Proxy
Statement
and Annual
Report
okta.com
2022
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
May 10, 2022
Dear Okta Stockholder:
I am pleased to invite you to attend the 2022 Annual Meeting of Stockholders of Okta, Inc. to be held on June 21, 2022, 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 virtualshareholdermeeting.com/OKTA2022 during the meeting.
Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2022
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 25, 2022.
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 10, 2022, 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 2022 Annual Meeting of Stockholders and our 2022
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 2022 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 2022 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 2022
Annual Meeting
of Stockholders
Notice is hereby given that Okta, Inc. will hold its 2022 Annual Meeting of
Stockholders on June 21, 2022, 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 virtualshareholdermeeting.com/OKTA2022 during the meeting. We are holding
the Annual Meeting for the following purposes, which are more fully described in
the accompanying proxy statement:
June 21, 2022
9:00 a.m. Pacific Time
• To elect three Class II directors to hold office until the 2025 Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
virtualshareholdermeeting.com/OKTA2022
public accounting firm for the fiscal year ending January 31, 2023;
• To ratify the appointment of Ernst & Young LLP as our independent registered
• 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 2022 Annual Meeting of Stockholders accompanying
this notice, in lieu of mailing printed copies. On or about May 10, 2022, 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 2022
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 2022 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 as of the close of business on April 25, 2022 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 10, 2022
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
Proxy Statement
for the 2022
Annual Meeting of
Stockholders –
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
Compensation Discussion and Analysis
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
Additional Information
1
8
17
29
31
32
33
34
52
62
63
64
67
69
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
General
Information
June 21, 2022
9:00 a.m. Pacific Time
virtualshareholdermeeting.com/
OKTA2022
Our board of directors solicits your proxy on our behalf for the 2022 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
2022 Annual Meeting of Stockholders and the accompanying Notice of 2022
Annual Meeting of Stockholders. The Annual Meeting will be held virtually via a live
interactive audio webcast on the internet on June 21, 2022, at 9:00 a.m. Pacific
Time. On or about May 10, 2022, 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 2022 Annual Report on Form 10-K. If you held
shares of our Class A or Class B common stock as of the close of business on April
25, 2022, you are invited to attend the meeting at virtualshareholdermeeting.com/
OKTA2022 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?
We will host our Annual Meeting via live webcast only. We believe that hosting a
virtual meeting will facilitate stockholder attendance and participation at our
Annual Meeting by enabling stockholders to participate from any location around
the world. We have designed the virtual meeting to provide the same rights and
opportunities to participate as stockholders would have at an in-person meeting,
including the right to listen, vote and ask questions during the meeting through the
virtual meeting platform. Any stockholder can attend the Annual Meeting live online
at virtualshareholdermeeting.com/OKTA2022. The webcast will start at 9:00 a.m.
Pacific Time on June 21, 2022. 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.
What matters are being voted on at the Annual Meeting?
You will be voting on:
•
The election of three Class II directors to serve until the 2025 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, 2023;
• 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.
Okta, Inc.
2022 Proxy Statement
1
General Information
How does the board of directors recommend that I vote on these
proposals?
Our board recommends a vote:
•
•
•
“FOR” the election of Jeff Epstein, J. Frederic Kerrest and Rebecca Saeger as
Class II 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, 2023; 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 the close of business on April 25,
2022, the record date for our Annual Meeting (the “Record Date”), may vote at the
Annual Meeting.
As of the Record Date, there were 150,748,176 shares of our Class A common stock
and 6,976,203 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.
What is the quorum requirement?
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
2
2022 Proxy Statement
Okta, Inc.
General Information
votes and broker non-votes are counted as shares present and entitled to vote for
the purposes of determining a quorum.
How many votes are needed for the approval of each proposal?
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,
2023 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 in person 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.
Because brokers have discretionary authority to vote on this proposal, we do not
expect any broker non-votes.
How do I vote?
If you are a stockholder of record, there are four ways to vote:
By Internet
By Telephone
Vote at www.proxyvote.com until 11:59
p.m. Eastern Time on June 20, 2022 (have
your Notice or proxy card in hand when
you visit the website).
Vote toll-free at 1-800-690-6903 until
11:59 p.m. Eastern Time on June 20, 2022
(have your Notice or proxy card in hand
when you call).
By Mail
During the Meeting
Vote by completing and mailing your
proxy card (if you received printed proxy
materials).
Instructions on how to attend and vote
at the Annual Meeting are described at
virtualshareholdermeeting.com/OKTA2022.
In order to be counted, proxies submitted by telephone or internet must be received
by 11:59 p.m. Eastern Time on June 20, 2022. 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
Okta, Inc.
2022 Proxy Statement
3
General Information
vote during the Annual Meeting unless you receive a legal proxy from your broker,
bank or other nominee.
Can I change my vote?
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 20, 2022 (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.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of our board. Todd McKinnon, J. Frederic
Kerrest, Brett Tighe 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.
What is the effect of abstentions and broker non-votes?
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, 2023 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, including the
election of directors (even if not contested).
Where can I find the voting results of the Annual Meeting?
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
4
2022 Proxy Statement
Okta, Inc.
General Information
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.
How are proxies solicited for the Annual Meeting?
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. We have engaged the
services of Innisfree M&A Incorporated, a professional proxy solicitation firm, to
help us solicit proxies from stockholders, including certain brokers, trustees,
nominees and other institutional owners, for a fee of approximately $25,000 plus
costs and expenses.
Why did I receive a Notice of Internet Availability of Proxy Materials
instead of a full set of proxy materials?
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 2022 Annual Report, primarily online. On or about May 10, 2022,
we mailed 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 2022 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.
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?
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.
Okta, Inc.
2022 Proxy Statement
5
General Information
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?
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 2023 Annual
Meeting of Stockholders, our Corporate Secretary must receive the written
stockholder proposal no later than January 10, 2023. 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
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 2023 Annual Meeting of Stockholders, our Corporate Secretary must receive the
written notice at our principal executive offices:
• not earlier than February 24, 2023, and
• not later than the close of business on March 24, 2023.
In the event we hold the 2023 Annual Meeting of Stockholders more than 30 days
before or more than 60 days after the one-year anniversary of the 2022 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. In addition
to satisfying the foregoing requirements under our bylaws, to comply with the
universal proxy rules, stockholders who intend to solicit proxies in support of
director nominees other than our nominees must provide notice that sets forth the
information required by Rule 14a-19 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), no later than April 22, 2023.
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. We reserve the right
to reject, rule out of order, or take other appropriate action with respect to any
proposal that does not comply with these or other applicable requirements.
We intend to file a proxy statement and WHITE proxy card with the SEC in
connection with the solicitation of proxies for our 2023 Annual Meeting of
6
2022 Proxy Statement
Okta, Inc.
General Information
Stockholders. Stockholders may obtain our proxy statement (and any amendments
and supplements thereto) and other documents as and when filed by us with the
SEC without charge from the SEC’s website at www.sec.gov.
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.”
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 2022 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.
Why is this Annual Meeting being held virtually?
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
virtualshareholdermeeting.com/OKTA2022. You also will be able to vote your
shares electronically prior to or during the Annual Meeting.
How can I submit a question at the Annual Meeting?
If you want to submit a question during the Annual Meeting, log into
virtualshareholdermeeting.com/OKTA2022, 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.
What if I have technical difficulties or trouble accessing the Annual
Meeting?
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 21, 2022 and will remain available until the Annual
Meeting ends.
Okta, Inc.
2022 Proxy Statement
7
01
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 II directors expires at the Annual Meeting. The term of the Class I
directors expires at the 2024 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
Director Since
Principal Occupation
Jeff Epstein
2021
Operating Partner, Bessemer
Venture Partners
J. Frederic Kerrest
2009
Chief Operating Officer
Rebecca Saeger
2019
Former Executive Vice President
and Chief Marketing Officer, Charles
Schwab & Co., Inc.
Our board has nominated Jeff Epstein, J. Frederic Kerrest and Rebecca Saeger for
election as Class II directors to hold office until the 2025 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 II
director and member of our board and has consented to serve if elected. Michelle
Wilson, currently a Class II director, is not standing for re-election at the Annual
Meeting. We thank her for her distinguished service to Okta. Our board has
adopted a resolution to reduce the size of the board from ten to nine directors
immediately upon the election of the Class II directors at the Annual Meeting.
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.
Proxies cannot be voted for a greater number of persons than three at the Annual
Meeting, the number of nominees named in this proxy statement. 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.
8
2022 Proxy Statement
Okta, Inc.
Proposal One: Election of Directors
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 (“Nasdaq”).
Directors
The following table sets forth information regarding our directors as of April 25, 2022.
Age
Director
Since
Principal Occupation
Class
Audit
Committee
Compensation
Committee
Nominating
Committee
Name
Employee Directors
Todd McKinnon,
Chairperson
J. Frederic Kerrest,
Executive Vice Chairperson
Independent Directors
50
2009
Chief Executive Officer
45
2009
Chief Operating Officer
Shellye Archambeau
59
2018
Robert L. Dixon, Jr.
66
2019
Jeff Epstein
65
2021
Patrick Grady
39
2014
Former Chief Executive
Officer, MetricStream, Inc.
Former Global Chief
Information Officer and
Senior Vice President,
PepsiCo, Inc.
Operating Partner, Bessemer
Venture Partners
Managing Member, Sequoia
Capital
Benjamin Horowitz,
Lead Independent Director
55
2010
General Partner, Andreessen
Horowitz
Rebecca Saeger
67
2019
Former Executive Vice
President and Chief
Marketing Officer, Charles
Schwab & Co., Inc.
Michael Stankey
Michelle Wilson
63
59
2016
Vice Chairman, Workday, Inc.
2015
Former Senior Vice President
and General Counsel,
Amazon.com, Inc.
I
II
III
III
II
III
III
II
I
II
member
member
chair
member
member
member
chair
member
member
chair
Okta, Inc.
2022 Proxy Statement
9
Proposal One: Election of Directors
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 metrics as of April 25, 2022 are highlighted in the following graphics. Information about
each individual director and director nominee follows.
Board Diversity Matrix (as of April 25, 2022)
Total Number of Directors: 10
Female
Male
Non- Binary
Did Not Disclose
Gender
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic
Background
3
1
—
—
—
—
2
—
7
1
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10
2022 Proxy Statement
Okta, Inc.
Gender37FemaleMaleAge1144<4040-4950-5960+Tenure433<5 yrs5-9 yrs10+ yrsIndependence82IndependentEmployee Director Skills Matrix
Proposal One: Election of Directors
Name
Archambeau
Dixon
Epstein
Grady
Horowitz
Kerrest
McKinnon
Saeger
Stankey
Wilson
Technology or
Innovation
Cybersecurity,
Information
Security or
Privacy
Global Sales,
Markets or
Operations
Senior
Leadership
Public
Company
Boards
Risk
Management
Marketing or
Brand
Finance or
Accounting
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
Okta, Inc.
2022 Proxy Statement
11
Proposal One: Election of Directors
Information Concerning Director Nominees
Jeff Epstein
Mr. Epstein joined our board in May 2021. Mr. Epstein is an Operating Partner at Bessemer
Venture Partners, a venture capital firm, which he joined in November 2011. From September
2008 to April 2011, Mr. Epstein served as Executive Vice President and Chief Financial Officer
of Oracle Corporation, an enterprise software company. Prior to joining Oracle, Mr. Epstein
served as chief financial officer of several public and private companies. Mr. Epstein
previously served on the boards of directors of Booking Holdings Inc. from April 2003 to June
2019 and Shutterstock, Inc. from April 2012 to June 2021. Mr. Epstein has served on the
boards of Twilio Inc., a cloud communication platform company, since July 2017, Poshmark,
Inc., a social commerce marketplace company, since April 2018, Couchbase, Inc., a provider
of a leading modern database for enterprise applications, since June 2015, and AvePoint, Inc.,
a cloud data management company, since July 2011. Mr. Epstein holds a Bachelor of Arts
from Yale University and a Masters in Business Administration from Stanford University.
We believe that Mr. Epstein 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.
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.
Operating Partner, Bessemer
Venture Partners
Age 65
Director Since 2021
Executive Vice Chairperson and
Chief Operating Officer
Age 45
Director Since 2009
12
2022 Proxy Statement
Okta, Inc.
Proposal One: Election of Directors
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.
Former Executive Vice
President and Chief Marketing
Officer, Charles Schwab & Co.,
Inc.
Age 67
Director Since 2019
Okta, Inc.
2022 Proxy Statement
13
Proposal One: Election of Directors
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.
Ms. Archambeau is not standing for re-election to Nordstrom’s board at its annual meeting
of stockholders in May 2022. 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 Computing Advisory Board and the
Georgia Institute of Technology Foundation 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.
Former Chief Executive Officer,
MetricStream, Inc.
Age 59
Director Since 2018
Former Global Chief
Information Officer and Senior
Vice President, PepsiCo, Inc.
Age 66
Director Since 2019
14
2022 Proxy Statement
Okta, Inc.
Proposal One: Election of Directors
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. From January 2013 to May 2020, Mr. Grady served as
a member of the board of directors of Prosper Marketplace, Inc., a peer-to-peer lending
platform. He has served on the boards of directors of Embark Technology, Inc., an
autonomous trucking company, since May 2018, and of Amplitude, Inc., a data analytics
company, since November 2018. 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.
Benjamin 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.
Managing Member, Sequoia
Capital
Age 39
Director Since 2014
General Partner, Andreessen
Horowitz
Age 55
Director Since 2010
Okta, Inc.
2022 Proxy Statement
15
Proposal One: Election of Directors
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.
Chairperson and Chief
Executive Officer
Age 50
Director Since 2009
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. From February 2017 to October 2021, Mr. Stankey served as a
member of the board of directors of Cloudera, Inc., a data management, machine learning
and advance analytics platform provider. 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.
Vice Chairman, Workday, Inc.
Age 63
Director Since 2016
16
2022 Proxy Statement
Okta, Inc.
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 disclosure 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, 2022 (“fiscal 2022”), no
waivers were granted from any provision of the code of conduct.
Okta, Inc.
2022 Proxy Statement
17
Corporate Governance
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 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 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.
Epstein, 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 Michael 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 at the time of his
service on our board. 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.
We believe that our current leadership structure provides effective independent oversight of management while Mr. McKinnon's
combined role enables strong leadership, creates clear accountability and enhances our ability to communicate our message
and strategy clearly and consistently to stockholders. Our board will continue to periodically review our leadership structure and
may make such changes in the future as it deems appropriate.
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.
18
2022 Proxy Statement
Okta, Inc.
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. 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.
Corporate Governance
Audit Committee
Compensation
Committee
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.
Nominating Committee
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 nine meetings during fiscal 2022. 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 the period for which he or she was a director or committee member
during fiscal 2022. 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 attended the 2021 Annual Meeting of Stockholders.
Okta, Inc.
2022 Proxy Statement
19
Corporate Governance
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
Primary Responsibilities
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;
• 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
2022.
Members
Ms. Archambeau
Mr. Epstein (Chair)
Mr. Grady
Ms. Archambeau served as
Chairperson of the audit committee
until May 2021, when Mr. Epstein
joined the audit committee and began
serving as Chairperson.
Ms. Wilson served on the audit
committee until June 2021.
Independence
The composition of our audit
committee meets the requirements for
independence under current Nasdaq
listing standards and SEC rules and
regulations.
Financial Expertise
Each member of our audit committee
meets the financial literacy
requirements of the Nasdaq listing
standards. In addition, our board has
determined that each of Ms.
Archambeau and Mr. Epstein is an
audit committee financial expert
within the meaning of Item 407(d) of
Regulation S-K under the Securities
Act of 1933, as amended (the
“Securities Act”).
20
2022 Proxy Statement
Okta, Inc.
Corporate Governance
Compensation Committee
Primary Responsibilities
Members
Mr. Dixon
Ms. Saeger
Mr. Stankey (Chair)
Ms. Wilson
Ms. Wilson is not standing for re-
election at the Annual Meeting, but
will serve on the compensation
committee until her term expires.
Independence
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 ten
meetings during fiscal 2022.
Compensation Committee Interlocks and Insider Participation
During fiscal 2022, 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
Primary Responsibilities
Members
Ms. Saeger
Mr. Stankey
Ms. Wilson (Chair)
Ms. Wilson is not standing for re-
election at the Annual Meeting, but
will serve as the nominating
committee chair until her term expires.
Independence
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;
• 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
2022.
Okta, Inc.
2022 Proxy Statement
21
Corporate Governance
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 (which may include consideration as to gender, race and national origin, LGBT
status, education, professional experience and differences in viewpoints), 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.
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 2022, consistent with the prior two years, we contacted over 30 of our top
institutional stockholders, which represented nearly 50% of our outstanding common stock, or over 51% of our 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. The breadth of our outreach program enabled us to gather feedback from a significant cross-
section of our stockholder base. As described further in the “Compensation Discussion and Analysis” below, while we received
many supportive and positive comments on our direction with respect to our business, ESG initiatives, board composition and
executive compensation program, based in part on the feedback we received in these discussions, we implemented a new
performance-based restricted stock unit award program for our named executive officers in fiscal 2023. Additionally, our CEO
and COO requested that they not be granted equity awards in fiscal 2023 to address stockholder concerns. We will continue to
engage with our stockholders to maintain an open dialogue and ensure that we have an in-depth understanding of our
stockholders’ perspectives.
22
2022 Proxy Statement
Okta, Inc.
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).
Corporate Governance
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, partners and communities. We maintain that operating our company in an
environmentally and socially responsible manner will help drive our long-term growth and shareholder value. 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
Supporting Our Communities
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. For more information on our security and data privacy efforts, please see the “Protecting
Our Customers” page of our website at okta.com/responsibility/protecting-our-customers and the “Transparency” page of our
website at okta.com/transparency. The information contained on, or that can be accessed through, our website is not
incorporated by reference into this Proxy Statement.
Okta, Inc.
2022 Proxy Statement
23
Corporate Governance
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 our employees and their
communities.
Love Our
Customers
Never Stop
Innovating
Act With
Integrity
Be Transparent
Empower Our
People
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.
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 made deeper investments in our diversity, inclusion and belonging (“DIB”) program at
Okta. Our DIB initiatives — spearheaded by our DIB department and employee resource groups (“ERGs”),
in partnership with various other teams — focus on DIB in our workforce, in our workplace and in the
marketplace.
We employ inclusive recruitment and hiring practices to source diverse talent and mitigate potential bias
throughout the hiring process. Our engagement with diversity sourcing programs and partnerships allows
us to both source top talent from underrepresented groups for current open roles, and further strengthen
our ability to build and nurture diverse talent communities for future roles. We also continue to recruit
from a range of colleges and engage with organizations that support diverse students and jobseekers
through our social impact arm, Okta for Good.
Nurturing a culture of inclusion and belonging in our workplace is a key priority. We empower our
employees to be authentic and grow through open conversations and engagement resources, including
regular safe space DIB discussion forums and facilitated workshops, personalized DIB learning tools,
mentoring and workplace development programs focused on supporting talent from underrepresented
communities, and sponsorship of ERGs that strengthen our DIB culture. We currently have ERGs
supporting women, people of color, veterans, the LGBTQIA+ community and parents and caregivers, and
plan to launch affinity groups supporting neurodiversity and persons with disabilities in fiscal 2023.
Additional information on our DIB strategy, workforce representation and inclusion programs can be
found in our most recent State of Inclusion at Okta Annual Report located on our website at okta.com/
state-of-inclusion-at-okta.
Diversity,
Inclusion and
Belonging
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 provide our employees with a wide
range of learning and development opportunities, including in-person, virtual, social and self-directed
learning, mentoring, coaching and external development. We offer extensive onboarding and training
programs through our internal learning initiative, Okta University, to prepare our employees at all levels
for career progression and individual development. Our “Oktavate” employee onboarding program helps
our employees get off to the right start, our “Managing the Okta Way” manager development program
helps to build a solid foundation for our people managers, and our “Okta Essentials” technical training
program quickly brings our new technical employees up to speed on our product offerings.
Growth and
Development
24
2022 Proxy Statement
Okta, Inc.
Compensation,
Benefits and
Wellness
Corporate Governance
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 that may vary by
country/region, including an employee stock purchase plan, a 401(k) plan with company matching
contributions, comprehensive medical, dental and vision insurance, life and disability insurance, health
savings accounts, charitable donation matching, flexible time off, volunteer time off, gender-neutral paid
parental leave, fertility and adoption support, family care resources, mobile and internet reimbursement,
mental health and lifestyle support programs and a variety of other health and wellness resources.
We are committed to fair compensation and opportunity in our workplace. We conduct regular equal pay
assessments and adjust as needed to ensure our employees are paid equitably without regard to gender
or ethnicity.
Additional information on our compensation, benefits and wellness programs is available on our Total
Rewards website at rewards.okta.com.
We help our employees succeed by providing flexibility in where and how they work. Prior to the COVID-19
pandemic, we had 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. As the COVID-19 pandemic evolves and
employees return to work in our offices, we remain committed to enabling our employees’ choices to
determine where and how they work, to best suit their circumstances.
Dynamic Work
Looking forward, we continue to focus on technologies and programs that create equity and build
community across our dynamic workforce, including:
•
Flexible benefit offerings that allow employee customization;
• Workplace solutions, such as coworking spaces, outside of our primary office locations that support
our distributed teams;
• A Dynamic Work Sustainability Guide to empower our employees to bring sustainability into their work
environments, wherever they are based; and
• Curated experience programs that foster a sense of community both in-person and virtually.
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 their important missions. 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 okta.com/okta-for-
good/impact-report.
Okta, Inc.
2022 Proxy Statement
25
Corporate Governance
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 165,000 shares of our Class A common stock remained reserved for future issuances as
of April 25, 2022.
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, which served as an instrumental
first step in helping us define sustainability goals and strategies going forward, including increasing our use of renewable energy
and reducing our overall carbon footprint. In July 2021, we submitted our fiscal 2021 GHG emissions analysis to CDP including our
scope 1, scope 2 and all relevant scope 3 emissions, and expanded our fiscal 2020 original inventory to include all relevant scope
3 emissions. For more information on our GHG inventory scope, methodology and results, please see okta.com/responsibility/
emissions-inventory-results-fy21.
We have committed to achieving 100% renewable electricity for our global real estate footprint on an annual basis. In fiscal 2022,
we achieved 100% renewable electricity for our global offices, including coworking spaces, and global employee work-from-home
electricity consumption, which marked 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 sustainability, starting in January 2021, all new Okta offices will be at least LEED Silver and WELL Silver certified.
To build on these milestones and to further maximize benefits to society, the environment and all of our stakeholders, we have
committed to:
•
Integrating climate into our enterprise-wide risk management process, as per the Task Force on Climate-Related Financial
Disclosures;
• Engaging in a “Listening and Learning” tour with community-based climate and environmental organizations to inform our
climate strategy; and
•
Incorporating social equity and justice into our climate work through purchasing renewable energy certificates that have a
social benefit, and into our grantmaking, as we recognize climate change disproportionately impacts historically marginalized
communities, including communities of color.
26
2022 Proxy Statement
Okta, Inc.
Corporate Governance
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 2021
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 unit awards (“RSUs”) having a fair market
value of $350,000 on the date of grant. These initial RSU grants vest in equal annual installments on the first three anniversaries
of the date on which the non-employee director was appointed to our board, subject to continuous service. Non-employee
directors receive the following annual cash retainers for their service:
Position
Board Member
Lead Independent Director
Audit Committee Chair
Compensation Committee Chair
Nominating Committee Chair
Audit Committee Member other than Chair
Compensation Committee Member other than Chair
Nominating Committee Member other than Chair
Annual Cash Retainer
($)
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 are 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”)).
The following table presents the total compensation for each person who served as a non-employee director during fiscal 2022,
with the exception of Mr. Kourey. Mr. Kourey, who was an employee for a portion of fiscal 2022, received director retainer fees of
$3,034 for the portion of the fiscal year in which he served as a non-employee director. Messrs. McKinnon and Kerrest, who were
also our employees, received no compensation for their service as directors. The compensation received by Mr. McKinnon as
CEO, by Mr. Kourey for his service both as a non-employee director and as CFO, and by Mr. Kerrest as COO is presented in the
“Fiscal 2022 Summary Compensation Table” below. Other than as set forth in the tables below, we did not pay any compensation
or make any equity awards to our non-employee directors during fiscal 2022.
Okta, Inc.
2022 Proxy Statement
27
Corporate Governance
Fiscal 2022 Director Compensation Table
Name
Shellye Archambeau
Robert L. Dixon, Jr.
Jeff Epstein(3)
Patrick Grady
Benjamin Horowitz
Rebecca Saeger
Michael Stankey
Michelle Wilson
Fees Earned or Paid In
Cash ($)
Stock Awards
($)(1)(2)
42,962
37,500
34,239
40,000
50,000
41,500
49,000
49,304
200,122
200,122
550,233
200,122
200,122
200,122
200,122
200,122
Total
($)
243,084
237,622
584,472
240,122
250,122
241,622
249,122
249,426
(1)
The amounts reported represent the aggregate grant date fair value of the RSUs granted during fiscal 2022 under our 2017 Plan as computed in accordance with
the Financial Accounting Standards 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 2022 Annual Report. These amounts do not necessarily correspond to the actual values recognized or that
may be recognized by the directors.
(2)
As of January 31, 2022, our non-employee directors held the options and stock awards set forth in the following table:
Name
Shellye Archambeau
Robert L. Dixon, Jr.
Jeff Epstein
Patrick Grady
Benjamin Horowitz
Rebecca Saeger
Michael Stankey
Michelle Wilson
(3) Mr. Epstein joined our board in May 2021.
Shares of Class B
Common Stock
Underlying Options
RSUs Covering
Class A Common
Stock
—
—
—
—
—
—
190,000
—
862
1,767
2,296
862
862
862
862
862
28
2022 Proxy Statement
Okta, Inc.
02
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, 2023. 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 (“PCAOB”). Our audit committee pre-approved all
services performed by the independent registered public accounting firm in fiscal
2022 in accordance with the foregoing pre-approval policies and procedures.
Okta, Inc.
2022 Proxy Statement
29
Proposal Two: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
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, 2022 and 2021. 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 2022
($)
4,518,000
—
88,000
4,000
4,610,000
Fiscal 2021
($)
3,096,000
—
—
8,000
3,104,000
(1)
(2)
(3)
Audit Fees relate to 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 the fiscal
year ended January 31, 2021 (“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.
Tax Fees relate to professional services provided for permissible tax advisory services in fiscal 2022.
All Other Fees relate to 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, 2023.
30
2022 Proxy Statement
Okta, Inc.
Report of the
Audit
Committee of
the Board of
Directors
The information contained in this audit committee report is being furnished and
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.
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 audited consolidated financial
statements for its fiscal year ended January 31, 2022, 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 audited
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, 2022. The audit committee also discussed with
members of Ernst & Young LLP the matters required to be discussed by the
applicable requirements of the PCAOB and the SEC.
In addition, the audit committee received the written disclosures and the letter
from Ernst & Young LLP required by applicable requirements of the PCAOB
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, 2022 be included in its Annual Report on Form 10-K for its 2022 fiscal
year.
Audit Committee
Jeff Epstein (Chair)
Shellye Archambeau
Patrick Grady
Okta, Inc.
2022 Proxy Statement
31
03
Proposal Three:
Advisory Non-
Binding Vote to
Approve the
Compensation of
Our Named
Executive
Officers
We are asking our stockholders to vote to approve, on an advisory non-binding
basis, the compensation of our named executive officers for fiscal 2022 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 2022 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 2022 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 Our 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.
32
2022 Proxy Statement
Okta, Inc.
Proposal Three: Advisory Non-Binding Vote to Approve the Compensation of Our Named Executive Officers
Executive Officers
The following table sets forth information regarding our executive officers, including their ages, as of April 25, 2022:
Name
Age
Positions and Offices Held with the Company
Todd McKinnon
J. Frederic Kerrest
Brett Tighe
Christopher K. Kramer
Jonathan T. Runyan
Susan St. Ledger
50
45
42
51
46
57
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
Chief Accounting Officer
General Counsel and Secretary
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 25, 2022 consisted of
the following individuals:
Brett Tighe
Mr. Tighe has served as our Chief Financial Officer since January 2022. Prior to his current role, Mr. Tighe served as our interim
Chief Financial Officer from June 2021 to January 2022, Senior Vice President of Finance and Treasurer from May 2017 to June
2021, Vice President, FP&A from June 2016 to May 2017, and as head of worldwide FP&A from April 2015 to May 2016. From May
2004 to March 2015, Mr. Tighe served in various finance roles, most recently as Senior Director, Corporate Finance & Strategy, at
salesforce.com, inc., a cloud-based customer relationship management company. Mr. Tighe holds a Master of Business
Administration from the University of San Francisco and a Bachelor of Arts from the University of California, Santa Barbara.
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 2017 to February 2021 and as Senior Vice
President, Chief Revenue Officer from 2016 to 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. Previously, Ms. St. Ledger served
in a variety of senior sales management roles at salesforce and Sun Microsystems, Inc., a provider of network computing
infrastructure solutions. Ms. St. Ledger has served on the board of directors of HashiCorp, Inc., a software infrastructure
company, since November 2019. Ms. St. Ledger holds a B.S. degree from the University of Scranton.
Okta, Inc.
2022 Proxy Statement
33
Compensation
Discussion and
Analysis
This Compensation Discussion and Analysis describes our executive
compensation program and the decisions in fiscal 2022 regarding the
compensation for:
Todd McKinnon
our CEO, Chairperson of the Board of Directors and co-founder;
Brett Tighe
our CFO, who served as interim CFO during a part of fiscal 2022;
J. Frederic Kerrest
our COO, Executive Vice Chairperson of the Board of Directors
and co-founder;
Jonathan T. Runyan our General Counsel;
Susan St. Ledger
our President, Worldwide Field Operations;
Michael Kourey
our former CFO, who served from March 8, 2021 to May 31, 2021;
and
William E. Losch
our former CFO, who retired on March 8, 2021.
Executive Transitions During Fiscal 2022
Charles Race retired from the role of President, Worldwide Field Operations at the
end of fiscal 2021 (January 31, 2021) and was succeeded by Ms. St. Ledger on
February 1, 2021. Mr. Losch retired from the role of CFO on March 8, 2021 and was
succeeded by Mr. Kourey, previously a member of our board, who served as our
CFO through May 31, 2021. Mr. Tighe, who was serving as our Senior Vice President
of Finance and Treasurer, was appointed our interim CFO effective June 1, 2021 and
our permanent CFO effective January 28, 2022. Mr. Losch continued to serve as an
advisor throughout fiscal 2022 and into fiscal 2023 at the request of our company
to help facilitate the CFO transitions.
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 the compensation committee arrived at the specific
compensation policies and decisions involving our named executive officers for
and during fiscal 2022.
Executive Summary
Okta is the leading independent identity provider. Our vision is to accelerate a
world where everyone can 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.
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Highlights of Fiscal 2022 Corporate Performance
Specific financial highlights of our performance in fiscal 2022 include:
• Acquisition of Auth0, Inc.: On May 3, 2021, we completed our previously announced acquisition of Auth0, our largest and
most ambitious acquisition to date. This transaction will accelerate our growth in the $80 billion identity market.
• Revenue: Total revenue was $1.30 billion, an increase of 56% year-over-year. Subscription revenue was $1.25 billion, an
increase of 57% year-over-year. On an Okta standalone basis (excluding $140 million attributable to the acquisition of Auth0),
total revenue grew 39% year-over-year.
• Remaining Performance Obligations (“RPO”): RPO, or subscription backlog, was $2.69 billion, an increase of 50% year-over-
year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.35
billion, an increase of 60% year-over-year.
• Operating Income/Loss: GAAP (as defined below) operating loss was $767 million, or 59% of total revenue, compared to a
GAAP operating loss of $204 million, or 24% of total revenue for fiscal 2021. Non-GAAP operating loss was $74 million, or 6% of
total revenue, compared to non-GAAP operating income of $8 million, or 1% of total revenue for fiscal 2021.
• Net Income/Loss: GAAP net loss was $848 million, compared to a GAAP net loss of $266 million for fiscal 2021. GAAP net loss
per share was $5.73, compared to a GAAP net loss per share of $2.09 for fiscal 2021. GAAP net loss and GAAP net loss per
share include $385 million and $2.60, respectively, attributable to Auth0. Non-GAAP net loss was $68 million, compared to
non-GAAP net income of $16 million for fiscal 2021. Non-GAAP basic and diluted net loss per share was $0.46, compared to
non-GAAP basic and diluted net income per share of $0.13 and $0.11, respectively, for fiscal 2021.
• Cash Flow: Net cash provided by operations was $104 million, or 8% of total revenue, compared to $128 million, or 15% of total
revenue, for fiscal 2021. Free cash flow was $87 million, or 7% of total revenue, compared to $111 million, or 13% of total
revenue, for fiscal 2021.
• Customers: Added over 5,000 customers bringing our total customer count to 15,000.
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” (pages 62 to 65) of our 2022
Annual Report on Form 10-K filed with the SEC on March 7, 2022 and Exhibit 99.1 to our Current Report on Form 8-K filed with the
SEC on March 2, 2022.
Key Actions of Fiscal 2022 Executive Compensation Program
Consistent with our performance and compensation objectives for fiscal 2022, our compensation committee took the following
key actions relating to the compensation of our named executive officers for fiscal 2022:
• Base Salary: Maintained the annual base salaries of our CEO and COO for fiscal 2022 at their fiscal 2021 levels, while
increasing the annual base salary of Mr. Runyan by 12% in recognition of his performance during the past fiscal year and to
more closely align with peer group compensation levels for similarly-situated executives. Established the annual base salaries
of Ms. St. Ledger and Mr. Kourey in connection with their appointment as our President, Worldwide Field Operations and CFO,
respectively, as described below. Increased the annual base salary of Mr. Tighe by approximately 9% when he was appointed
our interim CFO effective June 1, 2021.
• Short-Term Incentive Compensation: After achieving the performance objectives established for the first fiscal quarter of
fiscal 2022 (First Performance Period, i.e., pre-Auth0) and the second through fourth fiscal quarters of fiscal 2022 (Second
Performance Period, i.e., inclusive of Auth0) under our Senior Executive Incentive Bonus Plan (the “Bonus Plan”) at 125.1%, our
compensation committee used negative discretion to reduce the payout for internal pay equity purposes to 102.8%,
consistent with the achievement of goals established for our broader employee population. See “Elements of Our Executive
Compensation Program–Annual Performance-Based Incentive Compensation” below for more information regarding the
division of our Bonus Plan into two performance periods.
• Long-Term Incentive Compensation: Granted annual long-term incentive compensation in the form of options to purchase
shares of our Class A common stock and service-based RSUs that may be settled for 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.
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Compensation Discussion and Analysis
• Supplemental Stock Option Grants: Granted options to purchase shares of our Class A common stock to our CEO, COO and
Mr. Runyan in April 2021 to motivate these individuals to successfully execute the integration of Auth0, our largest and most
ambitious acquisition to date, into our company, to ensure the stability of our senior leadership team as we added new
executive officers at two critical positions within our company, and to reinstate meaningful incentives for long-term
retention. See “Elements of Our Executive Compensation Program–Long-Term Incentive Compensation–Supplemental Stock
Option Awards” below for more information relating to these grants including their rationale.
• New Compensation Arrangements: In connection with Ms. St. Ledger’s, Mr. Kourey’s and Mr. Tighe’s appointments as
executive officers during fiscal 2022, we entered into compensation packages with them that were intended to be aligned
with the compensation packages offered by our peer group companies, incentivize superior performance and provide
significant retentive value.
Fiscal 2022 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 2022 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 payments
or benefits for our executive officers
Use equity-based compensation to deliver a significant
majority of the total compensation of our executive officers
to further align their interests with those of our stockholders
No tax reimbursement payments or “gross-ups” for any tax
liability on severance or change-in-control payments or
benefits
Establish maximum payout amounts under our Senior
Executive Bonus Plan and require a threshold level of
achievement for payout with respect to each performance
measure
No guaranteed bonuses and no guaranteed base salary
increases
Conduct an annual risk assessment of our executive and
broad-based compensation programs to promote prudent
risk management
No post-termination retirement, pension or deferred
compensation benefits, other than participation in our
Section 401(k) plan on the same terms as other employees
Maintain a compensation committee consisting solely of
independent directors with extensive relevant experience
No material perquisites other than security costs for our CEO
and no health or other benefits, other than those that are
generally available to our employees
Conduct an annual review of our executive compensation
strategy, competitiveness and compensation
peer group
No strict benchmarking of compensation to a specific
percentile of our compensation peer group
Retain an independent compensation consultant who reports
directly to our compensation committee
No hedging or pledging of our securities by our directors or
any employees, including our officers
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Non-Binding Advisory Stockholder Vote on Named Executive Officer Compensation
Our company and our compensation committee value the input of our stockholders. In fiscal 2022, we conducted a non-binding,
stockholder advisory vote on the compensation of our named executive officers (commonly known as a “Say-on-Pay” vote).
Approximately 94.5% of the votes cast on our Say-on-Pay proposal were favorable, which reflected strong stockholder support
for our executive compensation program.
In fiscal 2022, consistent with the prior two years, members of our management team contacted over 30 of our top institutional
stockholders to discuss our business, ESG initiatives, board composition and executive compensation program. We contacted
stockholders representing nearly 50% of our outstanding common stock, or over 51% of our outstanding common stock
excluding shares held by our executive officers and the members of our board, 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. The breadth of our outreach program enabled us to gather feedback from a significant cross-section of our
stockholder base.
Based on these discussions, our compensation committee learned that our stockholders continued to be supportive of our
annual executive compensation program and the alignment between executive officer pay and our company’s performance.
However, while a number of stockholders considered stock options to be performance-based, some expressed concern that the
one-time supplemental stock option awards granted to certain executive officers in fiscal 2022 did not have performance-based
conditions.
Based in part on the stockholder feedback we received in these discussions, our compensation committee implemented a new
performance-based RSU (“PSU”) program for our named executive officers in fiscal 2023 other than our CEO and COO, who
requested that they not be granted equity awards in fiscal 2023. We value the opinions of our stockholders, and when making
compensation decisions for our executive officers in the future, our board and our compensation committee intend to consider
the outcome of the Say-on-Pay vote, in addition to other stockholder feedback we may receive throughout the year.
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
incentive compensation opportunities, long-term incentive compensation in the form of equity awards 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 our 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 and which also address the highly competitive labor market for
executive talent in the San Francisco Bay Area, 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.
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Compensation Discussion and Analysis
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—Amended and Restated Equity Award Grant Policy” below.
Compensation-Setting Process
Role of the Compensation Committee
Our compensation committee determines the target total direct compensation opportunities for our executive officers. When
making these decisions, our compensation committee reviews the recommendations of our CEO and other data, including input
from its 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.
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:
• our performance against the corporate performance objectives established by our compensation committee and our board;
• our financial performance relative to our compensation peer group;
•
•
•
•
the compensation levels and practices of our compensation peer group and/or selected broad-based compensation surveys;
each individual executive officer’s skills, experience and qualifications relative to other similarly-situated executives at the
companies in our compensation peer group and/or selected broad-based compensation surveys;
the scope of each individual executive officer’s role compared to other similarly-situated executives at the companies in our
compensation peer group and/or selected broad-based compensation surveys; 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 acts to determine specific pay levels, nor was the impact of any factor on the ultimate pay level decisions
quantifiable. Instead, our compensation committee uses its judgment to evaluate the factors as a whole in reaching
compensation decisions.
Role of our 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, financial
impact analysis, competitive market compensation data and management’s perspective on compensation matters. Our CEO
makes compensation recommendations for each of our executive officers other than recommendations providing compensation
to himself. These recommendations cover each executive officer’s target total direct compensation, consisting of base salary,
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Compensation Discussion and Analysis
short-term incentive compensation opportunity and long-term incentive compensation in the form of equity. 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 officer
has achieved his or her individual goals and the relative compensation parity among all of our executive officers.
In fiscal 2023, our CEO and COO requested that our compensation committee refrain from making an annual equity grant to
themselves, and to reallocate the equity to our other named executive officers and other employees.
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 a 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 2022, 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;
•
•
•
conduct an executive compensation risk assessment;
coordinate with our management for data collection and job matching for our executive officers; and
support other ad hoc matters, such as compensation packages for new executive officers, 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.
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 2020, with the assistance of Compensia, our compensation committee reviewed our compensation peer group
used for compensation decisions for fiscal 2022, 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-year and three-year revenue
growth (where possible), strong market capitalization-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, our compensation committee removed Anaplan, New
Relic, Proofpoint and Qualys from the compensation peer group and added Datadog and ServiceNow for fiscal 2022.
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Compensation Discussion and Analysis
Based on the foregoing, in October 2020 our compensation committee approved the following compensation peer group to
assist with the determination of compensation for our executive officers:
Coupa Software
Crowdstrike Holdings
Datadog
DocuSign
Dropbox
Hubspot
MongoDB
Palo Alto Networks
Paycom Software
RingCentral
ServiceNow
Splunk
Twilio
Veeva Systems
Zendesk
Zoom Video Communications
Slack Technologies
Zscaler
Our compensation committee uses data drawn from the public filings of the companies in our compensation peer group, as well
as data from a custom cut of the Radford Global Technology survey (which included 15 of our 18 peer companies), to evaluate the
competitive market when determining the total direct compensation packages for our executive officers.
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.
Elements of Our Executive Compensation Program
Our executive compensation program consists of the following primary elements:
• base salary;
•
•
•
short-term incentive compensation in the form of bonuses;
long-term incentive compensation in the form of equity awards; 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 Section 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 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 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 options to purchase shares of our Class A common stock, 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 officer’s
qualifications, experience and compensation expectations and competitive market data. At the beginning of each year, our
compensation committee reviews, and adjusts as necessary, base salaries for each of our 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 executive officers base salaries that are competitive with current market practice (as reflected by our compensation
peer group and/or selected broad-based compensation surveys).
In April 2021, in connection with its review of our executive compensation program, our compensation committee reviewed the
annual base salaries of our executive officers, including our named executive officers, and determined that the annual base
salaries of our CEO and COO would remain the same as in effect for fiscal 2021. Our compensation committee also determined to
increase the annual base salary of Mr. Runyan by 12% in recognition of his performance during the prior fiscal year and to more
closely align with peer group compensation levels for similarly-situated executives. The annual base salaries of Ms. St. Ledger
and Mr. Kourey were approved by our compensation committee in December 2020 following its review of competitive market
data and arm’s-length negotiations as part of their “new hire” compensation packages. Mr. Tighe’s base salary was increased by
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approximately 9% effective June 1, 2021 in connection with his promotion to interim CFO following our compensation
committee’s review of competitive market data. Mr. Losch’s annual base salary remained $350,900 throughout fiscal 2022 as he
worked as an advisor to the company and transitioned his duties to Mr. Kourey and later to Mr. Tighe.
The annual base salaries of our named executive officers for fiscal 2022 were as follows:
Annual Base Salaries for Fiscal 2022
Named Executive Officer
Fiscal 2021 Base Salary
($)
Fiscal 2022 Base Salary(1)
($)
Percentage Increase in Annual
Base Salary
Mr. McKinnon
Mr. Tighe
Mr. Kerrest
Mr. Runyan
Ms. St. Ledger
Mr. Kourey
Mr. Losch
306,000
367,100(1)
362,585
331,900
---
---
350,900
306,000
400,000
362,585
371,728
525,000
400,000
350,900
---
9.0%
---
12.0%
---
---
---
(1)
Base salary changes were effective February 1, 2021, other than for Mr. Tighe, whose initial salary as our interim CFO was effective June 1, 2021. Prior to his
promotion, Mr. Tighe’s annual base salary was $367,100.
The base salaries actually paid to our named executive officers during fiscal 2022 are set forth in the “Fiscal 2022 Summary
Compensation Table” below.
Annual Performance-Based Incentive Compensation
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 compensation 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 considers the factors
described in “Compensation-Setting Process—Role of the Compensation Committee” above.
Overview and Structure
In April 2021, in the period between announcement and completion of our acquisition of Auth0, our compensation committee
adopted the initial performance criteria and related target levels under the Bonus Plan for fiscal 2022, determining that it would
wait until after the closing of the Auth0 acquisition before adjusting the performance criteria and related target levels to reflect
expectations of the combined company. As described below, while the Bonus Plan originally provided for an annual performance
period, after reviewing pro forma expectations of the combined company, our compensation committee determined to adjust
the Bonus Plan to measure two separate performance periods; the first fiscal quarter of fiscal 2022 based on our company’s
organic financial results while the transaction was still pending, and the second through fourth fiscal quarters which combined
the financial results during that period of our company and Auth0. Our compensation committee later exercised negative
discretion to reduce payouts under the Bonus Plan for internal pay equity purposes.
Target Annual Incentive Compensation Opportunities
In April 2021, in connection with its review of our executive compensation program, our compensation committee determined
that the target annual incentive compensation percentages of our CEO, COO and Mr. Runyan would remain the same as in effect
for fiscal 2021. The target annual incentive compensation opportunities of Ms. St. Ledger and Mr. Kourey were approved by our
compensation committee in December 2020 as part of their “new hire” compensation packages. The target annual incentive
compensation opportunity for Mr. Tighe was increased in connection with his promotion to interim CFO on June 1, 2021. Mr.
Losch did not participate in our Bonus Plan for fiscal 2022.
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Compensation Discussion and Analysis
The target annual incentive compensation opportunities of our named executive officers for fiscal 2022 were as follows:
Target Annual Incentive Compensation Opportunities for Fiscal 2022
Named Executive Officer
Fiscal 2022 Base Salary
($)
Target Performance-Based
Incentive as Percentage
of Base Salary
Target Performance-Based
Incentive Under the Bonus Plan
($)
Mr. McKinnon
Mr. Tighe(1)
Mr. Kerrest
Mr. Runyan
Ms. St. Ledger
Mr. Kourey
Mr. Losch
306,000
400,000
362,585
371,728
525,000
400,000
350,900
65%
65%
60%
50%
100%
65%
0%
198,900
260,000
217,551
185,864
525,000
260,000
—
(1) Mr. Tighe’s annual incentive compensation opportunity was increased from 30% of annual base salary to 65% of annual base salary on June 1, 2021 in connection
with his promotion to interim CFO. The amount paid to Mr. Tighe was pro-rated to reflect his initial and adjusted annual base salary and his initial and adjusted
annual incentive compensation opportunity percentages.
Corporate Performance Measures
To measure performance for purposes of the Bonus Plan, in the first quarter of fiscal 2022 our compensation committee selected
revenue (weighted 70%) and non-GAAP operating income (weighted 30%) as the corporate performance measures that best
supported our annual operating plan and enhanced long-term value creation for our stockholders. For this purpose:
•
revenue meant GAAP revenue as reflected in our quarterly and annual financial statements; and
• non-GAAP operating income meant GAAP operating income as reflected in our quarterly and annual financial statements,
adjusted to exclude expenses related to stock-based compensation expense, non-cash charitable contributions, amortization
of acquired intangibles and acquisition-related expenses.
Bonus Plan Funding Methodology
In view of the timing of the completion of the acquisition of Auth0 (completed at the start of the second quarter of fiscal 2022),
our compensation committee determined in August 2021 that, for purposes of measuring our performance for fiscal 2022, the
Bonus Plan should be divided into two performance periods:
• The first performance period, representing the first fiscal quarter of fiscal 2022, would be based on our company’s organic
results for revenue and non-GAAP operating income for that period. The targets for these corporate performance measures
reflected our anticipated results for that period based on our original operating plan and were not changed from the targets
initially approved by the committee in the first quarter.
• The second performance period, representing the second through fourth fiscal quarters of fiscal 2022, would be based on the
consolidated revenue and non-GAAP operating income for our company and Auth0 based on our revised operating plan for
that period.
For each of these performance periods, our compensation committee set high thresholds to ensure that incentive payments
would only follow significant achievement. As a threshold matter, our named executive officers were eligible for annual incentive
compensation payouts for fiscal 2022 under the Bonus Plan only if we met or exceeded 95% with respect to the revenue target
for a performance period and if we met or exceeded 87.5% with respect to the non-GAAP operating income for the first fiscal
quarter and met or exceeded 92.5% with respect to the non-GAAP operating income target for the last three fiscal quarters of
the fiscal year. 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 133.3% of target for the first fiscal quarter and 110.8% of target for the last
three fiscal quarters of the fiscal year would result in a maximum payout of 150%. Total payouts were capped at 150% of the
target annual cash incentive compensation 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. Our compensation committee also retained discretion to reduce payouts if it determined it was necessary or
appropriate.
42
2022 Proxy Statement
Okta, Inc.
Compensation Discussion and Analysis
First Performance Period
The target levels required for 100% achievement for the corporate performance measures under the Bonus Plan for the first
performance period (weighted 25% of the full year bonus amount) were $246.9 million for revenue and negative $24.7 million for
non-GAAP operating income. 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 $27.8 million would result in 50% of
payment funding. For each additional 1% of achievement between negative $27.8 million and negative $24.7 million, payment
funding would increase an additional 4% of payment funding. Each additional 1% of achievement between negative $24.7 million
and negative $16.5 million would result in an additional 1.5% of payment funding, with a maximum funding of 150% at
achievement of negative $16.5 million or better.
Second Performance Period
The target levels required for 100% achievement for the corporate performance measures under the Bonus Plan for the second
performance period (weighted 75% of the full year bonus amount) were $1,014.8 million for revenue and negative $136.4 million for
non-GAAP operating income. 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 $146.7 million would result in 50% of
payment funding. For each additional 1% of achievement between negative $146.7 million and negative $136.4 million, payment
funding would increase an additional 6.6% of payment funding. Each additional 1% of achievement between negative $136.4
million and negative $121.7 million would result in an additional 4.6% of payment funding, with a maximum funding of 150% at
achievement of negative $121.7 million or better.
Performance in Fiscal 2022 and Payouts
In March 2022, our compensation committee assessed performance and determined payouts under our Bonus Plan in the two-
part process described above. First, our compensation committee measured actual Bonus Plan performance against the pre-
established target levels for each performance period. Second, after the end of the performance period, our compensation
committee exercised its negative discretion to determine the actual payout. For fiscal 2022, we exceeded the target performance
levels for each performance period under the Bonus Plan as follows:
First Performance Period
Performance Measure
Revenue
Non-GAAP Operating Income
Second Performance Period
Performance Measure
Revenue
Non-GAAP Operating Income
Adjusted Target
($)
246,900,000
(24,700,000)
Adjusted Target
($)
1,014,800,000
(136,400,000)
Result
($)
251,000,000
(15,900,000)
Actual Achievement
of Target
101.7%
135.6%
Result
($)
Actual Achievement
of Target
1,049,200,000
(56,400,000)
103.4%
158.6%
For the first performance period, as achievement of the revenue metric resulted in payment funding of 101.7% and achievement
of the non-GAAP operating income metric resulted in payment funding of 150.0%, the resulting total achievement percentage for
the first performance period was 116.2%. For the second performance period, as achievement of the revenue metric resulted in
payment funding of 118.7% and achievement of the non-GAAP operating income metric resulted in payment funding of 150.0%,
the resulting total achievement percentage for the second performance period was 128.1%. Based on a relative weighting of 25%
for the first performance period and 75% for the second performance period, the total achievement percentage for fiscal 2022
was 125.1%. After considering the recommendation of our CEO, our compensation committee exercised negative discretion and
reduced our named executive officer bonus payouts to 102.8%, consistent with the payout level of the bonus program applicable
to our broader employee population.
Okta, Inc.
2022 Proxy Statement
43
Compensation Discussion and Analysis
As a result, the total payouts to our named executive officers under the Bonus Plan in fiscal 2022 were as follows:
Named Executive Officer
Mr. McKinnon
Mr. Tighe(1)
Mr. Kerrest
Mr. Runyan
Ms. St. Ledger
Fiscal 2022 Target Annual Performance-Based
Incentive Compensation Opportunity
($)
Fiscal 2022 Actual Annual Performance-Based
Incentive Compensation
($)
198,900
260,000
217,551
185,864
525,000
204,469
215,431
223,642
191,068
539,700
(1)
Reflects Mr. Tighe’s pro-rated bonus based on his initial and adjusted base salary and annual incentive compensation opportunity percentages.
In connection with his separation, we agreed to pay Mr. Kourey a cash payment of $195,000 representing nine months of his
target annual incentive compensation opportunity under the Bonus Plan, as described more fully below under “Mr. Kourey’s
Employment and Separation Arrangements.”
The Bonus Plan provides that the incentive compensation payouts will be made in fully-vested RSUs, instead of cash, 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 average closing price of our Class A
common stock on the Nasdaq during the month prior to the date of grant, consistent with our Amended and Restated Equity
Award Grant Policy.
The grant date fair value of the RSUs earned by our named executive officers during fiscal 2022 under the Bonus Plan are set
forth in the “Fiscal 2022 Summary Compensation Table” below.
Long-Term Incentive Compensation
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 executive officers to create value for our stockholders. Equity awards also help us retain qualified executive
officers in a competitive market.
Historically, our compensation committee has granted equity awards in the form of options to purchase shares of our Class A
common stock and service-based RSU awards that are settled for shares of our Class A common stock. 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 executive
officers to remain employed with us as they require continued employment through the multi-year vesting period. We further
believe that RSU awards provide a strong retention incentive for our executive officers, provide a reward for growth in the value
of our common stock and are less dilutive than stock options to our stockholders.
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—Amended and Restated Equity Award Grant Policy”
below and are typically granted annually.
Annual Equity Awards
For fiscal 2022, our compensation committee determined that the annual equity awards to be granted to our executive officers,
including our named executive officers, should be divided equally to deliver half of the intended aggregate value in options to
purchase shares of our Class A common stock and the remaining half in service-based RSUs, with aggregate value determined in
accordance with our Amended and Restated Equity Award Grant Policy.
In determining the aggregate value of the equity awards granted to our executive officers in fiscal 2022, our compensation
committee considered our performance, market data for each executive officer, the criticality of individual roles, the individual
skills, experience and performance of each executive officer and the mix of cash and equity compensation to ensure that equity
awards would motivate the creation of long-term value.
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2022 Proxy Statement
Okta, Inc.
Compensation Discussion and Analysis
In April 2021, our compensation committee granted the following annual equity awards to our then-incumbent named executive
officers (other than Ms. St. Ledger and Mr. Kourey, who had recently been granted “new hire” equity awards):
Annual Equity Awards for Fiscal 2022
Named Executive Officer
Mr. McKinnon
Mr. Kerrest
Mr. Runyan
Options to Purchase Shares
of our Class A Common
Stock (grant value)
($)
Options to Purchase
Shares of our Class A
Common Stock
(number of shares)(1)
RSU Awards That May be
Settled for Class A Common
Stock (grant value)
($)
RSU Awards That May
be Settled for Class A
Common Stock
(number of shares)(2)
7,500,000
3,750,000
1,500,000
63,667
31,834
12,734
7,500,000
3,750,000
1,500,000
26,957
13,479
5,392
(1)
(2)
The number of shares of our Class A common stock subject to these stock options was calculated by dividing the dollar value of the award by the fair value of a
stock option for one share of our Class A common stock based on the Black-Scholes option pricing model using the assumptions used for financial reporting
purposes in February 2021, which was $117.8009 per share.
The number of shares of our Class A common stock subject to these RSU awards was calculated by dividing the dollar value of the award by the average closing
market price on the Nasdaq Global Select Market of one share of our Class A common stock in February 2021, which was $278.23 per share.
The annual stock options granted to these named executive officers have a 10-year term and generally vest as to one-quarter of
such shares of Class A common stock on February 1, 2022, the first anniversary of the vesting commencement date, and in 36
approximately equal monthly installments thereafter, subject to continuous service. The annual RSU awards granted to these
named executive officers generally vest as to one-quarter of such shares of Class A common stock on March 15, 2022, the first
anniversary of the vesting commencement date, and in 12 approximately equal quarterly installments thereafter, subject to
continuous service.
Supplemental Stock Option Awards
In addition to the foregoing, in April 2021 our compensation committee considered the critical juncture at which the company
found itself. Recognizing that our pending merger with Auth0 would require the renewed commitment of our executive officers
to successfully execute our largest and most ambitious acquisition to date, our compensation committee also noted the
significant changes in our executive team, with the addition of critical hires of a new CFO and a new senior leader of our sales
team. Our compensation committee believed that the compensation that had been required to secure those new senior leaders,
as well as the need to integrate the compensation arrangements of the executives of Auth0, presented internal pay equity
concerns. It also noted the meaningful retention risk for our current executive officers in a highly competitive market for
experienced executive talent as a result of the near complete vesting of pre-IPO equity awards that had significant in-the-money
value. After thoroughly considering these factors, as well as the opportunities and challenges facing our company in the near-
term, our compensation committee determined that it was in the best interests of our company and our stockholders to grant
supplemental stock option awards to certain named executive officers and other key members of our senior leadership team to
ensure that they were competitively rewarded if they were able to successfully execute over the long term. Accordingly, our
compensation committee granted to certain of our executive officers one-time supplemental stock option awards with a $274.96
exercise price, whose value could be realized only from increases in the price of our Class A common stock over the term of the
award.
In April 2021, our compensation committee granted the following supplemental options to purchase shares of our Class A
common stock to our then-incumbent named executive officers (other than Ms. St. Ledger and Mr. Kourey, who had recently
been granted “new hire” equity awards):
Supplemental Stock Option Awards for Fiscal 2022
Named Executive Officer
Mr. McKinnon
Mr. Kerrest
Mr. Runyan
Options to Purchase Shares of
our Class A Common Stock
(grant value)
($)
Options to Purchase Shares of
our Class A Common Stock
(number of shares)(1)
Option Exercise
Price per Share
($)
15,000,000
7,500,000
12,000,000
127,334
63,667
101,867
274.96
274.96
274.96
(1)
The number of shares of our Class A common stock subject to these stock options was calculated by dividing the dollar value of the award by the fair value of a
stock option for one share of our Class A common stock based on the Black-Scholes option pricing model using the assumptions used for financial reporting
purposes in February 2021, which was $117.8009 per share.
Okta, Inc.
2022 Proxy Statement
45
Compensation Discussion and Analysis
Ms. St. Ledger’s Equity Awards
In connection with Ms. St. Ledger’s appointment as our President, Worldwide Field Operations, effective February 1, 2021, and
following arm’s-length negotiations with Ms. St. Ledger and consultation with our CEO and our compensation consultant, which
included a review of data for initial grants made to the top sales executives in the companies in our compensation peer group, at
other software companies of similar size to us and within the broader technology sector, our compensation committee granted
Ms. St. Ledger an award of service-based RSUs that may be settled for shares of our Class A common stock with an award value
of $12 million, which was converted to 43,130 RSUs in accordance with our Amended and Restated Equity Award Grant Policy.
The RSUs vest as to 25% of the total number of RSUs on March 15, 2022 and in 12 equal quarterly installments thereafter, in each
case, subject to continuous service, but will fully accelerate and vest effective upon her death or disability.
Further, our compensation committee believed that it was necessary to address the potential forgone compensation
opportunity at Ms. St. Ledger’s former employer. At the time Ms. St. Ledger was identified as a candidate for our top sales
position, she was serving as President, Worldwide Field Operations for Splunk, a major cloud-based U.S. technology company
located in the San Francisco Bay Area. To induce Ms. St. Ledger to leave her position at Splunk, our compensation committee
determined that, as part of her initial compensation arrangements, we should grant her an inducement award in the form of an
RSU award that may be settled for shares of our Class A common stock with an award value of $30 million, which was converted
to 107,825 RSUs in accordance with our Amended and Restated Equity Award Grant Policy. This award value was intended to
largely offset the then-market value of the unvested equity awards that Ms. St. Ledger would effectively forfeit by leaving her
current position. The RSUs vest in two equal installments on September 15, 2021 and September 15, 2022, in each case, subject to
continuous service.
Mr. Kourey’s Equity Awards
In connection with Mr. Kourey’s appointment as our CFO effective March 8, 2021, and following arm’s-length negotiations with
Mr. Kourey and consultation with our CEO and our compensation consultant, which included a review of data for equity grants
made to CFOs in the companies in our compensation peer group, our compensation committee granted Mr. Kourey equity
awards with an aggregate award value of $14 million, split evenly between options and RSUs that may be settled for shares of our
Class A common stock. The aggregate award value was converted into an option to purchase 69,595 shares of our Class A
common stock and 31,070 RSUs in accordance with our Amended and Restated Equity Award Grant Policy. The option was
scheduled to vest as to 25% of the shares underlying the option on March 8, 2022 and in 36 equal monthly installments
thereafter, in each case, subject to continuous service. The RSUs were scheduled to vest as to 25% of the total number of RSUs
on March 15, 2022 and in 12 equal quarterly installments thereafter, in each case, subject to continuous service. A portion of Mr.
Kourey’s option and RSUs were forfeited in connection with his termination of employment as described below under the
heading “Mr. Kourey’s Employment and Separation Arrangements.”
Mr. Tighe’s Equity Award
In connection with Mr. Tighe’s appointment as our interim CFO effective June 1, 2021, and following consultation with our CEO
and our compensation consultant, which included a review of data for equity grants made to CFOs in the companies in our
compensation peer group, our compensation committee granted Mr. Tighe an award of service-based RSUs that may be settled
for shares of our Class A common stock with an award value of $4 million, which was converted to 17,416 RSUs in accordance
with our Amended and Restated Equity Award Grant Policy. The RSUs vest as to 25% of the total number of RSUs on September
15, 2021 and in 3 equal quarterly installments thereafter, in each case, subject to continuous service.
Prior to Mr. Tighe’s appointment as our interim CFO, in March 2021 our compensation committee granted Mr. Tighe 3,235 service-
based RSUs that may be settled in shares of our Class A common stock. This grant was made as part of our annual review cycle.
The RSUs vest as to 6.25% of the total number of RSUs on June 15, 2021 and in 15 equal quarterly installments thereafter, in each
case, subject to continuous service.
The equity awards granted to our named executive officers in fiscal 2022 are set forth in the “Fiscal 2022 Summary Compensation
Table” and the “Fiscal 2022 Grants of Plan-Based Awards Table” below.
Fiscal 2023 PSU Program
In March 2022, after taking into account a variety of considerations, including stockholder feedback, our compensation
committee adopted a new PSU program. Under the PSU program as initially approved by our compensation committee, 50% of
the annual award value granted to our CEO and 25% of the annual award value granted to our other executive officers were to be
in the form of PSUs settleable in shares of our Class A common stock. However, each of our CEO and COO requested that our
compensation committee not grant him an equity award in fiscal 2023 and did not ultimately participate in the fiscal 2023 PSU
program. The remaining participants in the PSU program are eligible to earn PSUs over three separate performance periods
beginning on February 1, 2022 and ending on January 31, 2023, 2024 and 2025. PSUs are earned based on our total stockholder
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2022 Proxy Statement
Okta, Inc.
Compensation Discussion and Analysis
return (“TSR”) relative to the TSR of a peer group consisting of the members of the Nasdaq Composite as of February 1, 2022. In
order to earn any of the PSUs our TSR must equal at least the 30th percentile of our peer group. At the 30th percentile,
participants earn 0.5 shares per PSU, at the 55th percentile, participants earn 1 share per PSU and at the 90th percentile,
participants earn 2 shares per PSU, with performance between levels determined using linear interpolation. The number of
shares issuable per PSU for the first two performance periods is capped at one, and participants may be topped up for
performance periods one and two based on achievement in the final performance period. In the event of a change in control, all
performance periods are truncated and the number of shares issuable for each PSU is determined based on relative TSR during
the truncated performance periods. Participants must continue to provide services to us through March 15 following the end of
each performance period to vest into any of the PSUs for that performance period, provided, that this service requirement is
deemed satisfied for any participant who becomes permanently and totally disabled and vesting is accelerated, with one share
issued per PSU, in the event of a participant’s death.
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 Section 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 2022, 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 CEO, for whom we paid for security-related services.
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
executive officers will be subject to review and approval by our compensation committee.
Section 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 Section 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 (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 Section 401(k) plan and earnings on those
contributions are not taxable to the employees until distributed from the Section 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 our 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 (i) the 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
Okta, Inc.
2022 Proxy Statement
47
Compensation Discussion and Analysis
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 our 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;
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.
Death-Related Equity Acceleration Policy
In February 2021, our compensation committee adopted a policy that upon the termination of employment of any employee due
to death, all equity awards (that is, options and RSUs) that vest solely based on continued service to our company and that are
outstanding and held by such individual immediately prior to his or her death will fully accelerate and vest effective as of the date
of death.
Mr. Losch’s Compensation Arrangements
In connection with his retirement as our CFO effective March 8, 2021, we entered into a Separation Agreement and Release (as
amended and restated, the “Losch Separation Agreement”) with Mr. Losch. Pursuant to the Losch Separation Agreement, Mr.
Losch was to continue to work as an advisor at the request of our company and be available to assist with any CFO transition-
related questions. As a result of the bifurcated CFO transition, Mr. Losch agreed to provide extended transition services to the
company through June 2022. He also was to remain on our company’s payroll system and benefit plans and continue to vest in
any outstanding equity awards that he held pursuant to our company’s stock plans according to the terms of the agreements
pursuant to which such equity awards were issued. Specifically, during the transition period, Mr. Losch was eligible to:
•
continue to receive his annual base salary of $350,900;
• participate in our benefit plans (provided that he remained eligible under the terms and conditions of the applicable benefit
plans);
•
•
receive his fiscal 2021 bonus paid in fully-vested RSUs for the performance period ended January 31, 2021 in accordance with
the terms and conditions of the Bonus Plan; and
continue to vest in all RSUs and options to purchase shares of our common stock previously granted to him under our 2017
Plan or any predecessor plan.
Mr. Kourey’s Employment and Separation Arrangements
We entered into an employment offer letter dated November 30, 2020 (the “Kourey Employment Letter”) with Mr. Kourey for him
to serve as our CFO effective upon Mr. Losch’s retirement on March 8, 2021. Pursuant to the Kourey Employment Letter, our
initial compensation arrangements with Mr. Kourey were as follows:
•
an annual base salary of $400,000;
• participation in our Bonus Plan, with a target annual incentive compensation opportunity equal to 65% of his annual base
salary;
•
a new hire equity award in the form of a service-based RSU award that may be settled for shares of our Class A common stock
with an award value of $7 million, and which vests over four years as described in the “Fiscal 2022 Grants of Plan-Based
Awards Table” below; and
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2022 Proxy Statement
Okta, Inc.
Compensation Discussion and Analysis
•
a new hire equity award in the form of an option to purchase shares of our Class A common stock with an award value of $7
million, and which vests over four years as described in the “Fiscal 2022 Grants of Plan-Based Awards Table” below.
In addition, Mr. Kourey became a participant in our Executive Severance Plan, as described in “Post-Employment Compensation
Arrangements” above.
On May 26, 2021, the company announced that Mr. Kourey would step down from the role of CFO, effective June 1, 2021, following
over five years of service with the company, including as a member of the board from October 2015 to February 2021. Mr. Kourey
remained as an employee through June 4, 2021 and then continued as an advisor to the company.
In accordance with a transition agreement entered into with Mr. Kourey, in exchange for Mr. Kourey’s advisory services and a
release of claims against the company and its affiliates, the company made a cash payment to Mr. Kourey in the amount of
$495,000, which constitutes nine months of Mr. Kourey’s base salary and target bonus opportunity, and an additional amount
($46,538) equal to the premiums Mr. Kourey would need to pay for continued healthcare coverage for nine months, grossed up
for taxes. In addition, the vesting of certain of Mr. Kourey’s equity awards were accelerated under the terms of the transition
agreement, resulting in the vesting of 5,826 RSUs (with the remaining 25,244 RSUs subject to such award canceled as of that
date) and options to purchase 13,050 shares of Class A common stock on June 15, 2021 (with the remaining 56,545 shares subject
to such award canceled as of that date). Mr. Kourey’s outstanding award of 1,064 RSUs granted in connection with his service as
a director also vested pursuant to its terms on June 16, 2021. Mr. Kourey’s vested and outstanding stock options, including 60,000
stock options he received in connection with his service as a director and that were fully vested in October 2019, remained
exercisable for three months after he ceased to provide advisory services to the company.
In addition, pursuant to the transition agreement, Mr. Kourey waived any and all benefits and rights under the Kourey
Employment Letter and the Executive Severance Plan, including any severance benefits or vesting acceleration rights triggered
by any change in control of the company and to any equity vesting after June 16, 2021.
Other Compensation Policies
Amended and Restated Equity Award Grant Policy
Our compensation committee has adopted an Equity Award Grant Policy (the “Grant Policy”), which was most recently amended
in December 2021. 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 Grant Policy, 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 senior 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-term 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 members of our
board and 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 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.
Okta, Inc.
2022 Proxy Statement
49
Compensation Discussion and Analysis
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 the awards are not deductible by us for tax purposes.
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.
50
2022 Proxy Statement
Okta, Inc.
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Executive Compensation
Fiscal 2022 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 2022, 2021 and 2020.
Non-Equity
Incentive Plan
Compensation
($)(4)
All Other
Compensation
($)
Total
($)
Name and Principal
Position(1)
Fiscal
Year
2022
2021
2020
2022
2022
2021
2020
2022
2021
2020
Todd McKinnon
CEO(5)
Brett Tighe
CFO(6)
J. Frederic Kerrest
COO(7)
Jonathan T. Runyan
General Counsel(8)
Susan St. Ledger
President, Worldwide
Field Operations(9)
Salary
($)
306,000
306,000
306,000
Stock Awards
($)(2)
Option Awards
($)(3)
7,412,097
6,070,523
4,180,794
23,899,745
5,551,843
4,123,267
165,312
202,646
171,342
385,031
4,824,969
—
174,248
362,585
362,585
362,585
371,728
331,900
331,900
3,706,186
4,272,142
2,705,200
1,482,584
2,159,103
1,229,607
11,949,935
3,886,309
2,667,988
14,339,897
1,943,123
1,212,671
180,801
221,630
187,436
154,589
169,253
143,018
37,323
31,820,477
—
247,917
—
—
247,917
—
—
—
—
—
12,131,012
9,029,320
5,384,248
16,199,507
8,990,583
5,923,209
16,348,798
4,603,379
2,917,196
35,487,793
2022
525,000
34,526,428
—
436,365
Former Executive Officers
Michael Kourey
Former CFO(10)
William E. Losch
Former CFO(11)
2022
2022
2021
2020
98,485
9,934,103
8,938,325
350,900
350,900
350,900
—
2,162,092
1,721,498
—
1,943,123
1,697,814
—
—
214,539
181,427
544,572
19,515,485
—
—
—
350,900
4,670,654
3,951,639
(1) Mr. Tighe, Ms. St. Ledger and Mr. Kourey were not named executive officers in fiscal 2021 and 2020 so their compensation is not presented for those periods.
Messrs. McKinnon and Kerrest serve on our board but are not paid compensation for such service.
(2)
(3)
(4)
The amounts reported represent the aggregate grant date fair values of the RSUs granted to our named executive officers in fiscal 2022, 2021 and 2020,
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 2022 Annual Report. These amounts do not necessarily correspond to the actual values recognized by our named executive
officers. The amount reported for Mr. Kourey in fiscal 2022 also includes the accounting expense for accelerated vesting of previously granted RSUs in
connection with his separation of service from the company.
The amounts reported represent the aggregate grant date fair values of the stock options granted to our named executive officers in fiscal 2022, 2021 and 2020,
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 2022 Annual Report. These amounts do not necessarily correspond to the actual values recognized by the named executive
officers. The amount reported for Mr. Kourey in fiscal 2022 also includes the accounting expense for accelerated vesting of previously granted stock options in
connection with his separation of service from the company.
The amounts reported represent the aggregate annual performance-based cash incentives earned in fiscal 2022, 2021 and 2020, based upon the achievement of
certain company metrics. For fiscal 2022, 2021 and 2020, the amounts reported represent the ASC Topic 718 grant date fair values of fully-vested RSUs issued in
lieu of the cash incentive payable. In fiscal 2022, the RSUs were granted on March 15, 2022 in the following numbers: Mr. McKinnon: 1,110 RSUs; Mr. Tighe: 1,170
RSUs; Mr. Kerrest: 1,214 RSUs; Mr. Runyan: 1,038 RSUs; and Ms. St. Ledger: 2,930 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 the
trailing average closing price of our common stock on the Nasdaq during the month prior to the date of grant, consistent with our 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 2022 cash achievement for each named
executive officer is described above in “Compensation Discussion and Analysis–Elements of Our Executive Compensation Program–Annual Performance-Based
Incentive Compensation–Performance in Fiscal 2022 and Payouts.”
(5) Mr. McKinnon’s fiscal 2022 option awards also include a supplemental stock option award with a $274.96 exercise price as described above in “Compensation
Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive Compensation–Supplemental Stock Option Awards.” Mr.
McKinnon's fiscal 2022 other compensation includes $37,323 for costs related to personal security.
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2022 Proxy Statement
Okta, Inc.
Executive Compensation
(6) Mr. Tighe was promoted from the role of Senior Vice President of Finance and Treasurer to serve as our interim CFO effective June 1, 2021 and our permanent
CFO effective January 28, 2022. Mr. Tighe's fiscal 2022 salary and non-equity incentive plan compensation reflect a partial year of service as Senior Vice
President and a partial year of service as interim CFO. Mr. Tighe’s fiscal 2022 stock awards also include an RSU award in connection with his promotion to
interim CFO as described above in “Compensation Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive
Compensation–Mr. Tighe’s Equity Award.”
(7) Mr. Kerrest’s fiscal 2022 option awards also include a supplemental stock option award with a $274.96 exercise price as described above in “Compensation
Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive Compensation–Supplemental Stock Option Awards.”
(8) Mr. Runyan’s fiscal 2022 option awards also include a supplemental stock option award with a $274.96 exercise price as described above in “Compensation
Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive Compensation–Supplemental Stock Option Awards.”
(9) Ms. St. Ledger’s fiscal 2022 stock awards include initial and inducement RSU awards in connection with her appointment as our President, Worldwide Field
Operations as described above in “Compensation Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive
Compensation–Ms. St. Ledger’s Equity Awards.”
(10) Mr. Kourey, previously a member of our board, served as our CFO from March 8, 2021 through May 31, 2021. Mr. Kourey's fiscal 2022 salary reflects a partial year
of service as CFO. Mr. Kourey’s fiscal 2022 stock awards also include $1,413,155 relating to an accounting expense in connection with the acceleration of vesting
of 5,826 RSUs pursuant to his transition agreement. His fiscal 2022 option awards also include $248,081 relating to an accounting expense in connection with
the acceleration of vesting of 13,050 stock options pursuant to his transition agreement. Mr. Kourey's fiscal 2022 other compensation includes (a) retainer fees
of $3,034 for his service as a non-employee director through March 7, 2021 and (b) transition payments of $495,000 (which constitutes nine months of his base
salary and target bonus opportunity) and $46,538 (equal to the premiums for continued health benefits for nine months plus $24,409 for the related tax gross-
up) as described above in “Compensation Discussion and Analysis–Mr. Kourey’s Employment and Separation Arrangements.”
(11) Mr. Losch retired from the role of CFO in March 2021 and continued to serve as an advisor throughout fiscal 2022 to assist with the CFO transitions.
Okta, Inc.
2022 Proxy Statement
53
Executive Compensation
Fiscal 2022 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to all plan-based awards granted to our named executive officers
during fiscal 2022.
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
All Other Stock
Awards: Number
of Shares of
Stock or Units
(#)(2)
All Other Option
Awards: Number
of Securities
Underlying
Options
(#)(2)
Exercise or Base
Price of Option
Awards
($/Sh)
Grant Date Fair
Value of Stock
and Option
Awards
($)(3)
Name
Todd McKinnon
Award Type
FY21 Bonus
RSU(4)
3/15/2021
–
–
–
886
Annual Cash
–
29,835
198,900
298,350
Annual Option(5)
4/22/2021
Annual RSU(6)
4/22/2021
Supplemental
Option(5)
4/22/2021
–
–
–
–
–
–
–
–
–
Brett Tighe
Annual Cash
–
31,434
209,563
314,345
Annual RSU(7)
3/26/2021
Promotion RSU(8)
7/15/2021
J. Frederic Kerrest
FY21 Bonus
RSU(4)
3/15/2021
–
–
–
–
–
–
–
–
–
Annual Cash
–
32,633
217,551
326,327
Jonathan T.
Runyan
Annual Option(5)
4/22/2021
Annual RSU(6)
4/22/2021
Supplemental
Option(5)
4/22/2021
FY21 Bonus
RSU(4)
3/15/2021
–
–
–
–
–
–
–
–
–
–
–
–
Annual Cash
–
27,880
185,864
278,796
Annual Option(5)
4/22/2021
Annual RSU(6)
4/22/2021
Supplemental
Option(5)
4/22/2021
–
–
–
–
–
–
–
–
–
Susan St. Ledger
Annual Cash
–
78,750
525,000
787,500
–
–
26,957
–
–
3,235
17,416
969
–
–
13,479
–
740
–
–
5,392
–
–
Initial RSU(9)
3/15/2021
Inducement
RSU(10)
3/15/2021
–
–
–
–
–
–
43,130
107,825
Former Executive Officers
Michael Kourey
Annual Cash
–
39,000
260,000
390,000
Initial Option(11)
4/15/2021
Initial RSU(12)
4/15/2021
Modified
Option(11)
5/24/2021
Modified RSU(12)
5/24/2021
William E. Losch
FY21 Bonus
RSU(4)
3/15/2021
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31,070
–
5,826
938
–
–
63,667
–
127,334
–
–
–
–
–
31,834
–
63,667
–
–
12,734
–
101,867
–
–
–
–
69,595
–
13,050
–
–
–
–
202,646
–
274.96
7,966,582
–
7,412,097
274.96
15,933,163
–
–
–
–
–
–
687,276
4,137,693
221,630
–
274.96
3,983,353
–
3,706,186
274.96
7,966,582
–
–
169,253
–
274.96
1,593,391
–
1,482,584
274.96
12,746,506
–
–
–
–
–
9,864,694
24,661,734
–
274.25
8,690,244
–
8,520,948
274.25
248,081
–
–
1,413,155
214,539
(1)
This column sets forth the fiscal 2022 target bonus amount for each of our named executive officers under our Bonus Plan (and for Mr. Tighe prior to his
promotion to interim CFO, under the bonus program applicable to our broader employee population). ‘‘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 2022 as follows: 65% for each of Messrs.
Kourey and McKinnon, 60% for Mr. Kerrest, 50% for Mr. Runyan and 100% for Ms. St. Ledger. Mr. Tighe’s target bonus as a percentage of his base salary earned
for fiscal 2022 was set at 30% prior to and 65% following his promotion to the interim CFO role. The threshold, target and maximum amounts shown for Mr. Tighe
are pro-rated to reflect his bonus levels before and after his promotion to CFO. The dollar values of the actual bonus awards earned by the named executive
officers are set forth in the ‘‘Fiscal 2022 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 2022. For a description of the Bonus Plan, see ‘‘Compensation Discussion and Analysis–Annual Performance-Based Incentive Compensation’’
above.
(2)
Annual stock options and RSUs were granted under the 2017 Plan. 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.
54
2022 Proxy Statement
Okta, Inc.
Executive Compensation
(3)
(4)
(5)
The amounts reported represent the aggregate grant date fair value of equity awards granted to our named executive officers in fiscal 2022, 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 2022 Annual Report. These amounts do not necessarily correspond to the actual values recognized by our named executive officers.
FY21 Bonus RSUs represent annual performance-based cash incentives earned in fiscal 2021 pursuant to the Bonus Plan but paid in the form of fully-vested
RSUs granted on March 15, 2021 (fiscal 2022) in amounts as determined in accordance with our Grant Policy. These amounts are reported above as fiscal 2021
compensation in the ‘‘Non-Equity Incentive Plan Compensation’’ column of the ‘‘Fiscal 2022 Summary Compensation Table’’ above.
Each of the annual and supplemental 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, 2021, and vest as to the remainder of the shares in 36 equal monthly installments thereafter, in each case,
subject to continuous service. 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 $274.96 per share.
(6)
These annual RSU awards vested as to 25% of the shares of Class A common stock underlying the RSU award upon the one-year anniversary of March 15, 2021,
and vest as to the remainder of the shares in 12 equal quarterly installments thereafter, in each case, subject to continuous service.
(7) Mr. Tighe’s annual RSU award, which was granted prior to his promotion to interim CFO, vested as to 6.25% of the shares of Class A common stock underlying
the RSU award on June 15, 2021, and vests as to the remainder of the shares in 15 equal quarterly installments thereafter, in each case, subject to continuous
service.
(8) Mr. Tighe’s promotion RSU award vested as to 25% of the shares of Class A common stock underlying the RSU award on September 15, 2021, and vests as to the
remainder of the shares in 3 equal quarterly installments thereafter, in each case, subject to continuous service.
(9) Ms. St. Ledger’s initial RSU award vested as to 25% of the shares of Class A common stock underlying the RSU award upon the one-year anniversary of March 15,
2021, and vests as to the remainder of the shares in 12 equal quarterly installments thereafter, in each case, subject to continuous service.
(10) Ms. St. Ledger’s inducement RSU award vests in two equal installments on September 15, 2021 and September 15, 2022, in each case, subject to continuous
service.
(11) Mr. Kourey’s initial stock option award was scheduled to vest as to 25% of the shares underlying the option on March 8, 2022 and in 36 equal monthly
installments thereafter, in each case, subject to continuous service. Under the terms of Mr. Kourey’s transition agreement, 13,050 shares of Class A common
stock underlying the stock option award vested and the remaining 56,545 shares were canceled on June 15, 2021. The stock option award shown as granted on
May 24, 2021 represents the modification of the pre-existing stock option award granted on April 15, 2021 in connection with Mr. Kourey’s separation of service
from the company, but does not reflect the actual issuance of new stock options.
(12) Mr. Kourey’s initial RSU award was scheduled to vest as to 25% of the shares of Class A common stock underlying the RSU award upon the one-year anniversary
of March 15, 2021, and as to the remainder of the shares in 12 equal quarterly installments thereafter, in each case, subject to continuous service. Under the
terms of Mr. Kourey’s transition agreement, 5,826 shares of Class A common stock underlying the RSU award vested and the remaining 25,244 shares were
canceled on June 15, 2021. The RSU award shown as granted on May 24, 2021 represents the modification of the pre-existing RSU award granted on April 15, 2021
in connection with Mr. Kourey’s separation of service from the company, but does not reflect the actual issuance of new RSUs.
Okta, Inc.
2022 Proxy Statement
55
Executive Compensation
Fiscal 2022 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, 2022.
Option Awards(1)(2)
Stock Awards(2)
Name
Grant Date
Vesting
Commencement
Date
Exercisable
(#)
Unexercisable
(#)
Option
Exercise Price
($)
Option
Expiration
Date
Number of Securities
Underlying Unexercised
Options
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(3)
Todd McKinnon
Brett Tighe
J. Frederic Kerrest
Jonathan T. Runyan
6/16/2020(7)
6/15/2020
12/17/2020(7)
12/15/2020
8/30/2013(4)
8/28/2015(4)
7/30/2016(4)
3/22/2018(5)
3/22/2018(6)
3/25/2019(5)
3/25/2019(6)
4/15/2020(5)
4/15/2020(6)
4/22/2021(5)
4/22/2021(6)
4/22/2021(5)
4/21/2015(4)
6/2/2016(4)
1/23/2017(4)
6/15/2018(6)
6/15/2019(6)
3/26/2021(7)
7/15/2021(8)
8/30/2013(4)
8/27/2014(4)
8/28/2015(4)
7/30/2016(4)
3/22/2018(5)
3/22/2018(6)
3/25/2019(5)
3/25/2019(6)
4/15/2020(5)
4/15/2020(6)
4/22/2021(5)
4/22/2021(6)
4/22/2021(5)
7/30/2016(4)
3/22/2018(5)
3/22/2018(6)
8/1/2013
8/1/2015
38,827
486,053
7/29/2016
1,798,891
2/1/2018
3/15/2018
2/1/2019
3/15/2019
2/1/2020
3/15/2020
2/1/2021
3/15/2021
2/1/2021
4/6/2015
6/2/2016
1/16/2017
6/15/2018
6/15/2019
3/15/2021
6/15/2021
8/1/2013
8/1/2014
8/1/2015
7/29/2016
2/1/2018
3/15/2018
2/1/2019
3/15/2019
2,719
—
2,304
—
1,860
—
—
—
—
25,500
23,546
20,000
—
—
—
—
—
—
3,572
42,812
236,053
988,852
111,625
—
52,169
—
2/1/2020
29,952
3/15/2020
2/1/2021
3/15/2021
2/1/2021
—
—
—
—
7/29/2016
135,000
2/1/2018
50,916
3/15/2018
—
—
—
—
2,719
—
29,947
—
46,512
—
63,667
—
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
—
—
274.96
4/21/2031
—
—
127,334
274.96
4/21/2031
3.92
4/20/2025
8.73
6/1/2026
9.74
1/22/2027
—
—
—
—
—
—
—
—
—
—
—
—
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
—
—
142.47
4/14/2030
—
—
274.96
4/21/2031
—
—
274.96
4/21/2031
8.97
7/29/2026
—
—
—
—
—
—
—
—
—
—
—
—
—
2,375
—
19,378
—
32,559
—
31,834
—
63,667
—
1,084
—
—
—
—
—
3,532
—
15,902
—
23,782
—
26,957
—
—
—
—
1,521
2,799
3,017
4,980
2,629
8,708
—
—
—
—
—
3,088
—
10,290
—
16,647
—
13,479
—
—
—
—
—
—
698,947
—
3,146,847
—
4,706,220
—
5,334,521
—
—
—
—
300,991
553,894
597,034
985,492
520,253
1,723,226
—
—
—
—
—
611,084
—
2,036,288
—
3,294,275
—
2,667,359
—
—
—
56
2022 Proxy Statement
Okta, Inc.
39.21
3/21/2028
—
—
—
1,407
278,431
Executive Compensation
3/25/2019(5)
3/25/2019(6)
4/15/2020(5)
4/15/2020(6)
4/22/2021(5)
4/22/2021(6)
4/22/2021(5)
3/15/2021(9)
3/15/2021(10)
4/15/2021(11)
7/30/2016(4)
3/22/2018(5)
3/22/2018(6)
3/25/2019(5)
3/25/2019(6)
4/15/2020(5)
4/15/2020(6)
2/1/2019
3/15/2019
2/1/2020
3/15/2020
2/1/2021
3/15/2021
2/1/2021
3/15/2021
3/15/2021
23,712
—
14,975
—
—
—
—
—
—
3/8/2021
13,050
7/29/2016
2/1/2018
3/15/2018
2/1/2019
3/15/2019
2/1/2020
3/15/2020
36
6,802
—
1,948
—
1,325
—
8,808
—
16,280
—
12,734
—
82.16
3/24/2029
—
—
142.47
4/14/2030
—
—
274.96
4/21/2031
—
—
101,867
274.96
4/21/2031
—
—
—
—
1,698
—
12,332
—
16,280
—
—
—
—
—
274.25
3/1/2022
8.97
7/29/2026
39.21
3/21/2028
—
—
82.16
3/24/2029
—
—
142.47
4/14/2030
—
—
—
4,677
—
8,323
—
5,392
—
43,130
53,913
—
—
—
2,207
—
6,548
—
8,323
—
925,532
—
1,647,038
—
1,067,023
—
8,534,996
10,668,844
—
—
—
436,743
—
1,295,784
—
1,647,038
Susan St. Ledger
Former Executive Officers
Michael Kourey
William E. Losch
(1)
Stock options granted prior to 2017 were granted pursuant to our 2009 Stock Plan (the ‘‘2009 Plan’’) and stock options granted after 2017 were granted pursuant
to our 2017 Plan.
(2) Upon (i) a termination of employment by us other than for cause (as defined in the Executive Severance Plan) or disability or (ii) a 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), or (iii) the death of the
employee, the vesting of the shares subject to options or RSUs will fully accelerate and will become vested in full upon such termination date.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
This column represents the market value of the shares underlying the RSUs or restricted stock as of January 31, 2022, based on the closing price of our Class A
common stock, as reported on Nasdaq, of $197.89 per share on January 31, 2022.
The stock options are fully vested and exercisable.
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.
6.25% of the shares underlying the award vested on the quarterly vesting date (March 15, June 15, September 15 or December 15) following the vesting
commencement date, and the balance of the shares vest in 15 successive equal quarterly installments, subject to continuous service.
25% of the shares underlying the award vested on the quarterly vesting date (March 15, June 15, September 15 or December 15) following the vesting
commencement date, and the balance of the shares vest in 3 successive equal quarterly 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. The shares underlying the award will accelerate and become fully
vested upon death or disability pursuant to Ms. St. Ledger’s offer letter.
(10) 50% of the shares underlying the award vested on September 15, 2021 and the remaining 50% of the shares vest on September 15, 2022, subject to continuous
service. The shares underlying the award will accelerate and become fully vested upon death or disability pursuant to Ms. St. Ledger’s offer letter.
(11)
The shares underlying the award accelerated and became fully vested on June 15, 2021 pursuant to Mr. Kourey’s transition agreement.
Okta, Inc.
2022 Proxy Statement
57
Executive Compensation
Fiscal 2022 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
2022.
Name
Todd McKinnon
Brett Tighe
J. Frederic Kerrest
Jonathan T. Runyan
Susan St. Ledger
Former Executive Officers
Michael Kourey
William E. Losch
Option Awards
Stock Awards
Number of Shares
Acquired on
Exercise
(#)
Value Realized
on Exercise
($)(1)
Number of Shares
Acquired on
Vesting
(#)
Value Realized
on Vesting
($)(2)
101,197
—
1,673
18,392
—
80,000
87,600
14,983,109
—
423,604
4,616,944
—
17,644,074
16,565,762
46,442
18,622
34,751
16,811
53,912
6,890
21,719
10,756,261
4,367,983
8,048,522
3,891,843
13,671,005
1,544,627
5,031,224
(1)
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.
(2)
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 2022 for Named Executive Officers
We entered into employment offer letters with Messrs. McKinnon, Kerrest, Runyan and Losch in February 2017, with Ms. St.
Ledger in September 2020, with Mr. Kourey in November 2020 and with Mr. Tighe in January 2022 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 serving named executive officers also participates in our Executive Severance Plan, as
described above under the heading “Post-Employment Compensation Arrangements” and below, and our Death-Related Equity
Acceleration Policy, as described above in “Compensation Discussion and Analysis—Post-Employment Compensation
Arrangements—Death-Related Equity Acceleration Policy,” and remains subject to our standard employment, confidential
information and invention assignment agreement.
Transition Agreement with Mr. Kourey
In accordance with a transition agreement entered into with Mr. Kourey in May 2021, in exchange for Mr. Kourey’s advisory
services and a release of claims against the company and its affiliates, the company made a cash payment to Mr. Kourey in the
amount of $495,000, which constitutes nine months of Mr. Kourey’s base salary and target bonus opportunity, and an additional
amount ($46,538) equal to the premiums Mr. Kourey would need to pay for continued healthcare coverage for nine months,
grossed up for taxes. In addition, the vesting of certain of Mr. Kourey’s equity awards were accelerated under the terms of the
transition agreement, resulting in the vesting of 5,826 RSUs (with the remaining 25,244 RSUs subject to such award canceled as
of that date) and options to purchase 13,050 shares of Class A common stock on June 15, 2021 (with the remaining 56,545 shares
subject to such award canceled as of that date), as set forth above in the “Fiscal 2022 Summary Compensation Table” and the
“Fiscal 2022 Grants of Plan-Based Awards Table.”
58
2022 Proxy Statement
Okta, Inc.
Executive Compensation
In addition, pursuant to the transition agreement, Mr. Kourey waived any and all benefits and rights under his employment offer
letter and the Executive Severance Plan, including any severance benefits or vesting acceleration rights triggered by any change
in control of the company and to any equity vesting after June 16, 2021.
Separation Agreement with Mr. Losch
In connection with Mr. Losch’s retirement as our CFO effective March 8, 2021, we entered into the Losch Separation Agreement,
pursuant to which he continued to work as an advisor at the request of our company and assisted with any CFO transition-
related questions through fiscal 2022 and into fiscal 2023. He remained on our company’s payroll system and benefit plans and
continued to vest in any outstanding equity awards that he held pursuant to our company’s stock plans according to the terms of
the agreements pursuant to which such equity awards were issued. Specifically, during the transition period, Mr. Losch:
•
•
•
•
continued to receive his annual base salary of $350,900;
continued to participate in our benefit plans;
received his fiscal 2021 bonus paid in fully-vested RSUs for the performance period ended January 31, 2021 in accordance with
the terms and conditions of the Bonus Plan; and
continued to vest in all RSUs and options to purchase shares of our common stock previously granted to him under our 2017
Plan or any predecessor plan.
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 2022. 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 2022, January 31, 2022, and a per share value of our common stock of $197.89, which is the closing
market price per share of our Class A common stock on such date. Actual payments and benefits could be different if such
events were to occur on any other date or at any other price or if any other assumptions are used to estimated potential
payments and benefits. Messrs. Kourey and Losch are excluded from the table—see “Transition Agreement with Mr. Kourey” and
“Separation Agreement with Mr. Losch” above for a description of actual amounts paid to them.
Name
Todd McKinnon
Brett Tighe
J. Frederic Kerrest
Benefit
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Termination
without Cause Not
in Connection with
a Change in Control
($)
Termination without
Cause or with Good
Reason in Connection
with a Change in Control
($)
306,000
31,929
—
337,929
300,000
7,694
—
307,694
271,939
17,372
—
289,311
Death
($)
—
—
657,900
47,894
20,361,447
20,361,447
21,067,241
20,361,447
660,000
10,258
—
—
4,680,890
4,680,890
5,351,148
4,680,890
580,136
23,163
—
—
13,032,907
13,032,907
13,636,206
13,032,907
Disability
($)
—
—
—
—
—
—
—
—
—
—
—
—
Okta, Inc.
2022 Proxy Statement
59
Executive Compensation
Name
Jonathan T. Runyan
Susan St. Ledger
Benefit
Cash Severance
Health Benefits
Equity Acceleration(1)
Total
Cash Severance
Health Benefits
Equity Acceleration(1)(2)
Total
Termination
without Cause Not
in Connection with
a Change in Control
($)
Termination without
Cause or with Good
Reason in Connection
with a Change in Control
($)
278,796
23,947
—
302,743
393,750
7,694
—
401,444
Death
($)
—
—
6,011,621
6,011,621
—
—
Disability
($)
—
—
—
—
—
—
557,592
31,929
6,011,621
6,601,142
1,050,000
10,258
19,203,839
19,203,839
19,203,839
20,264,097
19,203,839
19,203,839
(1)
The value of stock option and RSU award vesting acceleration is based on the closing price of $197.89 per share of our Class A common stock as of January 31,
2022, minus, in the case of stock options, the exercise price of the unvested stock option shares subject to acceleration.
(2)
The shares underlying Ms. St. Ledger’s initial and inducement RSU awards accelerate and fully vest upon disability pursuant to her offer letter.
60
2022 Proxy Statement
Okta, Inc.
Executive Compensation
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 2022, the median of the annual total compensation of all employees of our company (other than our CEO) was
$397,707(1) and the annual total compensation of our CEO was $31,820,477. Based on this information, for fiscal 2022 the ratio of
the annual total compensation of our CEO to the median of the annual total compensation of all employees was 80(1) to 1. This
ratio is a reasonable estimate calculated in a manner consistent with SEC rules.
For fiscal 2022, we calculated the CEO pay ratio using the same median employee that we used to calculate the pay ratio in fiscal
2020 and 2021, as we believe there has been no change in our employee population or compensation arrangements during fiscal
2022 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 was a full-time employee based in the United States.
We calculated this individual’s fiscal 2022 annual total compensation using the same methodology that we use for our named
executive officers as set forth in the “Fiscal 2022 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 2022
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 2022. Additionally,
the median employee terminated employment with the company in February 2022, following the end of fiscal 2022 but prior to the determination and payment of
bonuses for fiscal 2022. The median employee’s annual total compensation including (i) estimated CAPFL benefit payments of $4,086 in fiscal 2022 and (ii) a
bonus amount of $30,709 (representing the amount that would have been paid to the median employee in March 2022 based on the individual’s target bonus
and bonus plan attainment for fiscal 2022) would be $432,502, resulting in a pay ratio of 74 to 1.
Okta, Inc.
2022 Proxy Statement
61
Report of the
Compensation
Committee of
the Board of
Directors
The information contained in this compensation committee report is being
furnished and 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.
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, 2022.
Compensation Committee
Michael Stankey (Chair)
Robert L. Dixon, Jr.
Rebecca Saeger
Michelle Wilson
62
2022 Proxy Statement
Okta, Inc.
Equity Compensation
Plan Information
The following table provides information as of January 31, 2022 regarding shares of our common stock that may be issued under
our equity compensation plans, consisting of the 2009 Plan, the 2017 Plan, the 2017 Employee Stock Purchase Plan (the “2017
ESPP”), the Auth0, Inc. 2014 Equity Incentive Plan (the "2014 Plan") and the Auth0, Inc. Phantom Unit Plan (the "Phantom Unit
Plan" and together with the 2014 Plan, the “Auth0 Plans”).
Plan category
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
Plans (Excluding
Securities Referenced in
Column (a))
Equity compensation plans approved by security holders(1):
Equity compensation plans not approved by security
holders(5):
Total
(a)
12,722,695(2)
—
12,722,695
(b)
41.3959(3)
(c)
28,890,939(4)
—
—
41.3959
28,890,939
(1)
(2)
(3)
(4)
(5)
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, 2022, a total of 37,989,012 shares of our Class A common stock had been authorized for issuance
pursuant to the 2017 Plan, which number excludes the 7,830,135 shares that were added to the 2017 Plan as a result of the automatic annual increase on
February 1, 2022. 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, canceled, 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, 2022, a total of 5,757,220 shares of our Class A common stock had been reserved for issuance pursuant to the 2017 ESPP, which number excludes the
1,566,027 shares that were added to the 2017 ESPP as a result of the automatic annual increase on February 1, 2022. This number will be subject to adjustment in
the event of a stock split, stock dividend or other change in our capitalization.
Includes 6,979,427 shares of Class A and Class B common stock issuable upon the exercise of outstanding options and 5,743,268 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, 2022, there were 23,133,719 shares of Class A common stock available for grant under the 2017 Plan and 5,757,220 shares of Class A common
stock available for grant under the 2017 ESPP.
Excludes (i) 1,004,651 shares of Class A common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $27.0197 per
share and (ii) 482,479 shares of Class A common stock issuable upon the vesting of RSUs under the Auth0 Plans. We assumed the Auth0 Plans and certain
outstanding awards under the Auth0 Plans in connection with our acquisition of Auth0, Inc. in May 2021.
Okta, Inc.
2022 Proxy Statement
63
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, 2022
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, including former executive officers;
each of our directors; and
all of our directors and current 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 150,513,420 shares of our Class A common stock and 6,976,203
shares of our Class B common stock outstanding on April 1, 2022. We have deemed shares of our common stock subject to
options that are currently exercisable or exercisable within 60 days of April 1, 2022 and RSUs that are releasable within 60 days of
April 1, 2022 to be outstanding and to be beneficially owned by the person holding the option and/or RSU 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.
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
5% Stockholders
Entities affiliated with The Vanguard Group(1)
Entities affiliated with BlackRock(2)
Entities affiliated with T. Rowe Price(3)
13,242,424
12,325,210
10,889,976
8.8%
8.2%
7.2%
Non-Employee Directors
Shellye Archambeau(4)
Robert L. Dixon, Jr.(5)
Jeff Epstein(6)
Patrick Grady(7)
Benjamin Horowitz(8)
Rebecca Saeger(9)
Michael Stankey(10)
Michelle Wilson(11)
Named Executive Officers (Current)
Todd McKinnon(12)
Brett Tighe(13)
J. Frederic Kerrest(14)
7,802
2,074
478
107,808
557,633
7,132
18,334
18,334
95,934
32,084
251,481
*
*
*
*
*
*
*
*
*
*
*
—
—
—
—
—
—
—
—
—
190,000
100,000
7,634,799
69,046
2,799,043
%
—
—
—
—
—
—
—
—
—
2.7%
1.4%
82.1%
1.0%
33.9%
Total
Voting
%†
Total
Ownership
%
6.0%
5.6%
4.9%
8.4%
7.8%
6.9%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
31.4%
*
12.1%
4.8%
*
1.9%
64
2022 Proxy Statement
Okta, Inc.
Security Ownership of Certain Beneficial Owners and Management
Jonathan T. Runyan(15)
Susan St. Ledger(16)
Named Executive Officers (Former)
Michael Kourey(17)
William E. Losch(18)
All directors and current executive officers
as a group (14 persons)(19)
194,792
35,411
21,030
237,819
1,350,230
*
*
*
*
*
135,000
1.9%
—
—
36
—
—
*
*
*
*
*
*
*
*
*
10,927,888
99.7%
42.4%
7.6%
*
†
(1)
(2)
(3)
(4)
(5)
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, 2022. Of the shares of Class A common stock
beneficially owned, The Vanguard Group reported that it has sole dispositive power with respect to 12,956,149 shares, shared dispositive power with respect to
286,275 shares, sole voting power with respect to none of the shares and shared voting power with respect to 124,708 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 3, 2022. 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 11,133,898
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 T. Rowe Price Associates, Inc. on Schedule 13G filed with the SEC on February 14, 2022. Of the shares of Class A common stock
beneficially owned, T. Rowe Price Associates, Inc. reported that it has sole dispositive power with respect to all of the shares and sole voting power with respect
to 3,219,056 shares. T. Rowe Price Associates, Inc. listed its address as 100 E. Pratt Street, Baltimore, MD 21202.
Consists of 7,802 shares of Class A common stock held of record by Ms. Archambeau.
Consists of 2,074 shares of Class A common stock held of record by Mr. Dixon.
(6) Consists of 478 shares of Class A common stock underlying RSUs held by Mr. Epstein that are releasable within 60 days of April 1, 2022.
(7)
(8)
Consists of 107,808 shares of Class A common stock held of record by Mr. Grady.
Consists of (i) 1,064 shares of Class A common stock held of record by Mr. Horowitz and (ii) 556,569 shares of Class A common stock held of record by the 1997
Horowitz Family Trust, of which Mr. Horowitz and his spouse are trustees.
(9) Consists of 7,132 shares of Class A common stock held of record by Ms. Saeger.
(10) Consists of (i) 18,334 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, 2022.
(11) Consists of (i) 18,334 shares of Class A common stock held of record by Michelle Wilson & Doug Davis TR UA 11/29/2016 Wilson Davis Revocable Trust and (ii)
100,000 shares of Class B common stock held of record by Ms. Wilson.
(12) Consists of (i) 9,990 shares of Class A common stock held of record by Mr. McKinnon in an individual capacity, (ii) 85,944 shares of Class A common stock
subject to outstanding options that are exercisable within 60 days of April 1, 2022, (iii) 2,323,771 shares of Class B common stock subject to outstanding options
that are exercisable within 60 days of April 1, 2022, (iv) 5,182,781 shares of Class B common stock held of record by Mr. McKinnon, as trustee of the McKinnon
Stachon Family Trust and (v) 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. Mr. McKinnon has sole voting power and sole dispositive power with respect to the shares described in (i) through (iii). Mr. McKinnon has shared voting
power and shared dispositive power with respect to the shares described in (iv) and (v); provided, however, that 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.
(13) Consists of (i) 30,834 shares of Class A common stock held of record by Mr. Tighe, (ii) 1,250 shares of Class A common stock held of record by the Tighe Loomis
Family Trust and (iii) 69,046 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022.
(14) Consists of (i) 14,346 shares of Class A common stock held of record by Mr. Kerrest in an individual capacity, (ii) 237,135 shares of Class A common stock subject
to outstanding options that are exercisable within 60 days of April 1, 2022, (iii) 1,271,289 shares of Class B common stock subject to outstanding options that are
exercisable within 60 days of April 1, 2022, (iv) 1,183,510 shares of Class B common stock held of record by Mr. Kerrest and his wife, as trustees of the Kerrest
Family Revocable Trust, (v) 257,768 shares of Class B common stock held of record by the Commonwealth Trust Company, as trustee of the Kerrest Irrevocable
Trust and (vi) 86,476 shares of Class B common stock held of record by KLT 218 Holdings LLC. 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, 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. Mr. Kerrest’s father, as the manager of KLT 218 Holdings LLC,
has voting and dispositive power with respect to the shares held of record by KLT 218 Holdings LLC, and Mr. Kerrest has no voting and dispositive power with
respect to such shares.
(15) Consists of (i) 62,980 shares of Class A common stock held of record by the Runyan 2017 Trust dtd 07/11/2017, Jonathan Runyan & Kimberly Runyan TTEE, (ii)
131,812 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022 and (iii) 135,000 shares of Class B
common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022. Mr. Runyan and his spouse share voting and dispositive power
over the Runyan 2017 Trust dtd 07/11/2017.
(16) Consists of 35,411 shares of Class A common stock held of record by Ms. St. Ledger.
(17) Consists of 21,030 shares of Class A common stock held of record by the Kourey Living Trust, for which Mr. Kourey has sole voting and dispositive power.
Okta, Inc.
2022 Proxy Statement
65
Security Ownership of Certain Beneficial Owners and Management
(18) Consists of (i) 36,865 shares of Class A common stock held of record by Mr. Losch, (ii) 182,781 shares of Class A common stock held of record by William Losch
and Susanne Losch, Trustees of the Losch 2006 Trust, (iii) 18,173 shares of Class A common stock subject to outstanding options that are exercisable within 60
days of April 1, 2022 and (iv) 36 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022. Mr. Losch and
his spouse share voting and dispositive power over the Losch 2006 Trust.
(19) Consists of (i) 887,540 shares of Class A common stock beneficially owned by our directors and current executive officers as a group, (ii) 462,212 shares of Class
A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022, (iii) 478 shares of Class A common stock underlying RSUs
that are releasable within 60 days of April 1, 2022, (iv) 6,938,782 shares of Class B common stock beneficially owned by our directors and current executive
officers as a group and (v) 3,989,106 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2022.
66
2022 Proxy Statement
Okta, Inc.
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,
2021 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 “Compensation Discussion and
Analysis—Post-Employment Compensation Arrangements” for more information
regarding these agreements.
In April 2022, we purchased copies of a book, Zero to IPO, authored by Mr. Kerrest
for $339,552, and we plan to distribute the books to participants at our events as
well as to our employees. Mr. Kerrest has pledged to donate any profits he receives
from sales of the book to non-profit organizations.
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.
Okta, Inc.
2022 Proxy Statement
67
Certain Relationships and Related Party Transactions
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 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.
68
2022 Proxy Statement
Okta, Inc.
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.
Okta, Inc.
2022 Proxy Statement
69
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, 2022
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
100 First Street, Suite 600
(State or Other Jurisdiction of
Incorporation or Organization)
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 ☒
Yes ☐
The aggregate market value of the stock of the Registrant as of July 31, 2021 (based on a closing price of $247.79 per share) held by
non-affiliates was approximately $36.3 billion. As of February 28, 2022, there were 149,719,936 shares of the Registrant’s Class A Common
Stock and 6,976,203 shares of the Registrant's Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement relating to the 2022 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, 2022.
Okta, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2022
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
Equity Securities
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Removed and Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Executive Compensation
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.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
Part IV
Page
6
16
50
50
50
50
51
54
72
74
120
120
121
122
122
122
122
122
122
122
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 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 provider. Our vision is to free anyone 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 in the cloud 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 evolving security threat landscape 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, 2022, more than 15,000 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, 2022, which while not directly correlated to revenue, shows the breadth and acceptance
of our platform.
On May 3, 2021, we acquired Auth0, Inc. ("Auth0"). Auth0's cloud-native identity and access management
solution provides application builders with the building blocks they need to add authentication and authorization to
their applications, in a scalable and easy-to-integrate way.
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, including Auth0. We sell our products directly through our field and inside sales
6
teams, as well as indirectly through our network of channel partners, including resellers, system integrators and
other distribution partners.
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.
Workforce Identity Cloud
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.
Customer Identity Cloud
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.
Through our acquisition of Auth0, we are able to support a broader spectrum of customer identity use cases.
Auth0 offers a more customizable approach to customer identity for developers, which is complementary to Okta’s
customer identity solutions that focus on developers who prefer an out-of-the-box, low-code approach. Auth0
empowers application builders to innovate faster by removing the complexity from identity and making it simple,
extensible and customizable.
7
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.
Through Auth0, we offer an additional extensible and easy-to-integrate solution for developer-centric use cases.
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.
Leverage Partner Ecosystem. We also plan to further 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 20% of our revenue generated outside of the United States in
fiscal 2022, and our international revenue growing 97% from fiscal 2021 to fiscal 2022, 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, 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 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 our 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 our platform for their identity related requirements.
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
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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.
Okta 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 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
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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.
Auth0 Products
Universal Login. Universal Login is a standards-based login infrastructure with centralized feature
management and configuration for websites and applications that can be integrated with a wide range of
social providers, enterprise login services and customer-provided databases. Universal Login enables
Auth0 customers to provide a consistent login experience across many different applications and devices.
Attack Protection. Attack Protection is a suite of security capabilities that protect Auth0 customers from
different types of malicious traffic, including bots, breached passwords, suspicious IP addresses and brute
force attacks. Attack Protection enables Auth0 customers to minimize risks associated with the ever-
growing volume of identity-targeted attacks.
Adaptive Multi-Factor Authentication. Simple-to-use and adaptable Multi-Factor Authentication that
minimizes friction to end users. When using Adaptive Multi-Factor Authentication, Auth0 customers leverage
risk-assessment algorithms that present Multi-Factor Authentication challenges only to select authentication
attempts that require additional validation.
Passwordless. Passwordless authentication enables users to login without a password and supports a
variety of different login methods, including advanced device biometrics.
•
•
•
•
•
•
• Machine to Machine. Machine to Machine provides standards-based authentication and authorization with
non-interactive devices and applications.
•
Private Cloud. Private Cloud is a deployment option that allows Auth0 customers to run a dedicated cloud
instance of Auth0. Private Cloud capability supports multiple cloud providers.
• Organizations. Organizations enable Auth0 customers to support a large number of partners or customers
of their own with independent configurations, login experiences and security options.
By focusing on identity, the one constant in an ever-changing technology and threat landscape, we provide 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.
We focus on engineering an intuitive, but comprehensive, platform to solve complex problems. Our 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.
Our Technology
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Okta Identity Cloud 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 from 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. Okta's 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.
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.
Okta's 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 and Auth0 Marketplace
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. Our patented technology 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 benefits of the Okta Integration Network by creating their own integrations to both cloud
and on-premises proprietary applications.
Similarly, the Auth0 Marketplace is a trusted catalog of integrations that enables application teams to easily
assemble complete identity solutions. The Auth0 Marketplace connects customers with service providers and
builders who solve integration use cases and implement integrations with the Auth0 platform.
As of January 31, 2022, we had more than 15,000 customers, including more than 3,100 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 our platform to manage millions of their customers' identities.
Our Customers
Sales
Sales and Marketing
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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
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 our platform. 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 our services are 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
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
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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, 2022, we had twenty-eight issued patents in the United States, which expire between 2030
and 2039 and cover various aspects of our products. In addition, as of such date, we also had nine issued patents
in Australia which expire between 2033 and 2037, six issued patents in New Zealand which expire between 2034
and 2037, and nine issued European patents which have each been validated in Germany, France and Great
Britain, with some also validated in Switzerland, Denmark, Spain, the Netherlands, Norway and Sweden, and expire
between 2033 and 2037.
We have registered “Okta” and "Auth0" as trademarks in many jurisdictions throughout the world to protect
our brands. We also have filed other trademark applications pending in various jurisdictions throughout the world.
We also have registered other trademarks in the United States including "Okta Your Cloud, Covered," "Enterprise
Identity, Delivered," "Work Outside the Perimeter," "Oktane" and "Never Build Auth Again."
We are the registered holder of a variety of domestic and international domain names that include “Okta,”
"Auth0" 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,
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, certain 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,
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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.
As of January 31, 2022, we had 5,030 employees, of which approximately 74% were in the United States and
26% were in our international locations. We have not experienced any work stoppages, and we consider our
relations with our employees to be good. Our employee engagement program helps us understand employee
sentiment on a wide range of topics throughout the employee lifecycle, providing insights that inform our decisions
about company initiatives, employee programs, talent risks, management opportunities and more. In fiscal 2022,
83% of our eligible employees participated in our annual employee engagement survey.
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 most recent State of Inclusion at Okta annual report located on our website at
www.okta.com/state-of-inclusion-at-okta, and additional information on our compensation, benefits and wellness
programs is available on our Total Rewards website at rewards.okta.com. 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.
People First Philosophy
“Empower our people” is one of our core values and in fiscal 2022, we introduced our “People First”
philosophy in which culture, career growth, competitive rewards, flexible work and purpose come together to create
a shared sense of ownership in achieving our company vision. As we enter our next phase of growth, bolstered by
the addition of Auth0 and its employees, we want every employee to feel ownership of Okta.
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
made deeper investments in 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. Our engagement with diversity sourcing programs and partnerships allows us to both
source top talent from underrepresented groups for current open roles, and further strengthen our ability to build
and nurture diverse talent communities for future roles. We also continue to recruit from a range of colleges,
including those that support women in computer science and Historically Black Colleges and Universities, and
engage with organizations that support diverse students and jobseekers through our social impact arm, Okta for
Good.
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Nurturing a culture of inclusion and belonging in our workplace is a key priority. We empower our employees
to be authentic and grow through open conversations and engagement resources, including regular safe space DIB
discussion forums and facilitated workshops, personalized DIB learning tools, mentoring and workplace
development programs focused on supporting talent from underrepresented communities, and sponsorship of
ERGs that strengthen our DIB culture. We currently have ERGs supporting women, people of color, veterans, the
LGBTQIA+ community and parents and caregivers, and plan to launch affinity groups supporting neurodiversity and
persons with disabilities in fiscal 2023.
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 provide our employees with a wide range of
learning and development opportunities, including in-person, virtual, social and self-directed learning, mentoring,
coaching and external development. 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 offers comprehensive employee benefits that may vary by country/region,
including an employee stock purchase plan, a 401(k) plan with company matching contribution, comprehensive
medical, dental and vision insurance, life and disability insurance, health savings accounts, flexible time off,
volunteer time off, gender-neutral paid parental leave, fertility and adoption support, family care resources, mobile
and internet reimbursement, mental health and lifestyle support programs and a variety of other health and wellness
resources.
We are committed to fair compensation and opportunity in our workplace. We conduct regular equal pay
assessments and adjust as needed to ensure our employees are paid equitably without regard to gender or
ethnicity.
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.
Looking forward, we continue to focus on technologies and programs that create equity and build community
across our dynamic workforce, including:
•
Flexible benefit offerings that allow employee customization;
• Workplace solutions, such as coworking spaces, outside of our primary office locations that support our
distributed teams;
•
•
A Dynamic Work Sustainability Guide to empower our employees to reduce their carbon footprints wherever
they are working from; and
Curated experience programs that foster a sense of community both in-person and virtually.
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
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•
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.
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 172,500 shares of Class A common stock
remained reserved for future issuances as of January 31, 2022.
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
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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:
•
•
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.
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There are risks related to our ability to successfully integrate Auth0 and realize potential benefits from the
acquisition.
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.
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 42.6% of the voting power of our capital stock as of
January 31, 2022. 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.
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Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our
business to pay our indebtedness.
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.
The extent of the impact of COVID-19 on our future operational and financial performance remains uncertain
and will depend on certain developments, including the duration and spread of COVID-19 and variants of concern,
the manufacture, distribution, efficacy and public acceptance of COVID-19 treatments and vaccines, related public
health measures, including vaccine mandates, and their impact on the global economy, our customers, employees
and vendors. While some governments around the world have lifted restrictions and distributed vaccines, there
remains significant uncertainty around the recovery due to the challenging logistics of distributing the vaccines
globally, as well as the unknown impact of emerging variants of COVID-19. 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, for most of fiscal 2021, we temporarily closed our offices, required our
employees to work from home and implemented significant travel restrictions. We shifted our customer, employee
and industry events, including our annual user conferences Oktane20 Live and Oktane21 Live, to virtual-only
formats. In fiscal 2022, as the administration of vaccines increased, we reopened our offices to partial capacity,
allowing our employees to voluntarily return, and in fiscal 2023, we are shifting to hybrid in-person and virtual sales
formats and experiences for future annual user conferences. 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 been and may continue to be 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
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, global availability and acceptance of COVID-19
vaccines, the severity and transmission rate of the virus and emerging variants of concern, 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 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,
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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
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 2020 to fiscal 2021, our revenue grew from $586.1 million to $835.4 million, an increase
of 43%, and from fiscal 2021 to fiscal 2022, our revenue grew from $835.4 million to $1,300.2 million, an increase
of 56%. 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:
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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;
successfully introduce new products, enhance existing products and address new use cases;
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.
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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 $208.9
million, $266.3 million and $848.4 million in fiscal 2020, 2021 and 2022, 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 a result of the Auth0 acquisition, and 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 2,806 employees as of January 31, 2021 to 5,030
employees as of January 31, 2022. 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 in the Americas, Asia-Pacific and Europe, and we plan to continue
to expand our international operations 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:
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Authentication providers;
Access and lifecycle management providers;
• Multi-factor authentication providers;
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Infrastructure-as-a-service providers;
• Other customer identity and access management providers; and
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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
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.
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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:
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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;
health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
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;
the mix of revenue attributable to larger transactions as opposed to smaller transactions, and the
associated volatility and timing of our transactions;
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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
development programs of our competitors would give an advantage to such competitors and may harm our
business, results of operations and financial condition.
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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. 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;
claims by and disputes with the acquired company’s employees, customers, stockholders or third parties;
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;
acquired businesses, technologies or products 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.
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In addition, if an acquired business fails to meet our expectations, our business, results of operations and
financial condition could suffer. For further risks related to our acquisition of Auth0, please see below under “Risks
Related to the Acquisition of Auth0.”
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 Americas, Asia-Pacific and Europe, and we plan to expand our international operations. We also have added
several offices outside the United States through our acquisition of Auth0.
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Our international revenue was 16% and 20% of our total revenue in fiscal 2021 and fiscal 2022, respectively.
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:
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health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
• macroeconomic conditions and the economic impact of the COVID-19 pandemic;
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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 numerous and ever-growing landscape of U.S. and
international data privacy and cybersecurity regimes, many of which involve disparate standards and
enforcement approaches;
greater risk that our foreign employees or partners will fail to comply with U.S. and foreign laws;
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;
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;
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 receivable;
difficulties in managing and staffing international operations and differing employer/employee relationships
and local employment laws;
political, economic and social instability, war, terrorist activities or armed conflict, including Russia's invasion
of Ukraine;
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.
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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:
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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
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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 plan to continue to make, investments to support future sales opportunities in the government sector. The sale
of our services to government agencies is tied to budget cycles, and there are government requirements and
authorizations that we may be required to meet. 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
contract termination, 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. Government entities often require contract terms that differ from our standard
arrangements and impose additional compliance requirements, require increased attention to pricing practices, 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
certain 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
underlying regulatory requirements could be an impediment to our ability to efficiently provide our service to
government customers 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.
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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.
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.
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
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claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s
attention.
The ongoing integration of Auth0 may cause a disruption in our business.
Risks Related to the Acquisition of Auth0
The ongoing integration following the acquisition of Auth0 (the “Acquisition”) 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 ongoing 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 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. We also could be subject to litigation related to the Acquisition, which could
result in significant costs and expenses.
We may not realize potential benefits from the Acquisition because of difficulties related to
integration, the achievement of synergies, and other challenges.
Prior to the consummation of the Acquisition, we and Auth0 operated independently, and there can be no
assurances that our businesses can be combined in a manner that allows for the achievement of substantial
benefits. The ongoing 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:
•
•
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; and
evaluating and forecasting the financial impact of the Acquisition transaction.
In addition, at times the attention of certain members of our management and resources may be focused on
integration 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.
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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 paid for Auth0 has been 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 is 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.
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-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 will be sufficient in
amount, scope or duration to fully offset the possible liabilities associated with Auth0’s business or property that we
assumed 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.
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
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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
and the information that they store and process. For example, like other companies, we have experienced
numerous cybersecurity attacks and have had to expend increasing amounts of human and financial capital to
respond. We expect that these cybersecurity attacks will continue and that the scope and sophistication of these
efforts may increase in future periods. 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
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to liability and cause us financial harm. For example, in December 2021, a third party reported a remote code
execution vulnerability in the Java logging library known as “log4j” that affected many systems worldwide. We have
reviewed the use of this library within our software product portfolio and in our IT environment and have taken steps
to mitigate the vulnerability. There is no guarantee that our preventative and mitigation actions with respect to this
vulnerability and others like it will fully eliminate the risk of a malicious compromise of our or our customers’
systems.
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.
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, China, 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,
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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. Since the CPRA passed, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act
(“CDPA”) and, in June 2021, Colorado enacted the Colorado Privacy Act (“CPA”), both of which are comprehensive
privacy statutes that share similarities with the CCPA and CPRA. Some observers have noted the CCPA, CPRA,
CDPA and CPA mark the beginning of a trend toward more stringent privacy legislation in the United States,
including a potential federal privacy law, all of which could increase our potential liability and adversely affect our
business. Additionally, in August 2021, the National People’s Congress of the People's Republic of China adopted
the Personal Information Protection Law (“PIPL”), which took effect on November 1, 2021. The PIPL, which
introduces a legal framework similar to the GDPR (as defined and further described below), marks the introduction
of a comprehensive system for the protection of personal information in China. We cannot yet determine the impact
that the PIPL may have on our business; however, we may incur substantial expense in complying with any new
obligations, we could be subject to significant fines if we are found to not comply with the PIPL, 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.
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.
With respect to cybersecurity in the United States, we are closely monitoring the development of rules and
guidance pursuant to various executive orders that may apply to us, including, for example, pursuant to Executive
Order 14028 for “critical software.” While the rules and guidance coming from the Order are still being developed,
we could be categorized as a provider of critical software, which may increase our compliance costs and delay or
prevent our ability to execute contracts with customers, including in particular with government entities.
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.
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.
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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. With regard to transfers to the United States of personal data
from our employees and European customers and users, we rely upon the SCCs. On July 16, 2020, in what is
known as the “Schrems II” decision, 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. The
European Commission has now issued new SCCs that account for the CJEU’s “Schrems II” decision. Although we
believe we continue to satisfy regulatory requirements through our use of SCCs, these latest developments may
require major changes to our data transfer policy, including the need to conduct legal, technical, and security
assessments for each data transfer from the EEA to a country outside of the EEA. This means that we may be
unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA. We may, in
addition to other impacts, experience additional costs associated with increased compliance burdens, and we and
our customers face the potential for regulators in the EEA to apply different standards to the transfer of personal
data from the EEA to the United States, and to block, or require ad hoc verification of measures taken with respect
to, certain data flows from the EEA to the United States. We also anticipate being required to engage in new
contract negotiations with third parties that aid in processing data on our behalf, and entering into the new SCCs.
We may experience reluctance or refusal by current or prospective European customers to use our products, and
we may find it necessary or desirable to make further changes to our handling of personal data of EEA residents.
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.
The regulatory environment applicable to the handling of EEA residents' personal data, and our actions taken
in response, may cause us to assume additional liabilities or incur additional costs and could result in our business,
operating results and financial condition being harmed. We and our customers may face a risk of enforcement
actions by data protection authorities in the EEA relating to personal data transfers to us and by us from the EEA.
Any such enforcement actions could result in substantial costs and diversion of resources, distract management
and technical personnel and negatively affect our business, operating results and financial condition.
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
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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
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 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 modifications to the HIPAA
privacy regulations (“Privacy Rule”), including certain changes designed to strengthen individuals’ right to access
their own health information, improve information sharing for care coordination and case management, and reduce
administrative burdens on HIPAA covered entities, while continuing to protect individuals’ health information privacy
interests. The proposed rulemaking has not yet been finalized. We will continue to monitor whether any final
modifications to the Privacy Rule 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.
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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 rely on a number of third-party service providers to operate our services, any of which, if it encountered
interruptions or delays, could negatively affect our platform, damage our reputation, expose us to liability, cause us
to lose customers or otherwise harm our business. For example, we host our platform using AWS data centers and
other third-party 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 or other cloud services 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 virtual data center 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 third-party service
disruption affecting our platform for any of the foregoing reasons could be detrimental to 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 third-party services we use.
Our cloud infrastructure services enable us to order and reserve server capacity in varying amounts and sizes
distributed across multiple regions. These cloud infrastructure services provide us with computing and storage
capacity pursuant to agreements which may be terminated under specified circumstances.
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 third-party virtual 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
third-party 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.
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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.
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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;
cause us to enter into unfavorable royalty or license agreements, if such arrangements are available at all;
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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.
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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.
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), 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.
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-
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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.
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, value-added 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,
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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. For example, various legislative and regulatory actions and proposals, such as in the United States,
the Organisation for Economic Co-operation and Development and the EU, have increasingly focused on future tax
reform and contemplate changes to long-standing tax principles, which could adversely affect our liquidity and
results of operations.
As a multinational organization, we may be subject to taxation in certain 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.
State, foreign and local taxing jurisdictions have differing rules and regulations governing sales, use and other
indirect taxes, and these rules and regulations are subject to varying interpretations that may change over time. In
particular, the applicability of sales and value-added taxes to our platform in various jurisdictions is unclear. It is
possible that we could face tax audits and that our liability for these taxes could exceed our estimates as 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 such 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,
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 U.S. 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.
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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.
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.
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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 the valuation of goodwill and purchased
intangible assets arising from business combinations, 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 and valuation of certain equity awards assumed. 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:
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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 projections;
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;
announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint
ventures, or capital commitments;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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
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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 42.6% of the voting power of our capital
stock as of January 31, 2022. 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, 2022, our directors, executive officers and their affiliates held in the aggregate 42.6% of 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.
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.
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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;
permit the board of directors to establish the number of directors and fill any vacancies and newly-created
directorships;
require super-majority voting to amend some provisions in our amended and restated certificate of
incorporation and amended and restated bylaws;
authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a
stockholder rights plan;
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;
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;
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a
meeting of our stockholders;
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
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;
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
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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
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;
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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
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• 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
were triggered as of January 31, 2022, and the 2023 Notes are currently convertible at the option of the holders, in
whole or in part, between February 1, 2022 and April 30, 2022. Whether the 2023 Notes will be convertible following
such fiscal quarter will depend on the continued satisfaction of this condition or another conversion condition in the
future. The conditional conversion features of the 2025 Notes were triggered as of January 31, 2021 and the 2025
Notes were convertible at the option of the holders between February 1, 2021 and April 30, 2021; however, as of
January 31, 2022, the conditions allowing holders of the 2025 Notes to convert were not met. From the date of
issuance through January 31, 2022, 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 were classified as
current liabilities on the consolidated balance sheet as of January 31, 2022.
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
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, 2022, Note Hedges corresponding to approximately 6.8
million shares have been terminated or settled. As of January 31, 2022, Note Hedges giving us the option to
purchase approximately 0.4 million shares (subject to adjustment) remained outstanding. Through January 31,
2022, we have terminated Warrants corresponding to approximately 6.1 million shares. As of January 31, 2022,
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.
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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 statements 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.
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. For example, our former Chief Financial Officer stepped
down from his role in June 2021, and our current Chief Financial Officer served on an interim basis from June 2021
until his permanent appointment in January 2022. Such changes in our executive management team may be
disruptive to 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.
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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.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters is located in San Francisco, California, where we currently lease approximately
285,996 square feet under a lease, as amended, that expires in October 2028. We are entitled to two five-year
options to extend this lease, subject to certain requirements.
We also lease space in various locations in the Americas, 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, 2022, we had 233 holders of record of our Class A common stock and 19 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 of 1933, as amended ("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, 2022 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
Okta
Base period
4/7/2017
1/31/2018
1/31/2019
1/31/2020
1/31/2021
1/31/2022
$
100.00 $
125.27 $
350.62 $
544.66 $
1,101.70 $
841.73
S&P 500 Index
100.00
119.88
114.80
136.93
157.68
191.70
S&P 500 Information
Technology Index
100.00
132.07
129.11
185.80
251.86
315.66
52
OktaS&P 500 IndexS&P 500 Information Technology IndexBase period4/7/201701/31/1801/31/1901/31/2001/31/2101/31/22$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 2022 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Unregistered Sales of Equity Securities
(a)
Unregistered Sales of Equity Securities
In connection with conversions of certain convertible notes due in 2023 ("2023 Notes") during the year ended
January 31, 2022, we issued 475,915 shares of our Class A common stock. These issuances were made in reliance
on the exemption from registration provided by Section 4(a)(2) of the Securities Act. We 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 are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under the section titled “Risk Factors” under Part I, Item 1A in this Annual Report
on Form 10-K. Our fiscal year ends January 31.
Overview
Okta is the leading independent identity provider. 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, 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, 2022, more than 15,000 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, IT infrastructure and security vendors through our
Okta Integration Network. As of January 31, 2022, we had over 7,000 integrations with these cloud, mobile and web
applications and IT infrastructure and security vendors.
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 COVID-19 Pandemic
The extent of the impact of COVID-19 on our future operational and financial performance remains uncertain
and will depend on certain developments, including the duration and spread of COVID-19 and variants of concern,
related public health measures, including vaccine mandates, the manufacture, distribution, efficacy and public
acceptance of treatments and vaccines, 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
approximately 96% of total revenue for the year ended January 31, 2022. 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
impacts on revenue growth and other key metrics on a trailing basis. While we see risks associated with more highly
impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly
54
changing work and business environments. As workforces have transitioned to fully remote and hybrid work models,
Zero Trust has become an increasingly important security model and identity an increasingly critical service.
We believe we will be able to continue to deliver our cloud-based platform and support to our customers,
without compromising our employees’ safety. For most of fiscal 2021, we established mandatory work-from-home
procedures for our global office locations, and our employees had the necessary tools and technology to remain
connected and productive. In addition, in fiscal 2021 we shifted our customer, employee and industry events,
including our annual user conference to virtual-only formats, resulting in cost savings. We further experienced cost
savings driven by reductions in employee-related expenses as our sales and marketing activities shifted primarily to
an online-only sales format and our employees shifted to work-from-home procedures. In fiscal 2022, as the
administration of vaccines increased, we reopened our offices to partial capacity, allowing our employees to
voluntarily return and resumed some in-person sales and marketing activities. In fiscal 2023, we are shifting to
hybrid in-person and virtual sales formats and experiences for future annual user conferences, and we expect our
future costs to increase.
See Risk Factors for further discussion of the potential impact of COVID-19 and its related public health
measures on our business.
Acquisition of Auth0
On May 3, 2021, we completed the acquisition of Auth0, Inc ("Auth0"). The acquisition date fair value, net of
acquired cash and subject to final adjustments, was approximately $5,671.0 million, including approximately 19.2
million shares of our Class A common stock valued at $5,175.6 million, $257.0 million in cash, and assumed equity
awards with an initial fair market value of $238.4 million. In addition, we issued unvested restricted stock valued at
$332.1 million and assumed unvested equity and restricted cash awards valued at $430.2 million, which are subject
to future vesting and will be recorded as expense over the period the services are provided. Approximately 5% of
the total consideration was held back by us to secure the indemnification obligations of the Auth0 securityholders
arising during the twelve months following the closing. The estimated transaction value of approximately $6,500.0
million includes restricted stock and assumed equity and restricted cash awards subject to future vesting and was
based on the fixed conversion stock price specified in the Merger Agreement. Further, the estimated transaction
value excludes the impact of cash acquired and other customary closing purchase price adjustments. See Note 3 to
our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Financial Information and Segments
We operate our business as one reportable segment. Our revenue has grown significantly. For the years
ended January 31, 2022, 2021 and 2020, our revenue was $1,300.2 million, $835.4 million and $586.1 million,
respectively, representing a growth rate of 56% and 43%, respectively. For the years ended January 31, 2022, 2021
and 2020, we generated net losses of $848.4 million, $266.3 million and $208.9 million, respectively. Our
accumulated deficit as of January 31, 2022 was $1,815.9 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
As of January 31,
2022
2021
2020
(dollars in thousands)
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
3,100
124 %
1,950
121 %
1,467
119 %
$ 1,350,534
$ 2,694,262
$ 841,797
$ 1,796,949
$ 592,309
$ 1,209,659
Year Ended January 31,
2022
2021
2020
(in thousands)
Calculated billings
$ 1,718,289 $
975,994 $
703,558
Total Customers and Number of Customers with Annual Contract Value Above $100,000
As of January 31, 2022, we had over 15,000 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 3,100, 1,950 and 1,467 as of January 31, 2022,
2021 and 2020, respectively. We expect this trend to continue as larger enterprises recognize the value of our
platform and replace their legacy identity access management infrastructure. We define a customer as a separate
and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of
a large company that has an active contract with us or one of our partners to access our platform. For purposes of
determining our customer count, we do not include customers that use our platform under self-service
arrangements only.
Dollar-Based Net Retention Rate
Our ability to generate revenue is dependent upon our ability to maintain our relationships with our customers
and to increase their utilization of our platform. We believe we can achieve these goals by focusing on delivering
value and functionality that enables us to both retain our existing customers and expand the number of users and
products used within an existing customer. We assess our performance in this area by measuring our Dollar-Based
Net Retention Rate. Our Dollar-Based Net Retention Rate measures our ability to increase revenue across our
existing customer base through expansion of users and products associated with a customer as offset by churn and
contraction in the number of users and/or products associated with a customer.
Our Dollar-Based Net Retention Rate is based upon our ACV which is calculated based on the terms of that
customer’s contract and represents the total contracted annual subscription amount as of that period end. We
calculate our Dollar-Based Net Retention Rate as of a period end by starting with the ACV from all customers as of
twelve months prior to such period end ("Prior Period ACV"). We then calculate the ACV from these same
customers as of the current period end ("Current Period ACV"). Current Period ACV includes any upsells and is net
of contraction or churn over the trailing twelve months but excludes ACV from new customers in the current period.
We then divide the Current Period ACV by the Prior Period ACV to arrive at our Dollar-Based Net Retention Rate.
Our Dollar-Based Net Retention Rate is inclusive of ACV from self-service customers.
Our strong Dollar-Based Net Retention Rate is primarily attributable to gross retention, an expansion of users
and upselling additional products within our existing customers. Larger enterprises often implement a limited initial
deployment of our platform before increasing their deployment on a broader scale.
56
Remaining Performance Obligations (RPO)
RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with
customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-
cancelable amounts that will be invoiced and recognized as revenue in future periods. Current RPO represents the
portion of RPO expected to be recognized during the next 12 months. RPO fluctuates due to a number of factors,
including the timing, duration and dollar amount of customer contracts.
Calculated Billings
Calculated Billings represent our total revenue plus the change in deferred revenue, net of acquired deferred
revenue, and less the change in unbilled receivables, net of acquired 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 76% in the year ended January 31, 2022 over the year ended January 31, 2021.
We implemented operational changes to our billings process in the year ended January 31, 2022 pursuant to which
we billed customers earlier than we would have under our historical billing practices. These changes had a
favorable effect on billings in the year ended January 31, 2022. Absent the impact of the billings process changes,
Calculated Billings would have grown 60% year-over-year in the year ended January 31, 2022. 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, amortization expense associated with capitalized internal-
use software and acquired developed technology and allocated overhead.
We intend to continue to invest additional resources in our platform infrastructure and our platform support
organizations. As we continue to invest in technology innovation, we anticipate that capitalized internal-use software
57
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, allocated overhead and costs of
outside services associated with supplementing our professional services delivery team. The cost of providing
professional services has historically been higher than the associated revenue we generate.
Gross Margin. Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin
may fluctuate from period to period as a result of the timing and amount of investments to expand our hosting
capacity, our continued efforts to build platform support and professional services teams, increased stock-based
compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and
acquired intangible assets.
Operating Expenses
Research and Development. Research and development expenses consist primarily of employee
compensation costs and allocated overhead. We believe that continued investment in our platform is important for
our growth. 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, amortization expense associated
with acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade
names and allocated overhead. Commissions earned by our sales force that are considered incremental and
recoverable costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis
over a period of benefit that we have determined to be generally five years. 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 and as we return to in-person sales formats and
experiences for future annual user conferences. In the short-term, our sales and marketing expenses may increase
as a percentage of our total revenue, however, over time, we expect this percentage to decrease as our total
revenue grows.
General and Administrative. General and administrative expenses consist primarily of employee
compensation costs for finance, accounting, legal, information technology and human resources personnel. In
addition, general and administrative expenses include acquisition and integration-related costs, non-personnel
costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting
corporate expenses, such as information technology, not allocated to other departments. 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, gains and losses from our strategic investments 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 where we operate. 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
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:
Cost of subscription revenue
Cost of professional services and other revenue
Research and development
Sales and marketing
General and administrative
Year Ended January 31,
2022
2021
2020
(in thousands)
$ 1,249,210 $
796,613 $
50,991
1,300,201
329,131
67,274
396,405
903,796
38,811
835,424
170,095
47,586
217,681
617,743
469,259
770,326
431,314
1,670,899
(767,103)
(92,182)
9,768
(179)
(82,593)
(849,696)
(1,285)
(848,411) $
222,826
427,350
171,726
821,902
(204,159)
(72,660)
12,891
(2,263)
(62,032)
(266,191)
141
(266,332) $
$
552,688
33,379
586,067
116,445
42,937
159,382
426,685
159,269
340,356
112,892
612,517
(185,832)
(27,017)
17,089
(14,572)
(24,500)
(210,332)
(1,419)
(208,913)
Year Ended January 31,
2022
2021
2020
$
49,091 $
21,895 $
(in thousands)
12,324
192,712
135,916
175,437
8,083
63,270
53,802
49,131
12,923
7,164
37,683
38,077
30,777
Total stock-based compensation expense
$
565,480 $
196,181 $
126,624
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,
2022
2021
2020
96 %
4
100
25
5
30
70
36
59
34
129
(59)
(7)
1
—
(6)
(65)
—
(65) %
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) %
60
A discussion regarding our financial condition and results of operations for the year ended January 31, 2022
compared to the year ended January 31, 2021 is presented below. 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 can
be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the
SEC on March 4, 2021, 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, 2022 and 2021
Revenue
Revenue:
Subscription
Professional services and other
Total revenue
Percentage of revenue:
Subscription
Professional services and other
Total
Year Ended January 31,
2022
2021
$ Change
% Change
(dollars in thousands)
$ 1,249,210
50,991
$ 1,300,201
$ 796,613
38,811
$ 835,424
$
$
452,597
12,180
464,777
57 %
31
56 %
96 %
4
100 %
95 %
5
100 %
Subscription revenue increased by $452.6 million, or 57%, for the year ended January 31, 2022 compared to
the year ended January 31, 2021. The increase was primarily due to the addition of new customers, an increase in
users and sales of additional products to existing customers, and the inclusion of Auth0 revenue from the acquisition
date of May 3, 2021,
Professional services and other revenue increased by $12.2 million, or 31%, for the year ended January 31,
2022 compared to the year ended January 31, 2021. The increase in professional services revenue was primarily
related to an increase in implementation and other services associated with growth in the number of new customers
purchasing our subscription services, as well as the inclusion of Auth0 revenue from the acquisition date.
The business combination with Auth0 contributed approximately $139.7 million in total revenue for the period
from the acquisition date.
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,
2022
2021
$ Change
% Change
(dollars in thousands)
$ 329,131
67,274
$ 396,405
$ 903,796
$ 170,095
47,586
$ 217,681
$ 617,743
$
$
$
159,036
19,688
178,724
286,053
93 %
41
82 %
46 %
74 %
(32)
70 %
79 %
(23)
74 %
Cost of subscription revenue increased by $159.0 million, or 93%, for the year ended January 31, 2022
compared to the year ended January 31, 2021, primarily due to an increase of $77.5 million in employee
compensation costs related to higher headcount to support the growth in our subscription services, including the
Auth0 acquisition, an increase in amortization of acquired developed technology of $28.0 million primarily in
connection with the Auth0 acquisition, an increase of $26.6 million in third-party hosting costs as we expanded
capacity to support our growth and an increase of $11.8 million in software license costs.
61
Our gross margin for subscription revenue decreased to 74% from 79% during the year ended January 31,
2022, compared to the year ended January 31, 2021 primarily due to the inclusion of Auth0 revenue, which carries a
higher relative cost and lower gross margin as well as an increase in amortization of acquired developed technology
primarily in connection with the Auth0 acquisition. 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.
Cost of professional services and other revenue increased by $19.7 million, or 41%, for the year ended
January 31, 2022, compared to the year ended January 31, 2021, primarily due to an increase of $15.5 million in
employee compensation costs related to higher headcount, including the Auth0 acquisition.
Our gross margin for professional services and other revenue decreased to (32)% during the year ended
January 31, 2022 from (23)% during the year ended January 31, 2021 and includes Auth0.
Operating Expenses
Research and Development Expenses
Research and development
Percentage of revenue
Year Ended January 31,
2022
2021
$ Change
% Change
(dollars in thousands)
$ 469,259
$ 222,826
$
246,433
111 %
36 %
27 %
Research and development expenses increased $246.4 million, or 111%, for the year ended January 31,
2022 compared to the year ended January 31, 2021. The increase was primarily due to an increase of $220.2
million in employee compensation costs related to higher headcount, including the Auth0 acquisition and an
increase of $8.1 million in research and design expenses. The increase in employee compensation costs includes
$47.8 million in stock-based compensation expense primarily related to the revesting agreements from our Auth0
acquisition.
Sales and Marketing Expenses
Sales and marketing
Percentage of revenue
Year Ended January 31,
2022
2021
$ Change
% Change
(dollars in thousands)
$ 770,326
$ 427,350
$
342,976
80 %
59 %
51 %
Sales and marketing expenses increased $343.0 million, or 80%, for the year ended January 31, 2022,
compared to the year ended January 31, 2021 primarily due to an increase of $208.7 million in employee
compensation costs related to headcount growth, including the Auth0 acquisition, an increase in marketing and
event costs of $65.7 million primarily due to increases in demand generation programs, advertising and brand
awareness efforts aimed at acquiring new customers and higher production and advertising costs for our virtual
format annual customer conference, an increase in amortization expense of $29.6 million for acquired customer
relationships and trade names in connection with the Auth0 acquisition incurred in the year ended January 31, 2022,
but not in the year ended January 31, 2021, an increase in software license costs of $5.6 million, an increase in
consulting expenses of $4.0 million and an increase in travel expenses of $3.1 million. We expect sales and
marketing expenses will increase in absolute dollars and may increase as a percentage of total revenue in future
periods as we invest in acquiring new customers for both Okta and Auth0 products.
62
General and Administrative Expenses
General and administrative
Percentage of revenue
Year Ended January 31,
2022
2021
$ Change
% Change
$ 431,314
$ 171,726
$
259,588
151 %
(dollars in thousands)
34 %
20 %
General and administrative expenses increased $259.6 million, or 151%, for the year ended January 31, 2022
compared to the year ended January 31, 2021. The increase was primarily due to an increase of $178.5 million in
employee compensation costs related to higher headcount to support our continued growth, including the Auth0
acquisition, an increase of $51.2 million due to acquisition and integration-related costs incurred in the year ended
January 31, 2022, but not in the year ended January 31, 2021, an increase in software license costs of $9.2 million
and an increase in consulting expenses of $4.5 million. The increase in employee compensation costs includes
$33.8 million in one-time stock-based compensation expense related to accelerated vesting of equity awards for
certain Auth0 employees at transaction close and $36.5 million in stock-based compensation expense related to the
revesting agreements from our Auth0 acquisition in the year ended January 31, 2022.
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,
2022
2021
$ Change
% Change
(dollars in thousands)
(92,182) $
9,768
(72,660) $
12,891
(19,522)
(3,123)
(179)
(82,593) $
(2,263)
(62,032)
2,084
27 %
(24)
(92)
Interest expense increased $19.5 million, or 27%, for the year ended January 31, 2022 compared to the year
ended January 31, 2021, due primarily to an increase of $20.5 million for the 2026 Notes that were issued in the
second quarter of fiscal year 2021, partially offset by a decrease of $2.6 million for the 2023 Notes, due to the partial
repurchase of the 2023 Notes in June 2020 ("Second Partial Repurchase of 2023 Notes") and other conversion
activity.
Interest income and other, net decreased $3.1 million, or (24)%, for the year ended January 31, 2022
compared to the year ended January 31, 2021, primarily due to a decrease of $8.4 million in interest income
resulting from lower interest rates and an increase of $2.9 million in foreign currency exchange losses, partially
offset by an $8.2 million change in net realized gains and unrealized adjustments in the carrying value of our
strategic investments.
Loss on early extinguishment and conversion of debt decreased $2.1 million, or (92)%, for the year ended
January 31, 2022 compared to the year ended January 31, 2021 due to the Second Partial Repurchase of 2023
Notes which occurred in the year ended January 31, 2021 but not in the year ended January 31, 2022.
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
63
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, amortization of acquired
intangibles and acquisition and integration-related expenses.
Gross profit
Add:
Stock-based compensation expense included in cost of revenue
Amortization of acquired intangibles
Acquisition and integration-related expenses(1)
Non-GAAP gross profit
Gross margin
Non-GAAP gross margin
Year Ended January 31,
2022
2021
2020
(dollars in thousands)
$ 903,796
$ 617,743
$ 426,685
61,415
34,391
1,889
$ 1,001,491
29,978
6,373
—
$ 654,094
20,087
5,488
—
$ 452,260
70 %
77 %
74 %
78 %
73 %
77 %
(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-
year anniversary of transaction close.
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 and integration-related expenses.
Operating loss
Add:
Stock-based compensation expense
Non-cash charitable contributions
Amortization of acquired intangibles
Acquisition and integration-related expenses(1)
Non-GAAP operating income (loss)
Operating margin
Non-GAAP operating margin
Year Ended January 31,
2022
2021
2020
(dollars in thousands)
$ (767,103)
$ (204,159)
$ (185,832)
565,480
7,238
64,000
56,667
(73,718)
$
196,181
9,292
6,373
—
7,687
$
126,624
1,746
5,488
3,449
(48,525)
$
(59) %
(6) %
(24) %
1 %
(32) %
(8) %
(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-
year anniversary of transaction close.
Non-GAAP Net Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share,
Basic and Diluted
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 and integration-related expenses, amortization of debt discount and debt issuance costs and
loss on early extinguishment and conversion of debt.
64
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 our note hedge and capped call agreements on
convertible senior notes outstanding. Accordingly, we 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.
Year Ended January 31,
2021
(dollars in thousands)
$ (266,332)
$ (208,913)
$ (848,411)
2022
2020
Net loss
Add:
Stock-based compensation expense
Non-cash charitable contributions
Amortization of acquired intangibles
Acquisition and integration-related expenses(1)
Amortization of debt discount and debt issuance costs
Loss on early extinguishment and conversion of debt
Non-GAAP net income (loss)
Net margin
Non-GAAP net margin
565,480
7,238
64,000
56,667
86,461
179
(68,386)
$
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)
$
(65) %
(5) %
(32) %
2 %
(36) %
(5) %
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
148,036
—
127,212
15,171
117,221
—
148,036
142,383
117,221
Net loss per share, basic and diluted
Non-GAAP net income (loss) per share, basic
Non-GAAP net income (loss) per share, diluted
$
$
$
(5.73)
(0.46)
(0.46)
$
$
$
(2.09)
0.13
0.11
$
$
$
(1.78)
(0.27)
(0.27)
(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year
anniversary of transaction close.
65
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
Free cash flow
Net cash used in investing activities
Net cash provided by financing activities
Free cash flow margin
Calculated Billings
Year Ended January 31,
2022
2021
2020
(in thousands)
$ 104,119
$ 127,962
$
55,603
(12,310)
(4,336)
87,473
(13,083)
(4,159)
$ 110,720
(15,442)
(3,888)
36,273
$
$
$ (366,812)
89,066
$
$ (1,305,146)
$ 1,091,598
$ (688,041)
$ 853,385
7 %
13 %
6 %
We define Calculated billings as total revenue plus the change in deferred revenue, net of acquired deferred
revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.
Year Ended January 31,
Total revenue
Add:
Deferred revenue (end of period)
Unbilled receivables (beginning of period)
Acquired unbilled receivables
Less:
Deferred revenue (beginning of period)
Unbilled receivables (end of period)
Acquired deferred revenue
Calculated billings
2022
2021
2020
(in thousands)
$ 1,300,201 $
835,424 $
586,067
996,222
2,604
2,327
513,598
1,026
—
(513,598)
(3,228)
(66,239)
(371,450)
(2,604)
—
$ 1,718,289 $
975,994 $
371,450
1,457
—
(254,390)
(1,026)
—
703,558
Liquidity and Capital Resources
As of January 31, 2022, our principal sources of liquidity were cash, cash equivalents and short-term
investments totaling $2,501.8 million, which were held for working capital and general corporate purposes, including
future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury securities,
corporate debt securities and money market funds. 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.
66
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 partial repurchase of the 2023 Notes in September 2019 ("First Partial Repurchase of 2023 Notes", and together
with the Second Partial Repurchase of 2023 Notes, the "2023 Notes Partial Repurchases") 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.
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 January 31, 2022, we converted and settled approximately $33.4 million principal amount of 2023
Notes (not in connection with the 2023 Notes Partial Repurchases) and exercised and net-share-settled Note
Hedges corresponding to approximately $33.4 million principal amount of 2023 Notes. In connection with these
transactions, we issued approximately 0.7 million shares of Class A common stock and received approximately 0.5
million shares of Class A common stock, accompanied by immaterial cash payments. Subsequent to January 31,
2022, the Company received conversion requests for approximately $2.0 million aggregate principal amount of the
2023 Notes.
On May 3, 2021, we completed the acquisition of Auth0. In connection with this acquisition, consideration
included cash of $149.6 million, net of cash acquired of $107.4 million, and approximately 19.2 million shares of our
common stock with an estimated fair value of $5,175.6 million. In addition, we assumed outstanding employee
equity awards with vested fair value of $238.4 million. Our consolidated results of operations include the results of
operations for Auth0 for the period from May 3, 2021 through January 31, 2022.
On August 2, 2021, we completed the acquisition of atSpoke, providing total cash consideration, net of cash
acquired of $79.0 million. Of this amount, $13.4 million of consideration was held back as partial security for any
adjustments and indemnification obligations and will be paid within 18 months of the closing date.
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, the continuing market adoption of our platform,
and the costs associated with integration of acquired businesses. 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.
67
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, 2022, we had deferred revenue of
$996.2 million, of which $973.3 million was recorded as a current liability and is expected to be recorded as revenue
in the next 12 months, provided all other revenue recognition criteria have been met.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Net cash provided by operating activities
Net cash used in investing activities
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
Operating Activities
Year Ended January 31,
2022
2021
2020
(in thousands)
$
104,119 $
(366,812)
89,066
127,962 $
(1,305,146)
1,091,598
55,603
(688,041)
853,385
(2,347)
2,263
(209)
$
(175,974) $
(83,323) $
220,738
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.
During the year ended January 31, 2022, cash provided by operating activities was $104.1 million primarily
due to our net loss of $848.4 million, adjusted for non-cash charges of $811.4 million and net cash inflows of $141.1
million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-
based compensation, depreciation, amortization and accretion of property and equipment, intangible assets and
short-term investments, amortization of debt discount and issuance costs and amortization of deferred
commissions. The primary drivers of the changes in operating assets and liabilities related to a $416.4 million
increase in deferred revenue, a $78.5 million increase in accrued compensation, accrued other expenses and
accounts payable, and a $22.9 million decrease in operating lease right-of-use assets, partially offset by a $174.8
million increase in accounts receivable, a $170.6 million increase in deferred commissions, a $24.5 million decrease
in operating lease liabilities and a $6.8 million increase in prepaid expenses and other assets.
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.
Investing Activities
Net cash used in investing activities during the year ended January 31, 2022 of $366.8 million was primarily
attributable to purchases of investments of $1,846.7 million, payments of $215.2 million, net of cash acquired, in
connection with our Auth0 and atSpoke acquisitions and purchases of property and equipment of $12.3 million to
support additional office space and headcount and the capitalization of internal-use software costs of $4.3 million
68
associated with the development of additional features and functionality for our platform. These activities were
partially offset by proceeds from the sales and maturities of investments of $1,711.8 million.
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.
Financing Activities
Cash provided by financing activities during the year ended January 31, 2022 of $89.1 million was primarily
attributable to proceeds from the exercise of stock options of $53.5 million, and proceeds from employee purchases
under our employee stock purchase plan ("ESPP") of $35.6 million.
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
ESPP of $25.9 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, 2022 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 accounting principles generally
accepted in the United States of America ("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
69
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.
•
•
•
•
•
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.
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:
•
•
•
•
•
•
•
future expected cash flows from subscription contracts, professional services contracts, other customer
contracts and acquired developed technologies;
person hours required in recreating certain acquired technologies;
historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
royalty rates applied to acquired developed technology platforms and other intangible assets;
obsolescence curves and other useful life assumptions, such as the period of time and intended use of
acquired intangible assets in our product offerings;
discount rates;
uncertain tax positions and tax-related valuation allowances; and
70
•
fair value of assumed equity awards.
These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances
may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. 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. We continue to collect information and reevaluate these estimates and assumptions quarterly and record
any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period. 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 on our consolidated balance sheets totaled $5,401.3 million and $48.0 million as of January 31,
2022 and 2021, respectively. 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, 2022, 2021 and 2020.
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 ("ASC 470-20"). Pursuant to ASC 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 our 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 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 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.
71
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, 2022, 2021 and 2020, 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 $2,501.8 million as of January 31, 2022,
of which $2,393.9 million was invested in U.S. treasury securities, corporate debt securities and money market
funds. Our cash and cash equivalents are held for working capital and general corporate purposes, including
potential future acquisition activity. Our short-term investments are made for capital preservation purposes. We do
not enter into investments for trading or speculative purposes.
Our cash equivalents and our investment portfolio are subject to market risk due to changes in interest rates.
Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to
these factors, our future investment income may fall short of our expectations due to changes in interest rates or we
may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in
interest rates. However, because we classify our short-term investments as “available for sale,” no gains are
recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered
to be credit related changes, no losses in such securities are recognized due to changes in interest rates unless we
intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise
determine that all or a portion of the decline in fair value are due to credit related factors.
As of January 31, 2022, 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 January 31, 2022, we received and completed requests to convert approximately $33.4
million principal amount of 2023 Notes (not in connection with the 2023 Notes Partial Repurchases) and exercised
and net-share-settled Note Hedges corresponding to approximately $33.4 million principal amount of 2023 Notes.
Subsequent to January 31, 2022, the Company received conversion requests for approximately $2.0 million
aggregate 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
72
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.
73
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
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
75
80
81
82
83
85
87
74
Report of 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,
2022 and 2021, 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, 2022, 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, 2022 and
2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31,
2022, 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, 2022, 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 7, 2022 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.
75
Description of
the Matter
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-cancelable 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-cancelable 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.
How We
Addressed the
Matter in Our
Audit
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.
76
Description of
the Matter
Acquisition of Auth0 – Fair value of technology and customer-related intangible assets
As explained in Note 3 to the consolidated financial statements, the Company completed the
acquisition of Auth0, a privately-held, Identity-as-a-Service company during fiscal 2022 for total
consideration of $5.7 billion, which was accounted for as a business combination.
Auditing the Company's accounting for its acquisition of Auth0 was complex due to the
significant estimation required in determining the fair value of developed technology and
customer relationship intangible assets, which were valued and recorded at $172.0 million and
$140.9 million, respectively. The Company used discounted cash flow models to determine the
value of developed technology and customer relationship intangible assets. The significant
estimation was primarily due to the judgmental nature of the inputs to the valuation model and
the sensitivity of the fair value to certain significant underlying assumptions, in particular, the
projections of future revenue, including the impact of obsolescence curves for developed
technology assets, expected customer attrition rates and anticipated growth in revenue from
acquired customers.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
the Company's controls over its accounting for acquisitions, such as controls over the
recognition and measurement of developed technology and customer relationships intangible
assets, including the valuation model and underlying assumptions used to develop such
estimates.
To test the estimated fair value of the developed technology and customer relationship intangible
assets, our audit procedures included, among others, involvement of our valuation specialists to
assist us in the evaluation of the valuation methodology used by the Company and procedures
to test the assumptions used in the valuation, including the completeness and accuracy of the
underlying data. We compared the revenue forecast assumptions, including the impact of
technology obsolescence curves, expected customer attrition rates and anticipated growth in
revenue from acquired customers, to current industry, market and economic trends, and to
historical results of the acquired business and the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
San Jose, California
March 7, 2022
77
Report of 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, 2022, 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, 2022, based on the
COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of Auth0, Inc. which is included in the 2022 consolidated financial statements of the
Company and constituted 2% of consolidated total assets and 11% of consolidated revenue for the year then
ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the
internal control over financial reporting of Auth0, Inc.
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, 2022 and 2021, 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, 2022, and the related notes and our report dated March 7, 2022
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.
78
/s/ Ernst & Young LLP
San Jose, California
March 7, 2022
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 $4,359 and $3,451
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,
2022
2021
$
260,134 $
2,241,657
397,509
74,728
66,605
3,040,633
65,488
147,940
191,029
316,968
5,401,343
42,294
9,205,695 $
20,203 $
89,315
143,805
16,194
973,289
1,242,806
1,815,714
170,611
22,933
31,775
3,283,839
$
$
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
Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares
issued and outstanding as of January 31, 2022 and 2021
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized;
149,624 and 122,824 shares issued and outstanding as of January 31, 2022 and 2021,
respectively
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 6,978
and 8,159 shares issued and outstanding as of January 31, 2022 and 2021, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
15
—
12
1
7,749,716
(12,009)
(1,815,867)
5,921,856
9,205,695 $
1
1,656,096
5,390
(967,456)
694,043
3,298,797
$
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
Year Ended January 31,
2022
2021
2020
$ 1,249,210 $
796,613 $
552,688
50,991
1,300,201
329,131
67,274
396,405
903,796
469,259
770,326
431,314
1,670,899
38,811
835,424
170,095
47,586
217,681
617,743
222,826
427,350
171,726
821,902
33,379
586,067
116,445
42,937
159,382
426,685
159,269
340,356
112,892
612,517
(767,103)
(204,159)
(185,832)
(92,182)
9,768
(179)
(82,593)
(72,660)
12,891
(2,263)
(62,032)
(27,017)
17,089
(14,572)
(24,500)
Loss before provision for (benefit from) income taxes
(849,696)
(266,191)
(210,332)
Provision for (benefit from) income taxes
Net loss
(1,285)
141
(1,419)
$
(848,411) $
(266,332) $
(208,913)
Net loss per share, basic and diluted
$
(5.73) $
(2.09) $
(1.78)
Weighted-average shares used to compute net loss per share,
basic and diluted
148,036
127,212
117,221
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,
2022
2021
2020
$
(848,411) $
(266,332) $
(208,913)
(13,713)
(3,686)
(17,399)
(865,810) $
779
3,719
4,498
(261,834) $
1,220
(9)
1,211
(207,702)
$
See Notes to Consolidated Financial Statements.
82
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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:
Year Ended January 31,
2022
2021
2020
$
(848,411) $
(266,332) $
(208,913)
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
(Gain) loss on strategic investments
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
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
Payments for business acquisitions, net of cash acquired
Purchase of intangible assets
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 and conversions of convertible senior notes
Proceeds from hedges 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
565,480
107,612
86,461
57,177
(6,157)
7,238
179
(7,609)
1,051
(174,817)
(170,577)
(6,758)
22,856
6,764
50,309
21,391
(24,455)
416,385
104,119
196,181
36,865
68,424
39,661
(1,182)
9,292
2,263
628
4,909
(66,373)
(81,016)
(13,174)
19,053
4,081
44,157
5,527
(17,150)
142,148
127,962
(4,336)
(12,310)
(1,846,709)
1,482,033
229,798
(215,175)
(113)
(366,812)
(4,159)
(13,083)
(2,029,030)
535,123
206,129
—
(126)
(1,305,146)
—
(26)
2
—
—
53,522
35,568
—
89,066
1,134,841
(446)
195,046
(175,399)
(133,975)
45,620
25,911
—
1,091,598
(2,347)
(175,974)
448,630
2,263
(83,323)
531,953
Cash, cash equivalents and restricted cash at end of year
$
272,656 $ 448,630 $
126,624
17,815
25,892
28,588
(2,253)
1,746
14,572
(130)
119
(37,515)
(61,224)
(4,080)
12,951
1,689
23,034
9,972
(9,716)
116,432
55,603
(3,888)
(15,442)
(999,387)
356,277
27,271
(44,283)
(8,589)
(688,041)
1,040,660
(224,414)
405,851
(358,622)
(74,094)
45,363
18,767
(126)
853,385
(209)
220,738
311,215
531,953
85
Supplementary cash flow disclosure:
Cash paid during the period for:
Interest
Income taxes
Non-cash investing and financing activities:
Issuance of common stock and value of equity awards assumed in connection with
business combination
Issuance of common stock for repurchases and conversions of convertible senior notes
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
Issuance of common stock for bonus settlement
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
Year Ended January 31,
2022
2021
2020
$
5,704 $
3,759 $
3,116
978
5,409,344
126,144
92,097
7,238
21,518
—
—
307,910
37,076
9,292
45,611
9,818
$
$
260,134 $ 434,607 $
5,012
7,510
4,553
9,470
272,656 $ 448,630 $
862
1,123
—
380,406
—
1,746
16,832
2,809
520,048
467
11,438
531,953
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 provider. 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 consolidated financial statements include the results of operations for acquired businesses from their
acquisition dates to January 31, 2022. See Note 3 for additional details.
The Company’s fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year
ended January 31, 2022.
Certain reclassifications of components of prior period operating cash flows have been made in the
consolidated statements of cash flows to conform to the current period presentation. These reclassifications had no
impact on total operating cash flows as previously reported.
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, the valuation of goodwill and acquired intangible assets, including their
useful lives and the valuation of certain equity awards assumed.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which has
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
years ended January 31, 2022 and 2021. As events continue to evolve and additional information becomes
available, the Company’s 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,
2022, 2021 or 2020. 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.
87
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.
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.
88
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
period of benefit, which is generally two years. Amortization expense is included in sales and marketing expenses
in the accompanying consolidated statements of operations.
Sales commissions capitalized as contract costs totaled $170.7 million and $81.0 million in the years ended
January 31, 2022 and 2021, respectively. Amortization of contract costs was $57.2 million, $39.7 million and $28.6
million for the years ended January 31, 2022, 2021 and 2020, 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, 2022 and
2021.
As of January 31, 2022 and 2021, the Company's long-term restricted cash balance was $7.5 million and $9.5
million, respectively, primarily related to letters of credit for its facility lease agreements.
Short-Term Investments
The Company’s short-term investments comprise of 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.
Strategic Investments
The Company's strategic investments consist of equity investments in privately held companies and are
included in Other assets on the consolidated balance sheets. Investments in privately held companies without
readily determinable fair values in which the Company does not own a controlling interest or have significant
89
influence over are measured using the measurement alternative. In applying the measurement alternative, the
Company adjusts the carrying values of strategic investments based on observable price changes from orderly
transactions for identical or similar investments of the same issuer. Additionally, the Company evaluates its strategic
investments at least quarterly for impairment. Adjustments and impairments are recorded in Interest and other, net
on the consolidated statements of operations.
In determining the estimated fair value of its strategic investments in privately held companies, the Company
uses the most recent data available to the Company. Valuations of privately held securities are inherently complex
due to the lack of readily available market data and require the use of judgment. The determination of whether an
orderly transaction is for an identical or similar investment requires significant Company judgment. In its evaluation,
the Company considers factors such as differences in the rights and preferences of the investments and the extent
to which those differences would affect the fair values of those investments. The Company’s impairment analysis
encompasses an assessment of both qualitative and quantitative factors including the investee's financial metrics,
market acceptance of the investee's product or technology, general market conditions and liquidity considerations.
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.
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:
•
•
•
•
•
future expected cash flows from subscription contracts, professional services contracts, other customer
contracts and acquired developed technologies;
person hours required in recreating certain acquired technologies;
historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
royalty rates applied to acquired developed technology platforms and other intangible assets;
obsolescence curves and other useful life assumptions, such as the period of time and intended use of
acquired intangible assets in the Company’s product offerings;
90
•
•
•
discount rates;
uncertain tax positions and tax-related valuation allowances; and
fair value of assumed equity awards.
These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances
may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. 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. The Company continues to collect information and reevaluates these estimates and assumptions quarterly
and records any adjustments to the Company's preliminary estimates to goodwill provided that the Company is
within the measurement period. 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
such assets 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.
Operating Leases and Incremental Borrowing Rate
The Company leases office space under operating leases with expiration dates through 2029. 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 leases with a lease term of 12 months or less ("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.
91
Convertible Senior Notes
The Company accounts for the issuance of convertible senior notes in accordance with FASB ASC 470-20,
Debt with Conversion and Other Options. Pursuant to ASC 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 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 extinguishment 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 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 $78.9 million, $33.1 million, and $17.0
million for the years ended January 31, 2022, 2021 and 2020.
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 all positive and negative evidence, including its historical levels of income, expectations of
future taxable income and ongoing tax planning strategies. Because of the uncertainty of the realization of the U.S.
deferred tax assets, the Company has recorded a full valuation allowance against its U.S. 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
92
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, 2022 and 2021 and for each of the three years ended January 31, 2022, 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, Sydney
and Japan. 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.
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,
2022
2021
2020
$ 1,036,389 $
263,812
$ 1,300,201 $
701,635 $
133,789
835,424 $
494,529
91,538
586,067
Other than the United States, no individual country exceeded 10% of total revenue for the years ended
January 31, 2022, 2021 and 2020.
Property and equipment by geographic location is based on the location of the legal entity that owns the
asset. As of January 31, 2022 and 2021, 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
93
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 initial public offering, 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 for additional details.
Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued Accounting Standards Update (“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. Additionally, ASU 2020-06 requires the application
of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, 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.
The Company will adopt ASU 2020-06 effective February 1, 2022, using the modified retrospective method. In
the consolidated balance sheets the adoption of the new standard is estimated to result in an increase of
approximately $372 million to the total carrying value of the Company’s convertible senior notes, a decrease of
approximately $527 million to additional paid-in capital and a cumulative-effect adjustment of approximately $155
million to the beginning balance of accumulated deficit as of February 1, 2022.
In October 2021, the FASB issued ASU No. 2021-08 Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires entities to
recognize and measure contract assets and contract liabilities acquired in a business combination in accordance
with ASC Topic 606, Revenue from Contracts with Customers, in order to align the recognition of a contract liability
with the definition of a performance obligation. ASU 2021-08 is effective for interim and annual periods beginning
after December 15, 2022, on a prospective basis, with early adoption permitted. The Company has elected to early
adopt this standard effective February 1, 2022, with no material impact to its consolidated financial statements and
related disclosures.
94
3. Business Combinations
Acquisition of Auth0
On May 3, 2021, the Company acquired all outstanding shares of privately-held Auth0, an Identity-as-a-
Service company. The Company expects to combine Auth0’s developer-centric identity solution with the Company’s
Okta Identity Cloud to drive synergies, product options and value for current and future customers. The acquisition
date fair value of the consideration transferred for Auth0 was approximately $5,671.0 million, which consisted of the
following (in thousands):
Cash
Common stock issued
Fair value of outstanding employee equity awards assumed
Total consideration
Estimated Fair
Value
$
257,010
5,175,623
238,389
$ 5,671,022
Cash consideration of $257.0 million includes $3.8 million held back as partial security for post-closing true-up
adjustments as well as indemnification claims made within one year of the acquisition date.
Approximately 19.2 million shares of common stock valued at $5,175.6 million were issued to selling
stockholders, which includes approximately 1.1 million shares valued at $294.6 million held back as partial security
for post-closing true-up adjustments as well as any indemnification claims made within one year of the acquisition
date.
The Company entered into revesting agreements with Auth0’s founders pursuant to which approximately 1.2
million additional shares of Okta’s Class A common stock issued to the founders as of the closing date will vest over
three years. The $332.1 million fair value of the unvested restricted stock is not included as purchase consideration
above, as it has a post-combination service requirement and will be accounted for separately from the business
combination as stock compensation expense.
The Company issued replacement equity awards with a fair value of $655.1 million, of which $238.4 million
was allocated to the purchase consideration as it is attributable to pre-combination services rendered and $416.7
million was allocated to post-combination services and will be expensed over the remaining service periods as
stock-based compensation. The fair value of the stock options assumed by the Company was determined using the
Black-Scholes option pricing model. The Company also converted certain equity awards to unvested restricted cash
awards totaling $13.5 million that will be expensed over the remaining service periods.
See Note 13 for further discussion of amounts related to post-combination services that will be expensed over
the remaining service periods as stock-based compensation.
Acquisition costs of $29.0 million related to Auth0 were expensed by the Company in general and
administrative expenses in its consolidated statements of operations for the six months ended July 31, 2021.
The transaction was accounted for as a business combination. The total purchase price of $5,671.0 million
was allocated using information currently available to the Company and may be subject to change as additional
information is received. The primary areas that remain preliminary relate to the fair values of income and non-
income-based taxes and residual goodwill. The Company expects to finalize the valuation as soon as practicable,
but no later than one year from the acquisition date. Preliminary allocation of the purchase price to the tangible and
identifiable intangible assets acquired and liabilities assumed based on their estimated fair values is as follows (in
95
thousands):
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Property and equipment, net
Operating lease right-of-use assets
Other assets
Intangible assets
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Deferred revenue
Operating lease liabilities, noncurrent
Other liabilities, noncurrent
Net assets acquired
Estimated Fair
Value
$
107,425
28,572
12,748
1,928
6,873
5,201
334,300
(3,610)
(10,946)
(19,187)
(65,339)
(5,694)
(11,341)
$
380,930
The excess of purchase consideration over the fair value of the net tangible assets and identifiable intangible
assets acquired was $5,290.1 million and was recorded as goodwill, which is primarily attributable to expected
synergies in sales opportunities across complementary products, customers and geographies, cross-selling
opportunities, and improvements in the selling process. None of the goodwill is expected to be deductible for U.S.
federal income tax purposes.
The estimated useful lives and fair values of the identifiable intangible assets are as follows (in thousands):
Developed technology
Customer relationships
Trade name
Total identifiable intangible assets
Preliminary
Estimated
Useful Life
(in years)
Amount
5 years $
172,000
2 - 6 years
5 years
140,900
21,400
$
334,300
Developed technology represents the estimated fair value of the features underlying the Auth0 products as
well as the platform supporting and providing services to Auth0 customers. Customer relationships represents the
estimated fair value of the underlying relationships with Auth0 customers, including the fair value of unbilled and
unrecognized contracts yet to be fulfilled. Trade name represents the estimated fair value of the Auth0 brand.
Revenue and earnings of Auth0 included in the Company’s consolidated income statement from the
acquisition date through January 31, 2022 are as follows (in thousands):
Revenue
Net loss
For the period
May 3, 2021
to
January 31, 2022
$
139,679
(385,302)
The unaudited pro forma consolidated revenue and earnings for the year ended January 31, 2022 and 2021,
calculated as if Auth0 had been acquired as of February 1, 2020 are as follows (in thousands):
96
Revenue
Net loss
Pro Forma Consolidated Statement of Operations Data
Year Ended January 31,
2022
2021
$
1,349,779 $
(846,694)
944,782
(690,482)
The pro forma financial information for all periods presented above has been calculated after adjusting the
results of Auth0 to reflect certain business combination and one-time accounting effects such as the fair value
adjustment of deferred revenue, amortization expense from acquired intangible assets, stock-based compensation
expense for unvested equity awards assumed, deferred commissions, release of deferred tax asset valuation
allowance and acquisition costs as though the acquisition occurred as of the beginning of the Company’s fiscal
2021. The historical consolidated financial information has been adjusted in the pro forma combined financial results
to give effect to pro forma events that are directly attributable to the business combination, reasonably estimable
and factually supportable. The pro forma financial information is for informational purposes only and is not indicative
of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the
Company’s fiscal 2021.
Acquisition of atSpoke
On August 2, 2021, the Company acquired all issued and outstanding capital stock of Townsend Street Labs,
Inc. (“atSpoke”), a modern workplace operations platform. The Company will incorporate atSpoke’s platform with
Okta’s Identity Governance and Administration offering. The acquisition date cash consideration for atSpoke was
approximately $79.3 million of which $13.4 million of consideration was held back as partial security for any
adjustments and indemnification obligations and will be paid within 18 months of the closing date.
The Company recorded $18.3 million for developed technology intangible assets with an estimated useful life
of 3 years and preliminarily recorded $63.2 million of goodwill which is primarily attributed to the assembled
workforce as well as the integration of atSpoke’s technology and the Company’s technology. None of the goodwill is
expected to be deductible for U.S. federal income tax purposes. The Company may continue to adjust the
preliminary purchase price allocation after obtaining more information primarily relating to income and non-income
based taxes and residual goodwill through the measurement period.
The Company incurred $0.9 million of acquisition-related costs, which were recorded as general and
administrative expenses in its consolidated statements of operations in the quarter ended July 31, 2021.
This acquisition did not have a material impact on the Company’s consolidated financial statements;
therefore, historical and pro forma disclosures have not been presented.
97
4. Cash Equivalents and Investments
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, 2022 and 2021 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
Total cash equivalents
Short-term investments:
U.S. treasury securities
Corporate debt securities
Total short-term investments
Total
As of January 31, 2022
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
$
152,223 $
152,223
1,922,344
331,050
2,253,394
$ 2,405,617 $
— $
—
10
—
10
10 $
— $
—
152,223
152,223
1,912,188
(10,166)
329,469
(1,581)
(11,747)
2,241,657
(11,747) $ 2,393,880
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 $
1,890,431
(22)
231,153
(2)
2,121,584
(24)
(24) $ 2,432,841
All short-term investments were designated as available-for-sale securities as of January 31, 2022 and 2021.
The following table presents the contractual maturities of the Company's short-term investments as of
January 31, 2022 and 2021 (in thousands):
Due within one year
Due between one to five years
Total
As of January 31, 2022
Amortized
Cost
Estimated
Fair Value
$ 1,267,801 $ 1,264,675
976,982
$ 2,253,394 $ 2,241,657
985,593
As of January 31, 2022 and 2021, the Company included nil of unsettled purchases of short-term investments
in Accrued expenses and other current liabilities on the consolidated balance sheets and included nil and $31.0
million, respectively, of unsettled maturities of short-term investments in Prepaid expenses and other current assets
on the consolidated balance sheets.
The Company included $6.0 million and $10.5 million of interest receivable in Prepaid expenses and other
current assets on the consolidated balance sheets as of January 31, 2022 and 2021, respectively. The Company did
not recognize an allowance for credit losses against interest receivable as of January 31, 2022 and 2021 because
such potential losses were not material.
98
The following table presents the fair values and unrealized losses related to our investments in available-for-
sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position
as of January 31, 2022 (in thousands):
U.S. treasury securities
Corporate debt securities
Total
Less Than 12 Months
More Than 12 Months
Total
Estimated
Fair Value
1,801,985
319,767
2,121,752
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
(10,166)
(1,581)
(11,747)
—
—
—
—
—
—
Estimated
Fair Value
1,801,985
319,767
2,121,752
Unrealized
Losses
(10,166)
(1,581)
(11,747)
The Company had 193 and 10 short-term investments in unrealized loss positions as of January 31, 2022 and
2021, respectively. There were no material unrealized gains or losses from available-for-sale securities for the year
ended January 31, 2020. There were 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, 2022, 2021 and
2020.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the
Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will
be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis
and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. 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, 2022 and 2021.
Strategic Investments
The Company's strategic investments include equity investments in privately held companies, which do not
have a readily determinable fair value. As of January 31, 2022 and 2021, the balances of such strategic investments
were $15.3 million and $3.1 million, respectively.
During the year ended January 31, 2022, the Company recorded $7.6 million of realized gains and unrealized
adjustments in the carrying values of strategic investments. Realized gains and losses and unrealized adjustments
recognized during the years ended January 31, 2021 and 2020 were immaterial. All gains and losses on strategic
investments, whether realized or unrealized, are recognized in Interest income and other, net on the consolidated
statements of operations.
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):
99
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 $
As of January 31, 2022
Level 1
Level 2
Level 3
Total
152,223 $
152,223
— $
—
— $
—
152,223
152,223
—
—
—
1,912,188
329,469
2,241,657
152,223 $ 2,241,657 $
1,912,188
—
329,469
—
—
2,241,657
— $ 2,393,880
As of January 31, 2021
Level 1
Level 2
Level 3
Total
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 $
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
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 the Company's financial
instruments that are not recorded at fair value on the consolidated balance sheets (in thousands):
2023 convertible senior notes
2025 convertible senior notes
2026 convertible senior notes
(1) Before unamortized debt issuance costs.
As of January 31, 2022
Net Carrying
Amount(1)
Estimated
Fair Value
$
$
$
16,295 $
68,698
920,799 $ 1,323,406
913,875 $ 1,270,394
The principal amounts of the 2023 Notes, the 2025 Notes and the 2026 Notes are $17.2 million, $1,060.0
million and $1,150.0 million, respectively. The difference between the principal amounts 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, 2022, the difference between the net carrying amount of the Notes and their
estimated fair values represented the equity conversion value premium the market assigned to the Notes. Based on
the closing price of the Company's common stock of $197.89 on January 31, 2022, the if-converted values of
the 2023 Notes and 2025 Notes exceeded the principal amounts of $17.2 million and $1,060.0 million by $53.3
million and $51.6 million, respectively. The if-converted value of the 2026 Notes was less than the principal amount
of $1,150.0 million.
100
6. Goodwill and Intangible Assets, net
Goodwill
As of January 31, 2022 and 2021, goodwill was $5,401.3 million and $48.0 million, respectively. During the
year ended January 31, 2022, the Company recorded goodwill of $5,290.1 million in connection with the Auth0
acquisition that was completed in May 2021 and $63.2 million in connection with the atSpoke acquisition that was
completed in August 2021. See Note 3 for further details. No goodwill impairments were recorded during the years
ended January 31, 2022, 2021 and 2020.
Intangible Assets, net
Intangible assets consisted of the following (in thousands):
As of January 31, 2022
Gross
Accumulated
Amortization
Net
Capitalized internal-use software costs
$
36,319 $
(24,170) $
12,149
Purchased developed technology
Customer relationships
Trade name
Software licenses
Capitalized internal-use software costs
Purchased developed technology
Software licenses
219,100
140,900
21,400
116
417,835 $
(47,085)
(26,399)
(3,210)
(3)
(100,867) $
172,015
114,501
18,190
113
316,968
As of January 31, 2021
Gross
Accumulated
Amortization
Net
30,259 $
28,800
126
59,185 $
(19,478) $
(12,694)
(4)
(32,176) $
10,781
16,106
122
27,009
$
$
$
During the year ended January 31, 2022, the Company recorded intangible assets of $334.3 million and
$18.3 million in connection with the Auth0 and atSpoke acquisitions, respectively. See Note 3 for further details.
101
The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:
Purchased developed technology
Customer relationships
Trade name
Weighted-Average Remaining
Useful Life
As of January 31,
2022
2021
4.0 years
4.0 years
4.3 years
3.1 years
—
—
As of January 31, 2022, estimated remaining amortization expense for the intangible assets by fiscal year
was as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
Remaining
Amortization
$
$
90,221
79,865
67,183
59,528
18,788
1,383
316,968
Amortization expense of intangible assets for the years ended January 31, 2022, 2021 and 2020 was $69.0
million, $11.1 million, and $10.6 million, respectively.
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
As of January 31,
2022
2021
$
1,273 $
17,368
81,066
99,707
(34,219)
65,488 $
$
1,242
13,948
69,862
85,052
(22,269)
62,783
Depreciation expense was $12.1 million, $9.4 million and $8.8 million for the years ended January 31, 2022,
2021 and 2020, respectively.
102
Allowances
The Company’s accounts receivable allowances for the years ended January 31, 2022, 2021 and 2020 were
as follows (in thousands):
Balance, beginning of period
Additions (reductions)
Write-offs
Balance, end of period
As of January 31,
2022
2021
2020
$
$
3,451 $
2,898
(1,990)
4,359 $
1,166 $
3,252
(967)
3,451 $
2,098
(673)
(259)
1,166
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
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,
2022
2021
48,305 $
7,423
26,520
7,067
89,315 $
24,717
2,462
23,403
3,147
53,729
As of January 31,
2022
2021
9,416 $
22,359
31,775 $
3,877
7,498
11,375
$
$
$
$
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, 2022 and 2021 that was included in the
deferred revenue balances at the beginning of the respective periods was $494.7 million and $361.0 million,
respectively. Professional services and other revenue recognized in the years ended January 31, 2022 and 2021
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-cancelable
contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-
cancelable amounts that will be invoiced and recognized as revenue in future periods.
As of January 31, 2022, total remaining non-cancelable performance obligations under the Company’s
subscription contracts with customers was approximately $2,694.3 million. Of this amount, the Company expects to
recognize revenue of approximately $1,350.5 million, or 50%, 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, 2022 were not material.
103
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
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, 2022, $17.2 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.
104
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,
2022, 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, 2022 and were classified as current liabilities on
the consolidated balance sheet as of January 31, 2022.
During the year ended January 31, 2022, the Company issued approximately 0.5 million shares of Class A
common stock and paid an immaterial amount in cash to settle approximately $23.0 million principal amount of 2023
Notes. The loss on early note conversion was not material. Subsequent to January 31, 2022, the Company received
conversion requests for approximately $2.0 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.
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,
2022
2021
$
$
54 $
106
1,054
1,214 $
180
312
3,316
3,808
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.
105
As of January
31, 2022
$
$
$
$
17,228
(1,034)
16,194
3,993
(116)
3,877
Note Hedges
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
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, 2022, the Company exercised and net-share-settled Note Hedges
corresponding to approximately $23.0 million principal amount of 2023 Notes and received approximately 0.4 million
shares of Class A common stock and an immaterial cash payment.
As of January 31, 2022, Note Hedges giving the Company the option to purchase approximately 0.4 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, 2022, 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
106
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
per $1,000 principal amount of
initial conversion price 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 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. During the three months ended January 31, 2022, the conditions allowing holders of the 2025 Notes
to convert during the three months ending April 30, 2022 were not met, and as a result, the 2025 Notes were
classified as noncurrent liabilities as of January 31, 2022.
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, 2022, 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 2025 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
107
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,
2022
2021
$
$
1,325 $
2,300
35,338
38,963 $
1,325
2,097
33,932
37,354
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.
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, 2022
$ 1,059,997
(149,333)
910,664
$
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"). Upon conversion, the 2026 Notes may be settled in
108
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 2026 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 the Company's 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;
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 the Company's 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, 2022, the conditions allowing holders of the 2026 Notes to
convert were not met, and as a result, the 2026 Notes were classified as noncurrent liabilities as of January 31,
2022.
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 the Company provides notice of redemption, during any 30 consecutive
trading day period ending on and including the trading day preceding the date on which the Company provides
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, 2022, 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 2026 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 2026 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
109
Notes (in thousands):
Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total
Year Ended January 31,
2022
2021
$
4,313 $
1,431
46,232
$
51,976 $
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.
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, 2022
$ 1,150,000
(244,950)
$
905,050
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.
110
10. Leases
The Company has entered into various non-cancelable office space operating leases with original lease
periods expiring between 2022 and 2029. 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,
2022
2021
2020
$
38,254 $
33,076 $
23,193
(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 5.9 years and 6.8 years as of
January 31, 2022 and January 31, 2021, respectively, and the weighted-average discount rate used to measure the
present value of the operating lease liabilities was 5.5% and 5.6% as of January 31, 2022 and January 31, 2021,
respectively.
Maturities of the Company’s operating lease liabilities, which do not include short-term leases, were as follows
(in thousands):
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less imputed interest
Less tenant improvement allowances not yet incurred
Total operating lease liabilities
As of January
31, 2022
39,499
43,535
40,582
30,493
29,607
53,502
237,218
(37,633)
(2,454)
197,131
$
Cash payments included in the measurement of the Company’s operating lease liabilities were $39.6 million
and $31.1 million for the years ended January 31, 2022 and January 31, 2021, respectively.
As of January 31, 2022, the Company has $9.9 million of undiscounted future payments under new operating
lease arrangements that have not yet commenced, which is excluded from the table above. These operating leases
will commence in fiscal 2023 and have lease terms of 1.2 to 6.4 years.
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 $8.6 million and $11.2 million were issued and outstanding as of January 31, 2022 and January 31, 2021,
respectively. No draws have been made under such letters of credit. Noncurrent restricted cash of $6.4 million and
111
$8.6 million associated with these letters of credit is included in Other assets on the consolidated balance sheets as
of January 31, 2022 and January 31, 2021, respectively.
Purchase Obligations
As of January 31, 2022, future minimum purchase obligations, such as data center operations and sales and
marketing activities, were as follows (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total contractual obligations
Legal Matters
Purchase
Obligations
58,805
53,657
12,434
1,755
—
—
126,651
$
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, 2022
and 2021.
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 any material liabilities 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
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 incurred significant costs and has not accrued any material liabilities in the accompanying consolidated
financial statements as a result of these warranties.
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, 2022, the Company issued approximately 0.5 million shares of Class A common stock
in connection with 2023 Notes conversion requests and received approximately 0.4 million shares of Class A
common stock from the settlement of Note Hedges. See Note 9 for additional details.
112
As of January 31, 2022, 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, 2022
14,209,825
23,133,719
5,757,220
43,100,764
During the years ended January 31, 2022, 2021 and 2020, the Company issued 30,000, 42,500 and 15,000
shares, respectively, of Class A common stock as charitable contributions and recognized $7.2 million, $9.3 million
and $1.7 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,
2022
2021
2020
$
132,130 $
334,010
15,024
84,316
—
21,371 $
164,412
10,373
25
—
$
565,480 $
196,181 $
21,888
94,637
9,408
590
101
126,624
Stock-based compensation expense was recorded in the following cost and expense categories in the
Company’s consolidated statements of operations (in thousands):
Cost of revenue:
Subscription
Professional services and other
Research and development
Sales and marketing
General and administrative
Total
Equity Incentive Plans
Year Ended January 31,
2022
2021
2020
$
$
49,091 $
12,324
192,712
135,916
175,437
565,480 $
21,895 $
8,083
63,270
53,802
49,131
196,181 $
12,923
7,164
37,683
38,077
30,777
126,624
The Company has two equity incentive plans: the 2009 Stock Plan (“2009 Plan”) and the 2017 Equity
Incentive Plan (“2017 Plan”). In addition, the Company assumed Auth0, Inc. equity incentive plans as described
below. All shares that remain available for future grants are under the 2017 Plan. As of January 31, 2022, options to
purchase 2,339,467 shares of Class A common stock and 5,644,611 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.
113
A summary of the Company’s stock option activity and related information was as follows:
Outstanding as of January 31, 2021
Granted
Exercised
Canceled
Outstanding as of January 31, 2022
As of January 31, 2022
Vested and expected to vest
Vested and exercisable
Number of
Options
8,250,113 $
2,565,055
(2,578,074)
(253,016)
7,984,078 $
Weighted-
Average
Exercise
Price
18.93
93.95
21.02
106.41
39.59
Weighted-
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic Value
(in thousands)
5.6 $ 1,980,668
5.2 $ 1,314,031
7,984,078 $
6,467,950 $
39.59
13.29
5.2 $ 1,314,031
4.5 $ 1,194,987
The weighted-average grant-date fair value of options granted was $211.58, $63.32 and $37.35 during the
years ended January 31, 2022, 2021 and 2020, respectively. The total grant-date fair value of stock options vested
was $314.2 million, $19.7 million and $23.7 million during the years ended January 31, 2022, 2021 and 2020,
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 $544.8
million, $772.3 million and $558.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.
As of January 31, 2022 and January 31, 2021, there was a total of $209.6 million and $31.1 million,
respectively, of unrecognized stock-based compensation expense related to options, which is being recognized over
a weighted-average period of 2.4 years.
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,
2022
2021
2020
46 %
6.3
1.03 %
—
45 %
6.3
0.37% -
0.44%
—
43 %
6.3
1.55% -
2.27%
—
A summary of the Company’s RSU activity and related information was as follows:
Outstanding as of January 31, 2021
Granted
Vested
Forfeited
Outstanding as of January 31, 2022
Weighted-
Average
Grant Date
Fair Value Per
Share
122.90
236.57
125.75
170.23
207.26
Number of
RSUs
4,452,107 $
5,110,925
(2,294,380)
(1,042,905)
6,225,747 $
The Company granted 5,110,925 RSUs with an aggregate fair value of $1,209.1 million for the year ended
January 31, 2022. As of January 31, 2022 and 2021, there was a total of $1,152.3 million and $502.8 million,
respectively, of unrecognized stock-based compensation expense related to unvested RSUs, which is being
recognized over a weighted-average period of 2.9 years, based on vesting under the award service conditions. The
total fair value of RSUs vested during fiscal 2022, 2021 and 2020 was $531.4 million, $410.4 million and $193.9
million, respectively.
114
Equity Awards Issued in Connection with Business Combinations
In connection with the May 3, 2021 Auth0 acquisition described in Note 3, the Company assumed the Auth0,
Inc. 2014 Equity Incentive Plan and the Auth0, Inc. Phantom Unit Plan (together, the “Auth0 Plans”) and certain
outstanding options to purchase Auth0 common stock, RSUs settleable into shares of Auth0 common stock, and
phantom units under the Auth0 Plans. Certain assumed securities were converted into options (which in certain
instances were automatically net exercised) or RSUs, as applicable, for shares of the Company’s Class A common
stock, subject to adjustment as set forth in the Merger Agreement. Such assumed and converted options and RSUs
will continue to be outstanding and will be governed by the provisions of the Auth0 Plans.
Activity under the Auth0 Plans is included in the summaries of stock option and RSU activity above. Included
in the Granted total in the stock options activity table above are 1,850,079 options assumed at a weighted-average
exercise price per share of $24.21. Included in the Granted total in the RSU activity table above are 743,718 RSUs
assumed at a weighted-average grant date fair value per share of $269.70.
The Company entered into revesting agreements with the founders of the acquired businesses pursuant to
which 1,269,008 restricted shares of Okta’s Class A common stock with a weighted-average fair value per share of
$268.98 issued as of the respective closing dates will vest over 3 years.
In connection with the business combinations, as of January 31, 2022, there was $257.0 million of
unrecognized stock-based compensation expense related to unvested restricted shares, which is being recognized
over a weighted-average period of 2.3 years based on vesting under the award service conditions.
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,
2022
2021
2020
Expected volatility
Expected term (in years)
Risk-free interest rate
Expected dividend yield
44% - 48%
0.5 - 1.0
48% - 54%
0.5 - 1.0
0.06% - 0.29% 0.09% - 0.18% 1.53% - 2.05%
—
43% - 59%
0.5 - 1.0
—
—
During the year ended January 31, 2022, the Company's employees purchased 185,707 shares of its Class A
common stock under the ESPP. The shares were purchased at a weighted-average purchase price of $191.54 per
share, with proceeds of $35.6 million. 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 per share, with proceeds of $25.9 million.
As of January 31, 2022 and January 31, 2021, there was $16.5 million and $10.1 million, respectively, of
unrecognized stock-based compensation expense related to the ESPP which is being recognized over a weighted-
average vesting period of 0.7 years.
14. Income Taxes
The domestic and foreign components of pre-tax loss for the years ended January 31, 2022, 2021 and 2020
were as follows (in thousands):
Domestic
Foreign
Loss before provision for (benefit from) income taxes
Year Ended January 31,
2022
2021
2020
$
$
(903,227) $
53,531
(849,696) $
(282,026) $
15,835
(266,191) $
(220,846)
10,514
(210,332)
The components of the provision for (benefit from) income taxes for the years ended January 31, 2022, 2021
and 2020 were as follows (in thousands):
115
Current:
Federal
State
Foreign
Total current provision for income taxes
Deferred:
Federal
State
Foreign
Total deferred benefit from income taxes
Total provision for (benefit from) income taxes
Year Ended January 31,
2022
2021
2020
$
$
262 $
329
4,210
4,801
(7,407)
(1,335)
2,656
(6,086)
(1,285) $
11 $
136
1,294
1,441
51
5
(1,356)
(1,300)
141 $
33
86
822
941
(518)
(406)
(1,436)
(2,360)
(1,419)
For the tax year ended January 31, 2022, the income tax benefit resulted from the release of valuation
allowance in the United States in connection with acquisitions and excess tax benefits from stock-based
compensation in the United Kingdom, offset by income tax expense related to profitable foreign jurisdictions. For the
tax year ended January 31, 2021, the income tax expense from profitable jurisdictions was partially offset by 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. These income tax
benefits and expense in these years were partially offset by foreign income taxes, state taxes and tax amortization
of goodwill.
116
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, 2022, 2021 and 2020:
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,
2022
2021
2020
21.0 %
3.9
(36.1)
8.4
3.6
(0.6)
0.2 %
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 %
The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2022
and 2021 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,
2022
2021
$
955,272 $
48,254
4,630
49,669
28,631
91,782
6,949
1,185,187
(904,173)
281,014
(91,530)
(67,527)
(2,993)
(195)
(36,713)
(78,279)
(277,237)
$
3,777 $
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
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. The U.S. valuation
allowance increased by $349.0 million and $193.6 million during the years ended January 31, 2022 and 2021,
respectively.
As of January 31, 2022, the Company had approximately $3,783.5 million of federal and $2,254.3 million of
state net operating loss carryforwards available to offset future taxable income. If not utilized, the federal and state
net operating loss carryforwards will begin to expire in 2029 and 2023, respectively. As of January 31, 2022, the
Company had approximately $64.7 million of UK net operating losses which do not expire.
As of January 31, 2022, the Company had federal research and development tax credit carryforwards of
$80.2 million and California research and development tax credit carryforwards of $53.6 million. The federal
research and development credits will start to expire in 2030 while the California research and development credits
do not expire.
117
The Company’s ability to utilize 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.
Accounting guidance for income taxes requires a deferred tax liability to be established for the U.S. tax impact
of undistributed earnings of foreign subsidiaries unless it can be shown that these earnings will be permanently
reinvested outside the U.S. If the Company repatriated its accumulated foreign earnings, any deferred income taxes
for the estimated U.S. income tax, foreign income tax, and applicable withholding taxes on earnings of subsidiaries
is 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 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 CARES Act
did not have a material impact on the consolidated financial statements.
A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows (in thousands):
Year Ended January 31,
2022
2021
2020
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
$
22,224 $
5,124
9,207
—
15,987 $
—
7,189
(952)
23,931
658
6,866
(15,468)
$
36,555 $
22,224 $
15,987
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, 2022, the Company has an immaterial amount of unrecognized tax benefits that if
recognized would impact the effective tax rate. As of January 31, 2021 and 2020, the Company had no
unrecognized tax benefits that if recognized would impact the effective tax rate. The Company's policy is to include
interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of January 31,
2022, 2021 and 2020 the Company has not accrued a material amount in interest and penalties related to
unrecognized tax benefits. The Company does not have any significant uncertain tax positions as of January 31,
2022 for which it is reasonably possible that the positions will increase or decrease within the next twelve months.
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.
118
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,
2022
2021
2020
Class A
Class B
Class A
Class B
Class A
Class B
$ (806,276) $ (42,135) $ (248,892) $ (17,440) $ (192,138) $ (16,775)
Weighted-average shares outstanding,
basic and diluted
140,684
7,352
118,882
8,330
107,809
9,412
Net loss per share, basic and diluted
$
(5.73) $
(5.73) $
(2.09) $
(2.09) $
(1.78) $
(1.78)
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
Shares committed under the ESPP
Shares related to the 2023 Notes
Shares subject to warrants related to the issuance of the 2023
Notes
Shares related to the 2025 Notes
Shares related to the 2026 Notes
Year Ended January 31,
2022
2021
2020
7,984
6,226
1,269
—
253
356
1,048
5,617
4,820
27,573
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
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, 2022, 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.
119
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, 2022, 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, 2022. 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.
In accordance with guidance issued by the SEC, companies are permitted to exclude business combinations
from their final assessment of internal control over financial reporting during the year of acquisition while integrating
the acquired operations. Our management’s evaluation of internal control over financial reporting excluded the
internal control activities of Auth0, which we acquired on May 3, 2021, as discussed in Note 3, “Business
Combinations,” of the Notes to the Consolidated Financial Statements. Auth0's total assets (excluding material
acquisition-related fair value adjustments) excluded from this assessment was $148.6 million, representing 2% of
the Company's consolidated total assets as of January 31, 2022, and Auth0's total revenue of $139.7 million
represented 11% of the Company's consolidated revenue for the year ended January 31, 2022.
Changes in Internal Control over Financial Reporting
Except as noted above, 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, 2022 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.
120
Item 9B. Other Information
Not Applicable.
121
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 2022
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, 2022.
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 2022
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, 2022.
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 2022
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, 2022.
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 2022
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, 2022.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022
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, 2022.
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.
122
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 7, 2022
March 7, 2022
OKTA, INC.
/s/ Brett Tighe
Brett Tighe
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, Brett Tighe 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:
123
Signature
/s/ Todd McKinnon
Todd McKinnon
/s/ Brett Tighe
Brett Tighe
/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/ Jeff Epstein
Jeff Epstein
/s/ Patrick Grady
Patrick Grady
/s/ Ben Horowitz
Ben Horowitz
/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 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
124
EXHIBIT INDEX
Exhibit
Number
2.1
Exhibit Description
Agreement and Plan of Merger, dated as of March 3, 2021, by and among
Okta, Inc., Auth0, Inc., Ardbeg Merger Sub, Inc., and Fortis Advisors LLC.
3.1
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 Certificate of Incorporation.
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.
Incorporated by
Reference from
Form
Exhibit 2.1 to Form
8-K filed on May 10,
2021
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
125
Exhibit
Number
10.8#
Exhibit Description
Form of Offer Letter between the Registrant and each of its executive officers.
10.9#
Auth0, Inc. 2014 Equity Incentive Plan.
10.10#
Auth0, Inc. Phantom Unit Plan.
10.11
Office Lease Agreement dated December 2, 2017 between the Registrant and
KR 100 First Street Owner, LLC.
10.11.1
10.11.2
10.11.3
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.
Exhibit 10.9.2 to
Form 10-K filed on
March 4, 2021
Third Amendment dated August 17, 2021 to Office Lease Agreement dated
December 2, 2017 between the Registrant and KR 100 First Street Owner,
LLC.
10.12
Form of Call Option Transaction Confirmation.
10.13
Form of Warrant Confirmation.
10.14
Form of Capped Call Transaction Confirmation.
10.15
Form of Capped Call Transaction Confirmation.
21.1
23.1
31.1
31.2
32.1*
Subsidiaries of the Registrant.
Consent of 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.
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.
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.
101.INS
101.SCH XBRL Taxonomy Extension Schema Document
XBRL Instance Document
101.CAL
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL with applicable
taxonomy extension information contained in Exhibits 101.*)
126
Incorporated by
Reference from
Form
Exhibit 10.10 to
Form S-1 filed on
March 13, 2017
Exhibit 99.1 to Form
S-8 filed on May 10,
2021
Exhibit 99.2 to Form
S-8 filed on May 10,
2021
Exhibit 10.1 to Form
8-K filed on
December 6, 2017
Exhibit 10.2 to Form
10-Q filed on
December 6, 2019
Exhibit 10.1 to Form
10-Q filed on
December 2, 2021
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
Filed herewith
Furnished herewith
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.
127
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 7, 2022
/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, Brett Tighe, 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 7, 2022
/s/ Brett Tighe
Brett Tighe
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 Brett Tighe, 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, 2022, 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 7, 2022
/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)
CCoorrppoorraattee IInnffoorrmmaattiioonn
BBooaarrdd ooff DDiirreeccttoorrss::
EExxeeccuuttiivvee OOffffiicceerrss::
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.
Jeff Epstein
Operating Partner
Bessemer Venture Partners
Patrick Grady
Managing Member
Sequoia Capital
Benjamin Horowitz
General Partner
Andreessen Horowitz
Rebecca Saeger
Former Chief Marketing Officer
Charles Schwab & Co., Inc.
Michael Stankey
Vice Chairman
Workday, Inc.
Brett Tighe
Chief Financial Officer
Christopher Kramer
Chief Accounting Officer
Jonathan T. Runyan
General Counsel & Corporate Secretary
Susan St. Ledger
President, Worldwide Field Operations
CCoorrppoorraattee HHeeaaddqquuaarrtteerrss::
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105
SSttoocckk TTrraannssffeerr AAggeenntt::
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
IInnvveessttoorr RReellaattiioonnss::
Michelle Wilson*
Former Senior Vice President & General Counsel
Amazon.com, Inc.
Website: investor.okta.com
Email: investor@okta.com
* Ms. Wilson is not standing for re-election at the Annual
Meeting. We thank her for her distinguished service to
Okta.
SSttoocckk EExxcchhaannggee LLiissttiinngg:
Nasdaq
Symbol: OKTA
Proxy
Statement
and Annual
Report
okta.com
2022