Okta, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended January 31, 2024. The filing reports annual results, not standalone fourth-quarter figures. Okta provides cloud-based workforce and customer identity services through its Workforce Identity Cloud and Customer Identity Cloud, powered by Auth0. Revenue is primarily subscription-based.
Key financial metrics
| Metric | FY2024 | FY2023 |
|---|---|---|
| Revenue | $2.263 billion | $1.858 billion |
| Subscription revenue | $2.205 billion | $1.794 billion |
| Gross profit / gross margin | $1.682 billion / 74% | $1.312 billion / 71% |
| Operating loss / operating margin | $516 million / (23%) | $812 million / (44%) |
| Net loss | $355 million | $815 million |
| Cash from operating activities | $512 million | $86 million |
| Cash, cash equivalents and short-term investments | $2.202 billion | $2.580 billion |
| Convertible notes outstanding, principal | $1.160 billion | $2.210 billion |
Subscription gross margin improved to 77% from 74%; professional services gross margin was negative 36%, versus negative 27%. Stock-based compensation was $684 million, up from $677 million. At year-end, current assets were $2.980 billion and current liabilities were $1.782 billion. Deferred revenue was $1.511 billion, including $1.488 billion current.
Changes versus the prior year
- Revenue increased 22%, compared with 43% growth in FY2023. Subscription revenue rose 23%; professional services and other revenue declined 10% to $58 million.
- Customer count increased to 18,950 from 17,600; customers with annual contract value above $100,000 rose to 4,485 from 3,930.
- Dollar-based net retention fell to 111% from 120%. Management attributed the decline primarily to the macroeconomic environment and slower expansion in existing customers.
- Remaining performance obligations rose to $3.385 billion from $3.007 billion; $1.952 billion was expected to be recognized in the next 12 months.
- Operating cash flow increased to $512 million. Financing cash flow was negative $883 million, primarily reflecting $937 million paid to repurchase convertible notes.
Outlook, risks and unusual items
- The filing gives no numerical revenue or earnings guidance. Management expects research and development spending to rise in absolute dollars, while sales and marketing and general and administrative expenses are expected to decline as a percentage of revenue. The filing cautions that longer, less predictable sales cycles could weigh on deal timing, billings, RPO and cash flow.
- FY2024 included a $106 million gain on early extinguishment of debt. Okta repurchased $508 million principal of 2025 Notes for $462 million and $542 million principal of 2026 Notes for $475 million. Remaining principal is due in 2025 and 2026.
- Restructuring and other charges were $56 million, including $28 million in lease impairments and $28 million in severance costs. A workforce reduction of approximately 400 employees was expected to be substantially complete in FY2025; estimated associated charges were approximately $24 million.
- On February 1, 2024, Okta completed its acquisition of Spera Cybersecurity for approximately $80 million in cash and Class A shares, subject to final adjustments. Purchase-price allocation was not complete at filing.
- Okta reported past cybersecurity incidents, including a January 2022 third-party-provider incident and an October 2023 incident involving unauthorized access to and theft of information from its third-party-hosted customer support system. Management said the incidents could adversely affect future performance, but the extent was uncertain. The filing also states that no identified incident had materially affected, or was reasonably likely to materially affect, the company as of the report.
- A securities class action concerning cybersecurity disclosures and Auth0 integration was certified in February 2024; discovery was proceeding. Okta said it could not predict the outcome or estimate potential losses. Related derivative lawsuits were also pending.
- Other central risks include intense competition, particularly from Microsoft; slower customer growth and retention; macroeconomic pressure; privacy and regulatory obligations; service availability; and the costs and execution risks of growth and acquisitions. The company reported audited financial statements and effective internal controls over financial reporting.
Important facts for investors to verify
- Whether retention and customer expansion stabilize after the decline in dollar-based net retention to 111%.
- Whether subscription growth, RPO and deferred revenue convert into sustained revenue and operating profitability.
- The cash and dilution effects of the 2025 and 2026 Notes, future note actions, and the planned shift to funding employee payroll-tax withholding from company cash.
- The final cost and execution of the workforce restructuring, and the integration and purchase accounting for Spera.
- Developments and potential financial exposure from the cybersecurity incidents and related litigation.
- The effect of substantial stock-based compensation on shareholder dilution and progress toward profitability.