01—Abstract
Summary
Summary of the 10-K filed March 6, 2020. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. (Class A common stock listed on NASDAQ under OKTA) reported fiscal 2020 (year ended January 31, 2020) revenue of $586.1 milliona, up 47% from $399.3 million in fiscal 2019, with subscription revenue of $552.7 million.
The company remains unprofitable: net loss widened to $208.9 millionb from $125.5 million, operating loss was $185.8 million, and the company states it expects to keep incurring losses for the foreseeable future. Gross margin improved to 73% from 72%, and non-GAAP operating margin improved to (8)% from (10)%. Free cash flow was $36.3 million, compared with negative $6.8 million in fiscal 2019, and net cash provided by operating activities was $55.6 million.
Balance sheet activity was dominated by convertible debt. In September 2019 Okta issued $1,060.0 millionc of 0.125% convertible senior notes due 2025 and repurchased $224.4 million of its 0.25% 2023 notes for $604.8 million in consideration, including about 3.0 million Class A shares. Cash, cash equivalents and short-term investments totaled $1,403.0 million at January 31, 2020, against total liabilities of $1,550.1 million.
The 2023 notes were classified as current because the conversion condition was met as of January 31, 2020, and holders may convert during the quarter ending April 30, 2020. Customer metrics also grew: 7,950 customers, 1,467 with annual contract value above $100,000,d a dollar-based net retention rate of 119%, and remaining performance obligations of $1,209.7 million, of which $592.3 million is expected within 12 months.
Investors should weigh the growth and cash-flow improvement against continued GAAP losses, a dual-class structure in which directors, executive officers and their affiliates held 53.1% of voting power, and the convertible notes, which carry dilution and cash-settlement risk. The filing also cites the coronavirus outbreak as a risk to future demand and operations.
02—Key points
Key Highlights
- Revenue grew 47% to $586.1 million in fiscal 2020, with subscription revenue at $552.7 million, up from $370.8 million.
- Net loss widened to $208.9 million from $125.5 million, and the company expects continued losses for the foreseeable future.
- Free cash flow was $36.3 million, versus negative $6.8 million in fiscal 2019; operating cash flow was $55.6 million.
- Gross margin rose to 73% from 72%, and non-GAAP operating margin improved to (8)% from (10)%.
- In September 2019 the company issued $1,060.0 million of 2025 convertible notes and repurchased $224.4 million of 2023 notes; the 2023 notes became convertible and are classified as current liabilities.
- Cash, cash equivalents and short-term investments totaled $1,403.0 million at January 31, 2020.
- Dollar-based net retention rate was 119%, with 1,467 customers above $100,000 annual contract value and remaining performance obligations of $1,209.7 million.
- Directors, executive officers and affiliates held 53.1% of voting power under the dual-class structure.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Okta lost $0.36.
- Revenue$586.1M100.0%
- Cost of revenue−$159.4M27.2%
- Gross profit$426.7M72.8%
- Operating costs−$612.5M104.5%
- Operating income−$185.8M31.7%
- Interest, other & tax−$23.1M3.9%
- Net income−$208.9M35.6%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 6, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $586.07M$399.25M | +46.8% |
| Cost of Revenue | $159.38M$113.42M | +40.5% |
| Gross Profit | $426.69M$285.83M | +49.3% |
| R&D Expenses | $159.27M$102.39M | +55.6% |
| Operating Expenses | $612.52M$405.45M | +51.1% |
| Operating Income | -$185.83M-$119.62M | −55.3% |
| Interest Expense | $27.02M$15.07M | +79.3% |
| Net Income | -$208.91M-$125.50M | −66.5% |
| EPS (Basic) | $-1.78$-1.17 | −52.1% |
| EPS (Diluted) | $-1.78— | — |
| Shares Outstanding (Basic) | 117.22M107.50M | +9.0% |
| Shares Outstanding (Diluted) | 117.22M— | — |
05—Questions
Frequently Asked Questions
How fast is Okta's revenue growing and what is driving it?
Revenue grew 47% to $586.1 million in fiscal 2020, from $399.3 million. The filing attributes subscription growth primarily to new customers, plus more users and additional products sold to existing customers.
Is Okta profitable?
No. GAAP net loss was $208.9 million in fiscal 2020, up from $125.5 million, and the company states it expects to continue incurring net losses. Non-GAAP net loss narrowed to $36.7 million, and non-GAAP operating margin was (8)%.
What happened with the convertible notes?
In September 2019 Okta issued $1,060.0 million of 0.125% notes due 2025 and used part of the proceeds to repurchase $224.4 million of its 0.25% 2023 notes for $604.8 million in total consideration. $120.6 million of the 2023 notes remained outstanding. The 2023 notes are convertible during the quarter ending April 30, 2020 and are classified as current liabilities.
How much cash does Okta have and does it need more capital?
Cash, cash equivalents and short-term investments totaled $1,403.0 million at January 31, 2020. Management believes this, plus cash from operations, is sufficient for at least the next 12 months, but says it may need additional equity or debt financing in the future.
Who controls the company's voting power?
Class B shares carry ten votes each. Directors, executive officers and their affiliates held 53.1% of the voting power as of January 31, 2020, and this concentrated control is expected to last until April 12, 2027.
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