01—Abstract
Summary
Summary of the 10-Q filed December 1, 2023. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. filed this Form 10-Q for the quarter ended October 31, 2023.
For the three months ended October 31, 2023, total revenue was $584 milliona, up from $481 million, with subscription revenue at $569 million. Operating loss narrowed to $111 million from $207 million, and net loss was $81 million versus $209 million a year earlier. For the nine months, total revenue was $1,658 million versus $1,348 million, gross profit was $1,222 million versus $941 million, and net loss was $311 million versus $662 million.
Net cash provided by operating activities was $338 millionb for the nine months, compared with $10 million in the prior-year period. Balance sheet activity was driven by convertible note repurchases. During the nine months, the company repurchased $508 million principal of its 2025 Notes for $462 million in cash and $392 million principal of its 2026 Notes for $341 million in cash, producing a $91 million gain on early extinguishment of debt.
Convertible senior notes, net, noncurrent fell to $1,302 millionc from $2,193 million. Cash, cash equivalents and short-term investments totaled $2,130 million at October 31, 2023. Management stated it believes these resources, together with operating cash flows, will be sufficient for projected needs.
The filing also discloses an October 2023 cybersecurity incident in which a threat actor gained unauthorized access to and stole information from the company's third-party customer support system. Management said it expects the incident to adversely affect future financial performance, though it cannot predict the extent.
Securities class action and derivative lawsuits relating to cybersecurity controls and the Auth0 integration remain pending. Dollar-based net retention rate was 115%d as of October 31, 2023, down from 122%.
02—Key points
Key Highlights
- Total revenue for the three months ended October 31, 2023 was $584 million, up from $481 million; subscription revenue was 97% of total revenue for the nine months.
- Net loss narrowed to $81 million for the quarter from $209 million, and to $311 million for the nine months from $662 million.
- Operating cash flow for the nine months was $338 million, compared with $10 million a year earlier.
- The company repurchased $508 million of 2025 Notes and $392 million of 2026 Notes during the nine months, recognizing a $91 million gain on early extinguishment of debt.
- Cash, cash equivalents and short-term investments totaled $2,130 million as of October 31, 2023.
- Customers grew to over 18,800 from over 17,050, while Dollar-Based Net Retention Rate declined to 115% from 122%.
- In October 2023, a threat actor gained unauthorized access to and stole information from the company's third-party customer support system; management expects this to adversely affect future financial performance.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2024, Okta lost $0.14.
- Revenue$584.0M100.0%
- Cost of revenue−$145.0M24.8%
- Gross profit$439.0M75.2%
- Operating costs−$550.0M94.2%
- Operating income−$111.0M19.0%
- Interest, other & tax$30.0M5.1%
- Net income−$81.0M13.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed December 1, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $584.00M$481.00M | +21.4% |
| Cost of Revenue | $145.00M$138.00M | +5.1% |
| Gross Profit | $439.00M$343.00M | +28.0% |
| R&D Expenses | $165.00M$148.00M | +11.5% |
| Operating Expenses | $550.00M$550.00M | 0.0% |
| Operating Income | -$111.00M-$207.00M | +46.4% |
| Interest Expense | $2.00M$3.00M | −33.3% |
| Net Income | -$81.00M-$209.00M | +61.2% |
| EPS (Basic) | $-0.49$-1.32 | +62.9% |
| EPS (Diluted) | $-0.49$-1.32 | +62.9% |
| Shares Outstanding (Basic) | 164.38M158.71M | +3.6% |
| Shares Outstanding (Diluted) | 164.38M158.71M | +3.6% |
05—Questions
Frequently Asked Questions
How did Okta's profitability change in the quarter ended October 31, 2023?
Operating loss narrowed to $111 million from $207 million, and net loss narrowed to $81 million from $209 million. Gross profit rose to $439 million from $343 million, and total operating expenses were flat at $550 million in both periods.
Why did interest and other income increase so significantly?
Interest and other, net was $37 million for the quarter versus $2 million a year earlier, primarily due to the $18 million gain on early extinguishment of debt and higher interest income from short-term investments. For the nine months, the $91 million gain on debt extinguishment was the main driver.
What did the company do with its convertible notes?
During the nine months ended October 31, 2023, Okta repurchased $508 million principal of 2025 Notes for $462 million in cash and $392 million principal of 2026 Notes for $341 million in cash. Principal outstanding was $552 million for the 2025 Notes and $758 million for the 2026 Notes as of October 31, 2023.
What cybersecurity risk does the filing disclose?
The filing discloses that in October 2023 a threat actor gained unauthorized access to and stole information from the company's third-party customer support system. Management stated it expects these incidents to adversely affect future financial performance but cannot predict the extent of the impact with certainty.
What legal proceedings are pending?
A putative securities class action (In re Okta, Inc. Securities Litigation) and several derivative lawsuits are pending, alleging misleading statements about cybersecurity controls, data breach vulnerability, and the Auth0 integration. Plaintiffs moved for class certification on November 1, 2023, with a hearing scheduled for March 29, 2024. The company is defending the suits vigorously and cannot predict the outcome or estimate potential losses.
06—Continue