01—Abstract
Summary
Summary of the 10-K filed March 4, 2021. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. reported fiscal 2021 (year ended January 31, 2021) revenue of $835.4 milliona, up from $586.1 million in fiscal 2020, with the filing stating growth of 43%.
Subscription revenue was $796.6 millionb, or 95% of total revenue. Net loss widened to $266.3 million from $208.9 million, and the filing describes the company as having a history of losses it expects to continue. Non-GAAP operating income was $7.7 million, compared with a non-GAAP operating loss of $48.5 million in fiscal 2020.
Calculated billings grew 39% to $976.0 millionc, and remaining performance obligations reached $1.80 billion, of which $841.8 million (47%) is expected to be recognized over the next 12 months. Cash, cash equivalents and short-term investments totaled $2.56 billion as of January 31, 2021. On March 3, 2021, Okta agreed to acquire Auth0, Inc., an identity management platform for application developers, for $6.5 billion, paid in Class A common stock and assumed equity awards plus certain cash payouts.
The Class A shares are valued at a fixed $276.2147d per share, so their aggregate value will move with Okta's share price until closing, which is expected in the second quarter of fiscal 2022 (ending July 31, 2021). The filing notes that the acquisition is subject to customary closing conditions and approvals and that the company will incur significant transaction and integration costs.
The balance sheet carries $1.97 billion of convertible senior notes (2023, 2025 and 2026 Notes), with the 2023 and 2025 Notes classified as current liabilities because their conversion conditions were triggered. Founders and insiders held 48% of voting power through the dual-class structure, and the filing states that Class B shares carry ten votes each until April 12, 2027.
02—Key points
Key Highlights
- Revenue grew 43% to $835.4 million in fiscal 2021, with subscription revenue at $796.6 million (95% of total revenue).
- Net loss increased to $266.3 million from $208.9 million, while non-GAAP operating income improved to $7.7 million from a $48.5 million loss.
- Calculated billings increased 39% to $976.0 million; remaining performance obligations reached $1.80 billion, with 47% expected within 12 months.
- Customers with annual contract value above $100,000 rose to 1,950 from 1,467, and the dollar-based net retention rate was 121%.
- Agreed on March 3, 2021 to acquire Auth0 for $6.5 billion in Class A stock and assumed awards, with closing expected in the quarter ending July 31, 2021.
- Cash, cash equivalents and short-term investments totaled $2.56 billion as of January 31, 2021, against $1.97 billion of convertible senior notes outstanding on the balance sheet.
- Founders and insiders held 48% of voting power via the dual-class structure, with Class B shares carrying ten votes each.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2021, Okta lost $0.32.
- Revenue$835.0M100.0%
- Cost of revenue−$218.0M26.1%
- Gross profit$617.0M73.9%
- Operating costs−$821.0M98.3%
- Operating income−$204.0M24.4%
- Interest, other & tax−$62.0M7.4%
- Net income−$266.0M31.9%
04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 4, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $835.00M$586.07M | +42.5% |
| Cost of Revenue | $218.00M$159.38M | +36.8% |
| Gross Profit | $617.00M$426.69M | +44.6% |
| R&D Expenses | $223.00M$159.27M | +40.0% |
| Operating Expenses | $821.00M$612.52M | +34.0% |
| Operating Income | -$204.00M-$185.83M | −9.8% |
| Interest Expense | $73.00M$27.02M | +170.2% |
| Net Income | -$266.00M-$208.91M | −27.3% |
| EPS (Basic) | $-2.09$-1.78 | −17.4% |
| EPS (Diluted) | $-2.09$-1.78 | −17.4% |
| Shares Outstanding (Basic) | 127.21M117.22M | +8.5% |
| Shares Outstanding (Diluted) | 127.21M117.22M | +8.5% |
05—Questions
Frequently Asked Questions
How fast is Okta growing and is it profitable?
Revenue grew 43% to $835.4 million in fiscal 2021 from $586.1 million. The company remains unprofitable on a GAAP basis, with a net loss of $266.3 million, which the filing says it expects to continue for the foreseeable future. On a non-GAAP basis, operating income was $7.7 million, compared with a $48.5 million loss in fiscal 2020.
What is the Auth0 acquisition and how will it be paid for?
Okta agreed on March 3, 2021 to acquire Auth0, Inc., an identity management platform for application developers, for aggregate consideration of $6.5 billion. Payment is mainly in Okta Class A common stock valued at a fixed $276.2147 per share, plus assumed equity awards and certain cash payouts. The deal is expected to close in the quarter ending July 31, 2021, subject to customary conditions and approvals.
What are the main risks to investors?
The filing highlights ongoing losses, intense competition from larger companies (its principal competitor is Microsoft), and COVID-19 effects on customer spending and sales cycles. It also cites risks from the Auth0 integration and dilution, the cost of convertible notes that may need to be settled in cash, security incidents, and regulatory exposure such as GDPR and the CCPA. Insiders' 48% voting power limits outside shareholders' influence over corporate decisions.
How much debt does Okta have and when is it due?
Okta had convertible senior notes with a principal of $40.2 million due 2023, $1,060.0 million due 2025, and $1,150.0 million due 2026, carrying fixed interest rates of 0.25%, 0.125% and 0.375% respectively. The 2023 and 2025 Notes were classified as current liabilities because their conversion conditions were met as of January 31, 2021. Conversions may be settled in cash, shares or a combination, at the company's election.
How is Okta's revenue recognized and what does its backlog look like?
Subscription revenue is recognized ratably over the non-cancellable contract term, which is generally one to five years, and customers typically pay annually in advance. As of January 31, 2021, deferred revenue was $513.6 million and remaining performance obligations were $1.80 billion, of which $841.8 million, or 47%, was expected to be recognized over the next 12 months.
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