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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________ 
FORM 10-Q
_____________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38044
_____________________________________ 
Okta, Inc.
(Exact Name of Registrant as Specified in its Charter)
_____________________________________ 
Delaware
100 First Street, Suite 600
26-4175727
(State or Other Jurisdiction of
Incorporation or Organization)
San Francisco
(I.R.S. Employer
Identification Number)
California
94105
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (888) 722-7871
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading 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

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, a 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  ☒
As of May 26, 2023, the number of shares of registrant’s Class A common stock outstanding was 155,060,175 and the number of shares of the registrant’s Class B common stock outstanding was 7,299,891.



Okta, Inc.
Table of Contents
Page No.




FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, product development, business strategy, plans, market trends, opportunities, positioning and the macroeconomic environment. 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 Results of Operations” and “Risk Factors.”
Forward-looking statements contained in this Form 10-Q 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; and
the impact of recent accounting pronouncements on our financial statements.
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 Quarterly Report on Form 10-Q as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.




PART I
Item. 1 Financial Statements

OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, shares in thousands, except per share data)
April 30,
2023
January 31,
2023
(unaudited)
Assets 
Current assets: 
Cash and cash equivalents$125 $264 
Short-term investments2,245 2,316 
Accounts receivable, net of allowances of $7 and $8
290 481 
Deferred commissions95 92 
Prepaid expenses and other current assets88 76 
Total current assets2,843 3,229 
Property and equipment, net54 59 
Operating lease right-of-use assets114 122 
Deferred commissions, noncurrent208 210 
Intangible assets, net227 241 
Goodwill5,406 5,400 
Other assets48 46 
Total assets$8,900 $9,307 
Liabilities and stockholders' equity 
Current liabilities: 
Accounts payable$10 $12 
Accrued expenses and other current liabilities91 112 
Accrued compensation88 99 
Deferred revenue1,173 1,242 
Total current liabilities1,362 1,465 
Convertible senior notes, net, noncurrent1,831 2,193 
Operating lease liabilities, noncurrent134 142 
Deferred revenue, noncurrent14 18 
Other liabilities, noncurrent25 23 
Total liabilities3,366 3,841 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share; 100,000 shares authorized; no shares issued and outstanding as of April 30, 2023 and January 31, 2023
  
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized; 155,044 and 154,009 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively
  
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized; 7,300 shares issued and outstanding as of April 30, 2023 and January 31, 2023
  
Additional paid-in capital8,148 7,974 
Accumulated other comprehensive loss(20)(33)
Accumulated deficit(2,594)(2,475)
Total stockholders’ equity5,534 5,466 
Total liabilities and stockholders' equity$8,900 $9,307 
See Notes to Condensed Consolidated Financial Statements.
4


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, shares in thousands, except per share data)
(unaudited)
 Three Months Ended
April 30,
 20232022
Revenue:  
Subscription$503 $398 
Professional services and other15 17 
Total revenue518 415 
Cost of revenue:  
Subscription122 111 
Professional services and other20 20 
Total cost of revenue142 131 
Gross profit376 284 
Operating expenses:
Research and development163 162 
Sales and marketing256 252 
General and administrative110 110 
Restructuring and other charges7  
Total operating expenses536 524 
Operating loss(160)(240)
Interest expense(3)(3)
Interest income and other, net17 2 
Gain on early extinguishment of debt 31  
Interest and other, net45 (1)
Loss before provision for income taxes(115)(241)
Provision for income taxes4 2 
Net loss$(119)$(243)
Net loss per share, basic and diluted$(0.74)$(1.56)
  
Weighted-average shares used to compute net loss per share, basic and diluted161,323 155,875 

See Notes to Condensed Consolidated Financial Statements.

5


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(unaudited)
 Three Months Ended
April 30,
 20232022
Net loss$(119)$(243)
Other comprehensive income (loss):
Net change in unrealized gains or losses on available-for-sale securities 11 (17)
Foreign currency translation adjustments2 (7)
Other comprehensive income (loss)13 (24)
Comprehensive loss$(106)$(267)
See Notes to Condensed Consolidated Financial Statements.

6


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
 Three Months Ended
April 30,
 20232022
Common stock and additional paid-in capital:
Balance, beginning of period$7,974 $7,750 
Adjustments from adoption of Accounting Standards Update No. 2020-06 (528)
Issuance of common stock upon exercise of stock options and other activity, net8 7 
Stock-based compensation166 171 
Settlement of convertible senior notes 12 
Balance, end of period8,148 7,412 
Accumulated deficit:
Balance, beginning of period(2,475)(1,816)
Adjustments from adoption of Accounting Standards Update No. 2020-06 156 
Net loss(119)(243)
Balance, end of period(2,594)(1,903)
Accumulated other comprehensive loss:
Balance, beginning of period(33)(12)
Other comprehensive income (loss)13 (24)
Balance, end of period(20)(36)
Total stockholders’ equity$5,534 $5,473 

See Notes to Condensed Consolidated Financial Statements.

7


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 Three Months Ended
April 30,
 20232022
Cash flows from operating activities:
Net loss$(119)$(243)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation166 171 
Depreciation, amortization and accretion25 30 
Amortization of debt issuance costs1 1 
Amortization of deferred commissions23 19 
Deferred income taxes1  
Lease impairment charges8  
Gain on early extinguishment of debt(31) 
Net gain on strategic investments (1)
Other, net2  
Changes in operating assets and liabilities:
Accounts receivable191 139 
Deferred commissions(25)(22)
Prepaid expenses and other assets(13)(13)
Operating lease right-of-use assets6 7 
Accounts payable(2)15 
Accrued compensation(11)(60)
Accrued expenses and other liabilities(9)9 
Operating lease liabilities(10)(8)
Deferred revenue(74)(25)
Net cash provided by operating activities129 19 
Cash flows from investing activities:  
Capitalized software(5)(3)
Purchases of property and equipment (5)
Purchases of securities available-for-sale and other(431)(306)
Proceeds from maturities and redemption of securities available-for-sale456 231 
Proceeds from sales of securities available-for-sale and other61  
Purchases of intangible assets (1)
Payments for business acquisitions, net of cash acquired(22)(4)
Net cash provided by (used in) investing activities59 (88)
Cash flows from financing activities:
Payments for repurchases of convertible senior notes(332) 
Proceeds from stock option exercises, net of repurchases6 5 
Net cash provided by (used in) financing activities(326)5 
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash1 (5)
Net decrease in cash, cash equivalents and restricted cash(137)(69)
Cash, cash equivalents and restricted cash at beginning of period271 273 
Cash, cash equivalents and restricted cash at end of period$134 $204 
Supplementary cash flow disclosure:
Cash paid during the period for:
Operating leases12 11 
Non-cash activities:
Issuance of common stock for conversions of convertible senior notes 40 
Benefit from exercise of hedges related to convertible senior notes2 5 
Operating lease right-of-use assets exchanged for lease liabilities4 4 
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents$125 $194 
Restricted cash, current included in prepaid expenses and other current assets1 2 
Restricted cash, noncurrent included in other assets8 8 
Total cash, cash equivalents and restricted cash$134 $204 

See Notes to Condensed Consolidated Financial Statements.
8

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1. Overview and Basis of Presentation
Description of Business
Okta, Inc. (the “Company”) is the leading independent identity provider. The Company’s Workforce Identity and Customer Identity Clouds are powered by the Company’s Identity Platform enabling customers to securely connect the right people to the right technologies and services at the right time. Employees and contractors sign into the Workforce Identity Cloud to seamlessly and securely access the applications they need to do their most important work. Developers leverage the Workforce Identity and Customer Identity Clouds to securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their core missions. 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. The Company was incorporated in January 2009 as Saasure Inc., a California corporation, and was later reincorporated in April 2010 under the name Okta, Inc. as a Delaware corporation. The Company is headquartered in San Francisco, California.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed 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”) for interim periods. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. 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 condensed consolidated balance sheet as of January 31, 2023, included herein, was derived from the audited financial statements as of that date. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair statement of the results of operations for the interim periods presented but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2024 or any future period.
The Company’s fiscal year ends on January 31. References to fiscal 2024, for example, refer to the fiscal year ending January 31, 2024.
The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 3, 2023.
Use of Estimates
The preparation of condensed 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 condensed 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.
2. Accounting Standards and Significant Accounting Policies
Significant Accounting Policies
For a summary of the Company’s significant accounting policies refer to “Note 2. Summary of Significant Accounting Policies” of its Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
9

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 the year ended January 31, 2023. In the three months ended April 30, 2023, the Company recognized an additional $8 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 “Restructuring Plan”) intended to reduce operating expenses and improve profitability. The Restructuring Plan involved a reduction of the Company’s workforce by approximately 300 full-time employees.
The 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.
The following table summarizes the Company’s restructuring liability that is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheet:
Severance and termination benefit costs
(dollars in millions)
Balance as of January 31, 2023$15 
Cash payments(14)
Balance as of April 30, 2023$1 
4. Cash Equivalents and Investments
Cash Equivalents and Short-term Investments
In estimating fair value, the Company uses a three-tier fair value hierarchy 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.
10

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables present the amortized cost, unrealized gain (loss) and estimated fair value of cash equivalents and short-term investments:
 As of April 30, 2023
 
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value 
(dollars in millions)
Level 1:
Cash equivalents:    
Money market funds$12 $ $ $12 
Total cash equivalents12   12 
Level 2:
Short-term investments (Available-for-sale):
U.S. treasury securities2,155 1 (12)2,144 
Corporate debt securities102  (1)101 
Total short-term investments2,257 1 (13)2,245 
Total$2,269 $1 $(13)$2,257 
 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 equivalents133   133 
Level 2:
Short-term investments (Available-for-sale):
U.S. treasury securities2,207  (22)2,185 
Corporate debt securities133  (2)131 
Total short-term investments2,340  (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 April 30, 2023
 
Amortized
Cost
Estimated
Fair Value
(dollars in millions)
Due within one year$1,960 $1,949 
Due between one to five years297 296 
 Total$2,257 $2,245 
Interest receivable of $15 million and $10 million is included in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of April 30, 2023 and January 31, 2023, respectively.
11

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table presents the fair values and unrealized losses related to the Company’s investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of April 30, 2023:

 Less Than 12 MonthsMore Than 12 MonthsTotal
 
Estimated Fair Value
Unrealized
Losses
Estimated Fair Value
Unrealized
Losses
Estimated Fair Value
Unrealized
Losses
(dollars in millions)
U.S. treasury securities$1,212 $(4)$679 $(8)$1,891 $(12)
Corporate debt securities  83 (1)83 (1)
Total$1,212 $(4)$762 $(9)$1,974 $(13)
The Company had 139 and 159 short-term investments in unrealized loss positions as of April 30, 2023 and January 31, 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 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 April 30, 2023 and January 31, 2023.
Strategic Investments
Strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. As of April 30, 2023 and January 31, 2023, the balance of strategic investments was $26 million and $25 million, respectively.
5. Deferred Commissions
Sales commissions capitalized as contract costs totaled $25 million and $21 million in the three months ended April 30, 2023 and 2022, respectively. Amortization of contract costs totaled $23 million and $19 million for the three months ended April 30, 2023 and 2022, respectively.
6. 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 the three months ended April 30, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $467 million and $362 million, respectively. Professional services and other revenue recognized during the three months ended April 30, 2023 and 2022 that was included in the deferred revenue balances at the beginning of the respective periods was $4 million and $6 million, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations (“RPO”) 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 $2,942 million as of April 30, 2023. Of this amount, the Company expects to recognize revenue of approximately $1,701 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 April 30, 2023 were not material.
12

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
7. Convertible Senior Notes, Net
Convertible Senior Notes
The 2025 convertible senior notes (“2025 Notes”) and the 2026 convertible senior notes (“2026 Notes” and together with the 2025 Notes, the “Notes”) are recorded at face value less unamortized debt issuance costs.
During the three months ended April 30, 2023, the Company repurchased $366 million principal amount of the 2025 Notes for $332 million in cash resulting in a gain on early extinguishment of debt of $31 million, net of unamortized debt issuance costs.
The net carrying amount of the Notes consisted of the following:
As of April 30, 2023As of January 31, 2023
(dollars in millions)
2025 Notes:
Principal$694 $1,060 
Less: unamortized debt issuance costs(5)(8)
Net carrying amount$689 $1,052 
2026 Notes:
Principal$1,150 $1,150 
Less: unamortized debt issuance costs(8)(9)
Net carrying amount$1,142 $1,141 
Fair Value Measurements
The following table presents the principal amounts and estimated fair values of the Notes, which are not recorded at fair value on the condensed consolidated balance sheets:
 As of April 30, 2023
 Principal Amount
Estimated Fair Value 
(dollars in millions)
2025 Notes$694 $606 
2026 Notes$1,150 $972 
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 may be exercised over 80 scheduled trading days beginning on May 15, 2023 and will expire if they are not exercised on their respective exercise dates. The Company has elected to cash settle the warrants.
As of April 30, 2023, Warrants to acquire up to approximately 1 million shares remained outstanding.
8. Commitments and Contingencies
Letters of Credit
In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate amount of $6 million were issued and outstanding as of April 30, 2023 and January 31, 2023. No draws have been made under such letters of credit. Noncurrent restricted cash of $6 million associated with these letters of credit is included in Other assets on the condensed consolidated balance sheets as of April 30, 2023 and January 31, 2023.
13

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Legal Matters
From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings.
On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0, Inc. (“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 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. Discovery will proceed with respect to the issues remaining in the case.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United States District Court for the Northern District of California against certain of its current and former executive officers and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v. McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The lawsuits seek orders permitting the plaintiffs to maintain this action derivatively on behalf of the Company, awarding unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and requiring the Company to make certain reforms to its corporate governance and controls. 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.
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. No parties have been served.
The Company intends to defend these lawsuits vigorously. At this time, the Company is unable to predict the outcome or estimate the amount of loss or range of losses that could potentially result from these lawsuits.
Warranties and Indemnification
To date, the Company has not incurred significant costs and has not accrued any material liabilities in the accompanying condensed consolidated financial statements as a result of its warranty and indemnification obligations.
9. Employee Incentive Plans
The Company’s equity incentive plans provide for granting stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) to employees, consultants, officers and directors and restricted stock units with market-based vesting conditions to certain executives. In addition, the Company offers an Employee Stock Purchase Plan (“ESPP”) to eligible employees.
14

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Stock-based compensation expense was recorded in the following cost and expense categories in the Company’s condensed consolidated statements of operations:
 Three Months Ended
April 30,
 20232022
(dollars in millions)
Cost of revenue  
Subscription$16 $17 
Professional services and other4 4 
Research and development68 70 
Sales and marketing38 39 
General and administrative40 41 
Total$166 $171 
The following table presents total unrecognized stock-based compensation expense related to outstanding equity awards as of April 30, 2023:
 Unrecognized Stock-based Compensation Expense
(in millions)
Weighted-average remaining period
(in years)
Unvested RSUs$1,372 2.9 years
Unvested RSAs113 1.0 year
Unvested stock options66 1.6 years
ESPP16 0.5 years
Total$1,567 
Market-based Restricted Stock Units
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.
10. Income Taxes
For the three months ended April 30, 2023, the Company recorded a tax provision of $4 million on a pretax loss of $115 million. The effective tax rate for the three months ended April 30, 2023 was approximately (3.6)%. The effective tax rate differs from the statutory rate primarily as a result of a full valuation allowance against U.S. deferred tax assets, the tax effect of foreign operations, and U.S. federal and state taxes.
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 the Company's fiscal 2023. As a result, the Company may be required to utilize some of its federal and state tax attributes and there may be increases to cash taxes or tax expense.
For the three months ended April 30, 2022, the Company recorded a tax provision of $2 million on a pretax loss of $241 million. The effective tax rate for the three months ended April 30, 2022 was approximately (0.8)%. The effective tax rate differs from the statutory rate primarily as a result of a full valuation allowance against U.S.
15

OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
deferred tax assets, the tax effect of foreign operations, U.S. state taxes and excess tax benefits from stock-based compensation in the United Kingdom.
11. 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:
 Three Months Ended
April 30,
 20232022
 Class A Class BClass A Class B
(dollars in millions, shares in thousands, except per share data)
Numerator: 
Net loss$(114)$(5)$(232)$(11)
Denominator:
Weighted-average shares outstanding, basic and diluted154,023 7,300 148,898 6,977 
Net loss per share, basic and diluted$(0.74)$(0.74)$(1.56)$(1.56)
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:
As of April 30,
 20232022
(shares in thousands)
Issued and outstanding stock options5,865 7,569 
Unvested RSUs issued and outstanding12,339 8,347 
Unvested market-based RSUs issued and outstanding502 116 
Unvested RSAs issued and outstanding525 1,269 
Shares committed under the ESPP864 232 
Shares related to the 2023 Notes 108 
Shares subject to warrants related to the issuance of the 2023 Notes1,048 1,048 
Shares related to the 2025 Notes3,679 5,617 
Shares related to the 2026 Notes4,820 4,820 
 29,642 29,126 

16

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. 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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our 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 II, Item 1A in this Quarterly Report on Form 10-Q and Part I, Item 1A in our Annual Report on Form 10-K. Our fiscal year ends January 31.
Overview
Okta is the leading independent identity provider. Our Workforce Identity and Customer Identity Clouds are powered by our category-defining Okta Identity Platform that enables our customers to securely connect the right people to the right technologies and services at the right time. Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile, web and Software-as-a-Service ("SaaS") applications, on-premises servers, application programming interfaces, IT infrastructure providers and services from a multitude of devices. Employees and contractors sign into the Workforce Identity Cloud to seamlessly and securely access the applications they need to do their most important work. Developers leverage our Customer Identity and Workforce Identity Clouds to securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their core missions. Given the growth trends in the number of applications and cloud adoption, and the movement to remote workforces, identity is becoming the most critical layer of an organization’s security. As workforces have transitioned to fully remote and hybrid work models, Zero Trust has become an increasingly important security model and identity an increasingly critical service. Our approach to identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer facing applications.
As of April 30, 2023, more than 18,050 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 April 30, 2023, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure and security vendors.
We employ a SaaS business model, and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings. We focus on acquiring and retaining our customers and increasing their spending with us through expanding the number of users who access our Workforce Identity and Customer Identity Clouds and up-selling additional products. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners, including resellers, system integrators and other distribution partners. Our subscription fees include the use of our service and our technical support and management of our platform. We base subscription fees primarily on the products used and the number of users on our platform. We typically invoice customers in advance in annual installments for subscriptions to our platform.
Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 97% of total revenue for the three months ended April 30, 2023. Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow and RPO growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.

17

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Components of Results of Operations
Revenue
Subscription Revenue.    Subscription revenue primarily consists of fees for access to and usage of our cloud-based platform and related support. Subscription revenue is driven primarily by the number of customers, the number of users per customer and the products used. We typically invoice customers in advance in annual installments for subscriptions to our platform.
Professional Services and Other.    Professional services revenue includes fees from assisting customers in implementing and optimizing the use of our products. These services include application configuration, system integration and training services.
We generally invoice customers as the work is performed for time-and-materials arrangements, and up front for fixed fee arrangements. All professional services revenue is recognized as the services are performed.
Overhead Allocation and Employee Compensation Costs
We allocate shared costs, such as facilities costs (including rent, utilities and depreciation on assets shared by all departments), certain information technology costs and recruiting costs to all departments based on headcount. As such, allocated shared costs are reflected in each of the cost of revenue and operating expense categories. Employee compensation costs reflected in each of the cost of revenue and operating expense categories include salaries, bonuses, compensation related taxes, benefits and stock-based compensation. Additionally included in the sales and marketing expense category are sales commissions and related taxes.
Cost of Revenue and Gross Margin
Cost of Subscription.    Cost of subscription primarily consists of expenses related to hosting our services and providing support. These expenses include employee-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired developed technology and allocated overhead.
We intend to continue to invest additional resources in our platform infrastructure and our platform support organizations. We will continue to invest in technology innovation and we anticipate that costs qualifying for capitalization of internal-use software costs and related amortization may fluctuate over time. We expect our investment in technology to expand the capability of our platform enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of subscription revenue in the future.
Cost of Professional Services and Other.    Cost of professional services consists primarily of employee-related costs for our professional services delivery team, travel-related costs, allocated overhead and costs of outside services associated with supplementing our professional services delivery team. The cost of providing professional services has historically been higher than the associated revenue we generate.
Gross Margin.    Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin may fluctuate from period to period as a result of the timing and amount of investments to expand our hosting capacity, our continued efforts to build platform support and professional services teams, increased stock-based compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and acquired intangible assets.
Operating Expenses
Research and Development.    Research and development expenses consist primarily of employee compensation costs and allocated overhead. We believe that continued investment in our platform is important for our growth.
Sales and Marketing.    Sales and marketing expenses consist primarily of employee compensation costs, costs of general marketing and promotional activities, travel-related expenses, amortization expense associated with acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade
18

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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 Income Taxes
Our provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate. The primary difference between our effective tax rate and the federal statutory rate is due to a valuation allowance against U.S. deferred tax assets.
19

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
The following table sets forth our results of operations for the periods presented:
Three Months Ended
April 30,
20232022
(dollars in millions)
Revenue:
Subscription$503 $398 
Professional services and other15 17 
Total revenue518 415 
Cost of revenue:
Subscription(1)
122 111 
Professional services and other(1)
20 20 
Total cost of revenue142 131 
Gross profit376 284 
Operating expenses:
Research and development(1)
163 162 
Sales and marketing(1)
256 252 
General and administrative(1)
110 110 
Restructuring and other charges— 
Total operating expenses536 524 
Operating loss(160)(240)
Interest expense(3)(3)
Interest income and other, net17 
Gain on early extinguishment of debt 31 — 
Interest and other, net45 (1)
Loss before provision for income taxes(115)(241)
Provision for income taxes
Net loss$(119)$(243)
(1)     Includes stock-based compensation expense as follows:
 Three Months Ended
April 30,
 20232022
 (dollars in millions)
Cost of subscription revenue$16 $17 
Cost of professional services and other revenue
Research and development68 70 
Sales and marketing38 39 
General and administrative40 41 
Total stock-based compensation expense$166 $171 

20

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The following table sets forth our results of operations for the periods presented as a percentage of our total revenue:
 Three Months Ended
April 30,
 20232022
Revenue  
Subscription97 %96 %
Professional services and other
Total revenue100 100 
Cost of revenue
Subscription24 27 
Professional services and other
Total cost of revenue27 32 
Gross profit73 68 
Operating expenses
Research and development32 39 
Sales and marketing50 61 
General and administrative21 26 
Restructuring and other charges— 
Total operating expenses104 126 
Operating loss(31)(58)
Interest expense(1)— 
Interest income and other, net— 
Gain on early extinguishment of debt — 
Interest and other, net— 
Loss before provision for income taxes(22)(58)
Provision for income taxes— 
Net loss(23)%(58)%

21

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Three Months Ended April 30, 2023 and 2022
Revenue
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
Revenue:   
Subscription$503 $398 $105 26 %
Professional services and other15 17 (2)(16)
Total revenue$518 $415 $103 25 
Percentage of revenue:   
Subscription97 %96 %  
Professional services and other  
Total100 %100 %  
For the three months ended April 30, 2023, the increase in subscription revenue was primarily due to the addition of new customers, an increase in users and sales of additional products to existing customers. The increase in revenue was attributable to a 14% increase in total customers, from over 15,800 as of April 30, 2022 to over 18,050 as of April 30, 2023, and revenue from existing customers as reflected in our Dollar-Based Net Retention Rate of 117% as of April 30, 2023.
For the three months ended April 30, 2023, professional services and other revenue decreased primarily due to lower bookings associated with professional services.
Cost of Revenue, Gross Profit and Gross Margin
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
Cost of revenue:   
Subscription$122 $111 $11 10 %
Professional services and other20 20 — (3)
Total cost of revenue$142 $131 $11 
Gross profit$376 $284 $92 32 
Gross margin:   
Subscription76 %72 %  
Professional services and other(38)(19)  
Total gross margin73 68   
For the three months ended April 30, 2023, cost of subscription revenue increased primarily due to an increase of $6 million in employee compensation costs related to higher headcount to support the growth in our subscription services and an increase of $3 million in third-party hosting costs as we expanded capacity to support our growth.
Our gross margin for subscription revenue improved to 76% from 72% for the three months ended April 30, 2023 compared to the three months ended April 30, 2022. The increase was primarily driven by improved spend efficiency resulting in lower relative cost of subscription revenue. While our gross margin for subscription revenue may fluctuate in the near-term as we invest in our growth, we expect our subscription revenue gross margin to improve over the long-term as we achieve additional economies of scale.
22

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
For the three months ended April 30, 2023, cost of professional services and other revenue remained relatively flat.
Our gross margin for professional services and other revenue decreased to (38)% from (19)% for the three months ended April 30, 2023 compared to the three months ended April 30, 2022 primarily due to a decrease in professional services and other revenue.
Operating Expenses
Research and Development Expenses
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
Research and development$163 $162 $%
Percentage of revenue32 %39 %  
For the three months ended April 30, 2023, research and development expenses remained relatively flat. We expect our research and development expenses will increase in absolute dollars as our business grows.
Sales and Marketing Expenses
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
Sales and marketing$256 $252 $%
Percentage of revenue50 %61 %  
For the three months ended April 30, 2023, sales and marketing expenses increased primarily due to an increase of $16 million in employee compensation costs related to higher headcount, partially offset by a decrease in marketing costs of $13 million. We expect our sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future as we expand our sales and marketing efforts. In the short-term, our sales and marketing expenses may increase as a percentage of our total revenue, however, over time, we expect this percentage to decrease as our total revenue grows.
General and Administrative Expenses
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
General and administrative$110 $110 $— — %
Percentage of revenue21 %26 %  
For the three months ended April 30, 2023, general and administrative expenses remained relatively flat primarily due to an increase of $5 million in employee compensation costs associated with headcount growth, offset by a decrease in acquisition and integration-related costs of $5 million. We expect our general and administrative expenses will increase in absolute dollars as our business grows.
23

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Restructuring and Other Charges
Three Months Ended
April 30,
20232022$ Change
% Change  
(dollars in millions)
Restructuring and other charges$$— $— %
Percentage of revenue%— %
For the three months ended April 30, 2023, restructuring and other charges were primarily related to lease impairment charges. We may incur additional charges as a result of our ongoing real estate optimization plan and the evolving corporate real estate market conditions. See Note 3 to our condensed consolidated financial statements "Restructuring and Other Charges" for additional information.
Interest and Other, Net
 Three Months Ended
April 30,
 20232022$ Change% Change
 (dollars in millions)
Interest expense$(3)$(3)$— (3)%
Interest income and other, net17 15 876 
Gain on early extinguishment of debt31 — 31 — 
Interest and other, net$45 $(1)$46 (3,922)
For the three months ended April 30, 2023, the change in interest and other, net was primarily due to a gain on early extinguishment of debt related to repurchases of the 2025 Notes and an increase in interest income from our short-term investments. We expect interest income from our short-term investments to continue to increase in the short term as a result of increasing interest rates.
Provision for Income Taxes
Three Months Ended
April 30,
20232022$ Change
% Change  
(dollars in millions)
Provision for income taxes$$$125 %
For the three months ended April 30, 2023, income tax expense resulted primarily from income from profitable foreign jurisdictions, U.S. federal and state taxes, and the tax impact of shortfalls from stock-based compensation.
24

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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 April 30,
20232022
(dollars in millions)
Number of customers18,050 15,800 
Customers with annual contract value ("ACV") above $100,0004,080 3,305 
Dollar-based net retention rate for the trailing 12 months ended117 %123 %
Current remaining performance obligations$1,701 $1,413 
Remaining performance obligations$2,942 $2,710 
Total Customers and Number of Customers with Annual Contract Value Above $100,000
As of April 30, 2023, we had over 18,050 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 annual contract value (“ACV”) with us was 4,080 and 3,305 as of April 30, 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.
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.
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-
25

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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.
Liquidity and Capital Resources
As of April 30, 2023, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,370 million, which were held for working capital and general corporate purposes, including potential future acquisition activity. Our cash equivalents and investments consisted primarily of U.S. treasury securities, corporate debt securities and money market funds. Historically, we have generated significant operating losses and both positive and negative cash flows from operations as reflected in our accumulated deficit and condensed consolidated statements of cash flows. We expect to continue to incur operating losses and cash flows from operations that may fluctuate between positive and negative amounts for the foreseeable future.
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.
In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and received aggregate gross proceeds of $1,060 million. The interest rate on the 2025 Notes is fixed at 0.125% per annum and is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020. In connection with the 2025 Notes, we used a portion of the proceeds to enter into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock.
In June 2020, we completed our private offering of the 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 Notes, our liquidity requirements, legal and contractual restrictions and other factors. During the three months ended April 30, 2023, we repurchased $366 million principal amount of the 2025 Notes for $332 million in cash which resulted in a gain on early extinguishment of debt of $31 million, net of unamortized debt issuance costs. See Note 7 to our condensed consolidated financial statements “Convertible Senior Notes, Net” for additional information. The 2025 Capped Calls remain outstanding notwithstanding such repurchase.
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 the three months ended April 30, 2023.
26

OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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, warrant exercise activity, 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 condensed 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 April 30, 2023, we had deferred revenue of $1,187 million, of which $1,173 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:
 Three Months Ended
April 30,
20232022
 (dollars in millions)
Net cash provided by operating activities$129 $19 
Net cash provided by (used in) investing activities59 (88)
Net cash provided by (used in) financing activities(326)
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash(5)
Net decrease in cash, cash equivalents and restricted cash$(137)$(69)
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscription and professional services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs. In recent periods, we have supplemented working capital requirements through net proceeds from the issuance of the 2025 Notes and 2026 Notes in September 2019 and June 2020, respectively.
During the three months ended April 30, 2023, cash provided by operating activities was $129 million, an increase of $110 million compared to the three months ended April 30, 2022. The increase was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to vendors.
Investing Activities
During the three months ended April 30, 2023, cash provided by investing activities was $59 million compared to cash used in investing activities of $88 million during the three months ended April 30, 2022. The change was primarily attributable to an increase in cash provided from net investment purchases, sales, and maturities, partially offset by cash paid for business acquisitions, net of cash acquired.
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OKTA, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Financing Activities
During the three months ended April 30, 2023, cash used in financing activities was $326 million compared to cash provided by financing activities of $5 million during the three months ended April 30, 2022. The change was primarily attributable to payments made for repurchases of the 2025 Notes.
Material Cash Requirements
Except for the debt extinguishment and our election to cash settle the warrants as discussed in Note 7 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, there were no significant changes outside the ordinary course of business to our material cash requirements disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
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 condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive loss, or condensed consolidated statements of cash flows.
Critical Accounting Estimates
There have been no significant changes to our critical accounting estimates for the three months ended April 30, 2023 from those discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
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Item 3. 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, Australia and Canada. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. During the three months ended April 30, 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 condensed consolidated financial statements.
Interest Rate Risk
We had cash, cash equivalents and short-term investments totaling $2,370 million as of April 30, 2023, of which $2,257 million was invested in U.S. treasury securities, corporate debt securities and money market funds. Our cash and cash equivalents are held for working capital and general corporate purposes, including potential future acquisition activity. Our short-term investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our investment portfolio are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our short-term investments as “available-for-sale,” no gains are recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered to be credit related changes, no losses in such securities are recognized due to changes in interest rates unless we intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise determine that all or a portion of the decline in fair value are due to credit related factors.
As of April 30, 2023, a hypothetical 10% relative change in interest rates would not have had a material impact on the value of our cash equivalents or investment portfolio. Fluctuations in the value of our cash equivalents and investment portfolio caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income (loss), and are realized only if we sell the underlying securities prior to maturity.
Convertible Senior Notes
In 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 April 30, 2023, $694 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 April 30, 2023, the full principal amount of $1,150 million remains 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 fixed interest rate of the Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the Notes fluctuates when the market price of our common stock fluctuates. The fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. See Note 7 to our condensed consolidated financial statements for more information. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity.
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Item 4. 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc. Securities Litigation, No. 3:22-cv-02990. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0, Inc. (“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 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. Discovery will proceed with respect to the issues remaining in the case.
Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United States District Court for the Northern District of California against certain of its current and former executive officers and directors, captioned O’Dell v. McKinnon et al., No. 3:22-cv-07480 (filed Nov. 28, 2022), and LR Trust v. McKinnon et al., No. 3:22-cv-08627 (filed Dec. 13, 2022). The lawsuits allege, among other things, that the defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0. The lawsuits seek orders permitting the plaintiffs to maintain this action derivatively on behalf of the Company, awarding unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and requiring the Company to make certain reforms to its corporate governance and controls. 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.
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. No parties have been served.
The Company intends to defend these lawsuits vigorously.
See Note 8 to our condensed consolidated financial statements, “Commitments and Contingencies” for information related to other legal proceedings.
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 Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations, financial condition and growth prospects. In such an event, the market price of our Class A common stock could decline and you could lose all or part of your investment.
Risk Factor Summary
This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this summary. A summary of our risks includes, but is not limited to, the following:


Adverse general economic, market and industry conditions and reductions in workforce identity and customer identity spending may reduce demand for our products, which could harm our revenue, results of operations and cash flows.
31


We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
We have experienced rapid growth in recent periods, and our prior growth rates may not be indicative of our future growth. As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability.
We have a history of losses, and we expect to incur losses for the foreseeable future.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and customer satisfaction or adequately address competitive challenges.
We face intense competition, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position.
If we are unable to attract new customers, sell additional products to our existing customers or develop new products and enhancements to our products that achieve market acceptance, our revenue growth and profitability will be harmed.
Our business depends on our customers renewing their subscriptions and purchasing additional licenses or subscriptions from us. Any material decline in our Dollar-Based Net Retention Rate would harm our future results of operations.
Customer growth could fall below expectations.
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.
In the past we have experienced and in the future we may experience cybersecurity incidents that may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.
Any actual or perceived failure by us to comply with the privacy or security provisions of our privacy policy, our contracts and/or legal or regulatory requirements could result in proceedings, actions or penalties against us.
The stock price of our Class A common stock may be volatile or may decline.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering (“IPO”), including our directors, executive officers, and their affiliates, who held in the aggregate 41.2% of the voting power of our capital stock as of April 30, 2023. This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our business to pay our indebtedness.
We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business.
Risks Related to Our Business and Industry
Adverse general economic, market and industry conditions and reductions in workforce identity and customer identity spending may reduce demand for our products, which could harm our revenue, results of operations and cash flows.
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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, COVID-19, the systemic impact of a widespread recession (in the United States or internationally), energy costs, geopolitical issues, such as Russia’s invasion of Ukraine, or the availability and cost of credit have and could continue to lead to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S. economy and abroad, which in turn could result in reductions in workforce identity and customer identity spending by our existing and prospective customers. These economic conditions can occur abruptly. Prolonged economic slowdowns may result in customers requesting us to renegotiate existing contracts on less advantageous terms to us than those currently in place or defaulting on payments due on existing contracts or not renewing at the end of the contract term. For example, rising interest rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, employee healthcare and other components, which may further constrain our, our customers’ and prospective customers’ budgets. To the extent there is a sustained general economic downturn and our platforms and services are perceived by customers or potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in spending.
Our customers may merge with other entities who use alternative identity solutions and, during weak economic times, there is an increased risk that one or more of our customers will file for bankruptcy protection, either of which may harm our revenue, profitability and results of operations. We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign bankruptcy laws may be more difficult to predict. In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim. As a result, if economic growth in countries where we do business slows or if such countries experience further economic recession, it could harm our business, revenue, results of operations and cash flows.
We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
Much of our growth has occurred in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, including the risks and uncertainties described in this document. Additionally, the sales cycle for the evaluation and implementation of our platform, which typically extends for multiple months for enterprise deals, may also cause us to experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors, and our results of operations in future reporting periods may be below the expectations of investors. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our stock price to decline.
We have experienced rapid growth in recent periods, and our prior growth rates may not be indicative of our future growth. As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability.
From fiscal 2021 to fiscal 2022, our revenue grew from $835 million to $1,300 million, an increase of 56%, and from fiscal 2022 to fiscal 2023, our revenue grew from $1,300 million to $1,858 million, an increase of 43%. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. We believe our revenue growth depends on a number of factors, such as macroeconomic conditions including the inflation and interest rate environment, budget constraints and the economic impact of COVID-19, as well as, but not limited to, our ability to:
price our platform effectively so that we are able to attract and retain customers without compromising our profitability;
attract new customers, successfully deploy and implement our platform, upsell or otherwise increase our existing customers’ use of our platform, obtain customer renewals and provide our customers with excellent customer support;
increase our network of channel partners, which include resellers, system integrators and other distribution partners and independent software vendors (“ISVs”);
33


adequately expand our sales force, and maintain or increase our sales force’s productivity;
successfully identify and enter into agreements with suitable acquisition targets, integrate any acquisitions and integrate acquired technologies into our existing products or use them to develop new products;
successfully introduce new products, enhance existing products and address new use cases;
introduce our platform to new markets outside of the United States;
successfully compete against larger companies and new market entrants; and
increase awareness of our brand on a global basis.
If we are unable to accomplish any of these tasks, our revenue growth will be harmed. We also expect our operating expenses to increase in future periods, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability.
We have a history of losses, and we expect to incur losses for the foreseeable future.
We have incurred significant net losses in each year since our inception, including net losses of $266 million, $848 million and $815 million in fiscal 2021, 2022 and 2023, respectively. We expect to continue to incur net losses for the foreseeable future. Because the market for our platform is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future results of operations. We expect our operating expenses to significantly increase over the next several years as a result of the Auth0 acquisition, and as we hire additional personnel, particularly in sales and marketing, expand and improve the effectiveness of our distribution channels, expand our operations and infrastructure, both domestically and internationally, pursue business combinations and continue to develop our platform. As we continue to develop as a public company, we may incur additional legal, accounting and other expenses that we did not incur historically. If our revenue does not increase to 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 5,342 employees as of April 30, 2022 to 5,683 employees as of April 30, 2023. We have also experienced significant growth in the number of customers, users and logins and in the amount of data that our Software-as-a-Service (“SaaS”) infrastructure supports. Finally, our organizational structure is becoming more complex as we improve our operational, financial and management controls as well as our reporting systems and procedures. We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without undermining our culture of rapid innovation, teamwork and attention to customer success, which has been central to our growth so far. If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our platform may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers and employees.
We have established international offices in the Americas, Asia-Pacific and Europe, and we plan to continue to expand our international operations in the future. Our expansion has placed, and our expected future growth will continue to place, a significant strain on our managerial, customer operations, research and development, marketing and sales, administrative, financial and other resources. If we are unable to manage our continued growth successfully, our business and results of operations could suffer.
In addition, as we expand our business, it is important that we continue to maintain a high level of customer service and satisfaction. As our customer base continues to grow, we will need to expand our account management, customer service and other personnel, and our network of ISVs, system integrators and other channel partners, to
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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