Okta, Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended January 31, 2023. Although the request metadata refers to 2022 Q4, this filing is an annual report and the supplied text does not provide standalone fourth-quarter financial results.
Business context
Okta sells cloud-based workforce and customer identity products, primarily through multi-year subscriptions. As of January 31, 2023, it reported more than 17,600 customers and over 7,000 integrations. The May 2021 Auth0 acquisition contributed to reported growth; FY2023 included 12 months of Auth0 revenue, compared with approximately nine months in FY2022.
Financial and operating metrics
| Metric | FY2023 | FY2022 | Change or context |
|---|---|---|---|
| Revenue | $1.858 billion | $1.300 billion | Up 43% |
| Subscription revenue | $1.794 billion | $1.249 billion | Up 44%; 97% of total revenue |
| Gross profit / margin | $1.312 billion / 71% | $904 million / 70% | Margin improved 1 percentage point |
| Operating loss / margin | $812 million / (44%) | $768 million / (59%) | Operating loss widened |
| Net loss | $815 million | $848 million | Loss narrowed; FY2023 net loss margin was (44%), versus (65%) |
| Cash from operations | $86 million | $104 million | Down $18 million |
| Free cash flow | $65 million | $87 million | Down $22 million; margin fell to 3% from 7% |
| Cash, cash equivalents and short-term investments | $2.580 billion | Not stated here as a combined comparison | Available for working capital and general corporate purposes |
| Convertible notes, net carrying amount | $2.193 billion | $1.832 billion | FY2023 balance was noncurrent; nearly all 2023 Notes had been repurchased or converted by year-end |
At year-end, current assets were $3.229 billion and current liabilities were $1.465 billion. Deferred revenue totaled $1.260 billion. Remaining performance obligations were $3.007 billion, including $1.684 billion expected to be recognized over the next 12 months. Calculated billings were $2.123 billion, up 24% year over year.
Customer count rose to 17,600 from 15,000; customers with annual contract value above $100,000 increased to 3,930 from 3,100. Dollar-based net retention declined to 120% from 124%.
Material changes and notable items
- Revenue growth slowed to 43% from 56% in FY2022. International revenue was $402 million, or 22% of total revenue, and grew 53% year over year.
- Operating expenses rose to $2.124 billion from $1.672 billion. Sales and marketing remained the largest category at $1.066 billion; research and development was $620 million.
- Stock-based compensation increased to $677 million from $566 million, a significant expense relative to revenue.
- Adoption of accounting guidance for convertible instruments reduced FY2023 reported interest expense by approximately $85 million and net loss per share by $0.54; this contributed to the narrower GAAP net loss despite a wider operating loss.
- FY2023 restructuring and other charges were $29 million: $15 million in severance and termination benefits and $14 million in lease impairments. A workforce reduction of approximately 300 employees was expected to be substantially complete in Q1 FY2024.
Outlook, risks and contingencies
The filing does not provide a numerical revenue or earnings forecast. Management said it expects operating losses to continue for the foreseeable future and identified longer, less predictable sales cycles as a potential headwind to deal timing, cash flow, billings and RPO. It expects continued investment in the platform; it described potential long-term improvement in subscription gross margin as dependent on scale.
Key risks include weaker customer spending amid economic uncertainty, intense competition (with Microsoft identified as the principal competitor), customer renewal and expansion trends, and execution of the Auth0 integration. Okta also highlighted cybersecurity, service availability and privacy risks. It disclosed a January 2022 compromise of a third-party service provider, described as not material and not a breach of Okta’s products or systems, and related securities and derivative lawsuits. The company said it could not predict the lawsuits’ outcomes or estimate potential losses.
Convertible notes had $2.210 billion of principal outstanding in the contractual-obligations table, with $19 million of stated future interest payments; the 2025 and 2026 notes carry conversion and potential cash-settlement provisions. Okta reported $2.580 billion in cash, cash equivalents and short-term investments and said it believed existing resources and operating cash would meet projected needs for the foreseeable future. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Most important facts for investors to verify
- Standalone Q4 FY2023 results and any subsequent guidance, which are not provided in this annual filing text.
- Whether retention, billings and RPO trends support future revenue growth, particularly as retention fell to 120% and sales cycles lengthened.
- Progress toward improved operating performance and cash generation, including the effects of stock-based compensation and the restructuring.
- Debt maturities, conversion or settlement choices, and any resulting cash needs or shareholder dilution.
- Developments in cybersecurity remediation and the shareholder litigation, for which the filing gives no loss estimate.