Okta Announces Record First Quarter Financial Results

Sponsored by Businesswire

Okta, Inc. (NASDAQ: OKTA), the leading independent provider of identity
for the enterprise, today announced financial results for its first
quarter ended April 30, 2019.

“We’re pleased with the strong start to the fiscal year with 52%
year-over-year growth in subscription revenue, which was driven by our
acceleration with enterprise customers. The world’s largest
organizations are increasingly realizing that identity is essential to
their cloud, digital transformation, and security initiatives, which led
to 53% year-over-year growth in Okta customers with over $100,000 in
annual contract value,” said Todd McKinnon, Chief Executive Officer and
co-founder of Okta. “Last month at Oktane19, we announced new products
that further advance our leadership in both workforce and customer
identity. These new innovations, coupled with our existing best-in-class
offerings, position us well to continue executing on our significant and
growing market opportunities.”

First Quarter Fiscal 2020 Financial Highlights:

Revenue: Total revenue was $125.2 million, an increase of 50%
year-over-year. Subscription revenue was $117.2 million, an increase
of 52% year-over-year.
Operating Loss: GAAP operating loss was $51.8 million, or 41.4%
of total revenue, compared to $25.0 million, or 29.9% of total
revenue, in the first quarter of fiscal 2019. Non-GAAP operating loss
was $24.9 million, or 19.9% of total revenue, compared to $10.8
million, or 13.0% of total revenue, in the first quarter of fiscal
2019.
Net Loss: GAAP net loss was $52.0 million, compared to $26.0
million in the first quarter of fiscal 2019. GAAP net loss per share
was $0.46, compared to $0.25 in the first quarter of fiscal 2019.
Non-GAAP net loss was $21.4 million, compared to $9.4 million in the
first quarter of fiscal 2019. Non-GAAP net loss per share was $0.19,
compared to $0.09 in the first quarter of fiscal 2019.
Cash Flow: Net cash provided by operations was $21.3 million,
or 17.0% of total revenue, compared to net cash provided by operations
of $4.0 million, or 4.8% of total revenue, in the first quarter of
fiscal 2019. Free cash flow was positive $13.2 million, or 10.5% of
total revenue, compared to negative $1.6 million, or negative 1.9% of
total revenue, in the first quarter of fiscal 2019.
Cash, cash equivalents and short-term investments were $547.5
million as of April 30, 2019.

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

Financial Outlook:

For the second quarter of fiscal 2020, the Company currently expects:

Total revenue of $130 to $131 million, representing a growth rate of
37% to 38% year-over-year
Non-GAAP operating loss of $14.9 to $13.9 million
Non-GAAP net loss per share of $0.11 to $0.10, assuming shares
outstanding of approximately 115 million

For the full year fiscal 2020, the Company expects:

Total revenue of $543 to $548 million, representing a growth rate of
36% to 37% year-over-year
Non-GAAP operating loss of $67.0 to $62.0 million
Non-GAAP net loss per share of $0.49 to $0.45, assuming shares
outstanding of approximately 116 million

These statements are forward-looking and actual results may differ
materially. Refer to the Forward-Looking Statements safe harbor below
for information on the factors that could cause our actual results to
differ materially from these forward-looking statements.

Okta has not reconciled its expectations as to non-GAAP operating loss
and non-GAAP net loss per share to their most directly comparable GAAP
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.

Conference Call Information:

Okta will host a conference call and live webcast for analysts and
investors at 2:00 p.m. Pacific Time on May 30, 2019. 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 (888) 882-4478 or (323) 794-2590 and using the passcode 4237586.

A live webcast of the conference call will be accessible from the Okta
investor relations website at investor.okta.com.
A telephonic replay of the conference call will be available through
June 13, 2019 and may be accessed by dialing (888) 203-1112 or (719)
457-0820 and using the passcode 4237586.

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 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 intangible assets
and acquisition-related expenses.

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 and income 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 and income 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.

Please see the reconciliation tables at the end of this release for the
reconciliation of GAAP and non-GAAP results.

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 and market positioning. These
forward-looking statements are made as of the date they were first
issued and were based on current expectations, estimates, forecasts and
projections as well as the beliefs and assumptions of management. 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 or the
negative of these terms and similar expressions are intended to identify
these forward-looking statements. Forward-looking statements are subject
to a number of risks and uncertainties, many of which involve factors or
circumstances that are beyond Okta’s control. Okta’s actual results
could differ materially from those stated or implied in forward-looking
statements due to a number of factors, including but not limited to,
risks detailed in the Company’s filings and reports with the Securities
and Exchange Commission (SEC), including our Form 10-K for the fiscal
year ended January 31, 2019, as well as other filings and reports that
may be filed by the Company from time to time with the SEC. In
particular, the following factors, among others, could cause results to
differ materially from those expressed or implied by such
forward-looking statements: the market for our products may develop more
slowly than expected or than it has in the past; quarterly and annual
operating results may fluctuate more than expected; variations related
to our revenue recognition may cause significant fluctuations in our
results of operations and cash flows; assertions by third parties that
we violate their intellectual property rights could substantially harm
our business; any unreleased products, features or functionality
referenced in this or other presentations, press releases or public
statements are not currently available and may not be delivered on time
or at all; a network or data security incident that allows unauthorized
access to our network or data or our customers’ data could harm our
reputation, create additional liability and adversely impact our
financial results; the risk of interruptions or performance problems,
including a service outage, associated with our technology; intense
competition in our market; weakened global economic conditions may
adversely affect our industry; the risk of losing key employees; changes
in foreign exchange rates; general political or destabilizing events,
including war, conflict or acts of terrorism; our ability to
successfully identify and integrate acquisitions, strategic investments,
partnerships or alliances; our ability to pay off our convertible senior
notes when due; and other risks and uncertainties. Past performance is
not necessarily indicative of future results. The forward-looking
statements included in this press release represent Okta’s views as of
the date of this press release. The Company anticipates that subsequent
events and developments will cause its views to change. Okta undertakes
no intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. These forward-looking statements should not be relied upon as
representing Okta’s views as of any date subsequent to the date of this
press release.

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
6,000 pre-built integrations to applications and infrastructure
providers, Okta customers can easily and securely use the best
technologies for their business. Over 6,550 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, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited)

	Three Months Ended April 30,
	2019			2018

Revenue:
Subscription	$	117,163		$	76,841
Professional services and other		8,060			6,780
Total revenue		125,223			83,621
Cost of revenue:
Subscription ⁽¹⁾		24,540			16,332
Professional services and other⁽¹⁾		10,555			7,775
Total cost of revenue		35,095			24,107
Gross profit		90,128			59,514
Operating expenses:
Research and development ⁽¹⁾		34,032			19,929
Sales and marketing ⁽¹⁾		82,112			49,493
General and administrative ⁽¹⁾		25,766			15,070
Total operating expenses		141,910			84,492
Operating loss		(51,782	)		(24,978	)
Interest expense		(4,241	)		(2,717	)
Other income (expense), net		2,900			1,502
Loss before provision for (benefit from) income taxes		(53,123	)		(26,193	)
Provision for (benefit from) income taxes		(1,157	)		(231	)
Net loss	$	(51,966	)	$	(25,962	)

Net loss per share, basic and diluted	$	(0.46	)	$	(0.25	)

Weighted-average shares used to compute net loss per share, basic and diluted		112,682			104,203

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

	Three Months Ended April 30,
	2019			2018

Cost of subscription revenue	$	2,422		$	1,529
Cost of professional services and other revenue		1,519			889
Research and development		6,346			4,213
Sales and marketing		6,786			4,153
General and administrative		5,612			3,351
Total share-based compensation expense	$	22,685		$	14,135


OKTA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited)

	April 30, 2019			January 31, 2019
	April 30, 2019			As Adjusted⁽¹⁾
Assets
Current assets:
Cash and cash equivalents	$	208,106		$	298,394
Short-term investments	339,377			265,374
Accounts receivable, net of allowances of $1,960 and $2,098	83,328			91,926
Deferred commissions	25,576			24,185
Prepaid expenses and other current assets	20,542			28,237
Total current assets	676,929			708,116
Property and equipment, net	52,189			52,921
Operating lease right-of-use assets	119,916			121,389
Deferred commissions, noncurrent	56,824			54,812
Intangible assets, net	28,022			13,897
Goodwill	47,964			18,089
Other assets	16,698			15,089
Total assets	$	998,542		$	984,313
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,352		$	2,431
Accrued expenses and other current liabilities	32,412			33,653
Accrued compensation	21,463			19,770
Convertible senior notes, net	275,653			271,628
Deferred revenue	268,033			245,622
Total current liabilities	601,913			573,104
Operating lease liabilities, noncurrent	146,044			147,046
Deferred revenue, noncurrent	7,671			8,768
Other liabilities, noncurrent	3,470			3,018
Total liabilities	759,098			731,936
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—
Class A common stock	10			10
Class B common stock	1			1
Additional paid-in capital	784,067			744,896
Accumulated other comprehensive income (loss)	(457		)	(319		)
Accumulated deficit	(544,177		)	(492,211		)
Total stockholders’ equity	239,444			252,377
Total liabilities and stockholders’ equity	$	998,542		$	984,313

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


OKTA, INC. SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)

	Three Months Ended April 30,
	2019			2018
	2019			As Adjusted⁽¹⁾
Cash flows from operating activities:
Net loss	$	(51,966	)	$	(25,962	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	22,685			14,135
Depreciation, amortization and accretion	3,399			2,069
Amortization of debt discount and issuance costs	4,025			2,571
Amortization of deferred commissions	6,328			4,572
Deferred income taxes	(1,369		)	(348		)
Other	(100		)	161
Changes in operating assets and liabilities:
Accounts receivable	9,297			1,719
Deferred commissions	(9,795		)	(5,693		)
Prepaid expenses and other assets	5,975			(3,889		)
Operating lease right-of-use assets	3,066			4,564
Accounts payable	1,640			607
Accrued compensation	4,143			329
Accrued expenses and other liabilities	3,288			(1,023		)
Operating lease liabilities	(39		)	(2,954		)
Deferred revenue	20,685			13,114
Net cash provided by operating activities	21,262			3,972
Cash flows from investing activities:
Capitalization of internal-use software costs	(369		)	(1,051		)
Purchases of property and equipment	(7,710		)	(4,477		)
Purchases of securities available for sale	(146,545		)	(252,914		)
Proceeds from maturities of securities available for sale	61,244			19,500
Proceeds from sales of securities available for sale	11,996			—
Payments for business acquisition, net of cash acquired	(44,223		)	—
Net cash used in investing activities	(125,607		)	(238,942		)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs	—			335,055
Purchase of convertible senior notes hedge	—			(80,040		)
Proceeds from issuance of warrants related to convertible notes	—			52,440
Proceeds from stock option exercises, net of repurchases	13,388			12,196
Other, net	(126		)	(206		)
Net cash provided by financing activities	13,262			319,445
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash	(282		)	(387		)
Net increase in cash, cash equivalents and restricted cash	(91,365		)	84,088
Cash, cash equivalents and restricted cash at beginning of period	311,215			136,233
Cash, cash equivalents and restricted cash at end of period	$	219,850		$	220,321

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


OKTA, INC. Reconciliation of GAAP to Non-GAAP Data (In thousands, except percentages and per share data) (unaudited)

	Three Months Ended April 30, 2019
	GAAP			Stock-based compensation			Amortization of acquired intangibles			Amortization of debt discount			Acquisition- related expenses			Non-GAAP
Cost of revenue:
Cost of subscription services	$	24,540		$	(2,422	)	$	(763	)	$	—		$	—		$	21,355
Cost of professional services		10,555			(1,519	)		—			—			—			9,036
Gross profit		90,128			3,941			763			—			—			94,832
Gross margin		72.0	%		3.1	%		0.6	%		—	%		—	%		75.7	%
Operating expenses:
Research and development		34,032			(6,346	)		—			—			—			27,686
Sales and marketing		82,112			(6,786	)		—			—			—			75,326
General and administrative		25,766			(5,612	)		—			—			(3,449	)		16,705
Operating loss		(51,782	)		22,685			763			—			3,449			(24,885	)
Operating margin		(41.4	)%		18.1	%		0.6	%		—	%		2.8	%		(19.9	)%
Interest expense		(4,241	)		—			—			3,706			—			(535	)
Net loss	$	(51,966	)	$	22,685		$	763		$	3,706		$	3,449		$	(21,363	)
Net loss per share ⁽¹⁾	$	(0.46	)	$	0.20		$	0.01		$	0.03		$	0.03		$	(0.19	)

⁽¹⁾ GAAP and Non-GAAP net loss per common share calculated based upon 112,682 basic and diluted weighted-average shares of common stock.


	Three Months Ended April 30, 2018
	GAAP			Stock-based compensation			Amortization of debt discount		Non-GAAP
Cost of revenue:
Cost of subscription services	$	16,332		$	(1,529	)	$	—	$	14,803
Cost of professional services		7,775			(889	)		—		6,886
Gross profit		59,514			2,418			—		61,932
Gross margin		71.2	%		2.9	%		—		74.1	%
Operating expenses:
Research and development		19,929			(4,213	)		—		15,716
Sales and marketing		49,493			(4,153	)		—		45,340
General and administrative		15,070			(3,351	)		—		11,719
Operating loss		(24,978	)		14,135			—		(10,843	)
Operating margin		(29.9	)%		16.9	%		—		(13.0	)%
Interest expense		(2,717	)		—			2,381		(336	)
Net loss	$	(25,962	)	$	14,135		$	2,381	$	(9,446	)
Net loss per share ⁽¹⁾	$	(0.25	)	$	0.14		$	0.02	$	(0.09	)

⁽¹⁾ GAAP and Non-GAAP net loss per common share calculated based upon 104,203 basic and diluted weighted-average shares of common stock.


OKTA, INC. Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands) (unaudited)

Free Cash Flow
	Three Months Ended April 30,
	2019				2018
Net cash provided by (used in) operating activities	$	21,262			$	3,972
Less:
Purchases of property and equipment	(7,710		)		(4,477		)
Capitalization of internal-use software costs	(369		)		(1,051		)
Proceeds from sales of property and equipment	—				—
Free Cash Flow	$	13,183			$	(1,556	)
Net cash provided by (used in) investing activities	(125,607		)		(238,942		)
Net cash provided by financing activities	13,262				319,445
Free cash flow margin	10.5			%	(1.9			)%

Calculated Billings
	Three Months Ended April 30,
	2019				2018
Total revenue	$	125,223			$	83,621
Add:
Unbilled receivables, current (beginning of period)	1,457				809
Deferred revenue, current (end of period)	268,033				173,548
Less:
Unbilled receivables, current (end of period)	(799		)		(1,619		)
Deferred revenue, current (beginning of period)	(245,622		)		(159,816		)
Current calculated billings	148,292				96,543
Add:
Deferred revenue, noncurrent (end of period)	7,671				4,346
Less:
Deferred revenue, noncurrent (beginning of period)	(8,768		)		(4,963		)
Calculated billings	$	147,195			$	95,926

View source version on businesswire.com: https://www.businesswire.com/news/home/20190530005206/en/