Document
false0001660134 0001660134 2020-03-05 2020-03-05


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)
March 5, 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 March 5, 2020, Okta, Inc. issued a press release announcing its financial results for the fiscal quarter and year ended January 31, 2020.

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

Item 7.01 - Regulation FD Disclosures
On March 5, 2020, Okta, Inc. 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
99.1
 
 
 
 




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 5th day of March 2020.
 
 
 
 
 
 
Okta, Inc.
 
 
 
 
By:
/s/ William E. Losch
 
Name:
William E. Losch
 
Title:
Chief Financial Officer
 
 
 






Okta Announces Strong Fourth Quarter and Fiscal 2020 Financial Results
•
Q4 revenue grew 45% year-over-year; subscription revenue grew 46% year-over-year
•
Remaining performance obligations, or subscription revenue backlog, grew 66% year-over-year
•
Achieved positive operating and free cash flows for fiscal 2020

SAN FRANCISCO – March 5, 2020 – Okta, Inc. (NASDAQ: OKTA), the leading independent provider of identity for the enterprise, today announced financial results for its fourth quarter and fiscal year ended January 31, 2020.

"Our strong fourth quarter performance caps another fantastic year of growth and expansion," said Todd McKinnon, Chief Executive Officer and co-founder of Okta. "We continue to post industry leading growth for subscription revenue, remaining performance obligations, and billings, while achieving positive operating and free cash flows for the year. Our unparalleled cloud-based platform and continued execution is allowing us to achieve this exceptional growth at scale. We’re still in the early days of a massive addressable market to modernize identity for the workforce and customers and we are in the leading position to capitalize on the opportunity for many years to come."

Fourth Quarter Fiscal 2020 Financial Highlights:
•
Revenue: Total revenue was $167.3 million, an increase of 45% year-over-year. Subscription revenue was $158.5 million, an increase of 46% year-over-year.
•
Remaining Performance Obligations (RPO): RPO was $1.21 billion, an increase of 66% year-over-year. Current RPO, which is subscription revenue expected to be recognized over the next 12 months, was $592.3 million, up 54% compared to the fourth quarter of fiscal 2019.
•
Calculated Billings: Total calculated billings were $225.0 million, an increase of 42% year-over-year.
•
Operating Loss: GAAP operating loss was $44.7 million, or 26.7% of total revenue, compared to $27.7 million, or 24.0% of total revenue, in the fourth quarter of fiscal 2019. Non-GAAP operating loss was $5.6 million, or 3.3% of total revenue, compared to $4.9 million, or 4.3% of total revenue, in the fourth quarter of fiscal 2019.
•
Net Loss: GAAP net loss was $50.5 million, compared to $30.8 million in the fourth quarter of fiscal 2019. GAAP net loss per share was $0.42, compared to $0.28 in the fourth quarter of fiscal 2019. Non-GAAP net loss was $1.7 million, compared to $4.4 million in the fourth quarter of fiscal 2019. Non-GAAP net loss per share was $0.01, compared to $0.04 in the fourth quarter of fiscal 2019.
•
Cash Flow: Net cash provided by operations was $24.8 million, or 14.8% of total revenue, compared to net cash provided by operations of $10.1 million, or 8.8% of total revenue, in the fourth quarter of fiscal 2019. Free cash flow was $18.1 million, or 10.8% of total revenue, compared to $4.8 million, or 4.1% of total revenue, in the fourth quarter of fiscal 2019.
•
Cash, cash equivalents, and short-term investments were $1.40 billion.


1


Full Year Fiscal 2020 Financial Highlights:
•
    Revenue: Total revenue was $586.1 million, an increase of 47% year-over-year. Subscription revenue was $552.7 million, an increase of 49% year-over-year.
•
Calculated Billings: Total calculated billings were $703.6 million, an increase of 44% year-over-year.
•
Operating Loss: GAAP operating loss was $185.8 million, or 31.7% of total revenue, compared to $119.6 million, or 30.0% of total revenue for fiscal 2019. Non-GAAP operating loss was $48.5 million, or 8.3% of total revenue, compared to $41.5 million, or 10.4% of total revenue for fiscal 2019.
•
Net Loss: GAAP net loss was $208.9 million, compared to $125.5 million for fiscal 2019. GAAP net loss per share was $1.78, compared to $1.17 for fiscal 2019. Non-GAAP net loss was $36.7 million, compared to $34.1 million for fiscal 2019. Non-GAAP net loss per share was $0.31, compared to $0.32 for fiscal 2019.
•
Cash Flow: Net cash provided by operations was $55.6 million, or 9.5% of total revenue, compared to net cash provided by operations of $15.2 million, or 3.8% of total revenue for fiscal 2019. Free cash flow was $36.3 million, or 6.2% of total revenue, compared to negative $6.8 million, or 1.7% of total revenue for fiscal 2019.

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:
For the first quarter of fiscal 2021, the Company expects:
•
Total revenue of $171 million to $173 million, representing a growth rate of 37% to 38% year-over-year
•
Non-GAAP operating loss of $33.2 million to $32.2 million
•
Non-GAAP net loss per share of $0.24 to $0.23, assuming weighted shares outstanding of approximately 123 million

For the full year fiscal 2021, the Company expects:
•
Total revenue of $770 million to $780 million, representing a growth rate of 31% to 33% year-over-year
•
Non-GAAP operating loss of $65.0 million to $57.0 million
•
Non-GAAP net loss per share of $0.42 to $0.37, assuming weighted shares outstanding of approximately 125 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 conference call and live webcast for analysts and investors at 2:00 p.m. Pacific Time on March 5, 2020. The news release with the financial results will be accessible from the Company’s website at investor.okta.com prior to the conference call. Interested parties can access the call by dialing (800) 458-4121 or (323) 794-2093 and using the passcode 4522098.
A live 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 loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net margin, non-GAAP net loss per share, free cash flow, current calculated billings and calculated billings. Certain of these non-GAAP financial measures exclude stock-based compensation, amortization of debt discount, charitable contributions, amortization of acquired intangibles, acquisition-related expenses and loss on early extinguishment of debt, net of debt issuance costs.
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

3


regarding our financial outlook, product development, 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 operating results 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; 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 7,950 organizations, including 20th Century Fox, JetBlue, Nordstrom, Slack, Teach for America and Twilio, trust Okta to help protect the identities of their workforces and customers.
Okta 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.

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

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

4


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Revenue:
 
 
 
 
 
 
 
Subscription
$
158,514

 
$
108,462

 
$
552,688

 
$
370,855

Professional services and other
8,813

 
7,009

 
33,379

 
28,399

Total revenue
167,327

 
115,471

 
586,067

 
399,254

Cost of revenue:
 
 
 
 
 
 
 
Subscription(1)
33,864

 
21,546

 
116,445

 
77,354

Professional services and other(1)
10,819

 
9,840

 
42,937

 
36,067

Total cost of revenue
44,683

 
31,386

 
159,382

 
113,421

Gross profit
122,644

 
84,085

 
426,685

 
285,833

Operating expenses:
 

 
 

 
 
 
 
Research and development(1)
43,360

 
30,031

 
159,269

 
102,385

Sales and marketing(1)
92,635

 
62,552

 
340,356

 
227,960

General and administrative(1)
31,352

 
19,237

 
112,892

 
75,110

Total operating expenses
167,347

 
111,820

 
612,517

 
405,455

Operating loss
(44,703
)
 
(27,735
)
 
(185,832
)
 
(119,622
)
Interest expense
(10,646
)
 
(4,179
)
 
(27,017
)
 
(15,072
)
Interest income and other, net
5,743

 
2,969

 
17,089

 
9,180

Loss on early extinguishment of debt
—

 
—

 
(14,572
)
 
—

Interest expense and other, net
(4,903
)
 
(1,210
)
 
(24,500
)
 
(5,892
)
Loss before provision for (benefit from) income taxes
(49,606
)
 
(28,945
)
 
(210,332
)
 
(125,514
)
Provision for (benefit from) income taxes
866

 
1,866

 
(1,419
)
 
(17
)
Net loss
$
(50,472
)
 
$
(30,811
)
 
$
(208,913
)
 
$
(125,497
)
 
 

 
 

 
 
 
 
Net loss per share, basic and diluted
$
(0.42
)
 
$
(0.28
)
 
$
(1.78
)
 
$
(1.17
)
 
 

 
 

 
 
 
 
Weighted-average shares used to compute net loss per share, basic and diluted
121,562

 
110,223

 
117,221

 
107,504


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

 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Cost of subscription revenue
$
3,786

 
$
2,024

 
$
12,923

 
$
7,837

Cost of professional services and other revenue
1,872

 
1,706

 
7,164

 
4,983

Research and development
11,361

 
6,866

 
37,683

 
22,642

Sales and marketing
11,118

 
7,064

 
38,077

 
22,916

General and administrative
8,793

 
4,761

 
30,777

 
17,942

Total share-based compensation expense
$
36,930

 
$
22,421

 
$
126,624

 
$
76,320


5


OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 
 
As of January 31,
 
 
2020
 
2019
 
 
 
 
As Adjusted(1)
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
520,048

 
$
298,394

Short-term investments
 
882,976

 
265,374

Accounts receivable, net of allowances
 
130,115

 
91,926

Deferred commissions
 
33,636

 
24,185

Prepaid expenses and other current assets
 
32,950

 
28,237

Total current assets
 
1,599,725

 
708,116

Property and equipment, net
 
53,535

 
52,921

Operating lease right-of-use assets
 
125,204

 
121,389

Deferred commissions, noncurrent
 
77,874

 
54,812

Intangible assets, net
 
32,529

 
13,897

Goodwill
 
48,023

 
18,089

Other assets
 
18,505

 
15,089

Total assets
 
$
1,955,395

 
$
984,313

Liabilities and stockholders' equity
 
 

 
 
Current liabilities:
 
 

 
 
Accounts payable
 
$
3,837

 
$
2,431

Accrued expenses and other current liabilities
 
36,887

 
33,653

Accrued compensation
 
40,300

 
19,770

2023 Convertible senior notes, net
 
100,703

 
271,628

Deferred revenue
 
365,236

 
245,622

Total current liabilities
 
546,963

 
573,104

2025 Convertible senior notes, net
 
837,002

 
—

Operating lease liabilities, noncurrent
 
154,511

 
147,046

Deferred revenue, noncurrent
 
6,214

 
8,768

Other liabilities, noncurrent
 
5,361

 
3,018

Total liabilities
 
1,550,051

 
731,936

 
 
 

 
 
Stockholders’ equity:
 
 
 
 
Preferred stock
 
—

 
—

Class A common stock
 
11

 
10

Class B common stock
 
1

 
1

Additional paid-in capital
 
1,105,564

 
744,896

Accumulated other comprehensive income (loss)
 
892

 
(319
)
Accumulated deficit
 
(701,124
)
 
(492,211
)
Total stockholders’ equity
 
405,344

 
252,377

Total liabilities and stockholders' equity
 
$
1,955,395

 
$
984,313

(1) The condensed consolidated balance sheet for the prior period has been adjusted to reflect the adoption of ASC 842.

6


OKTA, INC.
SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
Twelve Months Ended January 31,
 
2020
 
2019
 
 
As Adjusted(1)
Cash flows from operating activities:
 
 
 
Net loss
$
(208,913
)
 
$
(125,497
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Stock-based compensation
126,624

 
76,320

Depreciation, amortization and accretion
17,815

 
8,001

Amortization of debt discount and issuance costs
25,892

 
14,279

Amortization of deferred commissions
28,588

 
20,852

Deferred income taxes
(2,253
)
 
(765
)
Non-cash charitable contributions
1,746

 
1,008

Loss on early extinguishment of debt
14,572

 
—

Other, net
(130
)
 
640

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(37,515
)
 
(39,682
)
Deferred commissions
(61,224
)
 
(41,342
)
Prepaid expenses and other assets
(4,080
)
 
(10,334
)
Operating lease right-of-use assets
12,951

 
17,239

Accounts payable
1,689

 
(1,437
)
Accrued compensation
23,034

 
7,429

Accrued expenses and other liabilities
9,972

 
5,800

Operating lease liabilities
(9,716
)
 
(6,642
)
Deferred revenue
116,432

 
89,303

Net cash provided by operating activities
55,603

 
15,172

Cash flows from investing activities:
 
 
 
Capitalization of internal-use software costs
(3,888
)
 
(2,851
)
Purchases of property and equipment
(15,442
)
 
(19,811
)
Proceeds from sales of property and equipment
—

 
740

Purchases of securities available for sale and other
(999,387
)
 
(631,488
)
Proceeds from maturities and redemption of securities available for sale
356,277

 
298,650

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

 
173,072

Purchases of intangible assets
(8,589
)
 
—

Payments for business acquisition, net of cash acquired
(44,283
)
 
(15,632
)
Net cash used in investing activities
(688,041
)
 
(197,320
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of convertible senior notes, net of issuance costs
1,040,660

 
334,980

Payments for repurchases of 2023 convertible senior notes
(224,414
)
 
—

Purchases of hedges related to 2023 convertible senior notes
—

 
(80,040
)
Proceeds from hedges related to 2023 convertible senior notes
405,851

 
—

Proceeds from issuance of warrants related to 2023 convertible senior notes
—

 
52,440

Payments for warrants related to 2023 convertible senior notes
(358,622
)
 
—

Purchases of capped calls related to 2025 convertible senior notes
(74,094
)
 
—

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

 
36,861

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

 
13,727

Other, net
(126
)
 
(206
)
Net cash provided by financing activities
853,385

 
357,762

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash
(209
)
 
(632
)
Net increase in cash, cash equivalents and restricted cash
220,738

 
174,982

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

 
136,233

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

 
$
311,215

(1) 
The condensed consolidated statement of cash flows for the prior period has been adjusted to reflect the adoption of ASC 842.

7


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
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Gross profit
$
122,644

 
$
84,085

 
$
426,685

 
$
285,833

Add:
 
 
 
 
 
 
 
Stock-based compensation expense included in cost of revenue(1)
5,658

 
3,730

 
20,087

 
12,820

Amortization of acquired intangibles
1,593

 
383

 
5,488

 
832

Non-GAAP gross profit
$
129,895

 
$
88,198

 
$
452,260

 
$
299,485

Gross margin
73
%
 
73
%
 
73
%
 
72
%
Non-GAAP gross margin
78
%
 
76
%
 
77
%
 
75
%
(1) See table above for breakdown of stock-based compensation expense by line item.

Non-GAAP Operating Loss and Non-GAAP Operating Margin
We define non-GAAP operating loss and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, charitable contributions, amortization of acquired intangibles and acquisition-related expenses.
 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Operating loss
$
(44,703
)
 
$
(27,735
)
 
$
(185,832
)
 
$
(119,622
)
Add:
 
 
 
 
 
 
 
Stock-based compensation expense(1)
36,930

 
22,421

 
126,624

 
76,320

Charitable contributions
584

 
—

 
1,746

 
1,008

Amortization of acquired intangibles
1,593

 
383

 
5,488

 
832

Acquisition-related expenses(2)
—

 
—

 
3,449

 
—

Non-GAAP operating loss
$
(5,596
)
 
$
(4,931
)
 
$
(48,525
)
 
$
(41,462
)
Operating margin
(27
)%
 
(24
)%
 
(32
)%
 
(30
)%
Non-GAAP operating margin
(3
)%
 
(4
)%
 
(8
)%
 
(10
)%
(1) See table 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.


8




Non-GAAP Net Loss and Non-GAAP Net Margin
We define non-GAAP net loss and non-GAAP net margin as GAAP net loss and GAAP net margin, adjusted for stock-based compensation expense, charitable contributions, amortization of acquired intangibles, acquisition-related expenses, amortization of debt discount and loss on early extinguishment of debt, net of debt issuance costs.
 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Net loss
$
(50,472
)
 
$
(30,811
)
 
$
(208,913
)
 
$
(125,497
)
Add:
 
 
 
 
 
 
 
Stock-based compensation expense(1)
36,930

 
22,421

 
126,624

 
76,320

Charitable contributions
584

 
—

 
1,746

 
1,008

Amortization of acquired intangibles
1,593

 
383

 
5,488

 
832

Acquisition-related expenses(2)
—

 
—

 
3,449

 
—

Amortization of debt discount
9,621

 
3,655

 
24,138

 
13,194

Loss on early extinguishment of debt, net of debt issuance costs
—

 
—

 
10,794

 
—

Non-GAAP net loss
$
(1,744
)
 
$
(4,352
)
 
$
(36,674
)
 
$
(34,143
)
Net margin
(30
)%
 
(27
)%
 
(36
)%
 
(31
)%
Non-GAAP net margin
(1
)%
 
(4
)%
 
(6
)%
 
(9
)%
Net loss per share
$
(0.42
)
 
$
(0.28
)
 
$
(1.78
)
 
$
(1.17
)
Non-GAAP net loss per share
$
(0.01
)
 
$
(0.04
)
 
$
(0.31
)
 
$
(0.32
)
(1) See table in footnote 1 in 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



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.

Free Cash Flow
 
 
 
 
 
 
 
 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Net cash provided by operating activities
$
24,835

 
$
10,104

 
$
55,603

 
$
15,172

Less:
 
 
 
 
 
 
 
Purchases of property and equipment
(5,462
)
 
(5,558
)
 
(15,442
)
 
(19,811
)
Capitalization of internal-use software costs
(1,229
)
 
(522
)
 
(3,888
)
 
(2,851
)
Proceeds from sales of property and equipment
—

 
740

 
—

 
740

Free cash flow
$
18,144

 
$
4,764

 
$
36,273

 
$
(6,750
)
Net cash provided by (used in) investing activities
$
(562,939
)
 
$
80,896

 
$
(688,041
)
 
$
(197,320
)
Net cash provided by financing activities
$
18,654

 
$
15,410

 
$
853,385

 
$
357,762

Free cash flow margin
10.8%

 
4.1%

 
6.2%

 
(1.7)%

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.

Calculated Billings
 
 
 
 
 
 
 
 
Three Months Ended
January 31,
 
Twelve Months Ended
January 31,
 
2020
 
2019
 
2020
 
2019
Total revenue
$
167,327

 
$
115,471

 
$
586,067

 
$
399,254

Add:
 
 
 
 
 
 
 
Unbilled receivables, current (beginning of period)
1,028

 
1,581

 
1,457

 
809

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

 
245,622

 
365,236

 
245,622

Less:
 
 
 
 
 
 
 
Unbilled receivables, current (end of period)
(1,026
)
 
(1,457
)
 
(1,026
)
 
(1,457
)
Deferred revenue, current (beginning of period)
(306,743
)
 
(206,146
)
 
(245,622
)
 
(159,816
)
Current calculated billings
225,822

 
155,071

 
706,112

 
484,412

Add:
 
 
 
 
 
 
 
Deferred revenue, noncurrent (end of period)
6,214

 
8,768

 
6,214

 
8,768

Less:
 
 
 
 
 
 
 
Deferred revenue, noncurrent (beginning of period)
(7,013
)
 
(4,977
)
 
(8,768
)
 
(4,963
)
Calculated billings
$
225,023

 
$
158,862

 
$
703,558

 
$
488,217


10