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Okta

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Okta Announces Record First Quarter Fiscal 2018 Financial Results

Okta Announces Record First Quarter Fiscal 2018 Financial Results

June 7, 2017
  • Q1 total revenue up 67% year-over-year; subscription revenue up 75% year-over-year
  • Q1 GAAP operating margin improved by 17 percentage points; Non-GAAP operating margin improved by 24 percentage points, year-over-year
  • Company raised $200 million in Initial Public Offering 

SAN FRANCISCO, June 07, 2017 (GLOBE NEWSWIRE) -- Okta, Inc. (NASDAQ:OKTA), the leading independent provider of identity for the enterprise, today announced financial results for its first fiscal quarter ended April 30, 2017.

“In our first quarter as a public company, we demonstrated strength by every measure. Total revenue grew by 67%, subscription revenue grew by 75%, and our operating performance improved significantly, year-over-year,” said Todd McKinnon, CEO of Okta.  “Our strong results were driven by our industry-leading products, the success we enable for our customers’ digital initiatives and the need for every organization to manage their business securely in the cloud.  With the Okta Identity Cloud, we are well positioned to capitalize on two large and growing markets: the $18 billion addressable market for management of employee identities, as well as the largely greenfield market for organizations looking to seamlessly and securely manage the identities of their customers, partners and suppliers.”

First Quarter Fiscal 2018 Financial Highlights:

  • Revenue: Total revenue was $53.0 million, an increase of 66.8% year-over-year. Subscription revenue was $48.4 million, an increase of 75.4% year-over-year.
  • Operating Loss: GAAP operating loss was $28.6 million, or 54.0% of total revenue, compared to $22.7 million in the first quarter of fiscal 2017, or 71.4% of total revenue. Non-GAAP operating loss was $19.7 million, or 37.2% of total revenue, compared to $19.3 million of the first quarter of fiscal 2017, or 60.7% of total revenue.
  • Net Loss: GAAP net loss was $28.9 million, compared to $22.8 million in the first quarter of fiscal 2017. GAAP net loss per share was $0.73, compared to $1.22 for the first quarter of fiscal 2017. Non-GAAP net loss was $20.0 million, compared to $19.3 million in the first quarter of fiscal 2017. Non-GAAP net loss per share was $0.50, compared to $1.04 for the first quarter of fiscal 2017.
  • Cash Flow: Net cash used in operations was $9.7 million, compared to $15.0 million for the first quarter of fiscal 2017. Free cash flow was negative $13.3 million, or 25.2% of total revenue, compared to negative $17.2 million, or 54.1% of total revenue, in the first quarter of fiscal 2017.
  • Cash and cash equivalents and short term investments were $224.2 million as of April 30, 2017.

The section titled "Non-GAAP Financial Measures" below contains a description of these non-GAAP financial measures and a reconciliation between historical GAAP and non-GAAP information is contained in the tables below.

Financial Outlook:

For the second quarter of fiscal 2018, the Company currently expects:

  • Total revenue of $55.0 to $56.0 million
  • Non-GAAP operating loss of $24.0 to $23.0 million
  • Non-GAAP net loss per share of $0.26 to $0.25 using shares outstanding of approximately 92.5 million

For the full fiscal 2018, the Company currently expects:

  • Total revenue of $233.0 to $236.0 million
  • Non-GAAP operating loss of $91.2 to $88.2 million
  • Non-GAAP net loss per share of $1.15 to $1.11 using shares outstanding of approximately 80.2 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 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 June 7, 2017. 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 888-490-2763 or 719-325-2394, using the passcode 8793739.

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 21, 2017 and may be accessed by dialing 888-203-1112 or 719-457-0820, using the passcode 8793739.

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 and calculated billings.  Certain of these non-GAAP financial measures exclude stock-based compensation and amortization of intangible assets.

Okta believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Okta’s financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. 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 management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Okta urges investors to review the reconciliation of its non-GAAP financial measures to the 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.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.

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 Okta’s Prospectus filed with the Securities and Exchange Commission effective on April 6, 2017 as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. 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; 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; we face 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; 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 connects and protects employees of many of the world's largest enterprises. It also securely connects enterprises to their partners, suppliers and customers. With deep integrations to over 5,000 applications, the Okta Identity Cloud enables simple and secure access for any user from any device. Thousands of customers, including 20th Century Fox, Adobe, Dish Networks, Experian, Flex, LinkedIn, and News Corp, trust Okta to help them work faster, boost revenue and stay secure. Okta helps customers fulfill their missions faster by making it safe and easy to use the technologies they need to do their most significant work. Learn more at www.okta.com.

 

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)
   
  Three Months Ended
April 30,
  2017   2016
       
Revenue      
Subscription $ 48,357     $ 27,563  
Professional services and other 4,650     4,224  
Total revenue 53,007     31,787  
Cost of revenue      
Subscription  (1) 11,157     7,460  
Professional services and other (1) 6,306     4,919  
Total cost of revenue 17,463     12,379  
Gross profit 35,544     19,408  
Operating expenses      
Research and development  (1) 15,359     8,766  
Sales and marketing  (1) 37,180     26,401  
General and administrative  (1) 11,639     6,945  
Total operating expenses 64,178     42,112  
Operating loss (28,634 )   (22,704 )
Other income (expense), net (19 )   32  
Loss before income taxes (28,653 )   (22,672 )
Provision for income taxes 248     81  
Net loss $ (28,901 )   $ (22,753 )
       
Net loss per common share, basic and diluted $ (0.73 )   $ (1.22 )
       
Weighted-average shares used to compute net loss per common share 39,783     18,574  

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

  Three Months Ended
April 30,
  2017   2016
       
Cost of subscription revenue $ 686     $ 393  
Cost of professional services and other revenue 469     273  
Research and development 3,301     618  
Sales and marketing 2,375     1,354  
General and administrative 2,075     731  
Total share-based compensation expense $ 8,906     $ 3,369  

 

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
       
  April 30, 2017   January 31, 2017
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 221,726     $ 23,282  
Short-term investments 2,500     14,390  
Accounts receivable, net of allowances of $1,025 and $1,306 32,171     34,544  
Deferred commissions 13,131     13,549  
Prepaid expenses and other current assets 10,271     7,025  
Total current assets 279,799     92,790  
Property and equipment, net 13,180     11,026  
Deferred commissions, noncurrent 9,463     10,050  
Intangible assets, net 9,835     9,155  
Goodwill 6,282     2,630  
Other assets 1,671     4,984  
Total assets $ 320,230     $ 130,635  
Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)      
Current liabilities:      
Accounts payable $ 15,909     $ 11,897  
Accrued expenses and other current liabilities 4,822     5,853  
Accrued compensation 6,613     9,866  
Deferred revenue 115,717     108,012  
Total current liabilities 143,061     135,628  
Deferred revenue, noncurrent 4,927     5,711  
Other liabilities, noncurrent 6,323     4,947  
Total liabilities 154,311     146,286  
Commitments and contingencies (Note 8)      
Redeemable convertible preferred stock     227,954  
Stockholders’ equity (deficit):      
Preferred stock      
Class A common stock 1      
Class B common stock 8     2  
Additional paid-in capital 483,019     44,469  
Accumulated other comprehensive loss (99 )   (167 )
Accumulated deficit (317,010 )   (287,909 )
Total stockholders’ equity (deficit) 165,919     (243,605 )
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 320,230     $ 130,635  

 

OKTA, INC.

SUMMARY OF CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)
   
  Three Months Ended April 30,
  2017   2016
       
Operating activities:      
Net loss $ (28,901 )   $ (22,753 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation, amortization and accretion 1,575     887  
Stock-based compensation 8,906     3,369  
Amortization of deferred commissions 4,039     3,053  
Other 270     (130 )
Changes in operating assets and liabilities:      
Accounts receivable 2,243     3,090  
Deferred commissions (3,033 )   (2,756 )
Prepaid expenses and other assets (3,143 )   (2,876 )
Accounts payable 3,782     3,681  
Accrued compensation (2,121 )   (2,855 )
Accrued expenses and other liabilities (223 )   (182 )
Deferred revenue 6,920     2,437  
Net cash used in operating activities (9,686 )   (15,035 )
Investing activities:      
Capitalization of internal-use software costs (1,208 )   (1,232 )
Purchases of property and equipment and other (2,448 )   (927 )
Other investing activities 11,873     3,000  
Net cash provided by investing activities 8,217     841  
Financing activities:      
Proceeds from initial public offering, net of underwriters' discounts and commissions 199,997      
Other financing activities 111     (337 )
Net cash provided by (used in) financing activities 200,108     (337 )
Effects of changes in foreign currency exchange rates on cash and cash equivalents  68     47  
Net increase (decrease) in cash and cash equivalents and restricted cash 198,707     (14,484 )
Cash and cash equivalents and restricted cash at beginning of year 23,282     58,081  
Cash and cash equivalents and restricted cash at end of year $ 221,989     $ 43,597  

 

OKTA, INC.

Reconciliation of GAAP to Non-GAAP Data

(In thousands, except percentages and per share data)

(unaudited)
     
    Three Months Ended April 30, 2017
    GAAP   Stock-based
compensation
  Amortization
of acquired
intangibles
  Non-GAAP
Costs and expenses:                
Cost of subscription services   $ 11,157     $ (686 )   $ (4 )   $ 10,467  
Cost of professional services   6,306     (469 )       5,837  
Gross profit   35,544     1,155     4     36,703  
Gross margin   67 %   2 %       69 %
Research and development   15,359     (3,301 )       12,058  
Sales and marketing   37,180     (2,375 )       34,805  
General and administrative   11,639     (2,075 )       9,564  
Operating loss   (28,634 )   8,906     4     (19,724 )
Operating margin   (54 )%   17 %       (37 )%
Net loss   $ (28,901 )   $ 8,906     $ 4     $ (19,991 )
Net loss per share (1)   $ (0.73 )   $ 0.22     $ 0.01     $ (0.50 )

(1) GAAP and Non-GAAP net loss per common share calculated based upon 39,783 basic and diluted weighted-average shares of common stock.

 

    Three Months Ended April 30, 2016
    GAAP   Stock-based
compensation
  Amortization
of acquired
intangibles
  Non-GAAP
Costs and expenses:                
Cost of subscription services   $ 7,460     $ (393 )   $ (47 )   $ 7,020  
Cost of professional services   4,919     (273 )       4,646  
Gross profit   19,408     666     47     20,121  
Gross margin   61 %   2 %       63 %
Research and development   8,766     (618 )       8,148  
Sales and marketing   26,401     (1,354 )       25,047  
General and administrative   6,945     (731 )       6,214  
Operating loss   (22,704 )   3,369     47     (19,288 )
Operating margin   (71 )%   10 %       (61 )%
Net loss   $ (22,753 )   $ 3,369     $ 47     $ (19,337 )
Net loss per share (1)   $ (1.22 )   $ 0.18     $     $ (1.04 )

(1) GAAP and Non-GAAP net loss per common share calculated based upon 18,574 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,
  2017   2016
Net cash used in operating activities $ (9,686 )   $ (15,035 )
Less:      
Purchases of property and equipment (2,448 )   (927 )
Capitalized internal-use software costs (1,208 )   (1,232 )
Free Cash Flow $ (13,342 )   $ (17,194 )
Net cash provided by investing activities $ 8,217     $ 841  
Net cash (used in) provided by financing activities $ 200,108     $ (337 )
Free Cash Flow Margin (25 )%   (54 )%

 

Calculated Billings      
  Three Months Ended
April 30,
  2017   2016
Total revenue $ 53,007     $ 31,787  
Add:      
Deferred revenue (end of period) 120,644     81,962  
Less:      
Deferred revenue (beginning of period) (113,723 )   (79,525 )
Calculated Billings $ 59,928     $ 34,224  

 

Investor Contact:                                                   
Catherine Buaninvestor@okta.com
415-604-3346

Media Contact:
Jenna Kozeljenna.kozel@okta.com
415-418-9600

 

Okta