Proxy Statement
and Annual Report
2023
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
May 11, 2023
Dear Okta Stockholder:
I am pleased to invite you to attend the 2023 Annual Meeting of Stockholders of Okta, Inc. to be held on June 22, 2023, 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/OKTA2023 during the meeting.
Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2023 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 26, 2023.
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 11, 2023, 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 2023 Annual Meeting of Stockholders and our 2023
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 2023 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 2023 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 2023
Annual Meeting
of Stockholders
Notice is hereby given that Okta, Inc. will hold its 2023 Annual Meeting of
Stockholders (the “Annual Meeting”) on June 22, 2023, 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/OKTA2023 during the
meeting. We are holding the Annual Meeting for the following purposes, which are
more fully described in the accompanying proxy statement:
June 22, 2023
• To elect three Class III directors to hold office until the 2026 Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
• To ratify the appointment of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending January 31, 2024;
• To approve, on an advisory non-binding basis, 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).
9:00 a.m. Pacific Time
virtualshareholdermeeting.com/OKTA2023
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 Annual Meeting accompanying this notice, in lieu of mailing
printed copies. On or about May 11, 2023, 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 2023 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 2023
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 26, 2023 are entitled
to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
Larissa Schwartz
Chief Legal Officer and Corporate Secretary
San Francisco, California
May 11, 2023
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
Proxy Statement
for the 2023
Annual Meeting of
Stockholders –
Table of Contents
General Information
1
Proposal One: Election of Directors
8
Corporate Governance
17
Proposal Two: Ratification of the Appointment of Our Independent Registered Public
Accounting Firm
29
Report of the Audit Committee of the Board of Directors
31
Proposal Three: Approval, on an Advisory Non-Binding Basis, of the Compensation of
Our Named Executive Officers
32
Executive Officers
33
Compensation Discussion and Analysis
34
Executive Compensation
50
Report of the Compensation Committee of the Board of Directors
64
Equity Compensation Plan Information
65
Security Ownership of Certain Beneficial Owners and Management
66
Certain Relationships and Related Party Transactions
68
Additional Information
70
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
General
Information
Our board of directors solicits your proxy on our behalf for the 2023 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 2023 Annual
Meeting of Stockholders and the accompanying Notice of 2023 Annual Meeting of
Stockholders. The Annual Meeting will be held virtually via a live interactive audio
webcast on the internet on June 22, 2023, at 9:00 a.m. Pacific Time. On or about May
11, 2023, 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 2023 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 26, 2023, you are invited to attend
the meeting at virtualshareholdermeeting.com/OKTA2023 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.
June 22, 2023
9:00 a.m. Pacific Time
virtualshareholdermeeting.com/OKTA2023
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/OKTA2023. The webcast will start at 9:00 a.m. Pacific
Time on June 22, 2023. 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 III directors to serve until the 2026 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, 2024;
•
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.
2023 Proxy Statement
1
How does the board of directors recommend that I vote on these proposals?
Our board recommends a vote:
•
“FOR” the election of Shellye Archambeau, Robert L. Dixon, Jr. and Benjamin
Horowitz as Class III 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, 2024; 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 26,
2023, the record date for our Annual Meeting (the “Record Date”), may vote at the
Annual Meeting.
As of the Record Date, there were 155,042,820 shares of our Class A common stock
and 7,299,891 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 votes and broker
non-votes are counted as shares present and entitled to vote for the purposes of
determining a quorum.
General Information
2
2023 Proxy Statement
Okta, Inc.
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,
2024 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. Because brokers
have discretionary authority to vote on this proposal, we do not expect any broker non-
votes.
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 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.
How do I vote?
If you are a stockholder of record, there are four ways to vote:
By Internet
Vote at www.proxyvote.com until 11:59
p.m. Eastern Time on June 21, 2023 (have
your Notice or proxy card in hand when
you visit the website).
By Telephone
Vote toll-free at 1-800-690-6903 until
11:59 p.m. Eastern Time on June 21, 2023
(have your Notice or proxy card in hand
when you call).
By Mail
Vote by completing and mailing your
proxy card (if you received printed proxy
materials).
During the Meeting
Instructions on how to attend and vote at
the Annual Meeting are described at
virtualshareholdermeeting.com/OKTA2023.
In order to be counted, proxies submitted by telephone or internet must be received by
11:59 p.m. Eastern Time on June 21, 2023. Proxies submitted by U.S. mail must be
received before the start of the Annual Meeting.
If you are a street name stockholder, please follow the instructions from your broker,
bank or other nominee to vote by internet, telephone or mail. You may not vote during
the Annual Meeting unless you receive a legal proxy from your broker, bank or other
nominee.
General Information
Okta, Inc.
2023 Proxy Statement
3
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
21, 2023 (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, Brett Tighe and
Larissa Schwartz 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,
2024 and (ii) the approval, on an advisory non-binding basis, 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
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.
General Information
4
2023 Proxy Statement
Okta, Inc.
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 D.F. King & Co.,
Inc., 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 $12,500 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 2023 Annual Report, primarily online. On or about May 11, 2023, 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 2023 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.
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
General Information
Okta, Inc.
2023 Proxy Statement
5
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 2024 Annual
Meeting of Stockholders, our Corporate Secretary must receive the written
stockholder proposal no later than January 12, 2024. In addition, stockholder proposals
must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) 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
2024 Annual Meeting of Stockholders, our Corporate Secretary must receive the
written notice at our principal executive offices:
•
not earlier than February 26, 2024, and
•
not later than the close of business on March 27, 2024.
In the event we hold the 2024 Annual Meeting of Stockholders more than 30 days
before or more than 60 days after the one-year anniversary of the 2023 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 Exchange Act.
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 2024 Annual Meeting of 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.
General Information
6
2023 Proxy Statement
Okta, Inc.
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 2023 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/
OKTA2023. 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/OKTA2023, 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.
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 22, 2023 and will remain available until the Annual Meeting
ends.
General Information
Okta, Inc.
2023 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 III 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 II
directors expires at the 2025 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
Shellye Archambeau
2018
Former Chief Executive Officer,
MetricStream, Inc.
Robert L. Dixon, Jr.
2019
Former Global Chief Information
Officer and Senior Vice President,
PepsiCo, Inc.
Benjamin Horowitz
2010
General Partner, Andreessen
Horowitz
Our board has nominated Shellye Archambeau, Robert L. Dixon, Jr. and Benjamin
Horowitz for election as Class III directors to hold office until the 2026 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
III director and member of our board and has consented to serve if elected. Patrick
Grady, currently a Class III director, is not standing for re-election at the Annual
Meeting. Mr. Grady’s resignation is not a result of any disagreement with us or any
matter relating to our operations, policies or practices. We thank him for his
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 III
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
2023 Proxy Statement
Okta, Inc.
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 26, 2023.
Name
Age
Director
Since
Principal Occupation
Class
Audit
Committee
Compensation
Committee
Nominating
Committee
Employee Directors
Todd McKinnon,
Chairperson
51
2009
Chief Executive Officer
I
J. Frederic Kerrest,
Executive Vice Chairperson
46
2009
Chief Operating Officer
II
Independent Directors
Shellye Archambeau
60
2018
Former Chief Executive
Officer, MetricStream, Inc.
III
member
Emilie Choi
44
2022
President and Chief Operating
Officer, Coinbase Global, Inc.
I
Robert L. Dixon, Jr.
67
2019
Former Global Chief
Information Officer and Senior
Vice President, PepsiCo, Inc.
III
member
Jeff Epstein
66
2021
Operating Partner, Bessemer
Venture Partners
II
chair
member
Patrick Grady
40
2014
Managing Member, Sequoia
Capital
III
member
Benjamin Horowitz,
Lead Independent Director
56
2010
General Partner, Andreessen
Horowitz
III
Rebecca Saeger
68
2019
Former Executive Vice
President and Chief Marketing
Officer, Charles Schwab & Co.,
Inc.
II
member
chair
Michael Stankey
64
2016
Vice Chairman, Workday, Inc.
I
chair
member
Proposal One: Election of Directors
Okta, Inc.
2023 Proxy Statement
9
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 26, 2023 are highlighted in the following graphics. Information about each individual
director and director nominee follows.
Gender
3
7
Female
Male
Age
2
2
3
3
<45
45-54
55-64
65+
Tenure
5
2
3
<5 yrs
5-9 yrs
10+ yrs
Independence
8
2
Independent
Employee
Board Diversity Matrix (as of April 26, 2023)
Total Number of Directors: 10
Female
Male
Non-Binary
Did Not Disclose
Gender
Part I: Gender Identity
Directors
3
7
—
—
Part II: Demographic Background
African American or Black
1
1
—
—
Alaskan Native or Native American
—
—
—
—
Asian
1
—
—
—
Hispanic or Latinx
—
—
—
—
Native Hawaiian or Pacific Islander
—
—
—
—
White
1
6
—
—
Two or More Races or Ethnicities
—
—
—
—
LGBTQ+
—
Did Not Disclose Demographic
Background
—
Proposal One: Election of Directors
10
2023 Proxy Statement
Okta, Inc.
Director Skills Matrix
Name
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
Archambeau
n
n
n
n
n
n
n
Choi
n
n
n
n
n
Dixon
n
n
n
n
n
n
Epstein
n
n
n
n
n
n
n
Grady
n
n
n
n
n
n
Horowitz
n
n
n
n
n
Kerrest
n
n
n
n
n
n
McKinnon
n
n
n
n
n
n
Saeger
n
n
n
n
n
Stankey
n
n
n
n
n
Proposal One: Election of Directors
Okta, Inc.
2023 Proxy Statement
11
Information Concerning Director Nominees
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 Verizon Communications Inc. since 2013 and Roper Technologies,
Inc. since 2018. Ms. Archambeau previously served on the boards of Nordstrom, Inc. from
February 2015 to May 2022 and Arbitron Inc. from 2005 to 2013. 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
experience as a company executive, her valuable knowledge of technology, digital media and
communications platforms and her experience serving on other boards.
Former Chief Executive Officer,
MetricStream, Inc.
Age 60
Director Since 2018
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 Elevance
Health, Inc. (formerly 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 and the College of Computing Advisory
Board and is an Emeritus Trustee of the 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 Global Chief Information
Officer and Senior Vice
President, PepsiCo, Inc.
Age 67
Director Since 2019
Proposal One: Election of Directors
12
2023 Proxy Statement
Okta, Inc.
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.
General Partner, Andreessen
Horowitz
Age 56
Director Since 2010
Proposal One: Election of Directors
Okta, Inc.
2023 Proxy Statement
13
Information Concerning Continuing Directors
Emilie Choi
Ms. Choi joined our board in August 2022. Ms. Choi has served as President of Coinbase Global,
Inc., a cryptocurrency exchange platform, since November 2020 and as Chief Operating Officer
since June 2019. Ms. Choi previously served as Vice President of Business, Data and
International at Coinbase from March 2018 to June 2019. From December 2009 to March 2018,
Ms. Choi served as the Vice President & Head of Corporate Development for LinkedIn
Corporation, a professional networking site and, following its acquisition in December 2016, a
subsidiary of Microsoft Corporation, a software company. From August 2007 to December
2009, Ms. Choi served in various positions at Warner Bros. Entertainment Inc., a mass media and
entertainment company, including as Director of Digital Business Strategy and Operations and
Manager of Corporate Business Development and Strategy. Ms. Choi served as a member of the
boards of directors of Naspers Limited, a global internet group, and Prosus N.V., the
international internet assets division of Naspers Limited, from April 2017 to August 2021, and
ZipRecruiter, Inc., a jobs marketplace, from November 2018 to August 2022. Ms. Choi holds a
B.A. in Economics from the Johns Hopkins University and an M.B.A. from the Wharton School at
the University of Pennsylvania.
President and Chief Operating
Officer, Coinbase Global, Inc.
Age 44
Director Since 2022
We believe that Ms. Choi is qualified to serve as a member of our board because of her
experience as a company executive, her knowledge of the industry in which we operate and her
experience as a public company director.
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,
Shutterstock, Inc. from April 2012 to June 2021 and Poshmark, Inc., a social commerce
marketplace company, from April 2018 to January 2023. Mr. Epstein has served on the boards of
Twilio Inc., a cloud communication platform company, since July 2017, 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.
Operating Partner, Bessemer
Venture Partners
Age 66
Director Since 2021
Proposal One: Election of Directors
14
2023 Proxy Statement
Okta, Inc.
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.
Executive Vice Chairperson and
Chief Operating Officer
Age 46
Director Since 2009
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 51
Director Since 2009
Proposal One: Election of Directors
Okta, Inc.
2023 Proxy Statement
15
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 68
Director Since 2019
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 64
Director Since 2016
Proposal One: Election of Directors
16
2023 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 that applies to our
directors or our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
similar functions by posting such information on the Governance Overview page of our website. During the fiscal year ended January
31, 2023 (“fiscal 2023”), no waivers were granted from any provision of the code of conduct.
Okta, Inc.
2023 Proxy Statement
17
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, Ms. Choi, Mr. Dixon, Mr. Epstein,
Mr. Grady, Mr. Horowitz, Ms. Saeger and Mr. Stankey 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 Michelle Wilson, who served on our board until June 2022, was “independent” under the applicable rules and
regulations of the SEC and the Nasdaq listing standards at the time of her 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. In addition, we believe the Chairperson of our board is well-positioned to act as a
bridge between management and the board, facilitating the regular flow of information. Among other duties, the Chairperson of our
board may represent our board in communications with stockholders and provide input on the structure and composition of our
board. Our board will continue to periodically review our leadership structure and may make such changes in the future as it deems
appropriate. During its routine review of the board’s leadership structure, our board and our company regularly consider the
circumstances under which the roles of Chairperson of our board and CEO could most effectively serve the interests of our company
and its stockholders if separated. As discussed in “Stockholder Outreach” below, from time to time, our company proactively engages
with stockholders throughout the year to learn their perspectives on significant issues, and intends to continue to do so, including with
respect to gathering stockholder perspectives on board leadership structure.
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. Management’s involvement in day-to-day risk management enables them to assist our board in the effective design,
establishment, maintenance, review and evaluation of our disclosure controls and procedures. 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
Corporate Governance
18
2023 Proxy Statement
Okta, Inc.
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. In addition, our board, through periodic
management presentations to individual directors, the audit committee and the board, oversees cybersecurity 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.
Audit 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.
Compensation Committee
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. In this regard, our nominating committee at least annually reviews director skill
sets and time commitments, committee membership and needs and, if warranted, implements
committee membership or structure adjustments.
Meetings of Our Board and Annual Meeting Attendance
Our board held seven meetings during fiscal 2023. 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 2023. Under our corporate governance guidelines, directors are expected to spend the time needed and meet as
frequently as our board deems necessary or appropriate to discharge their responsibilities. Directors are also expected to make
efforts to attend our Annual Meeting of Stockholders, all meetings of our board, and all meetings of the committees on which they
serve. All directors then in office attended the 2022 Annual Meeting of Stockholders.
Corporate Governance
Okta, Inc.
2023 Proxy Statement
19
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 2023.
Members
Ms. Archambeau
Mr. Epstein (Chair)
Mr. Grady
Mr. Grady is not standing for re-election
at the Annual Meeting, but will serve on
the audit committee until his term
expires. Ms. Choi will join the audit
committee effective at the Annual
Meeting.
Independence
Each of our current audit committee
members and Ms. Choi meet the
requirements for independence under
current Nasdaq listing standards and
SEC rules and regulations.
Financial Expertise
Each of our current audit committee
members and Ms. Choi meet 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”).
Corporate Governance
20
2023 Proxy Statement
Okta, Inc.
Compensation Committee
Primary Responsibilities
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 eight meetings during
fiscal 2023.
Compensation Committee Interlocks and Insider Participation
During fiscal 2023, Messrs. Dixon and Stankey and Ms. Saeger, and through June 2022, Ms. 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.
Members
Mr. Dixon
Ms. Saeger
Mr. Stankey (Chair)
Ms. Wilson served on the compensation
committee until June 2022.
Independence
The composition of our compensation
committee continues to meet 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.
Nominating Committee
Primary Responsibilities
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
2023.
Members
Mr. Epstein
Ms. Saeger (Chair)
Mr. Stankey
Ms. Wilson served on the nominating
committee until June 2022.
Independence
The composition of our nominating
committee meets the requirements for
independence under the Nasdaq listing
standards and SEC rules and
regulations.
Corporate Governance
Okta, Inc.
2023 Proxy Statement
21
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.
Our board appointed Emilie Choi as a director effective August 19, 2022 on the recommendation of our nominating committee, which
engaged a third-party search firm to identify and evaluate potential candidates for 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, since the fall of 2019 we have conducted an annual stockholder
outreach program to better understand stockholder perspectives and actively seek stockholder feedback on our board, governance,
sustainability and executive compensation practices. Our 2022 non-binding advisory Say-on-Pay vote received 54.4% support, which
the members of our compensation committee and board took seriously given previous fiscal years’ strong stockholder support for our
executive compensation program. As in past years, we discussed our compensation programs with significant stockholders in the fall
of 2021 (fiscal 2022) and based on the feedback we received and the results of our 2022 non-binding advisory Say-on-Pay vote, we
intensified our stockholder outreach through the fall of 2022 (fiscal 2023). In our most recent outreach effort in the fall of 2022, we
contacted stockholders representing over 55% of our outstanding common stock. 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 annual executive compensation program, a number of stockholders expressed concern over the April 2021 retention
stock options granted to our executive officers and a preference for performance-based equity in lieu of stock options.
Corporate Governance
22
2023 Proxy Statement
Okta, Inc.
Based in part on the feedback we received in these discussions, we implemented a new performance-based restricted stock unit
award program for our executive officers in fiscal 2023. Additionally, our CEO and our COO requested that they not be granted
annual equity awards in fiscal 2023 to address stockholder concerns. In March 2023, we also introduced robust stock ownership
guidelines for our named executive officers, encouraging even more alignment of the interests of our named executive officers and
our stockholders. 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.
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 Chief Legal Officer in writing at the address listed below or by email to investor@okta.com (specifying “ATTN Chief Legal Officer”
in the subject line). For a communication directed to an individual director in his or her capacity as a member of our board, please
contact the director in writing at the address listed below or by email to investor@okta.com (specifying “ATTN [name of director]” in
the subject line).
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105
Attn: [Chief Legal Officer or Name of Individual Director]
Our Chief Legal Officer, 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 Chief
Legal Officer 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 Okta 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.
Corporate Governance
Okta, Inc.
2023 Proxy Statement
23
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 and balanced teams. 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.
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.
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. In recent 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, precise language and inclusive calibrations, mentoring and
workplace development programs focused on supporting talent from underrepresented communities, and
sponsorship of ERGs that strengthen our DIB culture. We currently have an affinity group supporting
neurodiversity and ERGs supporting women, people of color, veterans, the LGBTQIA+ community and
parents and caregivers, as well as Circles for our global communities in Europe, the Middle East and Africa
(EMEA) and Asia Pacific and Japan (APJ) regions.
Additional information on our DIB strategy, workforce representation and inclusion programs can be found in
our most recent State of Inclusion Report located on our website at okta.com/state-of-inclusion-at-okta.
Growth and
Development
We invest significant resources to develop talent and actively foster a learning culture where employees are
empowered to drive their personal and professional growth. We 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 to prepare our employees at all levels for career progression and
individual development. Our employee onboarding program helps our employees get off to the right start, our
manager development program helps to build a solid foundation for our people managers, and our technical
training program quickly brings our new technical employees up to speed on our product offerings.
Corporate Governance
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2023 Proxy Statement
Okta, Inc.
Compensation,
Benefits and
Wellness
We provide robust compensation, benefits and wellness programs that help support the varying needs of our
employees. In addition to market-competitive base pay, short-term bonus incentives and long-term equity
incentives, our total rewards program includes comprehensive employee benefits 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.
Dynamic Work
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.
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 build a safely connected world where everyone can belong and thrive. We do
this by mobilizing our most important assets, our employees, products and corporate resources, to create long-term value for people
and the planet. Okta for Good works toward:
•
A digital society and economy in which everyone can fully participate;
•
Identity and digital infrastructure that protects and enables organizations and those they serve;
•
A healthy, sustainable and resilient environment; and
•
A technology sector that mitigates potential harm and works toward the collective good.
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 Okta to secure their teams, partners, volunteers, donors and beneficiaries — driving efficiency,
security and greater mission outcomes. Our employee volunteer and giving programs enable global team members to support
charitable organizations worldwide.
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 112,500 shares of our Class A common stock remained reserved for future issuances as of April
26, 2023. This commitment fuels strategic grantmaking out of the Okta for Good Fund, a donor-advised fund held at Tides Foundation.
Corporate Governance
Okta, Inc.
2023 Proxy Statement
25
For more information, please view our Okta for Good Impact Report at okta.com/okta-for-good/impact-report.
Environmental Sustainability
We have a long-term commitment to climate action. We annually complete a greenhouse gas (“GHG”) emissions analysis conducted by
a third party and annually submit our GHG emissions analysis to CDP including our scope 1, scope 2 and all relevant scope 3 emissions.
For more information on our GHG inventory scope, methodology and results, please see okta.com/responsibility/emissions-
inventory-results.
We have set public commitments to climate targets. 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. In fiscal 2023, we expanded our 100% renewable electricity program to
include cloud services. While we do not own real estate, our headquarters building is LEED Gold certified and contains 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 direct-leased 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; and
•
Incorporating equity 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.
Corporate Governance
26
2023 Proxy Statement
Okta, Inc.
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 2022 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 $350,000 on the date of grant. These initial RSU grants vest in equal annual installments on the first three anniversaries of the
date on which the non-employee director was appointed to our board, subject to continuous service. Non-employee directors receive
the following annual cash retainers for their service:
Position
Annual Cash Retainer
($)
Board Member
30,000
Lead Independent Director
20,000
Audit Committee Chair
20,000
Compensation Committee Chair
15,000
Nominating Committee Chair
8,000
Audit Committee Member other than Chair
10,000
Compensation Committee Member other than Chair
7,500
Nominating Committee Member other than Chair
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 $200,000 on the date of grant. These annual RSU
grants will fully vest on the earlier of the first anniversary of the grant date or immediately prior to the next Annual Meeting of
Stockholders, subject to continuous service.
Under our non-employee director compensation program, all RSUs granted to non-employee directors are settled in shares of our
Class A common stock. The non-employee director compensation program provides that these RSUs are subject to full accelerated
vesting upon the sale of our company in a Sale Event (as defined in our 2017 Equity Incentive Plan, as amended (the “2017 Plan”)).
The following table presents the total compensation for each person who served as a non-employee director during fiscal 2023.
Messrs. McKinnon and Kerrest, who were also our employees, received no compensation for their service as directors. The
compensation received by Mr. McKinnon as CEO is presented in the “Fiscal 2023 Summary Compensation Table” below. Mr. Kerrest,
our COO, is an executive officer other than a named executive officer for fiscal 2023. Other than as set forth in the tables below, we
did not pay any compensation or make any equity awards to our non-employee directors during fiscal 2023.
Corporate Governance
Okta, Inc.
2023 Proxy Statement
27
Fiscal 2023 Director Compensation Table
Name
Fees Earned or Paid In
Cash ($)
Stock Awards
($)(1)(2)
Total
($)
Shellye Archambeau
40,000
200,037
240,037
Emilie Choi(3)
13,533
350,012
363,545
Robert L. Dixon, Jr.
37,500
200,037
237,537
Jeff Epstein
50,543
200,037
250,580
Patrick Grady
40,000
200,037
240,037
Benjamin Horowitz
50,000
200,037
250,037
Rebecca Saeger
43,935
200,037
243,972
Michael Stankey
49,000
200,037
249,037
Michelle Wilson(4)
17,804
—
17,804
(1)
The amounts reported represent the aggregate grant date fair values of the RSUs granted during fiscal 2023 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 2023 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, 2023, our non-employee directors held the options and stock awards set forth in the following table:
Name
Shares of Class B
Common Stock
Underlying Options
RSUs Covering
Class A Common
Stock
Shellye Archambeau
—
2,378
Emilie Choi
—
3,638
Robert L. Dixon, Jr.
—
2,378
Jeff Epstein
—
3,334
Patrick Grady
—
2,378
Benjamin Horowitz
—
2,378
Rebecca Saeger
—
2,378
Michael Stankey
190,000
2,378
Michelle Wilson
—
—
(3) Ms. Choi joined our board in August 2022.
(4) Ms. Wilson served on our board until June 2022.
Corporate Governance
28
2023 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, 2024. 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 2023 in accordance with the
foregoing pre-approval policies and procedures.
Okta, Inc.
2023 Proxy Statement
29
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, 2023 and 2022. All of these services were approved by our audit committee.
Fee Category
Fiscal 2023
($)
Fiscal 2022
($)
Audit Fees(1)
4,245,000
4,518,000
Audit-Related Fees
—
—
Tax Fees(2)
67,000
88,000
All Other Fees(3)
6,000
4,000
Total Fees
4,318,000
4,610,000
(1)
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.
(2)
Tax Fees relate to professional services provided for permissible tax advisory services in fiscal 2023 and fiscal 2022.
(3)
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, 2024.
Proposal Two: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
30
2023 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, 2023, 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, 2023. 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, 2023 be included in its Annual Report on Form 10-K for its 2023 fiscal
year.
Audit Committee
Jeff Epstein (Chair)
Shellye Archambeau
Patrick Grady
Okta, Inc.
2023 Proxy Statement
31
03
Proposal Three:
Approval, on
an Advisory
Non-Binding
Basis, of 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 2023 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
2023 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 2023 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
2023 Proxy Statement
Okta, Inc.
Executive Officers
The following table sets forth information regarding our executive officers, including their ages, as of April 26, 2023:
Name
Age
Positions and Offices Held with the Company
Todd McKinnon
51
Chairperson of the Board of Directors, Chief Executive Officer and Director
J. Frederic Kerrest
46
Executive Vice Chairperson of the Board of Directors, Chief Operating Officer and Director
Brett Tighe
43
Chief Financial Officer
Shibu Ninan
48
Chief Accounting Officer
Larissa Schwartz
51
Chief Legal Officer and Corporate Secretary
Information Concerning Executive Officers
In addition to Messrs. McKinnon and Kerrest, who both serve as directors, our executive officers as of April 26, 2023 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.
Shibu Ninan
Mr. Ninan has served as our Chief Accounting Officer (“CAO”) since August 2022. Prior to his current role, Mr. Ninan served as Vice
President, Chief Accounting Officer at Veritas Technologies LLC, a data management company, from July 2015 to August 2022 and as
Chief Accounting Officer at Saba Software, Inc., a cloud-based intelligent talent management solutions company acquired by
Cornerstone OnDemand, Inc., from November 2013 to June 2015. Earlier in his career, Mr. Ninan served as a Senior Manager at
KPMG US and at Deloitte India. Mr. Ninan holds a Bachelor of Commerce degree from Bangalore University, a Chartered
Accountancy (CA) from the Institute of Chartered Accountants of India, and a Certified Public Accountancy (CPA) from the American
Institute of Certified Public Accountants.
Larissa Schwartz
Ms. Schwartz has served as our Chief Legal Officer and Corporate Secretary since March 2023. Prior to her current role, Ms. Schwartz
served as our Senior Vice President, Deputy General Counsel, Corporate & Securities from August 2020 to March 2023, as Vice
President, Associate General Counsel, Corporate & Securities from June 2017 to August 2020, as Associate General Counsel, Senior
Director, Corporate & Securities from November 2015 to June 2017 and as Assistant Corporate Secretary from December 2015 to
March 2023. From October 2012 to November 2015, Ms. Schwartz served as Corporate Counsel at Jazz Pharmaceuticals plc, a
biopharmaceutical company. Prior to that, Ms. Schwartz served as a corporate attorney at the law firms of Fenwick & West LLP and
Simpson Thacher & Bartlett LLP. Ms. Schwartz holds a Juris Doctor from the University of Hawaii at Manoa, a Masters in Philosophy
and a Masters of Arts from Yale University and a Bachelor of Arts from Middlebury College.
Proposal Three: Approval, on an Advisory Non-Binding Basis, of the Compensation of Our Named Executive Officers
Okta, Inc.
2023 Proxy Statement
33
Compensation
Discussion and
Analysis
This Compensation Discussion and Analysis describes our executive compensation
program and the decisions in fiscal 2023 regarding the compensation for the following
executive officers (our “named executive officers”):
Todd McKinnon
our CEO, Chairperson of the Board of Directors and co-founder;
Brett Tighe
our CFO;
Shibu Ninan
our CAO;
Jonathan T. Runyan
our former General Counsel; and
Susan St. Ledger
our former President, Worldwide Field Operations.
Executive Transitions
On January 28, 2022, we appointed Mr. Tighe as our CFO effective January 28, 2022.
Prior to this appointment, Mr. Tighe was serving as our interim CFO since June 1,
2021.
On July 18, 2022, we appointed Mr. Ninan as our CAO effective August 15, 2022. In
this position, he also serves as our principal accounting officer.
On November 30, 2022, we announced that Ms. St. Ledger, our President, Worldwide
Field Operations, intended to retire from her position with us effective January 31,
2023, the end of fiscal 2023.
On March 1, 2023, we announced that Mr. Runyan, our General Counsel, would retire
from his position with us effective March 3, 2023.
Executive Summary
Okta is the leading independent identity provider. Our vision is to free everyone to
safely use any technology, and we believe identity is the key to making that happen.
Our mission is to bring simple and secure digital access to people and organizations
everywhere. Our Workforce Identity and Customer Identity Clouds are powered by
our category-defining Okta Identity Platform that enables our customers to securely
connect the right people to the right technologies and services at the right time.
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2023 Proxy Statement
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Highlights of Fiscal 2023 Corporate Performance
Specific financial highlights of our performance in fiscal 2023 include:
•
Revenue: Total revenue was $1.86 billion, an increase of 43% year-over-year. Subscription revenue was $1.79 billion, an increase
of 44% year-over-year.
•
Remaining Performance Obligations (“RPO”): RPO, or subscription backlog, was $3.01 billion, an increase of 12% year-over-year.
Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.68 billion, an
increase of 25% year-over-year.
•
Operating Loss: GAAP (as defined below) operating loss was $812 million, or (44)% of total revenue, compared to a GAAP
operating loss of $768 million, or (59)% of total revenue for fiscal 2022. Non-GAAP operating loss was $10 million, or (1)% of total
revenue, compared to non-GAAP operating loss of $74 million, or (6)% of total revenue for fiscal 2022.
•
Net Loss: GAAP net loss was $815 million, compared to a GAAP net loss of $848 million for fiscal 2022. GAAP net loss per share
was $5.16, compared to a GAAP net loss per share of $5.73 for fiscal 2022. Non-GAAP net loss was $7 million, compared to non-
GAAP net loss of $68 million for fiscal 2022. Non-GAAP basic and diluted net loss per share was $0.04, compared to non-GAAP
basic and diluted net loss per share of $0.46 for fiscal 2022.
•
Cash Flow: Net cash provided by operations was $86 million, or 5% of total revenue, compared to $104 million, or 8% of total
revenue, for fiscal 2022. Free cash flow was $65 million, or 3% of total revenue, compared to $87 million, or 7% of total revenue,
for fiscal 2022.
•
Customers: Added over 17% more customers bringing our total customer count to 17,600.
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 or loss, non-GAAP operating margin, non-GAAP net income or loss, non-GAAP net income or 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 61 to 65) of our 2023 Annual Report on Form 10-K
filed with the SEC on March 3, 2023.
Key Actions of Fiscal 2023 Executive Compensation Program
Consistent with our performance and compensation objectives for fiscal 2023, our compensation committee took the following key
actions relating to the compensation of our named executive officers for fiscal 2023:
•
Base Salary: Maintained the annual base salary of our CEO for fiscal 2023 at its fiscal 2022 level, while increasing the annual base
salary of Mr. Tighe by 20%, the annual base salary of Mr. Runyan by 25% and the annual base salary of Ms. St. Ledger by 5%, each in
recognition of their performance during the past fiscal year and to more closely align with peer group compensation levels for
similarly-situated executives. Our compensation committee also set the initial annual base salary of Mr. Ninan at $380,000 as part
of his new hire compensation package as described below.
•
Short-Term Incentive Compensation: After achieving the performance objectives established under our Senior Executive
Incentive Bonus Plan (the “Bonus Plan”) at 107.1%, our compensation committee used negative discretion to reduce the payout for
internal pay equity purposes to 45%, consistent with the achievement of goals established for our broader employee population.
•
Long-Term Incentive Compensation: In addition to time-based restricted stock unit (“RSU”) awards, in response to shareholder
feedback, we introduced performance-based restricted stock units (“PSUs”) for the first time. In addition, at their request, our CEO
and COO were not granted equity awards in fiscal 2023.
The PSU awards provide that the number of PSUs actually earned (between 0% and 200% of the target number of units awarded)
will be determined based on our relative total stockholder return compared to the total stockholder return of the Nasdaq
Composite Index during three performance periods, a one-year, two-year and three-year performance period, each beginning on
February 1, 2022. Our named executive officers did not earn any PSUs for the one-year performance period covering fiscal 2023.
•
New Compensation Arrangements: In connection with Mr. Ninan’s appointment as our CAO during fiscal 2023, we entered into a
compensation package with him that was intended to be aligned with the compensation packages offered to the executives holding
comparable positions at the companies in our compensation peer group, incentivize superior performance and provide significant
retentive value. Mr. Ninan was also added as a “covered executive” to our Executive Severance Plan.
Compensation Discussion and Analysis
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2023 Proxy Statement
35
•
Stock Ownership Guidelines: In early March 2023, we adopted a stock ownership policy for our executive officers who are subject
to Section 16 of the Exchange Act and the non-employee members of our board, which is described in more detail in “Other
Compensation Policies—Stock Ownership Guidelines” below.
Fiscal 2023 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 2023 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 service-vesting equity change-in-
control payments or benefits for our executive officers;
performance-vesting equity accelerates only to the extent of
attainment of goals
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 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 401(k)
plan on the same terms as our other employees
Maintain a compensation committee consisting solely of
independent directors with extensive relevant experience
No material perquisites other than periodic security costs for
our executive officers and no health or other benefits, other
than those that are generally available to our other 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
Maintain stock ownership guidelines for our executive officers
and the non-employee members of our board
No hedging or pledging of our securities by our directors or any
employees, including our officers
Retain an independent compensation consultant who reports
directly to our compensation committee
Compensation Discussion and Analysis
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2023 Proxy Statement
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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. For this reason, since the fall of 2019, members of
our management team have contacted our top institutional stockholders to discuss our business, ESG initiatives, board composition
and executive compensation program.
Our 2022 non-binding advisory Say-on-Pay vote received 54.4% support, which the members of our compensation committee and
board took seriously given previous fiscal years’ strong stockholder support for our executive compensation program. As in past years,
we discussed our compensation programs with significant stockholders in the fall of 2021 (fiscal 2022) and based on the feedback we
received and the results of our 2022 non-binding advisory Say-on-Pay vote, we intensified our stockholder outreach through the fall
of 2022 (fiscal 2023). These stockholder meetings included discussions of the April 2021 retention equity (time-based stock options)
granted to our executive officers and our plans to grant performance-based equity. In our most recent outreach effort in the fall of
2022, we contacted stockholders representing over 55% of our outstanding common stock. 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 our intensified stockholder outreach, we learned that our stockholders generally supported our annual executive
compensation program and the alignment between executive officer pay and our company’s performance, but a number of
stockholders expressed concern over the retention stock option grants and a preference for performance-based equity in lieu of stock
options.
Based in part on the stockholder feedback we received in these discussions, our compensation committee implemented a new PSU
program for our executive officers in fiscal 2023, other than our CEO and our COO who requested that they not be granted annual
equity awards in fiscal 2023. Based on fiscal 2023 performance, no PSUs were earned under the one-year performance period
covering fiscal 2023. For fiscal 2024, we continued to expand our PSU program, increasing the percentage of our overall equity grants
to executive officers that are comprised of PSUs.
In March 2023, we also introduced robust stock ownership guidelines for our named executive officers, encouraging even more
alignment of the interests of our named executive officers and our stockholders.
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 non-binding advisory 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, though, for fiscal 2023, our CEO and COO, who are our co-founders, requested that our compensation
committee refrain from granting them annual equity awards and to instead use the shares that would have been granted to them for
grants to other employees. 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
Compensation Discussion and Analysis
Okta, Inc.
2023 Proxy Statement
37
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.
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 draws upon its members’ experience and 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 encourage 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.
Compensation Discussion and Analysis
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2023 Proxy Statement
Okta, Inc.
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, a short-term
incentive compensation opportunity and long-term incentive compensation in the form of equity awards. 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 shares that would have been granted to them for grants to 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 other matters.
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 2023, 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 2021, with the assistance of Compensia, our compensation committee reviewed our compensation peer group used for
compensation decisions for fiscal 2023, which was generally developed from publicly-traded companies with three primary
characteristics:
•
a focus on software, with an emphasis on application software, internet and services and systems software business models;
•
revenue of approximately $500 million to approximately $3 billion (0.5 to 3.0 times our last four fiscal quarters’ revenue of
approximately $1 billion); and
•
a market capitalization of approximately $9 billion to approximately $151 billion (within a range of 0.25 to 4.0 times our 30-day
average market capitalization of approximately $37.7 billion in September 2021).
Compensation Discussion and Analysis
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2023 Proxy Statement
39
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 Dropbox and, due to its acquisition,
Slack Technologies from the compensation peer group and added Cloudflare, Dynatrace, Snowflake, The Trade Desk and Workday for
fiscal 2023.
Based on the foregoing, in September 2021 our compensation committee approved the following compensation peer group to assist
with the determination of fiscal 2023 compensation for our executive officers:
Cloudflare
MongoDB
The Trade Desk
Coupa Software
Palo Alto Networks
Twilio
CrowdStrike Holdings
Paycom Software
Veeva Systems
Datadog
RingCentral
Workday
DocuSign
ServiceNow
Zendesk
Dynatrace
Snowflake
Zoom Video Communications
HubSpot
Splunk
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 18 of our 21 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 adjusts 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 annual 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, including medical, dental and vision
insurance, a 401(k) plan, life and disability insurance, flexible spending accounts, an employee stock purchase plan and other plans and
programs made available to all our eligible employees.
We believe these elements provide a compensation package that attracts and retains qualified individuals, links individual
performance to company performance, focuses the efforts of our 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 based on our stock
price. Our compensation committee recognizes the importance of base salaries as an element of compensation that helps to attract
and retain highly qualified executive talent.
At the beginning of each year, our compensation committee reviews, and adjusts as necessary, the annual base salaries for each of our
executive officers, including our CEO. Our compensation committee does not apply specific formulas in setting annual 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 annual base salaries that are competitive with current market practice (as reflected
by our compensation peer group and/or selected broad-based compensation surveys).
In March 2022, in connection with its review of our executive compensation program, our compensation committee reviewed the
annual base salaries of our executive officers, including our then-incumbent named executive officers, and determined that the annual
base salary of our CEO would remain the same as in effect for fiscal 2022. Our compensation committee also determined to increase
the annual base salary of Mr. Tighe by 20%, the annual base salary of Mr. Runyan by 25% and the annual base salary of Ms. St. Ledger
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2023 Proxy Statement
Okta, Inc.
by 5%, each in recognition of their performance during the past fiscal year and to more closely align with competitive market
compensation levels for similarly-situated executives.
The annual base salaries of our then-incumbent named executive officers for fiscal 2023 as determined in March 2022 were as
follows:
Annual Base Salaries for Fiscal 2023
Named Executive Officer
Fiscal 2022 Annual Base Salary
($)
Fiscal 2023 Annual Base Salary(1)
($)
Percentage Increase in Annual
Base Salary
Mr. McKinnon
306,000
306,000
—
Mr. Tighe
400,000
480,000
20%
Mr. Runyan
371,728
464,660
25%
Ms. St. Ledger
525,000
551,250
5%
(1)
Base salary changes were effective February 1, 2022.
In connection with his appointment as our CAO effective August 15, 2022, our compensation committee approved an initial annual
base salary for Mr. Ninan of $380,000, based on a variety of factors, including Mr. Ninan’s qualifications, experience, compensation
with his prior employer and competitive market data.
The base salaries actually paid to our named executive officers during fiscal 2023 are set forth in the “Fiscal 2023 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 related target levels 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 annual 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 March 2022, our compensation committee adopted the performance criteria and related target levels under the Bonus Plan for
fiscal 2023. As adopted, the Bonus Plan provided for an annual performance period.
Target Annual Incentive Compensation Opportunities
In March 2022, in connection with its review of our executive compensation program, our compensation committee determined that
the target annual incentive compensation opportunity for Mr. Runyan would be increased to 70% of his annual base salary in
recognition of his performance during the past fiscal year and to more closely align with competitive market compensation levels for
similarly-situated executives, while the target annual incentive compensation opportunities of our CEO and other then-incumbent
named executive officers would remain the same as in effect for fiscal 2022.
The target annual incentive compensation opportunities of our then-incumbent named executive officers for fiscal 2023 as
determined in March 2022 were as follows:
Target Annual Incentive Compensation Opportunities for Fiscal 2023
Named Executive Officer
Fiscal 2023 Annual Base Salary
($)
Target Annual Incentive
Compensation Opportunity as
Percentage
of Base Salary
Target Annual Incentive
Compensation Opportunity Under
the Bonus Plan
($)
Mr. McKinnon
306,000
65%
198,900
Mr. Tighe
480,000
65%
312,000
Mr. Runyan
464,660
70%
325,262
Ms. St. Ledger
551,250
100%
551,250
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2023 Proxy Statement
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In connection with his appointment as our CAO effective August 15, 2022, our compensation committee approved an initial target
annual incentive compensation opportunity for Mr. Ninan equal to 45% of his annual base salary, or $171,000 on an annualized basis,
but pro-rated for his period of actual employment in fiscal 2023, based on a variety of factors, including Mr. Ninan’s level within our
company, qualifications, experience, target bonus opportunity with his prior employer and competitive market data.
Corporate Performance Measures
To measure performance for purposes of the Bonus Plan, in March 2022 our compensation committee selected revenue (weighted
70%) and non-GAAP operating income (weighted 30%) as the corporate performance measures that best supported our annual
operating plan and enhanced long-term value creation for our stockholders. For this purpose:
•
“revenue” meant GAAP revenue as reflected in our quarterly and annual financial statements; and
•
“non-GAAP operating income” meant GAAP operating income as reflected in our quarterly and annual financial statements,
adjusted to exclude expenses related to stock-based compensation, non-cash charitable contributions, amortization of acquired
intangibles, acquisition- and integration-related expenses, restructuring costs related to severance and termination benefits and
lease impairments in connection with the closing of certain leased facilities, amortization of debt discount, amortization of debt
issuance costs and loss on early extinguishment of debt.
Bonus Plan Funding Methodology
The threshold, target and maximum performance goals for each metric and the percentage of target bonus earned at each
performance level for 2023 annual incentive awards were as follows:
Annual Bonus Plan Metrics
Revenue
(70% weight)
Non-GAAP Operating Income
(30% weight)
Total Revenue
(in millions)
($)
Percentage of
Target Goal
Achieved
Percentage of
Target Bonus
Earned
Total Non-GAAP
Operating Income
(in millions)
($)
Percentage of
Target Goal
Achieved
Percentage of
Target Bonus
Earned
Maximum
2,169.6
115%
150%
(125.4)
125%
150%
Target
1,886.8
100%
100%
(167.2)
100%
100%
Threshold
1,698.1
90%
25%
(183.9)
90%
50%
If actual performance for fiscal 2023 was less than 90% of the applicable performance target, no payment would be earned with
respect to that target. Our compensation committee set high thresholds to ensure that incentive payments would require significant
achievement. Total payouts were capped at 150% of the target annual cash incentive opportunities to manage potential incentive
compensation costs and avoid incentivizing undue risk in our executive compensation program, while still maintaining appropriate
incentives for our named executive officers.
With respect to the revenue component, for each additional 2% achievement between 90% and 100% of target, the percentage of
target bonus earned would increase by 15%, and for each additional 3% achievement between 100% and 115% of target, the
percentage of target bonus earned would increase by 10%, with a maximum bonus percentage of 150% of target.
With respect to the non-GAAP operating income component, for each additional 2% achievement between 90% and 100% of target,
the percentage of target bonus earned would increase by 10%, and for each additional 5% achievement between 100% and 125% of
target, the percentage of target bonus earned would increase by 10%, with a maximum bonus percentage of 150% of target.
Compensation Discussion and Analysis
42
2023 Proxy Statement
Okta, Inc.
Performance in Fiscal 2023 and Payouts
In February 2023, our compensation committee assessed our performance and determined payouts under the Bonus Plan using the
process described above. First, our compensation committee measured actual Bonus Plan performance against the pre-established
target levels for the fiscal year. Then, our compensation committee exercised its negative discretion to determine the actual payout.
For fiscal 2023, our achievement against the target performance levels under the Bonus Plan was as follows:
Performance Measure
Target
($)
Result
($)
Actual Achievement
of Target
Revenue
1,886.8 million
1,858.3 million
98%
Non-GAAP Operating Income
(167.2 million)
(35.0 million)
179%
For the full fiscal year, our achievement of the revenue performance measure resulted in payment funding of 89% and our
achievement of the non-GAAP operating income performance measure resulted in payment funding of 150%. Based on a relative
weighting of 70% for the revenue performance measure and 30% for the non-GAAP operating income performance measure, the total
achievement percentage for fiscal 2023 was 107.1%. After considering the recommendation of our CEO, our compensation
committee exercised negative discretion and reduced our named executive officer bonus payouts to 45%, consistent with the payout
level of the bonus program applicable to our broader employee population.
As a result, the total payouts to our named executive officers under the Bonus Plan in fiscal 2023 were as follows:
Bonus Plan Payouts for Fiscal 2023
Named Executive Officer
Fiscal 2023 Target Annual Incentive
Compensation Opportunity
($)
Fiscal 2023 Actual Annual Incentive
Compensation Payout
($)
Mr. McKinnon
198,900
89,505
Mr. Tighe
312,000
140,400
Mr. Ninan(1)
79,644
35,840
Mr. Runyan
325,262
146,368
Ms. St. Ledger
551,250
248,063
(1)
Mr. Ninan’s target annual incentive compensation opportunity was pro-rated to reflect his partial year of employment.
The Bonus Plan provides that the incentive compensation payouts to current executive officers for periods of service as executive
officers may 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. Consequently, on March 15, 2023, our named executive officers were
granted fully-vested RSU awards to satisfy their payouts earned under the Bonus Plan for fiscal 2023 for the following number of
units:
Bonus Plan Payouts for Fiscal 2023
Named Executive Officer
Fiscal 2023 Actual Number of Units Received as
Annual Incentive Compensation Payout
(#)
Mr. McKinnon
1,188
Mr. Tighe
1,864
Mr. Ninan
476
Mr. Runyan
1,943
Ms. St. Ledger was paid in cash pursuant to her Separation Agreement.
Each fully-vested RSU was settled for one share of our Class A common stock.
The grant date fair values of the RSUs earned by our named executive officers during fiscal 2023 under the Bonus Plan are set forth in
the “Fiscal 2023 Summary Compensation Table” below.
Compensation Discussion and Analysis
Okta, Inc.
2023 Proxy Statement
43
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. In fiscal 2023, long-term equity awards were granted in the form of RSUs and PSUs.
In prior fiscal years, our compensation committee granted equity awards in the form of options to purchase shares of our Class A
common stock and service-based RSU awards settled in shares of our Class A common stock. In fiscal 2023, our compensation
committee decided to replace stock options with PSU awards that may be earned and settled in shares of our Class A common stock,
contingent on achievement of performance goals. The purpose of this change was to be responsive to stockholder feedback and to
strengthen the overall performance orientation of our executive compensation program and further align the economic interests of
our executive officers with those of our stockholders.
PSU awards provide a direct link between compensation and stockholder return, motivating our executive officers to focus on and
strive to achieve both our annual and long-term financial and strategic objectives.
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 Class A common stock and are less dilutive than stock options to our stockholders. Since their value increases with any
increase in the value of the underlying shares, RSU awards serve as an incentive which aligns with the long-term interests of our
executive officers and stockholders. Unlike stock options, however, RSU awards have real economic value when they vest even if the
market price of our Class A common stock declines or stays flat, thus delivering more predictable value to our executive officers.
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 2023, our compensation committee determined that the annual equity awards to be granted to our executive officers,
including our then-incumbent named executive officers, should be a mix of service-based RSU awards (50% for the CEO and 75% for
other executive officers) and PSU awards (50% for the CEO and 25% for other executive officers).
In determining the aggregate value of the equity awards granted to our executive officers in fiscal 2023, 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. In addition, our compensation committee considers the factors described in “Compensation-Setting
Process—Role of the Compensation Committee” above.
In March 2022, our compensation committee granted the following annual equity awards to our then-incumbent named executive
officers, other than our CEO who requested that he not be granted an annual equity award in fiscal 2023:
Annual Equity Awards for Fiscal 2023
Named Executive Officer
PSU Awards that May be
Earned and Settled in Shares
of our Class A Common Stock
(value of underlying stock
based on target performance)
($)
PSU Awards that May be
Earned and Settled in
Shares of our Class A
Common Stock (target
number of shares)(1)
RSU Awards that May be
Settled in Shares of our Class
A Common Stock (value)
($)
RSU Awards that May be
Settled in Shares of our
Class A Common Stock
(number of shares)(2)
Mr. McKinnon
—
—
—
—
Mr. Tighe(3)
4,500,000
24,428
13,500,000
73,282
Mr. Runyan
3,750,000
20,357
11,250,000
61,069
Ms. St. Ledger
2,250,000
12,214
6,750,000
36,641
(1)
The number of shares of our Class A common stock subject to these PSU awards based on target performance 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 2022, which was $184.22 per share.
(2)
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 2022, which was $184.22 per share.
(3)
Mr. Tighe’s equity award was granted to him in connection with his appointment as our permanent CFO effective January 28, 2022.
Compensation Discussion and Analysis
44
2023 Proxy Statement
Okta, Inc.
PSU Awards
The PSU awards granted in fiscal 2023 to our named executive officers are to be earned, if at all, based on the performance of our total
stockholder return (“TSR”) relative to the TSR of the companies comprising the Nasdaq Composite Index (the “Index”) during three
performance periods: a one-year period from February 1, 2022 through January 31, 2023 (“Performance Period 1”), a two-year period
from February 1, 2022 through January 31, 2024 (“Performance Period 2”) and a three-year period from February 1, 2022 through
January 31, 2025 (“Performance Period 3”).
The number of units earned (and accordingly, the number of shares of our Class A common stock issuable) for each performance
period will be determined by multiplying the Achievement Factor (as defined below) for such performance period by one-third of the
total number of units granted to the named executive officer, subject to such named executive officer remaining in our service as a
director, consultant or employee through March 15th of the calendar year in which the applicable performance period ends.
Following the end of each performance period, our compensation committee will compare our TSR to the TSR of the Index for that
performance period, and determine the Achievement Factor, based on our relative TSR achievement (“Relative TSR”). The following
table shows how the Achievement Factor for each performance period will be determined:
Relative TSR for Performance Periods 1 and 2
Achievement Factor
Below the 30th percentile of the Nasdaq Composite
0
At the 30th percentile of the Nasdaq Composite
0.5
At or above the 55th percentile of the Nasdaq Composite
1
Relative TSR for Performance Period 3
Achievement Factor(1)
Below the 30th percentile of the Nasdaq Composite
0
At the 30th percentile of the Nasdaq Composite
Prior Achievement Sum greater than or equal to 1 = 0.5
Prior Achievement Sum less than 1 = 1.5 less the Prior Achievement Sum
At the 55th percentile of the Nasdaq Composite
3 less the Prior Achievement Sum
At or above the 90th percentile of the Nasdaq Composite
6 less the Prior Achievement Sum
(1)
“Prior Achievement Sum” means the sum of the Achievement Factors for Performance Period 1 and Performance Period 2.
If the Relative TSR achieved during the applicable performance period is between two of the achievement levels indicated in the
tables above, the Achievement Factor for that performance period will be determined using linear interpolation. The maximum
number of PSUs that can be earned for all three performance periods combined is 200% of the number of PSUs granted.
RSU Awards
The annual fiscal 2023 RSU awards granted to the named executive officers vested as to 6.25% of the award on June 15, 2022, with
the remaining units vesting in 15 equal quarterly installments thereafter, subject to the named executive officer’s continuous
employment with us through each applicable vesting date. Each unit granted pursuant to the RSU awards represents a contingent
right to receive one share of our Class A common stock upon vesting.
PSU Achievement for Performance Period 1
In February 2023, our compensation committee determined that, based on our TSR relative to the TSR of the Index, the Achievement
Factor for Performance Period 1 was zero. Consequently, our named executive officers did not earn any PSUs (or underlying shares of
our Class A common stock) for Performance Period 1.
Mr. Ninan’s New Hire Equity Award
On September 22, 2022, in connection with Mr. Ninan’s appointment as our CAO, our compensation committee granted to Mr. Ninan
an award of 35,134 time-based RSUs, with a target value of $3,500,000, which was converted into a number of RSUs using the
average closing trading price of our Class A common stock over the month of August 2022. This RSU award vests over four years as
described in the “Fiscal 2023 Grants of Plan-Based Awards Table” below.
The equity awards granted to our named executive officers in fiscal 2023 are set forth in the “Fiscal 2023 Summary Compensation
Table” and the “Fiscal 2023 Grants of Plan-Based Awards Table” below.
Compensation Discussion and Analysis
Okta, Inc.
2023 Proxy Statement
45
Employee Benefit Programs
Our named executive officers are eligible to participate in all of our employee benefit plans offered to U.S. employees, including our
401(k) plan, employee stock purchase plan and medical, dental, life and disability insurance plans, in each case on the same basis as
other U.S. employees.
Perquisites and Other Personal Benefits
We typically provide limited or no perquisites or personal benefits to our named executive officers. During fiscal 2023, 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 President, Worldwide Field Operations, 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.
401(k) Plan
We maintain a tax-qualified retirement plan, with company matching contributions of up to $5,000 per calendar year, that provides all
regular U.S. employees, including our executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Under
our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan,
subject to applicable annual limits under the U.S. Internal Revenue Code (the “Code”). Pre-tax contributions are allocated to each
participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions.
Employee elective deferrals are 100% vested at all times. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and
earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all contributions are
deductible by us when made.
Post-Employment Compensation Arrangements
Not in Connection with a Change in Control
Our Executive Severance Plan provides that upon the termination of employment of an eligible participant by us for any reason other
than for “cause” (as defined in the Executive Severance Plan), death or disability outside of the “change-in-control period” (defined as
the period beginning three months prior to and ending 12 months after a Sale Event, as defined in the 2017 Plan), an eligible
participant will be entitled to receive, subject to the timely 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
Our 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 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 timely execution and delivery of an effective general 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 incentive compensation opportunity;
•
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.
Compensation Discussion and Analysis
46
2023 Proxy Statement
Okta, Inc.
The payments and benefits provided under our 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
Our compensation committee has adopted a policy that upon the termination of employment of any employee due to death, all equity
awards that vest solely based on continued service to our company (that is, stock options and RSU awards) 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.
PSU Treatment on Death, Disability or Change in Control
The terms of the PSU award agreement provide for the following treatment on a termination of services:
•
Disability: Upon a termination due to disability, the participant’s service will be deemed to have continued through each vesting
date, and the participant’s unvested PSUs will be eligible to vest on the vesting date to the extent the applicable performance goals
are achieved.
•
Death: Upon a termination due to death, for each performance period that is complete as of the date of death, the participant’s
service will be deemed to have continued through the applicable vesting date, and the participant’s unvested PSUs will be eligible
to vest on the vesting date to the extent the applicable performance goals are achieved, and for each performance period that is
not complete as of the date of death, the unvested PSUs attributable to each performance period will accelerate as of the date of
death and vest as though a Relative TSR in the 55th percentile had been achieved.
•
Sale Event: In the event of a Sale Event (as defined in the 2017 Plan) prior to the end of Performance Period 3, then a number of
PSUs determined based on the Achievement Factor calculated for each performance period as of a date prior to the Sale Event by
the 2017 Plan’s administrator will vest, subject to the PSU holder remaining employed with the company through the effective
date of the Sale Event.
Ms. St. Ledger’s Transition Agreement
In connection with her decision to retire as our President, Worldwide Field Operations effective as of January 31, 2023, we entered
into a Transition Agreement and Release, dated November 28, 2022, with Ms. St. Ledger (the “St. Ledger Agreement”), whereby Ms.
St. Ledger ceased being an executive officer and our President, Worldwide Field Operations effective and beginning February 1, 2023.
Under the terms of the St. Ledger Agreement, Ms. St. Ledger remains as a non-executive employee to provide such transition and
advisory services as requested by us through (i) October 31, 2023 (the “Transition Date”) or (ii) such earlier date determined by us or
Ms. St. Ledger. Ms. St. Ledger will continue to receive her fiscal 2023 annual base salary and her equity awards will continue to vest
during this transition period. In addition, Ms. St. Ledger was also eligible to receive an annual cash performance bonus for fiscal 2023
based on the achievement of corporate performance goals as described in “Elements of Our Executive Compensation Program—
Annual Performance-Based Incentive Compensation” above. In addition, if Ms. St. Ledger provides services through the Transition
Date, she will be eligible to receive, subject to her timely execution and non-revocation of a general release of claims, (i) a lump sum
cash payment equal to two months of her annual base salary and (ii) payment of her monthly COBRA premiums for continued
coverage under our health plans for two months following the Transition Date.
Mr. Runyan’s Transition Agreement
In connection with his decision to retire as our General Counsel effective as of March 3, 2023, we entered into a Transition Agreement
and Release, dated February 27, 2023, with Mr. Runyan (the “Runyan Agreement”), whereby Mr. Runyan ceased being an executive
officer and our General Counsel effective March 3, 2023. Under the terms of the Runyan Agreement, Mr. Runyan remains as a non-
executive employee to provide such transition and advisory services as requested by us through (i) September 15, 2023 or (ii) such
earlier date determined by us or Mr. Runyan. Mr. Runyan will continue to receive his fiscal 2023 annual base salary and his equity
awards will continue to vest during this transition period.
Compensation Discussion and Analysis
Okta, Inc.
2023 Proxy Statement
47
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 Chief Legal Officer (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 Nasdaq has adopted a SEC-approved listing standard that complies with the SEC’s recently finalized clawback
rules for executive officer incentive compensation.
Mandatory Stock Ownership Guidelines
Our compensation committee believes that stock ownership by our executive officers and board is important to promote a long-term
perspective and align the interests of our executive officers and directors with those of our stockholders. In March 2023, our
compensation committee adopted mandatory stock ownership guidelines for our executive officers and directors, which require each
executive officer and director to hold shares of our common stock with an aggregate value equal to at least a specified multiple of each
executive officer’s base salary, or each director’s annual cash board retainer, as applicable. This is intended to create clear guidelines
that tie a portion of the executive officers’ and directors’ net worth to the performance of our common stock price. The current stock
ownership guidelines are as follows:
CEO
Other Executive Officers
Directors
Multiple of Base Salary/Board Retainer
5x
1x
3x
Executive officers have five years from their date of hire or promotion to a position subject to a higher ownership threshold to satisfy
the required level of stock ownership. Directors have five years from their board appointment to satisfy the required level of stock
ownership. Our compensation committee reviews progress against these guidelines and requirements annually and will update them
as appropriate. As of the most recent review of attainment, each of our executive officers and directors had satisfied the ownership
guidelines.
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 Exchange Act Rule 10b5-1. 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.
Compensation Discussion and Analysis
48
2023 Proxy Statement
Okta, Inc.
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 our company that exceed certain prescribed limits, and that our 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 be exempt from 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, RSUs, PSUs 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.
Compensation Discussion and Analysis
Okta, Inc.
2023 Proxy Statement
49
Executive Compensation
Fiscal 2023 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 2023, 2022 and 2021.
Name and Principal
Position(1)
Fiscal
Year
Salary
($)
Stock Awards
($)(2)
Option Awards
($)(3)
Non-Equity
Incentive Plan
Compensation
($)(4)
All Other
Compensation
($)
Total
($)
Todd McKinnon
CEO(5)
2023
306,000
—
—
98,853
7,337
412,190
2022
306,000
7,412,097
23,899,745
165,312
37,323
31,820,477
2021
306,000
6,070,523
5,551,843
202,646
—
12,131,012
Brett Tighe
CFO(6)
2023
480,000
18,174,779
—
155,103
5,738
18,815,620
2022
385,031
4,824,969
—
174,248
—
5,384,248
Shibu Ninan
CAO(7)
2023
175,606
1,941,505
—
39,608
2,280
2,158,999
Jonathan T. Runyan
Former General
Counsel(8)
2023
464,660
15,145,861
—
161,677
5,840
15,778,038
2022
371,728
1,482,584
14,339,897
154,589
—
16,348,798
2021
331,900
2,159,103
1,943,123
169,253
—
4,603,379
Susan St. Ledger
Former President,
Worldwide Field
Operations(9)
2023
551,250
9,087,541
—
248,063
68,491
9,955,345
2022
525,000
34,526,428
—
436,365
—
35,487,793
(1)
Mr. Ninan was not a named executive officer in fiscal 2022 and 2021 and Mr. Tighe and Ms. St. Ledger were not named executive officers in fiscal 2021 so their
compensation is not presented for those periods. Mr. Runyan and Ms. St. Ledger retired from the roles of General Counsel and President, Worldwide Field Operations,
respectively, after the end of fiscal 2023. Mr. McKinnon serves on our board but is not paid compensation for such service.
(2)
The amounts reported represent the aggregate grant date fair values of the RSUs granted to our named executive officers in fiscal 2023, 2022 and 2021 and the PSUs
granted to our named executive officers in fiscal 2023, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair values of
the RSUs are set forth in the notes to our consolidated financial statements included in our 2023 Annual Report. The grant date fair values of the PSUs were calculated
based on the application of a Monte Carlo simulation model to determine the probable outcomes of the market-based performance conditions. These amounts do not
necessarily correspond to the actual value recognized by our named executive officers.
The Monte Carlo valuation method simulates a range of possible future stock prices for our company and the Index using certain inputs. Such inputs for the PSUs
granted in fiscal 2023 consisted of the following:
Year of Grant
Expected Term(a)
Stock Price Volatility(b)
Risk-Free
Interest Rate(c)
Company
Index
2022
2.86 years
49.18%
72.31%
2.34%
(a) Based on the time period from the grant date to the end of the longest performance period (the “simulation term”).
(b) Based on historical stock price volatility over the 2.86 years prior to the date of grant.
(c) Derived from the continuously compounded yield on zero-coupon U.S. Treasury STRIPS as of the grant date for a period equivalent to the simulation term.
The vesting conditions and other terms of the PSU awards are discussed in more detail in the “Compensation Discussion and Analysis" above and the “Fiscal 2023
Grants of Plan-Based Awards Table” and “Fiscal 2023 Outstanding Equity Awards at Fiscal Year-End Table” below.
(3)
The amounts reported represent the aggregate grant date fair values of the stock options granted to our named executive officers in fiscal 2022 and 2021, calculated
in accordance with ASC Topic 718. No stock options were granted to our named executive officers in fiscal 2023. The assumptions used in calculating the grant date
fair value are set forth in the notes to our consolidated financial statements included in our 2023 Annual Report. These amounts do not necessarily correspond to the
actual values recognized by the named executive officers.
(4)
The amounts reported represent the aggregate annual performance-based cash incentives earned in fiscal 2023, 2022 and 2021, based upon the achievement of
certain company metrics. For fiscal 2023, the amount reported for Ms. St. Ledger was paid in cash pursuant to her transition agreement as described above in
“Compensation Discussion and Analysis–Post-Employment Compensation Arrangements–Ms. St. Ledger's Transition Agreement.” Otherwise, for fiscal 2023, 2022
and 2021, 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 2023, the
RSUs were granted on March 15, 2023 in the following numbers: Mr. McKinnon: 1,188 RSUs; Mr. Tighe: 1,864 RSUs; Mr. Ninan: 476 RSUs; and Mr. Runyan: 1,943
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 2023 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 2023 and Payouts.”
50
2023 Proxy Statement
Okta, Inc.
(5)
Mr. McKinnon's fiscal 2023 "All Other Compensation" includes (a) $5,417 for 401(k) matching contributions by the company, (b) $1,242 for term life insurance
premium payments by the company and (c) $678 for a tax gross-up related to the incremental cost of travel and attendance by Mr. McKinnon's spouse at a company-
sponsored event.
(6)
Mr. Tighe's fiscal 2023 "All Other Compensation" includes (a) $5,175 for 401(k) matching contributions by the company and (b) $563 for term life insurance premium
payments by the company.
(7)
Mr. Ninan's fiscal 2023 stock awards include an initial RSU award in connection with his appointment as our CAO in August 2022 as described above in
“Compensation Discussion and Analysis–Elements of Our Executive Compensation Program–Long-Term Incentive Compensation–Mr. Ninan’s New Hire Equity
Award.” Mr. Ninan's fiscal 2023 "All Other Compensation" includes (a) $1,875 for 401(k) matching contributions by the company and (b) $405 for term life insurance
premium payments by the company.
(8)
Mr. Runyan's fiscal 2023 "All Other Compensation" includes (a) $1,250 for 401(k) matching contributions by the company, (b) $810 for term life insurance premium
payments by the company and (c) $3,780 for a tax gross-up related to the incremental cost of travel and attendance by Mr. Runyan's spouse at a company-sponsored
event.
(9)
Ms. St. Ledger's fiscal 2023 "All Other Compensation" includes (a) $2,917 for 401(k) matching contributions by the company, (b) $2,322 for term life insurance
premium payments by the company, (c) $3,844 for the incremental cost of travel and attendance by Ms. St. Ledger's guest at a company-sponsored event and $3,780
for the related tax gross-up and (d) $55,628 for costs related to personal security.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
51
Fiscal 2023 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to all plan-based awards granted to our named executive officers
during fiscal 2023.
Name
Award Type
Grant
Date
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
All Other Stock
Awards: Number
of Shares of
Stock or Units
(#)(3)
Grant Date Fair
Value of Stock
and Option
Awards
($)(4)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Todd McKinnon
FY22 Bonus
RSU(5)
3/15/2022
—
—
—
—
—
—
1,110
165,312
Annual Cash
—
29,835
198,900
298,350
—
—
—
—
—
Brett Tighe
FY22 Bonus
RSU(5)
3/15/2022
—
—
—
—
—
—
1,170
174,248
Annual Cash
—
46,800
312,000
468,000
—
—
—
—
—
Annual RSU(6)
3/22/2022
—
—
—
—
—
—
73,282
12,196,323
Annual PSU
3/22/2022
—
—
—
4,071
24,428
48,856
—
5,978,456
Shibu Ninan
Annual Cash
—
11,947
79,644
119,466
—
—
—
—
—
Initial RSU(7)
9/22/2022
—
—
—
—
—
—
35,134
1,941,505
Jonathan T. Runyan
FY22 Bonus
RSU(5)
3/15/2022
—
—
—
—
—
—
1,038
154,589
Annual Cash
—
48,789
325,262
487,893
—
—
—
—
—
Annual RSU(6)
3/22/2022
—
—
—
—
—
—
61,069
10,163,714
Annual PSU
3/22/2022
—
—
—
3,393
20,357
40,714
—
4,982,147
Susan St. Ledger
FY22 Bonus
RSU(5)
3/15/2022
—
—
—
—
—
—
2,930
436,365
Annual Cash
—
82,688
551,250
826,875
—
—
—
—
—
Annual RSU(6)
3/22/2022
—
—
—
—
—
—
36,641
6,098,162
Annual PSU
3/22/2022
—
—
—
2,036
12,214
24,428
—
2,989,379
(1)
This column sets forth the fiscal 2023 target bonus amount for each of our named executive officers under our Bonus Plan. “Threshold” refers to the minimum amount
payable for a certain level of performance; “Target” refers to the amount payable if specified performance targets are reached; and “Maximum” refers to the maximum
payout possible. Target bonuses were set as a percentage of each named executive officer’s base salary earned for fiscal 2023 as follows: 65% for each of Messrs.
McKinnon and Tighe, 45% for Mr. Ninan, 70% for Mr. Runyan and 100% for Ms. St. Ledger. The threshold, target and maximum amounts shown for Mr. Ninan are pro-
rated to reflect his August 2022 hire date. The dollar values of the actual bonus awards earned by the named executive officers are set forth in the “Fiscal 2023
Summary Compensation Table” above. Pursuant to the Bonus Plan, the actual bonus awards for Messrs. McKinnon, Tighe, Ninan and Runyan were paid out in fully-
vested RSUs, instead of cash. The bonus award for Ms. St. Ledger was paid in cash pursuant to her transition agreement as described in “Compensation Discussion and
Analysis–Post-Employment Compensation Arrangements–Ms. St. Ledger's Transition Agreement” above. The amounts set forth in this column do not represent either
additional or actual compensation earned by the named executive officers for fiscal 2023. For a description of the Bonus Plan, see “Compensation Discussion and
Analysis–Annual Performance-Based Incentives” above.
(2)
Annual PSUs represent shares of Class A common stock subject to the PSU awards granted to each of Messrs. Tighe and Runyan and Ms. St. Ledger in fiscal 2023.
These columns show the awards that were possible at the threshold, target and maximum levels of performance. PSUs were to be earned based upon our TSR relative
to the TSR of the Index during three performance periods, as described in "Compensation Discussion and Analysis–Long-Term Incentive Compensation–PSU Awards"
above. Ultimately, PSUs could be earned from 0% (if threshold levels of performance were not achieved) to a maximum of 200% of target. PSUs are subject to potential
vesting acceleration as described in “Compensation Discussion and Analysis–Post-Employment Compensation Arrangements” above and “Potential Payments upon
Termination or Change in Control” below.
(3)
Annual RSUs were granted under the 2017 Plan. RSUs are subject to potential vesting acceleration as described in “Compensation Discussion and Analysis–Post-
Employment Compensation Arrangements” above and “Potential Payments upon Termination or Change in Control” below.
(4)
The amounts reported represent the aggregate grant date fair values of equity awards granted to our named executive officers in fiscal 2023, calculated in accordance
with ASC Topic 718. The assumptions used in calculating the grant date fair values of (a) RSUs are set forth in the notes to our consolidated financial statements
included in our 2023 Annual Report and (b) PSUs are set forth in footnote 2 of the “Fiscal 2023 Summary Compensation Table” above. These amounts do not
necessarily correspond to the actual values recognized by our named executive officers.
(5)
FY22 Bonus RSUs represent annual performance-based cash incentives earned in fiscal 2022 pursuant to the Bonus Plan but paid in the form of fully-vested RSUs
granted on March 15, 2022 (fiscal 2023) in amounts as determined in accordance with our Grant Policy. These amounts are reported above as fiscal 2022
compensation in the “Non-Equity Incentive Plan Compensation” column of the “Fiscal 2023 Summary Compensation Table” above.
(6)
These annual RSU awards vested as to 6.25% of the shares of Class A common stock underlying the RSU award on June 15, 2022, and vest as to the remainder of the
shares in 15 equal quarterly installments thereafter, in each case, subject to continuous service.
(7)
Mr. Ninan's initial RSU award vests as to 25% of the shares of Class A common stock underlying the RSU award on September 15, 2023, and vests as to the remainder
of the shares in 12 equal quarterly installments thereafter, in each case, subject to continuous service.
Executive Compensation
52
2023 Proxy Statement
Okta, Inc.
Fiscal 2023 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,
2023.
Option Awards(1)(2)
Stock Awards(2)
Vesting
Commencement
Date
Number of Securities
Underlying Unexercised
Options
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested(3)
($)
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(3)
($)
Name
Grant Date
Exercisable
(#)
Unexercisable
(#)
Todd McKinnon
8/28/2015(4)
8/1/2015
181,053
—
7.17
8/27/2025
—
—
—
—
7/30/2016(4)
7/29/2016
1,794,803
—
8.97
7/29/2026
—
—
—
—
3/22/2018(4)
2/1/2018
5,438
—
39.21
3/21/2028
—
—
—
—
3/25/2019(5)
2/1/2019
29,947
2,304
82.16
3/24/2029
—
—
—
—
3/25/2019(6)
3/15/2019
—
—
—
—
3,181
234,153
—
—
4/15/2020(5)
2/1/2020
24,186
24,186
142.47
4/14/2030
—
—
—
—
4/15/2020(6)
3/15/2020
—
—
—
—
13,213
972,609
—
—
4/22/2021(5)
2/1/2021
30,506
33,161
274.96
4/21/2031
—
—
—
—
4/22/2021(6)
3/15/2021
—
—
—
—
15,163
1,116,148
—
—
4/22/2021(5)
2/1/2021
61,013
66,321
274.96
4/21/2031
—
—
—
—
Brett Tighe
6/15/2019(6)
6/15/2019
—
—
—
—
933
68,678
—
—
6/16/2020(7)
6/15/2020
—
—
—
—
1,811
133,308
—
—
12/17/2020(7)
12/15/2020
—
—
—
—
3,320
244,385
—
—
3/26/2021(7)
3/15/2021
—
—
—
—
1,820
133,970
—
—
3/22/2022(7)
3/15/2022
—
—
—
—
59,542
4,382,887
—
—
3/22/2022(8)
2/1/2022
—
—
—
—
—
—
12,214
899,073
Shibu Ninan
9/22/2022(6)
9/15/2022
—
—
—
—
35,134
2,586,214
—
—
Jonathan T. Runyan
7/30/2016(4)
7/29/2016
134,900
—
8.97
7/29/2026
—
—
—
—
3/22/2018(4)
2/1/2018
52,000
—
39.21
3/21/2028
—
—
—
—
3/25/2019(5)
2/1/2019
31,842
678
82.16
3/24/2029
—
—
—
—
3/25/2019(6)
3/15/2019
—
—
—
—
936
68,899
—
—
4/15/2020(5)
2/1/2020
22,789
8,466
142.47
4/14/2030
—
—
—
—
4/15/2020(6)
3/15/2020
—
—
—
—
4,624
340,373
—
—
4/22/2021(5)
2/1/2021
6,101
6,633
274.96
4/21/2031
—
—
—
—
4/22/2021(6)
3/15/2021
—
—
—
—
3,033
223,259
—
—
4/22/2021(5)
2/1/2021
48,810
53,057
274.96
4/21/2031
—
—
—
—
3/22/2022(7)
3/15/2022
—
—
—
—
49,619
3,652,455
—
—
3/22/2022(8)
2/1/2022
—
—
—
—
—
—
10,179
749,276
Susan St. Ledger
3/15/2021(9)
3/15/2021
—
—
—
—
24,261
1,785,852
—
—
3/22/2022(7)
3/15/2022
—
—
—
—
29,771
2,191,443
—
—
3/22/2022(8)
2/1/2022
—
—
—
—
—
—
6,107
449,536
(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.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
53
(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) (such termination of
employment or resignation, a “termination without cause or with good reason in connection with a change in control”), 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. PSUs are subject to potential vesting acceleration
as described in “Compensation Discussion and Analysis–Post-Employment Compensation Arrangements” above and “Potential Payments upon Termination or
Change in Control” below.
(3)
These columns represent the market value of the shares underlying the RSUs or PSUs as of January 31, 2023, based on the closing price of our Class A common stock,
as reported on Nasdaq, of $73.61 per share on January 31, 2023.
(4)
The stock options are fully vested and exercisable.
(5)
25% of the shares underlying the options vested 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.
(6)
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.
(7)
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.
(8)
Represents PSUs reported based on threshold levels of achievement. PSUs are earned based upon our TSR relative to the TSR of the Index during three performance
periods, as described in "Compensation Discussion and Analysis—Long-Term Incentive Compensation—PSU Awards" above. While reflected in the table based on
threshold performance, no PSUs were earned for the fiscal 2023 performance period. PSUs are subject to potential vesting acceleration as described in
“Compensation Discussion and Analysis—Post-Employment Compensation Arrangements” above and “Potential Payments upon Termination or Change in Control”
below.
(9)
25% of the shares underlying the award vested 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.
Executive Compensation
54
2023 Proxy Statement
Okta, Inc.
Fiscal 2023 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 2023.
Option Awards
Stock Awards
Name
Number of Shares
Acquired on
Exercise
(#)
Value Realized
on Exercise
($)(1)
Number of Shares
Acquired on
Vesting
(#)
Value Realized
on Vesting
($)(2)
Todd McKinnon
347,915
18,574,889
39,726
4,187,018
Brett Tighe
69,046
3,724,608
30,680
2,872,578
Shibu Ninan
—
—
—
—
Jonathan T. Runyan
100
10,944
23,694
2,143,425
Susan St. Ledger
—
—
82,582
6,492,962
(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.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
55
Potential Payments upon Termination or Change in Control
Employment Offer Letters in Place During Fiscal 2023 for Named Executive Officers
We entered into employment offer letters with Messrs. McKinnon and Runyan in February 2017, with Ms. St. Ledger in September
2020, with Mr. Tighe in January 2022 and with Mr. Ninan in June 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.
Executive Severance Plan and Death-Related Equity Acceleration Policy
Each of our serving named executive officers also participates in our Executive Severance Plan, as described above under the heading
“Compensation Discussion and Analysis—Post-Employment Compensation Arrangements,” 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.
PSU Treatment on Death, Disability or Change in Control
The terms of the PSU award agreement provide for the following treatment on a termination of services:
•
Disability: Upon a termination due to disability, the participant’s service will be deemed to have continued through each vesting
date, and the participant’s unvested PSUs will be eligible to vest on the vesting date to the extent the applicable performance goals
are achieved.
•
Death: Upon a termination due to death, for each performance period that is complete as of the date of death, the participant’s
service will be deemed to have continued through the applicable vesting date, and the participant’s unvested PSUs will be eligible
to vest on the vesting date to the extent the applicable performance goals are achieved, and for each performance period that is
not complete as of the date of death, the unvested PSUs attributable to each performance period will accelerate as of the date of
death and vest at target.
•
Sale Event: In the event of a Sale Event (as defined in the 2017 Plan) prior to the end of Performance Period 3, then a number of
PSUs determined based on the Achievement Factor calculated for each performance period as of a date prior to the Sale Event by
the 2017 Plan’s administrator will vest, subject to the PSU holder remaining employed with the company through the effective
date of the Sale Event.
Transition Agreement with Ms. St. Ledger
As described in “Compensation Discussion and Analysis—Post-Employment Compensation Arrangements—Ms. St. Ledger’s Transition
Agreement” above, in connection with Ms. St. Ledger’s retirement as our President, Worldwide Field Operations effective January 31,
2023, we entered into the St. Ledger Agreement whereby Ms. St. Ledger ceased being an executive officer and our President,
Worldwide Field Operations effective and beginning February 1, 2023. Under the terms of the St. Ledger Agreement, Ms. St. Ledger
will continue to receive her fiscal 2023 annual base salary and her equity awards will continue to vest while providing transition
services, and Ms. St. Ledger was paid an annual cash performance bonus for fiscal 2023 based on the achievement of corporate
performance goals. Specifically, during the transition period, Ms. St. Ledger:
•
will continue to receive her annual base salary of $551,250;
•
will continue to participate in our benefit plans;
•
received her fiscal 2023 bonus amount of $248,063 paid in cash pursuant to the St. Ledger Agreement; and
•
will continue to vest in all RSUs previously granted to her under our 2017 Plan.
In addition, if Ms. St. Ledger provides services through the Transition Date, she will be eligible to receive, subject to her timely
execution and non-revocation of a general release of claims, (i) a lump sum cash payment equal to two months of her annual base
salary and (ii) payment of her monthly COBRA premiums for continued coverage under our health plans for two months following the
Transition Date.
Transition Agreement with Mr. Runyan
In connection with Mr. Runyan’s retirement as our General Counsel effective March 3, 2023, we entered into the Runyan Agreement
whereby Mr. Runyan ceased being an executive officer and our General Counsel effective March 3, 2023. Under the terms of the
Runyan Agreement, Mr. Runyan remains as a non-executive employee to provide such transition and advisory services as requested
by us through (i) September 15, 2023 or (ii) such earlier date determined by us or Mr. Runyan. During this transition period, Mr.
Runyan will continue to receive his fiscal 2023 annual base salary and continue to vest in any outstanding equity awards that he held
Executive Compensation
56
2023 Proxy Statement
Okta, Inc.
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. Runyan:
•
will continue to receive his annual base salary of $464,660;
•
will continue to participate in our benefit plans;
•
received his fiscal 2023 bonus paid in fully-vested RSUs for the performance period ended January 31, 2023 in accordance with
the terms and conditions of the Bonus Plan; and
•
will 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.
The following table presents information concerning (i) for each of Messrs. McKinnon, Tighe and Ninan, estimated payments and
benefits that would be provided pursuant to the arrangements described above and (ii) for each of Ms. St. Ledger and Mr. Runyan,
estimated payments and benefits that would be provided pursuant to the arrangements described above, as in effect at fiscal 2023
year-end. See “Transition Agreement with Ms. St. Ledger” and “Transition Agreement with Mr. Runyan” above for a description of
actual amounts to be paid to Ms. St. Ledger and Mr. Runyan, respectively, based on their transition agreements. The estimated
payments and benefits set forth below assume that the termination of employment or change-in-control event occurred on the last
business day of fiscal 2023, January 31, 2023, and a per share value of our common stock of $73.61, which is the closing market price
per share of our Class A common stock on such date. Actual payments and benefits could be different if such events were to occur on
any other date or at any other price or if any other assumptions are used to estimate potential payments and benefits.
Todd McKinnon
Cash Severance
306,000
657,900
—
—
Health Benefits
32,721
49,081
—
—
Equity Acceleration(1)
—
2,322,911
2,322,911
—
Total
338,721
3,029,892
2,322,911
—
Brett Tighe
Cash Severance
360,000
792,000
—
—
Health Benefits
24,541
32,721
—
—
Equity Acceleration(1)
—
6,761,373
6,761,373
—
Total
384,541
7,586,094
6,761,373
—
Shibu Ninan
Cash Severance
285,000
551,000
—
—
Health Benefits
18,960
25,281
—
—
Equity Acceleration(1)
—
2,586,214
2,586,214
—
Total
303,960
3,162,495
2,586,214
—
Jonathan T. Runyan(2)
Cash Severance
348,495
789,922
—
—
Health Benefits
24,541
32,721
—
—
Equity Acceleration(1)
—
5,783,464
5,783,464
—
Total
373,036
6,606,107
5,783,464
—
Susan St. Ledger(3)
Cash Severance
413,438
1,102,500
—
—
Health Benefits
7,884
10,511
—
—
Equity Acceleration(1)(4)
—
4,876,368
4,876,368
1,785,852
Total
421,322
5,989,379
4,876,368
1,785,852
Name
Benefit
Termination without
Cause Not in
Connection with a
Change in Control
($)
Termination without
Cause or with Good
Reason in Connection
with a Change in Control
($)
Death
($)
Disability
($)
(1)
The value of stock option and RSU award vesting acceleration is based on the closing price of $73.61 per share of our Class A common stock as of January 31, 2023,
minus, in the case of stock options, the exercise price of the unvested stock option shares subject to acceleration. The value of PSU award vesting acceleration is based
on the closing price of $73.61 per share of our Class A common stock as of January 31, 2023 and reflects (a) with respect to a termination without cause or with good
reason in connection with a change in control, acceleration of the number of shares of our Class A common stock subject to the PSU award based on target
performance, (b) with respect to the named executive officer’s death on January 31, 2023, Achievement Factors of 0, 1 and 2 for Performance Periods 1, 2 and 3,
respectively and (c) with respect to a change in control on January 31, 2023 without termination, forfeiture of the entire PSU award.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
57
(2)
See “Transition Agreement with Mr. Runyan” above for a description of actual amounts to be paid to Mr. Runyan based upon the Runyan Agreement, which was
entered into in March 2023 (fiscal 2024).
(3)
See “Transition Agreement with Ms. St. Ledger” above for a description of actual amounts to be paid to Ms. St. Ledger based upon the St. Ledger Agreement.
(4)
The shares underlying Ms. St. Ledger’s initial RSU award with a grant date of March 15, 2021 accelerate and fully vest upon disability pursuant to her offer letter.
Executive Compensation
58
2023 Proxy Statement
Okta, Inc.
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 for fiscal 2023 (our “CEO pay ratio”).
•
The median of the annual total compensation of all employees of our company (other than our CEO) was $233,825
•
The annual total compensation of our CEO was $412,190
•
The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 2 to 1
This ratio is a reasonable estimate calculated in a manner consistent with SEC rules. In evaluating this information, it should be noted
that the ratio is lower than in prior fiscal years because our CEO, at his request, did not receive an annual equity award in fiscal 2023.
Since it has been three years since we last identified our previous median employee, we conducted a new analysis to identify our
median employee for fiscal 2023 as follows:
Initially, we examined the compensation of all our full-time employees (other than our CEO) as of January 31, 2023, the last day of
fiscal 2023. 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. Aside from four interns, we did not have any temporary or seasonal employees as of January 31, 2023.
We used a consistently applied compensation measure consisting of 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, 2022 through January 31, 2023 to identify our
median employee. For simplicity and consistency across our organization, we used annual base salary rate. Equity awards granted
during the year were included using the same methodology we use for reporting the grant date fair value of the equity awards granted
to our named executive officers and reported 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, 2023. 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 employee’s fiscal 2023 annual total compensation using the same methodology that we use for determining the
annual total compensation of our named executive officers as reported in the “Fiscal 2023 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 2023
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.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
59
Pay Versus Performance Table
In accordance with SEC rules, the following table sets forth additional information concerning the compensation of our CEO (our
“PEO”) and our other named executive officers (our “Non-PEO NEOs” and together with our PEO, our “NEOs”) for each of fiscal years
2021, 2022 and 2023, and our financial and TSR performance for each such fiscal year.
The amounts below shown for compensation actually paid do not represent the aggregate value of cash and shares of common stock
received by our NEOs during the year, but rather is an amount calculated in accordance with SEC rules and includes, among other
things, year-over-year changes in the value of unvested equity awards. As a result of the calculation methodology required by the SEC,
compensation actually paid amounts below differ from compensation actually earned, realized or received by the individuals.
Pay Versus Performance
Year
(1)
Summary
Compensation
Table Total for
PEO
(2)
Compensation
Actually Paid
for PEO
(3)
Average
Summary
Compensation
Table Total for
Non-PEO
NEOs
(4)
Average
Compensation
Actually Paid
for Non-PEO
NEOs
(5)
Value of Initial Fixed $100
Investment Based On:
Net Income
Company-
Selected
Measure:
Revenue
(8)
Total
Shareholder
Return
(6)
Peer Group
Total
Shareholder
Return
(7)
2023
$412,190
-$21,077,609
$11,677,001
-$425,392
$57
$146
-$815,000,000
$1,858,000,000
2022
$31,820,477
$7,266,404
$15,547,789
$6,358,859
$155
$173
-$848,000,000
$1,300,000,000
2021
$12,131,012
$188,220,074
$5,622,552
$54,801,184
$202
$137
-$266,000,000
$835,000,000
(1)
The PEOs and Non-PEO NEOs included in the above columns reflect the following:
Fiscal Year
PEO (CEO)
Non-PEO NEOs
2023
Todd McKinnon
Jonathan Runyan, Brett Tighe, Susan St. Ledger, Shibu Ninan
2022
Todd McKinnon
William Losch, Frederic Kerrest, Jonathan Runyan, Brett Tighe, Susan St. Ledger, Michael Kourey
2021
Todd McKinnon
William Losch, Frederic Kerrest, Charles Race, Jonathan Runyan
(2)
Amounts reported in this column represent the total compensation reported in the Summary Compensation Table for the indicated fiscal year for our PEO.
(3)
Amounts reported in this column represent the compensation actually paid to our PEO, based on his total compensation reported in the Summary Compensation
Table for each of the indicated fiscal years and adjusted as shown in the table below:
PEO
2021
2022
2023
Summary Compensation Table - Total Compensation
(a)
$12,131,012 $31,820,477
$412,190
— Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal Year
(b)
$11,851,866 $31,311,842
$0
+
Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option
Awards Granted in Fiscal Year
(c)
$24,600,742 $18,370,703
$0
+
Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards
Granted in Prior Fiscal Years
(d)
$74,645,323
-$6,877,916 -$12,500,749
+
Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That
Vested During Fiscal Year
(e)
$378,989
$0
$0
+
Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in
Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During
Fiscal Year
(f)
$88,315,874
-$4,735,019
-$8,989,050
— Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards Granted in
Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
(g)
$0
$0
$0
=
Compensation Actually Paid
$188,220,074
$7,266,404 -$21,077,609
a.
Represents Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year.
b.
Represents the aggregate grant date fair value of the stock awards and option awards granted to our PEO during the indicated fiscal year, computed in
accordance with ASC Topic 718.
•
In fiscal 2021, our NEOs were given the option to elect to receive all or a portion of their salary in the form of RSUs that would vest quarterly
over a 12-month period. Mr. McKinnon elected to receive $276,534 in RSUs in lieu of base salary. This value has been added to the sum of the
amount reported in the stock awards and option awards column for fiscal 2021 (as has been the premium payable in RSUs for electing to
receive equity in lieu of cash). Since this value (plus the premium) represented compensation that fluctuated in value as it vested, the entire
amount has been included in calculating compensation actually paid.
Executive Compensation
60
2023 Proxy Statement
Okta, Inc.
c.
Represents the aggregate fair value as of the indicated fiscal year-end of our PEO's outstanding and unvested stock awards and option awards granted
during such fiscal year, computed in accordance with ASC Topic 718.
d.
Represents the aggregate change in fair value (from the prior fiscal year-end) during the indicated fiscal year of the outstanding and unvested stock awards
and option awards held by our PEO as of the last day of the indicated fiscal year, computed in accordance with ASC Topic 718 and, for awards subject to
performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the indicated
fiscal year.
e.
Represents the aggregate fair value at vesting of the stock awards and option awards that were granted to our PEO and vested during the indicated fiscal
year, computed in accordance with ASC Topic 718.
f.
Represents the aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award and option award held by
our PEO that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with ASC Topic 718.
g.
Represents the aggregate fair value as of the last day of the prior fiscal year of our PEO's stock awards and option awards that were granted in a prior fiscal
year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with ASC Topic 718.
(4)
Amounts reported in this column represent the average of the total compensation reported in the Summary Compensation Table for the indicated fiscal year for our
Non-PEO NEOs. Please see footnote (1) for our NEOs included in the average for each indicated fiscal year.
(5)
Amounts reported in this column represent the average compensation actually paid to our Non-PEO NEOs in the indicated fiscal year, based on the average total
compensation for our Non-PEO NEOs reported in the Summary Compensation Table for each of the indicated fiscal years and adjusted as shown in the table below:
Non-PEO NEO Average
2021
2022
2023
Summary Compensation Table - Total Compensation
(a)
$5,622,552 $15,547,789
$11,677,001
— Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal Year
(b)
$5,233,926 $14,950,405
$11,087,422
+
Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and Option
Awards Granted in Fiscal Year
(c)
$10,801,563
$6,586,929
$4,189,535
+
Change in Fair Value of Outstanding and Unvested Stock Awards and Option Awards
Granted in Prior Fiscal Years
(d)
$23,140,229
-$1,740,914
-$2,399,986
+
Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal Year That
Vested During Fiscal Year
(e)
$323,664
$2,647,596
$578,225
+
Change in Fair Value as of Vesting Date of Stock Awards and Option Awards Granted in
Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During
Fiscal Year
(f)
$20,147,101
-$940,687
-$3,382,745
— Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards Granted in
Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
(g)
$0
$791,448
$0
=
Compensation Actually Paid
$54,801,184
$6,358,859
-$425,392
a.
Represents the average Total Compensation as reported in the Summary Compensation Table for the reported Non-PEO NEOs in the indicated fiscal year.
b.
Represents the average aggregate grant date fair value of the stock awards and option awards granted to our Non-PEO NEOs during the indicated fiscal
year, computed in accordance with ASC Topic 718.
•
In fiscal 2021, our NEOs were given the option to elect to receive all or a portion of their salary in the form of RSUs that would vest quarterly
over a 12-month period. On average, our Non-PEO NEOs elected to receive $314,503 in RSUs in lieu of base salary. This value has been added
to the sum of the amount reported in the stock awards and option awards column for fiscal 2021 (as has been the premium payable in RSUs for
electing to receive equity in lieu of cash). Since this value (plus the premium) represented compensation that fluctuated in value as it vested,
the entire amount has been included in calculating compensation actually paid.
c.
Represents the average aggregate fair value as of the indicated fiscal year-end of our Non-PEO NEOs’ outstanding and unvested stock awards and option
awards granted during such fiscal year, computed in accordance with ASC Topic 718.
d.
Represents the average aggregate change in fair value (from the prior fiscal year-end) during the indicated fiscal year of the outstanding and unvested
stock awards and option awards held by our Non-PEO NEOs as of the last day of the indicated fiscal year, computed in accordance with ASC Topic 718
and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the
last day of the indicated fiscal year.
e.
Represents the average aggregate fair value at vesting of the stock awards and option awards that were granted to our Non-PEO NEOs and vested during
the indicated fiscal year, computed in accordance with ASC Topic 718.
f.
Represents the average aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award and option award
held by our Non-PEO NEOs that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with ASC
Topic 718.
g.
Represents the average aggregate fair value as of the last day of the prior fiscal year of our Non-PEO NEOs’ stock awards and option awards that were
granted in a prior fiscal year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with ASC Topic
718.
(6)
Pursuant to Item 402(v) of Regulation S-K, the comparison assumes $100 was invested on January 31, 2020 in our common stock. Historic stock price performance is
not necessarily indicative of future stock price performance.
(7)
The TSR Peer Group consists of the S&P 500 Information Technology Index, an independently prepared index.
(8)
We have selected revenue as the Company-Selected Measure because it is a core driver of our performance and stockholder value creation and, accordingly, was
utilized in the Bonus Plan.
Executive Compensation
Okta, Inc.
2023 Proxy Statement
61
Relationship Between Pay and Performance
Below are graphs showing the relationship of “Compensation Actually Paid” to our PEO and our non-PEO NEOs in our fiscal years
2021, 2022 and 2023 to (i) the TSR of both our common stock and the S&P 500 Information Technology Index, (ii) our net income and
(iii) our revenue.
Executive Compensation
62
2023 Proxy Statement
Okta, Inc.
Tabular List of Financial Performance Measures
The following is a list of financial performance measures, which in the company’s assessment represent the most important financial
performance measures used by the company to link compensation actually paid to our PEO and our Non-PEO NEOs for fiscal 2023 to
company performance:
•
Revenue
•
Non-GAAP Operating Income
•
Relative TSR
Executive Compensation
Okta, Inc.
2023 Proxy Statement
63
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, 2023.
Compensation Committee
Michael Stankey (Chair)
Robert L. Dixon, Jr.
Rebecca Saeger
64
2023 Proxy Statement
Okta, Inc.
Equity Compensation
Plan Information
The following table provides information as of January 31, 2023 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”).
Equity Compensation Plan Information
Plan category
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))
(a)
(b)
(c)
Equity compensation plans approved by security holders(1):
14,915,646(2)
45.2781(3)
32,058,768(4)
Equity compensation plans not approved by security holders(5):
—
—
—
Total
14,915,646
45.2781
32,058,768
(1)
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, 2023, a total of 45,822,345 shares of our Class A common stock had been authorized for issuance pursuant to the 2017
Plan, which number excludes the 8,065,451 shares that were added to the 2017 Plan as a result of the automatic annual increase on February 1, 2023. 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, 2023, a total of 6,831,282 shares of our Class A
common stock had been reserved for issuance pursuant to the 2017 ESPP, which number excludes the 1,613,090 shares that were added to the 2017 ESPP as a result
of the automatic annual increase on February 1, 2023. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our
capitalization.
(2)
Includes 5,806,797 shares of Class A and Class B common stock issuable upon the exercise of outstanding options and 9,108,849 shares of Class A common stock
issuable upon the vesting of RSUs.
(3)
As RSUs do not have any exercise price, such units are not included in the weighted average exercise price calculation.
(4)
As of January 31, 2023, there were 25,227,486 shares of Class A common stock available for grant under the 2017 Plan and 6,831,282 shares of Class A common
stock available for grant under the 2017 ESPP.
(5)
Excludes (i) 546,142 shares of Class A common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $29.4384 per share and
(ii) 266,618 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.
2023 Proxy Statement
65
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, 2023 for:
•
each person or group of affiliated persons 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 154,983,511 shares of our Class A common stock and 7,299,891 shares
of our Class B common stock outstanding on April 1, 2023. We have deemed shares of our common stock subject to options that are
currently exercisable or exercisable within 60 days of April 1, 2023 and RSUs that are releasable within 60 days of April 1, 2023 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
Total
Voting
%†
Total
Ownership
%
Shares
%
Shares
%
5% Stockholders
Entities affiliated with The Vanguard Group(1)
14,043,781
9.1%
—
—
6.2%
8.7%
Entities affiliated with BlackRock(2)
9,705,940
6.3%
—
—
4.3%
6.0%
Entities affiliated with FMR(3)
8,385,387
5.4%
—
—
3.7%
5.2%
Directors and Named Executive Officers
Shellye Archambeau(4)
8,664
*
—
—
*
*
Emilie Choi
—
—
—
—
—
—
Robert L. Dixon, Jr.(5)
3,441
*
—
—
*
*
Jeff Epstein(6)
1,818
*
—
—
*
*
Patrick Grady(7)
108,670
*
—
—
*
*
Benjamin Horowitz(8)
558,495
*
—
—
*
*
J. Frederic Kerrest(9)
261,748
*
2,772,743
32.5%
11.6%
1.9%
Todd McKinnon(10)
203,149
*
7,634,799
82.3%
30.9%
4.8%
Shibu Ninan(11)
279
*
—
—
*
*
Jonathan T. Runyan(12)
122,672
*
—
—
*
*
Rebecca Saeger(13)
7,994
*
—
—
*
*
Michael Stankey(14)
19,196
*
190,000
2.5%
*
*
Susan St. Ledger(15)
27
*
—
—
*
*
66
2023 Proxy Statement
Okta, Inc.
Brett Tighe(16)
49,451
*
69,046
*
*
*
All directors and current executive officers as a
group (13 persons)(17)
1,243,257
*
10,694,755
99.7%
41.2%
7.2%
*
Represents beneficial ownership of 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.
(1)
Based on information reported by The Vanguard Group on Schedule 13G/A filed with the SEC on February 9, 2023. Of the shares of Class A common stock beneficially
owned, The Vanguard Group reported that it has sole dispositive power with respect to 13,722,421 shares, shared dispositive power with respect to 321,360 shares,
sole voting power with respect to none of the shares and shared voting power with respect to 108,915 shares. The Vanguard Group listed its address as 100 Vanguard
Blvd., Malvern, PA 19355.
(2)
Based on information reported by BlackRock, Inc. on Schedule 13G/A filed with the SEC on February 7, 2023. BlackRock, as a parent holding company or control
person, may be deemed to beneficially own the indicated shares and has sole dispositive power over all of the shares and sole voting power over 8,829,096 shares.
BlackRock reported its beneficial ownership on behalf of itself and the following: BlackRock Life Limited, BlackRock Advisors, LLC, Aperio Group, 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, FutureAdvisor, Inc., BlackRock Investment
Management (UK) Limited, BlackRock Asset Management Canada Limited, 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.
(3)
Based on information reported by FMR LLC on Schedule 13G filed with the SEC on February 9, 2023. Of the shares of Class A common stock beneficially owned, FMR
LLC reported that it has sole dispositive power with respect to all of the shares and sole voting power with respect to 7,553,304 shares. Abigail P. Johnson, Director,
Chairman and Chief Executive Officer of FMR LLC, and members of the Johnson family, through their ownership of voting common shares and the execution of a
shareholders’ voting agreement with respect to FMR LLC, may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to
FMR LLC. FMR LLC listed its address as 245 Summer Street, Boston, MA 02210.
(4)
Consists of 8,664 shares of Class A common stock held of record by Ms. Archambeau.
(5)
Consists of 3,441 shares of Class A common stock held of record by Mr. Dixon.
(6)
Consists of (i) 1,340 shares of Class A common stock held of record by Mr. Epstein and (ii) 478 shares of Class A common stock underlying RSUs held by Mr. Epstein
that are releasable within 60 days of April 1, 2023.
(7)
Consists of 108,670 shares of Class A common stock held of record by Mr. Grady.
(8)
Consists of (i) 1,926 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 (i) 701 shares of Class A common stock held of record by Mr. Kerrest in an individual capacity, (ii) 261,047 shares of Class A common stock subject to
outstanding options held by Mr. Kerrest that are exercisable within 60 days of April 1, 2023, (iii) 1,237,512 shares of Class B common stock subject to outstanding
options held by Mr. Kerrest that are exercisable within 60 days of April 1, 2023, (iv) 1,191,187 shares of Class B common stock held of record by Mr. Kerrest and his
wife, as trustees of the Kerrest Family Revocable Trust, (v) 257,668 shares of Class B common stock held of record by KIT Holdings LLC and (vi) 86,376 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 manager of KIT Holdings LLC, has voting and dispositive power with respect to the shares held of record
by KIT Holdings LLC. 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.
(10)
Consists of (i) 26,395 shares of Class A common stock held of record by Mr. McKinnon in an individual capacity, (ii) 176,754 shares of Class A common stock subject to
outstanding options held by Mr. McKinnon that are exercisable within 60 days of April 1, 2023, (iii) 1,975,856 shares of Class B common stock subject to outstanding
options held by Mr. McKinnon that are exercisable within 60 days of April 1, 2023, (iv) 5,530,696 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.
(11)
Consists of 279 shares of Class A common stock held of record by Mr. Ninan.
(12)
Consists of (i) 297 shares of Class A common stock held of record by Mr. Runyan in an individual capacity and (ii) 122,375 shares of Class A common stock subject to
outstanding options held by Mr. Runyan that are exercisable within 60 days of April 1, 2023. Mr. Runyan is no longer an executive officer.
(13)
Consists of 7,994 shares of Class A common stock held of record by Ms. Saeger.
(14)
Consists of (i) 19,196 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
held by Mr. Stankey that are exercisable within 60 days of April 1, 2023.
(15)
Consists of 27 shares of Class A common stock held of record by Ms. St. Ledger. Ms. St. Ledger is no longer an executive officer.
(16)
Consists of (i) 48,201 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 Loomis Tighe Family
Living Trust and (iii) 69,046 shares of Class B common stock held of record by the Loomis Tighe Family Living Trust.
(17)
Consists of (i) 804,978 shares of Class A common stock beneficially owned by our directors and current executive officers as a group, (ii) 437,801 shares of Class A
common stock subject to outstanding options held by our directors and current executive officers as a group that are exercisable within 60 days of April 1, 2023, (iii)
478 shares of Class A common stock underlying RSUs held by our directors and current executive officers as a group that are releasable within 60 days of April 1,
2023, (iv) 7,263,220 shares of Class B common stock beneficially owned by our directors and current executive officers as a group and (v) 3,431,535 shares of Class B
common stock subject to outstanding options held by our directors and current executive officers as a group that are exercisable within 60 days of April 1, 2023.
Security Ownership of Certain Beneficial Owners and Management
Okta, Inc.
2023 Proxy Statement
67
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, 2022 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 RSUs to our directors and executive officers and PSUs to our
executive officers. See the sections titled “Executive Compensation” and “Corporate
Governance—Non-Employee Director Compensation” for a description of these RSUs
and PSUs.
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 distributed 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.
68
2023 Proxy Statement
Okta, Inc.
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.
Certain Relationships and Related Party Transactions
Okta, Inc.
2023 Proxy Statement
69
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.
70
2023 Proxy Statement
Okta, Inc.
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, 2023
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
26-4175727
(State or Other Jurisdiction of
Incorporation or Organization)
San Francisco
(I.R.S. Employer
Identification Number)
California
94105
(Address of Principal executive offices)
Registrant’s telephone number, including area code: (888) 722-7871
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
Trading Symbol(s)
(Name of each exchange on which registered)
Class A common stock, par value $0.0001 per share
OKTA
The Nasdaq Stock Market LLC
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
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The aggregate market value of the stock of the Registrant as of July 31, 2022 (based on a closing price of $98.45 per share) held by non-
affiliates was approximately $14.9 billion. As of February 27, 2023, there were 153,987,922 shares of the Registrant’s Class A Common Stock
and 7,299,891 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 2023 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, 2023.
Okta, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2023
TABLE OF CONTENTS
Part I
Item 1.
Business
6
Item 1A.
Risk Factors
17
Item 1B.
Unresolved Staff Comments
49
Item 2.
Properties
49
Item 3.
Legal Proceedings
50
Item 4.
Mine Safety Disclosures
50
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
51
Item 6.
Removed and Reserved
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
54
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
71
Item 8.
Financial Statements and Supplementary Data
73
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
113
Item 9A.
Controls and Procedures
113
Item 9B.
Other Information
113
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
114
Item 11.
Executive Compensation
114
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
114
Item 13.
Certain Relationships and Related Transactions, and Director Independence
114
Item 14.
Principal Accountant Fees and Services
114
Part IV
Item 15.
Exhibits, Financial Statement Schedules
114
Item 16.
Form 10-K Summary
114
Page
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 and
positioning. 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 general economic, business and market conditions, including general economic downturn or
recession, market volatility, and the inflation and interest rate environment;
•
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;
•
the impact of the global COVID-19 pandemic on our business and operations;
•
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 everyone to safely use any technology,
and we believe identity is the key to making that happen. Our mission is to bring simple and secure digital access to
people and organizations everywhere. Our Workforce Identity and Customer Identity Clouds are powered by our
category-defining Okta Identity Platform that enables our customers to securely connect the right people to the right
technologies and services at the right time.
Our Workforce Identity and Customer Identity Clouds help organizations effectively harness the power of
cloud, mobile and web technologies by securing users and connecting them with the applications and technology
they use. Every day, thousands of organizations and millions of people use Okta to securely access a wide range of
cloud, mobile, web and Software-as-a-Service ("SaaS") applications, on-premises servers, application programming
interfaces ("APIs"), IT infrastructure providers and services from a multitude of devices. Employees and contractors
sign into the Workforce Identity Cloud to seamlessly and securely access the applications they need to do their
most important work. Developers leverage our Customer Identity and Workforce Identity Clouds to securely and
efficiently embed identity into the software they build, allowing them to innovate and focus on their core mission.
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 our Workforce Identity and Customer Identity Clouds.
The acceleration of digital transformations, cloud adoption 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, interoperability, 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.
As of January 31, 2023, more than 17,600 customers across nearly every industry used Okta to secure and
manage identities around the world. Our customers consist of leading global organizations ranging from the largest
enterprises, to small- and medium-sized businesses, universities, non-profits and government agencies. We partner
with leading application, infrastructure and security vendors, such as Amazon Web Services ("AWS"), CrowdStrike,
Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce,
ServiceNow, VMware, Workday, Yubico and Zscaler. We had over 7,000 integrations with cloud, mobile and web
applications and IT infrastructure providers as of January 31, 2023, which while not directly correlated to revenue,
shows the breadth and acceptance of our platform.
We employ a SaaS business model and generate revenue primarily by selling multi-year subscriptions to our
cloud-based offerings. We focus on acquiring and retaining our customers and increasing their spending with us
through expanding the number of users who access our Workforce Identity and Customer Identity Clouds and up-
selling additional products. We sell our products directly through our field and inside sales teams, as well as
indirectly through our network of channel partners, including resellers, system integrators and other distribution
partners.
6
The Okta Identity Platform
Okta 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
Okta Identity Platform is designed to securely connect users to the technology that they choose. Our Workforce
Identity and Customer Identity Clouds are underpinned by Okta Platform Services which are the foundational
platform components that power our product features. We prioritize the compatibility of our platform with public
clouds, on-premises infrastructures and hybrid clouds.
The Okta Identity Platform 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 as supported
by our Workforce Identity Cloud. 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 as supported by our
Customer Identity Cloud.
Workforce Identity Cloud
The Workforce 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. The Workforce 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. Our
customers use the Workforce 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 end users, which
combined with our open approach, enables our customers to future-proof their environments. 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. 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.
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. Okta Identity Governance, our unified identity access management and identity
governance solution, helps our customers improve their security and compliance posture while mitigating modern
security risks and increasing efficiency. Our Advanced Server Access product is designed to significantly improve
our customers’ ability to secure access to cloud-based and on-premises servers, while Access Gateway enables our
customers to extend the Workforce Identity Cloud to their existing on-premises applications. The Workforce 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
The Customer 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.
Our Customer Identity Cloud primarily supports consumer and SaaS applications. It empowers application builders
to innovate faster by removing the complexity from identity and making it simple, extensible and customizable. We
enable organizations to integrate our powerful identity platform into their cloud, web and mobile applications. This
makes it easier for them to authenticate, manage, scale and secure their applications through comprehensive APIs,
software development kits and extensive developer community tools, enabling rapid time to market for the business.
Organizations are able to streamline user experience and improve security across all their applications, leading to
increased customer acquisition, retention and loyalty.
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
7
development kits. 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, Directories, Integrations and Insights.
Growth Strategy
Key elements of our growth strategy are to:
Execute with Our Platform
•
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 strive 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 our Workforce Identity Cloud for
workforce identity, and expanding those customers’ use of our Customer Identity Cloud 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 22% of our revenue generated outside of the United States in
fiscal 2023, and our international revenue growing 53% from fiscal 2022 to fiscal 2023, 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 ecosystem, which includes over
7,000 integrations with cloud, mobile and web applications and IT infrastructure providers. We plan to
maintain these integrations as well as add new ones 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 integrate identity into any application. We believe that our Okta Identity Platform enables
developers to focus their time and attention on innovating within their core application capabilities while
relying on our platform for their identity related requirements, leading to more secure and convenient
experiences for their own customers.
•
Leverage Our Unique Data Assets with Powerful Analytics. Our position at the intersection of people,
devices, applications and infrastructure gives us unique access to powerful data, and the opportunity to
provide differentiated insights based on that data, as well as predictive capabilities based on that data to
help keep customers more secure. We expect the value of our analytics to our customer base will increase
as customers continue to connect more devices, applications and users to their networks and as we add
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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
Okta's suite of products and services is used to manage and secure identities. Most of our products can be
used for both customer identity and for workforce identity use cases and we are continuously enhancing our
products and services. 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 our Workforce Identity and Customer Identity
Clouds through the release and development of additional products, features and services.
Workforce Identity 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 Lifecycle Management, organizations can securely manage the entire identity
lifecycle, from on-boarding to off-boarding, and ensure compliance requirements are met as user roles
evolve and access levels change.
•
API Access Management. API Access Management enables organizations to secure APIs as systems
connect to each other. Access to these APIs is managed based on the user, which enables organizations to
centrally maintain one set of permissions for any employee, partner or customer across every point of
access. API Access Management reduces development time, boosts security, helps in achieving
compliance and enables seamless end user experiences by providing a unified portable service for
authorizing secure and always available access to any API.
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•
Access Gateway. Access Gateway enables organizations to extend the Workforce 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 Workforce 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.
•
Okta Identity Governance. Okta Identity Governance, also referred to as "IGA," provides a unified identity
access management and identity governance solution focused on improving an organization’s security and
compliance posture, helping customers to mitigate everyday security risks and improve IT efficiency. Okta
Identity Governance includes governance capabilities relating to access requests, access certifications and
access reporting. Through these capabilities, Okta Identity Governance simplifies and automates the
process of requesting and approving access to applications and resources.
Customer Identity 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 our
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 our customers from
different types of malicious traffic, including bots, breached passwords, suspicious IP addresses and brute
force attacks. Attack Protection enables our 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, our 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 our customers to run a dedicated cloud
instance of the Customer Identity Cloud. Private Cloud capability supports multiple cloud providers.
•
Organizations. Organizations enable our customers to support a large number of partners or customers of
their own with independent configurations, login experiences and security options.
•
Actions and Extensibility. Actions and Extensibility allows our customers to visually drag and drop
Actions to build custom identity flows that address their unique requirements.
•
Enterprise Connections. Enterprise Connections enable Enterprise Federation using pre-built integrations
with commonly used Enterprise Identity Systems.
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.
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Our Technology
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.
Okta Identity Platform with Differentiated Administration, User and Developer Experience
Okta provides one common platform and user interface framework supporting our Workforce Identity and
Customer Identity Clouds, 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 encryption requirements.
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.
Our Workforce Identity and Customer Identity Clouds are 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, DocuSign, Google, Microsoft
Office 365, NetSuite, Oracle, Palo Alto Networks, Proofpoint, Salesforce, SAP, ServiceNow, Slack, Splunk, VMware,
Workday, Zendesk 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 Customer Identity Cloud.
Our Customers
As of January 31, 2023, we had more than 17,600 customers, including more than 3,930 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.
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Sales and Marketing
Sales
We sell directly to customers through our direct 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
Okta. 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
value-added resellers ("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 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 24/7 support for the
highest support tiers as well as access to Customer Success and Technical Account Managers. We also provide on-
demand access to a robust online digital community and customer success hub where customers can find answers
to common use cases, information about product features, and interact with Okta experts and industry peers.
Professional Services
Our professional services team provides assistance to customers in the deployment of our Workforce Identity
and Customer Identity Clouds and includes identity and security experts, customized deployment plans and
SmartStart, which provides a quick path to implementation.
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Okta Community
We have created the Okta Community, an online community available to all of our customers that enables
them to connect with other customers and partners to ask questions and find answers.
Intellectual Property
We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade
secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology.
As of January 31, 2023, we had thirty-four 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 a number of patents
granted around the world including twelve issued patents in Australia which expire between 2033 and 2037, seven
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 Workforce Identity Cloud,” “Okta
Customer Identity Cloud,” “Okta WIC,” “Okta CIC,” “The World’s Identity Company,” "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.
Our Competitors
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:
•
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.
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Principal competitive factors in our markets include flexibility, independence, product capabilities, total cost of
ownership, time to value, scalability, user experience, number of pre-built integrations, customer satisfaction, global
reach and ease of integration, management and use. We believe our product strategy, platform architecture,
technology and independence as well as our company culture allow us to compete favorably on each of these
factors.
We expect competition to increase as other established and emerging companies enter our markets, as
customer requirements evolve, and as new products and technologies are introduced. We expect this to be
particularly true as we are a cloud-based offering, and our competitors may also seek to acquire new offerings or
repurpose their existing offerings to provide identity management solutions with subscription models. With the
continuing merger and acquisition activity in the technology industry, particularly transactions involving security or
identity and access management technologies, there is a greater likelihood that we will compete with other large
technology companies in the future in both the workforce identity and customer identity markets.
Additional information regarding our competition is included in Part I, Item 1A “Risk Factors” of this Annual
Report on Form 10-K.
Human Capital Resources
Our core values – love our customers, never stop innovating, act with integrity, be transparent and empower
our people – inform and guide our human capital initiatives and objectives. In order to continue to innovate and drive
customer success, it is crucial that we continue to attract, develop and retain exceptional talent and balanced
teams. 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, 2023, we had 6,013 employees, of which approximately 72% were in the United States and
28% 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 2023,
84% 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. Our “People First” philosophy, in which culture, career
growth, competitive rewards, flexible work and purpose come together, creates a shared sense of ownership in
achieving our company vision. 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. In recent 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.
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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, precise language and inclusive calibrations, 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 an affinity group
supporting neurodiversity and ERGs supporting women, people of color, veterans, the LGBTQIA+ community and
parents and caregivers.
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 through our internal
learning initiative to prepare our employees at all levels for career progression and individual development. Our
employee onboarding program helps our employees get off to the right start, our manager development program
helps to build a solid foundation for our people managers, and our technical training program quickly brings our new
technical employees up to speed on our product offerings.
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 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.
Dynamic Work
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.
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.
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:
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•
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 Okta 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.
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 131,250 shares of Class A common stock
remained reserved for future issuances as of January 31, 2023. Additional information can be found on the "Okta for
Good" page of our website at www.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.
Sustainability
In fiscal 2021, we launched our Environmental, Social and Governance (“ESG”) program. We established an
oversight structure to provide strategic direction for our ESG program. Our ESG efforts are overseen by our
executive leadership team and are reviewed by the nominating and corporate governance committee of our board
of directors. Our ESG program covers issues relevant to our business under three categories: Protecting Our
Customers, Investing in Our People and Supporting Our Communities.
We have set public commitments to climate targets. Our climate strategy to address emissions is currently
aimed at energy consumption reduction, electrification, purchasing renewable energy and engaging with vendors to
address their emissions. We have a renewable energy program, which matches our electricity consumption from
our offices, our remote workforce and cloud services with renewable electricity. Additional information on our ESG
programs and initiatives can be found in our “ESG Fact Sheet” on the “Responsibility” page of our website at
www.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.
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
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as part of our investor relations website. Further corporate governance information, including our corporate
governance guidelines and code of conduct, is also available on our investor relations website under the heading
"Corporate Governance." The contents of our websites are not intended to be incorporated by reference into this
Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our
websites are intended to be inactive textual references only.
Item 1A. Risk Factors
A description of the risks and uncertainties associated with our business is set forth below. You should
carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report
on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or
developments described below, or of additional risks and uncertainties not presently known to us or that we
currently deem immaterial, could materially and adversely affect our business, results of operations, financial
condition and growth prospects. In such an event, the market price of our Class A common stock could decline and
you could lose all or part of your investment.
Risk Factor Summary
This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all
of the information that may be important to you, and you should read this risk factor summary together with the
more detailed discussion of risks and uncertainties set forth following this summary. A summary of our risks
includes, but is not limited to, the following:
•
Adverse general economic, market and industry 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.
•
We have experienced rapid growth in recent periods, and our prior 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.
•
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.
•
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.
17
•
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.
•
In the past we have experienced and in the future we may experience cybersecurity incidents that 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 stock price of our Class A common stock may be volatile or may decline.
•
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 41.7% of the voting power of our capital stock as of
January 31, 2023. This will limit or preclude your ability to influence corporate matters, including the election
of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or
substantially all of our assets, or other major corporate transaction requiring stockholder approval.
•
Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our
business to pay our indebtedness.
•
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.
Risks Related to Our Business and Industry
Adverse general economic, market and industry 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 inflation and interest rate environment, the COVID-19 pandemic, the systemic impact of a widespread
recession (in the United States or internationally), energy costs, geopolitical issues, such as Russia’s invasion of
Ukraine, 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. For example,
rising interest rates in the United States have begun to affect businesses across many industries, including ours, by
increasing the costs of labor, employee healthcare and other components, which may further constrain our, our
customers’ and prospective customers’ budgets. To the extent there is a sustained general economic downturn and
our platforms and services are perceived by customers or potential customers as costly, or too difficult to deploy or
migrate to, our revenue may be disproportionately affected by delays or reductions in spending.
Our customers may merge with other entities who use alternative identity solutions and, during weak
economic times, there is an increased risk that one or more of our customers will file for bankruptcy protection,
either of which may harm our revenue, profitability and results of operations. We also face risk from international
customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign
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.
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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 prior 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 2021 to fiscal 2022, our revenue grew from $835 million to $1,300 million, an increase
of 56%, and from fiscal 2022 to fiscal 2023, our revenue grew from $1,300 million to $1,858 million, an increase
of 43%. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. We
believe our revenue growth depends on a number of factors, such as macroeconomic conditions including the
inflation and interest rate environment, budget constraints and the economic impact of the COVID-19 pandemic, as
well as, but not limited to, our ability to:
•
price our platform effectively so that we are able to attract and retain customers without compromising our
profitability;
•
attract new customers, successfully deploy and implement our platform, upsell or otherwise increase our
existing customers’ use of our platform, obtain customer renewals and provide our customers with excellent
customer support;
•
increase our network of channel partners, which include resellers, system integrators and other distribution
partners and independent software vendors (“ISVs”);
•
adequately expand our sales force, and maintain or increase our sales force’s productivity;
•
successfully identify and enter into agreements with suitable acquisition targets, integrate any acquisitions
and integrate acquired technologies into our existing products or use them to develop new products;
•
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.
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 $266
million, $848 million and $815 million in fiscal 2021, 2022 and 2023, 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
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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 5,030 employees as of January 31, 2022 to 6,013
employees as of January 31, 2023. 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:
•
Authentication providers;
•
Access and lifecycle management providers;
•
Multi-factor authentication providers;
•
Infrastructure-as-a-service providers;
•
Other customer identity and access management providers; and
•
Solutions developed in-house by our potential customers.
We compete with both cloud-based and on-premise enterprise application software providers. Our
competitors vary in size and in the breadth and scope of the products and services offered. However, many of our
competitors have substantial competitive advantages such as significantly greater financial, technical, sales and
marketing, distribution, customer support or other resources, larger intellectual property portfolios, longer operating
20
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.
Further, to grow our business, we must convince developers to adopt and build their applications using our
application programming interfaces (“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.
21
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 inflation and interest rate environment and increased costs, 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.
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, 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.
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.
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. Although global economic conditions have generally improved
with the rollout of COVID-19 vaccines, business activity may not recover as quickly as anticipated, including as a
result of inflationary pressures and the responses by central banking authorities to control such inflation, rising
interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased
22
unemployment rates, decreased investor and consumer confidence, political turmoil and supply chain challenges.
Despite our best efforts to manage the impact of such events effectively, our business still may be harmed.
We may experience quarterly fluctuations in our results of operations due to a number of factors that
make our future results difficult to predict and could cause our results of operations to fall below analyst or
investor expectations.
Our quarterly results of operations fluctuate from quarter to quarter as a result of a number of factors, many of
which are outside of our control and may be difficult to predict, including, but not limited to:
•
the level of demand for our platform;
•
our ability to attract new customers, obtain renewals from existing customers and upsell or otherwise
increase our existing customers’ use of our platform;
•
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, the inflation and interest rate environment and increased costs,
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;
•
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 the inflation and interest
rate environment, geopolitical uncertainty and instability.
23
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.
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, and 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. For example, we
have experienced and continue to experience aspects of such challenges in connection with our May 2021
acquisition of Auth0.
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;
24
•
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.
In addition, if an acquired business fails to meet our expectations, our business, results of operations and
financial condition could suffer.
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 continue to expand our international operations.
Our international revenue was 20% and 22% of our total revenue in fiscal 2022 and fiscal 2023, 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:
•
health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
•
macroeconomic conditions, including the inflation and interest rate environment and the economic impact of
the COVID-19 pandemic;
•
unexpected costs and errors in the localization of our products, including translation into foreign languages
and adaptation for local practices and regulatory requirements;
•
lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory
requirements, tariffs and other barriers;
•
laws and business practices favoring local competitors or commercial parties;
•
costs and liabilities related to compliance with the numerous and ever-growing landscape of U.S. and
international data privacy and cybersecurity regimes, many of which involve disparate standards and
enforcement approaches, including implementation of the recently-announced agreement in principle
between the European Union and United States to implement a successor framework to the EU-U.S.
Privacy Shield, to address cross-border data flows;
•
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;
25
•
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;
•
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.
If we fail to adapt to rapid technological change, our ability to remain competitive could be impaired.
The industry in which we compete is characterized by rapid technological change, frequent introductions of
new products and evolving industry standards. Our ability to attract new customers and increase revenue from
existing customers will depend in significant part on our ability to anticipate industry standards and trends and
continue to enhance existing products or introduce or acquire new products on a timely basis to keep pace with
technological developments. The success of any enhancement or new product depends on several factors,
including the timely completion and market acceptance of the enhancement or new product. Any new product we
develop or acquire might not be introduced in a timely or cost-effective manner and might not achieve the broad
market acceptance necessary to generate significant revenue. If any of our competitors implements new
technologies before we are able to implement them, those competitors may be able to provide more effective
products than ours at lower prices. Any delay or failure in the introduction of new or enhanced products could harm
our business, results of operations and financial condition.
Our financial results may fluctuate due to increasing variability in our sales cycles.
We plan our expenses based on certain assumptions about the length and variability of our sales cycle.
These assumptions are based upon historical trends for sales cycles and conversion rates associated with our
existing customers. As we continue to focus on sales to larger organizations and in light of the current COVID-19
environment, our sales cycles are lengthening in certain circumstances and becoming less predictable, which may
harm our financial results. Other factors that may influence the length and variability of our sales cycle include,
among other things:
•
the need to raise awareness about the uses and benefits of our platform, including our customer identity
products;
•
the need to allay privacy, regulatory and security concerns;
•
the discretionary nature of purchasing and budget cycles and decisions;
•
the competitive nature of evaluation and purchasing processes;
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•
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
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.
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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.
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. For example, in the fourth quarter of fiscal 2023, we rebranded our Okta and Auth0 product offerings,
which we now refer to as Workforce Identity Cloud and Customer Identity Cloud. 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, the inflation and interest rate environment and increased
costs. 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
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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
claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s
attention.
Actions that we are taking to restructure our business to improve profitability may not be as effective
as anticipated.
During the first quarter of fiscal 2024, we announced a world-wide restructuring plan intended to reduce
operating expenses and improve profitability. We may encounter challenges in the execution of these efforts, and
these challenges could impact our ability to execute on our business initiatives and could impact our financial
results. If we are unable to realize the expected outcomes from our restructuring efforts, our business and operating
results may be harmed.
Increased and complex scrutiny of environmental, social and governance (“ESG”) matters may
require us to incur additional costs or otherwise adversely impact our business.
Increased attention to climate change; diversity, equity and inclusion; and other ESG issues, as well as
societal expectations regarding voluntary ESG initiatives and disclosures, may result in increased costs (including
but not limited to increased costs related to compliance, stakeholder engagement and contracting), impact our
reputation, or otherwise affect our business performance. In addition, organizations that provide information to
investors on corporate governance and related matters have developed ratings processes for evaluating companies
on ESG matters. Such ratings are used by some investors to inform their investment or voting decisions.
Unfavorable ESG ratings could lead to negative investor sentiment toward us and/or our industry, which could have
a negative impact on our access to and costs of capital. To the extent ESG matters negatively impact our reputation,
we may also not be able to compete as effectively to recruit or retain employees. We may take certain actions,
including the establishment of ESG-related goals or targets, to improve our ESG profile and/or respond to
stakeholder demand; however, such actions may be costly or be subject to numerous conditions that are outside
our control, and we cannot guarantee that such actions will have the desired effect.
Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time,
many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that
may or may not be representative of current or actual risks or events or forecasts of expected risks or events,
including the costs associated therewith. Such expectations and assumptions are necessarily uncertain and may be
prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single
approach to identifying, measuring and reporting on many ESG matters. Such disclosures may also be at least
partially reliant on third-party information that we have not independently verified or cannot be independently
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verified. In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise,
with respect to ESG matters, and increased regulation will likely lead to increased compliance costs as well as
scrutiny that could heighten all of the risks identified in this risk factor. Such ESG matters may also impact our
customers, which may adversely impact our business, financial condition, or results of operations.
Risks Related to Intellectual Property, Infrastructure Technology, Data Privacy and Security
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.
Our continued growth depends, in part, on the ability of our existing and potential customers to access our
platform 24 hours a day, seven days a week, without interruption or degradation of performance. We may
experience disruptions, data loss, outages and other performance problems with our infrastructure due to a variety
of factors, including infrastructure and functionality changes, human or software errors, capacity constraints or
security-related incidents. In some instances, we may not be able to identify the cause or causes of these
performance problems immediately or in short order. We may not be able to maintain the level of service uptime and
performance required by our customers, especially during peak usage times and as our products become more
complex and our user traffic increases. If our platform is unavailable or if our customers are unable to access our
products or deploy them within a reasonable amount of time, or at all, our business would be harmed. Since our
customers rely on our service to access and complete their work, any outage on our platform would impair the
ability of our customers to perform their work, which would negatively impact our brand, reputation and customer
satisfaction. Moreover, we depend on services from various third parties to maintain our infrastructure and distribute
our products via the internet. If a service provider fails to provide sufficient capacity to support our platform or
otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which
could adversely affect their perception of our platform's reliability and our revenues. Any disruptions in these
services, including as a result of actions outside of our control, would significantly impact the continued performance
of our products. In the future, these services may not be available to us on commercially reasonable terms, or at all.
Any loss of the right to use any of these services could result in decreased functionality of our products until
equivalent technology is either developed by us or, if available from another provider, is identified, obtained and
integrated into our infrastructure. If we do not accurately predict our infrastructure capacity requirements, our
customers could experience service shortfalls. We may also be unable to effectively address capacity constraints,
upgrade our systems as needed, and continually develop our technology and network architecture to accommodate
actual and anticipated changes in technology.
Any of the above circumstances or events may harm our reputation, cause customers to terminate their
agreements with us, impair our ability to obtain subscription renewals from existing customers, impair our ability to
grow our customer base, result in the expenditure of significant financial, technical and engineering resources,
subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business,
results of operations and financial condition.
In the past we have experienced and in the future we may experience cybersecurity incidents that 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, including Okta, 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 providers’
systems), 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
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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 users’ personal data. Okta has experienced and likely will in the
future experience attacks targeting such customer data. When such breaches occur, as a result of third-party action,
technology limitations, employee or contractor error, malfeasance or otherwise, and if the confidentiality, integrity or
availability of our customers’ data or systems is 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 have in certain cases resulted in and could in the future
result in a risk of loss or unauthorized disclosure of this information, or the denial of access to this information,
which, in turn, could lead to enforcement actions, litigation, regulatory or governmental audits, investigations and
possible liability, and increased requests by individuals regarding their personal data. Security breaches could also
damage our relationships with and ability to attract customers and partners, and trigger service availability,
indemnification and other contractual obligations. Security incidents may also cause us to incur significant
investigation, mitigation, remediation, notification and other expenses. Furthermore, as a well-known provider of
identity and security solutions, any such breach, including a breach of our customers’ systems, could compromise
systems secured by our products, creating system disruptions or slowdowns and exploiting security vulnerabilities of
our or our customers’ systems, and the information stored on our or our customers’ systems could be accessed,
publicly disclosed, altered, lost or stolen, which could subject us to liability and cause us financial harm. For
example, the January 2022 compromise of one of our third-party service providers by a threat actor, even though
not material and not a breach of our product or systems, nonetheless was widely publicized and focused attention
on the security of our systems and the systems of our third-party service providers. Our disclosures concerning
security incidents also may become the subject of litigation, and our disclosures concerning the January 2022
compromise, for example, have become the subject of lawsuits, as discussed in Item 3, “Legal Proceedings” below.
While we have taken a number of remediation steps, there is no guarantee that our preventative and mitigation
actions with respect to this incident and others like it will fully eliminate the risk of a malicious compromise of our,
our third-party service providers’ 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 have induced and may continue 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 applications, 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
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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, India 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”), which took effect
on January 1, 2020, and the California Privacy Rights Act (“CPRA”), which took effect on January 1, 2023 and
significantly modifies the CCPA, broadly define personal information and give California residents expanded privacy
rights and protections and provide for civil penalties for violations and a private right of action for data breaches. The
CPRA also creates a new state agency that is vested with authority to implement and enforce the CCPA and the
CPRA. Since the CPRA passed, Virginia, Colorado, Utah and Connecticut have each passed their own
comprehensive privacy statutes that share similarities with the CCPA and CPRA and will take effect in 2023. Some
observers see this influx of state privacy regimes as 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.
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
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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.
Privacy is a mission-critical issue for Okta and for our customers. We have attained multiple privacy
certifications, such as the Asia-Pacific Economic Cooperation Privacy Recognition for Processors, and the
European Union Cloud Code of Conduct, Level 2. If we fail to maintain our privacy certifications, or if we fail to seek
expansion of their applicability to acquired and/or newly-developed products, we may fail to meet our contractual
commitments and we may fail to retain our existing customers or attract new customers, and our business, results
of operations and financial condition could suffer.
We may face particular privacy, data security and data protection risks in Europe due to stringent data
protection and privacy laws, including the European General Data Protection Regulation, and increased
scrutiny over EU-U.S. data transfers.
We are subject to the EU General Data Protection Regulation 2016/679 (“GDPR”) and 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.
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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. In June
2021, the European Commission issued new SCCs that account for the CJEU’s “Schrems II” decision. The new
SCCs must be used for relevant new data transfers, and existing SCCs arrangements were required to be migrated
to the new SCCs by December 27, 2022. These new SCCs only apply to the transfer of personal data outside the
EEA, and not the United Kingdom. The United Kingdom’s Information Commissioner’s Office released revised UK
standard contractual clauses that can be used from March 21, 2022, with a two-year grace period.
U.S. and EU officials are actively seeking a solution to replace the Privacy Shield. On March 25, 2022, the
U.S. and European Commission announced that they had agreed in principle to a new “Trans-Atlantic Data Privacy
Framework” to enable trans-Atlantic data flows and address the concerns raised in the Schrems II decision. There is
no clear timeline for the enactment of this new framework. Moreover, once enacted, the new framework is likely to
be subject to legal challenges and may be struck down by the CJEU.
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 and UK to a country outside of the EEA and UK. This
means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data
from the EEA and UK. 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 and UK to apply
different standards to the transfer of personal data from the EEA and UK to the United States, and to block, or
require ad hoc verification of measures taken with respect to, certain data flows from the EEA and UK 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 and UK 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 and UK 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 and UK relating to personal data transfers to us and
by us from the EEA and UK. 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
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 EEA and UK 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 EEA and UK are conducted in compliance with all applicable regulatory obligations, the
guidance of data protection authorities and evolving best practices. Any investigation or charges by EEA and UK
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 EEA and UK personal data within
the EEA and UK, 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.
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The Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), 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.
If we fail to maintain our security attestations and certifications, our business, results of operations
and financial condition may suffer.
Security is a mission-critical issue for Okta and for our customers. We have attained multiple certifications,
including SOC 2 Type II certifications, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC 27018:2019
certifications, and agency FedRAMP Moderate Authorities to Operate. We also support FIPS 140-2 encryption
requirements. If we fail to maintain our security attestations and certifications, or if we fail to seek expansion of their
applicability to acquired and/or newly-developed products, we may fail to meet our contractual commitments and we
may fail to retain our existing customers or attract new customers, and our business, results of operations and
financial condition could suffer.
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, 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.
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
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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;
•
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.
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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.
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.
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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 relevant accounting principles generally accepted in the United States
(“GAAP”) 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-
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.
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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 certain international
markets. Our corporate structure and associated transfer pricing policies anticipate future growth into certain
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 taxes, 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
additional taxes, existing and potential future customers may elect not to purchase our products in the future.
Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our customers’ and our
compliance, operating and other costs, as well as the costs of our products. Further, these events could decrease
the capital we have available to operate our business. Any or all of these events could harm our business and
financial performance. 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.
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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.
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 fiscal 2018 could
expire unused.
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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.
GAAP are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and
various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or
interpretations could have a significant effect on our reported financial results, and could affect the reporting of
transactions completed before the announcement of a change. Adoption of such new standards and any difficulties
in implementation of changes in accounting principles, including the ability to modify our accounting systems, could
cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm
investors’ confidence in us.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our
results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the amounts reported in our consolidated financial statements and accompanying
notes. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments
about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not
readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated
financial statements include, but are not limited to those referenced in the section titled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” 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
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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.
The trading price of our Class A common stock has been, and in the future, may be, subject to substantial
volatility and wide fluctuations. For example, from February 1, 2022 through January 31, 2023, the trading price of
our Class A common stock has ranged from $44.12 per share to $203.79 per share. 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:
•
overall performance of the equity markets and/or publicly-listed technology companies;
•
volatility in the market prices and trading volumes of technology and high-growth companies generally, or
those in our industry in particular;
•
actual or anticipated fluctuations in our revenue or other financial or operating metrics;
•
our ability to meet or exceed forward-looking guidance we have given, our ability to give forward-looking
guidance consistent with past practices, and changes to or withdrawal of previous guidance or long-range
targets;
•
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;
•
actions and investment positions taken by institutional and other stockholders, including activist investors;
•
recruitment or departure of key personnel;
•
significant security breaches, technical difficulties or interruptions of our service;
•
the economy as a whole, the inflation and interest rate environment and market and industry conditions;
•
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,
including technology companies and high-growth, unprofitable companies in particular, 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. Our involvement in securities litigation
could subject us to substantial costs, divert resources and the attention of management from our business, and
harm our business.
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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 41.7% of the voting power of our capital
stock as of January 31, 2023. 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, 2023, our directors, executive officers and their affiliates held in the aggregate 41.7% 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). 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:
•
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:
•
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
46
•
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 or raise 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;
•
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
•
place us at a disadvantage compared to our competitors who have less debt;
•
limit our ability to borrow additional amounts to fund acquisitions, for working capital and for other general
corporate purposes; and
47
•
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 conversion features of the Notes, if triggered, may adversely affect our financial condition and
results of operations.
In the event the conditional conversion features of the 2025 Notes and the 2026 Notes are 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. 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, 2023, the conditions allowing holders of the 2025 Notes to convert were not met.
From the date of issuance through January 31, 2023, 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 and could limit our ability to raise
future capital.
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 2025 Notes and 2026 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 warrant transactions with
certain financial institutions (the “2023 Notes Option Counterparties”) pursuant to which we sold warrants for the
purchase of our Class A common stock (“Warrants”). 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, 2023, we have terminated Warrants corresponding to approximately 6 million shares. As of January 31,
2023, Warrants to acquire up to approximately 1 million shares (subject to adjustment) remained outstanding.
In addition, in connection with the issuance of the 2025 Notes and 2026 Notes, we entered into capped call
transactions (“Capped Calls”) with certain financial institutions (the 2025 Notes and 2026 Notes Capped Call
Counterparties and together with the 2023 Notes Option Counterparties, the “Option Counterparties”). The Capped
Calls are generally expected to reduce potential dilution to our Class A common stock upon any conversion or
settlement of the 2025 Notes and 2026 Notes and/or offset any cash payments we are required to make in excess
of the principal amount of converted 2025 Notes and 2026 Notes, as the case may be, with such reduction and/or
offset subject to a cap.
From time to time, the Option Counterparties or their respective affiliates may modify their hedge positions by
entering into or unwinding various derivative transactions with respect to our Class A common stock and/or
purchasing or selling our Class A common stock or other securities of ours in secondary market transactions prior to
the maturity of the Notes. This activity could cause a decrease in the market price of our Class A common stock.
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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 President, Worldwide Field Operations
retired at the end of our fiscal year and our Executive Vice Chairman and co-founder is on sabbatical through
October 2023. 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.
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.
49
We believe that our facilities are suitable to meet our current needs. We intend to add new facilities, as
necessary, 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
On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District
Court for the Northern District of California against the Company and certain of its executive officers, captioned In re
Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions
concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of
Auth0. The lawsuit seeks an order certifying the lawsuit as a class action and unspecified damages.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United
States District Court for the Northern District of California against certain of its current and former executive officers
and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v.
McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the
defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the
Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The
lawsuits seek orders permitting the plaintiffs to maintain this action derivatively on behalf of the Company, awarding
unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and
requiring the Company to make certain reforms to its corporate governance and controls.
The Company intends to defend these lawsuits vigorously.
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 27, 2023, we had 104 holders of record of our Class A common stock and 17 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.
The following graph shows a five-year comparison of cumulative total return (equal to dividends plus stock
appreciation) for our Class A common stock, the Standard & Poor’s 500 Stock Index ("S&P 500 Index") and
Standard & Poor's Information Technology Index ("S&P 500 Information Technology Index"). All values assume a
$100 initial investment, and data for the S&P 500 Index and S&P 500 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.
Okta
S&P 500 Index
S&P 500 Information Technology Index
01/31/2018
01/31/2019
01/31/2020
01/31/2021
01/31/2022
01/31/2023
$0
$200
$400
$600
$800
$1,000
Company/Index
1/31/2018
1/31/2019
1/31/2020
1/31/2021
1/31/2022
1/31/2023
Okta
$
100
$
280
$
435
$
879
$
672
$
250
S&P 500 Index
100
98
119
139
172
158
S&P 500 Information Technology Index
100
99
145
199
251
212
52
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 2023 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended January 31, 2023.
Unregistered Sales of Equity Securities
In connection with conversions of certain convertible notes due in 2023 ("2023 Notes") during the fiscal year
ended January 31, 2023, we issued 355,932 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.
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. Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum
of the components reported in millions may not equal the total amount reported in millions due to rounding. In
addition, percentages presented may not add to their respective totals or recalculate due to rounding. In addition to
historical financial information, the following discussion contains forward-looking statements that are based upon
current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those set forth
under the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K. Our fiscal year
ends January 31. References to fiscal 2023, for example, refer to the fiscal year ended January 31, 2023.
Overview
Okta is the leading independent identity provider. Our Workforce Identity and Customer Identity Clouds are
powered by our category-defining Okta Identity Platform that enables our customers to securely connect the right
people to the right technologies and services at the right time. Every day, thousands of organizations and millions of
people use Okta to securely access a wide range of cloud, mobile, web and Software-as-a-Service ("SaaS")
applications, on-premises servers, application programming interfaces, IT infrastructure providers and services from
a multitude of devices. Employees and contractors sign into the Workforce Identity Cloud to seamlessly and
securely access the applications they need to do their most important work. Developers leverage our Customer
Identity and Workforce Identity Clouds to securely and efficiently embed identity into the software they build,
allowing them to innovate and focus on their core mission. Given the growth trends in the number of applications
and cloud adoption, and the movement to remote workforces, identity is becoming the most critical layer of an
organization’s security. As workforces have transitioned to fully remote and hybrid work models, Zero Trust has
become an increasingly important security model and identity an increasingly critical service. Our approach to
identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems
and external customer facing applications.
As of January 31, 2023, more than 17,600 customers across nearly every industry used Okta to secure and
manage identities around the world. Our customers consist of leading global organizations ranging from the largest
enterprises, to small and medium-sized businesses, universities, non-profits and government agencies. We also
partner with leading application, IT infrastructure and security vendors through our Okta Integration Network. As of
January 31, 2023, we had over 7,000 integrations with these cloud, mobile and web applications and IT
infrastructure and security vendors.
We employ a SaaS business model and generate revenue primarily by selling multi-year subscriptions to our
cloud-based offerings. We focus on acquiring and retaining our customers and increasing their spending with us
through expanding the number of users who access our Workforce Identity and Customer Identity Clouds and up-
selling additional products. We sell our products directly through our field and inside sales teams, as well as
indirectly through our network of channel partners, including resellers, system integrators and other distribution
partners. Our subscription fees include the use of our service and our technical support and management of our
platform. We base subscription fees primarily on the products used and the number of users on our platform. We
typically invoice customers in advance in annual installments for subscriptions to our platform.
Our revenue is relatively predictable as a result of our subscription-based business model, which constituted
approximately 97% of total revenue for fiscal 2023. Future growth may be impacted by longer sales cycles, which
we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash
flow, remaining performance obligations (“RPO”) and billings growth as well as potential future impacts on revenue
growth and other key metrics on a trailing basis.
Acquisition of Auth0
On May 3, 2021, we completed the acquisition of Auth0, Inc. ("Auth0"). The acquisition date fair value, net of
acquired cash, was approximately $5,671 million, including shares of our Class A common stock, cash, and
assumed equity awards. In addition, we issued unvested restricted stock and assumed unvested equity and
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
54
restricted cash awards, which are subject to future vesting and will be recorded as expense over the period the
services are provided. A portion of the total consideration was held back by us to secure the indemnification
obligations of the Auth0 securityholders and was paid in full during fiscal 2023.
Financial Information and Segments
We operate our business as one reportable segment. For fiscal 2023, 2022 and 2021, our revenue was
$1,858 million, $1,300 million and $835 million, respectively, representing a growth rate of 43% and 56%,
respectively. For fiscal 2023, 2022 and 2021, we generated net losses of $815 million, $848 million and $266
million, respectively. Our accumulated deficit as of January 31, 2023 was $2,475 million.
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics, to evaluate our
business, measure our performance, identify trends affecting our business, formulate business plans, and make
strategic decisions.
As of January 31,
2023
2022
2021
(dollars in millions)
Number of customers
17,600
15,000
10,000
Customers with annual contract value ("ACV") above $100,000
3,930
3,100
1,950
Dollar-based net retention rate for the trailing 12 months ended
120 %
124 %
121 %
Current remaining performance obligations
$
1,684
$
1,351
$
842
Remaining performance obligations
$
3,007
$
2,694
$
1,797
Calculated billings
$
2,123
$
1,718
$
976
Total Customers and Number of Customers with Annual Contract Value Above $100,000
As of January 31, 2023, we had over 17,600 customers on our platform. We believe that our ability to
increase the number of customers on our platform is an indicator of our market penetration, the growth of our
business, and our potential future business opportunities. Increasing awareness of our platform and capabilities,
coupled with the mainstream adoption of cloud technology, has expanded the diversity of our customer base to
include organizations of all sizes across all industries. The number of customers who have greater than $100,000 in
ACV with us was 3,930, 3,100 and 1,950 as of January 31, 2023, 2022 and 2021, 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.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
55
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.
Remaining Performance Obligations ("RPO")
RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with
customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-
cancelable amounts that will be invoiced and recognized as revenue in future periods. Current RPO represents the
portion of RPO expected to be recognized during the next 12 months. RPO fluctuates due to a number of factors,
including the timing, duration and dollar amount of customer contracts and fluctuations in foreign currency exchange
rates.
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 24% in fiscal 2023 over fiscal 2022. See the section titled “Non-GAAP Financial
Measures” for additional information and a reconciliation of Calculated Billings to total revenue.
Components of Results of Operations
Revenue
Subscription Revenue. Subscription revenue primarily consists of fees for access to and usage of our cloud-
based platform and related support. Subscription revenue is driven primarily by the number of customers, the
number of users per customer and the products used. We typically invoice customers in advance in annual
installments for subscriptions to our platform.
Professional Services and Other. Professional services revenue includes fees from assisting customers in
implementing and optimizing the use of our products. These services include application configuration, system
integration and training services.
We generally invoice customers as the work is performed for time-and-materials arrangements, and up front
for fixed fee arrangements. All professional services revenue is recognized as the services are performed.
Overhead Allocation and Employee Compensation Costs
We allocate shared costs, such as facilities costs (including rent, utilities and depreciation on assets shared
by all departments), certain information technology costs and recruiting costs to all departments based on
headcount. As such, allocated shared costs are reflected in each of the cost of revenue and operating expense
categories. Employee compensation costs reflected in each of the cost of revenue and operating expense
categories include salaries, bonuses, compensation related taxes, benefits and stock-based compensation.
Additionally included in the sales and marketing expense category are sales commissions and related taxes.
Cost of Revenue and Gross Margin
Cost of Subscription. Cost of subscription primarily consists of expenses related to hosting our services and
providing support. These expenses include employee-related costs associated with our cloud-based infrastructure
and our customer support organization, third-party hosting fees, software and maintenance costs, outside services
associated with the delivery of our subscription services, amortization expense associated with capitalized internal-
use software and acquired developed technology and allocated overhead.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
56
We intend to continue to invest additional resources in our platform infrastructure and our platform support
organizations. We will continue to invest in technology innovation and we anticipate that costs qualifying for
capitalization of internal-use software costs and related amortization may fluctuate over time. We expect our
investment in technology to expand the capability of our platform enabling us to improve our gross margin over time.
The level and timing of investment in these areas could affect our cost of subscription revenue in the future.
Cost of Professional Services and Other. Cost of professional services consists primarily of employee-related
costs for our professional services delivery team, travel-related costs, allocated overhead and costs of outside
services associated with supplementing our professional services delivery team. The cost of providing professional
services has historically been higher than the associated revenue we generate.
Gross Margin. Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin
may fluctuate from period to period as a result of the timing and amount of investments to expand our hosting
capacity, our continued efforts to build platform support and professional services teams, increased stock-based
compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and
acquired intangible assets.
Operating Expenses
Research and Development. Research and development expenses consist primarily of employee
compensation costs and allocated overhead. We believe that continued investment in our platform is important for
our growth.
Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation costs, costs
of general marketing and promotional activities, travel-related expenses, amortization expense associated with
acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade names
and allocated overhead. Commissions earned by our sales force that are considered incremental and recoverable
costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis over a period
of benefit that we have determined to be generally five years.
General and Administrative. General and administrative expenses consist primarily of employee
compensation costs for finance, accounting, legal, information technology and human resources personnel. In
addition, general and administrative expenses include acquisition and integration-related costs, non-personnel
costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting
corporate expenses, such as information technology, not allocated to other departments.
Restructuring and Other Charges. Restructuring and other charges consist primarily of personnel costs, such
as notice period, employee severance payments and termination benefits. In addition, restructuring and other
charges include certain lease impairment charges.
Interest and Other, Net
Interest and other, net consists of interest expense, which primarily includes amortization of debt discount (in
comparative periods prior to the adoption of Accounting Standards Update ("ASU") No. 2020-06, Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06")), amortization of debt issuance
costs, contractual interest expense for our 2023 Notes, convertible notes due in 2025 ("2025 Notes") and
convertible notes due in 2026 ("2026 Notes", together with the 2023 Notes and 2025 Notes, the "Notes"), interest
income from our investment holdings, and gains and losses from our strategic investments.
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.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
57
Results of Operations
The following table sets forth our results of operations for the periods presented:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Revenue
Subscription
$
1,794 $
1,249 $
797
Professional services and other
64
51
38
Total revenue
1,858
1,300
835
Cost of revenue
Subscription(1)
464
329
170
Professional services and other(1)
82
67
48
Total cost of revenue
546
396
218
Gross profit
1,312
904
617
Operating expenses
Research and development(1)
620
469
223
Sales and marketing(1)
1,066
771
427
General and administrative(1)
409
432
171
Restructuring and other charges
29
—
—
Total operating expenses
2,124
1,672
821
Operating loss
(812)
(768)
(204)
Interest expense
(11)
(91)
(73)
Interest income and other, net
22
9
13
Loss on early extinguishment and conversion of debt
—
—
(2)
Interest and other, net
11
(82)
(62)
Loss before provision for (benefit from) income taxes
(801)
(850)
(266)
Provision for (benefit from) income taxes
14
(2)
—
Net loss
$
(815) $
(848) $
(266)
(1) Includes stock-based compensation expense as follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Cost of subscription revenue
$
69 $
49 $
21
Cost of professional services and other revenue
14
12
9
Research and development
275
193
63
Sales and marketing
159
136
53
General and administrative
160
176
49
Total stock-based compensation expense
$
677 $
566 $
195
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
58
The following table sets forth our results of operations for the periods presented as a percentage of our total
revenue:
Year Ended January 31,
2023
2022
2021
Revenue
Subscription
97 %
96 %
95 %
Professional services and other
3
4
5
Total revenue
100
100
100
Cost of revenue
Subscription
25
25
20
Professional services and other
4
5
6
Total cost of revenue
29
30
26
Gross profit
71
70
74
Operating expenses
Research and development
33
36
27
Sales and marketing
58
59
51
General and administrative
22
34
20
Restructuring and other charges
2
—
—
Total operating expenses
115
129
98
Operating loss
(44)
(59)
(24)
Interest expense
(1)
(7)
(9)
Interest income and other, net
2
1
1
Loss on early extinguishment and conversion of debt
—
—
—
Interest and other, net
1
(6)
(8)
Loss before provision for (benefit from) income taxes
(43)
(65)
(32)
Provision for (benefit from) income taxes
1
—
—
Net loss
(44) %
(65) %
(32) %
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
59
A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal
2022 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2022
compared to fiscal 2021 can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2022, filed with the
SEC on March 7, 2022, 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, 2023 and 2022
Revenue
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Revenue:
Subscription
$
1,794
$
1,249
$
545
44 %
Professional services and other
64
51
13
27
Total revenue
$
1,858
$
1,300
$
558
43 %
Percentage of revenue:
Subscription
97 %
96 %
Professional services and other
3
4
Total
100 %
100 %
For fiscal 2023, subscription revenue increased primarily due to the addition of new customers, an increase in
users and sales of additional products to existing customers. The increase in revenue was attributable to a 17%
increase in total customers, from over 15,000 as of January 31, 2022, to over 17,600 as of January 31, 2023, and
revenue from existing customers as reflected in our Dollar-Based Net Retention Rate of 120% as of January 31,
2023. Additionally, as our acquisition of Auth0 was completed on May 3, 2021, subscription revenue during fiscal
2023 includes twelve months of Auth0 revenue while subscription revenue during fiscal 2022 includes approximately
nine months of Auth0 revenue.
For fiscal 2023, professional services revenue increased primarily due to an increase in implementation and
other services associated with growth in the number of new customers purchasing our subscription services.
Cost of Revenue, Gross Profit and Gross Margin
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Cost of revenue:
Subscription
$
464
$
329
$
135
41 %
Professional services and other
82
67
15
22
Total cost of revenue
$
546
$
396
$
150
38 %
Gross profit
$
1,312
$
904
$
408
45 %
Gross margin:
Subscription
74 %
74 %
Professional services and other
(27)
(32)
Total gross margin
71 %
70 %
For fiscal 2023, cost of subscription revenue increased primarily due to an increase of $69 million in employee
compensation costs related to higher headcount to support the growth in our subscription services, an increase of
$26 million in third-party hosting costs as we expanded capacity to support our growth, an increase of $17 million in
software costs and an increase in amortization of acquired developed technology of $11 million.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
60
Our gross margin for subscription revenue remained consistent at 74% during fiscal 2023. 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.
For fiscal 2023, cost of professional services and other revenue increased primarily due to an increase of $11
million in employee compensation costs related to higher headcount.
Our gross margin for professional services and other revenue improved to (27)% during fiscal 2023 from
(32)% during fiscal 2022 primarily due to increases in professional services and other revenue at a faster rate than
increases in associated costs.
Operating Expenses
Research and Development Expenses
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Research and development
$
620
$
469
$
151
32 %
Percentage of revenue
33 %
36 %
For fiscal 2023, research and development expenses increased primarily due to an increase of $139 million in
employee compensation costs related to higher headcount. We expect our research and development expenses will
increase in absolute dollars as our business grows.
Sales and Marketing Expenses
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Sales and marketing
$
1,066
$
771
$
295
38 %
Percentage of revenue
58 %
59 %
For fiscal 2023, sales and marketing expenses increased primarily due to an increase of $217 million in
employee compensation costs related to headcount growth, an increase in travel expenses of $19 million, an
increase in marketing and event costs of $16 million primarily due to increases in demand generation programs,
advertising and brand awareness efforts aimed at acquiring new customers and an increase in amortization
expense of $10 million for acquired customer relationships and trade names. We expect our sales and marketing
expenses will continue to be our largest operating expense category for the foreseeable future as we expand our
sales and marketing efforts. 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 Expenses
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
General and administrative
$
409
$
432
$
(23)
(5) %
Percentage of revenue
22 %
34 %
For fiscal 2023, general and administrative expenses decreased primarily due to a decrease in acquisition
and integration-related costs of $46 million, partially offset by increases in employee compensation and related
costs associated with headcount growth. We expect our general and administrative expenses will increase in
absolute dollars as our business grows.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
61
Restructuring and Other Charges
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Restructuring and other charges
$
29
$
—
$
29
— %
Percentage of revenue
2 %
— %
For fiscal 2023, restructuring and other charges relate to severance and termination benefit costs of $15
million and lease impairment charges of $14 million. See Note 16 to our consolidated financial statements
"Restructuring and Other Charges" for additional information.
Interest and Other, Net
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Interest expense
$
(11) $
(91) $
80
(88) %
Interest income and other, net
22
9
13
126
Interest and other, net
$
11 $
(82)
For fiscal 2023, the change in interest and other, net was primarily due to a decrease in interest expense
resulting from the adoption of ASU 2020-06 and an increase in interest income from our short-term investments. We
expected interest income from our short-term investments to continue to increase as a result of increasing interest
rates.
Provision for (Benefit from) Income Taxes
Year Ended January 31,
2023
2022
$ Change
% Change
(dollars in millions)
Provision for (benefit from) income taxes
$
14 $
(2) $
16
(1,158) %
For fiscal 2023, income tax expense resulted primarily from income from profitable foreign jurisdictions, the
tax impact of shortfalls from stock-based compensation in the United Kingdom, and state taxes.
For fiscal 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.
Non-GAAP Financial Measures
In addition to our results determined in accordance with accounting principles generally accepted in the
United States (“GAAP”), we believe the following non-GAAP measures are useful in evaluating our operating
performance. We use the below referenced non-GAAP financial information, collectively, to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information,
when taken collectively with GAAP financial measures, may be helpful to investors because it provides consistency
and comparability with past financial performance, and assists in comparisons with other companies, some of which
use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information
is presented for supplemental informational purposes only, and should not be considered a substitute for financial
information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures
used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude
significant expenses that are required by GAAP to be recorded in our financial statements. In addition, they are
subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses
are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
62
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.
We periodically reassess the components of our Non-GAAP adjustments for changes in how we evaluate our
performance, changes in how we make financial and operational decisions, and consider the use of these measures
by our competitors and peers to ensure the adjustments remain relevant and meaningful.
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. Acquisition and integration-related expenses include
transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of the
transaction close.
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Gross profit
$
1,312
$
904
$
617
Add:
Stock-based compensation expense included in cost of revenue
83
61
30
Amortization of acquired intangibles
46
34
7
Acquisition and integration-related expenses
1
2
—
Non-GAAP gross profit
$
1,442
$
1,001
$
654
Gross margin
71 %
70 %
74 %
Non-GAAP gross margin
78 %
77 %
78 %
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, acquisition and integration-related expenses and restructuring costs related to
severance and termination benefits and lease impairments in connection with the closing of certain leased facilities.
Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs
incurred through the one-year anniversary of the transaction close.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
63
In fiscal 2023, we updated our definition of Non-GAAP operating income (loss) and Non-GAAP operating
margin to include restructuring costs as defined in the preceding paragraph.
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Operating loss
$
(812)
$
(768)
$
(204)
Add:
Stock-based compensation expense
677
566
195
Non-cash charitable contributions
4
8
9
Amortization of acquired intangibles
85
64
7
Acquisition and integration-related expenses
7
56
—
Restructuring costs
29
—
—
Non-GAAP operating income (loss)
$
(10)
$
(74)
$
7
Operating margin
(44) %
(59) %
(24) %
Non-GAAP operating margin
(1) %
(6) %
1 %
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, amortization of debt
issuance costs, loss on early extinguishment and conversion of debt and restructuring costs related to severance
and termination benefits and lease impairments in connection with the closing of certain leased facilities. Acquisition
and integration-related expenses include transaction costs and other non-recurring incremental costs incurred
through the one-year anniversary of the transaction close.
In fiscal 2023, we updated our definition of Non-GAAP net income (loss) and Non-GAAP net margin to include
restructuring costs as defined in the preceding paragraph.
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 impact of our note hedge and capped call agreements on convertible senior
notes outstanding, as applicable. The note hedge and capped call agreements are intended to offset potential
dilution to our Class A common stock upon any conversion or settlement of the convertible senior notes under
certain circumstances. Accordingly, we did not record any adjustments for the potential impact of the convertible
senior notes outstanding under the if-converted method.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
64
Year Ended January 31,
2023
2022
2021
(dollars in millions, shares in thousands, except per
share data)
Net loss
$
(815)
$
(848)
$
(266)
Add:
Stock-based compensation expense
677
566
195
Non-cash charitable contributions
4
8
9
Amortization of acquired intangibles
85
64
7
Acquisition and integration-related expenses
7
56
—
Amortization of debt discount and debt issuance costs
6
86
69
Loss on early extinguishment and conversion of debt
—
—
2
Restructuring costs
29
—
—
Non-GAAP net income (loss)
$
(7)
$
(68)
$
16
Net margin
(44) %
(65) %
(32) %
Non-GAAP net margin
— %
(5) %
2 %
Weighted-average shares used to compute net loss per share,
basic and diluted
158,023
148,036
127,212
Non-GAAP weighted-average effect of potentially dilutive securities
—
—
15,171
Non-GAAP weighted-average shares used to compute non-GAAP
net income (loss) per share, diluted
158,023
148,036
142,383
Net loss per share, basic and diluted
$
(5.16)
$
(5.73)
$
(2.09)
Non-GAAP net income (loss) per share, basic
$
(0.04)
$
(0.46)
$
0.13
Non-GAAP net income (loss) per share, diluted
$
(0.04)
$
(0.46)
$
0.11
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.
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Net cash provided by operating activities
$
86
$
104
$
128
Less:
Purchases of property and equipment
(12)
(13)
(13)
Capitalization of internal-use software costs
(9)
(4)
(4)
Free cash flow
$
65
$
87
$
111
Net cash used in investing activities
$
(130)
$
(367)
$
(1,305)
Net cash provided by financing activities
$
48
$
89
$
1,092
Free cash flow margin
3 %
7 %
13 %
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
65
Calculated Billings
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,
2023
2022
2021
(dollars in millions)
Total revenue
$
1,858 $
1,300 $
835
Add:
Deferred revenue (end of period)
1,260
996
514
Unbilled receivables (beginning of period)
3
3
1
Acquired unbilled receivables
—
2
—
Less:
Deferred revenue (beginning of period)
(996)
(514)
(371)
Unbilled receivables (end of period)
(2)
(3)
(3)
Acquired deferred revenue
—
(66)
—
Calculated Billings
$
2,123 $
1,718 $
976
Liquidity and Capital Resources
As of January 31, 2023, our principal sources of liquidity were cash, cash equivalents and short-term
investments totaling $2,580 million, which were held for working capital and general corporate purposes, including
potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury
securities, 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 million. Nearly all of the 2023 Notes have been repurchased or converted as
of January 31, 2023. 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 used a portion of the proceeds to enter into convertible note hedges ("Note
Hedges") with respect to our Class A common stock. The cost of the Note Hedges was partially offset by proceeds
from the sale of warrants to purchase shares of our Class A common stock ("Warrants") in connection with the
issuance of the 2023 Notes.
In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and
received aggregate gross proceeds of $1,060 million The interest rate on the 2025 Notes is fixed at 0.125% per
annum and is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1,
2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter into capped call transactions
("2025 Capped Calls") with respect to our Class A common stock. Concurrent with the private offering of the 2025
Notes, we repurchased a portion of the 2023 Notes and terminated a portion of our existing Note Hedges and
Warrants.
In June 2020, we completed our private offering of the 2026 Notes due on June 15, 2026 and received
aggregate proceeds of $1,150 million. The interest rate on the 2026 Notes is fixed at 0.375% per year and is
payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. In
connection with the 2026 Notes, we used a portion of the proceeds to enter into capped call transactions ("2026
Capped Calls") with respect to our Class A common stock. Concurrent with the private offering of the 2026 Notes,
we repurchased a portion of the 2023 Notes and terminated a portion of our existing Note Hedges and Warrants.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
66
On May 3, 2021, we completed the acquisition of Auth0. In connection with this acquisition, consideration
included cash of $150 million, net of cash acquired of $107 million, and approximately 19 million shares of our
common stock with an estimated fair value of $5,176 million. In addition, we assumed outstanding employee equity
awards with vested fair value of $238 million.
On August 2, 2021, we completed the acquisition of Townsend Street Labs, Inc. ("atSpoke"), providing total
cash consideration, net of cash acquired of $79 million. Of this amount, $13 million of consideration was held back
as partial security for any adjustments and indemnification obligations and 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, and the continuing market adoption of our
platform. We continue to assess our capital structure and evaluate the merits of deploying available cash. We may
in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies,
including intellectual property rights. We may be required to seek additional equity or debt financing. In the event
that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us
or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and
invest in new technologies this could reduce our ability to compete successfully and harm our results of operations.
A significant majority of our customers pay in advance for annual subscriptions. Therefore, a substantial
source of our cash is from our deferred revenue, which is included on our consolidated balance sheet as a liability.
Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recognized as
revenue in accordance with our revenue recognition policy. As of January 31, 2023, we had deferred revenue of
$1,260 million, of which $1,242 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:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Net cash provided by operating activities
$
86 $
104 $
128
Net cash used in investing activities
(130)
(367)
(1,305)
Net cash provided by financing activities
48
89
1,092
Effects of changes in foreign currency exchange rates on cash,
cash equivalents and restricted cash
(6)
(2)
2
Net decrease in cash, cash equivalents and restricted cash
$
(2) $
(176) $
(83)
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscription and professional
services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing
expenses and third-party hosting costs. In recent periods, we have supplemented working capital requirements
through net proceeds from the issuance of the 2023, 2025 and 2026 Notes in February 2018, September 2019 and
June 2020, respectively.
During fiscal 2023, cash provided by operating activities was $86 million, decreasing by $18 million
compared to fiscal 2022. The decrease was primarily attributable to an increase in cash paid to employees and
vendors, partially offset by an increase in cash received from customers.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
67
Investing Activities
During fiscal 2023, cash used in investing activities was $130 million, decreasing by $237 million compared to
fiscal 2022. The decrease was primarily attributable to a decrease in payments for business acquisitions, net of
cash acquired, and a decrease in cash used from net investment purchases, sales, and maturities.
Financing Activities
During fiscal 2023, cash provided by financing activities was $48 million, decreasing by $41 million compared
to fiscal 2022. The decrease was primarily attributable to a decrease in proceeds from the exercise of stock options
and a decrease in proceeds from employee purchases under our employee stock purchase plan ("ESPP").
Material Cash Requirements
Contractual Obligations
The following table represents the Company’s known short-term (i.e., the next twelve months) and long-term
(i.e., beyond the next twelve months) obligations as of January 31, 2023:
Short-term
Long-term
Total
(dollars in millions)
Convertible Senior Notes:(1)
Principal payments
$
— $
2,210 $
2,210
Interest payments
6
13
19
Operating leases(2)
43
160
203
Purchase obligations(3)
237
361
598
Total contractual obligations
$
286 $
2,744 $
3,030
(1) See Note 9 to our consolidated financial statements "Convertible Senior Notes, Net" for additional information.
(2) See Note 10 to our consolidated financial statements "Leases" for additional information.
(3) Purchase obligations primarily relate to data center hosting facilities, and other sales and marketing obligations.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which
we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain
matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided
by us or from intellectual property infringement claims made by third parties. In addition, we have entered into
indemnification agreements with our directors and certain officers and employees that will require us, among other
things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors,
officers or employees. No material demands have been made upon us to provide indemnification under such
agreements and there are no claims that we are aware of that could have a material effect on our consolidated
balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash
flows.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America. 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 estimates, which
we discuss below.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
68
Income Taxes
Income taxes are accounted for in accordance with the liability method. Under this method, deferred tax
assets and liabilities are recognized 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.
Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are
more likely than not expected to be realized based on the weighting of positive and negative evidence. Future
realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate
character, within the carry-back or carry-forward periods available under the applicable tax law. In assessing the
need for a valuation allowance, we consider available evidence, including past operating results, estimates of future
taxable income, and the feasibility of tax planning strategies. Our judgment regarding future estimates may change
due to many factors, including future market conditions and the ability to successfully execute our business plans
and tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our provision for
income taxes would increase or decrease in the period in which the assessment is changed.
Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. We
recognize the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable
upon examination by the taxing authority, based on the technical merits. Significant judgment is required in
determining the technical merits of an uncertain tax position, such as taking into account current tax laws, our
interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and
domestic tax authorities. We adjust these reserves in light of changing facts and circumstances, such as the closing
of a tax audit or the refinement of an estimate. To the extent the final tax outcome of these matters is different than
the amounts recorded, such differences may impact the provision for income taxes in the period in which such
determination is made.
Business Combinations
When we acquire a business, the purchase price is allocated to the acquired assets, including separately
identifiable intangible assets, and assumed liabilities at their respective 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
•
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
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
69
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.
Loss Contingencies
We evaluate contingent liabilities, including threatened or pending litigation, and make provisions for such
liabilities when it is both probable that a loss has been incurred and its amount can be reasonably estimated.
Because of uncertainties inherent in litigation, we base our estimate and accrue the liabilities, if any, on the
information available at the time of our assessment. Significant judgment is required to determine both the
probability and the estimated amount of loss given such legal proceedings are inherently unpredictable and subject
to significant uncertainties, some of which are beyond our control. Developments in these matters could affect the
amount of any liability we may accrue. As additional information becomes available, we may revise our estimates.
Any revisions in the estimates of potential liabilities could have a material impact on our operating results and
financial position. Further, until the final resolution of any such matter, there may be a loss exposure in excess of the
liability recognized and such amount could be significant.
Revenue Recognition
We derive our revenues primarily from subscription fees and professional services fees. A description of our
revenue recognition policies is included in Note 2 to our consolidated financial statements "Summary of Significant
Accounting Policies."
Our contracts with customers often contain multiple performance obligations. For these contracts, we account
for individual performance obligations separately if they are distinct. The transaction price of the contract is allocated
to the separate performance obligations on a relative standalone selling price basis. Evaluating customer contracts
with multiple performance obligations and complex terms may require significant judgment in identifying the distinct
performance obligations.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements “Summary of Significant Accounting Policies — Recently
Adopted Accounting Pronouncements" for more information.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
70
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
fiscal 2023, 2022 and 2021, 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 $2,580 million as of January 31, 2023, of
which $2,449 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, 2023, a hypothetical 10% relative change in interest rates would not have had a material
impact on the value of our cash equivalents or investment portfolio. Fluctuations in the value of our cash equivalents
and investment portfolio caused by a change in interest rates (gains or losses on the carrying value) are recorded in
other comprehensive income (loss), and are realized only if we sell the underlying securities prior to maturity.
Convertible Senior Notes
In February 2018, we issued the 2023 Notes due February 15, 2023 with a principal amount of $345 million,
of which $224 million and $70 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 partial repurchases of
the 2023 Notes. The Note Hedges were completed to reduce the potential dilution from the conversion of the 2023
Notes. Additionally, through January 31, 2023, we received and completed requests to convert approximately $51
million principal amount of 2023 Notes (not in connection with the partial repurchases of the 2023 Notes) and
exercised and net-share-settled Note Hedges corresponding to approximately $45 million principal amount of 2023
Notes.
In September 2019, we issued the 2025 Notes due September 1, 2025 with a principal amount of $1,060
million. Concurrently with the issuance of the 2025 Notes, we entered into separate capped call transactions. The
2025 Capped Calls were completed to reduce the potential dilution from the conversion of the 2025 Notes.
In June 2020, we issued the 2026 Notes due June 15, 2026 with a principal amount of $1,150 million.
Concurrently with the issuance of the 2026 Notes, we entered into separate capped call transactions. The 2026
Capped Calls were completed to reduce the potential dilution from the conversion of the 2026 Notes.
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
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
71
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. Changes in the interest rate environment upon
maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether
the debt is replaced with other fixed rate debt, variable rate debt or equity.
72
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
74
Consolidated Balance Sheets
77
Consolidated Statements of Operations
78
Consolidated Statements of Comprehensive Loss
79
Consolidated Statements of Stockholders’ Equity
80
Consolidated Statements of Cash Flows
82
Notes to Consolidated Financial Statements
84
73
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,
2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and
cash flows for each of the three years in the period ended January 31, 2023, 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, 2023 and 2022, and the results of
its operations and its cash flows for each of the three years in the period ended January 31, 2023, 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, 2023, 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 3, 2023 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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
74
Revenue recognition – Identifying and evaluating terms and conditions in contracts
Description of
the Matter
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.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
San Jose, California
March 3, 2023
75
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, 2023, 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, 2023, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2023 and 2022, the related
consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the
three years in the period ended January 31, 2023, and the related notes and our report dated March 3, 2023
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
March 3, 2023
76
OKTA, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in millions, shares in thousands, except per share data)
As of January 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
264 $
260
Short-term investments
2,316
2,242
Accounts receivable, net of allowances of $8 and $4
481
398
Deferred commissions
92
75
Prepaid expenses and other current assets
76
66
Total current assets
3,229
3,041
Property and equipment, net
59
65
Operating lease right-of-use assets
122
148
Deferred commissions, noncurrent
210
191
Intangible assets, net
241
317
Goodwill
5,400
5,401
Other assets
46
43
Total assets
$
9,307 $
9,206
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
12 $
20
Accrued expenses and other current liabilities
112
90
Accrued compensation
99
144
Convertible senior notes, net
—
16
Deferred revenue
1,242
973
Total current liabilities
1,465
1,243
Convertible senior notes, net, noncurrent
2,193
1,816
Operating lease liabilities, noncurrent
142
171
Deferred revenue, noncurrent
18
23
Other liabilities, noncurrent
23
31
Total liabilities
3,841
3,284
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares issued
and outstanding as of January 31, 2023 and 2022.
—
—
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized;
154,009 and 149,624 shares issued and outstanding as of January 31, 2023 and 2022,
respectively.
—
—
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 7,300
and 6,978 shares issued and outstanding as of January 31, 2023 and 2022, respectively.
—
—
Additional paid-in capital
7,974
7,750
Accumulated other comprehensive loss
(33)
(12)
Accumulated deficit
(2,475)
(1,816)
Total stockholders’ equity
5,466
5,922
Total liabilities and stockholders’ equity
$
9,307 $
9,206
See Notes to Consolidated Financial Statements.
77
OKTA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, shares in thousands, except per share data)
Year Ended January 31,
2023
2022
2021
Revenue
Subscription
$
1,794 $
1,249 $
797
Professional services and other
64
51
38
Total revenue
1,858
1,300
835
Cost of revenue
Subscription
464
329
170
Professional services and other
82
67
48
Total cost of revenue
546
396
218
Gross profit
1,312
904
617
Operating expenses
Research and development
620
469
223
Sales and marketing
1,066
771
427
General and administrative
409
432
171
Restructuring and other charges
29
—
—
Total operating expenses
2,124
1,672
821
Operating loss
(812)
(768)
(204)
Interest expense
(11)
(91)
(73)
Interest income and other, net
22
9
13
Loss on early extinguishment and conversion of debt
—
—
(2)
Interest and other, net
11
(82)
(62)
Loss before provision for (benefit from) income taxes
(801)
(850)
(266)
Provision for (benefit from) income taxes
14
(2)
—
Net loss
$
(815) $
(848) $
(266)
Net loss per share, basic and diluted
$
(5.16) $
(5.73) $
(2.09)
Weighted-average shares used to compute net loss per share,
basic and diluted
158,023
148,036
127,212
See Notes to Consolidated Financial Statements.
78
OKTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
Year Ended January 31,
2023
2022
2021
Net loss
$
(815) $
(848) $
(266)
Other comprehensive income (loss):
Net change in unrealized gains or losses on available-for-sale
securities
(12)
(14)
1
Foreign currency translation adjustments
(9)
(3)
3
Other comprehensive income (loss)
(21)
(17)
4
Comprehensive loss
$
(836) $
(865) $
(262)
See Notes to Consolidated Financial Statements.
79
OKTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in millions, shares in thousands)
Balances as of January 31, 2020
113,990
$
—
8,648
$
—
$
1,106
$
1
$
(702)
$
405
Issuance of common stock upon exercise of stock options and other activity,
net
4,114
—
254
—
46
—
—
46
Issuance of common stock under employee stock purchase plan, net of
cancellations
247
—
—
—
26
—
—
26
Issuance of common stock for settlement of restricted stock units
2,109
—
—
—
—
—
—
—
Issuance of common stock for bonus settlement
86
—
—
—
10
—
—
10
Issuance of common stock pursuant to charitable donation
43
—
—
—
9
—
—
9
Conversion of Class B common stock to Class A common stock
743
—
(743)
—
—
—
—
—
Exercise of hedges related to convertible senior notes
(168)
—
—
—
—
—
—
—
Equity component of convertible senior notes, net of issuance costs
—
—
—
—
306
—
—
306
Equity component of early extinguishment and conversion of convertible senior
notes
1,660
—
—
—
70
—
—
70
Proceeds from hedges related to convertible senior notes
—
—
—
—
195
—
—
195
Payments for warrants related to convertible senior notes
—
—
—
—
(175)
—
—
(175)
Purchases of capped calls related to convertible senior notes
—
—
—
—
(134)
—
—
(134)
Stock-based compensation
—
—
—
—
197
—
—
197
Other comprehensive income
—
—
—
—
—
4
—
4
Net loss
—
—
—
—
—
—
(266)
(266)
Balances as of January 31, 2021
122,824
$
—
8,159
$
—
$
1,656
$
5
$
(968)
$
693
Issuance of common stock in connection with business combinations
19,190
—
—
—
5,409
—
—
5,409
Issuance of common stock in connection with business combinations subject
to future vesting
1,269
—
—
—
—
—
—
—
Issuance of common stock upon exercise of stock options and other activity,
net
2,552
—
2
—
54
—
—
54
Issuance of common stock under employee stock purchase plan, net of
cancellations
186
—
—
—
36
—
—
36
Issuance of common stock for settlement of restricted stock units
2,294
—
—
—
—
—
—
—
Issuance of common stock pursuant to charitable donation
30
—
—
—
7
—
—
7
Conversion of Class B common stock to Class A common stock
1,183
—
(1,183)
—
—
—
—
—
Equity component of early extinguishment and conversion of convertible senior
notes
476
—
—
—
21
—
—
21
Proceeds from hedges related to convertible senior notes
(380)
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
567
—
—
567
Other comprehensive loss
—
—
—
—
—
(17)
—
(17)
Net loss
—
—
—
—
—
—
(848)
(848)
Balances as of January 31, 2022
149,624
$
—
6,978
$
—
$
7,750
$
(12)
$
(1,816) $
5,922
Class A Common Stock
Class B Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
80
Adjustments from adoption of ASU 2020-06
—
—
—
—
(528)
—
156
(372)
Forfeiture of unvested common stock issued in connection with business
combinations
(14)
—
—
—
—
—
—
—
Issuance of common stock upon exercise of stock options and other activity,
net
965
—
451
—
17
—
—
17
Issuance of common stock under employee stock purchase plan, net of
cancellations
492
—
—
—
31
—
—
31
Issuance of common stock for settlement of restricted stock units
2,555
—
—
—
—
—
—
—
Issuance of common stock pursuant to charitable donation
42
—
—
—
4
—
—
4
Conversion of Class B common stock to Class A common stock
129
—
(129)
—
—
—
—
—
Settlement of convertible senior notes
356
—
—
—
17
—
—
17
Proceeds from hedges related to convertible senior notes
(140)
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
683
—
—
683
Other comprehensive loss
—
—
—
—
—
(21)
—
(21)
Net loss
—
—
—
—
—
—
(815)
(815)
Balances as of January 31, 2023
154,009
$
—
7,300
$
—
$
7,974
$
(33)
$
(2,475) $
5,466
Class A Common Stock
Class B Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
See Notes to Consolidated Financial Statements.
81
OKTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net loss
$
(815) $
(848) $
(266)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation
677
566
195
Depreciation, amortization and accretion
114
108
37
Amortization of debt discount and issuance costs
6
86
68
Amortization of deferred commissions
84
57
40
Deferred income taxes
7
(6)
(1)
Non-cash charitable contributions
4
7
9
Lease impairment charges
14
—
3
Loss on early extinguishment and conversion of debt
—
—
2
(Gain) loss on strategic investments
(1)
(8)
1
Other, net
3
2
2
Changes in operating assets and liabilities:
Accounts receivable
(87)
(175)
(66)
Deferred commissions
(122)
(171)
(81)
Prepaid expenses and other assets
(13)
(7)
(13)
Operating lease right-of-use assets
27
23
19
Accounts payable
(6)
7
4
Accrued compensation
(44)
50
44
Accrued expenses and other liabilities
8
21
6
Operating lease liabilities
(34)
(24)
(17)
Deferred revenue
264
416
142
Net cash provided by operating activities
86
104
128
Cash flows from investing activities:
Capitalization of internal-use software costs
(9)
(4)
(4)
Purchases of property and equipment
(12)
(13)
(13)
Purchases of securities available for sale and other
(1,411)
(1,847)
(2,029)
Proceeds from maturities and redemption of securities available for sale
1,308
1,482
535
Proceeds from sales of securities available for sale and other
—
230
206
Payments for business acquisitions, net of cash acquired
(4)
(215)
—
Purchase of intangible assets
(2)
—
—
Net cash used in investing activities
(130)
(367)
(1,305)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs
—
—
1,135
Proceeds from hedges related to convertible senior notes
—
—
195
Payments for warrants related to convertible senior notes
—
—
(175)
Purchases of capped calls related to convertible senior notes
—
—
(134)
Proceeds from stock option exercises, net of repurchases
17
53
45
Proceeds from shares issued in connection with employee stock purchase plan
31
36
26
Net cash provided by financing activities
48
89
1,092
Effects of changes in foreign currency exchange rates on cash, cash equivalents and
restricted cash
(6)
(2)
2
Net decrease in cash, cash equivalents and restricted cash
(2)
(176)
(83)
Cash, cash equivalents and restricted cash at beginning of year
273
449
532
Cash, cash equivalents and restricted cash at end of year
$
271
$
273
$
449
Year Ended January 31,
2023
2022
2021
82
Supplementary cash flow disclosure:
Cash paid during the period for:
Interest
$
6
$
6
$
4
Income taxes
8
3
1
Non-cash investing and financing activities:
Issuance of common stock and value of equity awards assumed in connection with
business combination
—
5,409
—
Issuance of common stock for repurchases and conversions of convertible senior notes
47
126
308
Benefit from exercise of hedges related to convertible senior notes
18
92
37
Operating lease right-of-use assets exchanged for lease liabilities
11
22
46
Issuance of common stock for bonus settlement
—
—
10
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
$
264
$
260
$
435
Restricted cash, current included in prepaid expenses and other current assets
—
5
5
Restricted cash, noncurrent included in other assets
7
8
9
Total cash, cash equivalents and restricted cash
$
271
$
273
$
449
Year Ended January 31,
2023
2022
2021
See Notes to Consolidated Financial Statements.
83
1. Overview and Basis of Presentation
Description of Business
Okta, Inc. (the “Company”) is the leading independent identity provider. The Company's Workforce Identity
and Customer Identity Clouds are powered by the Company's Identity Platform enabling customers to securely
connect the right people to the right technologies and services at the right time, and developers to securely and
efficiently embed identity into the software they build, allowing them to innovate and focus on their core mission. 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. All intercompany balances and transactions have been eliminated in consolidation. The
Company conducts business globally and is managed, operated and organized by major functional departments
that operate on a consolidated basis. As result, the Company operates in one reportable segment.
The Company’s fiscal year ends on January 31. References to fiscal 2023, for example, refer to the fiscal year
ended January 31, 2023.
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 the aggregate cash flow classifications as previously reported.
In fiscal 2023, the Company elected to change its presentation of dollars from thousands to millions. As a
result, the sum of the components reported in millions may not equal the total amount reported in millions due to
rounding. In addition, percentages presented may not add to their respective totals or recalculate due to rounding.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses
during the reporting period. Estimates are based on historical experience and on other assumptions that
management believes are reasonable under the circumstances. Actual results could vary from those estimates. The
Company’s most significant estimates include the valuation of deferred income tax assets, uncertain tax positions,
assets and liabilities acquired in business combinations, and loss contingencies related to litigation.
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 income (loss) within the consolidated statements of stockholders’ equity. Foreign
currency transaction gains and losses are included in interest and other, net in the consolidated statements of
operations and were not material in fiscal 2023, 2022 or 2021. 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.
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue is derived 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
arrangements are generally non-cancellable and non-refundable. Furthermore, if a customer reduces the contracted
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
84
usage or service level, the customer has no right of refund. The 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.
Revenue recognition is determined 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 performance obligations are satisfied.
The Company recognizes revenue net of any applicable value added or sales tax.
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
Professional services principally consist of customer-specific requests for application integrations, user
interface enhancements and other customer-specific requests. Revenue for 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 standalone selling price ("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. Pricing objectives, market conditions or other factors may change in the future resulting in changes to
standalone selling prices that could impact the timing or amount of revenue recognition.
Deferred Revenue
Deferred revenue consists primarily of payments received and accounts receivable recorded in advance of
revenue recognition under the Company’s subscription and support services and professional services
arrangements. The Company primarily invoices its customers for its subscription services arrangements annually in
advance. The Company’s payment terms generally provide that customers pay the invoiced portion of the total
arrangement fee within 30 days of the invoice date. Amounts anticipated to be recognized within one year of the
balance sheet date are recorded as deferred revenue, current; the remaining portion is recorded as deferred
revenue, noncurrent in the consolidated balance sheets.
Deferred Commissions
Sales commissions earned by the Company’s sales force are generally 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 is 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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
85
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, as determined by considering the
average contractual term for renewal contracts.
Sales commissions capitalized as contract costs totaled $121 million and $171 million in fiscal 2023
and 2022, respectively. Amortization of contract costs was $84 million, $57 million and $40 million in fiscal
2023, 2022 and 2021, respectively. Amortization expense is included in sales and marketing expenses in the
accompanying consolidated statements of operations.
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.
Research and Development
Research and development expense incurred in the normal course of business is expensed as incurred.
Software Development Costs
Qualifying internally-developed software development costs, including the associated stock-based
compensation expenses, are capitalized during the application development stage, as long as management has
authorized and committed to funding the project, it is probable the project will be completed and the software will be
used to perform the function intended. Capitalization of such costs ceases once the project is substantially complete
and ready for its intended use. Capitalized software development costs are included in Intangible assets, net on the
consolidated balance sheets and are amortized on a straight-line basis over an expected useful life of 3 years.
Advertising Expenses
Advertising costs are expensed as incurred. Advertising expense was $77 million, $79 million, and $33 million
in fiscal 2023, 2022 and 2021, respectively.
Restructuring and Other Charges
Restructuring generally includes significant actions involving employee-related severance charges, facilities
consolidation and contract termination costs. Employee-related severance charges are largely based upon
substantive severance plans, while some are mandated requirements in certain foreign jurisdictions. Severance
costs generally include severance payments, outplacement services, health insurance coverage and legal costs.
These charges are reflected in the period when both the actions are probable, at the balance sheet date, and the
amounts are reasonably estimable. Right-of-use asset impairments are recognized on the date the premises have
been vacated or the Company have ceased-use of the leased facilities.
Actual results may differ from the Company's estimates and assumptions. Restructuring liabilities are
classified in accrued expenses and other current liabilities in the consolidated balance sheets.
Stock-Based Compensation
The Company's equity incentive plans provide for granting stock options, restricted stock units ("RSUs"),
restricted stock awards to employees, consultants, officers and directors and RSUs with market-based vesting
conditions to certain executives. In addition, the Company offers an ESPP to eligible employees.
Stock-based compensation expense related to stock awards (including stock options, RSUs, market-based
RSUs, and ESPP) is measured based on the fair value of the awards granted and recognized as an expense over
the requisite service period.
The fair value of each option and ESPP awards are estimated on the grant date using the Black-Scholes
option pricing model which requires the use of various assumptions, including the expected term of the award, the
expected volatility of the price of the underlying common stock, risk-free interest rates, and expected dividend yield
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
86
of the underlying common stock. Stock-based compensation expense is recognized following the straight-line
attribution method over the requisite service period for options, and over the offering period for ESPP awards. The
expected term of the Company’s stock options granted to employees has been determined utilizing the simplified
method due to lack of historical exercise data. The expected volatility has been determined using a weighted-
average of the historical volatility measures of a group of guideline companies and the Company's own historical
volatility. The risk-free interest rate used is based on the U.S. Treasury yield in effect at the time of grant for a period
consistent with the expected term of the award. The expected dividend is assumed to be zero as the Company has
never declared or paid any cash dividends and do not currently intend to declare dividends in the foreseeable
future.
The fair value of each RSU award is based on the fair value of the underlying common stock as of the grant
date. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period,
generally four years.
The fair value of each market-based RSU award is measured using a Monte Carlo simulation valuation model
which requires the use of various assumptions, including the stock price volatility and risk-free interest rate as of the
valuation date corresponding to the length of time remaining in the performance period. Stock-based compensation
expense for awards with market conditions is recognized over the requisite service period using the accelerated
attribution method and is not reversed if the market condition is not met.
The assumptions used to determine the fair value of the stock awards represent management's best
estimates. These estimates involve inherent uncertainties and the application of management's judgment.
Forfeitures are accounted for as they occur.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred
tax assets are also recognized for operating losses and tax credit carry forwards. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Management
considers all positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, for
example its historical results and forecasts of future ability to realize its deferred tax assets, including forecasts of
future taxable income by jurisdiction. Deferred tax assets and liabilities are measured using enacted tax rates
applicable in the years in which they are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax law is recognized in the provision for income taxes in the period that includes the
enactment date.
The Company does not provide for income taxes on undistributed earnings of subsidiaries that are intended
to be indefinitely reinvested. Where the Company does not intend to indefinitely reinvest subsidiary earnings,
income and withholding taxes, as applicable, are provided on such undistributed earnings.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax
regulations. The Company determines if the weight of available evidence indicates that it is more likely than not that
a tax position will be sustained on tax audit, assuming that all issues are audited and resolution of any related
appeals or litigation processes are considered. The tax benefit is then measured as the largest amount that is more
than 50% likely to be realized upon ultimate settlement. The reserves for uncertain tax positions are adjusted as
facts and circumstances change, for example on closing of a tax audit, expiration of statutes of limitation on
potential assessments or refinement of an estimate. To the extent that the final outcome of these matters is different
than the amounts recorded, such differences will impact the provision for income taxes in the period in which such a
determination is made. The provisions for income taxes include the impact of reserves for uncertain tax positions,
along with the related interest and penalties.
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, 2023 and
2022.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
87
As of January 31, 2023 and 2022, the Company's long-term restricted cash balance was $7 million and $8
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
impairment. 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 primarily 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
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 and available data. 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. The Company assesses collectibility by reviewing accounts receivable on an aggregated basis where
similar characteristics exist and on an individual basis when specific customers with collectibility issues are
identified. 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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
88
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:
Useful lives
Computers and equipment
3 years
Furniture and fixtures
7 years
Leasehold improvements
Shorter of estimated useful life or
remaining lease term
Business Combinations
Business combinations are accounted for under the acquisition method of accounting, which requires the
acquired assets, including separately identifiable intangible assets, and assumed liabilities to be recorded as of the
acquisition date at their respective estimated fair values. Any excess of the purchase price over the fair value of the
assets acquired, including separately identifiable intangible assets and liabilities assumed, is recorded as goodwill.
The determination of the fair value of assets acquired and liabilities assumed involves assessments of factors
such as the expected future cash flows associated with individual assets and liabilities and appropriate discount
rates at the date of the acquisition. Significant management inputs used in the estimation of fair value of assets
acquired and liabilities assumed include, but are not limited to, expected future cash flows, future changes in
technology, estimated replacement costs, discount rates and assumptions about the period of time the brand will
continue to be used in the Company’s product portfolio. Where appropriate, external advisers are consulted to
assist in the determination of fair value. For non-observable market values, fair value has been determined using
acceptable valuation methods. The results of operations for businesses acquired are included in the financial
statements from the acquisition date. Acquisition-related expenses and post-acquisition restructuring costs are
recognized separately from the business combination and are expensed as incurred.
Goodwill and Other Long-Lived Assets
Goodwill represents the excess of the purchase price over the estimated fair value of net assets of
businesses acquired in a business combination. Goodwill amounts are not amortized. Goodwill is tested for
impairment annually on the first day of the fourth quarter of each fiscal year, or whenever events or changes in
circumstances indicate the carrying amount of goodwill may not be recoverable. The Company operates as a single
operating segment.
Management has the option to first perform a qualitative assessment to determine whether it is more likely
than not that the fair value of the Company is less than the carrying amount, including goodwill. If it is determined
that it is more likely than not that the fair value of the Company is less than the carrying amount, a quantitative
assessment is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment
charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to
exceed the total amount of goodwill allocated to that reporting unit. The Company also has the option to bypass the
qualitative assessment, and perform the quantitative assessment. No goodwill impairments were recorded during
the years presented.
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. Intangible assets with finite lives are
amortized on a straight-line basis over their estimated useful lives.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
89
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 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 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"), rent expense is recorded in the
consolidated statements of operations on a straight-line basis over the lease term and records variable lease
payments as incurred.
Loss Contingencies
The Company is periodically involved in various legal claims and proceedings. The Company routinely
reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from
any matter is considered probable and the amount can be reasonably estimated, the Company records a liability for
the estimated loss. If either or both of the criteria for recording the liability are not met, the Company assesses
whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is
a reasonable possibility that a loss may have been incurred, the Company discloses the estimate of the amount of
loss or range of loss, discloses that the amount is immaterial, or discloses that an estimate of loss cannot be made,
as applicable. Because of inherent uncertainties related to these legal matters, the Company bases its loss accruals
on the best information available at the time. As additional information becomes available, the Company reassesses
its potential liability and may review its estimates. Actual outcomes of these legal and regulatory proceedings may
differ materially from the Company’s estimates.
Concentrations of Risk
Financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash
equivalents, short-term investments and accounts receivable. The Company's short-term investments are primarily
intended to facilitate liquidity and capital preservation and consist predominately of highly liquid investment-grade
fixed-income securities, diversified among industries and individual issuers. The Company's policy is designed to
limit exposure from any particular issuer or institution.
Credit risk arising from accounts receivable is mitigated due to the large number of customers and their
dispersion across various industries and geographies. For the periods presented, there were no customers that
represented more than 10% of the Company's accounts receivable balance or total revenue.
The Company serves customers and users from data center facilities located across various different physical
locations, such as the U.S., Europe and Asia-Pacific, most of which are operated by a single third party. The
Company has disaster recovery protocols at the third-party service providers. Even with these procedures for
disaster recovery in place, access to the Company's service could be significantly interrupted, resulting in an
adverse effect on its operating results and financial condition.
Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders is computed 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 without consideration for
potentially dilutive securities as they do not share in losses. The diluted net loss per share attributable to common
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
90
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 RSUs, unvested common stock and
restricted stock issued in connection with certain business combinations, convertible senior notes and warrants are
considered common stock equivalents but have been excluded from the calculation of diluted net loss per share
attributable to common stockholders as their effect is antidilutive. The rights of the holders of the Company's Class A
and Class B common stock are identical, except with respect to voting and conversion rights. See Note 15 for
additional details.
Recently Adopted Accounting Pronouncements
ASU No. 2020-06
The Company adopted ASU 2020-06, effective February 1, 2022, using the modified retrospective method.
The prior period consolidated financial statements have not been retrospectively adjusted and continue to be
reported under the accounting standards in effect for those periods.
The new guidance 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, the
guidance removes from GAAP the liability and equity separation model for convertible instruments with a cash
conversion feature, and as a result, after adoption, no longer requires separately presenting in equity an embedded
conversion feature for such debt. Similarly, the embedded conversion feature is no longer amortized into income as
interest expense over the life of the instrument. Instead, the convertible debt instrument is accounted for wholly as
debt unless (1) a convertible instrument contains features that require bifurcation as a derivative, or (2) a convertible
debt instrument was issued at a substantial premium. Additionally, the guidance 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 prior to the adoption of the new guidance.
The Company recognized a cumulative effect of initially applying the guidance as an adjustment to the
February 1, 2022 opening balance of accumulated deficit. Due to the elimination of the equity conversion
component of the Company’s convertible senior notes outstanding as of February 1, 2022, additional paid-in capital
was reduced. The elimination of the equity conversion component had the effect of increasing the Company’s net
debt balance. The reduction of other liabilities is related to changes to the Company’s deferred tax liabilities.
The adoption of the new guidance resulted in the following changes to the Company’s consolidated balance
sheet as of February 1, 2022:
Balance at
January 31, 2022
Adjustments from
Adoption of ASU
2020-06
Balance at
February 1, 2022
(dollars in millions)
Liabilities
Convertible senior notes, net
$
16 $
1 $
17
Convertible senior notes, net, noncurrent
1,816
372
2,188
Other liabilities, noncurrent
31
(1)
30
Stockholders’ equity
Additional paid-in capital
7,750
(528)
7,222
Accumulated deficit
(1,816)
156
(1,660)
In addition, the adoption of the new guidance resulted in a decrease in reported net interest expense of
approximately $85 million and a decrease in basic and diluted net loss per share of $0.54 in fiscal 2023.
ASU No. 2021-08
The Company adopted the Financial Accounting Standards Board ("FASB") issued ASU No. 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers (“ASU 2021-08”), effective February 1, 2022, on a prospective basis. The update requires contract
assets and contract liabilities acquired in a business combination be recognized and measured in accordance with
the latest revenue guidance. The adoption of the new guidance did not have a material impact on the Company’s
consolidated financial statements.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
91
ASU No. 2021-04
The Company adopted the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), effective February 1, 2022, on a
prospective basis. The new guidance addresses specific guidance related to modifications or exchanges of
freestanding equity-classified written call options (such as warrants) by specifying the accounting for various
modification scenarios. The adoption of the new guidance did not have a material impact on the Company’s
consolidated financial statements.
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. Total consideration transferred for Auth0 was $5,671 million, including approximately 19 million
shares of common stock valued at $5,176 million, cash of $257 million, and assumed outstanding equity awards
with vested fair value of $238 million. Cash consideration of $4 million and approximately 1 million shares valued at
$295 million were 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 consideration held back was paid in full during fiscal 2023.
The Company incurred $29 million of acquisition-related costs, which were recorded as general and administrative
expenses in its consolidated statement of operations in fiscal 2022.
The transaction was accounted for as a business combination. The total purchase price of $5,671 million was
allocated to the tangible and identifiable intangible assets and liabilities based on their estimated fair values. The
excess of purchase consideration over the fair value of the assets acquired and liabilities assumed was $5,290
million and was recorded as goodwill.
Acquisition of atSpoke
On August 2, 2021, the Company acquired all issued and outstanding capital stock of privately-held atSpoke,
a modern workplace operations platform. The acquisition date cash consideration for atSpoke was approximately
$79 million, of which $13 million of consideration was held back as partial security for any adjustments and
indemnification obligations and was paid within 18 months of the closing date.
The Company recorded $18 million for developed technology intangible assets with an estimated useful life of
3 years and recorded $62 million of goodwill. The Company incurred $1 million of acquisition-related costs, which
were recorded as general and administrative expenses in its consolidated statement of operations in fiscal 2022.
4. Cash Equivalents and Investments
Cash Equivalents and Short-term Investments
The following tables present the amortized cost, unrealized gain (loss) and estimated fair value of cash
equivalents and short-term investments:
As of January 31, 2023
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
(dollars in millions)
Cash equivalents:
Money market funds
$
133 $
— $
— $
133
Total cash equivalents
133
—
—
133
Short-term investments:
U.S. treasury securities
2,207
—
(22)
2,185
Corporate debt securities
133
—
(2)
131
Total short-term investments
2,340
—
(24)
2,316
Total
$
2,473 $
— $
(24) $
2,449
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
92
As of January 31, 2022
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
(dollars in millions)
Cash equivalents:
Money market funds
$
152 $
— $
— $
152
Total cash equivalents
152
—
—
152
Short-term investments:
U.S. treasury securities
1,922
—
(9)
1,913
Corporate debt securities
331
—
(2)
329
Total short-term investments
2,253
—
(11)
2,242
Total
$
2,405 $
— $
(11) $
2,394
All short-term investments were designated as available-for-sale securities as of January 31, 2023 and 2022.
The following table presents the contractual maturities of the Company's short-term investments:
As of January 31, 2023
Amortized
Cost
Estimated
Fair Value
(dollars in millions)
Due within one year
$
2,097 $
2,076
Due between one to five years
243
240
Total
$
2,340 $
2,316
Interest receivable of $10 million and $6 million is included in Prepaid expenses and other current assets on
the consolidated balance sheets as of January 31, 2023 and 2022, respectively.
The following table presents the fair values and unrealized losses related to the Company's investments in
available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized
loss position as of January 31, 2023:
Less Than 12 Months
More Than 12 Months
Total
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
(dollars in millions)
U.S. treasury securities
$
1,204 $
(9) $
846 $
(13) $
2,050 $
(22)
Corporate debt securities
13
—
114
(2)
127
(2)
Total
$
1,217 $
(9) $
960 $
(15) $
2,177 $
(24)
The Company had 159 and 193 short-term investments in unrealized loss positions as of January 31, 2023
and 2022, respectively.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the
Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will
be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis
and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. There were no
material credit or non-credit related impairments for short-term investments as of January 31, 2023 and 2022.
Strategic Investments
Strategic investments primarily include equity investments in privately held companies, which do not have a
readily determinable fair value. As of January 31, 2023 and 2022, the balance of strategic investments was $25
million and $15 million, respectively.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
93
5. Fair Value Measurements
Financial assets are measured 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 tables present information about financial assets that were measured at fair value on a recurring
basis using the above input categories:
As of January 31, 2023
Level 1
Level 2
Level 3
Total
(dollars in millions)
Assets:
Cash equivalents:
Money market funds
$
133 $
— $
— $
133
Total cash equivalents
133
—
—
133
Short-term investments:
U.S. treasury securities
—
2,185
—
2,185
Corporate debt securities
—
131
—
131
Total short-term investments
—
2,316
—
2,316
Total cash equivalents and short-term investments
$
133 $
2,316 $
— $
2,449
As of January 31, 2022
Level 1
Level 2
Level 3
Total
(dollars in millions)
Assets:
Cash equivalents:
Money market funds
$
152 $
— $
— $
152
Total cash equivalents
152
—
—
152
Short-term investments:
U.S. treasury securities
—
1,913
—
1,913
Corporate debt securities
—
329
—
329
Total short-term investments
—
2,242
—
2,242
Total cash equivalents and short-term investments
$
152 $
2,242 $
— $
2,394
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
tables above.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
94
Fair Value Measurements of Other Financial Instruments
The following table presents the principal amounts and estimated fair values of financial instruments that are
not recorded at fair value on the consolidated balance sheets:
As of January 31, 2023
Principal
Amount
Estimated
Fair Value
(dollars in millions)
2025 convertible senior notes
$
1,060 $
933
2026 convertible senior notes
$
1,150 $
981
The Notes are recorded at face value less unamortized debt issuance costs (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.
6. Goodwill and Intangible Assets, net
Goodwill
As of January 31, 2023 and 2022, goodwill was $5,400 million and $5,401 million, respectively. No goodwill
impairments were recorded during fiscal 2023, 2022 and 2021.
Intangible Assets, net
Intangible assets consisted of the following:
As of January 31, 2023
Gross
Accumulated
Amortization
Net
(dollars in millions)
Capitalized internal-use software costs
$
48 $
(28) $
20
Purchased developed technology
220
(93)
127
Customer relationships
141
(62)
79
Trade name
21
(7)
14
Software licenses
1
—
1
$
431 $
(190) $
241
As of January 31, 2022
Gross
Accumulated
Amortization
Net
(dollars in millions)
Capitalized internal-use software costs
$
36 $
(24) $
12
Purchased developed technology
220
(48)
172
Customer relationships
141
(26)
115
Trade name
21
(3)
18
$
418 $
(101) $
317
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
95
The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:
Weighted-Average Remaining
Useful Life
As of January 31,
2023
2022
Purchased developed technology
3.0 years
4.0 years
Customer relationships
3.4 years
4.0 years
Trade name
3.3 years
4.3 years
As of January 31, 2023, estimated remaining amortization expense for the intangible assets by fiscal year
was as follows:
Remaining
Amortization
(dollars in millions)
2024
$
84
2025
72
2026
63
2027
20
2028
2
Thereafter
—
Total
$
241
Amortization expense of intangible assets was $93 million, $69 million and $11 million in fiscal 2023, 2022
and 2021, respectively.
7. Balance Sheet Components
Property and Equipment, net
Property and equipment consisted of the following:
As of January 31,
2023
2022
(dollars in millions)
Computers and equipment
$
— $
1
Furniture and fixtures
19
17
Leasehold improvements
88
82
Property and equipment, gross
107
100
Less accumulated depreciation
(48)
(35)
Property and equipment, net
$
59 $
65
Depreciation expense was $12 million in fiscal 2023 and 2022, and $9 million in fiscal 2021.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
96
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of January 31,
2023
2022
(dollars in millions)
Accrued expenses
$
67 $
48
Accrued taxes payable
5
7
Operating lease liabilities
32
27
Other
8
8
Accrued expenses and other current liabilities
$
112 $
90
Other Liabilities, Noncurrent
Other liabilities, noncurrent consisted of the following:
As of January 31,
2023
2022
(dollars in millions)
Deferred tax liabilities
$
12 $
9
Other
11
22
Other liabilities, noncurrent
$
23 $
31
8. Deferred Revenue and Performance Obligations
Deferred Revenue
Deferred revenue, which is a contract liability, consists primarily of payments received and accounts
receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is
recognized as the revenue recognition criteria are met.
Subscription revenue recognized during fiscal 2023 and 2022 included $952 million and $495 million,
respectively, from deferred revenue balances at the beginning of the respective periods. Professional services and
other revenue recognized in fiscal 2023 and 2022 from deferred revenue balances at the beginning of the
respective periods was $14 million and $7 million, respectively.
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.
Total remaining non-cancelable performance obligations under subscription contracts with customers was
approximately $3,007 million as of January 31, 2023. Of this amount, the Company expects to recognize revenue of
approximately $1,684 million, or 56%, 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, 2023
were not material.
9. Convertible Senior Notes, Net
2023 Convertible Senior Notes
The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.25%
per year. Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning
on August 15, 2018. The outstanding 2023 Notes matured on February 15, 2023.
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
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
97
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 the 2023 Notes, which is equal to an 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. As of January 31, 2023, an immaterial amount of 2023 Notes
remained outstanding.
During fiscal 2023, the Company issued approximately 0.4 million shares of Class A common stock and paid
an immaterial amount in cash to settle approximately $17 million principal amount of 2023 Notes.
As of January 31, 2023, the effective interest rate on the 2023 Notes was 0.85%. As of January 31, 2022 and
2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2023 Notes
was 5.68%. Interest expense recognized related to the 2023 Notes was immaterial during fiscal 2023, 2022 and
2021.
The net carrying amount of the 2023 Notes consisted of the following:
As of January 31,
2023
As of January 31,
2022
(dollars in millions)
Liability component:
Principal
$
— $
17
Less: unamortized debt issuance costs and debt discount(1)
—
(1)
Net carrying amount
$
— $
16
Equity component:(1)
2023 Notes
$
— $
4
Less: issuance costs
—
—
Carrying amount of the equity component(2)
$
— $
4
(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.
(2) Included in the January 31, 2022 consolidated balance sheet within Additional paid-in capital.
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 shares, subject to anti-dilution adjustments substantially identical to those in the 2023 Notes, 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 Note Hedges meet the
criteria for classification as equity and, as such, are not remeasured each reporting period.
During fiscal 2023, the Company exercised and net-share-settled Note Hedges corresponding to
approximately $12 million principal amount of 2023 Notes and received approximately 0.1 million shares of Class A
common stock and an immaterial cash payment.
As of January 31, 2023, Note Hedges giving the Company the option to purchase approximately 0.1 million
shares (subject to adjustment) remained outstanding.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
98
Warrants
In connection with the issuance of the 2023 Notes, the Company 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 shares, subject to anti-dilution adjustments, 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 Warrants meet the criteria for classification as equity and,
as such, are not remeasured each reporting period.
As of January 31, 2023, Warrants to acquire up to approximately 1 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 terms of the 2025 Notes are governed by an Indenture by and between the Company and Wilmington
Trust, National Association, as Trustee (the "2025 Indenture"). Upon conversion, the 2025 Notes may be settled in
cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the
Company’s election.
The 2025 Notes are convertible at an initial conversion rate of 5.2991 shares of Class A common stock
per $1,000 principal amount of the 2025 Notes, which is equal to an 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:
•
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, 2023, the conditions allowing holders of the 2025 Notes
to convert during the three months ending April 30, 2023 were not met, and as a result, the 2025 Notes were
classified as noncurrent liabilities as of January 31, 2023.
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
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
99
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.
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.
As of January 31, 2023, the effective interest rate on the 2025 Notes was 0.43%. As of January 31, 2022 and
2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2025 Notes
was 4.10%. The following table sets forth total interest expense recognized related to the 2025 Notes:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Contractual interest expense
$
1 $
1 $
1
Amortization of debt issuance costs
3
2
2
Amortization of debt discount(1)
—
36
34
Total
$
4 $
39 $
37
(1) Not applicable subsequent to the adoption of ASU 2020-06.
The net carrying amount of the 2025 Notes consisted of the following:
As of January 31,
2023
As of January 31,
2022
(dollars in millions)
Liability component:
Principal
$
1,060 $
1,060
Less: unamortized debt issuance costs and debt discount(1)
(8)
(149)
Net carrying amount
$
1,052 $
911
Equity component:(1)
2025 Notes
$
— $
221
Less: issuance costs
—
(4)
Carrying amount of the equity component(2)
$
— $
217
(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.
(2) Included in the January 31, 2022 consolidated balance sheet within Additional paid-in capital.
2025 Capped Calls
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 approximately 6 million shares, subject to anti-dilution adjustments substantially identical to
those in the 2025 Notes, 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 2025 Capped
Calls meet the criteria for classification as equity and, as such, are not remeasured each reporting period.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
100
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 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
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 three months ended January 31, 2023, the conditions allowing holders of the 2026 Notes
to convert during the three months ending April 30, 2023 were not met, and as a result, the 2026 Notes were
classified as noncurrent liabilities as of January 31, 2023.
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.
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
101
As of January 31, 2023, the effective interest rate on the 2026 Notes was 0.60%. As of January 31, 2022 and
2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2026 Notes
was 5.75%. The following table sets forth total interest expense recognized related to the 2026 Notes:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Contractual interest expense
$
4 $
4 $
3
Amortization of debt issuance costs
3
1
1
Amortization of debt discount(1)
—
46
27
Total
$
7 $
51 $
31
(1) Not applicable subsequent to the adoption of ASU 2020-06.
The net carrying amount of the 2026 Notes consisted of the following:
As of January 31,
2023
As of January 31,
2022
(dollars in millions)
Liability component:
Principal
$
1,150 $
1,150
Less: unamortized debt issuance costs and debt discount(1)
(9)
(245)
Net carrying amount
$
1,141 $
905
Equity component:(1)
2026 Notes
$
— $
310
Less: issuance costs
—
(4)
Carrying amount of the equity component(2)
$
— $
306
(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.
(2) Included in the January 31, 2022 consolidated balance sheet within Additional paid-in capital.
2026 Capped Calls
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 approximately 5 million shares, subject to anti-dilution adjustments substantially identical to
those in the 2026 Notes, 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 2026 Capped
Calls meet the criteria for classification as equity and, as such, are not remeasured each reporting period.
10. Leases
The Company has entered into various non-cancelable office space operating leases with original lease
periods expiring between 2023 and 2029. These leases do not contain material variable rent payments, residual
value guarantees, financial 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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
102
Operating lease costs were as follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Operating lease costs(1)
$
40 $
38 $
33
(1) Amounts are presented exclusive of sublease income and include short-term leases, which are immaterial.
The weighted-average remaining term of operating leases was 5.1 years and 5.9 years as of January 31,
2023 and January 31, 2022, respectively, and the weighted-average discount rate used to measure the present
value of the operating lease liabilities was 5.3% and 5.5% as of January 31, 2023 and January 31, 2022,
respectively.
Maturities of operating lease liabilities, which do not include short-term leases, were as follows:
As of January 31, 2023
Fiscal Year Ending January 31:
(dollars in millions)
2024
$
43
2025
42
2026
32
2027
31
2028
31
Thereafter
24
Total lease payments
203
Less imputed interest
(26)
Less tenant improvement allowances not yet incurred
(2)
Total operating lease liabilities
$
175
Cash payments made related to operating lease liabilities were $44 million and $40 million in fiscal 2023 and
2022, respectively.
11. Commitments and Contingencies
Letters of Credit
In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate
amount of $6 million and $9 million were issued and outstanding as of January 31, 2023 and January 31, 2022,
respectively. No draws have been made under such letters of credit. Noncurrent restricted cash of $6 million
associated with these letters of credit is included in Other assets on the consolidated balance sheets as of
January 31, 2023 and January 31, 2022.
Legal Matters
From time to time in the normal course of business, the Company may be subject to various legal matters
such as threatened or pending claims or proceedings.
On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District
Court for the Northern District of California against the Company and certain of its executive officers, captioned In re
Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions
concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of
Auth0. The lawsuit seeks an order certifying the lawsuit as a class action and unspecified damages.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United
States District Court for the Northern District of California against certain of its current and former executive officers
and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v.
McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the
defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
103
Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The
lawsuits seek orders permitting the plaintiffs to maintain this action derivatively on behalf of the Company, awarding
unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and
requiring the Company to make certain reforms to its corporate governance and controls.
The Company intends to defend these lawsuits vigorously. At this time, the Company is unable to predict the
outcome or estimate the amount of loss or range of losses that could potentially result from these lawsuits.
Warranties and Indemnification
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.
Agreements with customers and other third parties may include indemnification or other provisions under
which the Company agrees 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 the Company’s platform or other acts or omissions. The Company cannot reasonably
estimate potential payment obligations as a result of indemnification claims because it cannot predict when and
under what circumstances they may be incurred. As a result, no material liabilities have been recognized in the
accompanying consolidated financial statements related to these indemnification obligations.
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.
As of January 31, 2023, shares of common stock reserved for future issuance were as follows:
(shares in thousands)
Options and unvested RSUs outstanding
15,728
Available for future stock option and RSU grants
25,228
Available for ESPP
6,831
47,787
As of January 31, 2023
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
104
Awards Issued as Charitable Contributions
During fiscal 2023, 2022 and 2021, the Company issued 41,250, 30,000 and 42,500 shares, respectively, of
Class A common stock as charitable contributions and recognized $4 million, $7 million and $9 million, respectively,
as general and administrative expense in the consolidated statements of operations.
13. Employee Incentive Plans
Equity Incentive Plans
The Company has two equity incentive plans: the 2009 Stock Plan (“2009 Plan”) and the 2017 Equity
Incentive Plan (“2017 Plan”). All shares that remain available for future grants are under the 2017 Plan. As
of January 31, 2023, options to purchase 1,758,264 shares of Class A common stock and 4,594,675 shares of
Class B common stock remained outstanding.
The Company’s equity incentive plans provide for granting stock options, RSUs, restricted stock awards to
employees, consultants, officers and directors and RSUs with market-based vesting conditions to certain
executives. In addition, the Company offers an ESPP to eligible employees.
Stock-based compensation expense by award type was as follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Stock options
$
82 $
132 $
21
RSUs
464
335
164
ESPP
19
15
10
Restricted stock awards
112
84
—
Total
$
677 $
566 $
195
Stock-based compensation expense was recorded in the following cost and expense categories in the
consolidated statements of operations:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Cost of revenue:
Subscription
$
69 $
49 $
21
Professional services and other
14
12
9
Research and development
275
193
63
Sales and marketing
159
136
53
General and administrative
160
176
49
Total
$
677 $
566 $
195
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
105
A summary of stock option activity and related information was as follows:
Number of
Options
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic Value
(in millions)
Outstanding as of January 31, 2022
7,984 $
39.59
5.2
$
1,314
Exercised
(1,416)
11.92
Expired
(26)
189.80
Forfeited
(189)
80.67
Outstanding as of January 31, 2023
6,353 $
43.92
4.3
$
331
As of January 31, 2023
Vested and expected to vest
6,353 $
43.92
4.3
$
331
Vested and exercisable
5,729 $
29.75
3.9
$
323
No options were granted during fiscal 2023. The weighted-average grant-date fair value of options granted
was $211.58 and $63.32 during fiscal 2022 and 2021, respectively. The total grant-date fair value of stock options
vested was $104 million, $314 million and $20 million during fiscal 2023, 2022 and 2021, 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 $108 million, $545 million and
$772 million during fiscal 2023, 2022 and 2021, respectively.
As of January 31, 2023 and January 31, 2022, there was a total of $90 million and $210 million, respectively,
of unrecognized stock-based compensation expense related to options, which is being recognized over a weighted-
average period of 1.8 years.
The Company used the Black-Scholes option pricing model to estimate the fair value of stock options granted
with the following assumptions:
Year Ended January 31,
2023
2022
2021
Expected volatility
— %
46 %
45 %
Expected term (in years)
0.0
6.3
6.3
Risk-free interest rate
— %
1.03% 0.37% - 0.44%
Expected dividend yield
—
—
—
Restricted Stock Units
A summary of RSU activity (inclusive of market-based RSUs) and related information was as follows:
Number of
RSUs
(in thousands)
Weighted-
Average
Grant Date
Fair Value Per
Share
Outstanding as of January 31, 2022
6,226 $
207.26
Granted
7,194
111.84
Vested
(2,556)
180.81
Forfeited
(1,489)
191.40
Outstanding as of January 31, 2023
9,375 $
143.77
The Company granted 7,194,187 RSUs with an aggregate fair value of $805 million during fiscal 2023. As of
January 31, 2023 and 2022, there was a total of $1,200 million and $1,152 million, respectively, of unrecognized
stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average
period of 3.0 years, based on vesting under the award service conditions. The total fair value of RSUs vested during
fiscal 2023, 2022 and 2021 was $229 million, $531 million and $410 million, respectively.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
106
Market-based Restricted Stock Units
In March 2022, the Company granted market-based RSUs to certain members of management. The target
number of market-based RSUs granted was 58,150. One-third of these market-based RSUs vest over each of a
one-, two- and three-year performance period, each starting on February 1, 2022. The number of shares that can be
earned ranges from 0% to 200% of the target number of shares based on the relative performance of the per share
price of the Company’s common stock as compared to the Nasdaq Composite Index over the respective
performance periods and subject to continuous employment through the vesting dates. The $244.73 grant date fair
value per target market-based RSU was determined using a Monte Carlo simulation approach. Compensation
expense for awards with market conditions is recognized over the service period using the accelerated attribution
method and is not reversed if the market condition is not met.
Restricted Stock Awards Issued in Connection with Business Combinations
In fiscal 2022, 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, 2023, there was $141 million of
unrecognized stock-based compensation expense related to unvested restricted shares, which is being recognized
over a weighted-average period of 1.3 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 ESPP contains a reset provision under
which the offering period resets if the fair market value of the Company’s common stock on the purchase date is
less than the fair market value on the offering date.
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,
2023
2022
2021
Expected volatility
63% - 90%
44% - 48%
48% - 54%
Expected term (in years)
0.5 - 1.0
0.5 - 1.0
0.5 - 1.0
Risk-free interest rate
2.46% - 4.67%
0.06% - 0.29%
0.09% - 0.18%
Expected dividend yield
—
—
—
During fiscal 2023, the Company's employees purchased 491,965 shares of its Class A common stock under
the ESPP. The shares were purchased at a weighted-average purchase price of $63.97 per share, with proceeds of
$31 million. During fiscal 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 $36 million.
As of January 31, 2023 and January 31, 2022, there was $26 million and $17 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.
Employee Defined Contribution Plan
The Company has a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code
covering eligible employees. A portion of employee contributions are matched up to a fixed maximum dollar amount
per year per employee. The Company began matching contributions in fiscal 2023. Matching contributions to the
plan were $21 million during fiscal 2023.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
107
14. Income Taxes
The domestic and foreign components of pre-tax loss for fiscal 2023, 2022 and 2021 were as follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Domestic
$
(834) $
(904) $
(282)
Foreign
33
54
16
Loss before provision for (benefit from) income taxes
$
(801) $
(850) $
(266)
The components of the provision for (benefit from) income taxes for fiscal 2023, 2022 and 2021 were as
follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Current:
Federal
$
— $
— $
—
State
2
—
—
Foreign
5
4
1
Total current provision for income taxes
7
4
1
Deferred:
Federal
—
(8)
—
State
—
(1)
—
Foreign
7
3
(1)
Total deferred provision for (benefit from) income taxes
7
(6)
(1)
Total provision for (benefit from) income taxes
$
14 $
(2) $
—
For fiscal 2023, the income tax expense resulted primarily from income tax expense related to profitable
foreign jurisdictions, the tax impact of shortfalls from stock-based compensation in the United Kingdom, and state
taxes. For fiscal 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 fiscal 2021, the income tax expense from
profitable jurisdictions was partially offset by excess tax benefits from stock-based compensation in the United
Kingdom.
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for
fiscal 2023, 2022 and 2021:
Year Ended January 31,
2023
2022
2021
Tax at federal statutory rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
3.6
3.9
4.1
Change in valuation allowance
(9.9)
(36.1)
(101.0)
Stock-based compensation
(12.3)
8.4
70.2
Research and development credits
2.6
3.6
6.4
Non-deductible expenses
(5.4)
—
—
Other, net
(1.2)
(0.6)
(0.8)
Effective tax rate
(1.6) %
0.2 %
(0.1) %
The Tax Cuts and Jobs Act enacted on December 22, 2017 amended Internal Revenue Code Section 174 to
require that specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years
(U.S. R&E) or fifteen years (non-U.S. R&E) beginning in fiscal 2023. The capitalization of R&E expenditures
resulted in a deferred tax asset of $189 million. Additionally, the effective tax rate was impacted by (5.4)% due to
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
108
certain tax deductions being disavowed, which further resulted in the utilization of federal and state tax attributes to
offset this impact.
The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2023
and 2022 were as follows:
As of January 31,
2023
2022
(dollars in millions)
Deferred tax assets:
Net operating loss carryforwards
$
817 $
955
Capitalized research expenditures
189
—
Stock-based compensation
52
48
Operating lease liabilities
43
50
Other reserves and accruals
31
40
Research and development and other credits
113
92
Total deferred tax assets
1,245
1,185
Valuation allowance
(1,078)
(904)
Total deferred tax assets, net
167
281
Deferred tax liabilities:
Convertible debt
—
(91)
Deferred commissions
(77)
(68)
Other deferred tax liabilities
(5)
(3)
Operating lease right-of-use assets
(31)
(37)
Depreciation and amortization
(56)
(78)
Total deferred tax liabilities
(169)
(277)
Net deferred tax assets (liabilities)
$
(2) $
4
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 $174 million and $349 million during fiscal 2023 and 2022, respectively.
As of January 31, 2023, the Company had approximately $3,208 million of federal and $2,108 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, 2023, the
Company had approximately $46 million of UK net operating losses which do not expire.
As of January 31, 2023, the Company had federal research and development tax credit carryforwards of $98
million and California research and development tax credit carryforwards of $65 million. The federal research and
development credits will start to expire in 2030 while the California research and development credits do not expire.
The Company’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 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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
109
A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
Gross amount of unrecognized tax benefits as of the beginning of
the year
$
37 $
22 $
16
Additions based on tax positions related to a prior year
1
5
—
Additions based on tax positions related to current year
7
10
7
Reductions based on tax positions taken in a prior year
(2)
—
(1)
Gross amount of unrecognized tax benefits as of the end of the
year
$
43 $
37 $
22
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 the 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 2017
and forward.
As of January 31, 2023 and 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, 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, 2023, 2022
and 2021, 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, 2023 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. The following table presents the calculation of basic and diluted net loss per
share:
Year Ended January 31,
2023
2022
2021
Class A
Class B
Class A
Class B
Class A
Class B
(dollars in millions, shares in thousands, except per share data)
Numerator:
Net loss
$
(778) $
(37) $
(806) $
(42) $
(249) $
(17)
Denominator:
Weighted-average shares outstanding,
basic and diluted
150,891
7,132 140,684
7,352 118,882
8,330
Net loss per share, basic and diluted
$
(5.16) $
(5.16) $
(5.73) $
(5.73) $
(2.09) $
(2.09)
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
110
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:
Year Ended January 31,
2023
2022
2021
(shares in thousands)
Issued and outstanding stock options
6,353
7,984
8,250
Unvested RSUs issued and outstanding
9,317
6,226
4,452
Unvested market-based RSUs issued and outstanding
116
—
—
Unvested restricted stock awards issued and outstanding
627
1,269
—
Shares committed under the ESPP
921
253
137
Shares related to the 2023 Notes
—
356
832
Shares subject to warrants related to the issuance of the 2023 Notes
1,048
1,048
1,048
Shares related to the 2025 Notes
5,617
5,617
5,617
Shares related to the 2026 Notes
4,820
4,820
4,820
28,819
27,573
25,156
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
Notes, 2025 Notes 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.
16. Restructuring and Other Charges
During the third quarter of fiscal 2023, the Company announced a real estate optimization plan which
provided for closing duplicative sites and decommissioning underutilized offices and floors. As a result, the
Company recognized non-cash lease impairment charges. The non-cash lease impairment charges represent the
amount that the carrying value of the asset groups exceeded their estimated fair values. The asset groups primarily
include operating lease right-of-use assets, leasehold improvements, and related property and equipment. To
estimate the fair value of the asset group, the Company utilized a discounted cash flow approach using market
participant assumptions of the expected cash flows and discount rate.
During the fourth quarter of fiscal 2023, the Company approved a restructuring plan (the “Restructuring Plan”)
intended to reduce operating expenses and improve profitability. The Restructuring Plan involves a reduction of the
Company’s workforce by approximately 300 full-time employees.
The Restructuring Plan is expected to be substantially complete by the first quarter of fiscal 2024. Aggregate
restructuring costs associated with the Restructuring Plan are estimated to be approximately $15 million. The
charges that the Company expects to incur throughout the completion of its Restructuring Plan are subject to a
number of assumptions, including local law requirements in various jurisdictions, and the actual remaining expenses
may differ from the original estimates.
The following table summarizes the Company’s restructuring and other charges during the period:
Year Ended January 31,
2023
(dollars in millions)
Severance and termination benefit costs
$
15
Lease impairment charges
14
Total
$
29
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
111
The following table summarizes the Company’s restructuring liability that is included in accrued expenses and
other current liabilities on the consolidated balance sheet:
Severance and termination
benefit costs
(dollars in millions)
Balance as of January 31, 2022
$
—
Restructuring charges
15
Cash payments
—
Balance as of January 31, 2023
$
15
17. Geographical Information
Revenue by location is determined by the billing address of the customer. The following table sets forth
revenue by geographic area:
Year Ended January 31,
2023
2022
2021
(dollars in millions)
United States
$
1,456 $
1,036 $
702
International
402
264
133
Total
$
1,858 $
1,300 $
835
Other than the United States, no individual country exceeded 10% of total revenue for fiscal 2023, 2022 and
2021.
Property and equipment by geographic location is based on the location of the legal entity that owns the
asset. As of January 31, 2023 and 2022, substantially all of the Company’s property and equipment was located in
the United States.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
112
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
the
effectiveness
of
our
disclosure
controls
and
procedures
(as
defined
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.
Based on this evaluation, our management concluded that, as of January 31, 2023, 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.
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, 2023. Our
independent registered public accounting firm, Ernst & Young LLP, has issued an audit report with respect to our
internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K, and is
incorporated herein by reference.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the
evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended
January 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Inherent Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures and internal control over financial
reporting, management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of
disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are
resource constraints and that management is required to apply its judgment in evaluating the benefits of possible
controls and procedures relative to their costs.
Item 9B. Other Information
Not Applicable.
113
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 2023
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, 2023.
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 2023
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, 2023.
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 2023
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, 2023.
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 2023
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, 2023.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2023
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, 2023.
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.
114
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.
OKTA, INC.
March 3, 2023
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Todd McKinnon and Brett Tighe, 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:
Signature
Title
Date
/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer and Director
(Principal Executive Officer)
March 3, 2023
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)
March 3, 2023
/s/ Shibu Ninan
Shibu Ninan
Chief Accounting Officer
(Principal Accounting Officer)
March 3, 2023
/s/ J. Frederic Kerrest
J. Frederic Kerrest
Executive Vice Chairperson and Director
March 3, 2023
/s/ Shellye Archambeau
Shellye Archambeau
Director
March 3, 2023
/s/ Emilie Choi
Emilie Choi
Director
March 3, 2023
/s/ Robert L. Dixon, Jr.
Robert L. Dixon, Jr.
Director
March 3, 2023
/s/ Jeff Epstein
Jeff Epstein
Director
March 3, 2023
/s/ Patrick Grady
Patrick Grady
Director
March 3, 2023
/s/ Benjamin Horowitz
Benjamin Horowitz
Director
March 3, 2023
/s/ Rebecca Saeger
Rebecca Saeger
Director
March 3, 2023
/s/ Michael Stankey
Michael Stankey
Director
March 3, 2023
115
EXHIBIT INDEX
2.1
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.
Exhibit 2.1 to Form
8-K filed on May 10,
2021
3.1
Amended and Restated Certificate of Incorporation.
Exhibit 3.2 to Form
S-1 filed on March
13, 2017
3.2
Amended and Restated Bylaws.
Exhibit 3.4 to Form
S-1 filed on March
13, 2017
4.1
Form of Class A Common Stock Certificate.
Exhibit 4.1 to Form
S-1 filed on March
13, 2017
4.2
Indenture, dated as of February 27, 2018, between Okta, Inc. and Wilmington
Trust, National Association, as trustee.
Exhibit 4.1 to Form
8-K filed on February
27, 2018
4.3
Form of 0.25% Convertible Senior Notes due 2023.
Exhibit 4.1 to Form
8-K filed on February
27, 2018
4.4
Indenture, dated as of September 9, 2019, between Okta, Inc. and Wilmington
Trust, National Association, as trustee.
Exhibit 4.1 to Form
8-K filed on
September 10, 2019
4.5
Form of 0.125% Convertible Senior Notes due 2025.
Exhibit 4.1 to Form
8-K filed on
September 10, 2019
4.6
Indenture, dated as of June 12, 2020, between Okta, Inc. and Wilmington Trust,
National Association, as trustee.
Exhibit 4.1 to Form
8-K filed on June 15,
2020
4.7
Form of 0.375% Convertible Senior Notes due 2026.
Exhibit 4.1 to Form
8-K filed on June 15,
2020
4.8
Description of the Registrant’s Securities Registered Pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended.
Exhibit 4.6 to Form
10-K filed on March
6, 2020
10.1#
Form of Indemnification Agreement between the Registrant and each of its
directors and executive officers.
Exhibit 10.1 to Form
S-1 filed on March
13, 2017
10.2#
Amended and Restated 2009 Stock Plan, as amended, and forms of
agreements thereunder.
Exhibit 10.2 to Form
S-1 filed on March
13, 2017
10.3#
2017 Equity Incentive Plan, and forms of agreements thereunder.
Exhibit 10.3 to Form
S-1A filed on March
27, 2017
10.4#
2017 Employee Stock Purchase Plan.
Exhibit 10.4 to Form
S-1A filed on March
27, 2017
10.5#
Amended and Restated Senior Executive Incentive Bonus Plan.
Exhibit 99.2 to Form
8-K filed on March 7,
2019
10.6#
Executive Severance Plan.
Exhibit 10.8 to Form
S-1 filed on March
13, 2017
10.7#
Non-Employee Director Compensation Policy.
Exhibit 10.9 to Form
S-1 filed on March
13, 2017
Exhibit
Number
Exhibit Description
Incorporated by
Reference from
Form
116
10.8#
Form of Offer Letter between the Registrant and each of its executive officers.
Exhibit 10.10 to
Form S-1 filed on
March 13, 2017
10.9#
Auth0, Inc. 2014 Equity Incentive Plan.
Exhibit 99.1 to Form
S-8 filed on May 10,
2021
10.10#
Auth0, Inc. Phantom Unit Plan.
Exhibit 99.2 to Form
S-8 filed on May 10,
2021
10.11
Office Lease Agreement dated December 2, 2017 between the Registrant and
KR 100 First Street Owner, LLC.
Exhibit 10.1 to Form
8-K filed on
December 6, 2017
10.11.1
Amendment dated August 29, 2019 to Office Lease Agreement dated
December 2, 2017 between the Registrant and KR 100 First Street Owner,
LLC.
Exhibit 10.2 to Form
10-Q filed on
December 6, 2019
10.11.2
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
10.11.3
Third Amendment dated August 17, 2021 to Office Lease Agreement dated
December 2, 2017 between the Registrant and KR 100 First Street Owner,
LLC.
Exhibit 10.1 to Form
10-Q filed on
December 2, 2021
10.12
Form of Call Option Transaction Confirmation.
Exhibit 10.1 to Form
8-K filed on February
27, 2018
10.13
Form of Warrant Confirmation.
Exhibit 10.2 to Form
8-K filed on February
27, 2018
10.14
Form of Capped Call Transaction Confirmation.
Exhibit 10.1 to Form
8-K filed on
September 10, 2019
10.15
Form of Capped Call Transaction Confirmation.
Exhibit 10.1 to Form
8-K filed on June 15,
2020
10.16#
Transition Agreement and Release dated November 28, 2022 between the
Registrant and Susan St. Ledger.
Filed herewith
21.1
Subsidiaries of the Registrant.
Filed herewith
23.1
Consent of Independent Registered Public Accounting Firm.
Filed herewith
31.1
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.
Filed herewith
31.2
Certification of the Chief Financial Officer pursuant to Exchange Act Rules
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Filed herewith
32.1*
Certification of the Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Furnished herewith
101.INS
XBRL Instance Document
Filed herewith
101.SCH
XBRL Taxonomy Extension Schema Document
Filed herewith
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
Filed herewith
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Filed herewith
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
Filed herewith
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith
104
Cover Page Interactive Data File (formatted as inline XBRL with applicable
taxonomy extension information contained in Exhibits 101.*)
Filed herewith
Exhibit
Number
Exhibit Description
Incorporated by
Reference from
Form
117
* 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.
118
Exhibit 31.1
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
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 3, 2023
/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
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
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 3, 2023
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
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
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.
The Company’s Annual Report on Form 10-K for the year ended January 31, 2023, 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
2.
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 3, 2023
/s/ Todd McKinnon
Todd McKinnon
Chief Executive Officer
(Principal Executive Officer)
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)
Corporate Information
Board of Directors:
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
Shellye Archambeau
Former Chief Executive Officer
MetricStream, Inc.
Emilie Choi
President and Chief Operating Officer
Coinbase Global, 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.
* Mr. Grady is not standing for re-election at the
Annual Meeting. We thank him for his distinguished
service to Okta.
Executive Officers:
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
Brett Tighe
Chief Financial Officer
Shibu Ninan
Chief Accounting Officer
Larissa Schwartz
Chief Legal Officer & Corporate Secretary
Corporate Headquarters:
Okta, Inc.
100 First Street, Suite 600
San Francisco, California 94105
Stock Transfer Agent:
Computershare
C/O: Shareholder Services
By Regular Mail:
P.O. Box 43006
Providence, Rhode Island 02940
By Overnight Delivery:
150 Royall Street, Suite 101
Canton, Massachusetts 02021
Toll Free Phone: (800) 736-3001
International: +1 (781) 575-3100
Investor Relations:
Website: investor.okta.com
Email: investor@okta.com
Stock Exchange Listing:
Nasdaq
Symbol: OKTA
Okta, Inc.
100 First Street, Suite 600
San Francisco, CA 94105
info@okta.com
1-888-722-7871