Okta, Inc 10-K for FY2022

Okta, Inc. (OKTA)

10-K 2022-03-07 For: 2022-01-31

Added on April 12, 2026

About this 10-K

Okta, Inc filed this 10-K on March 7, 2022, covering the fiscal year ended January 31, 2022 (FY2022).

Headline figures

Fiscal year ended January 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.3B; up 55.6% from $835.42M a year earlier
Net loss: $848.41M; compared with a net loss of $266.33M a year earlier
Diluted EPS: -$5.73; compared with -$2.09 a year earlier

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		Page
Part I
Item 1.	Business	5
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	49
Item 2.	Properties	49
Item 3.	Legal Proceedings	49
Item 4.	Mine Safety Disclosures	49
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	50
Item 6.	Removed and Reserved
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	71
Item 8.	Financial Statements and Supplementary Data	73
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	119
Item 9A.	Controls and Procedures	119
Item 9B.	Other Information	120
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	121
Item 11.	Executive Compensation	121
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
Item 13.	Certain Relationships and Related Transactions, and Director Independence	121
Item 14.	Principal Accountant Fees and Services	121
Part IV
Item 15.	Exhibits, Financial Statement Schedules	121
Item 16.	Form 10-K Summary	121


Company/Index	Base period 4/7/2017		1/31/2018		1/31/2019		1/31/2020		1/31/2021		1/31/2022
Okta	$	100.00	$	125.27	$	350.62	$	544.66	$	1,101.70	$	841.73
S&P 500 Index	100.00		119.88		114.80		136.93		157.68		191.70
S&P 500 Information Technology Index	100.00		132.07		129.11		185.80		251.86		315.66


	As of January 31,
	2022			2021			2020
	(dollars in thousands)
Customers with annual contract value ("ACV") above $100,000	3,100			1,950			1,467
Dollar-based net retention rate for the trailing 12 months ended	124		%	121		%	119		%
Current remaining performance obligations	$	1,350,534		$	841,797		$	592,309
Remaining performance obligations	$	2,694,262		$	1,796,949		$	1,209,659


	Year Ended January 31,
	2022		2021		2020
	(in thousands)
Calculated billings	$	1,718,289	$	975,994	$	703,558


	Year Ended January 31,
	2022		2021		2020
	(in thousands)
Revenue
Subscription	$	1,249,210	$	796,613	$	552,688
Professional services and other	50,991		38,811		33,379
Total revenue	1,300,201		835,424		586,067
Cost of revenue
Subscription(1)	329,131		170,095		116,445
Professional services and other(1)	67,274		47,586		42,937
Total cost of revenue	396,405		217,681		159,382
Gross profit	903,796		617,743		426,685
Operating expenses
Research and development(1)	469,259		222,826		159,269
Sales and marketing(1)	770,326		427,350		340,356
General and administrative(1)	431,314		171,726		112,892
Total operating expenses	1,670,899		821,902		612,517
Operating loss	(767,103)		(204,159)		(185,832)
Interest expense	(92,182)		(72,660)		(27,017)
Interest income and other, net	9,768		12,891		17,089
Loss on early extinguishment and conversion of debt	(179)		(2,263)		(14,572)
Interest and other, net	(82,593)		(62,032)		(24,500)
Loss before provision for (benefit from) income taxes	(849,696)		(266,191)		(210,332)
Provision for (benefit from) income taxes	(1,285)		141		(1,419)
Net loss	$	(848,411)	$	(266,332)	$	(208,913)


☒			ANNUAL 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


			Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)			74
Consolidated Balance Sheets			79
Consolidated Statements of Operations			80
Consolidated Statements of Comprehensive Loss			81
Consolidated Statements of Stockholders’ Equity (Deficit)			82
Consolidated Statements of Cash Flows			84
Notes to Consolidated Financial Statements			86


						Revenue recognition – Identifying and evaluating terms and conditions in contracts
Description of the Matter						As explained in Note 2 to the consolidated financial statements, the Company derives revenue from subscription fees and professional services fees. The Company’s arrangements are generally non-cancelable and non-refundable. In addition, the arrangements do not provide customers with the right to take possession of the software and, as a result, are accounted for as service arrangements. Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancelable contractual term of the arrangement, generally beginning on the date that the Company’s service is made available to the customer. Revenue for the Company’s professional services is recognized as services are performed in proportion to their pattern of transfer. Auditing the Company’s accounting for revenue recognition was challenging, specifically related to the appropriate identification and evaluation of non-standard terms and conditions. For example, certain non-standard terms and conditions required judgment to identify the distinct performance obligations and determine the timing of revenue recognition.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over the identification and evaluation of terms and conditions in contracts that impact revenue recognition, including the identification of performance obligations and the determination of the timing of revenue recognition. This included testing relevant controls over the information systems that are used in the initiation, billing and recording of revenue transactions. Among other procedures, on a sample basis, we tested the completeness and accuracy of management’s identification and evaluation of the non-standard terms and conditions in contracts. We also tested amounts recognized pursuant to contractual terms and conditions by examining the relationship between revenue recognized and accounts receivable and related cash collections. Further, we selected a sample of contractual arrangements to test that management had properly assessed the impact of any non-standard terms on the identified performance obligations and timing of revenue recognition. Additionally, to verify completeness of non-standard terms and conditions, we obtained confirmations of terms and conditions for a sample of arrangements with customers.


						Acquisition of Auth0 – Fair value of technology and customer-related intangible assets
Description of the Matter						As explained in Note 3 to the consolidated financial statements, the Company completed the acquisition of Auth0, a privately-held, Identity-as-a-Service company during fiscal 2022 for total consideration of $5.7 billion, which was accounted for as a business combination. Auditing the Company's accounting for its acquisition of Auth0 was complex due to the significant estimation required in determining the fair value of developed technology and customer relationship intangible assets, which were valued and recorded at $172.0 million and $140.9 million, respectively. The Company used discounted cash flow models to determine the value of developed technology and customer relationship intangible assets. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation model and the sensitivity of the fair value to certain significant underlying assumptions, in particular, the projections of future revenue, including the impact of obsolescence curves for developed technology assets, expected customer attrition rates and anticipated growth in revenue from acquired customers.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for acquisitions, such as controls over the recognition and measurement of developed technology and customer relationships intangible assets, including the valuation model and underlying assumptions used to develop such estimates. To test the estimated fair value of the developed technology and customer relationship intangible assets, our audit procedures included, among others, involvement of our valuation specialists to assist us in the evaluation of the valuation methodology used by the Company and procedures to test the assumptions used in the valuation, including the completeness and accuracy of the underlying data. We compared the revenue forecast assumptions, including the impact of technology obsolescence curves, expected customer attrition rates and anticipated growth in revenue from acquired customers, to current industry, market and economic trends, and to historical results of the acquired business and the Company.


	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
		Shares	Amount		Shares									Amount







































Balances as of January 31, 2019		101,093,322	10		11,059,181	1		744,896		(319)		(492,211)			252,377
Issuance of common stock upon exercise of stock options and other activity, net		5,323,410	1		100,007	—		45,731		—		—			45,732
Issuance of common stock under employee stock purchase plan		322,795	—		—	—		18,767		—		—			18,767
Issuance of common stock for settlement of RSUs		1,716,222	—		—	—		—		—		—			—
Issuance of common stock for bonus settlement		34,600	—		—	—		2,809		—		—			2,809
Issuance of common stock pursuant to charitable donation		15,000	—		—	—		1,746		—		—			1,746
Conversion of Class B common stock to Class A common stock		2,511,409	—		(2,511,409)	—		—		—		—			—
Equity component of convertible senior notes, net of issuance costs		—	—		—	—		217,347		—		—			217,347
Equity component of early extinguishment of convertible senior notes		2,973,311	—		—	—		(26,713)		—		—			(26,713)
Proceeds from hedges related to convertible senior notes		—	—		—	—		405,851		—		—			405,851
Payments for warrants related to convertible senior notes		—	—		—	—		(358,622)		—		—			(358,622)
Purchases of capped calls related to convertible senior notes		—	—		—	—		(74,094)		—		—			(74,094)
Stock-based compensation		—	—		—	—		127,846		—		—			127,846
Other comprehensive income		—	—		—	—		—		1,211		—			1,211
Net loss		—	—		—	—		—		—		(208,913)			(208,913)
Balances as of January 31, 2020		113,990,069	$	11	8,647,779	$	1	$	1,105,564	$	892	$	(701,124)		$	405,344


			Useful lives
Capitalized internal-use software costs			3 years
Computers and equipment			3 years
Furniture and fixtures			7 years
Leasehold improvements			Shorter of estimated useful life or remaining lease term



	Estimated Fair Value

Cash	$	257,010
Common stock issued	5,175,623
Fair value of outstanding employee equity awards assumed	238,389
Total consideration	$	5,671,022



	Estimated Fair Value

Cash and cash equivalents	$	107,425
Accounts receivable	28,572
Prepaid expenses and other current assets	12,748
Property and equipment, net	1,928
Operating lease right-of-use assets	6,873
Other assets	5,201
Intangible assets	334,300
Accounts payable	(3,610)
Accrued expenses and other current liabilities	(10,946)
Accrued compensation	(19,187)
Deferred revenue	(65,339)
Operating lease liabilities, noncurrent	(5,694)
Other liabilities, noncurrent	(11,341)
Net assets acquired	$	380,930



	Preliminary Estimated Useful Life (in years)	Amount

Developed technology	5 years	$	172,000
Customer relationships	2 - 6 years	140,900
Trade name	5 years	21,400
Total identifiable intangible assets		$	334,300


	Year Ended January 31,
	2022			2021			2020
	(dollars in thousands)
Operating loss	$	(767,103)		$	(204,159)		$	(185,832)
Add:
Stock-based compensation expense	565,480			196,181			126,624
Non-cash charitable contributions	7,238			9,292			1,746
Amortization of acquired intangibles	64,000			6,373			5,488

Acquisition and integration-related expenses(1)	56,667			—			3,449
Non-GAAP operating income (loss)	$	(73,718)		$	7,687		$	(48,525)
Operating margin	(59)		%	(24)		%	(32)		%
Non-GAAP operating margin	(6)		%	1		%	(8)		%


	Year Ended January 31,
	2022			2021			2020
	(dollars in thousands)
Net loss	$	(848,411)		$	(266,332)		$	(208,913)
Add:
Stock-based compensation expense	565,480			196,181			126,624
Non-cash charitable contributions	7,238			9,292			1,746
Amortization of acquired intangibles	64,000			6,373			5,488
Acquisition and integration-related expenses(1)	56,667			—			3,449
Amortization of debt discount and debt issuance costs	86,461			68,424			25,892
Loss on early extinguishment and conversion of debt	179			2,263			14,572
Non-GAAP net income (loss)	$	(68,386)		$	16,201		$	(31,142)
Net margin	(65)		%	(32)		%	(36)		%
Non-GAAP net margin	(5)		%	2		%	(5)		%

Weighted-average shares used to compute net loss per share, basic and diluted	148,036			127,212			117,221
Non-GAAP weighted-average effect of potentially dilutive securities	—			15,171			—
Non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, diluted	148,036			142,383			117,221

Net loss per share, basic and diluted	$	(5.73)		$	(2.09)		$	(1.78)
Non-GAAP net income (loss) per share, basic	$	(0.46)		$	0.13		$	(0.27)
Non-GAAP net income (loss) per share, diluted	$	(0.46)		$	0.11		$	(0.27)


	Year Ended January 31,
	2022			2021			2020
	(in thousands)
Net cash provided by operating activities	$	104,119		$	127,962		$	55,603
Less:
Purchases of property and equipment	(12,310)			(13,083)			(15,442)
Capitalization of internal-use software costs	(4,336)			(4,159)			(3,888)

Free cash flow	$	87,473		$	110,720		$	36,273
Net cash used in investing activities	$	(366,812)		$	(1,305,146)		$	(688,041)
Net cash provided by financing activities	$	89,066		$	1,091,598		$	853,385
Free cash flow margin	7		%	13		%	6		%


	Year Ended January 31,
	2022		2021		2020
	(in thousands)
Total revenue	$	1,300,201	$	835,424	$	586,067
Add:
Deferred revenue (end of period)	996,222		513,598		371,450
Unbilled receivables (beginning of period)	2,604		1,026		1,457
Acquired unbilled receivables	2,327		—		—
Less:
Deferred revenue (beginning of period)	(513,598)		(371,450)		(254,390)
Unbilled receivables (end of period)	(3,228)		(2,604)		(1,026)
Acquired deferred revenue	(66,239)		—		—
Calculated billings	$	1,718,289	$	975,994	$	703,558


	For the period
	May 3, 2021 to January 31, 2022

Revenue	$	139,679
Net loss	(385,302)


		Pro Forma Consolidated Statement of Operations Data
	Year Ended January 31,
		2022		2021

Revenue		$	1,349,779	$	944,782
Net loss		(846,694)		(690,482)


	As of January 31, 2022
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash equivalents:
Money market funds	$	152,223	$	—	$	—	$	152,223



Total cash equivalents	152,223		—		—		152,223
Short-term investments:


U.S. treasury securities	1,922,344		10		(10,166)		1,912,188
Corporate debt securities	331,050		—		(1,581)		329,469
Total short-term investments	2,253,394		10		(11,747)		2,241,657
Total	$	2,405,617	$	10	$	(11,747)	$	2,393,880


	As of January 31, 2021
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash equivalents:
Money market funds	$	311,257	$	—	$	—	$	311,257

Total cash equivalents	311,257		—		—		311,257
Short-term investments:


U.S. treasury securities	1,888,882		1,571		(22)		1,890,431
Corporate debt securities	230,726		429		(2)		231,153
Total short-term investments	2,119,608		2,000		(24)		2,121,584
Total	$	2,430,865	$	2,000	$	(24)	$	2,432,841


	Less Than 12 Months		More Than 12 Months		Total
	Estimated Fair Value	Unrealized Losses	Estimated Fair Value	Unrealized Losses	Estimated Fair Value	Unrealized Losses
U.S. treasury securities	1,801,985	(10,166)	—	—	1,801,985	(10,166)
Corporate debt securities	319,767	(1,581)	—	—	319,767	(1,581)
Total	2,121,752	(11,747)	—	—	2,121,752	(11,747)


	As of January 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	152,223	$	—	$	—	$	152,223



Total cash equivalents	152,223		—		—		152,223
Short-term investments:


U.S. treasury securities	—		1,912,188		—		1,912,188
Corporate debt securities	—		329,469		—		329,469
Total short-term investments	—		2,241,657		—		2,241,657
Total cash equivalents and short-term investments	$	152,223	$	2,241,657	$	—	$	2,393,880


	As of January 31, 2022
	Net Carrying Amount(1)		Estimated Fair Value
2023 convertible senior notes	$	16,295	$	68,698
2025 convertible senior notes	$	920,799	$	1,323,406
2026 convertible senior notes	$	913,875	$	1,270,394


	As of January 31, 2022
	Gross		Accumulated Amortization		Net

Capitalized internal-use software costs	$	36,319	$	(24,170)	$	12,149
Purchased developed technology	219,100		(47,085)		172,015
Customer relationships	140,900		(26,399)		114,501
Trade name	21,400		(3,210)		18,190
Software licenses	116		(3)		113
	$	417,835	$	(100,867)	$	316,968



	Remaining Amortization
2023	$	90,221
2024	79,865
2025	67,183
2026	59,528
2027	18,788
Thereafter	1,383
Total	$	316,968


	As of January 31, 2022
Liability component:
Principal	$	17,228
Less: unamortized debt issuance costs and debt discount	(1,034)
Net carrying amount	$	16,194

Equity component:
2023 Notes	$	3,993
Less: issuance costs	(116)
Carrying amount of the equity component(1)	$	3,877


	As of January 31, 2022
2023	39,499
2024	43,535
2025	40,582
2026	30,493
2027	29,607
Thereafter	53,502
Total lease payments	237,218
Less imputed interest	(37,633)
Less tenant improvement allowances not yet incurred	(2,454)
Total operating lease liabilities	$	197,131


	Purchase Obligations
2023	58,805
2024	53,657
2025	12,434
2026	1,755
2027	—
Thereafter	—
Total contractual obligations	$	126,651


			As of January 31, 2022
Options and unvested RSUs outstanding			14,209,825
Available for future stock option and RSU grants			23,133,719
Available for ESPP			5,757,220
			43,100,764


	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
















Outstanding as of January 31, 2021	8,250,113	$	18.93	5.6	$	1,980,668
Granted	2,565,055	93.95
Exercised	(2,578,074)	21.02
Canceled	(253,016)	106.41
Outstanding as of January 31, 2022	7,984,078	$	39.59	5.2	$	1,314,031
As of January 31, 2022
Vested and expected to vest	7,984,078	$	39.59	5.2	$	1,314,031
Vested and exercisable	6,467,950	$	13.29	4.5	$	1,194,987


	Number of RSUs	Weighted- Average Grant Date Fair Value Per Share
Outstanding as of January 31, 2021	4,452,107	$	122.90
Granted	5,110,925	236.57
Vested	(2,294,380)	125.75
Forfeited	(1,042,905)	170.23
Outstanding as of January 31, 2022	6,225,747	$	207.26


						OKTA, INC.

March 7, 2022						/s/ Brett Tighe
						Brett Tighe Chief Financial Officer

March 7, 2022						/s/ Christopher K. Kramer
						Christopher K. Kramer Chief Accounting Officer


/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)


/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)