Okta, Inc 10-Q for FY2021 Q2

Okta, Inc. (OKTA)

10-Q 2020-08-28 For: 2020-07-31

Added on April 12, 2026

About this 10-Q

Okta, Inc filed this 10-Q on August 28, 2020, covering the quarter ended July 31, 2020 (FY2021 Q2).

Headline figures

Quarter ended July 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $200.45M; up 42.7% from $140.48M a year earlier
Net loss: $60.1M; compared with a net loss of $42.98M a year earlier

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Delaware	100 First Street, Suite 600	26-4175727
(State or Other Jurisdiction of Incorporation or Organization)	San Francisco	(I.R.S. Employer Identification Number)
	California
	94105
	(Address of Principal executive offices)



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



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets as of July 31, 2020 and January 31, 2020	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2020 and 2019	6
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended July 31, 2020 and 2019	7
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 31, 2020 and 2019	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2020 and 2019	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	48
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 6.	Exhibits	80
	Signatures	82



	July 31, 2020			January 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	957,234		$	520,048
Short-term investments	1,557,279			882,976
Accounts receivable, net of allowances of $3,243 and $1,166	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
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized; no shares issued and outstanding as of July 31, 2020 and January 31, 2020	—			—
Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 119,960 and 113,990 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively	12			11
Class B common stock, par value $0.0001 per share; 120,000 shares authorized; 8,128 and 8,648 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively	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



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


•	our future financial performance, including our revenue, costs of revenue, gross profits, margins and operating expenses;


•	the impact of the global coronavirus pandemic on our business and operations;


•	the sufficiency of our cash and cash equivalents, investments and cash provided by sales of our products and services to meet our liquidity needs;


•	market or other opportunities arising from business combinations; and


•	the impact of recent accounting pronouncements on our financial statements.



	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	39,501			27,917			76,658			52,457
Professional services and other	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	53,866			40,045			102,360			74,077
Sales and marketing	98,322			78,385			202,365			160,497
General and administrative	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



	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

Supplementary cash flow disclosure:
Cash paid during the period for:
Interest	$	841		$	431
Income taxes	393			654
Non-cash investing and financing activities:
Issuance of common stock for repurchases of convertible senior notes	260,368			—
Vesting of early exercised common stock options	—			370
Common stock issued as charitable contribution	2,417			652
Operating lease right-of-use assets exchanged for lease liabilities	41,388			1,665
Property and equipment acquired through tenant improvement allowance	3,852			—
Issuance of common stock for bonus settlement	9,818			2,809
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	957,234		$	206,753
Restricted cash, current included in prepaid expenses and other current assets	2,217			307
Restricted cash, noncurrent included in other assets	11,693			11,438
Total cash, cash equivalents and restricted cash	$	971,144		$	218,498



	As of July 31, 2020
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(unaudited)
Cash equivalents:
Money market funds	$	857,921	$	—	$	—		$	857,921
Total cash equivalents	857,921		—		—			857,921
Short-term investments:
U.S. treasury securities	1,142,143		3,376		(39		)	1,145,480
Corporate debt securities	410,369		1,484		(54		)	411,799
Total short-term investments	1,552,512		4,860		(93		)	1,557,279
Total	$	2,410,433	$	4,860	$	(93	)	$	2,415,200


•	trends in our key business metrics;


⁽¹⁾	Before unamortized debt issuance costs.



	As of July 31, 2020
	(unaudited)
	Gross		Accumulated Amortization			Write-offs		Net
Capitalized internal-use software costs	$	27,837	$	(17,138	)	$	—	$	10,699
Purchased developed technology	28,800		(9,508		)	—		19,292
Software licenses	1,112		(1,072		)	—		40
	$	57,749	$	(27,718	)	$	—	$	30,031



	As of January 31, 2020
	Gross		Accumulated Amortization			Write-offs			Net
Capitalized internal-use software costs	$	24,890	$	(14,828	)	$	(119	)	$	9,943
Purchased developed technology	28,800		(6,321		)	—			22,479
Software licenses	1,112		(1,005		)	—			107
	$	54,802	$	(22,154	)	$	(119	)	$	32,529



	As of July 31, 2020
	Level 1		Level 2		Level 3		Total
	(unaudited)
Assets:
Cash equivalents:
Money market funds	$	857,921	$	—	$	—	$	857,921
Total cash equivalents	857,921		—		—		857,921
Short-term investments:
U.S. treasury securities	—		1,145,480		—		1,145,480
Corporate debt securities	—		411,799		—		411,799
Total short-term investments	—		1,557,279		—		1,557,279
Total cash equivalents and short-term investments	$	857,921	$	1,557,279	$	—	$	2,415,200



	As of July 31, 2020
	Net Carrying Amount ⁽¹⁾		Estimated Fair Value
	(unaudited)
2023 convertible senior notes	$	44,242	$	219,886
2025 convertible senior notes	$	868,327	$	1,417,220
2026 convertible senior notes	$	845,491	$	1,341,487


•	during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day; or


•	upon the occurrence of specified corporate events, as described in the 2023 Indenture.



	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020		2019
	(unaudited)
Contractual interest expense	$	52	$	215	$	127	$	431
Amortization of debt issuance costs	90		329		217		648
Amortization of debt discount	958		3,759		2,328		7,465
Total	$	1,100	$	4,303	$	2,672	$	8,544



	As of July 31, 2020
	(unaudited)
Liability component:
Principal	$	50,665
Less: unamortized debt issuance costs and debt discount	(7,087		)
Net carrying amount	$	43,578

	As of July 31, 2020
	(unaudited)
Equity component:
2023 Notes	$	11,743
Less: issuance costs	(341		)
Carrying amount of the equity component⁽¹⁾	$	11,402


•	if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or



	Three Months Ended		Six Months Ended
	July 31, 2020
	(unaudited)
Contractual interest expense	$	331	$	662
Amortization of debt issuance costs	518		1,024
Amortization of debt discount	8,440		16,794
Total	$	9,289	$	18,480



	Three and Six Months Ended
	July 31, 2020
	(unaudited)
Contractual interest expense	$	575
Amortization of debt issuance costs	165
Amortization of debt discount	5,802
Total	$	6,542



	Operating Leases
	(unaudited)
2021	$	12,971
2022	35,972
2023	36,596
2024	37,461
2025	35,415
Thereafter	99,891
Total lease payments	258,306
Less imputed interest	(49,616		)
Total operating lease liabilities	$	208,690



	As of
	July 31, 2020
	(unaudited)
Stock options and unvested RSUs outstanding	15,180,332
Available for future stock option and RSU grants	20,798,312
Available for ESPP	4,752,501
	40,731,145



	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 31, 2020	12,359,302		$	11.82	6.2	$	1,436,487
Granted	399,936		144.58
Exercised	(2,705,093	)	10.17
Canceled	(135,864	)	19.68
Outstanding as of July 31, 2020 (unaudited)	9,918,281		$	17.52	6.0	$	2,017,986
As of July 31, 2020
Vested and exercisable (unaudited)	7,606,991		$	9.43	5.6	$	1,609,285



	Number of RSUs		Weighted- Average Grant Date Fair Value Per Share
Outstanding as of January 31, 2020	4,893,241		$	77.99
Granted	1,779,276		159.92
Vested	(1,156,701	)	78.72
Forfeited	(253,765	)	79.89
Outstanding as of July 31, 2020 (unaudited)	5,262,051		$	105.44



	As of July 31,
	2020	2019
	(unaudited)
Issued and outstanding stock options	9,918	14,587
Unvested RSUs issued and outstanding	5,262	5,401
Unvested restricted stock awards issued and outstanding	—	177
Unvested shares subject to repurchase	1	14
Shares committed under the ESPP	141	215
Shares related to the 2023 Notes	1,048	7,134
Shares subject to warrants related to the issuance of the 2023 Notes	1,048	7,134
Shares related to the 2025 Notes	5,617	—
Shares related to the 2026 Notes	4,820	—
	27,855	34,662


⁽¹⁾	Includes stock-based compensation expense as follows:


⁽¹⁾	We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental costs incurred.



Exhibit Number	Exhibit Description	Incorporated by Reference from Form
4.1	Indenture, dated as of June 12, 2020, between Okta, Inc., and Wilmington Trust, National Association, as trustee.	Exhibit 4.1 to Form 8-K filed June 15, 2020
4.2	Form of 0.375% Convertible Senior Notes due 2026 (included in Exhibit 4.1).	Exhibit 4.2 to Form 8-K filed June 15, 2020
10.1	Form of Capped Call Transaction Confirmation.	Exhibit 10.1 to Form 8-K filed June 15, 2020
31.1	Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1*	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its IBRL tags are embedded within the Inline XBRL document.	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)	Filed herewith



	Okta, Inc.


August 27, 2020		/s/	William E. Losch
			William E. Losch
			Chief Financial Officer
			(Principal Financial Officer)