01—Abstract
Summary
Summary of the 10-Q filed August 29, 2024. Cited figures are marked; the original filing is the authoritative source.
Okta, Inc. reported its 10-Q for the quarter ended July 31, 2024.
Total revenue for the three months ended July 31, 2024 was $646 milliona, up from $556 million, and subscription revenue was $632 million, up from $542 million. Gross profit was $491 million versus $407 million a year earlier, and the operating loss narrowed to $19 million from $162 million. The company reported net income of $29 million for the quarter, compared with a net loss of $111 million in the prior-year period.
For the six months ended July 31, 2024, net loss was $11 millionb, versus $230 million a year earlier, and operating cash flow was $305 million versus $182 million. Subscription revenue made up about 98% of total revenue for the six-month period. Dollar-based net retention was 110% as of July 31, 2024, down from 115% a year earlier, which the filing attributes primarily to the macroeconomic environment and slower expansion from existing customers.
The balance sheet showed cash, cash equivalents and short-term investments of $2,358 millionc, against convertible senior notes with principal of $552 million (2025 Notes) and $565 million (2026 Notes). Customers grew to 19,300 from 18,400, and customers with annual contract value above $100,000 rose to 4,620 from 4,205. Remaining performance obligations were $3,505 million, of which $1,995 million is expected to be recognized over the next 12 months.
The filing also discloses a stipulated settlement of the securities class action for $60 milliond, covered by D&O insurance and the company's $10 million retention on the primary policy, subject to court approval with a final hearing set for November 8, 2024. Derivative lawsuits remain pending and the company cannot estimate their potential losses. The filing also discloses a cybersecurity incident in October 2023 in which a threat actor stole information from a third-party customer support system.
02—Key points
Key Highlights
- Total revenue rose to $646 million for the three months ended July 31, 2024, from $556 million, with subscription revenue at $632 million.
- Operating loss narrowed to $19 million from $162 million in the prior-year quarter, and net income was $29 million versus a net loss of $111 million.
- Gross margin improved to 76% from 73% for the three months ended July 31, 2024 and 2023.
- Dollar-based net retention rate was 110% as of July 31, 2024, down from 115%, which the filing attributes to slower ACV growth from existing customers amid the macroeconomic environment.
- Customers reached 19,300 and customers with ACV above $100,000 reached 4,620, up from 4,205.
- Cash, cash equivalents and short-term investments totaled $2,358 million, and operating cash flow for the six months was $305 million versus $182 million.
- A $60 million settlement of the securities class action was agreed, covered by D&O insurance and the company's retention, subject to court approval with a final hearing on November 8, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Okta kept $0.04.
- Revenue$646.0M100.0%
- Cost of revenue−$155.0M24.0%
- Gross profit$491.0M76.0%
- Operating costs−$510.0M78.9%
- Operating income−$19.0M2.9%
- Interest, other & tax$48.0M7.4%
- Net income$29.0M4.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed August 29, 2024Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $646.00M$556.00M | +16.2% |
| Cost of Revenue | $155.00M$149.00M | +4.0% |
| Gross Profit | $491.00M$407.00M | +20.6% |
| R&D Expenses | $164.00M$172.00M | −4.7% |
| Operating Expenses | $510.00M$569.00M | −10.4% |
| Operating Income | -$19.00M-$162.00M | +88.3% |
| Net Income | $29.00M-$111.00M | +126.1% |
| EPS (Basic) | $0.18$-0.68 | +126.5% |
| EPS (Diluted) | $0.15$-0.68 | +122.1% |
| Shares Outstanding (Basic) | 168.61M162.75M | +3.6% |
| Shares Outstanding (Diluted) | 174.44M162.75M | +7.2% |
05—Questions
Frequently Asked Questions
Did Okta return to profitability in the quarter ended July 31, 2024?
Yes. The filing reports net income of $29 million for the three months ended July 31, 2024, compared with a net loss of $111 million in the same period of 2023. For the six months, the company still reported a net loss of $11 million, versus $230 million a year earlier.
Why did dollar-based net retention decline?
The filing states the decline from 115% to 110% was primarily a result of the macroeconomic environment, with overall ACV from existing customers increasing at a slower rate in the current period.
What is the status of the securities class action lawsuit?
The parties entered a stipulation of settlement under which the company agreed to pay, or cause its insurers to pay, a total of $60 million. The court granted preliminary approval on July 19, 2024, and set a final settlement approval hearing for November 8, 2024. The settlement does not constitute an admission of fault, and related derivative lawsuits remain pending with no estimate of potential loss.
How much debt does Okta have outstanding and when is it due?
As of July 31, 2024, the company had $552 million principal of 2025 Notes due September 1, 2025, with a 0.125% fixed interest rate, and $565 million principal of 2026 Notes due June 15, 2026, with a 0.375% fixed interest rate. The filing states the 2025 Notes will be classified as current as of the end of the third quarter of fiscal 2025.
How much of the company's future revenue is already contracted?
Total remaining non-cancelable performance obligations under subscription contracts were approximately $3,505 million as of July 31, 2024. Of this amount, the company expects to recognize approximately $1,995 million, or 57%, over the next 12 months.
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