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Proxy 
Statement  
and Annual 
Report

2021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105

May 6, 2021

Dear Okta Stockholder:

I am pleased to invite you to attend the 2021 Annual Meeting of Stockholders of Okta, Inc. to be held on
June 17, 2021, at 9:00 a.m. Pacific Time. The Annual Meeting will be held virtually via a live interactive audio
webcast on the internet. You will be able to listen, vote and submit your questions at
www.virtualshareholdermeeting.com/OKTA2021 during the meeting.

Details regarding the meeting and the business to be conducted are more fully described in the

accompanying Notice of 2021 Annual Meeting of Stockholders and Proxy Statement. We encourage you to vote
at our Annual Meeting and any adjournments, continuations or postponements of our Annual Meeting if you
were a stockholder as of the close of business on April 19, 2021.

Thank you for your ongoing support of Okta.

Sincerely,

Todd McKinnon
Chairperson of the Board of Directors and Chief Executive Officer

YOUR VOTE IS IMPORTANT

On or about May 6, 2021, we expect to mail to our stockholders a Notice of Internet Availability of Proxy

Materials containing instructions on how to access our proxy statement for our 2021 Annual Meeting of
Stockholders and our 2021 Annual Report on Form 10-K. The Notice provides instructions on how to vote online
or by telephone and explains how to receive a paper copy of proxy materials by mail. This Proxy Statement and
our 2021 Annual Report can be accessed online at www.proxyvote.com using the control number located on the
Notice, on your proxy card, or in the instructions that accompanied your proxy materials. Our 2021 Annual
Report and Proxy Statement are also available on our investor relations website at investor.okta.com.

Even if you plan to attend the Annual Meeting, please ensure that your shares are voted by signing and

returning a proxy card or by using our internet or telephonic voting system.

 
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 17, 2021

Notice is hereby given that Okta, Inc. will hold its 2021 Annual Meeting of Stockholders on June 17, 2021,
at 9:00 a.m. Pacific Time via a live interactive audio webcast on the internet. You will be able to listen, vote and
submit your questions at www.virtualshareholdermeeting.com/OKTA2021 during the meeting. We are holding the
Annual Meeting for the following purposes, which are more fully described in the accompanying proxy
statement:

•

•

•

•

To elect two Class I directors to hold office until the 2024 Annual Meeting of Stockholders or until
their successors are duly elected and qualified;

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm
for the fiscal year ending January 31, 2022;

To conduct an advisory non-binding vote to approve the compensation of our named executive officers;
and

To transact any other business that properly comes before the Annual Meeting (including adjournments,
continuations and postponements thereof).

Our board of directors recommends that you vote ‘‘FOR’’ the director nominees named in Proposal One,

‘‘FOR’’ the ratification of the appointment of Ernst & Young LLP as our independent registered public
accounting firm as described in Proposal Two, and ‘‘FOR’’ the approval, on an advisory non-binding basis, of the
compensation of our named executive officers as described in Proposal Three.

We have elected to provide access to our Annual Meeting materials, which include the proxy statement for

our 2021 Annual Meeting of Stockholders accompanying this notice, in lieu of mailing printed copies. On or
about May 6, 2021, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials
containing instructions on how to access our Proxy Statement and our 2021 Annual Report on Form 10-K. The
Notice provides instructions on how to vote online or by telephone and explains how you can request a paper
copy of the proxy materials. Our Proxy Statement and our 2021 Annual Report can be accessed online at
www.proxyvote.com using the control number located on your Notice, on your proxy card, or in the instructions
that accompanied your proxy materials.

Only stockholders of record at the close of business on April 19, 2021 are entitled to notice of and to vote

at the Annual Meeting.

By Order of the Board of Directors,

Jonathan T. Runyan
General Counsel and Corporate Secretary

San Francisco, California
May 6, 2021

 
OKTA, INC.

2021 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT

TABLE OF CONTENTS

GENERAL INFORMATION

PROPOSAL ONE: ELECTION OF DIRECTORS

CORPORATE GOVERNANCE

PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

PROPOSAL THREE: ADVISORY NON-BINDING VOTE TO APPROVE THE COMPENSATION OF

OUR NAMED EXECUTIVE OFFICERS

EXECUTIVE OFFICERS

EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

EQUITY COMPENSATION PLAN INFORMATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

DELINQUENT SECTION 16(a) REPORTS

ADDITIONAL INFORMATION

1

9

13

23

24

25

26

27

47

48

49

52

54

54

[THIS PAGE INTENTIONALLY LEFT BLANK]

 
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105

PROXY STATEMENT
FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 2021

GENERAL INFORMATION

Our board of directors solicits your proxy on our behalf for the 2021 Annual Meeting of Stockholders and

at any adjournment, continuation or postponement of the Annual Meeting for the purposes set forth in this Proxy
Statement for our 2021 Annual Meeting of Stockholders and the accompanying Notice of 2021 Annual Meeting
of Stockholders. The Annual Meeting will be held virtually via a live interactive audio webcast on the internet on
June 17, 2021, at 9:00 a.m. Pacific Time. On or about May 6, 2021, we mailed our stockholders a Notice of
Internet Availability of Proxy Materials (the ‘‘Notice’’) containing instructions on how to access this Proxy
Statement and our 2021 Annual Report on Form 10-K. If you held shares of our Class A or Class B common
stock on April 19, 2021, you are invited to attend the meeting at www.virtualshareholdermeeting.com/OKTA2021
and to vote on the proposals described in this Proxy Statement.

In this Proxy Statement, the terms ‘‘Okta,’’ ‘‘the company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to Okta, Inc. and
its subsidiaries. The mailing address of our principal executive offices is Okta, Inc., 100 First Street, Suite 600,
San Francisco, California 94105.

How can I attend the Annual Meeting
online?

What matters are being voted on at the
Annual Meeting?

We will host our Annual Meeting via live webcast only. Any
stockholder can attend the Annual Meeting live online at
www.virtualshareholdermeeting.com/OKTA2021. The webcast will
start at 9:00 a.m. Pacific Time on June 17, 2021. Stockholders may
listen, vote and ask questions while attending the Annual Meeting
online. To attend the Annual Meeting, you will need the 16-digit
control number that is located on your Notice, on your proxy card,
or in the instructions accompanying your proxy materials.
Instructions on how to participate in the Annual Meeting are also
posted online at www.proxyvote.com.

You will be voting on:

•

•

•

•

The election of two Class I directors to serve until the
2024 Annual Meeting of Stockholders or until their
successors are duly elected and qualified;
A proposal to ratify the appointment of Ernst & Young
LLP as our independent registered public accounting firm
for the fiscal year ending January 31, 2022;
A proposal to approve, on an advisory non-binding basis,
the compensation of our named executive officers; and
Any other business as may properly come before the
Annual Meeting.

1

How does the board of directors
recommend that I vote on these
proposals?

Our board recommends a vote:

•

•

•

‘‘FOR’’ the election of Todd McKinnon and Michael
Stankey as Class I directors;
‘‘FOR’’ the ratification of the appointment of Ernst &
Young LLP as our independent registered public
accounting firm for the fiscal year ending January 31,
2022; and
‘‘FOR’’ the approval, on an advisory non-binding basis,
of the compensation of our named executive officers, as
disclosed in this Proxy Statement.

Who is entitled to vote?

Holders of either class of our common stock as of April 19, 2021,
the record date for our Annual Meeting (the ‘‘Record Date’’), may
vote at the Annual Meeting.

As of the Record Date, there were 125,052,387 shares of our
Class A common stock and 7,542,705 shares of our Class B
common stock outstanding. Our Class A common stock and Class B
common stock are collectively referred to in this Proxy Statement
as our ‘‘common stock.’’ Our Class A common stock and Class B
common stock will vote as a single class on all matters described in
this Proxy Statement. Stockholders are not permitted to cumulate
votes with respect to the election of directors. Each share of
Class A common stock is entitled to one vote on each proposal and
each share of Class B common stock is entitled to 10 votes on each
proposal.

Registered Stockholders. If shares of our common stock are
registered directly in your name with our transfer agent,
Computershare, you are considered the ‘‘stockholder of record’’
with respect to those shares. As the stockholder of record, you have
the right to vote online, by telephone, or—if you receive paper
proxy materials by mail—by filling out and returning the proxy
card.

Street Name Stockholders. If shares of our common stock are held
on your behalf in a brokerage account or by a bank or other
nominee, you are considered to be the beneficial owner of shares
that are held in ‘‘street name’’ (i.e., a ‘‘street name stockholder’’)
and the Notice was forwarded to you by your broker or nominee,
who is considered the stockholder of record with respect to those
shares. As the beneficial owner, you have the right to direct your
broker, bank or other nominee as to how to vote your shares. If you
are a beneficial owner, you may attend the Annual Meeting.
However, since a beneficial owner is not the stockholder of record,
you may not vote your shares of our common stock at the Annual
Meeting unless you request and obtain a valid proxy from the
organization that holds your shares giving you the right to vote at
the meeting. If you request a printed copy of our proxy materials by
mail, your broker, bank or other nominee will provide a voting
instruction form for you to use.

2

What is the quorum requirement?

How many votes are needed for the
approval of each proposal?

How do I vote?

A quorum is the minimum number of shares required to be present
to properly hold an Annual Meeting of Stockholders and conduct
business under our bylaws and Delaware law. The presence, in
person or by proxy, of a majority of the voting power of all issued
and outstanding shares of our common stock entitled to vote on the
Record Date will constitute a quorum at the Annual Meeting.
Abstentions, withhold votes and broker non-votes are counted as
shares present and entitled to vote for the purposes of determining a
quorum.

Proposal One. The election of directors requires a plurality of the
voting power of the shares of our common stock present in person
or by proxy at the Annual Meeting and entitled to vote thereon to
be approved. ‘‘Plurality’’ means that the nominees who receive the
largest number of votes cast ‘‘For’’ such nominees are elected as
directors. As a result, any shares not voted ‘‘For’’ a particular
nominee (whether as a result of stockholder abstention or a broker
non-vote) will not be counted in such nominee’s favor and will
have no effect on the outcome of the election. You may vote ‘‘For’’
or ‘‘Withhold’’ on each of the nominees for election as a director.

Proposal Two. The ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm for
our fiscal year ending January 31, 2022 requires the affirmative
vote of a majority of the voting power of the shares of our common
stock present in person or by proxy at the Annual Meeting and
entitled to vote thereon. Abstentions are considered shares present
and entitled to vote on this proposal, and thus, will have the same
effect as a vote ‘‘Against’’ this proposal. Broker non-votes will have
no effect on the outcome of this proposal.

Proposal Three. The approval of the compensation of our named
executive officers requires the affirmative vote of a majority of the
voting power of the shares of our common stock present in person
or by proxy at the Annual Meeting and entitled to vote thereon.
Abstentions will have the same effect as a vote ‘‘Against’’ this
proposal. Broker non-votes will have no effect on the outcome of
this proposal.

If you are a stockholder of record, there are four ways to vote:
(1) by internet at www.proxyvote.com, until 11:59 p.m.
Eastern Time on June 16, 2021 (have your Notice or
proxy card in hand when you visit the website);

(2) by toll-free telephone at 1-800-690-6903, until 11:59 p.m.
Eastern Time on June 16, 2021 (have your Notice or
proxy card in hand when you call);

(3) by completing and mailing your proxy card (if you

received printed proxy materials); or

(4) by internet during the Annual Meeting. Instructions on
how to attend and vote at the Annual Meeting are
described at
www.virtualshareholdermeeting.com/OKTA2021.

3

Can I change my vote?

What is the effect of giving a proxy?

In order to be counted, proxies submitted by telephone or internet
must be received by 11:59 p.m. Eastern Time on June 16, 2021.
Proxies submitted by U.S. mail must be received before the start of
the Annual Meeting.

If you are a street name stockholder, please follow the instructions
from your broker, bank or other nominee to vote by internet,
telephone or mail. You may not vote during the Annual Meeting
unless you receive a legal proxy from your broker, bank or other
nominee.

Yes. If you are a stockholder of record, you can change your vote
or revoke your proxy by:

•

•

•

notifying our Corporate Secretary, in writing, at Okta,
Inc., 100 First Street, Suite 600, San Francisco, California
94105 before the vote is counted;
voting again using the telephone or internet before 11:59
p.m. Eastern Time on June 16, 2021 (your latest telephone
or internet proxy is the one that will be counted); or
attending and voting during the Annual Meeting.

Simply logging into the Annual Meeting will not, by itself, revoke
your proxy.

If you are a street name stockholder, you may revoke any prior
voting instructions by contacting your broker, bank or other
nominee.

Proxies are solicited by and on behalf of our board. Todd
McKinnon, J. Frederic Kerrest, Michael Kourey and Jonathan T.
Runyan have been designated as proxy holders by our board. If
your proxy is properly granted, your shares represented by such
proxy will be voted at the Annual Meeting in accordance with your
instructions. If you do not give specific instructions, your shares
will be voted in accordance with the recommendations of our board
as described above. If any matters not described in this Proxy
Statement are properly presented at the Annual Meeting, the proxy
holders will use their own judgment to determine how to vote the
shares. If the Annual Meeting is adjourned, continued or postponed,
the proxy holders can vote your shares on the new Annual Meeting
date as well, unless you revoke your proxy instructions, as
described above.

4

What is the effect of abstentions and
broker non-votes?

Where can I find the voting results of
the Annual Meeting?

How are proxies solicited for the
Annual Meeting?

Why did I receive a Notice of Internet
Availability of Proxy Materials instead
of a full set of proxy materials?

Votes withheld from any nominee, abstentions and ‘‘broker
non-votes’’ (i.e., where a broker has not received voting instructions
from the beneficial owner and for which the broker does not have
discretionary power to vote on a particular matter) are counted as
present for purposes of determining the presence of a quorum, but
otherwise have no effect on the election of directors. Abstentions
have the same effect as a vote ‘‘Against’’ (i) the ratification of the
appointment of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending January 31, 2022
and (ii) the advisory non-binding approval of the compensation of
our named executive officers.

Brokerage firms and other intermediaries holding shares of our
common stock in street name for their customers are generally
required to vote such shares in the manner directed by their
customers. If you do not give timely voting instructions, your
broker will have discretion to vote your shares on the proposal to
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm but will not have discretion to
vote on any other proposals.

We will announce preliminary results at the Annual Meeting. We
will disclose final results by filing a Current Report on Form 8-K
within four business days after the Annual Meeting. If final results
are not available at that time, we will provide preliminary voting
results in the Current Report on Form 8-K and then provide the
final results in an amendment to that Current Report as soon as they
become available.

Our board is soliciting proxies for use at the Annual Meeting. All
expenses associated with this solicitation will be borne by us. We
will reimburse brokers or other nominees for reasonable expenses
that they incur in sending our proxy materials to their customers
who are beneficial owners of our common stock. In addition, our
directors and employees may also solicit proxies in person, by
telephone, or by other means of communication. Our directors and
employees will not be paid any additional compensation for
soliciting proxies.

In accordance with the rules of the U.S. Securities and Exchange
Commission (the ‘‘SEC’’), we have elected to furnish our proxy
materials, including this Proxy Statement and our 2021 Annual
Report, primarily online. On or about May 6, 2021, we mailed to
our stockholders a Notice that contains instructions on how to
access our proxy materials electronically, how to vote at the
meeting, and how to request printed copies of the proxy materials
and 2021 Annual Report. The Notice explains how you can request
to receive all future proxy materials in printed form by mail or
electronically by email. We encourage stockholders to access our
proxy materials online to help reduce the environmental impact of
our annual meetings.

5

I share an address with another
stockholder, and we received only one
paper copy of the proxy materials. How
may I obtain an additional copy?

What is the deadline to propose actions
for consideration at next year’s Annual
Meeting of Stockholders or to nominate
individuals to serve as directors?

As permitted by the SEC, we have adopted a procedure called
‘‘householding.’’ Under this procedure, we deliver a single copy of
the Notice and, if applicable, our proxy materials to multiple
stockholders who share the same address, unless we have received
contrary instructions from one or more of such stockholders.
Householding reduces our printing costs, mailing costs and fees, as
well as our environmental impact. Stockholders who participate in
householding will continue to be able to access and receive
individual proxy cards. Upon written or oral request, we will deliver
promptly a separate copy of the Notice and, if applicable, our proxy
materials to any stockholder at a shared address to which we
delivered a single copy of any of these materials. To receive a
separate copy, or if you are receiving multiple copies and wish to
participate in householding, please contact us at our principal office
address:

Okta, Inc.
Attention: Investor Relations
100 First Street, Suite 600
San Francisco, California 94105
(415) 604-3346

Street name stockholders may contact their broker, bank or other
nominee to request information about householding.

Stockholder Proposals
Stockholders may present proper proposals for inclusion in our
proxy statement and for consideration at next year’s Annual
Meeting of Stockholders by submitting their proposals in writing to
our Corporate Secretary at our principal office address shown
above. To be considered for inclusion in our proxy statement for the
2022 Annual Meeting of Stockholders, our Corporate Secretary
must receive the written stockholder proposal no later than
January 6, 2022. In addition, stockholder proposals must comply
with the requirements of SEC Rule 14a-8 regarding the inclusion of
stockholder proposals in company-sponsored proxy materials.
Stockholder proposals should be addressed to:

Okta, Inc.
Attention: Corporate Secretary
100 First Street, Suite 600
San Francisco, California 94105

6

Our bylaws establish an advance notice procedure for stockholders
who wish to present a proposal before an Annual Meeting of
Stockholders but do not intend for the proposal to be included in
our proxy statement. Our bylaws provide that the only business that
may be conducted at an Annual Meeting of Stockholders is business
that is (i) specified in our proxy materials with respect to such
Annual Meeting of Stockholders, (ii) otherwise properly brought
before such Annual Meeting of Stockholders by or at the direction
of our board, or (iii) properly brought before such meeting by a
stockholder of record entitled to vote at such Annual Meeting of
Stockholders who has delivered timely written notice to our
Corporate Secretary, which notice must contain the information
specified in our bylaws. To be timely for the 2022 Annual Meeting
of Stockholders, our Corporate Secretary must receive the written
notice at our principal executive offices:

•
•

not earlier than February 20, 2022, and
not later than the close of business on March 22, 2022.

In the event we hold the 2022 Annual Meeting of Stockholders
more than 30 days before or more than 60 days after the one-year
anniversary of the 2021 Annual Meeting, then, for notice by the
stockholder to be timely, it must be received by the Corporate
Secretary not earlier than the close of business on the 120th day
prior to such Annual Meeting and not later than the close of
business on the later of the 90th day prior to such Annual Meeting
or the tenth day following the day on which public announcement
of the date of such Annual Meeting is first made.

If a stockholder who has notified us of his, her or its intention to
present a proposal at an Annual Meeting of Stockholders does not
appear to present his, her or its proposal at such Annual Meeting of
Stockholders, we are not required to present the proposal for a vote
at such Annual Meeting of Stockholders.

Nomination of Director Candidates
Holders of our common stock may propose director candidates for
consideration by the nominating and corporate governance
committee of our board (the ‘‘nominating committee’’). Any such
recommendation must include the nominee’s name and
qualifications for membership on our board and be directed to our
Corporate Secretary at the address set forth above. For additional
information regarding stockholder recommendations for director
candidates, see the section titled ‘‘Corporate
Governance—Identifying and Evaluating Director
Nominees—Stockholder Recommendations.’’

7

Why is this Annual Meeting being held
virtually?

How can I submit a question at the
Annual Meeting?

What if I have technical difficulties or
trouble accessing the Annual Meeting?

In addition, our bylaws permit stockholders to nominate directors
for election at an Annual Meeting of Stockholders. To nominate a
director, you must provide the information required by our bylaws.
In addition, you must give timely notice to our Corporate Secretary
in accordance with our bylaws, which, in general, require that the
notice be received by our Corporate Secretary within the time
periods described above under the section titled ‘‘Stockholder
Proposals’’ for stockholder proposals that are not intended to be
included in a proxy statement.

Availability of Bylaws
A copy of our bylaws is included as Exhibit 3.2 to our 2021 Annual
Report and available via the SEC’s website at www.sec.gov. You
may also contact our Corporate Secretary at the address set forth
above for a copy of the relevant bylaw provisions regarding the
requirements for making stockholder proposals and nominating
director candidates.

We continue to embrace the latest technology to provide ease of
access, real-time communication, and cost savings for our
stockholders and our company. Hosting a virtual meeting makes it
easy for our stockholders to participate from any location around
the world.
You will be able to participate in the Annual Meeting of
Stockholders online and submit your questions during the meeting
by visiting www.virtualshareholdermeeting.com/OKTA2021. You
also will be able to vote your shares electronically prior to or
during the Annual Meeting.

If you want to submit a question during the Annual Meeting, log
into www.virtualshareholdermeeting.com/OKTA2021, type your
question in the ‘‘Ask a Question’’ field, and click ‘‘Submit.’’
Questions pertinent to meeting matters will be read and answered
during the meeting, subject to time constraints. The questions and
answers will be available as soon as practical after the Annual
Meeting at investor.okta.com and will remain available for one
week after posting.

If you encounter any difficulties accessing the virtual meeting
during the check-in or meeting time, please call the technical
support number that will be posted on the Virtual Shareholder
Meeting log in page. Technical support will be available starting at
8:30 a.m. Pacific Time on June 17, 2021 and will remain available
until the Annual Meeting ends.

8

PROPOSAL ONE:

ELECTION OF DIRECTORS

Board Structure

Our board is divided into three staggered classes of directors. One class is elected each year at the Annual

Meeting of Stockholders for a term of three years. The term of the Class I directors expires at the Annual
Meeting. The term of the Class II directors expires at the 2022 Annual Meeting of Stockholders and the term of
the Class III directors expires at the 2023 Annual Meeting of Stockholders. Directors who are re-elected are
expected to hold office for a three-year term or until the election and qualification of their successors in office.

Nominees

Our board has nominated Todd McKinnon and Michael Stankey for election as Class I directors to hold
office until the 2024 Annual Meeting of Stockholders or until their successors are duly elected and qualified,
subject to their earlier resignation or removal. Each of the nominees is a current Class I director and member of
our board and has consented to serve if elected.

Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote
all proxies received ‘‘FOR’’ the election of each nominee. If any nominee is unable or unwilling to serve at the
time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee chosen by our
present board. In the alternative, the proxies may vote only for the remaining nominees, leaving a vacancy on
our board. Our board may fill such vacancy at a later date or reduce the size of our board. We have no reason to
believe that any of the nominees will be unwilling or unable to serve if elected as a director.

Recommendation of our Board

OUR BOARD RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE ELECTION OF EACH OF THE

NOMINEES.

The biographies of each of the nominees and continuing directors below contain information regarding each

such person’s service as a director, business experience, director positions held currently or at any time during
the last five years and the experiences, qualifications, attributes or skills that caused our board to determine that
the person should serve as a director of the company. In addition to the information presented below regarding
each nominee’s and continuing director’s specific experience, qualifications, attributes and skills that led our
board to conclude that he or she should serve as a director, we believe that each of our directors has a reputation
for integrity, honesty and high ethical standards. Each of our directors has demonstrated business acumen and an
ability to exercise sound judgment, as well as a commitment of service to our company and our board. Finally,
we value our directors’ experience in relevant areas of business management and on other boards of directors and
board committees.

Our corporate governance guidelines dictate that a majority of our board must consist of directors whom our

board has determined are ‘‘independent’’ under the listing requirements of the Nasdaq Stock Market LLC
(the ‘‘Nasdaq’’).

9

Directors

The following table sets forth information regarding our directors as of April 19, 2021.

Director
Since

Age

Principal Occupation

Class

Audit
Committee

Compensation
Committee

Nominating
Committee

49

2009 Chief Executive Officer

44

2009 Chief Operating Officer

Name
Employee Directors
Todd McKinnon,
Chairperson
J. Frederic Kerrest,
Executive Vice
Chairperson
Independent Directors
Shellye Archambeau

58

2018

Robert L. Dixon, Jr.

65

2019

Former Chief Executive
Officer, MetricStream, Inc.
Former Global Chief
Information Officer and
Senior Vice President,
PepsiCo, Inc.

I

II

III

III

chair

member

Patrick Grady

38

2014 Managing Member, Sequoia

III member

Ben Horowitz, Lead
Independent Director
Rebecca Saeger

Michael Stankey
Michelle Wilson

Capital

54

2010 General Partner, Andreessen

66

62
58

2019

Horowitz
Former Executive Vice
President and Chief
Marketing Officer, Charles
Schwab & Co., Inc.
2016 Vice Chairman, Workday, Inc.
Former Senior Vice President
2015
and General Counsel,
Amazon.com Inc.

III

II

member

member

I
II member

chair
member

member
chair

Our board believes that directors who provide a significant breadth of experience, knowledge and abilities in

areas relevant to our business, while also representing a diversity of age, gender, race, sexual orientation and
ethnicity, contribute to a well-balanced and effective board. Our board’s current metrics are highlighted in the
following graphic. Information about each individual director and director nominee follows.

Diverse and Highly Qualified Board

2 years or less

3 - 8 years

9+ years

Tenure

3

3

< 40

40 - 49

50 - 59

Age

1

2

3

3

60+

3

Gender

Underrepresented 
Community (“URC”)*

Independence

nemoW

3

CRU

2

neM

6

CRU-noN

7

tnednepednI

7

eeyolpmE

2

* As defined in California Assembly Bill 979

10

Information Concerning Director Nominees

Todd McKinnon. Mr. McKinnon co-founded Okta and has served as our Chief Executive Officer (‘‘CEO’’)

and as a member of our board since January 2009. Mr. McKinnon was appointed Chairperson of our board in
February 2017. From October 2003 to February 2009, Mr. McKinnon served in various roles at salesforce.com,
inc., a cloud-based customer relationship management company, most recently as Senior Vice President of
Development. From 1995 to 2003, Mr. McKinnon held various engineering and leadership positions at
Peoplesoft, Inc., an enterprise application software company, which was acquired by Oracle Corporation in
January 2005. Mr. McKinnon holds a Master of Science in computer science from California Polytechnic State
University, San Luis Obispo and a Bachelor of Science in management and information systems from Brigham
Young University.

We believe that Mr. McKinnon is qualified to serve as a member of our board because of his experience

and perspective as our CEO and co-founder.

Michael Stankey. Mr. Stankey joined our board in December 2016. Mr. Stankey currently serves as Vice

Chairman at Workday, Inc., a financial and human capital management software vendor where, from September
2009 to June 2015, he served as President and Chief Operating Officer. Mr. Stankey also served as a member of
the board of directors of Workday from June 2015 to April 2021. From October 2007 to September 2009,
Mr. Stankey was an Operating Partner at Greylock Partners, a venture capital firm. From December 2001 to
April 2007, Mr. Stankey served as Chairman and Chief Executive Officer at PolyServe, Inc., a database and file
serving utility service. Since February 2017, Mr. Stankey has served as a member of the board of directors of
Cloudera, Inc., a data management, machine learning and advance analytics platform provider. Mr. Stankey also
serves on the boards of two private companies. Mr. Stankey holds a Bachelor of Business Administration from
the University of Wisconsin-Eau Claire.

We believe that Mr. Stankey is qualified to serve as a member of our board because of his experience as a
company executive and as a current and former director of many companies, and because of his knowledge of
the industry in which we operate.

Information Concerning Continuing Directors

Shellye Archambeau. Ms. Archambeau joined our board in December 2018. From 2002 until 2018,
Ms. Archambeau was Chief Executive Officer of MetricStream, Inc., a leading provider of governance, risk,
compliance and quality management solutions to corporations across diverse industries. Prior to that,
Ms. Archambeau served as Chief Marketing Officer and Executive Vice President of Sales for Loudcloud, Inc.,
Chief Marketing Officer of NorthPoint Communications Group, Inc., and President of Blockbuster Inc.’s
e-commerce division. Before she joined Blockbuster, she held domestic and international executive positions
during a 15-year career at IBM. Ms. Archambeau has served on the boards of Nordstrom, Inc. since 2015,
Verizon Communications Inc. since 2013, and Roper Technologies, Inc. since 2018. She formerly served on the
board of Arbitron Inc. Ms. Archambeau holds a Bachelor of Science from the Wharton School of the University
of Pennsylvania.

We believe that Ms. Archambeau is qualified to serve as a member of our board because of her valuable
knowledge of technology, digital media and communications platforms and her experience serving on other boards.

Robert L. Dixon, Jr. Mr. Dixon joined our board in June 2019. Mr. Dixon has owned The RD Factor, Inc.,

a digital and information technology consulting business, since December 2016. Mr. Dixon served at PepsiCo,
Inc., a global food and beverage company, as Global Chief Information Officer and Senior Vice President from
2007 through 2016. Previously, Mr. Dixon held various positions with The Procter & Gamble Company, a
consumer household products company, since 1977, including Vice President of Global Business Services.
Mr. Dixon has served on the boards of Anthem, Inc., a health benefits company, since 2011, and Build-A-Bear
Workshop, Inc., a specialty retailer, since February 2018. At the Georgia Institute of Technology, Mr. Dixon
serves on the President’s Advisory Board, the College of Engineering Advisory Board and the College of
Computing Advisory Board. He previously served on the CIO Advisory Board for IBM. Mr. Dixon holds a
Bachelor of Science in electrical engineering from the Georgia Institute of Technology.

We believe that Mr. Dixon is qualified to serve as a member of our board because he brings valuable
technology experience and the perspective of our customers through his prior role as Global Chief Information
Officer and his service on the CIO advisory board for another large public company.

11

Patrick Grady. Mr. Grady joined our board in May 2014. Since March 2007, Mr. Grady has held various

roles at Sequoia Capital, a venture capital firm, where he currently serves as a Managing Member. From
July 2004 to February 2007, Mr. Grady served as an associate at Summit Partners, a venture capital and private
equity firm. Since January 2013, Mr. Grady has served as a member of the board of directors of Prosper
Marketplace, Inc., a peer-to-peer lending platform. Mr. Grady also currently serves on the boards of several
private companies. Mr. Grady holds a Bachelor of Science in economics and finance from Boston College.

We believe that Mr. Grady is qualified to serve as a member of our board because of his significant
knowledge of and history with our company, his experience as a seasoned investor and as a current and former
director of many companies, and his knowledge of the industry in which we operate.

Ben Horowitz. Mr. Horowitz joined our board in February 2010. Mr. Horowitz is a co-founder and has

served as a General Partner of Andreessen Horowitz, a venture capital firm, since July 2009. From September
2007 to October 2008, Mr. Horowitz served as a Vice President and General Manager at Hewlett-Packard
Company, an information technology company. From September 1999 to September 2007, Mr. Horowitz
co-founded and served as the President and Chief Executive Officer of Opsware Inc., a computer software
company. From June 2016 to June 2020, Mr. Horowitz served as a member of the board of directors of
Lyft, Inc., which operates a multimodal transportation network. Mr. Horowitz also currently serves on the boards
of several private companies. Mr. Horowitz holds a Master of Science in computer science from the University
of California, Los Angeles and a Bachelor of Arts in computer science from Columbia University.

We believe that Mr. Horowitz is qualified to serve as a member of our board because of his significant
knowledge of and history with our company; his experience as a company executive, a seasoned investor, and a
current and former director of many companies; and his knowledge of the industry in which we operate.

J. Frederic Kerrest. Mr. Kerrest co-founded Okta and has served as our Chief Operating Officer (‘‘COO’’)

and as a member of our board since July 2009. Mr. Kerrest was appointed Executive Vice Chairperson of our
board in March 2019. From August 2002 to February 2007, Mr. Kerrest served in a variety of sales and business
development roles at salesforce.com, inc., a cloud-based customer relationship management company. Mr. Kerrest
holds a Masters in Business Administration from the MIT Sloan School of Management and a Bachelor of
Science in computer science from Stanford University.

We believe that Mr. Kerrest is qualified to serve as a member of our board because of his experience and

perspective as our COO and co-founder.

Rebecca Saeger. Ms. Saeger joined our board in January 2019. Ms. Saeger served as an Executive Vice
President at Charles Schwab & Co., Inc. from 2004 until 2011, most recently as Chief Marketing Officer. Prior
to joining Charles Schwab, she served as Executive Vice President, Marketing at Visa U.S.A. Before joining
Visa, Ms. Saeger was Senior Vice President and head of Account Management at Foote, Cone & Belding, and
Senior Vice President at Ogilvy & Mather. From February 2012 to October 2020, Ms. Saeger served on the
board of directors of E*TRADE Financial Corporation, a financial services company, and as a member of the
E*TRADE Bank board. She holds a Bachelor of Arts from Muhlenberg College and a Masters in Business
Administration from the Wharton School of the University of Pennsylvania.

We believe that Ms. Saeger is qualified to serve as a member of our board because of her valuable expertise

in consumer and business-to-business marketing, strategic planning and brand development, as well as her
experience serving on other boards.

Michelle Wilson. Ms. Wilson joined our board in August 2015. From 1999 to 2012, Ms. Wilson served as
Senior Vice President and General Counsel, and held a variety of other senior roles, at Amazon.com Inc., an electronic
commerce and cloud computing company. Prior to Amazon.com, Ms. Wilson was a Partner at Perkins Coie LLP, a
law firm. Ms. Wilson has served on the boards of Zendesk, Inc., a software development company that provides a
SaaS customer service platform, since 2014, and of Pinterest, Inc., a visual discovery engine, since May 2016.
Ms. Wilson is not standing for re-election to Pinterest’s board at its 2021 annual meeting of stockholders. Ms. Wilson
holds a Juris Doctor from University of Chicago and a Bachelor of Arts in finance from University of Washington.

We believe that Ms. Wilson is qualified to serve as a member of our board because of her experience as a

public company board member, her experience as a public company executive officer with primary responsibility
for advising on legal and corporate governance issues, her extensive experience advising an internet services
company, and her knowledge of the industry in which we operate.

12

CORPORATE GOVERNANCE

Our business and affairs are managed under the direction of our board, which is elected by our stockholders.
In carrying out its responsibilities, our board selects and monitors our top management, provides oversight of our
financial reporting processes, and determines and implements our corporate governance policies.

Our board and management team are committed to good corporate governance to ensure that Okta is

managed for the long-term benefit of our stockholders, and we have a variety of policies and procedures to
promote such goals. To that end, during the past year, our management periodically reviewed our corporate
governance policies and practices to ensure that they remain consistent with the requirements of the
Sarbanes-Oxley Act of 2002, SEC rules and Nasdaq listing standards.

Besides verifying the independence of the members of our board and committees (as discussed below under

‘‘Independence of Our Board’’), at the direction of our board, we also:

•

•

•

•

Periodically review and make necessary changes to the charters for our audit, compensation and
nominating committees;

Have established disclosures control policies and procedures in accordance with the requirements of the
Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC;

Have a procedure to receive and address anonymous and confidential complaints or concerns regarding
audit or accounting matters; and

Have a code of conduct that applies to our employees, officers and directors, including our CEO,
Chief Financial Officer (‘‘CFO’’) and other executive and senior financial officers.

Corporate Governance Guidelines

Our board has adopted a set of corporate governance guidelines, which can be found on our investor
relations website at investor.okta.com under ‘‘Responsibility and Governance–Governance Overview.’’ Our
corporate governance guidelines address such matters as:

•

•

•

•

Director independence—independent directors must constitute at least a majority of our board;

Board effectiveness—our board and each of its committees must conduct an annual self-evaluation;

Access to independent advisors—our board as a whole, and each of its committees separately, has
authority to retain independent experts, advisors or professionals as each deems necessary or
appropriate; and

Board committees—all members of the audit, compensation and nominating committees are
independent in accordance with applicable Nasdaq criteria.

Our nominating committee is responsible for reviewing our corporate governance guidelines from time to time
and reporting and making recommendations to our board concerning corporate governance matters.

Code of Conduct

Our board has adopted a code of conduct that applies to all of our employees, officers and directors,

including our CEO, CFO and other executive and senior financial officers. The full text of our code of conduct is
available on our investor relations website at investor.okta.com under ‘‘Responsibility and
Governance–Governance Overview.’’ We intend to satisfy the disclosure requirement under Item 5.05 of
Form 8-K regarding amendments to, or waivers from, a provision of our code of conduct by posting such
information on our Governance Overview web page. During the fiscal year ended January 31, 2021 (‘‘fiscal
2021’’), no waivers were granted from any provision of the code of conduct.

Independence of Our Board

Our Class A common stock is listed on Nasdaq. Under the Nasdaq listing standards, independent directors

must constitute a majority of a listed company’s board. In addition, the Nasdaq listing standards require that,
subject to specified exceptions, each member of a listed company’s audit, compensation and nominating

13

committees be independent. Under the Nasdaq listing standards, a director will only qualify as an
‘‘independent director’’ if, in the opinion of that listed company’s board of directors, that director does not have a
relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of
a director.

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3
under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) and the Nasdaq listing standards.
Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1
under the Exchange Act and the Nasdaq listing standards.

Our board has undertaken a review of the independence of each director. Based on information provided by

each director concerning his or her background, employment and affiliations, our board has determined that
Ms. Archambeau, Mr. Dixon, Mr. Grady, Mr. Horowitz, Ms. Saeger, Mr. Stankey and Ms. Wilson do not have
any relationships that would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director, and that each of these directors is ‘‘independent’’ as that term is defined under the
applicable rules and regulations of the SEC and the Nasdaq listing standards. The board also previously
determined that Mr. Kourey, who served on our board prior to becoming our CFO in March 2021, was
‘‘independent’’ under the applicable rules and regulations of the SEC and the Nasdaq listing standards. In making
these determinations, our board considered the current and prior relationships that each non-employee director
has with our company and all other facts and circumstances our board deemed relevant in determining their
independence, including the beneficial ownership of our capital stock by each non-employee director and any of
their affiliated funds, and any transactions involving them described in the section titled ‘‘Certain Relationships
and Related Party Transactions.’’

Board Leadership Structure and Role of Our Lead Independent Director

Mr. McKinnon, our co-founder and CEO, serves as Chairperson of our board. In that capacity, he presides

over meetings of our board and holds such other powers and carries out such other duties as are customarily
carried out by a board chairperson. Mr. Kerrest, our co-founder and COO, serves as Executive Vice Chairperson
of our board. Mr. McKinnon and Mr. Kerrest bring valuable insight to our board due to their perspective and
experience as Okta’s co-founders and senior executives.

Our corporate governance guidelines provide that one of our independent directors will serve as the lead

independent director. Our board has appointed Mr. Horowitz to serve as lead independent director. In that
capacity, Mr. Horowitz presides over periodic meetings of our independent directors, serves as a liaison between
the Chairperson of our board and the independent directors, and performs such additional duties as our board
may otherwise determine and delegate.

Our Board’s Role in Risk Oversight

Risk is inherent in every business and we face a number of risks, including, among others, strategic,

financial, business and operational, macroeconomic, cybersecurity, legal and regulatory compliance and
reputational risks. We have designed and implemented processes to manage risk in our operations, including our
enterprise risk management program.

Our management team is responsible for the day-to-day management of risks the company faces, while our

board, as a whole and assisted by its committees, has responsibility for the oversight of risk management,
including our enterprise risk management program. In its risk oversight role, our board has the responsibility to
satisfy itself that the enterprise risk management processes our management team has designed and implemented
are appropriate and functioning as designed. To that end, our board believes that open communication between
our management team and our board is essential for effective risk management and oversight. Our CEO and
other members of the senior management team attend quarterly meetings of our board, as well as such other
meetings as the board deems appropriate, where, among other topics, they discuss strategy and risks facing the
company. In this respect, our full board reviews strategic and operational risk in the context of reports from our
management team, receives reports on all significant committee activities at each regular meeting, and evaluates
the risks inherent in significant transactions and events.

For example, our board has been and remains highly engaged with our management team regarding the
impact of the COVID-19 pandemic and provided regular oversight of our response and risk mitigation strategies.

14

Our board has reviewed and discussed with our management team on a regular basis the pandemic’s impact on
our employees, operations, business and communities, as well as strategies and initiatives to respond to and
mitigate potential risks.

While our board is ultimately responsible for risk oversight, our board committees help fulfill those

oversight responsibilities in certain areas of risk, as described below.

Our audit committee assists our board in fulfilling its oversight responsibilities with respect to risk
management in the areas of internal control over financial reporting and disclosure controls and procedures,
legal and regulatory compliance, liquidity risk and cybersecurity. Our audit committee discusses with our
management team and Ernst & Young LLP guidelines and policies with respect to risk assessment and risk
management and reviews our major financial risk exposures and the steps our management team has taken to
monitor and control these exposures. Our audit committee also monitors certain key risks on a regular basis, such
as risk associated with internal control over financial reporting and liquidity risk.

Our compensation committee assesses risks created by the incentives inherent in our compensation policies.
Specifically, the compensation committee, along with our management team, at least annually considers potential
risks when reviewing and approving various compensation plans, including executive compensation. Based on its
most recent review, our compensation committee has concluded that our compensation programs, including our
executive compensation program, do not encourage risk taking to a degree that is reasonably likely to have a
materially adverse impact on Okta or our operations.

Our nominating committee assists our board in fulfilling its oversight responsibilities with respect to the

management of risk associated with our board’s organization, membership and structure, and corporate
governance.

Meetings of Our Board and Annual Meeting Attendance

Our board held seven meetings during fiscal 2021. Each director attended at least 75% of all meetings of

our board and the committees on which he or she served that were held during fiscal 2021. Under our corporate
governance guidelines, directors are expected to spend the time needed and meet as frequently as our board
deems necessary or appropriate to discharge their responsibilities. Directors are also expected to make efforts to
attend our Annual Meeting of Stockholders, all meetings of our board, and all meetings of the committees on
which they serve. All directors then in office attended the 2020 Annual Meeting of Stockholders.

Committees of Our Board

Our board has established three standing committees: audit, compensation, and nominating. The composition
and responsibilities of each committee are described below. Members serve on these committees until they resign
or until otherwise determined by our board. Our board assesses the composition of the committees at least
annually to consider whether committee assignments should be rotated. Each committee operates pursuant to a
written charter adopted by our board that is available on our website at
investor.okta.com/corporate-governance/governance-overview.

Audit Committee

During fiscal 2021, our audit committee consisted of Mses. Archambeau and Wilson and Mr. Grady, with

Ms. Archambeau serving as Chairperson. Mr. Kourey served as a member and Chairperson of the audit
committee until December 2020, when Ms. Archambeau began serving as Chairperson and Ms. Wilson joined the
committee. The composition of our audit committee meets the requirements for independence under current
Nasdaq listing standards and SEC rules and regulations. Each member of our audit committee meets the financial
literacy requirements of the Nasdaq listing standards. In addition, our board has determined that Ms. Archambeau
and Mr. Kourey each are audit committee financial experts within the meaning of Item 407(d) of Regulation S-K
under the Securities Act of 1933, as amended (the ‘‘Securities Act’’). Our audit committee, among other things:

•

•

selects a qualified firm to serve as the independent registered public accounting firm to audit our
financial statements;

discusses the scope and results of the audit with the independent registered public accounting firm, and
reviews, with our management team and the independent registered public accounting firm, our interim
and year-end results of operations;

15

•

•

•

•

develops procedures for employees to submit concerns anonymously about questionable accounting or
audit matters;

reviews our policies on risk assessment and risk management;

reviews related party transactions; and

approves (or, as permitted, pre-approves) all audit and all permissible non-audit services, other than
de minimis non-audit services, to be performed by the independent registered public accounting firm.

Our audit committee annually reviews the independent registered public accounting firm’s performance and

independence, including reviewing all relationships between the independent registered public accounting firm
and Okta and any disclosed relationships or services that may impact the objectivity and independence of the
independent registered public accounting firm.

Our audit committee operates under a written charter that satisfies the applicable rules of the SEC and the

Nasdaq listing standards. Our audit committee held eight meetings during fiscal 2021.

Compensation Committee

During fiscal 2021, our compensation committee consisted of Messrs. Dixon and Stankey and Mses. Saeger

and Wilson, with Mr. Stankey serving as Chairperson. The composition of our compensation committee meets
the requirements for independence under the Nasdaq listing standards and SEC rules and regulations.
Each member of our compensation committee is also a non-employee director, as defined pursuant to Rule 16b-3
promulgated under the Exchange Act. The purpose of our compensation committee is to discharge the
responsibilities of our board relating to the compensation of our executive officers. Our compensation committee,
among other things:

•

•

•

•

reviews, approves and determines, or makes recommendations to our board regarding, the compensation
of our executive officers;

administers our equity incentive plans;

reviews and approves, or makes recommendations to our board regarding, incentive compensation and
equity plans; and

establishes and reviews general policies relating to the compensation and benefits offered to our
employees.

Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC

and the Nasdaq listing standards. Our compensation committee held seven meetings during fiscal 2021.

Compensation Committee Interlocks and Insider Participation

During fiscal 2021, Messrs. Dixon and Stankey and Mses. Saeger and Wilson were the only members of our

compensation committee. No member of our compensation committee is or has been an officer or employee of
our company. No Okta executive officer currently serves, or in the past year has served, as a member of the
board of directors or compensation committee of any entity that has one or more executive officers serving on
our board or compensation committee. See the section titled ‘‘Certain Relationships and Related Party
Transactions’’ for information about related party transactions involving members of our compensation committee
or their affiliates.

Nominating Committee

During fiscal 2021, our nominating committee consisted of Mses. Saeger and Wilson and Mr. Stankey, with

Ms. Wilson serving as Chairperson. The composition of our nominating committee meets the requirements for
independence under the Nasdaq listing standards and SEC rules and regulations. Our nominating committee,
among other things:

•

•

identifies, evaluates and selects, or makes recommendations to our board regarding, nominees for
election to our board and its committees;

evaluates the performance of our board and its committees;

16

•

•

•

•

•

considers and makes recommendations to our board regarding the composition of our board and its
committees;

reviews developments in corporate governance practices;

reviews our environmental, social and governance (‘‘ESG’’) programs and public disclosures;

evaluates the adequacy of our corporate governance practices and reporting; and

develops and makes recommendations to our board regarding our corporate governance guidelines.

Our nominating committee operates under a written charter that satisfies the applicable listing requirements

and rules of Nasdaq. Our nominating committee held four meetings during fiscal 2021.

Identifying and Evaluating Director Nominees

Our board has delegated to our nominating committee the responsibility of identifying suitable candidates to

nominate to our board (including candidates to fill any vacancies that may occur) and assessing their
qualifications in light of the policies and principles in our corporate governance guidelines and the committee’s
charter. Our nominating committee may gather information about candidates through interviews, detailed
questionnaires, comprehensive background checks, or any other means its members deem appropriate.
Our nominating committee then meets as a group to discuss and evaluate the qualities and skills of each
candidate, both on an individual basis and taking into account the overall composition and needs of our board.
Based on the results of the evaluation process, our nominating committee recommends candidates for our board’s
approval as director nominees for election to our board.

Minimum Qualifications

Our nominating committee uses a variety of methods for identifying and evaluating director nominees and

will consider all facts and circumstances that it deems appropriate or advisable. As part of this process, our
nominating committee will consider the current size and composition of our board, as well as the needs of our
board and its committees.

Some of the qualifications that our nominating committee considers include, without limitation, issues of
character, ethics, integrity, judgment, independence, diversity, skills, education, expertise, business acumen, length
of service, understanding of our business and industry and other commitments. In addition, nominees must have
proven achievement and competence in their respective fields, the ability to exercise sound business judgment, an
objective perspective, the ability to offer advice and support to our management team, and the ability to make
significant contributions to Okta’s success. The nominating committee looks for individuals who have skills that
are complementary to those of our existing board, the highest ethics, a commitment to the long-term interests of
our stockholders, and an understanding of the fiduciary responsibilities of a public company director. Finally,
nominees must have sufficient time available in the judgment of our nominating committee to effectively perform
all board and committee responsibilities. Members of our board are expected to prepare for, attend and
participate in all board and applicable committee meetings. Other than the foregoing, there are no stated
minimum criteria for director nominees, although our nominating committee may also consider other factors that
it deems, from time to time, to be in the best interests of Okta and our stockholders. After completing its review
and evaluation of director candidates, our nominating committee recommends to our full board the director
nominees for selection.

Stockholder Recommendations

Stockholders may submit recommendations for director candidates to our nominating committee by writing

to our Corporate Secretary at Okta, Inc., 100 First Street, Suite 600, San Francisco, California 94105. All such
recommendations should include the nominee’s name and qualifications and all other information required by our
bylaws. Our nominating committee will evaluate any candidates properly recommended by stockholders against
the same criteria and pursuant to the same policies and procedures that govern the evaluation of candidates
proposed by directors or members of our management team.

17

Stockholder Outreach

With oversight and direction from the nominating committee, we conduct an annual stockholder outreach

program to better understand stockholder perspectives and actively seek stockholder feedback on our board,
governance, sustainability and executive compensation practices. In fiscal 2021, we contacted our top
30 institutional stockholders, which represented over 58% of our outstanding common stock, or over 62% of our
shares of outstanding common stock excluding shares held by our executive officers and board members, and
engaged in extensive discussions with several of our largest stockholders. In this regard, our team met with
governance professionals from passive funds as well as portfolio managers from active funds. We received many
supportive and positive comments on our direction with respect to our business, ESG initiatives,
board composition and executive compensation program. The breadth of our outreach program enabled us to
gather feedback from a significant cross-section of our stockholder base. We will continue to engage with
stockholders to maintain an open dialogue and ensure that we have an in-depth understanding of our
stockholders’ perspectives.

Stockholder Communications

All stockholders and other interested parties are welcome to communicate with our board as a whole or with

individual directors through an established process for stockholder communication. For a communication directed to
our board as a whole, please contact our General Counsel in writing at the address listed below or by email to
investor@okta.com (specifying ‘‘ATTN General Counsel’’ in the subject line). For a communication directed to an
individual director in his or her capacity as a member of our board, please contact the director in writing at the address
listed below or by email to investor@okta.com (specifying ‘‘ATTN [name of director]’’ in the subject line).

Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105
Attn: [General Counsel or Name of Individual Director]

Our General Counsel, in consultation with appropriate members of our board as necessary, will review all
incoming communications and, if appropriate, will forward such communications to the appropriate director(s) or
to the Chairperson of our board. The General Counsel will generally not forward communications if they are
deemed inappropriate; if they are solicitations, advertisements, surveys, ‘‘junk’’ mail or mass mailings; or if they
consist of individual grievances or other interests that are personal to the writer and could not reasonably be
construed to be of concern to securityholders or other constituencies of the company.

Environmental, Social and Governance Matters

We believe we have a long-term responsibility to maximize benefits to our society, the environment, and all

of our stakeholders, including our stockholders, employees, customers and communities. We maintain that
operating our company in an environmentally and socially responsible manner will help drive our long-term
growth. We take that responsibility seriously, and lead Okta with the conviction that how we build the future is
as important as what we build. To that end, our ESG efforts are led by our executive leadership team and are
reviewed by the board’s nominating and corporate governance committee.

In May 2020, we publicly launched our ESG program. We worked with external experts and internal
stakeholders to help define our most material issues, which form the foundation for our ESG program. We
organized our top material issues into three categories:

•

•

•

Protecting our customers;

Investing in our people; and

Supporting our communities.

18

Protecting our Customers

Our customers trust us to safely connect people to technology by making it highly available and secure.

They benefit from a service designed, built, maintained and monitored to meet the rigorous confidentiality,
integrity and availability requirements of the most security-sensitive organizations and industries. Privacy and
security are interdependent and we attach prime importance to both. Protecting individuals’ privacy is at the
foundation of everything we do and is pivotal to our customers trusting us as their identity provider.

Investing in Our People

Our core values—love our customers, never stop innovating, act with integrity, be transparent and empower
our people—inform and guide our human capital initiatives and objectives. In order to continue to innovate and
drive customer success, it is crucial that we continue to attract, develop and retain exceptional talent. To that end,
we strive to make Okta a diverse and inclusive workplace, with opportunities for our employees to grow and
develop in their careers, supported by fair and competitive compensation, benefits and wellness programs, and by
initiatives that foster connections between and among our employees and their communities.

We encourage you to review the ‘‘Diversity, Inclusion and Belonging,’’ ‘‘Responsibility,’’ ‘‘Careers’’ and
‘‘Okta for Good’’ pages of our website at www.okta.com for more detailed information regarding our human
capital programs and initiatives. The information contained on, or that can be accessed through, our website is
not incorporated by reference into this Proxy Statement.

Diversity, Inclusion and Belonging

We are committed to fostering a culture of inclusion and belonging, and to building a diverse workforce to
drive innovation and collective growth, which we believe is critical to our success. Over the past few years, we
have prioritized our diversity, inclusion and belonging (‘‘DIB’’) program at Okta. Our DIB initiatives –
spearheaded by our DIB department, Inclusion Council and employee resource groups, in partnership with
various other teams – focus on DIB in our workforce, in our workplace and in the community.

We employ inclusive recruitment and hiring practices to source diverse talent and mitigate potential bias

throughout the hiring process. We also continue to recruit from a broad range of colleges and engage with
organizations that support diverse students and jobseekers through our social impact arm, Okta for Good.

Additional information on our diversity, inclusion and belonging strategy, diversity metrics and programs

can be found in our State of Inclusion at Okta Annual Report located on our website at
www.okta.com/state-of-inclusion-at-okta.

Growth and Development

We invest significant resources to develop talent and actively foster a learning culture where employees are
empowered to drive their personal and professional growth. We offer extensive onboarding and training programs
to prepare our employees at all levels for career progression and individual development.

Compensation, Benefits and Wellness

We provide robust compensation, benefits and wellness programs that help support the varying needs of our

employees. In addition to market-competitive base pay, short-term bonus incentives and long-term equity
incentives, our total rewards program includes comprehensive employee benefits and a variety of other health
and wellness resources. We are committed to fair compensation and opportunity in our workplace.

Dynamic Work

We help our employees succeed by providing flexibility in where and how they work. Over the past few

years, we introduced and began transitioning our workforce to a ‘‘Dynamic Work’’ framework, based on the
premise that enabling our employees to work from anywhere can increase employee empowerment, satisfaction
and productivity, drive efficiency and enable us to hire from a broader, more diverse pool of talent. In response
to the COVID-19 pandemic, we accelerated our move to Dynamic Work to protect the health, safety and
wellness of our employees.

19

COVID-19 Pandemic Response and Action

Our response to the COVID-19 pandemic demonstrated the resiliency of our company and employees in the

face of a global health crisis. Our guiding principles in responding to the COVID-19 pandemic were to protect
the health and safety of our employees, to support our customers through the challenges the pandemic posed to
their workforces and businesses, and to support our communities.

First and foremost, we prioritized the health, safety and well-being of our employees. We immediately
transitioned nearly all of our employees to a remote-work model, while implementing enhanced safety protocols
for employees continuing critical on-site work. We also took a series of steps to provide our employees with
additional assistance and benefits to support them and their families during the pandemic and help with work/life
balance while working from home.

We supported our customers by offering our core services for free to new customers through our Emergency

Remote Work Program, and accelerating customer deployments to transition remote workforces necessitated by
the COVID-19 pandemic. To keep our customers healthy and safe, we transitioned all of our in-person customer
events, including Oktane and Okta Showcase, to virtual-only experiences.

We also worked with our communities and non-profit partners to support COVID-19 prevention and

response efforts by providing rapid response grants and matching funds through our social impact arm, as well as
secure identity and access management tools for organizations around the world to enable secure collaboration
during crisis response.

Supporting our Communities

The mission of our social impact arm, Okta for Good, is to strengthen the connections between people,

technology and community. We do this by mobilizing our most important assets, our employees, products and
funding, in service of our global communities. Okta for Good’s core focus areas are:

•

•

•

•

Developing technology for good ecosystems;

Expanding economic opportunity and pathways into the technology sector;

Supporting non-profits addressing critical needs in our global communities; and

Empowering our employees to become changemakers.

Through Okta for Good, which is a part of our company and not a separate legal entity, we donate and
discount access to our service for non-profit organizations, who use the Okta Identity Cloud to make their teams
more efficient, allowing them to focus on making a meaningful impact in the world. Our employee volunteer
program enables global team members to donate time to support charitable organizations worldwide. For more
information, please view our Okta for Good Impact Report at www.okta.com/okta-for-good/impact-report.

In addition, prior to our initial public offering in April 2017, we reserved 300,000 shares of our common
stock to fund and support the operations of Okta for Good, of which 195,000 shares of our Class A common
stock remain reserved for future issuances.

Environmental Sustainability

We have a long-term commitment to climate action. In August 2020, we completed our first greenhouse gas

(‘‘GHG’’) emissions analysis conducted by a third-party consultant and in accordance with industry best
practices. Measuring and setting an emissions baseline is an instrumental first step in helping us define
sustainability goals and strategies going forward, which include increasing our use of renewable energy and
reducing our overall carbon footprint.

In April 2021, we committed to achieving 100% renewable electricity for our global real estate footprint by
2022, which marks a critical step in our journey to reduce GHG emissions and take long-term action on climate
change. While we do not own real estate, our dual headquarter buildings are LEED Gold certified and contain
efficient technology, such as carbon-free heating and smart lighting, reducing our costs and environmental
impact. As part of our commitment to becoming a sustainable company, starting in January 2021, all new Okta
offices will be at least LEED Silver and WELL Silver certified.

20

Non-Employee Director Compensation

Our non-employee director compensation program is designed to attract, retain and reward qualified
directors and further align the financial interests of our non-employee directors with those of our stockholders.
The compensation committee is responsible for reviewing and making recommendations to the board regarding
compensation paid to non-employee directors for their board and board committee service. Periodically, the
compensation committee reviews our non-employee director compensation program, receiving input from the
compensation committee’s independent compensation consultant regarding market practices and the
competitiveness of our non-employee director compensation program in relation to the general market and our
peer group. The compensation committee last reviewed our non-employee director compensation program in June
2020 and did not recommend any changes to the board.

Under our non-employee director compensation program, non-employee directors receive initial equity
grants when they join the board, and annual cash retainers and equity grants for their continued annual service.
We also reimburse all reasonable out-of-pocket expenses incurred by directors in order to attend meetings of our
board or any committee thereof.

When first appointed to our board, non-employee directors are granted restricted stock units (‘‘RSUs’’)
having a fair market value of $350,000 on the date of grant. These initial RSU grants will vest in equal annual
installments on the first three anniversaries of the date on which the non-employee director was appointed to our
board, subject to continuous service.

Non-employee directors receive the following annual cash retainers for their service:

Position
Board Member
Lead Independent Director
Audit Committee Chair
Compensation Committee Chair
Nominating Committee Chair
Audit Committee Member other than Chair
Compensation Committee Member other than Chair
Nominating Committee Member other than Chair

Annual Cash
Retainer
$30,000
$20,000
$20,000
$15,000
$ 8,000
$10,000
$ 7,500
$ 4,000

In addition, on the date of each Annual Meeting of Stockholders, each non-employee director who will
continue as a non-employee director following such meeting will be granted RSUs having a fair market value of
$200,000 on the date of grant. These annual RSU grants will fully vest on the earlier of the first anniversary of
the grant date or immediately prior to the next Annual Meeting of Stockholders, subject to continuous service.

Under our non-employee director compensation program, all RSUs granted to non-employee directors will
be settled for shares of our Class A common stock. The non-employee director compensation program provides
that these RSUs are subject to full accelerated vesting upon the sale of our company in a Sale Event (as defined
in our 2017 Equity Incentive Plan, as amended (the ‘‘2017 Plan’’)).

21

The following table presents the total compensation for each person who served as a non-employee director

during fiscal 2021. Other than as set forth in the table below, we did not pay any compensation or make any
equity awards to our non-employee directors during fiscal 2021. Messrs. McKinnon and Kerrest, who were also
our employees, received no compensation for their service as directors. The compensation received by
Mr. McKinnon as CEO and by Mr. Kerrest as COO is presented in ‘‘Executive Compensation—Fiscal 2021
Summary Compensation Table’’ below.

Fiscal 2021 Director Compensation Table

Name
Shellye Archambeau
Robert L. Dixon, Jr.
Patrick Grady
Ben Horowitz
Michael Kourey(3)
Rebecca Saeger
Michael Stankey
Michelle Wilson

Fees Earned or Paid In
Cash ($)
41,685
37,500
40,000
50,000
46,630
41,500
49,000
47,185

Stock Awards
($)(1)(2)
200,138
200,138
200,138
200,138
200,138
200,138
200,138
200,138

Total
($)
241,823
237,638
240,138
250,138
246,768
241,638
249,138
247,323

(1)

(2)

The amounts reported represent the aggregate grant date fair value of the RSUs granted during fiscal 2021 under our 2017 Plan as
computed in accordance with the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (‘‘ASC Topic
718’’). Such grant date fair values do not take into account any estimated forfeitures related to service-based vesting conditions. The
assumptions used in calculating the grant date fair values are set forth in the notes to our consolidated financial statements included in
our 2021 Annual Report. These amounts do not necessarily correspond to the actual values recognized or that may be recognized by
the directors.

As of January 31, 2021, our non-employee directors held the options and stock awards set forth in the following table:

Name

Shellye Archambeau

Robert L. Dixon, Jr.

Patrick Grady

Ben Horowitz

Michael Kourey

Rebecca Saeger

Michael Stankey

Michelle Wilson

Shares of Class B
Common Stock
Underlying Options

RSUs Covering
Class A Common
Stock

—

—

—

—

80,000

—

190,000

—

2,799

2,874

1,064

1,064

1,064

2,575

1,064

1,064

(3) Mr. Kourey resigned from the board effective upon his assumption of the CFO role in March 2021.

22

PROPOSAL TWO:

RATIFICATION OF THE APPOINTMENT OF
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our audit committee has appointed Ernst & Young LLP as our independent registered public accounting
firm to perform the audit of our consolidated financial statements for the fiscal year ending January 31, 2022. We
are asking our stockholders to ratify this appointment. Ernst & Young LLP has served as our independent
registered public accounting firm since 2013.

Our board is submitting the appointment of Ernst & Young LLP to stockholders for ratification as a matter
of good corporate governance. In the event our stockholders do not ratify this appointment by a majority of the
votes properly cast at the Annual Meeting, our audit committee will reconsider retaining Ernst & Young LLP.
Even if the appointment is ratified, our audit committee in its discretion may direct the appointment of a
different independent registered public accounting firm at any time during the year if they determine that such a
change would be in the best interests of the stockholders.

We expect a representative of Ernst & Young LLP will attend the Annual Meeting. That individual will have

an opportunity to make a statement and will be available to respond to appropriate questions from stockholders.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm

We have adopted a policy under which our audit committee must pre-approve all audit and permissible
non-audit services to be provided by the independent registered public accounting firm. As part of its review, our
audit committee considers whether the categories of pre-approved services are consistent with rules on
accountant independence prescribed by the SEC and the Public Company Accounting Oversight Board. Our audit
committee pre-approved all services performed by the independent registered public accounting firm in fiscal
2021.

Audit Fees

The following table sets forth the fees billed or to be billed by Ernst & Young LLP and its affiliates for
professional services rendered with respect to the fiscal years ended January 31, 2021 and 2020. All of these
services were approved by our audit committee.

Fee Category
Audit Fees(1)
Audit-Related Fees
Tax Fees(2)
All Other Fees(3)
Total Fees

Fiscal 2021
Fiscal 2020
$3,096,000 $3,417,000
—
19,000
4,000
$3,104,000 $3,440,000

—
—
8,000

(1)

(2)

(3)

Audit Fees consist of fees billed for professional services provided in connection with the audit of our consolidated financial statements
and audit of internal control over financial reporting, reviews of our quarterly condensed consolidated financial statements, and
accounting consultations billed as audit services. For fiscal 2021, this category also includes fees for services provided in connection
with our offering of 0.375% convertible senior notes due June 15, 2026. For the fiscal year ended January 31, 2020 (‘‘fiscal 2020’’),
this category also includes fees for services provided in connection with our offering of 0.125% convertible senior notes due
September 1, 2025.

Tax Fees consist of fees billed for permissible tax services in connection with our assessment of net operating loss carryforward
limitations in fiscal 2020.

All Other Fees consist of aggregate fees billed for products and services provided other than those disclosed above, which include
subscription fees paid for access to online accounting research software applications.

Recommendation of our Board

OUR BOARD RECOMMENDS THAT YOU VOTE ‘‘FOR’’ RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2022.

23

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The information contained in this audit committee report shall not be deemed to be ‘‘soliciting material,’’

‘‘filed’’ with the SEC, subject to Regulations 14A or 14C of the Exchange Act, or subject to the liabilities of
Section 18 of the Exchange Act. No portion of this audit committee report shall be deemed to be incorporated by
reference into any filing under the Securities Act or the Exchange Act, through any general statement
incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent
that Okta specifically incorporates this report or a portion of it by reference. In addition, this report shall not be
deemed filed under either the Securities Act or the Exchange Act.

This report is submitted by the audit committee of the board of directors. The audit committee consists of
the directors whose names appear below. No member of the audit committee is an officer or employee of Okta,
and the board of directors has determined that each member of the audit committee is ‘‘independent’’ for audit
committee purposes as that term is defined under Rule 10A-3 of the Exchange Act and the applicable Nasdaq
rules. Each member of the audit committee meets the requirements for financial literacy under the applicable
rules and regulations of the SEC and Nasdaq.

The audit committee’s general role is to assist the board of directors in monitoring the company’s financial
reporting process and related matters. The audit committee’s specific responsibilities are set forth in its charter.

The audit committee has reviewed the company’s consolidated financial statements for its fiscal year ended
January 31, 2021, and met with its management team, as well as with representatives of Ernst & Young LLP, the
company’s independent registered public accounting firm, to discuss the consolidated financial statements and
management’s assessment and Ernst & Young’s evaluation of the effectiveness of the company’s internal control
over financial reporting as of January 31, 2021. The audit committee also discussed with members of Ernst &
Young LLP the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit
Committees, as adopted by the Public Company Accounting Oversight Board.

In addition, the audit committee received the written disclosures and the letter from Ernst & Young LLP
required by applicable requirements of the Public Company Accounting Oversight Board and the SEC regarding
the independent accountant’s communications with the audit committee concerning independence. The audit
committee has discussed with Ernst & Young LLP the independence of that firm and has considered whether the
provision of non-audit services was compatible with maintaining the independence of that firm.

Based on these discussions, the financial statement review, and other matters it deemed relevant, the audit
committee recommended to the board of directors that the company’s audited consolidated financial statements
for its fiscal year ended January 31, 2021, be included in its Annual Report on Form 10-K for its 2021 fiscal
year.

Audit Committee

Shellye Archambeau (Chairperson)
Patrick Grady
Michelle Wilson

24

ADVISORY NON-BINDING VOTE TO APPROVE THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS

PROPOSAL THREE:

We are asking our stockholders to vote to approve, on an advisory non-binding basis, the compensation of
our named executive officers for fiscal 2021 as disclosed in this Proxy Statement. As described in detail under
the heading ‘‘Compensation Discussion and Analysis,’’ our executive compensation program is designed to drive
and reward performance and align the compensation of our named executive officers with the long-term interests
of our stockholders. Please read the ‘‘Compensation Discussion and Analysis’’ and the compensation tables and
narrative disclosure that follow for information about our executive compensation program, including details of
the fiscal 2021 compensation of our named executive officers.

This proposal, commonly known as a ‘‘say-on-pay’’ proposal, gives our stockholders the opportunity to
express their views on our named executive officers’ compensation as a whole. This vote is not intended to
address any specific element of compensation, but rather the overall compensation of our named executive
officers and the philosophy, policies and practices described in this Proxy Statement. Our board and our
compensation committee believe that these policies and practices are effective in implementing our compensation
philosophy and achieving our compensation program goals.

Accordingly, we are asking our stockholders to vote ‘‘FOR’’ the following resolution:

RESOLVED, that the stockholders hereby approve, on an advisory non-binding basis, the compensation
paid to Okta’s named executive officers, as disclosed in the company’s proxy statement for the 2021 Annual
Meeting of Stockholders, pursuant to the compensation disclosure rules of the SEC, including in the
Compensation Discussion and Analysis, the compensation tables and the narrative discussions that
accompany the compensation tables.

Vote Required

The approval of this advisory non-binding proposal requires the affirmative vote of a majority of the voting

power of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to
vote thereon.

As an advisory vote, the outcome of the vote on this proposal is not binding. However, our management

team, our board and our compensation committee, which is responsible for designing and administering our
executive compensation program, value the opinions expressed by our stockholders, and will consider the
outcome of this vote when making future executive compensation decisions.

Recommendation of the Board

OUR BOARD RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL, ON AN ADVISORY

NON-BINDING BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS,
AS DISCLOSED IN THIS PROXY STATEMENT.

25

The following table sets forth information regarding our executive officers, including their ages, as of

EXECUTIVE OFFICERS

April 19, 2021:

Name
Todd McKinnon
J. Frederic Kerrest

Michael Kourey
Christopher K. Kramer
Jonathan T. Runyan
Susan St. Ledger

Age
49
44

Positions and Offices Held with the Company

Chairperson of the Board of Directors, Chief Executive Officer and Director
Executive Vice Chairperson of the Board of Directors, Chief Operating
Officer and Director
Chief Financial Officer
61
50
Chief Accounting Officer
45 General Counsel and Secretary
56

President, Worldwide Field Operations

Information Concerning Executive Officers

In addition to Messrs. McKinnon and Kerrest, who both serve as directors, our executive officers as of April 19,

2021 consisted of the following individuals:

Michael Kourey. Mr. Kourey has served as our Chief Financial Officer since March 2021. Mr. Kourey previously

served on our board from October 2015 until his appointment as our Chief Financial Officer in March 2021 and
served as Chairperson of our audit committee from December 2015 until December 2020 when he agreed to accept
the Chief Financial Officer position. From January 2019 to December 2020, Mr. Kourey served as the Chief Financial
Officer of Vlocity Inc., a cloud software company, which was acquired by salesforce.com, inc. in 2020. From
June 2015 to November 2018, Mr. Kourey served as the Chief Financial Officer of Medallia, Inc., a cloud-based
customer experience management company. From May 2013 to March 2015, Mr. Kourey served as a Partner at
Khosla Ventures, a venture capital firm, where he previously served as Operating Partner from April 2012 to May
2013. From July 1991 to February 2012, Mr. Kourey served in a variety of roles at Polycom, Inc., a communications
solutions company, most recently as Chief Financial Officer. Mr. Kourey also served as a director of Polycom from
January 1999 to May 2011. Mr. Kourey serves on the board of trustees of Villanova University and on the board of
directors of a private company. In addition to serving on our board, Mr. Kourey previously served on the boards of
RingCentral, Inc., Aruba Networks, Inc., Riverbed Technology, Inc. and other public and private companies.
Mr. Kourey holds a Masters of Business Administration from Santa Clara University and a Bachelor of Science from
University of California, Davis.

Christopher K. Kramer. Mr. Kramer has served as our Chief Accounting Officer since October 2019. Prior to
that, Mr. Kramer served as our Vice President, Controller from June 2016 to October 2019 and as our Controller from
May 2014 to June 2016. From April 2013 to May 2014, Mr. Kramer served as Vice President, Corporate Controller of
Cyan, Inc., a global supplier of software-defined networks. From December 2008 to April 2013, Mr. Kramer served as
Vice President, Assistant Controller of Riverbed Technology, Inc., an information technology performance company.
Mr. Kramer holds a Bachelor of Science in accounting from California Polytechnic State University, San Luis Obispo,
and is a licensed CPA (inactive) in the State of California.

Jonathan T. Runyan. Mr. Runyan has served as our General Counsel since January 2015 and our Secretary
since July 2015. From January 2011 to January 2015, Mr. Runyan served as a Partner and Associate at Goodwin
Procter LLP, a law firm, where he practiced corporate and securities law, primarily advising companies and investors
in technology industries. From September 2006 to December 2010, Mr. Runyan served as an Associate at Gunderson
Dettmer, LLP, a law firm. Mr. Runyan holds a Masters in Business Administration from the Yale School of
Management, a Juris Doctor from the University of California, Hastings, and a Bachelor of Science in business
administration from San Diego State University.

Susan St. Ledger. Ms. St. Ledger has served as our President, Worldwide Field Operations since February 2021.
Previously, Ms. St. Ledger served at Splunk Inc., a data analytics company, as President, Worldwide Field Operations
from October 2017 to January 2021 and as Senior Vice President, Chief Revenue Officer from May 2016 to October
2017. Ms. St. Ledger served as Chief Revenue Officer, Marketing Cloud at salesforce.com, inc., a provider of
enterprise cloud computing software, from 2012 to 2016. In 2012, Ms. St. Ledger served as President at Buddy Media,
a social media marketing platform that was acquired by salesforce.com. Previously, Ms. St. Ledger served in a variety
of senior sales management roles at salesforce.com and Sun Microsystems, Inc., a provider of network computing
infrastructure solutions. Ms. St. Ledger holds a Bachelor of Science in computer science from the University of
Scranton.

26

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis describes our executive compensation program and the

decisions in fiscal 2021 regarding the compensation for:

•

Todd McKinnon, our CEO, Chairperson of the board and co-founder;

• William E. Losch, our former CFO;
•

J. Frederic Kerrest, our COO, Executive Vice Chairperson of the board and co-founder;

•

•

Charles Race, our former President, Worldwide Field Operations; and

Jonathan T. Runyan, our General Counsel.

We refer to these executive officers collectively in this Compensation Discussion and Analysis and the

accompanying compensation tables as the ‘‘named executive officers.’’ Mr. Race retired from the role of
President, Worldwide Field Operations at the end of fiscal 2021 and was succeeded by Ms. St. Ledger in
February 2021. Mr. Losch retired from the role of CFO in March 2021 and was succeeded by Mr. Kourey,
previously a member of our board.

This Compensation Discussion and Analysis provides an overview of our executive compensation
philosophy, the overall objectives of our executive compensation program, and each element of compensation
that we provide. In addition, we explain how and why our compensation committee arrived at the specific
compensation policies and decisions involving our named executive officers during fiscal 2021.

This Compensation Discussion and Analysis contains forward-looking statements that are based on our

current plans, considerations, expectations and determinations regarding future compensation plans and
arrangements. The actual compensation plans and arrangements that we adopt may differ materially from
currently anticipated plans and arrangements as summarized in this Compensation Discussion and Analysis.

Executive Summary

Okta is the leading independent identity provider. Our vision is to enable everyone to safely use any
technology, and we believe identity is the key to making that happen. Our mission is to bring simple and secure
digital access to people and organizations everywhere. The Okta Identity Cloud is powered by our
category-defining platform that enables our customers to securely connect the right people to the right
technologies and services at the right time.

Fiscal 2021 was a year of continued strong growth and improved operating leverage for our business despite
challenges related to the COVID-19 pandemic. Nonetheless, some of our executive compensation actions early in
the fiscal year were influenced by uncertainty surrounding the COVID-19 pandemic, including the decision not
to increase the annual base salaries and bonus targets of our named executive officers and the adoption of a
program to allow the base salaries of our executive officers to be paid in RSUs instead of cash, in each case to
preserve our cash resources in the face of economic uncertainty, and the decision to delay the approval of equity
grants and the adoption of bonus plan performance criteria.

Highlights of Fiscal 2021 Corporate Performance

Specific financial highlights of our performance in fiscal 2021 include:

•

•

•

Revenue: Total revenue was $835.4 million, an increase of 43% year-over-year. Subscription revenue
was $796.6 million, an increase of 44% year-over-year.

Remaining Performance Obligations (‘‘RPO’’): RPO, or subscription backlog, was $1.80 billion, an
increase of 49% year-over-year. Current RPO, which is contracted subscription revenue expected to be
recognized over the next 12 months, was $841.8 million, up 42% compared to the fourth quarter of
fiscal 2020.

Calculated Billings: Total calculated billings were $976.0 million, an increase of 39% year-over-year.

27

• Operating Income/Loss: GAAP (as defined below) operating loss was $204.2 million, or 24.4% of
total revenue, compared to a GAAP operating loss of $185.8 million, or 31.7% of total revenue for
fiscal 2020. Non-GAAP operating income was $7.7 million, or 0.9% of total revenue, compared to a
non-GAAP operating loss of $48.5 million, or 8.3% of total revenue for fiscal 2020.

•

•

Net Income/Loss: GAAP net loss was $266.3 million, compared to a GAAP net loss of $208.9 million
for fiscal 2020. GAAP net loss per share was $2.09, compared to a GAAP net loss per share of $1.78
for fiscal 2020. Non-GAAP net income was $16.2 million, compared to a non-GAAP net loss of
$31.1 million for fiscal 2020. Non-GAAP basic and diluted net income per share were $0.13 and $0.11,
respectively, compared to a non-GAAP basic and diluted net loss per share of $0.27 for fiscal 2020.

Cash Flow: Net cash provided by operations was $128.0 million, or 15.3% of total revenue, compared
to $55.6 million, or 9.5% of total revenue, for fiscal 2020. Free cash flow was $110.7 million, or
13.3% of total revenue, compared to $36.3 million, or 6.2% of total revenue, for fiscal 2020.

To supplement our consolidated financial statements, which are prepared and presented in accordance with

accounting principles generally accepted in the United States (‘‘GAAP’’), we provide investors with certain
non-GAAP financial measures, including non-GAAP operating income (loss), non-GAAP operating margin,
non-GAAP net income (loss), non-GAAP net income (loss) per share, basic and diluted, and free cash flow. For
a full reconciliation for each non-GAAP financial measure to the most directly comparable financial measure
stated in accordance with GAAP, please see the ‘‘Non-GAAP Financial Measures’’ section of Item 7
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ of our 2021 Annual
Report filed with the SEC on March 4, 2021 and Exhibit 99.1 to our Current Report on Form 8-K filed with the
SEC on March 3, 2021.

Highlights of Fiscal 2021 Executive Compensation Program

Consistent with our performance and compensation objectives for fiscal 2021, our compensation committee

took the following key actions relating to the compensation of our named executive officers for fiscal 2021:

Base Salary – Did not increase the annual base salaries of our named executive officers for fiscal 2021 and
adopted a program to allow our named executive officers to elect to be paid 100% of their base salaries effective
from May 1, 2020 through January 31, 2021 in RSUs, instead of cash. In each case, these decisions were made
in order to preserve our cash resources in the face of economic uncertainty surrounding the COVID-19 pandemic
and to further align the interests of our named executive officers with those of our stockholders and provide an
additional incentive for our long-term growth.

Bonus Plan – Awarded bonus payouts to our named executive officers at 123.9% of their respective fiscal
2021 target bonus opportunities based on achievement of the performance objectives established for fiscal 2021
under our Senior Executive Incentive Bonus Plan (the ‘‘Bonus Plan’’). In February 2021, our compensation
committee approved bonus payouts in fully-vested RSUs, instead of cash, in order to further align the interests of
our named executive officers with those of our stockholders and provide an additional incentive for our
long-term growth.

Long-Term Incentive Compensation – Granted long-term incentive compensation in the form of stock
options to purchase shares of our Class A common stock and service-based vesting RSUs covering shares of our
Class A common stock to align the long-term incentive opportunities of our named executive officers with the
interests of our stockholders. The grant date fair values of these equity awards are set forth in the ‘‘Fiscal 2021
Summary Compensation Table’’ and the ‘‘Fiscal 2021 Grants of Plan-Based Awards Table’’ below.

28

Fiscal 2021 Executive Compensation Policies and Practices

Our executive compensation policies and practices reinforce our pay-for-performance philosophy and align

with sound governance principles. Listed below are highlights of our fiscal 2021 compensation policies and
practices.

What we do

What we do not do

☑ Use a pay-for-performance philosophy to align
executive compensation with performance

☒ No ‘‘single-trigger’’ cash or equity change in

control benefits for executives

☑ Use equity-based compensation to deliver a

☒ No tax gross-ups on severance or change in

significant majority of the total compensation of
our executive officers to further align their
interests with those of our stockholders

control benefits

☑ Establish maximum payout amounts under the

Bonus Plan and require a threshold level of
achievement for payout with respect to each
performance measure

☒

☒

No guaranteed bonuses

No guaranteed base salary increases

☑ Conduct an annual risk assessment of our
executive and broad-based compensation
programs to promote prudent risk management

☑ Maintain a compensation committee consisting
solely of independent directors with extensive
relevant experience

☒ No post-termination retirement, pension or
deferred compensation benefits, other than
participation in our 401(k) plan on the same
terms as other employees

☒ No perquisites other than reimbursement of HSR
filing fees and a gross-up of compensation
recognized in connection with such
reimbursement and no health or other benefits,
other than those that are generally available to
our employees

☑ Conduct an annual review of our executive

☒ No strict benchmarking of compensation to a

compensation strategy, competitiveness and peer
group

specific percentile of our peer group

☑ Retain an independent compensation consultant
who reports directly to our compensation
committee

☒ No hedging or pledging of Okta securities by

any employees or directors

Say-on-Pay Advisory Stockholder Vote on Executive Compensation

Okta and the compensation committee value the input of our stockholders. In fiscal 2021, over 96% of the

votes cast on our Say-on-Pay proposal were favorable, which reflected strong stockholder support for our
executive compensation programs. In fiscal 2021, members of our management team contacted our top
30 institutional stockholders, which represented over 58% of our outstanding common stock, or over 62% of our
shares of outstanding common stock excluding shares held by our executive officers and board members, and
engaged in extensive discussions with several of our largest stockholders. Our team met with governance
professionals from passive funds as well as portfolio managers from active funds to discuss our business, ESG
initiatives, board composition and executive compensation program. The breadth of our outreach program
enabled us to gather feedback from a significant cross-section of our stockholder base. Based on these
discussions, the compensation committee found that our stockholders continued to be supportive of our executive
compensation program and the alignment between executive officer pay and Okta’s performance. We value the
opinions of our stockholders, and when making compensation decisions for our named executive officers in the
future, our board and our compensation committee intend to consider the outcome of the say-on-pay advisory
vote, in addition to other stockholder feedback we may receive throughout the year.

29

Executive Compensation Philosophy, Objectives and Design

Our compensation philosophy is that an executive compensation program should drive and reward
performance and further align the compensation of our executive officers with the long-term interests of our
stockholders. Consistent with this philosophy, our executive compensation program is designed to achieve the
following primary objectives:

•

•

•

attract, motivate, incent and retain our executive officers, who contribute to our long-term success;

provide compensation packages to our executive officers that are competitive and drive and reward the
achievement of our business objectives; and

effectively align our executive officers’ interests with the interests of our stockholders by focusing on
long-term equity incentives that correlate with the growth of sustainable long-term value for our
stockholders.

Our executive compensation program design incorporates a mix of compensation elements, including base

salary, short-term bonus opportunities, long-term equity incentives and benefits (such as change in control
payments and benefits), to attract and retain our named executive officers. In determining the amount of each
element of direct compensation awarded to the named executive officers, our compensation committee does not
apply any fixed percentage of any one element in relation to the overall compensation package. Rather, our
compensation committee looks at the overall compensation package and the relative amount of each element on a
stand-alone basis for each individual to determine whether such amounts and mix of elements are consistent with
the basic principles and objectives of our overall executive compensation program.

A significant majority of the compensation opportunity for our named executive officers is weighted toward

equity, as opposed to cash, compensation. We structure our executive compensation program to be heavily
weighted toward long-term equity incentives as we continue to transition the compensation of our named
executive officers to levels that are more consistent with executive compensation in our compensation peer
group, which we also believe correlates with the growth of sustainable long-term value for our stockholders.

We evaluate our executive compensation philosophy and executive compensation program, including design

and competitiveness, at least annually and as circumstances require. As part of this review process, our
compensation committee applies our values and the objectives outlined above.

Compensation Committee Oversight of Executive Compensation Process

Our compensation committee discharges many of the responsibilities of our board relating to the

compensation of our executive officers and the non-employee members of our board (described in ‘‘Corporate
Governance—Non-Employee Director Compensation’’ above), and regularly reports to our board on its
discussions, decisions and other actions. Our compensation committee has overall responsibility for overseeing
our compensation structure, policies and programs generally, and for overseeing and evaluating the compensation
plans, policies and practices applicable to our executive officers. Our compensation committee has the authority
to retain, and has retained, an independent compensation consultant to provide support to the committee in its
review and oversight of our executive compensation program.

Our compensation committee reviews the base salary levels, short-term incentive compensation

opportunities, and long-term incentive compensation opportunities of our named executive officers each fiscal
year at the beginning of the year, or more frequently as warranted. Long-term incentive compensation is granted
on a regularly-scheduled basis, as described in ‘‘Other Compensation Policies—Equity Award Grant Policy’’
below.

Compensation-Setting Process

Role of the CEO

In discharging its responsibilities, our compensation committee works with members of management,
including our CEO. Management assists our compensation committee by providing information on corporate and
individual performance, competitive market compensation data and management’s perspective on compensation
matters. Our CEO makes compensation recommendations for each of our executive officers other than himself.
These recommendations cover each executive officer’s total target direct compensation, consisting of base salary,

30

short-term incentive opportunity and long-term equity incentives. In making these recommendations, our CEO
considers a variety of factors, including our business results, the executive officer’s individual contribution
toward these results, the executive officer’s role and performance of his or her duties, whether the executive has
achieved his or her individual goals, and the relative compensation parity among all of our executive officers.
Our compensation committee reviews the recommendation of our CEO and other data and then exercises its own
independent judgment to determine the target total direct compensation, and each element thereof, for each of our
executive officers, including our CEO. While our CEO typically attends meetings of our compensation
committee, our compensation committee meets in executive session outside the presence of our CEO when
determining his compensation and when discussing certain other matters as well.

Role of the Compensation Consultant

Our compensation committee engages an independent compensation consultant to assist it by providing
information, analysis and other advice relating to our executive compensation program and the decisions resulting
from the committee’s annual executive compensation review. For fiscal 2021, our compensation committee
retained Compensia, a national compensation consulting firm with expertise relating to technology companies, to
provide it with market information, analysis and other advice relating to executive compensation on an ongoing
basis. Compensia was engaged directly by our compensation committee to, among other things:

•

•

•

•

•

•

•

assist in developing a relevant group of peer companies to help our compensation committee determine
the appropriate level of overall compensation for our executive officers;

assess each separate element of compensation, with a goal of ensuring that the compensation we offer
to our executive officers, individually as well as in the aggregate, is competitive and fair;

review compensation for the non-employee members of our board;

provide market practices for equity compensation design;

develop a compensation risk assessment;

coordinate with our management for data collection and job matching for our executive officers; and

support other ad hoc matters throughout the year.

Based on its consideration of the factors specified in SEC rules and the Nasdaq listing standards, our
compensation committee does not believe that its relationship with Compensia and the work of Compensia on
behalf of our compensation committee has raised any conflict of interest. Our compensation committee reviews
these factors on an annual basis. As part of our compensation committee’s determination of Compensia’s
independence, it received written confirmation from Compensia addressing these factors and stating its belief that
it remains an independent compensation consultant to our compensation committee.

Role of the Compensation Committee

Our compensation committee determines the target total direct compensation opportunities for our executive

officers. When making these decisions, the compensation committee reviews the recommendations of our CEO
and other data, including input from the independent compensation consultant, compensation survey data, and
publicly-available compensation data of our peers. Our compensation committee then exercises its independent
judgment to determine the target total direct compensation, and each element of compensation, for each of our
executive officers.

Our compensation committee does not use a single method or measure in making its determinations, nor

does it establish specific targets for the total direct compensation opportunities of our executive officers.
Nonetheless, as it continues to adjust the compensation of our named executive officers to levels that are more
consistent with those of our compensation peer group, our compensation committee begins its deliberations on
cash and equity compensation levels with reference to the 25th, 50th and 75th percentile levels for cash
compensation and target total direct compensation as reflected in competitive market data. For more information,
see ‘‘Competitive Positioning’’ below.

31

When determining the amount and approving each compensation element and the target total direct

compensation opportunity for our executive officers, our compensation committee considers the following factors,
among others:

•

•

•

•

•

•

Okta’s performance against the corporate performance objectives established by our compensation
committee and our board;

Okta’s financial performance relative to our compensation peer group;

the compensation levels and practices of our compensation peer group;

each individual executive officer’s skills, experience and qualifications relative to other
similarly-situated executives at the companies in our compensation peer group;

the scope of each individual executive officer’s role compared to other similarly-situated executives at
the companies in our compensation peer group; and

the performance of each individual executive officer, based on a subjective assessment of his or her
contributions to our overall performance, ability to lead his or her function, and ability to work as part
of a team.

These items reflect our core values and compensation parity among our individual executive officers and provide
the framework for compensation decision-making and final decisions regarding the compensation opportunity for
each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor
on the determination of pay levels quantifiable.

Competitive Positioning

For purposes of comparing our executive compensation against the competitive market, our compensation

committee reviews and considers the compensation levels and practices of a group of peer companies.

In September 2019, with the assistance of Compensia, our compensation committee reviewed our

compensation peer group for fiscal 2021, which was generally developed from publicly-traded companies with
three primary characteristics:

•

•

•

a focus on software, with an emphasis on software-as-a-service and cloud business models;

revenue of 0.5 to 3.0 times our annual revenue; and

a range of 0.25 to 4.0 times our market capitalization.

Where appropriate, we further refined our peer group by focusing on companies with strong one- and three-year
revenue growth (where possible), strong market cap-to-revenue multiples and on companies based in the San
Francisco Bay Area or in other U.S. metropolitan areas. Based on the foregoing review, the compensation
committee removed Ellie Mae, Imperva, Medidata Solutions, Tableau Software, Box, Cornerstone OnDemand,
FireEye and Guidewire Software from the peer group and added Anaplan, CrowdStrike Holdings, DocuSign,
Dropbox, MongoDB, Palo Alto Networks, Slack Technologies and Zoom Video Communications for fiscal 2021.
Our compensation committee reviews our compensation peer group at least annually and makes adjustments to
its composition, if warranted, taking into account changes in both our business and the businesses of our peers.

Our compensation committee uses data drawn from the public filings of our compensation peer group to

evaluate the competitive market when determining the total direct compensation packages for our executive
officers.

At the beginning of fiscal 2021, based on the foregoing, our compensation committee used the following

compensation peer group to assist with the determination of compensation for our executive officers:

Anaplan
Coupa Software
CrowdStrike Holdings
DocuSign
Dropbox

HubSpot
MongoDB
New Relic
Palo Alto Networks
Paycom Software

Proofpoint
Qualys
RingCentral
Slack Technologies
Splunk

Twilio
Veeva Systems
Zendesk
Zoom Video Communications
Zscaler

32

Elements of Our Executive Compensation Program

Our executive compensation program consists of the following primary components:

•

•

•

•

base salary;

short-term annual incentive bonuses;

long-term equity compensation; and

severance and change in control-related payments and benefits.

We also provide our executive officers with comprehensive employee benefit programs, such as medical,
dental and vision insurance, a 401(k) plan, life and disability insurance, flexible spending accounts, an employee
stock purchase plan and other plans and programs made available to all our eligible employees.

We believe these elements provide a compensation package that attracts and retains qualified individuals,
links individual performance to company performance, focuses the efforts of our named executive officers on the
achievement of both our short-term and long-term objectives and further aligns the interests of our executive
officers with those of our stockholders.

Base Salaries

We provide base salary as a fixed source of compensation for each of our named executive officers,
allowing them a degree of certainty relative to the significant majority of their compensation that is based on
equity awards, the value of which varies and, in the case of stock options, is contingent on our stock price
appreciation. Our compensation committee recognizes the importance of base salaries as an element of
compensation that helps to attract and retain highly qualified executive talent.

Other than with respect to our co-founders, the initial base salary of each executive officer is established through
arm’s-length negotiation at the time the executive officer is hired, taking into account a variety of factors, including the
executive’s qualifications, experience and compensation expectations and comparable market data. At the beginning of
each year, our compensation committee reviews, and adjusts as necessary, base salaries for each of our named
executive officers, including our co-founders. Our compensation committee does not apply specific formulas in setting
base salary levels or determining adjustments from year to year. However, in completing its annual review and
adjustment, our compensation committee targets paying our named executive officers base salaries that are competitive
with current market practice (as reflected by our compensation peer group).

In April 2020, our compensation committee determined that the annual base salaries of our named executive
officers previously approved by the compensation committee for fiscal 2020 were appropriate and would remain
in effect for fiscal 2021, and adopted a fiscal 2021 program to allow our named executive officers to elect to be
paid 100% of their base salaries effective from May 1, 2020 through January 31, 2021 in RSUs, instead of cash,
in order to preserve our cash resources in the face of economic uncertainty surrounding the COVID-19 pandemic
and to further align the interests of our named executive officers with those of our stockholders and our
long-term growth.

The fiscal 2021 base salary amounts paid in cash and in RSUs for our named executive officers were as

follows:

Base Salaries for Fiscal 2021

Named Executive Officer
Todd McKinnon
William E. Losch
J. Frederic Kerrest
Charles Race
Jonathan T. Runyan

Approved Full
Fiscal 2021
Base Salary
($)
306,000
350,900
362,585
346,700
331,900

2/1/2020 – 4/30/2020
Base Salary
Paid in Cash
($)
76,500
87,725
90,646
86,675
82,975

5/1/2020 – 1/31/2021
RSUs Granted in
Lieu of Base Salary
(#)(1)(2)
1,941
2,226
2,300
2,199
2,105

(1) Mr. McKinnon received 1,941 RSUs in lieu of payment in cash of $229,500 of his base salary; Mr. Losch received 2,226 RSUs in lieu

33

of payment in cash of $263,175 of his base salary; Mr. Kerrest received 2,300 RSUs in lieu of payment in cash of $271,939 of his base
salary; Mr. Race received 2,199 RSUs in lieu of payment in cash of $260,025 of his base salary; and Mr. Runyan received 2,105 RSUs
in lieu of payment in cash of $248,925 of his base salary. The number of RSUs granted to each named executive officer in satisfaction
of his forgone cash salary amount was determined by dividing such amount by the trailing average closing price of our common stock
on the Nasdaq during the month prior to the date of grant, consistent with our Equity Award Grant Policy. As a result, the ASC
Topic 718 grant date fair values for such RSUs (as set forth in the ‘‘Fiscal 2021 Summary Compensation Table’’ below) differ from the
dollar values of the forgone cash salary amounts payable.

(2)

Each RSU was granted on April 15, 2020 and vested as to 17% of the shares of Class A common stock underlying the RSU on
June 15, 2020, 33% on September 15, 2020, 39% on December 15, 2020, and the remaining 11% on March 15, 2021.

Annual Performance-Based Incentives

We use performance-based incentives to motivate our named executive officers to achieve our annual
financial and operational objectives, while making progress toward our longer-term strategic and growth goals.
Typically, near the beginning of each fiscal year, our compensation committee adopts the performance criteria
and targets for our Bonus Plan for that fiscal year, and establishes the target annual incentive opportunity for
each plan participant based on a percentage of each participant’s base salary, the performance measures and the
associated target levels for each measure, and the potential payouts based on actual performance for the fiscal
year. In addition, our compensation committee considered the factors described in ‘‘Compensation-Setting
Process’’ above.

Overview & Structure

In light of the economic uncertainty surrounding the evolving COVID-19 pandemic, our compensation

committee deferred adopting the targets for fiscal 2021 under our Bonus Plan until April 2020 and the
performance criteria for fiscal 2021 under our Bonus Plan until June 2020. At those times, our compensation
committee adopted and approved the performance criteria and targets for fiscal 2021 under our Bonus Plan, as
set forth in ‘‘Corporate Performance Measures and Bonus Plan Funding Methodology’’ below. The Bonus Plan
provides opportunities for incentive compensation payouts based on our actual achievement of pre-established
corporate financial objectives. The target levels for the financial objectives were set at levels determined to be
challenging and requiring substantial skill and effort by our named executive officers. The Bonus Plan provided
for an annual performance period with annual cash payouts, in order to align the committee’s assessment of our
named executive officers’ performance to our achievement of our annual operating plan.

Target Annual Incentive Compensation Opportunities

In April 2020, in connection with its review of our executive compensation program, our compensation
committee determined that the existing target annual incentive opportunities of our named executive officers were
appropriate and would remain unchanged from fiscal 2020, as set forth in the table below.

Target Performance-Based Incentives for Fiscal 2021

Named Executive Officer
Todd McKinnon
William E. Losch
J. Frederic Kerrest
Charles Race
Jonathan T. Runyan

Target
Performance-Based
Incentive as
Percent of Base
Salary
65%
60%
60%
100%
50%

Target
Performance-Based
Incentive Under the
Bonus Plan
($)
198,900
210,540
217,551
346,700
165,950

Base Salary
($)
306,000
350,900
362,585
346,700
331,900

Corporate Performance Measures and Bonus Plan Funding Methodology

To measure performance for purposes of the Bonus Plan, our compensation committee selected revenue
(weighted 70%) and non-GAAP operating income (weighted 30%) as the corporate performance measures that best
support our annual operating plan and enhance long-term value creation for our stockholders. For this purpose:

revenue means GAAP revenue as reflected in our quarterly and annual financial statements; and

34

non-GAAP operating income means GAAP operating income as reflected in our quarterly and annual
financial statements, adjusted to exclude expenses related to stock-based compensation expense, charitable
contributions, amortization of acquired intangibles and acquisition-related expenses.

The target levels required for 100% achievement for the corporate performance measures under our Bonus

Plan were $806.5 million for revenue and negative $4.6 million for non-GAAP operating income. As a threshold
matter, our named executive officers were eligible for annual incentive compensation payouts for fiscal 2021
only if we met or exceeded 95% with respect to the revenue target and our non-GAAP operating income was
equal to or better than negative $17.1 million. The compensation committee set high thresholds to ensure that
incentive payments would only follow significant achievement. On the other end of the spectrum, revenue
achievement of 106% of target would result in a maximum payout of 150%, and non-GAAP operating income
achievement of $15.4 million or greater would result in a maximum payout of 150%. Total payouts were capped
at 150% of the target annual cash incentive opportunities to manage potential incentive compensation costs and
avoid incentivizing undue risk in our executive compensation program, while still maintaining appropriate
incentives for our named executive officers.

With respect to the revenue component, 95% achievement would result in 25% of payment funding. For
each additional 1% achievement between 95% and 100% of target, payment funding would increase an additional
15%. Each additional 1% achievement between 100% and 102% of target would result in an additional 1% of
payment funding and each additional 1% achievement between 102% and 106% of target would result in an
additional 12% of payment funding, with a maximum funding of 150% at 106% achievement or greater.

With respect to the non-GAAP operating income component, achievement of negative $17.1 million would

result in 50% of payment funding. For each additional $1.0 million of achievement between negative
$17.1 million and negative $4.6 million, payment funding would increase an additional 4% of payment funding.
Each additional $1.0 million of achievement between negative $4.6 million and $15.4 million would result in an
additional 2.5% of payment funding, with a maximum funding of 150% at achievement of $15.4 million or
greater.

Performance in Fiscal 2021 and Payouts

In February 2021, our compensation committee measured actual Bonus Plan performance against the
pre-established target levels for the performance period. For fiscal 2021, we exceeded the target performance
levels under the Bonus Plan as follows:

Performance Measure
Revenue
Non-GAAP Operating Income

Target
($ in millions)
806.5
(4.6)

Result
($ in millions)
835.4
7.7

Actual Achievement
of Target
103.6%
$12.3 million above target

As achievement of the revenue metric resulted in payment funding of 121.0% and achievement of the
non-GAAP operating income metric resulted in payment funding of 130.8%, the resulting total achievement
percentage was 123.9%. As a result, the total payouts to our named executive officers under the Bonus Plan in
fiscal 2021 were as follows:

Named Executive Officer
Todd McKinnon
William E. Losch
J. Frederic Kerrest
Charles Race
Jonathan T. Runyan

Fiscal 2021 Target Annual
Performance-Based
Incentive Compensation
Opportunity
($)
198,900
210,540
217,551
346,700
165,950

Fiscal 2021 Actual
Performance-Based
Incentive Compensation
($)
246,437
260,859
269,546
429,561
205,612

35

In March 2019, our compensation committee amended the Bonus Plan to provide that the incentive
compensation payouts may be made in fully-vested RSUs, instead of cash, and determined that any bonuses
awarded for achievement in future years would be paid in fully-vested RSUs, in order to further align the
interests of our executive officers with those of our stockholders. The number of fully-vested RSUs granted to
the applicable named executive officer in satisfaction of the amount payable under the Bonus Plan was
determined by dividing the earned incentive compensation amount payable (expressed as a dollar value) by the
trailing average closing price of our common stock on the Nasdaq during the month prior to the date of grant,
consistent with our Equity Award Grant Policy.

The RSUs earned by our named executive officers during fiscal 2021 under the Bonus Plan are set forth in

the ‘‘Fiscal 2021 Summary Compensation Table’’ below.

Long-Term Equity Incentives

We view long-term incentive compensation in the form of equity awards as a critical element of our

executive compensation program. The realized value of these equity awards has a direct relationship to our stock
price; therefore, these awards are an incentive for our named executive officers to create value for our
stockholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our

compensation committee on a regularly-scheduled basis, as described in ‘‘Other Compensation Policies—Equity
Award Grant Policy’’ below.

For fiscal 2021, our compensation committee determined that the equity awards to be granted to our
executive officers should be divided equally to deliver half of the intended aggregate fair value in stock options
and the remaining half in RSUs. The equity awards granted to our named executive officers in fiscal 2021 are set
forth in the ‘‘Fiscal 2021 Summary Compensation Table’’ and the ‘‘Fiscal 2021 Grants of Plan-Based Awards
Table’’ below.

In determining the size of the equity awards granted to our named executive officers in fiscal 2021, our
compensation committee considered the company’s performance, market data for each named executive officer,
the criticality of individual roles, the individual skills, experience and performance of each named executive
officer and the mix of cash and equity compensation to ensure that equity awards would motivate the creation of
long-term value.

Stock Options

We believe that stock options provide a strong reward for growth in the market price of our common stock,

as their entire value depends on stock price appreciation over the exercise price on the grant date. In addition,
stock options provide a strong incentive for our named executive officers to remain employed with us as they
require continued employment through the multi-year vesting period.

In fiscal 2021, we granted our named executive officers stock options to purchase shares of our Class A
common stock. These options have a 10-year term and generally vest as to one-quarter of such shares on the
first anniversary of the ‘‘vesting commencement date’’ and in 36 approximately equal monthly installments
thereafter, so long as the option holder remains employed with us through the applicable vesting date. Consistent
with our compensation objectives, we believe this approach further aligns our executive officers’ efforts and
contributions with our long-term interests and allows them to participate in any future appreciation in the value
of our common stock.

RSUs

We believe RSUs provide a strong retention incentive for our named executive officers, provide a reward for
growth in the value of our common stock, and are less dilutive than stock options to our stockholders. All RSUs
are granted under our 2017 Plan and are settled for shares of our Class A common stock. In fiscal 2021, we
granted our named executive officers RSUs that generally vest as to one-quarter of such shares on the first
anniversary of the applicable ‘‘vesting commencement date,’’ and in 12 approximately equal quarterly
installments thereafter, so long as the named executive officer remains employed with us through the applicable
vesting date.

36

Employee Benefit Programs

Our named executive officers are eligible to participate in all of our employee benefit plans offered to
U.S. employees, including our 401(k) plan, employee stock purchase plan, and medical, dental, life and disability
insurance plans, in each case on the same basis as other U.S. employees.

Perquisites and Other Personal Benefits

We typically provide limited or no perquisites or personal benefits to our named executive officers. During

fiscal 2021, none of our named executive officers received perquisites or other personal benefits that were, in the
aggregate, $10,000 or more for each individual, except our COO, for whom we paid the filing fee under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 (‘‘HSR’’) as well as a tax gross-up related to such fee. We
believe that reimbursing our COO for the HSR filing fee and its related tax consequences was consistent with
our decision to continue to compensate him primarily through equity-compensation arrangements. Absent this
regulatory filing, our COO would not be able to fully participate in our long-term incentive compensation
program and, therefore, we determined that it was appropriate for us to reimburse him for this filing fee and
related tax liabilities. In the future, we may provide perquisites or other personal benefits in limited
circumstances, such as where we believe it is appropriate to assist an individual in the performance of his or her
duties, to make our executive team more efficient and effective, or for recruitment or retention purposes. All
future practices with respect to perquisites or other benefits for our named executive officers will be subject to
review and approval by our compensation committee.

401(k) Plan

We maintain a tax-qualified retirement plan that provides all regular U.S. employees, including our

executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan,
participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the
plan, subject to applicable annual limits under the U.S. Internal Revenue Code of 1984, as amended (the
‘‘Code’’). Pre-tax contributions are allocated to each participant’s individual account and are then invested in
selected investment alternatives according to the participants’ directions. Employee elective deferrals are
100% vested at all times. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and earnings
on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all
contributions are deductible by us when made.

Post-Employment Compensation Arrangements

Not in Connection with a Change in Control

Our Executive Severance Plan provides that upon the termination of employment of an eligible participant

by us for any reason other than for ‘‘cause’’ (as defined in the Executive Severance Plan), death or disability
outside of the ‘‘change in control period’’ (defined as the period beginning three months prior to and ending
12 months after a Sale Event), an eligible participant will be entitled to receive, subject to the execution and
delivery of an effective release of claims in favor of the company:

•

•

a lump sum cash payment equal to 12 months of base salary for our CEO, nine months of base salary
for our other executive officers, and six months of base salary for the other participants; and

a monthly cash payment equal to our contribution toward health insurance for 12 months for our CEO,
nine months for our other executive officers, and six months for the other participants.

In Connection with a Change in Control

The Executive Severance Plan also provides that upon the (i) termination of employment of an eligible
participant by us other than for cause, death or disability or (ii) the resignation of an eligible participant for
‘‘good reason’’ (as defined in the Executive Severance Plan), in each case within the change in control period, an
eligible participant will be entitled to receive, in lieu of the payments and benefits above and subject to the
execution and delivery of an effective release of claims in favor of the company:

•

a lump sum cash payment equal to 18 months of base salary for our CEO, 12 months of base salary for
our other executive officers, and nine months of base salary for the other participants;

37

•

•

•

a lump sum cash payment equal to the eligible participant’s annual target bonus;

a monthly cash payment equal to our contribution toward health insurance for 18 months for our CEO,
12 months for our other executive officers, and nine months for the other participants; and

full accelerated vesting of all outstanding and unvested equity awards held by such participant,
provided that any unvested and outstanding equity awards subject to performance conditions will be
deemed satisfied at the target levels specified in the applicable award agreements.

The payments and benefits provided under the Executive Severance Plan in connection with a change in

control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of the Code.
These payments and benefits may subject an eligible participant to an excise tax under Section 4999 of the Code.
If the payments or benefits payable in connection with a change in control would be subject to the excise tax
imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction
would result in a higher net after-tax benefit to the recipient. We have not provided any named executive officer
with any tax reimbursement or gross-up in connection with these change in control arrangements.

Other Compensation Policies

Equity Award Grant Policy

Our compensation committee has adopted an ‘‘Equity Award Grant Policy.’’ Under this policy, we generally

grant equity awards on a regularly-scheduled basis to enhance the effectiveness of our internal control over our
equity award grant process. Pursuant to the Equity Award Grant Policy, which was most recently amended in
December 2020, our compensation committee has delegated certain limited authority to an equity committee
consisting of our CEO, Chief People Officer, CFO and General Counsel (the ‘‘equity committee’’), by which any
two members of the equity committee may approve the grant of routine new hire, promotion, refresh and certain
other equity awards to employees within equity guidelines reviewed and approved from time to time by our
compensation committee and subject to other limitations and requirements. The equity committee may not grant
equity awards to its members, to employees who are subject to the reporting and other provisions of Section 16
of the Exchange Act, or to employees with titles more senior than vice president. Grants of equity awards are
generally made monthly and will be effective on the date such grant is approved by our compensation committee
or equity committee, as applicable.

Compensation Recovery Policy

Our 2017 Plan provides that awards under such plan will be subject to our compensation recovery (‘‘clawback’’)
policy, if and when we adopt one. We intend to adopt a general compensation recovery policy covering our short- and
long-term incentive award plans and arrangements once the SEC adopts final rules implementing the requirement of
Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Policy Prohibiting Hedging and Pledging of Company Securities

Our insider trading policies prohibit the members of our board and all employees, including our executive

officers, from engaging in derivative securities transactions, including hedging, with respect to our securities, and
from pledging our securities as collateral for a loan or holding company securities in a margin account. Our
insider trading policies require that our executive officers may trade in our securities only pursuant to trading
plans that comply with Rule 10b5-1 under the Exchange Act. Certain other employees and our directors are
subject to certain pre-clearance procedures in order to trade in our securities or may trade pursuant to trading
plans that comply with Rule 10b5-1.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Section 162(m) of the Code generally places a $1 million limit on the amount of compensation a public

company can deduct in any one year for certain current and former executive officers. While our compensation
committee considers tax deductibility as one factor in determining executive compensation, our compensation
committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award
compensation that it determines to be consistent with the goals of our executive compensation program, even if

38

the awards are not deductible by us for tax purposes. The former exemption from Section 162(m)’s deduction
limit for performance-based compensation has been repealed, effective for taxable years beginning after
December 31, 2017, such that compensation paid to our named executive officers and certain other individuals in
excess of $1 million will not be deductible unless it qualifies for the limited transition relief applicable to certain
arrangements in place as of November 2, 2017. We expect that a portion of the cash compensation and equity
awards to our executive officers will not be deductible under Section 162(m).

Despite our compensation committee’s efforts to structure certain performance-based awards that were
granted prior to November 2, 2017, in a manner intended to be exempt from Section 162(m) and therefore not
subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of
Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under
the legislation repealing the performance-based compensation exemption from the deduction limit, no assurance
can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact
will. Further, our compensation committee reserves the right to modify compensation that was initially intended
to be exempt from Section 162(m) if it determines that such modifications are consistent with our business
needs. Our compensation committee believes that stockholder interests are best served if its discretion and
flexibility in awarding compensation is not restricted, even though some compensation awards may result in
non-deductible compensation expenses.

Taxation of ‘‘Parachute’’ Payments

Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant
equity interests and certain other service providers may be subject to significant additional taxes if they receive
payments or benefits in connection with a change in control of the company that exceed certain prescribed limits,
and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We
have not agreed to provide any executive officer, including any named executive officer, with a ‘‘gross-up’’ or
other reimbursement payment for any tax liability that the executive officer might owe as a result of the
application of Sections 280G or 4999 of the Code.

Section 409A of the Code

Section 409A of the Code imposes additional significant taxes in the event that an executive officer, director

or service provider receives ‘‘deferred compensation’’ that does not satisfy the requirements of Section 409A of
the Code. Although we do not maintain a traditional nonqualified deferred compensation plan for our executive
officers, Section 409A of the Code does apply to certain severance arrangements, bonus arrangements and equity
awards. We have structured all such arrangements and awards in a manner to either avoid or comply with the
applicable requirements of Section 409A of the Code.

Accounting for Stock-Based Compensation

We follow ASC Topic 718 for our stock-based compensation awards. ASC Topic 718 requires us to measure

the compensation expense for all share-based payment awards made to our employees and non-employee
members of our board, including options to purchase shares of our common stock and other stock awards, based
on the grant date ‘‘fair value’’ of these awards. This calculation is performed for accounting purposes and
reported in the executive compensation tables required by the federal securities laws, even though the recipient
may never realize any value from such awards.

39

Fiscal 2021 Summary Compensation Table

The following table presents information regarding the compensation awarded to, earned by and paid to

each of our named executive officers in fiscal 2021, 2020 and 2019.

Name and Principal Position
Todd McKinnon

CEO(7)

William E. Losch
Former CFO(8)

J. Frederic Kerrest

COO(7)

Charles Race

Former President, Worldwide
Field Operations(9)

Jonathan T. Runyan
General Counsel

Fiscal
Year
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019

Salary
($)(1)
306,000
306,000
306,000
350,900
350,900
326,400
362,585
362,585
300,400
346,700
346,700
322,500
331,900
331,900
308,700

Stock
Awards
($)(2)(3)
6,070,523
4,180,794
2,215,365
2,162,092
1,721,498
1,384,113
4,272,142
2,705,200
1,936,974
1,860,214
1,475,511
992,013
2,159,103
1,229,607
882,225

Option
Awards
($)(4)
5,551,843
4,123,267
2,245,905
1,943,123
1,697,814
1,402,615
3,886,309
2,667,988
1,961,940
1,665,534
1,455,205
1,006,785
1,943,123
1,212,671
894,920

Non-Equity
Incentive
Plan
Compensation
($)(5)
202,646
171,342
290,011
214,539
181,427
285,545
221,630
187,436
262,812
353,144
298,803
470,252
169,253
143,018
225,059

All Other
Compensation
($)(6)

0
247,917
0
0
0
0
247,917
0
0
0
0
0
0
0
0

Total
($)
12,131,012
9,029,320
5,057,281
4,670,654
3,951,639
3,398,673
8,990,583
5,923,209
4,462,126
4,225,592
3,576,219
2,791,550
4,603,379
2,917,196
2,310,904

(1)

(2)

(3)

(4)

(5)

The amounts reported in fiscal 2021 represent the salary amounts paid in cash to our named executive officers effective February 1,
2020 through April 30, 2020 (the ‘‘FY21 Cash Salary Amounts’’) plus the value of cash salary forgone effective May 1, 2020 through
January 31, 2021 in favor of RSU awards (the ‘‘FY21 Salary RSUs’’) at the election of the named executive officers, as further
described in footnote (3) below and above in ‘‘Compensation Discussion and Analysis–Elements of our Executive Compensation
Program–Base Salaries.’’

The FY21 Cash Salary Amounts were as follows: Mr. McKinnon received $76,500 of his base salary paid in cash; Mr. Losch received
$87,725 of his base salary paid in cash; Mr. Kerrest received $90,646 of his base salary paid in cash; Mr. Race received $86,675 of his
base salary paid in cash; and Mr. Runyan received $82,975 of his base salary paid in cash.

The FY21 Salary RSUs were granted on April 15, 2020 as follows: Mr. McKinnon received 1,941 RSUs in lieu of payment in cash of
$229,500 of his base salary; Mr. Losch received 2,226 RSUs in lieu of payment in cash of $263,175 of his base salary; Mr. Kerrest
received 2,300 RSUs in lieu of payment in cash of $271,939 of his base salary; Mr. Race received 2,199 RSUs in lieu of payment in
cash of $260,025 of his base salary; and Mr. Runyan received 2,105 RSUs in lieu of payment in cash of $248,925 of his base salary.
Each FY21 Salary RSU award vested as to 17% of the shares of Class A common stock underlying the award on June 15, 2020, 33%
on September 15, 2020, 39% on December 15, 2020, and the remaining 11% on March 15, 2021. The number of RSUs granted to each
named executive officer in satisfaction of his forgone cash salary amount was determined by dividing such amount by the trailing
average closing price of our common stock on the Nasdaq during the month prior to the date of grant, consistent with our Equity
Award Grant Policy. As a result, the ASC Topic 718 grant date fair values of the FY21 Salary RSUs exceed the dollar values of the
forgone cash salary amounts payable, which excess amounts (the ‘‘FY21 Salary RSU Excess GDFVs’’) are reflected in the ‘‘Stock
Awards’’ column above and further described in footnote (3) below.

The amounts reported represent the aggregate grant date fair values of the RSUs granted to our named executive officers in fiscal 2021,
2020 and 2019, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value are set
forth in the notes to our consolidated financial statements included in our 2021 Annual Report. These amounts do not necessarily
correspond to the actual values recognized by our named executive officers.

The amounts reported in fiscal 2021 also include the FY21 Salary RSU Excess GDFVs described in footnote (1) above. The ASC
Topic 718 grant date fair value of each named executive officer’s FY21 Salary RSU award exceeded his forgone cash salary by the
following amount: Mr. McKinnon: $47,034; Mr. Losch: $53,963; Mr. Kerrest: $55,742; Mr. Race: $53,267; and Mr. Runyan: $50,974.
The assumptions used in calculating the grant date fair value are set forth in the notes to our consolidated financial statements included
in our 2021 Annual Report.

The amounts reported represent the aggregate grant date fair values of the stock options granted to our named executive officers in
fiscal 2021, 2020 and 2019, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair
value are set forth in the notes to our consolidated financial statements included in our 2021 Annual Report. These amounts do not
necessarily correspond to the actual values recognized by the named executive officers.

The amounts reported represent the aggregate annual performance-based cash incentives earned in fiscal 2021, 2020 and 2019, based
upon the achievement of certain company metrics. For fiscal 2021, 2020 and 2019, the amounts reported represent the ASC Topic 718
grant date fair values of fully-vested RSUs granted in lieu of the cash incentive payable, which grant date fair values were less than the
amounts earned by the named executive officers under the Bonus Plan for such fiscal years. For fiscal 2021, the RSUs were granted on
March 15, 2021 in the following numbers: Mr. McKinnon: 886 RSUs; Mr. Losch: 938 RSUs; Mr. Kerrest: 969 RSUs; Mr. Race: 1,544
RSUs; and Mr. Runyan: 740 RSUs. The number of RSUs granted to the applicable named executive officer in satisfaction of the
amount payable under the Bonus Plan was determined by dividing the earned cash incentive payable (expressed as a dollar value) by

40

the trailing average closing price of our common stock on the Nasdaq during the month prior to the date of grant, consistent with our
Equity Award Grant Policy. As a result, the RSU ASC Topic 718 grant date fair values differ from the dollar values of the earned cash
incentive payable. The fiscal 2021 cash achievement for each named executive officer is described above in ‘‘Compensation Discussion
and Analysis–Annual Performance-Based Incentives–Performance in Fiscal 2021 and Payout.’’

(6)

For Mr. Kerrest, consists of a reimbursement from us for a $125,000 HSR filing fee related to Mr. Kerrest’s stock ownership and
$122,917 for the related tax gross-up in fiscal 2021.

(7) Messrs. McKinnon and Kerrest serve on our board but are not paid compensation for such service.
(8) Mr. Losch retired from the role of CFO and was succeeded by Mr. Kourey, previously a member of our board, in March 2021.
(9) Mr. Race retired from the role of President, Worldwide Field Operations at the end of fiscal 2021 and was succeeded by Ms. St. Ledger

in February 2021.

Fiscal 2021 Grants of Plan-Based Awards Table

The following table sets forth certain information with respect to all plan-based awards granted to our

named executive officers during fiscal 2021.

Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)

Threshold
($)

Target
($)

Maximum
($)

Name
Todd McKinnon

William E. Losch

J. Frederic Kerrest

Charles Race

Jonathan T. Runyan

Award Type
FY20 Bonus RSU(5)
Annual Cash
Annual Option
Annual RSU
FY21 Salary RSU(6)
FY20 Bonus RSU(5)
Annual Cash
Annual Option
Annual RSU
FY21 Salary RSU(6)
FY20 Bonus RSU(5)
Annual Cash
Annual Option
Annual RSU
FY21 Salary RSU(6)
FY20 Bonus RSU(5)
Annual Cash
Annual Option
Annual RSU
FY21 Salary RSU(6)
FY20 Bonus RSU(5)
Annual Cash
Annual Option
Annual RSU
FY21 Salary RSU(6)

Grant Date
3/15/2020

4/15/2020
4/15/2020
4/15/2020
3/15/2020

—
— 29,835
—
—
—
—
— 31,581
—
—
—
—
— 32,633
—
—
—
—
— 52,005
—
—
—
—
— 24,893
—
—
—

4/15/2020
4/15/2020
4/15/2020
3/15/2020

4/15/2020
4/15/2020
4/15/2020
3/15/2020

4/15/2020
4/15/2020
4/15/2020
3/15/2020

4/15/2020
4/15/2020
4/15/2020

—
198,900
—
—
—
—
210,540
—
—
—
—
217,551
—
—
—
—
346,700
—
—
—
—
165,950
—
—
—

—
298,350
—
—
—
—
315,810
—
—
—
—
326,327
—
—
—
—
520,050
—
—
—
—
248,925
—
—
—

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2)
1,597
—
—
42,279
1,941
1,691
—
—
14,797
2,226
1,747
—
—
29,595
2,300
2,785
—
—
12,683
2,199
1,333
—
—
14,797
2,105

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
—
—
89,301
—
—
—
—
31,255
—
—
—
—
62,511
—
—
—
—
26,790
—
—
—
—
31,255
—
—

Exercise
or Base
Price of
Option
Awards
($/Sh)(3)
—
—
142.47

Grant Date
Fair Value
of Stock
and
Option
Awards
($)(4)
171,342
—
5,551,843
— 6,023,489
276,534
—
181,427
—
—
—
1,943,123
142.47
— 2,108,129
317,138
—
187,436
—
—
—
3,886,309
142.47
— 4,216,400
327,681
—
298,803
—
—
—
1,665,534
142.47
— 1,806,947
313,292
—
143,018
—
—
—
1,943,123
142.47
— 2,108,129
299,899
—

(1)

(2)

This column sets forth the fiscal 2021 target bonus amount for each of our named executive officers under our Bonus Plan.
‘‘Threshold’’ refers to the minimum amount payable for a certain level of performance; ‘‘Target’’ refers to the amount payable if
specified performance targets are reached; and ‘‘Maximum’’ refers to the maximum payout possible. Target bonuses were set as a
percentage of each named executive officer’s base salary earned for fiscal 2021 as follows: 65% for Mr. McKinnon, 60% for each of
Messrs. Losch and Kerrest, 100% for Mr. Race and 50% for Mr. Runyan. The dollar values of the actual bonus awards earned by the
named executive officers are set forth in the ‘‘Fiscal 2021 Summary Compensation Table’’ above. Pursuant to the Bonus Plan, the
actual bonus awards were paid out in fully-vested RSUs, instead of cash. The amounts set forth in this column do not represent either
additional or actual compensation earned by the named executive officers for fiscal 2021. For a description of the Bonus Plan, see
‘‘Compensation Discussion and Analysis–Annual Performance-Based Incentives’’ above.

Annual stock options and RSUs were granted under the 2017 Plan. Each of the annual stock option awards listed in the table above
vested as to 25% of the shares of Class A common stock underlying the stock options upon the one-year anniversary of February 1,
2020, and vest as to the remainder of the shares in 36 equal monthly installments thereafter. Each of the annual RSU awards vested as

41

(3)

(4)

(5)

(6)

to 25% of the shares of Class A common stock underlying the RSU award upon the one-year anniversary of March 15, 2020, and vest
as to the remainder of the shares in 12 equal quarterly installments thereafter. Stock options and RSUs are subject to potential vesting
acceleration as described under the heading ‘‘Post-Employment Compensation Arrangements’’ above and ‘‘Potential Payments upon
Termination or Change in Control’’ below.

Stock options were granted with an exercise price equal to the closing trading price of our Class A common stock on the date of grant,
which was $142.47 per share for the April 15, 2020 annual grants.

The amounts reported represent the aggregate grant date fair value of equity awards granted to our named executive officers in fiscal
2021, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value are set forth in the
notes to our consolidated financial statements included in our 2021 Annual Report. These amounts do not necessarily correspond to the
actual values recognized by our named executive officers.

FY20 Bonus RSUs represent annual performance-based cash incentives earned in fiscal 2020 pursuant to the Bonus Plan but paid in
the form of fully-vested RSUs granted on March 15, 2020 (fiscal 2021) in amounts as determined in accordance with our Equity Award
Grant Policy. These amounts are reported above as fiscal 2020 compensation in the ‘‘Non-Equity Incentive Plan Compensation’’
column of the ‘‘Fiscal 2021 Summary Compensation Table’’ above.

FY21 Salary RSUs represent each named executive officer’s fiscal 2021 salary effective from May 1, 2020 through January 31, 2021
paid in the form of RSUs in lieu of cash, granted on April 15, 2020 in amounts as determined in accordance with our Equity Award
Grant Policy. Each of the fiscal 2021 salary RSU awards vested as to 17% of the shares of Class A common stock underlying the RSU
award on June 15, 2020, 33% on September 15, 2020, 39% on December 15, 2020, and the remaining 11% on March 15, 2021, subject
to continuous service.

Fiscal 2021 Outstanding Equity Awards at Fiscal Year-End Table

The following table provides information regarding outstanding equity awards held by our named executive

officers as of January 31, 2021.

Option Awards(1)(2)

Stock Awards

Number of
Shares
or Units
of Stock
That
Have Not
Vested
(#)

Option
Expiration
Date

Option
Exercise
Price
($)
1.40 8/29/2023
7.17 8/27/2025
8.97 7/29/2026
39.21 3/21/2028
—
82.16 3/24/2029
—
142.47 4/14/2030
—
—

—
—
—
—
— 17,657
—
— 28,623
—
— 42,279
213
—
—
8.97 7/29/2026
39.21 3/21/2028
—
— 11,032
—
82.16 3/24/2029
—
— 11,786
—
142.47 4/14/2030
—
— 14,797
—
244
—
—

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)

—
—
—
—
4,573,340
—
7,413,643
—
10,950,684
55,169
—
—
2,857,398
—
3,052,692
—
3,832,571
63,198

Name
Todd McKinnon

William E. Losch

Vesting
Commencement
Date
8/1/2013
8/1/2015
7/29/2016
2/1/2018
3/15/2018
2/1/2019
3/15/2019
2/1/2020
3/15/2020
5/1/2020
7/29/2016
2/1/2018
3/15/2018
2/1/2019
3/15/2019
2/1/2020
3/15/2020
5/1/2020

Grant Date
8/30/2013(4)
8/28/2015(4)
7/30/2016(5)
3/22/2018(6)
3/22/2018(7)
3/25/2019(6)
3/25/2019(7)
4/15/2020(6)
4/15/2020(7)
4/15/2020(8)
7/30/2016(5)
3/22/2018(6)
3/22/2018(7)
3/25/2019(6)
3/25/2019(7)
4/15/2020(6)
4/15/2020(7)
4/15/2020(8)

Number of Securities
Underlying Unexercised
Options

Exercisable Unexercisable

38,827
486,053
1,798,891
2,719
—
2,303
—
—
—
—
41,736
427
—
8,816
—
—
—
—

—
—
—
35,344
—
57,591
—
89,301
—
—
—
22,073
—
23,714
—
31,255
—
—

42

Name
J. Frederic Kerrest

Charles Race

Jonathan T. Runyan

Option Awards(1)(2)

Number of Securities
Underlying Unexercised
Options

Exercisable Unexercisable

3,572
42,812
236,053
990,525
83,125
—
34,282
—
—
—
—
138,852
42,656
—
18,699
—
—
—
—
153,392
37,916
—
15,582
—
—
—
—

—
—
—
—
30,875
—
37,265
—
62,511
—
—
—
15,844
—
20,325
—
26,790
—
—
—
14,084
—
16,938
—
31,255
—
—

Vesting
Commencement
Date
Grant Date
8/30/2013(4)
8/1/2013
8/27/2014(4)
8/1/2014
8/28/2015(4)
8/1/2015
7/30/2016(5)
7/29/2016
3/22/2018(6)
2/1/2018
3/22/2018(7)
3/15/2018
3/25/2019(6)
2/1/2019
3/25/2019(7)
3/15/2019
4/15/2020(6)
2/1/2020
4/15/2020(7)
3/15/2020
4/15/2020(8)
5/1/2020
10/24/2016(4) 10/20/2016
3/22/2018(6)
2/1/2018
3/22/2018(7)
3/15/2018
3/25/2019(6)
2/1/2019
3/25/2019(7)
3/15/2019
4/15/2020(6)
2/1/2020
4/15/2020(7)
3/15/2020
4/15/2020(8)
5/1/2020
7/30/2016(5)
7/29/2016
3/22/2018(6)
2/1/2018
3/22/2018(7)
3/15/2018
3/25/2019(6)
2/1/2019
3/25/2019(7)
3/15/2019
4/15/2020(6)
2/1/2020
4/15/2020(7)
3/15/2020
4/15/2020(8)
5/1/2020

Stock Awards

Number of
Shares
or Units
of Stock
That
Have Not
Vested
(#)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)

—
—

142.47 4/14/2030

Option
Expiration
Date

Option
Exercise
Price
($)
1.40 8/29/2023
3.11 8/26/2024
7.17 8/27/2025
8.97 7/29/2026
39.21 3/21/2028
—
82.16 3/24/2029
—

—
—
—
—
—
— 15,438
—
— 18,521
—
— 29,595
253
—
—
8.97 10/23/2026
39.21 3/21/2028
—
— 7,907
—
82.16 3/24/2029
—
— 10,102
—
142.47 4/14/2030
—
— 12,683
—
241
—
—
—
8.97 7/29/2026
39.21 3/21/2028
—
— 7,032
—
82.16 3/24/2029
—
— 8,418
—
142.47 4/14/2030
—
— 14,797
—
231
—
—

—
—
—
—
—
3,998,596
—
4,797,124
—
7,665,401
65,530
—
—
2,047,992
—
2,616,519
—
3,285,024
62,421
—
—
1,821,358
—
2,180,346
—
3,832,571
59,831

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Stock options granted prior to 2017 were granted pursuant to our 2009 Stock Plan (the ‘‘2009 Plan’’), and unless otherwise described
in the footnotes below, are immediately exercisable subject to a repurchase right in favor of the company that expires over a four-year
period. Stock options granted after 2017 were granted pursuant to our 2017 Plan and are not immediately exercisable.

Upon a (i) termination of employment by us other than for cause (as defined in the Executive Severance Plan), death or disability or
(ii) resignation for good reason (as defined in the Executive Severance Plan), in each case within the change in control period (as
defined in the Executive Severance Plan), the vesting of the shares subject to options will fully accelerate and will become vested in
full upon such termination date.

This column represents the market value of the shares underlying the RSUs or restricted stock as of January 31, 2021, based on the
closing price of our Class A common stock, as reported on Nasdaq, of $259.01 per share on January 29, 2021, the last business day of
fiscal 2021.

The stock options are fully vested and exercisable.

20% of the shares underlying the options vest upon completion of one year of service measured from the vesting commencement date;
another 20% of the shares underlying the options vest upon completion of two years of service measured from the vesting
commencement date; and the balance of shares vest in 36 successive equal monthly installments, subject to continuous service.

25% of the shares underlying the options vest upon completion of one year of service measured from the vesting commencement date,
and the balance of the shares vest in 36 successive equal monthly installments, subject to continuous service.

25% of the shares underlying the award vest upon completion of one year of service measured from the vesting commencement date,
and the balance of the shares vest in 12 successive equal quarterly installments, subject to continuous service.

17% of the shares underlying the award vested on June 15, 2020, 33% on September 15, 2020, 39% on December 15, 2020, and the
remaining 11% on March 15, 2021, subject to continuous service.

43

Fiscal 2021 Option Exercises and Stock Vested Table

The following table presents, for each of our named executive officers, the shares of our common stock that

were acquired upon the exercise of stock options and the vesting of RSUs and the related value realized upon
such exercise or vesting during fiscal 2021.

Name
Todd McKinnon
William E. Losch
J. Frederic Kerrest
Charles Race
Jonathan T. Runyan

Option Awards

Stock Awards

Number of Shares
Acquired on Exercise
(#)
173,289
262,820
127,038
611,148
88,650

Value Realized
on Exercise
($)(1)
29,247,615
47,189,135
26,888,894
111,759,658
18,567,596

Number of Shares
Acquired on Vesting
(#)
39,713
21,665
30,549
18,925
15,380

Value Realized
on Vesting
($)(2)
6,562,808
3,650,790
5,123,256
3,099,133
2,595,644

(1)

(2)

The value realized on exercise is based on the difference between the closing price of our Class A common stock on the date of
exercise and the applicable exercise price of those options, and does not represent actual amounts received by our named executive
officers as a result of the option exercises.

The value realized on vesting is determined by multiplying the number of vested RSUs by the closing price of our Class A common
stock on the vesting date.

Pension Benefits

Aside from our 401(k) plan, which is described above, we do not maintain any pension plan or arrangement

under which our named executive officers are entitled to participate or receive post-retirement benefits.

Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans or arrangements under which our named

executive officers are entitled to participate.

Potential Payments upon Termination or Change in Control

Employment Offer Letters in Place During Fiscal 2021 for Named Executive Officers

In February 2017, we entered into employment offer letters with each of our named executive officers that
provided for at-will employment and set forth each executive’s annual base salary, target bonus opportunity and
eligibility to participate in our benefit plans generally. Each of our named executive officers also participates in
our Executive Severance Plan, as described above under the heading ‘‘Post-Employment Compensation
Arrangements’’ and below. Each named executive officer also remains subject to our standard employment,
confidential information and invention assignment agreement.

44

The following table presents information concerning estimated payments and benefits that would be

provided pursuant to the arrangements described above for each of our named executive officers serving as of the
end of fiscal 2021. The payments and benefits set forth below are estimated assuming that the termination of
employment or change in control event occurred on the last business day of fiscal 2021, January 29, 2021, and a
per share value of our common stock of $259.01, which is the closing market price per share of our Class A
common stock on such date. Actual payments and benefits could be different if such events were to occur on any
other date or at any other price or if any other assumptions are used to estimated potential payments and
benefits.

Name
Todd McKinnon

William E. Losch

J. Frederic Kerrest

Charles Race

Jonathan T. Runyan

Termination without
Cause Not in
Connection with a
Change in Control
($)
306,000
29,505
—
335,505
263,175
15,508
—
278,683
271,939
15,675
—
287,614
260,025
7,107
—
267,132
248,925
22,129
—
271,054

Termination without Cause
or with Good Reason
in Connection with a
Change in Control
($)
657,900
44,258
101,361,804
102,063,962
561,440
20,678
31,245,184
31,827,302
580,136
20,901
62,192,573
62,793,610
693,400
9,476
18,211,050
18,913,926
497,850
29,505
23,878,713
24,406,068

Benefit

Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total

(1)

The value of stock option and RSU award vesting acceleration is based on the closing price of $259.01 per share of our Class A
common stock as of January 29, 2021, minus, in the case of stock options, the exercise price of the unvested stock option shares
subject to acceleration.

45

CEO Pay Ratio Disclosure

As required by SEC rules, we are providing the following information about the relationship between the

annual total compensation of our CEO and the annual total compensation of our median compensated employee
(our ‘‘CEO pay ratio’’).

For fiscal 2021, the median of the annual total compensation of all employees of our company (other than

our CEO) was $258,687(1) and the annual total compensation of our CEO was $12,131,012. Based on this
information, for fiscal 2021 the ratio of the annual total compensation of our CEO to the median of the annual
total compensation of all employees was 47(1) to 1. This ratio is a reasonable estimate calculated in a manner
consistent with SEC rules.

For fiscal 2021, we calculated the CEO pay ratio using the same median employee that we used to calculate
the pay ratio in fiscal 2020, as we believe there has been no change in our employee population or compensation
arrangements during fiscal 2021 that would result in a significant change to our pay ratio disclosure.

To identify the median employee in fiscal 2020, we examined the compensation of all our full- and
part-time employees (other than our CEO) as of January 31, 2020, the last day of fiscal 2020. Our employee
population consisted of individuals (other than our CEO) working at our parent company and consolidated
subsidiaries both within and outside the United States. We did not include any contractors or other non-employee
workers in our employee population. We did not have any temporary or seasonal employees as of January 31,
2020.

We used a consistently applied compensation measure consisting of actual annual base salary, target annual

bonus or commission, and the grant date fair value of equity awards for the 12-month period from February 1,
2019 through January 31, 2020 to identify our median employee for fiscal 2020. For simplicity, we calculated
annual base salary using a reasonable estimate of the hours worked during fiscal 2020 for hourly employees and
actual salary paid for our remaining employees. We annualized compensation for any full-time and part-time
employees who commenced work during fiscal 2020 to reflect a full year. Equity awards granted during the year
were included using the same methodology we use for our named executive officers in our Summary
Compensation Table. Payments not made in U.S. dollars were converted to U.S. dollars using a currency
exchange rate as of January 31, 2020. We did not make any cost-of-living adjustment.

Using this approach, we identified the individual at the median of our employee population who was the

best representative of our employee population. The individual is a full-time employee based in the United
States.

We calculated this individual’s fiscal 2021 annual total compensation using the same methodology that we

use for our named executive officers as set forth in the ‘‘Fiscal 2021 Summary Compensation Table’’ above.

With respect to the annual total compensation of our CEO, we used the amount reported in the ‘‘Total’’

column of the ‘‘Fiscal 2021 Summary Compensation Table’’ above.

Because SEC rules for identifying the median of the annual total compensation of all employees allow
companies to adopt a variety of methodologies, apply certain exclusions and make reasonable estimates and
assumptions that reflect their employee population and compensation practices, the pay ratio reported by other
companies may not be comparable to our pay ratio, as other companies have different employee populations and
compensation practices and may have used different methodologies, exclusions, estimates and assumptions in
calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to
facilitate comparisons of pay ratios among different companies, even companies within the same industry, but
rather to allow stockholders to better understand and assess each particular company’s compensation practices
and pay ratio disclosures.

(1) Represents the median employee’s annual total compensation not including California Paid Family Leave (“CAPFL”) benefit payments
in fiscal 2021. The median employee’s annual total compensation including CAPFL benefit payments in fiscal 2021 would be $265,001,
resulting in a pay ratio of 46 to 1.

46

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The information contained in this compensation committee report shall not be deemed to be ‘‘soliciting

material,’’ ‘‘filed’’ with the SEC, subject to Regulations 14A or 14C of the Exchange Act, or subject to the
liabilities of Section 18 of the Exchange Act. No portion of this compensation committee report shall be deemed
to be incorporated by reference into any filing under the Securities Act or the Exchange Act, through any general
statement incorporating by reference in its entirety the proxy statement in which this report appears, except to
the extent that Okta specifically incorporates this report or a portion of it by reference. In addition, this report
shall not be deemed filed under either the Securities Act or the Exchange Act.

The compensation committee has reviewed and discussed the section captioned ‘‘Executive Compensation’’

with the company’s management team. Based on such review and discussions, the compensation committee
recommended to the board of directors that this Compensation Discussion and Analysis be included in the Proxy
Statement and be included in the Annual Report on Form 10-K we filed with the SEC for the fiscal year ended
January 31, 2021.

Compensation Committee

Michael Stankey (Chairperson)
Robert L. Dixon, Jr.
Rebecca Saeger
Michelle Wilson

47

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of January 31, 2021 regarding shares of our common stock that

may be issued under our equity compensation plans, consisting of the 2009 Stock Plan, the 2017 Plan and the
2017 Employee Stock Purchase Plan (the ‘‘2017 ESPP’’).

Equity Compensation Plan Information

Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights

Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plan (Excluding
Securities Referenced in
Column (a))

(a)

(b)

(c)

12,702,220(2)

$18.9323(3)

25,207,534(4)

N/A
12,702,220

N/A
$18.9323

N/A
25,207,534

Plan category

Equity compensation plans approved by

security holders(1):

Equity compensation plans not approved by

security holders:

Total

(1)

(2)

(3)

(4)

The 2017 Plan provides that the number of shares of Class A common stock reserved and available for issuance under the 2017 Plan
will automatically increase each February 1, beginning on February 1, 2018, by 5% of the outstanding number of shares of our Class A
and Class B common stock on the immediately preceding January 31 or such lesser number of shares as determined by our
compensation committee. The 2017 ESPP provides that the number of shares of Class A common stock reserved and available for
issuance under the 2017 ESPP will automatically increase each February 1, beginning on February 1, 2018, by 1% of the outstanding
number of shares of our Class A and Class B common stock on the immediately preceding January 31 or such lesser number of shares
as determined by our compensation committee. As of January 31, 2021, a total of 31,439,842 shares of our Class A common stock had
been authorized for issuance pursuant to the 2017 Plan, which number excludes the 6,549,170 shares that were added to the 2017 Plan
as a result of the automatic annual increase on February 1, 2021. This number will be subject to adjustment in the event of a stock
split, stock dividend or other change in our capitalization. The shares of Class A and Class B common stock underlying any awards
that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding,
reacquired by us prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated, other than by exercise,
under the 2017 Plan and the 2009 Plan will be added back to the shares of Class A common stock available for issuance under the
2017 Plan (provided, that any such shares of Class B common stock will first be converted into shares of Class A common stock). We
no longer make grants under the 2009 Plan. As of January 31, 2021, a total of 4,633,093 shares of our Class A common stock had been
reserved for issuance pursuant to the 2017 ESPP, which number excludes the 1,309,834 shares that were added to the 2017 ESPP as a
result of the automatic annual increase on February 1, 2021. This number will be subject to adjustment in the event of a stock split,
stock dividend or other change in our capitalization.

Includes 8,250,113 shares of Class A and Class B common stock issuable upon the exercise of outstanding options and
4,452,107 shares of Class A common stock issuable upon the vesting of RSUs.

As RSUs do not have any exercise price, such units are not included in the weighted average exercise price calculation.

As of January 31, 2021, there were 20,574,441 shares of Class A common stock available for grant under the 2017 Plan and
4,633,093 shares of Class A common stock available for grant under the 2017 ESPP.

48

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our capital

stock as of April 1, 2021, for:

•

•

•

•

each person known by us to be the beneficial owner of more than five percent of the outstanding
shares of our Class A or Class B common stock;

each of our named executive officers;

each of our directors; and

all of our directors and executive officers as a group.

We have determined beneficial ownership in accordance with SEC rules, and thus it represents sole or
shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our
knowledge, the persons and entities named in the table have sole voting and sole investment power with respect
to all shares that they beneficially owned, subject to community property laws where applicable.

We have based percentage ownership of our capital stock on 123,977,557 shares of our Class A common

stock and 8,159,447 shares of our Class B common stock outstanding on April 1, 2021. We have deemed shares
of our common stock subject to options that are currently exercisable or exercisable within 60 days of April 1,
2021, to be outstanding and to be beneficially owned by the person holding the option for the purpose of
computing the percentage ownership of that person, but have not treated them as outstanding for the purpose of
computing the percentage ownership of any other person.

49

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Okta, Inc.,

100 First Street, Suite 600, San Francisco, California 94105.

Shares Beneficially Owned

Class A

Class B

Shares

%

Shares

%

Total
Voting %†

Total
Ownership %

5% Stockholders:
Entities affiliated with The Vanguard Group(1)
Entities affiliated with Blackrock(2)
Entities affiliated with FMR(3)
Entities affiliated with Morgan Stanley(4)
Named Executive Officers and Directors:
Todd McKinnon(5)
William E. Losch(6)
J. Frederic Kerrest(7)
Charles Race(8)
Jonathan T. Runyan(9)
Shellye Archambeau(10)
Robert L. Dixon, Jr.(11)
Patrick Grady(12)
Ben Horowitz(13)
Rebecca Saeger(14)
Michael Stankey(15)
Michelle Wilson(16)
All directors and executive officers as a group

(15 persons)(17)

11,041,746 8.9%
9,513,480 7.7%
9,046,822 7.3%
8,940,589 7.2%

— —
— —
— —
— —

5.4%
4.6%
4.4%
4.3%

62,805
43,929
173,381
108,042
124,686
5,003
905
106,744
796,569
4,557
17,270
17,270

478,442

1.7%
1.8%

138,852
153,392

* 7,634,799 72.8% 33.4%
*
5.8% 2.3%
* 2,899,565 30.7% 13.4%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*

— —
— —
— —
— —
— —

190,000
100,000

2.3%
1.2%

8.4%
7.2%
6.8%
6.8%

5.7%
*
2.3%
*
*
*
*
*
*
*
*
*

1,490,082 1.2%11,671,717 94.5% 47.7%

9.6%

*

†

(1)

(2)

(3)

(4)

Represents less than one percent (1%).

Percentage of total voting power represents voting power with respect to all shares of our Class A common stock and Class B common
stock, as a single class. The holders of our Class A common stock are entitled to one vote per share, and holders of our Class B
common stock are entitled to ten votes per share.

Based on information reported by The Vanguard Group on Schedule 13G/A filed with the SEC on February 10, 2021. Of the shares of
Class A common stock beneficially owned, The Vanguard Group reported that it has sole dispositive power with respect to
10,759,012 shares, shared dispositive power with respect to 282,734 shares, sole voting power with respect to none of the shares and
shared voting power with respect to 123,857 shares. The Vanguard Group listed its address as 100 Vanguard Blvd., Malvern, PA 19355.

Based on information reported by Blackrock, Inc. on Schedule 13G/A filed with the SEC on February 5, 2021. BlackRock, as a parent
holding company or control person, may be deemed to beneficially own the indicated shares and has sole dispositive power over all of
the shares and sole voting power over 8,597,330 shares. BlackRock reported its beneficial ownership on behalf of itself and the
following: BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V.,
BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial
Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC,
BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management
Deutschland AG, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK)
Limited, BlackRock Fund Advisors, BlackRock Asset Management North Asia Limited, BlackRock (Singapore) Limited, BlackRock
Fund Managers Ltd. Blackrock, Inc. listed its address as 55 East 52nd Street, New York, NY 10055.

Based on information reported by FMR LLC on Schedule 13G/A filed with the SEC on February 8, 2021. Of the shares of Class A
common stock beneficially owned, FMR LLC reported that it has sole dispositive power with respect to all of the shares and sole
voting power with respect to 1,927,243 shares. Abigail P. Johnson, Director, Chairman and Chief Executive Officer of FMR LLC, and
members of the Johnson family, through their ownership of voting common shares and the execution of a shareholders’ voting
agreement with respect to FMR LLC, may be deemed, under the Investment Company Act of 1940, to form a controlling group with
respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned
directly by the various investment companies registered under the Investment Company Act (‘‘Fidelity Funds’’) advised by Fidelity
Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of
Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the
Fidelity Funds’ Boards of Trustees. FMR LLC listed its address as 245 Summer Street, Boston, Massachusetts 02210.

Based on information reported by Morgan Stanley on Schedule 13G filed with the SEC on February 12, 2021. Of the shares of Class A
common stock beneficially owned, Morgan Stanley reported that it has shared dispositive power with respect to all of the shares and

50

(5)

(6)

(7)

(8)

(9)

shared voting power with respect to 8,054,436 shares. Morgan Stanley, as a parent holding company, may be deemed to beneficially
own the indicated shares which are held by Morgan Stanley Investment Management Inc., a wholly-owned subsidiary of Morgan
Stanley. Morgan Stanley listed its address as 1585 Broadway New York, NY 10036.

Consists of (i) 9,787 shares of Class A common stock held of record by Mr. McKinnon, (ii) 5,182,781 shares of Class B common stock
held of record by Mr. McKinnon, as trustee of the McKinnon Stachon Family Trust, (iii) 128,247 shares of Class B common stock held
of record by Mr. McKinnon’s brother-in-law, as trustee of the McKinnon Irrevocable Trust, (iv) 53,018 shares of Class A common
stock subject to outstanding options that are exercisable within 60 days of April 1, 2021 and (v) 2,323,771 shares of Class B common
stock subject to outstanding options that are exercisable within 60 days of April 1, 2021. Mr. McKinnon and his wife share voting and
dispositive power over the McKinnon Stachon Family Trust. Mr. McKinnon’s wife, in her role as the sole member of the investment
committee of the McKinnon Irrevocable Trust, has voting and dispositive power with respect to the shares held of record by
Mr. McKinnon’s brother-in-law, as trustee of the McKinnon Irrevocable Trust, and Mr. McKinnon has no voting and dispositive power
with respect to such shares.

Consists of (i) 27,335 shares of Class A common stock held of record by Mr. Losch, (ii) 448,706 shares of Class B common stock held
of record by William Losch and Susanne Losch, Trustees of the Losch 2006 Trust, (iii) 16,594 shares of Class A common stock subject
to outstanding options that are exercisable within 60 days of April 1, 2021 and (iv) 29,736 shares of Class B common stock subject to
outstanding options that are exercisable within 60 days of April 1, 2021. Mr. Losch and Mrs. Losch share voting and dispositive power
over the Losch 2006 Trust.

Consists of (i) 20,978 shares of Class A common stock held of record by Mr. Kerrest in an individual capacity, (ii) 152,403 shares of
Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2021, (iii) 1,272,962 shares of
Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2021, (iv) 1,358,901 shares of
Class B common stock held of record by Mr. Kerrest and his wife, as trustees of the Kerrest Family Revocable Trust and
(v) 267,702 shares of Class B common stock held of record by the Commonwealth Trust Company, as trustee of the Kerrest
Irrevocable Trust. Mr. Kerrest has sole voting power and sole dispositive power with respect to the shares described in (i) through (iii).
Mr. Kerrest has shared voting power and shared dispositive power with respect to the shares held of record by Mr. Kerrest and his
wife, as trustees of the Kerrest Family Revocable Trust. Mr. Kerrest’s father, in his role as the sole member of the investment
committee of the Kerrest Irrevocable Trust, has voting and dispositive power with respect to the shares held of record by the
Commonwealth Trust Company, as trustee of the Kerrest Irrevocable Trust, and Mr. Kerrest has no voting and dispositive power with
respect to such shares.

Consists of (i) 35,369 shares of Class A common stock held of record by Mr. Race, (ii) 72,673 shares of Class A common stock subject
to outstanding options that are exercisable within 60 days of April 1, 2021 and (iii) 138,852 shares of Class B common stock subject to
outstanding options that are exercisable within 60 days of April 1, 2021.

Consists of (i) 54,378 shares of Class A common stock held of record by the Runyan 2017 Trust dtd 07/11/2017, Jonathan Runyan &
Kimberly Runyan TTEE, (ii) 70,308 shares of Class A common stock subject to outstanding options that are exercisable within 60 days
of April 1, 2021 and (iii) 153,392 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of
April 1, 2021. Mr. Runyan and Mrs. Runyan share voting and dispositive power over the Runyan 2017 Trust dtd 07/11/2017.

(10) Consists of 5,003 shares of Class A common stock held of record by Ms. Archambeau.
(11) Consists of 905 shares of Class A common stock held of record by Mr. Dixon.
(12) Consists of 106,744 shares of Class A common stock held of record by Mr. Grady.
(13) Consists of 796,569 shares of Class A common stock held of record by a family trust for which Mr. Horowitz is a trustee.
(14) Consists of 4,557 shares of Class A common stock held of record by Ms. Saeger.
(15) Consists of (i) 17,270 shares of Class A common stock held of record by Mr. Stankey and (ii) 190,000 shares of Class B common

stock subject to outstanding options that are exercisable within 60 days of April 1, 2021.

(16) Consists of (i) 17,270 shares of Class A common stock held of record by Ms. Wilson and (ii) 100,000 shares of Class B common stock

held of record by Ms. Wilson.

(17) Consists of (i) 1,121,455 shares of Class A common stock beneficially owned by our named executive officers, other executive officers
and directors as a group, (ii) 7,486,337 shares of Class B common stock beneficially owned by our named executive officers, other
executive officers and directors as a group, (iii) 368,627 shares of Class A common stock subject to outstanding options that are
exercisable within 60 days of April 1, 2021 and (iv) 4,185,380 shares of Class B common stock subject to outstanding options that are
exercisable within 60 days of April 1, 2021.

51

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Certain Relationships and Transactions

In addition to the compensation arrangements, including employment, termination of employment and

change in control arrangements and indemnification arrangements, the following is a description of each
transaction since February 1, 2020 and each currently proposed transaction in which:

•

•

•

Okta was or will be a participant;

the amount involved exceeded or exceeds $120,000; and

any of our directors, executive officers or holders of more than 5% of our capital stock, or any
immediate family member of, or person sharing the household with, any of these individuals, had or
will have a direct or indirect material interest.

We have granted stock options to our executive officers and certain of our directors, and we have granted

RSUs to our directors and our executive officers. See the sections titled ‘‘Executive Compensation’’ and
‘‘Corporate Governance—Non-Employee Director Compensation’’ for a description of these options and RSUs.

We have entered into change in control arrangements with certain of our executive officers that, among
other things, provide for certain severance and change in control benefits. See the section titled ‘‘Executive
Compensation—Compensation Discussion and Analysis—Post-Employment Compensation Arrangements’’ for
more information regarding these agreements.

Limitation of Liability and Indemnification of Officers and Directors

Our certificate of incorporation contains provisions that limit the liability of our directors for monetary
damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable
to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability
for the following:

•

•

•

•

any breach of their duty of loyalty to our company or our stockholders;

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of
law;

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in
Section 174 of the Delaware General Corporation Law; or

any transaction from which they derived an improper personal benefit.

Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions
in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the Delaware
General Corporation Law is amended to provide for further limitations on the personal liability of directors of
corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by
the Delaware General Corporation Law.

In addition, our bylaws provide that we will indemnify, to the fullest extent permitted by law, any person

who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact
that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer
of another corporation, partnership, joint venture, trust, or other enterprise. Our bylaws also provide that we may
indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a
party to any action, suit or proceeding by reason of the fact that he or she is or was one of our employees or
agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Our bylaws provide that we must advance expenses incurred by or on behalf of
a director or officer in advance of the final disposition of any action or proceeding, subject to very limited
exceptions.

Further, we have entered into indemnification agreements with each of our directors and executive officers
that may be broader than the specific indemnification provisions contained in the Delaware General Corporation
Law. These indemnification agreements require us, among other things, to indemnify our directors and executive

52

officers against liabilities that may arise by reason of their status or service. These indemnification agreements
also require us to advance all expenses incurred by the directors and executive officers in investigating or
defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and
retain qualified individuals to serve as directors and executive officers.

The limitation of liability and indemnification provisions that are included in our certificate of incorporation,

bylaws and in indemnification agreements that we enter into with our directors and executive officers may
discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their
fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive
officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s
investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors
and executive officers as required by these indemnification provisions.

We have obtained insurance policies under which, subject to the limitations of the policies, coverage is

provided to our directors and executive officers against loss arising from claims made by reason of breach of
fiduciary duty or other wrongful acts as a director or executive officer, including, without limitation, claims
relating to public securities matters, and coverage is provided to us with respect to payments that may be made
by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a
matter of law.

Certain of our non-employee directors may, through their relationships with their employers or affiliated
entities, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our
board.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in
the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.

Procedures for Approval of Related Party Transactions

Our audit committee charter provides that our audit committee has the primary responsibility for reviewing

and approving or disapproving ‘‘related party transactions,’’ which are transactions between us and related
persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a
related person has or will have a direct or indirect material interest. For purposes of this policy, a related person
is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our
common stock, in each case since the beginning of the most recently completed fiscal year, and their immediate
family members.

53

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more

than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in
ownership on Form 4 or 5 with the SEC and the Nasdaq. Such executive officers, directors and stockholders also
are required by SEC rules to furnish us with copies of all Section 16(a) forms that they file.

To our knowledge, based solely on our review of the copies of such reports furnished to us and written
representations that no other reports were required to be filed during fiscal 2021, we believe that for fiscal 2021,
all required reports were filed on a timely basis under Section 16(a), except for the following: Messrs. Kerrest,
Kramer, Losch, McKinnon, Race and Runyan each had one report relating to the quarterly vesting of three
previously reported RSU awards on Sunday, March 15, 2020 that was inadvertently filed one day late on
March 18, 2020.

ADDITIONAL INFORMATION

Our board knows of no other matters that will be presented for consideration at the Annual Meeting. If any
other matters are properly brought before the Annual Meeting, the persons appointed in the accompanying proxy
intend to vote the shares represented thereby in accordance with their best judgment on such matters, under
applicable laws.

54

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K 

(Mark One)

☒

☐

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

For the fiscal year ended January 31, 2021 
or

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
(State or Other Jurisdiction of
Incorporation or Organization)

100 First Street, Suite 600
San Francisco

California

94105

26-4175727
(I.R.S. Employer
Identification Number)

(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)
Class A common stock, par value $0.0001 per share

Trading Symbol(s)

OKTA

(Name of each exchange on which registered)
The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None
___________________________________________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
  No  ☒
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, 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

Non-accelerated filer

☒

☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness 

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public 
accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). 
    No  ☒
The aggregate market value of the stock of the Registrant as of July 31, 2020 (based on a closing price of $220.98 per share) held by 

Yes  ☐ 

non-affiliates was approximately $26.2 billion. As of February 28, 2021, there were 123,053,024 shares of the Registrant’s Class A Common 
Stock and 8,159,447 shares of the Registrant's Class B Common Stock outstanding.

Portions of the registrant's definitive Proxy Statement relating to the 2021 Annual Meeting of Stockholders are incorporated herein by 
reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and 
Exchange Commission within 120 days of the registrant's fiscal year ended January 31, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

  
    
  
Okta, Inc. 

Form 10-K

For the Fiscal Year Ended January 31, 2021 

TABLE OF CONTENTS

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Item 3.

Item 4.

Properties

Legal Proceedings

Mine Safety Disclosures

Part I

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 

Item 6.

Item 7.

Equity Securities

Removed and Reserved

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Item 9.

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Part III

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 

Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accountant Fees and Services

Item 15.

Exhibits, Financial Statement Schedules

Item 16.

Form 10-K Summary

Part IV

Page

6

15

50

50

50

50

51

54

73

75

115

115

115

116

116

116

116

116

116

116

Special Note Regarding Forward-Looking Statements 

This  Annual  Report  on  Form  10-K  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 anticipated impact on our business of the COVID-19 pandemic, related public health measures 
and any associated economic downturn. 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  Result  of  Operations” 
and “Risk Factors."

Forward-looking  statements  contained  in  this  Annual  Report  on  Form  10-K  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 the global COVID-19 pandemic on our business and operations;

• 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;

• our ability to maintain the security and availability of our internal networks and platform;

• our ability to increase our number of customers;

• our ability to sell additional products to and retain our existing customers;

• our ability to successfully expand in our existing markets and into new markets;

• our ability to effectively manage our growth and future expenses;

• our ability to expand our network of channel partners;

• our  ability  to  form  and  expand  partnerships  with  independent  software  vendors  and  system 

integrators;

• our ability to introduce new products, enhance existing products and address new use cases;

• our ability to add new integration partners;

• our ability to grow our international business;

• our ability to maintain, protect and enhance our intellectual property;

• our ability to comply with modified or new laws and regulations applying to our business;

• the attraction and retention of qualified employees and key personnel;

• our anticipated investments in sales and marketing and research and development; 

• our ability to comply with modified or new laws and regulations applying to our business, including 

GDPR (as defined below), and other privacy regulations that may be implemented in the future;

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

• our ability to successfully defend litigation brought against us; and

• our ability to successfully integrate and realize the benefits of strategic acquisitions or investments, 

including our proposed acquisition of Auth0, Inc. (Auth0).

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 Annual  Report  on  Form  10-K  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 
Annual  Report  on  Form  10-K  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 Annual Report on Form 10-K to conform 
these statements to actual results or to changes in our expectations.

Part I

Item 1. Business 

Overview

Okta  is  the  leading  independent  identity  management  platform  for  the  enterprise.  Our  vision  is  to  enable 
everyone to safely use any technology, and we believe identity is the key to making that happen. Our mission is to 
bring simple and secure digital access to people and organizations everywhere. The Okta Identity Cloud is powered 
by  our  category-defining  platform  that  enables  our  customers  to  securely  connect  the  right  people  to  the  right 
technologies and services at the right time.

The  Okta  Identity  Cloud  helps  organizations  effectively  harness  the  power  of  cloud,  mobile  and  web 
technologies by securing users and connecting them with the applications and technology they use. We designed 
the Okta Identity Cloud to provide organizations an integrated approach to managing and securing every identity in 
an organization. Every day, thousands of organizations and millions of people use Okta to securely access a wide 
range  of  cloud,  mobile  and  web  applications,  on-premises  servers,  application  program  interfaces  (APIs),  IT 
infrastructure providers and services from a multitude of devices. Developers leverage our platform to securely and 
efficiently embed identity into the software they build, allowing them to focus on their core mission. Employees and 
contractors  sign  into  the  Okta  Identity  Cloud  to  seamlessly  and  securely  access  the  applications  they  need  to  do 
their  most  important  work.  Organizations  use  our  platform  to  collaborate  with  their  partners,  and  to  provide  their 
customers  with  more  modern  and  secure  experiences  online  and  via  mobile  devices. As  we  add  new  customers, 
users,  developers  and  integrations  to  our  platform,  our  business,  customers,  partners  and  users  benefit  from 
powerful network effects that increase the value and security of the Okta Identity Cloud.

The  acceleration  of  digital  transformations,  cloud  modernization  and  changing  consumer  expectations  to 
simple,  secure  digital  experiences  are  driving  a  shift  in  how  organizations  manage  consumer  identities  on  the 
internet.  Organizations  are  building  secure  consumer-facing  applications  and  are  turning  to  identity  to  optimize 
seamless and private user experiences. Our approach provides organizations with the scale, efficiency and security 
they need to build customer facing applications. 

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  organizations  shift  from 
network-based  security  models  to  a  Zero  Trust  security  model  focusing  on  adaptive  and  context-aware  controls, 
identity  has  become  the  most  reliable  way  to  manage  user  access  and  protect  digital  assets.  Our  approach  to 
identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems 
and external customer facing applications. 

We  designed  the  Okta  Identity  Cloud  to  provide  organizations  an  integrated  approach  to  managing  and 
securing  all  of  their  identities.  Our  platform  allows  our  customers  to  easily  provision  their  customers,  employees, 
contractors,  and  partners,  enabling  any  user  to  connect  to  any  device,  cloud  or  application,  all  with  a  simple, 
intuitive and consumer-like user experience.

As  of  January  31,  2021,  more  than  10,000  customers  across  nearly  every  industry  used  the  Okta  Identity 
Cloud  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  partner  with  leading  application,  infrastructure  and  security  vendors,  such  as Amazon 
Web  Services,  Cisco,  CrowdStrike,  Google  Cloud,  Microsoft,  Netskope,  Proofpoint,  Salesforce,  ServiceNow, 
VMware and Workday. We had over 7,000 integrations with cloud, mobile and web applications and IT infrastructure 
providers as of January 31, 2021, which while not directly correlated to revenue, shows the breadth and acceptance 
of our platform.

We employ a Software-as-a-Service (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 the Okta Identity Cloud 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.

6

On  March  3,  2021,  we  entered  into  a  definitive  agreement  to  acquire  Auth0,  Inc.  (Auth0)  pursuant  to  an 
Agreement  and  Plan  of  Merger  (the  Merger Agreement).  Upon  consummation  of  the  transaction  contemplated  by 
the  Merger  Agreement,  all  outstanding  shares  of  Auth0  capital  stock,  options,  warrants,  convertible  securities, 
phantom equity and other outstanding equity interests will be cancelled in exchange for aggregate consideration of 
$6.5 billion in the form of shares of Class A common stock of the Company and assumed awards of corresponding 
Company equity interests, subject to customary purchase price adjustments and certain customary cash payouts in 
lieu  of  shares  of  Company  Class  A  common  stock,  as  provided  by  the  Merger  Agreement.  The  purchase  price 
payable  in  shares  of  Class A  common  stock  will  be  valued  at  $276.2147  per  share  (which  price  was  calculated 
based on the daily volume-weighted average sales price per share of Company Class A common stock for the 20 
trading days ending on February 26, 2021). The per share price of these shares has been fixed as of the Merger 
Agreement signing date, and the aggregate value of these shares will fluctuate based on changes in our share price 
between the signing and closing dates.

Auth0  is  an  identity  management  platform  for  application  developers  that  provides  solutions  to  add 
authorization and authentication services to developer applications. The proposed transaction is expected to close 
during  the  Company’s  second  quarter  of  fiscal  2022,  the  quarter  ending  July  31,  2021.  The  closing  of  this 
transaction is subject to certain customary closing conditions and approvals.

The Okta Identity Cloud

The Okta Identity Cloud is an independent and neutral cloud-based identity solution that allows our customers 
to integrate with nearly any application, service or cloud that they choose through our secure, reliable and scalable 
platform  and  cloud  infrastructure.  Our  technological  neutrality  allows  our  customers  to  easily  adopt  the  best 
technologies,  and  our  platform  is  designed  to  securely  connect  users  to  the  technology  that  they  choose.  We 
prioritize  the  compatibility  of  the  Okta  Identity  Cloud  with  public  clouds,  on-premises  infrastructures  and  hybrid 
clouds. Our customers use the Okta Identity Cloud to secure their workforces, to create solutions that make their 
partner networks more collaborative, and to provide more seamless and secure experiences for their customers or 
end users, which combined with our open approach, enables our customers to future-proof their environments.

The  Okta  Identity  Cloud  can  be  used  as  the  central  system  for  an  organization’s  connectivity,  access, 

authentication and identity lifecycle management needs spanning all of its users, technology and applications.

We enable our customers to easily deploy, manage and secure applications and devices, and to provision and 
support users across their IT environments, with a simple, intuitive, consumer-like user experience. Developers are 
similarly able to leverage a robust set of tools through the platform to quickly build custom cloud, mobile and web 
application  experiences  that  leverage  the  breadth  and  depth  of  capabilities  within  the  Okta  Identity  Cloud.  Once 
deployed, we enable administrators to enforce contextual access management decisions based on conditions such 
as user identity, device, location, application identity, IP reputation and time of day.

The Okta Identity Cloud is used by organizations in two distinct and powerful ways. Our customers use it to 
manage  and  secure  their  employees,  contractors  and  partners,  which  we  refer  to  as  workforce  identity.  Our 
customers also use it to enable, manage and secure the identities of their own customers via the powerful APIs we 
have developed, which we refer to as customer identity. The Okta Identity Cloud is underpinned by Okta Platform 
Services which are the foundational platform components that power our product features. 

The Okta Identity Cloud for Workforce Identity

In  workforce  identity  use  cases,  the  Okta  Identity  Cloud  simplifies  the  way  an  organization’s  employees, 
contractors  and  partners  connect  to  its  applications  and  data  from  any  device,  while  increasing  efficiency  and 
keeping IT environments secure. We enable organizations to provide their workforces with immediate and secure 
access  to  every  application  they  need  from  any  device  they  use,  without  requiring  multiple  credentials,  which 
significantly  enhances  user  connectivity  and  productivity.  We  offer  our  customers  an  additional  security  layer 
through our Adaptive Multi-Factor Authentication product. Our Universal Directory product also serves as a system 
of record to help our customers organize, customize and manage their users. Our Lifecycle Management product 
enables customers to manage users’ access privileges through their entire lifecycle with a no-code approach that 
improves administrative efficiency and productivity. Our Advanced Server Access product is designed to significantly 
improve  our  customers’  ability  to  secure  access  to  cloud-based  and  on-premises  servers,  while  Okta  Access 
Gateway  enables  our  customers  to  extend  the  Okta  Identity  Cloud  to  their  existing  on-premises  applications. The 
Okta  Identity  Cloud  enables  our  customers  to  automate  access  across  their  growing  ecosystem  of  employees, 
contractors and partners, increasing collaboration across their workforces.

7

The Okta Identity Cloud for Customer Identity

In  customer  identity  use  cases,  the  Okta  Identity  Cloud  enables  organizations  to  transform  their  own 
customers’  experiences  by  empowering  development  teams  to  rapidly  and  securely  build  customer-facing  cloud, 
mobile  or  web  applications.  We  enable  an  organization’s  product  team  to  layer  our  powerful  identity  platform  into 
their cloud, web and mobile applications. This makes it easier for them to authenticate, manage, scale and secure 
their connections, enabling rapid time to market for the business. Organizations are able to centrally manage policy 
and  API-level  access  across  all  their  applications,  leading  to  more  seamless  customer  experiences  that  are 
personalized, engaging and secure.

Okta Platform Services

In order to enable customers and partners to address a wide range of identity use cases, we have built a set 
of modular components, called Okta Platform Services, which can be combined to build new features and tailored 
experiences  faster.  Okta  Platform  Services  are  available  in  Okta  packaged  products  through  APIs  and  software 
development  kits  (SDKs).  Okta  Platform  Services  can  be  used  across  both  workforce  and  customer  identity  use 
cases. We expect to use Okta Platform Services to continue to enable new and expanded use cases and enable 
customers or third-party developers to build their own solutions based on an industry use case or unique customer 
need. Okta Platform Services include Okta’s Identity Engine, Workflows, Devices, Integrations and Insights. 

Key elements of our growth strategy are to:

Execute with Our Platform 

Growth Strategy

• Drive New Customer Growth.   To increase our market share, we intend to continue to grow our 
customer base using a land-and-expand sales model, with a focus on key markets by size of customers, as 
well as key verticals, including highly-regulated sectors.

• Deepen  Relationships  Within  Our  Existing  Customer  Base.      We  plan  to  further  increase 
revenue from our existing customers by cross-selling and up-selling additional and new products. We also 
believe we can expand our footprint by focusing on current customers that have deployed the Okta Identity 
Cloud for workforce identity, and expanding those customers’ use of our platform for customer identity, or 
vice versa.

• Expand Our Channel Partner Ecosystem.   We also plan to expand our indirect sales network to 
leverage the sales efforts of resellers, system integrators and other distribution partners, and to increase the 
contribution we receive from these channel partners.

• Expand Our International Footprint.   With 16% of our revenue generated outside of the United 
States in fiscal 2021, and our international revenue growing 46% from fiscal 2020 to fiscal 2021, we believe 
there is significant opportunity to continue to grow our international business. We believe global demand for 
our  products  will  continue  to  be  a  long-term  opportunity  as  organizations  outside  the  United  States  fully 
embrace  the  transition  to  cloud  computing,  and  larger  international  organizations  take  advantage  of 
technology consolidation within their global locations.

Increase Our Opportunities

• Innovate  and  Extend  Our  Platform  with  New  Products.      We  intend  to  continue  making 
significant  investments  in  research  and  development,  hiring  top  technical  talent  and  maintaining  an  agile 
organization.  In  addition,  we  intend  to  selectively  pursue  acquisitions  and  strategic  investments  in 
businesses and technologies to extend our platform. By continuing to innovate, introduce new products and 
extend our platform to  additional use cases, we  believe  that we can offer increasing value to our existing 
and potential customers.

• Extend Our Accessible Market with New Use Cases.   As technology and our customers’ needs 
evolve, we plan to use our platform to help our customers address new challenges, regulatory requirements 
and use cases.

• Leverage  Our  Integrations.      The  Okta  Integration  Network  is  an  extensive  partner  ecosystem, 
which  includes  over  7,000  integrations  with  cloud,  mobile  and  web  applications  and  IT  infrastructure 

8

providers. We plan to continue these partnerships as well as add new integration partners to enrich our user 
experience  and  expand  our  customer  base.  We  view  our  investment  in  these  partnerships  as  a  force 
multiplier that enables us to build and promote complementary capabilities that benefit our customers.  

• Expand our Developer Ecosystem.   We want to empower every application developer to use the 
Okta Identity Platform to securely build authentication into any application. We believe that our secure and 
seamless  access  solutions  enable  developers  to  focus  their  time  and  attention  on  building  their  core 
application capabilities while relying on the Okta Identity Platform for their identity related requirements. We 
currently  offer  a  free  developer  license,  and  we  plan  to  create  additional  SDKs  and  APIs  to  make  our 
platform  more  extensible  and  allow  developers  to  build  applications  and  services  that  extend  its 
functionality. 

• Leverage Our Unique Data Assets with Powerful Analytics.   Our position at the intersection of 
people,  devices,  applications  and  infrastructure  gives  us  unique  access  to  powerful  data,  and  the 
opportunity to provide differentiated insights based on that data, as well as predictive capabilities based on 
that data to help keep customers more secure. We expect the value of our analytics to our customer base 
will increase as customers continue to connect more devices, applications and users to their networks and 
as we add more customers. We also expect that our analytics ability will enable our customers to use our 
data  and  third-party  data  from  our  partners,  to  help  customers  make  more  informed  and  secure  access 
decisions.  We  do  not  currently  derive  direct  revenue  from  our  unique  data  assets,  but  we  may  explore 
opportunities for monetization in the future.

• Mergers  and  Acquisitions  and  Investments.      From  time  to  time,  we  evaluate  opportunities  to 
acquire  or  invest  in  emerging  and  adjacent  technologies  to  complement  our  organic  investments  and 
improve our products, services and customers’ experiences. We will continue to use these types of strategic 
levers as opportunities arise.

Our Products

The Okta Identity Cloud consists of an independent platform with a suite of products and services to manage 
and  secure  identities.  We  are  continuously  enhancing  these  products  and  services.  Most  of  our  products  can  be 
used for both customer identity and for workforce identity use cases. Our workforce identity products are consumed 
through  web  and  mobile  interfaces,  and  provide  simple  ways  for  IT  organizations  to  manage  identities  for  their 
employees, contractors and partners. For customer identity, our APIs are also used by developers to embed Okta 
identity functionality into their own customer-facing mobile or web applications. We continuously improve the Okta 
Identity Cloud through the release and development of additional products, features and services.

Products

• Universal Directory.  Universal Directory provides a centralized, cloud-based system of record to 
store and secure user, application and device profiles for an organization. Users and profiles stored in the 
directory can be used with our Single Sign-On product to manage passwords and authentication, or can be 
used  by  developers  to  store  and  authenticate  the  users  of  their  applications.  When  used  for  workforce 
identity,  Universal  Directory  becomes  a  customer’s  system  of  record  for  all  of  its  employees,  contractors 
and partners. When used for customer identity, Universal Directory becomes a customer's secure system of 
record for management of all of its users.

• Single Sign-On.  When used to manage and secure identities for a customer’s workforce, Single 
Sign-On  enables  users  to  access  all  of  their  applications,  whether  in  the  cloud  or  on-premise,  from  any 
device, with a single entry of their user credentials. We combine secure access, modern protocols, flexible 
policies and a consumer-like user experience to permit organizations to easily allow customers or partners 
to  sign  in  to  their  applications  with  their  existing  identity  information.  Single  Sign-On  also  enables  built-in 
reporting and analytics that provide real-time search functionalities across users, devices, applications and 
the associated access and usage activity. When used for customer identity, Single Sign-On enables secure 
authentication for applications by external customers.

• Adaptive Multi-Factor Authentication.  Adaptive Multi-Factor Authentication is a comprehensive, 
but  simple-to-use,  product  that  provides  an  additional  layer  of  security  for  an  organization’s  cloud,  mobile 
and  web  applications  and  data.  We  offer  an  intelligent  approach  to  security,  built  on  contextual  data. 
Adaptive Multi-Factor Authentication includes a policy framework that is integrated with a broad set of cloud 

9

and on-premises applications and network infrastructures. It offers adaptive, risk-based authentication that 
leverages data intelligence from across the Okta network of thousands of organizations.

• Lifecycle Management.  Lifecycle Management enables IT organizations or developers to manage 
a  user's  identity  throughout  its  entire  lifecycle.  It  automates  IT  processes  and  ensures  user  accounts  are 
created  and  deactivated  at  the  appropriate  times,  including  the  workflow  and  policies  needed  to  power 
those processes. With Okta Lifecycle Management, organizations can securely manage the entire identity 
lifecycle,  from  on-boarding  to  off-boarding,  and  ensure  compliance  requirements  are  met  as  user  roles 
evolve and access levels change.

• API  Access  Management.    API  Access  Management  enables  organizations  to  secure  APIs  as 
systems  connect  to  each  other.  Access  to  these  APIs  is  managed  based  on  the  user,  which  enables 
organizations  to  centrally  maintain  one  set  of  permissions  for  any  employee,  partner  or  customer  across 
every  point  of  access.  API  Access  Management  reduces  development  time,  boosts  security,  helps  in 
achieving compliance and enables seamless end-user experiences by providing a unified portable service 
for authorizing secure and always available access to any API.

• Access Gateway.  Access Gateway enables organizations to extend the Okta Identity Cloud, which 
is  a  cloud  native  platform,  from  the  cloud  to  their  existing  on-premises  applications,  so  that  they  can 
harness  the  benefits  of  Okta  to  manage  all  of  their  critical  systems,  whether  in  the  cloud,  on-premises  or 
hybrid. Extending the benefits of the Okta Identity Cloud to hybrid IT environments delivers a single point of 
management for our customers’ administrators and a single location from which end users can access their 
critical applications.

• Advanced  Server  Access.    Advanced  Server  Access  offers  continuous,  contextual  access 
management to secure cloud infrastructure. Organizations can continuously manage and secure access to 
on-premises Windows and Linux servers and across leading Infrastructure-as-a-Service vendors, including 
Amazon Web Services, Google Cloud Platform and Microsoft Azure. Advanced Server Access enables our 
customers to centralize access controls in a seamless manner to better mitigate the risk of credential theft, 
reuse, sprawl and abandoned administrative accounts.

By  focusing  on  identity,  the  one  constant  in  an  ever-changing  technology  and  threat  landscape,  the  Okta 
Identity  Cloud  provides  our  customers  with  a  solution  to  solve  their  IT  and  security  challenges,  facilitate  their 
adoption of a Zero Trust security model and enable their digital transformation.

Our Technology

We focus on engineering an intuitive, but comprehensive, platform to solve complex problems. Our pure cloud 
architecture  is  multi-tenant,  encrypted  and  third-party  validated.  Our  service  also  allows  us  to  integrate  into  our 
customers’ on-premises components and hybrid configurations.

One Platform with Differentiated Administration, User and Developer Experience

The Okta Identity Cloud is built on one common platform and user interface framework, offering administrators 
and users a consistent, easy-to-use, consumer-like experience across our products. Our technology integrates with 
industry-leading browsers and mobile applications to provide seamless access to nearly any web or native mobile 
application.  We  also  heavily  leverage  operating  system  management  and  security  technologies  across  desktops, 
laptops  and  mobile  devices  to  provide  a  transparent,  but  secure  experience  for  users  across  a  range  of  devices. 
These integrations allow us to seamlessly deliver connectivity use cases that previously required significant custom 
development to achieve.

Robust Security

Security is a mission-critical issue for Okta and for our customers. Our approach to security spans day-to-day 
operational  practices  to  the  design  and  development  of  our  software  to  how  customer  data  is  segmented  and 
secured  within  our  multi-tenant  platform.  We  ensure  that  access  to  our  platform  is  securely  delegated  across  an 
organization.  Our  source  code  is  updated  weekly,  and  there  are  audited  and  verifiable  security  checkpoints  to 
ensure source code fidelity and continuous security review. We have attained multiple SOC 2 Type II Attestations, 
CSA  Star  Level  2  Attestation,  ISO/IEC  27001:2013,  ISO/IEC  27018:2019  and  Health  Insurance  Portability  and 
Accountability Act (HIPAA) certifications and multiple agency Federal Risk and Authorization Management Program 
(FedRAMP) Moderate Authorities to Operate. We also support FIPS 140-2 validated encryption in our Okta Verify 
MFA product.

10

Scalability and Uptime

Our  technical  operations  and  engineering  teams  are  designed  around  the  concept  of  an  always-on,  highly 
redundant and available platform that we can upgrade without customer disruption. Our products and architecture 
were built entirely in and for the cloud with availability and scalability at the center of the design and were built to be 
agnostic with respect to the underlying infrastructure. Our maintenance windows do not require any downtime.

Our  proprietary  cell  architecture  includes  redundant,  active-active  availability  zones  with  cross-continental 
disaster  recovery  centers,  real-time  database  replication  and  geo-distributed  storage.  If  one  of  our  systems  goes 
down, another is quickly promoted. Our architecture is designed to scale both vertically by increasing the size of the 
application tiers and horizontally by adding new geo-distributed cells.

The Okta Identity Cloud is monitored not only at the infrastructure level but also at the application and third-
party integration level. Synthetic transaction monitoring allows our technical operations team to detect and resolve 
issues proactively. 

Okta Integration Network

The Okta Integration Network contains over 7,000 integrations with cloud, mobile and web applications, IoT 
devices  and  IT  infrastructure  providers,  including Amazon  Web  Services, Atlassian,  Cisco,  F5  Networks,  Google 
Cloud  Platform,  Microsoft  Office  365,  NetSuite,  Oracle,  Palo  Alto  Networks,  Proofpoint,  Salesforce,  SAP, 
ServiceNow, Slack, Splunk, VMware, Workday and Zoom. At the core of the Okta Integration Network is a patented 
technology  that  allows  our  customers  to  seamlessly  connect  to  any  application  or  type  of  device  that  is  already 
integrated into our network. In addition, customers can extend the Okta Integration Network by creating their own 
integrations to both cloud and on-premises proprietary applications.

Our Customers

As  of  January  31,  2021,  we  had  more  than  10,000  customers  on  our  platform,  including  more  than  1,950 
customers  with  an  annual  contract  value  greater  than  $100,000.  Our  customers  span  nearly  all  industry  verticals 
and  range  from  small  organizations  with  fewer  than  100  employees  to  companies  in  the  Fortune  50,  with  up  to 
hundreds  of  thousands  of  employees,  some  of  which  use  the  Okta  Identity  Cloud  to  manage  millions  of  their 
customers' identities.

Sales

Sales and Marketing

We sell directly to customers through our inside and field sales force and also indirectly through our extensive 
ecosystem  of  channel  partners.  Once  a  sale  is  made,  we  leverage  our  land-and-expand  sales  model  to  generate 
incremental revenue, often within the term of the initial agreement, through the addition of new users and the sale of 
additional products. In many instances, we find that initial customer success with our platform results in key internal 
decision makers expanding their deployments, for example, from initial use for workforce identity to expanded use 
for  their  customer  identity  needs.  Furthermore,  as  our  customers  are  successful  in  their  businesses  and  increase 
headcount or the number of their customers, we share in their growth as the number of identities that we manage 
increases.

Our sales organization is structured to address the specific needs of each segment of our target market. Our 
sales team is divided by geography, customer size and industry vertical. Our direct sales force is supported by our 
sales engineers, security team, cloud architects, professional services team and other technical resources.

We  benefit  from  an  expansive  partner  ecosystem  that  helps  drive  additional  sales.  Nearly  all  of  the  leading 
cloud application providers are our partners, and many of them drive further customer acquisition for us through co-
selling arrangements, building our offerings directly into their products, and product demonstrations running on the 
Okta Identity Cloud. We also partner with several of the large technology companies that are driving the movement 
to  the  cloud.  In  addition  to  these  technology  partners,  we  leverage  our  channel  partners,  including  system 
integrators, traditional VARs and Government VARs, to broaden the range of customers we reach.

Marketing

Our most valuable marketing features our customers and their successes, and is informed by a deeply data-
driven  approach,  giving  us  insights  into  the  efficacy  of  our  efforts.  Our  marketing  efforts  focus  on  promoting  our 

11

industry-leading identity platform, establishing our brand, generating awareness, creating sales leads and cultivating 
the Okta Community.

A centerpiece of our marketing strategy is our annual customer conference, Oktane, that features customers 
sharing their success stories, new product and feature announcements and hands-on product labs. We also host a 
number of other events, such as Okta Showcase, a key event for product and feature announcements, where we 
engage with both existing customers and new prospects, as well as deliver product training.

Research and Development

Our  research  and  development  organization  is  responsible  for  the  design,  architecture,  creation  and  the 
quality of the Okta Identity Cloud. The research and development organization also works closely with our technical 
operations team to ensure the successful deployment and monitoring of our platform. We use test automation and 
application monitoring to ensure the Okta Identity Cloud is always-on. 

Customer Support and Professional Services

Our products are designed for ease of use and fast deployments. As part of our customer first strategy, we are 
focused  on  customer  success  and  offer  several  programs  to  help  our  customers  maximize  their  success  with  our 
products. These programs leverage the expertise and best practices that we have built while helping thousands of 
Okta customers to adopt and deploy our products.

Customer Support and Training Services

We offer three tiers of support, each of which builds upon the previous tier. We provide live webinars as well 
as  on-demand  instructional  videos  to  provide  our  customers  with  information  about  product  features,  functionality 
and our most common customer use cases.

Professional Services

Our professional services team provides assistance to customers in the deployment of the Okta Identity Cloud 
and  includes  identity  and  security  experts,  customized  deployment  plans  and  SmartStart,  which  provides  a  quick 
path to implementation.

Okta Community

We  have  created  the  Okta  Community,  an  online  community  available  to  all  of  our  customers  that  enables 

them to connect with other customers and partners to ask questions and find answers.

Intellectual Property

We  protect  our  intellectual  property  through  a  combination  of  trademarks,  domain  names,  copyrights,  trade 

secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology.

As of January 31, 2021, we had twenty issued patents in the United States, which expire between 2030 and 
2037  and  cover  various  aspects  of  our  products.  In  addition,  as  of  such  date,  we  also  had  five  issued  patents  in 
Australia which expire between 2033 and 2037, five issued patents in New Zealand which expire between 2034 and 
2037, and five issued European patents which have each been validated in Germany, France and Great Britain and 
expire between 2033 and 2036.

We  have  registered  “Okta”  as  a  trademark  in  the  United  States,  Australia,  Canada,  China,  the  European 
Union,  Japan  and  the  United  Kingdom.  We  also  have  filed  other  trademark  applications  pending  in  the  United 
States  and  China.  We  also  have  registered  in  the  United  States  the  trademarks  "Okta  Your  Cloud,  Covered," 
"Enterprise Identity, Delivered," "Work Outside the Perimeter," "Oktane," "Never Build Auth Again" and "Zero Trusts 
Given."

We are the registered holder of a variety of domestic and international domain names that include “Okta” and 

similar variations.

In  addition  to  the  protection  provided  by  our  intellectual  property  rights,  we  enter  into  confidentiality  and 
proprietary  rights  or  similar  agreements  with  our  employees,  consultants  and  contractors.  Our  employees, 

12

consultants and contractors are also subject to invention assignment agreements. We further control the use of our 
proprietary  technology  and  intellectual  property  through  provisions  in  both  general  and  product-specific  terms  of 
use.

Additional information regarding certain risks related to our intellectual property is included in Part I, Item 1A 

“Risk Factors” of this Annual Report on Form 10-K.

The markets for our products are rapidly evolving, highly competitive and subject to shifting customer needs 
and frequent introductions of new competing technologies. As the markets in which we operate continue to mature 
and  new  technologies  and  competitors  enter  those  markets,  we  expect  competition  to  intensify.  Our  competitor 
categories include: 

Our Competitors

• Authentication providers; 

• Lifecycle Management providers;

• Multi-factor Authentication providers;. 

• Infrastructure-as-a-service providers;

• Other customer identity and access management providers; and

• Solutions developed in-house by our potential customers.

We  compete  with  both  cloud-based  and  on-premise  enterprise  application  software  providers.  Our 
competitors vary in size and in the breadth and scope of the products and services offered. However, many of our 
competitors  have  substantial  competitive  advantages  such  as  significantly  greater  financial,  technical,  sales  and 
marketing, distribution, customer support or other resources, longer operating histories, greater resources to make 
strategic acquisitions and greater name recognition than we do. Our principal competitor is Microsoft.

Due  to  the  flexibility  and  breadth  of  our  platform,  we  can  and  often  do  co-exist  alongside  our  competitors’ 

products within our customer base.

Principal competitive factors in our markets include flexibility, independence, product capabilities, total cost of 
ownership, time to value, scalability, user experience, number of pre-built integrations, customer satisfaction, global 
reach  and  ease  of  integration,  management  and  use.  We  believe  our  product  strategy,  platform  architecture, 
technology  and  independence  as  well  as  our  company  culture  allow  us  to  compete  favorably  on  each  of  these 
factors.

We  expect  competition  to  increase  as  other  established  and  emerging  companies  enter  our  markets,  as 
customer  requirements  evolve,  and  as  new  products  and  technologies  are  introduced.  We  expect  this  to  be 
particularly true as we are a cloud-based offering, and our competitors may also seek to acquire new offerings or 
repurpose  their  existing  offerings  to  provide  identity  management  solutions  with  subscription  models.  With  the 
continuing  merger  and  acquisition  activity  in  the  technology  industry,  particularly  transactions  involving  security  or 
identity  and  access  management  technologies,  there  is  a  greater  likelihood  that  we  will  compete  with  other  large 
technology companies in the future in both the workforce identity and customer identity markets. 

Additional  information  regarding  our  competition  is  included  in  Part  I,  Item  1A  “Risk  Factors”  of  this Annual 

Report on Form 10-K.

Human Capital Resources

Our core values – love our customers, never stop innovating, act with integrity, be transparent and empower 
our people – inform and guide our human capital initiatives and objectives. In order to continue to innovate and drive 
customer  success,  it  is  crucial  that  we  continue  to  attract,  develop  and  retain  exceptional  talent.  To  that  end,  we 
strive to make Okta a diverse and inclusive workplace, with opportunities for our employees to grow and develop in 
their careers, supported by fair and competitive compensation, benefits and wellness programs, and by initiatives 
that foster connections between and among our employees and their communities.

13

As of January 31, 2021, we had 2,806 employees, of which approximately 83% were in the United States and 
17%  were  in  our  international  locations.  We  have  not  experienced  any  work  stoppages,  and  we  consider  our 
relations with our employees to be good.

We encourage you to review the “Diversity, Inclusion and Belonging,” “Responsibility,” “Careers” and “Okta for 
Good” pages of our website at www.okta.com for more detailed information regarding our human capital programs 
and  initiatives.  Additional  information  on  our  diversity,  inclusion  and  belonging  strategy,  diversity  metrics  and 
programs can be found in our State of Inclusion at Okta Annual Report located on our website at www.okta.com/
state-of-inclusion-at-okta.  The  information  contained  on,  or  that  can  be  accessed  through,  our  website  is  not 
incorporated by reference into this Annual Report on Form 10-K.

Diversity, Inclusion and Belonging

We  are  committed  to  fostering  a  culture  of  inclusion  and  belonging,  and  to  building  a  diverse  workforce  to 
drive innovation and collective growth, which we believe is critical to our success. Over the past few years, we have 
prioritized  our  diversity,  inclusion  and  belonging  (DIB)  program  at  Okta.  Our  DIB  initiatives  –  spearheaded  by  our 
DIB department, Inclusion Council and employee resource groups (ERGs), in partnership with various other teams 
– focus on DIB in our workforce, in our workplace and in the community.

We  employ  inclusive  recruitment  and  hiring  practices  to  source  diverse  talent  and  mitigate  potential  bias 
throughout  the  hiring  process.  We  also  continue  to  recruit  from  a  broad  range  of  colleges  and  engage  with 
organizations that support diverse students and jobseekers through our social impact arm, Okta for Good. 

Growth and Development

We invest significant resources to develop talent and actively foster a learning culture where employees are 
empowered to drive their personal and professional growth. We offer extensive onboarding and training programs to 
prepare our employees at all levels for career progression and individual development. 

Compensation, Benefits and Wellness

We provide robust compensation, benefits and wellness programs that help support the varying needs of our 
employees.  In  addition  to  market-competitive  base  pay,  short-term  bonus  incentives  and  long-term  equity 
incentives, our total rewards program includes comprehensive employee benefits and a variety of other health and 
wellness resources. We are committed to fair compensation and opportunity in our workplace. 

Dynamic Work

We help our employees succeed by providing flexibility in where and how they work. Over the past few years, 
we  introduced  and  began  transitioning  our  workforce  to  a  “Dynamic  Work”  framework,  based  on  the  premise  that 
enabling our employees to work from anywhere can increase employee empowerment, satisfaction and productivity, 
drive  efficiency  and  enable  us  to  hire  from  a  broader,  more  diverse  pool  of  talent.  In  response  to  the  COVID-19 
pandemic, we accelerated our move to Dynamic Work to protect the health, safety and wellness of our employees.

Community and Social Impact

The  mission  of  our  social  impact  arm,  Okta  for  Good,  is  to  strengthen  the  connections  between  people, 
technology  and  community,  which  we  believe  fosters  a  more  meaningful,  fulfilling  and  enjoyable  workplace.  Our 
employees  are  passionate  about  many  causes  and  Okta  for  Good  connects  them  with  numerous  giving  and 
volunteering opportunities in service of our communities. Okta for Good's core focus areas are:

• Developing technology for good ecosystems;

• Expanding economic opportunity and pathways into the technology sector;

• Supporting non-profits addressing critical needs in our global communities; and

• Empowering our employees to become changemakers. 

Through  Okta  for  Good,  which  is  a  part  of  our  company  and  not  a  separate  legal  entity,  we  donate  and 
discount  access  to  our  service  for  non-profit  organizations,  who  use  the  Okta  Identity  Cloud  to  make  their  teams 
more efficient, allowing them to focus on making a meaningful impact in the world. Our employee volunteer program 
enables global team members to donate time to support charitable organizations worldwide. 

14

In addition, prior to our initial public offering (IPO) in April 2017, we reserved 300,000 shares of our common 
stock  to  fund  and  support  the  operations  of  Okta  for  Good,  of  which  195,000  shares  of  Class A  common  stock 
remain reserved for future issuances.

Financial Information

The financial information required under this Item 1 is incorporated herein by reference to the section of this 
Annual  Report  on  Form  10-K  titled  “Part  II-Item  8-Financial  Statements  and  Supplementary  Data.”  For  financial 
information  regarding  our  business,  see  “Part  II-Item  7-Management’s  Discussion  and  Analysis  of  Financial 
Condition  and  Results  of  Operations”  of  this Annual  Report  on  Form  10-K  and  our  consolidated  audited  financial 
statements and related notes included elsewhere in this Annual Report on Form 10-K.

Corporate Information

We were incorporated in 2009 as Saasure Inc., a California corporation, and were later reincorporated in 2010 
under the name Okta, Inc. as a Delaware corporation. Our principal executive offices are located at 100 First Street, 
Suite 600, San Francisco, California 94105, and our telephone number is (888) 722-7871. Our website address is 
www.okta.com. Information contained on, or that can be accessed through, our website does not constitute part of 
this Annual Report on Form 10-K.

Additional Information

The following filings are available through our investor relations website after we file them with the Securities 
and Exchange Commission (SEC): Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our Proxy 
Statement for our annual meeting of stockholders. These filings are also available for download free of charge on 
our  investor  relations  website.  Our  investor  relations  website  is  located  at  investor.okta.com.  The  SEC  also 
maintains an internet website that contains reports, proxy statements and other information about issuers, like us, 
that file electronically with the SEC. The address of that website is www.sec.gov.

We webcast our earnings calls and certain events we participate in or host with members of the investment 
community  on  our  investor  relations  website.  Additionally,  we  provide  notifications  of  news  or  announcements 
regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs 
as  part  of  our  investor  relations  website.  Further  corporate  governance  information,  including  our  corporate 
governance guidelines and code of conduct, is also available on our investor relations website under the heading 
"Corporate  Governance." The  contents  of  our  websites  are  not  intended  to  be  incorporated  by  reference  into  this 
Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our 
websites are intended to be inactive textual references only.

Item 1A. Risk Factors

A  description  of  the  risks  and  uncertainties  associated  with  our  business  is  set  forth  below.  You  should 
carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report 
on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion 
and  Analysis  of  Financial  Condition  and  Results  of  Operations.”  The  occurrence  of  any  of  the  events  or 
developments  described  below,  or  of  additional  risks  and  uncertainties  not  presently  known  to  us  or  that  we 
currently  deem  immaterial,  could  materially  and  adversely  affect  our  business,  results  of  operations,  financial 
condition and growth prospects. In such an event, the market price of our Class A common stock could decline and 
you could lose all or part of your investment.

Risk Factor Summary

This  risk  factor  summary  contains  a  high-level  summary  of  risks  associated  with  our  business.  It  does  not 
contain all of the information that may be important to you, and you should read this risk factor summary together 
with the more detailed discussion of risks and uncertainties set forth following this summary. A summary of our risks 
includes, but is not limited to, the following:

15

• The  effects  of  the  COVID-19  pandemic  have  affected  how  we  and  our  customers  are  operating  our 
businesses,  and  the  duration  and  extent  to  which  this  will  impact  our  future  results  of  operations  and  overall 
financial performance remains uncertain.

• Adverse general economic and market conditions and reductions in workforce identity and customer identity 
spending  may  reduce  demand  for  our  products,  which  could  harm  our  revenue,  results  of  operations  and  cash 
flows.

• We  have  experienced  rapid  growth  in  recent  periods,  which  makes  it  difficult  to  forecast  our  revenue  and 

evaluate our business and future prospects.

• Our recent growth rates may not be indicative of our future growth. As our costs increase, we may not be 

able to generate sufficient revenue to achieve and, if achieved, maintain profitability.

• We have a history of losses, and we expect to incur losses for the foreseeable future.

• If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high 

levels of service and customer satisfaction or adequately address competitive challenges.

• We face intense competition, especially from larger, well-established companies, and we may lack sufficient 

financial or other resources to maintain or improve our competitive position.

• If we are unable to attract new customers, sell additional products to our existing customers or develop new 
products and enhancements to our products that achieve market acceptance, our revenue growth and profitability 
will be harmed.

• Our business depends on our customers renewing their subscriptions and purchasing additional licenses or 
subscriptions from us. Any material decline in our Dollar-Based Net Retention Rate would harm our future results of 
operations.

• Customer growth could fall below expectations.

• We may experience quarterly fluctuations in our results of operations due to a number of factors that make 
our  future  results  difficult  to  predict  and  could  cause  our  results  of  operations  to  fall  below  analyst  or  investor 
expectations.

• If  there  are  interruptions  or  performance  problems  associated  with  our  technology  or  infrastructure,  our 
existing  customers  may  experience  service  outages,  and  our  new  customers  may  experience  delays  in  the 
deployment of our platform.

• An application, data security or network incident may allow unauthorized access to our systems or data or 
our  customers’  data,  disable  access  to  our  service,  harm  our  reputation,  create  additional  liability  and  adversely 
impact our financial results.

• Any actual or perceived failure by us to comply with the privacy or security provisions of our privacy policy, 

our contracts and/or legal or regulatory requirements could result in proceedings, actions or penalties against us.

• There are risks related to our proposed acquisition of Auth0, including our ability to complete the acquisition 

in a timely manner, successfully integrate Auth0 and realize potential benefits from the acquisition.

• The  dual  class  structure  of  our  common  stock  has  the  effect  of  concentrating  voting  control  with  those 
stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, 
and their affiliates, who held in the aggregate 48% of the voting power of our capital stock as of January 31, 2021. 
This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments 
of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other 
major corporate transaction requiring stockholder approval.

• Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our 

business to pay our indebtedness.

16

Risks Related to Our Business and Industry

The  effects  of  the  COVID-19  pandemic  have  materially  affected  how  we  and  our  customers  are 
operating  our  businesses,  and  the  duration  and  extent  to  which  this  will  impact  our  future  results  of 
operations and overall financial performance remains uncertain.

In  December  2019,  a  novel  coronavirus  (COVID-19)  was  reported  in  China,  in  January  2020,  the  World 
Health Organization (WHO) declared it a Public Health Emergency of International Concern and in March 2020, the 
WHO declared it a pandemic. This contagious disease outbreak has continued to spread across the globe and is 
impacting  worldwide  economic  activity  and  financial  markets,  resulting  in  an  economic  downturn  that  became  a 
global  recession.  The  extent  of  the  impact  of  COVID-19  on  our  future  operational  and  financial  performance  will 
depend on certain developments, including the duration and spread of the outbreak, the effectiveness, distribution 
and  acceptance  of  COVID-19  vaccines,  including  the  vaccines’  efficacy  against  emerging  COVID-19  variants, 
related public health measures, and their impact on the global economy, our customers, employees and vendors. In 
the  absence  of  mass  distribution  and  acceptance  of  effective  COVID-19  vaccines,  we  expect  to  see  continued 
fluctuations  in  business  openings  and  closures  as  communities  respond  to  local  outbreaks.  This  pandemic  has 
resulted in a widespread health crisis that is adversely affecting broader economies and financial markets.

As  a  result  of  the  COVID-19  pandemic,  we  have  temporarily  closed  our  offices,  required  our  employees  to 
work from home and implemented significant travel restrictions. We shifted our annual user conference, Oktane20 
Live, held in the spring of 2020, to a virtual-only conference and in the near-term we have changed our customer, 
employee  and  industry  events,  including  Oktane21  Live,  to  virtual-only  formats.  The  conditions  caused  by  the 
COVID-19 pandemic have and may continue to affect the rate of IT spending and have and could adversely affect 
our  current  and  potential  customers’  ability  or  willingness  to  purchase  our  offerings.  It  has  and  could  continue  to 
delay current and prospective customers’ purchasing decisions, adversely impact our ability to provide professional 
services  to  our  customers,  delay  the  provisioning  of  our  offerings,  lengthen  payment  terms,  reduce  the  value  or 
duration of our subscription contracts, or affect customer attrition rates, all of which could adversely affect our future 
sales, operating results and overall financial performance. 

Our  operations  have  also  begun  to  be  negatively  affected  by  a  range  of  external  factors  related  to  the 
COVID-19 pandemic that are not within our control. For example, many cities, counties, states and countries have 
imposed  or  may  impose  a  wide  range  of  restrictions  on  our  employees’,  partners’,  customers’  and  potential 
customers’ physical movement to limit the spread of COVID-19. If the COVID-19 pandemic has a substantial impact 
on our employees’, partners’, customers’ or potential customers’ attendance or productivity, our results of operations 
and overall financial performance may be harmed. 

The  duration  and  extent  of  the  impact  from  the  COVID-19  pandemic  depends  on  future  developments  that 
cannot be accurately predicted at this time, such as the efficacy, availability and acceptance of COVID-19 vaccines, 
the severity and transmission rate of the virus, and emerging variants, the extent and effectiveness of containment 
actions and the impact of these and other factors on our employees, customers, partners and vendors as well as 
the global economy. Despite our best efforts to manage the impact of such events effectively, our business still may 
be harmed.

Adverse general economic and market conditions and reductions in workforce identity and customer 
identity  spending  may  reduce  demand  for  our  products,  which  could  harm  our  revenue,  results  of 
operations and cash flows. 

Our revenue, results of operations and cash flows depend on the overall demand for our products. Concerns 
about  the  COVID-19  pandemic,  the  systemic  impact  of  a  related  widespread  recession  (in  the  United  States  or 
internationally),  energy  costs,  geopolitical  issues  or  the  availability  and  cost  of  credit  have  and  could  continue  to 
lead to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S. 
economy and abroad, which in turn could result in reductions in workforce identity and customer identity spending 
by  our  existing  and  prospective  customers.  These  economic  conditions  can  occur  abruptly.  Prolonged  economic 
slowdowns may result in customers requesting us to renegotiate existing contracts on less advantageous terms to 
us than those currently in place or defaulting on payments due on existing contracts or not renewing at the end of 
the contract term.

Our  customers  may  merge  with  other  entities  who  use  alternative  identity  solutions  and,  during  weak 
economic  times,  there  is  an  increased  risk  that  one  or  more  of  our  customers  will  file  for  bankruptcy  protection, 
either  of  which  may  harm  our  revenue,  profitability  and  results  of  operations.  We  also  face  risk  from  international 
customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign 

17

bankruptcy laws may be more difficult to predict. In addition, we may determine that the cost of pursuing any claim 
may  outweigh  the  recovery  potential  of  such  claim.  As  a  result,  if  economic  growth  in  countries  where  we  do 
business  slows  or  if  such  countries  experience  further  economic  recession,  it  could  harm  our  business,  revenue, 
results of operations and cash flows.

We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue 

and evaluate our business and future prospects. 

Much  of  our  growth  has  occurred  in  recent  periods,  which  makes  it  difficult  to  forecast  our  revenue  and 
evaluate  our  business  and  future  prospects.  We  have  encountered  and  will  continue  to  encounter  risks  and 
uncertainties  frequently  experienced  by  growing  companies  in  rapidly  changing  industries,  including  the  risks  and 
uncertainties described in this document. Additionally, the sales cycle for the evaluation and implementation of our 
platform, which typically extends for multiple months for enterprise deals, may also cause us to experience a delay 
between increasing operating expenses and the generation of corresponding revenue, if any. Accordingly, we may 
be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a 
result of delays arising from these factors, and our results of operations in future reporting periods may be below the 
expectations  of  investors.  If  we  do  not  address  these  risks  successfully,  our  results  of  operations  could  differ 
materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our 
stock price to decline.

We  have  experienced  rapid  growth  in  recent  periods,  and  our  recent  growth  rates  may  not  be 
indicative of our future growth. As our costs increase, we may not be able to generate sufficient revenue to 
achieve and, if achieved, maintain profitability.

From  fiscal  2019  to  fiscal  2020,  our  revenue  grew  from  $399.3  million  to  $586.1  million,  an  increase 
of  47%,  and  from  fiscal  2020  to  fiscal  2021,  our  revenue  grew  from  $586.1  million  to  $835.4  million,  an  increase 
of 43%. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. We 
believe our revenue growth depends on a number of factors, such as macroeconomic conditions and the economic 
impact of the COVID-19 pandemic, as well as, but not limited to, our ability to:

•

price  our  platform  effectively  so  that  we  are  able  to  attract  and  retain  customers  without 

compromising our profitability;

•

attract new customers, successfully deploy and implement our platform, upsell or otherwise 
increase  our  existing  customers’  use  of  our  platform,  obtain  customer  renewals  and  provide  our 
customers with excellent customer support;

•

increase our network  of  channel partners,  which include resellers, system integrators and 

other distribution partners and independent software vendors (ISVs);

•

adequately expand our sales force, and maintain or increase our sales force’s productivity;

•

successfully  identify  and  enter  into  agreements  with  suitable  acquisition  targets,  integrate 
any acquisitions and integrate acquired technologies into our existing products or use them to develop 
new products;

•
cases;

•

•

•

successfully  introduce  new  products,  enhance  existing  products  and  address  new  use 

introduce our platform to new markets outside of the United States;

successfully compete against larger companies and new market entrants; and

increase awareness of our brand on a global basis.

If we are unable to accomplish any of these tasks, our revenue growth will be harmed. We also expect our 
operating  expenses  to  increase  in  future  periods,  and  if  our  revenue  growth  does  not  increase  to  offset  these 
anticipated  increases  in  our  operating  expenses,  our  business,  financial  position  and  results  of  operations  will  be 
harmed, and we may not be able to achieve or maintain profitability.

18

We have a history of losses, and we expect to incur losses for the foreseeable future.

We  have  incurred  significant  net  losses  in  each  year  since  our  inception,  including  net  losses  of  $125.5 
million, $208.9 million and $266.3 million in fiscal 2019, 2020 and 2021, respectively. We expect to continue to incur 
net  losses  for  the  foreseeable  future.  Because  the  market  for  our  platform  is  rapidly  evolving  and  has  not  yet 
reached widespread adoption, it is difficult for us to predict our future results of operations. We expect our operating 
expenses to significantly increase over the next several years as we hire additional personnel, particularly in sales 
and  marketing,  expand  and  improve  the  effectiveness  of  our  distribution  channels,  expand  our  operations  and 
infrastructure,  both  domestically  and  internationally,  pursue  business  combinations  and  continue  to  develop  our 
platform.  As  we  continue  to  develop  as  a  public  company,  we  may  incur  additional  legal,  accounting  and  other 
expenses  that  we  did  not  incur  historically.  If  our  revenue  does  not  increase  to  offset  these  increases  in  our 
operating expenses, we will not be profitable in future periods. While historically, our total revenue has grown, not all 
components of our total revenue have grown consistently. Further, in future periods, our revenue growth could slow 
or  our  revenue  could  decline  for  a  number  of  reasons,  including  slowing  demand  for  our  software,  increasing 
competition,  any  failure  to  gain  or  retain  channel  partners,  a  decrease  in  the  growth  of  our  overall  market,  or  our 
failure, for any reason, to continue to capitalize on growth opportunities. As a result, our past financial performance 
should not be considered indicative of our future performance. Any failure by us to achieve or sustain profitability on 
a consistent basis could cause the value of our common stock to decline.

If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain 

high levels of service and customer satisfaction or adequately address competitive challenges. 

We have experienced, and may continue to experience, rapid growth and organizational change, which has 
placed,  and  may  continue  to  place,  significant  demands  on  our  management  and  our  operational  and  financial 
resources.  For  example,  our  headcount  has  grown  from  2,248  employees  as  of  January  31,  2020  to  2,806 
employees as of January 31, 2021. We have also experienced significant growth in the number of customers, users 
and logins and in the amount of data that our SaaS infrastructure supports. Finally, our organizational structure is 
becoming more complex as we improve our operational, financial and management controls as well as our reporting 
systems and procedures. We will require significant capital expenditures and the allocation of valuable management 
resources  to  grow  and  change  in  these  areas  without  undermining  our  culture  of  rapid  innovation,  teamwork  and 
attention  to  customer  success,  which  has  been  central  to  our  growth  so  far.  If  we  fail  to  manage  our  anticipated 
growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our platform 
may  suffer,  which  could  negatively  affect  our  brand  and  reputation  and  harm  our  ability  to  retain  and  attract 
customers and employees.

We have established international offices, including offices in the United Kingdom, the Netherlands, Sweden, 
France,  Germany,  Canada, Australia,  Singapore  and  Japan,  and  we  plan  to  continue  to  expand  our  international 
operations into other countries in the future. Our expansion has placed, and our expected future growth will continue 
to  place,  a  significant  strain  on  our  managerial,  customer  operations,  research  and  development,  marketing  and 
sales, administrative, financial and other resources. If we are unable to manage our continued growth successfully, 
our business and results of operations could suffer.

In addition, as we expand our business, it is important that we continue to maintain a high level of customer 
service and satisfaction. As our customer base continues to grow, we will need to expand our account management, 
customer service and other personnel, and our network of ISVs, system integrators and other channel partners, to 
provide  personalized  account  management  and  customer  service.  If  we  are  not  able  to  continue  to  provide  high 
levels  of  customer  service,  our  reputation,  as  well  as  our  business,  results  of  operations  and  financial  condition, 
could be harmed.

We  face  intense  competition,  especially  from  larger,  well-established  companies,  and  we  may  lack 

sufficient financial or other resources to maintain or improve our competitive position. 

The markets for our products are rapidly evolving, highly competitive and subject to shifting customer needs 
and  frequent  introductions  of  new  technologies. As  the  markets  in  which  we  operate  continue  to  mature  and  new 
technologies  and  competitors  enter  such  markets,  we  expect  competition  to  intensify.  Our  competitor  categories 
include, but are not limited to: 

•

•

Authentication providers;

Access and lifecycle management providers; 

19

•

•

•

•

Multi-factor authentication providers; 

Infrastructure-as-a-service providers;

Other customer identity and access management providers; and

Solutions developed in-house by our potential customers.

We  compete  with  both  cloud-based  and  on-premise  enterprise  application  software  providers.  Our 
competitors vary in size and in the breadth and scope of the products and services offered. However, many of our 
competitors  have  substantial  competitive  advantages  such  as  significantly  greater  financial,  technical,  sales  and 
marketing, distribution, customer support or other resources, larger intellectual property portfolios, longer operating 
histories, greater resources to make strategic acquisitions and greater name recognition than we do. Our principal 
competitor is Microsoft. 

With  the  continuing  merger  and  acquisition  activity  in  the  technology  industry,  particularly  transactions 
involving  security  or  identity  and  access  management  technologies,  there  is  a  greater  likelihood  that  we  will 
compete  with  other  large  technology  companies  in  the  future  in  both  the  workforce  identity  and  customer  identity 
markets. 

In  addition,  some  of  our  larger  competitors  have  substantially  broader  product  offerings  and  leverage  their 
relationships  based  on  other  products  or  incorporate  functionality  into  existing  products  to  gain  business  in  a 
manner that discourages users from purchasing our products, including through selling at zero or negative margins, 
product  bundling  or  closed  technology  platforms.  Potential  customers  may  also  prefer  to  purchase  from  their 
existing  suppliers  rather  than  a  new  supplier  regardless  of  product  performance  or  features.  These  larger 
competitors often have broader product lines and market focus and as a result are not as susceptible to downturns 
in a particular market. Our competitors may also seek to acquire new offerings or repurpose their existing offerings 
to  provide  identity  solutions  with  subscription  models.  Conditions  in  our  market  could  change  rapidly  and 
significantly  as  a  result  of  technological  advancements,  partnering  by  our  competitors  or  continuing  market 
consolidation. New start-up companies that innovate and large competitors that are making significant investments 
in  research  and  development  may  invent  similar  or  superior  products  and  technologies  that  compete  with  our 
products.  In  addition,  some  of  our  competitors  may  enter  into  new  alliances  with  each  other  or  may  establish  or 
strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties. Any such 
consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of market 
share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of 
which  could  harm  our  ability  to  compete.  Furthermore,  organizations  may  be  more  willing  to  incrementally  add 
solutions  to  their  existing  infrastructure  from  competitors  than  to  replace  their  existing  infrastructure  with  our 
products.  These  competitive  pressures  in  our  market  or  our  failure  to  compete  effectively  may  result  in  price 
reductions, fewer orders, reduced revenue and gross margins, increased net losses, and loss of market share. Any 
failure to meet and address these factors could harm our business, results of operations and financial condition.

If  we  are  unable  to  attract  new  customers,  sell  additional  products  to  our  existing  customers  or 
develop  new  products  and  enhancements  to  our  products  that  achieve  market  acceptance,  our  revenue 
growth and profitability will be harmed. 

To increase our revenue and achieve and maintain profitability, we must add new customers or sell additional 
products to our existing customers. Numerous factors, however, may impede our ability to add new customers and 
sell  additional  products  to  our  existing  customers,  including  our  failure  to  convert  new  organizations  into  paying 
customers, failure to attract, effectively train, retain and motivate sales and marketing personnel, failure to develop 
or  expand  relationships  with  channel  partners,  failure  to  successfully  deploy  products  for  new  customers  and 
provide  quality  customer  support  or  failure  to  ensure  the  effectiveness  of  our  marketing  programs.  In  addition,  if 
prospective customers do not perceive our platform to be of sufficiently high value and quality, we will not be able to 
attract the number and types of new customers that we are seeking.

In  addition,  our  ability  to  attract  new  customers  and  increase  revenue  from  existing  customers  depends  in 
large  part  on  our  ability  to  enhance  and  improve  our  existing  products  and  to  introduce  compelling  new  products 
that  reflect  the  changing  nature  of  our  markets.  The  success  of  any  enhancement  to  our  products  depends  on 
several  factors,  including  timely  completion  and  delivery,  competitive  pricing,  adequate  quality  testing,  integration 
with existing technologies and our platform and overall market acceptance. If we are unable to successfully develop 

20

new products, enhance our existing products to meet customer requirements, or otherwise gain market acceptance, 
our business, results of operations and financial condition would be harmed.

Further, to grow our business, we must convince developers to adopt and build their applications using our 
APIs and products. We believe that these developer-built applications facilitate greater usage and customization of 
our products. If these developers stop developing on or supporting our platform, we will lose the benefit of network 
effects  that  have  contributed  to  the  growth  in  our  number  of  customers,  and  our  business  (including  the 
performance levels of our products), results of operations and financial condition could be harmed.

Our  business  depends  on  our  customers  renewing  their  subscriptions  and  purchasing  additional 
licenses or subscriptions from us. Any material decline in our Dollar-Based Net Retention Rate would harm 
our future results of operations.

To continue to grow our business, it is important that our customers renew their subscriptions when existing 
contract terms expire and that we expand our commercial relationships with our existing customers. Our customers 
have no obligation to renew their subscriptions, and our customers may decide not to renew their subscriptions with 
a  similar  contract  period,  at  the  same  prices  and  terms  or  with  the  same  or  a  greater  number  of  users.  We  have 
experienced significant growth in the number of users of our platform, but we do not know whether we will continue 
to achieve similar user growth rates in the future. In the past, some of our customers have elected not to renew their 
agreements with us, and it is difficult to accurately predict long-term customer retention and expansion rates. Our 
customer  retention  and  expansion  may  decline  or  fluctuate  as  a  result  of  a  number  of  factors,  including  our 
customers’  satisfaction  with  our  products,  our  product  support,  our  prices  and  pricing  plans,  particularly  in  light  of 
COVID-19-related  economic  conditions,  the  prices  of  competing  software  products,  reductions  in  our  customers’ 
spending levels, user adoption of our platform, deployment success, utilization rates by our customers, new product 
releases  and  changes  to  the  packaging  of  our  product  offerings.  If  our  customers  do  not  purchase  additional 
subscriptions  or  renew  their  subscriptions,  renew  on  less  favorable  terms  or  fail  to  add  more  users,  our  revenue 
may decline or grow less quickly than anticipated, which would harm our future results of operations. Furthermore, if 
our  contractual  subscription  terms  were  to  shorten  it  could  lead  to  increased  volatility  of,  and  diminished  visibility 
into,  future  recurring  revenue.  If  our  sales  of  new  or  recurring  subscriptions  and  software-related  support  service 
contracts  decline  from  existing  customers,  our  revenue  and  revenue  growth  may  decline,  and  our  business  will 
suffer.

Customer growth could fall below expectations.

We have experienced significant growth in the number of our customers in recent periods. As our customer 
base  continues  to  grow  and  as  we  increase  our  focus  on  sales  to  the  world’s  largest  organizations,  we  do  not 
expect  customer  growth  to  continue  at  the  same  pace  as  it  has  previously.  These  factors  could  cause  customer 
growth to fall below analyst or investor expectations. If we fail to meet or exceed such expectations for these or any 
other  reasons,  the  market  price  of  our  Class  A  common  stock  could  fall  substantially,  and  we  could  face  costly 
lawsuits, including securities class action suits.

We may experience quarterly fluctuations in our results of operations due to a number of factors that 
make our future results difficult to predict and could cause our results of operations to fall below analyst or 
investor expectations. 

Our quarterly results of operations fluctuate from quarter to quarter as a result of a number of factors, many of 

which are outside of our control and may be difficult to predict, including, but not limited to:

•

•

the level of demand for our platform;

our ability to attract new customers, obtain renewals from existing customers and upsell or 

otherwise increase our existing customers’ use of our platform;

•
viruses;

health epidemics, such as COVID-19, influenza and other highly communicable diseases or 

•

the timing and success of new product introductions by us or our competitors or any other 

change in the competitive landscape of our market;

•

•

pricing pressure as a result of competition, COVID-19 or otherwise;

seasonal buying patterns for IT spending;

21

•

the  mix  of  revenue  attributable  to  larger  transactions  as  opposed  to  smaller  transactions, 

and the associated volatility and timing of our transactions;

•

changes in remaining performance obligations (RPO) due to seasonality, the timing of and 
compounding  effects  of  renewals,  invoice  duration,  size  and  timing,  new  business  linearity  between 
quarters and within a quarter, average contract term or fluctuations due to foreign currency movements, 
all of which may impact implied growth rates;

•

errors in our forecasting of the demand for our products, which could lead to lower revenue, 

increased costs or both;

•

increases in and timing of sales and marketing and other operating expenses that we may 

incur to grow and expand our operations and to remain competitive;

•

significant  security  breaches  of,  technical  difficulties  with,  or  interruptions  to,  the  delivery 

and use of our platform and products; 

•

our  ability  to  comply  with  privacy  laws  and  requirements,  including  the  General  Data 

Protection Regulation and California Consumer Privacy Act;

•

costs  related  to  the  acquisition  of  businesses,  talent,  technologies  or  intellectual  property, 

including potentially significant amortization costs and possible write-downs; 

•

•

credit or other difficulties confronting our channel partners;

adverse litigation judgments, settlements of litigation and other disputes or other litigation-

related or dispute-related costs;

•

•

•

•

•

the impact of new accounting pronouncements and associated system implementations;

changes in the legislative or regulatory environment;

fluctuations in foreign currency exchange rates;

expenses related to real estate, including our office leases, and other fixed expenses; and

general  economic  conditions  in  either  domestic  or  international  markets,  including 

geopolitical uncertainty and instability.

Any  one  or  more  of  the  factors  above  may  result  in  significant  fluctuations  in  our  results  of  operations. You 

should not rely on our past results as an indicator of our future performance.

The variability and unpredictability of our quarterly results of operations or other operating metrics could result 
in  our  failure  to  meet  our  expectations  or  those  of  analysts  that  cover  us  or  investors  with  respect  to  revenue  or 
other metrics for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, 
the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including 
securities class action suits.

Our  ability  to  introduce  new  products  and  features  is  dependent  on  adequate  research  and 
development resources and our ability to successfully complete acquisitions. If we do not adequately fund 
our  research  and  development  efforts  or  complete  acquisitions  successfully,  we  may  not  be  able  to 
compete effectively and our business and results of operations may be harmed.

To  remain  competitive,  we  must  continue  to  develop  new  products,  applications  and  enhancements  to  our 
existing platform. This is particularly true as we further expand and diversify our capabilities. Maintaining adequate 
research and development resources, such as the appropriate personnel and development technology, to meet the 
demands of the market is essential. If we elect not to or are unable to develop products internally, we may choose to 
expand  into  a  certain  market  or  strategy  via  an  acquisition  for  which  we  could  potentially  pay  too  much  or  fail  to 
successfully integrate into our operations. Further, many of our competitors expend a considerably greater amount 
of funds on their respective research and development programs, and those that do not may be acquired by larger 
companies  that  could  allocate  greater  resources  to  our  competitors’  research  and  development  programs.  Our 
failure to maintain adequate research and development resources or to compete effectively with the research and 

22

development  programs  of  our  competitors  would  give  an  advantage  to  such  competitors  and  may  harm  our 
business, results of operations and financial condition.

Future acquisitions, investments, partnerships or alliances could be difficult to identify and integrate, 
divert the attention of management personnel, disrupt our business, dilute stockholder value and harm our 
results of operations and financial condition.

We have in the past acquired, and we may in the future seek to acquire or invest in, businesses, products or 
technologies that we believe could complement or expand our current platform, enhance our technical capabilities 
or otherwise offer growth opportunities. For example, we have entered into the proposed acquisition of Auth0. If that 
transaction  closes,  our  stockholders  will  incur  substantial  dilution.  For  further  risks  related  to  the  proposed 
acquisition  of Auth0,  please  see  below  under  “Risks  Related  to  the Acquisition  of Auth0.” The  pursuit  of  potential 
acquisitions  may  divert  the  attention  of  management  and  cause  us  to  incur  various  expenses  in  identifying, 
investigating and pursuing suitable acquisitions, whether or not they are consummated. In addition, we have limited 
experience in acquiring other businesses. If we acquire additional businesses, we may not be able to successfully 
integrate  and  retain  the  acquired  personnel,  integrate  the  acquired  operations  and  technologies,  adequately  test 
and  assimilate  the  internal  control  processes  of  the  acquired  business  in  accordance  with  the  requirements  of 
Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), or effectively manage the combined business 
following the acquisition. 

We may not be able to find and identify desirable acquisition targets or we may not be successful in entering 
into an agreement with any particular target. Acquisitions could also result in dilutive issuances of equity securities, 
use  of  our  available  cash  or  the  incurrence  of  debt,  or  in  adverse  tax  consequences  or  unfavorable  accounting 
treatment, which could harm our results of operations.

In addition, from time to time we invest in private growth stage companies for strategic reasons and to support 
key business initiatives, and we may not realize a return on these investments. All of our venture investments are 
subject to a risk of partial or total loss of investment capital.

Acquisitions and strategic transactions involve numerous risks, including:

•

•

•

delays or reductions in customer purchases for both us and the acquired business; 

disruption of partner and customer relationships;

potential loss of key employees of the acquired company;

•
or third parties;

claims  by  and  disputes  with  the  acquired  company’s  employees,  customers,  stockholders 

•

unknown  liabilities  or  risks  associated  with  the  acquired  business,  product  or  technology, 
such  as  contractual  obligations,  potential  security  vulnerabilities  of  the  acquired  company  and  its 
products  and  services,  potential  intellectual  property  infringement,  costs  arising  from  the  acquired 
company’s failure to comply with legal or regulatory requirements and litigation matters;

•

acquired  technologies  or  products  may  not  comply  with  legal  or  regulatory  requirements 

and may require us to make additional investments to make them compliant;

•

acquired  technologies  or  products  may  not  be  able  to  provide  the  same  support  service 

levels that we generally offer with our other products; 

•

they  could  be  viewed  unfavorably  by  our  partners,  our  customers,  our  stockholders  or 

securities analysts;

•

•

unforeseen integration or other expenses; and

future impairment of goodwill or other acquired intangible assets. 

In  addition,  if  an  acquired  business  fails  to  meet  our  expectations,  our  business,  results  of  operations  and 

financial condition could suffer.

23

If we fail to adapt to rapid technological change, our ability to remain competitive could be impaired.

The  industry  in  which  we  compete  is  characterized  by  rapid  technological  change,  frequent  introductions  of 
new  products  and  evolving  industry  standards.  Our  ability  to  attract  new  customers  and  increase  revenue  from 
existing  customers  will  depend  in  significant  part  on  our  ability  to  anticipate  industry  standards  and  trends  and 
continue  to  enhance  existing  products  or  introduce  or  acquire  new  products  on  a  timely  basis  to  keep  pace  with 
technological  developments.  The  success  of  any  enhancement  or  new  product  depends  on  several  factors, 
including the timely completion and market acceptance of the enhancement or new product. Any new product we 
develop  or  acquire  might  not  be  introduced  in  a  timely  or  cost-effective  manner  and  might  not  achieve  the  broad 
market  acceptance  necessary  to  generate  significant  revenue.  If  any  of  our  competitors  implements  new 
technologies  before  we  are  able  to  implement  them,  those  competitors  may  be  able  to  provide  more  effective 
products than ours at lower prices. Any delay or failure in the introduction of new or enhanced products could harm 
our business, results of operations and financial condition.

Our financial results may fluctuate due to increasing variability in our sales cycles. 

We  plan  our  expenses  based  on  certain  assumptions  about  the  length  and  variability  of  our  sales  cycle. 
These  assumptions  are  based  upon  historical  trends  for  sales  cycles  and  conversion  rates  associated  with  our 
existing customers. As we continue to focus on sales to larger organizations and in light of the current COVID-19 
environment, our sales cycles are lengthening in certain circumstances and becoming less predictable, which may 
harm  our  financial  results.  Other  factors  that  may  influence  the  length  and  variability  of  our  sales  cycle  include, 
among other things:

•

the  need  to  raise  awareness  about  the  uses  and  benefits  of  our  platform,  including  our 

customer identity products;

•

•

•

•

the need to allay privacy, regulatory and security concerns;

the discretionary nature of purchasing and budget cycles and decisions;

the competitive nature of evaluation and purchasing processes;

announcements or planned introductions of new products, features or functionality by us or 

our competitors; and

•

often lengthy purchasing approval processes.

Our  increasing  focus  on  sales  to  larger  organizations  may  further  increase  the  variability  of  our  financial 
results. If we are unable to close one or more of such expected significant transactions in a particular period, or if 
such an expected transaction is delayed until a subsequent period, our results of operations for that period, and for 
any future periods in which revenue from such transaction would otherwise have been recognized, may be harmed.

Our growth depends, in part, on the success of our strategic relationships with third parties. 

To grow our business, we anticipate that we will continue to depend on relationships with third parties, such 
as  channel  partners.  Identifying  partners,  and  negotiating  and  documenting  relationships  with  them,  requires 
significant time and resources. Our competitors may be effective in causing third parties to favor their products or 
services over subscriptions to our platform. In addition, acquisitions of such partners by our competitors could result 
in a decrease in the number of our current and potential customers, as these partners may no longer facilitate the 
adoption of our applications by potential customers. Further, some of our partners are or may become competitive 
with  certain  of  our  products  and  may  elect  to  no  longer  integrate  with  our  platform.  If  we  are  unsuccessful  in 
establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow 
our  revenue  could  be  impaired,  and  our  results  of  operations  may  suffer.  Even  if  we  are  successful,  we  cannot 
ensure that these relationships will result in increased customer usage of our applications or increased revenue.

Failure to effectively develop and expand our marketing and sales capabilities could harm our ability 

to increase our customer base and achieve broader market acceptance of our products. 

Our ability to increase our customer base and achieve broader market acceptance of our products will depend 
to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding 
our  direct  sales  force  and  engaging  additional  channel  partners,  both  domestically  and  internationally.  This 
expansion  will  require  us  to  invest  significant  financial  and  other  resources.  Our  business  will  be  harmed  if  our 

24

efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from 
expanding  our  direct  sales  force  if  we  are  unable  to  hire  and  develop  talented  direct  sales  personnel,  if  our  new 
direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if we are 
unable to retain our existing direct sales personnel. We also may not achieve anticipated revenue growth from our 
channel partners if we are unable to attract and retain additional motivated channel partners, if any existing or future 
channel partners fail to successfully market, resell, implement or support our products for their customers, or if they 
represent  multiple  providers  and  devote  greater  resources  to  market,  resell,  implement  and  support  the  products 
and solutions of these other providers. For example, some of our channel partners also sell or provide integration 
and administration services for our competitors’ products, and if such channel partners devote greater resources to 
marketing,  reselling  and  supporting  competing  products,  this  could  harm  our  business,  results  of  operations  and 
financial condition.

Various  factors  may  cause  our  product  implementations  to  be  delayed,  inefficient  or  otherwise 

unsuccessful. 

Our  business  depends  upon  the  successful  implementation  of  our  products  by  our  customers.  Increasingly, 
we, as well as our customers, rely on our network of partners to deliver implementation services, and there may not 
be  enough  qualified  implementation  partners  available  to  meet  customer  demand.  Various  factors  may  cause 
implementations  to  be  delayed,  inefficient  or  otherwise  unsuccessful.  For  example,  changes  in  the  functional 
requirements of our customers, delays in timeline, or deviation from recommended best practices may occur during 
the  course  of  an  implementation  project.  As  a  result  of  these  and  other  risks,  we  or  our  customers  may  incur 
significant implementation costs in connection with the purchase, implementation and enablement of our products. 
Some customer implementations may take longer than planned or fail to meet our customers’ expectations, which 
may  delay  our  ability  to  sell  additional  products  or  result  in  customers  canceling  or  failing  to  renew  their 
subscriptions  before  our  products  have  been  fully  implemented.  Unsuccessful,  lengthy  or  costly  customer 
implementation  and  integration  projects  could  result  in  claims  from  customers,  harm  to  our  reputation  and 
opportunities for competitors to displace our products, each of which could have an adverse effect on our business 
and results of operations.

A  portion  of  our  revenues  are  generated  by  sales  to  government  entities,  which  are  subject  to  a 

number of challenges and risks. 

A  portion  of  our  sales  are  to  partners  that  resell  our  services  to  government  agencies,  and  we  have  made, 
and may continue to make, investments to support future sales opportunities in the government sector. Government 
demand  for  our  products  could  be  impacted  by  budgetary  cycles,  and  there  may  be  governmental  certification 
requirements  for  our  products.  Further,  we  may  be  subject  to  audits  and  investigations  regarding  our  role  as  a 
subcontractor in government contracts, and violations could result in penalties and sanctions, including termination 
of  the  contract,  refunding  or  forfeiting  payments,  fines,  and  suspension  or  debarment  from  future  government 
business.  Selling  to  these  entities  can  be  highly  competitive,  expensive  and  time  consuming,  often  requiring 
significant upfront time and expense without any assurance that we will successfully complete a sale. Government 
entities  often  require  contract  terms  that  differ  from  our  standard  arrangements  and  impose  compliance 
requirements  that  are  complicated,  increased  attention  to  pricing  practices,  termination  rights  tied  to  funding 
availability, or are otherwise time consuming and expensive to satisfy. Government entities may also have statutory, 
contractual or other legal rights to terminate contracts with our partners for convenience, for lack of funding or due 
to a default, and any such termination may adversely impact our future results of operations. If we represent that we 
meet special standards or requirements and do not meet them, we could be subject to increased liability from our 
customers,  investigation  by  regulators  or  termination  rights.  Even  if  we  do  meet  them,  the  additional  costs 
associated  with  providing  our  service  to  government  entities  could  harm  our  margins.  Moreover,  changes  in  the 
underlying regulatory conditions that affect these types of customers could harm our ability to efficiently provide our 
service  to  them  and  to  grow  or  maintain  our  customer  base.  Any  of  these  risks  related  to  contracting  with 
government entities could adversely impact our future sales and results of operations, or make them more difficult to 
predict. 

25

If  we  fail  to  enhance  our  brand  cost-effectively,  our  ability  to  expand  our  customer  base  will  be 

impaired and our business, results of operations and financial condition may suffer.

We believe that developing and maintaining awareness of our brand in a cost-effective manner is critical to 
achieving widespread acceptance of our existing and future products and is an important element in attracting new 
customers.  Furthermore,  we  believe  that  the  importance  of  brand  recognition  will  increase  as  competition  in  our 
market  increases.  Successful  promotion  of  our  brand  will  depend  largely  on  the  effectiveness  of  our  marketing 
efforts and on our ability to provide reliable and useful products at competitive prices. In the past, our efforts to build 
our  brand  have  involved  significant  expenses.  Brand  promotion  activities  may  not  yield  increased  revenue,  and 
even  if  they  do,  any  increased  revenue  may  not  offset  the  expenses  we  incur  in  building  our  brand.  If  we  fail  to 
successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote 
and  maintain  our  brand,  we  may  fail  to  attract  new  customers  or  retain  our  existing  customers  to  the  extent 
necessary  to  realize  a  sufficient  return  on  our  brand-building  efforts,  and  our  business,  results  of  operations  and 
financial condition could suffer.

We may not set optimal prices for our products. 

In the past, we have at times adjusted our prices either for individual customers in connection with long-term 
agreements  or  for  a  particular  product.  We  expect  that  we  may  need  to  change  our  pricing  in  future  periods  and 
potentially in response to COVID-19 pricing pressures. Further, as competitors introduce new products that compete 
with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on 
our  historical  pricing. As  we  expand  internationally,  we  also  must  determine  the  appropriate  price  to  enable  us  to 
compete effectively internationally. In addition, if our mix of products sold changes, then we may need to, or choose 
to, revise our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, 
which could harm our business, results of operations and financial condition.

Because our long-term success depends, in part, on our ability to expand the sales of our products to 
customers  located  outside  of  the  United  States,  our  business  will  be  susceptible  to  risks  associated  with 
international operations. 

We currently have sales personnel outside the United States and maintain offices outside the United States in 
the United Kingdom, the Netherlands, Sweden, France, Germany, Canada, Australia, Singapore and Japan, and we 
plan to expand our international operations. 

In  each  of  fiscal  2020  and  2021,  our  international  revenue  was  16%  of  our  total  revenue. Any  international 
expansion  efforts  that  we  may  undertake  may  not  be  successful.  In  addition,  conducting  international  operations 
subjects  us  to  new  risks,  some  of  which  we  have  not  generally  faced  in  the  United  States.  These  risks  include, 
among other things:

•
viruses;

•

•

health epidemics, such as COVID-19, influenza and other highly communicable diseases or 

macroeconomic conditions and the economic impact of the COVID-19 pandemic;

unexpected  costs  and  errors  in  the  localization  of  our  products,  including  translation  into 

foreign languages and adaptation for local practices and regulatory requirements;

•

lack  of  familiarity  and  burdens  of  complying  with  foreign  laws,  legal  standards,  privacy 

standards, regulatory requirements, tariffs and other barriers;

•

•

laws and business practices favoring local competitors or commercial parties;

costs and liabilities related to compliance with the EU General Data Protection Regulation 

2016/679 and disparate data privacy standards and enforcement;

laws;

•

•

greater risk that our foreign employees or partners will fail to comply with U.S. and foreign 

practical difficulties of enforcing intellectual property rights in countries with fluctuating laws 

and standards and reduced or varied protection for intellectual property rights in some countries;

26

•

restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, 
tariffs,  import  and  export  restrictions  or  quotas,  barriers,  sanctions,  custom  duties  or  other  trade 
restrictions;

•

•

•

•
receivable;

unexpected changes in legal and regulatory requirements;

difficulties in managing systems integrators and technology partners;

differing technology standards;

longer  accounts  receivable  payment  cycles  and  difficulties 

in  collecting  accounts 

•

difficulties  in  managing  and  staffing  international  operations  and  differing  employer/

employee relationships and local employment laws;

•

•

political, economic and social instability, war, armed conflict or terrorist activities;

global  economic  uncertainty  caused  by  global  political  events,  including  the  United 

Kingdom's exit from the European Union, and similar geopolitical developments;

•

fluctuations in exchange rates that may increase the volatility of our foreign-based revenue 

and expense; and

•

potentially adverse tax consequences, including the complexities of foreign value added tax 

(or other tax) systems and restrictions on the repatriation of earnings.

Additionally,  operating  in  international  markets  also  requires  significant  management  attention  and  financial 
resources. We cannot be certain that the investment and additional resources required in establishing operations in 
other countries will produce desired levels of revenue or profitability.

We  have  not  engaged  in  currency  hedging  activities  to  limit  risk  of  exchange  rate  fluctuations.  Changes  in 
exchange rates affect our costs and earnings, and may also affect the book value of our assets located outside the 
United States and the amount of our stockholders’ equity.

We have limited experience in marketing, selling and supporting our platform abroad. Our limited experience 
in operating our business internationally increases the risk that any potential future expansion efforts that we may 
undertake will not be successful. If we invest substantial time and resources to expand our international operations 
and are unable to do so successfully and in a timely manner, our business and results of operations will suffer.

Our failure to raise additional capital or generate cash flows necessary to expand our operations and 
invest  in  new  technologies  in  the  future  could  reduce  our  ability  to  compete  successfully  and  harm  our 
results of operations.

We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing 
on  favorable  terms,  if  at  all.  If  we  raise  additional  equity  or  convertible  debt  financing,  our  security  holders  may 
experience  significant  dilution  of  their  ownership  interests.  If  we  engage  in  additional  debt  financing,  we  may  be 
required  to  accept  terms  that  restrict  our  ability  to  incur  additional  indebtedness,  force  us  to  maintain  specified 
liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we need additional capital and 
cannot raise it on acceptable terms, or at all, we may not be able to, among other things:

•

•

•

•

•

develop and enhance our products;

continue to expand our product development, sales and marketing organizations;

hire, train and retain employees;

respond to competitive pressures or unanticipated working capital requirements; or

pursue acquisition opportunities.

Our  inability  to  do  any  of  the  foregoing  could  reduce  our  ability  to  compete  successfully  and  harm  our 

business, results of operations and financial condition.

27

We may be subject to liability claims if we breach our contracts and our insurance may be inadequate 

to cover our losses.

We  are  subject  to  numerous  obligations  in  our  contracts  with  our  customers  and  partners.  Despite  the 
procedures, systems and internal controls we have implemented to comply with our contracts, we may breach these 
commitments, whether through a weakness in these procedures, systems and internal controls, negligence or the 
willful act of an employee or contractor. Our insurance policies, including our errors and omissions insurance, may 
be  inadequate  to  compensate  us  for  the  potentially  significant  losses  that  may  result  from  claims  arising  from 
breaches of our contracts, disruptions in our service, including those caused by cybersecurity incidents, failures or 
disruptions to our infrastructure, catastrophic events and disasters or otherwise. In addition, such insurance may not 
be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all 
claims  made  against  us  and  defending  a  suit,  regardless  of  its  merit,  could  be  costly  and  divert  management’s 
attention.

Risks Related to Intellectual Property, Infrastructure Technology, Data Privacy and Security

If 

there  are 

technology  or 
infrastructure,  our  existing  customers  may  experience  service  outages,  and  our  new  customers  may 
experience delays in the deployment of our platform. 

interruptions  or  performance  problems  associated  with  our 

Our  continued  growth  depends,  in  part,  on  the  ability  of  our  existing  and  potential  customers  to  access  our 
platform  24  hours  a  day,  seven  days  a  week,  without  interruption  or  degradation  of  performance.  We  may 
experience disruptions, data loss, outages and other performance problems with our infrastructure due to a variety 
of  factors,  including  infrastructure  and  functionality  changes,  human  or  software  errors,  capacity  constraints  or 
security-related  incidents.  In  some  instances,  we  may  not  be  able  to  identify  the  cause  or  causes  of  these 
performance problems immediately or in short order. We may not be able to maintain the level of service uptime and 
performance  required  by  our  customers,  especially  during  peak  usage  times  and  as  our  products  become  more 
complex and our user traffic increases. If our platform is unavailable or if our customers are unable to access our 
products  or  deploy  them  within  a  reasonable  amount  of  time,  or  at  all,  our  business  would  be  harmed.  Since  our 
customers  rely  on  our  service  to  access  and  complete  their  work,  any  outage  on  our  platform  would  impair  the 
ability  of  our  customers  to  perform  their  work,  which  would  negatively  impact  our  brand,  reputation  and  customer 
satisfaction. Moreover, we depend on services from various third parties to maintain our infrastructure and distribute 
our  products  via  the  internet.  If  a  service  provider  fails  to  provide  sufficient  capacity  to  support  our  platform  or 
otherwise  experiences  service  outages,  such  failure  could  interrupt  our  customers’  access  to  our  service,  which 
could  adversely  affect  their  perception  of  our  platform's  reliability  and  our  revenues.  Any  disruptions  in  these 
services, including as a result of actions outside of our control, would significantly impact the continued performance 
of our products. In the future, these services may not be available to us on commercially reasonable terms, or at all. 
Any  loss  of  the  right  to  use  any  of  these  services  could  result  in  decreased  functionality  of  our  products  until 
equivalent  technology  is  either  developed  by  us  or,  if  available  from  another  provider,  is  identified,  obtained  and 
integrated  into  our  infrastructure.  If  we  do  not  accurately  predict  our  infrastructure  capacity  requirements,  our 
customers could experience service shortfalls. We may also be unable to effectively address capacity constraints, 
upgrade our systems as needed, and continually develop our technology and network architecture to accommodate 
actual and anticipated changes in technology.

Any  of  the  above  circumstances  or  events  may  harm  our  reputation,  cause  customers  to  terminate  their 
agreements with us, impair our ability to obtain subscription renewals from existing customers, impair our ability to 
grow  our  customer  base,  result  in  the  expenditure  of  significant  financial,  technical  and  engineering  resources, 
subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business, 
results of operations and financial condition.

An  application,  data  security  or  network  incident  may  allow  unauthorized  access  to  our  systems  or 
data or our customers’ data, disable access to our service, harm our reputation, create additional liability 
and adversely impact our financial results.

Increasingly, companies are subject to a wide variety of attacks on their systems and networks on an ongoing 
basis. In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms 
and  ransomware),  employee  or  contractor  theft  or  misuse,  password  spraying,  phishing  and  denial-of-service 
attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-
state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks 
to our systems (including those hosted on AWS or other cloud services), internal networks, our customers’ systems 

28

and the information that they store and process. Despite significant efforts to create security barriers to such threats, 
it  is  virtually  impossible  for  us  to  entirely  mitigate  these  risks.  As  a  well-known  provider  of  identity  and  security 
solutions, we pose an attractive target for such attacks. The security measures we have integrated into our internal 
systems  and  platform,  which  are  designed  to  detect  unauthorized  activity  and  prevent  or  minimize  security 
breaches,  may  not  function  as  expected  or  may  not  be  sufficient  to  protect  our  internal  networks  and  platform 
against  certain  attacks.  In  addition,  techniques  used  to  sabotage  or  to  obtain  unauthorized  access  to  networks  in 
which data is stored or through which data is transmitted change frequently, become more complex over time and 
generally  are  not  recognized  until  launched  against  a  target. As  a  result,  we  and  our  third-party  service  providers 
may  be  unable  to  anticipate  these  techniques  or  implement  adequate  preventative  measures  quickly  enough  to 
prevent  either  an  electronic  intrusion  into  our  systems  or  services  or  a  compromise  of  customer  data,  employee 
data or other protected information.

Our  customers’  use  of  Okta  to  access  business  systems  and  store  data  concerning,  among  others,  their 
employees, contractors, partners and customers is essential to their use of our platform, which stores, transmits and 
processes customers’ proprietary information and personal data. If a breach of customer data on our platform were 
to  occur,  as  a  result  of  third-party  action,  technology  limitations,  employee  or  contractor  error,  malfeasance  or 
otherwise, and the confidentiality, integrity or availability of our customers’ data or systems was disrupted, we could 
incur significant liability to our customers and to individuals or businesses whose information was being stored by 
our customers, and our platform may be perceived as less desirable, which could negatively affect our business and 
damage  our  reputation.  Because  techniques  used  to  obtain  unauthorized  access  to,  or  to  sabotage,  systems 
change  frequently  and  generally  are  not  recognized  until  launched  against  a  target,  we,  our  third-party  service 
providers  and  our  customers  may  be  unable  to  anticipate  these  techniques  or  to  implement  adequate  preventive 
measures.  Further,  because  we  do  not  control  our  third-party  service  providers,  or  the  processing  of  data  by  our 
third-party service providers, we cannot ensure the integrity or security of measures they take to protect customer 
information and prevent data loss.

In addition, security breaches impacting our platform could result in a risk of loss or unauthorized disclosure of 
this  information,  or  the  denial  of  access  to  this  information,  which,  in  turn,  could  lead  to  enforcement  actions, 
litigation,  regulatory  or  governmental  audits,  investigations  and  possible  liability,  and  increased  requests  by 
individuals regarding their personal data. Security breaches could also damage our relationships with and ability to 
attract  customers  and  partners,  and  trigger  service  availability,  indemnification  and  other  contractual  obligations. 
Security incidents may also cause us to incur significant investigation, mitigation, remediation, notification and other 
expenses.  Furthermore,  as  a  well-known  provider  of  identity  and  security  solutions,  any  such  breach,  including  a 
breach of our customers’ systems, could compromise systems secured by our products, creating system disruptions 
or slowdowns and exploiting security vulnerabilities of our or our customers’ systems, and the information stored on 
our or our customers’ systems could be accessed, publicly disclosed, altered, lost or stolen, which could subject us 
to  liability  and  cause  us  financial  harm.  While  we  maintain  cybersecurity  insurance,  our  insurance  may  be 
insufficient  to  cover  all  liabilities  incurred  in  these  incidents,  and  any  incidents  may  result  in  loss  of,  or  increased 
costs  of,  our  cybersecurity  insurance.  These  breaches,  or  any  perceived  breach,  of  our  systems,  our  customers’ 
systems,  or  other  systems  or  networks  secured  by  our  products,  whether  or  not  any  such  breach  is  due  to  a 
vulnerability in our platform, may also undermine confidence in our platform or our industry and result in damage to 
our  reputation  and  brand,  negative  publicity,  loss  of  ISVs  and  other  channel  partners,  customers  and  sales, 
increased  costs  to  remedy  any  problem,  costly  litigation  and  other  liability.  In  addition,  a  breach  of  the  security 
measures of one of our key ISVs or other channel partners could result in the exfiltration of confidential corporate 
information or other data that may provide additional avenues of attack, and if a high profile security breach occurs 
with respect to a comparable cloud technology provider, our customers and potential customers may lose trust in 
the  security  of  the  cloud  business  model  generally,  which  could  adversely  impact  our  ability  to  retain  existing 
customers  or  attract  new  ones,  potentially  causing  a  negative  impact  on  our  business.  Any  of  these  negative 
outcomes  could  adversely  impact  market  acceptance  of  our  products  and  could  harm  our  business,  results  of 
operations and financial condition.

Third parties may attempt to fraudulently induce employees, contractors, customers or our customers’ users 
into disclosing sensitive information such as user names, passwords or other information or otherwise compromise 
the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data 
or  our  customers’  data,  which  could  result  in  significant  legal  and  financial  exposure,  a  loss  of  confidence  in  the 
security of our platform, interruptions or malfunctions in our operations, account lock outs and, ultimately, harm to 
our  future  business  prospects  and  revenue.  We  may  be  required  to  expend  significant  capital  and  financial 
resources to protect against such threats or to alleviate problems caused by breaches in security.

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Any actual or perceived failure by us to comply with the privacy or security provisions of our privacy 
policy,  our  contracts  and/or  legal  or  regulatory  requirements  could  result  in  proceedings,  actions  or 
penalties against us.

Our  customers’  storage  and  use  of  data  concerning,  among  others,  their  employees,  contractors,  partners 
and customers is essential to their use of our platform. We have implemented various features intended to enable 
our customers to better comply with applicable privacy and security requirements in their collection and use of data 
within  our  online  service,  but  these  features  do  not  ensure  their  compliance  and  may  not  be  effective  against  all 
potential privacy or related regulatory concerns.

Many  jurisdictions  have  enacted  or  are  considering  enacting  or  revising  privacy  and/or  data  security 
legislation,  including  laws  and  regulations  applying  to  the  collection,  use,  storage,  transfer,  disclosure  and/or 
processing  of  personal  data.  The  costs  of  compliance  with,  and  other  burdens  imposed  by,  such  laws  and 
regulations that are applicable to the operations of our customers may limit the use and adoption of our service and 
reduce  overall  demand  for  it. These  privacy  and  data  security  related  laws  and  regulations  are  evolving  and  may 
result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. In addition, 
we  are  subject  to  certain  contractual  obligations  regarding  the  collection,  use,  storage,  transfer,  disclosure  and/or 
processing  of  personal  data.  Although  we  are  working  to  comply  with  those  federal,  state  and  foreign  laws  and 
regulations,  industry  standards,  contractual  obligations  and  other  legal  obligations  that  apply  to  us,  those  laws, 
regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent 
manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, 
our  practices  or  the  features  of  our  platform.  In  addition,  some  of  our  customers  rely  on  our  authorization  under 
FedRAMP  to  help  satisfy  their  own  legal  and  regulatory  compliance  requirements  which,  in  addition  to  state  or 
international regulations, may require us to undertake additional actions and expense to ensure compliance.

We  also  expect  that  there  will  continue  to  be  new  proposed  laws,  regulations,  self-regulatory  and  industry 
standards  concerning  privacy,  data  protection  and  information  security  in  the  United  States,  the  European  Union 
and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may 
have on our business. For example, the California Consumer Privacy Act (CCPA) took effect on January 1, 2020, 
which broadly defines personal information and gives California residents expanded privacy rights and protections 
and  provides  for  civil  penalties  for  violations  and  a  private  right  of  action  for  data  breaches.  In  addition,  on 
November 3, 2020, California voters passed the California Privacy Rights Act (CPRA) into law. The CPRA will take 
substantial effect on January 1, 2023 with enforcement scheduled for July 1, 2023 and will significantly modify the 
CCPA and create a new state agency that will be vested with authority to implement and enforce the CCPA and the 
CPRA. Some observers have noted the CCPA and CPRA could mark the beginning of a trend toward more stringent 
United  States  federal  privacy  legislation,  which  could  increase  our  potential  liability  and  adversely  affect  our 
business.  Future  laws,  regulations,  standards  and  other  obligations,  and  changes  in  the  interpretation  of  existing 
laws,  regulations,  standards  and  other  obligations  could  impair  our  or  our  customers’  ability  to  collect,  use  or 
disclose information relating to consumers, which could decrease demand for our applications, restrict our business 
operations, or increase our costs and impair our ability to maintain and grow our customer base and increase our 
revenue. Such laws and regulations may require companies to implement privacy and security policies, permit users 
to exercise various data rights, inform individuals of security breaches that affect their personal data, and, in some 
cases, obtain individuals’ consent to use personal data for certain purposes. If we, or the third parties on which we 
rely, fail to comply with federal, state and international data privacy laws and regulations our ability to successfully 
operate our business and pursue our business goals could be harmed.

Any  failure  or  perceived  failure  by  us  to  comply  with  federal,  state  or  foreign  laws  or  regulations,  industry 
standards,  contractual  obligations  or  other  legal  obligations,  compliance  frameworks  that  Okta  has  contractually 
committed to comply with, or any actual or suspected privacy or security incident, even if unfounded, whether or not 
resulting in unauthorized access to, or acquisition, release or transfer of personal data or other data, may result in 
enforcement  actions  and  prosecutions,  private  litigation,  fines,  penalties  and  censure,  claims  for  damages  by 
customers  and  other  affected  individuals,  or  adverse  publicity  and  could  cause  our  customers  to  lose  trust  in  us, 
which could have an adverse effect on our reputation and business. 

We  publicly  post  our  privacy  policies  and  practices  concerning  our  processing,  use  and  disclosure  of  the 
personal  data  provided  to  us  by  our  website  visitors  and  by  our  customers,  and  other  individuals  with  whom  we 
interact.  Our  publication  of  our  privacy  policies  and  other  statements  we  publish  that  provide  promises  and 
assurances about privacy and security can subject us to potential state and federal action if they are found to be 
unfair, deceptive or misrepresentative of our practices.

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If our platform is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data 
security requirements, it may subject us or our customers to public criticism and potential legal liability. Existing and 
potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers 
to  unauthorized  processing  of  personal  data  may  create  negative  public  reactions  to  technologies,  products  and 
services such as ours. Public concerns regarding personal data processing, privacy and security may cause some 
of our customers’ end users to be less likely to visit their websites or otherwise interact with them. If enough end 
users choose not to visit our customers’ websites or otherwise interact with them, our customers could stop using 
our platform. This, in turn, may reduce the value of our service, and slow or eliminate the growth of our business, or 
cause our business to contract.

We may face particular privacy, data security and data protection risks in Europe due to stringent data 
protection  and  privacy  laws,  including  the  European  General  Data  Protection  Regulation,  and  increased 
scrutiny over EU-U.S. data transfers.

We are subject to the EU General Data Protection Regulation 2016/679 (GDPR) that took effect on May 25, 
2018,  and,  as  a  result  of  the  United  Kingdom’s  exit  from  the  European  Union,  as  of  January  1,  2021,  the  UK 
General Data Protection Regulation and Data Protection Act 2018 (UK Data Protection Laws). The GDPR and UK 
Data  Protection  Laws  have  enhanced  data  protection  obligations  for  processors  and  controllers  of  personal  data, 
including,  for  example,  expanded  disclosures  about  how  personal  data  is  to  be  used,  limitations  on  retention  of 
information,  mandatory  data  breach  notification  requirements  and  onerous  new  obligations  on  services  providers. 
Non-compliance  with  the  GDPR  can  trigger  fines  of  up  to  €20  million,  or  4%  of  total  worldwide  annual  revenue, 
whichever is higher. The UK Data Protection Laws mirror the fines under the GDPR. Given the breadth and depth of 
changes  in  data  protection  obligations,  complying  with  its  requirements  has  caused  us  to  expend  significant 
resources  and  such  expenditures  are  likely  to  continue  into  the  near  future  as  we  respond  to  new  interpretations 
and  enforcement  actions  following  the  effective  date  of  the  regulation  and  as  we  continue  to  negotiate  data 
processing agreements with our customers and business partners. Separate EU laws and regulations (and member 
states’ implementations of them) govern the protection of consumers and of electronic communications and these 
are  also  evolving.  A  draft  of  the  new  ePrivacy  Regulation  extends  the  strict  opt-in  marketing  rules  with  limited 
exceptions  to  business-to-business  communications,  alters  rules  on  third-party  cookies,  web  beacons  and  similar 
technology  and  significantly  increases  penalties.  We  cannot  yet  determine  the  impact  that  such  future  laws, 
regulations  and  standards  may  have  on  our  business.  Such  laws  and  regulations  are  often  subject  to  differing 
interpretations  and  may  be  inconsistent  among  jurisdictions.  We  may  incur  substantial  expense  in  complying  with 
any new obligations and we may be required to make significant changes in our business operations and product 
and services development, all of which may adversely affect our revenues and our business overall.

In addition, the GDPR restricts transfers outside of the EU to third countries deemed to lack adequate privacy 
protections  (such  as  the  United  States),  unless  an  appropriate  safeguard  specified  by  the  GDPR  is  implemented, 
such as the Standard Contractual Clauses (SCCs) approved by the European Commission and, until July 16, 2020, 
the Privacy Shield for EU-U.S. data transfers. On July 16, 2020, the Court of Justice of the European Union (CJEU) 
invalidated the EU-U.S. Privacy Shield Framework (Privacy Shield) under which personal data could be transferred 
from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme. While the CJEU upheld the 
adequacy  of  the  SCCs  (a  standard  form  of  contract  approved  by  the  European  Commission  as  an  adequate 
personal  data  transfer  mechanism,  and  potential  alternative  to  the  Privacy  Shield),  it  made  clear  that  reliance  on 
them  alone  may  not  necessarily  be  sufficient  in  all  circumstances.  Use  of  the  SCCs  must  now  be  assessed  on  a 
case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable 
surveillance  laws  and  rights  of  individuals  and  additional  measures  and/or  contractual  provisions  may  need  to  be 
put in place, however, the nature of these additional measures is currently uncertain. The CJEU went on to state 
that if a competent supervisory authority believes that the standard contractual clauses cannot be complied with in 
the  destination  country  and  the  required  level  of  protection  cannot  be  secured  by  other  means,  such  supervisory 
authority is under an obligation to suspend or prohibit that transfer. There are few viable alternatives to the SCCs, 
and the law in this area remains dynamic. These recent developments will require us to review and may require us 
to amend the legal mechanisms by which we make and/or receive personal data transfers to/in the United States. 

We also continue to see jurisdictions imposing data localization laws, which require personal information, or 
certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may deter 
customers from using cloud-based services such as ours, and may inhibit our ability to expand into those markets or 
prohibit us from continuing to offer services in those markets without significant additional costs.

We and our customers are at risk of enforcement actions taken by certain EU data protection authorities until 
such point in time that we may be able to ensure that all transfers of personal data to us in the United States from 

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the  EU  are  conducted  in  compliance  with  all  applicable  regulatory  obligations,  the  guidance  of  data  protection 
authorities and evolving best practices. Any investigation or charges by EU data protection authorities could have a 
negative  effect  on  our  existing  business  and  on  our  ability  to  attract  and  retain  new  customers.  We  may  find  it 
necessary  to  establish  systems  to  maintain  EU  personal  data  within  in  the  EU,  which  may  involve  substantial 
expense  and  may  cause  us  to  need  to  divert  resources  from  other  aspects  of  our  business,  all  of  which  may 
adversely affect our business.

We function as a HIPAA Business Associate for certain of our customers and, as such, are subject to 
strict privacy and data security requirements. If we fail to comply with any of these requirements, we could 
be  subject  to  significant  liability,  all  of  which  can  adversely  affect  our  business  as  well  as  our  ability  to 
attract and retain new customers. 

The  Health  Insurance  Portability  and  Accountability  Act  of  1996,  as  amended  by  the  Health  Information 
Technology  for  Economic  and  Clinical  Health Act  (HITECH),  and  their  respective  implementing  regulations  under 
HIPAA, imposes specified requirements relating to the privacy, security and transmission of individually identifiable 
health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business 
associates. We function as a business associate for certain of our customers that are HIPAA covered entities and 
service  providers,  and  in  that  context  we  are  regulated  as  a  business  associate  for  the  purposes  of  HIPAA.  The 
HIPAA-covered entities and service providers to which we provide services require us to enter into HIPAA-compliant 
business  associate  agreements  with  them. These  agreements  impose  stringent  data  security  obligations  on  us.  If 
we  are  unable  to  comply  with  our  obligations  as  a  HIPAA  business  associate  or  under  the  terms  of  the  business 
associate  agreements  we  have  executed,  we  could  face  substantial  civil  and  even  criminal  liability  as  well  as 
contractual liability under the applicable business associate agreement, all of which can have an adverse impact on 
our business and generate negative publicity, which, in turn, can have an adverse impact on our ability to attract and 
retain  new  customers.  Modifying  the  already  stringent  penalty  structure  that  was  present  under  HIPAA  prior  to 
HITECH, HITECH created four new tiers of civil monetary penalties and gave state attorneys general new authority 
to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ 
fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and 
security  of  health  information  in  certain  circumstances,  many  of  which  differ  from  HIPAA  and  each  other  in 
significant ways and may not have the same effect.

In  addition,  the  U.S.  Department  of  Health  &  Human  Services  recently  proposed  additional  draft  HIPAA 
guidance which is subject to public comment before being finalized. We will continue to monitor whether the final 
guidance  may  obligate  us  to  change  our  practices.  Significant  changes  to  HIPAA,  including  interpretation  and 
application of HIPAA, could negatively impact our business.

We  provide  service  level  commitments  under  our  customer  contracts.  If  we  fail  to  meet  these 
contractual  commitments,  we  could  be  obligated  to  provide  credits  for  future  service,  or  face  contract 
termination  with  refunds  of  prepaid  amounts  related  to  unused  subscriptions,  which  could  harm  our 
business, results of operations and financial condition. 

Our customer agreements contain service level commitments, under which we guarantee specified availability 
of  our  platform.  Any  failure  of  or  disruption  to  our  infrastructure  could  make  our  platform  unavailable  to  our 
customers.  If  we  are  unable  to  meet  the  stated  service  level  commitments  to  our  customers  or  suffer  extended 
periods  of  unavailability  of  our  platform,  we  may  be  contractually  obligated  to  provide  affected  customers  with 
service  credits  for  future  subscriptions.  Our  revenue,  other  results  of  operations  and  financial  condition  could  be 
harmed if we suffer unscheduled downtime that exceeds the service level commitments under our agreements with 
our customers, and any extended service outages could adversely affect our business and reputation as customers 
may elect not to renew and we could lose future sales.

32

If  we  are  unable  to  ensure  that  our  products  integrate  or  interoperate  with  a  variety  of  operating 
systems and software applications that are developed by others, our platform may become less competitive 
and our results of operations may be harmed. 

The  number  of  people  who  access  the  internet  through  mobile  devices  and  access  cloud-based  software 
applications  through  mobile  devices,  including  smartphones  and  handheld  tablets  or  laptop  computers,  has 
increased  significantly  in  the  past  several  years  and  is  expected  to  continue  to  increase.  While  we  have  created 
mobile applications and mobile versions of our products, if these mobile applications and products do not perform 
well,  our  business  may  suffer.  We  are  also  dependent  on  third-party  application  stores  that  may  prevent  us  from 
timely updating our current products or uploading new products. In addition, our products interoperate with servers, 
mobile  devices  and  software  applications  predominantly  through  the  use  of  protocols,  many  of  which  are  created 
and maintained by third parties. As a result, we depend on the interoperability of our products with such third-party 
services, mobile devices and mobile operating systems, as well as cloud-enabled hardware, software, networking, 
browsers,  database  technologies  and  protocols  that  we  do  not  control.  Any  changes  in  such  technologies  that 
degrade the functionality of our products or give preferential treatment to competitive services could adversely affect 
adoption and usage of our platform. Also, we may not be successful in developing or maintaining relationships with 
key participants in the mobile industry or in developing products that operate effectively with a range of operating 
systems,  networks,  devices,  browsers,  protocols  and  standards.  In  addition,  we  may  face  different  fraud,  security 
and  regulatory  risks  from  transactions  sent  from  mobile  devices  than  we  do  from  personal  computers.  If  we  are 
unable to effectively anticipate and manage these risks, or if it is difficult for our customers to access and use our 
platform, our business, results of operations and financial condition may be harmed.

Our  success  also  depends  on  the  willingness  of  third-party  developers  and  technology  providers  to  build 
applications  and  provide  integrations  that  are  complementary  to  our  service.  Without  the  development  of  these 
applications  and  integrations,  both  current  and  potential  customers  may  not  find  our  service  sufficiently  attractive, 
and our business, results of operations and financial condition could suffer.

Interruptions  or  delays  in  the  services  provided  by  third-party  data  centers  or  internet  service 

providers could impair the delivery of our platform and our business could suffer. 

We host our platform using AWS data centers, a provider of cloud infrastructure services. All of our products 
use  resources  operated  by  us  in  these  locations.  Our  operations  depend  on  protecting  the  virtual  cloud 
infrastructure hosted in AWS by maintaining its configuration, architecture and interconnection specifications, as well 
as  the  information  stored  in  these  virtual  data  centers  and  which  third-party  internet  service  providers  transmit. 
Although we have disaster recovery plans that use multiple AWS locations, any incident affecting their infrastructure 
that may be caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, unauthorized 
intrusion,  computer  viruses  and  disabling  devices,  natural  disasters,  war,  criminal  act,  military  actions,  terrorist 
attacks and other similar events beyond our control could negatively affect our platform. A prolonged AWS service 
disruption  affecting  our  platform  for  any  of  the  foregoing  reasons  could  damage  our  reputation  with  current  and 
potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also 
incur  significant  costs  for  using  alternative  equipment  or  taking  other  actions  in  preparation  for,  or  in  reaction  to, 
events that damage the AWS services we use.

AWS  enables  us  to  order  and  reserve  server  capacity  in  varying  amounts  and  sizes  distributed  across 
multiple regions. AWS provides us with computing and storage capacity pursuant to an agreement that continues 
until  terminated  by  either  party. AWS  may  terminate  the  agreement  by  providing  30  days  prior  written  notice  and 
may, in some cases, terminate the agreement immediately for cause upon notice.

Our platform is accessed by a large number of customers, often at the same time. As we continue to expand 
the number of our customers and products available to our customers, we may not be able to scale our technology 
to  accommodate  the  increased  capacity  requirements,  which  may  result  in  interruptions  or  delays  in  service.  In 
addition,  the  failure  of  AWS  data  centers,  or  third-party  internet  service  providers,  or  other  third-party  service 
providers  whose  services  are  integrated  with  our  platform,  to  meet  our  capacity  requirements  could  result  in 
interruptions or delays in access to our platform or impede our ability to scale our operations. In the event that our 
AWS  service  agreements  are  terminated,  or  there  is  a  lapse  of  service,  interruption  of  internet  service  provider 
connectivity  or  damage  to  such  facilities,  we  could  experience  interruptions  in  access  to  our  platform  as  well  as 
delays and additional expense in arranging new facilities and services.

33

Our  success  depends,  in  part,  on  the  integrity  and  scalability  of  our  systems  and  infrastructures. 
System  interruption  and  the  lack  of  integration,  redundancy  and  scalability  in  these  systems  and 
infrastructures may harm our business, results of operations and financial condition. 

Our  success  depends,  in  part,  on  our  ability  to  maintain  the  integrity  of  our  systems  and  infrastructure, 
including websites, information and related systems. System interruption and a lack of integration and redundancy 
in our information systems and infrastructure may adversely affect our ability to operate websites, process and fulfill 
transactions,  respond  to  customer  inquiries  and  generally  maintain  cost-efficient  operations.  We  may  experience 
occasional  system  interruptions  that  make  some  or  all  systems  or  data  unavailable  or  prevent  us  from  efficiently 
providing  access  to  our  platform.  We  also  rely  on  third-party  computer  systems,  broadband  and  other 
communications systems and service providers in connection with providing access to our platform generally. Any 
interruptions, outages or delays in our systems and infrastructure, our business and/or third parties, or deterioration 
in the performance of these systems and infrastructure, could impair our ability to provide access to our platform. 
Fire, flood, power loss, telecommunications failure, hurricanes, tornadoes, earthquakes, other natural disasters, acts 
of  war  or  terrorism  and  similar  events  or  disruptions  may  damage  or  interrupt  computer,  broadband  or  other 
communications  systems  and  infrastructure  at  any  time.  Any  of  these  events  could  cause  system  interruption, 
delays and loss of critical data, and could prevent us from providing access to our platform. While we have backup 
systems for certain aspects of these operations, disaster recovery planning by its nature cannot be sufficient for all 
eventualities.  In  addition,  we  may  not  have  adequate  insurance  coverage  to  compensate  for  losses  from  a  major 
interruption.  If  any  of  these  events  were  to  occur,  it  could  harm  our  business,  results  of  operations  and  financial 
condition.

We rely on software and services from other parties. Defects in or the loss of access to software or 

services from third parties could increase our costs and adversely affect the quality of our products. 

We  rely  on  technologies  from  third  parties  to  operate  critical  functions  of  our  business,  including  cloud 
infrastructure services and customer relationship management services. Our business would be disrupted if any of 
the third-party software or services we use, or functional equivalents, were unavailable due to extended outages or 
interruptions or because they are no longer available on commercially reasonable terms or prices. In each case, we 
would be required to either seek licenses to software or services from other parties and redesign our products to 
function with such software or services or develop substitutes ourselves, which would result in increased costs and 
could result in delays in our product launches and the release of new product offerings until equivalent technology 
can be identified, licensed or developed, and integrated into our products. Furthermore, we might be forced to limit 
the  features  available  in  our  current  or  future  products.  These  delays  and  feature  limitations,  if  they  occur,  could 
harm our business, results of operations and financial condition.

Real  or  perceived  errors,  failures,  vulnerabilities  or  bugs  in  our  products,  including  deployment 

complexity, could harm our business and results of operations.

Errors, failures, vulnerabilities or bugs may occur in our products, especially when updates are deployed or 
new products are rolled out. Our platform is often used in connection with large-scale computing environments with 
different  operating  systems,  system  management  software,  equipment  and  networking  configurations,  which  may 
cause  errors  or  failures  of  products,  or  other  aspects  of  the  computing  environment  into  which  our  products  are 
deployed.  In  addition,  deployment  of  our  products  into  complicated,  large-scale  computing  environments  may 
expose errors, failures, vulnerabilities or bugs in our products. Any such errors, failures, vulnerabilities or bugs may 
not be found until after they are deployed to our customers. Real or perceived errors, failures, vulnerabilities or bugs 
in our products, or delays in or difficulties implementing our product releases, could result in negative publicity, loss 
of  customer  data,  loss  of  or  delay  in  market  acceptance  of  our  products,  a  decrease  in  customer  satisfaction  or 
adoption rates, loss of competitive position, or claims by customers for losses sustained by them, all of which could 
harm our business, results of operations and financial condition.

34

If we fail to adequately protect our proprietary rights, our competitive position could be impaired and 

we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights. 

Our success is dependent, in part, upon protecting our proprietary information and technology. We rely on a 
combination  of  patents,  copyrights,  trademarks,  service  marks,  trade  secret  laws  and  contractual  restrictions  to 
establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be 
inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do 
not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized 
third parties to copy our products and use information that we regard as proprietary to create products that compete 
with  ours.  Some  contract  provisions  protecting  against  unauthorized  use,  copying,  transfer  and  disclosure  of  our 
products  may  be  unenforceable  under  the  laws  of  certain  jurisdictions  and  foreign  countries.  Further,  the  laws  of 
some  countries  do  not  protect  proprietary  rights  to  the  same  extent  as  the  laws  of  the  United  States,  and 
mechanisms  for  enforcement  of  intellectual  property  rights  in  some  foreign  countries  may  be  inadequate.  To  the 
extent  we  expand  our  international  activities,  our  exposure  to  unauthorized  copying  and  use  of  our  products  and 
proprietary  information  may  increase. Accordingly,  despite  our  efforts,  we  may  be  unable  to  prevent  third  parties 
from infringing upon or misappropriating our technology and intellectual property.

We  rely  in  part  on  trade  secrets,  proprietary  know-how  and  other  confidential  information  to  maintain  our 
competitive  position.  Although  we  enter  into  confidentiality  and  invention  assignment  agreements  with  our 
employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic 
relationships  and  business  alliances,  no  assurance  can  be  given  that  these  agreements  will  be  effective  in 
controlling access to and distribution of our products and proprietary information. Further, these agreements do not 
prevent our competitors from independently developing technologies that are substantially equivalent or superior to 
our products.

To protect our intellectual property rights, we may be required to spend significant resources to monitor and 
protect  these  rights.  Litigation  may  be  necessary  in  the  future  to  enforce  our  intellectual  property  rights  and  to 
protect our trade secrets. Such litigation could be costly, time consuming and distracting to management and could 
result  in  the  impairment  or  loss  of  portions  of  our  intellectual  property.  Furthermore,  our  efforts  to  enforce  our 
intellectual  property  rights  may  be  met  with  defenses,  counterclaims  and  countersuits  attacking  the  validity  and 
enforceability  of  our  intellectual  property  rights.  Our  inability  to  protect  our  proprietary  technology  against 
unauthorized  copying  or  use,  as  well  as  any  costly  litigation  or  diversion  of  our  management’s  attention  and 
resources, could delay further sales or the implementation of our products, impair the functionality of our products, 
delay introductions of new products, result in our substituting inferior or more costly technologies into our products, 
or  injure  our  reputation.  In  addition,  we  may  be  required  to  license  additional  technology  from  third  parties  to 
develop  and  market  new  products,  and  we  cannot  ensure  that  we  can  license  that  technology  on  commercially 
reasonable terms or at all, and our inability to license this technology could harm our ability to compete.

Our  results  of  operations  may  be  harmed  if  we  are  subject  to  an  infringement  claim  or  a  claim  that 

results in a significant damage award.

There  is  considerable  patent  and  other  intellectual  property  development  activity  in  our  industry,  and  we 
expect that software companies will increasingly be subject to infringement claims as the number of products and 
competitors grows and the functionality of products in different industry segments overlaps. In addition, the patent 
portfolios  of  many  of  our  competitors  are  larger  than  ours,  and  this  disparity  may  increase  the  risk  that  our 
competitors may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or 
settle through patent cross-licenses. Other companies have claimed in the past, and may claim in the future, that we 
infringe upon their intellectual property rights. A claim may also be made relating to technology that we acquire or 
license from third parties. Further, we may be unaware of the intellectual property rights of others that may cover 
some or all of our technology.

Any claim of infringement, regardless of its merit or our defenses, could:

•

require  costly  litigation  to  resolve  and/or  the  payment  of  substantial  damages,  ongoing 

royalty payments or other amounts to settle such disputes;

•

require significant management time and attention;

•
available at all;

cause us to enter into unfavorable royalty or license agreements, if such arrangements are 

35

•

require us to discontinue the sale of some or all of our products, remove or reduce features 

or functionality of our products or comply with other unfavorable terms;

•

•

require us to indemnify our customers or third-party service providers; and/or

require us to expend additional development resources to redesign our products.

Any one or more of the above could harm our business, results of operations and financial condition.

We  use  open  source  software  in  our  products,  which  could  negatively  affect  our  ability  to  offer  our 

products and subject us to litigation or other actions.

We  use  open  source  software  in  our  products  and  expect  to  use  more  open  source  software  in  the  future. 
From time to time, there have been claims challenging the ownership of open source software against companies 
that incorporate open source software into their products. However, the terms of many open source licenses have 
not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could 
impose unanticipated conditions or restrictions on our ability to commercialize our products. As a result, we could be 
subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be 
costly for us to defend, have a negative effect on our results of operations and financial condition or require us to 
devote additional research and development resources to change our products. In addition, if we were to combine 
our  proprietary  software  products  with  open  source  software  in  a  certain  manner,  we  could,  under  certain  of  the 
open source licenses, be required to release the source code of our proprietary software to the public. This would 
allow  our  competitors  to  create  similar  products  with  less  development  effort  and  time.  If  we  inappropriately  use 
open source software, or if the license terms for open source software that we use change, we may be required to 
re-engineer  our  products,  incur  additional  costs,  discontinue  the  sale  of  some  or  all  of  our  products  or  take  other 
remedial actions.

In addition to risks related to license requirements, usage of open source software can lead to greater risks 
than  use  of  third-party  commercial  software,  as  open  source  licensors  generally  do  not  provide  warranties  or 
assurance of title or controls on origin of the software. In addition, many of the risks associated with usage of open 
source  software,  such  as  the  lack  of  warranties  or  assurances  of  title,  cannot  be  eliminated,  and  could,  if  not 
properly  addressed,  negatively  affect  our  business.  We  have  established  processes  to  help  alleviate  these  risks, 
including a review process for screening requests from our development organizations for the use of open source 
software, but we cannot be sure that all of our use of open source software is in a manner that is consistent with our 
current policies and procedures, or will not subject us to liability.

Indemnity  provisions  in  various  agreements  potentially  expose  us  to  substantial  liability  for 

intellectual property infringement and other losses. 

Our agreements with customers and other third parties may include indemnification or other provisions under 
which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of 
intellectual  property  infringement,  damages  caused  by  us  to  property  or  persons,  or  other  liabilities  relating  to  or 
arising  from  the  use  of  our  platform  or  other  acts  or  omissions.  The  term  of  these  contractual  provisions  often 
survives  termination  or  expiration  of  the  applicable  agreement.  As  we  continue  to  grow,  the  possibility  of 
infringement  claims  and  other  intellectual  property  rights  claims  against  us  may  increase.  For  any  intellectual 
property rights indemnification claim against us or our customers, we will incur significant legal expenses and may 
have to pay damages, settlement fees, license fees and/or stop using technology found to be in violation of the third 
party’s rights. Large indemnity payments could harm our business, results of operations and financial condition. We 
may  also  have  to  seek  a  license  for  the  infringing  or  allegedly  infringing  technology.  Such  license  may  not  be 
available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to 
restrict our business activities and limit our ability to deliver certain products. As a result, we may also be required to 
develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to 
alter our platform, which could negatively affect our business.

From  time  to  time,  customers  require  us  to  indemnify  or  otherwise  be  liable  to  them  for  breach  of 
confidentiality, violation of applicable law or failure to implement adequate security measures with respect to their 
data  stored,  transmitted,  or  accessed  using  our  platform. Although  we  normally  contractually  limit  our  liability  with 
respect to such obligations, the existence of such a dispute may have adverse effects on our customer relationship 
and reputation and we may still incur substantial liability related to them.

36

Any  assertions  by  a  third  party,  whether  or  not  successful,  with  respect  to  such  indemnification  obligations 
could  subject  us  to  costly  and  time-consuming  litigation,  expensive  remediation  and  licenses,  divert  management 
attention  and  financial  resources,  harm  our  relationship  with  that  customer  and  other  current  and  prospective 
customers,  reduce  demand  for  our  platform,  and  harm  our  brand,  business,  results  of  operations  and  financial 
condition.

The proposed acquisition of Auth0 may cause a disruption in our business.

Risks Related to the Acquisition of Auth0

The  proposed  acquisition  (the  Acquisition)  of  Auth0  could  cause  disruptions  to  our  business  or  business 
relationships, which could have an adverse impact on results of operations. Parties with which we have business 
relationships  may  experience  uncertainty  as  to  the  future  of  such  relationships  and  may  delay  or  defer  certain 
business  decisions,  seek  alternative  relationships  with  third  parties  or  seek  to  alter  their  present  business 
relationships  with  us.  Parties  with  whom  we  otherwise  may  have  sought  to  establish  business  relationships  may 
seek alternative relationships with third parties.

The  pursuit  of  the  Acquisition,  the  preparation  for  the  transition  and  the  integration  of  Auth0  may  place  a 
significant burden on our management and internal resources. The diversion of management’s attention away from 
day-to-day  business  concerns  and  any  difficulties  encountered  in  the  transition  and  integration  process  could 
adversely affect our financial results.

We  have  incurred  and  expect  to  continue  to  incur  significant  costs,  expenses  and  fees  for  professional 
services and other transaction costs in connection with the Acquisition. We may also incur unanticipated costs in the 
integration  of  Auth0’s  business  with  our  business.  The  substantial  majority  of  these  costs  will  be  non-recurring 
expenses  relating  to  the  Acquisition,  and  many  of  these  costs  are  payable  regardless  of  whether  or  not  the 
Acquisition is consummated. We also could be subject to litigation related to the proposed Acquisition, which could 
result in significant costs and expenses.

Failure  to  complete  the  Acquisition  in  a  timely  manner  or  at  all  could  negatively  impact  the  market 
price of our Class A common stock, as well as our future business and our financial condition, results of 
operations and cash flows.

We  currently  anticipate  the  Acquisition  will  be  completed  in  the  second  quarter  of  fiscal  2022,  the  quarter 
ending  July  31,  2021,  but  we  cannot  be  certain  when  or  if  the  conditions  for  the Acquisition  will  be  satisfied  or  (if 
permissible under applicable law) waived. The Acquisition cannot be completed until certain customary conditions to 
closing  are  satisfied  or  (if  permissible  under  applicable  law)  waived.  Our  obligation  to  complete  the Acquisition  is 
also subject to, among other conditions, the absence of regulatory authorities requiring certain actions on our part. 

The satisfaction of the required conditions could delay the completion of the Acquisition for a significant period 
of  time  or  prevent  it  from  occurring.  Further,  there  can  be  no  assurance  that  the  conditions  to  the  closing  of  the 
Acquisition will be satisfied or waived or that the Acquisition will be completed.

If  the  Acquisition  is  not  completed  in  a  timely  manner  or  at  all,  our  ongoing  business  may  be  adversely 

affected as follows:

•

we may experience negative reactions from the financial markets, and our stock price could 
decline  to  the  extent  that  the  current  market  price  reflects  an  assumption  that  the  transaction  will  be 
completed;

•
parties;

we may experience negative reactions from employees, customers, suppliers or other third 

•

management’s focus may have been diverted from pursuing other opportunities that could 

have been beneficial to us; and

•

our costs of pursuing the Acquisition may be higher than anticipated.

If the Acquisition is not consummated, there can be no assurance that these risks will not materialize and will 

not materially adversely affect our stock price, business, financial condition, results of operations or cash flows.

37

We  may  not  realize  potential  benefits  from  the  Acquisition  because  of  difficulties  related  to 

integration, the achievement of synergies, and other challenges.

We and Auth0 have operated and, until completion of the Acquisition, will continue to operate, independently, 
and there can be no assurances that our businesses can be combined in a manner that allows for the achievement 
of substantial benefits. Any integration process may require significant time and resources, and we may not be able 
to  manage  the  process  successfully  as  our  ability  to  acquire  and  integrate  larger  or  more  complex  companies, 
products  or  technologies  in  a  successful  manner  is  unproven.  If  we  are  not  able  to  successfully  integrate Auth0’s 
businesses  with  ours  or  pursue  our  customer  and  product  strategy  successfully,  the  anticipated  benefits  of  the 
Acquisition  may  not  be  realized  fully  or  may  take  longer  than  expected  to  be  realized.  Further,  it  is  possible  that 
there could be a loss of our and/or Auth0’s key employees and customers, disruption of either company’s or both 
companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post‑completion 
process  that  takes  longer  than  originally  anticipated.  Specifically,  the  following  issues,  among  others,  must  be 
addressed in combining Auth0’s operations with ours in order to realize the anticipated benefits of the Acquisition so 
the combined company performs as the parties hope:

•

combining the companies’ corporate functions;

•

combining Auth0’s business with our business in a manner that permits us to achieve the 
synergies  anticipated  to  result  from  the Acquisition,  the  failure  of  which  would  result  in  the  anticipated 
benefits of the Acquisition not being realized in the timeframe currently anticipated or at all;

•

maintaining existing agreements with customers, distributors, providers, talent and vendors 
and avoiding delays in entering into new agreements with prospective customers, distributors, providers, 
talent and vendors;

•

determining  whether  and  how  to  address  possible  differences  in  corporate  cultures  and 

management philosophies;

•

•

•

integrating the companies’ administrative and information technology infrastructure;

developing products and technology that allow value to be unlocked in the future;

evaluating  and  forecasting  the  financial  impact  of  the  Acquisition  transaction,  including 

accounting charges; and

•

effecting  potential  actions  that  may  be  required  in  connection  with  obtaining  regulatory 

approvals.

In addition, at times the attention of certain members of our management and resources may be focused on 
completion  of  the Acquisition  and  integration  planning  of  the  businesses  of  the  two  companies  and  diverted  from 
day‑to‑day  business  operations,  which  may  disrupt  our  ongoing  business  and  the  business  of  the  combined 
company.

We may incur significant, non‑recurring costs in connection with the Acquisition and integrating the operations 
of Okta and Auth0, including costs to maintain employee morale and to retain key employees. Management cannot 
ensure that the elimination of duplicative costs or the realization of other efficiencies will offset the transaction and 
integration costs in the long term or at all.

Purchase price accounting in connection with our Acquisition requires estimates that may be subject 
to  change  and  could  impact  our  consolidated  financial  statements  and  future  results  of  operations  and 
financial position.

Pursuant to the acquisition method of accounting, the purchase price we will pay for Auth0 will be allocated to 
the underlying Auth0 tangible and intangible assets acquired and liabilities assumed based on their respective fair 
market  values  with  any  excess  purchase  price  allocated  to  goodwill.  The  acquisition  method  of  accounting  is 
dependent upon certain valuations and other studies that are preliminary. Accordingly, the purchase price allocation 
as of the Acquisition date will be preliminary. We currently anticipate that all the information needed to identify and 
measure  values  assigned  to  the  assets  acquired  and  liabilities  assumed  will  be  obtained  and  finalized  during  the 
one‑year  measurement  period  following  the  date  of  completion  of  the  Acquisition.  Differences  between  these 
preliminary estimates and the final acquisition accounting may occur, and these differences could have a material 
impact  on  the  consolidated  financial  statements  and  the  combined  company’s  future  results  of  operations  and 
financial position.

38

Auth0 may have liabilities that are not known to us.

Auth0 may have liabilities that we failed, or were unable, to discover, or that we underestimated, in the course 
of performing our due diligence investigations of Auth0’s business and we, as the successor owner of such acquired 
company, might be responsible for those liabilities. Such potential liabilities could include employment-, retirement- 
or severance-related obligations under applicable law or other benefits arrangements, legal or regulatory claims, tax 
liabilities, warranty or similar liabilities to customers, product liabilities, claims related to infringement of third-party 
intellectual property rights, and claims by or amounts owed to vendors or other third parties. We cannot assure you 
that  the  indemnification  available  to  us  under  the  Merger Agreement  with  respect  to  the Acquisition  in  connection 
with such agreement will be sufficient in amount, scope or duration to fully offset the possible liabilities associated 
with  Auth0’s  business  or  property  that  we  will  assume  upon  consummation  of  the  Acquisition.  We  may  learn 
additional information about Auth0 that materially adversely affects us, such as unknown or contingent liabilities and 
liabilities related to compliance with applicable laws. Any such liabilities, individually or in the aggregate, could have 
a material adverse effect on our business, results of operations and financial condition.

While  the  Acquisition  is  pending,  we  and  Auth0  will  be  subject  to  business  uncertainties  that  could 

adversely affect our respective businesses, results of operations and financial conditions.

Our  success  following  the  announcement  of  the  Acquisition  will  depend  in  part  upon  the  ability  of  us  and 
Auth0  to  maintain  our  respective  business  relationships.  Uncertainty  about  the  effect  of  the  Acquisition  on 
customers,  suppliers,  employees  and  other  constituencies  may  have  a  material  adverse  effect  on  us  and Auth0. 
Customers,  suppliers  and  others  who  deal  with  us  or  Auth0  may  delay  or  defer  business  decisions,  decide  to 
terminate,  modify  or  renegotiate  their  relationships  or  take  other  actions  as  a  result  of  the Acquisition  that  could 
negatively affect the revenues, earnings and cash flows of our company or Auth0. If we are unable to maintain these 
business and operational relationships, our financial position, results of operations or cash flows could be materially 
affected.

Risks Related to Legal, Accounting and Tax Matters

Because we generally recognize revenue from our subscriptions and support services over the term 
of  the  relevant  service  period,  a  decrease  in  sales  during  a  reporting  period  may  not  be  immediately 
reflected in our results of operations for that period. 

We  generally  recognize  revenue  from  subscriptions  and  related  support  services  revenue  ratably  over  the 
relevant service period. Net new revenue from new subscriptions, upsells and renewals entered into during a period 
can  generally  be  expected  to  generate  revenue  for  the  duration  of  the  service  period.  As  a  result,  most  of  the 
revenue we report in each period is derived from the recognition of deferred revenue relating to subscriptions and 
support  services  contracts  entered  into  during  previous  periods.  Consequently,  a  decrease  in  new  or  renewed 
subscriptions in any single reporting period will have a limited impact on our revenue for that period. In addition, our 
ability to adjust our cost structure in the event of a decrease in new or renewed subscriptions may be limited.

Further, a decline in new subscriptions or renewals in a given period may not be fully reflected in our revenue 
for that period, but will negatively affect our revenue in future periods. Accordingly, the effect of significant downturns 
in sales and market acceptance of our services, and changes in our rate of renewals, may not be fully reflected in 
our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase 
our  revenue  through  additional  sales  in  any  period,  as  revenue  from  new  customers  is  generally  recognized  over 
the  applicable  service  period. Additionally,  due  to  the  complexity  of  certain  of  our  customer  contracts,  the  actual 
revenue recognition treatment required under Accounting Standards Update No. 2014-09, Revenue from Contracts 
with Customers (Topic 606), or ASC 606, will depend on contract-specific terms and may result in greater variability 
in revenue from period to period.

In  addition,  a  decrease  in  new  subscriptions  or  renewals  in  a  reporting  period  may  not  have  an  immediate 

impact on billings for that period.

39

We may face exposure to foreign currency exchange rate fluctuations.

Today,  a  vast  majority  of  our  customer  contracts  are  denominated  in  U.S.  dollars.  Over  time,  however,  an 
increasing portion of our international customer contracts may be denominated in local currencies. In addition, the 
majority of our international costs are denominated in local currencies. As a result, fluctuations in the value of the 
U.S. dollar and foreign currencies may affect our results of operations when translated into U.S. dollars. We do not 
currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. However, in the future, 
we  may  use  derivative  instruments,  such  as  foreign  currency  forward  and  option  contracts,  to  hedge  certain 
exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any 
or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the 
limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we 
are unable to structure effective hedges with such instruments.

We are subject to anti-corruption, anti-bribery and similar laws, and non-compliance with such laws 

can subject us to criminal penalties or significant fines and harm our business and reputation. 

We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices 
Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, 
the USA PATRIOT Act, the U.K. Bribery Act 2010 and other anti-corruption, anti-bribery and anti-money laundering 
laws  in  countries  in  which  we  conduct  activities.  Anti-corruption  and  anti-bribery  laws  have  been  enforced 
aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents 
from  promising,  authorizing,  making  or  offering  improper  payments  or  other  benefits  to  government  officials  and 
others in the private sector. As we increase our international sales and business, our risks under these laws may 
increase.

In addition, we use channel partners to sell our products and conduct business on our behalf abroad. We or 
such partners may have direct or indirect interactions with officials and employees of government agencies or state-
owned or affiliated entities and under certain circumstances we could be held liable for the corrupt or other illegal 
activities of such partners and our employees, representatives, contractors, partners and agents, even if we do not 
explicitly authorize such activities. We have implemented an anti-corruption compliance program but cannot ensure 
that  all  our  employees  and  agents,  as  well  as  those  companies  to  which  we  outsource  certain  of  our  business 
operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held 
responsible.

Noncompliance  with  the  FCPA,  other  applicable  anti-corruption  laws,  or  anti-money  laundering  laws  could 
subject us to investigations, whistleblower complaints, sanctions, settlements, prosecution, and other enforcement 
actions. Any violation of these laws could result in disgorgement of profits, significant fines, damages, other civil and 
criminal  penalties  or  injunctions,  adverse  media  coverage,  loss  of  export  privileges,  severe  criminal  or  civil 
sanctions, suspension or debarment from U.S. government contracts and other consequences, any of which could 
have a material adverse effect on our reputation, business, results of operations and financial condition.

We are subject to governmental export controls and economic sanctions laws that could impair our 
ability  to  compete  in  international  markets  and  subject  us  to  liability  if  we  are  not  in  full  compliance  with 
applicable laws.

Our business activities are subject to various restrictions under U.S. export controls and trade and economic 
sanctions  laws,  including  the  U.S.  Commerce  Department’s  Export Administration  Regulations  and  economic  and 
trade  sanctions  regulations  maintained  by  the  U.S.  Treasury  Department’s  Office  of  Foreign Assets  Control.  The 
U.S.  export  control  laws  and  U.S.  economic  sanctions  laws  include  prohibitions  on  the  sale  or  supply  of  certain 
products  and  services  to  U.S.  embargoed  or  sanctioned  countries,  governments,  persons  and  entities  and  also 
require authorization for the export of encryption items. In addition, various countries regulate the import of certain 
encryption technology, including through import and licensing requirements, and have enacted laws that could limit 
our ability to distribute our service or could limit our customers’ ability to implement our service in those countries. If 
we  fail  to  comply  with  these  laws  and  regulations,  we  and  certain  of  our  employees  could  be  subject  to  civil  or 
criminal penalties, including the possible loss of export privileges and monetary penalties. Obtaining the necessary 
authorizations,  including  any  required  license,  for  a  particular  transaction  may  be  time-consuming,  is  not 
guaranteed, and may result in the delay or loss of sales opportunities. Although we take precautions to prevent our 
products from being provided in violation of such laws, our products may have been in the past, and could in the 
future  be,  provided  inadvertently  in  violation  of  such  laws,  despite  the  precautions  we  take.  This  could  result  in 
negative consequences to us, including government investigations, penalties and harm to our reputation.

40

Our international operations may give rise to potentially adverse tax consequences. 

We  are  expanding  our  international  operations  and  staff  to  better  support  our  growth  into  the  international 
markets.  Our  corporate  structure  and  associated  transfer  pricing  policies  anticipate  future  growth  into  the 
international markets. The amount of taxes we pay in different jurisdictions may depend on the application of the tax 
laws of the various jurisdictions, including the United States, to our international business activities, changes in tax 
rates,  new  or  revised  tax  laws  or  interpretations  of  existing  tax  laws  and  policies  and  our  ability  to  operate  our 
business  in  a  manner  consistent  with  our  corporate  structure  and  intercompany  arrangements.  The  taxing 
authorities  of  the  jurisdictions  in  which  we  operate  may  challenge  our  methodologies  for  pricing  intercompany 
transactions,  which  are  generally  required  to  be  computed  on  an  arm’s-length  basis  pursuant  to  intercompany 
arrangements  or  disagree  with  our  determinations  as  to  the  income  and  expenses  attributable  to  specific 
jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be 
required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective 
tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements could fail to 
reflect adequate reserves to cover such a contingency.

Changes in tax laws or regulations in the various tax jurisdictions we are subject to that are applied 

adversely to us or our customers could increase the costs of our products and harm our business. 

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any 
time.  Those  enactments  could  harm  our  domestic  and  international  business  operations,  and  our  business  and 
financial  performance.  Further,  existing  tax  laws,  statutes,  rules,  regulations  or  ordinances  could  be  interpreted, 
changed, modified or applied adversely to us. These events could require us or our customers to pay additional tax 
amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines and/or penalties 
and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing 
and  potential  future  customers  may  elect  not  to  purchase  our  products  in  the  future. Additionally,  new,  changed, 
modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and 
other costs, as well as the costs of our products. Further, these events could decrease the capital we have available 
to operate our business. Any or all of these events could harm our business and financial performance.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with 
increasingly  complex  tax  laws,  the  application  of  which  can  be  uncertain.  The  amount  of  taxes  we  pay  in  these 
jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased 
tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could harm our liquidity 
and results of operations. In addition, the authorities in these jurisdictions could review our tax returns and impose 
additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to 
us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which 
could harm us and our results of operations.

Our business may be subject to additional obligations to collect and remit sales tax and other taxes, 
and  we  may  be  subject  to  tax  liability  for  past  sales.  Any  successful  action  by  state,  foreign  or  other 
authorities to collect additional or past sales tax could harm our business. 

States and some local taxing jurisdictions have differing rules and regulations governing sales and use taxes, 
and these rules and regulations are subject to varying interpretations that may change over time. In particular, the 
applicability of sales taxes to our platform in various jurisdictions is unclear. It is possible that we could face sales 
tax audits and that our liability for these taxes could exceed our estimates as state tax authorities could still assert 
that  we  are  obligated  to  collect  additional  amounts  as  taxes  from  our  customers  and  remit  those  taxes  to  those 
authorities. We could also be subject to audits in states and international jurisdictions for which we have not accrued 
tax liabilities. A successful assertion that we should be collecting additional sales or other taxes on our service in 
jurisdictions where we have not historically done so and do not accrue for sales taxes could result in substantial tax 
liabilities  for  past  sales,  discourage  customers  from  purchasing  our  products  or  otherwise  harm  our  business, 
results of operations and financial condition.

We  file  sales  tax  returns  in  certain  states  within  the  United  States  as  required  by  law  and  certain  customer 
contracts for a portion of the products that we provide. We do not collect sales or other similar taxes in other states 
and  many  of  such  states  do  not  apply  sales  or  similar  taxes  to  the  vast  majority  of  the  products  that  we  provide. 
However, one or more states or foreign authorities could seek to impose additional sales, use or other tax collection 
and record-keeping obligations on us or may determine that such taxes should have, but have not been, paid by us. 
Liability  for  past  taxes  may  also  include  substantial  interest  and  penalty  charges. Any  successful  action  by  state, 

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foreign or other authorities to compel us to collect and remit sales tax, use tax or other taxes, either retroactively, 
prospectively or both, could harm our business, results of operations and financial condition.

Our  ability  to  use  our  net  operating  loss  carry-forwards  and  certain  other  tax  attributes  may  be 

limited. 

Under  Section  382  of  the  Internal  Revenue  Code  of  1986,  as  amended,  if  a  corporation  undergoes  an 
“ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three 
year period, the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change 
tax  attributes,  such  as  research  tax  credits  and  distributed  interest  deduction  carryover,  to  offset  its  post-change 
income may be limited. We have experienced ownership changes in the past and any such ownership change in the 
future could result in increased future tax liability. In addition, we may experience ownership changes in the future 
as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use 
our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, 
which could potentially result in increased future tax liability to us.

On  March  27,  2020,  the  U.S.  government  enacted  the  Coronavirus Aid,  Relief,  and  Economic  Security Act 
(CARES Act) which included temporary relief from the net operating loss limitations imposed by the Tax Cuts and 
Jobs Act for tax years beginning after December 31, 2017 and before January 1, 2021, and made certain technical 
corrections to applying the net operating loss utilization limitations for tax years beginning after January 1, 2021.   

Our ability to use our net operating losses is conditioned upon generating future U.S. federal taxable income. 
Since  we  do  not  know  whether  or  when  we  will  generate  the  U.S.  federal  taxable  income  necessary  to  use  our 
remaining  net  operating  losses,  these  net  operating  loss  carryforwards  generated  prior  to  our  tax  year  ended 
January 31, 2018 could expire unused.

If  we  fail  to  maintain  an  effective  system  of  disclosure  controls  and  internal  control  over  financial 
reporting,  our  ability  to  produce  timely  and  accurate  financial  statements  or  comply  with  applicable 
regulations could be impaired. 

The  Sarbanes-Oxley  Act  requires,  among  other  things,  that  we  maintain  effective  disclosure  controls  and 
procedures  and  internal  control  over  financial  reporting.  In  order  to  maintain  the  effectiveness  of  our  disclosure 
controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will 
continue  to  expend,  significant  resources,  including  accounting-related  costs  and  significant  management 
oversight. If any of these new or improved controls and systems do not perform as expected, we may experience 
material weaknesses or significant deficiencies in our controls.

Our controls may become inadequate because of changes in conditions in our business. Further, weaknesses 
in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to 
maintain effective controls could harm our results of operations or cause us to fail to meet our reporting obligations 
and may result in a restatement of our financial statements for prior periods. Any failure to maintain effective internal 
control  over  financial  reporting  also  could  adversely  affect  the  results  of  periodic  management  evaluations  and 
annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal 
control  over  financial  reporting  that  we  are  required  to  include  in  our  periodic  reports  that  are  filed  with  the  SEC. 
Ineffective  disclosure  controls  and  procedures  and  internal  control  over  financial  reporting  could  also  cause 
investors  to  lose  confidence  in  our  reported  financial  and  other  information,  which  would  likely  have  a  negative 
effect  on  the  trading  price  of  our  Class A  common  stock.  In  addition,  if  we  are  unable  to  continue  to  meet  these 
requirements,  we  may  not  be  able  to  remain  listed  on  the  Nasdaq.  We  are  required  to  provide  an  annual 
management report on the effectiveness of our internal control over financial reporting.

Our  independent  registered  public  accounting  firm  is  required  to  formally  attest  to  the  effectiveness  of  our 
internal  control  over  financial  reporting  annually.  Our  independent  registered  public  accounting  firm  may  issue  a 
report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting 
is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over 
financial reporting could harm our business and results of operations and could cause a decline in the price of our 
Class A common stock.

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Changes  in  existing  financial  accounting  standards  or  practices,  or  taxation  rules  or  practices,  may 

harm our results of operations. 

Changes  in  existing  accounting  or  taxation  rules  or  practices,  new  accounting  pronouncements  or  taxation 
rules, or varying interpretations of current accounting pronouncements or taxation practice could harm our results of 
operations  or  the  manner  in  which  we  conduct  our  business.  Further,  such  changes  could  potentially  affect  our 
reporting of transactions completed before such changes are effective.

Accounting  principles  generally  accepted  in  the  United  States  (GAAP)  are  subject  to  interpretation  by  the 
Financial  Accounting  Standards  Board  (FASB),  the  SEC  and  various  bodies  formed  to  promulgate  and  interpret 
appropriate accounting principles. A change in these principles or interpretations could have a significant effect on 
our reported financial results, and could affect the reporting of transactions completed before the announcement of 
a  change.  Adoption  of  such  new  standards  and  any  difficulties  in  implementation  of  changes  in  accounting 
principles,  including  the  ability  to  modify  our  accounting  systems,  could  cause  us  to  fail  to  meet  our  financial 
reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

If  our  estimates  or  judgments  relating  to  our  critical  accounting  policies  prove  to  be  incorrect,  our 

results of operations could be adversely affected. 

The  preparation  of  financial  statements  in  conformity  with  GAAP  requires  management  to  make  estimates 
and  assumptions  that  affect  the  amounts  reported  in  our  consolidated  financial  statements  and  accompanying 
notes.  We  base  our  estimates  on  historical  experience  and  on  various  other  assumptions  that  we  believe  to  be 
reasonable  under  the  circumstances,  as  provided  in  the  section  titled  “Management’s  Discussion  and Analysis  of 
Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments 
about  the  carrying  values  of  assets,  liabilities  and  equity,  and  the  amount  of  revenue  and  expenses  that  are  not 
readily  apparent  from  other  sources.  Significant  assumptions  and  estimates  used  in  preparing  our  consolidated 
financial statements include, but are not limited to those related to revenue recognition, period of benefit for deferred 
commissions,  incremental  borrowing  rates  for  operating  leases,  effective  interest  rates  for  convertible  notes, 
valuation  of  deferred  income  taxes,  business  combination  and  valuation  of  goodwill  and  purchased  intangible 
assets. Our results of operations may be adversely affected if our assumptions change or if actual circumstances 
differ from those in our assumptions, which could cause our results of operations to fall below the expectations of 
securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.

Risks Related to Ownership of Our Class A Common Stock

The stock price of our Class A common stock may be volatile or may decline.

Prior to our IPO, there was no public market for shares of our Class A common stock. The market prices of 
the securities of other newly public companies have historically been highly volatile, and our stock price has been 
volatile  since  our  IPO.  The  market  price  of  our  Class A  common  stock  may  fluctuate  significantly  in  response  to 
numerous factors, many of which are beyond our control, including, but not limited to:

•

•

•
projections;

overall performance of the equity markets and/or publicly-listed technology companies;

actual or anticipated fluctuations in our revenue or other financial or operating metrics;

changes  in  the  financial  projections  we  provide  to  the  public  or  our  failure  to  meet  these 

•

failure  of  securities  analysts  to  initiate  or  maintain  coverage  of  us,  changes  in  financial 

estimates and/or recommendations by any securities analysts who follow our company;

•

•

•

•

•

our failure to meet the estimates or the expectations of securities analysts or investors;

recruitment or departure of key personnel;

significant security breaches, technical difficulties or interruptions of our service;

the economy as a whole and market conditions in our industry;

rumors and market speculation involving us or other companies in our industry;

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•

announcements  by  us  or  our  competitors  of  significant  innovations,  acquisitions,  strategic 

partnerships, joint ventures or capital commitments;

•
our business;

•

•

new laws or regulations or new interpretations of existing laws or regulations applicable to 

lawsuits threatened or filed against us;

other  events  or  factors,  including  those  resulting  from  war,  incidents  of  terrorism,  or 

responses to these events; and

•

sales of additional shares of our Class A common stock by us, our directors, our officers or 

our stockholders.

In  addition,  stock  markets  have  experienced  extreme  price  and  volume  fluctuations  that  have  affected  and 
continue to affect the market prices of equity securities of many companies. Stock prices of many companies have 
fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, 
stockholders  have  instituted  securities  class  action  litigation  following  periods  of  market  volatility.  If  we  were  to 
become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of 
management from our business, and harm our business.

The  dual  class  structure  of  our  common  stock  has  the  effect  of  concentrating  voting  control  with 
those stockholders who held our capital stock prior to the completion of our IPO, including our directors, 
executive  officers,  and  their  affiliates,  who  held  in  the  aggregate  48%  of  the  voting  power  of  our  capital 
stock as of January 31, 2021. This will limit or preclude your ability to influence corporate matters, including 
the  election  of  directors,  amendments  of  our  organizational  documents,  and  any  merger,  consolidation, 
sale  of  all  or  substantially  all  of  our  assets,  or  other  major  corporate  transaction  requiring  stockholder 
approval.

Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. 
As  of  January  31,  2021,  our  directors,  executive  officers  and  their  affiliates  held  in  the  aggregate  48%  the  voting 
power of our capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, 
the  holders  of  our  Class  B  common  stock  collectively  could  continue  to  control  nearly  a  majority  of  the  combined 
voting power of our common stock and be able to effectively control all matters submitted to our stockholders for 
approval until April 12, 2027, the date that is the ten year anniversary of the closing of our IPO. This concentrated 
control  may  limit  or  preclude  your  ability  to  influence  corporate  matters  for  the  foreseeable  future,  including  the 
election  of  directors,  amendments  of  our  organizational  documents,  and  any  merger,  consolidation,  sale  of  all  or 
substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this 
may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in 
your best interest as one of our stockholders.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class 
A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The 
conversion  of  Class  B  common  stock  to  Class A  common  stock  will  have  the  effect,  over  time,  of  increasing  the 
relative voting power of those holders of Class B common stock who have retained their shares.

Sales of a substantial number of shares of our Class A common stock in the public markets, or the 

perception that sales might occur, could cause the market price of our Class A common stock to decline. 

Sales of a substantial number of shares of our Class A common stock into the public market, particularly sales 
by our directors, executive officers and principal stockholders, or the perception that these sales might occur, could 
cause the market price of our Class A common stock to decline.

In addition, we have options outstanding that, if fully exercised, would result in the issuance of shares of our 
Class A  and  Class  B  common  stock.  We  also  have  restricted  stock  units  (RSUs)  outstanding  that,  if  vested  and 
settled, would result in the issuance of shares of Class A common stock. All of the shares of Class A and Class B 
common stock issuable upon the exercise of stock options and vesting of RSUs and the shares reserved for future 
issuance  under  our  equity  incentive  plans,  are  registered  for  public  resale  under  the  Securities  Act  of  1933,  as 
amended  (Securities  Act).  Accordingly,  these  shares  will  be  able  to  be  freely  sold  in  the  public  market  upon 
issuance, subject to applicable vesting requirements.

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Furthermore, a substantial number of shares of our Class A common stock is reserved for issuance upon the 
exercise of the Notes (as defined below) and the Warrants (as defined below) issued at the time of the issuance of 
the 2023 Notes (as defined below). If we elect to satisfy our conversion obligation on the Notes solely in shares of 
our Class A common stock upon conversion of the notes, we will be required to deliver the shares of our Class A 
common  stock,  together  with  cash  for  any  fractional  share,  on  the  second  business  day  following  the  relevant 
conversion date.

If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or 
unfavorable  research,  about  our  business,  the  price  of  our  Class  A  common  stock  and  trading  volume 
could decline.

The  trading  market  for  our  Class  A  common  stock  will  depend  in  part  on  the  research  and  reports  that 
securities  or  industry  analysts  publish  about  us  or  our  business.  If  industry  analysts  do  not  publish  or  cease 
publishing research on our company, the trading price for our Class A common stock would be negatively affected. If 
one  or  more  of  the  analysts  who  cover  us  downgrade  our  Class  A  common  stock  or  publish  inaccurate  or 
unfavorable research about our business, our Class A common stock price would likely decline. If one or more of 
these  analysts  cease  coverage  of  us  or  fail  to  publish  reports  on  us  on  a  regular  basis,  demand  for  our  Class A 
common stock could decrease, which might cause our Class A common stock price and trading volume to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash 
dividends  in  the  foreseeable  future.  We  anticipate  that  we  will  retain  all  of  our  future  earnings  for  use  in  the 
operation of our business and for general corporate purposes. Any determination to pay dividends in the future will 
be  at  the  discretion  of  our  board  of  directors. Accordingly,  investors  must  rely  on  sales  of  their  Class A  common 
stock  after  price  appreciation,  which  may  never  occur,  as  the  only  way  to  realize  any  future  gains  on  their 
investments.

Provisions  in  our  charter  documents  and  under  Delaware  law  could  make  an  acquisition  of  our 
company  more  difficult,  limit  attempts  by  our  stockholders  to  replace  or  remove  our  current  board  of 
directors, and limit the market price of our Class A common stock.

Provisions  in  our  amended  and  restated  certificate  of  incorporation  and  amended  and  restated  bylaws  may 
have  the  effect  of  delaying  or  preventing  a  change  of  control  or  changes  in  our  management.  Our  amended  and 
restated certificate of incorporation and amended and restated bylaws include provisions that:

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provide that our board of directors is classified into three classes of directors with staggered 

three-year terms;

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permit the board of directors to establish the number of directors and fill any vacancies and 

newly-created directorships;

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require  super-majority  voting  to  amend  some  provisions  in  our  amended  and  restated 

certificate of incorporation and amended and restated bylaws;

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authorize  the  issuance  of  “blank  check”  preferred  stock  that  our  board  of  directors  could 

use to implement a stockholder rights plan;

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provide that only the Chairperson of our board of directors, our Chief Executive Officer, or a 

majority of our board of directors are authorized to call a special meeting of stockholders;

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provide for a dual class common stock structure in which holders of our Class B common 
stock have the ability to effectively control the outcome of matters requiring stockholder approval, even if 
they own significantly less than a majority of the outstanding shares of our Class A and Class B common 
stock, including the election of directors and significant corporate transactions, such as a merger or other 
sale of our company or its assets;

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prohibit stockholder action by written consent, which requires all stockholder actions to be 

taken at a meeting of our stockholders;

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bylaws; and

provide  that  the  board  of  directors  is  expressly  authorized  to  make,  alter  or  repeal  our 

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advance  notice  requirements  for  nominations  for  election  to  our  board  of  directors  or  for 

proposing matters that can be acted upon by stockholders at annual stockholder meetings.

Moreover, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change 
in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other 
transactions between us and holders of 15% or more of our common stock.

Our  amended  and  restated  bylaws  designate  a  state  or  federal  court  located  within  the  State  of 
Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could 
limit stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our  amended  and  restated  bylaws  provide  that  the  Court  of  Chancery  of  the  State  of  Delaware  will  be  the 

exclusive forum for:

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•

any derivative action or proceeding brought on our behalf;

any action asserting a breach of fiduciary duty;

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any  action  asserting  a  claim  against  us  arising  pursuant  to  the  Delaware  General 
Corporation  Law,  our  amended  and  restated  certificate  of  incorporation,  or  our  amended  and  restated 
bylaws; or

•

any action asserting a claim against us that is governed by the internal affairs doctrine.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds 
favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits 
with  respect  to  such  claims.  Alternatively,  if  a  court  were  to  find  the  choice  of  forum  provision  contained  in  our 
amended  and  restated  certificate  of  incorporation  to  be  inapplicable  or  unenforceable  in  an  action,  we  may  incur 
additional costs associated with resolving such action in other jurisdictions, which could harm our business, results 
of operations and financial condition.

Risks Related to our Outstanding Convertible Notes

Servicing  our  debt  may  require  a  significant  amount  of  cash.  We  may  not  have  sufficient  cash  flow 

from our business to pay our indebtedness.

Since  February  2018,  we  have  issued  convertible  notes  due  in  2023  (2023  Notes),  2025  (2025  Notes)  and 
2026  (2026  Notes,  and  together  with  the  2023  Notes  and  2025  Notes,  the  Notes).  Our  ability  to  make  scheduled 
payments of the principal of, to pay interest on or to refinance our indebtedness, including the Notes, depends on 
our future performance, which is subject to economic, financial, competitive and other factors beyond our control. 
Our  business  may  not  generate  cash  flow  from  operations  in  the  future  sufficient  to  service  our  debt  and  make 
necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or 
more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital 
on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will depend on the 
capital markets and our financial condition at such time. We may not be able to engage in any of these activities or 
engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any 
of  our  future  debt  agreements  may  contain  restrictive  covenants  that  may  prohibit  us  from  adopting  any  of  these 
alternatives.  Our  failure  to  comply  with  these  covenants  could  result  in  an  event  of  default  which,  if  not  cured  or 
waived, could result in the acceleration of our debt.

We may not have the ability to raise the funds necessary for cash settlement upon conversion of the 
Notes  or  to  repurchase  the  Notes  for  cash  upon  a  fundamental  change,  and  our  future  debt  may  contain 
limitations on our ability to pay cash upon conversion of the Notes or to repurchase the Notes.

Holders  of  the  Notes  have  the  right  to  require  us  to  repurchase  their  Notes  upon  the  occurrence  of  a 
fundamental change (as defined in the Indentures governing their respective Notes) at a repurchase price equal to 
100%  of  the  principal  amount  of  the  Notes  to  be  repurchased,  plus  accrued  and  unpaid  interest,  if  any.  Upon 
conversion  of  the  Notes,  unless  we  elect  to  deliver  solely  shares  of  our  Class  A  common  stock  to  settle  such 
conversion  (other  than  paying  cash  in  lieu  of  delivering  any  fractional  share),  we  will  be  required  to  make  cash 
payments in respect of the  Notes being converted. We  may not have enough available cash or be able to obtain 
financing  at  the  time  we  are  required  to  make  repurchases  of  Notes  surrendered  or  Notes  being  converted.  In 

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addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by 
regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Notes at a time 
when  the  repurchase  is  required  by  the  indenture  governing  such  notes  or  to  pay  any  cash  payable  on  future 
conversions of the Notes as required by such indenture would constitute a default under such indenture. A default 
under  the  indenture  governing  the  Notes  or  the  fundamental  change  itself  could  also  lead  to  a  default  under 
agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated 
after  any  applicable  notice  or  grace  periods,  we  may  not  have  sufficient  funds  to  repay  the  indebtedness  and 
repurchase the Notes or make cash payments upon conversions.

In  addition,  our  indebtedness,  combined  with  our  other  financial  obligations  and  contractual  commitments, 

could have other important consequences. For example, it could:

•

make  us  more  vulnerable  to  adverse  changes  in  general  U.S.  and  worldwide  economic, 

industry and competitive conditions and adverse changes in government regulation;

•

•

•

limit our flexibility in planning for, or reacting to, changes in our business and our industry;

place us at a disadvantage compared to our competitors who have less debt; 

limit our ability to borrow additional amounts to fund acquisitions, for working capital and for 

other general corporate purposes; and

•

make an acquisition of our company less attractive or more difficult.

Any of these factors could harm our business, results of operations and financial condition. In addition, if we 
incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness 
would increase.

The  conditional  conversion  feature  of  the  Notes,  if  triggered,  may  adversely  affect  our  financial 

condition and results of operations.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to 
convert the Notes, as applicable, at any time during specified periods at their option. If one or more holders elect to 
convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A 
common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a 
portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. As 
disclosed in Note 9 to our consolidated financial statements, the conditional conversion features of the 2023 Notes 
and  2025  Notes  were  triggered  as  of  January  31,  2021,  and  the  2023  Notes  and  2025  Notes  are  currently 
convertible at the option of the holders, in whole or in part, between February 1, 2021 and April 30, 2021. Whether 
the  2023  Notes  or  2025  Notes  will  be  convertible  following  such  fiscal  quarter  will  depend  on  the  continued 
satisfaction  of  this  condition  or  another  conversion  condition  in  the  future.  From  the  date  of  issuance  through 
January 31, 2021, the conditions allowing holders of the 2026 Notes to convert were not met.

In  addition,  even  if  holders  do  not  elect  to  convert  their  Notes,  we  could  be  required  under  applicable 
accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-
term liability, which would result in a material reduction of our net working capital. The 2023 Notes and 2025 Notes 
were classified as current liabilities on the consolidated balance sheet as of January 31, 2021.

Transactions relating to our Notes may affect the value of our Class A common stock.

 The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to 
the  extent  we  satisfy  our  conversion  obligation  by  delivering  shares  of  our  Class  A  common  stock  upon  any 
conversion  of  such  Notes.  Our  Notes  may  become  in  the  future  convertible  at  the  option  of  their  holders  under 
certain circumstances. If holders of our Notes elect to convert their notes, we may settle our conversion obligation 
by delivering to them a significant number of shares of our Class A common stock, which would cause dilution to our 
existing stockholders.

In addition, in connection with the issuance of the 2023 Notes, we entered into convertible note hedges (Note 
Hedges)  with  certain  financial  institutions  (the  2023  Notes  Option  Counterparties).  We  also  entered  into  warrant 
transactions with the 2023 Notes Option Counterparties pursuant to which we sold warrants for the purchase of our 
Class A common stock (Warrants). The Note Hedges are expected generally to reduce the potential dilution to our 
Class A common stock upon any conversion or settlement of the 2023 Notes and/or offset any cash payments we 

47

are required to make in excess of the principal amount of converted 2023 Notes, as the case may be. The Warrant 
transactions  could  separately  have  a  dilutive  effect  to  the  extent  that  the  market  price  per  share  of  our  Class A 
common stock exceeds the strike price of any Warrants unless, subject to the terms of the Warrant transactions, we 
elect  to  cash  settle  the  Warrants.  Through  January  31,  2021,  Note  Hedges  corresponding  to  approximately  6.3 
million  shares  have  been  terminated  or  settled.  As  of  January  31,  2021,  Note  Hedges  giving  us  the  option  to 
purchase  approximately  0.8  million  shares  (subject  to  adjustment)  remained  outstanding.  Through  January  31, 
2021,  we  have  terminated  Warrants  corresponding  to  approximately  6.1  million  shares. As  of  January  31,  2021, 
Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.

In addition, in connection with the issuance of the 2025 Notes and 2026 Notes, we entered into capped call 
transactions  (Capped  Calls)  with  certain  financial  institutions  (the  2025  Notes  and  2026  Notes  Capped  Call 
Counterparties and together with the 2023 Notes  Option  Counterparties, the Option Counterparties). The Capped 
Calls  are  generally  expected  to  reduce  potential  dilution  to  our  Class  A  common  stock  upon  any  conversion  or 
settlement of the 2025 Notes and 2026 Notes and/or offset any cash payments we are required to make in excess 
of the principal amount of converted 2025 Notes and 2026 Notes, as the case may be, with such reduction and/or 
offset subject to a cap.

From time to time, the Option Counterparties or their respective affiliates may modify their hedge positions by 
entering  into  or  unwinding  various  derivative  transactions  with  respect  to  our  Class  A  common  stock  and/or 
purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to 
the maturity of the Notes. This activity could cause a decrease in the market price of our Class A common stock.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, 

could have a material effect on our reported financial results. 

Under  FASB  Accounting  Standards  Codification  470-20,  Debt  with  Conversion  and  Other  Options  (ASC 
470-20),  an  entity  must  separately  account  for  the  liability  and  equity  components  of  convertible  debt  instruments 
(such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the 
issuer’s economic interest cost. ASC 470-20 requires the value of the conversion options of the Notes, representing 
the  equity  component,  to  be  recorded  as  additional  paid-in  capital  within  stockholders’  equity  in  our  consolidated 
balance sheet and as a discount to the Notes, which reduces their initial carrying value. The carrying value of the 
Notes, net of the applicable discount recorded, will be accreted up to the principal amount of the Notes, as the case 
may  be,  from  the  issuance  date  until  maturity,  which  will  result  in  non-cash  charges  to  interest  expense  in  our 
consolidated statement of operations. Accordingly, we will report lower net income or higher net loss in our financial 
results because ASC 470-20 requires interest to include both the current period’s accretion of the debt discount and 
the  instrument’s  coupon  interest,  which  could  adversely  affect  our  reported  or  future  financial  results,  the  trading 
price of our Class A common stock and the respective trading price of the Notes.

Accounting  standards  in  the  future  will  result  in  changes  to  the  current ASC  470-20  accounting  model. The 
FASB issued an accounting standards update that eliminates the liability and equity component separation model 
for  convertible  debt  instruments  with  a  cash  conversion  feature.  Among  other  potential  impacts,  this  change  is 
expected  to  reduce  reported  interest  expense,  increase  reported  net  income  or  lower  net  loss  and  result  in  a 
reclassification of certain balance sheet amounts from stockholders' equity to liabilities as it relates to the Notes.

48

General Risk Factors

We depend on our executive officers and other key employees, and the loss of one or more of these 

employees or an inability to attract and retain other highly skilled employees could harm our business.

Our success depends largely upon the continued services of our executive officers and other key employees. 
We rely on our leadership team in the areas of research and development, operations, security, marketing, sales, 
customer  support,  general  and  administrative  functions,  and  on  individual  contributors  in  our  research  and 
development  and  operations  functions.  From  time  to  time,  there  may  be  changes  in  our  executive  management 
team  resulting  from  the  hiring  or  departure  of  executives,  such  as  the  recent  retirement  of  our  former  President, 
Worldwide  Field  Operations  and  upcoming  retirement  of  our  Chief  Financial  Officer,  which  could  disrupt  our 
business. We do not have employment agreements with our executive officers or other key personnel that require 
them to continue to work for us for any specified period and they could terminate their employment with us at any 
time.  The  loss  of  one  or  more  of  our  executive  officers  or  key  employees,  and  any  failure  to  have  in  place  and 
execute  an  effective  succession  plan  for  key  executives,  could  harm  our  business.  Changes  in  our  executive 
management team may also cause disruptions in, and harm to, our business.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for 
these personnel in the San Francisco Bay Area, where our headquarters is located, and in other locations where we 
maintain  offices,  is  intense,  especially  for  engineers  experienced  in  designing  and  developing  software  and  SaaS 
applications  and  experienced  sales  professionals.  We  have  from  time  to  time  experienced,  and  we  expect  to 
continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, and may not be 
able  to  fill  positions  in  the  desired  regions,  or  at  all.  Our  efforts  to  attract  new  personnel  may  be  compounded  by 
intensified  restriction  on  travel  (including  during  the  COVID-19  pandemic),  changes  to  immigration  policy  or  the 
availability of work visas. Many of the companies with which we compete for experienced personnel have greater 
resources  than  we  have.  If  we  hire  employees  from  competitors  or  other  companies,  their  former  employers  may 
attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our 
time  and  resources.  In  addition,  job  candidates  and  existing  employees  often  consider  the  value  of  the  equity 
awards  they  receive  in  connection  with  their  employment.  If  the  perceived  value  of  our  equity  awards  declines,  it 
may harm our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain 
and motivate our current personnel, our business and future growth prospects could be harmed.

Catastrophic events may disrupt our business.

Natural  disasters  or  other  catastrophic  events  may  cause  damage  or  disruption  to  our  operations, 
international  commerce  and  the  global  economy,  and  thus  could  harm  our  business.  We  have  a  large  employee 
presence  in  San  Francisco,  California  and  the  west  coast  of  the  United  States  contains  active  earthquake  and 
wildfire zones which have the potential to disrupt our business. For example, in the fall of 2019 and 2020, PG&E 
shut off power to certain cities in the San Francisco Bay Area in order to reduce the risk of wildfires and this resulted 
in  many  of  our  employees  being  unable  to  work  remotely.  In  the  event  of  a  major  earthquake,  hurricane  or 
catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, terrorist attack 
or  health  epidemic  (including  COVID-19),  we  may  be  unable  to  continue  our  operations  and  may  endure  system 
interruptions,  reputational  harm,  delays  in  our  application  development,  lengthy  interruptions  in  our  products, 
breaches of data security and loss of critical data, all of which could harm our business, results of operations and 
financial  condition.  In  addition,  the  insurance  we  maintain  may  be  insufficient  to  cover  our  losses  resulting  from 
disasters, cyber-attacks or other business interruptions, and any incidents may result in loss of, or increased costs 
of, such insurance.

49

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters is located in San Francisco, California, where we currently lease approximately 
266,366  square  feet  and  19,129  square  feet  under  a  lease,  as  amended,  that  expires  in  October  2028  and  a 
sublease that expires in August 2021, respectively. The Company is entitled to two five-year options to extend the 
lease with an October 2028 expiry date, subject to certain requirements.

We also lease space in various locations in North America, Europe and Asia-Pacific.

We believe that our facilities are suitable to meet our current needs. We intend to expand our facilities or add 
new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or 
alternative space will be available as needed to accommodate any such growth. 

Item 3. Legal Proceedings

We are not a party to any material legal proceedings on the date of this report. See Note 11 to our 

consolidated financial statements "Commitments and Contingencies" for information related to legal proceedings.

Item 4. Mine Safety Disclosures

Not Applicable.

50

Part II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of 
Equity Securities

Market Information and Holders

Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol "OKTA" 
since April 7, 2017. Prior to that date, there was no public trading market for our Class A common stock. Our Class 
B common stock is not listed or traded on any stock exchange. 

As of February 28, 2021, we had 37 holders of record of our Class A common stock and 26 holders of record 
of our Class B common stock. The actual number of Class A beneficial stockholders is substantially greater than the 
number of holders of record because a large portion of our Class A common stock is held in street name by brokers 
and other nominees.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future 
earnings  for  use  in  the  operation  of  our  business  and  do  not  intend  to  declare  or  pay  any  cash  dividends  in  the 
foreseeable  future. Any  further  determination  to  pay  dividends  on  our  capital  stock  will  be  at  the  discretion  of  our 
board  of  directors,  subject  to  applicable  laws,  and  will  depend  on  our  financial  condition,  results  of  operations, 
capital requirements, general business conditions and other factors that our board of directors considers relevant.

51

Stock Performance Graph

This  performance  graph  shall  not  be  deemed  "soliciting  material"  or  to  be  "filed"  with  the  Securities  and 
Exchange Commission (SEC) for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the 
Exchange Act), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated 
by reference into any filing of Okta, Inc. under the Securities Act or the Exchange Act.

We  have  presented  below  the  cumulative  total  return  to  our  stockholders  from April  7,  2017  (the  date  our 
Class  A  common  stock  commenced  trading  on  the  Nasdaq)  through  January  31,  2021  in  comparison  to  the 
Standard & Poor’s 500 Index and Standard & Poor Information Technology Index. All values assume a $100 initial 
investment  and  data  for  the  Standard  &  Poor’s  500  Index  and  Standard  &  Poor  Information  Technology  Index 
assume  reinvestment  of  dividends.  The  comparisons  are  based  on  historical  data  and  are  not  indicative  of,  nor 
intended to forecast, the future performance of our Class A common stock.

Company/Index

Base period
4/7/2017

1/31/2018

1/31/2019

1/31/2020

1/31/2021

Okta

$ 

100.00  $ 

125.27  $ 

350.62  $ 

544.66  $ 

1,101.70 

S&P 500 Index 

100.00 

119.88 

114.80 

136.93 

157.68 

S&P 500 Information 
Technology Index 

100.00 

132.07 

129.11 

185.80 

251.86 

52

OktaS&P 500 IndexS&P 500 Information Technology IndexBase period4/7/201701/31/1801/31/1901/31/2001/31/21$0$250$500$750$1,000$1,250 
 
 
 
 
 
 
 
 
 
Securities Authorized for Issuance under Equity Compensation Plans 

The  information  required  by  this  item  with  respect  to  our  equity  compensation  plans  is  incorporated  by 
reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and 
Exchange Commission within 120 days of the fiscal year ended January 31, 2021.

Unregistered Sales of Equity Securities 

(a) Unregistered Sales of Equity Securities

In connection with the partial repurchase of the convertible notes due in 2023 (2023 Notes) in June 2020 and 
the conversion of certain 2023 Notes in August 2020, the Company issued 1,445,927 shares and 214,177 shares of 
Company Class A common stock on June 12, 2020 and August 31, 2020, respectively. These issuances were made 
in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended 
(Securities Act). The Company relied on this exemption from registration based in part on representations made by 
the holders of the 2023 Notes in the exchange agreements pursuant to which the shares of Class A Common Stock 
were issued. 

(b) 

Issuer Purchases of Equity Securities

None.

53

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual Report 
on  Form  10-K.  In  addition  to  historical  financial  information,  the  following  discussion  contains  forward-looking 
statements  that  is  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 I, Item 1A in this Annual Report 
on Form 10-K. Our fiscal year ends January 31.

Overview

Okta is the leading independent identity management platform for the enterprise. The Okta Identity Cloud is 
powered by our category-defining 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  and  web  applications,  on-premises  servers,  application 
program interfaces (APIs), IT infrastructure providers and services from a multitude of devices. Developers leverage 
our platform to securely and efficiently embed identity into the software they build, allowing them to focus on their 
core mission. Employees and contractors sign into the Okta Identity Cloud to seamlessly and securely access the 
applications  they  need  to  do  their  most  important  work.  Organizations  use  our  platform  to  collaborate  with  their 
partners, and to provide their customers with more modern and secure experiences online and via mobile devices. 
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.  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  January  31,  2021,  more  than  10,000  customers  across  nearly  every  industry  used  the  Okta  Identity 
Cloud  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,  infrastructure  and  security  vendors  through  our 
Okta Integration Network. As of January 31, 2021, we had over 7,000 integrations with these cloud, mobile and web 
applications and IT infrastructure providers. 

We employ a Software-as-a-Service (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 the Okta Identity Cloud 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.

Impact of Coronavirus (COVID-19) Pandemic

In  December  2019,  a  novel  coronavirus  (COVID-19)  was  reported  in  China,  in  January  2020,  the  World 
Health Organization (WHO) declared it a Public Health Emergency of International Concern and in March 2020, the 
WHO declared it a pandemic. This contagious disease outbreak has continued to spread across the globe and is 
impacting worldwide economic activity and financial markets. The extent of the impact of COVID-19 on our future 
operational and financial performance will depend on certain developments, including the duration and spread of the 
outbreak,  related  public  health  measures,  and  their  impact  on  the  macroeconomy,  our  current  and  prospective 
customers, employees and vendors. None of these impacts can be predicted with certainty.

Our revenue is relatively predictable as a result of our subscription-based business model, which constituted 
over 95% of total revenue for the year ended January 31, 2021. 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,  remaining  performance  obligations  (RPO)  and  billings  growth  as  well  as  potential  future 

54

impacts on revenue growth and other key metrics on a trailing basis. Our allowance for doubtful accounts and sales 
reserves  have  increased  primarily  due  to  an  increase  in  overall  uncertainty  in  our  forecasts  of  future  economic 
conditions  and  concession  requests.  While  we  see  risks  associated  with  more  highly  impacted  companies  and 
industries, we are also seeing new interest from other organizations, driven by rapidly changing work and business 
environments. As workforces have transitioned to working from home in a distributed model, Zero Trust has become 
an increasingly important security model and identity an increasingly critical service. 

We  believe  we  will  be  able  to  continue  to  deliver  our  cloud-based  platform  and  support  to  our  customers, 
without compromising our employees’ safety. Since March 2020, we have put in place mandatory work-from-home 
procedures for our global office locations, and our employees have the necessary tools and technology to remain 
connected  and  productive.  In  addition,  we  shifted  our  annual  user  conference,  Oktane20  Live,  to  a  virtual-only 
experience, resulting in cost savings, and in the near-term, we have changed our customer, employee and industry 
events,  including  Oktane21  Live,  to  virtual-only  format.  We  have  further  benefited  from  cost  savings,  driven  by 
reduced growth in employee compensation costs due to slower hiring, reductions in employee-related expenses as 
our  sales  and  marketing  activities  shift  primarily  to  an  online-only  sales  format  and  a  shift  to  work-from-home 
procedures.

See Risk Factors for further discussion of the potential impact of COVID-19 and its related public health 

measures on our business.

Proposed Acquisition of Auth0

On  March  3,  2021,  we  entered  into  a  definitive  agreement  to  acquire  Auth0,  Inc.  (Auth0)  pursuant  to  an 
Agreement  and  Plan  of  Merger  (the  Merger Agreement).  Upon  consummation  of  the  transaction  contemplated  by 
the  Merger  Agreement,  all  outstanding  shares  of  Auth0  capital  stock,  options,  warrants,  convertible  securities, 
phantom equity and other outstanding equity interests will be cancelled in exchange for aggregate consideration of 
$6.5 billion in the form of shares of Class A common stock of the Company and assumed awards of corresponding 
Company equity interests, subject to customary purchase price adjustments and certain customary cash payouts in 
lieu  of  shares  of  Company  Class  A  common  stock,  as  provided  by  the  Merger  Agreement.  The  purchase  price 
payable  in  shares  of  Class A  common  stock  will  be  valued  at  $276.2147  per  share  (which  price  was  calculated 
based on the daily volume-weighted average sales price per share of Company Class A common stock for the 20 
trading days ending on February 26, 2021). The per share price of these shares has been fixed as of the Merger 
Agreement signing date, and the aggregate value of these shares will fluctuate based on changes in our share price 
between the signing and closing dates.

The  proposed  transaction  is  expected  to  close  during  the  Company’s  second  quarter  of  fiscal  2022,  the 
quarter ending July 31, 2021. The closing of this transaction is subject to certain customary closing conditions and 
approvals.  If  consummated,  the  acquisition  of  Auth0  may  have  a  significant  impact  on  our  liquidity,  financial 
condition  and  results  of  operations.  The  following  discussion  and  analysis  of  our  results  of  operations  and  our 
liquidity and capital resources focuses on our existing operations exclusive of the impact of the proposed acquisition 
of Auth0. Any  forward-looking  statements  contained  herein  do  not  take  into  account  the  impact  of  the  proposed 
acquisition. 

Financial Information and Segments

We  operate  our  business  as  one  reportable  segment.  Our  revenue  has  grown  significantly.  For  the  years 
ended  January  31,  2021,  2020  and  2019,  our  revenue  was  $835.4  million,  $586.1  million  and  $399.3  million, 
respectively, representing a growth rate of 43% and 47%, respectively. For the years ended January 31, 2021, 2020 
and  2019,  we  generated  net  losses  of  $266.3  million,  $208.9  million  and  $125.5  million,  respectively.  Our 
accumulated deficit as of January 31, 2021 was $967.5 million.

55

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.

Key Business Metrics 

Customers with annual contract value (ACV) above $100,000 
Dollar-based net retention rate for the trailing 12 months ended
Current remaining performance obligations
Remaining performance obligations

1,950 

 121 %

1,467 

 119 %

1,038 

 120 %

$  841,797 
$ 1,796,949 

$  592,309 
$ 1,209,659 

$  385,600 
$  728,900 

As of January 31,

2021

2020

2019

(dollars in thousands)

Year Ended January 31,

2021

2020

2019

(in thousands)

Calculated billings

$ 

975,994  $ 

703,558  $ 

488,217 

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

As  of  January  31,  2021,  we  had  over  10,000  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. Over time, larger customers have constituted a greater share 
of  our  total  revenue,  which  has  contributed  to  an  increase  in  average  revenue  per  customer.  The  number  of 
customers  who  have  greater  than  $100,000  in ACV  with  us  was  1,950,  1,467  and  1,038  as  of  January  31,  2021, 
2020  and  2019,  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. 

Dollar-Based Net Retention Rate 

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 strong Dollar-Based Net Retention Rate is primarily attributable to 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. 

Remaining Performance Obligations

Remaining  performance  obligations  (RPO)  represent  all  future,  non-cancellable,  contracted  revenue  under 
our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has 

56

 
 
 
 
 
 
 
 
been  invoiced  and  non-cancellable  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.

Calculated Billings 

Calculated Billings represent our total revenue plus the change in deferred revenue and less the change in 
unbilled  receivables  in  the  period.  Calculated  Billings  in  any  particular  period  reflect  sales  to  new  customers  plus 
subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support 
and professional services. We typically invoice customers in advance in annual installments for subscriptions to our 
platform. 

Calculated Billings increased 39% in the year ended January 31, 2021 over the year ended January 31, 2020. 
As our Calculated Billings continue to grow in absolute terms, we expect our Calculated Billings growth rate to trend 
down  over  time.  See  the  section  titled  “Non-GAAP  Financial  Measures”  for  additional  information  and  a 
reconciliation of Calculated Billings to total revenue. 

Revenue 

Components of Results of Operations 

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 cost of revenue and operating expense category. 
Employee compensation costs include salaries, bonuses, benefits and stock-based compensation for each cost of 
revenue  and  operating  expense  category,  sales  commissions  for  sales  and  marketing  and  any  compensation 
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, travel-related costs, amortization expense associated with 
capitalized internal-use software and acquired technology, and allocated overhead. 

We  intend  to  continue  to  invest  additional  resources  in  our  platform  infrastructure  and  our  platform  support 
organizations. As we continue to invest in technology innovation, we anticipate that capitalized internal-use software 
costs and related amortization may increase. 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. 

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,  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. 

57

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. We expect our research and development expenses will increase in absolute dollars as our business 
grows. 

Sales  and  Marketing.        Sales  and  marketing  expenses  consist  primarily  of  employee  compensation  costs, 
costs  of  general  marketing  and  promotional  activities, 
travel-related  expenses  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. We expect our sales and marketing expenses will increase in absolute 
dollars and continue to be our largest operating expense category for the foreseeable future as we expand our sales 
and marketing efforts. However, we expect our sales and marketing expenses to decrease as a percentage of our 
total revenue as our total revenue grows. 

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  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. We expect our general and administrative expenses will increase in 
absolute dollars as our business grows. 

Interest and Other, Net 

Interest and other, net consists of interest expense, which primarily includes amortization of debt discount and 
issuance  costs  and  contractual  interest  expense  for  our  2023  Notes,  convertible  notes  due  in  2025  (2025  Notes) 
and convertible notes due in 2026 (2026 Notes, together with the 2023 Notes and 2025 Notes, the Notes), interest 
income from our investment holdings and loss on early extinguishment and conversion of debt.

Provision for (Benefit from) Income Taxes 

Our provision for (benefit from) income taxes consists of federal and state income taxes in the United States 

and income taxes in certain foreign jurisdictions. The primary difference between our effective tax rate and the 
federal statutory rate relates to the net operating losses in jurisdictions with a valuation allowance against related 
deferred tax assets.

58

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

Results of Operations

Year Ended January 31,

2021

2020

2019

(in thousands)

Revenue

Subscription
Professional services and other

Total revenue

Cost of revenue

Subscription(1)
Professional services and other(1)

Total cost of revenue

Gross profit
Operating expenses

Research and development(1)
Sales and marketing(1)
General and administrative(1)
Total operating expenses

Operating loss

Interest expense
Interest income and other, net
Loss on early extinguishment and conversion of debt

Interest and other, net
Loss before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net loss

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

$  796,613  $  552,688  $  370,855 
28,399 
  399,254 

38,811 
  835,424 

33,379 
  586,067 

  170,095 
47,586 
  217,681 
  617,743 

  116,445 
42,937 
  159,382 
  426,685 

77,354 
36,067 
  113,421 
  285,833 

  222,826 
  427,350 
  171,726 
  821,902 

  159,269 
  340,356 
  112,892 
  612,517 

  102,385 
  227,960 
75,110 
  405,455 
(119,622) 
(15,072) 
9,180 
— 
(5,892) 
(125,514) 
(17) 
$  (266,332)  $  (208,913)  $  (125,497) 

(185,832)   
(27,017)   
17,089 
(14,572)   
(24,500)   
(210,332)   
(1,419)   

(204,159)   
(72,660)   
12,891 
(2,263)   
(62,032)   
(266,191)   

141 

Year Ended January 31,

2021

2020

2019

Cost of subscription revenue

Cost of professional services and other revenue

Research and development

Sales and marketing

General and administrative

(in thousands)

$ 

21,895  $ 

12,923  $ 

8,083 

63,270 

53,802 

49,131 

7,164 

37,683 

38,077 

30,777 

Total stock-based compensation expense

$ 

196,181  $ 

126,624  $ 

7,837 

4,983 

22,642 

22,916 

17,942 

76,320 

59

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

revenue:

Revenue

Subscription
Professional services and other
Total revenue
Cost of revenue
Subscription
Professional services and other
Total cost of revenue

Gross profit
Operating expenses:

Research and development
Sales and marketing
General and administrative
Total operating expenses

Operating loss

Interest expense
Interest income and other, net
Loss on early extinguishment and conversion of debt

Interest and other, net
Loss before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net loss

Year Ended January 31,

2021

2020

2019

 95 %
 5 
 100 

 20 
 6 
 26 
 74 

 27 
 51 
 20 
 98 
 (24) 
 (9) 
 1 
 — 
 (8) 
 (32) 
 — 
 (32) %

 94 %
 6 
 100 

 20 
 7 
 27 
 73 

 27 
 58 
 20 
 105 
 (32) 
 (5) 
 3 
 (2) 
 (4) 
 (36) 
 — 
 (36) %

 93 %
 7 
 100 

 19 
 9 
 28 
 72 

 26 
 57 
 19 
 102 
 (30) 
 (3) 
 2 
 — 
 (1) 
 (31) 
 — 
 (31) %

60

 
 
 
A discussion regarding our financial condition and results of operations for the year ended January 31, 2021 
compared  to  the  year  ended  January  31,  2020  is  presented  below. A  discussion  regarding  our  financial  condition 
and results of operations for the year ended January 31, 2020 compared to the year ended January 31, 2019 can 
be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the 
SEC  on  March  6,  2020,  which  is  available  free  of  charge  on  the  SEC’s  website  at  www.sec.gov  and  our  Investor 
Relations website at investor.okta.com.

Comparison of the Years Ended January 31, 2021 and 2020

Revenue 

Revenue:

Subscription
Professional services and other
Total revenue

Percentage of revenue:

Subscription
Professional services and other
Total

Year Ended January 31,

2021

2020

$ Change

% Change  

(dollars in thousands)

$ 796,613 
  38,811 
$ 835,424 

$ 552,688 
  33,379 
$ 586,067 

$  243,925 
5,432 
$  249,357 

 44 %
 16 
 43 %

 95 %
 5 
 100 %

 94 %
 6 
 100 %

Subscription revenue increased by $243.9 million, or 44%, for the year ended January 31, 2021 compared to 
the year ended January 31, 2020. The increase was primarily due to the addition of new customers as well as an 
increase in users and sales of additional products to existing customers. 

Professional services and other revenue increased by $5.4 million, or 16%, for the year ended January 31, 
2021 compared to the year ended January 31, 2020. The increase in professional services revenue was primarily 
related  to  an  increase  in  implementation  and  other  services  associated  with  an  increase  in  the  number  of  new 
customers purchasing our subscription services. 

Cost of Revenue, Gross Profit and Gross Margin 

Cost of revenue:
Subscription
Professional services and other
Total cost of revenue

Gross profit
Gross margin:
Subscription
Professional services and other
Total gross margin

Year Ended January 31,

2021

2020

$ Change

% Change 

(dollars in thousands)

$ 170,095 
  47,586 
$ 217,681 
$ 617,743 

$ 116,445 
  42,937 
$ 159,382 
$ 426,685 

$  53,650 
4,649 
$  58,299 
$  191,058 

 46 %
 11 
 37 %
 45 %

 79 %
 (23) 
 74 %

 79 %
 (29) 
 73 %

Cost  of  subscription  revenue  increased  by  $53.7  million,  or  46%,  for  the  year  ended  January  31,  2021 
compared  to  the  year  ended  January  31,  2020,  primarily  due  to  an  increase  of  $34.7  million  in  employee 
compensation costs related to higher headcount to support the growth in our subscription services, an increase of 
$6.8  million  in  software  license  costs  and  an  increase  of  $6.7  million  in  third-party  hosting  costs  as  we  increased 
capacity to support our growth.

Our  gross  margin  for  subscription  revenue  remained  consistent  at  79%  during  the  year  ended  January  31, 
2021,  compared  to  the  year  ended  January  31,  2020.  While  our  gross  margins  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. 

61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of professional services and other revenue increased by $4.6 million, or 11%, for the year ended January 
31, 2021, compared to the year ended January 31, 2020, primarily due to an increase of $3.7 million in employee 
compensation costs related to higher headcount. 

Our  gross  margin  for  professional  services  and  other  revenue  improved  to  (23)%  during  the  year  ended 
January  31,  2021  from  (29)%  during  the  year  ended  January  31,  2020  primarily  due  to  increases  in  professional 
services and other revenue at a faster rate than increases in associated costs.

Operating Expenses 

Research and Development Expenses 

Research and development
Percentage of revenue

Year Ended January 31,

2021

2020

$ Change

% Change  

(dollars in thousands)

$ 222,826 

$ 159,269 

$ 

63,557 

 40 %

 27 %

 27 %

Research and development expenses increased $63.6 million, or 40%, for the year ended January 31, 2021 
compared to the year ended January 31, 2020. The increase was primarily due to an increase of $57.6 million in 
employee compensation costs due to higher headcount.

Sales and Marketing Expenses 

Sales and marketing
Percentage of revenue

Year Ended January 31,

2021

2020

$ Change

% Change  

(dollars in thousands)

$ 427,350 

$ 340,356 

$ 

86,994 

 26 %

 51 %

 58 %

Sales  and  marketing  expenses  increased  $87.0  million,  or  26%,  for  the  year  ended  January  31,  2021, 
compared to the year ended January 31, 2020. The increase was primarily due to an increase of $71.0 million in 
employee compensation costs related to headcount growth, an increase of $5.9 million in allocated overhead costs 
and an increase of $3.4 million in software license costs, partially offset by a decrease of $18.5 million in employee-
related expenses primarily due to reduced travel-related expenditures resulting from our temporary shift of our sales 
and  marketing  activities  to  a  primarily  online-only  format.  Marketing  and  event  costs  increased  by  $24.5  million 
primarily due to increases in demand generation programs, advertising, brand awareness efforts aimed at acquiring 
new customers and a change in the timing of expenses incurred for a future event, partially offset by a decrease of 
$4.9 million due to a change to a virtual format for our annual customer conference in the first quarter of fiscal 2021 
compared to an in-person format in the first quarter of fiscal 2020.

General and Administrative Expenses 

General and administrative
Percentage of revenue

Year Ended January 31,

2021

2020

$ Change

% Change  

(dollars in thousands)

$ 171,726 

$ 112,892 

$ 

58,834 

 52 %

 20 %

 20 %

General and administrative expenses increased $58.8 million, or 52%, for the year ended January 31, 2021 
compared to the year ended January 31, 2020. The increase was primarily due to an increase of $41.3 million in 
employee compensation costs related to higher headcount to support our continued growth and an increase in non-
cash charitable contributions of $7.5 million, partially offset by a decrease of $3.4 million in acquisition costs.

62

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and Other, Net

Interest expense
Interest income and other, net
Loss on early extinguishment and conversion of debt

Interest and other, net

Year Ended January 31,

2021

2020

$ Change

% Change  

(dollars in thousands)

$ 

$ 

(72,660)  $ 
12,891 
(2,263)   
(62,032)  $ 

(27,017)  $ 
17,089 
(14,572)   
(24,500) 

(45,643) 
(4,198) 
12,309 

 169 %
 (25) 
 (84) 

Interest expense increased $45.6 million or 169% for the year ended January 31, 2021 compared to the year 
ended January 31, 2020, primarily related to an increase of $23.1 million and $31.5 million for the 2025 Notes and 
2026  Notes,  respectively,  partially  offset  by  a  decrease  of  $9.0  million  for  the  2023  Notes,  due  to  the  partial 
repurchase  of  the  2023  Notes  in  September  2019  (First  Partial  Repurchase  of  2023  Notes)  and  the  partial 
repurchase of the 2023 Notes in June 2020 (Second Partial Repurchase of 2023 Notes, and together with the First 
Partial Repurchase of the 2023 Notes, the 2023 Notes Partial Repurchases).

Interest  income  and  other,  net  decreased  $4.2  million,  or  (25)%  for  the  year  ended  January  31,  2021 
compared  to  the  year  ended  January  31,  2020,  primarily  due  to  lower  interest  rates,  resulting  in  lower  interest 
income earned on higher cash and cash equivalents and short-term investment balances.

Loss on early extinguishment and conversion of debt decreased $12.3 million for the year ended January 31, 
2021  primarily  due  to  differences  in  the  loss  on  early  extinguishment  of  debt  recognized  for  the  First  Partial 
Repurchase  of  2023  Notes  in  the  year  ended  January  31,  2020  compared  to  the  Second  Partial  Repurchase  of 
2023 Notes in the year ended January 31, 2021.

Non-GAAP Financial Measures 

In  addition  to  our  results  determined  in  accordance  with  U.S.  generally  accepted  accounting  principles,  or 
GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use 
the  below  referenced  non-GAAP  financial  information,  collectively,  to  evaluate  our  ongoing  operations  and  for 
internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively 
with GAAP financial measures, may be helpful to investors because it provides consistency and comparability with 
past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP 
financial  information  to  supplement  their  GAAP  results.  The  non-GAAP  financial  information  is  presented  for 
supplemental  informational  purposes  only,  and  should  not  be  considered  a  substitute  for  financial  information 
presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other 
companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses 
that  are  required  by  GAAP  to  be  recorded  in  our  financial  statements.  In  addition,  they  are  subject  to  inherent 
limitations  as  they  reflect  the  exercise  of  judgment  by  our  management  about  which  expenses  are  excluded  or 
included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP 
financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are 
encouraged  to  review  the  related  GAAP  financial  measures  and  the  reconciliation  of  these  non-GAAP  financial 
measures  to  their  most  directly  comparable  GAAP  financial  measures,  and  not  to  rely  on  any  single  financial 
measure to evaluate our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin 

We  define  non-GAAP  gross  profit  and  non-GAAP  gross  margin  as  GAAP  gross  profit  and  GAAP  gross 
margin, adjusted for stock-based compensation expense included in cost of revenue and amortization of acquired 
intangibles. 

63

 
 
 
 
 
 
 
Gross profit
Add:

Stock-based compensation expense included in cost of revenue
Amortization of acquired intangibles

Non-GAAP gross profit
Gross margin
Non-GAAP gross margin

Year Ended January 31,

2021

2020

2019

(dollars in thousands)

$  617,743 

$  426,685 

$  285,833 

29,978 
6,373 
$  654,094 

20,087 
5,488 
$  452,260 

12,820 
832 
$  299,485 

 74 %
 78 %

 73 %
 77 %

 72 %
 75 %

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin 

We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and 
GAAP  operating  margin,  adjusted  for  stock-based  compensation  expense,  non-cash  charitable  contributions, 
amortization of acquired intangibles and acquisition-related expenses.

Operating loss
Add:

Year Ended January 31,

2021

2020

2019

(dollars in thousands)

$ (204,159) 

$ (185,832) 

$ (119,622) 

Stock-based compensation expense
Non-cash charitable contributions
Amortization of acquired intangibles
Acquisition-related expenses(1)
Non-GAAP operating income (loss)
Operating margin
 (30) %
 (10) %
Non-GAAP operating margin
(1)  We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental 

76,320 
1,008 
832 
— 
$  (41,462) 

  126,624 
1,746 
5,488 
3,449 
$  (48,525) 

  196,181 
9,292 
6,373 
— 
7,687 

 (24) %
 1 %

 (32) %
 (8) %

$ 

costs incurred. 

Non-GAAP Net Income (Loss) and Non-GAAP Net Margin 

We define non-GAAP net income (loss) and non-GAAP net margin as GAAP net loss and GAAP net margin, 
adjusted  for  stock-based  compensation  expense,  non-cash  charitable  contributions,  amortization  of  acquired 
intangibles, acquisition-related expenses, amortization of debt discount and debt issuance costs and loss on early 
extinguishment and conversion of debt.

64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
Add:

Stock-based compensation expense
Non-cash charitable contributions
Amortization of acquired intangibles
Acquisition-related expenses(2)
Amortization of debt discount and debt issuance costs(3)
Loss on early extinguishment and conversion of debt(4)

Non-GAAP net income (loss)
Net margin
Non-GAAP net margin

Year Ended January 31,
2020(1)

2019(1)

2021

(dollars in thousands)

$ (266,332) 

$ (208,913) 

$ (125,497) 

  196,181 
9,292 
6,373 
— 
68,424 
2,263 
$  16,201 

  126,624 
1,746 
5,488 
3,449 
25,892 
14,572 
$  (31,142) 

76,320 
1,008 
832 
— 
14,387 
— 
$  (32,950) 

 (32) %
 2 %

 (36) %
 (5) %

 (31) %
 (8) %

(1)  Prior periods have been adjusted to conform to the current presentation. See footnotes (3) and (4) for additional details.

(2)  We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring 
incremental costs incurred.

(3)  Amortization of debt issuance costs is an adjustment to non-GAAP net income (loss), effective July 31, 2020. Debt issuance costs included 
are $3.2 million, $1.8 million and $1.2 million for the years ended January 31, 2021, 2020 and 2019, respectively.

(4)  Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective July 31, 2020. The 
amounts of these write-offs are $1.1 million, $3.8 million and nil for the years ended January 31, 2021, 2020 and 2019, respectively.

Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

We define non-GAAP net income (loss) per share, basic, as non-GAAP net income (loss) divided by GAAP 

weighted-average shares used to compute net loss per share, basic and diluted.

We define non-GAAP net income (loss) per share, diluted, as non-GAAP net income (loss) divided by GAAP 
weighted-average shares used to compute net loss per share, basic and diluted adjusted for the potentially dilutive 
effect  of  (i)  employee  equity  incentive  plans,  excluding  the  impact  of  unrecognized  stock-based  compensation 
expense,  and  (ii)  convertible  senior  notes  outstanding  and  related  warrants.  In  addition,  non-GAAP  net  income 
(loss) per share, diluted, includes the anti-dilutive impact of the Company’s note hedge and capped call agreements 
on  convertible  senior  notes  outstanding,  which  fully  reduced  the  potential  dilutive  effect  of  the  convertible  senior 
notes outstanding. Accordingly, the Company did not record any adjustments to non-GAAP net income (loss) for the 
potential impact of the convertible senior notes outstanding under the if-converted method.

65

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
Add:

Year Ended January 31,
2020(1)

2019(1)

2021

(dollars in thousands)

$ 

(266,332)  $ 

(208,913)  $ 

(125,497) 

Stock-based compensation expense
Non-cash charitable contributions
Amortization of acquired intangibles
Acquisition-related expenses(2)
Amortization of debt discount and debt issuance costs(3)
Loss on early extinguishment and conversion of debt(4)

196,181 
9,292 
6,373 
— 
68,424 
2,263 

Non-GAAP net income (loss)

$ 

16,201  $ 

126,624 
1,746 
5,488 
3,449 
25,892 
14,572 
(31,142)  $ 

76,320 
1,008 
832 
— 
14,387 
— 
(32,950) 

Weighted-average shares used to compute net loss per share, basic 
and diluted
Non-GAAP weighted-average effect of potentially dilutive securities
Non-GAAP weighted-average shares used to compute non-GAAP net 
income (loss) per share, diluted

127,212 
15,171 

117,221 
— 

107,504 
— 

142,383 

117,221 

107,504 

Net loss per share, basic and diluted
Non-GAAP net income (loss) per share, basic(5)
Non-GAAP net income (loss) per share, diluted(5)

$ 
$ 
$ 

(2.09)  $ 
0.13  $ 
0.11  $ 

(1.78)  $ 
(0.27)  $ 
(0.27)  $ 

(1.17) 
(0.31) 
(0.31) 

(1)  Prior periods have been adjusted to conform to the current presentation. See footnotes (3), (4) and (5)  for additional details.

(2)  We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring 
incremental costs incurred.

(3)  Amortization of debt issuance costs is an adjustment to non-GAAP net income (loss), effective July 31, 2020. Debt issuance costs included 
are $3.2 million, $1.8 million and $1.2 million for the years ended January 31, 2021, 2020 and 2019, respectively.

(4)  Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective July 31, 2020. The 
amounts of these write-offs are $1.1 million, $3.8 million and nil for the years ended January 31, 2021, 2020 and 2019, respectively.

(5)  The total impact of the adjustments noted in footnotes (3) and (4) on non-GAAP net income (loss) per share, basic and diluted is $0.04 and 
$0.01 for the years ended January 31, 2020 and 2019, respectively. 

Free Cash Flow and Free Cash Flow Margin

We  define  Free  Cash  Flow  as  net  cash  provided  by  operating  activities,  less  cash  used  for  purchases  of 
property and equipment, net of sales proceeds, and capitalized internal-use software costs. Free cash flow margin 
is calculated as free cash flow divided by total revenue.

Net cash provided by operating activities
Less:

Purchases of property and equipment
Capitalization of internal-use software costs
Proceeds from sales of property and equipment

Free cash flow

Net cash used in investing activities
Net cash provided by financing activities
Free cash flow margin

66

Year Ended January 31,

2021

2020

2019

(in thousands)

$  127,962 

$  55,603 

$  15,172 

(13,083) 
(4,159) 
— 
$  110,720 

$ (1,305,146) 
$ 1,091,598 

(15,442) 
(3,888) 
— 
$  36,273 

$ (688,041) 
$  853,385 

(19,811) 
(2,851) 
740 
(6,750) 

$ 

$ (197,320) 
$  357,762 

 13 %

 6 %

 (2) %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Calculated Billings 

We define Calculated Billings as total revenue  plus  the change in deferred revenue and less the change in 

unbilled receivables during the period. 

Total revenue
Add:

Deferred revenue (end of period)
Unbilled receivables (beginning of period)

Less:

Unbilled receivables (end of period)
Deferred revenue (beginning of period)

Calculated billings

Year Ended January 31,

2021

2020

2019

(in thousands)

$  835,424  $  586,067  $  399,254 

513,598 
1,026 

371,450 
1,457 

254,390 
809 

(2,604)   
(371,450)   

(1,457) 
(164,779) 
$  975,994  $  703,558  $  488,217 

(1,026)   
(254,390)   

Liquidity and Capital Resources 

As  of  January  31,  2021,  our  principal  sources  of  liquidity  were  cash,  cash  equivalents  and  short-term 
investments  totaling  $2,556.2  million,  which  were  held  for  working  capital  purposes.  Our  cash  equivalents  and 
investments  consisted  primarily  of  U.S.  treasury  securities,  money  market  funds  and  corporate  debt  securities. 
Historically,  we  have  generated  significant  operating  losses  and  both  positive  and  negative  cash  flows  from 
operations as reflected in our accumulated deficit and 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. 

In  February  2018,  we  completed  our  private  offering  of  the  2023  Notes  due  on  February  15,  2023  and 
received aggregate proceeds of $345.0 million, before deducting costs of issuance of $10.0 million. The interest rate 
on the 2023 Notes is fixed at 0.25% per annum and is payable semi-annually in arrears on February 15 and August 
15 of each year, beginning on August 15, 2018. In connection with the issuance of the 2023 Notes, we entered into 
convertible note hedges (Note Hedges) with respect to our Class A common stock. We used an aggregate amount 
of $80.0 million of the net proceeds from the sale of the 2023 Notes to purchase the Note Hedges. The cost of the 
Note Hedges was partially offset by proceeds of $52.4 million from the sale of warrants to purchase shares of our 
Class A common stock (Warrants) in connection with the issuance of the 2023 Notes.

In  September  2019,  we  completed  our  private  offering  of  the  2025  Notes  due  on  September  1,  2025  and 
received  aggregate  proceeds  of  $1,060.0  million,  before  deducting  issuance  costs  of  approximately  $19.3  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 entered into 
capped call transactions (2025 Capped Calls) with respect to our Class A common stock. We used an aggregate 
amount of $74.1 million of the net proceeds from the sale of the 2025 Notes to purchase the 2025 Capped Calls.

Concurrent with the private offering of the 2025 Notes, we repurchased $224.4 million principal amount of the 
2023  Notes  in  privately-negotiated  transactions  for  aggregate  consideration  of  $604.8  million,  including 
approximately  $224.4  million  in  cash  and  approximately  3.0  million  shares  of  Class  A  common  stock.  We  also 
terminated a portion of our existing Note Hedges and Warrants in amounts corresponding to the principal amount of 
the First Partial Repurchase of 2023 Notes for net proceeds of $47.2 million.

In  June  2020,  we  completed  our  private  offering  of  the  2026  Notes  due  on  June  15,  2026  and  received 
aggregate  proceeds  of  $1,150.0  million,  before  deducting  issuance  costs  of  approximately  $15.2  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 entered into 
capped call transactions (2026 Capped Calls) with respect to our Class A common stock. We used an aggregate 
amount of $134.0 million of the net proceeds from the sale of the 2026 Notes to purchase the 2026 Capped Calls.

67

 
 
 
 
 
 
 
 
Concurrent with the private offering of the 2026 Notes, we repurchased $69.9 million principal amount of the 
2023  Notes  in  privately-negotiated  transactions  for  aggregate  consideration  of  $260.5  million,  including 
approximately 1.4 million shares of Class A common stock and $0.2 million in cash. We also terminated a portion of 
our  existing  Note  Hedges  and  Warrants  in  amounts  corresponding  to  the  principal  amount  of  the  Second  Partial 
Repurchase of 2023 Notes for net proceeds of $19.6 million.

Through  the  year  ended  January  31,  2021,  we  converted  approximately  $10.4  million  principal  amount  of 
2023  Notes  (not  in  connection  with  the  Second  Partial  Repurchase  of  2023  Notes)  and  exercised  corresponding 
Note Hedges. In connection with these transactions, we issued approximately 0.2 million shares of Class A common 
stock and made immaterial cash payments and received approximately 0.2 million shares of Class A common stock 
and an immaterial cash payment.  

During the fourth quarter of fiscal 2021, we received additional conversion requests and settled approximately 
$4.3 million aggregate principal amount of the 2023 Notes, primarily in shares of Class A common stock, in the first 
quarter of fiscal 2022. In addition, subsequent to January 31, 2021, the Company has received conversion requests 
for approximately $3.2 million aggregate principal amount of the 2023 Notes.

While the potential impacts of the COVID-19 pandemic may create near-term headwinds for cash flow caused 
by factors such as delays in customer payments and delays in deals closing, 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  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 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  January  31,  2021,  we  had  deferred  revenue  of 
$513.6 million, of which $502.7 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.

On March 3, 2021, we and Auth0 entered into the Merger Agreement, pursuant to which we agreed to acquire 
Auth0, subject to the terms and conditions set forth therein. If consummated, the acquisition of Auth0 may have a 
significant impact on our liquidity, financial condition and results of operations.

Cash Flows 

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

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities

Year Ended January 31,

2021

2020

2019

(in thousands)

$  127,962  $ 
 (1,305,146)   
  1,091,598 

55,603  $ 

(688,041)   
853,385 

15,172 
(197,320) 
357,762 

Effects of changes in foreign currency exchange rates on cash, cash 
equivalents and restricted cash
Net (decrease) increase in cash, cash equivalents and restricted cash

$ 

68

2,263 

(632) 
(83,323)  $  220,738  $  174,982 

(209)   

 
 
 
 
 
 
 
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 2023, 2025 and 2026 Notes in February 2018, September 2019 and 
June 2020, respectively, and from our initial public offering (IPO) in April 2017.

During the year ended January 31, 2021, cash provided by operating activities was $128.0 million primarily 
due to our net loss of $266.3 million, adjusted for non-cash charges of $357.0 million and net cash inflows of $37.3 
million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-
based  compensation,  amortization  of  debt  discount  and  issuance  costs,  amortization  of  deferred  commissions,  
depreciation and amortization of property and equipment and intangible assets, non-cash charitable contributions, 
loss on early extinguishment and conversion of debt and deferred income taxes. The primary drivers of the changes 
in operating assets and liabilities related to a $142.1 million increase in deferred revenue, a $53.8 million increase in 
accounts  payable,  accrued  compensation  and  accrued  other  expenses  and  a  $19.1  million  decrease  in  operating 
lease  right-of-use  assets,  partially  offset  by  a  $81.0  million  increase  in  deferred  commissions,  a  $66.4  million 
increase in accounts receivable, a $17.2 million decrease in operating lease liabilities and a $13.2 million increase 
in prepaid expenses and other assets.

During the year ended January 31, 2020, cash provided by operating activities was $55.6 million primarily due 
to  our  net  loss  of  $208.9  million,  adjusted  for  non-cash  charges  of  $213.0  million  and  net  cash  inflows  of  $51.5 
million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-
based  compensation,  amortization  of  deferred  commissions,  amortization  of  debt  discount  and  issuance  costs, 
depreciation  and  amortization  of  property  and  equipment  and  intangible  assets,  deferred  income  taxes,  non-cash 
charitable contributions and loss on early extinguishment of debt. The primary drivers of the changes in operating 
assets and liabilities related to a $116.4 million increase in deferred revenue, a $34.7 million increase in accounts 
payable, accrued compensation, and accrued other expenses and a $13.0 million decrease in operating lease right-
of-use  assets,  partially  offset  by  a  $61.2  million  increase  in  deferred  commissions,  a  $37.5  million  increase  in 
accounts  receivable,  a  $9.7  million  decrease  in  operating  lease  liabilities  and  a  $4.1  million  increase  in  prepaid 
expenses and other assets. 

Investing Activities 

Net cash used in investing activities during the year ended January 31, 2021 of $1,305.1 million was primarily 
attributable  to  the  purchases  of  investments  of  $2,029.0  million,  purchases  of  property  and  equipment  of  $13.1 
million to support additional office space and headcount and the capitalization of internal-use software costs of $4.2 
million  associated  with  the  development  of  additional  features  and  functionality  for  our  platform.  These  activities 
were offset by proceeds from the sales and maturities of investments of $741.3 million.

Net cash used in investing activities during the year ended January 31, 2020 of $688.0 million was primarily 
attributable  to  the  purchases  of  investments  of  $999.4  million,  payment  of  $44.3  million,  net  of  cash  acquired,  in 
connection  with  an  acquisition,  purchases  of  property  and  equipment  of  $15.4  million  to  support  additional  office 
space and headcount, payment of $8.6 million in connection with the purchase of developed technology intangible 
assets  and  the  capitalization  of  internal-use  software  costs  of  $3.9  million  associated  with  the  development  of 
additional  features  and  functionality  for  our  platform. These  activities  were  offset  by  proceeds  from  the  sales  and 
maturities of investments of $383.5 million. 

Financing Activities 

Cash  provided  by  financing  activities  during  the  year  ended  January  31,  2021  of  $1,091.6  million  was 
primarily attributable to the issuance of the 2026 Notes for proceeds of $1,134.8 million, net of issuance costs and 
proceeds from the termination of Note Hedges of $195.0 million, offset by payments for termination of Warrants of 
$175.4 million and the purchase of the 2026 Capped Calls of $134.0 million. Other items impacting cash provided 
by financing activities include proceeds from the exercise of stock options of $45.6 million and proceeds from our 
employee stock purchase plan (ESPP) of $25.9 million.

Cash provided by financing activities during the year ended January 31, 2020 of $853.4 million was primarily 
attributable to the issuance of the 2025 Notes for proceeds of $1,040.7 million, net of issuance costs, and proceeds 
from  the  termination  of  Note  Hedges  of  $405.9  million,  offset  by  payments  for  termination  of  Warrants  of  $358.6 

69

million,  payments  for  the  First  Partial  Repurchase  of  2023  Notes  of  $224.4  million,  and  the  purchase  of  the  2025 
Capped Calls of $74.1 million. Other items impacting cash provided by financing activities include proceeds from the 
exercise of stock options of $45.4 million and proceeds from our ESPP of $18.8 million. 

Obligations and Other Commitments 

Our  principal  commitments  consist  of  obligations  under  our  convertible  senior  notes,  operating  leases  for 
office  space,  data  center  hosting  facilities,  and  other  sales  and  marketing  obligations.  Our  obligations  under  our 
convertible  senior  notes  are  described  in  the  "Liquidity  and  Capital  Resources"  section  of  Item  7  of  this  Annual 
Report  on  Form  10-K  and  in  Note  9  to  our  consolidated  financial  statements  included  elsewhere  in  this  Annual 
Report  on  Form  10-K.  Information  regarding  our  non-cancellable  lease  and  other  purchase  commitments  as  of 
January 31, 2021 can be found in Notes 10 and 11 to our consolidated financial statements included elsewhere in 
this Annual Report on Form 10-K.

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  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 consolidated balance sheets, 
consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

Critical Accounting Policies and Estimates 

We  prepare  our  consolidated  financial  statements  in  accordance  with  GAAP.  In  the  preparation  of  these 
consolidated  financial  statements,  we  are  required  to  make  estimates  and  assumptions  that  affect  the  reported 
amounts  of  assets,  liabilities,  revenue,  costs  and  expenses,  and  related  disclosures.  To  the  extent  that  there  are 
material  differences  between  these  estimates  and  actual  results,  our  financial  condition  or  results  of  operations 
would  be  affected.  We  base  our  estimates  on  past  experience  and  other  assumptions  that  we  believe  are 
reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting 
estimates of this type as critical accounting policies and estimates, which we discuss below. 

Revenue Recognition 

We  derive  revenue  from  subscription  fees  (which  include  support  fees)  and  professional  services  fees.  We 
sell  subscriptions  to  our  platform  through  arrangements  that  are  generally  one  to  five  years  in  length.  Our 
arrangements are generally non-cancellable and non-refundable. Furthermore, if a customer reduces the contracted 
usage  or  service  level,  the  customer  has  no  right  of  refund.  Our  subscription  arrangements  do  not  provide 
customers with the right to take possession of the software supporting the platform and, as a result, are accounted 
for  as  service  arrangements.  This  revenue  recognition  policy  is  consistent  for  sales  generated  directly  with 
customers and sales generated indirectly through channel partners. 

70

We determine revenue recognition through the following steps: 

•

•

•

•

•

Identification of the contract, or contracts, with a customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of revenue when, or as, we satisfy a performance obligation.

Subscription Revenue 

Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancellable 
contractual  term  of  the  arrangement,  generally  beginning  on  the  date  that  our  service  is  made  available  to  the 
customer.

Professional Services Revenue 

Our  professional  services  principally  consist  of  customer-specific  requests  for  application  integrations,  user 
interface enhancements and other customer specific requests. Revenue for our professional services is recognized 
as services are performed in proportion with their pattern of transfer. 

Contracts with Multiple Performance Obligations

Some  of  our  contracts  with  customers  contain  multiple  performance  obligations.  For  these  contracts,  we 
account for individual performance obligations separately if they are distinct. The transaction price is allocated to the 
separate performance obligations on a relative stand-alone selling price (SSP) basis. We determine SSP based on 
observable prices, if available, for those related services when sold separately. When such observable prices are 
not available, we determine SSP based on overarching pricing objectives and strategies, taking into consideration 
market  conditions  and  other  factors,  including  customer  size,  volume  purchased,  market  and  industry  conditions, 
product-specific factors and historical sales of the deliverables.

Deferred Commissions 

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining 
a contract with a customer. Sales commissions for new revenue contracts, including incremental sales to existing 
customers,  are  deferred  and  then  amortized  on  a  straight-line  basis  over  a  period  of  benefit,  which  we  have 
determined to be generally five years. We determined the period of benefit by taking into consideration the terms of 
our customer contracts, our technology and other factors. Sales commissions for renewal contracts (which are not 
considered  commensurate  with  sales  commissions  for  new  revenue  contracts  and  incremental  sales  to  existing 
customers)  are  deferred  and  then  amortized  on  a  straight-line  basis  over  the  related  period  of  benefit,  which  is 
generally the related contract renewal term. Amortization expense is included in sales and marketing expenses in 
our consolidated statements of operations.

Deferred  commissions  on  our  consolidated  balance  sheets  totaled  $154.5  million  and  $111.5  million 

at January 31, 2021 and 2020, respectively. 

Business Combinations

When  we  acquire  a  business,  the  purchase  price  is  allocated  to  the  net  tangible  and  identifiable  intangible 
assets  acquired  based  on  their  estimated  fair  values.  Any  residual  purchase  price  is  recorded  as  goodwill.  The 
allocation of the purchase price requires management to make significant estimates in determining the fair values of 
assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, 
but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-
average cost of capital and the cost savings expected to be derived from acquiring an asset. These estimates are 
inherently  uncertain  and  unpredictable.  During  the  measurement  period,  which  may  be  up  to  one  year  from  the 
acquisition  date,  adjustments  to  the  fair  value  of  these  tangible  and  intangible  assets  acquired  and  liabilities 
assumed  may  be  recorded,  with  the  corresponding  offset  to  goodwill.  Upon  the  conclusion  of  the  measurement 
period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any 
subsequent adjustments are recorded to our consolidated statements of operations.

71

Goodwill on our consolidated balance sheets totaled $48.0 million at January 31, 2021 and 2020. Goodwill is 

tested for impairment annually on November 1 or more frequently if certain indicators are present. Based on the 
annual assessment, no indicator of impairment was noted and as such no impairment charge was recorded during 
the years ended January 31, 2021, 2020 and 2019.

Convertible Senior Notes

We account for the issuance of convertible senior notes in accordance with Financial Accounting Standards 
Board (FASB) Accounting Standards Codification (ASC) Subtopic 470-20, Debt with Conversion and Other Options. 
Pursuant to ASC Subtopic 470-20, as our Notes have a net settlement feature and may be settled wholly or partially 
in cash upon conversion, we are required to separately account for the liability (debt) and equity (conversion option) 
components  of  the  instrument.  The  carrying  amount  of  the  liability  component  is  computed  by  estimating  the  fair 
value  of  a  similar  liability  without  the  conversion  option  using  income  and  market  based  approaches.  For  the 
income-based  approach,  we  use  a  convertible  bond  pricing  model  that  includes  several  assumptions  such  as 
volatility, the risk-free rate, and observable trading activity for the Company's existing Notes. For the market-based 
approach, we observe the price of derivative instruments purchased in conjunction with our convertible senior note 
issuances or we evaluate issuances of convertible debt securities by other companies with similar credit risk ratings 
at the time of issuance. The amount of the equity component is then calculated by deducting the fair value of the 
liability  component  from  the  principal  amount  of  the  instrument. This  difference  represents  a  debt  discount  that  is 
amortized to interest expense over the respective terms of the Notes using an effective interest rate method. The 
equity  component  is  not  remeasured  as  long  as  it  continues  to  meet  the  conditions  for  equity  classification.  In 
accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability 
and equity components were based on their relative values.

Similarly,  in  accordance  with ASC  Subtopic  470-20,  transactions  involving  contemporaneous  exchanges  of 
cash  between  the  same  debtor  and  creditor  in  connection  with  the  issuance  of  a  new  debt  obligation  and 
satisfaction  of  an  existing  debt  obligation  by  the  debtor  should  be  evaluated  as  a  modification  or  an  exchange 
transaction  depending  on  whether  the  exchange  is  determined  to  have  substantially  different  terms.  When  the 
exchange is deemed to have substantially different terms due to a significant difference between the value of the 
conversion  option  immediately  prior  to  and  after  the  exchange,  the  transaction  is  accounted  for  as  a  debt 
extinguishment.  Pursuant  to  ASC  Subtopic  470-20,  total  consideration  for  the  satisfaction  of  an  existing  debt 
obligation is separated into liability and equity components by estimating the fair value of a similar liability without a 
conversion  option  and  assigning  the  residual  value  to  the  equity  component.  The  effective  interest  rate  used  to 
estimate  the  fair  value  of  the  liability  component  is  based  on  the  income  and  market  based  approaches  used  to 
determine the effective interest rate of the new debt obligation, adjusted for the remaining tenor of the extinguished 
debt. The  difference  between  the  fair  value  and  the  amortized  carrying  value  of  the  extinguished  debt,  net  of  the 
proportionate amounts of unamortized debt discount and remaining unamortized debt issuance costs, is recorded 
as a gain or loss on extinguishment.

Recent Accounting Pronouncements 

See Note 2 to our consolidated financial statements “Summary of Significant Accounting Policies — Recently 
Adopted Accounting Pronouncements" and " — Recently Issued Accounting Pronouncements Not Yet Adopted” for 
more information.

72

Item 7A. 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  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 years ended January 31, 2021, 2020 and 2019, a hypothetical 10% change in foreign currency exchange rates 
applicable to our business would not have had a material impact on our consolidated financial statements. 

Interest Rate Risk 

We had cash, cash equivalents and short-term investments totaling $2,556.2 million as of January 31, 2021, 
of  which  $2,432.8  million  was  invested  in  money  market  funds,  U.S.  treasury  securities  and  corporate  debt 
securities.  Our  cash  and  cash  equivalents  are  held  for  working  capital  purposes.  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 January 31, 2021, 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 February 2018, we issued the 2023 Notes due February 15, 2023 with a principal amount of $345.0 million, 
of  which  $224.4  million  and  $69.9  million  were  repurchased  in  September  2019  and  June  2020,  respectively. 
Concurrently with the issuance of the 2023 Notes, we entered into separate Note Hedges and Warrant transactions, 
a  portion  of  which  were  terminated  in  September  2019  and  June  2020  in  connection  with  the  2023  Notes  Partial 
Repurchases. The  Note  Hedges  were  completed  to  reduce  the  potential  dilution  from  the  conversion  of  the  2023 
Notes.  Additionally,  through  the  year  ended  January  31,  2021,  we  received  and  completed  requests  to  convert 
$10.4  million  principal  amount  of  the  2023  Notes  (not  in  connection  with  the  Second  Partial  Repurchase  of  2023 
Notes) and exercised a corresponding amount of Note Hedges. During the fourth quarter of fiscal 2021, we received 
additional  conversion  requests  for  $4.3  million  principal  amount  of  the  2023  Notes  that  were  settled  in  the  first 
quarter  of  fiscal  2022.  In  addition,  subsequent  to  January  31,  2021,  we  received  conversion  requests  for 
approximately $3.2 million principal amount of the 2023 Notes.

In September 2019, we issued the 2025 Notes due September 1, 2025 with a principal amount of $1,060.0 
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.

In  June  2020,  we  issued  the  2026  Notes  due  June  15,  2026  with  a  principal  amount  of  $1,150.0  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.

The  2023  Notes,  2025  Notes  and  2026  Notes  have  a  fixed  annual  interest  rate  of  0.25%,  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 

73

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 
5 to our consolidated financial statements for more information.

74

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Page

76

80

81

82

83

85

87

75

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm 

To the Stockholders and the Board of Directors of Okta, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Okta, Inc. (the Company) as of January 
31,  2021  and  2020,  the  related  consolidated  statements  of  operations,  comprehensive  loss,  stockholders'  equity 
(deficit),  and  cash  flows  for  each  of  the  three  years  in  the  period  ended  January  31,  2021,  and  the  related  notes 
(collectively  referred  to  as  the  “consolidated  financial  statements”).  In  our  opinion,  the  consolidated  financial 
statements  present  fairly,  in  all  material  respects,  the  financial  position  of  the  Company  at  January  31,  2021  and 
2020, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 
2021, in conformity with U.S. generally accepted accounting principles. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board 
(United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2021, based on 
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations 
of  the  Treadway  Commission  (2013  framework)  and  our  report  dated  March  4,  2021  expressed  an  unqualified 
opinion thereon.

Basis for Opinion

These  financial  statements  are  the  responsibility  of  the  Company's  management.  Our  responsibility  is  to 
express  an  opinion  on  the  Company’s  financial  statements  based  on  our  audits.  We  are  a  public  accounting  firm 
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the 
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission 
and the PCAOB. 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we 
plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are  free  of 
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks 
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that 
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and 
disclosures  in  the  financial  statements.  Our  audits  also  included  evaluating  the  accounting  principles  used  and 
significant  estimates  made  by  management,  as  well  as  evaluating  the  overall  presentation  of  the  financial 
statements. We believe that our audits provide a reasonable basis for our opinion. 

Critical Audit Matters

The  critical  audit  matters  communicated  below  are  matters  arising  from  the  current  period  audit  of  the 
financial statements that were communicated or required to be communicated to the audit committee and that: (1) 
relate  to  accounts  or  disclosures  that  are  material  to  the  financial  statements  and  (2)  involved  our  especially 
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way 
our  opinion  on  the  consolidated  financial  statements,  taken  as  a  whole,  and  we  are  not,  by  communicating  the 
critical  audit  matters  below,  providing  separate  opinions  on  the  critical  audit  matters  or  on  the  accounts  or 
disclosures to which they relate.

76

Description 
of the Matter

How We 
Addressed 
the Matter in 
Our Audit

Revenue recognition - Identifying and evaluating terms and conditions in contracts

As  explained  in  Note  2  to  the  consolidated  financial  statements,  the  Company  derives  revenue 
from  subscription  fees  and  professional  services  fees.  The  Company’s  arrangements  are 
generally  non-cancellable  and  non-refundable.  In  addition,  the  arrangements  do  not  provide 
customers with the right to take possession of the software and, as a result, are accounted for as 
service arrangements. Subscription revenue, which includes support, is recognized on a straight-
line  basis  over  the  non-cancellable  contractual  term  of  the  arrangement,  generally  beginning  on 
the  date  that  the  Company’s  service  is  made  available  to  the  customer.  Revenue  for  the 
Company’s  professional  services  is  recognized  as  services  are  performed  in  proportion  to  their 
pattern of transfer. 

Auditing  the  Company’s  accounting  for  revenue  recognition  was  challenging,  specifically  related 
to  the  appropriate  identification  and  evaluation  of  non-standard  terms  and  conditions.  For 
example,  certain  non-standard  terms  and  conditions  required  judgment  to  identify  the  distinct 
performance obligations and determine the timing of revenue recognition.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the 
Company’s  internal  controls  over  the  identification  and  evaluation  of  terms  and  conditions  in 
contracts  that  impact  revenue  recognition,  including  the  identification  of  performance  obligations 
and the determination of the timing of revenue recognition. This included testing relevant controls 
over  the  information  systems  that  are  used  in  the  initiation,  billing  and  recording  of  revenue 
transactions. 

Among  other  procedures,  on  a  sample  basis,  we  tested  the  completeness  and  accuracy  of 
management’s identification and evaluation of the non-standard terms and conditions in contracts. 
We  also  tested  amounts  recognized  pursuant  to  contractual  terms  and  conditions  by  examining 
the  relationship  between  revenue  recognized  and  accounts  receivable  and  related  cash 
collections. Further, we selected a sample of contractual arrangements to test that management 
had  properly  assessed  the  impact  of  any  non-standard  terms  on  the  identified  performance 
obligations and timing of revenue recognition. Additionally, to verify completeness of non-standard 
terms  and  conditions,  we  obtained  confirmations  of  terms  and  conditions  for  a  sample  of 
arrangements with customers.

Convertible Notes

Description 
of the Matter

As  explained  in  Note  9  to  the  consolidated  financial  statements,  in  June  2020  the  Company 
issued $1.15 billion of convertible senior notes due June 15, 2026 (2026 Notes), which permit the 
Company to settle in cash or stock at its option. Concurrent with the offering of the 2026 Notes, 
the  Company  entered  into  separate  capped  call  transactions  to  reduce  potential  dilution  upon 
conversion of the 2026 Notes. Simultaneous with the issuance of the 2026 Notes, the Company 
repurchased a portion of the convertible notes issued in February 2018, due February 15, 2023 
(2023 Notes) (Second Partial Repurchase of 2023 Notes), and accounted for this transaction as a 
debt  extinguishment.  These  transactions  are  collectively  referred  to  as  the  Convertible  Notes 
Transactions.

77

Auditing  the  Company’s  accounting  for  the  Convertible  Notes Transactions  was  complex  due  to 
the significant judgment required in determining the liability component of the related convertible 
notes as well as the balance sheet classification of the elements of the 2026 Notes. The Company 
accounted  for  the  Convertible  Notes  Transactions  as  separate  liability  and  equity  components, 
determined the fair value of the respective liability components based on an estimate of the fair 
value of a similar liability without a conversion option and assigned the residual value to the equity 
component. 

The Company estimated the fair value of the liability component of the 2026 Notes, 2025 Notes 
and  2023  Notes  using  a  discounted  cash  flow  model  with  a  risk  adjusted  yield  for  similar  debt 
instruments, absent any embedded conversion feature.  In estimating the risk adjusted yield, the 
Company used both an income and market approach.  For the income approach, the Company 
used  a  convertible  bond  pricing  model,  which  included  several  assumptions  including  volatility, 
risk-free  rate,  and  observable  trading  activity  for  the  Company’s  existing  Notes.  For  the  market 
approach,  the  Company  performed  an  evaluation  of  issuances  of  convertible  debt  securities  by 
other comparable companies.  

Additionally,  a  detailed  analysis  of  the  terms  of  the  2026  Notes  was  required  to  determine 
existence  of  any  derivatives  that  may  require  separate  mark-to-market  accounting  under 
applicable accounting guidance.
We obtained an understanding,  evaluated  the design,  and tested the operating effectiveness of 
controls  over  the  Company’s  Convertible  Notes  Transactions.  For  example,  we  tested  the 
Company’s  controls  over  the  initial  recognition  and  measurement  of  the  Convertible  Notes 
Transactions, including the recording of the associated liability and equity components.  

How We 
Addressed 
the Matter in 
Our Audit

Our  testing  of  the  Company’s  initial  accounting  for  the  Convertible  Notes  Transactions,  among 
other  procedures,  included  reading  the  underlying  agreements  and  evaluating  the  Company’s 
accounting analysis of the initial accounting of the Convertible Notes Transactions, including the 
determination  of  the  balance  sheet  classification  of  each  transaction,  identification  of  any 
derivatives included in the arrangements, and determination that the Second Partial Repurchase 
of 2023 Notes was a debt extinguishment.

Our testing of the fair value of the liability components of the 2026 Notes and the Second Partial 
Repurchase  of  2023  Notes,  included,  among  other  procedures,  evaluating  the  Company's 
selection  of  the  valuation  methodology  and  significant  assumptions  and  evaluating  the 
completeness  and  accuracy  of  the  underlying  data  supporting  the  significant  assumptions  and 
estimates.  Specifically,  when  assessing  the  key  assumptions,  we  focused  on  the  Company’s 
assumptions  used  to  determine  the  risk  adjusted  yield  as  well  as  its  analysis  of  comparable 
issuances of debt securities by other companies. In addition, we involved a valuation specialist to 
assist in our evaluation of the significant assumptions and methodology used by the Company.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

San Francisco, California

March 4, 2021

78

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Okta, Inc. 

Opinion on Internal Control Over Financial Reporting

We have audited Okta, Inc.’s internal control over financial reporting as of January 31, 2021, based on criteria 
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the 
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Okta, Inc. (the Company) maintained, 
in  all  material  respects,  effective  internal  control  over  financial  reporting  as  of  January  31,  2021,  based  on  the 
COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board 
(United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2021 and 2020, the 
related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for 
each of the three years in the period ended January 31, 2021, and the related notes and our report dated March 4, 
2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting 
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying 
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on 
the  Company’s  internal  control  over  financial  reporting  based  on  our  audit.  We  are  a  public  accounting  firm 
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the 
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission 
and the PCAOB.

We  conducted  our  audit  in  accordance  with  the  standards  of  the  PCAOB. Those  standards  require  that  we 
plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  effective  internal  control  over  financial 
reporting was maintained in all material respects. 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk 
that  a  material  weakness  exists,  testing  and  evaluating  the  design  and  operating  effectiveness  of  internal  control 
based  on  the  assessed  risk,  and  performing  such  other  procedures  as  we  considered  necessary  in  the 
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance 
regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial  statements  for  external  purposes  in 
accordance  with  generally  accepted  accounting  principles.  A  company’s  internal  control  over  financial  reporting 
includes  those  policies  and  procedures  that  (1)  pertain  to  the  maintenance  of  records  that,  in  reasonable  detail, 
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable 
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and expenditures of the company are being made 
only in accordance  with authorizations of management  and directors of the company; and (3) provide reasonable 
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 
assets that could have a material effect on the financial statements.

Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect 
misstatements.  Also,  projections  of  any  evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that 
controls  may  become  inadequate  because  of  changes  in  conditions,  or  that  the  degree  of  compliance  with  the 
policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Francisco, California

March 4, 2021

79

OKTA, INC. 

CONSOLIDATED BALANCE SHEETS 

(in thousands, except per share data) 

Assets
Current assets:

Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances of $3,451 and $1,166
Deferred commissions
Prepaid expenses and other current assets
Total current assets

Property and equipment, net
Operating lease right-of-use assets
Deferred commissions, noncurrent
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:

Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Convertible senior notes, net
Deferred revenue
Total current liabilities

Convertible senior notes, net, noncurrent
Operating lease liabilities, noncurrent
Deferred revenue, noncurrent
Other liabilities, noncurrent

Total liabilities

Commitments and contingencies (Note 11)
Stockholders’ equity:

As of January 31,

2021

2020

$ 

434,607  $ 

2,121,584 
194,818 
45,949 
81,609 
2,878,567 
62,783 
149,604 
108,555 
27,009 
48,023 
24,256 
3,298,797  $ 

8,557  $ 

53,729 
71,906 
908,684 
502,738 
1,545,614 
857,387 
179,518 
10,860 
11,375 
2,604,754 

$ 

$ 

520,048 
882,976 
130,115 
33,636 
32,950 
1,599,725 
53,535 
125,204 
77,874 
32,529 
48,023 
18,505 
1,955,395 

3,837 
36,887 
40,300 
100,703 
365,236 
546,963 
837,002 
154,511 
6,214 
5,361 
1,550,051 

Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares 
issued and outstanding as of January 31, 2021 and 2020

Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized; 
122,824 and 113,990 shares issued and outstanding as of January 31, 2021 and 2020, 
respectively
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 8,159 
and 8,648 shares issued and outstanding as of January 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity

Total liabilities and stockholders’ equity 

— 

12 

— 

11 

1 
1,656,096 
5,390 
(967,456)   
694,043 
3,298,797  $ 

1 
1,105,564 
892 
(701,124) 
405,344 
1,955,395 

$ 

See Notes to Consolidated Financial Statements.

80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OKTA, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(in thousands, except per share data) 

Revenue

Subscription

Professional services and other

Total revenue

Cost of revenue

Subscription

Professional services and other

Total cost of revenue
Gross profit

Operating expenses

Research and development

Sales and marketing

General and administrative

Total operating expenses

Operating loss

Interest expense

Interest income and other, net

Loss on early extinguishment and conversion of debt

Interest and other, net

Loss before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net loss

Year Ended January 31,

2021

2020

2019

$  796,613  $  552,688  $  370,855 

38,811 

835,424 

33,379 

586,067 

28,399 

399,254 

170,095 

47,586 

217,681 
617,743 

222,826 

427,350 

171,726 

821,902 

116,445 

42,937 

159,382 
426,685 

159,269 

340,356 

112,892 

612,517 

77,354 

36,067 

113,421 
285,833 

102,385 

227,960 

75,110 

405,455 

(204,159)   

(185,832)   

(119,622) 

(72,660)   

(27,017)   

(15,072) 

12,891 

17,089 

(2,263)   

(14,572)   

9,180 

— 

(62,032)   

(24,500)   

(5,892) 

(266,191)   

(210,332)   

(125,514) 

141 

(1,419)   

(17) 

$  (266,332)  $  (208,913)  $  (125,497) 

Net loss per share, basic and diluted

$ 

(2.09)  $ 

(1.78)  $ 

(1.17) 

Weighted-average shares used to compute net loss per share, basic 
and diluted

127,212 

117,221 

107,504 

See Notes to Consolidated Financial Statements. 

81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OKTA, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 

(in thousands) 

Net loss

Other comprehensive income (loss):

Net change in unrealized gains or losses on available-for-sale securities

Foreign currency translation adjustments

Other comprehensive income (loss)

Comprehensive loss

Year Ended January 31,

2021

2020

2019

$ (266,332)  $  (208,913)  $ (125,497) 

779 

3,719 

4,498 

1,220 

(9)

1,211 

179 

(889)

(710) 

$ (261,834)  $  (207,702)  $ (126,207) 

See Notes to Consolidated Financial Statements.

82

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84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OKTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(in thousands) 

Cash flows from operating activities:

Net loss

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation

Depreciation, amortization and accretion

Amortization of debt discount and issuance costs

Amortization of deferred commissions

Deferred income taxes

Non-cash charitable contributions

Loss on early extinguishment and conversion of debt

Other, net

Changes in operating assets and liabilities:

Accounts receivable

Deferred commissions

Prepaid expenses and other assets

Operating lease right-of-use assets

Accounts payable

Accrued compensation

Accrued expenses and other liabilities

Operating lease liabilities

Deferred revenue

Net cash provided by operating activities

Cash flows from investing activities:

Capitalization of internal-use software costs

Purchases of property and equipment

Proceeds from sales of property and equipment

Purchases of securities available for sale and other

Proceeds from maturities and redemption of securities available for sale

Proceeds from sales of securities available for sale and other

Purchase of intangible assets

Payments for business acquisition, net of cash acquired

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs
Payments for repurchases of convertible senior notes

Purchases of hedges related to convertible senior notes

Proceeds from hedges related to convertible senior notes

Proceeds from issuance of warrants related to convertible senior notes

Payments for warrants related to convertible senior notes

Purchases of capped calls related to convertible senior notes

Proceeds from stock option exercises, net of repurchases

Proceeds from shares issued in connection with employee stock purchase plan

Other, net

Net cash provided by financing activities

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted 
cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

85

Year Ended January 31,

2021

2020

2019

$ 

(266,332)  $ 

(208,913)  $ 

(125,497) 

196,181 

126,624 

36,865 

68,424 

39,661 

(1,182) 

9,292 

2,263 

5,537 

(66,373) 

(81,016) 

(13,174) 

19,053 

4,081 

44,157 

5,527 

(17,150) 

142,148 

127,962 

(4,159) 

(13,083) 

— 

17,815 

25,892 

28,588 

(2,253) 

1,746 

14,572 

(11)

(37,515) 

(61,224) 

(4,080) 

12,951 

1,689 

23,034 

9,972 

(9,716) 

116,432 

55,603 

(3,888) 

(15,442) 

— 

76,320 

8,001 

14,279 

20,852 

(765) 

1,008 

— 

640

(39,682) 

(41,342) 

(10,334) 

17,239 

(1,437) 

7,429 

5,800 

(6,642) 

89,303 

15,172 

(2,851) 

(19,811) 

740 

(2,029,030) 

(999,387) 

(631,488) 

535,123 

206,129 

(126)

— 

356,277 

27,271 

(8,589)

298,650 

173,072 

— 

(44,283) 

(15,632) 

(1,305,146) 

(688,041) 

(197,320) 

1,134,841 
(446)

1,040,660 
(224,414)

— 

— 

195,046 

405,851 

334,980 
— 

(80,040) 

— 

— 

— 

52,440 

(175,399) 

(358,622) 

(133,975) 

(74,094) 

45,620 

25,911 

— 

45,363 

18,767 

(126)

— 

— 

36,861 

13,727 

(206)

1,091,598 

853,385 

357,762 

2,263 

(83,323) 

531,953 

(209)

220,738 

311,215 

(632)

174,982 

136,233 

$ 

448,630  $  531,953 

$  311,215 

Year Ended January 31,

2021

2020

2019

Supplementary cash flow disclosure:

Cash paid during the period for:

Interest

Income taxes

Non-cash investing and financing activities:

$ 

3,759  $ 

862 

$ 

978 

1,123 

Issuance of common stock for repurchases and conversions of convertible senior notes

307,910 

380,406 

Benefit from exercise of hedges related to convertible senior notes

Common stock issued as charitable contribution

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

Property and equipment acquired through tenant improvement allowance

Property and equipment and other accrued but not yet paid

Issuance of common stock for bonus settlement

37,076 

9,292 

45,611 

4,811 

974 

9,818 

— 

1,746 

16,832 

304 

855 

2,809 

403 

514 

— 

— 

1,008 

127,575 

22,236 

7,225 

— 

Reconciliation of cash, cash equivalents, and restricted cash within the consolidated 
balance sheets to the amounts shown in the statements of cash flows above:

Cash and cash equivalents

Restricted cash, current included in prepaid expenses and other current assets

Restricted cash, noncurrent included in other assets

Total cash, cash equivalents and restricted cash

$ 

434,607  $  520,048 

$  298,394 

4,553 

9,470 

467 

11,438 

1,384 

11,437 

$ 

448,630  $  531,953 

$  311,215 

See Notes to Consolidated Financial Statements.

86

OKTA, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

1. Overview and Basis of Presentation 

Description of Business 

Okta,  Inc.  (the  Company)  is  the  leading  independent  identity  management  platform  for  the  enterprise.  The 
Okta Identity Cloud enables the Company's customers to securely connect the right people to the right technologies 
and  services  at  the  right  time.  The  Company  was  incorporated  in  January  2009  as  Saasure,  Inc.,  a  California 
corporation, and was later reincorporated in April 2010 under the name Okta, Inc. as a Delaware corporation. The 
Company is headquartered in San Francisco, California.

Basis of Presentation and Principles of Consolidation 

The  accompanying  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).  All  intercompany  balances  and  transactions  have  been  eliminated  in 
consolidation. 

The Company’s fiscal year ends on January 31. References to fiscal 2021, for example, refer to the fiscal year 

ended January 31, 2021. 

Use of Estimates 

The preparation of consolidated financial statements in conformity with GAAP requires management to make 
estimates,  judgments  and  assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,  disclosure  of 
contingent  assets  and  liabilities  at  the  date  of  the  consolidated  financial  statements  and  the  reported  amounts  of 
revenue and expenses during the reporting period. The Company bases its estimates on historical experience and 
on other assumptions that its management believes are reasonable under the circumstances. Actual results could 
vary from those estimates. The Company’s most significant estimates include the SSP for each distinct performance 
obligation included in customer contracts with multiple performance obligations, the determination of the period of 
benefit  for  deferred  commissions,  the  determination  of  the  effective  interest  rate  of  the  liability  components  of  its 
convertible senior notes, the determination of the incremental borrowing rate used for operating lease liabilities, the 
valuation of deferred income tax assets and the valuation of acquired intangible assets.

In  March  2020,  the  World  Health  Organization  (WHO)  declared  the  outbreak  of  the  novel  coronavirus, 
COVID-19,  a  pandemic,  which  continues  to  spread  across  the  globe.  The  Company  considered  the  impact  of 
COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on 
the  consolidated  financial  statements  for  the  year  ended  January  31,  2021.  As  events  continue  to  evolve  and 
additional information becomes available, our assumptions and estimates may change materially in future periods.

Foreign Currency 

The  functional  currencies  of  the  Company’s  foreign  subsidiaries  are  the  respective  local  currencies. 
Translation  adjustments  arising  from  the  use  of  differing  exchange  rates  from  period  to  period  are  included  in 
accumulated  other  comprehensive  loss  within  the  consolidated  statements  of  redeemable  convertible  preferred 
stock  and  stockholders’  equity  (deficit).  Foreign  currency  transaction  gains  and  losses  are  included  in  other 
expense, net in the consolidated statements of operations and were not material for the years ended January 31, 
2021, 2020 or 2019. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at 
the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate 
during the period, and equity balances are translated using historical exchange rates. 

2. Summary of Significant Accounting Policies 

Segment Information 

The Company operates in a single operating segment. The Company’s chief operating decision maker is its 
chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making 
operating decisions, assessing financial performance and allocating resources. 

87

Revenue Recognition 

The Company derives revenue from subscription fees (which include support fees) and professional services 
fees. The Company sells subscriptions to its platform through arrangements that are generally one to five years in 
length. The Company’s arrangements are generally non-cancellable and non-refundable. Furthermore, if a customer 
reduces  the  contracted  usage  or  service  level,  the  customer  has  no  right  of  refund.  The  Company’s  subscription 
arrangements  do  not  provide  customers  with  the  right  to  take  possession  of  the  software  supporting  the  platform 
and, as a result, are accounted for as service arrangements. This revenue recognition policy is consistent for sales 
generated directly with customers and sales generated indirectly through channel partners.

The Company determines revenue recognition through the following steps:

•

•

•

•

•

Identification of the contract, or contracts, with a customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Subscription Revenue

Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancellable 
contractual term of the arrangement, generally beginning on the date that the Company’s service is made available 
to the customer.

Professional Services Revenue

The  Company’s  professional  services  principally  consist  of  customer-specific  requests  for  application 
integrations,  user  interface  enhancements  and  other  customer-specific  requests.  Revenue  for  the  Company’s 
professional services is recognized as services are performed in proportion to their pattern of transfer.

Contracts with Multiple Performance Obligations

Some  of  the  Company’s  contracts  with  customers  contain  multiple  performance  obligations.  For  these 
contracts,  the  Company  accounts  for  individual  performance  obligations  separately  if  they  are  distinct.  The 
transaction  price  is  allocated  to  the  separate  performance  obligations  on  a  relative  SSP  basis.  The  Company 
determines  SSP  based  on  observable,  if  available,  prices  for  those  related  services  when  sold  separately.  When 
such  observable  prices  are  not  available,  the  Company  determines  SSP  based  on  overarching  pricing  objectives 
and  strategies,  taking  into  consideration  market  conditions  and  other  factors,  including  customer  size,  volume 
purchased, market and industry conditions, product-specific factors and historical sales of the deliverables.

Deferred Revenue 

Deferred  revenue  consists  primarily  of  payments  received  and  accounts  receivable  recorded  in  advance  of 
revenue  recognition  under  the  Company’s  subscription  and  support  services  and  professional  services 
arrangements. The Company primarily invoices its customers for its subscription services arrangements annually in 
advance.  The  Company’s  payment  terms  generally  provide  that  customers  pay  the  invoiced  portion  of  the  total 
arrangement  fee  within  30  days  of  the  invoice  date. Amounts  anticipated  to  be  recognized  within  one  year  of  the 
balance  sheet  date  are  recorded  as  deferred  revenue,  current;  the  remaining  portion  is  recorded  as  deferred 
revenue, noncurrent in the consolidated balance sheets. 

Deferred Commissions 

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs 
of obtaining a contract with a customer. Sales commissions for new revenue contracts, including incremental sales 
to existing customers, are deferred and then amortized on a straight-line basis over a period of benefit, which the 
Company has determined to be generally five years. The Company determined the period of benefit by taking into 
consideration the terms of its customer contracts, its technology and other factors. Sales commissions for renewal 
contracts  (which  are  not  considered  commensurate  with  sales  commissions  for  new  revenue  contracts  and 
incremental sales to existing customers) are deferred and then amortized on a straight-line basis over the related 

88

period of benefit, which is generally the related contract renewal term. Amortization expense is included in sales and 
marketing expenses in the accompanying consolidated statements of operations.

Sales  commissions  capitalized  as  contract  costs  totaled  $81.0  million  and  $61.3  million  in  the  years  ended 
January 31, 2021 and 2020, respectively. Amortization of contract costs was $39.7 million, $28.6 million and $20.9 
million for the years ended January 31, 2021, 2020 and 2019, respectively. There was no impairment loss in relation 
to the costs capitalized.

Cost of Revenue 

Costs  of  revenue  primarily  consist  of  costs  related  to  providing  the  Company’s  cloud-based  platform  to  its 
customers,  including  third-party  hosting  fees,  amortization  of  capitalized  internal-use  software  and  finite-lived 
purchased  developed  technology,  customer  support,  other  employee-related  expenses  for  security,  technical 
operations and professional services staff, and allocated overhead costs. 

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of 
three months or less from the date of purchase. Cash equivalents generally consist of investments in money market 
funds.  The  fair  market  value  of  cash  equivalents  approximated  their  carrying  value  as  of  January  31,  2021  and 
2020. 

As  of  January  31,  2021  and  2020,  the  Company's  long-term  restricted  cash  balance  was  $9.5  million  and 

$11.4 million, respectively, primarily related to letters of credit for its facility lease agreements. 

Short-Term Investments 

The Company’s short-term investments comprise U.S. treasury securities and corporate debt securities. The 
Company  determines  the  appropriate  classification  of  its  short-term  investments  at  the  time  of  purchase  and 
reevaluates such designation at each balance sheet date. The Company has classified and accounted for its short-
term investments as available-for-sale securities as the Company may sell these securities at any time for use in its 
current  operations  or  for  other  purposes,  even  prior  to  maturity.  As  a  result,  short-term  investments,  including 
securities  with  stated  maturities  beyond  twelve  months,  are  classified  within  current  assets  in  the  consolidated 
balance sheets. 

Available-for-sale securities are recorded at fair value each reporting period and are periodically evaluated for 
unrealized losses. For unrealized losses in securities that the Company intends to hold and will not more likely than 
not  be  required  to  sell  before  recovery,  the  Company  further  evaluates  whether  declines  in  fair  value  below 
amortized cost are due to credit or non-credit related factors. 

The Company considers credit related impairments to be changes in value that are driven by a change in the 
creditor’s ability to meet its payment obligations, and records an allowance and recognizes a corresponding loss in 
interest income and other, net when the impairment is incurred. Unrealized non-credit related losses and unrealized 
gains are reported as a separate component of accumulated other comprehensive loss in the consolidated balance 
sheets until realized. Realized gains and losses are determined based on the specific identification method and are 
reported in interest income and other, net in the consolidated statements of operations. 

Accounts Receivable and Allowances 

Accounts receivable are recorded at the invoiced amount, net of allowances. These allowances are based on 
the Company’s assessment of the collectibility of accounts by considering the age of each outstanding invoice, the 
collection  history  of  each  customer,  and  an  evaluation  of  current  expected  risk  of  credit  loss  based  on  current 
economic  conditions  and  reasonable  and  supportable  forecasts  of  future  economic  conditions  over  the  life  of  the 
receivable.  We  assess  collectibility  by  reviewing  accounts  receivable  on  an  aggregated  basis  where  similar 
characteristics  exist  and  on  an  individual  basis  when  we  identify  specific  customers  with  collectibility  issues. 
Amounts deemed uncollectible are recorded as an allowance in the consolidated balance sheets with an offsetting 
decrease in deferred revenue or a charge to general and administrative expense in the consolidated statements of 
operations.

89

As  of  January  31,  2021,  allowances  include  collectibility  concerns  stemming  from  business  and  market 
disruption  caused  by  COVID-19  and  may  fluctuate  materially  in  future  periods  as  the  duration  and  severity  of  the 
impact of the COVID-19 pandemic remains uncertain. 

Property and Equipment 

Property and equipment, net, is stated at cost less accumulated depreciation. Depreciation is recorded using 
the straight-line method over the estimated useful lives of the respective assets. Repairs and maintenance costs are 
expensed as incurred.

  The useful lives of property and equipment are as follows:

Capitalized internal-use software costs
Computers and equipment
Furniture and fixtures

Leasehold improvements

Business Combinations 

Useful lives

3 years
3 years
7 years
Shorter of estimated useful life or 
remaining lease term

When the Company acquires a business, the purchase price is allocated to the net tangible and identifiable 
intangible assets acquired based on their estimated fair values. Any residual purchase price is recorded as goodwill. 
The  allocation  of  the  purchase  price  requires  management  to  make  significant  estimates  in  determining  the  fair 
values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can 
include,  but  are  not  limited  to,  the  cash  flows  that  an  asset  is  expected  to  generate  in  the  future,  the  appropriate 
weighted-average  cost  of  capital  and  the  cost  savings  expected  to  be  derived  from  acquiring  an  asset.  These 
estimates are inherently uncertain and unpredictable. During the measurement period, which may be up to one year 
from  the  acquisition  date,  adjustments  to  the  fair  value  of  these  tangible  and  intangible  assets  acquired  and 
liabilities  assumed  may  be  recorded,  with  the  corresponding  offset  to  goodwill.  Upon  the  conclusion  of  the 
measurement  period  or  final  determination  of  the  fair  value  of  assets  acquired  or  liabilities  assumed,  whichever 
comes first, any subsequent adjustments are recorded to the consolidated statements of operations. 

Goodwill and Other Long-Lived Assets 

The  excess  of  the  purchase  price  over  the  estimated  fair  value  of  net  assets  of  businesses  acquired  in  a 
business combination is recognized as goodwill. Goodwill is tested for impairment annually on November 1st or more 
frequently if certain indicators are present. 

Long-lived assets, such as property and equipment and finite-lived intangible assets subject to amortization 
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any 
asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying 
amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds 
the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as 
the amount by which the carrying amount exceeds its fair value. 

The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful 

lives in cost of revenue in the consolidated statements of operations. 

90

 Operating Leases and Incremental Borrowing Rate

The Company leases office space under operating leases with expiration dates through 2028. The Company 
determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its 
consolidated balance sheets at lease commencement. Lease liabilities are measured based on the present value of 
the total lease payments not yet paid discounted based on the more readily determinable of either the rate implicit in 
the lease or the Company’s incremental borrowing rate, which is the estimated rate the Company would be required 
to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. Lease liabilities 
due  within  twelve  months  are  included  within  accrued  expenses  and  other  current  liabilities  on  the  Company's 
consolidated  balance  sheet.  The  estimation  of  the  incremental  borrowing  rate  is  based  on  an  estimate  of  the 
Company's unsecured borrowing rate for its Notes, adjusted for tenor and collateralized security features. Right-of-
use assets are measured based on the corresponding lease liability adjusted for (i) payments made to the lessor at 
or  before  the  commencement  date,  (ii)  initial  direct  costs  incurred  and  (iii)  tenant  incentives  received,  incurred  or 
payable under the lease. Recognition of rent expense begins when the lessor makes the underlying asset available 
to the Company. The Company does not assume renewals or early terminations of its leases unless it is reasonably 
certain to exercise  these options at commencement and does not allocate consideration between lease and non-
lease components.

For  short-term  leases,  the  Company  records  rent  expense  in  its  consolidated  statements  of  operations  on 

a straight-line basis over the lease term and records variable lease payments as incurred.

Convertible Senior Notes

The Company accounts for the issuance of convertible senior notes in accordance with FASB ASC Subtopic 
470-20,  Debt  with  Conversion  and  Other  Options.  Pursuant  to  ASC  Subtopic  470-20,  as  the  Notes  have  a  net 
settlement  feature  and  may  be  settled  wholly  or  partially  in  cash  upon  conversion,  the  Company  is  required  to 
separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying 
amount of the liability component is computed by estimating the fair value of a similar liability without the conversion 
option  using  income  and  market  based  approaches.  For  the  income-based  approach,  the  Company  uses  a 
convertible  bond  pricing  model  that  includes  several  assumptions  such  as  volatility,  the  risk-free  rate,  and 
observable  trading  activity  for  the  Company's  existing  Notes.  For  the  market-based  approach,  the  Company 
observes the price of derivative instruments purchased in conjunction with our convertible senior note issuances or 
the Company evaluates issuances of convertible debt securities by other companies with similar credit risk ratings 
at the time of issuance. The amount of the equity component is then calculated by deducting the fair value of the 
liability  component  from  the  principal  amount  of  the  instrument. This  difference  represents  a  debt  discount  that  is 
amortized to interest expense over the respective terms of the Notes using an effective interest rate method. The 
equity  component  is  not  remeasured  as  long  as  it  continues  to  meet  the  conditions  for  equity  classification.  In 
accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability 
and equity components were based on their relative values.

Similarly,  in  accordance  with ASC  Subtopic  470-20,  transactions  involving  contemporaneous  exchanges  of 
cash  between  the  same  debtor  and  creditor  in  connection  with  the  issuance  of  a  new  debt  obligation  and 
satisfaction  of  an  existing  debt  obligation  by  the  debtor  should  be  evaluated  as  a  modification  or  an  exchange 
transaction  depending  on  whether  the  exchange  is  determined  to  have  substantially  different  terms.  When  the 
exchange is deemed to have substantially different terms due to a significant difference between the value of the 
conversion  option  immediately  prior  to  and  after  the  exchange,  the  transaction  is  accounted  for  as  a  debt 
extinguishment.  Pursuant  to  ASC  Subtopic  470-20,  total  consideration  for  the  satisfaction  of  an  existing  debt 
obligation is separated into liability and equity components by estimating the fair value of a similar liability without a 
conversion  option  and  assigning  the  residual  value  to  the  equity  component.  The  effective  interest  rate  used  to 
estimate  the  fair  value  of  the  liability  component  is  based  on  the  income  and  market  based  approaches  used  to 
determine the effective interest rate of the new debt obligation, adjusted for the remaining tenor of the extinguished 
debt. The  difference  between  the  fair  value  and  the  amortized  carrying  value  of  the  extinguished  debt,  net  of  the 
proportionate amounts of unamortized debt discount and remaining unamortized debt issuance costs, is recorded 
as a gain or loss on extinguishment.

Advertising Expenses 

Advertising costs are expensed as incurred. Advertising expense was $33.1 million, $17.0 million, and $10.0 

million for the years ended January 31, 2021, 2020 and 2019.

91

Income Taxes 

The  Company  accounts  for  income  taxes  in  accordance  with  the  liability  method  of  accounting  for  income 
taxes.  Under  this  method,  the  Company  recognizes  deferred  tax  assets  and  liabilities  for  the  expected  future  tax 
consequences  of  temporary  differences  between  the  financial  reporting  and  tax  basis  of  assets  and  liabilities,  as 
well  as  for  operating  loss  and  tax  credit  carryforwards.  Deferred  tax  assets  and  liabilities  are  measured  using 
enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities 
are expected to be realized or settled. 

The  Company  records  a  valuation  allowance  to  reduce  its  deferred  tax  assets  to  the  net  amount  that  the 
Company  believes  is  more  likely  than  not  to  be  realized.  In  assessing  the  need  for  a  valuation  allowance,  the 
Company  has  considered  its  historical  levels  of  income,  expectations  of  future  taxable  income  and  ongoing  tax 
planning  strategies.  Because  of  the  uncertainty  of  the  realization  of  the  deferred  tax  assets,  the  Company  has 
recorded  a  full  valuation  allowance  against  its  deferred  tax  assets.  Realization  of  its  deferred  tax  assets  is 
dependent primarily upon future U.S. taxable income. 

The Company recognizes and measures tax benefits from uncertain tax positions using a two-step approach. 

The  first  step  is  to  evaluate  the  tax  position  taken  or  expected  to  be  taken  by  determining  if  the  weight  of 
available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including 
resolution  of  any  related  appeals  or  litigation  processes.  The  second  step  is  to  measure  the  tax  benefit  as  the 
largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required 
to evaluate uncertain tax positions. 

Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide 
no assurance that the final tax outcome of these matters will not be materially different. The Company evaluates its 
uncertain tax position on a regular basis and evaluations are based on a number of factors, including changes in 
facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and 
effective settlement of audit issues. 

To  the  extent  that  the  final  tax  outcome  of  these  matters  is  different  than  the  amounts  recorded,  such 
differences will affect the provision for income taxes in the period in which such determination is made and could 
have  a  material  impact  on  the  Company’s  financial  condition  and  results  of  operations.  The  provision  for  income 
taxes  includes  the  effects  of  any  accruals  that  the  Company  believes  are  appropriate,  as  well  as  the  related  net 
interest and penalties. 

Concentrations of Risk and Significant Customers 

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash 
and cash equivalents, short-term investments and accounts receivable. Cash and cash equivalents and short-term 
investments are currently held in three financial institutions and, at times, may exceed federally insured limits. 

As  of  January  31,  2021  and  2020  and  for  each  of  the  three  years  ended  January  31,  2021,  no  single 

customer represented greater than 10% of accounts receivable or greater than 10% of revenue, respectively. 

In  order  to  reduce  the  risk  of  downtime  of  the  Company’s  subscription  services,  the  Company  uses  data 
center  facilities  operated  by  a  third-party  located  in  Virginia,  Oregon,  Ohio,  Germany,  Ireland,  Singapore  and 
Sydney. The Company has internal procedures to restore services in the event of disaster at any of its current data 
center  facilities.  Even  with  these  procedures  for  disaster  recovery  in  place,  the  Company’s  subscription  services 
could be significantly interrupted during the time period following a disaster at one of its sites and the subsequent 
restoration of services at another site. 

92

Geographical Information 

Revenue  by  location  is  determined  by  the  billing  address  of  the  customer.  The  following  table  sets  forth 

revenue by geographic area (in thousands): 

United States
International
Total

Year Ended January 31,

2021

2020

2019

$ 701,635  $  494,529  $  337,367 
  133,789 
61,887 
$ 835,424  $  586,067  $  399,254 

91,538 

Other  than  the  United  States,  no  individual  country  exceeded  10%  of  total  revenue  for  the  years  ended 

January 31, 2021, 2020 and 2019. 

Property  and  equipment  by  geographic  location  is  based  on  the  location  of  the  legal  entity  that  owns  the 
asset. As of January 31, 2021 and 2020, substantially all of the Company’s property and equipment was located in 
the United States. 

Net Loss per Share 

The  Company  computes  basic  and  diluted  net  loss  per  share  attributable  to  common  stockholders  in 
conformity  with  the  two-class  method  required  for  participating  securities.  Under  the  two-class  method,  basic  net 
loss  per  share  attributable  to  common  stockholders  is  calculated  by  dividing  the  net  loss  attributable  to  common 
stockholders  by  the  weighted-average  number  of  shares  of  common  stock  outstanding  during  the  period,  less 
shares subject to repurchase, without consideration for potentially dilutive securities as they do not share in losses. 
The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive 
common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common 
stock,  unvested  restricted  stock  units  (RSUs)  purchase  rights  issued  under  the  2017  Employee  Stock  Purchase 
Plan  shares  subject  to  repurchase  from  early  exercised  options,  unvested  common  stock  and  restricted  stock 
issued  in  connection  with  certain  business  combinations,  convertible  senior  notes  and  warrants  are  considered 
common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to 
common stockholders as their effect is antidilutive. Since the Company's IPO, Class A and Class B common stock 
are the only outstanding equity of the Company. The rights of the holders of Class A and Class B common stock are 
identical, except with respect to voting and conversion rights. See Note 15. 

Recently Adopted Accounting Pronouncements 

In  June  2016,  the  FASB  issued Accounting  Standards  Update  (ASU)  2016-13,  which  changes  the  existing 
incurred loss impairment model for financial assets held at amortized cost. The new model uses a forward-looking 
expected  loss  method  to  calculate  credit  loss  estimates. ASU  2016-13  also  eliminates  the  concept  of  other-than-
temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through 
an  allowance  for  credit  losses  rather  than  as  a  reduction  in  the  amortized  cost  basis  of  the  securities.  These 
changes will result in earlier recognition of credit losses. The Company adopted the requirements of ASU 2016-13 
as  of  February  1,  2020  on  a  modified  retrospective  basis.  The  adoption  of  this  standard  did  not  have  a  material 
impact on the Company’s consolidated financial statements.

In  August  2018,  the  FASB  issued  ASU  No.  2018-15,  Customer’s  Accounting  for  Implementation  Costs 
Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15), which requires a customer 
in  a  cloud  computing  arrangement  that  is  a  service  contract  to  follow  the  internal-use  software  guidance  in 
Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an 
asset. The Company adopted the requirements of ASU 2018-15 as of February 1, 2020 on a prospective basis. The 
adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In  December  2019,  the  FASB  issued ASU  No.  2019-12,  Simplifying  the Accounting  for  Income Taxes  (ASU 
2019-12),  as  part  of  its  Simplification  Initiative  to  reduce  the  cost  and  complexity  in  accounting  for  income  taxes. 
ASU  2019-12  removes  certain  exceptions  related  to  the  approach  for  intraperiod  tax  allocation  and  clarifies  the 
methodology  for  calculating  income  taxes  in  an  interim  period  and  the  recognition  of  deferred  tax  liabilities  for 
outside  basis  differences.  The  guidance  is  effective  for  interim  and  annual  periods  beginning  after  December  15, 
2020,  with  early  adoption  permitted.  The  Company  early  adopted  ASU  2019-12  as  of  February  1,  2020  on  a 

93

 
 
 
 
prospective  basis.  The  adoption  of  this  standard  did  not  have  a  material  impact  on  the  Company’s  consolidated 
financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted 

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in 
an  Entity’s  Own  Equity  (ASU  2020-06),  which  simplifies  the  accounting  for  certain  financial  instruments  with 
characteristics  of  liabilities  and  equity,  including  convertible  instruments  and  contracts  in  an  entity’s  own  equity. 
Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible 
instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present 
in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer 
be  amortized  into  income  as  interest  expense  over  the  life  of  the  instrument.  Instead,  entities  will  account  for  a 
convertible  debt  instrument  wholly  as  debt  unless  (1)  a  convertible  instrument  contains  features  that  require 
bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was 
issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest 
expense, increase reported net income, and result in a reclassification of certain conversion feature-related balance 
sheet  amounts  from  stockholders’  equity  to  liabilities  as  it  relates  to  the  Company’s  convertible  senior  notes. 
Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible 
instruments  on  diluted  earnings  per  share  (EPS),  which  is  consistent  with  the  Company’s  accounting  treatment 
under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early 
adoption  permitted  for  fiscal  years  beginning  after  December  15,  2020,  and  can  be  adopted  on  either  a  fully 
retrospective or modified retrospective basis. The Company is currently evaluating the timing, method of adoption 
and overall impact of this standard on its consolidated financial statements. 

3. Business Combinations

During the year ended year ended January 31, 2020, the Company completed a business combination for a 
purchase  price  of  $44.2  million,  net  of  $1.1  million  in  cash  acquired.  The  Company  recorded  $15.7  million  for 
developed  technology  intangible  assets  with  an  estimated  useful  life  of  five  years  and  recorded  $29.9  million  of 
goodwill  which  is  primarily  attributed  to  the  assembled  workforce  as  well  as  the  integration  of  the  acquired 
technology.  The  Company  incurred  $3.0  million  of  acquisition-related  costs,  which  were  recorded  as  general  and 
administrative expense in the quarter ended April 30, 2019. 

The  Company  also  entered  into  deferred  compensation  arrangements  in  connection  with  prior  acquisitions 
totaling  $10.8  million,  of  which  $3.0  million  was  recognized  as  compensation  during  the  year  ended  January  31, 
2021. The remaining deferred compensation balance is immaterial.

These  acquisitions  did  not  have  a  material  impact  on  the  Company’s  consolidated  financial  statements; 

therefore, historical and proforma disclosures have not been presented.

94

4. Cash Equivalents and Short-term Investments

The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and 

short-term investments as of January 31, 2021 and 2020 were as follows (in thousands):  

Cash equivalents:

Money market funds
Total cash equivalents
Short-term investments:
U.S. treasury securities
Corporate debt securities
Total short-term investments

Total

Cash equivalents:

Money market funds
U.S. treasury securities

Total cash equivalents
Short-term investments:
U.S. treasury securities
Corporate debt securities
Total short-term investments

Total

As of January 31, 2021

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Estimated
Fair Value 

$  311,257  $ 
311,257 

—  $ 
— 

—  $  311,257 
311,257 
— 

  1,888,882 
230,726 
  2,119,608 
$ 2,430,865  $ 

1,571 
429 
2,000 
2,000  $ 

(2)   

(22)    1,890,431 
231,153 
(24)    2,121,584 
(24)  $ 2,432,841 

As of January 31, 2020

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Estimated
Fair Value 

$  416,584  $ 
19,996 
436,580 

—  $ 
— 
— 

—  $  416,584 
19,996 
— 
436,580 
— 

575,920 
305,859 
881,779 
$ 1,318,359  $ 

686 
519 
1,205 
1,205  $ 

576,598 
(8)   
306,378 
— 
(8)   
882,976 
(8)  $ 1,319,556 

All short-term investments were designated as available-for-sale securities as of January 31, 2021 and 2020. 

The  following  table  presents  the  contractual  maturities  of  the  Company's  short-term  investments  as  of 

January 31, 2021 and 2020 (in thousands): 

Due within one year
Due between one to five years
Total

As of January 31, 2021

Amortized
Cost

Estimated
Fair Value

$ 1,509,241  $ 1,510,810 
610,774 
$ 2,119,608  $ 2,121,584 

610,367 

  As  of  January  31,  2021  and  2020,  the  Company  included  $31.0  million  and  nil,  respectively,  of  unsettled 

maturities of short-term investments in Prepaid expenses and other current assets.

The  Company  included  $10.5  million  and  $5.7  million  of  interest  receivable  in  Prepaid  expenses  and  other 
current  assets  as  of  January  31,  2021  and  2020,  respectively.  The  Company  did  not  recognize  an  allowance  for 
credit losses against interest receivable as of January 31, 2021 and 2020 because such potential losses were not 
material.

The Company had 10 and 7 short-term investments in unrealized loss positions as of January 31, 2021 and 
2020, respectively. There were no material gross unrealized gains or losses from available-for-sale securities and 
no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other 
comprehensive income for the years ended January 31, 2021, 2020 and 2019.

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 

95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. Based on this 
evaluation,  the  Company  determined  that  for  short-term  investments,  there  were  no  material  credit  or  non-credit 
related impairments as of January 31, 2021 and 2020.

5. Fair Value Measurements 

The  Company  measures  its  financial  assets  at  fair  value  each  reporting  period  using  a  fair  value  hierarchy 
that  prioritizes  the  use  of  observable  inputs  and  minimizes  the  use  of  unobservable  inputs  when  measuring  fair 
value. A  financial  instrument’s  classification  within  the  fair  value  hierarchy  is  based  upon  the  lowest  level  of  input 
that is significant to the fair value measurement. 

 Three levels of inputs may be used to measure 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. 

Assets and Liabilities Measured at Fair Value on a Recurring Basis 

The  following  table  presents  information  about  the  Company’s  financial  assets  that  were  measured  at  fair 

value on a recurring basis using the above input categories (in thousands):   

Assets:
Cash equivalents:

Money market funds
Total cash equivalents
Short-term investments:
U.S. treasury securities
Corporate debt securities
Total short-term investments
Total cash equivalents and short-term investments

Assets:
Cash equivalents:

Money market funds
U.S. treasury securities

Total cash equivalents
Short-term investments:
U.S. treasury securities
Corporate debt securities
Total short-term investments
Total cash equivalents and short-term investments

As of January 31, 2021

Level 1

Level 2 

Level 3

Total

$  311,257  $ 
311,257 

—  $ 
— 

—  $  311,257 
311,257 
— 

— 
— 
— 

  1,890,431 
231,153 
  2,121,584 

$  311,257  $ 2,121,584  $ 

  1,890,431 
— 
231,153 
— 
— 
  2,121,584 
—  $ 2,432,841 

As of January 31, 2020

Level 1

Level 2 

Level 3

Total

$  416,584  $ 

—  $ 

— 
416,584 

19,996 
19,996 

—  $  416,584 
19,996 
— 
436,580 
— 

— 
— 
— 

576,598 
306,378 
882,976 

$  416,584  $  902,972  $ 

—  $  576,598 
306,378 
— 
882,976 
— 
—  $ 1,319,556 

The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable and 
accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table 
above.  

Fair Value Measurements of Other Financial Instruments

The following table presents the carrying amounts and estimated fair values of our financial instruments that 

are not recorded at fair value on the consolidated balance sheets (in thousands):

96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023 convertible senior notes
2025 convertible senior notes
2026 convertible senior notes
(1)  Before unamortized debt issuance costs. 

As of January 31, 2021

Net Carrying 
Amount(1)

Estimated
Fair Value 

$ 
$ 
$ 

36,092  $ 

216,926 
885,465  $  1,605,508 
867,643  $  1,493,850 

The  principal  amounts  of  the  2023  Notes,  the  2025  Notes  and  the  2026  Notes  are  $40.2  million,  $1,060.0 
million and $1,150.0 million, respectively. The difference between the principal amounts of the 2023 Notes, the 2025 
Notes  and  the  2026  Notes  and  the  respective  net  carrying  amounts  before  unamortized  debt  issuance  costs 
represents the unamortized debt discount (See Note 9 for additional details). 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. As of January 31, 2021, the difference between 
the  net  carrying  amount  of  the  Notes  and  their  estimated  fair  values  represented  the  equity  conversion  value 
the  closing  price  of  our  common  stock 
premium 
of $259.01 on January 31, 2021, the if-converted value of the 2023 Notes, 2025 Notes and 2026 Notes exceeded 
the principal amount of $40.2 million, $1,060.0 million and $1,150.0 million, respectively.

the  Notes.  Based  on 

the  market  assigned 

to 

6. Goodwill and Intangible Assets, net 

Goodwill 

As of January 31, 2021 and 2020, goodwill was $48.0 million. During the year ended January 31, 2020, the 
Company  recorded  $29.9  million  of  goodwill  in  connection  with  a  business  combination  that  was  completed  in 
March 2019. No goodwill impairments were recorded during the years ended January 31, 2021, 2020 and 2019.

Intangible Assets, net 

Intangible assets consisted of the following (in thousands):  

Capitalized internal-use software costs
Purchased developed technology
Software licenses

Capitalized internal-use software costs
Purchased developed technology
Software licenses

$ 

$ 

$ 

As of January 31, 2021

Gross

Accumulated 
Amortization

Write-offs

Net

30,259  $ 
28,800 
126 
59,185  $ 

(19,478)  $ 
(12,694)   
(4)   

(32,176)  $ 

—  $ 
— 
— 
—  $ 

10,781 
16,106 
122 
27,009 

As of January 31, 2020

Gross

Accumulated 
Amortization

Write-offs

Net

24,890  $ 
28,800 
1,112 

$ 

54,802  $ 

(14,828)  $ 
(6,321)   
(1,005)   
(22,154)  $ 

(119)  $ 
— 
— 
(119)  $ 

9,943 
22,479 
107 
32,529 

The Company capitalized $5.5 million and $5.1 million of internal-use software costs during the years ended 

January 31, 2021 and 2020, respectively. 

During  the  year  ended  January  31,  2020,  the  Company  recorded  $24.2  million  of  purchased  developed 
technology  in  connection  with  a  business  combination  and  an  asset  acquisition. The  remaining  weighted-average 
useful life of all purchased developed technology was 3.1 years and 3.9 years as of January 31, 2021, and 2020, 
respectively.

97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization expense of intangible assets for the years ended January 31, 2021, 2020 and 2019 was $11.1 

million, $10.6 million, and $5.8 million, respectively.

As  of  January  31,  2021,  estimated  remaining  amortization  expense  for  the  intangible  assets  by  fiscal  year 

was as follows (in thousands):

2022
2023
2024
2025
Total

7. Balance Sheet Components 

Property and Equipment, net 

Property and equipment consisted of the following (in thousands):  

Computers and equipment
Furniture and fixtures
Leasehold improvements

Property and equipment, gross

Less accumulated depreciation
Property and equipment, net

Remaining 
Amortization 

$ 

$ 

10,354 
8,416 
7,354 
885 
27,009 

As of January 31,

2021

2020

$ 

1,242  $ 

3,567 
11,014 
55,363 
69,944 
(16,409) 
$  62,783  $  53,535 

13,948 
69,862 
85,052 
(22,269)   

Depreciation expense was $9.4 million, $8.8 million and $5.7 million for the years ended January 31, 2021, 

2020 and 2019, respectively. 

Allowances 

The Company’s accounts receivable allowances for the years ended January 31, 2021, 2020 and 2019 were 

as follows (in thousands):  

Balance, beginning of period

Additions (reductions)
Write-offs

Balance, end of period

As of January 31,

2021

2020

2019

$ 

$ 

1,166  $ 
3,252 
(967)   
3,451  $ 

2,098  $ 
(673)   
(259)   
1,166  $ 

1,472 
888 
(262) 
2,098 

Accrued Expenses and Other Current Liabilities 

Accrued expenses and other current liabilities consisted of the following (in thousands):  

Accrued expenses
Accrued taxes payable
Operating lease liabilities
Other

Accrued expenses and other current liabilities

98

As of January 31,

2021

2020

$  24,717  $  22,530 
1,591 
12,064 
702 
$  53,729  $  36,887 

2,462 
23,403 
3,147 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Liabilities, Noncurrent 

Other liabilities, noncurrent consisted of the following (in thousands):  

Deferred tax liabilities
Other

Other liabilities, noncurrent

8. Deferred Revenue and Performance Obligations

Deferred Revenue

As of January 31,

2021

2020

$ 

3,877  $ 
7,498 
$  11,375  $ 

1,558 
3,803 
5,361 

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 years ended January 31, 2021 and 2020 that was included in the 
deferred  revenue  balances  at  the  beginning  of  the  respective  periods  was  $361.0  million  and  $241.1  million, 
respectively.  Professional  services  and  other  revenue  recognized  in  the  years  ended  January  31,  2021  and  2020 
from deferred revenue balances at the beginning of the respective periods was not material.

Transaction Price Allocated to the Remaining Performance Obligations

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

As  of  January  31,  2021,  total  remaining  non-cancellable  performance  obligations  under  the  Company’s 
subscription contracts with customers was approximately $1,796.9 million. Of this amount, the Company expects to 
recognize  revenue  of  approximately  $841.8  million,  or  47%,  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 January 31, 2021 were not material.

9. Convertible Senior Notes, Net

2023 Convertible Senior Notes

The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.25% 
per year. Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning 
on August 15, 2018. The 2023 Notes mature on February 15, 2023 unless earlier repurchased or converted. The 
Company  may  not  redeem  the  2023  Notes  prior  to  maturity.  The  total  net  proceeds  from  the  2023  Notes,  after 
deducting initial purchasers’ discounts and debt issuance costs, was $335.0 million.

In  September  2019,  the  Company  used  part  of  the  net  proceeds  from  the  issuance  of  the  2025  Notes  to 
repurchase  a  portion  of  the  2023  Notes,  which  consisted  of  a  repurchase  of  $224.4  million  aggregate  principal 
amount  of  the  2023  Notes  in  privately-negotiated  transactions  for  aggregate  consideration  of  $604.8  million, 
consisting of approximately $224.4 million in cash and approximately 3.0 million shares of Class A common stock. 
The  $604.8  million  in  aggregate  consideration  was  allocated  between  the  debt  and  equity  components  in  the 
amounts of $197.7 million and $407.1 million, respectively, using an effective interest rate of 4.00% to determine the 
fair value of the liability component. As of the repurchase date, the carrying value of the notes subject to the First 
Partial Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $183.1 million. The 
First Partial Repurchase of 2023 Notes resulted in a $14.6 million loss on early debt extinguishment during the year 
ended January 31, 2020, of which $3.8 million consisted of unamortized debt issuance costs. 

In June 2020, the Company used part of the net proceeds from the issuance of the 2026 Notes to repurchase 
a  portion  of  the  2023  Notes,  which  consisted  of  a  repurchase  of  $69.9  million  aggregate  principal  amount  of  the 
2023  Notes  in  privately-negotiated  transactions,  for  aggregate  consideration  of  $260.5  million,  consisting  of 
approximately    $0.2  million  in  cash  and  approximately  1.4  million  shares  of  Class A  common  stock.  The  $260.5 

99

 
 
 
 
million in aggregate consideration was allocated between the debt and equity components in the amounts of $61.8 
million  and  $198.7  million  respectively,  using  an  effective  interest  rate  of  4.90%  to  determine  the  fair  value  of  the 
liability  component.  As  of  the  repurchase  date,  the  carrying  value  of  the  notes  subject  to  the  Second  Partial 
Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $59.6 million. The Second 
Partial Repurchase of 2023 Notes resulted in a $2.2 million loss on early debt extinguishment during the year ended 
January 31, 2021, of which $1.0 million consisted of unamortized debt issuance costs.

The interest rates used in the 2023 Notes Partial Repurchases were based on the income and market based 
approaches  used  to  determine  the  effective  interest  rate  of  the  2025  Notes  and  2026  Notes,  adjusted  for  the 
remaining tenor of the 2023 Notes. As of January 31, 2021, $40.2 million of principal remained outstanding on the 
2023 Notes.

The  terms  of  the  2023  Notes  are  governed  by  an  Indenture  by  and  between  the  Company  and  Wilmington 
Trust,  National Association,  as Trustee  (the  2023  Indenture).  Upon  conversion,  the  2023  Notes  may  be  settled  in 
cash,  shares  of  Class  A  common  stock  or  a  combination  of  cash  and  shares  of  Class  A  common  stock,  at  the 
Company’s election.

The  2023  Notes  are  convertible  at  an  initial  conversion  rate  of  20.6795  shares  of  Class  A  common  stock 
per  $1,000  principal  amount  of 
initial  conversion  price  of 
approximately  $48.36  per  share  of  Class A  common  stock,  subject  to  adjustment  under  certain  circumstances  in 
accordance with the terms of the 2023 Indenture. Prior to the close of business on the business day immediately 
preceding  October  15,  2022,  holders  of  the  2023  Notes  may  convert  all  or  a  portion  of  their  2023  Notes  only  in 
multiples of $1,000 principal amount, under the following circumstances:

the  2023  Notes,  which 

is  equal 

to  an 

• during  any  fiscal  quarter  commencing  after  the  fiscal  quarter  ending  on April  30,  2018  (and  only 
during  such  fiscal  quarter),  if  the  last  reported  sale  price  of  Class A  common  stock  for  at  least  20  trading 
days  (whether  or  not  consecutive)  during  the  period  of  30  consecutive  trading  days  ending  on,  and 
including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of 
the conversion price of the 2023 Notes on each applicable trading day;

• during  the  five  business  day  period  after  any  five  consecutive  trading  day  period  in  which  the 
trading  price  per  $1,000  principal  amount  of  the  2023  Notes  for  each  trading  day  of  that  five  consecutive 
trading day period was less than 98% of the product of the last reported sale price of Class A common stock 
and the conversion rate on such trading day; or

• upon the occurrence of specified corporate events, as described in the 2023 Indenture.

On  or  after  October  15,  2022  until  the  close  of  business  on  the  second  scheduled  trading  day  immediately 
preceding the maturity date, holders may convert all or any portion of their 2023 Notes regardless of the foregoing 
circumstances.  For  at  least  20  trading  days  during  the  period  of  30  consecutive  trading  days  ended  January  31, 
2021,  the  last  reported  sale  price  of  the  Company’s  common  stock  was  equal  to  or  exceeded  130%  of  the 
conversion price of the 2023 Notes on each applicable trading day. As a result, the 2023 Notes are convertible at 
the option of the holders during the fiscal quarter ending April 30, 2021 and were classified as current liabilities on 
the consolidated balance sheet as of January 31, 2021. 

During  the  year  ended  January  31,  2021,  the  Company  paid  approximately  $0.3  million  in  cash  and  issued 
approximately 0.2 million shares of Class A common stock to settle approximately $10.4 million principal amount of 
2023  Notes  (not  in  connection  with  the  Second  Partial  Repurchase  of  the  2023  Notes).  The  loss  on  early  note 
conversion was not material. During the fourth quarter of fiscal 2021, the Company received additional conversion 
requests,  and  approximately  $4.3  million  aggregate  principal  amount  of  the  2023  Notes  were  primarily  settled  in 
shares of Class A common stock in the first quarter of fiscal 2022. In addition, subsequent to January 31, 2021, the 
Company  received  conversion  requests  for  approximately  $3.2  million  aggregate  principal  amount  of  the  2023 
Notes.

Holders  of  the  2023  Notes  who  convert  their  2023  Notes  in  connection  with  certain  corporate  events  that 
constitute a make-whole fundamental change (as defined in the 2023 Indenture) are, under certain circumstances, 
entitled  to  an  increase  in  the  conversion  rate.  Additionally,  in  the  event  of  a  corporate  event  that  constitutes  a 
fundamental  change  (as  defined  in  the  2023  Indenture),  holders  of  the  2023  Notes  may  require  the  Company  to 
repurchase all or a portion of their 2023 Notes at a price equal to 100% of the principal amount of the 2023 Notes 
being repurchased, plus any accrued and unpaid interest.

100

In  accounting  for  the  issuance  of  the  2023  Notes,  the  Company  separated  the  2023  Notes  into  liability  and 
equity components, using an effective interest rate of 5.68% to determine the fair value of the liability component. 
This  interest  rate  was  based  on  both  an  income  and  a  market  based  approach.  For  the  income  approach,  the 
Company  used  a  convertible  bond  pricing  model,  which  included  several  assumptions  including  volatility  and  the 
risk-free  rate.  For  the  market  approach,  the  Company  observed  the  price  of  the  Note  Hedges  (see  below)  it 
purchased for its 2023 Notes and also performed an evaluation of issuances of convertible debt securities by other 
companies with similar credit risk ratings at the time of issuance. The following table sets forth total interest expense 
recognized related to the 2023 Notes (in thousands): 

Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total

Year Ended January 31,

2021

2020

$ 

$ 

180  $ 
312 
3,316 
3,808  $ 

606 
985 
11,219 
12,810 

Total  initial  issuance  costs  of  $10.0  million  related  to  the  2023  Notes  were  allocated  between  liability  and 
equity in the same proportion as the allocation of the total proceeds to the liability and equity components. Issuance 
costs attributable to the liability component are being amortized to interest expense over the respective term of the 
2023 Notes using the effective interest rate method. The issuance costs attributable to the equity component were 
netted against the respective equity component in Additional paid-in capital. The Company initially recorded liability 
issuance costs of $7.7 million and equity issuance costs of $2.3 million.

The 2023 Notes, net consisted of the following (in thousands): 

Liability component:
Principal
Less: unamortized debt issuance costs and debt discount
Net carrying amount

Equity component:
2023 Notes
Less: issuance costs
Carrying amount of the equity component(1)
(1)  Included in the consolidated balance sheets within Additional paid-in capital.

Note Hedges

As of January 31, 
2021

$ 

$ 

$ 

$ 

40,246 
(4,591) 
35,655 

9,328 
(271) 
9,057 

In  connection  with  the  pricing  of  the  2023  Notes,  the  Company  entered  into  convertible  note  hedges  with 
respect to its Class A common stock. The Note Hedges are purchased call options that give the Company the option 
to purchase, subject to anti-dilution adjustments substantially identical to those in the 2023 Notes, approximately 7.1 
million  shares  of  its  Class  A  common  stock  for  approximately  $48.36  per  share  (subject  to  adjustment), 
corresponding  to  the  approximate  initial  conversion  price  of  the  2023  Notes,  exercisable  upon  conversion  of  the 
2023 Notes. The Note Hedges will expire in 2023, if not exercised earlier. The Note Hedges are intended to offset 
potential  dilution  to  the  Company’s  Class  A  common  stock  and/or  offset  the  potential  cash  payments  that  the 
Company  could  be  required  to  make  in  excess  of  the  principal  amount  upon  any  conversion  of  the  2023  Notes 
under certain circumstances. The Note Hedges are separate transactions and are not part of the terms of the 2023 
Notes.

The Company paid an aggregate amount of $80.0 million for the Note Hedges. The amount paid for the Note 

Hedges was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

In September 2019 and in June 2020, and in connection with the First Partial Repurchase of 2023 Notes and 
Second Partial Repurchase of 2023 Notes, the Company terminated Note Hedges corresponding to approximately 

101

 
 
 
 
 
 
4.6 million and 1.4 million shares for cash proceeds of $405.9 million and $195.0 million, respectively. The proceeds 
were recorded as an increase to Additional paid-in capital in the consolidated balance sheets. 

During the year ended January 31, 2021, the Company exercised and net-share-settled a portion of the Note 
Hedges, corresponding to approximately $10.4 million principal amount of 2023 Notes and received approximately 
0.2 million shares of Class A common stock and an immaterial cash payment. As of January 31, 2021, Note Hedges 
giving  the  Company  the  option  to  purchase  approximately  0.8  million  shares  (subject  to  adjustment)  remained 
outstanding.

Warrants

In  connection  with  the  issuance  of  the  2023  Notes,  the  Company  also  entered  into  separate  warrant 
transactions pursuant to which it sold net-share-settled (or, at the Company’s election subject to certain conditions, 
cash-settled)  warrants  to  acquire,  subject  to  anti-dilution  adjustments,  up  to  approximately  7.1  million  shares 
over  80  scheduled  trading  days  beginning  in  May  2023  of  the  Company’s  Class  A  common  stock  at  an  initial 
exercise price of approximately $68.06 per share (subject to adjustment). If the Warrants are not exercised on their 
exercise dates, they will expire. If the market value per share of the Company’s Class A common stock exceeds the 
applicable  exercise  price  of  the  Warrants,  the  Warrants  could  have  a  dilutive  effect  on  the  Company’s  Class  A 
common stock unless, subject to the terms of the Warrants, the Company elects to cash settle the Warrants. The 
Warrants are separate transactions and are not part of the terms of the 2023 Notes or the Note Hedges.

The Company received aggregate proceeds of $52.4 million from the sale of the Warrants in connection with 
the  2023  Notes.  The  proceeds  from  the  sale  of  the  Warrants  were  recorded  as  an  increase  to Additional  paid-in 
capital in the consolidated balance sheets.

In September 2019 and in June 2020, and in connection with the First Partial Repurchase of 2023 Notes and 
Second Partial Repurchase of 2023 Notes, the Company terminated Warrants corresponding to approximately 4.6 
million  and  1.4  million  shares  for  total  cash  payments  of  $358.6  million  and  $175.4  million,  respectively.  The 
termination payments were recorded as a decrease to Additional paid-in capital in the consolidated balance sheets. 

As  of  January  31,  2021,  Warrants  to  acquire  up  to  approximately  1.0  million  shares  (subject  to  adjustment) 

remained outstanding.

2025 Convertible Senior Notes

The 2025 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.125% 
per year. Interest is payable in cash semi-annually in arrears on March 1 and September 1 of each year, beginning 
on  March  1,  2020.  The  2025  Notes  mature  on  September  1,  2025  unless  earlier  redeemed,  repurchased  or 
converted.  The  total  net  proceeds  from  the  2025  Notes,  after  deducting  initial  purchasers’  discounts  and  debt 
issuance costs, were $1,040.7 million.

The  terms  of  the  2025  Notes  are  governed  by  an  Indenture  by  and  between  the  Company  and  Wilmington 
Trust,  National Association,  as Trustee  (the  2025  Indenture).  Upon  conversion,  the  2025  Notes  may  be  settled  in 
cash,  shares  of  Class  A  common  stock  or  a  combination  of  cash  and  shares  of  Class  A  common  stock,  at  the 
Company’s election. 

The  2025  Notes  are  convertible  at  an  initial  conversion  rate  of  5.2991  shares  of  Class  A  common  stock 
initial  conversion  price  of 
per  $1,000  principal  amount  of 
approximately $188.71 per share of Class A common stock, subject to adjustment under certain circumstances in 
accordance with the terms of the 2025 Indenture. Prior to the close of business on the business day immediately 
preceding June 1, 2025, holders of the 2025 Notes may convert all or a portion of their 2025 Notes only in multiples 
of $1,000 principal amount, under the following circumstances:

the  2025  Notes,  which 

is  equal 

to  an 

• during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2020 (and only 
during  such  fiscal  quarter),  if  the  last  reported  sale  price  of  Class A  common  stock  for  at  least  20  trading 
days  (whether  or  not  consecutive)  during  the  period  of  30  consecutive  trading  days  ending  on,  and 
including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of 
the conversion price of the 2025 Notes on each applicable trading day;

• during  the  five  business  day  period  after  any  five  consecutive  trading  day  period  in  which  the 
trading  price  per  $1,000  principal  amount  of  the  2025  Notes  for  each  trading  day  of  that  five  consecutive 

102

trading day period was less than 98% of the product of the last reported sale price of Class A common stock 
and the conversion rate on such trading day;

• if  the  Company  calls  the  notes  for  redemption,  at  any  time  prior  to  the  close  of  business  on  the 

second scheduled trading day immediately preceding the redemption date; or

• upon the occurrence of specified corporate events, as described in the 2025 Indenture.

On  or  after  June  1,  2025  until  the  close  of  business  on  the  second  scheduled  trading  day  immediately 
preceding the maturity date, holders may convert all or any portion of their 2025 Notes regardless of the foregoing 
circumstances.  For  at  least  20  trading  days  during  the  period  of  30  consecutive  trading  days  ended  January  31, 
2021,  the  last  reported  sale  price  of  the  Company’s  common  stock  was  equal  to  or  exceeded  130%  of  the 
conversion price of the 2025 Notes on each applicable trading day. As a result, the 2025 Notes are convertible at 
the option of the holders during the fiscal quarter ending April 31, 2021 and were classified as current liabilities on 
the  consolidated  balance  sheet  as  of  January  31,  2021.  No  requests  to  convert  material  amounts  of  notes  are 
currently outstanding.

The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after September 
6,  2022,  if  the  last  reported  sale  price  of  the  Company’s  Class A  common  stock  has  been  at  least  130%  of  the 
conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive 
trading day period (including the last trading day of such period) ending on and including the trading day preceding 
the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal 
amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption 
date. During the year ended January 31, 2021, the Company did not redeem any of the 2025 Notes.

Holders  of  the  2025  Notes  who  convert  their  2025  Notes  in  connection  with  certain  corporate  events  that 
constitute  a  make-whole  fundamental  change  (as  defined  in  the  2025  Indenture)  or  in  connection  with  the 
Company’s  issuance  of  a  redemption  notice  are,  under  certain  circumstances,  entitled  to  an  increase  in  the 
conversion rate. Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in 
the  Indenture),  holders  of  the  2025  Notes  may  require  the  Company  to  repurchase  all  or  a  portion  of  their  2025 
Notes at a price equal to 100% of the principal amount of the 2025 Notes being repurchased, plus any accrued and 
unpaid interest.

In  accounting  for  the  issuance  of  the  2025  Notes,  the  Company  separated  the  2025  Notes  into  liability  and 
equity components using an effective interest  rate of 4.10% to determine the fair value of the liability component. 
This  interest  rate  was  based  on  both  an  income  and  a  market  based  approach.  For  the  income  approach,  the 
Company  used  a  convertible  bond  pricing  model,  which  included  several  assumptions  including  volatility  and  the 
risk-free  rate.  For  the  market  approach,  the  Company  performed  an  evaluation  of  issuances  of  convertible  debt 
securities by other companies with similar credit risk ratings at the time of issuance. The following table sets forth 
total interest expense recognized related to the 2025 Notes (in thousands):

Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total

Year Ended January 31,

2021

2020

$ 

$ 

1,325  $ 
2,097   
33,932   
37,354  $ 

519 
769 
12,919 
14,207 

Total issuance costs of $19.3 million related to the 2025 Notes were allocated between liability and equity in 
the  same  proportion  as  the  allocation  of  the  total  proceeds  to  the  liability  and  equity  components.  Issuance  costs 
attributable to the liability component are being amortized to interest expense over the respective term of the 2025 
Notes using the effective interest rate method. The issuance costs attributable to the equity component were netted 
against the respective equity component in Additional paid-in capital. The Company recorded liability issuance costs 
of $15.3 million and equity issuance costs of $4.0 million.

103

 
 
The 2025 Notes, net consisted of the following (in thousands):

Liability component:
Principal
Less: unamortized debt issuance costs and debt discount
Net carrying amount

Equity component:
2025 Notes
Less: issuance costs
Carrying amount of the equity component(1)
(1)  Included in the consolidated balance sheets within Additional paid-in capital.

2025 Capped Calls 

As of January 31, 
2021

$ 

$ 

$ 

$ 

1,060,000 
(186,971) 
873,029 

At Issuance

221,387 
(4,040) 
217,347 

In  connection  with  the  pricing  of  the  2025  Notes,  the  Company  entered  into  capped  call  transactions  with 
respect to its Class A common stock. The 2025 Capped Calls are purchased call options that give the Company the 
option  to  purchase,  subject  to  anti-dilution  adjustments  substantially  identical  to  those  in  the  2025  Notes, 
approximately  5.6  million  shares  of  its  Class  A  common  stock  for  approximately  $188.71  per  share  (subject  to 
adjustment),  corresponding  to  the  approximate  initial  conversion  price  of  the  2025  Notes,  exercisable  upon 
conversion  of  the  2025  Notes.  The  2025  Capped  Calls  have  initial  cap  prices  of  $255.88  per  share  (subject  to 
adjustment) and will expire in 2025, if not exercised earlier. The 2025 Capped Calls are intended to offset potential 
dilution to the Company’s Class A common stock and/or offset the potential cash payments that the Company could 
be  required  to  make  in  excess  of  the  principal  amount  upon  any  conversion  of  the  2025  Notes  under  certain 
circumstances. The 2025 Capped Calls are separate transactions and are not part of the terms of the 2025 Notes.

The Company paid an aggregate amount of $74.1 million for the 2025 Capped Calls. The amount paid for the 

2025 Capped Calls was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

2026 Convertible Senior Notes

The 2026 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.375% 
per year. Interest is payable in cash semi-annually in arrears on June 15 and December 15 of each year, beginning 
on  December  15,  2020.  The  2026  Notes  mature  on  June  15,  2026  unless  earlier  redeemed,  repurchased  or 
converted.  The  total  net  proceeds  from  the  2026  Notes,  after  deducting  initial  purchasers’  discounts  and  debt 
issuance costs, were $1,134.8 million.

The  terms  of  the  2026  Notes  are  governed  by  an  Indenture  by  and  between  the  Company  and  Wilmington 
Trust,  National  Association,  as  Trustee  (the  2026  Indenture,  and  together  with  the  2023  Indenture  and  2025 
Indenture,  the  Indentures).  Upon  conversion,  the  2026  Notes  may  be  settled  in  cash,  shares  of  Class A  common 
stock or a combination of cash and shares of Class A common stock, at the Company’s election.

The 2026 Notes are convertible at an initial conversion rate of 4.1912 shares of Class A common stock per 
$1,000 principal amount of the 2026 Notes, which is equal to an initial conversion price of approximately $238.60 
per  share  of  Class  A  common  stock,  subject  to  adjustment  under  certain  circumstances  in  accordance  with  the 
terms of the Indenture. Prior to the close of business on the business day immediately preceding March 15, 2026, 
holders  of  the  2026  Notes  may  convert  all  or  a  portion  of  their  2026  Notes  only  in  multiples  of  $1,000  principal 
amount, under the following circumstances:

• during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2020 (and only 
during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading 
days  (whether  or  not  consecutive)  during  the  period  of  30  consecutive  trading  days  ending  on,  and 
including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of 
the conversion price of the 2026 Notes on each applicable trading day;

104

 
 
• during  the  five  business  day  period  after  any  five  consecutive  trading  day  period  in  which  the 
trading  price  per  $1,000  principal  amount  of  the  2026  Notes  for  each  trading  day  of  that  five  consecutive 
trading day period was less than 98% of the product of the last reported sale price of our Class A common 
stock and the conversion rate on such trading day;

• if  the  Company  calls  the  notes  for  redemption,  at  any  time  prior  to  the  close  of  business  on  the 

second scheduled trading day immediately preceding the redemption date; or 

• upon the occurrence of specified corporate events, as described in the 2026 Indenture.

On  or  after  March  15,  2026  until  the  close  of  business  on  the  second  scheduled  trading  day  immediately 
preceding the maturity date, holders may convert all or any portion of their 2026 Notes regardless of the foregoing 
circumstances.  During  the  year  ended  January  31,  2021,  the  conditions  allowing  holders  of  the  2026  Notes  to 
convert were not met. 

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 
2023,  if  the  last  reported  sale  price  of  the  Company’s  Class  A  common  stock  has  been  at  least  130%  of  the 
conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day 
immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day 
period ending on and including the trading day preceding the date on which we provide notice of redemption price 
equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but 
excluding, the redemption date. During the year ended January 31, 2021, the Company did not redeem any of the 
2026 Notes.

Holders  of  the  2026  Notes  who  convert  their  2026  Notes  in  connection  with  certain  corporate  events  that 
constitute  a  make-whole  fundamental  change  (as  defined  in  the  Indenture)  or  in  connection  with  the  Company’s 
issuance  of  a  redemption  notice  are,  under  certain  circumstances,  entitled  to  an  increase  in  the  conversion  rate. 
Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the Indenture), 
holders of the 2026 Notes may require the Company to repurchase all or a portion of their 2026 Notes at a price 
equal to 100% of the principal amount of the 2026 Notes being repurchased, plus any accrued and unpaid interest. 

In  accounting  for  the  issuance  of  the  2026  Notes,  the  Company  separated  the  2026  Notes  into  liability  and 
equity components using an effective interest  rate of 5.75% to determine the fair value of the liability component. 
This  interest  rate  was  based  on  both  an  income  and  a  market  based  approach.  For  the  income  approach,  the 
Company used a convertible bond pricing model, which included several assumptions including volatility, the risk-
free rate and observable trading activity for the Company’s existing Notes. For the market approach, the Company 
performed  an  evaluation  of  issuances  of  convertible  debt  securities  by  other  companies  with  similar  credit  risk 
ratings at the time of issuance. The following table sets forth total interest expense recognized related to the 2026 
Notes (in thousands):

Contractual interest expense

Amortization of debt issuance costs

Amortization of debt discount

Total

Year Ended
January 31, 2021

$ 

$ 

2,731 

813 

27,954 

31,498 

Total issuance costs of $15.2 million related to the 2026 Notes were allocated between liability and equity in 
the  same  proportion  as  the  allocation  of  the  total  proceeds  to  the  liability  and  equity  components.  Issuance  costs 
attributable to the liability component are being amortized to interest expense over the respective term of the 2026 
Notes using the effective interest rate method. The issuance costs attributable to the equity component were netted 
against the respective equity component in Additional paid-in capital. The Company recorded liability issuance costs 
of $11.1 million and equity issuance costs of $4.1 million.

105

 
 
The 2026 Notes, net consisted of the following (in thousands):

Liability component:

Principal

Less: unamortized debt issuance costs and debt discount

Net carrying amount

Equity component:

2026 Notes

Less: issuance costs
Carrying amount of the equity component(1)
(1) Included in the consolidated balance sheets within Additional paid-in capital.

2026 Capped Calls

As of January 31, 
2021

$ 

$ 

$ 

$ 

1,150,000 

(292,613) 

857,387 

At Issuance

310,311 

(4,090) 

306,221 

In  connection  with  the  pricing  of  the  2026  Notes,  the  Company  entered  into  capped  call  transactions  with 
respect to its Class A common stock. The 2026 Capped Calls are purchased call options that give the Company the 
option  to  purchase,  subject  to  anti-dilution  adjustments  substantially  identical  to  those  in  the  2026  Notes, 
approximately  4.8  million  shares  of  its  Class  A  common  stock  for  approximately  $238.60  per  share  (subject  to 
adjustment),  corresponding  to  the  approximate  initial  conversion  price  of  the  2026  Notes,  exercisable  upon 
conversion  of  the  2026  Notes.  The  2026  Capped  Calls  have  initial  cap  prices  of  $360.14  per  share  (subject  to 
adjustment) and will expire in 2026, if not exercised earlier. The 2026 Capped Calls are intended to offset potential 
dilution to the Company’s Class A common stock and/or offset the potential cash payments that the Company could 
be  required  to  make  in  excess  of  the  principal  amount  upon  any  conversion  of  the  2026  Notes  under  certain 
circumstances. The 2026 Capped Calls are separate transactions and are not part of the terms of the 2026 Notes.

The Company paid an aggregate amount of $134.0 million for the 2026 Capped Calls. The amount paid for 

the 2026 Capped Calls was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

10. Leases

The  Company  has  entered  into  various  non-cancellable  office  space  operating  leases  with  original  lease 
periods  expiring  between  2021  and  2028.  These  leases  do  not  contain  material  variable  rent  payments,  residual 
value guarantees, covenants or other restrictions. The Company's corporate headquarters lease in San Francisco 
has a 10 year term, which expires in October 2028. The Company is entitled to two five-year options to extend this 
lease, subject to certain requirements. 

Operating lease costs were as follows (in thousands):

Operating lease costs(1)

Year Ended January 31,

2021

2020

2019

$ 

33,076  $  23,193  $  23,290 

(1)  Amounts are presented exclusive of sublease income and include short-term leases, which are immaterial.

The  weighted-average  remaining  term  of  the  Company’s  operating  leases  was  6.8  and  7.9  years  and 
the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.6% 
and 5.7% as of January 31, 2021 and January 31, 2020, respectively.

Maturities of the Company’s operating lease liabilities, which do not include short-term leases, as of 

January 31, 2021 were as follows (in thousands):

106

 
 
2022
2023
2024
2025
2026
Thereafter

Total lease payments

Less imputed interest

Total operating lease liabilities

Operating Leases

$ 

$ 

34,410 
37,910 
38,823 
36,289 
26,839 
73,135 
247,406 
(44,279) 
203,127 

Cash payments included in the measurement of the Company’s operating lease liabilities were $31.1 million 

and $18.3 million for the years ended January 31, 2021 and January 31, 2020, respectively.

The Company recorded an impairment charge for operating lease right-of-use assets of $3.1 million and nil 

for the years ended January 31, 2021 and January 31, 2020, respectively.

11. 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 $11.2 million and $11.9 million were issued and outstanding as of January 31, 2021 and 2020, 
respectively. No draws have been made under such letters of credit.

Purchase Obligations 

As of January 31, 2021, future minimum purchase obligations, such as data center operations and sales and 

marketing activities, were as follows (in thousands):

2022
2023
2024
2025
2026
Total contractual obligations

Legal Matters 

Purchase 
Obligations

$ 

$ 

53,992 
38,370 
32,844 
1,604 
1,417 
128,227 

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. There were no such material matters as of January 31, 2021 
and 2020.

Warranties and Indemnification 

The  Company’s  subscription  services  are  generally  warranted  to  perform  materially  in  accordance  with  the 
Company’s  online  help  documentation  under  normal  use  and  circumstances.  Additionally,  the  Company’s 
arrangements generally include provisions for indemnifying customers against liabilities if its subscription services 
infringe a third party’s intellectual property rights. Furthermore, the Company may also incur liabilities if it breaches 
the  security  or  confidentiality  obligations  in  its  arrangements.  To  date,  the  Company  has  not  incurred  significant 
costs  and  has  not  accrued  a  liability  in  the  accompanying  consolidated  financial  statements  as  a  result  of  these 
obligations. 

  The  Company  has  entered  into  service-level  agreements  with  a  majority  of  its  customers  defining  levels  of 
uptime  reliability  and  performance  and  permitting  certain  customers  to  receive  credits  for  paid  amounts  related  to 
subscription  services  when  the  Company  fails  to  meet  the  defined  levels  of  uptime.  In  very  limited  instances,  the 
Company allows customers to early terminate their agreements in the event that the Company fails to meet those 

107

 
 
 
 
 
 
 
 
 
 
 
 
levels  as  they  may  constitute  a  breach  of  contract.  If  the  customer  did  terminate,  they  would  receive  a  refund  of 
prepaid  unused  subscription  fees.  To  date,  the  Company  has  not  experienced  any  significant  failures  to  meet 
defined levels of uptime reliability and performance as a result of those agreements and, as a result, the Company 
has not accrued any liabilities related to these agreements in the consolidated financial statements. 

12. Common Stock and Stockholders' Equity 

Common Stock 

Holders  of  Class A  and  Class  B  common  stock  are  entitled  to  one  vote  per  share  and  10  votes  per  share, 
respectively, and the shares of Class A common stock and Class B common stock are identical, except for voting 
and conversion rights. Shares of Class B common stock may be converted into Class A common stock at any time 
at the option of the stockholder on a one-for-one basis, and are automatically converted into Class A common stock 
upon sale or transfer, subject to certain limited exceptions. Shares of Class A common stock are not convertible.

In  September  2019  and  June  2020,  in  connection  with  the  2023  Notes  Partial  Repurchases,  the  Company 
issued approximately 3.0 million and 1.4 million shares of Class A common stock, respectively. In addition, during 
the year ended January 31, 2021, the Company issued approximately 0.2 million shares of Class A common stock 
in  connection  with  2023  Notes  conversion  requests  and  received  approximately  0.2  million  shares  of  Class  A 
common stock from the settlement of Note Hedges. See Note 9 for additional details.

As of January 31, 2021, shares of common stock reserved for future issuance were as follows:

Options and unvested RSUs outstanding
Available for future stock option and RSU grants
Available for ESPP

Awards Issued as Charitable Contributions

As of January 31, 
2021

12,702,220 
20,574,441 
4,633,093 
37,909,754 

During the years ended January 31, 2021, 2020 and 2019, the Company issued 42,500, 15,000 and 20,000 
shares, respectively, of Class A common stock as charitable contributions and recognized $9.3 million, $1.7 million 
and $1.0 million, respectively, as general and administrative expense in the consolidated statements of operations. 

13. Employee Incentive Plans 

The Company’s equity incentive plans provide for granting stock options, RSUs and restricted stock awards to 

employees, consultants, officers and directors. In addition, the Company offers an ESPP to eligible employees. 

Stock-based compensation expense by award type was as follows (in thousands):

Stock options
RSUs 
ESPP 
Restricted stock awards
Restricted common stock 
Total 

Year Ended January 31,

2021

2020

2019

$  21,371  $  21,888  $  23,466 
41,637 
  164,412 
7,248 
10,373 
1,608 
25 
2,361 
— 
$  196,181  $  126,624  $  76,320 

94,637 
9,408 
590 
101 

108

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based  compensation  expense  was  recorded  in  the  following  cost  and  expense  categories  in  the 

Company’s consolidated statements of operations (in thousands):  

Year Ended January 31,

2021

2020

2019

Cost of revenue:
Subscription
Professional services and other

Research and development
Sales and marketing
General and administrative
Total

Equity Incentive Plans

$  21,895  $  12,923  $ 

7,837 
4,983 
22,642 
22,916 
17,942 
$  196,181  $  126,624  $  76,320 

8,083 
63,270 
53,802 
49,131 

7,164 
37,683 
38,077 
30,777 

The Company has two equity incentive plans: the 2009 Stock Plan (2009 Plan) and the 2017 Equity Incentive 
Plan  (2017  Plan). All  shares  that  remain  available  for  future  grants  are  under  the  2017  Plan. As  of  January  31, 
2021, options to purchase 1,074,212 shares of Class A common stock and 7,175,901 shares of Class B common 
stock remained outstanding. 

Stock Options 

Options  issued  under  the  Plan  generally  are  exercisable  for  periods  not  to  exceed  ten  years  and  generally 
vest  over  four  years  with  25%  vesting  after  one  year  and  with  the  remainder  vesting  monthly  thereafter  in  equal 
installments. Shares offered under the Plan may be: (i) authorized but unissued shares or (ii) treasury shares. 

A summary of the Company’s stock option activity and related information was as follows:  

Outstanding as of January 31, 2020
Granted
Exercised 
Canceled 
Outstanding as of January 31, 2021
As of January 31, 2021
Vested and expected to vest
Vested and exercisable 

Number of
Options 

Weighted-
Average
Exercise
Price 

12,359,302  $ 
402,891 
(4,368,683)   
(143,397)   
8,250,113  $ 

8,250,113  $ 
6,818,491  $ 

11.82 
145.08 
10.44 
19.23 
18.93 

18.93 
9.93 

Aggregate
Intrinsic Value
(in thousands)

Weighted-
Average
Remaining
Contractual
Term
(Years)

6.2 $ 

1,436,487 

5.6 $ 

1,980,668 

5.6 $ 
5.2 $ 

1,980,668 
1,698,330 

The  weighted-average  grant-date  fair  value  of  options  granted  was  $63.32,  $37.35  and  $17.21  during  the 
years ended January 31, 2021, 2020 and 2019, respectively. The total grant-date fair value of stock options vested 
was  $19.7  million,  $23.7  million  and  $23.8  million  during  the  years  ended  January  31,  2021,  2020  and  2019, 
respectively. The  intrinsic  value  of  the  options  exercised,  which  represents  the  difference  between  the  fair  market 
value of the Company’s common stock on the date of exercise and the exercise price of each option, was $772.3 
million, $558.6 million and $309.3 million for the years ended January 31, 2021, 2020 and 2019, respectively. 

As  of  January  31,  2021  and  January  31,  2020,  there  was  a  total  of  $31.1  million  and  $28.2  million, 
respectively, of unrecognized stock-based compensation expense related to options, which was being recognized 
over a weighted-average period of 1.4 years. 

109

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company used the Black-Scholes option pricing model to estimate the fair value of stock options granted 

with the following assumptions:  

Expected volatility
Expected term (in years)
Risk-free interest rate
Expected dividend yield

Restricted Stock Units

Year Ended January 31,

2021

2020

2019

 43 %
6.3
0.37% - 0.44%   1.55% - 2.27%

 45 %
6.3

— 

— 

 40 %
6.3
 2.70 %
— 

A summary of the Company’s RSU activities and related information is as follows: 

Outstanding as of January 31, 2020
Granted
Vested
Forfeited
Outstanding as of January 31, 2021

Number of
RSUs

Weighted-
Average
Grant Date Fair 
Value Per Share

4,893,241  $ 
2,198,704 
(2,195,094)   
(444,744)   
4,452,107  $ 

77.99 
173.64 
80.28 
90.01 
122.90 

The  Company  granted  2,198,704  RSUs  with  an  aggregate  fair  value  of  $381.8  million  for  the  year  ended 
January  31,  2021. As  of  January  31,  2021,  there  was  $502.8  million  of  unrecognized  stock-based  compensation 
expense related to unvested RSUs, which is being recognized over a weighted-average period of 2.5 years based 
on  vesting  under  the  award  service  conditions.  The  total  fair  value  of  RSUs  vested  during  fiscal  2021,  2020  and 
2019 was $410.4 million, $193.9 million and $58.7 million, respectively.

Employee Stock Purchase Plan

The  ESPP  provides  for  12-month  offering  periods  beginning  June  21  and  December  21  of  each  year,  and 

each offering period consists of up to two six-month purchase periods. 

The Company estimated the fair value of ESPP purchase rights using a Black-Scholes option pricing model 

with the following assumptions:

Year Ended January 31,

2021

2020

2019

Expected volatility
Expected term (in years)
Risk-free interest rate
Expected dividend yield

48% - 54%
0.5 - 1.0

43% - 59%
0.5 - 1.0
0.09% - 0.18% 1.53% - 2.05% 2.12% - 2.62%
—

39% - 70%
0.5 - 1.0

—

—

During the year ended January 31, 2021, the Company's employees purchased 247,142 shares of its Class A 
common stock under the ESPP. The shares were purchased at a weighted-average purchase price of $104.84, with 
proceeds of $25.9 million. During the year ended January 31, 2020, the Company's employees purchased 322,795 
shares of its Class A common stock under the ESPP. The shares were purchased at a weighted-average purchase 
price of $58.14 with proceeds of $18.8 million.

As of January 31, 2021, there was $10.1 million of unrecognized stock-based compensation expense related 

to the ESPP that is expected to be recognized over an average vesting period of 0.9 years.

110

 
 
 
 
 
 
 
 
 
 
 
 
14. Income Taxes

The domestic and foreign components of pre-tax loss for the years ended January 31, 2021, 2020 and 2019 

were as follows (in thousands):  

Domestic
Foreign
Loss before provision for (benefit from) income taxes

Year Ended January 31,

2021

2020

2019

$ 

$ 

(282,026)  $ 
15,835 
(266,191)  $ 

(220,846)  $ 
10,514 
(210,332)  $ 

(128,214) 
2,700 
(125,514) 

The components of the provision for (benefit from) income taxes for the years ended January 31, 2021, 2020 

and 2019 were as follows (in thousands):  

Year Ended January 31,

2021

2020

2019

Current:
Federal
State
Foreign

Total current provision for income taxes

Deferred:
Federal
State
Foreign

Total deferred benefit from income taxes

$ 

11  $ 

136 
1,294 
1,441 

51 
5 

(1,356)   
(1,300)   

Total provision for (benefit from) income taxes

$ 

141  $ 

33  $ 
86 
822 
941 

(518)   
(406)   
(1,436)   
(2,360)   
(1,419)  $ 

— 
61 
667 
728 

(620) 
(130) 
5 
(745) 
(17) 

For the tax year ended January 31, 2021, the income tax expense from profitable jurisdictions was partially 
offset  by  the  excess  tax  benefits  from  stock-based  compensation  in  the  United  Kingdom.  For  the  tax  year  ended 
January  31,  2020  the  income  tax  benefit  resulted  from  the  release  of  valuation  allowance  in  the  United  States  in 
connection with an acquisition and excess tax benefits from stock-based compensation in the United Kingdom. For 
the tax year ended January 31, 2019, the income tax benefit resulted from the release of valuation allowance in the 
United  States  in  connection  with  an  acquisition  and  excess  tax  benefits  from  stock-based  compensation  in  the 
United Kingdom. The income tax expense and benefits in the years ended January 31, 2021, 2020 and 2019 were 
partially offset by foreign income taxes, state taxes and tax amortization of goodwill. 

 The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for 

the years ended January 31, 2021, 2020 and 2019:  

Tax at federal statutory rate
State income taxes, net of federal benefit
Change in valuation allowance
Stock-based compensation
Research and development credits
Other, net
Effective tax rate

Year Ended January 31,

2021

2020

2019

 21.0 %
 4.1 
 (101.0) 
 70.2 
 6.4 
 (0.8) 
 (0.1) %

 21.0 %
 4.0 
 (100.1) 
 59.8 
 18.0 
 (2.0) 
 0.7 %

 21.0 %
 3.8 
 (68.5) 
 45.5 
 — 
 (1.8) 

 — %

111

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2021 

and 2020 were as follows (in thousands):

Deferred tax assets:

Net operating loss carryforwards
Stock-based compensation
Deferred revenue
Operating lease liabilities
Other reserves and accruals
Research and development and other credits
Disallowed interest
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net

Deferred tax liabilities:

Convertible debt
Deferred commissions
Capitalized internal-use software costs
Goodwill
Operating lease right-of-use assets
Depreciation and amortization
Total deferred tax liabilities

Net deferred tax assets

As of January 31,

2021

2020

$ 

607,483  $ 

18,952 
1,144 
51,702 
16,586 
57,060 
6,091 
759,018 
(555,199)   
203,819 

(112,547)   
(38,710)   
(2,691)   
(306)   
(37,522)   
(8,522)   
(200,298)   

$ 

3,521  $ 

370,705 
18,680 
1,960 
42,073 
6,414 
39,918 
4,507 
484,257 
(361,606) 
122,651 

(50,963) 
(27,569) 
(2,248) 
(262) 
(31,165) 
(8,315) 
(120,522) 
2,129 

As  a  result  of  continuing  losses,  the  Company  has  determined  that  it  is  not  more  likely  than  not  that  it  will 
realize the benefits of the U.S. deferred tax assets and, therefore, the Company has recorded a valuation allowance 
to  reduce  the  carrying  value  of  the  U.S.  deferred  tax  assets,  net  of  U.S.  deferred  tax  liabilities,  to  approximately 
zero.  The  U.S.  valuation  allowance  increased  by  $193.6  million  and  $157.7  million  during  the  years  ended 
January 31, 2021 and 2020, respectively. 

As of January 31, 2021, the Company had approximately $2,390.3 million of federal and $1,541.9 million of 
state net operating loss carryforwards available to offset future taxable income. If not used, the federal and state net 
operating  loss  carryforwards  will  begin  to  expire  in  2029  and  2022,  respectively.  As  of  January  31,  2021,  the 
Company had approximately $49.4 million of UK net operating losses which do not expire.

As  of  January  31,  2021,  the  Company  had  federal  research  and  development  tax  credit  carryforwards  of 
$50.3  million  and  California  research  and  development  tax  credit  carryforwards  of  $33.4  million.  The  federal 
research and development credits will start to expire in 2030 while the California research and development credits 
do not expire. The Company also had California Enterprise Zone credits of $1.0 million that begin to expire in 2023.

The Company’s ability to use the net operating loss and tax credit carryforwards in the future may be subject 
to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal 
Revenue Code and similar state tax laws. 

The Company attributes net revenue, costs and expenses to domestic and foreign components based on the 
terms  of  its  agreements  with  its  subsidiaries.  The  Company  does  not  provide  for  federal  income  taxes  on  the 
undistributed  earnings  of  its  foreign  subsidiaries  as  such  earnings  are  to  be  reinvested  offshore  indefinitely.  If  the 
Company  repatriated  these  earnings,  the  resulting  income  tax  liability  would  be  insignificant.  The  Company  is 
subject to taxation in the United States and various states and foreign jurisdictions.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the 
CARES Act). The CARES Act provides numerous tax provisions and other stimulus measures, including temporary 
changes  regarding  the  prior  and  future  use  of  net  operating  losses,  temporary  changes  to  the  prior  and  future 

112

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion 
of  Social  Security  taxes,  technical  corrections  from  prior  tax  legislation  for  tax  depreciation  of  certain  qualified 
improvement  property,  and  the  creation  of  certain  refundable  employee  retention  credits. The  Company  does  not 
expect  there  to  be  a  material  tax  impact  on  its  consolidated  financial  statements  at  this  time,  and  will  continue  to 
assess the implications of the CARES Act and its continuing developments and interpretations. 

A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows (in thousands):  

Year Ended January 31,
2020

2021

2019

Gross amount of unrecognized tax benefits as of the beginning of the year $ 
Additions based on tax positions related to a prior year
Additions based on tax positions related to current year
Reductions based on tax positions taken in a prior year 
Gross amount of unrecognized tax benefits as of the end of the year

$ 

15,987  $ 
— 
7,189 
(952)   
22,224  $ 

23,931  $  11,719 
1,859 
658 
10,353 
6,866 
(15,468)   
— 
15,987  $  23,931 

  The  Company  is  subject  to  taxation  in  the  U.S.  and  various  other  state  and  foreign  jurisdictions.  As  the 
Company  has  net  operating  loss  carryforwards  for  U.S.  federal  and  state  jurisdictions,  the  statute  of  limitations  is 
open for all years. For material foreign jurisdictions, the tax years open to examination include the tax years 2016 
and forward. 

As of January 31, 2021, 2020 and 2019, the Company had unrecognized tax benefits which would not impact 
the effective tax rate because of the valuation allowance. The Company's policy is to include interest and penalties 
related to unrecognized tax benefits within the provision for income taxes. The Company did not have any uncertain 
tax  positions  as  of  January  31,  2021  for  which  it  was  reasonably  possible  that  the  positions  will  increase  or 
decrease  within  the  next  twelve  months. As  of  January  31,  2021  and  2020,  the  Company  had  not  accrued  any 
interest or penalties related to unrecognized tax benefits. 

15. 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 (in thousands, except per 

share data):  

Numerator:
Net loss

Denominator:

Year Ended January 31,

2021

2020

2019

Class A

Class B

Class A

Class B

Class A

Class B

$ (248,892)  $  (17,440)  $ (192,138)  $  (16,775)  $ (107,926)  $  (17,571) 

Weighted-average shares outstanding, 
basic and diluted

  118,882 

8,330 

  107,809 

9,412 

92,452 

  15,052 

Net loss per share, basic and diluted

$ 

(2.09)  $ 

(2.09)  $ 

(1.78)  $ 

(1.78)  $ 

(1.17)  $ 

(1.17) 

113

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (in thousands):

Issued and outstanding stock options
Unvested RSUs issued and outstanding
Unvested restricted stock awards issued and outstanding
Unvested shares subject to repurchase
Unvested restricted common stock issued and outstanding
Shares committed under the ESPP
Shares related to 2023 Notes
Shares subject to warrants related to the issuance of 2023 Notes
Shares related to 2025 Notes
Shares related to 2026 Notes

Year Ended January 31,

2021

2020

2019

8,250 
4,452 
— 
— 
— 
137 
832 
1,048 
5,617 
4,820 
25,156 

12,359 
4,893 
177 
5 
— 
253 
2,494 
2,494 
5,617 
— 
28,292 

17,804 
4,836 
388 
48 
400 
271 
7,134 
— 
— 
— 
30,881 

The  Company  uses  the  if-converted  method  for  calculating  any  potential  dilutive  effect  of  the  conversion 
options embedded in the Notes on diluted net income per share, if applicable. The conversion options of the 2023, 
2025  and  2026  Notes  are  dilutive  in  periods  of  net  income  on  a  weighted-average  basis  using  an  assumed 
conversion date equal to the later of the beginning of the reporting period and the date of issuance of the respective 
Notes. The  exercise  rights  of  the  Warrants  will  have  a  dilutive  impact  on  net  income  per  share  of  common  stock 
under the treasury-stock method when the average market price per share of the Company’s Class A common stock 
for a given period exceeds the conversion price of $68.06 per share. During the year ended January 31, 2021, the 
average  price  per  share  of  the  Company’s  Class A  common  stock  exceeded  the  exercise  price  of  the  Warrants; 
however, since the Company is in a net loss position there was no dilutive effect during any period presented.

16. Subsequent Events

On  March  3,  2021,  the  Company  entered  into  a  definitive  agreement  to  acquire  Auth0,  an  identity 

management platform, pursuant to the Merger Agreement.

Upon  consummation  of  the  transaction  contemplated  by  the  Merger  Agreement,  all  outstanding  shares  of 
Auth0 capital stock, options, warrants, convertible securities, phantom equity and other outstanding equity interests 
will be cancelled in exchange for aggregate consideration of $6.5 billion in the form of shares of Class A common 
stock  of  the  Company  and  assumed  awards  of  corresponding  Company  equity  interests,  subject  to  customary 
purchase  price  adjustments  and  certain  customary  cash  payouts  in  lieu  of  shares  of  Company  Class A  common 
stock, as provided by the Merger Agreement. The purchase price payable in shares of Class A common stock will 
be valued at $276.2147 per share (which price was calculated based on the daily volume-weighted average sales 
price per share of Company Class A common stock for the 20 trading days ending on February 26, 2021). The per 
share price of these shares has been fixed as of the Merger Agreement signing date, and the aggregate value of 
these shares will fluctuate based on changes in our share price between the signing and closing dates.

The  proposed  transaction  is  expected  to  close  during  the  Company’s  second  quarter  of  fiscal  2022,  the 
quarter ending July 31, 2021. The closing of this transaction is subject to certain customary closing conditions and 
approvals.

114

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. 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 
in 
Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report 
on Form 10-K.

effectiveness 

procedures 

disclosure 

controls 

defined 

and 

our 

the 

(as 

of 

Based  on  this  evaluation,  our  management  concluded  that,  as  of  January  31,  2021,  our  disclosure  controls 
and procedures are effective to provide reasonable assurance that information we are required to disclose in reports 
that  we  file  or  submit  under  the  Exchange Act  is  recorded,  processed,  summarized,  and  reported  within  the  time 
periods  specified  in  the  Securities  and  Exchange  Commission’s  rules  and  forms,  and  that  such  information  is 
accumulated and communicated to our management, including our principal executive officer and principal financial 
officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, our ability to maintain an 
effective internal control environment has not been impacted by the COVID-19 pandemic.

Management's Report on Internal Control over Financial Reporting

Our  management  is  responsible  for  establishing  and  maintaining  adequate  internal  control  over  financial 
reporting,  as  defined  in  Rule  13a-15(f)  of  the  Exchange  Act.  Our  management  conducted  an  evaluation  of  the 
effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated 
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). 
Our  internal  control  over  financial  reporting  includes  policies  and  procedures  that  provide  reasonable  assurance 
regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial  statements  for  external  reporting 
purposes in accordance with U.S. generally accepted accounting principles. Based on this evaluation, management 
concluded  that  our  internal  control  over  financial  reporting  was  effective  as  of  January  31,  2021.  In  addition,  our 
ability to maintain an effective internal control environment has not been impacted by the COVID-19 pandemic. Our 
independent  registered  public  accounting  firm,  Ernst  & Young  LLP,  has  issued  an  audit  report  with  respect  to  our 
internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K, and is 
incorporated herein by reference.

Changes in Internal Control over Financial Reporting

There  was  no  change  in  our  internal  control  over  financial  reporting  identified  in  connection  with  the 
evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended 
January  31,  2021  that  has  materially  affected,  or  is  reasonably  likely  to  materially  affect,  our  internal  control  over 
financial reporting.

Inherent Limitations on Effectiveness of Controls

In  designing  and  evaluating  the  disclosure  controls  and  procedures  and  internal  control  over  financial 
reporting, management recognizes that any controls and procedures, no matter how well designed and operated, 
can  provide  only  reasonable  assurance  of  achieving  the  desired  control  objectives.  In  addition,  the  design  of 
disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are 
resource constraints and that management is required to apply its judgment in evaluating the benefits of possible 
controls and procedures relative to their costs.

Item 9B. Other Information

Not Applicable.

115

Part III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 
Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission 
within 120 days of the fiscal year ended January 31, 2021.

Code of Conduct 

Our  board  of  directors  has  adopted  a  code  of  conduct  that  applies  to  all  of  our  employees,  officers  and 
directors.    The  full  text  of  our  code  of  conduct  is  available  on  our  investor  relations  website  at  investor.okta.com 
under  "Corporate  Governance."  We  intend  to  satisfy  the  disclosure  requirement  under  Item  5.05  of  Form  8-K 
regarding  amendments  to,  or  waiver  from,  a  provision  of  our  code  of  conduct  by  posting  such  information  on  the 
website address and location specified above.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 
Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission 
within 120 days of the fiscal year ended January 31, 2021.

Item  12.  Security  Ownership  of  Certain  Beneficial  Owners  and  Management  and  Related  Stockholder 
Matters

The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 
Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission 
within 120 days of the fiscal year ended January 31, 2021.

Item 13. Certain Relationships and Related Party Transactions, and Director Independence

The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 
Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission 
within 120 days of the fiscal year ended January 31, 2021. 

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 
Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission 
within 120 days of the fiscal year ended January 31, 2021.

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

1.

Financial Statements

 See Index to Financial Statements under Part II, Item 8 of this Annual Report on Form 10-K.

2.

Financial Statement Schedules

Schedules not listed above have been omitted because they are not required, not applicable, or the 

required information is otherwise included.

3.

Exhibits

 See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K.

Item 16. Form 10-K Summary

None.

116

SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the 

registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

March 4, 2021

March 4, 2021

OKTA, INC.

/s/   William E. Losch
William E. Losch
Chief Financial Officer

/s/   Christopher K. Kramer
Christopher K. Kramer
Chief Accounting Officer

POWER OF ATTORNEY 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes 
and appoints Todd McKinnon and Jonathan T. Runyan, and each of them, as his or her true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and 
stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, 
with Exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, 
hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to 
be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by 

the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

117

 
 
 
Signature

/s/ Todd McKinnon
Todd McKinnon

/s/ William E. Losch
William E. Losch

/s/ Christopher K. Kramer
Christopher K. Kramer

/s/ J. Frederic Kerrest
J. Frederic Kerrest

/s/ Shellye Archambeau
Shellye Archambeau

/s/ Robert L. Dixon, Jr.
Robert L. Dixon, Jr. 

/s/ Patrick Grady
Patrick Grady

/s/ Ben Horowitz
Ben Horowitz

/s/ Michael Kourey
Michael Kourey

/s/ Rebecca Saeger
Rebecca Saeger

/s/ Michael Stankey
Michael Stankey

/s/ Michelle Wilson
Michelle Wilson

Title

Date

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer 
(Principal Financial Officer)

Chief Accounting Officer 
(Principal Accounting Officer)

Executive Vice Chairperson, 
Chief Operating Officer and Director

Director

Director

Director

Director

Director

Director

Director

Director

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

March 4, 2021

118

EXHIBIT INDEX

Exhibit 
Number
3.1

Exhibit Description
Amended and Restated Certificate of Incorporation.

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

10.1#

10.2#

Amended and Restated Bylaws.

Form of Class A Common Stock Certificate.

Indenture, dated as of February 27, 2018, between Okta, Inc. and Wilmington 
Trust, National Association, as trustee.

Form of 0.25% Convertible Senior Notes due 2023.

Indenture, dated as of September 9, 2019, between Okta, Inc. and Wilmington 
Trust, National Association, as trustee.

Form of 0.125% Convertible Senior Notes due 2025.

Indenture, dated as of June 12, 2020, between Okta, Inc. and Wilmington 
Trust, National Association, as trustee.

Form of 0.375% Convertible Senior Notes due 2026.

Description of the Registrant’s Securities Registered Pursuant to Section 12 of 
the Securities Exchange Act of 1934, as amended.

Form of Indemnification Agreement between the Registrant and each of its 
directors and executive officers.

Amended and Restated 2009 Stock Plan, as amended, and forms of 
agreements thereunder.

10.3#

2017 Equity Incentive Plan, and forms of agreements thereunder.

10.4#

2017 Employee Stock Purchase Plan.

10.5#

Amended and Restated Senior Executive Incentive Bonus Plan.

10.6#

Executive Severance Plan.

10.7#

Non-Employee Director Compensation Policy.

10.8#

Form of Offer Letter between the Registrant and each of its executive officers.

 Incorporated by 
Reference from 
Form
Exhibit 3.2 to Form 
S-1 filed on March 
13, 2017

Exhibit 3.4 to Form 
S-1 filed on March 
13, 2017

Exhibit 4.1 to Form 
S-1 filed on March 
13, 2017

Exhibit 4.1 to Form 
8-K filed on February 
27, 2018

Exhibit 4.1 to Form 
8-K filed on February 
27, 2018

Exhibit 4.1 to Form 
8-K filed on 
September 10, 2019

Exhibit 4.1 to Form 
8-K filed on 
September 10, 2019

Exhibit 4.1 to Form 
8-K filed on June 15, 
2020

Exhibit 4.1 to Form 
8-K filed on June 15, 
2020

Exhibit 4.6 to Form 
10-K filed on March 
6, 2020

Exhibit 10.1 to Form 
S-1 filed on March 
13, 2017

Exhibit 10.2 to Form 
S-1 filed on March 
13, 2017

Exhibit 10.3 to Form 
S-1A filed on March 
27, 2017

Exhibit 10.4 to Form 
S-1A filed on March 
27, 2017

Exhibit 99.2 to Form 
8-K filed on March 7, 
2019

Exhibit 10.8 to Form 
S-1 filed on March 
13, 2017

Exhibit 10.9 to Form 
S-1 filed on March 
13, 2017

Exhibit 10.10 to 
Form S-1 filed on 
March 13, 2017

119

21.1

23.1

31.1

31.2

32.1*

Exhibit 
Number
10.9

10.9.1

10.9.2

Exhibit Description
Office Lease Agreement dated December 2, 2017 between the Registrant and 
KR 100 First Street Owner, LLC. 

Amendment dated August 29, 2019 to Office Lease Agreement dated 
December 2, 2017 between the Registrant and KR 100 First Street Owner, 
LLC. 

Second Amendment dated October 14, 2020 to Office Lease Agreement dated 
December 2, 2017 between the Registrant and KR 100 First Street Owner, 
LLC.

10.10

Form of Call Option Transaction Confirmation.

10.11

Form of Warrant Confirmation.

10.12

Form of Capped Call Transaction Confirmation.

10.13

Form of Capped Call Transaction Confirmation.

Subsidiaries of the Registrant.

Consent of Ernst & Young LLP, Independent Registered Public Accounting 
Firm.
Certification of the Chief Executive Officer pursuant to Exchange Act Rules 
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.

 Incorporated by 
Reference from 
Form
Exhibit 10.1 to Form 
8-K filed on 
December 6, 2017

Exhibit 10.2 to Form 
10-Q filed on 
December 6, 2019

Filed herewith

Exhibit 10.1 to Form 
8-K filed on February 
27, 2018

Exhibit 10.2 to Form 
8-K filed on February 
27, 2018

Exhibit 10.1 to Form 
8-K filed on 
September 10, 2019

Exhibit 10.1 to Form 
8-K filed on June 15, 
2020

Filed herewith

Filed herewith

Filed herewith

Certification of the Chief Financial Officer pursuant to Exchange Act Rules 
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.

Filed herewith

Certification of the Chief Executive Officer and Chief Financial Officer pursuant 
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the 
Sarbanes-Oxley Act of 2002.

Furnished herewith

101.INS

XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable
taxonomy extension information contained in Exhibits 101.*)

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Filed herewith
Filed herewith

Filed herewith

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-
K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, 
except to the extent that the registrant specifically incorporates it by reference.

# Indicates management contract or compensatory plan, contract or agreement.

120

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.1

I, Todd McKinnon, certify that:

1. I have reviewed this Annual Report on Form 10-K of Okta, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a 
material fact necessary to make the statements made, in light of the circumstances under which such statements 
were made, not misleading with respect to the period covered by this report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly 
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, 
and for, the periods presented in this report;

4.  The  registrant’s  other  certifying  officer(s)  and  I  are  responsible  for  establishing  and  maintaining  disclosure 
controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over 
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to 
be  designed  under  our  supervision,  to  ensure  that  material  information  relating  to  the  registrant,  including  its 
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which 
this report is being prepared;

(b)  Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial 
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial 
reporting and the preparation of financial statements for external purposes in accordance with generally accepted 
accounting principles;

(c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and  presented  in  this 
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period 
covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred 
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial 
reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal 
control  over  financial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the  registrant’s  board  of 
directors (or persons performing the equivalent functions):

(a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over 
financial  reporting  which  are  reasonably  likely  to  adversely  affect  the  registrant’s  ability  to  record,  process, 
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant 

role in the registrant’s internal control over financial reporting.

Date: March 4, 2021 

/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.2

I, William E. Losch, certify that:

1. I have reviewed this Annual Report on Form 10-K of Okta, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a 
material fact necessary to make the statements made, in light of the circumstances under which such statements 
were made, not misleading with respect to the period covered by this report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly 
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, 
and for, the periods presented in this report;

4.  The  registrant’s  other  certifying  officer(s)  and  I  are  responsible  for  establishing  and  maintaining  disclosure 
controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over 
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to 
be  designed  under  our  supervision,  to  ensure  that  material  information  relating  to  the  registrant,  including  its 
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which 
this report is being prepared;

(b)  Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial 
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial 
reporting and the preparation of financial statements for external purposes in accordance with generally accepted 
accounting principles;

(c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and  presented  in  this 
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period 
covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred 
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial 
reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal 
control  over  financial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the  registrant’s  board  of 
directors (or persons performing the equivalent functions):

(a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over 
financial  reporting  which  are  reasonably  likely  to  adversely  affect  the  registrant’s  ability  to  record,  process, 
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant 

role in the registrant’s internal control over financial reporting.

Date: March 4, 2021 

/s/ William E. Losch
William E. Losch
Chief Financial Officer
(Principal Financial Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the 
“Exchange Act”),  and  Section  1350  of  Chapter  63  of Title  18  of  the  United  States  Code  (18  U.S.C.  §1350), Todd 
McKinnon, Chief Executive Officer of Okta, Inc. (the “Company”), and William E. Losch, Chief Financial Officer of 
the Company, each hereby certifies that, to the best of his knowledge:

1.

2.

The  Company’s  Annual  Report  on  Form  10-K  for  the  year  ended  January  31,  2021,  to  which  this 
Certification  is  attached  as  Exhibit  32.1  (the  “Periodic  Report”),  fully  complies  with  the  requirements  of 
Section 13(a) or Section 15(d) of the Exchange Act; and

The  information  contained  in  the  Periodic  Report  fairly  presents,  in  all  material  respects,  the  financial 
condition and results of operations of the Company.

Date: March 4, 2021 

/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)

/s/ William E. Losch
William E. Losch
Chief Financial Officer
(Principal Financial Officer)

[THIS PAGE INTENTIONALLY LEFT BLANK]

 
 
 
Corporate Information 

Board of Directors: 

Executive Officers: 

Todd McKinnon 
Chairperson of the Board of Directors, 
Chief Executive Officer & Director 

Todd McKinnon 
Chairperson of the Board of Directors, 
Chief Executive Officer & Director 

J. Frederic Kerrest
Executive Vice Chairperson of the Board of
Directors, Chief Operating Officer & Director

J. Frederic Kerrest
Executive Vice Chairperson of the Board of
Directors, Chief Operating Officer & Director

Shellye Archambeau 
Former Chief Executive Officer 
MetricStream, Inc. 

Robert Dixon, Jr.  
Former Global Chief Information Officer & 
Senior Vice President 
PepsiCo, Inc. 

Patrick Grady 
Managing Member 
Sequoia Capital 

Ben Horowitz 
General Partner  
Andreessen Horowitz 

Rebecca Saeger 
Former Chief Marketing Officer 
Charles Schwab & Co., Inc. 

Michael Stankey 
Vice Chairman  
Workday, Inc. 

Michelle Wilson 
Former Senior Vice President & General Counsel 
Amazon.com Inc. 

Michael Kourey 
Chief Financial Officer 

Christopher Kramer 
Chief Accounting Officer 

Jonathan T. Runyan 
General Counsel & Corporate Secretary 

Susan St. Ledger 
President, Worldwide Field Operations 

Corporate Headquarters: 

Okta, Inc. 
100 First Street, Suite 600 
San Francisco, California 94105 

Stock Transfer Agent: 

Computershare 
C/O:  Shareholder Services  
462 South 4th Street, Suite 1600  
Louisville, Kentucky 40202  
Toll Free Phone:  (800) 736-3001 
International:  +1 (781) 575-3100 

Investor Relations: 

Website:  investor.okta.com 
Email:  investor@okta.com 

Stock Exchange Listing: 

Nasdaq  
Symbol:  OKTA 

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okta.com