Summary
Okta reported fiscal 2021 third-quarter results on December 2, 2020. Revenue for the quarter ended October 31, 2020 rose 42.0% to $217.38 million from $153.04 million in the prior-year quarter. Year-to-date revenue was $600.68 million, up 43.5%. Gross profit increased 43.0% to $160.47 million, and gross margin was 73.8%, up 0.5 percentage points from 73.3%. The company still reported an operating loss of $51.98 million, wider than the $45.73 million loss in the prior-year quarter, although operating margin improved to -23.9% from -29.9%. Net loss widened to $72.76 million from $63.50 million. GAAP diluted loss per share was -$0.56 for the quarter and -$1.51 year to date.
Cash generation was a bright spot. Operating cash flow was $43.43 million in the quarter, up 308.1% from $10.64 million a year earlier. For the nine months, operating cash flow was $93.05 million, up 202.4% from $30.77 million. Capital expenditures were $0.63 million in the quarter, up 896.8% from $0.06 million, and $11.30 million year to date, up 13.2% from $9.98 million. Free cash flow, a non-GAAP measure, was $41.6 million in the quarter, or 19% of revenue, compared with $9.2 million, or 6% of revenue, in the prior-year quarter. Free cash flow is separate from operating cash flow.
Backlog and customer metrics pointed to durable demand. Remaining performance obligations were $1.58 billion, up 53.4% from $1.03 billion a year earlier. Current RPO, the portion expected to be recognized over the next 12 months, was $753.2 million, up 46% compared with the third quarter of fiscal 2020. Calculated billings were $252.4 million, up 44% year over year. Current deferred revenue was $424.76 million, up 38.5% from $306.74 million. Customers with annual contract value above $100,000 rose to 1,780 from 1,325. The dollar-based net retention rate for the trailing 12 months was 123%, compared with 117%. Okta said it had over 9,400 customers and over 6,500 integrations as of October 31, 2020.
Guidance moved higher. For the fourth quarter of fiscal 2021, Okta said it expects revenue growth of 32% to 33% year over year, a non-GAAP operating loss of $2.0 million to $1.0 million, and a non-GAAP net loss per share of $0.02 to $0.01, assuming about 131 million weighted shares outstanding. For the full fiscal year 2021, the company now expects revenue growth of 40% year over year, a non-GAAP operating loss of $2.3 million to $1.3 million, and non-GAAP net income per diluted share of $0.04 to $0.05, assuming about 143 million weighted shares outstanding. Management also announced a CFO transition: board member Mike Kourey will become CFO in March 2021, succeeding Bill Losch, who has served as CFO since 2013 and will stay through the filing of the Form 10-K and as an advisor through the end of the first quarter of fiscal 2022.
The quarter's growth came with familiar risks. Okta said COVID-19 and related public health measures could continue to affect its business, and it warned that longer sales cycles and delays in deals closing could create near-term headwinds for cash flow, RPO and billings growth. The company also increased its allowance for doubtful accounts and sales reserves because of uncertainty in economic conditions and concession requests. Other named risks include a network or data security incident, service outages, inability to pay off convertible senior notes when due, and deteriorating global economic conditions. GAAP profitability remains negative, with the quarter's operating loss and net loss showing that stock-based compensation and other costs continue to weigh on results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $217.4M | $200.4M | +8.4% | $153.0M | +42.0% |
| Gross profit | $160.5M | $149.3M | +7.5% | $112.2M | +43.0% |
| Gross margin | 73.8% | 74.5% | -0.7 pp | 73.3% | +0.5 pp |
| Research & development | $58.1M | $53.9M | +8.0% | $41.8M | +39.0% |
| Sales & marketing | $109.8M | $98.3M | +11.7% | $87.2M | +25.9% |
| General & administrative | $44.5M | $42.5M | +4.7% | $28.9M | +54.0% |
| Total operating expenses | $212.4M | $194.7M | +9.1% | $157.9M | +34.5% |
| Operating income (loss) | -$52.0M | -$45.4M | -14.5% | -$45.7M | -13.7% |
| Operating margin | -23.9% | -22.6% | -1.3 pp | -29.9% | +6.0 pp |
| Net income (loss) | -$72.8M | -$60.1M | -21.1% | -$63.5M | -14.6% |
| Net margin | -33.5% | -30.0% | -3.5 pp | -41.5% | +8.0 pp |
| Customers | 9,400 | 8,950 | +5.0% | 7,400 | +27.0% |
Risks
COVID-19 has materially affected how Okta and its customers operate, with offices temporarily closed, employees required to work from home, and Oktane20 Live shifted to virtual-only. The filing states the pandemic has and could continue to delay purchasing decisions, reduce the value or duration of subscription contracts, lengthen payment terms, and affect customer attrition rates, with duration and financial impact still uncertain.
Okta's increasing focus on larger organizations and the COVID-19 environment are lengthening sales cycles and making them less predictable. MD&A states longer sales cycles could delay deal closings and create near-term headwinds for cash flow, remaining performance obligations, and billings growth.
The 2023 Notes' conditional conversion feature was triggered as of October 31, 2020, making them convertible at holders' option between November 1, 2020 and January 31, 2021, and they were classified as current liabilities. Interest expense increased 186% for the three months ended October 31, 2020 compared to the prior-year period, and cash settlement or repurchase obligations could strain liquidity.
As a well-known provider of identity and security solutions, Okta believes it is an attractive target for sophisticated attacks, including from nation-state and nation-state supported actors. A breach of its platform or customer data could lead to significant liability, remediation and notification expenses, loss of customer trust, and harm to its reputation.
Okta faces intense competition from larger, well-established companies and identifies Microsoft as its principal competitor. Larger competitors may have broader product offerings, bundle identity functionality into existing products, or sell at zero or negative margins, which could pressure pricing, revenue, and gross margins.
The newly approved California Privacy Rights Act of 2020 strengthens California privacy law by adding sensitive personal information limits, prohibiting precise geolocation tracking, increasing penalties for violations involving consumers under age 16, and establishing the California Privacy Protection Agency. Okta anticipates additional costs and expenses associated with CPRA compliance.
Okta states that as its customer base grows and it focuses more on sales to the world's largest organizations, it does not expect customer growth to continue at the same pace as previously. It also warns that any material decline in Dollar-Based Net Retention Rate would harm future results of operations.
Okta must attract and retain highly qualified personnel, especially engineers and sales professionals, in competitive locations including the San Francisco Bay Area. COVID-19 related travel restrictions, immigration policy changes, work visa availability, and the perceived value of equity awards may make hiring and retention more difficult.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Free Cash Flow Margin
Free Cash Flow
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Customers with annual contract value (ACV) above $100,000
Total Customers
Calculated Billings
Non-GAAP Operating Income
Current Remaining Performance Obligations
Dollar-Based Net Retention Rate
Summary, forecast, risks and KPIs are extracted from Okta, Inc.'s SEC filings for Q3 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.