Document
false0001660134 0001660134 2020-08-27 2020-08-27


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
___________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported)
August 27, 2020
___________________________________
Okta, Inc.
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
001-38044
26-4175727
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification Number)

100 First Street, Suite 600
San Francisco, California 94105
(Address of principal executive offices)

(888) 722-7871
(Registrant's telephone number, including area code)

___________________________________

___________________________________
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A common stock, par value $0.0001 per share
 
OKTA
 
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02 - Results of Operations and Financial Condition
On August 27, 2020, Okta, Inc. (the "Company" or "Okta") issued a press release announcing its financial results for the fiscal quarter ended July 31, 2020.

A copy of the press release is attached as Exhibit 99.1.

Item 7.01 - Regulation FD Disclosures
On August 27, 2020, the Company posted supplemental investor materials on its investor.okta.com website. 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, investors should monitor Okta’s investor relations website in addition to following Okta press releases, SEC filings and public conference calls and webcasts.


The information furnished in the current report on Form 8-K and in the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.



Item 9.01 - Financial Statements and Exhibits
(d) Exhibits
 
Exhibit
Number
 
Description
 
Press release dated August 27, 2020, issued by Okta, Inc.
 
 
 




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 27th day of August 2020.
 
 
 
 
 
 
Okta, Inc.
 
 
 
 
By:
/s/ William E. Losch
 
Name:
William E. Losch
 
Title:
Chief Financial Officer
 
 
(Principal Financial Officer)




Okta Announces Strong Second Quarter Results
•
Increases revenue and operating profit outlook for fiscal 2021
•
Q2 revenue grew 43% year-over-year; subscription revenue grew 44% year-over-year
•
Remaining performance obligations, or subscription revenue backlog, grew 56% year-over-year


SAN FRANCISCO – August 27, 2020 – Okta, Inc. (NASDAQ: OKTA), the leading independent provider of identity for the enterprise, today announced financial results for its second quarter ended July 31, 2020.

"The three mega-trends that have been driving our business for the past several years - the adoption of cloud and hybrid IT, digital transformation, and zero trust security - are all being accelerated globally by the current environment,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “These trends are reflected in our strong second quarter results and reflect the work that Okta is doing to help organizations around the world accelerate their adoption and deployment of cloud applications, and remote access, and re-imagine their digital customer experiences. As part of this process, organizations are re-evaluating their roadmap to modernize their identity systems and Okta’s platform is the linchpin of the new cloud technology stack. We believe that the world will not return to the pre-COVID work environment and Okta is committed to helping our customers on their journeys."

Second Quarter Fiscal 2021 Financial Highlights:
•
Revenue: Total revenue was $200.4 million, an increase of 43% year-over-year. Subscription revenue was $190.7 million, an increase of 44% year-over-year.
•
Remaining Performance Obligations (RPO): RPO was $1.43 billion, an increase of 56% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $684.5 million, up 48% compared to the second quarter of fiscal 2020.
•
Calculated Billings: Total calculated billings were $198.1 million, an increase of 27% year-over-year.
•
GAAP Operating Loss: GAAP operating loss was $45.4 million, or 22.6% of total revenue, compared to $43.6 million, or 31.0% of total revenue, in the second quarter of fiscal 2020.
•
Non-GAAP Operating Income/Loss: Non-GAAP operating income was $6.5 million, or 3.2% of total revenue, compared to a non-GAAP operating loss of $9.9 million, or 7.1% of total revenue, in the second quarter of fiscal 2020.
•
GAAP Net Loss: GAAP net loss was $60.1 million, compared to $43.0 million in the second quarter of fiscal 2020. GAAP net loss per share was $0.48, compared to $0.37 in the second quarter of fiscal 2020.
•
Non-GAAP Net Income/Loss: Non-GAAP net income was $9.9 million, compared to a non-GAAP net loss of $5.2 million in the second quarter of fiscal 2020. Non-GAAP basic net income per share was $0.08, compared to a non-GAAP basic net loss per share of $0.05 in the second quarter of fiscal 2020. Non-GAAP diluted net income per share was $0.07, compared to a non-GAAP diluted net loss per share of $0.05 in the second quarter of fiscal 2020.
•
Cash Flow: Net cash provided by operations was $10.9 million, or 5.5% of total revenue, compared to net cash provided by operations of $1.1 million, or 0.8% of total revenue, in the second quarter of fiscal

1


2020. Free cash flow was $6.9 million, or 3.4% of total revenue, compared to negative $4.3 million, or 3.1% of total revenue, in the second quarter of fiscal 2020.
•
Cash, cash equivalents, and short-term investments were $2.5 billion at July 31, 2020.

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

Financial Outlook:
"We are pleased with our continued execution and excellent second quarter results," said Bill Losch, Chief Financial Officer of Okta. "We believe it's prudent to continue to expect some near-term economic uncertainty as the business impacts stemming from the pandemic further unfold; however, our strong first half results give us confidence in raising our fiscal year 2021 outlook for both revenue and profitability."

For the third quarter of fiscal 2021, the Company expects:
•
Total revenue of $202 million to $203 million, representing a growth rate of 32% to 33% year-over-year
•
Non-GAAP operating loss of $3.0 million to $2.0 million
•
Non-GAAP net loss per share of $0.02 to $0.01, assuming weighted shares outstanding of approximately 129 million

For the full year fiscal 2021, the Company now expects:
•
Total revenue of $800 million to $803 million, representing a growth rate of 37% year-over-year
•
Non-GAAP operating loss of $13.0 million to $11.0 million
•
Non-GAAP net loss per share of $0.03 to $0.01, assuming weighted shares outstanding of approximately 127 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 its most directly comparable GAAP measure because certain items are out of Okta’s control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP operating loss and non-GAAP net loss per share is not available without unreasonable effort.


2


Conference Call Information:
Okta will host a live video webcast at 2:00 p.m. Pacific Time on August 27, 2020 to discuss the results and outlook. The news release with the financial results will be accessible from the Company’s website at investor.okta.com prior to the conference call. The live video webcast of the conference call will be accessible from the Okta investor relations website at investor.okta.com.

Supplemental Financial and Other Information:
Supplemental financial and other information can be accessed through the Company’s investor relations website at investor.okta.com.

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


3


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

About Okta
Okta is the leading independent provider of identity for the enterprise. The Okta Identity Cloud enables organizations to securely connect the right people to the right technologies at the right time. With over 6,500 pre-built integrations to applications and infrastructure providers, Okta customers can easily and securely use the best technologies for their business. Over 8,950 organizations, including Engie, JetBlue, Nordstrom, Takeda Pharmaceutical, Teach for America, T-Mobile and Twilio, trust Okta to help protect the identities of their workforces and customers.

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



4


Investor Contact:    
Dave Gennarelli
[email protected]
415-851-4744

Media Contact:
Jenna Kozel
[email protected]
415-418-9600

5


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 
Three Months Ended
July 31,
Six Months Ended
July 31,
 
2020
 
2019
2020
 
2019
Revenue:
 
 
 
 
 
 
Subscription
$
190,689

 
$
132,494

$
364,470

 
$
249,657

Professional services and other
9,757

 
7,986

18,835

 
16,046

Total revenue
200,446

 
140,480

383,305

 
265,703

Cost of revenue:
 
 
 
 
 
 
Subscription(1)
39,501

 
27,917

76,658

 
52,457

Professional services and other(1)
11,646

 
10,863

22,975

 
21,418

Total cost of revenue
51,147

 
38,780

99,633

 
73,875

Gross profit
149,299

 
101,700

283,672

 
191,828

Operating expenses:
 

 
 

 
 
 
Research and development(1)
53,866

 
40,045

102,360

 
74,077

Sales and marketing(1)
98,322

 
78,385

202,365

 
160,497

General and administrative(1)
42,499

 
26,887

76,534

 
52,653

Total operating expenses
194,687

 
145,317

381,259

 
287,227

Operating loss
(45,388
)
 
(43,617
)
(97,587
)
 
(95,399
)
Interest expense
(16,931
)
 
(4,304
)
(27,695
)
 
(8,545
)
Interest income and other, net
3,960

 
3,464

8,859

 
6,364

Loss on early extinguishment of debt
(2,174
)
 
—

(2,174
)
 
—

Interest and other, net
(15,145
)
 
(840
)
(21,010
)
 
(2,181
)
Loss before benefit from income taxes
(60,533
)
 
(44,457
)
(118,597
)
 
(97,580
)
Benefit from income taxes
(433
)
 
(1,477
)
(835
)
 
(2,634
)
Net loss
$
(60,100
)
 
$
(42,980
)
$
(117,762
)
 
$
(94,946
)
 
 

 
 

 
 
 
Net loss per share, basic and diluted
$
(0.48
)
 
$
(0.37
)
$
(0.94
)
 
$
(0.83
)
 
 

 
 

 
 
 
Weighted-average shares used to compute net loss per share, basic and diluted
126,319

 
115,033

124,922

 
114,042


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

 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
 
 
2020
 
2019
 
2020
 
2019
 
Cost of subscription revenue
$
5,164

 
$
3,111

 
$
9,139

 
$
5,533

 
Cost of professional services and other
2,000

 
1,873

 
3,811

 
3,392

 
Research and development
14,953

 
9,082

 
26,888

 
15,428

 
Sales and marketing
13,165

 
9,236

 
24,325

 
16,022

 
General and administrative
13,112

 
7,972

 
21,959

 
13,584

 
Total stock-based compensation expense
$
48,394

 
$
31,274

 
$
86,122

 
$
53,959

 

6


OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 
 
July 31,
 
January 31,
 
 
2020
 
2020
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
957,234

 
$
520,048

Short-term investments
 
1,557,279

 
882,976

Accounts receivable, net of allowances
 
110,540

 
130,115

Deferred commissions
 
37,808

 
33,636

Prepaid expenses and other current assets
 
44,074

 
32,950

Total current assets
 
2,706,935

 
1,599,725

Property and equipment, net
 
63,406

 
53,535

Operating lease right-of-use assets
 
157,781

 
125,204

Deferred commissions, noncurrent
 
86,556

 
77,874

Intangible assets, net
 
30,031

 
32,529

Goodwill
 
48,023

 
48,023

Other assets
 
22,283

 
18,505

Total assets
 
$
3,115,015

 
$
1,955,395

Liabilities and stockholders' equity
 
 

 
 
Current liabilities:
 
 

 
 
Accounts payable
 
$
4,726

 
$
3,837

Accrued expenses and other current liabilities
 
54,803

 
36,887

Accrued compensation
 
39,227

 
40,300

Convertible senior notes, net
 
43,578

 
100,703

Deferred revenue
 
391,246

 
365,236

Total current liabilities
 
533,580

 
546,963

Convertible senior notes, net, noncurrent
 
1,689,438

 
837,002

Operating lease liabilities, noncurrent
 
189,208

 
154,511

Deferred revenue, noncurrent
 
5,574

 
6,214

Other liabilities, noncurrent
 
12,018

 
5,361

Total liabilities
 
2,429,818

 
1,550,051

 
 
 

 
 
Stockholders’ equity:
 
 
 
 
Preferred stock
 
—

 
—

Class A common stock
 
12

 
11

Class B common stock
 
1

 
1

Additional paid-in capital
 
1,498,549

 
1,105,564

Accumulated other comprehensive income
 
5,521

 
892

Accumulated deficit
 
(818,886
)
 
(701,124
)
Total stockholders’ equity
 
685,197

 
405,344

Total liabilities and stockholders' equity
 
$
3,115,015

 
$
1,955,395



7


OKTA, INC.
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
Six Months Ended July 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net loss
$
(117,762
)
 
$
(94,946
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Stock-based compensation
86,106

 
53,959

Depreciation, amortization and accretion
12,691

 
7,916

Amortization of debt discount and issuance costs
26,330

 
8,113

Amortization of deferred commissions
18,077

 
13,192

Deferred income taxes
(1,915
)
 
(3,057
)
Non-cash charitable contributions
2,417

 
652

Loss on early extinguishment of debt
2,174

 
—

Other, net
1,435

 
84

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
18,626

 
4,459

Deferred commissions
(30,332
)
 
(21,372
)
Prepaid expenses and other assets
(7,622
)
 
1,534

Operating lease right-of-use assets
8,972

 
6,189

Accounts payable
810

 
1,368

Accrued compensation
15,045

 
4,717

Accrued expenses and other liabilities
(3,131
)
 
1,304

Operating lease liabilities
(7,663
)
 
(159
)
Deferred revenue
25,369

 
36,175

Net cash provided by operating activities
49,627

 
20,128

Cash flows from investing activities:
 
 
 
Capitalization of internal-use software costs
(2,326
)
 
(1,330
)
Purchases of property and equipment
(10,669
)
 
(9,917
)
Purchases of securities available for sale and other
(1,029,281
)
 
(237,693
)
Proceeds from maturities and redemption of securities available for sale
280,395

 
136,344

Proceeds from sales of securities available for sale and other
89,620

 
17,329

Purchases of intangible assets
—

 
(8,500
)
Payments for business acquisition, net of cash acquired
—

 
(44,223
)
Net cash used in investing activities
(672,261
)
 
(147,990
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of convertible senior notes, net of issuance costs
1,135,418

 
—

Payments for repurchases of convertible senior notes
(181
)
 
—

Proceeds from hedges related to convertible senior notes
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
27,517

 
27,453

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

 
9,005

Other, net
—

 
(126
)
Net cash provided by financing activities
1,061,247

 
36,332

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash
578

 
(1,187
)
Net increase (decrease) in cash, cash equivalents and restricted cash
439,191

 
(92,717
)
Cash, cash equivalents and restricted cash at beginning of period
531,953

 
311,215

Cash, cash equivalents and restricted cash at end of period
$
971,144

 
$
218,498



8


OKTA, INC.
Reconciliation of GAAP to Non-GAAP Data
(In thousands, except percentages and per share data)
(unaudited)
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense and amortization of acquired intangibles.
 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
 
2020
 
2019
 
2020
 
2019
Gross profit
$
149,299

 
$
101,700

 
$
283,672

 
$
191,828

Add:
 
 
 
 
 
 
 
Stock-based compensation expense included in cost of revenue(1)
7,164

 
4,984

 
12,950

 
8,925

Amortization of acquired intangibles
1,594

 
1,785

 
3,187

 
2,548

Non-GAAP gross profit
$
158,057

 
$
108,469

 
$
299,809

 
$
203,301

Gross margin
74
%
 
72
%
 
74
%
 
72
%
Non-GAAP gross margin
79
%
 
77
%
 
78
%
 
77
%
(1) See table in footnote (1) to the condensed consolidated statements of operations above for breakdown of stock-based compensation expense by line item.
Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin
We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles and acquisition-related expenses.
 
Three Months Ended
July 31,
Six Months Ended
July 31,
 
2020
 
2019
2020
 
2019
Operating loss
$
(45,388
)
 
$
(43,617
)
$
(97,587
)
 
$
(95,399
)
Add:
 
 
 
 
 
 
Stock-based compensation expense(1)
48,394

 
31,274

86,122

 
53,959

Non-cash charitable contributions
1,881

 
652

2,417

 
652

Amortization of acquired intangibles
1,594

 
1,785

3,187

 
2,548

Acquisition-related expenses(2)
—

 
—

—

 
3,449

Non-GAAP operating income (loss)
$
6,481

 
$
(9,906
)
$
(5,861
)
 
$
(34,791
)
Operating margin
(23
)%
 
(31
)%
(25
)%
 
(36
)%
Non-GAAP operating margin
3
 %
 
(7
)%
(2
)%
 
(13
)%
(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.


9


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 of debt.
 
Three Months Ended
July 31,
 
Six Months Ended
July 31,
 
2020
 
2019(1)
 
2020
 
2019(1)
Net loss
$
(60,100
)
 
$
(42,980
)
 
$
(117,762
)
 
$
(94,946
)
Add:
 
 
 
 
 
 
 
Stock-based compensation expense(2)
48,394

 
31,274

 
86,122

 
53,959

Non-cash charitable contributions
1,881

 
652

 
2,417

 
652

Amortization of acquired intangibles
1,594

 
1,785

 
3,187

 
2,548

Acquisition-related expenses(3)
—

 
—

 
—

 
3,449

Amortization of debt discount and debt issuance costs(4)
15,973

 
4,088

 
26,330

 
8,113

Loss on early extinguishment of debt(5)
2,174

 
—

 
2,174

 
—

Non-GAAP net income (loss)
$
9,916

 
$
(5,181
)
 
$
2,468

 
$
(26,225
)
Net margin
(30
)%
 
(31
)%
 
(31
)%
 
(36
)%
Non-GAAP net margin
5
 %
 
(4
)%
 
1
 %
 
(10
)%
(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 the three and six months ended July 31, 2020. Debt issuance costs included are $0.8 million and $1.4 million for the three and six months ended July 31, 2020, respectively, and $0.3 million and $0.6 million for the three and six months ended July 31, 2019, respectively.
(5) Loss on early extinguishment of debt is calculated inclusive of write-offs of debt issuance costs, effective the three and six months ended July 31, 2020. The amounts of these write-offs are $1.0 million for the three and six months ended July 31, 2020, respectively, and nil for the three and six months ended July 31, 2019, respectively.
Non-GAAP Net Income (Loss) per share, basic and diluted
We define non-GAAP net income (loss) per share, basic, as non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.
We define non-GAAP net income (loss) per share, diluted, as non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted adjusted for the potentially dilutive effect of (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense, and (ii) convertible senior notes outstanding and related warrants. In addition, non-GAAP net income (loss) per share, diluted, includes the anti-dilutive impact of the Company’s note hedge and capped call agreements on convertible senior notes outstanding, which fully reduced the potential dilutive effect of the convertible senior notes outstanding. Accordingly, the Company did not record any adjustments to non-GAAP net income (loss) for the potential impact of the convertible senior notes outstanding under the if-converted method.

10


 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2020
 
2019(1)
 
2020
 
2019(1)
Net loss
$
(60,100
)
 
$
(42,980
)
 
$
(117,762
)
 
$
(94,946
)
Add:
 
 
 
 
 
 
 
Stock-based compensation expense(2)
48,394

 
31,274

 
86,122

 
53,959

Non-cash charitable contributions
1,881

 
652

 
2,417

 
652

Amortization of acquired intangibles
1,594

 
1,785

 
3,187

 
2,548

Acquisition-related expenses(3)
—

 
—

 
—

 
3,449

Amortization of debt discount and debt issuance costs(4)
15,973

 
4,088

 
26,330

 
8,113

Loss on early extinguishment of debt(5)
 
2,174

 
—

 
2,174

 
—

Non-GAAP net income (loss)
$
9,916

 
$
(5,181
)
 
$
2,468

 
$
(26,225
)
 
 
 
 
 
 
 
 
Weighted-average shares used to compute net loss per share, basic and diluted
126,319


115,033


124,922


114,042

Non-GAAP weighted-average effect of potentially dilutive securities

15,936


—


16,281


—

Non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, diluted
142,255


115,033


141,203


114,042

 
 
 
 
 
 
 
 
Net loss per share, basic and diluted
$
(0.48
)

$
(0.37
)

$
(0.94
)

$
(0.83
)
Non-GAAP net income (loss) per share, basic(6)
$
0.08


$
(0.05
)

$
0.02


$
(0.23
)
Non-GAAP net income (loss) per share, diluted(6)
$
0.07


$
(0.05
)

$
0.02


$
(0.23
)
 
 
 
 
 
 
 
 

(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 the three and six months ended July 31, 2020. Debt issuance costs included are $0.8 million and $1.4 million for the three and six months ended July 31, 2020, respectively, and $0.3 million and $0.6 million for the three and six months ended July 31, 2019, respectively.
(5) Loss on early extinguishment of debt is calculated inclusive of write-offs of debt issuance costs, effective the three and six months ended July 31, 2020. The amounts of these write-offs are $1.0 million for the three and six months ended July 31, 2020, respectively, and nil for the three and six months ended July 31, 2019, respectively.
(6) The total impact of the adjustments noted in footnotes (4) and (5) and for the periods noted in footnote (1) above on non-GAAP net income (loss) per share, basic and diluted is nil and $0.01 for the three and six months ended July 31, 2019, respectively.





11



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
July 31,
Six Months Ended
July 31,
 
2020
 
2019
2020
 
2019
Net cash provided by (used in) operating activities
$
10,930

 
$
(1,134
)
$
49,627

 
$
20,128

Less:
 
 
 
 
 
 
Purchases of property and equipment
(2,739
)
 
(2,207
)
(10,669
)
 
(9,917
)
Capitalization of internal-use software costs
(1,326
)
 
(961
)
(2,326
)
 
(1,330
)
Free cash flow
$
6,865

 
$
(4,302
)
$
36,632

 
$
8,881

Net cash used in investing activities
$
(722,865
)
 
$
(22,383
)
$
(672,261
)
 
$
(147,990
)
Net cash provided by financing activities
$
1,047,080

 
$
23,070

$
1,061,247

 
$
36,332

Free cash flow margin
3
%
 
(3
)%
10
%
 
3
%
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
July 31,
Six Months Ended
July 31,
 
2020
 
2019
2020
 
2019
Total revenue
$
200,446

 
$
140,480

$
383,305

 
$
265,703

Add:
 
 
 

 
 
Unbilled receivables, current (beginning of period)
1,121

 
799

1,026

 
1,457

Deferred revenue, current (end of period)
391,246

 
283,724

391,246

 
283,724

Less:
 
 
 


 
 
Unbilled receivables, current (end of period)
(2,113
)
 
(1,004
)
(2,113
)
 
(1,004
)
Deferred revenue, current (beginning of period)
(392,121
)
 
(268,033
)
(365,236
)
 
(245,622
)
Current calculated billings
198,579

 
155,966

408,228

 
304,258

Add:
 
 
 


 
 
Deferred revenue, noncurrent (end of period)
5,574

 
7,469

5,574

 
7,469

Less:
 
 
 


 
 
Deferred revenue, noncurrent (beginning of period)
(6,070
)
 
(7,671
)
(6,214
)
 
(8,768
)
Calculated billings
$
198,083

 
$
155,764

$
407,588

 
$
302,959


12