Business Wire | Dec 1, 2021 04:01PM EST

Okta Announces Strong Third Quarter Results

Dec. 01, 2021

SAN FRANCISCO--(BUSINESS WIRE)--Dec. 01, 2021--Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its third quarter ended October 31, 2021.

"Our strong third quarter results reflect the continued shift to Identity-First architectures and the critical adoption of Zero Trust security environments, which are both propelling our market leading position," said Todd McKinnon, Chief Executive Officer and co-founder of Okta. "We're maintaining the momentum of both Okta and Auth0 and are making great progress on the integration. We're already seeing early success cross-selling into each other's customer bases and are on our way to capturing more of the massive identity market faster together."

Third Quarter Fiscal 2022 Financial Highlights:

* Revenue: Total revenue was $351 million, an increase of 61% year-over-year. Subscription revenue was $337 million, an increase of 63% year-over-year. On an Okta standalone basis (excluding $46 million attributable to Auth0), total revenue grew 40%. * Remaining Performance Obligations (RPO): RPO, or subscription backlog, was $2.35 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 $1.18 billion, up 57% compared to the third quarter of fiscal 2021. * Calculated Billings: Total calculated billings, net of acquired deferred revenue, was $389 million, an increase of 54% year-over-year. Calculated billings includes the effect of billings process improvements that were enacted at the end of the first quarter of fiscal 2022. Excluding these changes, calculated billings would have been $387 million, an increase of 53% year-over-year. * GAAP Operating Loss: GAAP operating loss was $199 million, or 57% of total revenue, compared to a GAAP operating loss of $52 million, or 24% of total revenue, in the third quarter of fiscal 2021. * Non-GAAP Operating Income/Loss: Non-GAAP operating loss was $10 million, or (3)% of total revenue, compared to non-GAAP operating income of $6 million, or 3% of total revenue, in the third quarter of fiscal 2021. * GAAP Net Loss: GAAP net loss was $221 million, compared to a GAAP net loss of $73 million in the third quarter of fiscal 2021. GAAP net loss per share was $1.44, compared to a GAAP net loss per share of $0.56 in the third quarter of fiscal 2021. GAAP net loss and GAAP net loss per share include $120 million and $0.78, respectively, attributable to Auth0 in the third quarter of fiscal 2022. * Non-GAAP Net Income/Loss: Non-GAAP net loss was $11 million, compared to non-GAAP net income of $6 million in the third quarter of fiscal 2021. Non-GAAP basic and diluted net loss per share was $0.07, compared to non-GAAP basic and diluted net income per share of $0.04 in the third quarter of fiscal 2021. * Cash Flow: Net cash provided by operations was $37 million, or 11% of total revenue, compared to net cash provided by operations of $43 million, or 20% of total revenue, in the third quarter of fiscal 2021. Free cash flow was $33 million, or 10% of total revenue, compared to $42 million, or 19% of total revenue, in the third quarter of fiscal 2021. * Cash, cash equivalents, and short-term investments were $2.48 billion at October 31, 2021.

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:

Okta's financial outlook for the fourth quarter and full year fiscal 2022 includes the expected contribution from the acquisition of Auth0, net of purchase accounting adjustments.

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

* Total revenue of $358 million to $360 million, representing a growth rate of 53% year-over-year; * Non-GAAP operating loss of $35 million to $34 million; and * Non-GAAP net loss per share of $0.25 to $0.24, assuming weighted-average shares outstanding of approximately 154 million.

For the full year fiscal 2022, the Company now expects:

* Total revenue of $1.275 billion to $1.277 billion, representing a growth rate of 53% year-over-year; * Non-GAAP operating loss of $85 million to $84 million; and * Non-GAAP net loss per share of $0.53 to $0.52, assuming weighted-average shares outstanding of approximately 147 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.

Gartner Magic Quadrant:

Finally, Okta is pleased to highlight its recognition as a Leader in the 2021 Gartner Magic Quadrant for Access Management. The report evaluated 12 vendors on 15 criteria and placed both Okta and Okta (Auth0) in the Leaders Quadrant. This marks the fifth consecutive year in which Okta has been named a Leader, and the first for Okta (Auth0). A complimentary version of the full report can be found here.

Conference Call Information:

Okta will host a live video webcast at 2:00 p.m. Pacific Time on December 1, 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.

Gartner Disclaimers:

GARTNER and MAGIC QUADRANT are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved. Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's Research & Advisory organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt.

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; global economic conditions could deteriorate; we may not achieve expected synergies and efficiencies of operations between Okta and Auth0, and we may not be able to successfully integrate the companies. 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 14,000 organizations, including JetBlue, Nordstrom, Siemens, Slack, 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 Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Revenue:

Subscription $ 336,702 $ 206,743 $ 879,881 $ 571,213

Professionalservices and 13,978 10,636 37,305 29,471 other

Total revenue 350,680 217,379 917,186 600,684

Cost of revenue:

Subscription^(1) 91,048 44,762 227,903 121,420

Professionalservices and 18,626 12,146 49,000 35,121 other^(1)

Total cost of 109,674 56,908 276,903 156,541 revenue

Gross profit 241,006 160,471 640,283 444,143

Operating expenses:

Research and 130,535 58,150 321,805 160,510 development^(1)

Sales and 203,878 109,812 548,749 312,177 marketing^(1)

General andadministrative^ 105,149 44,485 322,406 121,019 (1)

Total operating 439,562 212,447 1,192,960 593,706 expenses

Operating loss (198,556 ) (51,976 ) (552,677 ) (149,563 )

Interest expense (23,144 ) (22,368 ) (68,776 ) (50,063 )

Interest income 1,056 1,878 7,622 10,737 and other, net

Loss on earlyextinguishment - (89 ) (179 ) (2,263 ) and conversionof debt

Interest and (22,088 ) (20,579 ) (61,333 ) (41,589 ) other, net

Loss beforeprovision for (220,644 ) (72,555 ) (614,010 ) (191,152 ) (benefit from)income taxes

Provision for(benefit from) 667 209 (6,785 ) (626 ) income taxes

Net loss $ (221,311 ) $ (72,764 ) $ (607,225 ) $ (190,526 )



Net loss pershare, basic and $ (1.44 ) $ (0.56 ) $ (4.17 ) $ (1.51 ) diluted



Weighted-averageshares used tocompute net loss 153,756 128,813 145,782 126,222 per share, basicand diluted

(1) Amounts include stock-based compensation expense as follows (in thousands):Three Months Ended October 31,

Nine Months Ended October 31,

2021

2020

2021

2020

Cost of subscription revenue

$

13,455

$

6,090

$

33,843

$

15,229

Cost of professional services and other

3,376

2,113

8,879

5,924

Research and development

56,573

17,546

129,998

44,434

Sales and marketing

39,248

14,368

101,602

38,693

General and administrative

43,133

13,535

133,289

35,494

Total stock-based compensation expense

$

155,785

$

53,652

$

407,611

$

139,774

^(1) Amounts include stock-based compensation expense as follows (inthousands): Three Months Ended Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Cost of subscription revenue $ 13,455 $ 6,090 $ 33,843 $ 15,229

Cost of professional services 3,376 2,113 8,879 5,924 and other

Research and development 56,573 17,546 129,998 44,434

Sales and marketing 39,248 14,368 101,602 38,693

General and administrative 43,133 13,535 133,289 35,494

Total stock-based compensation $ 155,785 $ 53,652 $ 407,611 $ 139,774 expense

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

October 31,

January 31,

2021

2021

Assets

Current assets:

Cash and cash equivalents

$

372,372

$

434,607

Short-term investments

2,109,687

2,121,584

Accounts receivable, net of allowances

253,568

194,818

Deferred commissions

60,465

45,949

Prepaid expenses and other current assets

56,776

81,609

Total current assets

2,852,868

2,878,567

Property and equipment, net

60,751

62,783

Operating lease right-of-use assets

154,522

149,604

Deferred commissions, noncurrent

145,655

108,555

Intangible assets, net

336,354

27,009

Goodwill

5,401,343

48,023

Other assets

45,480

24,256

Total assets

$

8,996,973

$

3,298,797

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

11,547

$

8,557

Accrued expenses and other current liabilities

91,516

53,729

Accrued compensation

109,233

71,906

Convertible senior notes, net

15,956

908,684

Deferred revenue

759,914

502,738

Total current liabilities

988,166

1,545,614

Convertible senior notes, net, noncurrent

1,793,970

857,387

Operating lease liabilities, noncurrent

179,205

179,518

Deferred revenue, noncurrent

17,958

10,860

Other liabilities, noncurrent

33,119

11,375

Total liabilities

3,012,418

2,604,754

Stockholders' equity:

Preferred stock

-

-

Class A common stock

15

12

Class B common stock

1

1

Additional paid-in capital

7,558,816

1,656,096

Accumulated other comprehensive income

404

5,390

Accumulated deficit

(1,574,681

)

(967,456

)

Total stockholders' equity

5,984,555

694,043

Total liabilities and stockholders' equity

$

8,996,973

$

3,298,797

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

October 31, January 31,

2021 2021

Assets

Current assets:

Cash and cash equivalents $ 372,372 $ 434,607

Short-term investments 2,109,687 2,121,584

Accounts receivable, net of allowances 253,568 194,818

Deferred commissions 60,465 45,949

Prepaid expenses and other current assets 56,776 81,609

Total current assets 2,852,868 2,878,567

Property and equipment, net 60,751 62,783

Operating lease right-of-use assets 154,522 149,604

Deferred commissions, noncurrent 145,655 108,555

Intangible assets, net 336,354 27,009

Goodwill 5,401,343 48,023

Other assets 45,480 24,256

Total assets $ 8,996,973 $ 3,298,797

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 11,547 $ 8,557

Accrued expenses and other current 91,516 53,729 liabilities

Accrued compensation 109,233 71,906

Convertible senior notes, net 15,956 908,684

Deferred revenue 759,914 502,738

Total current liabilities 988,166 1,545,614

Convertible senior notes, net, noncurrent 1,793,970 857,387

Operating lease liabilities, noncurrent 179,205 179,518

Deferred revenue, noncurrent 17,958 10,860

Other liabilities, noncurrent 33,119 11,375

Total liabilities 3,012,418 2,604,754



Stockholders' equity:

Preferred stock - -

Class A common stock 15 12

Class B common stock 1 1

Additional paid-in capital 7,558,816 1,656,096

Accumulated other comprehensive income 404 5,390

Accumulated deficit (1,574,681 ) (967,456 )

Total stockholders' equity 5,984,555 694,043

Total liabilities and stockholders' equity $ 8,996,973 $ 3,298,797

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Nine Months Ended October 31,

2021

2020(1)

Cash flows from operating activities:

Net loss

$

(607,225

)

$

(190,526

)

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

Stock-based compensation

407,611

139,774

Depreciation, amortization and accretion

76,631

23,694

Amortization of debt discount and issuance costs

64,478

47,261

Amortization of deferred commissions

40,041

28,428

Deferred income taxes

(13,606

)

(2,414

)

Non-cash charitable contributions

5,649

4,662

Loss on early extinguishment and conversion of debt

179

2,263

(Gain) loss on strategic investments

(5,665

)

628

Other, net

(267

)

3,887

Changes in operating assets and liabilities:

Accounts receivable

(29,561

)

(10,547

)

Deferred commissions

(92,183

)

(51,837

)

Prepaid expenses and other assets

5,356

(6,794

)

Operating lease right-of-use assets

16,564

13,979

Accounts payable

(195

)

1,377

Accrued compensation

19,488

37,863

Accrued expenses and other liabilities

22,537

2,442

Operating lease liabilities

(17,280

)

(11,750

)

Deferred revenue

198,035

60,663

Net cash provided by operating activities

90,587

93,053

Cash flows from investing activities:

Capitalization of internal-use software costs

(2,348

)

(3,530

)

Purchases of property and equipment

(5,800

)

(11,297

)

Purchases of securities available for sale and other

(1,333,617

)

(1,845,958

)

Proceeds from maturities and redemption of securities available for sale

1,118,448

386,774

Proceeds from sales of securities available for sale and other

228,344

206,129

Payments for business acquisitions, net of cash acquired

(215,129

)

-

Net cash used in investing activities

(210,102

)

(1,267,882

)

Cash flows from financing activities:

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

-

1,134,841

Payments for repurchases and conversions of convertible senior notes

(26

)

(447

)

Proceeds from hedges related to convertible senior notes

2

195,046

Payments for warrants related to convertible senior notes

-

(175,399

)

Purchases of capped calls related to convertible senior notes

-

(133,975

)

Proceeds from stock option exercises

41,054

33,570

Proceeds from shares issued in connection with employee stock purchase plan

17,417

12,821

Net cash provided by financing activities

58,447

1,066,457

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

(494

)

121

Net decrease in cash, cash equivalents and restricted cash

(61,562

)

(108,251

)

Cash, cash equivalents and restricted cash at beginning of period

448,630

531,953

Cash, cash equivalents and restricted cash at end of period

$

387,068

$

423,702

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Nine Months Ended October 31,

2021 2020^(1)

Cash flows from operating activities:

Net loss $ (607,225 ) $ (190,526 )

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

Stock-based compensation 407,611 139,774

Depreciation, amortization and accretion 76,631 23,694

Amortization of debt discount and issuance 64,478 47,261 costs

Amortization of deferred commissions 40,041 28,428

Deferred income taxes (13,606 ) (2,414 )

Non-cash charitable contributions 5,649 4,662

Loss on early extinguishment and conversion 179 2,263 of debt

(Gain) loss on strategic investments (5,665 ) 628

Other, net (267 ) 3,887

Changes in operating assets and liabilities:

Accounts receivable (29,561 ) (10,547 )

Deferred commissions (92,183 ) (51,837 )

Prepaid expenses and other assets 5,356 (6,794 )

Operating lease right-of-use assets 16,564 13,979

Accounts payable (195 ) 1,377

Accrued compensation 19,488 37,863

Accrued expenses and other liabilities 22,537 2,442

Operating lease liabilities (17,280 ) (11,750 )

Deferred revenue 198,035 60,663

Net cash provided by operating activities 90,587 93,053

Cash flows from investing activities:

Capitalization of internal-use software costs (2,348 ) (3,530 )

Purchases of property and equipment (5,800 ) (11,297 )

Purchases of securities available for sale (1,333,617 ) (1,845,958 ) and other

Proceeds from maturities and redemption of 1,118,448 386,774 securities available for sale

Proceeds from sales of securities available 228,344 206,129 for sale and other

Payments for business acquisitions, net of (215,129 ) - cash acquired

Net cash used in investing activities (210,102 ) (1,267,882 )

Cash flows from financing activities:

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

Payments for repurchases and conversions of (26 ) (447 ) convertible senior notes

Proceeds from hedges related to convertible 2 195,046 senior notes

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

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

Proceeds from stock option exercises 41,054 33,570

Proceeds from shares issued in connection 17,417 12,821 with employee stock purchase plan

Net cash provided by financing activities 58,447 1,066,457

Effects of changes in foreign currencyexchange rates on cash, cash equivalents and (494 ) 121 restricted cash

Net decrease in cash, cash equivalents and (61,562 ) (108,251 ) restricted cash

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

Cash, cash equivalents and restricted cash at $ 387,068 $ 423,702 end of period

(1) The condensed consolidated statement of cash flows for the prior period has been adjusted to conform to current period presentation.

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, amortization of acquired intangibles and acquisition and integration-related expenses.

(1) The condensed consolidated statement of cash flows for the prior period hasbeen adjusted to conform to current period presentation.

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, amortization of acquired intangibles and acquisition and integration-related expenses.

Three Months Ended Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Gross profit $ 241,006 $ 160,471 $ 640,283 $ 444,143

Add:

Stock-based compensationexpense included in cost 16,831 8,203 42,722 21,153 of revenue^(1)

Amortization of acquired 11,335 1,593 23,056 4,780 intangibles

Acquisition andintegration-related 658 - 1,316 - expenses^(2)

Non-GAAP gross profit $ 269,830 $ 170,267 $ 707,377 $ 470,076

Gross margin 69 % 74 % 70 % 74 %

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

(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)

Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

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 and integration-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.

^ Acquisition and integration-related expenses include transaction costs and(2) other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

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 and integration-related expenses.

Three Months Ended Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Operating loss $ (198,556 ) $ (51,976 ) $ (552,677 ) $ (149,563 )

Add:

Stock-basedcompensation 155,785 53,652 407,611 139,774 expense^(1)

Non-cash charitable 1,986 2,245 5,649 4,662 contributions

Amortization ofacquired 21,204 1,593 42,795 4,780 intangibles

Acquisition andintegration-related 10,060 - 46,664 - expenses^(2)

Non-GAAP operating $ (9,521 ) $ 5,514 $ (49,958 ) $ (347 ) income (loss)

Operating margin (57 ) % (24 ) % (60 ) % (25 ) %

Non-GAAP operating (3 ) % 3 % (5 ) % - %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)

Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

Non-GAAP Net Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

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

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 our note hedge and capped call agreements on convertible senior notes outstanding. Accordingly, we 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.

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

^ Acquisition and integration-related expenses include transaction costs and(2) other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

Non-GAAP Net Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

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

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 our note hedge and capped call agreements on convertible senior notes outstanding. Accordingly, we 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 Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Net loss $ (221,311 ) $ (72,764 ) $ (607,225 ) $ (190,526 )

Add:

Stock-basedcompensation 155,785 53,652 407,611 139,774 expense^(1)

Non-cash charitable 1,986 2,245 5,649 4,662 contributions

Amortization ofacquired 21,204 1,593 42,795 4,780 intangibles

Acquisition andintegration-related 10,060 - 46,664 - expenses^(2)

Amortization ofdebt discount and 21,698 20,931 64,478 47,261 debt issuance costs

Loss on earlyextinguishment and - 89 179 2,263 conversion of debt

Non-GAAP net income $ (10,578 ) $ 5,746 $ (39,849 ) $ 8,214 (loss)



Net margin (63 ) % (33 ) % (66 ) % (32 ) %

Non-GAAP net margin (3 ) % 3 % (4 ) % 1 %



Weighted-averageshares used tocompute net loss 153,756 128,813 145,782 126,222 per share, basicand diluted

Non-GAAPweighted-averageeffect of - 14,579 - 15,714 potentiallydilutive securities

Non-GAAPweighted-averageshares used to 153,756 143,392 145,782 141,936 compute non-GAAP net income (loss)per share, diluted



Net loss per share, $ (1.44 ) $ (0.56 ) $ (4.17 ) $ (1.51 ) basic and diluted

Non-GAAP net income(loss) per share, $ (0.07 ) $ 0.04 $ (0.27 ) $ 0.07 basic

Non-GAAP net income(loss) per share, $ (0.07 ) $ 0.04 $ (0.27 ) $ 0.06 diluted

(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)

Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

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, net of sales proceeds, and capitalized internal-use software costs. Free cash flow margin is calculated as Free cash flow divided by total revenue.

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

^ Acquisition and integration-related expenses include transaction costs and(2) other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

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, net of sales proceeds, and capitalized internal-use software costs. Free cash flow margin is calculated as Free cash flow divided by total revenue.

Three Months Ended Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Net cashprovided by $ 37,120 $ 43,426 $ 90,587 $ 93,053 operating activities

Less:

Purchases ofproperty and (1,766 ) (628 ) (5,800 ) (11,297 ) equipment

Capitalizationof (1,970 ) (1,204 ) (2,348 ) (3,530 ) internal-use software costs

Free cash flow $ 33,384 $ 41,594 $ 82,439 $ 78,226

Net cashprovided by(used in) $ 101,459 $ (595,621 ) $ (210,102 ) $ (1,267,882 ) investingactivities

Net cashprovided by $ 9,214 $ 5,210 $ 58,447 $ 1,066,457 financing activities

Free cash flow 10 % 19 % 9 % 13 %margin

Calculated Billings

We define Calculated billings as total revenue plus the change in deferred revenue, net of acquired deferred revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.

Three Months Ended Nine Months Ended October 31, October 31,

2021 2020 2021 2020

Total revenue $ 350,680 $ 217,379 $ 917,186 $ 600,684

Add:

Deferredrevenue, 759,914 424,765 759,914 424,765 current (end of period)

Unbilledreceivables,current 3,409 2,113 2,604 1,026 (beginning ofperiod)

Acquiredunbilled - - 2,327 - receivables, current

Less:

Deferredrevenue,current (721,808 ) (391,246 ) (502,738 ) (365,236 ) (beginning ofperiod)

Unbilledreceivables, (5,085 ) (2,427 ) (5,085 ) (2,427 ) current (end of period)

Acquireddeferred (900 ) - (61,422 ) - revenue, current

Currentcalculated 386,210 250,584 1,112,786 658,812 billings

Add:

Deferredrevenue,noncurrent 17,958 7,349 17,958 7,349 (end ofperiod)

Less:

Deferredrevenue,noncurrent (15,489 ) (5,574 ) (10,860 ) (6,214 ) (beginning ofperiod)

Acquireddeferred - - (4,817 ) - revenue, noncurrent

Calculated $ 388,679 $ 252,359 $ 1,115,067 $ 659,947 billings

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CONTACT: Investor Contact: Dave Gennarelli investor@okta.com Media Contact: Adam Simons press@okta.com