Proxy Statement and
Annual Report 2024
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
May 9, 2024
Dear Okta Stockholder:
I am pleased to invite you to attend the 2024 Annual Meeting of Stockholders of Okta, Inc. to be held on June 20, 2024, 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/OKTA2024 during the meeting.
Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2024 Annual
Meeting of Stockholders and Proxy Statement. We encourage you to vote at the Annual Meeting and any adjournment, rescheduling
or postponement of the Annual Meeting if you were a stockholder as of the close of business on April 24, 2024.
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 9, 2024, 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 2024 Annual Meeting of Stockholders and our 2024 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 the 2024 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 Proxy Statement and 2024 Annual Report 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 2024
Annual Meeting
of Stockholders
Notice is hereby given that Okta, Inc. will hold its 2024 Annual Meeting of
Stockholders (the “Annual Meeting”) on June 20, 2024, 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/OKTA2024 during the
meeting. We are holding the meeting for the following purposes, which are more fully
described in the accompanying Proxy Statement:
June 20, 2024
• To elect three Class I directors to hold office until the 2027 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, 2025;
• 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 adjournment, rescheduling or postponement thereof).
9:00 a.m. Pacific Time
virtualshareholdermeeting.com/OKTA2024
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 meeting materials, which include the Proxy
Statement accompanying this notice, in lieu of mailing printed copies. On or about May
9, 2024, 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 2024 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 2024 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 24, 2024 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 9, 2024
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
Proxy Statement for the
2024 Annual Meeting of Stockholders
Table of Contents
General Information
1
Proposal One: Election of Directors
8
Corporate Governance
17
Environmental, Social and Governance Matters
24
Non-Employee Director Compensation
28
Proposal Two: Ratification of the Appointment of Our Independent Registered Public
Accounting Firm
31
Report of the Audit Committee of the Board of Directors
33
Proposal Three: Approval, on an Advisory Non-Binding Basis, of the Compensation of
Our Named Executive Officers
34
Executive Officers
35
Compensation Discussion and Analysis
36
Executive Compensation
52
Fiscal 2024 Summary Compensation Table
52
Fiscal 2024 Grants of Plan-Based Awards Table
54
Fiscal 2024 Outstanding Equity Awards at Fiscal Year-End Table
55
Fiscal 2024 Option Exercises and Stock Vested Table
57
CEO Pay Ratio Disclosure
59
Pay Versus Performance Table
60
Report of the Compensation Committee of the Board of Directors
65
Equity Compensation Plan Information
66
Security Ownership of Certain Beneficial Owners and Management
67
Certain Relationships and Related Party Transactions
69
Additional Information
71
Okta, Inc., 100 First Street, Suite 600
San Francisco, California 94105
General
Information
Our board solicits your proxy on our behalf for the Annual Meeting and at any
adjournment, rescheduling or postponement of the Annual Meeting for the purposes
set forth in this Proxy Statement for our Annual Meeting and the accompanying
Notice. The Annual Meeting will be held virtually via a live interactive audio webcast
on the internet on June 20, 2024, at 9:00 a.m. Pacific Time. On or about May 9, 2024,
we mailed our stockholders the Notice of Internet Availability of Proxy Materials (the
“Notice”) containing instructions on how to access this Proxy Statement and our 2024
Annual Report. If you held shares of our Class A or Class B common stock as of the
close of business on April 24, 2024, you are invited to attend the meeting at
virtualshareholdermeeting.com/OKTA2024 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 20, 2024
9:00 a.m. Pacific Time
virtualshareholdermeeting.com/OKTA2024
How can I attend the Annual Meeting online?
We will host the Annual Meeting via live webcast only. We believe that hosting a virtual
meeting will facilitate stockholder attendance and participation at the 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/OKTA2024. The webcast will start at 9:00 a.m. Pacific
Time on June 20, 2024. 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 I directors to serve until the 2027 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, 2025;
•
a proposal to approve, on an advisory non-binding basis, the compensation of our
named executive officers (our “NEOs”); and
•
any other business as may properly come before the Annual Meeting (including
adjournment, rescheduling or postponement thereof).
Okta, Inc.
2024 Proxy Statement
1
How does the board of directors recommend that I vote on these proposals?
Our board recommends a vote:
•
“FOR ALL” of the nominees for Class I directors: Emilie Choi, Todd McKinnon and
Michael Stankey;
•
“FOR” the ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending January 31, 2025; and
•
“FOR” the approval, on an advisory non-binding basis, of the compensation of our
NEOs, 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 24,
2024, the record date for the Annual Meeting (the “Record Date”), may vote at the
Annual Meeting.
As of the Record Date, there were 160,912,267 shares of our Class A common stock
and 7,291,091 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, bank 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 meeting.
However, since a beneficial owner is not the stockholder of record, you may not vote
your shares of our common stock at the 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
2024 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. “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
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,
2025 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 NEOs 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 19, 2024 (have
your Notice or proxy card in hand when
you visit the website). You may also access
the voting website by scanning the QR
Barcode available on your proxy card.
By Telephone
Vote toll-free at 1-800-690-6903 until
11:59 p.m. Eastern Time on June 19, 2024
(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/
OKTA2024.
In order to be counted, proxies submitted by telephone or internet must be received by
11:59 p.m. Eastern Time on June 19, 2024. Proxies submitted by U.S. mail must be
received before the start of the Annual Meeting.
General Information
Okta, Inc.
2024 Proxy Statement
3
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.
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
19, 2024 (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, rescheduled 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,
2025 and (ii) the approval, on an advisory non-binding basis, of the compensation of our
NEOs.
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 that
their customers direct. 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).
General Information
4
2024 Proxy Statement
Okta, Inc.
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 date
of 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 the voting results become
available.
How are proxies solicited for the Annual Meeting?
Our board is soliciting proxies for use at the Annual Meeting. Okta bears all expenses
associated with this solicitation. 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 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 2024 Annual Report, primarily online. On or about May 9, 2024, 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 2024 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 promptly deliver 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.
General Information
Okta, Inc.
2024 Proxy Statement
5
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 the 2025 Annual Meeting of Stockholders by submitting their
proposals in writing to our Corporate Secretary at our principal office address listed
above. To be considered for inclusion in our proxy statement for the 2025 Annual
Meeting of Stockholders, our Corporate Secretary must receive the written
stockholder proposal no later than January 9, 2025. 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 2025 Annual Meeting of Stockholders, our
Corporate Secretary must receive the written notice at our principal executive offices:
•
not earlier than February 23, 2025, and
•
not later than the close of business on March 25, 2025.
In the event we hold the 2025 Annual Meeting of Stockholders more than 30 days
before or more than 60 days after the one-year anniversary of the 2024 Annual
Meeting, then, for notice by the stockholder to be timely, our bylaws provide that the
notice 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 2025 Annual Meeting of Stockholders.
Stockholders may obtain our proxy statements (and any amendments and supplements
General Information
6
2024 Proxy Statement
Okta, Inc.
thereto) and other documents as and when filed by us with the SEC without charge
from the SEC’s website at www.sec.gov.
Nomination of Director Candidates
Holders of our common stock may propose director candidates for consideration by the
nominating and corporate governance committee of our board (the “nominating
committee”). Any such recommendation must include the nominee’s name and
qualifications for membership on our board and be directed to our Corporate Secretary
at the address listed above. For additional information regarding stockholder
recommendations for director candidates, please see the section titled “Corporate
Governance—Identifying and Evaluating Director Nominees—Stockholder
Recommendations” below.
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 amended and restated bylaws is included as Exhibit 3.2 to our 2024
Annual Report and is available via the SEC’s website at www.sec.gov. You may also
contact our Corporate Secretary at the address set forth above to receive a copy of the
relevant bylaw provisions regarding the requirements for making stockholder
proposals and nominating director candidates.
Why is the 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 online and submit your questions
during the meeting by visiting virtualshareholdermeeting.com/OKTA2024. 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/OKTA2024, 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
Stockholder Meeting log in page. Technical support will be available starting at 8:30
a.m. Pacific Time on June 20, 2024 and will remain available until the Annual Meeting
ends.
General Information
Okta, Inc.
2024 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 I directors expires at the Annual Meeting. The term of the Class II directors
expires at the 2025 Annual Meeting of Stockholders and the term of the Class III
directors expires at the 2026 Annual Meeting of Stockholders. We expect directors
who are re-elected to hold office for a three-year term, or until the election and
qualification of their successors in office.
Nominees
Director Since
Principal Occupation
Emilie Choi
2022
President and Chief Operating
Officer, Coinbase Global, Inc.
Todd McKinnon
2009
Chief Executive Officer, Okta
Michael Stankey
2016
Former Vice Chairman, Workday, Inc.
Our board has nominated Emilie Choi, Todd McKinnon and Michael Stankey for
election as Class I directors to hold office until the 2027 Annual Meeting of
Stockholders, or until their successors are duly elected and qualified, subject to their
earlier resignation or removal. Each of the nominees is a current Class I director and
member of our board, and has consented to serve if elected.
Unless you direct otherwise through your proxy voting instructions, the persons
named as proxies will vote all proxies received “FOR” the election of each nominee.
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
2024 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 nominee and continuing director below contain information regarding each such person’s service as a director
of our board, business experience, other 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 to our board. Finally, we value our directors’
experience in their respective areas of business management, and on the boards of directors and board committees of other
companies.
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 May 9, 2024.
Name
Age
Director
Since
Principal Occupation
Class
Audit
Committee
Compensation
Committee
Nominating
Committee
Cybersecurity
Risk
Committee
Current and Former Employee Directors
Todd McKinnon,
Chairperson
52
2009
Chief Executive Officer
I
J. Frederic Kerrest,(1)
Vice Chairperson
47
2009
Former Chief Operating
Officer
II
Independent Directors
Shellye Archambeau
61
2018
Former Chief Executive
Officer, MetricStream, Inc.
III
member
member
Emilie Choi
45
2022
President and Chief
Operating Officer, Coinbase
Global, Inc.
I
member
member
Robert L. Dixon, Jr.
68
2019
Former Global Chief
Information Officer and
Senior Vice President,
PepsiCo, Inc.
III
member
chair
Jeff Epstein
67
2021
Operating Partner,
Bessemer Venture Partners
II
chair
member
Benjamin Horowitz,
Lead Independent
Director(2)
57
2010
General Partner,
Andreessen Horowitz
III
Rebecca Saeger
69
2019
Former Executive Vice
President and Chief
Marketing Officer, Charles
Schwab & Co., Inc.
II
member
chair
Michael Stankey
65
2016
Former Vice Chairman,
Workday, Inc.
I
chair
member
(1)
Mr. Kerrest was on a sabbatical from Okta from November 1, 2022 to October 31, 2023. During this time he remained an at-will employee and continued to serve on
our board as Vice Chairperson and a director, but did not fulfill any regular duties as an employee or an officer. Prior to the end of his sabbatical, Mr. Kerrest
announced that he would not return as an employee and, effective October 31, 2023, stepped down as our Chief Operating Officer (“COO”). He continues to serve on
our board as Vice Chairperson and a director.
(2)
Mr. Horowitz will be our Lead Independent Director up until the Annual Meeting, following which Mr. Epstein will assume the role.
Proposal One: Election of Directors
Okta, Inc.
2024 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 May 9, 2024 are highlighted in the following graphics. Information about each individual
director and director nominee follows.
Gender
3
6
Female
Male
Age
3
3
3
45-55
56-65
> 65
Tenure
3
3
3
< 5 yrs
5-9 yrs
10+ yrs
Independence
7
2
Independent
Not Independent
Board Diversity Matrix (as of May 9, 2024)
Total Number of Directors: 9
Female
Male
Non-Binary
Did Not Disclose
Gender
Part I: Gender Identity
Directors
3
6
—
—
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
2
5
—
—
Two or More Races or Ethnicities
1
—
—
—
LGBTQ+
—
Did Not Disclose Demographic
Background
—
Proposal One: Election of Directors
10
2024 Proxy Statement
Okta, Inc.
Director Skills Matrix
Archambeau
Choi
Dixon
Epstein
Horowitz
Kerrest
McKinnon
Saeger
Stankey
Technology or
Innovation
Professional
background or
experience in the
technology industry
serving in engineering,
product, or R&D roles,
or managing such
functions.
■
■
■
■
■
■
■
■
Cybersecurity,
Information Security
or Privacy
Leadership or
significant experience
overseeing and
managing risks related
to the protection and
confidentiality of
digital systems or data.
■
■
■
■
■
■
■
Global Sales,
Markets or
Operations
Experience driving
business success in
markets around the
world, or directing
corporate sales and
operations in diverse
global environments.
■
■
■
■
■
■
■
■
Senior Leadership
Experience serving as
an executive officer or
other officer
responsible for a
function or business
unit.
■
■
■
■
■
■
■
■
■
Public Company
Boards
Tenure on a public
company board other
than our board, with
an understanding of
the related obligations
and time
commitments.
■
■
■
■
■
■
Risk Management
Executive or board-
level leadership
experience overseeing,
auditing or facilitating
the execution of a risk
management program.
■
■
■
■
Marketing or Brand
Experience leading
marketing teams or
spearheading efforts to
strengthen market
share, brand
awareness and
reputation.
■
■
■
■
■
■
■
Finance or
Accounting
Professional
background or
executive or board-
level leadership
experience in finance,
accounting, or internal
audit, or knowledge of
financial markets and
strategic transactions.
■
■
■
■
■
Proposal One: Election of Directors
Okta, Inc.
2024 Proxy Statement
11
Information Concerning Director Nominees
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 previously 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 Bachelor of Arts in Economics from the Johns Hopkins University and a Masters in Business
Administration from the Wharton School at the University of Pennsylvania.
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.
President and Chief Operating
Officer, Coinbase Global, Inc.
Age 45
Director Since 2022
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 52
Director Since 2009
Proposal One: Election of Directors
12
2024 Proxy Statement
Okta, Inc.
Michael Stankey
Mr. Stankey joined our board in December 2016. Mr. Stankey served as Vice Chairman at
Workday, Inc., a financial and human capital management software vendor, from June 2015 to
May 2024, as President and Chief Operating Officer from September 2009 to June 2015, and as
a member of the board of directors 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 board member of other public
companies.
Former Vice Chairman,
Workday, Inc.
Age 65
Director Since 2016
Proposal One: Election of Directors
Okta, Inc.
2024 Proxy Statement
13
Information Concerning Continuing Directors
Shellye Archambeau
Ms. Archambeau joined our board in December 2018. From 2002 until 2018, Ms. Archambeau
was Chief Executive Officer of MetricStream, Inc., a leading provider of governance, risk,
compliance and quality management solutions to corporations across diverse industries. Prior to
that, Ms. Archambeau served as Chief Marketing Officer and Executive Vice President of Sales
for Loudcloud, Inc., Chief Marketing Officer of NorthPoint Communications Group, Inc., and
President of Blockbuster Inc.’s e-commerce division. Before she joined Blockbuster, she held
domestic and international executive positions during a 15-year career at IBM. Ms. Archambeau
has served on the boards of directors of Verizon Communications Inc. since 2013 and Roper
Technologies, Inc. since 2018. Ms. Archambeau previously served on the boards of directors 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 of directors.
Former Chief Executive Officer,
MetricStream, Inc.
Age 61
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 directors 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 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 68
Director Since 2019
Proposal One: Election of Directors
14
2024 Proxy Statement
Okta, Inc.
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 2021. 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 67
Director Since 2021
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 57
Director Since 2010
Proposal One: Election of Directors
Okta, Inc.
2024 Proxy Statement
15
J. Frederic Kerrest
Mr. Kerrest co-founded Okta and has served as a member of our board since July 2009. Mr.
Kerrest was appointed Executive Vice Chairperson of our board in March 2019 and, since
November 2023, has served as Vice Chairperson. From 2009 to November 2023, Mr. Kerrest
served as our COO. 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 co-founder and former COO.
Vice Chairperson and Former
Chief Operating Officer, Okta
Age 47
Director Since 2009
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 of directors.
Former Executive Vice President
and Chief Marketing Officer,
Charles Schwab & Co., Inc.
Age 69
Director Since 2019
Proposal One: Election of Directors
16
2024 Proxy Statement
Okta, Inc.
Corporate
Governance
Our business and affairs are managed under the direction of our board, the members of which are 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 in order to manage Okta for the long-term benefit of
our stockholders. Our governance framework includes a variety of policies, procedures and practices to promote such goal, as well as
facilitate our board’s effective oversight of our business and corporate strategy independent of management. 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 status of each director and each member of our board 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 each of our board committees, including the audit committee
of the board (the “audit committee”), the compensation committee of the board (the “compensation committee”), the nominating
committee, and the cybersecurity risk committee of our board (the “cybersecurity risk committee”);
•
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
•
maintain 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 for 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 Current Report on 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, 2024 (“fiscal 2024”), no waivers were granted from any provision of the code of conduct.
Okta, Inc.
2024 Proxy Statement
17
Independence of Our Board
Our Class A common stock is listed on Nasdaq. Under the Nasdaq listing standards and our corporate governance guidelines,
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 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. 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. Our board also previously determined that
Patrick Grady, a former director who served on our board until the 2023 Annual Meeting of Stockholders, was independent during his
tenure. In making these independence 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, as described in the section titled “Certain Relationships and Related Party Transactions.”
There are no family relationships among any of our directors or executive officers.
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 former COO, serves as 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 as current and former senior executives, respectively.
To facilitate robust independent oversight by our board, our corporate governance guidelines provide that one of our independent
directors will serve as the lead independent director. Our lead independent director 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. Mr. Horowitz currently serves as our lead independent director
and, effective as of the date of the Annual Meeting, Mr. Epstein will assume the role of lead independent director.
We believe that our current leadership structure is appropriate because it promotes effective independent oversight of management.
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 lead independent director promotes a balanced leadership structure by serving as an impartial
representative of the independent directors who can communicate their views to the Chairperson and CEO. Our board will continue
to periodically review our leadership structure and may make such changes in the future as it deems appropriate. During their 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 such roles were
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.
Corporate Governance
18
2024 Proxy Statement
Okta, Inc.
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 and its processes for monitoring our risk exposures. 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 framework
and processes that our management team has designed and implemented are appropriate, and are 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.
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, each committee has oversight over certain business and operational risks that are relevant
to its focus area.
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 meets with our management team and Ernst & Young LLP to (i)
discuss guidelines and policies with respect to risk assessment and risk management, and
(ii) review our major financial risk exposures and the steps our management team has taken
to monitor and control these exposures. Our audit committee also receives updates on our
enterprise risk management program, which include updates on certain existing and
emerging risks, including those related to cybersecurity.
Compensation Committee
Our compensation committee assesses risks created by the incentives inherent in our
compensation policies for both executives and employees generally. At least annually, our
compensation committee, along with our management team, 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.
Cybersecurity Risk Committee
Our cybersecurity risk committee assists our board in the oversight of the company’s
management of risks related to cybersecurity and data privacy. In fulfilling this role, our
cybersecurity risk committee oversees the effectiveness of our cybersecurity and data
privacy programs, including the company’s practices for identifying, assessing and
mitigating cybersecurity and data privacy risks across all business functions. Our
cybersecurity risk committee receives periodic reports from the Chief Security Officer and
other members of management relating to risk management of our cybersecurity and data
programs.
Corporate Governance
Okta, Inc.
2024 Proxy Statement
19
Meetings of Our Board and Annual Meeting Attendance
Our board held four meetings during fiscal 2024. 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
2024. 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 but one of our
directors then in office attended the 2023 Annual Meeting of Stockholders.
Committees of Our Board
Our board has established four standing committees: audit, compensation, nominating, and cybersecurity risk. Our cybersecurity risk
committee, initially formed by our board as an ad hoc committee to enhance the board’s oversight of cybersecurity and data privacy
risks and controls, was established as a standing committee in December 2023.
The composition and responsibilities of each board committee are described below. Each committee is composed of independent
directors of our board who serve on the relevant committee until they resign or until otherwise determined by our board. Former
director and audit committee member Patrick Grady, who resigned from our board as of the date of the 2023 Annual Meeting of
Stockholders, satisfied the requirements for audit committee independence during the period he served on the committee. Our board
assesses the composition of the committees at least annually to consider whether to rotate committee assignments. Each committee
operates pursuant to a written charter that our board has adopted. Our audit, compensation and nominating committee charters are
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, which includes 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 nine meetings during fiscal 2024.
Members
Ms. Archambeau
Ms. Choi
Mr. Epstein (Chair)
Independence
Each of our current audit committee
members meet the requirements for
independence under current Nasdaq
listing standards and SEC rules and
regulations.
Financial Expertise
Each of our current audit committee
members meet the financial literacy
requirements of the Nasdaq listing
standards. In addition, our board has
determined that each of our current
audit committee members 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
2024 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 six meetings during
fiscal 2024.
Compensation Committee Interlocks and Insider Participation
During fiscal 2024, Messrs. Dixon and Stankey and Ms. Saeger 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)
Independence
The composition of our compensation
committee meets the requirements for
independence under the Nasdaq listing
standards and SEC rules and
regulations. Each member of our
compensation committee is also a non-
employee director, as defined pursuant
to Rule 16b-3 promulgated under the
Exchange Act.
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 Nasdaq
listing standards. Our nominating committee held five meetings during fiscal 2024.
Members
Mr. Epstein
Ms. Saeger (Chair)
Mr. Stankey
Independence
The composition of our nominating
committee meets the requirements for
independence under the Nasdaq listing
standards and SEC rules and
regulations.
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Okta, Inc.
2024 Proxy Statement
21
Cybersecurity Risk
Committee
Primary Responsibilities
Our cybersecurity risk committee, among other things:
• oversees the effectiveness of our cybersecurity and data privacy programs, including the
company’s practices for identifying, assessing and mitigating cybersecurity and data privacy risks
across all business functions;
• reviews controls to prevent, detect and respond to cybersecurity attacks or incidents, or
information or data breaches;
• oversees our cybersecurity resiliency, including related crisis preparedness and incident
response plans; and
• receives periodic reports from our chief security officer, and as appropriate, other members of
management or outside advisors, relating to risk management of our cybersecurity and data
privacy programs.
Our cybersecurity risk committee operates under a written charter that our board has adopted.
Our predecessor ad hoc cybersecurity risk committee held four meetings during fiscal 2024.
Members
Ms. Archambeau
Ms. Choi
Mr. Dixon (Chair)
Independence
Each member of the cybersecurity risk
committee meets the requirements for
independent directors generally under
the Nasdaq listing standards and SEC
rules and regulations.
Corporate Governance
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2024 Proxy Statement
Okta, Inc.
Identifying and Evaluating Director Nominees
Our board has delegated to our nominating committee the responsibilities of identifying suitable candidates to nominate to our board
(including candidates to fill any vacancies that may occur), and assessing their qualifications in light of the policies and principles in our
corporate governance guidelines and the committee’s charter. Our nominating committee may gather information about candidates
through interviews, detailed questionnaires, comprehensive background checks, or any other means its members deem appropriate.
Our nominating committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an
individual basis and taking into account the overall composition and needs of our board. Based on the results of the evaluation
process, our nominating committee recommends candidates for our board’s approval as director nominees for election to our board.
Minimum Qualifications
Our nominating committee uses a variety of methods for identifying and evaluating director nominees, and will consider all facts and
circumstances that it deems appropriate or advisable. As part of this process, our nominating committee considers 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, LGBTQIA+ 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. Our 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 the 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
We value the input of our stockholders and actively seek their feedback on our board, corporate governance practices, ESG initiatives,
and executive compensation program. With oversight and direction from our nominating committee, we conduct an annual
stockholder outreach program to solicit and better understand stockholder perspectives.
In the fall of 2023 (fiscal 2024), our team met with governance professionals from passive funds as well as portfolio managers from
active funds. We contacted stockholders representing approximately 55% of our outstanding common stock. The breadth of our
outreach enabled us to gather feedback from a significant cross-section of our stockholder base. During our engagements, we
received many supportive and positive comments from stockholders on the direction of our business, ESG initiatives and reporting
practices, and board composition.
As in prior years, we also discussed our compensation programs with significant stockholders. We learned during our fiscal 2024
discussions that stockholders generally supported our annual executive compensation program and how it aligns executive officer pay
with our company’s performance. We also received positive feedback from stockholders regarding the addition of performance-based
equity to our executive officer equity portfolio. Our compensation-related stockholder outreach is discussed further in“Compensation
Discussion and Analysis” below.
Our 2023 non-binding advisory Say-on-Pay vote received 95.6% support, which was a 41 percentage point improvement over the
prior period . We continue to consider stockholder feedback from past outreach discussions. Based in part on that feedback, we
updated certain of our compensation practices in fiscal 2024:
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2024 Proxy Statement
23
•
We expanded our performance-based restricted stock unit (“PSU”) program for executive officers, increasing the percentage of
our overall equity grants to executive officers that consist of PSUs.
•
In March 2023, we introduced robust stock ownership guidelines for our NEOs, encouraging even more alignment between the
interests of our NEOs and our stockholders.
•
In October 2023, we adopted a compensation clawback policy in accordance with the Nasdaq listing requirements and Rule 10D-1
under the Exchange Act. The policy provides for the recoupment of certain erroneously awarded incentive compensation paid to
current or former executive officers if there has been an accounting restatement due to material noncompliance with the financial
reporting requirements.
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 have a positive impact on our society, the environment and all of our stakeholders,
including our stockholders, customers, employees, partners and communities. We take this responsibility seriously and our focus on
ESG helps guide our business priorities. Since publicly launching our ESG program in May 2020, we have worked to develop an ESG
strategy that aligns with our long-term goal to operate in a sustainable manner. We are executing on this strategy by establishing
effective governance to identify and manage the key ESG risks arising from our operations, which we believe will help drive long-term
growth and create measurable value for our stockholders.
For more information on our ESG strategy and initiatives, please view the “Social and Environmental Responsibility at Okta” section of
our website at okta.com/responsibility. That section of our website also includes important ESG reporting and disclosures, including
our latest ESG Fact Sheet, which tracks our year-over-year updates with respect to our greenhouse gas (“GHG”) emissions inventory,
human capital programs, community support, and sustainability efforts. The information contained on, or that can be accessed
through, our website is not incorporated by reference into this Proxy Statement.
ESG Governance and Strategic Oversight
We have established a multi-tiered governance structure designed to provide an appropriate level of oversight and accountability
over ESG matters. The day-to-day management of our ESG program and related initiatives is managed by our internal ESG Committee,
which is composed of cross-functional employees. The ESG Committee periodically reports to our ESG Executive Committee, which
consists of members of our executive leadership team, including our CEO, CFO, Chief Legal Officer (“CLO”), Chief People Officer and
EVP of Corporate Development. The ESG Executive Committee is responsible for the strategic direction of our ESG efforts. The status
of our ESG program and related public disclosures are reported to and reviewed by our nominating committee throughout the year,
acting on behalf of our board.
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2024 Proxy Statement
Okta, Inc.
Additionally, each standing board committee reviews certain functional aspects of our ESG program that fall under their respective
purview:
Audit Committee
•
Materiality risk assessments, which include energy and climate risks, and
regulatory compliance
Compensation Committee
•
Human capital management, including diversity, culture and leadership
Nominating Committee
•
Corporate governance and board practices
•
Investor and stakeholder policies and feedback
•
Social responsibility and philanthropic commitments
Cybersecurity Risk Committee
•
Cybersecurity and data privacy
Priority Issues
During fiscal 2024, we partnered with external experts and internal stakeholders to reassess the ESG topics that we believe are most
relevant to our business and our key stakeholders. Our assessment identified nine key topics across our three stakeholder groups
that, together, form the foundation for our ESG program. We use the results of this assessment to consider the priorities of our
voluntary ESG initiatives throughout the year.
Protecting Our Customers
•
Data Privacy
•
Security
Investing in Our People
•
Diversity, Inclusion and Belonging
•
Workforce Development
•
Ethical Business Practices
•
Health, Safety and Wellbeing
Supporting Our Communities
•
Tech for Good
•
Digital Divide
•
Energy and Climate
Protecting Our Customers
We believe privacy and security are interdependent. In designing our product offerings and services, we strive to protect our
customers’ information and maintain the security of our and our customers’ systems and networks.
•
Data Privacy. Protecting the privacy of our customers and employees is a key goal in our product development and operations. We
implement a variety of technical and operational safeguards designed to protect the data of our customers and employees and be
transparent about our use of that data. Our cybersecurity risk committee also oversees the effectiveness of Okta’s data privacy
program. The privacy team advises management and briefs the cybersecurity risk committee on our privacy program.
•
Security. Our board has delegated to our cybersecurity risk committee responsibility for overseeing Okta’s cybersecurity
program. Our cybersecurity program includes a risk management framework intended to protect the integrity and availability of
our critical systems, internal networks and information. Through this program, we implement policies and processes to respond to
cybersecurity threats and mitigate impacts to our business and our customers.
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2024 Proxy Statement
25
Investing in Our People
“Build and own it” is a core value at Okta. Our goal is to create an environment in which employees share a sense of ownership in
achieving our company vision. We believe that much of our success in advancing a builder-and-owner culture depends on our ability to
attract, develop, and retain exceptional talent and balanced teams. To that end, we strive to make Okta a supportive and honest
workplace—one where inclusivity, career growth, ethical business practices, and comprehensive benefits can empower our employees
to do great work.
Diversity,
Inclusion and
Belonging
We believe that building a workforce with a wide range of backgrounds and perspectives helps drive growth
and innovation. Our diversity, inclusion and belonging (“DIB”) team collaborates with our employee resource
groups (“ERG”) to integrate DIB considerations into our workforce development programs and hiring process.
They partner with teams across the company to focus on DIB efforts in three major areas: our workforce, our
workplace and in the marketplace.
We use inclusive recruitment and hiring practices to source talent from marginalized and underrepresented
groups. Our engagement with diversity sourcing programs and partnerships helps us source top talent from
underrepresented groups to fill current open roles and expands our pool of diverse talent for future roles. As
described further below in “Supporting Our Communities,” we also continue to engage with organizations
that provide technology-related career support for diverse students and jobseekers.
Fostering a culture of inclusion and belonging in our workplace is a key priority at Okta. We empower our
employees to be authentic and grow through open conversations and education. Our employees have access
to a variety of DIB resources, including regular safe space discussion forums and facilitated workshops;
precise language and inclusive calibrations; mentoring and workplace development programs focused on
supporting talent from underrepresented communities; and ERG sponsorship opportunities. We also offer
ERG and affinity groups supporting neurodiversity, women, people of color, veterans, the LGBTQIA+
community, parents and caregivers, and cultural and ethnic diversity. For additional information on our DIB
strategy, workforce representation and inclusion programs, please see our most recent State of Inclusion
Report, available on our website at okta.com/state-of-inclusion-at-okta.
Workforce
Development
We invest significant resources to develop talent and encourage employees to engage in learning
opportunities and take ownership over their professional growth. Okta employees can take advantage of 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.
Ethical Business
Practices
Our ethical standards and expectations are set forth in our code of conduct and other policies. These
resources apply to all employees and are designed to enable adherence to applicable laws, rules and
regulations. New employees certify to the code of conduct upon joining Okta and re-certify on an annual
basis. In addition, we expect all employees to affirm that they have read, understood and agree to comply with
our ethics and compliance policies.
Our audit committee is responsible for ethical compliance oversight. At least annually, the audit committee
reviews the results of management’s efforts to monitor compliance with our ethics programs and policies, as
well as our code of conduct.
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2024 Proxy Statement
Okta, Inc.
Health, Safety
and Wellbeing
At Okta, we are focused on maintaining a safe workplace and supporting the varying health needs of our
employees. We promote employee health and safety through our benefits and workplace safety standards,
respectively.
We offer health and wellness benefits to enhance the wellbeing of our workforce. Our employee experience
programs aim to support our workforce and their families, regardless of their geographic location or family
structure. In fiscal 2024, we focused on expanding our support for mental healthcare and wellbeing, women’s
health and family planning, neurodivergent care, and bereavement leave.
We have policies and standards designed to create a safe and secure working environment for all Okta
employees. These standards form the basis of our Physical Security, Health and Safety Program and are
designed to protect employees from a range of physical threats and hazards whether working in our office,
working remotely, attending an Okta event, or traveling on behalf of Okta. While our Global Workplace and
Safety Team manages the program, we believe that everyone at Okta plays a vital role in contributing to
workplace safety and security. Employees receive education on overall program compliance, as well as the
processes for reporting work-related incidents. These trainings are designed to equip employees with the
knowledge and necessary tools they need to be practitioners of positive security and safety behaviors.
Additional information on our compensation, benefits and wellness programs is available on our Total
Rewards website at rewards.okta.com.
Supporting Our Communities
We strive to create a safely connected world where everyone can belong and thrive by mobilizing our people, products, and dollars to
give back to our communities. Our people, in particular, play a key role in driving our community impact. In fiscal 2024, approximately
88% of Okta employees participated in Okta for Good, our social impact and sustainability initiative, by donating or volunteering.
In service of our philanthropic vision, in fiscal 2024, we announced a $50 million, five-year funding commitment via Okta for Good.
Through the Okta for Good Fund, we plan to deploy these funds to address pressing challenges in three key areas:
•
Tech for Good: We want to accelerate digital transformation and strengthen the security posture of civil society organizations. In
partnership with The NetHope Center for Digital Nonprofit, of which Okta is a founding member, we provide grants, as well as
educational resources and tools, to help global nonprofit organizations integrate digital programs and technology solutions into
their business models. In addition, we make our own identity solutions accessible by donating our technology and services to
qualifying nonprofit organizations to help them better protect their businesses and the vulnerable communities they serve.
•
Digital Divide: We aim to bridge the technology and talent gap by making digital education and job opportunities more accessible
to all. Our work, in partnership with nonprofit and community organizations, is focused on improving digital literacy and advancing
inclusive pathways into technology and cyber careers. In October 2023, we launched the Okta Workforce Development Initiative
to advance our goals of finding and developing cybersecurity talent. Through this initiative, we provide funding to organizations
working to increase the technology job opportunities available to women, people of color, veterans and other historically
underrepresented talent. We also provide educational grants for cybersecurity training programs.
•
Energy and Climate: Our focus on managing climate-related risks and opportunities extends beyond our own business, and we
work to help our partners and our communities achieve their energy and climate goals. We encourage our vendors to create their
own science-based targets and provide them with educational guidebooks as a starting point to help them achieve those targets.
We are also continuing to support the security and resilience of our communities with our climate equity grants. During fiscal
2024, our climate equity grants were focused on assisting marginalized communities that have been disproportionately impacted
by climate change. We also collaborated with local partners to help install solar energy in low- and moderate-income areas.
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2024 Proxy Statement
27
Environmental Sustainability
As part of our focus on climate action, we have set long-term goals and targets to address climate-related risks relevant to our
business. We track our progress around these goals and targets throughout the year, and use the results to identify further
opportunities to reduce our carbon footprint. With the help of a third-party consultant, we conduct a GHG emissions analysis, which
includes our Scope 1, Scope 2 and relevant Scope 3 emissions categories, the results of which we submit to CDP.
We continue to work on achieving 100% renewable electricity for our global real estate footprint on an annual basis. In fiscal 2023, we
achieved 100% renewable electricity to match the electricity consumption of our global offices, the estimated electricity consumption
of our remote workforce, and the electricity consumption of our third-party cloud service providers. In fiscal 2024, we continued our
efforts to right-size our global office footprint and achieve both LEED Silver and WELL Silver standards for all new direct-leased
offices.
Our emissions reduction efforts also include the following:
•
Preparing resources to help our third-party vendors set their own climate-related targets, including, for example, a Sustainable
Travel Guidebook to educate Okta employees, vendors, and external partners on making business travel decisions that reduce
climate impacts.
•
Integrating climate into our enterprise-wide risk management process, in line with the recommendations of the Task Force on
Climate-Related Financial Disclosures.
•
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.
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2024 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. Our 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, our compensation committee reviews our non-employee director compensation program,
receiving input from our 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 compensation peer
group.
In spring 2024, our compensation committee reviewed our non-employee director compensation program to determine whether to
recommend any compensation changes to our board. The review included a market assessment prepared by the independent
compensation consultant comparing director compensation levels and practices against our compensation peer group and the
broader market. Based on that review, our compensation committee recommended to our board, and our board approved,
adjustments to our non-employee director compensation for the first time since our IPO in 2017. These changes were made to more
closely align existing pay elements with the competitive market. Other than the change to the initial RSU grant, which became
effective in April 2024, these changes will be effective as of the Annual Meeting, as set forth below.
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 $530,000 ($350,000 prior to the April 2024 compensation change) on the date of grant. These initial RSU grants vest in equal
annual installments on the first three anniversaries of the date on which the non-employee director was appointed to our board,
subject to continuous service.
Non-employee directors receive the following annual cash retainers for their service:
Position
Current Annual Cash Retainer
($)
Updated Annual Cash Retainer
($)
Board Member
30,000
35,000
Lead Independent Director
20,000
No change
Audit Committee Chair
20,000
26,000
Compensation Committee Chair
15,000
20,000
Nominating Committee Chair
8,000
12,000
Cybersecurity Risk Committee Chair
—
18,000
Audit Committee Member other than Chair
10,000
13,000
Compensation Committee Member other than Chair
7,500
10,000
Nominating Committee Member other than Chair
4,000
6,000
Cybersecurity Risk Committee Member other than Chair
—
9,000
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 $245,000 ($200,000 prior to the April 2024
compensation change) 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 2024. Mr.
McKinnon, who is also an Okta employee, received no compensation for his service as a director. The compensation received by Mr.
McKinnon as CEO is presented in the “Fiscal 2024 Summary Compensation Table” below.
From November 1, 2022 to October 31, 2023, Mr. Kerrest was on a sabbatical from the company. During this time, he remained an at-
will employee of the company and continued to serve as a director and Vice Chairperson of our board, but did not fulfill any of his
regular duties as an employee or officer. Other than health care benefits, Mr. Kerrest did not receive compensation from the company
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2024 Proxy Statement
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during his sabbatical. Mr. Kerrest ceased to be COO and an employee of the company effective October 31, 2023, but continues to
serve as a director and as Vice Chairperson of our board. Mr. Kerrest did not receive cash compensation in connection with his service
as a director during his tenure as an employee of the company. Pursuant to the terms of his transition agreement with the company,
Mr. Kerrest will not receive any cash compensation under our non-employee director compensation program until the date of the
Annual Meeting. In lieu of receiving an initial RSU grant as a non-employee director, Mr. Kerrest agreed to forfeit 76,549 stock options
that were out of the money, and his outstanding RSUs and 5,963 stock options continued to vest in accordance with their original
terms. On the date of the Annual Meeting, and subject to his continuous service, Mr. Kerrest will receive the annual cash and equity
retainers for which all non-employee directors are eligible under the amended non-employee director compensation policy, as
described above.
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 2024.
Fiscal 2024 Director Compensation Table
Name
Fees Earned or Paid In
Cash ($)
Stock Awards
($)(1)(2)
Total
($)
Shellye Archambeau
40,000
200,050
240,050
Emilie Choi
36,087
200,050
236,137
Robert L. Dixon, Jr.
37,500
200,050
237,550
Jeff Epstein
54,000
200,050
254,050
Patrick Grady(3)
15,761
—
15,761
Benjamin Horowitz
50,000
200,050
250,050
J. Frederic Kerrest(4)
—
1,929,805
1,929,805
Rebecca Saeger
45,500
200,050
245,550
Michael Stankey
49,000
200,050
249,050
(1)
The amounts reported represent the aggregate grant date fair values of the RSUs granted during fiscal 2024 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 2024 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, 2024, our non-employee directors held the options and stock awards as set forth in the following table:
Name
Shares of Class A
Common Stock
Underlying Options
Shares of Class B
Common Stock
Underlying Options
RSUs Covering
Class A Common
Stock
Shellye Archambeau
—
—
2,818
Emilie Choi
—
—
5,244
Robert L. Dixon, Jr.
—
—
2,818
Jeff Epstein
—
—
3,296
Benjamin Horowitz
—
—
2,818
J. Frederic Kerrest
267,010
1,237,512
18,889
Rebecca Saeger
—
—
2,818
Michael Stankey
—
190,000
2,818
(3)
Mr. Grady served on our board until June 2023.
(4)
As noted above under “Non-Employee Director Compensation,” in lieu of receiving an initial RSU grant as a non-employee director, Mr. Kerrest agreed to forfeit
76,549 stock options that were out of the money, and his outstanding RSUs and 5,963 stock options continued to vest in accordance with their original terms. The
amount for Mr. Kerrest in the Stock Awards column reflects the incremental fair value for Mr. Kerrest’s RSU and option awards that continued to vest in connection
with his service as a director, computed in accordance with ASC Topic 718 as of the modification date of August 26, 2023.
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2024 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, 2025. 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.
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 2024 in accordance with the
foregoing pre-approval policies and procedures.
Okta, Inc.
2024 Proxy Statement
31
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 fiscal 2024 and the fiscal year ended January 31, 2023 (“fiscal 2023”). All of these services were approved by our audit
committee.
Fee Category
Fiscal 2024
($)
Fiscal 2023
($)
Audit Fees(1)
4,024,000
4,245,000
Audit-Related Fees(2)
993,000
—
Tax Fees(3)
449,000
67,000
All Other Fees(4)
7,000
6,000
Total Fees
5,473,000
4,318,000
(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)
Audit-Related Fees relate to assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial
statements and are not reported under “Audit Fees.” These include fees for service organization control examinations and other attestation services.
(3)
Tax Fees relate to professional services provided for permissible tax advisory services in fiscal 2024 and fiscal 2023.
(4)
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, 2025.
Proposal Two: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
32
2024 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, 2024, 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, 2024. 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, 2024 be included in its Annual Report on Form 10-K for its 2024 fiscal
year.
Audit Committee
Jeff Epstein (Chair)
Shellye Archambeau
Emilie Choi
Okta, Inc.
2024 Proxy Statement
33
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 NEOs for fiscal 2024 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 2024 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 NEOs’ 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 2024 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.
34
2024 Proxy Statement
Okta, Inc.
Executive Officers
The following table sets forth information regarding our executive officers, including their ages, as of May 9, 2024:
Name
Age
Positions and Offices Held with the Company
Todd McKinnon
52
Chief Executive Officer, Chairperson of our board and Director
Brett Tighe
44
Chief Financial Officer
Shibu Ninan
49
Chief Accounting Officer
Larissa Schwartz
52
Chief Legal Officer and Corporate Secretary
Jon Addison
49
Chief Revenue Officer
Information Concerning Executive Officers
In addition to Mr. McKinnon, who serves as a director and whose biography is included under “Proposal One: Election of Directors”
above, our executive officers as of May 9, 2024 consisted of the following individuals:
Brett Tighe
Mr. Tighe has served as our CFO 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 from the Institute of Chartered Accountants of India, and a Certified Public Accountancy from the American Institute of
Certified Public Accountants.
Larissa Schwartz
Ms. Schwartz has served as our CLO 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.
Jon Addison
Mr. Addison has served as our Chief Revenue Officer (“CRO”) since November 2023. Prior to his current role, Mr. Addison served as
our Interim Chief Revenue Officer from February 2023 to November 2023, and as our General Manager of EMEA from September
2021 to November 2023. Before joining Okta, Mr. Addison served as Vice President, EMEA & LATAM, Talent Solutions at LinkedIn
from September 2019 to October 2021, and as Head of Sales, Talent Solutions, U.K., from October 2016 to September 2019. Earlier in
his career, Mr. Addison held various roles at Oracle, Finastra, Opentext, Pitney Bowes, and CapGemini. Mr. Addison holds a Bachelor’s
Degree in Geography and Economics from King's College London.
Proposal Three: Approval, on an Advisory Non-Binding Basis, of the Compensation of Our Named Executive Officers
Okta, Inc.
2024 Proxy Statement
35
Compensation
Discussion and
Analysis
This Compensation Discussion and Analysis describes our executive compensation
program and the decisions in fiscal 2024 regarding the compensation for our NEOs,
who, for fiscal 2024, were as follows:
Todd McKinnon
our CEO, Chairperson of our board and co-founder;
Brett Tighe
our CFO;
Shibu Ninan
our CAO;
Larissa Schwartz
our CLO and Corporate Secretary; and
Jon Addison
our CRO.
Executive Transitions
In the first quarter of fiscal 2024 , we appointed Ms. Schwartz as our CLO and
Corporate Secretary and an executive officer to replace Jonathan Runyan, our former
General Counsel, who left Okta at that time. Prior to this appointment, Ms. Schwartz
was serving as our Senior Vice President, Deputy General Counsel and Assistant
Corporate Secretary.
In the first quarter of fiscal 2024, we appointed Mr. Addison as interim CRO, and in the
fourth quarter of fiscal 2024, we appointed Mr. Addison as our CRO and an executive
officer.
Executive Summary
Okta is the leading independent identity partner. Our vision is to free everyone to
safely use any technology, and we believe identity is the key to making that happen.
Our purpose is to bring simple and secure digital access to people and organizations
everywhere. Our Workforce Identity Cloud and Customer Identity Cloud, powered by
Auth0, enable our customers to securely connect the right people to the right
technologies and services at the right time.
36
2024 Proxy Statement
Okta, Inc.
Highlights of Fiscal 2024 Corporate Performance
Specific financial highlights of our performance in fiscal 2024 include:
•
Revenue: Total revenue was $2.263 billion, an increase of 22% year-over-year. Subscription revenue was $2.205 billion, an
increase of 23% year-over-year.
•
Remaining Performance Obligations (“RPO”): RPO, or subscription backlog, was $3.385 billion, an increase of 13% year-over-
year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.952
billion, an increase of 16% year-over-year.
•
GAAP Operating Loss: GAAP (as defined below) operating loss was $516 million, or (23)% of total revenue, compared to a GAAP
operating loss of $812 million, or (44)% of total revenue for fiscal 2023.
•
Non-GAAP Operating Income/Loss: Non-GAAP operating income was $310 million, or 14% of total revenue, compared to a non-
GAAP operating loss of $10 million, or (1)% of total revenue for fiscal 2023.
•
Net Loss: GAAP net loss was $355 million, compared to a GAAP net loss of $815 million for fiscal 2023. GAAP net loss per share
was $2.17, compared to a GAAP net loss per share of $5.16 for fiscal 2023. Non-GAAP net income was $286 million, compared to a
non-GAAP net loss of $7 million for fiscal 2023. Non-GAAP basic and diluted net loss per share were $1.75 and $1.60, respectively,
compared to non-GAAP basic and diluted net loss per share of $0.04 for fiscal 2023.
•
Cash Flow: Net cash provided by operations was $512 million, or 23% of total revenue, compared to $86 million, or 5% of total
revenue, for fiscal 2023. Free cash flow was $489 million, or 22% of total revenue, compared to $65 million, or 3% of total revenue,
for fiscal 2023.
•
Customers: Added approximately 1,350 customers, bringing our total customer count to more than 18,950 as of January 31, 2024.
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 gross profit, non-GAAP gross margin, non-GAAP operating income or loss, non-GAAP operating margin, non-GAAP net income
or loss, non-GAAP net margin, non-GAAP net income or loss per share, basic and diluted, non-GAAP tax rate, free cash flow, and free
cash flow margin. 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 “Reconciliation of GAAP to Non-GAAP Data” section (pages 11 to 13) of Exhibit 99.1
to our Current Report on Form 8-K, filed with the SEC on February 28, 2024.
Key Actions of Fiscal 2024 Executive Compensation Program
Consistent with our performance and compensation objectives for fiscal 2024, our compensation committee took the following key
actions relating to the compensation of our NEOs for fiscal 2024:
•
Base Salary: Maintained the annual base salaries of our CEO and CFO for fiscal 2024 at their fiscal 2023 levels, increasing the
annual base salary of Mr. Ninan by 5% to more closely align with peer group compensation levels for similarly-situated executives,
while increasing the annual base salaries of Ms. Schwartz by 7% and Mr. Addison by 23% in connection with their promotions to
CLO and CRO, respectively.
•
Short-Term Incentive Compensation: After achieving the performance objectives established under our Senior Executive
Incentive Bonus Plan (the “Bonus Plan”) at 117.6%, our compensation committee used negative discretion to reduce the payouts
for internal pay equity purposes to 85% to 90% of target to more closely align with the achievement of goals established for our
broader employee population. For fiscal 2024, Mr. Addison did not participate in the Bonus Plan but participated in a separate
sales commission plan (the “Sales Commission Plan”). Based upon the achievement of company performance, Mr. Addison attained
87% of his target commission-based cash incentive award opportunity.
•
Long-Term Incentive Compensation: In addition to time-based RSU awards, in response to stockholder feedback, we increased
the mix of PSU awards granted to our executive officers.
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 (“TSR”) compared to the Nasdaq Composite Index TSR during
three performance periods—a one-year, two-year and three-year performance period—each beginning on February 1, 2023. Based
on the company’s relative TSR performance over the one-year and two-year performance periods ending January 31, 2024,
tranche one of the fiscal 2024 PSUs and tranche two of the fiscal 2023 PSUs were earned at 100% and 62%, respectively. Tranche
one of the fiscal 2024 PSUs would have been earned at 200% of target based on relative TSR but was capped at 100% of target
based on the PSU award design.
Compensation Discussion and Analysis
Okta, Inc.
2024 Proxy Statement
37
•
New Compensation Arrangements: In connection with Ms. Schwartz’s appointment as our CLO and Mr. Addison’s appointment as
our CRO during fiscal 2024, we entered into compensation packages with each of them that were intended: to align with the
compensation packages offered to executives holding comparable positions at the companies in our compensation peer group;
incentivize superior performance; and provide significant retentive value. In addition, each of Ms. Schwartz and Mr. Addison was
added as a “covered executive” to our Executive Severance Plan.
•
Stock Ownership Guidelines: In 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. Our stock ownership policy is described in more
detail in “Other Compensation Policies—Stock Ownership Guidelines” below.
•
Compensation Clawback Policy: In October 2023, we adopted a compensation clawback policy that provides for the recoupment
of certain erroneously awarded incentive-based compensation paid to current or former executive officers in the event of an
accounting restatement due to material noncompliance with financial reporting requirements. Our compensation clawback policy
is described in more detail in “Other Compensation Policies—Compensation Clawback Policy” below.
Fiscal 2024 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 2024 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 executive officers
Retain an independent compensation consultant who reports
directly to our compensation committee
Maintain an Exchange Act Rule 10D-1 and Nasdaq-compliant
compensation clawback policy for our executive officers
Compensation Discussion and Analysis
38
2024 Proxy Statement
Okta, Inc.
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 2023 non-binding advisory Say-on-Pay vote received 95.6% support, which was a 41 point improvement over the prior year and
reflected strong stockholder support for our executive compensation program. As in past years, we discussed our compensation
programs with significant stockholders in the fall of 2023 (fiscal 2024). We contacted stockholders representing approximately 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 stockholder outreach, we learned that our stockholders largely supported our annual executive compensation program
and the alignment between executive officer pay and our company’s performance. We also received positive feedback on the addition
of performance-based equity to our executive officer equity portfolio.
Based in part on the stockholder feedback we received in these and past outreach discussions, our compensation committee
expanded our PSU program in fiscal 2024, increasing the percentage of our overall equity awards granted to executive officers that
consist of PSUs.
In March 2023, we introduced robust stock ownership guidelines for our executive officers, encouraging even more alignment of the
interests of our executive officers and our stockholders.
We value the opinions of our stockholders. Our board and our compensation committee consider stockholder feedback, in addition to
the outcome of our non-binding advisory Say-on-Pay vote, when making compensation decisions for our executive officers.
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 opportunities in the form of equity awards and benefits
(such as change-in-control severance payments and benefits), to attract and retain our executive officers. In determining the amount
of each element of direct compensation awarded to our 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 executive officers is weighted toward equity as opposed to cash
compensation. We structure our executive compensation program to be heavily weighted toward variable, long-term and “at risk”
equity compensation, 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 Discussion and Analysis
Okta, Inc.
2024 Proxy Statement
39
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 makes recommendations to our board regarding the compensation of the non-employee directors 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 our compensation 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 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 (other than with respect to himself) and
other data, including input from its independent compensation consultant, compensation survey data, and the publicly-available
compensation data of our compensation peer group. Our compensation committee then draws upon its members’ experience and
exercises its independent judgment to determine, for each of our executive officers, the target total direct compensation and each
element of compensation.
Our compensation committee does not rely on 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, 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, please 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
40
2024 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 himself. These recommendations cover each executive
officer’s target total direct compensation, consisting of base salary, short-term incentive compensation opportunity, and long-term
incentive compensation in the form of equity awards. In making these compensation recommendations, our CEO considers a variety
of factors, including the company’s 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.
Our compensation committee reviews the recommendation of our CEO (other than with respect to himself) 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 regularly in executive sessions outside the presence of our CEO when determining his compensation and when
discussing other matters.
Role of the Compensation Consultant
Our compensation committee engages an independent compensation consultant to provide information, analysis and other advice
relating to our executive compensation program and the decisions resulting from our compensation committee’s annual executive
compensation review. For fiscal 2024, our compensation committee retained Compensia, a nationally recognized compensation
consulting firm with expertise relating to technology companies. Compensia provided our compensation committee 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 and provide recommendations regarding the compensation of the non-employee directors 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
Compensia’s 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 2022, with the assistance of Compensia, our compensation committee reviewed the compensation peer group we used
as a reference when making compensation decisions for fiscal 2024, 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 $800 million to approximately $4.8 billion (0.5 to 3.0 times our last four fiscal quarters’ revenue of
approximately $1.6 billion); and
•
a market capitalization of approximately $3.8 billion to approximately $61.4 billion (within a range of 0.25 to 4.0 times our 30-day
average market capitalization of approximately $15.4 billion in September 2022).
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2024 Proxy Statement
41
Where appropriate, we further refined our peer group by focusing on companies with strong one-year and three-year revenue
growth, 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 Zendesk, due to its acquisition, from the
compensation peer group, and added Autodesk and Elastic for fiscal 2024, and approved the following compensation peer group to
assist with the determination of fiscal 2024 compensation for our NEOs:
Autodesk
HubSpot
The Trade Desk
Cloudflare
MongoDB
Twilio
Coupa Software
Palo Alto Networks
Veeva Systems
CrowdStrike Holdings
Paycom Software
Workday
Datadog
RingCentral
Zoom Video Communications
DocuSign
ServiceNow
Zscaler
Dynatrace
Snowflake
Elastic
Splunk
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 peer cut of the Radford Global Technology survey (which included 19 of our 22 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 compensation peer group.
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 and, in the case of Mr. Addison, sales commissions;
•
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 in the United States and pension scheme in the United Kingdom, 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 generally intends to pay 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 addition, our compensation
committee considers the factors described in “Compensation-Setting Process—Role of the Compensation Committee” above.
In March 2023, in connection with its review of our executive compensation program, our compensation committee reviewed the
annual base salaries of our executive officers and determined that the annual base salaries of our CEO and CFO would remain the
same as in effect for fiscal 2023. Our compensation committee also decided to increase the annual base salary of Mr. Ninan by 5% to
more closely align with competitive market compensation levels for similarly-situated executives, and to increase the annual base
salary of Ms. Schwartz by 7% in connection with her promotion to CLO.
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2024 Proxy Statement
Okta, Inc.
The annual base salaries of our NEOs for fiscal 2024, as determined in March 2023, were as follows:
Annual Base Salaries for Fiscal 2024
NEO
Fiscal 2023 Annual Base Salary
($)
Fiscal 2024 Annual Base Salary(1)
($)
Percentage Increase in Annual
Base Salary
Mr. McKinnon
306,000
306,000
—
Mr. Tighe
480,000
480,000
—
Mr. Ninan
380,000
399,000
5%
Ms. Schwartz
419,950
450,000
7%
(1)
Base salary changes were effective February 1, 2023.
In connection with Mr. Addison’s promotion to CRO and being appointed as an executive officer during the fourth quarter of fiscal
2024, our compensation committee approved an annual base salary for Mr. Addison of $450,000, based on a variety of factors,
including Mr. Addison’s qualifications, experience, and competitive market data.
The base salaries actually paid to our NEOs during fiscal 2024 are set forth in the “Fiscal 2024 Summary Compensation Table” below.
Annual Performance-Based Incentive Compensation
We use performance-based incentives to motivate our NEOs 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 payments 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 2023, our compensation committee adopted the performance criteria and related target levels under the Bonus Plan for
fiscal 2024. As adopted, the Bonus Plan provided for an annual performance period.
Target Annual Incentive Compensation Opportunities
In March 2023, in connection with its review of our executive compensation program, our compensation committee determined that
the target annual incentive compensation opportunity for Ms. Schwartz would be increased to 50% of her annual base salary in
connection with her promotion, while the target annual incentive compensation opportunities of our CEO and other NEOs would
remain the same as in effect for fiscal 2023.
The target annual incentive compensation opportunities of our NEOs for fiscal 2024 as determined in March 2023 were as follows:
Target Annual Incentive Compensation Opportunities for Fiscal 2024
NEO
Fiscal 2024 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. Ninan
399,000
45%
179,550
Ms. Schwartz
450,000
50%
225,000
Mr. Addison did not participate in the Bonus Plan in fiscal 2024. However, throughout fiscal 2024 and prior to his promotion to CRO
and appointment as an executive officer in the fourth quarter of fiscal 2024, Mr. Addison participated in the Sales Commission Plan
with a target sales commission opportunity of $268,908.
Corporate Performance Measures
To measure performance for purposes of the Bonus Plan, in March 2023 our compensation committee selected revenue (weighted
70%) and non-GAAP operating income (weighted 30%) as the corporate performance measures that best supported our annual
operating plan and enhanced long-term value creation for our stockholders. For this purpose:
•
“revenue” meant GAAP revenue as reflected in our quarterly and annual financial statements; and
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2024 Proxy Statement
43
•
“non-GAAP operating income” meant GAAP operating income as reflected in our quarterly and annual financial statements,
adjusted to exclude expenses related to stock-based compensation, non-cash charitable contributions, amortization of acquired
intangibles, acquisition- and integration-related expenses, restructuring costs related to severance and termination benefits and
lease impairments in connection with the closing of certain leased facilities, amortization of debt issuance costs, and gains and
losses on early extinguishment of debt.
Bonus Plan Funding Methodology
The threshold, target and maximum performance goals for each measure and the percentage of target bonus earned at each
performance level for 2024 annual incentive awards were as follows:
Annual Bonus Plan Measures
Revenue
(70% weight)
Non-GAAP Operating Income
(30% weight)
Total Revenue
(in millions)
($)
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
2,573.7
115%
150%
261.9
125%
150%
Target
2,238.2
100%
100%
209.5
100%
100%
Threshold
2,014.4
90%
25%
188.5
90%
50%
If actual performance for fiscal 2024 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 potential payments 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 executive officers.
With respect to the revenue component, for each additional 1% achievement between 90% and 100% of target, the percentage of
target bonus earned would increase by 7.5%, and for each additional 1% achievement between 100% and 115% of target, the
percentage of target bonus earned would increase by 3.3%, with a maximum bonus payment of 150% of target.
With respect to the non-GAAP operating income component, for each additional 1% achievement between 90% and 100% of target,
the percentage of target bonus earned would increase by 5%, and for each additional 1% achievement between 100% and 125% of
target, the percentage of target bonus earned would increase by 2%, with a maximum bonus payment of 150% of target.
Compensation Discussion and Analysis
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2024 Proxy Statement
Okta, Inc.
Performance in Fiscal 2024 and Payments
In early 2024, our compensation committee assessed our performance under the Bonus Plan using the process described above. First,
our compensation committee measured actual Bonus Plan performance, prior to the use of negative discretion, against the pre-
established target levels for the fiscal year. For fiscal 2024, our achievement against the target performance levels under the Bonus
Plan, prior to the use of negative discretion, was as follows:
Performance Measure
Target
($)
Result
($)
Actual Achievement
of Target
Revenue
2,238.2 million
2,262.8 million
103.7%
Non-GAAP Operating Income
209.5 million
296.5 million
150%
For the full fiscal year, our achievement of the revenue performance measure resulted in payment funding of 103.7% of target and our
achievement of the non-GAAP operating income performance measure resulted in payment funding of 150% of target. Based on a
relative weighting of 70% for the revenue performance measure and 30% for the non-GAAP operating income performance measure,
the total achievement percentage for fiscal 2024 was 117.6%. After considering the recommendation of our CEO, our compensation
committee exercised negative discretion and reduced the bonus payments for our executive officers to range from 85% to 90% of
their target opportunity to more closely align with the achievement of goals established for our broader employee population.
As a result, the total payments to our NEOs under the Bonus Plan in fiscal 2024 were as follows:
Bonus Plan Payments for Fiscal 2024
NEO
Fiscal 2024 Target Annual Incentive
Compensation Opportunity
($)
Fiscal 2024 Actual Annual Incentive
Compensation Payment
($)
Mr. McKinnon
198,900
169,065
Mr. Tighe
312,000
265,200
Mr. Ninan
179,550
161,596
Ms. Schwartz
225,000
191,250
The fiscal 2024 incentive compensation payments under the Bonus Plan were made in cash.
Sales Commission Plan for Mr. Addison
Mr. Addison did not participate in the Bonus Plan but was eligible to receive cash sales commissions based on the company’s
achievement of specific fiscal 2024 net annualized recurring revenue objectives. Mr. Addison’s target commission-based cash
incentive award opportunity was set at 50% of his overall target cash compensation opportunity (consisting of his base salary and
target commission-based cash incentive award opportunity). The entire commission-based target amount was related to the
achievement of a pre-established net annualized recurring revenue objective. The Sales Commission Plan design also provided for an
additional commission incentive based on the volume of multi-year bookings closed by the sales organization in the fiscal year in order
to incentivize the pursuit of multi-year contracts with our customers. We are not disclosing the multi-year bookings and fiscal 2024
target, or actual net annualized recurring revenue amounts because these amounts represent confidential information, the disclosure
of which would result in competitive harm. However, the company set the targets at definitive, rigorous and objective levels so as to
require significant effort and achievement by Mr. Addison to be attained.
For fiscal 2024, Okta’s actual net annualized recurring revenue was below the target level set for Mr. Addison. As a result, Mr.
Addison’s actual commission-based cash incentive was 87% of his target level. Mr. Addison’s award was based on a pre-established
formula and was not subject to discretion. The amount paid to Mr. Addison pursuant to his Sales Commission Plan for fiscal 2024,
including the additional payment based on achievement against the multi-year booking target, was $286,132.
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 2024, long-term equity awards were granted in the form of PSUs and RSUs.
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
Compensation Discussion and Analysis
Okta, Inc.
2024 Proxy Statement
45
less dilutive than other equity vehicles, such as 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
In March 2023, our compensation committee determined to increase the percentage of overall equity awards granted to our
executive officers that consisted of PSUs. As a result, the annual equity awards granted to our then-executive officers consisted of a
mix, based on the number of underlying shares at target, of service-based RSU awards (50% for the CEO and 67% for other executive
officers) and PSU awards (50% for the CEO and 33% for other executive officers).
In determining the aggregate value of the equity awards granted to our executive officers in fiscal 2024, our compensation committee
considered our performance, market data for each executive officer, the criticality of individual roles, recent promotions, 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 2023, our compensation committee granted the following annual equity awards to our NEOs:
Annual Equity Awards for Fiscal 2024
NEO
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
9,500,000
126,062
9,500,000
126,062
Mr. Tighe
2,805,000
37,222
5,695,000
75,571
Mr. Ninan
247,500
3,285
502,500
6,668
Ms. Schwartz
1,980,000
26,274
4,020,000
53,344
Mr. Addison(3)
—
—
3,000,000
39,809
(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 2023, which was $73.36 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 2023, which was $73.36 per share.
(3)
Mr. Addison’s RSU award was granted to him in connection with his appointment as our interim CRO. Mr. Addison was not an executive officer at the time our
compensation committee granted PSU awards in March 2023, and was therefore not eligible for a PSU award.
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2024 Proxy Statement
Okta, Inc.
PSU Awards
The PSU awards granted in fiscal 2024 to our NEOs are to be earned, if at all, based on the performance of our 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, 2023 through January 31, 2024 (“Performance Period 1”), a two-year period from February 1, 2023 through January 31,
2025 (“Performance Period 2”) and a three-year period from February 1, 2023 through January 31, 2026 (“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 NEO, subject to such NEO 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. 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 Index
0
At the 30th percentile of the Index
0.5
At or above the 55th percentile of the Index
1
Relative TSR for Performance Period 3
Achievement Factor(1)
Below the 30th percentile of the Index
0
At the 30th percentile of the Index
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 Index
3 less the Prior Achievement Sum
At or above the 80th percentile of the Index
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 2024 RSU awards granted to the NEOs vested as to 6.25% of the award on June 15, 2023, with the remaining units
vesting in 15 equal quarterly installments thereafter, subject to the NEO’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 of Fiscal 2024 PSUs and Performance Period 2 of Fiscal 2023 PSUs
In March 2024, our compensation committee determined that, based on our TSR relative to the TSR of the Index, the Achievement
Factor for the fiscal 2024 and fiscal 2023 PSUs were as follows:
•
Performance Period 1 of the fiscal 2024 PSUs would have been 200% of target, but based on the PSU design, was capped at target
at 100% of target.
•
Performance Period 2 of the fiscal 2023 PSUs was 62% of target.
Mr. Addison’s Promotion Equity Award
On December 14, 2023, and in connection with Mr. Addison’s appointment as our CRO, our compensation committee granted to Mr.
Addison an award of 43,092 time-based RSUs with a target value of $3 million, which was converted into a number of RSUs using the
average closing trading price of our Class A common stock over the month of November 2023. This RSU award vests quarterly over
three years, as described in the “Fiscal 2024 Grants of Plan-Based Awards Table” below.
The equity awards granted to our NEOs in fiscal 2024 are set forth in the “Fiscal 2024 Summary Compensation Table” and the “Fiscal
2024 Grants of Plan-Based Awards Table,” each below.
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2024 Proxy Statement
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Employee Benefit Programs
Our NEOs based in the United States 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. Mr. Addison, who is based in the United Kingdom, is eligible to participate in all of our employee
benefit plans offered to U.K. employees, including our pension scheme, employee stock purchase plan, and medical, dental, life and
disability insurance plans, in each case on the same basis as other U.K. employees.
Perquisites and Other Personal Benefits
We typically provide limited or no perquisites or other personal benefits to our NEOs. During fiscal 2024, none of our NEOs received
perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual, except our CRO, for whom we
paid a car allowance, which is a customary practice for executives in the United Kingdom.
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.
U.K. Pension Scheme
We maintain a tax-qualified pension scheme, with company matching contributions of up to 4% of salary per calendar year, that
provides all regular U.K. employees, including our executive officers, with an opportunity to save for retirement on a tax-advantaged
basis. Under our pension scheme, participants may elect to defer a portion of their compensation on a pre-tax basis and have it
contributed to the pension scheme. Pre-tax contributions are allocated to each participant’s individual account and are then invested
in selected investment alternatives according to the participants’ directions. As a U.K. tax-qualified retirement pension scheme,
contributions to the pension scheme and earnings on those contributions are not taxable to the employees until distributed from the
pension scheme, 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),
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2024 Proxy Statement
Okta, Inc.
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.
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 service:
•
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.
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 CLO (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 the equity committee, as applicable.
Compensation Discussion and Analysis
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2024 Proxy Statement
49
Compensation Clawback Policy
In October 2023, our board adopted a compensation clawback policy that provides for the recoupment of certain erroneously
awarded incentive compensation paid to current or former executive officers in the event of an accounting restatement due to
material noncompliance with financial reporting requirements. The policy is compliant with Exchange Act Rule 10D-1 and Nasdaq
listing standards regarding recovery of excess incentive-based compensation, and is applicable to current and former executive
officers in the event of a required accounting restatement.
Mandatory Stock Ownership Guidelines
Our compensation committee believes that stock ownership by our executive officers and the non-employee directors of our board is
important to promote a long-term perspective and align the interests of our executive officers and non-employee directors with those
of our stockholders. In March 2023, our compensation committee adopted mandatory stock ownership guidelines for our executive
officers and non-employee directors, which require each executive officer and non-employee 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 non-employee
director’s annual cash board retainer, as applicable. This is intended to create clear guidelines that tie a portion of the executive
officers’ and non-employee 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. Non-employee 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 non-employee 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 Exchange Act Rule 10b5-1.
Compensation Discussion and Analysis
50
2024 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 NEO, 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 directors 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. While
our compensation committee may consider grant date fair value in awarding equity compensation, it retains discretion to use other
measures of value when determining the number of shares underlying equity awards. Regardless of the method used by the
compensation committee when granting equity awards, the calculation of grant date fair value 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.
2024 Proxy Statement
51
Executive Compensation
Fiscal 2024 Summary Compensation Table
The following table presents information regarding the compensation awarded to, earned by and paid to each of our NEOs in fiscal
2024, 2023 and 2022.
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)
2024
306,000
29,530,934
—
169,065
6,226
30,012,225
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
Brett Tighe
CFO(6)
2024
480,000
11,959,365
—
265,200
6,004
12,710,569
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)
2024
399,000
1,055,329
—
161,596
5,833
1,621,758
2023
175,606
1,941,505
—
39,608
2,280
2,158,999
Larissa Schwartz
CLO and Corporate Secretary(8)
2024
450,000
8,441,733
—
191,250
5,026
9,088,009
Jon Addison
CRO(9)(10)
2024
364,896
6,856,102
—
286,132
29,113
7,536,243
(1)
Mr. Ninan was not an NEO in the fiscal year ending January 31, 2022 (“fiscal 2022”), and Ms. Schwartz and Mr. Addison were not NEOs in fiscal 2023 or 2022, so their
compensation is not presented for those periods. 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 NEOs in fiscal 2024, 2023 and 2022, and the PSUs granted to our
NEOs in fiscal 2024 and 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 2024 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 NEOs.
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 2024 and 2023 consisted of the following:
Fiscal Year of
Grant
Expected Term(a)
Stock Price Volatility(b)
Risk-Free
Interest Rate(c)
Company
Index
2024
2.87 years
62.37%
71.63%
3.97%
2023
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 2.87 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 “Compensation Discussion and Analysis" above, and the “Fiscal 2024 Grants
of Plan-Based Awards Table” and “Fiscal 2024 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 NEOs in fiscal 2022, calculated in accordance with ASC Topic
718. No stock options were granted to our NEOs in fiscal 2024 and 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 2024 Annual Report. These amounts do not necessarily correspond to the actual values recognized by the NEOs.
(4)
The amounts reported for fiscal 2024 for Messrs. McKinnon, Tighe, Ninan and Ms. Schwartz, our US-based NEOs, represent the aggregate annual performance-based
cash incentives earned in fiscal 2024 pursuant to the Bonus Plan and based upon the achievement of certain company metrics. The amount reported for Mr. Addison
represents the amount earned by him under the Sales Commission Plan. The fiscal 2024 achievement for each NEO is described above in “Compensation Discussion
and Analysis—Elements of Our Executive Compensation Program—Annual Performance-Based Incentive Compensation—Performance in Fiscal 2024 and Payments.”
(5)
Mr. McKinnon's fiscal 2024 "All Other Compensation" includes (a) $5,000 for 401(k) matching contributions by the company and (b) $1,226 for term life insurance
premium payments by the company.
(6)
Mr. Tighe's fiscal 2024 "All Other Compensation" includes (a) $5,450 for 401(k) matching contributions by the company and (b) $554 for term life insurance premium
payments by the company.
(7)
Mr. Ninan's fiscal 2024 "All Other Compensation" includes (a) $5,000 for 401(k) matching contributions by the company and (b) $833 for term life insurance premium
payments by the company.
52
2024 Proxy Statement
Okta, Inc.
(8)
Ms. Schwartz’s fiscal 2024 "All Other Compensation" includes (a) $3,800 for 401(k) matching contributions by the company and (b) $1,226 for term life insurance
premium payments by the company.
(9)
In fiscal 2024, Mr. Addison received compensation for his “Salary,” “Non-equity Incentive Plan Compensation” and “All Other Compensation” in British pounds
sterling. The compensation amounts reported in this table have been converted to U.S. dollars using the exchange rate of $1.267 to £1 as of January 31, 2024, the last
day of fiscal 2024.
(10)
Mr. Addison's fiscal 2024 "All Other Compensation" includes (a) $14,596 for matching contributions by the company pursuant to the Okta U.K. pension scheme, (b)
$1,340 for premium payments by the company pursuant to the Okta U.K. life assurance policy, and (c) $13,177 for a car allowance.
Executive Compensation
Okta, Inc.
2024 Proxy Statement
53
Fiscal 2024 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to all plan-based awards granted to our NEOs during fiscal 2024.
Name
Award Type
Grant
Date
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
All Other Stock
Awards: Number
of Shares of
Stock or Units
(#)(3)
Grant Date Fair
Value of Stock
and Option
Awards
($)(4)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Todd McKinnon
FY23 Bonus
RSU(5)
3/15/2023
—
—
—
—
—
—
1,188
98,853
Annual Cash
—
29,835
198,900
298,350
—
—
—
—
—
Annual RSU(6)
3/21/2023
—
—
—
—
—
—
126,062
10,649,718
Annual PSU
3/21/2023
—
—
—
21,010
126,062
252,124
—
18,881,216
Brett Tighe
FY23 Bonus
RSU(5)
3/15/2023
—
—
—
—
—
—
1,864
155,103
Annual Cash
—
46,800
312,000
468,000
—
—
—
—
—
Annual RSU(6)
3/21/2023
—
—
—
—
—
—
75,571
6,384,238
Annual PSU
3/21/2023
—
—
—
6,204
37,222
74,444
—
5,575,127
Shibu Ninan
FY23 Bonus
RSU(5)
3/15/2023
—
—
—
—
—
—
476
39,608
Annual Cash
—
26,933
179,550
269,325
—
—
—
—
—
Annual RSU(6)
3/21/2023
—
—
—
—
—
—
6,668
563,313
Annual PSU
3/21/2023
—
—
—
548
3,285
6,570
—
492,016
Larissa Schwartz
Annual Cash
—
33,750
225,000
337,550
—
—
—
—
—
Annual RSU(6)
3/21/2023
—
—
—
—
—
—
53,344
4,506,501
Annual PSU
3/21/2023
—
—
—
4,379
26,274
52,548
—
3,935,232
Jon Addison
Annual Cash
—
—
268,908
—
—
—
—
—
—
Annual RSU(6)
3/21/2023
—
—
—
—
—
—
39,809
3,363,064
Promotion RSU(7)
12/14/2023
—
—
—
—
—
—
43,092
3,493,038
(1)
This column sets forth the fiscal 2024 target bonus amount for each of Messrs. McKinnon, Tighe, and Ninan and Ms. Schwartz under our Bonus Plan. “Threshold”
refers to the minimum amount payable for a certain level of performance assuming performance above 0%; “Target” refers to the amount payable if specified
performance targets are reached; and “Maximum” refers to the maximum payout possible. Target bonuses for Bonus Plan participants were set as a percentage of
each NEO’s base salary earned for fiscal 2024 as follows: 65% for each of Messrs. McKinnon and Tighe, 45% for Mr. Ninan, and 50% for Ms. Schwartz. Mr. Addison did
not participate in the Bonus Plan, but participated in the Sales Commission Plan, pursuant to which he was eligible to receive cash sales commissions based on the
company’s achievement of fiscal 2024 net annualized recurring revenue objectives. The target bonus for Mr. Addison under the Sales Commission Plan was set at 50%
of his overall target cash compensation opportunity consisting of his base salary and target commission-based cash incentive opportunity. There are no threshold and
maximum payouts under the Sales Commission Plan. The dollar values of the actual bonus awards earned by the NEOs are set forth in the “Fiscal 2024 Summary
Compensation Table” above. For fiscal 2024, these bonus awards were paid out to each NEO in cash. The amounts set forth in this column do not represent either
additional or actual compensation earned by the NEOs for fiscal 2024. For descriptions of the Bonus Plan and the Sales Commission Plan, please see “Compensation
Discussion and Analysis—Annual Performance-Based Incentives” above.
(2)
Annual PSUs were granted under the 2017 Plan. These columns show the PSUs that could be earned 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 NEOs in fiscal 2024, 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 2024
Annual Report and (b) PSUs are set forth in footnote 2 of the “Fiscal 2024 Summary Compensation Table” above. These amounts do not necessarily correspond to the
actual values recognized by our NEOs.
(5)
“FY23 Bonus RSUs” represent annual performance-based cash incentives earned in fiscal 2023 pursuant to the Bonus Plan but paid in the form of fully-vested RSUs
granted on March 15, 2023 (fiscal 2024) in amounts as determined in accordance with our Grant Policy. These amounts are reported above as fiscal 2023
compensation in the “Non-Equity Incentive Plan Compensation” column of the “Fiscal 2024 Summary Compensation Table” above.
(6)
These annual RSU awards vested as to 8.33% of the shares of Class A common stock underlying the RSU award on June 15, 2023, and vest as to the remainder of the
shares in 11 equal quarterly installments thereafter, in each case, subject to continuous service.
(7)
In December 2023, Mr. Addison received an RSU award under the 2017 Plan in connection with his promotion to the role of CRO. Mr. Addison’s promotion RSU award
vested as to 8.33% of the shares of Class A common stock underlying the RSU award on March 15, 2024, and vests as to the remainder of the shares in 11 equal
quarterly installments thereafter, in each case, subject to continuous service.
Executive Compensation
54
2024 Proxy Statement
Okta, Inc.
Fiscal 2024 Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information regarding outstanding equity awards held by our NEOs as of January 31, 2024.
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)
($)
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(4)
(#)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(4)
($)
Name
Grant Date
Exercisable
(#)
Unexercisable
(#)
Todd McKinnon
8/28/2015(5)
8/1/2015
181,053
—
7.17
8/27/2025
—
—
—
—
7/30/2016(5)
7/29/2016
1,794,803
—
8.97
7/29/2026
—
—
—
—
3/22/2018(5)
2/1/2018
5,438
—
39.21
3/21/2028
—
—
—
—
3/25/2019(6)
2/1/2019
32,251
—
82.16
3/24/2029
—
—
—
—
4/15/2020(6)
2/1/2020
46,511
1,861
142.47
4/14/2030
—
—
—
—
4/15/2020(7)
3/15/2020
—
—
—
—
2,643
218,444
—
—
4/22/2021(6)
2/1/2021
46,423
17,244
274.96
4/21/2031
—
—
—
—
4/22/2021(7)
3/15/2021
—
—
—
—
8,424
696,243
—
—
4/22/2021(6)
2/1/2021
92,847
34,487
274.96
4/21/2031
—
—
—
—
3/21/2023(8)
3/15/2023
—
—
—
—
94,547
7,814,310
—
—
3/21/2023(9)
2/1/2023
—
—
—
—
42,020
3,472,953
—
—
3/21/2023(10)
2/1/2023
—
—
—
—
—
—
210,104
17,365,096
Brett Tighe
6/16/2020(11)
6/15/2020
—
—
—
—
604
49,921
—
—
12/17/2020(11)
12/15/2020
—
—
—
—
1,660
137,199
—
—
3/26/2021(11)
3/15/2021
—
—
—
—
1,011
83,559
—
—
3/22/2022(11)
3/15/2022
—
—
—
—
41,222
3,406,998
—
—
3/22/2022(12)
2/1/2022
—
—
—
—
5,049
417,300
—
—
3/22/2022(13)
2/1/2022
—
—
—
—
—
—
8,143
673,019
3/21/2023(8)
3/15/2023
—
—
—
—
56,679
4,684,519
—
—
3/21/2023(9)
2/1/2023
—
—
—
—
12,407
1,025,439
—
—
3/21/2023(10)
2/1/2023
—
—
—
—
—
—
62,037
5,127,358
Shibu Ninan
9/22/2022(7)
9/15/2022
—
—
—
—
24,155
1,996,411
—
—
3/21/2023(8)
3/15/2023
—
—
—
—
5,001
413,333
—
—
3/21/2023(9)
2/1/2023
—
—
—
—
1,095
90,502
—
—
3/21/2023(10)
2/1/2023
—
—
—
—
—
—
5,475
452,509
Larissa Schwartz
12/17/2015(5)
11/16/2015
14,167
—
8.62
12/16/2025
—
—
—
—
6/02/2016(5)
6/02/2016
9,000
—
8.73
6/01/2026
—
—
—
—
3/06/2017(5)
3/01/2017
5,000
—
11.36
3/05/2027
—
—
—
—
6/11/2020(11)
6/15/2020
—
—
—
—
355
29,341
—
—
12/17/2020(11)
12/15/2020
—
—
—
—
415
34,300
—
—
3/26/2021(11)
3/15/2021
—
—
—
—
843
69,674
—
—
12/16/2021(11)
12/15/2021
—
—
—
—
2,528
208,939
—
—
3/22/2022(11)
3/15/2022
—
—
—
—
974
80,501
—
—
3/21/2023(8)
3/15/2023
—
—
—
—
40,008
3,306,661
—
—
3/21/2023(9)
2/1/2023
—
—
—
—
8,758
723,849
—
—
3/21/2023(10)
2/1/2023
—
—
—
—
—
—
43,790
3,619,244
Executive Compensation
Okta, Inc.
2024 Proxy Statement
55
Jon Addison
11/15/2021(7)
12/15/2021
—
—
—
—
8,552
706,882
—
—
4/08/2022(11)
3/15/2022
—
—
—
—
7,634
630,950
—
—
1/21/2023(14)
3/15/2023
—
—
—
—
5,651
467,055
—
—
3/21/2023(8)
3/15/2023
—
—
—
—
29,857
2,467,681
—
—
12/14/2023(8)
12/15/2023
—
—
—
—
43,092
3,561,554
—
—
(1)
Stock options granted prior to 2017 were granted pursuant to our 2009 Stock Plan (the “2009 Plan”), and stock options, RSUs and PSUs granted after 2017 were
granted pursuant to our 2017 Plan.
(2)
Upon (i) a termination of employment by us other than for cause (as defined in the Executive Severance Plan) or disability or (ii) a resignation for good reason (as
defined in the Executive Severance Plan), in each case within the change-in-control period (as defined in the Executive Severance Plan) (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, 2024, based on the closing price of our Class A common stock,
as reported on Nasdaq, of $82.65 per share on January 31, 2024.
(4)
Represents PSUs that are earned, if at all, based upon certain achievement levels relating to 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. Such 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.
(5)
The stock options are fully vested and exercisable.
(6)
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.
(7)
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.
(8)
8.33% 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 11 successive equal quarterly installments, subject to continuous service.
(9)
Represents the number of shares that were determined to be earned for Performance Period 1 for the fiscal 2024 PSUs, as certified by our compensation committee
on March 11, 2024. The PSUs vested on March 15, 2024 following the achievement of the awards’ service-based criteria. As described in “Compensation Discussion
and Analysis–Long-Term Incentive Compensation—PSU Achievement for Performance Period 1 of Fiscal 2024 PSUs and Performance Period 2 of Fiscal 2023 PSUs,”
above, Performance Period 1 exceeded maximum levels at 200% of target, but due to their design were capped at target achievement level at 100% of target.
(10)
Represents the total PSUs granted for fiscal 2024, less the number of shares underlying the PSUs that were determined to be earned for Performance Period 1 for the
fiscal 2024 PSUs as certified by our compensation committee on March 11, 2024. The number of shares reflects payout at maximum achievement level, since
performance during Performance Period 1 was capped at the target achievement level at 100% of target. 33.33% of the shares underlying the fiscal 2024 PSU award
vest upon completion of one year of service measured from the vesting commencement date, and the balance of the shares vest in two successive equal annual
installments, subject to continuous service
(11)
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.
(12)
Represents the number of shares underlying the PSUs granted to Mr. Tighe that were determined to be earned for Performance Period 2 for the fiscal 2023 PSUs, as
certified by our compensation committee on March 11, 2024. The PSUs vested on March 15, 2024 following the achievement of the award’s service-based criteria. As
described in “Compensation Discussion and Analysis—Long-Term Incentive Compensation—PSU Achievement for Performance Period 1 of Fiscal 2024 PSUs and
Performance Period 2 of Fiscal 2023 PSUs,” above, the completed years of Performance Period 2 exceeded threshold levels at 62% of target.
(13)
Represents the total PSUs granted to Mr. Tighe for fiscal 2023, less the number of shares underlying the PSUs that were determined to be earned for Performance
Period 2 for the fiscal 2023 PSUs as certified by our compensation committee on March 11, 2024. The number of shares reflects payout at target achievement level,
since performance during the completed years of Performance Period 2 exceeded threshold levels. 33.33% of the shares underlying the fiscal 2023 PSU award vest
upon completion of one year of service measured from the vesting commencement date, and the balance of the shares vest in two successive equal annual
installments, subject to continuous service.
(14)
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 three successive equal quarterly installments, subject to continuous service.
Executive Compensation
56
2024 Proxy Statement
Okta, Inc.
Fiscal 2024 Option Exercises and Stock Vested Table
The following table presents, for each of our NEOs, the shares of our common stock that were acquired upon the vesting of RSUs and
the related value realized upon such vesting during fiscal 2024. Our NEOs did not exercise any stock options during fiscal 2024.
Stock Awards
Name
Number of Shares
Acquired on
Vesting
(#)
Value Realized
on Vesting
($)(1)
Todd McKinnon
53,193
4,337,651
Brett Tighe
43,685
3,561,324
Shibu Ninan
13,122
1,098,144
Larissa Schwartz
17,356
1,410,589
Jon Addison
34,574
2,811,920
(1)
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
We do not maintain any defined benefit pension plans or arrangements under which our NEOs are eligible to participate.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans or arrangements under which our NEOs are eligible to participate.
Potential Payments upon Termination or Change in Control
Employment Offer Letters in Place During Fiscal 2024 for NEOs
We entered into employment offer letters with Ms. Schwartz in October 2015, with Mr. McKinnon in February 2017, with Mr. Tighe
in January 2022, with Mr. Ninan in June 2022 and with Mr. Addison in January 2024, each of which provided for at-will employment
and set forth each executive’s annual base salary, target bonus opportunity and, for Messrs. McKinnon, Tighe and Ninan and Ms.
Schwartz, eligibility to participate in our U.S. benefit plans, and for Mr. Addison, eligibility to participate in our U.K. benefit plans.
Executive Severance Plan and Death-Related Equity Acceleration Policy
Each of our serving NEOs 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
Executive Compensation
Okta, Inc.
2024 Proxy Statement
57
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.
The following table presents information concerning, for each of Messrs. McKinnon, Tighe, Ninan and Addison, and Ms. Schwartz,
estimated payments and benefits that would be provided pursuant to the arrangements described above. 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 2024, January 31, 2024, and a per share value of our common stock of $82.65, which is the closing market price per share of
our Class A common stock on such date. Actual payments and benefits could be different if such events were to occur on any other
date or at any other price, or if any other assumptions are used to estimate potential payments and benefits.
Todd McKinnon
Cash Severance
306,000
657,900
—
Health Benefits
33,772
50,657
—
Equity Acceleration(1)
—
19,148,021
19,148,021
Total
339,772
19,856,578
19,148,021
Brett Tighe
Cash Severance
360,000
792,000
—
Health Benefits
25,329
33,772
—
Equity Acceleration(1)
—
12,784,633
12,784,633
Total
385,329
13,610,405
12,784,633
Shibu Ninan
Cash Severance
299,250
578,550
—
Health Benefits
19,592
26,123
—
Equity Acceleration(1)
—
2,681,249
2,681,249
Total
318,842
3,285,922
2,681,249
Larissa Schwartz
Cash Severance
337,500
675,000
—
Health Benefits
8,134
10,846
—
Equity Acceleration(1)
—
5,900,962
5,900,962
Total
345,634
6,586,808
5,900,962
Jon Addison
Cash Severance
273,672
633,804
—
Health Benefits
—
—
—
Equity Acceleration(1)
—
7,834,063
7,834,063
Total
273,672
8,467,867
7,834,063
Name
Benefit
Termination without
Cause Not in
Connection with a
Change in Control
($)
Termination without
Cause or with Good
Reason in Connection
with a Change in Control
($)
Death
($)
(1)
The value of stock option and RSU award vesting acceleration is based on the closing price of $82.65 per share of our Class A common stock as of January 31, 2024,
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 $82.65 per share of our Class A common stock as of January 31, 2024 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 NEO’s death on January 31, 2024, 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, 2024 without termination, forfeiture of the entire PSU award.
Executive Compensation
58
2024 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 2024 (our “CEO pay ratio”).
•
The median of the annual total compensation of all employees of our company (other than our CEO) was $261,591
•
The annual total compensation of our CEO was $30,012,225
•
Our CEO pay ratio was 115 to 1
This ratio is a reasonable estimate calculated in a manner consistent with SEC rules. For fiscal 2024, we calculated the CEO pay ratio
using the same median employee that we used to calculate the pay ratio in fiscal 2023, as we believe there has been no change in our
employee population or compensation arrangements during fiscal 2024 that would result in a significant change to our pay ratio
disclosure.
To identify the median employee in fiscal 2023, 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 NEOs 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 individual’s fiscal 2024 annual total compensation using the same methodology that we use for our NEOs as set
forth in the “Fiscal 2024 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 2024
Summary Compensation Table” above.
Because SEC rules for identifying the median of the annual total compensation of all employees allow companies to adopt a variety of
methodologies, apply certain exclusions and make reasonable estimates and assumptions that reflect their employee population and
compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have
different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and
assumptions in calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to facilitate
comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to
better understand and assess each particular company’s compensation practices and pay ratio disclosures.
Executive Compensation
Okta, Inc.
2024 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 NEOs for the fiscal year ending January 31, 2021 (“fiscal 2021”), fiscal 2022, fiscal 2023, and fiscal 2024, 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 fiscal 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 our NEOs.
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)
2024
$30,012,225
$30,397,098
$7,739,145
$7,822,230
$65
$219
-$355,000,000
$2,263,000,000
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 PEO and Non-PEO NEOs included in the above table consist of the following individuals:
Fiscal Year
PEO (CEO)
Non-PEO NEOs
2024
Todd McKinnon
Brett Tighe, Shibu Ninan, Larissa Schwartz, Jon Addison
2023
Todd McKinnon
Jonathan Runyan, Brett Tighe, Susan St. Ledger, Shibu Ninan
2022
Todd McKinnon
William Losch, J. Frederic Kerrest, Jonathan Runyan, Brett Tighe, Susan St. Ledger, Michael Kourey
2021
Todd McKinnon
William Losch, J. 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
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Summary Compensation Table - Total Compensation
(a)
$12,131,012 $31,820,477
$412,190
$30,012,225
— Grant Date Fair Value of Stock Awards and Option Awards Granted in
Fiscal Year
(b)
$11,851,866 $31,311,842
$0
$29,530,934
+
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
$25,972,540
+
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
$528,230
+
Fair Value at Vesting of Stock Awards and Option Awards Granted in
Fiscal Year That Vested During Fiscal Year
(e)
$378,989
$0
$0
$2,559,648
+
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
$855,389
—
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
$0
=
Compensation Actually Paid
$188,220,074
$7,266,404 -$21,077,609
$30,397,098
Executive Compensation
60
2024 Proxy Statement
Okta, Inc.
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 base 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” columns 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 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
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Summary Compensation Table - Total Compensation
(a)
$5,622,552 $15,547,789
$11,677,001
$7,739,145
— Grant Date Fair Value of Stock Awards and Option Awards Granted in
Fiscal Year
(b)
$5,233,926 $14,950,405
$11,087,422
$7,078,132
+
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
$6,013,279
+
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
$127,198
+
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
$890,316
+
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
$130,424
—
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
$0
=
Compensation Actually Paid
$54,801,184
$6,358,859
-$425,392
$7,822,230
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 base 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” columns 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.
Executive Compensation
Okta, Inc.
2024 Proxy Statement
61
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
62
2024 Proxy Statement
Okta, Inc.
Relationship Between Pay and Performance
Below are graphs showing the relationship of “Compensation Actually Paid” to our PEO and our non-PEO NEOs in fiscal 2021, 2022,
2023 and 2024 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
Okta, Inc.
2024 Proxy Statement
63
Tabular List of Financial Performance Measures
The following is a list of financial performance measures, which in our 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 2024 to company
performance:
•
Revenue
•
Non-GAAP Operating Income
•
Relative TSR
Executive Compensation
64
2024 Proxy Statement
Okta, Inc.
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, 2024.
Compensation Committee
Michael Stankey (Chair)
Robert L. Dixon, Jr.
Rebecca Saeger
Okta, Inc.
2024 Proxy Statement
65
Equity Compensation
Plan Information
The following table provides information as of January 31, 2024 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):
13,692,507(2)
32.6481(3)
37,518,898(4)
Equity compensation plans not approved by security holders(5):
—
—
—
Total
13,692,507
32.6481
37,518,898
(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, 2024, a total of 53,887,796 shares of our Class A common stock had been authorized for issuance pursuant to the 2017
Plan, which number excludes the 8,356,283 shares that were added to the 2017 Plan as a result of the automatic annual increase on February 1, 2024. 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, 2024, a total of 7,650,633 shares of our Class A
common stock had been reserved for issuance pursuant to the 2017 ESPP, which number excludes the 1,671,256 shares that were added to the 2017 ESPP as a result
of the automatic annual increase on February 1, 2024. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our
capitalization.
(2)
Includes 4,726,452 shares of Class A and Class B common stock issuable upon the exercise of outstanding options and 8,966,055 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, 2024, there were 29,868,265 shares of Class A common stock available for grant under the 2017 Plan and 7,650,633 shares of Class A common
stock available for grant under the 2017 ESPP. A maximum of 1,637,570 shares may be purchased in the current offering periods under the 2017 ESPP.
(5)
Excludes (i) 311,678 shares of Class A common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $30.9415 per share and
(ii) 114,156 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.
66
2024 Proxy Statement
Okta, Inc.
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, 2024 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 NEOs;
•
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 160,853,773 shares of our Class A common stock and 7,291,091 shares
of our Class B common stock outstanding on April 1, 2024. We have deemed shares of our common stock subject to options that are
currently exercisable or exercisable within 60 days of April 1, 2024 and RSUs that are releasable within 60 days of April 1, 2024 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)
15,719,527
9.8%
—
—
6.7%
9.3%
Entities affiliated with FMR(2)
15,515,353
9.6%
—
—
6.6%
9.2%
Entities affiliated with BlackRock(3)
9,119,528
5.7%
—
—
3.9%
5.4%
Sands Capital Management, LLC(4)
8,358,414
5.2%
—
—
3.6%
5.0%
Directors and NEOs
Jon Addison(5)
24,971
*
—
—
*
*
Shellye Archambeau(6)
11,042
*
—
—
*
*
Emilie Choi(7)
1,212
—
—
—
—
—
Robert L. Dixon, Jr.(8)
5,819
*
—
—
*
*
Jeff Epstein(9)
4,674
*
—
—
*
*
Benjamin Horowitz(10)
560,873
*
—
—
*
*
J. Frederic Kerrest(11)
273,181
*
2,763,943
32.4%
11.3%
1.8%
Todd McKinnon(12)
280,637
*
7,634,799
82.4%
30.2%
4.6%
Shibu Ninan(13)
4,111
*
—
—
*
*
Rebecca Saeger(14)
10,372
*
—
—
*
*
Larissa Schwartz(15)
29,027
*
28,167
*
*
*
Michael Stankey(16)
21,574
*
190,000
2.5%
*
*
Okta, Inc.
2024 Proxy Statement
67
Brett Tighe(17)
90,589
*
69,046
*
*
*
All directors and current executive officers as a
group (13 persons)(18)
1,318,082
*
10,685,955
99.7%
40.3%
7.0%
*
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 13, 2024. Of the shares of Class A common stock
beneficially owned, The Vanguard Group reported that, as of December 31, 2024, it has sole dispositive power with respect to 15,378,113 shares, shared dispositive
power with respect to 341,414 shares, sole voting power with respect to none of the shares and shared voting power with respect to 102,785 shares. The Vanguard
Group listed its address as 100 Vanguard Blvd., Malvern, PA 19355.
(2)
Based on information reported by FMR LLC on Schedule 13G/A filed with the SEC on February 8, 2024. Of the shares of Class A common stock beneficially owned,
FMR LLC reported that, as of December 31, 2024, it has sole dispositive power with respect to all of the shares and sole voting power with respect to 14,765,329
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.
(3)
Based on information reported by BlackRock, Inc. (“BlackRock”) on Schedule 13G/A filed with the SEC on January 29, 2024. BlackRock, as a parent holding company or
control person, may be deemed to beneficially own the indicated shares and, as of December 31, 2024, has sole dispositive power with respect to 8,225,993 shares
and sole voting power with respect to all of the 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; 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; and BlackRock Fund Managers Ltd. BlackRock, Inc. listed its address as 50 Hudson Yards, New York, NY 10001.
(4)
Based on information reported by Sands Capital Management, LLC (“SCM”) on Schedule 13G on February 13, 2024. Of the shares of Class A common stock
beneficially owned, SCM reported that, as of December 31, 2024, it has shared dispositive power with respect to 5,874,242 of the shares and shared voting power
with respect to all of the shares. Frank M. Sands, Chief Investment Officer and Chief Executive Officer of SCM, through his ownership of voting common shares and
investment power over the securities held by SCM, may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to SCM.
SCM listed its address as 1000 Wilson Blvd., Suite 3000, Arlington, VA 22209.
(5)
Consists of 24,971 shares of Class A common stock held of record by Mr. Addison.
(6)
Consists of 11,042 shares of Class A common stock held of record by Ms. Archambeau.
(7)
Consists of 1,212 shares of Class A common stock held of record by Ms. Choi.
(8)
Consists of 5,819 shares of Class A common stock held of record by Mr. Dixon.
(9)
Consists of (i) 4,196 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, 2024.
(10)
Consists of (i) 4,304 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.
(11)
Consists of (i) 6,171 shares of Class A common stock held of record by Mr. Kerrest in an individual capacity, (ii) 267,010 shares of Class A common stock subject to
outstanding options held by Mr. Kerrest that are exercisable within 60 days of April 1, 2024, (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, 2024, (iv) 1,153,387 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) 115,376 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.
(12)
Consists of (i) 39,389 shares of Class A common stock held of record by Mr. McKinnon in an individual capacity, (ii) 241,248 shares of Class A common stock subject to
outstanding options held by Mr. McKinnon that are exercisable within 60 days of April 1, 2024, (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, 2024, (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). 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 described in (v) held of record by Mr. McKinnon’s brother-
in-law, as trustee of the McKinnon Irrevocable Trust, and Mr. McKinnon has no voting and dispositive power with respect to such shares.
(13)
Consists of 4,111 shares of Class A common stock held of record by Mr. Ninan.
(14)
Consists of 10,372 shares of Class A common stock held of record by Ms. Saeger.
(15)
Consists of (i) 29,027 shares of Class A common stock held of record by Ms. Schwartz and (ii) 28,167 shares of Class B common stock subject to outstanding options
held by Ms. Schwartz that are exercisable within 60 days of April 1, 2024.
(16)
Consists of (i) 21,574 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, 2024.
(17)
Consists of (i) 89,339 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.
(18)
Consists of (i) 1,318,082 shares of Class A common stock beneficially owned by our directors and current executive officers as a group, (ii) 508,258 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, 2024, (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,
2024, (iv) 10,685,955 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, 2024.
Security Ownership of Certain Beneficial Owners and Management
68
2024 Proxy Statement
Okta, Inc.
Certain
Relationships
and Related
Party
Transactions
Certain Relationships and Transactions
In addition to the compensation arrangements, including employment, termination of
employment and change-in-control arrangements and indemnification arrangements,
the following is a description of each transaction since February 1, 2023 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. For a description of these RSUs and PSUs, please see the sections
titled “Executive Compensation” and “Corporate Governance—Non-Employee
Director Compensation” above.
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.
Limitation of Liability and Indemnification of Officers and Directors
Our certificate of incorporation contains provisions that limit the liability of our
directors for monetary damages to the fullest extent permitted by Delaware law.
Consequently, our directors will not be personally liable to us or our stockholders for
monetary damages for any breach of fiduciary duties as directors, except liability for
the following:
•
any breach of their duty of loyalty to our company or our stockholders;
•
any act or omission not in good faith or that involves intentional misconduct or a
knowing violation of law;
•
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law; or
•
any transaction from which they derived an improper personal benefit.
Okta, Inc.
2024 Proxy Statement
69
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
70
2024 Proxy Statement
Okta, Inc.
Additional Information
Our board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly
brought before the Annual Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby
in accordance with their best judgment on such matters, under applicable laws.
Okta, Inc.
2024 Proxy Statement
71
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, 2024
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, 2023 (based on a closing price of $76.86 per share) held by non-
affiliates was approximately $12.0 billion. As of February 26, 2024, there were 160,106,072 shares of the Registrant’s Class A Common Stock
and 7,291,091 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 2024 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, 2024.
Okta, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2024
TABLE OF CONTENTS
Part I
Item 1.
Business
6
Item 1A.
Risk Factors
17
Item 1B.
Unresolved Staff Comments
49
Item 1C.
Cybersecurity
49
Item 2.
Properties
51
Item 3.
Legal Proceedings
52
Item 4.
Mine Safety Disclosures
52
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
53
Item 6.
[Reserved]
55
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
56
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
70
Item 8.
Financial Statements and Supplementary Data
71
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
108
Item 9A.
Controls and Procedures
108
Item 9B.
Other Information
108
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
108
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
109
Item 11.
Executive Compensation
109
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
109
Item 13.
Certain Relationships and Related Transactions, and Director Independence
109
Item 14.
Principal Accountant Fees and Services
109
Part IV
Item 15.
Exhibits and Financial Statement Schedules
109
Item 16.
Form 10-K Summary
109
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;
•
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 the
General Data Protection Regulation, 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 ("SEC"). 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 partner. Our vision is to free everyone to safely use any technology,
and we believe identity is the key to making that happen. Our purpose is to bring simple and secure digital access to
people and organizations everywhere. Our Workforce Identity Cloud and Customer Identity Cloud, powered by
Auth0, enable our customers to securely connect the right people to the right technologies and services at the right
time.
The acceleration of digital transformation, cloud adoption and the evolving security threat landscape are
driving a shift in how organizations securely manage the identity of their employees, contractors and partners on the
internet. At the same time, changing consumer expectations favoring simple, secure digital experiences are driving
the adoption of new consumer identity technologies. Our Workforce Identity Cloud and Customer Identity Cloud 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 Workforce Identity Cloud to seamlessly
and securely access the applications they need to do their most important work. Organizations use our platform to
collaborate with their partners and to provide their customers with more modern and secure experiences in the
cloud and via mobile devices. Developers leverage our Customer Identity Cloud and Workforce Identity Cloud to
securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their
core mission. Our approach to customer identity provides organizations—from companies to government agencies
—with the scale, interoperability, extensibility and security they need to build applications with seamless and private
experiences that serve a wide variety of users, from customers to citizens. 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 Cloud and Customer Identity Cloud.
Given the growth trends in the number of applications and cloud adoption and the movement to remote and
hybrid 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, 2024, more than 18,950 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, nonprofits 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, 2024, 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 the value we provide to
our customers over time and thus their spending with us through expanding the number of users who access our
Workforce Identity Cloud and Customer Identity Cloud and up-selling additional product offerings. We sell our
product offerings 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.
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Our 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
two clouds are designed to securely connect users to the technology that they choose. We prioritize the
compatibility of our platform with public clouds, on-premises infrastructures and hybrid clouds.
Our 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 customers,
which we refer to as customer identity as supported by our Customer Identity Cloud.
Workforce Identity Cloud
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.
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 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 (“Adaptive MFA”) product offering. Our Universal Directory product offering also serves as a system
of record to help our customers organize, customize and manage their users. Our Lifecycle Management product
offering 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 product offering, helps our customers improve their security and
compliance posture while mitigating modern security risks and increasing efficiency. Our Privileged Access
Management product offering provides unified access and governance for privileged resources and increases
visibility, compliance and security without compromising user experience. Our Access Gateway product offering
enables our customers to extend Workforce Identity Cloud to their existing on-premises applications. 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
Customer Identity Cloud, powered by Auth0, enables companies, nonprofits and governmental agencies to
transform their own customers’ or citizens’ experiences by empowering development teams to rapidly and securely
build customer- and citizen-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 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.
Customer Identity Cloud provides multiple enhanced security capabilities including bot detection, Adaptive
MFA, fraud prevention, and account takeover attack protection while delivering a high level of security. In addition to
security and authentication, Customer Identity Cloud also supports authorization.
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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 product offerings. We also believe
we can expand our footprint by focusing on current customers that have deployed our Workforce Identity
Cloud and expanding those customers’ use of our Customer Identity Cloud, or vice versa.
•
Leverage Partner Ecosystem. We plan to further leverage the sales efforts of resellers, system
integrators, managed service providers, and other distribution partners, for growth, scale and specialized
expertise. For example, in fiscal 2024, we launched the Okta Elevate Partner Program designed to
incentivize partners to deliver and manage Okta solutions.
•
Expand Our International Footprint. With 21% of our revenue generated outside of the United States in
fiscal 2024, and our international revenue growing 19% from fiscal 2023 to fiscal 2024, we believe there is a
significant opportunity to continue to grow our international business. We believe global demand for our
product offerings 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.
By continuing to innovate, introduce new product offerings 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 as well integrated solutions with IT infrastructure
providers. These integrations include both Okta-maintained and vendor-maintained solutions. We continue
to add new integrations as we expand the surface area of our identity platform. 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 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
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. For example, in fiscal 2024 we announced Okta AI, which is designed to use AI
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models and Okta’s unique crowdsourced threat intelligence identity data to power real-time identity actions,
such as the industry’s first real Universal Logout solution.
•
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
product offerings, services and customers’ experiences. We will continue to use these types of strategic
levers as opportunities arise.
Our Product Offerings
Okta's suite of product offerings and services is used to manage and secure identities. Most of our product
offerings can be used for both customer identity and for workforce identity use cases and we are continuously
enhancing our product offerings and services. Our workforce identity product offerings are consumed through web
and mobile interfaces and provide simple ways for IT organizations to manage identities for their employees,
contractors and business 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 Cloud and Customer Identity Cloud through the release and development of additional product
offerings, features and services.
Workforce Identity Product Offerings
Access Management
•
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-premises, 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. With Okta FastPass, we enable our customers to
provide their users with a passwordless experience across any device and every major operating system.
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.
•
Adaptive Multi-Factor Authentication. Adaptive MFA 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 MFA 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 as well as from our partner ecosystem.
•
API Access Management. API Access Management enables organizations to secure APIs as systems
connect to each other. Access to these APIs is managed based on the user, which enables organizations to
centrally maintain one set of permissions for any employee, partner or customer across every point of
access. API Access Management reduces development time, boosts security, helps in achieving
compliance and enables seamless end-user experiences by providing a unified portable service for
authorizing secure and always available access to any API.
•
Access Gateway. Access Gateway enables organizations to extend 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 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.
•
Okta Device Access. Okta Device Access extends Okta's secure access management to the device login
experience. Okta Device Access enables end users to securely log in to their devices with their Okta
credentials and meet MFA challenges from a set of strong factors, helping organizations to harden their
security posture by protecting a user's device with the same experience Okta provides for applications and
resources.
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Identity Governance and Administration (“IGA”)
•
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.
•
Lifecycle Management. Lifecycle Management enables IT organizations or developers to manage a
user's identity throughout its lifecycle, from onboarding to offboarding. 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, and helps ensure compliance requirements are met as user
roles evolve and access levels change.
•
Okta Identity Governance. Okta Identity Governance 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.
Privileged Access Management
•
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 AWS, 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 Privileged Access. Okta Privileged Access enables organizations to reduce risk with unified access
and governance management for on-premises and cloud privileged resources, for better visibility,
compliance, and security for critical applications, resources and infrastructure requiring privileged access.
Workforce Identity Cloud Platform: Extensibility
•
Okta Workforce Identity Workflows. Designed to enable IT and security teams to move faster, more
accurately and more cost effectively as they scale, Okta Workflows enables the building of identity-related
business processes with minimal or no code, such as automating user onboarding and provisioning,
creating just-in-time authorization for software development and IT processes, automating identity-centric
security responses, and orchestrating customer data across backend systems.
Customer Identity Cloud Product Offerings
•
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 media login credential 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 MFA that minimizes friction to end
users. When using Adaptive MFA, our customers leverage risk-assessment algorithms that present MFA
challenges only to select authentication attempts that require additional validation.
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•
Passwordless. Passwordless authentication enables users to login without a password and supports a
variety of different login methods, including advanced device biometrics such as passkeys.
•
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 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 allow our customers to create customized identity
flows that address their unique requirements through a drag-and-drop interface to add pre-built partner
integrations and their own custom logic across an authentication flow.
•
Enterprise Connections. Enterprise Connections enable Enterprise Federation using pre-built integrations
with commonly used Enterprise Identity Systems.
Through our broad and deep product offerings that support a wide range of workforce and customer identity use
cases, we deliver multiple critical business outcomes for our customers. These include boosting their cybersecurity
posture, reducing IT spending, addressing regulations, reducing fraud, increasing new customer conversions,
creating frictionless customer experiences and helping technical teams deliver products to market faster.
Our Technology
We focus on engineering an intuitive and comprehensive platform to solve complex identity management and
security challenges. 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.
Differentiated Administration, User and Developer Experience
Workforce Identity Cloud and Customer Identity Cloud offer administrators and users a consistent, easy-to-
use, consumer-like experience across our product offerings. 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 identity, access, security and management use cases that previously
required significant custom development to achieve.
Robust Security
Security is essential 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. The Okta platform and features are updated regularly, and along with continuous security
testing, there are periodic security reviews that provide audited and verifiable security checkpoints to ensure the
quality of our source code. A number of our product offerings have attained multiple certifications, including SOC 2
Type II Attestations, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC 27017:2015, ISO/IEC 27018:2019,
multiple agency Federal Risk and Authorization Management Program ("FedRAMP") Authorities to Operate,
Department of Defense Impact Level 4, are in accordance with Health Insurance Portability and Accountability Act
("HIPAA"), and comply with many other international security frameworks. Workforce Identity Cloud also supports
FIPS 140-2 encryption requirements.
Additional information regarding our cybersecurity risk management strategy and governance is included in
“Cybersecurity” under Part I, Item 1C of this Annual Report on Form 10-K. For additional information regarding the
cybersecurity risks that we face, see “Risk Factors” included under Part I, Item 1A of this Annual Report on Form 10-
K.
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Scalability and Uptime
Our technical operations and engineering models are designed around the concept of an always-on, highly
redundant and available platform that we seek to upgrade without customer disruption. Our product offerings and
architecture were built entirely in and for the cloud with availability, resiliency and scalability at the center of the
design. We have zero planned downtime, including during our maintenance windows.
Okta's proprietary architecture includes redundant, active-active-active availability zones with cross-
continental disaster recovery regions, 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 Cloud and Customer Identity Cloud 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 AWS, 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 Customer Identity Cloud.
Our Customers
As of January 31, 2024, we had more than 18,950 customers, including more than 4,485 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.
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. We also use a self-service approach for developers to sign up for free
trials of our Customer Identity Cloud. which may transition to paid offerings. We often leverage our expansion 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 product offerings. 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, the number of their customers or their monthly active users, we share
in their growth as the number of identities that we manage increases. Conversely, if our customers reduce the size
of their workforce, then the number of identities that we manage, and therefore our revenue, decreases.
Our sales organization is structured to address the specific needs of each segment of our target market. Our
sales team is divided by geography and customer size, and in some cases by 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
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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 product lines, establishing our brand, generating awareness, creating sales leads and cultivating
the Okta Communities.
A centerpiece of our marketing strategy is our annual customer conference, Oktane, which 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 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 product offerings 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 product offerings. These programs leverage the expertise and best practices that we have built
while helping thousands of customers adopt and deploy our product offerings.
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 our 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
Cloud and Customer Identity Cloud and includes identity and security experts, customized deployment plans,
SmartStart, which provides a quick path to implementation, and Okta Expert Assist, in which we provide Workforce
Identity Cloud and Customer Identity Cloud customers with recommendations and best practices designed to
improve their security posture.
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, 2024, we had fifty-two issued patents in the United States, which expire between 2030 and
2043 and cover various aspects of our product offerings. In addition, as of such date, we also had seventy-three
issued patents granted outside of the United States, which expire between 2033 and 2043 and cover various
aspects of our product offerings.
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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,” “The World’s Identity Company,” and “Oktane".
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 “Risk Factors”
under Part I, Item 1A of this Annual Report on Form 10-K.
Our Competitors
The markets for our product offerings 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;
•
Identity governance 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-premises enterprise application software providers. We also
compete against open-source technologies that customers can use to build their own identity solutions. 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 have. Our principal competitor is Microsoft.
Due to the flexibility and breadth of our platform, we can and often do co-exist alongside our competitors’
products within our customer base.
Principal competitive factors in our markets include flexibility, independence, product capabilities, total cost of
ownership, time to value, scalability, user experience, number of pre-built integrations, customer satisfaction, global
reach and ease of integration, management and use. We believe our product strategy, platform architecture,
technology and independence as well as our company culture allow us to compete favorably on each of these
factors.
We expect competition to increase as other established and emerging companies enter our markets, as
customer requirements evolve, and as new products and technologies are introduced. We expect this to be
particularly true as we are a cloud-based offering, and our competitors may also seek to acquire new offerings or
repurpose their existing offerings to provide identity management solutions with subscription models. With the
continuing merger and acquisition activity in the technology industry, particularly transactions involving security or
identity and access management technologies, there is a greater likelihood that we will compete with other large
technology companies in the future in both the workforce identity and customer identity markets.
Additional information regarding our competition is included in “Risk Factors” under Part I, Item 1A of this
Annual Report on Form 10-K.
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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 and
a sense of belonging.
As of January 31, 2024, we had 5,908 employees, of which approximately 67% were in the United States and
33% 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 2024,
83% of our eligible employees participated in our annual employee engagement survey.
We encourage you to review the “Diversity, Inclusion and Belonging,” “Responsibility,” “Careers” and “Okta for
Good” pages of our website at www.okta.com for more detailed information regarding our human capital programs
and initiatives. Additional information on our diversity, inclusion and belonging strategy, diversity metrics and
programs can be found in our most recent State of Inclusion at Okta annual report located on our website at
www.okta.com/state-of-inclusion-at-okta, and additional information on our compensation, benefits and wellness
programs is available on our Total Rewards website at rewards.okta.com.
Builder and Owner Culture
“Build and own it” is one of our core values. Our goal is to create a shared sense of ownership in achieving
our company vision where career growth, competitive rewards, and purpose empower our employees to do great
work. We want every employee to feel ownership of Okta.
Diversity, Inclusion and Belonging
We strive to foster a culture of inclusion and belonging and to build a diverse workforce to drive innovation
and collective growth. Our diversity, inclusion and belonging (“DIB”) initiatives—spearheaded by our DIB team and
employee resource groups ("ERGs"), in partnership with various other teams—focus on DIB in our workforce, our
workplace and the marketplace.
We employ inclusive recruitment and hiring practices to source talent from marginalized and
underrepresented groups. 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 talent communities for future roles. We also continue to recruit from a range of colleges and engage
with organizations that support students and job seekers from marginalized and underrepresented groups 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 facilitated workshops
that focus on 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 ERGs supporting women, people of collective cultures,
veterans, the LGBTQIA+ community, neurodivergent people, 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 brings our new
technical employees up to speed on our product offerings.
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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 in the United States 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 attempt to ensure our employees are paid equitably without regard to gender
or ethnicity.
Hybrid and Remote Work
We help our employees succeed by providing flexibility in where and how they work. For many years, Okta
has embraced a hybrid approach to enable our employees to work remotely or from one of our offices. We believe a
hybrid approach can increase employee empowerment, satisfaction and productivity, drive efficiency and enable us
to hire from a broader, more diverse pool of talent.
Community and Social Impact
The mission of our social impact arm, Okta for Good, is to build a safely connected world where everyone can
belong and thrive. We mobilize our people, products and financial resources in service of our communities.
Our employees are passionate about many causes and Okta for Good connects them with numerous giving
and volunteering opportunities in service of our communities. We believe this fosters a more meaningful, fulfilling
and enjoyable workplace. In addition, through Okta for Good we donate and discount access to our service for non-
profit organizations. These organizations use Okta to make their teams more efficient and secure, allowing them to
focus on their important missions. We also engage in philanthropic grantmaking via the Okta for Good Fund, a
donor-advised fund held at Tides Foundation. Grantmaking focus areas include:
•
Tech for Good;
•
Digital Equity; and
•
Climate Action.
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 56,250 shares of Class A common stock remained
reserved for future issuances as of January 31, 2024. Okta for Good is a part of our company and not a separate
legal entity. Additional information can be found on the "Okta for Good" page of our website at www.okta.com.
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.
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Financial Information
The financial information required under this Item 1 is incorporated herein by reference to “Financial
Statements and Supplementary Data” included in Part II, Item 8 of this Annual Report on Form 10-K. For financial
information regarding our business, see “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included in Part II, Item 7 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.
Additional Information
The following filings are available through our investor relations website after we file them with the 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. Supplemental financial and other information can be accessed through
the Company’s investor relations website. Okta uses its investor.okta.com website and okta.com/blog websites
(including the Security Blog, Okta Developer Blog and Auth0 Developer Blog) as a means of disclosing material
non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations
under Regulation FD. Accordingly, you should monitor our investor relations and okta.com/blog websites in addition
to following our press releases, SEC filings and public conference calls and webcasts. 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." Information contained on, or that can be
accessed through, our websites is not 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 have, in the past, and may, in the future, reduce demand for our products, which
could harm our revenue, results of operations and cash flows.
•
In the past we have experienced cybersecurity incidents that allowed unauthorized access to our systems
or data or our customers’ data, harmed our reputation, created additional liability and adversely impacted
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our financial results. We may experience similar incidents in the future which may also include disabling
access to our service.
•
We have experienced rapid growth in prior periods, and any failure to effectively manage future growth
could harm our business and future prospects.
•
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 has slowed in recent periods and could fall below expectations.
•
We may experience quarterly fluctuations in our results of operations due to a number of factors that make
our future results difficult to predict and could cause our results of operations to fall below analyst or
investor expectations.
•
If there are interruptions or performance problems associated with our technology or infrastructure, our
existing customers may experience service outages, and our new customers may experience delays in the
deployment of our platform.
•
We have, in the past, failed or been perceived to have failed to fully comply with the privacy or security
provisions of our privacy policy, our contracts and/or legal or regulatory requirements, which could result in
proceedings, actions or penalties against us. We may experience similar incidents in the future.
•
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 40.4% of the voting power of our capital stock as of
January 31, 2024. 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 have, in the past, and may, in the future, 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 instability of financial institutions, health epidemics, the
systemic impact of a widespread recession (in the United States or internationally), energy costs, geopolitical
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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 prior periods, and any failure to effectively manage future
growth could harm our business and future prospects.
We have experienced rapid growth since our founding in 2009. As we continue efforts to expand our business
globally, we have faced new macroeconomic conditions, as well as operational and organizational challenges, that
make it difficult to forecast our revenue and evaluate our business and future prospects. We have encountered and
will continue to encounter risks and uncertainties that growing companies frequently experience in rapidly changing
industries and macroeconomic environments, 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.
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 2022 to fiscal 2023, our revenue grew from $1,300 million to $1,858 million, an increase
of 43%, and from fiscal 2023 to fiscal 2024, our revenue grew from $1,858 million to $2,263 million, an increase
of 22%. 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 and budget constraints, 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;
•
adequately expand our sales force, and maintain or increase our sales force’s productivity;
•
protect against security breaches of, technical difficulties with, or interruptions to, the delivery and use of our
platform and products, and any negative market perception or customer reactions related to, or arising from
the disclosure of, such breaches, difficulties or interruptions;
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•
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 $848
million, $815 million and $355 million in fiscal 2022, 2023 and 2024, respectively. We expect to continue to incur net
losses for the foreseeable future. We expect our operating expenses to significantly increase over the next several
years as we hire additional personnel, particularly in sales and marketing, expand and improve the effectiveness of
our distribution channels, expand our operations and infrastructure, both domestically and internationally, pursue
business combinations and continue to develop our platform. If our revenue does not increase to offset these
increases in our operating expenses, we will not be profitable in future periods. While historically, our total revenue
has grown, not all components of our total revenue have grown consistently. Further, in future periods, our revenue
growth could slow or our revenue could decline for a number of reasons, including slowing demand for our software,
increasing competition, any failure to gain or retain channel partners, a decrease in the growth of our overall market,
or our failure, for any reason, to continue to capitalize on growth opportunities. As a result, our past financial
performance should not be considered indicative of our future performance. Any failure by us to achieve or sustain
profitability on a consistent basis could cause the value of our common stock to decline.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain
high levels of service and customer satisfaction or adequately address competitive challenges.
We have experienced, and may continue to experience, rapid growth and organizational change, which has
placed, and may continue to place, significant demands on our management and our operational and financial
resources. For example, our headcount has grown from 5,030 employees as of January 31, 2022 to 5,908
employees as of January 31, 2024. In order to manage our growth and better align our organizational structure and
resources with our business priorities, we may undertake restructuring plans from time to time. For example, during
the first quarter of each of fiscal 2024 and fiscal 2025, we announced separate world-wide restructuring plans
intended to reduce operating expenses and improve profitability that involved a reduction of our workforce by
approximately 300 and 400 full-time employees, respectively. We may encounter challenges in the execution of
these restructuring efforts, such as adverse impacts on employee morale or attrition beyond the intended
reductions, and these challenges could impact our ability to execute on our business initiatives, which could cause
our restructuring efforts to not be as effective as anticipated and harm our financial results.
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.
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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 independent software vendors (“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
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.
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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, failure to ensure the effectiveness of our marketing programs, or any negative
market perception stemming from past or future security breaches. 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
APIs and products. We believe that these developer-built applications facilitate greater usage and customization of
our products. If these developers stop developing on or supporting our platform, we will lose the benefit of network
effects that have contributed to the growth in our number of customers, and our business (including the
performance levels of our products), results of operations and financial condition could be harmed.
Our business depends on our customers renewing their subscriptions and purchasing additional
licenses or subscriptions from us. Any material decline in our Dollar-Based Net Retention Rate would harm
our future results of operations.
To continue to grow our business, it is important that our customers renew their subscriptions when existing
contract terms expire and that we expand our commercial relationships with our existing customers. Our customers
have no obligation to renew their subscriptions, and our customers may decide not to renew their subscriptions with
a similar contract period, at the same prices and terms or with the same or a greater number of users. We have
experienced significant growth in the number of users of our platform, but we do not know whether we will continue
to achieve similar user growth rates in the future. In the past, some of our customers have elected not to renew their
agreements with us, and it is difficult to accurately predict long-term customer retention and expansion rates. Our
customer retention and expansion has, in the past, and may, in the future, 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 macroeconomic 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, negative sentiment stemming from cybersecurity incidents, 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 has slowed in recent periods and could fall below expectations.
We have experienced significant growth in the number of our customers since our founding, but this growth
has slowed in recent periods. 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. This could cause customer growth to fall
below analyst or investor expectations. If we fail to meet or exceed such expectations for this or any other reason,
the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including
securities class action suits.
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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;
•
the timing and success of new product introductions by us or our competitors or any other change in the
competitive landscape of our market;
•
security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform and
products, and any negative market perception or customer reactions related to, or arising from the
disclosure of, such breaches, difficulties or interruptions;
•
pricing pressure as a result of competition, the inflation and interest rate environment and increased costs;
•
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;
•
our ability to comply with privacy laws and requirements;
•
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;
•
health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses; and
•
general economic conditions in either domestic or international markets, including the inflation and interest
rate environment, geopolitical uncertainty and instability.
Any one or more of the factors above may result in significant fluctuations in our results of operations. You
should not rely on our past results as an indicator of our future performance.
The variability and unpredictability of our quarterly results of operations or other operating metrics could result
in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or
23
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.
Even if we maintain adequate research and development resources, we may be unable to monetize newly
developed products or features such that we can recoup our research and development expenditures. For example,
if we develop a new product feature but our competitors give an equivalent feature away for free, we may need to
also include our newly developed feature for free as part of an existing product offering to remain competitive in the
marketplace. Such a loss of anticipated revenue to offset our research and development expenditures 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,
teams 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 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 22% and 21% of our total revenue in fiscal 2023 and fiscal 2024, 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:
•
macroeconomic conditions, including the inflation and interest rate environment;
•
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, 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;
•
differing technology standards;
•
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
25
•
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;
•
health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
•
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.
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
macroeconomic environment, our sales cycles are lengthening in certain circumstances and becoming less
predictable, which may harm our financial results. Other factors that may influence the length and variability of our
sales cycle include, among other things:
•
the need to raise awareness about the uses and benefits of our platform, including our customer identity
products;
•
the need to allay privacy, regulatory and security concerns;
•
the discretionary nature of purchasing and budget cycles and decisions;
•
the competitive nature of evaluation and purchasing processes;
•
announcements or planned introductions of new products, features or functionality by us or our competitors;
and
•
often lengthy purchasing approval processes.
26
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.
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
27
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. For example, some of our government entity customers
contract with us on the basis of our authorization under FedRAMP, which has, in the past, and may, in the future,
require us to undertake additional actions and expense to ensure compliance. 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, authorizations (such as FedRAMP) or requirements and do not meet
them, or if such authorizations are suspended or revoked, 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. 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 and have not always attracted a sufficient number of new customers
to be cost-effective. 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 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
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;
28
•
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.
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
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 have, in the
past, and may, in the future, experience disruptions, data loss or corruption, outages and other performance
problems with our infrastructure or service due to a variety of factors. These factors include, for example,
29
infrastructure and functionality changes, human or software errors, capacity constraints, ransomware attacks that
encrypt our data and render it inaccessible or security-related incidents. In some instances, we may not be able to
identify the cause or causes of these performance problems immediately, and it could take months, or even years,
for such problems to become pronounced enough for us to detect or for our customers to detect and inform us. 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, including intentionally
blocking our internet traffic or all internet traffic, for example at the request of a national government intending to
isolate its country’s network, 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 cybersecurity incidents that allowed unauthorized access to our
systems or data or our customers’ data, harmed our reputation, created additional liability and adversely
impacted our financial results. We may experience similar incidents in the future which may also include
disabling access to our service.
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 actors and organized crime groups 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 we and they store and process. For
example, like other companies, we have experienced an increase in 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 will 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 that form a part of our customers’ security software supply
chain, 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 and have not in the past been, and may not in the future be, sufficient to
protect our internal networks and platform against certain attacks. In addition, techniques used to sabotage or to
obtain unauthorized access to networks in which data is stored or through which data is transmitted change
frequently, become more complex over time and generally are not recognized until launched against a target. As a
result, we and our third-party service providers have in the past been, and may in the future 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
30
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. Techniques used to obtain
unauthorized access to, or to sabotage, systems change frequently and generally are not recognized until launched
against a target. As a result, we, our third-party service providers and our customers have not in the past been, and
may not in the future be, able 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 or theft 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. For example, our customers have in the past
published public criticisms of our security practices in connection with security incidents, and these postings harm
our reputation and brand. 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 that form a part of our customers’ security software supply chain, 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. 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 or our customers’ systems.
We have experienced cybersecurity incidents resulting from our use of and oversight over third-party service
providers and may experience such incidents in the future. These incidents have, in the past, and may, in the future,
result from our configuration of such providers’ products or from cybersecurity attacks on such providers of the
same type that could affect our own systems. While we have implemented security measures and configuration
policies that seek to protect data stored with our third-party service providers, such measures and policies have not
in the past been, and may not in the future be, sufficient to protect our data or our customers’ data. 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. In addition, in October 2023, a threat actor gained
unauthorized access to and stole information from inside our customer support system, which was hosted by a
third-party service provider.
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, our service providers’ 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 or a security software supply chain attack even many levels removed could result in the
exfiltration of confidential corporate information or other data that may provide additional avenues of attack. For
example, an exploitation in an open source library that is imported and used in another framework that is used by a
software product used by Okta could introduce an avenue of attack into the Okta service. 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
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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
operations, account lockouts, 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.
We have, in the past, failed or been perceived to have failed to fully comply with the privacy or
security provisions of our privacy policy, our contracts and/or legal or regulatory requirements, which
could result in proceedings, actions or penalties against us. We may experience similar incidents in the
future.
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 have, in the past, not ensured and may, in the future, not ensure our
customers’ 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 contract with us on the basis of our
authorization under FedRAMP, which, in addition to state or international regulations, has, in the past, and may, in
the future, 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 created a new state agency that is vested with authority to implement and enforce the CCPA and the
CPRA. Since the CPRA passed, a number of states have passed their own comprehensive privacy statutes that
share similarities with the CCPA and CPRA and, depending on the jurisdiction, will take effect in 2024 or thereafter.
Following California’s enactment of the CCPA and CPRA, a number of other states have passed new privacy laws
with differing requirements and remedies for violations. We expect that additional states will enact privacy
regulations that differ from each other. We may expend significant resources attempting to comply with conflicting
and overlapping state privacy regulations, and the cost and complexity of complying with such regulations could
adversely affect our business or increase our potential liability if we fail to comply. This influx of state privacy
regimes indicates a trend toward more stringent privacy legislation in the United States, including a potential federal
privacy law, which could also 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
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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 by us to comply with federal, state or foreign laws or regulations, industry standards, contractual
obligations or other legal obligations, compliance frameworks that Okta has contractually committed to comply with,
or any actual or suspected privacy or security incident, even if unfounded, whether or not resulting in unauthorized
access to, or acquisition, release or transfer of personal data or other data, may result in enforcement actions and
prosecutions, private litigation, fines, penalties and censure, claims for damages by customers and other affected
individuals, or adverse publicity and could cause our customers to lose trust in us, which could have an adverse
effect on our reputation and business.
We publicly post our privacy policies and practices concerning our processing, use and disclosure of the
personal data provided to us by our website visitors and by our customers, and other individuals with whom we
interact. Our publication of our privacy policies and other statements we publish that provide promises and
assurances about privacy and security can subject us to potential state and federal action if they are found to be
unfair, deceptive or misrepresentative of our practices.
If our platform is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data
security requirements, it may subject us or our customers to public criticism and potential legal liability. Existing and
potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers
to unauthorized processing of personal data may create negative public reactions to technologies, products and
services such as ours. Public concerns regarding personal data processing, privacy and security may cause some
of our customers’ end users to be less likely to visit their websites or otherwise interact with them. If enough end
users choose not to visit our customers’ websites or otherwise interact with them, our customers could stop using
our platform. This, in turn, may reduce the value of our service, and slow or eliminate the growth of our business, or
cause our business to contract.
Privacy is a key 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 and increased scrutiny over EU-U.S. data transfers.
We are subject to global data protection laws and regulations (“Data Protection Laws”) that may impact how
we do business with customers. Data Protection Laws, such as those applicable in the European Union, Canada
and certain of its provinces, United Kingdom, Asia, and certain states in the United States, have enhanced data
protection obligations for companies that handle personal data. Obligations include, for example, expanded
disclosures about how personal data is to be used, individual rights to access and delete personal data, limitations
on retention of personal data, mandatory data breach notification requirements and strict obligations on service
providers.
In addition, increasing numbers of Data Protection Laws restrict transfers of personal data outside of their
country of origin to countries deemed to lack adequate privacy protections. These types of transfers must be
supported by a transfer mechanism that we may be required to implement; for example, data transfers out of the
European Economic Area may require certification to the EU-U.S. Data Privacy Framework (“DPF”) or agreeing to
the European Commission’s Standard Contractual Clauses (“SCCs”), each of which impose additional compliance
obligations.
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One Okta subsidiary is a certified participant of the DPF and receives European personal data in the U.S.
pursuant to the DPF and the SCCs, and by contrast, the rest of Okta relies on the SCCs for its lawful transfers of
European personal data to the U.S. The DPF and the SCCs are subject to further review by European authorities
(such as the Court of Justice of the European Union) and could be invalidated in the future, requiring expenditure of
additional resources to support lawful transfers of European personal data.
Additional jurisdictions continue to adopt data localization laws, which require personal data, or certain
subcategories of personal data, 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.
This regulatory environment applicable to the handling of 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, results of
operations and financial condition being harmed. We and our customers may face a risk of enforcement actions by
an increasing number of global data protection authorities in countries where data protection laws apply to us and
with which we may not be able to comply. Any such enforcement actions could result in substantial costs and
diversion of resources, distract management and technical personnel and negatively affect our business, results of
operations and financial condition.
Non-compliance with these obligations can trigger significant fines. For example, in Europe fines for non-
compliance can be a maximum of €20 million or 4% of total worldwide annual revenue, whichever is higher. In some
U.S. states, fines can be up to $7,500 per violation, multiplied by the number of impacted individuals, and, in
addition, some states allow a private right of action. Given the breadth and depth of changes in data protection
obligations, complying with these requirements has caused us to expend significant resources, which is likely to
continue into the near future as we respond to new interpretations and enforcement actions.
In addition, new laws are continually being passed. For example, in the European Union, a draft ePrivacy
Regulation extends strict opt-in marketing rules, alters rules on third-party cookies, web beacons and similar
technology and significantly increases penalties for violations. India recently passed a comprehensive data
protection law that will apply new privacy rules for the first time in that country. In addition, the number of U.S. states
with comprehensive Data Protection Laws significantly increased in 2023. 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, we may be required to make significant changes in our business operations
and product and services development, and we may not be able to comply with some of these regulatory
developments, all of which may adversely affect our revenues and our business overall.
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.
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. Further, certain modifications have been proposed to the HIPAA privacy regulations, and we expect that there
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will continue to be changes to health information privacy laws in the United States, including HIPAA, and we cannot
yet determine the impact such changes to existing laws, regulations and standards may have on our business.
If we fail to maintain our security attestations and certifications, our business, results of operations
and financial condition may suffer.
Security is essential for Okta and for our customers. A number of our product offerings have attained multiple
certifications, including SOC 2 Type II Attestations, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC
27017:2015, ISO/IEC 27018:2019, multiple agency FedRAMP Authorities to Operate, Department of Defense
Impact Level 4, are in accordance with Health Insurance Portability and Accountability Act ("HIPAA"), and comply
with many other international security frameworks. Workforce Identity Cloud also supports 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.
If we are unable to ensure that our products integrate or interoperate with a variety of operating
systems, platforms, services, software applications devices, mobile phones and other hardware form
factors 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. Past and future changes in such
technologies that degrade the functionality of our products or give preferential treatment to competitive services
have, in the past, and could, in the future, adversely affect adoption and usage of our platform. Any change in our
customers’ preference for cloud-based identity management or any shift towards on-premises systems could also
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.
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Interruptions or delays in the services provided by third-party data centers or internet service
providers have, in the past, and could, in the future, 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 encounters
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 and, in the past, service interruptions from such infrastructure
providers have caused outages on our platform, which could occur again in the future. 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 or malicious action, 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.
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 information technology 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, unauthorized access or malicious acts, and similar events or disruptions may damage or
interrupt computers, 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.
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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, have, in the past and could, in the future, harm our business and results of operations.
Errors, failures, vulnerabilities or bugs have, in the past and may, in the future, occur in our products,
especially when updates are deployed or new products are rolled out, maintenance patches are applied, or
infrastructure, architectural or configuration changes are made. In the past, such issues have caused outages for
our customers. 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.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory
environment, may result in reputational harm, liability, or other adverse consequences to our business
operations.
We use internally developed and third-party developed machine learning and artificial intelligence (“AI”)
technologies in our offerings and business, and we are making investments in expanding our artificial intelligence
capabilities in our products, services, and tools, including ongoing deployment and improvement of existing machine
learning and AI technologies, as well as developing new product features using AI technologies, including, for
example, generative AI. AI technologies are complex and rapidly evolving, and we face significant competition from
other companies as well as an evolving regulatory landscape. For example, in the European Union, the proposed
Artificial Intelligence Act, if approved, would establish obligations for providers of AI based on the type of AI and its
potential risks to society. The introduction of AI technologies into new or existing products may result in new or
enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other
complications that could adversely affect our business, reputation, or financial results. For example, even if
permitted by our privacy policy and contractual rights, our use of data in novel AI applications may, in time, expand
beyond customer expectations. The intellectual property ownership and license rights, including copyright,
surrounding AI technologies has not been fully addressed by courts or national or local laws or regulations, and the
use or adoption of third-party AI technologies into our products and services may result in exposure to claims of
copyright infringement or other intellectual property misappropriation. Uncertainty around new and emerging AI
technologies, such as generative AI, may require additional investment in the development and maintenance of
proprietary datasets and machine learning models, development of new approaches and processes to provide
attribution or remuneration to creators of training data, and development of appropriate protections and safeguards
for handling the use of customer data with AI technologies, which may be costly and could impact our expenses if
we decide to expand generative AI into our product offerings. AI technologies, including generative AI, may create
content that appears correct but is factually inaccurate or flawed. Our customers or others may rely on or use this
flawed content to their detriment, which may expose us to brand or reputational harm, competitive harm, and/or
legal liability. The use of AI technologies presents emerging ethical and social issues, and if we enable or offer
solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a
whole, we may experience brand or reputational harm, competitive harm, and/or legal liability.
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If we fail to adequately protect our proprietary rights, our competitive position could be impaired and
we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.
Our success is dependent, in part, upon protecting our proprietary information and technology. We rely on a
combination of patents, copyrights, trademarks, service marks, trade secret laws and contractual restrictions to
establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be
inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do
not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized
third parties to copy our products and use information that we regard as proprietary to create products that compete
with ours. Some contract provisions protecting against unauthorized use, copying, transfer and disclosure of our
products may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of
some countries do not protect proprietary rights to the same extent as the laws of the United States, and
mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate. To the
extent we expand our international activities, our exposure to unauthorized copying and use of our products and
proprietary information may increase. Accordingly, despite our efforts, we may be unable to prevent third parties
from infringing upon or misappropriating our technology and intellectual property.
We rely in part on trade secrets, proprietary know-how and other confidential information to maintain our
competitive position. Although we enter into confidentiality and invention assignment agreements with our
employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic
relationships and business alliances, no assurance can be given that these agreements will be effective in
controlling access to and distribution of our products and proprietary information. Further, these agreements do not
prevent our competitors from independently developing technologies that are substantially equivalent or superior to
our products.
To protect our intellectual property rights, we may be required to spend significant resources to monitor and
protect these rights. Litigation may be necessary in the future to enforce our intellectual property rights and to
protect our trade secrets. Such litigation could be costly, time consuming and distracting to management and could
result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our
intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and
enforceability of our intellectual property rights. Our inability to protect our proprietary technology against
unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and
resources, could delay further sales or the implementation of our products, impair the functionality of our products,
delay introductions of new products, result in our substituting inferior or more costly technologies into our products,
or injure our reputation. In addition, we may be required to license additional technology from third parties to
develop and market new products, and we cannot ensure that we can license that technology on commercially
reasonable terms or at all, and our inability to license this technology could harm our ability to compete.
Our results of operations may be harmed if we are subject to an infringement claim or a claim that
results in a significant damage award.
There is considerable patent and other intellectual property development activity in our industry, and we
expect that software companies will increasingly be subject to infringement claims as the number of products and
competitors grows and the functionality of products in different industry segments overlaps. In addition, the patent
portfolios of many of our competitors are larger than ours, and this disparity may increase the risk that our
competitors may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or
settle through patent cross-licenses. Other companies have claimed in the past, and may claim in the future, that we
infringe upon their intellectual property rights. A claim may also be made relating to technology that we acquire or
license from third parties. Further, we may be unaware of the intellectual property rights of others that may cover
some or all of our technology.
Any claim of infringement, regardless of its merit or our defenses, could:
•
require costly litigation to resolve and/or the payment of substantial damages, ongoing royalty payments or
other amounts to settle such disputes;
•
require significant management time and attention;
•
cause us to enter into unfavorable royalty or license agreements, if such arrangements are available at all;
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•
require us to discontinue the sale of some or all of our products, remove or reduce features or functionality
of our products or comply with other unfavorable terms;
•
require us to indemnify our customers or third-party service providers; and/or
•
require us to expend additional development resources to redesign our products.
Any one or more of the above could harm our business, results of operations and financial condition.
We use open source software in our products, which could negatively affect our ability to offer our
products and subject us to litigation or other actions.
We use open source software in our products and expect to use more open source software in the future.
From time to time, there have been claims challenging the ownership of open source software against companies
that incorporate open source software into their products. However, the terms of many open source licenses have
not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could
impose unanticipated conditions or restrictions on our ability to commercialize our products. As a result, we could be
subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be
costly for us to defend, have a negative effect on our results of operations and financial condition or require us to
devote additional research and development resources to change our products. In addition, if we were to combine
our proprietary software products with open source software in a certain manner, we could, under certain of the
open source licenses, be required to release the source code of our proprietary software to the public. This would
allow our competitors to create similar products with less development effort and time. If we inappropriately use
open source software, or if the license terms for open source software that we use change, we may be required to
re-engineer our products, incur additional costs, discontinue the sale of some or all of our products or take other
remedial actions. Some open source software may include generative AI software or other software that
incorporates or relies on generative AI or other AI technologies. The use of such software may expose us to risks as
the intellectual property ownership and license rights, including copyright, of generative AI software and tools, has
not been fully interpreted by U.S. courts or been fully addressed by federal or state regulation.
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
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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.
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.
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In addition, we use channel partners to sell our products and conduct business on our behalf. We or such
partners may have direct or indirect interactions with officials and employees of government agencies or state-
owned or affiliated entities and under certain circumstances we could be held liable for the corrupt or other illegal
activities of such partners, and our employees, representatives, contractors, partners, and agents, even if we do not
explicitly authorize such activities. We have implemented an anti-corruption compliance program but cannot ensure
that all our employees and agents, as well as those companies to which we outsource certain of our business
operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held
responsible.
Noncompliance with the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could
subject us to investigations, whistleblower complaints, sanctions, settlements, prosecution, and other enforcement
actions within the U.S. and internationally. 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. These laws and regulations may change frequently in response to evolving international issues. 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 transaction level taxes, tax laws, statutes, rules, regulations or
ordinances could be enacted at any time. Those enactments could adversely impact our domestic and international
business operations, and our business and financial performance. Further, existing tax laws, statutes, rules,
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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.
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 (including digital services taxes), and these rules and regulations are subject to varying interpretations
that may change over time. In particular, the applicability of certain sales, value-added and digital services 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.
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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, 2023 through January 31, 2024, the trading price of
our Class A common stock has ranged from $65.04 per share to $92.38 per share. The market price of our Class A
common stock fluctuates 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;
•
security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform and
products, and any negative market perception or customer reactions related to, or arising from the
disclosure of, such breaches, difficulties or interruptions;
•
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
has, in the past, and could, in the future, 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 40.4% of the voting power of our capital
stock as of January 31, 2024. 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, 2024, our directors, executive officers and their affiliates held in the aggregate 40.4% of the voting
power of our capital stock, taking into account shares of our common stock subject to options that are currently
exercisable or exercisable within 60 days of January 31, 2024 and RSUs that are releasable within 60 days of
January 31, 2024. 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). If we elect to satisfy our conversion obligation on the Notes solely in
shares of our Class A common stock upon conversion of the Notes, we will be required to deliver the shares of our
Class A common stock, together with cash for any fractional share, on the second business day following the
relevant conversion date.
If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or
unfavorable research, about our business, the price of our Class A common stock and trading volume
could decline.
The trading market for our Class A common stock will depend in part on the research and reports that
securities or industry analysts publish about us or our business. If industry analysts do not publish or cease
publishing research on our company, the trading price for our Class A common stock would be negatively affected. If
one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or
unfavorable research about our business, our Class A common stock price would likely decline. If one or more of
these analysts cease coverage of us or fail to publish reports on us on a regular basis, demand for our Class A
common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
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We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash
dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the
operation of our business and for general corporate purposes. Any determination to pay dividends in the future will
be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common
stock after price appreciation, which may never occur, as the only way to realize any future gains on their
investments.
Provisions in our charter documents and under Delaware law could make an acquisition of our
company more difficult, limit attempts by our stockholders to replace or remove our current board of
directors, and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may
have the effect of delaying or preventing a change of control or changes in our management. Our amended and
restated certificate of incorporation and amended and restated bylaws include provisions that:
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provide that our board of directors is classified into three classes of directors with staggered three-year
terms;
•
permit the board of directors to establish the number of directors and fill any vacancies and newly-created
directorships;
•
require super-majority voting to amend some provisions in our amended and restated certificate of
incorporation and amended and restated bylaws;
•
authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a
stockholder rights plan;
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provide that only the Chairperson of our board of directors, our Chief Executive Officer, or a majority of our
board of directors are authorized to call a special meeting of stockholders;
•
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
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•
any action asserting a claim against us that is governed by the internal affairs doctrine.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits
with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our
amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur
additional costs associated with resolving such action in other jurisdictions, which could harm our business, results
of operations and financial condition.
Risks Related to our Outstanding Convertible Notes
Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow
from our business to pay our indebtedness.
We have issued convertible notes due in 2025 (“2025 Notes”) and 2026 (“2026 Notes” and together with the
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, 2024, the conditions allowing holders of the 2025 Notes to convert were not met.
From the date of issuance through January 31, 2024, 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. We have in the past, and may in the future, engage in exchanges, repurchase,
or induce conversions of the Notes. Holders of the Notes that participate in any of these exchanges, repurchases, or
induced conversions may enter into or unwind various derivatives with respect to our Class A common stock or sell
shares of our Class A common stock in the open market to hedge their exposure in connection with these
transactions. These activities could decrease (or reduce the size of any increase in) the market price of our Class A
common stock or the Notes, or dilute the ownership interests of our stockholders. In addition, the market price of our
Class A common stock is likely to be affected by short sales of our Class A common stock or the entry into or
unwind of economically equivalent derivative transactions with respect to our Class A common stock by investors
that do not participate in the exchange transactions and by the hedging activity of the counterparties to our capped
call transactions ("Capped Calls") or their respective affiliates.
In addition, in connection with the issuance of the 2025 Notes and 2026 Notes, we entered into Capped Calls
with certain financial institutions (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. If we unwind
the Capped Calls in connection with Note repurchases or otherwise, we would lose the anti-dilutive impact of any
unwound Capped Calls.
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.
48
General Risk Factors
We depend on our executive officers and other key employees, and the loss of one or more of these
employees or an inability to attract and retain other highly skilled employees could harm our business.
Our success depends largely upon the continued services of our executive officers and other key employees.
We rely on our leadership team in the areas of research and development, operations, security, marketing, sales,
customer support, general and administrative functions, and on individual contributors in our research and
development and operations functions. From time to time, there may be changes in our executive management
team resulting from the hiring or departure of executives. For example, our former Chief Operating Officer did not
return as an employee following his recent sabbatical, though he is continuing to serve as a director and as Vice
Chairman of the Board of Directors. 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, 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 1C. Cybersecurity
Okta, like other companies, is subject to a wide variety of cybersecurity attacks on its systems and networks
on an ongoing basis and with increasing sophistication. 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, Okta and its third-party service providers now also face
threats from sophisticated nation-state actors and organized crime groups who engage in attacks (including
49
advanced persistent threat intrusions). In the face of this threat landscape, Okta remains committed to protecting its
systems, internal networks and its customers’ systems, and the information that it and they store and process.
Okta has an established cybersecurity risk management program intended to protect the confidentiality,
integrity, and availability of its critical systems, internal networks and information. This program implements policies,
processes and controls to respond to cybersecurity threats and mitigate business impacts. Okta’s board of directors
(the “board”) has delegated to the cybersecurity risk committee of the board (the “cybersecurity risk committee”)
oversight responsibility of the cybersecurity risk management program, which includes a cybersecurity incident
response plan.
Okta devotes significant resources, including human and financial capital, to create security measures,
configuration policies and response plans to address cybersecurity threats. However, as a well-known provider of
identity and security solutions, Okta is a particularly attractive target for such threats. For additional information
related to these risks, see “Risk Factors” included under Part I, Item 1A of this Annual Report on Form 10-K. In the
past we have experienced cybersecurity incidents, and we cannot anticipate when or the extent to which
cybersecurity breaches will materially affect Okta or its customers’ use of Okta’s platform in the future. To date we
have not identified any prior cybersecurity incidents that have materially affected or are reasonably likely to
materially affect us, including our operations, business strategy, results of operations, or financial condition. There
can be no assurance that Okta’s cybersecurity risk management program and processes, including its policies,
controls or procedures, will be fully implemented, complied with or effective in protecting its systems and
information.
Cybersecurity Risk Management and Strategy
Cybersecurity is essential for Okta. Our cybersecurity strategy is to develop a consistent framework of
security controls that can apply to all business functions. To execute on this strategy, we integrate cybersecurity risk
management into our broader enterprise risk management program. We also take a cross-functional approach to
cybersecurity risk management by engaging teams across the business, including security, technical operations,
engineering, IT, customer support, legal and communications, to implement shared processes for identifying,
assessing and managing key cybersecurity risks.
We design and assess our cybersecurity risk management program against the National Institute of
Standards and Technology Cybersecurity Framework (the “NIST Framework”). This does not imply that Okta
satisfies any particular specifications or requirements, only that we use the NIST Framework to guide our efforts to
improve our security posture.
Our cybersecurity risk management program consists of technical and organizational safeguards aimed at
protecting the confidentiality of our systems and the Okta platform. From time to time, we engage external
consultants and advisors to perform independent assessments and testing of our program, or otherwise assist with
aspects of our program and security controls.
Key features of our cybersecurity risk management program include:
•
Designated security risk team. Our security risk management team is responsible for maintaining Okta’s
cybersecurity risk management framework and risk assessments and tracking risk mitigation efforts. This
team, together with our enterprise risk management team, monitors and regularly reports on our
cybersecurity risk profile. Our internal audit team partners with these teams to provide input on the overall
effectiveness of Okta’s security risk governance and management processes.
•
Risk assessments. We periodically perform enterprise-wide assessments to stay informed about critical
security risks. Okta’s functional teams also assess risks associated with their specific activities, with
supervision by the security risk management team. Functional team risk assessments follow an established
framework that includes information-gathering from internal and external sources to identify risks, and
evaluating the adequacy of controls to mitigate those risks. We have a management-level risk oversight
committee, led by internal audit and security risk management personnel, that meets quarterly with other
internal business leaders to review the results of these enterprise-wide and functional team risk
assessments and evaluate the adequacy of any proposed mitigation plans.
•
Incident response planning. Okta’s cybersecurity incident response plan outlines the processes and
procedures for responding to, remediating and resolving a security incident, and defines the roles and
responsibilities of Okta personnel in responding to such incidents.
•
Security awareness training. We require our employees and contractors to complete general
cybersecurity awareness training at least annually. These training sessions advise on how to protect Okta,
our information systems and data, as well as our customers’ systems and data. From time to time we may
also require supplemental cybersecurity training for certain members of our workforce depending on their
job responsibilities.
•
Third-party risk management. We require high risk third-party vendors, suppliers and service providers to
undergo a cybersecurity risk assessment prior to contracting with Okta. Certain third parties are monitored
and reassessed on an ongoing basis, depending on their level of risk or in the event of changes to their
products or services.
Cybersecurity Governance
Okta’s board oversees Okta’s enterprise risk management program, of which cybersecurity is a critical
component. To facilitate the board’s supervision of cybersecurity matters, the board formed a cybersecurity risk
committee. Among other responsibilities, the cybersecurity risk committee oversees Okta's cybersecurity program.
The cybersecurity risk committee receives regular updates from Okta’s chief security officer (the “CSO”) on
our cybersecurity program. In addition, management updates the cybersecurity risk committee, as appropriate,
regarding cybersecurity incidents. The cybersecurity risk committee reports to the board on its activities. In addition
to receiving reports from the cybersecurity risk committee, the board periodically receives cyber risk management
program briefings directly from the CSO. Additionally, the audit committee of the board receives cybersecurity
updates as part of the audit committee’s oversight of Okta’s enterprise risk management program.
Our management team, including the CSO, is responsible for assessing and managing our risks from
cybersecurity threats. The CSO partners with the security, technical operations, legal, internal audit, engineering
and product development teams to supervise both our cybersecurity program and our retained external
cybersecurity consultants, and to stay informed on Okta’s security and the overall security landscape. Our current
CSO brings over 20 years of cybersecurity and risk management experience to his work at Okta, having held
numerous security leadership positions in highly-regulated industries such as finance. Prior to joining Okta, the CSO
was Senior Vice President and Chief Security Officer at Symantec Corporation, a leading cybersecurity company,
where he had global oversight responsibility for all cybersecurity and physical security programs. His experience
delivering cybersecurity at scale extends internationally, and includes security and risk management roles at
companies in Australia, the United Kingdom and the United States. Our security team includes individuals with
experience across a broad range of cybersecurity areas, including product security; cloud security; infrastructure
security; security monitoring and incident response; identity and access management; vulnerability management;
and governance, risk and compliance.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and
incidents through various means, which may include briefings from internal security and technical personnel; threat
intelligence and other information obtained from governmental, public or private sources, including external
consultants engaged by us; and alerts and reports produced by security tools deployed in our technical
environment.
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 sublease approximately 111,168 square feet of
space under this lease to third parties.
We also lease space in various locations in the Americas, Europe and Asia-Pacific.
We believe that our facilities are suitable to meet our current needs. We intend to 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, as amended (the "Exchange Act"), 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. The defendants moved to dismiss the amended complaint. On March 31, 2023,
the court issued an order granting in part and denying in part the motion to dismiss. The court dismissed in full the
claims based on the plaintiff’s allegations related to the Company’s cybersecurity controls and vulnerability to data
breaches, and dismissed in part and denied in part the claims based on allegations related to the Auth0 integration.
On November 1, 2023, the plaintiffs filed a motion for class certification, on January 17, 2024, the defendants filed a
notice of non-opposition to the motion, and on February 5, 2024, the court granted the motion. The court has not
otherwise issued a scheduling order, and discovery is proceeding.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United
States District Court for the Northern District of California against certain of its current and former executive officers
and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v.
McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the
defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the
Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The
lawsuits seek orders permitting the plaintiffs to maintain the actions derivatively on behalf of the Company, awarding
unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and
requiring the Company to make certain reforms to its corporate governance and controls. On February 22, 2023, the
court entered a stipulated order consolidating the derivative actions, appointing co-lead counsel for plaintiffs, and
staying the consolidated derivative actions during the pendency of the motion to dismiss in the securities class
action lawsuit. The consolidated derivative action is captioned In re Okta, Inc. Stockholder Derivative Litigation, No.
3:22-cv-07480. On May 9, 2023, the court entered a stipulated order continuing the stay through the close of
discovery in the securities class action lawsuit.
On April 14, 2023, another shareholder filed a substantially similar derivative lawsuit in the United States
District Court for the District of Delaware against certain of the Company’s current and former executive officers and
directors, captioned Buono v. McKinnon et al., No. 1:23-cv-00413. On May 31, 2023, the court entered a stipulated
order whereby the defendants agreed to accept service and stay the derivative action through the close of discovery
in the securities class action lawsuit.
On January 25, 2024, another shareholder filed a substantially similar derivative lawsuit in the United States
District Court for the District of Delaware against certain of the Company’s current and former executive officers and
directors, captioned Nasr v. McKinnon, et al., No. 1:24-cv-00106.
The Company is defending these lawsuits vigorously.
See Note 10 to our consolidated financial statements "Commitments and Contingencies" for information
related to legal proceedings.
Item 4. Mine Safety Disclosures
Not Applicable.
52
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 26, 2024, we had 68 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.
53
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 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
01/31/2019
01/31/2020
01/31/2021
01/31/2022
01/31/2023
01/31/2024
$50
$100
$150
$200
$250
$300
$350
Company/Index
1/31/2019
1/31/2020
1/31/2021
1/31/2022
1/31/2023
1/31/2024
Okta
$
100
$
155
$
314
$
240
$
89
$
100
S&P 500 Index
100
122
143
176
161
195
S&P 500 Information Technology Index
100
146
200
253
214
320
54
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 2024 Annual Report to Stockholders, which includes our Proxy Statement for the 2024 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended January 31, 2024.
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, 2024, we issued 81 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.
Item 6. [Reserved]
55
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 of this Annual Report on Form 10-K. Our fiscal year
ends January 31. References to fiscal 2024, for example, refer to the fiscal year ended January 31, 2024.
Overview
Okta is the leading independent identity partner. Our Workforce Identity Cloud and Customer Identity Cloud,
powered by Auth0, enable 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. 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. Developers leverage our
Customer Identity Cloud and Workforce Identity Cloud to securely and efficiently embed identity into the software
they build, allowing them to innovate and focus on their core missions.
Given the growth trends in the number of applications and cloud adoption and the movement to remote and
hybrid 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, 2024, more than 18,950 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, 2024, 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 the value we provide to
our customers over time, and thus their spending with us through expanding the number of users who access our
Workforce Identity Cloud and Customer Identity Cloud and up-selling additional product offerings. We sell our
product offerings 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 2024. 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.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
56
Impact of Cybersecurity Incidents
In the past we have experienced cybersecurity incidents, such as the January 2022 incident involving one of
our third-party service providers and the October 2023 incident where a threat actor gained unauthorized access to
and stole information from our third-party customer support system, that harmed our reputation and customer
relations, adversely impacted our financial results and may create additional liabilities. While we expect the impact
of these security incidents to adversely affect our future financial performance, we cannot predict the extent of such
impact with certainty. Due to the nature of our business, the announcement of any security incidents, even if not
significant, could have these impacts.
Impact of Current Economic Conditions
Worldwide economic uncertainties and negative trends, including financial and credit market fluctuations,
uncertainty in the banking sector, rising interest rates, inflation and other impacts from the macroeconomic
environment have, and could continue to, adversely affect our business operations or financial results. As we
continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these
macroeconomic events on our business, results of operations and overall financial position remain uncertain. See
the section titled “Risk Factors'' included under Part I, Item 1A above for further discussion of the possible impact of
these factors and other risks on our business.
Financial Information and Segments
We operate our business as one reportable segment. For fiscal 2024, 2023 and 2022, our revenue was
$2,263 million, $1,858 million and $1,300 million, respectively, representing a growth rate of 22% and 43% in fiscal
2024 and 2023, respectively. For fiscal 2024, 2023 and 2022, we generated net losses of $355 million, $815 million
and $848 million, respectively. Our accumulated deficit as of January 31, 2024 was $2,830 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,
2024
2023
2022
(dollars in millions)
Number of customers
18,950
17,600
15,000
Customers with annual contract value ("ACV") above $100,000
4,485
3,930
3,100
Dollar-based net retention rate for the trailing 12 months ended
111 %
120 %
124 %
Current remaining performance obligations
$
1,952
$
1,684
$
1,351
Remaining performance obligations
$
3,385
$
3,007
$
2,694
Total Customers and Number of Customers with Annual Contract Value Above $100,000
As of January 31, 2024, we had over 18,950 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 4,485, 3,930 and 3,100 as of January 31, 2024, 2023 and 2022, respectively. We expect this trend
to continue as larger enterprises recognize the value of our platform and replace their legacy identity access
management infrastructure. We define a customer as a separate and distinct buying entity, such as a company, an
educational or government institution, or a distinct business unit of a large company that has an active contract with
us or one of our partners to access our platform. For purposes of determining our customer count, we do not include
customers that use our platform under self-service arrangements only.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
57
Dollar-Based Net Retention Rate
Part of our ability to generate revenue is dependent upon our ability to maintain our relationships with our
customers and to increase their utilization of our platform. We believe we can achieve these goals by focusing on
delivering value and functionality that enables us to both retain our existing customers and expand the number of
users and products used within an existing customer. We assess our performance in this area by measuring our
Dollar-Based Net Retention Rate. Our Dollar-Based Net Retention Rate measures our ability to increase revenue
across our existing customer base through expansion of users and products associated with a customer as offset by
churn and contraction in the number of users and/or products associated with a customer.
Our Dollar-Based Net Retention Rate is based upon our ACV which is calculated based on the terms of that
customer’s contract and represents the total contracted annual subscription amount as of that period end. We
calculate our Dollar-Based Net Retention Rate as of a period end by starting with the ACV from all customers as of
twelve months prior to such period end ("Prior Period ACV"). We then calculate the ACV from these same
customers as of the current period end ("Current Period ACV"). Current Period ACV includes any upsells and is net
of contraction or churn over the trailing twelve months but excludes ACV from new customers in the current period.
We then divide the Current Period ACV by the Prior Period ACV to arrive at our Dollar-Based Net Retention Rate.
Our Dollar-Based Net Retention Rate is inclusive of ACV from self-service customers.
Our strong Dollar-Based Net Retention Rate is primarily attributable to gross retention, an expansion of users
and upselling additional products within our existing customers. Larger enterprises often implement a limited initial
deployment of our platform before increasing their deployment on a broader scale. The decrease in our Dollar-
Based Net Retention Rate as of January 31, 2024, compared to January 31, 2023, was primarily a result of the
macroeconomic environment, with ACV from existing customers increasing at a slower rate in the current period.
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.
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. 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.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
58
Cost of Revenue and Gross Margin
Cost of Subscription. Cost of subscription primarily consists of expenses related to hosting our services and
providing support. These expenses include employee-related costs associated with our cloud-based infrastructure
and our customer support organization, third-party hosting fees, software and maintenance costs, outside services
associated with the delivery of our subscription services, amortization expense associated with capitalized internal-
use software and acquired developed technology and allocated overhead.
We intend to continue to invest additional resources in our platform infrastructure, our platform support
organizations and security posture. 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 and our continued efforts to build platform support and professional services teams.
Operating Expenses
Research and Development. Research and development expenses consist primarily of employee
compensation costs and allocated overhead. We believe that continued investment in our platform is important for
our growth.
Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation costs, costs
of general marketing and promotional activities, travel-related expenses, amortization expense associated with
acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade names
and allocated overhead. Commissions earned by our sales force that are considered incremental and recoverable
costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis over a period
of benefit that we have determined to be generally five years.
General and Administrative. General and administrative expenses consist primarily of employee
compensation costs for finance, accounting, legal, information technology and human resources personnel. In
addition, general and administrative expenses include acquisition and integration-related costs, non-personnel
costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting
corporate expenses, such as information technology, not allocated to other departments.
Restructuring and Other Charges. Restructuring and other charges consist primarily of personnel costs, such
as notice period, employee severance payments and termination benefits. In addition, restructuring and other
charges include certain lease impairment charges.
Interest and Other, Net
Interest and other, net consists of interest expense, which primarily includes amortization of debt issuance
costs and contractual interest expense for our convertible senior notes, interest income from our investment
holdings, gains on early extinguishment of debt and gains and losses from our strategic investments.
Provision for (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 difference between our effective tax rate
and the federal statutory rate is primarily due to a valuation allowance against U.S. deferred tax assets, the tax
effect of foreign operations and state taxes.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
59
Results of Operations
The following table sets forth our results of operations for the periods presented:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Revenue
Subscription
$
2,205 $
1,794 $
1,249
Professional services and other
58
64
51
Total revenue
2,263
1,858
1,300
Cost of revenue
Subscription(1)
502
464
329
Professional services and other(1)
79
82
67
Total cost of revenue
581
546
396
Gross profit
1,682
1,312
904
Operating expenses
Research and development(1)
656
620
469
Sales and marketing(1)
1,036
1,066
771
General and administrative(1)
450
409
432
Restructuring and other charges
56
29
—
Total operating expenses
2,198
2,124
1,672
Operating loss
(516)
(812)
(768)
Interest expense
(8)
(11)
(91)
Interest income and other, net
81
22
9
Gain on early extinguishment of debt
106
—
—
Interest and other, net
179
11
(82)
Loss before provision for (benefit from) income taxes
(337)
(801)
(850)
Provision for (benefit from) income taxes
18
14
(2)
Net loss
$
(355) $
(815) $
(848)
(1) Includes stock-based compensation expense as follows:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Cost of subscription revenue
$
75 $
69 $
49
Cost of professional services and other revenue
15
14
12
Research and development
277
275
193
Sales and marketing
156
159
136
General and administrative
161
160
176
Total stock-based compensation expense
$
684 $
677 $
566
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
60
The following table sets forth our results of operations for the periods presented as a percentage of our total
revenue:
Year Ended January 31,
2024
2023
2022
Revenue
Subscription
97 %
97 %
96 %
Professional services and other
3
3
4
Total revenue
100
100
100
Cost of revenue
Subscription
22
25
25
Professional services and other
4
4
5
Total cost of revenue
26
29
30
Gross profit
74
71
70
Operating expenses
Research and development
29
33
36
Sales and marketing
46
58
59
General and administrative
20
22
34
Restructuring and other charges
2
2
—
Total operating expenses
97
115
129
Operating loss
(23)
(44)
(59)
Interest expense
—
(1)
(7)
Interest income and other, net
4
2
1
Gain on early extinguishment of debt
4
—
—
Interest and other, net
8
1
(6)
Loss before provision for (benefit from) income taxes
(15)
(43)
(65)
Provision for (benefit from) income taxes
1
1
—
Net loss
(16) %
(44) %
(65) %
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
61
A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal
2023 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2023
compared to fiscal 2022 can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2023, filed with the
SEC on March 3, 2023, 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, 2024 and 2023
Revenue
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Revenue:
Subscription
$
2,205
$
1,794
$
411
23 %
Professional services and other
58
64
(6)
(10)
Total revenue
$
2,263
$
1,858
$
405
22 %
Percentage of revenue:
Subscription
97 %
97 %
Professional services and other
3
3
Total
100 %
100 %
For fiscal 2024, the increase in subscription revenue was primarily due to the addition of new customers, an
increase in users and sales of additional products to existing customers. The increase in revenue was attributable to
a 8% increase in total customers, from over 17,600 as of January 31, 2023, to over 18,950 as of January 31, 2024,
and revenue from existing customers as reflected in our Dollar-Based Net Retention Rate of 111% as of January 31,
2024.
For fiscal 2024, the decrease in professional services and other revenue was due to lower bookings
associated with professional services.
Cost of Revenue, Gross Profit and Gross Margin
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Cost of revenue:
Subscription
$
502
$
464
$
38
8 %
Professional services and other
79
82
(3)
(4)
Total cost of revenue
$
581
$
546
$
35
6 %
Gross profit
$
1,682
$
1,312
$
370
28 %
Gross margin:
Subscription
77 %
74 %
Professional services and other
(36)
(27)
Total gross margin
74 %
71 %
For fiscal 2024, cost of subscription revenue increased primarily due to an increase of $22 million in employee
compensation costs, an increase of $7 million in software costs and an increase of $5 million in third-party hosting
costs as we expanded capacity to support our growth.
Our gross margin for subscription revenue improved from 74% to 77% during fiscal 2024. The increase was
primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue.
For fiscal 2024, cost of professional services and other revenue decreased slightly.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
62
Our gross margin for professional services and other revenue decreased to (36)% during fiscal 2024 from
(27)% during fiscal 2023 primarily due to a decrease in professional services and other revenue.
Operating Expenses
Research and Development Expenses
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Research and development
$
656
$
620
$
36
6 %
Percentage of revenue
29 %
33 %
For fiscal 2024, research and development expenses increased primarily due to an increase of $39 million in
employee compensation costs. We expect our research and development expenses will increase in absolute dollars
as our business grows.
Sales and Marketing Expenses
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Sales and marketing
$
1,036
$
1,066
$
(30)
(3) %
Percentage of revenue
46 %
58 %
For fiscal 2024, sales and marketing expenses decreased primarily due to a decrease in marketing costs of
$15 million and a decrease in amortization expense of $9 million for acquired customer relationships and trade
names. The decrease in sales and marketing expenses as a percentage of total revenue was primarily driven by
improved spend efficiency. We expect our sales and marketing expenses will continue to be our largest operating
expense category for the foreseeable future. We expect sales and marketing expenses as a percentage of total
revenue to decrease as our total revenue grows.
General and Administrative Expenses
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
General and administrative
$
450
$
409
$
41
10 %
Percentage of revenue
20 %
22 %
For fiscal 2024, general and administrative expenses increased primarily due to an increase of $26 million in
employee compensation costs. We expect general and administrative expenses as a percentage of total revenue to
decrease as our total revenue grows.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
63
Restructuring and Other Charges
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Restructuring and other charges
$
56
$
29
$
27
92 %
Percentage of revenue
2 %
2 %
For fiscal 2024, restructuring and other charges increased primarily due to an increase of $14 million in lease
impairment charges and an increase of $13 million in severance and termination benefit costs.
Interest and Other, Net
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Interest expense
$
(8) $
(11) $
3
(25) %
Interest income and other, net
81
22
59
265
Gain on early extinguishment of debt
106
—
106
—
Interest and other, net
$
179 $
11 $
168
1,571 %
For fiscal 2024, the change in interest and other, net was primarily due to the gain on early extinguishment of
debt related to repurchases of convertible senior notes and an increase in interest income from our short-term
investments.
Provision for Income Taxes
Year Ended January 31,
2024
2023
$ Change
% Change
(dollars in millions)
Provision for income taxes
$
18 $
14 $
4
31 %
For fiscal 2024, income tax expense resulted primarily from income in profitable foreign jurisdictions, federal
and state taxes resulting from tax attribution utilization limitations, and the tax impact of shortfalls from stock-based
compensation in the United Kingdom.
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.
The Organization for Economic Cooperation and Development ("OECD") and many countries have proposed
to reallocate some portion of profits of large multinational companies with global revenues exceeding EUR 20 billion
to markets where sales arise ("Pillar One"), as well as enacted a global minimum tax rate of at least 15% for
multinationals with global revenues exceeding EUR 750 million ("Pillar Two"), with additional countries considering
or intending to adopt these proposals. In December 2022, the Council of the European Union ("EU") formally
adopted the EU Minimum Tax Directive, which would require member states to adopt Pillar Two into their domestic
law. The directive requires the rules to initially become effective for fiscal years starting on or after December 31,
2023. Certain jurisdictions in which we operate have enacted Pillar Two legislation, with other countries considering
changes to their tax laws to adopt the OECD's proposals. The enactment of Pillar Two legislation is not expected to
have a material adverse effect in fiscal 2025, on our effective tax rate, financial position, results of operations and
cash flows. We will continue to monitor and reflect the impact of such legislative changes in future financial
statements as appropriate.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
64
Liquidity and Capital Resources
As of January 31, 2024, our principal sources of liquidity were cash, cash equivalents and short-term
investments totaling $2,202 million, which were held for working capital and general corporate purposes, including
potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury
securities, money market funds, corporate debt securities and certificates of deposit. Historically, we have
generated significant operating losses and both positive and negative cash flows from operations as reflected in our
accumulated deficit and consolidated statements of cash flows.
Recent macroeconomic events, including rising interest rates, global inflation and bank failures, have led to
further economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed
across large financial institutions. In addition, we have policy restrictions in place on the types of securities that can
be purchased as part of our available-for-sale securities portfolio. These restrictions take credit quality, liquidity and
diversification into consideration among other criteria. We continue to monitor the impacts of this situation; however,
there can be no assurances that conditions in the banking sector and in global financial markets will not worsen
and/or adversely affect us.
Effective the first quarter of fiscal 2025, we intend to satisfy employee payroll tax withholding due upon the
vesting of share-based compensation awards with our own funds under the "net share settlement" approach.
Previously, payroll tax withholding was satisfied via the sale of shares of our common stock in the open market. The
net share settlement approach reduces our equity dilution rate by covering such withholding tax obligations from
existing cash reserves and impacts future liquidity. The cash outflow to cover these tax obligations is classified as a
financing activity in the statement of cash flows.
In September 2019, we completed our private offering of the 2025 convertible senior notes ("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 year and is payable semi-annually in arrears on March 1 and September 1 of each
year, beginning on March 1, 2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter
into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock.
In June 2020, we completed our private offering of the 2026 convertible senior notes ("2026 Notes") due on
June 15, 2026 and received aggregate gross proceeds of $1,150 million. The interest rate on the 2026 Notes is
fixed at 0.375% per year and is payable semi-annually in arrears on June 15 and December 15 of each year,
beginning on December 15, 2020. In connection with the 2026 Notes, we used a portion of the proceeds to enter
into capped call transactions ("2026 Capped Calls") with respect to our Class A common stock.
In the ordinary course of our business, we may, at any time and from time to time, seek to extinguish our
outstanding Notes through cash purchases and/or exchanges for equity, in open-market purchases, privately
negotiated transactions or otherwise. Such extinguishments, if any, will be conducted on such terms and at such
prices as we may determine, and will depend on our evaluation of the prevailing market conditions, trading price of
the 2025 Notes and 2026 Notes (collectively, "the Notes"), our liquidity requirements, legal and contractual
restrictions and other factors. During fiscal 2024, we repurchased $508 million principal amount of the 2025 Notes
for $462 million in cash and $542 million principal amount of the 2026 Notes for $475 million in cash, which resulted
in an aggregate gain on early extinguishment of debt of $106 million. The 2025 Capped Calls and 2026 Capped
Calls remained outstanding notwithstanding such repurchase. We may, however, elect to terminate the 2025
Capped Calls or 2026 Capped Calls, in full or in part. In connection with any such termination, the option
counterparties or their respective affiliates are expected to modify their hedge positions, which activity could affect
the market price of our Class A common stock or the trading price of the Notes that remain outstanding. See Note 8
to our consolidated financial statements “Convertible Senior Notes, Net” and the section titled “Transactions relating
to our Notes may affect the value of our Class A common stock” in “Risk Factors” included under Part I, Item 1A of
this Annual Report on Form 10-K for additional information.
On August 2, 2021, we completed the acquisition of Townsend Street Labs, Inc. ("atSpoke"), providing total
cash consideration, net of cash acquired of $79 million. Of this amount, $13 million of consideration was held back
as partial security for any adjustments and indemnification obligations and was paid during fiscal 2024.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
65
On February 1, 2024, we completed the acquisition of Spera Cybersecurity, Inc. and its subsidiary ("Spera").
Total net consideration, subject to final adjustments, consists of approximately $80 million of cash and our Class A
common stock. See Note 16 to our consolidated financial statements "Subsequent Events" for additional
information.
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, 2024, we had deferred revenue of
$1,511 million, of which $1,488 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,
2024
2023
2022
(dollars in millions)
Net cash provided by operating activities
$
512 $
86 $
104
Net cash provided by (used in) investing activities
441
(130)
(367)
Net cash provided by (used in) financing activities
(883)
48
89
Effects of changes in foreign currency exchange rates on cash,
cash equivalents and restricted cash
1
(6)
(2)
Net increase (decrease) in cash, cash equivalents and restricted
cash
$
71 $
(2) $
(176)
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.
During fiscal 2024, cash provided by operating activities was $512 million, an increase of $426 million
compared to fiscal 2023. The increase was primarily attributable to an increase in cash received from customers
and improved spend efficiency, partially offset by an increase in cash paid to vendors.
Investing Activities
During fiscal 2024, cash provided by investing activities was $441 million, compared to cash used in investing
activities of $130 million during fiscal 2023. The change was primarily attributable to an increase in cash provided
from investment maturities and sales, net of purchases, partially offset by cash paid for business acquisitions, net of
cash acquired.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
66
Financing Activities
During fiscal 2024, cash used in financing activities was $883 million, compared to cash provided by financing
activities of $48 million during fiscal 2023. The change was primarily attributable to payments made for repurchases
of the Notes.
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, 2024:
Short-term
Long-term
Total
(dollars in millions)
Convertible Senior Notes:(1)
Principal payments
$
— $
1,160 $
1,160
Interest payments
3
4
7
Operating leases(2)
37
124
161
Purchase obligations(3)
262
240
502
Total contractual obligations
$
302 $
1,528 $
1,830
(1) See Note 8 to our consolidated financial statements "Convertible Senior Notes, Net" for additional information.
(2) See Note 9 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.
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.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
67
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.
If the initial accounting for a business combination is not complete following the acquisition date, we report
provisional amounts for the known assets, liabilities, equity interests, or items of consideration for which the
accounting is incomplete at the end of the financial reporting period. Provisional accounting is inherently subjective
and judgmental. The objective of the measurement period is to provide a reasonable period of time to obtain the
information necessary to complete all aspects of business combination accounting with a high level of confidence.
During the measurement period, which may be up to one year from the acquisition date, adjustments to the reported
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
68
provisional amounts may be recorded for which the accounting was incomplete, with the corresponding offset to
goodwill. Should the accounting for a business combination be incomplete by the end of a reporting period that falls
within the measurement period, we report provisional amounts in our financial statements, disclosing them as
provisional, and any material measurement period adjustments are identified as such. Additional assets acquired or
liabilities assumed in an acquisition that were not recognized at the acquisition date might be identified during 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, no further adjustments are made.
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 — Recent
Accounting Pronouncements Not Yet Adopted" for more information.
OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
69
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 currency 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 2024, 2023 and 2022, a hypothetical 10% change in foreign currency exchange rates
applicable to our business would not have had a material impact on our consolidated financial statements.
Interest Rate Risk
We had cash, cash equivalents and short-term investments totaling $2,202 million as of January 31, 2024, of
which $2,019 million was invested in U.S. treasury securities, money market funds, corporate debt securities and
certificates of deposit. Our cash and cash equivalents are held for working capital and general corporate purposes,
including potential future acquisition activity. Our short-term investments are made for capital preservation
purposes. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our investment portfolio are subject to market risk due to changes in interest rates.
Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to
these factors, our future investment income may fall short of our expectations due to changes in interest rates or we
may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in
interest rates. However, because we classify our short-term investments as “available for sale,” no gains are
recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered
to be credit related changes, no losses in such securities are recognized due to changes in interest rates unless we
intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise
determine that all or a portion of the decline in fair value are due to credit related factors.
As of January 31, 2024, a hypothetical 10% relative change in interest rates would not have had a material
impact on the value of our cash equivalents or investment portfolio. Fluctuations in the value of our cash equivalents
and investment portfolio caused by a change in interest rates (gains or losses on the carrying value) are recorded in
other comprehensive income (loss), and are realized only if we sell the underlying securities prior to maturity.
Convertible Senior Notes
In September 2019, we issued the 2025 Notes due September 1, 2025 with a principal amount of $1,060
million. Concurrently with the issuance of the 2025 Notes, we entered into separate capped call transactions. The
2025 Capped Calls were completed to reduce the potential dilution from the conversion of the 2025 Notes. As of
January 31, 2024, $552 million principal amount of the 2025 Notes remain outstanding.
In June 2020, we issued the 2026 Notes due June 15, 2026 with a principal amount of $1,150 million.
Concurrently with the issuance of the 2026 Notes, we entered into separate capped call transactions. The 2026
Capped Calls were completed to reduce the potential dilution from the conversion of the 2026 Notes. As of
January 31, 2024, $608 million principal amount of the 2026 Notes remain outstanding.
The 2025 Notes and 2026 Notes have a fixed annual interest rate of 0.125% and 0.375%, respectively;
accordingly, we do not have economic interest rate exposure on the Notes. However, the fair value of the Notes is
exposed to interest rate risk. Generally, the fair market value of the Notes will increase as interest rates fall and
decrease as interest rates rise. In addition, the fair value of the Notes fluctuates when the market price of our
common stock fluctuates. The fair value was determined based on the quoted bid price of the Notes in an over-the-
counter market on the last trading day of the reporting period. See Note 8 to our consolidated financial statements
"Convertible Senior Notes, Net" for additional 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.
70
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
72
Consolidated Balance Sheets
75
Consolidated Statements of Operations
76
Consolidated Statements of Comprehensive Loss
77
Consolidated Statements of Stockholders’ Equity
78
Consolidated Statements of Cash Flows
80
Notes to Consolidated Financial Statements
82
71
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,
2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of
its operations and its cash flows for each of the three years in the period ended January 31, 2024, 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, 2024, 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 1, 2024 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.
72
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.
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.
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. 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. 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 1, 2024
73
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, 2024, 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, 2024, 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, 2024 and 2023, 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, 2024, and the related notes and our report dated March 1, 2024
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 1, 2024
74
OKTA, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in millions, shares in thousands, except per share data)
As of January 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
334 $
264
Short-term investments
1,868
2,316
Accounts receivable, net of allowances of $6 and $8
559
481
Deferred commissions
113
92
Prepaid expenses and other current assets
106
76
Total current assets
2,980
3,229
Property and equipment, net
48
59
Operating lease right-of-use assets
83
122
Deferred commissions, noncurrent
242
210
Intangible assets, net
182
241
Goodwill
5,406
5,400
Other assets
48
46
Total assets
$
8,989 $
9,307
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
12 $
12
Accrued expenses and other current liabilities
115
112
Accrued compensation
167
99
Deferred revenue
1,488
1,242
Total current liabilities
1,782
1,465
Convertible senior notes, net, noncurrent
1,154
2,193
Operating lease liabilities, noncurrent
112
142
Deferred revenue, noncurrent
23
18
Other liabilities, noncurrent
30
23
Total liabilities
3,101
3,841
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares issued
and outstanding as of January 31, 2024 and 2023.
—
—
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized;
159,835 and 154,009 shares issued and outstanding as of January 31, 2024 and 2023,
respectively.
—
—
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 7,291
and 7,300 shares issued and outstanding as of January 31, 2024 and 2023, respectively.
—
—
Additional paid-in capital
8,724
7,974
Accumulated other comprehensive loss
(6)
(33)
Accumulated deficit
(2,830)
(2,475)
Total stockholders’ equity
5,888
5,466
Total liabilities and stockholders’ equity
$
8,989 $
9,307
See Notes to Consolidated Financial Statements.
75
OKTA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, shares in thousands, except per share data)
Year Ended January 31,
2024
2023
2022
Revenue
Subscription
$
2,205 $
1,794 $
1,249
Professional services and other
58
64
51
Total revenue
2,263
1,858
1,300
Cost of revenue
Subscription
502
464
329
Professional services and other
79
82
67
Total cost of revenue
581
546
396
Gross profit
1,682
1,312
904
Operating expenses
Research and development
656
620
469
Sales and marketing
1,036
1,066
771
General and administrative
450
409
432
Restructuring and other charges
56
29
—
Total operating expenses
2,198
2,124
1,672
Operating loss
(516)
(812)
(768)
Interest expense
(8)
(11)
(91)
Interest income and other, net
81
22
9
Gain on early extinguishment of debt
106
—
—
Interest and other, net
179
11
(82)
Loss before provision for (benefit from) income taxes
(337)
(801)
(850)
Provision for (benefit from) income taxes
18
14
(2)
Net loss
$
(355) $
(815) $
(848)
Net loss per share, basic and diluted
$
(2.17) $
(5.16) $
(5.73)
Weighted-average shares used to compute net loss per share,
basic and diluted
163,634
158,023
148,036
See Notes to Consolidated Financial Statements.
76
OKTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
Year Ended January 31,
2024
2023
2022
Net loss
$
(355) $
(815) $
(848)
Other comprehensive income (loss):
Net change in unrealized gains or losses on available-for-sale
securities
26
(12)
(14)
Foreign currency translation adjustments
1
(9)
(3)
Other comprehensive income (loss)
27
(21)
(17)
Comprehensive loss
$
(328) $
(836) $
(865)
See Notes to Consolidated Financial Statements.
77
OKTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in millions, shares in thousands)
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)
—
—
—
—
—
Settlement 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
Adjustments from adoption of ASU No. 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
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
78
Forfeiture of unvested common stock issued in connection with business
combinations
(5)
—
—
—
—
—
—
—
Issuance of common stock upon exercise of stock options and other activity,
net
879
—
—
—
15
—
—
15
Issuance of common stock under employee stock purchase plan, net of
cancellations
794
—
—
—
46
—
—
46
Issuance of common stock for settlement of restricted stock units
4,107
—
—
—
—
—
—
—
Issuance of common stock pursuant to charitable donation
75
—
—
—
6
—
—
6
Conversion of Class B common stock to Class A common stock
9
—
(9)
—
—
—
—
—
Proceeds from hedges related to convertible senior notes
(33)
—
—
—
—
—
—
—
Stock-based compensation
—
—
—
—
690
—
—
690
Settlement of warrants
—
—
—
—
(7)
—
—
(7)
Other comprehensive income
—
—
—
—
—
27
—
27
Net loss
—
—
—
—
—
—
(355)
(355)
Balances as of January 31, 2024
159,835
—
7,291
—
8,724
(6)
(2,830)
5,888
Class A Common Stock
Class B Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
See Notes to Consolidated Financial Statements.
79
OKTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net loss
$
(355) $
(815) $
(848)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation
684
677
566
Depreciation, amortization and accretion
84
114
108
Amortization of debt issuance costs
3
6
86
Amortization of deferred commissions
104
84
57
Deferred income taxes
6
7
(6)
Lease impairment charges
28
14
—
Gain on early extinguishment of debt
(106)
—
—
Net gain on strategic investments
—
(1)
(8)
Other, net
10
7
9
Changes in operating assets and liabilities:
Accounts receivable
(79)
(87)
(175)
Deferred commissions
(158)
(122)
(171)
Prepaid expenses and other assets
(32)
(13)
(7)
Operating lease right-of-use assets
23
27
23
Accounts payable
—
(6)
7
Accrued compensation
68
(44)
50
Accrued expenses and other liabilities
21
8
21
Operating lease liabilities
(39)
(34)
(24)
Deferred revenue
250
264
416
Net cash provided by operating activities
512
86
104
Cash flows from investing activities:
Capitalized software
(15)
(9)
(4)
Purchases of property and equipment
(8)
(12)
(13)
Purchases of securities available for sale and other
(1,709)
(1,411)
(1,847)
Proceeds from maturities and redemption of securities available for sale
2,134
1,308
1,482
Proceeds from sales of securities available for sale and other
62
—
230
Payments for business acquisitions, net of cash acquired
(22)
(4)
(215)
Purchases of intangible assets
(1)
(2)
—
Net cash provided by (used in) investing activities
441
(130)
(367)
Cash flows from financing activities:
Payments for repurchases of convertible senior notes
(937)
—
—
Payments for warrants related to convertible senior notes
(7)
—
—
Proceeds from stock option exercises
15
17
53
Proceeds from shares issued in connection with employee stock purchase plan
46
31
36
Net cash provided by (used in) financing activities
(883)
48
89
Effects of changes in foreign currency exchange rates on cash, cash equivalents and
restricted cash
1
(6)
(2)
Net increase (decrease) in cash, cash equivalents and restricted cash
71
(2)
(176)
Cash, cash equivalents and restricted cash at beginning of year
271
273
449
Cash, cash equivalents and restricted cash at end of year
$
342
$
271
$
273
Year Ended January 31,
2024
2023
2022
80
Supplementary cash flow disclosure:
Cash paid during the period for:
Interest
$
5
$
6
$
6
Income taxes
14
8
3
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
Benefit from exercise of hedges related to convertible senior notes
2
18
92
Operating lease right-of-use assets exchanged for lease liabilities
11
11
22
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
$
334
$
264
$
260
Restricted cash, current included in prepaid expenses and other current assets
2
—
5
Restricted cash, noncurrent included in other assets
6
7
8
Total cash, cash equivalents and restricted cash
$
342
$
271
$
273
Year Ended January 31,
2024
2023
2022
See Notes to Consolidated Financial Statements.
81
1. Overview and Basis of Presentation
Description of Business
Okta, Inc. (the “Company”) is the leading independent identity partner. The Company’s Workforce Identity
Cloud and Customer Identity Cloud, powered by Auth0, enable customers to securely connect the right people to
the right technologies and services at the right time. Employees and contractors sign into the Workforce Identity
Cloud to seamlessly and securely access the applications they need to do their most important work. Organizations
use the Company’s Identity Platform to collaborate with their partners, and to provide their customers with more
modern and secure experiences in the cloud and via mobile devices. Developers leverage the Workforce Identity
Cloud and Customer Identity Cloud to securely and efficiently embed identity into the software they build, allowing
them to innovate and focus on their core missions. The Company is headquartered in San Francisco, California.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements, which include the accounts of the Company and its
wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). All intercompany balances and transactions have been eliminated in
consolidation. The Company conducts business globally and is managed, operated and organized by major
functional departments that operate on a consolidated basis. As a result, the Company operates in one reportable
segment.
The Company’s fiscal year ends on January 31. References to fiscal 2024, for example, refer to the fiscal year
ended January 31, 2024.
Certain prior period amounts have been reclassified to conform to the current period presentation.
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 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 2024, 2023 or 2022. 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
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82
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.
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
83
Sales commissions capitalized as contract costs totaled $158 million and $121 million in fiscal 2024
and 2023, respectively. Amortization of contract costs was $104 million, $84 million and $57 million in fiscal
2024, 2023 and 2022, 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 $65 million, $77 million, and $79 million
in fiscal 2024, 2023 and 2022, 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 employee stock purchase program ("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
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, which were last granted to employees in fiscal 2022, was
determined utilizing the simplified method due to lack of historical exercise data. No options were granted in fiscal
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
84
2024 and 2023. The expected volatility was 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
was 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 was 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 three to 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, 2024 and
2023.
As of January 31, 2024 and 2023, the Company's restricted cash balance was $8 million and $7 million,
respectively, primarily related to letters of credit for its facility lease agreements.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
85
Short-Term Investments
The Company’s short-term investments comprise of U.S. treasury securities, corporate debt securities and
certificates of deposit. 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.
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
86
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, person hours required in recreating certain acquired technologies,
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 Company
uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and
liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to
refinement. During the measurement period, which may be up to one year from the acquisition date, the Company
may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed,
with the corresponding offset to goodwill. 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’s reporting unit is less than the carrying amount, including goodwill. The
Company also has the option, which the Company has elected, to bypass the qualitative assessment, and perform
the quantitative assessment. The quantitative assessment involves comparing the fair value of the reporting unit to
its carrying value, including goodwill. 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. No goodwill impairments were recorded during the years presented based on the assessments performed.
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)
87
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, 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
The Company computes basic and diluted net loss per share attributable to common stockholders for Class A
and Class B common stock using the two-class method required for participating securities. Under the two-class
method, basic net loss per share attributable to common stockholders is computed by dividing the net loss
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
88
attributable to common stockholders by the weighted-average number of shares of common stock outstanding
during the period.
Diluted earnings per share attributable to common stockholders is computed by giving effect to all potential
shares of common stock, including shares underlying convertible senior notes and warrants, unvested RSUs,
outstanding stock options, unvested common stock and restricted stock issued in connection with certain business
combinations, and ESPP obligations, to the extent they are dilutive. As the Company has reported losses for all
periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals
diluted net loss per share.
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 14 to our consolidated financial statements "Net Loss Per Share"
for additional information.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance which requires
disclosure of incremental segment information on an annual and interim basis. This guidance is effective for fiscal
years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,
2024, and requires retrospective application to all prior periods presented in the financial statements. The Company
is currently evaluating the impact of this Accounting Standards Update ("ASU"), and intends to adopt this guidance
in fiscal 2025.
In December 2023, the FASB issued guidance to provide disaggregated income tax disclosures on the rate
reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15,
2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU.
3. Restructuring and Other Charges
During the third quarter of fiscal 2023, the Company announced a real estate optimization plan which
provided for closing duplicative sites and decommissioning underutilized offices and floors. The Company
recognized non-cash lease impairment charges of $14 million in fiscal 2023. In fiscal 2024, the Company
recognized an additional $28 million of non-cash lease impairment charges as a result of the real estate
optimization plan. The non-cash lease impairment charges represent the amount that the carrying value of the asset
groups exceeded their estimated fair values. The asset groups primarily include operating lease right-of-use assets,
leasehold improvements, and related property and equipment. To estimate the fair value of the asset group, the
Company utilized a discounted cash flow approach using market participant assumptions of the expected cash
flows and discount rate.
During the fourth quarter of fiscal 2023, the Company approved a restructuring plan (the “2023 Restructuring
Plan”) intended to reduce operating expenses and improve profitability. The 2023 Restructuring Plan involved a
reduction of the Company’s workforce by approximately 300 full-time employees. The 2023 Restructuring Plan was
substantially complete by the first quarter of fiscal 2024 and the Company recognized aggregate restructuring costs
of $15 million in the fourth quarter of fiscal 2023.
During the fourth quarter of fiscal 2024, the Company approved a restructuring plan (the “2024 Restructuring
Plan”) intended to improve operating efficiencies and profitability. The 2024 Restructuring Plan involves a reduction
of the Company’s workforce by approximately 400 full-time employees. The 2024 Restructuring Plan is expected to
be substantially complete by the first quarter of fiscal 2025. Aggregate restructuring costs associated with the 2024
Restructuring Plan are estimated to be approximately $24 million. The charges that the Company expects to incur
throughout the completion of the 2024 Restructuring Plan are subject to a number of factors and assumptions,
including local law requirements in various jurisdictions, and the actual remaining expenses may differ from the
original estimates.
Separate from the 2024 Restructuring Plan, the Company recognized $4 million of severance and termination
benefit costs related to an insignificant workforce reduction in fiscal 2024.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
89
The following table summarizes the Company’s restructuring and other charges during fiscal 2024 and 2023:
Year Ended January 31,
2024
2023
(dollars in millions)
Severance and termination benefit costs
$
28 $
15
Lease impairment charges
28
14
Total
$
56 $
29
The following table summarizes the Company’s restructuring liability that is included in Accrued expenses and
other current liabilities on the consolidated balance sheets:
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
Restructuring charges
28
Cash payments
(19)
Balance as of January 31, 2024
$
24
4. Cash Equivalents and Investments
Cash Equivalents and Short-term Investments
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.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
90
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, 2024
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
(dollars in millions)
Level 1:
Cash equivalents:
Money market funds
$
151 $
— $
— $
151
Total cash equivalents
151
—
—
151
Level 2:
Short-term investments (Available-for-sale):
U.S. treasury securities
1,782
3
(1)
1,784
Corporate debt securities
43
—
—
43
Certificates of deposit
41
—
—
41
Total short-term investments
1,866
3
(1)
1,868
Total
$
2,017 $
3 $
(1) $
2,019
As of January 31, 2023
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
(dollars in millions)
Level 1:
Cash equivalents:
Money market funds
$
133 $
— $
— $
133
Total cash equivalents
133
—
—
133
Level 2:
Short-term investments (Available-for-sale):
U.S. treasury securities
2,207
—
(22)
2,185
Corporate debt securities
133
—
(2)
131
Total short-term investments
2,340
—
(24)
2,316
Total
$
2,473 $
— $
(24) $
2,449
The following table presents the contractual maturities of the Company's short-term investments:
As of January 31, 2024
Amortized
Cost
Estimated
Fair Value
(dollars in millions)
Due within one year
$
1,352 $
1,352
Due between one to five years
514
516
Total
$
1,866 $
1,868
Interest receivable of $20 million and $10 million is included in Prepaid expenses and other current assets on
the consolidated balance sheets as of January 31, 2024 and 2023, respectively.
The Company had 41 and 159 short-term investments in unrealized loss positions as of January 31, 2024 and
2023, respectively.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the
Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will
be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
91
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, 2024 and 2023.
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, 2024 and 2023, the balance of strategic investments was $26
million and $25 million, respectively.
5. Goodwill and Intangible Assets, net
Goodwill
As of January 31, 2024 and 2023, goodwill was $5,406 million and $5,400 million, respectively. No goodwill
impairments were recorded during fiscal 2024, 2023 and 2022.
Intangible Assets, net
Intangible assets consisted of the following:
As of January 31, 2024
Gross
Accumulated
Amortization
Net
(dollars in millions)
Capitalized internal-use software costs
$
48 $
(17) $
31
Purchased developed technology
220
(134)
86
Customer relationships
116
(62)
54
Trade name
21
(12)
9
Other
4
(2)
2
$
409 $
(227) $
182
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
Other
1
—
1
$
431 $
(190) $
241
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,
2024
2023
Purchased developed technology
2.2 years
3.0 years
Customer relationships
2.5 years
3.4 years
Trade name
2.3 years
3.3 years
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
92
As of January 31, 2024, estimated remaining amortization expense for the intangible assets by fiscal year
was as follows:
Remaining
Amortization
(dollars in millions)
2025
$
79
2026
72
2027
27
2028
4
Thereafter
—
Total
$
182
Amortization expense of intangible assets was $87 million, $93 million and $69 million in fiscal 2024, 2023
and 2022, respectively.
6. Balance Sheet Components
Property and Equipment, net
Property and equipment consisted of the following:
As of January 31,
2024
2023
(dollars in millions)
Furniture and fixtures
$
18 $
19
Leasehold improvements
92
88
Property and equipment, gross
110
107
Less accumulated depreciation
(62)
(48)
Property and equipment, net
$
48 $
59
Depreciation expense was $12 million in fiscal 2024, 2023 and 2022.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of January 31,
2024
2023
(dollars in millions)
Accrued expenses
$
48 $
52
Accrued taxes payable
4
5
Operating lease liabilities
31
32
Accrued restructuring
24
15
Other
8
8
Accrued expenses and other current liabilities
$
115 $
112
Other Liabilities, Noncurrent
Other liabilities, noncurrent consisted of the following:
As of January 31,
2024
2023
(dollars in millions)
Deferred tax liabilities
$
16 $
12
Other
14
11
Other liabilities, noncurrent
$
30 $
23
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
93
7. 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 2024 and 2023 included $1,229 million and $952 million,
respectively, from deferred revenue balances at the beginning of the respective periods. Professional services and
other revenue recognized in fiscal 2024 and 2023 from deferred revenue balances at the beginning of the
respective periods was $10 million and $14 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 $3,385 million as of January 31, 2024. Of this amount, the Company expects to recognize revenue of
approximately $1,952 million, or 58%, 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, 2024
were not material.
8. Convertible Senior Notes, Net
Convertible Senior Notes
The 2025 Notes and 2026 Notes are recorded at face value less unamortized debt issuance costs.
During fiscal 2024, the Company repurchased $508 million principal amount of the 2025 Notes for $462
million in cash and $542 million principal amount of the 2026 Notes for $475 million in cash, resulting in an
aggregate gain on early extinguishment of debt of $106 million.
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;
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
94
•
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, 2024, the conditions allowing holders of the 2025 Notes
to convert during the three months ending April 30, 2024 were not met, and as a result, the 2025 Notes were
classified as noncurrent liabilities as of January 31, 2024.
The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after September
6, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130% of the
conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive
trading day period (including the last trading day of such period) ending on and including the trading day preceding
the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal
amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption
date.
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.
During fiscal 2024 and 2023, the effective interest rate on the 2025 Notes was 0.43%. During fiscal 2022,
prior to the adoption of ASU No. 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,
2024
2023
2022
(dollars in millions)
Contractual interest expense
$
1 $
1 $
1
Amortization of debt issuance costs
2
3
2
Amortization of debt discount(1)
—
—
36
Total
$
3 $
4 $
39
(1) Not applicable subsequent to the adoption of ASU No. 2020-06.
The net carrying amount of the 2025 Notes consisted of the following:
As of January 31,
2024
As of January 31,
2023
(dollars in millions)
Principal
$
552 $
1,060
Less: unamortized debt issuance costs and debt discount
(3)
(8)
Net carrying amount
$
549 $
1,052
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
95
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.
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, 2024, the conditions allowing holders of the 2026 Notes
to convert during the three months ending April 30, 2024 were not met, and as a result, the 2026 Notes were
classified as noncurrent liabilities as of January 31, 2024.
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
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
96
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.
During fiscal 2024 and 2023, the effective interest rate on the 2026 Notes was 0.60%. During fiscal 2022,
prior to the adoption of ASU No. 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,
2024
2023
2022
(dollars in millions)
Contractual interest expense
$
4 $
4 $
4
Amortization of debt issuance costs
1
3
1
Amortization of debt discount(1)
—
—
46
Total
$
5 $
7 $
51
(1) Not applicable subsequent to the adoption of ASU No. 2020-06.
The net carrying amount of the 2026 Notes consisted of the following:
As of January 31,
2024
As of January 31,
2023
(dollars in millions)
Principal
$
608 $
1,150
Less: unamortized debt issuance costs and debt discount
(3)
(9)
Net carrying amount
$
605 $
1,141
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.
Fair Value Measurements
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, 2024
Principal Amount
Estimated Fair Value
(dollars in millions)
2025 convertible senior notes
$
552 $
514
2026 convertible senior notes
$
608 $
541
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
97
The estimated fair values of the Notes, which are Level 2 financial instruments, were determined based on
the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.
Warrants
In February 2018, the Company sold net-share-settled (or, at the Company’s election subject to certain
conditions, cash-settled) warrants (the “Warrants”) to acquire shares of the Company’s Class A common stock at an
initial exercise price of approximately $68.06 per share. The Warrants were exercisable over 80 scheduled trading
days beginning on May 15, 2023. The Company elected to cash settle the Warrants. During fiscal 2024, the
Company settled Warrants corresponding to approximately 1.0 million shares for total cash payments of $7 million.
As of January 31, 2024, no Warrants remained outstanding.
9. Leases
The Company has entered into various non-cancelable office space operating leases with original lease
periods expiring between 2024 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.
Operating lease costs were as follows:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Operating lease costs(1)
$
34 $
40 $
38
(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 4.5 years and 5.1 years as of January 31,
2024 and January 31, 2023, respectively, and the weighted-average discount rate used to measure the present
value of the operating lease liabilities was 5.5% and 5.3% as of January 31, 2024 and January 31, 2023,
respectively.
Maturities of operating lease liabilities, which do not include short-term leases, were as follows:
As of January 31, 2024
Fiscal Year Ending January 31:
(dollars in millions)
2025
$
37
2026
33
2027
33
2028
33
2029
25
Total lease payments
161
Less imputed interest
(19)
Total operating lease liabilities
$
142
Cash payments made related to operating lease liabilities were $47 million and $44 million in fiscal 2024 and
2023, respectively.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
98
10. Commitments and Contingencies
Letters of Credit
In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate
amount of $7 million and $6 million were issued and outstanding as of January 31, 2024 and January 31, 2023,
respectively. No draws have been made under such letters of credit.
Legal Matters
From time to time in the normal course of business, the Company may be subject to various legal matters
such as threatened or pending claims or proceedings.
On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District
Court for the Northern District of California against the Company and certain of its executive officers, captioned In re
Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the
Exchange Act, 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. The defendants moved to
dismiss the amended complaint. On March 31, 2023, the court issued an order granting in part and denying in part
the motion to dismiss. The court dismissed in full the claims based on the plaintiff’s allegations related to the
Company’s cybersecurity controls and vulnerability to data breaches, and dismissed in part and denied in part the
claims based on allegations related to the Auth0 integration. On November 1, 2023, the plaintiffs filed a motion for
class certification, on January 17, 2024, the defendants filed a notice of non-opposition to the motion, and on
February 5, 2024, the court granted the motion. The court has not otherwise issued a scheduling order, and
discovery is proceeding.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United
States District Court for the Northern District of California against certain of its current and former executive officers
and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v.
McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the
defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the
Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The
lawsuits seek orders permitting the plaintiffs to maintain the actions derivatively on behalf of the Company, awarding
unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and
requiring the Company to make certain reforms to its corporate governance and controls. On February 22, 2023, the
court entered a stipulated order consolidating the derivative actions, appointing co-lead counsel for plaintiffs, and
staying the consolidated derivative actions during the pendency of the motion to dismiss in the securities class
action lawsuit. The consolidated derivative action is captioned In re Okta, Inc. Stockholder Derivative Litigation, No.
3:22-cv-07480. On May 9, 2023, the court entered a stipulated order continuing the stay through the close of
discovery in the securities class action lawsuit.
On April 14, 2023, another shareholder filed a substantially similar derivative lawsuit in the United States
District Court for the District of Delaware against certain of the Company’s current and former executive officers and
directors, captioned Buono v. McKinnon et al., No. 1:23-cv-00413. On May 31, 2023, the court entered a stipulated
order whereby the defendants agreed to accept service and stay the derivative action through the close of discovery
in the securities class action lawsuit.
On January 25, 2024, another shareholder filed a substantially similar derivative lawsuit in the United States
District Court for the District of Delaware against certain of the Company’s current and former executive officers and
directors, captioned Nasr v. McKinnon, et al., No. 1:24-cv-00106.
The Company is defending these lawsuits vigorously. At this time, the Company is unable to predict the
outcome or estimate the amount of loss or range of losses that could potentially result from these lawsuits.
Warranties and Indemnification
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
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
99
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.
11. Common Stock and Stockholders' Equity
Common Stock
Holders of Class A and Class B common stock are entitled to one vote per share and ten 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, 2024, shares of common stock reserved for future issuance were as follows:
(shares in thousands)
Options and unvested RSUs outstanding
14,118
Available for future stock option and RSU grants
29,868
Available for ESPP
7,651
51,637
As of January 31, 2024
Awards Issued as Charitable Contributions
During fiscal 2024, 2023 and 2022, the Company issued 75,000, 41,250 and 30,000 shares, respectively, of
Class A common stock as charitable contributions and recognized $6 million, $4 million and $7 million, respectively,
as general and administrative expense in the consolidated statements of operations.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
100
12. 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, 2024, options to purchase 1,013,961 shares of Class A common stock and 4,024,169 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,
2024
2023
2022
(dollars in millions)
Stock options
$
45 $
82 $
132
RSUs
502
464
335
ESPP
26
19
15
Restricted stock awards
111
112
84
Total
$
684 $
677 $
566
Stock-based compensation expense was recorded in the following cost and expense categories in the
consolidated statements of operations:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Cost of revenue:
Subscription
$
75 $
69 $
49
Professional services and other
15
14
12
Research and development
277
275
193
Sales and marketing
156
159
136
General and administrative
161
160
176
Total
$
684 $
677 $
566
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)
101
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, 2023
6,353 $
43.92
4.3
$
331
Exercised
(879)
17.04
Expired
(211)
233.57
Forfeited
(225)
226.21
Outstanding as of January 31, 2024
5,038 $
32.54
3.1
$
320
As of January 31, 2024
Vested and expected to vest
5,038 $
32.54
3.1
$
320
Vested and exercisable
4,928 $
29.12
3.0
$
318
No options were granted during fiscal 2024 and 2023. The weighted-average grant-date fair value of options
granted was $211.58 during fiscal 2022. The total grant-date fair value of stock options vested was $48 million, $104
million and $314 million during fiscal 2024, 2023 and 2022, 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 $57 million, $108 million and $545 million during fiscal 2024,
2023 and 2022, respectively.
As of January 31, 2024 and January 31, 2023, there was a total of $16 million and $90 million, respectively, of
unrecognized stock-based compensation expense related to options, which is being recognized over a weighted-
average period of 0.9 years.
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, 2023
9,375 $
143.77
Granted
5,644
81.80
Vested
(4,107)
133.88
Forfeited
(1,832)
137.28
Outstanding as of January 31, 2024
9,080 $
111.03
The Company granted 5,644,041 RSUs with an aggregate fair value of $462 million during fiscal 2024. As of
January 31, 2024 and 2023, there was a total of $898 million and $1,200 million, respectively, of unrecognized
stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average
period of 2.2 years, based on vesting under the award service conditions. The total fair value of RSUs vested during
fiscal 2024, 2023 and 2022 was $335 million, $229 million and $531 million, respectively.
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 average grant
date fair value per target market-based RSU was determined using a Monte Carlo simulation approach.
Compensation expense for awards with market conditions is recognized over the service period using the
accelerated attribution method and is not reversed if the market condition is not met.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
102
In March 2023, the Company granted market-based RSUs to certain members of management. The target
number of market-based RSUs granted was 192,843. One-third of these market-based RSUs vest over each of a
one-, two- and three-year performance period, each starting on February 1, 2023. The number of shares that can be
earned ranges from 0% to 200% of the target number of shares based on the relative performance of the per share
price of the Company’s common stock as compared to the Nasdaq Composite Index over the respective
performance periods and subject to continuous employment through the vesting dates. The $149.78 average grant
date fair value per target market-based RSU was determined using a Monte Carlo simulation approach.
Compensation expense for awards with market conditions is recognized over the service period using the
accelerated attribution method and is not reversed if the market condition is not met.
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, 2024, there was $29 million of unrecognized
stock-based compensation expense related to unvested restricted shares, which is being recognized over a
weighted-average period of 0.3 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,
2024
2023
2022
Expected volatility
46% - 74%
63% - 90%
44% - 48%
Expected term (in years)
0.5 - 1.0
0.5 - 1.0
0.5 - 1.0
Risk-free interest rate
4.84% - 5.41%
2.46% - 4.67%
0.06% - 0.29%
Expected dividend yield
—
—
—
During fiscal 2024, the Company's employees purchased 793,739 shares of its Class A common stock under
the ESPP. The shares were purchased at a weighted-average purchase price of $57.84 per share, with proceeds of
$46 million. 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.
As of January 31, 2024 and January 31, 2023, there was $16 million and $26 million, respectively, of
unrecognized stock-based compensation expense related to the ESPP which is being recognized over a weighted-
average vesting period of 0.9 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. During fiscal 2024 and 2023,
matching contributions related to the plan were $19 million and $21 million, respectively.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
103
13. Income Taxes
The domestic and foreign components of pre-tax loss for fiscal 2024, 2023 and 2022 were as follows:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Domestic
$
(360) $
(834) $
(904)
Foreign
23
33
54
Loss before provision for (benefit from) income taxes
$
(337) $
(801) $
(850)
The components of the provision for (benefit from) income taxes for fiscal 2024, 2023 and 2022 were as
follows:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Current:
Federal
$
2 $
— $
—
State
3
2
—
Foreign
6
5
4
Total current provision for income taxes
11
7
4
Deferred:
Federal
—
—
(8)
State
—
—
(1)
Foreign
7
7
3
Total deferred provision for (benefit from) income taxes
7
7
(6)
Total provision for (benefit from) income taxes
$
18 $
14 $
(2)
For fiscal 2024, income tax expense resulted primarily from income in profitable foreign jurisdictions, federal
and state taxes resulting from tax attribution utilization limitations, and the tax impact of shortfalls from stock-based
compensation in the United Kingdom. For fiscal 2023, income tax expense resulted primarily from income in
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.
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for
fiscal 2024, 2023 and 2022:
Year Ended January 31,
2024
2023
2022
Tax at federal statutory rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
4.0
3.6
3.9
Change in valuation allowance
(4.7)
(9.9)
(36.1)
Stock-based compensation
(30.1)
(12.3)
8.4
Research and development credits
5.3
2.6
3.6
Non-deductible expenses
—
(5.4)
—
Other, net
(0.8)
(1.2)
(0.6)
Effective tax rate
(5.3) %
(1.6) %
0.2 %
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. As a result, for fiscal 2024 and 2023, the
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
104
Company disavowed certain tax deductions, which 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, 2024
and 2023 were as follows:
As of January 31,
2024
2023
(dollars in millions)
Deferred tax assets:
Net operating loss carryforwards
$
716 $
817
Capitalized research expenditures
268
189
Stock-based compensation
41
52
Operating lease liabilities
36
43
Other reserves and accruals
21
31
Research and development and other credits
125
113
Total deferred tax assets
1,207
1,245
Valuation allowance
(1,087)
(1,078)
Total deferred tax assets, net
120
167
Deferred tax liabilities:
Deferred commissions
(67)
(77)
Other deferred tax liabilities
(5)
(5)
Operating lease right-of-use assets
(21)
(31)
Depreciation and amortization
(35)
(56)
Total deferred tax liabilities
(128)
(169)
Net deferred tax assets (liabilities)
$
(8) $
(2)
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 its 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 $9 million and $174 million during fiscal 2024 and 2023, respectively.
As of January 31, 2024, the Company had approximately $2,768 million of federal and $2,000 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 2036 and 2025, respectively. As of January 31, 2024, the
Company had approximately $43 million of UK net operating losses which do not expire.
As of January 31, 2024, the Company had federal research and development tax credit carryforwards of $111
million and California research and development tax credit carryforwards of $73 million. The federal research and
development credits will start to expire in 2038 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)
105
A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows:
Year Ended January 31,
2024
2023
2022
(dollars in millions)
Gross amount of unrecognized tax benefits as of the beginning of
the year
$
43 $
37 $
22
Additions based on tax positions related to a prior year
—
1
5
Additions based on tax positions related to current year
7
7
10
Reductions based on tax positions taken in a prior year
(1)
(2)
—
Gross amount of unrecognized tax benefits as of the end of the
year
$
49 $
43 $
37
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 2018
and forward.
For all years presented, the Company has an immaterial amount of 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. For all years presented, 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, 2024 for which it is reasonably possible that the
positions will increase or decrease within the next twelve months.
14. 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,
2024
2023
2022
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
$
(339) $
(16) $
(778) $
(37) $
(806) $
(42)
Denominator:
Weighted-average shares outstanding,
basic and diluted
156,335
7,299 150,891
7,132 140,684
7,352
Net loss per share, basic and diluted
$
(2.17) $
(2.17) $
(5.16) $
(5.16) $
(5.73) $
(5.73)
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
106
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,
2024
2023
2022
(shares in thousands)
Issued and outstanding stock options
5,038
6,353
7,984
Unvested RSUs issued and outstanding
8,871
9,317
6,226
Unvested market-based RSUs issued and outstanding
435
116
—
Unvested RSAs issued and outstanding
206
627
1,269
Shares committed under the ESPP
629
921
253
Shares related to the 2023 Notes
—
—
356
Shares subject to warrants related to the issuance of the 2023 Notes
—
1,048
1,048
Shares related to the 2025 Notes
2,925
5,617
5,617
Shares related to the 2026 Notes
2,548
4,820
4,820
20,652
28,819
27,573
15. 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,
2024
2023
2022
(dollars in millions)
United States
$
1,783 $
1,456 $
1,036
International
480
402
264
Total
$
2,263 $
1,858 $
1,300
Other than the United States, no individual country exceeded 10% of total revenue for fiscal 2024, 2023 and
2022.
Property and equipment by geographic location is based on the location of the legal entity that owns the
asset. As of January 31, 2024 and 2023, substantially all of the Company's long-lived assets, which primarily consist
of property and equipment and operating lease right-of-use assets, were located in the United States.
16. Subsequent Events
On February 1, 2024, the Company completed its acquisition of Spera. The acquisition of Spera, an identity
security platform provider, is expected to broaden the Company's identity threat detection and security posture
management capabilities. The Company provided total net consideration, subject to final adjustments, of
approximately $80 million consisting of cash and the Company’s Class A common stock. An agreed upon amount of
consideration was deposited into a third party escrow account to secure the indemnification obligations of the selling
stockholders.
Due to the limited amount of time since closing the transaction, the preliminary allocation of the purchase
price is not yet complete. The initial, provisional purchase price allocation, subject to measurement period
adjustments, will be provided within the Company's Form 10-Q for the first quarter of fiscal 2025.
OKTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
107
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, 2024, 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, 2024. 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, 2024 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
On December 14, 2023, Shellye Archambeau, a director of the Company, adopted a Rule 10b5-1 trading
arrangement (the "10b5-1 Plan") that is intended to satisfy the affirmative defense of Rule 10b501(c) of the
Exchange Act. The 10b5-1 Plan allows for the sale of up to 5,000 shares of our Class A common stock,
commencing on March 14, 2024 and continuing until all shares are sold or until June 15, 2024, whichever comes
first.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
108
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 2024
Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year
ended January 31, 2024.
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 2024
Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year
ended January 31, 2024.
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 2024
Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year
ended January 31, 2024.
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 2024
Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year
ended January 31, 2024.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2024
Annual Meeting of Stockholders. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year
ended January 31, 2024.
Part IV
Item 15. Exhibits and 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.
109
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 1, 2024
/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 1, 2024
/s/ Brett Tighe
Brett Tighe
Chief Financial Officer
(Principal Financial Officer)
March 1, 2024
/s/ Shibu Ninan
Shibu Ninan
Chief Accounting Officer
(Principal Accounting Officer)
March 1, 2024
/s/ Shellye Archambeau
Shellye Archambeau
Director
March 1, 2024
/s/ Emilie Choi
Emilie Choi
Director
March 1, 2024
/s/ Robert L. Dixon, Jr.
Robert L. Dixon, Jr.
Director
March 1, 2024
/s/ Jeff Epstein
Jeff Epstein
Director
March 1, 2024
/s/ Benjamin Horowitz
Benjamin Horowitz
Director
March 1, 2024
/s/ J. Frederic Kerrest
J. Frederic Kerrest
Director
March 1, 2024
/s/ Rebecca Saeger
Rebecca Saeger
Director
March 1, 2024
/s/ Michael Stankey
Michael Stankey
Director
March 1, 2024
110
EXHIBIT INDEX
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 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
4.3
Form of 0.125% Convertible Senior Notes due 2025.
Exhibit 4.1 to Form
8-K filed on
September 10, 2019
4.4
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
4.5
Form of 0.375% Convertible Senior Notes due 2026.
Exhibit 4.1 to Form
8-K filed on June 15,
2020
4.6
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
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
Exhibit
Number
Exhibit Description
Incorporated by
Reference from
Form
111
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 Capped Call Transaction Confirmation.
Exhibit 10.1 to Form
8-K filed on
September 10, 2019
10.13
Form of Capped Call Transaction Confirmation.
Exhibit 10.1 to Form
8-K filed on June 15,
2020
10.14#
Transition Agreement, dated February 27, 2023, between Jonathan Runyan
and Okta, Inc.
Exhibit 10.1 to Form
10-Q filed on June 1,
2023
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
97.1
Policy Relating to Recovery of Erroneously Awarded Compensation.
Filed 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
* 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.
112
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 1, 2024
/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 1, 2024
/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, 2024, 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 1, 2024
/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
Vice Chairperson of the Board of Directors,
Director & Former Chief Operating Officer
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
Benjamin Horowitz*
General Partner
Andreessen Horowitz
Rebecca Saeger
Former Executive Vice President &
Chief Marketing Officer
Charles Schwab & Co., Inc.
Michael Stankey
Former Vice Chairman
Workday, Inc.
* Okta Lead Independent Director until the 2024 Annual
Meeting, after which date Mr. Epstein will assume this role.
Executive Officers:
Todd McKinnon
Chairperson of the Board of Directors,
Chief Executive Officer & Director
Brett Tighe
Chief Financial Officer
Shibu Ninan
Chief Accounting Officer
Larissa Schwartz
Chief Legal Officer & Corporate Secretary
Jon Addison
Chief Revenue Officer
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:
(800) 736-3001
International: +1 (781) 575-3100
Investor Relations:
Website:
investor.okta.com
Email:
investor@okta.com
Stock Exchange Listing:
Nasdaq Symbol: OKTA
Proxy Statement and
Annual Report 2024
Proxy Statement and
Annual Report 2024
Okta Inc.
100 First Street
San Francisco, CA 94105
info@okta.com
1-888-722-7871