01—Abstract
Summary
Summary of the 10-Q filed August 31, 2023. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. reported its Form 10-Q for the quarter ended July 31, 2023.
Total revenue for the three months ended July 31, 2023 was $556 milliona, up from $452 million, with subscription revenue at $542 million. Net loss narrowed to $111 million from $210 million in the prior-year quarter, and operating loss improved to $162 million from $208 million. For the six months, net loss was $230 million versus $453 million a year earlier.
Gross margin for the quarter was 73% versus 70%, and subscription gross margin improved to 77% from 73%. Restructuring and other charges of $17 millionb in the quarter were primarily non-cash lease impairment charges tied to a real estate optimization plan. The balance sheet and capital structure changed notably.
Okta repurchased $142 millionc of 2025 Notes and $242 million of 2026 Notes during the quarter, paying $130 million and $209 million in cash, which produced a $42 million gain on early extinguishment of debt. For the six months, total repurchases included $508 million of 2025 Notes and $242 million of 2026 Notes, with a $73 million gain. Convertible senior notes, net, noncurrent fell to $1,451 million from $2,193 million at January 31, 2023.
Cash, cash equivalents and short-term investments totaled $2,106 milliond as of July 31, 2023. Net cash provided by operating activities was $182 million for the six months, and total remaining performance obligations were approximately $3,027 million, of which 59% (about $1,772 million) is expected to be recognized over the next 12 months.
The filing also details pending securities class action and derivative lawsuits concerning cybersecurity controls, data breach vulnerabilities and the Auth0 integration, which the company is defending vigorously and for which it cannot predict the outcome or estimate potential losses. Dollar-based net retention rate was 115% as of July 31, 2023, down from 122% a year earlier, and customers grew to over 18,400 from over 16,400.
02—Key points
Key Highlights
- Total revenue of $556 million for the quarter, up from $452 million; subscription revenue was $542 million.
- Net loss narrowed to $111 million for the quarter from $210 million; net loss for the six months was $230 million versus $453 million.
- Subscription gross margin improved to 77% from 73%; total gross margin was 73% versus 70%.
- Repurchased $142 million of 2025 Notes and $242 million of 2026 Notes in the quarter, producing a $42 million gain on early extinguishment of debt.
- Cash, cash equivalents and short-term investments totaled $2,106 million as of July 31, 2023; operating cash flow was $182 million for the six months.
- Total remaining performance obligations were approximately $3,027 million, with about 59% expected to be recognized over the next 12 months.
- Dollar-based net retention rate fell to 115% from 122%, which the company attributed primarily to the macroeconomic environment; customers rose to over 18,400.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2024, Okta lost $0.20.
- Revenue$556.0M100.0%
- Cost of revenue−$149.0M26.8%
- Gross profit$407.0M73.2%
- Operating costs−$569.0M102.3%
- Operating income−$162.0M29.1%
- Interest, other & tax$51.0M9.2%
- Net income−$111.0M20.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 31, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $556.00M$452.00M | +23.0% |
| Cost of Revenue | $149.00M$138.00M | +8.0% |
| Gross Profit | $407.00M$314.00M | +29.6% |
| R&D Expenses | $172.00M$156.00M | +10.3% |
| Operating Expenses | $569.00M$522.00M | +9.0% |
| Operating Income | -$162.00M-$208.00M | +22.1% |
| Interest Expense | $2.00M$3.00M | −33.3% |
| Net Income | -$111.00M-$210.00M | +47.1% |
| EPS (Basic) | $-0.68$-1.34 | +49.3% |
| EPS (Diluted) | $-0.68$-1.34 | +49.3% |
| Shares Outstanding (Basic) | 162.75M157.40M | +3.4% |
| Shares Outstanding (Diluted) | 162.75M157.40M | +3.4% |
05—Questions
Frequently Asked Questions
How did Okta's profitability change in the quarter?
Operating loss narrowed to $162 million from $208 million, and net loss narrowed to $111 million from $210 million. Gross profit rose to $407 million from $314 million, and interest and other, net was income of $58 million, which includes the $42 million gain on early extinguishment of debt.
What drove the debt repurchases and what is the remaining convertible debt?
During the quarter Okta repurchased $142 million principal of 2025 Notes for $130 million in cash and $242 million principal of 2026 Notes for $209 million in cash. Principal outstanding was $552 million for the 2025 Notes and $908 million for the 2026 Notes as of July 31, 2023.
Why did restructuring and other charges increase?
Restructuring and other charges were $17 million in the quarter and $24 million for the six months, primarily non-cash lease impairment charges from a real estate optimization plan. The filing notes that additional charges may be incurred under this plan and changing real estate market conditions.
What legal risks does the filing disclose?
Okta is defending a putative securities class action filed May 20, 2022, alleging misleading statements about cybersecurity controls, data breach vulnerabilities and the Auth0 integration, along with several derivative lawsuits. The court dismissed in full the cybersecurity-related claims and dismissed in part and denied in part the Auth0-related claims. The company cannot predict the outcome or estimate potential losses.
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