Business Wire | Mar 3, 2021 04:01PM EST

Okta Announces Strong Fourth Quarter and Fiscal Year 2021 Results

Mar. 03, 2021

SAN FRANCISCO--(BUSINESS WIRE)--Mar. 03, 2021--Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its fourth quarter and fiscal year ended January 31, 2021. The Company also announced it has entered into a definitive agreement to acquire Auth0, a leading identity platform for application teams, in a stock transaction valued at approximately $6.5 billion.

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

Fourth Quarter Fiscal 2021 Financial Highlights:

* Revenue: Total revenue was $234.7 million, an increase of 40% year-over-year. Subscription revenue was $225.4 million, an increase of 42% year-over-year. * Remaining Performance Obligations (RPO): RPO, or subscription backlog, was $1.80 billion, an increase of 49% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $841.8 million, up 42% compared to the fourth quarter of fiscal 2020. * Calculated Billings: Total calculated billings were $316.0 million, an increase of 40% year-over-year. * GAAP Operating Loss: GAAP operating loss was $54.6 million, or 23.3% of total revenue, compared to a GAAP operating loss of $44.7 million, or 26.7% of total revenue, in the fourth quarter of fiscal 2020. * Non-GAAP Operating Income/Loss: Non-GAAP operating income was $8.0 million, or 3.4% of total revenue, compared to a non-GAAP operating loss of $5.6 million, or 3.3% of total revenue, in the fourth quarter of fiscal 2020. * GAAP Net Loss: GAAP net loss was $75.8 million, compared to a GAAP net loss of $50.5 million in the fourth quarter of fiscal 2020. GAAP net loss per share was $0.58, compared to a GAAP net loss per share of $0.42 in the fourth quarter of fiscal 2020. * Non-GAAP Net Income/Loss: Non-GAAP net income was $8.0 million, compared to a non-GAAP net loss of $1.1 million in the fourth quarter of fiscal 2020. Non-GAAP basic and diluted net income per share was $0.06, compared to a non-GAAP basic and diluted net loss per share of $0.01 in the fourth quarter of fiscal 2020. * Cash Flow: Net cash provided by operations was $34.9 million, or 14.9% of total revenue, compared to net cash provided by operations of $24.8 million, or 14.8% of total revenue, in the fourth quarter of fiscal 2020. Free cash flow was $32.5 million, or 13.8% of total revenue, compared to $18.1 million, or 10.8% of total revenue, in the fourth quarter of fiscal 2020. * Cash, cash equivalents, and short-term investments were $2.56 billion at January 31, 2021.

Full Year Fiscal 2021 Financial Highlights:

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

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

Financial Outlook:

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

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

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

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

For the full year fiscal 2022, the Company expects:

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

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Okta has not reconciled its expectations as to non-GAAP operating loss and non-GAAP net loss per share to their most directly comparable GAAP measures because certain items are out of Okta's control or cannot be reasonably predicted. Accordingly, reconciliations for forward-looking non-GAAP operating loss and non-GAAP net loss per share are not available without unreasonable effort.

Proposed Acquisition of Auth0

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

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

Conference Call Information:

Okta will host a live video webcast at 2:00 p.m. Pacific Time on March 3, 2021 to discuss the results and outlook. The news release with the financial results will be accessible from the Company's website at investor.okta.com prior to the conference call. The live video webcast of the conference call will be accessible from the Okta investor relations website at investor.okta.com.

Supplemental Financial and Other Information:

Supplemental financial and other information can be accessed through the Company's investor relations website at investor.okta.com.

Non-GAAP Financial Measures:

This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net margin, non-GAAP net income (loss) per share, basic and diluted, free cash flow, free cash flow margin, current calculated billings and calculated billings. Certain of these non-GAAP financial measures exclude stock-based compensation, amortization of debt discount and debt issuance costs, non-cash charitable contributions, amortization of acquired intangibles, acquisition-related expenses and loss on early extinguishment and conversion of debt.

Okta believes that non-GAAP financial information, when taken collectively with GAAP financial measures, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by the Company's management about which expenses are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Okta encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company's business.

Forward-Looking Statements: This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, business strategy and plans, market trends and market size, opportunities and positioning and expected benefits that will be derived from the Auth0 transaction. These forward-looking statements are based on current expectations, estimates, forecasts and projections. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," "shall" and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. For example, the market for our products may develop more slowly than expected or than it has in the past; our results of operations may fluctuate more than expected; there may be significant fluctuations in our results of operations and cash flows related to our revenue recognition or otherwise; the impact of COVID-19, related public health measures and any associated economic downturn on our business and results of operations may be more than we expect; a network or data security incident that allows unauthorized access to our network or data or our customers' data could damage our reputation; we could experience interruptions or performance problems associated with our technology, including a service outage; we may not be able to pay off our convertible senior notes when due; and global economic conditions could deteriorate; the parties may not be able to satisfy the Auth0 transaction closing conditions in a timely fashion or at all, and we may not be able to successfully integrate the companies. Further information on potential factors that could affect our financial results is included in our most recent Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission. The forward-looking statements included in this press release represent our views only as of the date of this press release and we assume no obligation and do not intend to update these forward-looking statements.

About Okta

Okta is the leading independent identity provider. The Okta Identity Cloud enables organizations to securely connect the right people to the right technologies at the right time. With more than 7,000 pre-built integrations to applications and infrastructure providers, Okta provides simple and secure access to people and organizations everywhere, giving them the confidence to reach their full potential. More than 10,000 organizations, including JetBlue, Nordstrom, Siemens, Slack, T-Mobile, Takeda, Teach for America, and Twilio, trust Okta to help protect the identities of their workforces and customers.

Okta uses its investor.okta.com website as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings and public conference calls and webcasts.

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

Three Months Ended Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Revenue:

Subscription $ 225,400 $ 158,514 $ 796,613 $ 552,688

Professional services 9,340 8,813 38,811 33,379 and other

Total revenue 234,740 167,327 835,424 586,067

Cost of revenue:

Subscription^(1) 48,675 33,864 170,095 116,445

Professional services 12,465 10,819 47,586 42,937 and other^(1)

Total cost of revenue 61,140 44,683 217,681 159,382

Gross profit 173,600 122,644 617,743 426,685

Operating expenses:

Research and 62,316 43,360 222,826 159,269 development^(1)

Sales and marketing^ 115,173 92,635 427,350 340,356 (1)

General and 50,707 31,352 171,726 112,892 administrative^(1)

Total operating 228,196 167,347 821,902 612,517 expenses

Operating loss (54,596 ) (44,703 ) (204,159 ) (185,832 )

Interest expense (22,597 ) (10,646 ) (72,660 ) (27,017 )

Interest income and 2,154 5,743 12,891 17,089 other, net

Loss on earlyextinguishment and - - (2,263 ) (14,572 )conversion of debt

Interest and other, (20,443 ) (4,903 ) (62,032 ) (24,500 )net

Loss before provisionfor (benefit from) (75,039 ) (49,606 ) (266,191 ) (210,332 )income taxes

Provision for (benefit 767 866 141 (1,419 )from) income taxes

Net loss $ (75,806 ) $ (50,472 ) $ (266,332 ) $ (208,913 )



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



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

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

Three Months EndedJanuary 31,

Twelve Months EndedJanuary 31,

2021

2020

2021

2020

Cost of subscription revenue

$

6,666

$

3,786

$

21,895

$

12,923

Cost of professional services and other

2,159

1,872

8,083

7,164

Research and development

18,836

11,361

63,270

37,683

Sales and marketing

15,109

11,118

53,802

38,077

General and administrative

13,637

8,793

49,131

30,777

Total stock-based compensation expense

$

56,407

$

36,930

$

196,181

$

126,624

^(1) Amounts include stock-based compensation expense as follows (inthousands):

Three Months Ended Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Cost of subscription revenue $ 6,666 $ 3,786 $ 21,895 $ 12,923

Cost of professional services 2,159 1,872 8,083 7,164 and other

Research and development 18,836 11,361 63,270 37,683

Sales and marketing 15,109 11,118 53,802 38,077

General and administrative 13,637 8,793 49,131 30,777

Total stock-based compensation $ 56,407 $ 36,930 $ 196,181 $ 126,624 expense

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

January 31,

January 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

434,607

$

520,048

Short-term investments

2,121,584

882,976

Accounts receivable, net of allowances

194,818

130,115

Deferred commissions

45,949

33,636

Prepaid expenses and other current assets

81,609

32,950

Total current assets

2,878,567

1,599,725

Property and equipment, net

62,783

53,535

Operating lease right-of-use assets

149,604

125,204

Deferred commissions, noncurrent

108,555

77,874

Intangible assets, net

27,009

32,529

Goodwill

48,023

48,023

Other assets

24,256

18,505

Total assets

$

3,298,797

$

1,955,395

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

8,557

$

3,837

Accrued expenses and other current liabilities

53,729

36,887

Accrued compensation

71,906

40,300

Convertible senior notes, net

908,684

100,703

Deferred revenue

502,738

365,236

Total current liabilities

1,545,614

546,963

Convertible senior notes, net, noncurrent

857,387

837,002

Operating lease liabilities, noncurrent

179,518

154,511

Deferred revenue, noncurrent

10,860

6,214

Other liabilities, noncurrent

11,375

5,361

Total liabilities

2,604,754

1,550,051

Stockholders' equity:

Preferred stock

-

-

Class A common stock

12

11

Class B common stock

1

1

Additional paid-in capital

1,656,096

1,105,564

Accumulated other comprehensive income

5,390

892

Accumulated deficit

(967,456

)

(701,124

)

Total stockholders' equity

694,043

405,344

Total liabilities and stockholders' equity

$

3,298,797

$

1,955,395

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

January 31, January 31,

2021 2020

Assets

Current assets:

Cash and cash equivalents $ 434,607 $ 520,048

Short-term investments 2,121,584 882,976

Accounts receivable, net of allowances 194,818 130,115

Deferred commissions 45,949 33,636

Prepaid expenses and other current assets 81,609 32,950

Total current assets 2,878,567 1,599,725

Property and equipment, net 62,783 53,535

Operating lease right-of-use assets 149,604 125,204

Deferred commissions, noncurrent 108,555 77,874

Intangible assets, net 27,009 32,529

Goodwill 48,023 48,023

Other assets 24,256 18,505

Total assets $ 3,298,797 $ 1,955,395

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 8,557 $ 3,837

Accrued expenses and other current 53,729 36,887 liabilities

Accrued compensation 71,906 40,300

Convertible senior notes, net 908,684 100,703

Deferred revenue 502,738 365,236

Total current liabilities 1,545,614 546,963

Convertible senior notes, net, noncurrent 857,387 837,002

Operating lease liabilities, noncurrent 179,518 154,511

Deferred revenue, noncurrent 10,860 6,214

Other liabilities, noncurrent 11,375 5,361

Total liabilities 2,604,754 1,550,051



Stockholders' equity:

Preferred stock - -

Class A common stock 12 11

Class B common stock 1 1

Additional paid-in capital 1,656,096 1,105,564

Accumulated other comprehensive income 5,390 892

Accumulated deficit (967,456 ) (701,124 )

Total stockholders' equity 694,043 405,344

Total liabilities and stockholders' equity $ 3,298,797 $ 1,955,395

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Twelve Months Ended January 31,

2021

2020

Cash flows from operating activities:

Net loss

$

(266,332

)

$

(208,913

)

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

Stock-based compensation

196,181

126,624

Depreciation, amortization and accretion

36,865

17,815

Amortization of debt discount and issuance costs

68,424

25,892

Amortization of deferred commissions

39,661

28,588

Deferred income taxes

(1,182

)

(2,253

)

Non-cash charitable contributions

9,292

1,746

Loss on early extinguishment and conversion of debt

2,263

14,572

Other, net

5,537

(11

)

Changes in operating assets and liabilities:

Accounts receivable

(66,373

)

(37,515

)

Deferred commissions

(81,016

)

(61,224

)

Prepaid expenses and other assets

(13,174

)

(4,080

)

Operating lease right-of-use assets

19,053

12,951

Accounts payable

4,081

1,689

Accrued compensation

44,157

23,034

Accrued expenses and other liabilities

5,527

9,972

Operating lease liabilities

(17,150

)

(9,716

)

Deferred revenue

142,148

116,432

Net cash provided by operating activities

127,962

55,603

Cash flows from investing activities:

Capitalization of internal-use software costs

(4,159

)

(3,888

)

Purchases of property and equipment

(13,083

)

(15,442

)

Purchases of securities available for sale and other

(2,029,030

)

(999,387

)

Proceeds from maturities and redemption of securities available for sale

535,123

356,277

Proceeds from sales of securities available for sale and other

206,129

27,271

Purchases of intangible assets

(126

)

(8,589

)

Payments for business acquisition, net of cash acquired

-

(44,283

)

Net cash used in investing activities

(1,305,146

)

(688,041

)

Cash flows from financing activities:

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

1,134,841

1,040,660

Payments for repurchases of convertible senior notes

(446

)

(224,414

)

Proceeds from hedges related to convertible senior notes

195,046

405,851

Payments for warrants related to convertible senior notes

(175,399

)

(358,622

)

Purchases of capped calls related to convertible senior notes

(133,975

)

(74,094

)

Proceeds from stock option exercises, net of repurchases

45,620

45,363

Proceeds from shares issued in connection with employee stock purchase plan

25,911

18,767

Other, net

-

(126

)

Net cash provided by financing activities

1,091,598

853,385

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

2,263

(209

)

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

(83,323

)

220,738

Cash, cash equivalents and restricted cash at beginning of period

531,953

311,215

Cash, cash equivalents and restricted cash at end of period

$

448,630

$

531,953

OKTA, INC.

Reconciliation of GAAP to Non-GAAP Data

(In thousands, except percentages and per share data)

(unaudited)

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue and amortization of acquired intangibles.

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Twelve Months Ended January 31,

2021 2020

Cash flows from operating activities:

Net loss $ (266,332 ) $ (208,913 )

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

Stock-based compensation 196,181 126,624

Depreciation, amortization and accretion 36,865 17,815

Amortization of debt discount and issuance costs 68,424 25,892

Amortization of deferred commissions 39,661 28,588

Deferred income taxes (1,182 ) (2,253 )

Non-cash charitable contributions 9,292 1,746

Loss on early extinguishment and conversion of 2,263 14,572 debt

Other, net 5,537 (11 )

Changes in operating assets and liabilities:

Accounts receivable (66,373 ) (37,515 )

Deferred commissions (81,016 ) (61,224 )

Prepaid expenses and other assets (13,174 ) (4,080 )

Operating lease right-of-use assets 19,053 12,951

Accounts payable 4,081 1,689

Accrued compensation 44,157 23,034

Accrued expenses and other liabilities 5,527 9,972

Operating lease liabilities (17,150 ) (9,716 )

Deferred revenue 142,148 116,432

Net cash provided by operating activities 127,962 55,603

Cash flows from investing activities:

Capitalization of internal-use software costs (4,159 ) (3,888 )

Purchases of property and equipment (13,083 ) (15,442 )

Purchases of securities available for sale and (2,029,030 ) (999,387 )other

Proceeds from maturities and redemption of 535,123 356,277 securities available for sale

Proceeds from sales of securities available for 206,129 27,271 sale and other

Purchases of intangible assets (126 ) (8,589 )

Payments for business acquisition, net of cash - (44,283 )acquired

Net cash used in investing activities (1,305,146 ) (688,041 )

Cash flows from financing activities:

Proceeds from issuance of convertible senior 1,134,841 1,040,660 notes, net of issuance costs

Payments for repurchases of convertible senior (446 ) (224,414 )notes

Proceeds from hedges related to convertible senior 195,046 405,851 notes

Payments for warrants related to convertible (175,399 ) (358,622 )senior notes

Purchases of capped calls related to convertible (133,975 ) (74,094 )senior notes

Proceeds from stock option exercises, net of 45,620 45,363 repurchases

Proceeds from shares issued in connection with 25,911 18,767 employee stock purchase plan

Other, net - (126 )

Net cash provided by financing activities 1,091,598 853,385

Effects of changes in foreign currency exchangerates on cash, cash equivalents and restricted 2,263 (209 )cash

Net (decrease) increase in cash, cash equivalents (83,323 ) 220,738 and restricted cash

Cash, cash equivalents and restricted cash at 531,953 311,215 beginning of period

Cash, cash equivalents and restricted cash at end $ 448,630 $ 531,953 of period

OKTA, INC.

Reconciliation of GAAP to Non-GAAP Data

(In thousands, except percentages and per share data)

(unaudited)

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue and amortization of acquired intangibles.

Three Months Ended Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Gross profit $ 173,600 $ 122,644 $ 617,743 $ 426,685

Add:

Stock-based compensationexpense included in cost 8,825 5,658 29,978 20,087 of revenue^(1)

Amortization of acquired 1,593 1,593 6,373 5,488 intangibles

Non-GAAP gross profit $ 184,018 $ 129,895 $ 654,094 $ 452,260

Gross margin 74 % 73 % 74 % 73 %

Non-GAAP gross margin 78 % 78 % 78 % 77 %

(1)

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

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

We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles and acquisition-related expenses.

^ See table in footnote (1) to the condensed consolidated statements of(1) 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 Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Operating loss $ (54,596 ) $ (44,703 ) $ (204,159 ) $ (185,832 )

Add:

Stock-basedcompensation expense^ 56,407 36,930 196,181 126,624 (1)

Non-cash charitable 4,630 584 9,292 1,746 contributions

Amortization of 1,593 1,593 6,373 5,488 acquired intangibles

Acquisition-related - - - 3,449 expenses^(2)

Non-GAAP operating $ 8,034 $ (5,596 ) $ 7,687 $ (48,525 )income (loss)

Operating margin (23 ) (27 ) (24 ) (32 ) % % % %

Non-GAAP operating 3 % (3 ) 1 % (8 )margin % %

(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.

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

^ We define acquisition-related expenses as costs associated with(2) 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 Twelve Months Ended January 31, January 31,

2021 2020^(1) 2021 2020^(1)

Net loss $ (75,806) $ (50,472) $ (266,332) $ (208,913)

Add:

Stock-basedcompensation 56,407 36,930 196,181 126,624 expense^(2)

Non-cash charitable 4,630 584 9,292 1,746 contributions

Amortization ofacquired 1,593 1,593 6,373 5,488 intangibles

Acquisition-related - - - 3,449 expenses^(3)

Amortization ofdebt discount and 21,163 10,239 68,424 25,892 debt issuance costs^(4)

Loss on earlyextinguishment and - - 2,263 14,572 conversion of debt^(5)

Non-GAAP net income $ 7,987 $ (1,126) $ 16,201 $ (31,142) (loss)

Net margin (32) % (30) % (32) % (36) %

Non-GAAP net margin 3 % (1) % 2 % (5) %

(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 $3.2 million for the three and twelve months ended January 31, 2021, respectively, and $0.6 million and $1.8 million for the three and twelve months ended January 31, 2020, 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 nil and $1.1 million for the three and twelve months ended January 31, 2021, respectively, and nil and $3.8 million for the three and twelve months ended January 31, 2020, 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.

^ Prior periods have been adjusted to conform to the current presentation.(1) See footnotes (4) and (5) for additional details.

^ See table in footnote (1) to the condensed consolidated statements of(2) operations above for breakdown of stock-based compensation expense by line item.

^ We define acquisition-related expenses as costs associated with(3) acquisitions, including transaction costs and other non-recurring incremental costs incurred.

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(4) million and $3.2 million for the three and twelve months ended January 31, 2021, respectively, and $0.6 million and $1.8 million for the three and twelve months ended January 31, 2020, respectively. Loss on early extinguishment and conversion of debt is calculated inclusive^ of write-offs of debt issuance costs, effective July 31, 2020. The amounts(5) of these write-offs are nil and $1.1 million for the three and twelve months ended January 31, 2021, respectively, and nil and $3.8 million for the three and twelve months ended January 31, 2020, 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 Twelve Months Ended January 31, January 31,

2021 2020^(1) 2021 2020^(1)

Net loss $ (75,806 ) $ (50,472 ) $ (266,332 ) $ (208,913 )

Add:

Stock-basedcompensation expense^ 56,407 36,930 196,181 126,624 (2)

Non-cash charitable 4,630 584 9,292 1,746 contributions

Amortization of 1,593 1,593 6,373 5,488 acquired intangibles

Acquisition-related - - - 3,449 expenses^(3)

Amortization of debtdiscount and debt 21,163 10,239 68,424 25,892 issuance costs^(4)

Loss on earlyextinguishment and - - 2,263 14,572 conversion of debt^(5)

Non-GAAP net income $ 7,987 $ (1,126 ) $ 16,201 $ (31,142 )(loss)



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

Non-GAAPweighted-average 13,541 - 15,171 - effect of potentiallydilutive securities

Non-GAAPweighted-averageshares used to compute 143,679 121,562 142,383 117,221 non-GAAP net income(loss) per share,diluted



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

Non-GAAP net income(loss) per share, $ 0.06 $ (0.01 ) $ 0.13 $ (0.27 )basic^(6)

Non-GAAP net income(loss) per share, $ 0.06 $ (0.01 ) $ 0.11 $ (0.27 )diluted^(6)



(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 $3.2 million for the three and twelve months ended January 31, 2021, respectively, and $0.6 million and $1.8 million for the three and twelve months ended January 31, 2020, 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 nil and $1.1 million for the three and twelve months ended January 31, 2021, respectively, and nil and $3.8 million for the three and twelve months ended January 31, 2020, 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 nil and $0.04 for the three and twelve months ended January 31, 2020, 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.

^ Prior periods have been adjusted to conform to the current presentation.(1) See footnotes (4), (5) and (6) for additional details.

^ See table in footnote (1) to the condensed consolidated statements of(2) operations above for breakdown of stock-based compensation expense by line item.

^ We define acquisition-related expenses as costs associated with(3) acquisitions, including transaction costs and other non-recurring incremental costs incurred.

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(4) million and $3.2 million for the three and twelve months ended January 31, 2021, respectively, and $0.6 million and $1.8 million for the three and twelve months ended January 31, 2020, respectively.

Loss on early extinguishment and conversion of debt is calculated inclusive^ of write-offs of debt issuance costs, effective July 31, 2020. The amounts(5) of these write-offs are nil and $1.1 million for the three and twelve months ended January 31, 2021, respectively, and nil and $3.8 million for the three and twelve months ended January 31, 2020, respectively.

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(6) share, basic and diluted is nil and $0.04 for the three and twelve months ended January 31, 2020, 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 Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Net cash provided by $ 34,909 $ 24,835 $ 127,962 $ 55,603 operating activities

Less:

Purchases ofproperty and (1,786 ) (5,462 ) (13,083 ) (15,442 )equipment

Capitalization ofinternal-use (629 ) (1,229 ) (4,159 ) (3,888 )software costs

Free cash flow $ 32,494 $ 18,144 $ 110,720 $ 36,273

Net cash used in $ (37,264 ) $ (562,939 ) $ (1,305,146 ) $ (688,041 )investing activities

Net cash provided by $ 25,141 $ 18,654 $ 1,091,598 $ 853,385 financing activities

Free cash flow 14 % 11 % 13 % 6 %margin

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 Twelve Months Ended January 31, January 31,

2021 2020 2021 2020

Total revenue $ 234,740 $ 167,327 $ 835,424 $ 586,067

Add:

Unbilled receivables,current (beginning of 2,427 1,028 1,026 1,457 period)

Deferred revenue, current 502,738 365,236 502,738 365,236 (end of period)

Less:

Unbilled receivables, (2,604 ) (1,026 ) (2,604 ) (1,026 )current (end of period)

Deferred revenue, current (424,765 ) (306,743 ) (365,236 ) (245,622 )(beginning of period)

Current calculated 312,536 225,822 971,348 706,112 billings

Add:

Deferred revenue,noncurrent (end of 10,860 6,214 10,860 6,214 period)

Less:

Deferred revenue,noncurrent (beginning of (7,349 ) (7,013 ) (6,214 ) (8,768 )period)

Calculated billings $ 316,047 $ 225,023 $ 975,994 $ 703,558

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

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