Okta, Inc. [OKTA] Filings

10-Q 1 okta-20231031.htm 10-Q okta-20231031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38044

_____________________________________

Okta, Inc.

(Exact Name of Registrant as Specified in its Charter)

_____________________________________

Delaware

100 First Street, Suite 600

26-4175727

(State or Other Jurisdiction of

Incorporation or Organization)

San Francisco

(I.R.S. Employer

Identification Number)

California

94105

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (888) 722-7871

___________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

OKTA

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 27, 2023, the number of shares of registrant’s Class A common stock outstanding was 158,045,390 and the number of shares of the registrant’s Class B common stock outstanding was 7,299,891.

Okta, Inc.

Table of Contents


		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets as of October 31, 2023 and January 31, 2023	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2023 and 2022	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2023 and 2022	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 31, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 5.	Other Information	66
Item 6.	Exhibits	66
	Signatures	68

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, product development, business strategy, plans, market trends, opportunities, positioning and the macroeconomic environment. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” “shall” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements include these identifying words. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”

Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our revenue, costs of revenue, gross profits, margins and operating expenses;

•the impact of general economic, business and market conditions, including general economic downturn or recession, market volatility, and the inflation and interest rate environment;

•the impact of past or future cybersecurity incidents;

•trends in our key business metrics;

•our growth strategy and ability to compete;

•the sufficiency of our cash and cash equivalents, investments and cash provided by sales of our products and services to meet our liquidity needs;

•market or other opportunities arising from business combinations; and

•the impact of recent accounting pronouncements on our financial statements.

Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in “Risk Factors” in this Quarterly Report on Form 10-Q as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

PART I

Item. 1 Financial Statements

OKTA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions, shares in thousands, except per share data)


	October 31, 2023		January 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	400	$	264
Short-term investments	1,730		2,316
Accounts receivable, net of allowances of $7 and $8	418		481
Deferred commissions	104		92
Prepaid expenses and other current assets	75		76
Total current assets	2,727		3,229
Property and equipment, net	50		59
Operating lease right-of-use assets	91		122
Deferred commissions, noncurrent	220		210
Intangible assets, net	197		241
Goodwill	5,406		5,400
Other assets	49		46
Total assets	$	8,740	$	9,307
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	11	$	12
Accrued expenses and other current liabilities	108		112
Accrued compensation	168		99

Deferred revenue	1,256		1,242
Total current liabilities	1,543		1,465
Convertible senior notes, net, noncurrent	1,302		2,193
Operating lease liabilities, noncurrent	119		142
Deferred revenue, noncurrent	18		18
Other liabilities, noncurrent	28		23
Total liabilities	3,010		3,841
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized; no shares issued and outstanding as of October 31, 2023 and January 31, 2023	—		—
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized; 158,024 and 154,009 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively	—		—
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 7,300 shares issued and outstanding as of October 31, 2023 and January 31, 2023	—		—
Additional paid-in capital	8,534		7,974
Accumulated other comprehensive loss	(18)		(33)
Accumulated deficit	(2,786)		(2,475)
Total stockholders’ equity	5,730		5,466
Total liabilities and stockholders' equity	$	8,740	$	9,307

See Notes to Condensed Consolidated Financial Statements.

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in millions, shares in thousands, except per share data)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue:
Subscription	$	569	$	466	$	1,614	$	1,299
Professional services and other	15		15		44		49
Total revenue	584		481		1,658		1,348
Cost of revenue:
Subscription	126		117		376		345
Professional services and other	19		21		60		62
Total cost of revenue	145		138		436		407
Gross profit	439		343		1,222		941
Operating expenses:
Research and development	165		148		500		466
Sales and marketing	270		290		787		807
General and administrative	111		98		340		309
Restructuring and other charges	4		14		28		14
Total operating expenses	550		550		1,655		1,596
Operating loss	(111)		(207)		(433)		(655)
Interest expense	(2)		(3)		(7)		(9)
Interest income and other, net	21		5		56		12
Gain on early extinguishment of debt	18		—		91		—
Interest and other, net	37		2		140		3
Loss before provision for income taxes	(74)		(205)		(293)		(652)
Provision for income taxes	7		4		18		10
Net loss	$	(81)	$	(209)	$	(311)	$	(662)

Net loss per share, basic and diluted	$	(0.49)	$	(1.32)	$	(1.91)	$	(4.21)

Weighted-average shares used to compute net loss per share, basic and diluted	164,381		158,708		162,836		157,344

See Notes to Condensed Consolidated Financial Statements.

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Net loss	$	(81)	$	(209)	$	(311)	$	(662)
Other comprehensive income (loss):
Net change in unrealized gains or losses on available-for-sale securities	5		(8)		19		(27)
Foreign currency translation adjustments	(9)		(7)		(4)		(17)
Other comprehensive income (loss)	(4)		(15)		15		(44)
Comprehensive loss	$	(85)	$	(224)	$	(296)	$	(706)

See Notes to Condensed Consolidated Financial Statements.

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Common stock and additional paid-in capital:
Balance, beginning of period	$	8,359	$	7,607	$	7,974	$	7,750
Adjustments from adoption of Accounting Standards Update No. 2020-06	—		—		—		(528)

Issuance of common stock upon exercise of stock options and other activity, net	3		6		40		36

Stock-based compensation	175		173		527		516

Settlement of convertible senior notes	—		—		—		12




Settlement of warrants	(3)		—		(7)		—


Balance, end of period	8,534		7,786		8,534		7,786

Accumulated deficit:
Balance, beginning of period	(2,705)		(2,113)		(2,475)		(1,816)
Adjustments from adoption of Accounting Standards Update No. 2020-06	—		—		—		156
Net loss	(81)		(209)		(311)		(662)



Balance, end of period	(2,786)		(2,322)		(2,786)		(2,322)

Accumulated other comprehensive loss:
Balance, beginning of period	(14)		(41)		(33)		(12)
Other comprehensive income (loss)	(4)		(15)		15		(44)


Balance, end of period	(18)		(56)		(18)		(56)
Total stockholders’ equity	$	5,730	$	5,408	$	5,730	$	5,408

See Notes to Condensed Consolidated Financial Statements.

OKTA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Nine Months Ended October 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(311)	$	(662)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	523		513
Depreciation, amortization and accretion	64		89
Amortization of debt issuance costs	3		4
Amortization of deferred commissions	76		61
Deferred income taxes	4		4



Lease impairment charges	25		14
Gain on early extinguishment of debt	(91)		—
Net (gain) loss on strategic investments	1		(2)
Other, net	5		2
Changes in operating assets and liabilities:
Accounts receivable	61		15
Deferred commissions	(102)		(82)
Prepaid expenses and other assets	(1)		(4)
Operating lease right-of-use assets	18		21
Accounts payable	(1)		29
Accrued compensation	70		(30)
Accrued expenses and other liabilities	9		(6)
Operating lease liabilities	(29)		(22)
Deferred revenue	14		66
Net cash provided by operating activities	338		10
Cash flows from investing activities:
Capitalized software	(10)		(8)
Purchases of property and equipment	(5)		(9)
Purchases of securities available-for-sale and other	(1,151)		(872)
Proceeds from maturities and redemption of securities available-for-sale	1,702		848
Proceeds from sales of securities available-for-sale and other	61		—
Purchases of intangible assets	(1)		(2)
Payments for business acquisitions, net of cash acquired	(22)		(4)
Net cash provided by (used in) investing activities	574		(47)
Cash flows from financing activities:


Payments for repurchases of convertible senior notes	(803)		—



Payments for warrants related to convertible senior notes	(7)		—


Proceeds from stock option exercises, net of repurchases	10		15
Proceeds from shares issued in connection with employee stock purchase plan	26		19

Net cash provided by (used in) financing activities	(774)		34
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash	(1)		(11)
Net increase (decrease) in cash, cash equivalents and restricted cash	137		(14)
Cash, cash equivalents and restricted cash at beginning of period	271		273
Cash, cash equivalents and restricted cash at end of period	$	408	$	259

Supplementary cash flow disclosure:
Cash paid during the period for:


Operating leases	34		30
Non-cash activities:

Issuance of common stock for conversions of convertible senior notes	—		40
Benefit from exercise of hedges related to convertible senior notes	2		18





Operating lease right-of-use assets exchanged for lease liabilities	11		8









Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	400	$	250
Restricted cash, current included in prepaid expenses and other current assets	2		2
Restricted cash, noncurrent included in other assets	6		7
Total cash, cash equivalents and restricted cash	$	408	$	259

See Notes to Condensed Consolidated Financial Statements.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Overview and Basis of Presentation

Description of Business

Okta, Inc. (the “Company”) is the leading independent identity partner. The Company’s Workforce Identity and Customer Identity Clouds are powered by the Company’s Identity Platform enabling customers to securely connect the right people to the right technologies and services at the right time. Employees and contractors sign into the Workforce Identity Cloud to seamlessly and securely access the applications they need to do their most important work. Developers leverage the Workforce Identity and Customer Identity Clouds to securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their core missions. Organizations use the Company’s Identity Platform to collaborate with their partners, and to provide their customers with more modern and secure experiences in the cloud and via mobile devices. The Company is headquartered in San Francisco, California.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim periods. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. All intercompany balances and transactions have been eliminated in consolidation. The Company conducts business globally and is managed, operated and organized by major functional departments that operate on a consolidated basis. As a result, the Company operates in one reportable segment.

The condensed consolidated balance sheet as of January 31, 2023, included herein, was derived from the audited financial statements as of that date. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair statement of the results of operations for the interim periods presented but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2024 or any future period.

The Company’s fiscal year ends on January 31. References to fiscal 2024, for example, refer to the fiscal year ending January 31, 2024.

Certain reclassifications of components of prior period operating expenses have been made in the condensed consolidated statements of operations to conform to the current period presentation. These reclassifications had no impact on total operating expenses as previously reported.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 3, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates are based on historical experience and on other assumptions that management believes are reasonable under the circumstances. Actual results could vary from those estimates. The Company’s most significant estimates include the valuation of deferred income tax assets, uncertain tax positions, assets and liabilities acquired in business combinations, and loss contingencies related to litigation.

2. Accounting Standards and Significant Accounting Policies

Significant Accounting Policies

For a summary of the Company’s significant accounting policies refer to “Note 2. Summary of Significant Accounting Policies” of its Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the new standard.

3. Restructuring and Other Charges

During the third quarter of fiscal 2023, the Company announced a real estate optimization plan which provided for closing duplicative sites and decommissioning underutilized offices and floors. The Company recognized non-cash lease impairment charges of $14 million in the year ended January 31, 2023. In the nine months ended October 31, 2023, the Company recognized an additional $25 million of non-cash lease impairment charges as a result of the real estate optimization plan. The non-cash lease impairment charges represent the amount that the carrying value of the asset groups exceeded their estimated fair values. The asset groups primarily include operating lease right-of-use assets, leasehold improvements, and related property and equipment. To estimate the fair value of the asset group, the Company utilized a discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate.

During the fourth quarter of fiscal 2023, the Company approved a restructuring plan (the “Restructuring Plan”) intended to reduce operating expenses and improve profitability. The Restructuring Plan involved a reduction of the Company’s workforce by approximately 300 full-time employees.

The Restructuring Plan was substantially complete by the first quarter of fiscal 2024 and the Company recognized aggregate restructuring costs of $15 million in the fourth quarter of fiscal 2023.

In the three and nine months ended October 31, 2023, the Company recognized an additional $4 million of severance and termination benefit costs related to an insignificant workforce reduction.

The following table summarizes the Company’s restructuring liability that is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheet:


	Severance and termination benefit costs
	(dollars in millions)
Balance as of January 31, 2023	$	15
Restructuring charges	4
Cash payments	(15)
Balance as of October 31, 2023	$	4

4. Cash Equivalents and Investments

Cash Equivalents and Short-term Investments

In estimating fair value, the Company uses a three-tier fair value hierarchy as follows:

•Level 1 — Valuations based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

•Level 2 — Valuations based on other inputs that are directly or indirectly observable in the marketplace.

•Level 3 — Valuations based on unobservable inputs that are supported by little or no market activity.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables present the amortized cost, unrealized gain (loss) and estimated fair value of cash equivalents and short-term investments:


	As of October 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
	(dollars in millions)
Level 1:
Cash equivalents:
Money market funds	$	287	$	—	$	—	$	287



Total cash equivalents	287		—		—		287
Level 2:
Short-term investments (Available-for-sale):


U.S. treasury securities	1,672		—		(5)		1,667
Corporate debt securities	32		—		—		32
Certificates of deposit	31		—		—		31
Total short-term investments	1,735		—		(5)		1,730
Total	$	2,022	$	—	$	(5)	$	2,017


	As of January 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
	(dollars in millions)
Level 1:
Cash equivalents:
Money market funds	$	133	$	—	$	—	$	133



Total cash equivalents	133		—		—		133
Level 2:
Short-term investments (Available-for-sale):


U.S. treasury securities	2,207		—		(22)		2,185
Corporate debt securities	133		—		(2)		131
Total short-term investments	2,340		—		(24)		2,316
Total	$	2,473	$	—	$	(24)	$	2,449

The following table presents the contractual maturities of the Company’s short-term investments:


	As of October 31, 2023
	Amortized Cost		Estimated Fair Value
	(dollars in millions)
Due within one year	$	1,369	$	1,364
Due between one to five years	366		366
Total	$	1,735	$	1,730

Interest receivable of $17 million and $10 million is included in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of October 31, 2023 and January 31, 2023, respectively.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table presents the fair values and unrealized losses related to the Company’s investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of October 31, 2023:


	Less Than 12 Months				More Than 12 Months				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(dollars in millions)
U.S. treasury securities	$	1,185	$	(2)	$	332	$	(3)	$	1,517	$	(5)
Corporate debt securities	28		—		4		—		32		—
Total	$	1,213	$	(2)	$	336	$	(3)	$	1,549	$	(5)

The Company had 98 and 159 short-term investments in unrealized loss positions as of October 31, 2023 and January 31, 2023, respectively.

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. There were no material credit or non-credit related impairments for short-term investments as of October 31, 2023 and January 31, 2023.

Strategic Investments

Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. As of October 31, 2023 and January 31, 2023, the balance of strategic investments was $28 million and $25 million, respectively.

5. Deferred Commissions

Sales commissions capitalized as contract costs totaled $37 million and $33 million in the three months ended October 31, 2023 and 2022, respectively, and $102 million and $82 million in the nine months ended October 31, 2023 and 2022, respectively.

Amortization of contract costs totaled $27 million and $21 million for the three months ended October 31, 2023 and 2022, respectively, and $76 million and $61 million for the nine months ended October 31, 2023 and 2022, respectively.

6. Deferred Revenue and Performance Obligations

Deferred Revenue

Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.

Subscription revenue recognized during the three months ended October 31, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $519 million and $418 million, respectively, and $1,114 million and $858 million in the nine months ended October 31, 2023 and 2022, respectively. Professional services and other revenue recognized during the three months ended October 31, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $5 million and $6 million, respectively, and $9 million and $13 million in the nine months ended October 31, 2023 and 2022, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations (“RPO”) represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Total remaining non-cancelable performance obligations under subscription contracts with customers was approximately $3,073 million as of October 31, 2023. Of this amount, the Company expects to recognize revenue of approximately $1,826 million, or 59%, over the next 12 months, with the balance to be recognized as revenue thereafter. Remaining performance obligations for professional services and other contracts as of October 31, 2023 were not material.

7. Convertible Senior Notes, Net

Convertible Senior Notes

The 2025 convertible senior notes (“2025 Notes”) and the 2026 convertible senior notes (“2026 Notes” and together with the 2025 Notes, the “Notes”) are recorded at face value less unamortized debt issuance costs.

During the three months ended October 31, 2023, the Company repurchased $150 million principal amount of the 2026 Notes for $132 million in cash, resulting in a gain on early extinguishment of debt of $18 million.

During the nine months ended October 31, 2023, the Company repurchased $508 million principal amount of the 2025 Notes for $462 million in cash and $392 million principal amount of the 2026 Notes for $341 million in cash, resulting in an aggregate gain on early extinguishment of debt of $91 million.

The net carrying amount of the Notes consisted of the following:


	As of October 31, 2023		As of January 31, 2023
	(dollars in millions)
2025 Notes:
Principal	$	552	$	1,060
Less: unamortized debt issuance costs	(3)		(8)
Net carrying amount	$	549	$	1,052
2026 Notes:
Principal	$	758	$	1,150
Less: unamortized debt issuance costs	(5)		(9)
Net carrying amount	$	753	$	1,141

Fair Value Measurements

The following table presents the principal amounts and estimated fair values of the Notes, which are not recorded at fair value on the condensed consolidated balance sheets:


	As of October 31, 2023
	Principal Amount		Estimated Fair Value
	(dollars in millions)
2025 Notes	$	552	$	491
2026 Notes	$	758	$	650

The estimated fair values of the Notes, which are Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.

Warrants

In February 2018, the Company sold net-share-settled (or, at the Company’s election subject to certain conditions, cash-settled) warrants (the “Warrants”) to acquire shares of the Company’s Class A common stock at an initial exercise price of approximately $68.06 per share. The Warrants were exercisable over 80 scheduled trading days beginning on May 15, 2023. The Company elected to cash settle the Warrants.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

During the nine months ended October 31, 2023, the Company settled Warrants corresponding to approximately 1.0 million shares for total cash payments of $7 million. As of October 31, 2023, no Warrants remained outstanding.

8. Commitments and Contingencies

Letters of Credit

In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate amount of $7 million and $6 million were issued and outstanding as of October 31, 2023 and January 31, 2023, respectively. No draws have been made under such letters of credit.

Legal Matters

From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings.

On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0, Inc. (“Auth0”). The lawsuit seeks an order certifying the lawsuit as a class action and unspecified damages. The defendants moved to dismiss the amended complaint. On March 31, 2023, the court issued an order granting in part and denying in part the motion to dismiss. The court dismissed in full the claims based on the plaintiff’s allegations related to the Company’s cybersecurity controls and vulnerability to data breaches, and dismissed in part and denied in part the claims based on allegations related to the Auth0 integration. On November 1, 2023, the plaintiffs filed a motion for class certification and the court has scheduled a hearing on that motion for March 29, 2024. The court has not issued a scheduling order beyond class certification, and discovery is proceeding.

Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United States District Court for the Northern District of California against certain of its current and former executive officers and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v. McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The lawsuits seek orders permitting the plaintiffs to maintain the actions derivatively on behalf of the Company, awarding unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and requiring the Company to make certain reforms to its corporate governance and controls. On February 22, 2023, the court entered a stipulated order consolidating the derivative actions, appointing co-lead counsel for plaintiffs, and staying the consolidated derivative actions during the pendency of the motion to dismiss in the securities class action lawsuit. The consolidated derivative action is captioned In re Okta, Inc. Stockholder Derivative Litigation, No. 3:22-cv-07480. On May 9, 2023, the court entered a stipulated order continuing the stay through the close of discovery in the securities class action lawsuit.

On April 14, 2023, another shareholder filed a substantially similar derivative lawsuit in the United States District Court for the District of Delaware against certain of the Company’s current and former executive officers and directors, captioned Buono v. McKinnon et al., No. 1:23-cv-00413. On May 31, 2023, the court entered a stipulated order whereby the defendants agreed to accept service and stay the derivative action through the close of discovery in the securities class action lawsuit.

The Company is defending these lawsuits vigorously. At this time, the Company is unable to predict the outcome or estimate the amount of loss or range of losses that could potentially result from these lawsuits.

Warranties and Indemnification

To date, the Company has not incurred significant costs and has not accrued any material liabilities in the accompanying condensed consolidated financial statements as a result of its warranty and indemnification obligations.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

9. Employee Incentive Plans

The Company’s equity incentive plans provide for granting stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) to employees, consultants, officers and directors and restricted stock units with market-based vesting conditions to certain executives. In addition, the Company offers an Employee Stock Purchase Plan (“ESPP”) to eligible employees.

Stock-based compensation expense was recorded in the following cost and expense categories in the Company’s condensed consolidated statements of operations:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
	(dollars in millions)
Cost of revenue
Subscription	$	20	$	17	$	57	$	52
Professional services and other	3		4		11		11
Research and development	70		69		212		209
Sales and marketing	40		41		119		119
General and administrative	39		41		124		122
Total	$	172	$	172	$	523	$	513

The following table presents total unrecognized stock-based compensation expense related to outstanding equity awards as of October 31, 2023:

Unrecognized Stock-based Compensation Expense
(in millions)

Weighted-average remaining period
(in years)

Unvested RSUs

1,053

2.5 years

Unvested RSAs

0.5 years

Unvested stock options

1.0 year

ESPP

0.3 years

Total

1,139

Market-based Restricted Stock Units

In March 2023, the Company granted market-based RSUs to certain members of management. The target number of market-based RSUs granted was 192,843. One-third of these market-based RSUs vest over each of a one-, two- and three-year performance period, each starting on February 1, 2023. The number of shares that can be earned ranges from 0% to 200% of the target number of shares based on the relative performance of the per share price of the Company’s common stock as compared to the Nasdaq Composite Index over the respective performance periods and subject to continuous employment through the vesting dates. The $149.78 average grant date fair value per target market-based RSU was determined using a Monte Carlo simulation approach. Compensation expense for awards with market conditions is recognized over the service period using the accelerated attribution method and is not reversed if the market condition is not met.

10. Income Taxes

For the three and nine months ended October 31, 2023, the Company recorded a tax provision of $7 million and $18 million on pretax losses of $74 million and $293 million, respectively. The effective tax rate for the three and nine months ended October 31, 2023 was approximately (9.0)% and (6.0)%, respectively. The effective tax rate differs from the statutory rate primarily as a result of a full valuation allowance against U.S. deferred tax assets, the tax effect of foreign operations, U.S. federal and state taxes, and shortfalls from stock-based compensation.

OKTA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The Tax Cuts and Jobs Act enacted on December 22, 2017 amended Internal Revenue Code Section 174 to require that specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years (U.S. R&E) or fifteen years (non-U.S. R&E) beginning in the Company's fiscal 2023. As a result, the Company utilized federal and state tax attributes and incurred cash taxes and tax expense.

For the three and nine months ended October 31, 2022, the Company recorded a tax provision of $4 million and $10 million on pretax losses of $205 million and $652 million, respectively. The effective tax rate for the three and nine months ended October 31, 2022 was approximately (1.8)% and (1.5)%, respectively. The effective tax rate differs from the statutory rate primarily as a result of a full valuation allowance against U.S. deferred tax assets, the tax effect of foreign operations, U.S. state taxes, and stock-based compensation shortfalls in the United Kingdom.

11. Net Loss Per Share

The Company computes net loss per share of common stock in conformity with the two-class method required for participating securities. The following table presents the calculation of basic and diluted net loss per share:


	Three Months Ended October 31,								Nine Months Ended October 31,
	2023				2022				2023				2022
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
	(dollars in millions, shares in thousands, except per share data)
Numerator:
Net loss	$	(77)	$	(4)	$	(200)	$	(9)	$	(297)	$	(14)	$	(632)	$	(30)
Denominator:
Weighted-average shares outstanding, basic and diluted	157,081		7,300		151,535		7,173		155,536		7,300		150,296		7,048
Net loss per share, basic and diluted	$	(0.49)	$	(0.49)	$	(1.32)	$	(1.32)	$	(1.91)	$	(1.91)	$	(4.21)	$	(4.21)

As the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	As of October 31,
	2023	2022
	(shares in thousands)




Issued and outstanding stock options	5,423	6,630
Unvested RSUs issued and outstanding	10,164	9,120
Unvested market-based RSUs issued and outstanding	435	116
Unvested RSAs issued and outstanding	308	743


Shares committed under the ESPP	401	597
Shares related to the 2023 Notes	—	108
Shares subject to warrants related to the issuance of the 2023 Notes	—	1,048
Shares related to the 2025 Notes	2,925	5,617
Shares related to the 2026 Notes	3,177	4,820
	22,833	28,799

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding. In addition, percentages presented may not add to their respective totals or recalculate due to rounding. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q and Part I, Item 1A in our Annual Report on Form 10-K. Our fiscal year ends January 31.

Overview

Okta is the leading independent identity partner. Our Workforce Identity and Customer Identity Clouds are powered by our category-defining Okta Identity Platform that enables our customers to securely connect the right people to the right technologies and services at the right time. Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile, web and Software-as-a-Service ("SaaS") applications, on-premises servers, application programming interfaces, IT infrastructure providers and services from a multitude of devices. Employees and contractors sign into the Workforce Identity Cloud to seamlessly and securely access the applications they need to do their most important work. Developers leverage our Customer Identity and Workforce Identity Clouds to securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their core missions. Given the growth trends in the number of applications and cloud adoption, and the movement to remote workforces, identity is becoming the most critical layer of an organization’s security. As workforces have transitioned to fully remote and hybrid work models, Zero Trust has become an increasingly important security model and identity an increasingly critical service. Our approach to identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer facing applications.

As of October 31, 2023, more than 18,800 customers across nearly every industry used Okta to secure and manage identities around the world. Our customers consist of leading global organizations ranging from the largest enterprises, to small and medium-sized businesses, universities, non-profits and government agencies. We also partner with leading application, IT infrastructure and security vendors through our Okta Integration Network. As of October 31, 2023, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure and security vendors.

We employ a SaaS business model, and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings. We focus on acquiring and retaining our customers and increasing their spending with us through expanding the number of users who access our Workforce Identity and Customer Identity Clouds and up-selling additional products. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners, including resellers, system integrators and other distribution partners. Our subscription fees include the use of our service and our technical support and management of our platform. We base subscription fees primarily on the products used and the number of users on our platform. We typically invoice customers in advance in annual installments for subscriptions to our platform.

Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 97% of total revenue for the nine months ended October 31, 2023. Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow and RPO growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Impact of Cybersecurity Incidents

In the past we have experienced cybersecurity incidents, such as the January 2022 incident involving one of our third-party service providers and the October 2023 incident where a threat actor gained unauthorized access to and stole information from our third-party customer support system, that harmed our reputation and customer relations, adversely impacted our financial results and may create additional liabilities. While we expect the impact of these security incidents to adversely affect our future financial performance, we cannot predict the extent of such impact with certainty. Due to the nature of our business, the announcement of any security incidents, even if not significant, could have these impacts.

Impact of Current Economic Conditions

Worldwide economic uncertainties and negative trends, including financial and credit market fluctuations, uncertainty in the banking sector, rising interest rates, inflation and other impacts from the macroeconomic environment have, and could continue to, adversely affect our business operations or financial results. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic events on our business, results of operations and overall financial position remain uncertain. See the section titled “Risk Factors'' included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.

Components of Results of Operations

Revenue

Subscription Revenue. Subscription revenue primarily consists of fees for access to and usage of our cloud-based platform and related support. Subscription revenue is driven primarily by the number of customers, the number of users per customer and the products used. We typically invoice customers in advance in annual installments for subscriptions to our platform.

Professional Services and Other. Professional services revenue includes fees from assisting customers in implementing and optimizing the use of our products. These services include application configuration, system integration and training services.

We generally invoice customers as the work is performed for time-and-materials arrangements, and up front for fixed fee arrangements. All professional services revenue is recognized as the services are performed.

Overhead Allocation and Employee Compensation Costs

We allocate shared costs, such as facilities costs (including rent, utilities and depreciation on assets shared by all departments), certain information technology costs and recruiting costs to all departments based on headcount. As such, allocated shared costs are reflected in each of the cost of revenue and operating expense categories. Employee compensation costs reflected in each of the cost of revenue and operating expense categories include salaries, bonuses, compensation related taxes, benefits and stock-based compensation. Additionally included in the sales and marketing expense category are sales commissions and related taxes.

Cost of Revenue and Gross Margin

Cost of Subscription. Cost of subscription primarily consists of expenses related to hosting our services and providing support. These expenses include employee-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired developed technology and allocated overhead.

We intend to continue to invest additional resources in our platform infrastructure and our platform support organizations. We will continue to invest in technology innovation and we anticipate that costs qualifying for capitalization of internal-use software costs and related amortization may fluctuate over time. We expect our investment in technology to expand the capability of our platform enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of subscription revenue in the future.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cost of Professional Services and Other. Cost of professional services consists primarily of employee-related costs for our professional services delivery team, travel-related costs, allocated overhead and costs of outside services associated with supplementing our professional services delivery team. The cost of providing professional services has historically been higher than the associated revenue we generate.

Gross Margin. Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin may fluctuate from period to period as a result of the timing and amount of investments to expand our hosting capacity, our continued efforts to build platform support and professional services teams, increased stock-based compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and acquired intangible assets.

Operating Expenses

Research and Development. Research and development expenses consist primarily of employee compensation costs and allocated overhead. We believe that continued investment in our platform is important for our growth.

Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation costs, costs of general marketing and promotional activities, travel-related expenses, amortization expense associated with acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade names and allocated overhead. Commissions earned by our sales force that are considered incremental and recoverable costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally five years.

General and Administrative. General and administrative expenses consist primarily of employee compensation costs for finance, accounting, legal, information technology and human resources personnel. In addition, general and administrative expenses include acquisition and integration-related costs, non-personnel costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting corporate expenses, such as information technology, not allocated to other departments.

Restructuring and Other Charges. Restructuring and other charges consist primarily of personnel costs, such as notice period, employee severance payments and termination benefits. In addition, restructuring and other charges include certain lease impairment charges.

Interest and Other, Net

Interest and other, net consists of interest expense, which primarily includes amortization of debt issuance costs and contractual interest expense for our convertible senior notes, interest income from our investment holdings, gains on early extinguishment of debt and gains and losses from our strategic investments.

Provision for Income Taxes

Our provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate. The difference between our effective tax rate and the federal statutory rate is primarily due to a valuation allowance against U.S. deferred tax assets, the tax effect of foreign operations and state taxes.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Results of Operations

The following table sets forth our results of operations for the periods presented:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
	(dollars in millions)
Revenue:
Subscription	$	569	$	466	$	1,614	$	1,299
Professional services and other	15		15		44		49
Total revenue	584		481		1,658		1,348
Cost of revenue:
Subscription(1)	126		117		376		345
Professional services and other(1)	19		21		60		62
Total cost of revenue	145		138		436		407
Gross profit	439		343		1,222		941
Operating expenses:
Research and development(1)	165		148		500		466
Sales and marketing(1)	270		290		787		807
General and administrative(1)	111		98		340		309
Restructuring and other charges	4		14		28		14
Total operating expenses	550		550		1,655		1,596
Operating loss	(111)		(207)		(433)		(655)
Interest expense	(2)		(3)		(7)		(9)
Interest income and other, net	21		5		56		12
Gain on early extinguishment of debt	18		—		91		—
Interest and other, net	37		2		140		3
Loss before provision for income taxes	(74)		(205)		(293)		(652)
Provision for income taxes	7		4		18		10
Net loss	$	(81)	$	(209)	$	(311)	$	(662)

(1) Includes stock-based compensation expense as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
	(dollars in millions)
Cost of subscription revenue	$	20	$	17	$	57	$	52
Cost of professional services and other revenue	3		4		11		11
Research and development	70		69		212		209
Sales and marketing	40		41		119		119
General and administrative	39		41		124		122
Total stock-based compensation expense	$	172	$	172	$	523	$	513

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table sets forth our results of operations for the periods presented as a percentage of our total revenue:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue
Subscription	97	%	97	%	97	%	96	%
Professional services and other	3		3		3		4
Total revenue	100		100		100		100
Cost of revenue
Subscription	22		25		23		26
Professional services and other	3		4		3		4
Total cost of revenue	25		29		26		30
Gross profit	75		71		74		70
Operating expenses
Research and development	28		31		30		35
Sales and marketing	46		60		47		60
General and administrative	19		20		20		23
Restructuring and other charges	1		3		3		1
Total operating expenses	94		114		100		119
Operating loss	(19)		(43)		(26)		(49)
Interest expense	—		(1)		—		(1)
Interest income and other, net	4		1		3		2
Gain on early extinguishment of debt	2		—		5		—
Interest and other, net	6		—		8		1
Loss before provision for income taxes	(13)		(43)		(18)		(48)
Provision for income taxes	1		—		1		1
Net loss	(14)	%	(43)	%	(19)	%	(49)	%

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Comparison of the Three and Nine Months Ended October 31, 2023 and 2022

Revenue


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Revenue:
Subscription	$	569		$	466		$	103	22	%
Professional services and other	15			15			—		2
Total revenue	$	584		$	481		$	103	21
Percentage of revenue:
Subscription	97		%	97		%
Professional services and other	3			3
Total	100		%	100		%

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Revenue:
Subscription	$	1,614		$	1,299		$	315	24	%
Professional services and other	44			49			(5)		(9)
Total revenue	$	1,658		$	1,348		$	310	23
Percentage of revenue:
Subscription	97		%	96		%
Professional services and other	3			4
Total	100		%	100		%

Three and nine months ended

For the three and nine months ended October 31, 2023, the increase in subscription revenue was primarily due to the addition of new customers, an increase in users and sales of additional products to existing customers. The increase in revenue was attributable to a 10% increase in total customers, from over 17,050 as of October 31, 2022 to over 18,800 as of October 31, 2023, and revenue from existing customers as reflected in our Dollar-Based Net Retention Rate of 115% as of October 31, 2023.

For the three months ended October 31, 2023, professional services and other revenue was relatively flat. The decrease in professional services and other revenue for the nine months ended October 31, 2023 was due to lower bookings associated with professional services.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Cost of Revenue, Gross Profit and Gross Margin


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Cost of revenue:
Subscription	$	126		$	117		$	9	8	%
Professional services and other	19			21			(2)		(5)
Total cost of revenue	$	145		$	138		$	7	6
Gross profit	$	439		$	343		$	96	28
Gross margin:
Subscription	78		%	75		%
Professional services and other	(25)			(34)
Total gross margin	75			71

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Cost of revenue:
Subscription	$	376		$	345		$	31	9	%
Professional services and other	60			62			(2)		(3)
Total cost of revenue	$	436		$	407		$	29	7
Gross profit	$	1,222		$	941		$	281	30
Gross margin:
Subscription	77		%	73		%
Professional services and other	(37)			(28)
Total gross margin	74			70

Three months ended

For the three months ended October 31, 2023, cost of subscription revenue increased primarily due to an increase of $7 million in employee compensation costs.

Our gross margin for subscription revenue improved to 78% from 75% for the three months ended October 31, 2023 compared to the three months ended October 31, 2022. The increase was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue. While our gross margin for subscription revenue may fluctuate in the near-term as we invest in our growth, we expect our subscription revenue gross margin to improve over the long-term as we achieve additional economies of scale.

For the three months ended October 31, 2023, cost of professional services and other revenue decreased slightly and as a result our gross margin for professional services and other revenue improved to (25)% from (34)% for the three months ended October 31, 2023 compared to the three months ended October 31, 2022.

Nine months ended

For the nine months ended October 31, 2023, cost of subscription revenue increased primarily due to an increase of $21 million in employee compensation costs and an increase of $6 million in third-party hosting costs as we expanded capacity to support our growth.

Our gross margin for subscription revenue improved to 77% from 73% for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022. The increase was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

For the nine months ended October 31, 2023, cost of professional services and other revenue decreased slightly. Our gross margin for professional services and other revenue decreased to (37)% from (28)% for the nine months ended October 31, 2023 compared to the nine months ended October 31, 2022 primarily due to a decrease in professional services and other revenue.

Operating Expenses

Research and Development Expenses


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Research and development	$	165		$	148		$	17	11	%
Percentage of revenue	28		%	31		%

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Research and development	$	500		$	466		$	34	7	%
Percentage of revenue	30		%	35		%

Three and nine months ended

For the three and nine months ended October 31, 2023, research and development expenses increased primarily due to increases of $15 million and $36 million, respectively, in employee compensation costs. We expect our research and development expenses will increase in absolute dollars as our business grows.

Sales and Marketing Expenses


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Sales and marketing	$	270		$	290		$	(20)	(7)	%
Percentage of revenue	46		%	60		%

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Sales and marketing	$	787		$	807		$	(20)	(2)	%
Percentage of revenue	47		%	60		%

Three months ended

For the three months ended October 31, 2023, sales and marketing expenses decreased primarily due to a decrease in employee compensation costs of $28 million, partially offset by an increase in marketing costs of $11 million. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency. We expect our sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future. In the short-term, our sales and marketing expenses may increase as a percentage of our total revenue, however, over time, we expect this percentage to decrease as our total revenue grows.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Nine months ended

For the nine months ended October 31, 2023, sales and marketing expenses decreased primarily due to a decrease in amortization expense of $6 million for acquired customer relationships and trade names and a decrease in marketing costs of $6 million. The decrease in sales and marketing as a percentage of total revenue was primarily driven by improved spend efficiency.

General and Administrative Expenses


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
General and administrative	$	111		$	98		$	13	14	%
Percentage of revenue	19		%	20		%

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
General and administrative	$	340		$	309		$	31	10	%
Percentage of revenue	20		%	23		%

Three and nine months ended

For the three and nine months ended October 31, 2023, general and administrative expenses increased primarily due to increases of $10 million and $27 million, respectively, in employee compensation costs. We expect our general and administrative expenses will increase in absolute dollars as our business grows.

Restructuring and Other Charges


	Three Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Restructuring and other charges	$	4		$	14		$	(10)	(68)	%
Percentage of revenue	1		%	3		%

	Nine Months Ended October 31,
	2023			2022			$ Change		% Change
	(dollars in millions)
Restructuring and other charges	$	28		$	14		$	14	98	%
Percentage of revenue	3		%	1		%

Three months ended

For the three months ended October 31, 2023, restructuring and other charges decreased primarily due to the lease impairment charges incurred in the same period last year.

Nine months ended

For the nine months ended October 31, 2023, restructuring and other charges increased primarily due to lease impairment charges. We may incur additional charges as a result of our ongoing real estate optimization plan

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

and the evolving corporate real estate market conditions. See Note 3 to our condensed consolidated financial statements "Restructuring and Other Charges" for additional information.

Interest and Other, Net


	Three Months Ended October 31,
	2023		2022		$ Change		% Change
	(dollars in millions)
Interest expense	$	(2)	$	(3)	$	1	(34)	%
Interest income and other, net	21		5		16		393
Gain on early extinguishment of debt	18		—		18		—
Interest and other, net	$	37	$	2	$	35	2,438

	Nine Months Ended October 31,
	2023		2022		$ Change		% Change
	(dollars in millions)
Interest expense	$	(7)	$	(9)	$	2	(20)	%
Interest income and other, net	56		12		44		420
Gain on early extinguishment of debt	91		—		91		—
Interest and other, net	$	140	$	3	$	137	6,622

Three and nine months ended

For the three and nine months ended October 31, 2023, the change in interest and other, net was primarily due to the gain on early extinguishment of debt related to repurchases of the Notes and an increase in interest income from our short-term investments. We expect interest income from our short-term investments to continue to increase in the short term as a result of increasing interest rates.

Provision for Income Taxes


	Three Months Ended October 31,
	2023		2022		$ Change		% Change
	(dollars in millions)
Provision for income taxes	$	7	$	4	$	3	79	%

	Nine Months Ended October 31,
	2023		2022		$ Change		% Change
	(dollars in millions)
Provision for income taxes	$	18	$	10	$	8	79	%

Three and nine months ended

For the three and nine months ended October 31, 2023, income tax expense resulted primarily from income from profitable foreign jurisdictions, U.S. federal and state taxes, and the tax impact of shortfalls from stock-based compensation.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Key Business Metrics

We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.


	As of October 31,
	2023			2022
	(dollars in millions)
Number of customers	18,800			17,050
Customers with annual contract value ("ACV") above $100,000	4,365			3,740
Dollar-based net retention rate for the trailing 12 months ended	115		%	122		%
Current remaining performance obligations	$	1,826		$	1,579
Remaining performance obligations	$	3,073		$	2,853

Total Customers and Number of Customers with Annual Contract Value Above $100,000

As of October 31, 2023, we had over 18,800 customers on our platform. We believe that our ability to increase the number of customers on our platform is an indicator of our market penetration, the growth of our business, and our potential future business opportunities. Increasing awareness of our platform and capabilities, coupled with the mainstream adoption of cloud technology, has expanded the diversity of our customer base to include organizations of all sizes across all industries. The number of customers who have greater than $100,000 in annual contract value (“ACV”) with us was 4,365 and 3,740 as of October 31, 2023 and 2022, respectively. We expect this trend to continue as larger enterprises recognize the value of our platform and replace their legacy identity access management infrastructure. We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platform. For purposes of determining our customer count, we do not include customers that use our platform under self-service arrangements only.

Dollar-Based Net Retention Rate

Part of our ability to generate revenue is dependent upon our ability to maintain our relationships with our customers and to increase their utilization of our platform. We believe we can achieve these goals by focusing on delivering value and functionality that enables us to both retain our existing customers and expand the number of users and products used within an existing customer. We assess our performance in this area by measuring our Dollar-Based Net Retention Rate. Our Dollar-Based Net Retention Rate measures our ability to increase revenue across our existing customer base through expansion of users and products associated with a customer as offset by churn and contraction in the number of users and/or products associated with a customer.

Our Dollar-Based Net Retention Rate is based upon our ACV which is calculated based on the terms of that customer’s contract and represents the total contracted annual subscription amount as of that period end. We calculate our Dollar-Based Net Retention Rate as of a period end by starting with the ACV from all customers as of twelve months prior to such period end (“Prior Period ACV”). We then calculate the ACV from these same customers as of the current period end (“Current Period ACV”). Current Period ACV includes any upsells and is net of contraction or churn over the trailing twelve months but excludes ACV from new customers in the current period. We then divide the Current Period ACV by the Prior Period ACV to arrive at our Dollar-Based Net Retention Rate. Our Dollar-Based Net Retention Rate is inclusive of ACV from self-service customers.

Our strong Dollar-Based Net Retention Rate is primarily attributable to gross retention, an expansion of users and upselling additional products within our existing customers. Larger enterprises often implement a limited initial deployment of our platform before increasing their deployment on a broader scale. The decrease in our Dollar-Based Net Retention Rate as of October 31, 2023, compared to October 31, 2022, was primarily a result of the macroeconomic environment, with ACV from existing customers increasing at a slower rate in the current period.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Remaining Performance Obligations (“RPO”)

RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. Current RPO represents the portion of RPO expected to be recognized during the next 12 months. RPO fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts and fluctuations in foreign currency exchange rates.

Liquidity and Capital Resources

As of October 31, 2023, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,130 million, which were held for working capital and general corporate purposes, including potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury securities, money market funds, corporate debt securities and certificates of deposit. Historically, we have generated significant operating losses and both positive and negative cash flows from operations as reflected in our accumulated deficit and condensed consolidated statements of cash flows. We expect to continue to incur operating losses and cash flows from operations that may fluctuate between positive and negative amounts for the foreseeable future.

Recent macroeconomic events, including rising interest rates, global inflation and bank failures, have led to further economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed across large financial institutions. In addition, we have policy restrictions in place on the types of securities that can be purchased as part of our available-for-sale securities portfolio. These restrictions take credit quality, liquidity and diversification into consideration among other criteria. We continue to monitor the impacts of this situation; however, there can be no assurances that conditions in the banking sector and in global financial markets will not worsen and/or adversely affect us.

In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and received aggregate gross proceeds of $1,060 million. The interest rate on the 2025 Notes is fixed at 0.125% per annum and is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock.

In June 2020, we completed our private offering of the 2026 Notes due on June 15, 2026 and received aggregate gross proceeds of $1,150 million. The interest rate on the 2026 Notes is fixed at 0.375% per year and is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. In connection with the 2026 Notes, we used a portion of the proceeds to enter into capped call transactions ("2026 Capped Calls") with respect to our Class A common stock.

In the ordinary course of our business, we may, at any time and from time to time, seek to extinguish our outstanding Notes through cash purchases and/or exchanges for equity, in open-market purchases, privately negotiated transactions or otherwise. Such extinguishments, if any, will be conducted on such terms and at such prices as we may determine, and will depend on our evaluation of the prevailing market conditions, trading price of the Notes, our liquidity requirements, legal and contractual restrictions and other factors. During the nine months ended October 31, 2023, we repurchased $508 million principal amount of the 2025 Notes for $462 million in cash and $392 million principal amount of the 2026 Notes for $341 million in cash, which resulted in an aggregate gain on early extinguishment of debt of $91 million. See Note 7 to our condensed consolidated financial statements “Convertible Senior Notes, Net” for additional information. The 2025 Capped Calls and 2026 Capped Calls remain outstanding notwithstanding such repurchase.

On August 2, 2021, we completed the acquisition of Townsend Street Labs, Inc. (“atSpoke”), providing total cash consideration, net of cash acquired of $79 million. Of this amount, $13 million of consideration was held back as partial security for any adjustments and indemnification obligations and was paid during the nine months ended October 31, 2023.

We believe our existing cash and cash equivalents, our investments and cash provided by sales of our products and services will be sufficient to meet our short-term and long-term projected working capital and capital

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

expenditure needs for the foreseeable future. Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings and the continuing market adoption of our platform. We continue to assess our capital structure and evaluate the merits of deploying available cash. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies this could reduce our ability to compete successfully and harm our results of operations.

A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included on our condensed consolidated balance sheet as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recognized as revenue in accordance with our revenue recognition policy. As of October 31, 2023, we had deferred revenue of $1,274 million, of which $1,256 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


	Nine Months Ended October 31,
	2023		2022
	(dollars in millions)
Net cash provided by operating activities	$	338	$	10
Net cash provided by (used in) investing activities	574		(47)
Net cash provided by (used in) financing activities	(774)		34
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash	(1)		(11)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	137	$	(14)

Operating Activities

Our largest source of operating cash is cash collections from our customers for subscription and professional services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs. In recent periods, we have supplemented working capital requirements through net proceeds from the issuance of the 2025 Notes and 2026 Notes in September 2019 and June 2020, respectively.

During the nine months ended October 31, 2023, cash provided by operating activities was $338 million, an increase of $328 million compared to the nine months ended October 31, 2022. The increase was primarily attributable to an increase in cash received from customers and improved spend efficiency, partially offset by an increase in cash paid to vendors.

Investing Activities

During the nine months ended October 31, 2023, cash provided by investing activities was $574 million compared to cash used in investing activities of $47 million during the nine months ended October 31, 2022. The change was primarily attributable to an increase in cash provided from investment maturities and sales, net of purchases, partially offset by cash paid for business acquisitions, net of cash acquired.

OKTA, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Financing Activities

During the nine months ended October 31, 2023, cash used in financing activities was $774 million compared to cash provided by financing activities of $34 million during the nine months ended October 31, 2022. The change was primarily attributable to payments made for repurchases of the Notes.

Material Cash Requirements

Except for the debt extinguishment and the cash settlement of Warrants as discussed in Note 7 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, there were no significant changes outside the ordinary course of business to our material cash requirements disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Indemnification Agreements

In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No material demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive loss, or condensed consolidated statements of cash flows.

Critical Accounting Estimates

There have been no significant changes to our critical accounting estimates for the nine months ended October 31, 2023 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

The functional currencies of our foreign subsidiaries are the respective local currencies. Most of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, the United Kingdom, Canada and Australia. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. During the nine months ended October 31, 2023 and 2022, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.

Interest Rate Risk

We had cash, cash equivalents and short-term investments totaling $2,130 million as of October 31, 2023, of which $2,017 million was invested in U.S. treasury securities, money market funds, corporate debt securities and certificates of deposit. Our cash and cash equivalents are held for working capital and general corporate purposes, including potential future acquisition activity. Our short-term investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our investment portfolio are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our short-term investments as “available-for-sale,” no gains are recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered to be credit related changes, no losses in such securities are recognized due to changes in interest rates unless we intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise determine that all or a portion of the decline in fair value are due to credit related factors.

As of October 31, 2023, a hypothetical 10% relative change in interest rates would not have had a material impact on the value of our cash equivalents or investment portfolio. Fluctuations in the value of our cash equivalents and investment portfolio caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income (loss), and are realized only if we sell the underlying securities prior to maturity.

Convertible Senior Notes

In September 2019, we issued the 2025 Notes due September 1, 2025 with a principal amount of $1,060 million. Concurrently with the issuance of the 2025 Notes, we entered into separate capped call transactions. The 2025 Capped Calls were completed to reduce the potential dilution from the conversion of the 2025 Notes. As of October 31, 2023, $552 million principal amount of the 2025 Notes remain outstanding.

In June 2020, we issued the 2026 Notes due June 15, 2026 with a principal amount of $1,150 million. Concurrently with the issuance of the 2026 Notes, we entered into separate capped call transactions. The 2026 Capped Calls were completed to reduce the potential dilution from the conversion of the 2026 Notes. As of October 31, 2023, $758 million principal amount of the 2026 Notes remain outstanding.

The 2025 Notes and 2026 Notes have a fixed annual interest rate of 0.125% and 0.375%, respectively; accordingly, we do not have economic interest rate exposure on the Notes. However, the fair value of the Notes is exposed to interest rate risk. Generally, the fair market value of the fixed interest rate of the Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the Notes fluctuates when the market price of our common stock fluctuates. The fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. See Note 7 to our condensed consolidated financial statements for more information. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is defending these lawsuits vigorously.

Okta, Inc. [OKTA] Filings
10-Q	[2023-12-01]
10-Q	[2023-08-31]
10-Q	[2023-06-01]
10-K	[2023-03-03]
10-Q	[2022-12-01]
10-Q	[2022-09-01]
10-Q	[2022-06-03]
10-K	[2022-03-07]
10-Q	[2021-12-02]
10-Q	[2021-09-02]
10-Q	[2021-05-27]
10-K	[2021-03-04]
10-Q	[2020-12-03]
10-Q	[2020-08-28]
10-Q	[2020-05-29]
10-K	[2020-03-06]
10-Q	[2019-12-06]
10-Q	[2019-08-29]
10-Q	[2019-05-31]
10-K	[2019-03-14]
10-Q	[2018-12-06]
10-Q	[2018-09-07]
10-Q	[2018-06-08]
10-K	[2018-03-12]
10-Q	[2017-12-07]
10-Q	[2017-09-08]
10-Q	[2017-06-08]
S-1	[2017-03-13]