01—Abstract
Summary
Summary of the 10-K filed March 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. reported fiscal 2023 (year ended January 31, 2023) total revenue of $1,858 milliona, up 43% from $1,300 million in fiscal 2022, with subscription revenue of $1,794 million making up about 97% of total revenue.
Net loss was $815 millionb, compared with $848 million in fiscal 2022, and gross margin improved to 71% from 70%. Customer count grew to more than 17,600 from over 15,000, customers with annual contract value above $100,000 rose to 3,930 from 3,100, and the Dollar-Based Net Retention Rate was 120%, down from 124%. Calculated billings increased 24% to $2,123 million, and free cash flow fell to $65 million from $87 million.
The company's Auth0 acquisition, completed May 3, 2021, continues to shape results, and management expects operating expenses to rise significantly. The balance sheet shows cash, cash equivalents and short-term investments of $2,580 millionc against convertible senior notes of roughly $2.2 billion in principal (2025 and 2026 notes, plus the 2023 notes that were nearly all repurchased or converted), and an accumulated deficit of $2,475 million. Management states that existing cash and investments will be sufficient for projected working capital and capital expenditure needs for the foreseeable future.
In the fourth quarter of fiscal 2023 the company approved a restructuring plan to reduce its workforce by approximately 300 full-time employees, with aggregate costs estimated at about $15 milliond; fiscal 2023 restructuring and other charges totaled $29 million. Investors should note the dual-class structure, under which directors, executive officers and their affiliates held 41.7% of voting power as of January 31, 2023, and the securities class action and derivative lawsuits filed in 2022 concerning cybersecurity controls, data breaches and the Auth0 integration. The company states it intends to defend these lawsuits vigorously and cannot predict their outcome.
02—Key points
Key Highlights
- Total revenue of $1,858 million in fiscal 2023, up 43% from $1,300 million, with subscription revenue at $1,794 million (about 97% of total revenue).
- Net loss of $815 million in fiscal 2023, versus $848 million in fiscal 2022; operating loss was $812 million.
- Gross margin rose to 71% from 70%, and subscription gross margin held at 74%.
- Customers exceeded 17,600 and those with annual contract value above $100,000 reached 3,930; Dollar-Based Net Retention Rate was 120%, down from 124%.
- Calculated billings grew 24% to $2,123 million, while free cash flow declined to $65 million from $87 million.
- Cash, cash equivalents and short-term investments totaled $2,580 million at January 31, 2023, against convertible senior notes with about $2.2 billion of principal outstanding.
- Class B shares carry ten votes each; directors, executive officers and affiliates held 41.7% of voting power, and securities and derivative lawsuits filed in 2022 remain pending.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2023, Okta lost $0.44.
- Revenue$1.86B100.0%
- Cost of revenue−$546.0M29.4%
- Gross profit$1.31B70.6%
- Operating costs−$2.12B114.3%
- Operating income−$812.0M43.7%
- Interest, other & tax−$3.0M0.2%
- Net income−$815.0M43.9%
04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 3, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $1.86B$1.30B | +42.9% |
| Cost of Revenue | $546.00M$396.00M | +37.9% |
| Gross Profit | $1.31B$904.00M | +45.1% |
| R&D Expenses | $620.00M$469.00M | +32.2% |
| Operating Expenses | $2.12B$1.67B | +27.0% |
| Operating Income | -$812.00M-$768.00M | −5.7% |
| Interest Expense | $11.00M$91.00M | −87.9% |
| Net Income | -$815.00M-$848.00M | +3.9% |
| EPS (Basic) | $-5.16$-5.73 | +9.9% |
| EPS (Diluted) | $-5.16$-5.73 | +9.9% |
| Shares Outstanding (Basic) | 158.02M148.04M | +6.7% |
| Shares Outstanding (Diluted) | 158.02M148.04M | +6.7% |
05—Questions
Frequently Asked Questions
How fast did Okta's revenue grow, and what drove it?
Revenue grew from $1,300 million in fiscal 2022 to $1,858 million in fiscal 2023, a 43% increase. The filing attributes subscription growth to new customers, more users and sales of additional products to existing customers, and notes that fiscal 2023 includes twelve months of Auth0 revenue versus about nine months in fiscal 2022.
Is Okta still losing money, and does management expect profitability?
Yes. Okta reported net losses of $266 million, $848 million and $815 million in fiscal 2021, 2022 and 2023. Management expects to continue incurring net losses for the foreseeable future and expects operating expenses to increase significantly, particularly with the Auth0 acquisition, so revenue would need to rise faster than expenses to achieve profitability.
Does Okta have enough cash to meet its obligations?
Management states that existing cash, cash equivalents, investments and cash from sales will be sufficient for projected working capital and capital expenditure needs for the foreseeable future. Cash, cash equivalents and short-term investments totaled $2,580 million at January 31, 2023. Total contractual obligations were $3,030 million, including $2,210 million of convertible note principal due beyond twelve months.
What legal risks are disclosed?
A putative securities class action was filed on May 20, 2022 alleging false or misleading statements about cybersecurity controls, data breach vulnerability and the Auth0 integration. Two derivative lawsuits were also filed in late 2022 on similar allegations. The company intends to defend these lawsuits vigorously and states it cannot predict the outcome or estimate potential losses.
Who controls voting power at Okta?
Class B common stock carries ten votes per share, and as of January 31, 2023, directors, executive officers and their affiliates held 41.7% of the company's voting power. The filing states that Class B holders could continue to control nearly a majority of combined voting power until April 12, 2027, which may limit other stockholders' ability to influence corporate matters.
06—Continue