs	—			8,369
Proceeds from shares issued in connection with employee stock purchase plan	13,727			—
Other, net	(206		)	(517		)
Net cash provided by financing activities	357,762			237,408
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash	(632		)	487
Net increase in cash, cash equivalents and restricted cash	174,982			112,951
Cash, cash equivalents and restricted cash at beginning of period	136,233			23,282
Cash, cash equivalents and restricted cash at end of period	$	311,215		$	136,233

⁽¹⁾

The condensed consolidated statement of cash flows for the prior
period has been adjusted to reflect the adoption of ASC 606.


OKTA, INC.
Reconciliation of GAAP to Non-GAAP Data
(In thousands, except percentages and per share data)
(unaudited)

	Three Months Ended January 31, 2019
							Amortization			Amortization
				Stock-based			of acquired			of debt
	GAAP			compensation			intangibles			discount			Non-GAAP
Cost of revenue:
Cost of subscription services	$	21,546		$	(2,024	)	$	(383	)	$	—		$	19,139
Cost of professional services	9,840			(1,706		)	—			—			8,134
Gross profit	84,085			3,730			383			—			88,198
Gross margin	72.8		%	3.3		%	0.3		%	—		%	76.4		%
Operating expenses:
Research and development	30,031			(6,866		)	—			—			23,165
Sales and marketing	62,552			(7,064		)	—			—			55,488
General and administrative	19,237			(4,761		)	—			—			14,476
Operating loss	(27,735		)	22,421			383			—			(4,931		)
Operating margin	(24.0		)%	19.4		%	0.3		%	—		%	(4.3		)%
Other income (expense), net	(1,210		)	—			—			3,655			2,445
Net loss	$	(30,811	)	$	22,421		$	383		$	3,655		$	(4,352	)
Net loss per share ⁽¹⁾	$	(0.28	)	$	0.21		$	—		$	0.03		$	(0.04	)

⁽¹⁾

GAAP and Non-GAAP net loss per common share calculated based upon
110,223 basic and diluted weighted-average shares of common stock.

	Three Months Ended January 31, 2018
				Stock-based			Charitable
	GAAP ⁽²⁾			compensation			contributions			Non-GAAP ⁽²⁾
Cost of revenue:
Cost of subscription services	$	15,080		$	(1,437	)	$	—		$	13,643
Cost of professional services	7,407			(951		)	—			6,456
Gross profit	54,565			2,388			—			56,953
Gross margin	70.8		%	3.1		%	—			73.9		%
Operating expenses:
Research and development	19,349			(5,194		)	—			14,155
Sales and marketing	44,259			(3,952		)	—			40,307
General and administrative	14,670			(3,034		)	—			11,636
Operating loss	(23,713		)	14,568			—			(9,145		)
Operating margin	(30.8		)%	18.9		%	—		%	(11.9		)%
Other income (expense), net	810			—			—			810
Net loss	$	(23,045	)	$	14,568		$	—		$	(8,477	)
Net loss per share ⁽¹⁾	$	(0.23	)	$	0.15		$	—		$	(0.08	)

⁽¹⁾		GAAP and Non-GAAP net loss per common share calculated based upon 100,969 basic and diluted weighted-average shares of common stock.
⁽²⁾		Financial information for prior period presented above has been adjusted to reflect the adoption of ASC 606.


OKTA, INC.
Reconciliation of GAAP to Non-GAAP Data
(In thousands, except percentages and per share data)
(unaudited)

	Year Ended January 31, 2019
										Amortization			Amortization
				Stock-based			Charitable			of acquired			of debt
	GAAP			compensation			contributions			intangibles			discount			Non-GAAP
Cost of revenue:
Cost of subscription services	$	77,354		$	(7,837	)	$	—		$	(832	)	$	—		$	68,685
Cost of professional services	36,067			(4,983		)	—			—			—			31,084
Gross profit	285,833			12,820			—			832			—			299,485
Gross margin	71.6		%	3.2		%	—		%	0.2		%	—		%	75.0		%
Operating expenses:
Research and development	102,385			(22,642		)	—			—			—			79,743
Sales and marketing	227,960			(22,916		)	—			—			—			205,044
General and administrative	75,110			(17,942		)	(1,008		)	—			—			56,160
Operating loss	(119,622		)	76,320			1,008			832			—			(41,462		)
Operating margin	(30.0		)%	19.1		%	0.3		%	0.2		%	—		%	(10.4		)%
Other income (expense), net	(5,892		)	—			—			—			13,194			7,302
Net loss	(125,497		)	76,320			1,008			832			13,194			(34,143		)
Net loss per share ⁽¹⁾	$	(1.17	)	$	0.71		$	0.01		$	0.01		$	0.12		$	(0.32	)

⁽¹⁾

GAAP and Non-GAAP net loss per common share calculated based upon
107,504 basic and diluted weighted-average shares of common stock.

	Year Ended January 31, 2018
										Amortization
				Stock-based			Charitable			of acquired
	GAAP ⁽²⁾			compensation			contributions			intangibles			Non-GAAP ⁽²⁾
Cost of revenue:
Cost of subscription services	$	52,481		$	(4,600	)	$	—		$	(4	)	$	47,877
Cost of professional services	28,274			(3,137		)	—			—			25,137
Gross profit	175,792			7,737			—			4			183,533
Gross margin	68.5		%	3.0		%	—		%	—		%	71.5		%
Operating expenses:
Research and development	70,821			(18,107		)	—			—			52,714
Sales and marketing	165,020			(13,242		)	—			—			151,778
General and administrative	51,803			(10,774		)	(754		)	—			40,275
Operating loss	(111,852		)	49,860			754			4			(61,234		)
Operating margin	(43.6		)%	19.4		%	0.3		%	—		%	(23.9		)%
Other income (expense), net	1,682			—			—			—			1,682
Net loss	$	(109,849	)	$	49,860		$	754		$	4		$	(59,231	)
Net loss per share ⁽¹⁾	$	(1.32	)	$	0.60		$	0.01		$	—		$	(0.71	)

⁽¹⁾		GAAP and Non-GAAP net loss per common share calculated based upon 83,004 basic and diluted weighted-average shares of common stock.
⁽²⁾		Financial information for prior period presented above has been adjusted to reflect the adoption of ASC 606.


OKTA, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(unaudited)

Free Cash Flow
	Three Months Ended
	January 31,						Year Ended January 31,
	2019			2018			2019			2018
Net cash provided by (used in) operating activities	$	10,104		$	155		$	15,172		$	(25,240	)
Less:
Purchases of property and equipment	(5,558		)	(980		)	(19,811		)	(6,550		)
Capitalization of internal-use software costs	(522		)	(1,359		)	(2,851		)	(5,431		)
Proceeds from sales of property and equipment	740			—			740			—
Free Cash Flow	$	4,764		$	(2,184	)	$	(6,750	)	$	(37,221	)
Net cash provided by (used in) investing activities	80,896			(18,241		)	(197,320		)	(99,704		)
Net cash provided by financing activities	15,410			16,041			357,762			237,408
Free Cash Flow Margin	4.1%			(2.8)%			(1.7)%			(14.5)%

Contacts

Investor Contact:
Janice Li
[email protected]
415-699-3460

Media
Contact:
Jenna Kozel
[email protected]
888-722-7871

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Okta Announces Record Fourth Quarter and Fiscal Year 2019 Financial Results

ByVitaliy Dadalyan