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What changed in Okta, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Okta, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+420 added−441 removedSource: 10-K (2023-03-03) vs 10-K (2022-03-07)

Top changes in Okta, Inc.'s 2023 10-K

420 paragraphs added · 441 removed · 307 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+17 added−14 removed51 unchanged
Biggest changeOur service also allows us to integrate into our customers’ on-premises components and hybrid configurations. 9 Okta Identity Cloud Platform with Differentiated Administration, User and Developer Experience The Okta Identity Cloud is built on one common platform and user interface framework, offering administrators and users a consistent, easy-to-use, consumer-like experience across our products.
Biggest changeOkta Identity Platform with Differentiated Administration, User and Developer Experience Okta provides one common platform and user interface framework supporting our Workforce Identity and Customer Identity Clouds, offering administrators and users a consistent, easy-to-use, consumer-like experience across our products. Our technology integrates with industry-leading browsers and mobile applications to provide seamless access to nearly any web or native mobile application.
API Access Management reduces development time, boosts security, helps in achieving 8 compliance and enables seamless end user experiences by providing a unified portable service for authorizing secure and always available access to any API. • Access Gateway .
API Access Management reduces development time, boosts security, helps in achieving compliance and enables seamless end user experiences by providing a unified portable service for authorizing secure and always available access to any API. 8 • Access Gateway .
Okta for Good's core focus areas are: • Developing technology for good ecosystems; • Expanding economic opportunity and pathways into the technology sector; • Supporting non-profits addressing critical needs in our global communities; and 14 • Empowering our employees to become changemakers.
Okta for Good's core focus areas are: 14 • Developing technology for good ecosystems; • Expanding economic opportunity and pathways into the technology sector; • Supporting non-profits addressing critical needs in our global communities; and • Empowering our employees to become changemakers.
Nearly all of the leading cloud application providers are our partners, and many of them drive further customer acquisition for us through co-selling arrangements, building our offerings directly into their products, and product demonstrations running on the Okta Identity Cloud. We also partner with several of the large technology companies that are driving the movement to the cloud.
Nearly all of the leading cloud application providers are our partners, and many of them drive further customer acquisition for us through co-selling arrangements, building our offerings directly into their products, and product demonstrations running on Okta. We also partner with several of the large technology companies that are driving the movement to the cloud.
By focusing on identity, the one constant in an ever-changing technology and threat landscape, we provide our customers with a solution to solve their IT and security challenges, facilitate their adoption of a Zero Trust security model and enable their digital transformation. Our Technology We focus on engineering an intuitive, but comprehensive, platform to solve complex problems.
By focusing on identity, the one constant in an ever-changing technology and threat landscape, we provide our customers with a solution to solve their IT and security challenges, facilitate their adoption of a Zero Trust security model and enable their digital transformation. 9 Our Technology We focus on engineering an intuitive, but comprehensive, platform to solve complex problems.
As technology and our customers’ needs evolve, we plan to use our platform to help our customers address new challenges, regulatory requirements and use cases. • Leverage Our Integrations . The Okta Integration Network is an extensive partner ecosystem, which includes over 7,000 integrations with cloud, mobile and web applications and IT infrastructure providers.
As technology and our customers’ needs evolve, we plan to use our platform to help our customers address new challenges, regulatory requirements and use cases. • Leverage Our Integrations . The Okta Integration Network is an extensive ecosystem, which includes over 7,000 integrations with cloud, mobile and web applications and IT infrastructure providers.
We believe our product strategy, platform architecture, 12 technology and independence as well as our company culture allow us to compete favorably on each of these factors. We expect competition to increase as other established and emerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced.
We believe our product strategy, platform architecture, technology and independence as well as our company culture allow us to compete favorably on each of these factors. We expect competition to increase as other established and emerging companies enter our markets, as customer requirements evolve, and as new products and technologies are introduced.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs 15 as part of our investor relations website.
Our approach provides organizations with the scale, efficiency and security they need to build customer-facing applications. 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.
Our approach provides organizations with the scale, interoperability, efficiency and security they need to build customer-facing applications. 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.
Access Gateway enables organizations to extend the Okta Identity Cloud, which is a cloud native platform, from the cloud to their existing on-premises applications, so that they can harness the benefits of Okta to manage all of their critical systems, whether in the cloud, on-premises or hybrid.
Access Gateway enables organizations to extend the Workforce Identity Cloud, which is a cloud native platform, from the cloud to their existing on-premises applications, so that they can harness the benefits of Okta to manage all of their critical systems, whether in the cloud, on-premises or hybrid.
Our position at the intersection of people, devices, applications and infrastructure gives us unique access to powerful data, and the opportunity to 7 provide differentiated insights based on that data, as well as predictive capabilities based on that data to help keep customers more secure.
Our position at the intersection of people, devices, applications and infrastructure gives us unique access to powerful data, and the opportunity to provide differentiated insights based on that data, as well as predictive capabilities based on that data to help keep customers more secure.
We expect the value of our analytics to our customer base will increase as customers continue to connect more devices, applications and users to their networks and as we add more customers.
We expect the value of our analytics to our customer base will increase as customers continue to connect more devices, applications and users to their networks and as we add 7 more customers.
The acceleration of digital transformations, cloud modernization and evolving security threat landscape and changing consumer expectations to simple, secure digital experiences are driving a shift in how organizations manage consumer identities on the internet. Organizations are building secure consumer-facing applications and are turning to identity to optimize seamless and private user experiences.
The acceleration of digital transformations, cloud adoption and evolving security threat landscape and changing consumer expectations to simple, secure digital experiences are driving a shift in how organizations manage consumer identities on the internet. Organizations are building secure consumer-facing applications and are turning to identity to optimize seamless and private user experiences.
Extending the benefits of the Okta Identity Cloud to hybrid IT environments delivers a single point of management for our customers’ administrators and a single location from which end users can access their critical applications. • Advanced Server Access . Advanced Server Access offers continuous, contextual access management to secure cloud infrastructure.
Extending the benefits of the Workforce Identity Cloud to hybrid IT environments delivers a single point of management for our customers’ administrators and a single location from which end users can access their critical applications. • Advanced Server Access . Advanced Server Access offers continuous, contextual access management to secure cloud infrastructure.
In addition to market-competitive base pay, short-term bonus incentives and long-term equity incentives, our total rewards program offers comprehensive employee benefits that may vary by country/region, including an employee stock purchase plan, a 401(k) plan with company matching contribution, comprehensive medical, dental and vision insurance, life and disability insurance, health savings accounts, flexible time off, volunteer time off, gender-neutral paid parental leave, fertility and adoption support, family care resources, mobile and internet reimbursement, mental health and lifestyle support programs and a variety of other health and wellness resources.
In addition to market-competitive base pay, short-term bonus incentives and long-term equity incentives, our total rewards program offers comprehensive employee benefits that may vary by country/region, including an employee stock purchase plan, a 401(k) plan with company matching contributions, comprehensive medical, dental and vision insurance, life and disability insurance, health savings accounts, charitable donation matching, flexible time off, volunteer time off, gender-neutral paid parental leave, fertility and adoption support, family care resources, mobile and internet reimbursement, mental health and lifestyle support programs and a variety of other health and wellness resources.
Item 1. Business Overview Okta is the leading independent identity provider. Our vision is to free anyone to safely use any technology, and we believe identity is the key to making that happen. Our mission is to bring simple and secure digital access to people and organizations everywhere.
Item 1. Business Overview Okta is the leading independent identity provider. Our vision is to free everyone to safely use any technology, and we believe identity is the key to making that happen. Our mission is to bring simple and secure digital access to people and organizations everywhere.
Our Advanced Server Access product is designed to significantly improve our customers’ ability to secure access to cloud-based and on-premises servers, while Okta Access Gateway enables our customers to extend the Okta Identity Cloud to their existing on-premises applications.
Our Advanced Server Access product is designed to significantly improve our customers’ ability to secure access to cloud-based and on-premises servers, while Access Gateway enables our customers to extend the Workforce Identity Cloud to their existing on-premises applications.
In addition to these technology partners, we leverage our channel partners, including system integrators, traditional VARs and Government VARs, to broaden the range of customers we reach. Marketing Our most valuable marketing features our customers and their successes, and is informed by a deeply data-driven approach, giving us insights into the efficacy of our efforts.
In addition to these technology partners, we leverage our channel partners, including system integrators, traditional value-added resellers ("VARs") and Government VARs, to broaden the range of customers we reach. Marketing Our most valuable marketing features our customers and their successes, and is informed by a deeply data-driven approach, giving us insights into the efficacy of our efforts.
We provide our employees with a wide range of learning and development opportunities, including in-person, virtual, social and self-directed learning, mentoring, coaching and external development. We offer extensive onboarding and training programs to prepare our employees at all levels for career progression and individual development.
We provide our employees with a wide range of learning and development opportunities, including in-person, virtual, social and self-directed learning, mentoring, coaching and external development. We offer extensive onboarding and training programs through our internal learning initiative to prepare our employees at all levels for career progression and individual development.
Our customers use the Okta Identity Cloud to secure their workforces, to create solutions that make their partner networks more collaborative, and to provide more seamless and secure experiences for their customers or end users, which combined with our open approach, enables our customers to future-proof their environments.
Our customers use the Workforce Identity Cloud to secure their workforces, to create solutions that make their partner networks more collaborative, and to provide more seamless and secure experiences for their end users, which combined with our open approach, enables our customers to future-proof their environments.
Similarly, the Auth0 Marketplace is a trusted catalog of integrations that enables application teams to easily assemble complete identity solutions. The Auth0 Marketplace connects customers with service providers and builders who solve integration use cases and implement integrations with the Auth0 platform.
Similarly, the Auth0 Marketplace is a trusted catalog of integrations that enables application teams to easily assemble complete identity solutions. The Auth0 Marketplace connects customers with service providers and builders who solve integration use cases and implement integrations with the Customer Identity Cloud.
We empower our employees to be authentic and grow through open conversations and engagement resources, including regular safe space DIB discussion forums and facilitated workshops, personalized DIB learning tools, mentoring and workplace development programs focused on supporting talent from underrepresented communities, and sponsorship of ERGs that strengthen our DIB culture.
We empower our employees to be authentic and grow through open conversations and engagement resources, including regular safe space DIB discussion forums and facilitated workshops, precise language and inclusive calibrations, personalized DIB learning tools, mentoring and workplace development programs focused on supporting talent from underrepresented communities, and sponsorship of ERGs that strengthen our DIB culture.
Our employee engagement program helps us understand employee sentiment on a wide range of topics throughout the employee lifecycle, providing insights that inform our decisions about company initiatives, employee programs, talent risks, management opportunities and more. In fiscal 2022, 83% of our eligible employees participated in our annual employee engagement survey.
Our employee engagement program helps us understand employee sentiment on a wide range of topics throughout the employee lifecycle, providing insights that inform our decisions about company initiatives, employee programs, talent risks, management opportunities and more. In fiscal 2023, 84% of our eligible employees participated in our annual employee engagement survey.
In order to continue to innovate and drive customer success, it is crucial that we continue to attract, develop and retain exceptional talent.
In order to continue to innovate and drive customer success, it is crucial that we continue to attract, develop and retain exceptional talent and balanced teams.
Our DIB initiatives – spearheaded by our DIB department, Inclusion Council and employee resource groups ("ERGs"), in partnership with various other teams – focus on DIB in our workforce, in our workplace and in the community. We employ inclusive recruitment and hiring practices to source diverse talent and mitigate potential bias throughout the hiring process.
Our DIB initiatives – spearheaded by our DIB department and employee resource groups ("ERGs"), in partnership with various other teams – focus on DIB in our workforce, in our workplace and in the marketplace. We employ inclusive recruitment and hiring practices to source diverse talent and mitigate potential bias throughout the hiring process.
Okta Integration Network and Auth0 Marketplace The Okta Integration Network contains over 7,000 integrations with cloud, mobile and web applications, IoT devices and IT infrastructure providers, including Amazon Web Services, Atlassian, Cisco, F5 Networks, Google Cloud Platform, Microsoft Office 365, NetSuite, Oracle, Palo Alto Networks, Proofpoint, Salesforce, SAP, ServiceNow, Slack, Splunk, VMware, Workday and Zoom.
Okta Integration Network and Auth0 Marketplace The Okta Integration Network contains over 7,000 integrations with cloud, mobile and web applications, IoT devices and IT infrastructure providers, including Amazon Web Services, Atlassian, DocuSign, Google, Microsoft Office 365, NetSuite, Oracle, Palo Alto Networks, Proofpoint, Salesforce, SAP, ServiceNow, Slack, Splunk, VMware, Workday, Zendesk and Zoom.
The Okta Identity Cloud enables our customers to automate access across their growing ecosystem of employees, contractors and partners, increasing collaboration across their workforces. Customer Identity Cloud In customer identity use cases, the Okta Identity Cloud enables organizations to transform their own customers’ experiences by empowering development teams to rapidly and securely build customer-facing cloud, mobile or web applications.
The Workforce Identity Cloud enables our customers to automate access across their growing ecosystem of employees, contractors and partners, increasing collaboration across their workforces. Customer Identity Cloud The Customer Identity Cloud enables organizations to transform their own customers’ experiences by empowering development teams to rapidly and securely build customer-facing cloud, mobile or web applications.
Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology. As of January 31, 2022, we had twenty-eight issued patents in the United States, which expire between 2030 and 2039 and cover various aspects of our products.
Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology. As of January 31, 2023, we had thirty-four issued patents in the United States, which expire between 2030 and 2039 and cover various aspects of our products.
Diversity, Inclusion and Belonging We are committed to fostering a culture of inclusion and belonging, and to building a diverse workforce to drive innovation and collective growth, which we believe is critical to our success. Over the past few years, we have made deeper investments in our diversity, inclusion and belonging ("DIB") program at Okta.
Diversity, Inclusion and Belonging We are committed to fostering a culture of inclusion and belonging, and to building a diverse workforce to drive innovation and collective growth, which we believe is critical to our success. In recent years, we have made deeper investments in our diversity, inclusion and belonging ("DIB") program at Okta.
Looking forward, we continue to focus on technologies and programs that create equity and build community across our dynamic workforce, including: • Flexible benefit offerings that allow employee customization; • Workplace solutions, such as coworking spaces, outside of our primary office locations that support our distributed teams; • A Dynamic Work Sustainability Guide to empower our employees to reduce their carbon footprints wherever they are working from; and • Curated experience programs that foster a sense of community both in-person and virtually.
Looking forward, we continue to focus on technologies and programs that create equity and build community across our dynamic workforce, including: • Flexible benefit offerings that allow employee customization; • Workplace solutions, such as coworking spaces, outside of our primary office locations that support our distributed teams; • A Dynamic Work Sustainability Guide to empower our employees to bring sustainability into their work environments, wherever they are based; and • Curated experience programs that foster a sense of community both in-person and virtually.
We also have registered other trademarks in the United States including "Okta Your Cloud, Covered," "Enterprise Identity, Delivered," "Work Outside the Perimeter," "Oktane" and "Never Build Auth Again." We are the registered holder of a variety of domestic and international domain names that include “Okta,” "Auth0" and similar variations.
We also have registered other trademarks in the United States including “Okta Workforce Identity Cloud,” “Okta Customer Identity Cloud,” “Okta WIC,” “Okta CIC,” “The World’s Identity Company,” "Okta Your Cloud, Covered," "Enterprise Identity, Delivered," "Work Outside the Perimeter," "Oktane" and "Never Build Auth Again." We are the registered holder of a variety of domestic and international domain names that include “Okta,” "Auth0" and similar variations.
In addition, prior to our initial public offering ("IPO") in April 2017, we reserved 300,000 shares of our common stock to fund and support the operations of Okta for Good, of which 172,500 shares of Class A common stock remained reserved for future issuances as of January 31, 2022.
In addition, prior to our initial public offering ("IPO") in April 2017, we reserved 300,000 shares of our common stock to fund and support the operations of Okta for Good, of which 131,250 shares of Class A common stock remained reserved for future issuances as of January 31, 2023.
We plan to continue these partnerships as well as add new integration partners to enrich our user experience and expand our customer base. We view our investment in these partnerships as a force multiplier that enables us to build and promote complementary capabilities that benefit our customers. • Expand our Developer Ecosystem .
We plan to maintain these integrations as well as add new ones to enrich our user experience and expand our customer base. We view our investment in these partnerships as a force multiplier that enables us to build and promote complementary capabilities that benefit our customers. • Expand our Developer Ecosystem .
Developers leverage our platform to securely and efficiently embed identity into the software they build, allowing them to focus on their core mission. Employees and contractors sign into the Okta Identity Cloud to seamlessly and securely access the applications they need to do their most important work.
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 mission.
We have attained multiple SOC 2 Type II Attestations, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC 27018:2019 and Health Insurance Portability and Accountability Act ("HIPAA") certifications and multiple agency Federal Risk and Authorization Management Program ("FedRAMP") Moderate Authorities to Operate. We also support FIPS 140-2 validated encryption in our Okta Verify MFA product.
We have attained multiple SOC 2 Type II Attestations, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC 27018:2019 and Health Insurance Portability and Accountability Act ("HIPAA") certifications and multiple agency Federal Risk and Authorization Management Program ("FedRAMP") Moderate Authorities to Operate. We also support FIPS 140-2 encryption requirements.
As we add new customers, users, developers and integrations to our platform, our business, customers, partners and users benefit from powerful network effects that increase the value and security of the Okta Identity Cloud.
As we add new customers, users, developers and integrations to our platform, our business, customers, partners and users benefit from powerful network effects that increase the value and security of our Workforce Identity and Customer Identity Clouds.
Private Cloud is a deployment option that allows Auth0 customers to run a dedicated cloud instance of Auth0. Private Cloud capability supports multiple cloud providers. • Organizations . Organizations enable Auth0 customers to support a large number of partners or customers of their own with independent configurations, login experiences and security options.
Private Cloud is a deployment option that allows our customers to run a dedicated cloud instance of the Customer Identity Cloud. Private Cloud capability supports multiple cloud providers. • Organizations . Organizations enable our customers to support a large number of partners or customers of their own with independent configurations, login experiences and security options. • Actions and Extensibility .
We also host a number of other events, such as Okta Showcase, a key event for product and feature announcements, where we engage with both existing customers and new prospects, as well as deliver product training. Research and Development Our research and development organization is responsible for the design, architecture, creation and the quality of our platform.
We also host a number of other events where we engage with both existing customers and new prospects, as well as deliver product training. Research and Development Our research and development organization is responsible for the design, architecture, creation and the quality of our platform.
As of January 31, 2022, more than 15,000 customers across nearly every industry used the Okta Identity Cloud 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.
As of January 31, 2023, more than 17,600 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.
From time to time, we evaluate opportunities to acquire or invest in emerging and adjacent technologies to complement our organic investments and improve our products, services and customers’ experiences. We will continue to use these types of strategic levers as opportunities arise.
From time to time, we evaluate opportunities to acquire or invest in emerging and adjacent technologies to complement our organic investments and improve our products, services and customers’ experiences. We will continue to use these types of strategic levers as opportunities arise. Our Products Okta's suite of products and services is used to manage and secure identities.
We also continue to recruit from a range of colleges, including those that support women in computer science and Historically Black Colleges and Universities, and engage with organizations that support diverse students and jobseekers through our social impact arm, Okta for Good. 13 Nurturing a culture of inclusion and belonging in our workplace is a key priority.
We also continue to recruit from a range of colleges and engage with organizations that support diverse students and jobseekers through our social impact arm, Okta for Good. 13 Nurturing a culture of inclusion and belonging in our workplace is a key priority.
In addition, as of such date, we also had nine issued patents in Australia which expire between 2033 and 2037, six issued patents in New Zealand which expire between 2034 and 2037, and nine issued European patents which have each been validated in Germany, France and Great Britain, with some also validated in Switzerland, Denmark, Spain, the Netherlands, Norway and Sweden, and expire between 2033 and 2037.
In addition, as of such date, we also had a number of patents granted around the world including twelve issued patents in Australia which expire between 2033 and 2037, seven issued patents in New Zealand which expire between 2034 and 2037, and nine issued European patents which have each been validated in Germany, France and Great Britain, with some also validated in Switzerland, Denmark, Spain, the Netherlands, Norway and Sweden, and expire between 2033 and 2037.
With 20% of our revenue generated outside of the United States in fiscal 2022, and our international revenue growing 97% from fiscal 2021 to fiscal 2022, we believe there is significant opportunity to continue to grow our international business.
With 22% of our revenue generated outside of the United States in fiscal 2023, and our international revenue growing 53% from fiscal 2022 to fiscal 2023, we believe there is significant opportunity to continue to grow our international business.
Over the past few years, we introduced and began transitioning our workforce to a “Dynamic Work” framework, based on the premise that enabling our employees to work from anywhere can increase employee empowerment, satisfaction and productivity, drive efficiency and enable us to hire from a broader, more diverse pool of talent.
Prior to the COVID-19 pandemic, we had introduced and began transitioning our workforce to a “Dynamic Work” framework, based on the premise that enabling our employees to work from anywhere can increase employee empowerment, satisfaction and productivity, drive efficiency and enable us to hire from a broader, more diverse pool of talent.
When used for customer identity, Universal Directory becomes a customer's secure system of record for management of all of its users. • Single Sign-On .
When used for workforce identity, Universal Directory becomes a customer’s system of record for all of its employees, contractors and partners. When used for customer identity, Universal Directory becomes a customer's secure system of record for management of all of its users. • Single Sign-On .
The Okta Identity Cloud is monitored not only at the infrastructure level but also at the application and third-party integration level. Synthetic transaction monitoring allows our technical operations team to detect and resolve issues proactively.
Our Workforce Identity and Customer Identity Clouds are monitored not only at the infrastructure level but also at the application and third-party integration level. Synthetic transaction monitoring allows our technical operations team to detect and resolve issues proactively.
We focus on acquiring and retaining our customers and increasing their spending with us through expanding the number of users who access the Okta Identity Cloud and up-selling additional products, including Auth0.
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.
Our customers use it to manage and secure their employees, contractors and partners, which we refer to as workforce identity. Our customers also use it to enable, manage and secure the identities of their own customers via the powerful APIs we have developed, which we refer to as customer identity.
Our customers also use it to enable, manage and secure the identities of their own customers via the powerful APIs we have developed, which we refer to as customer identity as supported by our Customer Identity Cloud.
Through Okta for Good, which is a part of our company and not a separate legal entity, we donate and discount access to our service for non-profit organizations, who use the Okta Identity Cloud to make their teams more efficient, allowing them to focus on making a meaningful impact in the world.
Through Okta for Good, which is a part of our company and not a separate legal entity, we donate and discount access to our service for non-profit organizations, who use Okta to make their teams more efficient, allowing them to focus on their important missions.
We currently have ERGs supporting women, people of color, veterans, the LGBTQIA+ community and parents and caregivers, and plan to launch affinity groups supporting neurodiversity and persons with disabilities in fiscal 2023. Growth and Development We invest significant resources to develop talent and actively foster a learning culture where employees are empowered to drive their personal and professional growth.
We currently have an affinity group supporting neurodiversity and ERGs supporting women, people of color, veterans, the LGBTQIA+ community and parents and caregivers. Growth and Development We invest significant resources to develop talent and actively foster a learning culture where employees are empowered to drive their personal and professional growth.
Access to these APIs is managed based on the user, which enables organizations to centrally maintain one set of permissions for any employee, partner or customer across every point of access.
API Access Management enables organizations to secure APIs as systems connect to each other. Access to these APIs is managed based on the user, which enables organizations to centrally maintain one set of permissions for any employee, partner or customer across every point of access.
Our Customers As of January 31, 2022, we had more than 15,000 customers, including more than 3,100 customers with an annual contract value greater than $100,000.
Our Customers As of January 31, 2023, we had more than 17,600 customers, including more than 3,930 customers with an annual contract value greater than $100,000.
We want to empower every application developer to use our platform to securely build authentication into any application.
We want to empower every application developer to use our platform to securely integrate identity into any application.
As of January 31, 2022, we had 5,030 employees, of which approximately 74% were in the United States and 26% were in our international locations. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
As of January 31, 2023, we had 6,013 employees, of which approximately 72% were in the United States and 28% were in our international locations. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
We expect to use Okta Platform Services to continue to enable new and expanded use cases and enable customers or third-party developers to build their own solutions based on an industry use case or unique customer need. Okta Platform Services include Okta’s Identity Engine, Workflows, Devices, Integrations and Insights.
Okta Platform Services can be used across both workforce and customer identity use cases. We expect to use Okta Platform Services to continue to enable new and expanded use cases and enable customers or third-party developers to build their own solutions based on an industry use case or unique customer need.
Principal competitive factors in our markets include flexibility, independence, product capabilities, total cost of ownership, time to value, scalability, user experience, number of pre-built integrations, customer satisfaction, global reach and ease of integration, management and use.
Due to the flexibility and breadth of our platform, we can and often do co-exist alongside our competitors’ products within our customer base. 12 Principal competitive factors in our markets include flexibility, independence, product capabilities, total cost of ownership, time to value, scalability, user experience, number of pre-built integrations, customer satisfaction, global reach and ease of integration, management and use.
Our customers span nearly all industry verticals and range from small organizations with fewer than 100 employees to companies in the Fortune 50, with up to hundreds of thousands of employees, some of which use our platform to manage millions of their customers' identities.
Our customers span nearly all industry verticals and range from small organizations with fewer than 100 employees to companies in the Fortune 50, with up to hundreds of thousands of employees, some of which use our platform to manage millions of their customers' identities. 10 Sales and Marketing Sales We sell directly to customers through our direct inside and field sales force and also indirectly through our extensive ecosystem of channel partners.
We plan to further increase revenue from our existing customers by cross-selling and up-selling additional and new products. We also believe we can expand our footprint by focusing on current customers that have deployed the Okta Identity Cloud for workforce identity, and expanding those customers’ use of our platform for customer identity, or vice versa. • Leverage Partner Ecosystem .
We also believe we can expand our footprint by focusing on current customers that have deployed our Workforce Identity Cloud for workforce identity, and expanding those customers’ use of our Customer Identity Cloud for customer identity, or vice versa. • Leverage Partner Ecosystem .
We believe that our secure and seamless access solutions enable developers to focus their time and attention on building their core application capabilities while relying on our platform for their identity related requirements. • Leverage Our Unique Data Assets with Powerful Analytics .
We believe that our Okta Identity Platform enables developers to focus their time and attention on innovating within their core application capabilities while relying on our platform for their identity related requirements, leading to more secure and convenient experiences for their own customers. • Leverage Our Unique Data Assets with Powerful Analytics .
Auth0 Products • Universal Login . Universal Login is a standards-based login infrastructure with centralized feature management and configuration for websites and applications that can be integrated with a wide range of social providers, enterprise login services and customer-provided databases.
Universal Login is a standards-based login infrastructure with centralized feature management and configuration for websites and applications that can be integrated with a wide range of social providers, enterprise login services and customer-provided databases. Universal Login enables our customers to provide a consistent login experience across many different applications and devices. • Attack Protection .
We partner with leading application, infrastructure and security vendors, such as Amazon Web Services, Cisco, CrowdStrike, Google Cloud, Microsoft, Netskope, Proofpoint, Salesforce, ServiceNow, VMware and Workday.
We partner with leading application, infrastructure and security vendors, such as Amazon Web Services ("AWS"), CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler.
We designed the Okta Identity Cloud to provide organizations an integrated approach to managing and securing every identity in an organization. Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile and web applications, on-premises servers, application program interfaces ("APIs"), IT infrastructure providers and services from a multitude of devices.
Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile, web and Software-as-a-Service ("SaaS") applications, on-premises servers, application programming interfaces ("APIs"), IT infrastructure providers and services from a multitude of devices.
We ensure that access to our platform is securely delegated across an organization. Okta's source code is updated weekly, and there are audited and verifiable security checkpoints to ensure source code fidelity and continuous security review.
Okta's source code is updated weekly, and there are audited and verifiable security checkpoints to ensure source code fidelity and continuous security review.
Attack Protection enables Auth0 customers to minimize risks associated with the ever-growing volume of identity-targeted attacks. • Adaptive Multi-Factor Authentication . Simple-to-use and adaptable Multi-Factor Authentication that minimizes friction to end users. When using Adaptive Multi-Factor Authentication, Auth0 customers leverage risk-assessment algorithms that present Multi-Factor Authentication challenges only to select authentication attempts that require additional validation. • Passwordless .
Simple-to-use and adaptable Multi-Factor Authentication that minimizes friction to end users. When using Adaptive Multi-Factor Authentication, our customers leverage risk-assessment algorithms that present Multi-Factor Authentication challenges only to select authentication attempts that require additional validation. • Passwordless .
Users and profiles stored in the directory can be used with our Single Sign-On product to manage passwords and authentication, or can be used by developers to store and authenticate the users of their applications. When used for workforce identity, Universal Directory becomes a customer’s system of record for all of its employees, contractors and partners.
Universal Directory provides a centralized, cloud-based system of record to store and secure user, application and device profiles for an organization. Users and profiles stored in the directory can be used with our Single Sign-On product to manage passwords and authentication, or can be used by developers to store and authenticate the users of their applications.
These integrations allow us to seamlessly deliver connectivity use cases that previously required significant custom development to achieve. Robust Security Security is a mission-critical issue for Okta and for our customers. Our approach to security spans day-to-day operational practices from the design and development of our software to how customer data is segmented and secured within our multi-tenant platform.
Robust Security Security is a mission-critical issue for Okta and for our customers. Our approach to security spans day-to-day operational practices from the design and development of our software to how customer data is segmented and secured within our multi-tenant platform. We ensure that access to our platform is securely delegated across an organization.
The Okta Identity Cloud is underpinned by Okta Platform Services which are the foundational platform components that power our product features. Workforce Identity Cloud In workforce identity use cases, the Okta Identity Cloud simplifies the way an organization’s employees, contractors and partners connect to its applications and data from any device, while increasing efficiency and keeping IT environments secure.
Workforce Identity Cloud The Workforce Identity Cloud simplifies the way an organization’s employees, contractors and partners connect to its applications and data from any device, while increasing efficiency and keeping IT environments secure.
Auth0 empowers application builders to innovate faster by removing the complexity from identity and making it simple, extensible and customizable. 6 Platform Services In order to enable customers and partners to address a wide range of identity use cases, we have built a set of modular components, called Okta Platform Services, which can be combined to build new features and tailored experiences faster.
Platform Services In order to enable customers and partners to address a wide range of identity use cases, we have built a set of modular components, called Okta Platform Services, which can be combined to build new features and tailored experiences faster. Okta Platform Services are available in Okta packaged products through APIs and software 6 development kits.
People First Philosophy “Empower our people” is one of our core values and in fiscal 2022, we introduced our “People First” philosophy in which culture, career growth, competitive rewards, flexible work and purpose come together to create a shared sense of ownership in achieving our company vision.
Our “People First” philosophy, in which culture, career growth, competitive rewards, flexible work and purpose come together, creates a shared sense of ownership in achieving our company vision. We want every employee to feel ownership of Okta.
The Okta Identity Cloud The Okta Identity Cloud is an independent and neutral cloud-based identity solution that allows our customers to integrate with nearly any application, service or cloud that they choose through our secure, reliable and scalable platform and cloud infrastructure.
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. 5 The Okta Identity Platform Okta is an independent and neutral cloud-based identity solution that allows our customers to integrate with nearly any application, service or cloud that they choose through our secure, reliable and scalable platform and cloud infrastructure.
We had over 7,000 integrations with cloud, mobile and web applications and IT infrastructure providers as of January 31, 2022, which while not directly correlated to revenue, shows the breadth and acceptance of our platform. On May 3, 2021, we acquired Auth0, Inc. ("Auth0").
We had over 7,000 integrations with cloud, mobile and web applications and IT infrastructure providers as of January 31, 2023, which while not directly correlated to revenue, shows the breadth and acceptance of our platform. We employ a SaaS business model and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings.
Organizations can continuously manage and secure access to on-premises Windows and Linux servers and across leading Infrastructure-as-a-Service vendors, including Amazon Web Services, Google Cloud Platform and Microsoft Azure. Advanced Server Access enables our customers to centralize access controls in a seamless manner to better mitigate the risk of credential theft, reuse, sprawl and abandoned administrative accounts.
Organizations can continuously manage and secure access to on-premises Windows and Linux servers and across leading Infrastructure-as-a-Service vendors, including Amazon Web Services, Google Cloud Platform and Microsoft Azure.
Okta Community 11 We have created the Okta Community, an online community available to all of our customers that enables them to connect with other customers and partners to ask questions and find answers.
Professional Services Our professional services team provides assistance to customers in the deployment of our Workforce Identity and Customer Identity Clouds and includes identity and security experts, customized deployment plans and SmartStart, which provides a quick path to implementation. 11 Okta Community We have created the Okta Community, an online community available to all of our customers that enables them to connect with other customers and partners to ask questions and find answers.
With Okta Lifecycle Management, organizations can securely manage the entire identity lifecycle, from on-boarding to off-boarding, and ensure compliance requirements are met as user roles evolve and access levels change. • API Access Management . API Access Management enables organizations to secure APIs as systems connect to each other.
It automates IT processes and ensures user accounts are created and deactivated at the appropriate times, including the workflow and policies needed to power those processes. With Lifecycle Management, organizations can securely manage the entire identity lifecycle, from on-boarding to off-boarding, and ensure compliance requirements are met as user roles evolve and access levels change. • API Access Management .
Universal Login enables Auth0 customers to provide a consistent login experience across many different applications and devices. • Attack Protection . Attack Protection is a suite of security capabilities that protect Auth0 customers from different types of malicious traffic, including bots, breached passwords, suspicious IP addresses and brute force attacks.
Attack Protection is a suite of security capabilities that protect our customers from different types of malicious traffic, including bots, breached passwords, suspicious IP addresses and brute force attacks. Attack Protection enables our customers to minimize risks associated with the ever-growing volume of identity-targeted attacks. • Adaptive Multi-Factor Authentication .
Our workforce identity products are consumed through web and mobile interfaces, and provide simple ways for IT organizations to manage identities for their employees, contractors and partners. For customer identity, our APIs are also used by developers to embed Okta identity functionality into their own customer-facing mobile or web applications.
Most of our products can be used for both customer identity and for workforce identity use cases and we are continuously enhancing our products and services. Our workforce identity products are consumed through web and mobile interfaces, and provide simple ways for IT organizations to manage identities for their employees, contractors and partners.
Our technological neutrality allows our customers to easily adopt the best technologies, and our platform is designed to securely connect users to the technology that they choose. We prioritize the compatibility of the Okta Identity Cloud with public clouds, on-premises infrastructures and hybrid clouds.
Our technological neutrality allows our customers to easily adopt the best technologies, and our Okta Identity Platform is designed to securely connect users to the technology that they choose. Our Workforce Identity and Customer Identity Clouds are underpinned by Okta Platform Services which are the foundational platform components that power our product features.
The Okta Identity Cloud is powered by our category-defining platform that enables our customers to securely connect the right people to the right technologies and services at the right time. The Okta Identity Cloud helps organizations effectively harness the power of cloud, mobile and web technologies by securing users and connecting them with the applications and technology they use.
Our Workforce Identity and Customer Identity Clouds help organizations effectively harness the power of cloud, mobile and web technologies by securing users and connecting them with the applications and technology they use.
The Okta Identity Cloud can be used as the central system for an organization’s connectivity, access, authentication and identity lifecycle management needs spanning all of its users, technology and applications. We enable our customers to easily deploy, manage and secure applications and devices, and to provision and support users across their IT environments, with a simple, intuitive, consumer-like user experience.
The Workforce Identity Cloud can be used as the central system for an organization’s connectivity, access, authentication and identity lifecycle management needs spanning all of its users, technology and applications.
Our cloud architecture is multi-tenant, encrypted and third-party validated.
Our cloud architecture is multi-tenant, encrypted and third-party validated. Our service also allows us to integrate into our customers’ on-premises components and hybrid configurations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, among other things: • health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses; • macroeconomic conditions and the economic impact of the COVID-19 pandemic; • unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for local practices and regulatory requirements; • lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs and other barriers; • laws and business practices favoring local competitors or commercial parties; • costs and liabilities related to compliance with the numerous and ever-growing landscape of U.S. and international data privacy and cybersecurity regimes, many of which involve disparate standards and enforcement approaches; • greater risk that our foreign employees or partners will fail to comply with U.S. and foreign laws; • practical difficulties of enforcing intellectual property rights in countries with fluctuating laws and standards and reduced or varied protection for intellectual property rights in some countries; • restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, tariffs, import and export restrictions or quotas, barriers, sanctions, custom duties or other trade restrictions; • unexpected changes in legal and regulatory requirements; • difficulties in managing systems integrators and technology partners; • differing technology standards; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • difficulties in managing and staffing international operations and differing employer/employee relationships and local employment laws; • political, economic and social instability, war, terrorist activities or armed conflict, including Russia's invasion of Ukraine; • global economic uncertainty caused by global political events, including the United Kingdom's exit from the European Union, and similar geopolitical developments; • fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expense; and • potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings.
Biggest changePrivacy Shield, to address cross-border data flows; • greater risk that our foreign employees or partners will fail to comply with U.S. and foreign laws; • practical difficulties of enforcing intellectual property rights in countries with fluctuating laws and standards and reduced or varied protection for intellectual property rights in some countries; • restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, tariffs, import and export restrictions or quotas, barriers, sanctions, custom duties or other trade restrictions; • unexpected changes in legal and regulatory requirements; • difficulties in managing systems integrators and technology partners; 24 • differing technology standards; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • difficulties in managing and staffing international operations and differing employer/employee relationships and local employment laws; • political, economic and social instability, war, terrorist activities or armed conflict, including Russia's invasion of Ukraine; • global economic uncertainty caused by global political events; • fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expense; and • potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings.
If we acquire additional businesses, we may not be able to successfully integrate and retain the acquired personnel, integrate the acquired operations and technologies, adequately test and assimilate the internal control processes of the acquired business in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), or effectively manage the combined business following the acquisition.
If we acquire additional businesses, we may not be able to successfully integrate and retain the acquired personnel, integrate the acquired operations and technologies, and adequately test and assimilate the internal control processes of the acquired business in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), or effectively manage the combined business following the acquisition.
In addition, the failure of third-party virtual data centers, or third-party internet service providers, or other third-party service providers whose services are integrated with our platform, to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to scale our operations.
In addition, the failure of third-party virtual data centers, third-party internet service providers, or other third-party service providers whose services are integrated with our platform, to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to scale our operations.
Acquisitions and strategic transactions involve numerous risks, including: • delays or reductions in customer purchases for both us and the acquired business; • disruption of partner and customer relationships; • potential loss of key employees of the acquired company; • claims by and disputes with the acquired company’s employees, customers, stockholders or third parties; • unknown liabilities or risks associated with the acquired business, product or technology, such as contractual obligations, potential security vulnerabilities of the acquired company and its products and services, potential intellectual property infringement, costs arising from the acquired company’s failure to comply with legal or regulatory requirements and litigation matters; • acquired technologies or products may not comply with legal or regulatory requirements and may require us to make additional investments to make them compliant; • acquired technologies or products may not be able to provide the same support service levels that we generally offer with our other products; • acquired businesses, technologies or products could be viewed unfavorably by our partners, our customers, our stockholders or securities analysts; • unforeseen integration or other expenses; and • future impairment of goodwill or other acquired intangible assets.
Acquisitions and strategic transactions involve numerous risks, including: • delays or reductions in customer purchases for both us and the acquired business; • disruption of partner and customer relationships; • potential loss of key employees of the acquired company; • claims by and disputes with the acquired company’s employees, customers, stockholders or third parties; 23 • unknown liabilities or risks associated with the acquired business, product or technology, such as contractual obligations, potential security vulnerabilities of the acquired company and its products and services, potential intellectual property infringement, costs arising from the acquired company’s failure to comply with legal or regulatory requirements and litigation matters; • acquired technologies or products may not comply with legal or regulatory requirements and may require us to make additional investments to make them compliant; • acquired technologies or products may not be able to provide the same support service levels that we generally offer with our other products; • acquired businesses, technologies or products could be viewed unfavorably by our partners, our customers, our stockholders or securities analysts; • unforeseen integration or other expenses; and • future impairment of goodwill or other acquired intangible assets.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, compliance frameworks that Okta has contractually committed to comply with, or any actual or suspected privacy or security incident, even if unfounded, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal data or other data, may result in enforcement actions and prosecutions, private litigation, fines, penalties and censure, claims for damages by customers and other affected individuals, or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, compliance frameworks that Okta has contractually 31 committed to comply with, or any actual or suspected privacy or security incident, even if unfounded, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal data or other data, may result in enforcement actions and prosecutions, private litigation, fines, penalties and censure, claims for damages by customers and other affected individuals, or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Any claim of infringement, regardless of its merit or our defenses, could: • require costly litigation to resolve and/or the payment of substantial damages, ongoing royalty payments or other amounts to settle such disputes; • require significant management time and attention; • cause us to enter into unfavorable royalty or license agreements, if such arrangements are available at all; 37 • require us to discontinue the sale of some or all of our products, remove or reduce features or functionality of our products or comply with other unfavorable terms; • require us to indemnify our customers or third-party service providers; and/or • require us to expend additional development resources to redesign our products.
Any claim of infringement, regardless of its merit or our defenses, could: • require costly litigation to resolve and/or the payment of substantial damages, ongoing royalty payments or other amounts to settle such disputes; • require significant management time and attention; • cause us to enter into unfavorable royalty or license agreements, if such arrangements are available at all; • require us to discontinue the sale of some or all of our products, remove or reduce features or functionality of our products or comply with other unfavorable terms; • require us to indemnify our customers or third-party service providers; and/or • require us to expend additional development resources to redesign our products.
Other factors that may influence the length and variability of our sales cycle include, among other things: • the need to raise awareness about the uses and benefits of our platform, including our customer identity products; • the need to allay privacy, regulatory and security concerns; • the discretionary nature of purchasing and budget cycles and decisions; • the competitive nature of evaluation and purchasing processes; • announcements or planned introductions of new products, features or functionality by us or our competitors; and • often lengthy purchasing approval processes.
Other factors that may influence the length and variability of our sales cycle include, among other things: • the need to raise awareness about the uses and benefits of our platform, including our customer identity products; • the need to allay privacy, regulatory and security concerns; • the discretionary nature of purchasing and budget cycles and decisions; • the competitive nature of evaluation and purchasing processes; 25 • announcements or planned introductions of new products, features or functionality by us or our competitors; and • often lengthy purchasing approval processes.
Furthermore, as a well-known provider of identity and security solutions, any such breach, including a breach of our customers’ systems, could compromise systems secured by our products, creating system disruptions or slowdowns and exploiting security vulnerabilities of our or our customers’ systems, and the information stored on our or our customers’ systems could be accessed, publicly disclosed, altered, lost or stolen, which could subject us 30 to liability and cause us financial harm.
Furthermore, as a well-known provider of identity and security solutions, any such breach, including a breach of our customers’ systems, could compromise systems secured by our products, creating system disruptions or slowdowns and exploiting security vulnerabilities of our or our customers’ systems, and the information stored on our or our customers’ systems could be accessed, publicly disclosed, altered, lost or stolen, which could subject us to liability and cause us financial harm.
Any loss of the right to use any of these services could result in decreased functionality of our products until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and 29 integrated into our infrastructure. If we do not accurately predict our infrastructure capacity requirements, our customers could experience service shortfalls.
Any loss of the right to use any of these services could result in decreased functionality of our products until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated into our infrastructure. If we do not accurately predict our infrastructure capacity requirements, our customers could experience service shortfalls.
We may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA to apply different standards to the transfer of personal data from the EEA to the United States, and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA to the United States.
We may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA and UK to apply different standards to the transfer of personal data from the EEA and UK to the United States, and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA and UK to the United States.
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.
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 19 histories, greater resources to make strategic acquisitions and greater name recognition than we do. Our principal competitor is Microsoft.
We also expect that there will continue to be new proposed laws, regulations, self-regulatory and industry standards concerning privacy, data protection and information security in the United States, China, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business.
We also expect that there will continue to be new proposed laws, regulations, self-regulatory and industry standards concerning privacy, data protection and information security in the United States, China, the European Union, India and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business.
We or such partners may have direct or indirect interactions with officials and employees of government agencies or state- 39 owned or affiliated entities and under certain circumstances we could be held liable for the corrupt or other illegal activities of such partners, and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
We or such partners may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and under certain circumstances we could be held liable for the corrupt or other illegal activities of such partners, and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.
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. 16 • Servicing our debt may require a significant amount of cash.
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.
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 recent growth rates may not be indicative of our future growth.
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.
Our competitor categories include, but are not limited to: • Authentication providers; • Access and lifecycle management providers; • Multi-factor authentication providers; 19 • 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 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.
We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA residents. There are few viable alternatives to the SCCs, and the law in this area remains dynamic.
We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA and UK residents. There are few viable alternatives to the SCCs, and the law in this area remains dynamic.
New income, sales, use, value-added or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Those enactments could harm our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
New income, sales, use, value-added or other taxes, tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Those enactments could harm our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
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, 17 either of which may harm our revenue, profitability and results of operations.
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.
Although we believe we continue to satisfy regulatory requirements through our use of SCCs, these latest developments may require major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA to a country outside of the EEA.
Although we believe we continue to satisfy regulatory requirements through our use of SCCs, these latest developments may require major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA and UK to a country outside of the EEA and UK.
Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our ability to refinance or raise any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all 27 claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed. 48 Catastrophic events may disrupt our business.
If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed. Catastrophic events may disrupt our business.
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.
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 18 offset these increases in our operating expenses, we will not be profitable in future periods.
The regulatory environment applicable to the handling of EEA residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed.
The regulatory environment applicable to the handling of EEA and UK residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed.
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 15 This risk factor summary contains a high-level summary of risks associated with our business.
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.
In addition, techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently, become more complex over time and generally are not recognized until launched against a target.
In addition, techniques used to sabotage or to obtain unauthorized 29 access to networks in which data is stored or through which data is transmitted change frequently, become more complex over time and generally are not recognized until launched against a target.
Any one or more of the above could harm our business, results of operations and financial condition. We use open source software in our products, which could negatively affect our ability to offer our products and subject us to litigation or other actions.
Any one or more of the above could harm our business, results of operations and financial condition. 37 We use open source software in our products, which could negatively affect our ability to offer our products and subject us to litigation or other actions.
These regulations may deter 33 customers from using cloud-based services such as ours, and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs.
These regulations may deter customers from using cloud-based services such as ours, and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs.
If we engage in additional debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.
If we engage in additional debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified 27 liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.
This expansion will require us to invest significant financial and other resources. Our business will be harmed if our 25 efforts do not generate a corresponding increase in revenue.
This expansion will require us to invest significant financial and other resources. Our business will be harmed if our efforts do not generate a corresponding increase in revenue.
Our quarterly results of operations fluctuate from quarter to quarter as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the level of demand for our platform; • our ability to attract new customers, obtain renewals from existing customers and upsell or otherwise increase our existing customers’ use of our platform; • health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses; • the timing and success of new product introductions by us or our competitors or any other change in the competitive landscape of our market; • pricing pressure as a result of competition, COVID-19 or otherwise; • seasonal buying patterns for IT spending; • the mix of revenue attributable to larger transactions as opposed to smaller transactions, and the associated volatility and timing of our transactions; 21 • changes in remaining performance obligations (“RPO”) due to seasonality, the timing of and compounding effects of renewals, invoice duration, size and timing, new business linearity between quarters and within a quarter, average contract term or fluctuations due to foreign currency movements, all of which may impact implied growth rates; • errors in our forecasting of the demand for our products, which could lead to lower revenue, increased costs or both; • increases in and timing of sales and marketing and other operating expenses that we may incur to grow and expand our operations and to remain competitive; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform and products; • our ability to comply with privacy laws and requirements, including the General Data Protection Regulation and California Consumer Privacy Act; • costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs; • credit or other difficulties confronting our channel partners; • adverse litigation judgments, settlements of litigation and other disputes or other litigation-related or dispute-related costs; • the impact of new accounting pronouncements and associated system implementations; • changes in the legislative or regulatory environment; • fluctuations in foreign currency exchange rates; • expenses related to real estate, including our office leases, and other fixed expenses; and • general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability.
Our quarterly results of operations fluctuate from quarter to quarter as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • the level of demand for our platform; • our ability to attract new customers, obtain renewals from existing customers and upsell or otherwise increase our existing customers’ use of our platform; • health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses; • the timing and success of new product introductions by us or our competitors or any other change in the competitive landscape of our market; • pricing pressure as a result of competition, the inflation and interest rate environment and increased costs, COVID-19 or otherwise; • seasonal buying patterns for IT spending; • the mix of revenue attributable to larger transactions as opposed to smaller transactions, and the associated volatility and timing of our transactions; • changes in remaining performance obligations (“RPO”) due to seasonality, the timing of and compounding effects of renewals, invoice duration, size and timing, new business linearity between quarters and within a quarter, average contract term or fluctuations due to foreign currency movements, all of which may impact implied growth rates; • errors in our forecasting of the demand for our products, which could lead to lower revenue, increased costs or both; • increases in and timing of sales and marketing and other operating expenses that we may incur to grow and expand our operations and to remain competitive; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform and products; • our ability to comply with privacy laws and requirements, including the General Data Protection Regulation and California Consumer Privacy Act; • costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs; • credit or other difficulties confronting our channel partners; • adverse litigation judgments, settlements of litigation and other disputes or other litigation-related or dispute-related costs; • the impact of new accounting pronouncements and associated system implementations; • changes in the legislative or regulatory environment; • fluctuations in foreign currency exchange rates; • expenses related to real estate, including our office leases, and other fixed expenses; and • general economic conditions in either domestic or international markets, including the inflation and interest rate environment, geopolitical uncertainty and instability. 22 Any one or more of the factors above may result in significant fluctuations in our results of operations.
Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme.
Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to U.S. 32 entities who had self-certified under the Privacy Shield scheme.
In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS or other cloud services), internal networks, our customers’ systems and the information that they store and process.
In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state-supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS’ or other cloud services providers’ systems), internal networks, our customers’ systems and the information that they store and process.
This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA.
This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA and UK.
We believe our revenue growth depends on a number of factors, such as macroeconomic conditions and the economic impact of the COVID-19 pandemic, 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”); • 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.
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 the COVID-19 pandemic, 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”); • 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.
We and our customers are at risk of enforcement actions taken by certain EU data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EU are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices.
We and our customers are at risk of enforcement actions taken by certain EEA and UK data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EEA and UK are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices.
The conditional conversion features of the 2025 Notes were triggered as of January 31, 2021 and the 2025 Notes were convertible at the option of the holders between February 1, 2021 and April 30, 2021; however, as of January 31, 2022, the conditions allowing holders of the 2025 Notes to convert were not met.
The conditional conversion features of the 2025 Notes were triggered as of January 31, 2021 and the 2025 Notes were convertible at the option of the holders between February 1, 2021 and April 30, 2021; however, as of January 31, 2023, the conditions allowing holders of the 2025 Notes to convert were not met.
Our international operations may give rise to potentially adverse tax consequences. We are expanding our international operations and staff to better support our growth into the international markets. Our corporate structure and associated transfer pricing policies anticipate future growth into the international markets.
Our international operations may give rise to potentially adverse tax consequences. We are expanding our international operations and staff to better support our growth into certain international markets. Our corporate structure and associated transfer pricing policies anticipate future growth into certain international markets.
Any of these factors could harm our business, results of operations and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.
Any of these factors could harm our business, results of operations and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. The conversion features of the Notes, if triggered, may adversely affect our financial condition and results of operations.
We may find it necessary to establish systems to maintain EU personal data within the EU, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.
We may find it necessary to establish systems to maintain EEA and UK personal data within the EEA and UK, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.
Third parties may attempt to fraudulently induce employees, contractors, customers or our customers’ users into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data, which could result in significant legal and financial exposure, a loss of confidence in the security of our platform, interruptions or malfunctions in our operations, account lock outs, and, ultimately, harm to our future business prospects and revenue.
Third parties have induced and may continue to fraudulently induce employees, contractors, customers or our customers’ users into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our applications, internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data, which could result in significant legal and financial exposure, a loss of confidence in the security of our platform, interruptions or malfunctions in our 30 operations, account lock outs, and, ultimately, harm to our future business prospects and revenue.
If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not to purchase our products in the future. Additionally, 40 new, changed, modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our products.
If we raise our prices to offset the costs of these additional taxes, existing and potential future customers may elect not to purchase our products in the future. Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our products.
Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our products, our product support, our prices and pricing plans, particularly in light of COVID-19-related economic conditions, the prices of competing software products, reductions in our customers’ spending levels, user adoption of our platform, deployment success, utilization rates by our customers, new product releases and changes to the packaging of our product offerings.
Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our products, our product support, our prices and pricing plans, particularly in light of COVID-19-related economic conditions, the inflation and interest rate environment and increased costs, the prices of competing software products, reductions in our customers’ spending levels, user adoption of our platform, deployment success, utilization rates by our customers, new product releases and changes to the packaging of our product offerings.
From the date of issuance through January 31, 2022, the conditions allowing holders of the 2026 Notes to convert were not met.
From the date of issuance through January 31, 2023, the conditions allowing holders of the 2026 Notes to convert were not met.
In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital and could limit our ability to raise future capital.
In addition, security breaches impacting our platform could result in a risk of loss or unauthorized disclosure of this information, or the denial of access to this information, which, in turn, could lead to enforcement actions, litigation, regulatory or governmental audits, investigations and possible liability, and increased requests by individuals regarding their personal data.
In addition, security breaches impacting our platform have in certain cases resulted in and could in the future result in a risk of loss or unauthorized disclosure of this information, or the denial of access to this information, which, in turn, could lead to enforcement actions, litigation, regulatory or governmental audits, investigations and possible liability, and increased requests by individuals regarding their personal data.
Any investigation or charges by EU data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers.
Any investigation or charges by EEA and UK data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers.
While some governments around the world have lifted restrictions and distributed vaccines, there remains significant uncertainty around the recovery due to the challenging logistics of distributing the vaccines globally, as well as the unknown impact of emerging variants of COVID-19. This pandemic has resulted in a widespread health crisis that is adversely affecting broader economies and financial markets.
While some governments around the world have lifted restrictions and distributed vaccines, there remains significant uncertainty around the recovery, as well as the unknown impact of emerging variants of COVID-19. This pandemic has resulted in a widespread health crisis that is adversely affecting broader economies and financial markets.
If a breach of customer data on our platform were to occur, as a result of third-party action, technology limitations, employee or contractor error, malfeasance or otherwise, and the confidentiality, integrity or availability of our customers’ data or systems was disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation.
When such breaches occur, as a result of third-party action, technology limitations, employee or contractor error, malfeasance or otherwise, and if the confidentiality, integrity or availability of our customers’ data or systems is disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation.
If we are unable to successfully develop new products, enhance our existing products to meet customer requirements, or otherwise gain market acceptance, our business, results of operations and financial condition would be harmed. 20 Further, to grow our business, we must convince developers to adopt and build their applications using our APIs and products.
If we are unable to successfully develop new products, enhance our existing products to meet customer requirements, or otherwise gain market acceptance, our business, results of operations and financial condition would be harmed. Further, to grow our business, we must convince developers to adopt and build their applications using our application programming interfaces (“APIs”) and products.
Concerns about the COVID-19 pandemic, the systemic impact of a widespread recession (in the United States or internationally), energy costs, geopolitical issues 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.
Concerns about the inflation and interest rate environment, the COVID-19 pandemic, 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.
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 2,806 employees as of January 31, 2021 to 5,030 employees as of January 31, 2022.
We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and our operational and financial resources. For example, our headcount has grown from 5,030 employees as of January 31, 2022 to 6,013 employees as of January 31, 2023.
If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which could harm our business, results of operations and financial condition. Our customer agreements contain service level commitments, under which we guarantee specified availability of our platform.
We provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which could harm our business, results of operations and financial condition.
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, including technology companies and high-growth, unprofitable companies in particular, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability. From fiscal 2020 to fiscal 2021, our revenue grew from $586.1 million to $835.4 million, an increase of 43%, and from fiscal 2021 to fiscal 2022, our revenue grew from $835.4 million to $1,300.2 million, an increase of 56%.
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%.
The proposed rulemaking has not yet been finalized. We will continue to monitor whether any final modifications to the Privacy Rule may obligate us to change our practices. Significant changes to HIPAA, including interpretation and application of HIPAA, could negatively impact our business. We provide service level commitments under our customer contracts.
The proposed rulemaking has not yet been finalized. We will continue to monitor whether any final modifications to the Privacy Rule may obligate us to change our practices. Significant changes to HIPAA, including interpretation and application of HIPAA, could negatively impact our business.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of January 31, 2022, our directors, executive officers and their affiliates held in the aggregate 42.6% of the voting power of our capital stock.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of January 31, 2023, our directors, executive officers and their affiliates held in the aggregate 41.7% of the voting power of our capital stock.
In addition, in connection with the issuance of the 2023 Notes, we entered into convertible note hedges (“Note Hedges”) with certain financial institutions (the “2023 Notes Option Counterparties”). We also entered into warrant transactions with the 2023 Notes Option Counterparties pursuant to which we sold warrants for the purchase of our Class A common stock (“Warrants”).
In addition, in connection with the issuance of the 2023 Notes, we entered into warrant transactions with certain financial institutions (the “2023 Notes Option Counterparties”) pursuant to which we sold warrants for the purchase of our Class A common stock (“Warrants”).
Any failure of or disruption to our infrastructure could make our platform unavailable to our customers. If we are unable to meet the stated service level commitments to our customers or suffer extended periods of unavailability of our platform, we may be contractually obligated to provide affected customers with service credits for future subscriptions.
If we are unable to meet the stated service level commitments to our customers or suffer extended periods of unavailability of our platform, we may be contractually obligated to provide affected customers with service credits for future subscriptions.
In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
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. 18 We have a history of losses, and we expect to incur losses for the foreseeable future.
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.
If these developers stop developing on or supporting our platform, we will lose the benefit of network effects that have contributed to the growth in our number of customers, and our business (including the performance levels of our products), results of operations and financial condition could be harmed.
If these developers stop developing on or supporting our platform, we will lose the benefit of network effects that have contributed to the growth in our number of customers, and our business (including the performance levels of our products), results of operations and financial condition could be harmed. 20 Our business depends on our customers renewing their subscriptions and purchasing additional licenses or subscriptions from us.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which included temporary relief from the net operating loss limitations imposed by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017 and before January 1, 2021, and made certain technical corrections to applying the net operating loss utilization limitations for tax years beginning after January 1, 2021. 41 Our ability to use our net operating losses is conditioned upon generating future U.S. federal taxable income.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which included temporary relief from the net operating loss limitations imposed by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017 and before January 1, 2021, and made certain technical corrections to applying the net operating loss utilization limitations for tax years beginning after January 1, 2021.
Our success is dependent, in part, upon protecting our proprietary information and technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate.
We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate.
We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and they could terminate their employment with us at any time.
Such changes in our executive management team may be disruptive to our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and they could terminate their employment with us at any time.
In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes, as applicable, at any time during specified periods at their option.
In the event the conditional conversion features of the 2025 Notes and the 2026 Notes are triggered, holders of the Notes will be entitled to convert the Notes, as applicable, at any time during specified periods at their option.
We have incurred significant net losses in each year since our inception, including net losses of $208.9 million, $266.3 million and $848.4 million in fiscal 2020, 2021 and 2022, respectively. We expect to continue to incur net losses for the foreseeable future.
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.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including, but not limited to: • overall performance of the equity markets and/or publicly-listed technology companies; • actual or anticipated fluctuations in our revenue or other financial or operating metrics; • changes in the financial projections we provide to the public or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates and/or recommendations by any securities analysts who follow our company; • our failure to meet the estimates or the expectations of securities analysts or investors; • recruitment or departure of key personnel; • significant security breaches, technical difficulties or interruptions of our service; • the economy as a whole and market conditions in our industry; • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us; • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and • sales of additional shares of our Class A common stock by us, our directors, our officers or our stockholders.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including, but not limited to: • overall performance of the equity markets and/or publicly-listed technology companies; • volatility in the market prices and trading volumes of technology and high-growth companies generally, or those in our industry in particular; • actual or anticipated fluctuations in our revenue or other financial or operating metrics; • our ability to meet or exceed forward-looking guidance we have given, our ability to give forward-looking guidance consistent with past practices, and changes to or withdrawal of previous guidance or long-range targets; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates and/or recommendations by any securities analysts who follow our company; • our failure to meet the estimates or the expectations of securities analysts or investors; • actions and investment positions taken by institutional and other stockholders, including activist investors; • recruitment or departure of key personnel; • significant security breaches, technical difficulties or interruptions of our service; • the economy as a whole, the inflation and interest rate environment and market and industry conditions; • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us; • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and • sales of additional shares of our Class A common stock by us, our directors, our officers or our stockholders.
The variability and unpredictability of our quarterly results of operations or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or other metrics for a particular period.
You should not rely on our past results as an indicator of our future performance. The variability and unpredictability of our quarterly results of operations or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or other metrics for a particular period.
A portion of our revenues are generated by sales to government entities, which are subject to a number of challenges and risks. A portion of our sales are to partners that resell our services to government agencies, and we have made, and plan to continue to make, investments to support future sales opportunities in the government sector.
A portion of our sales are to partners that resell our services to government agencies, and we have made, and plan to continue to make, investments to support future sales opportunities in the government sector.
We believe that developing and maintaining awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future products and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market increases.
We believe that developing and maintaining awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future products and is an important element in attracting new customers.
For example, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020, which broadly defines personal information and gives California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action for data breaches.
For example, the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020, and the California Privacy Rights Act (“CPRA”), which took effect on January 1, 2023 and significantly modifies the CCPA, broadly define personal information and give California residents expanded privacy rights and protections and provide for civil penalties for violations and a private right of action for data breaches.
The Note Hedges are expected generally to reduce the potential dilution to our Class A common stock upon any conversion or settlement of the 2023 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023 Notes, as the case may be.
The Capped Calls are generally expected to reduce potential dilution to our Class A common stock upon any conversion or settlement of the 2025 Notes and 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2025 Notes and 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap.
We may not have sufficient cash flow from our business to pay our indebtedness. Risks Related to Our Business and Industry The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
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. • There are risks related to our ability to successfully integrate Auth0 and realize potential benefits from the acquisition. • 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. • An application, data security or network incident 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 dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who held in the aggregate 42.6% of the voting power of our capital stock as of January 31, 2022.
Any material decline in our Dollar-Based Net Retention Rate would harm our future results of operations. • Customer growth could fall below expectations. • The effects of the COVID-19 pandemic have affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. • 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. 16 • 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 IPO, including our directors, executive officers, and their affiliates, who held in the aggregate 41.7% of the voting power of our capital stock as of January 31, 2023.
In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States.
Any international expansion efforts that we may undertake may not be successful. In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States.
A summary of our risks includes, but is not limited to, the following: • The effects of the COVID-19 pandemic have affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. • Adverse general economic and market 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. • We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects. • Our recent growth rates may not be indicative of our future growth.
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. • 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.
Unsuccessful, lengthy, or costly customer implementation and integration projects could result in claims from customers, harm to our reputation, and opportunities for competitors to displace our products, each of which could have an adverse effect on our business and results of operations.
Unsuccessful, lengthy, or costly customer implementation and integration projects could result in claims from customers, harm to our reputation, and opportunities for competitors to displace our products, each of which could have an adverse effect on our business and results of operations. 26 A portion of our revenues are generated by sales to government entities, which are subject to a number of challenges and risks.
Real or perceived errors, failures, vulnerabilities or bugs in our products, or delays in or difficulties implementing our product releases, could result in negative publicity, loss of customer data, loss of or delay in market acceptance of our products, a decrease in customer satisfaction or adoption rates, loss of competitive position, or claims by customers for losses sustained by them, all of which could harm our business, results of operations and financial condition. 36 If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.
Real or perceived errors, failures, vulnerabilities or bugs in our products, or delays in or difficulties implementing our product releases, could result in negative publicity, loss of customer data, loss of or delay in market acceptance of our products, a decrease in customer satisfaction or adoption rates, loss of competitive position, or claims by customers for losses sustained by them, all of which could harm our business, results of operations and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are suitable to meet our current needs. We intend to expand our facilities or add new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
Biggest changeWe intend to add new facilities, as necessary, as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
Item 2. Properties Our corporate headquarters is located in San Francisco, California, where we currently lease approximately 285,996 square feet under a lease, as amended, that expires in October 2028. We are entitled to two five-year options to extend this lease, subject to certain requirements. We also lease space in various locations in the Americas, Europe and Asia-Pacific.
Item 2. Properties Our corporate headquarters is located in San Francisco, California, where we currently lease approximately 285,996 square feet under a lease, as amended, that expires in October 2028. We are entitled to two five-year options to extend this lease, subject to certain requirements.
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We also lease space in various locations in the Americas, Europe and Asia-Pacific. 48 We believe that our facilities are suitable to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are not a party to any material legal proceedings on the date of this report. See Note 11 to our consolidated financial statements "Commitments and Contingencies" for information related to legal proceedings. Item 4. Mine Safety Disclosures Not Applicable. 49 Part II
Biggest changeSee Note 11 to our consolidated financial statements "Commitments and Contingencies" for information related to legal proceedings. Item 4. Mine Safety Disclosures Not Applicable. 49 Part II
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Item 3. Legal Proceedings On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc. Securities Litigatio n, No. 3:22-cv-02990.
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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. The lawsuit seeks an order certifying the lawsuit as a class action and unspecified damages.
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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.
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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.
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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. The Company intends to defend these lawsuits vigorously.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have presented below the cumulative total return to our stockholders from April 7, 2017 (the date our Class A common stock commenced trading on the Nasdaq) through January 31, 2022 in comparison to the Standard & Poor’s 500 Index and Standard & Poor Information Technology Index.
Biggest changeThe following graph shows a five-year comparison of cumulative total return (equal to dividends plus stock appreciation) for our Class A common stock, the Standard & Poor’s 500 Stock Index ("S&P 500 Index") and Standard & Poor's Information Technology Index ("S&P 500 Information Technology Index").
Unregistered Sales of Equity Securities (a) Unregistered Sales of Equity Securities In connection with conversions of certain convertible notes due in 2023 ("2023 Notes") during the year ended January 31, 2022, we issued 475,915 shares of our Class A common stock. These issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Unregistered Sales of Equity Securities In connection with conversions of certain convertible notes due in 2023 ("2023 Notes") during the fiscal year ended January 31, 2023, we issued 355,932 shares of our Class A common stock. These issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
All values assume a $100 initial investment and data for the Standard & Poor’s 500 Index and Standard & Poor Information Technology Index assume reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock.
All values assume a $100 initial investment, and data for the S&P 500 Index and S&P 500 Information Technology Index assume reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock.
We relied on this exemption from registration based in part on representations made by the holders of the 2023 Notes in the exchange agreements pursuant to which the shares of Class A Common Stock were issued. (b) Issuer Purchases of Equity Securities None. 52
We relied on this exemption from registration based in part on representations made by the holders of the 2023 Notes in the exchange agreements pursuant to which the shares of Class A Common Stock were issued. Issuer Purchases of Equity Securities None. 52 OKTA, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Class B common stock is not listed or traded on any stock exchange. As of February 28, 2022, we had 233 holders of record of our Class A common stock and 19 holders of record of our Class B common stock.
Our Class B common stock is not listed or traded on any stock exchange. As of February 27, 2023, we had 104 holders of record of our Class A common stock and 17 holders of record of our Class B common stock.
Company/Index Base period 4/7/2017 1/31/2018 1/31/2019 1/31/2020 1/31/2021 1/31/2022 Okta $ 100.00 $ 125.27 $ 350.62 $ 544.66 $ 1,101.70 $ 841.73 S&P 500 Index 100.00 119.88 114.80 136.93 157.68 191.70 S&P 500 Information Technology Index 100.00 132.07 129.11 185.80 251.86 315.66 51 Securities Authorized for Issuance under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Company/Index 1/31/2018 1/31/2019 1/31/2020 1/31/2021 1/31/2022 1/31/2023 Okta $ 100 $ 280 $ 435 $ 879 $ 672 $ 250 S&P 500 Index 100 98 119 139 172 158 S&P 500 Information Technology Index 100 99 145 199 251 212 51 Securities Authorized for Issuance under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCost of Revenue, Gross Profit and Gross Margin Year Ended January 31, 2022 2021 $ Change % Change (dollars in thousands) Cost of revenue: Subscription $ 329,131 $ 170,095 $ 159,036 93 % Professional services and other 67,274 47,586 19,688 41 Total cost of revenue $ 396,405 $ 217,681 $ 178,724 82 % Gross profit $ 903,796 $ 617,743 $ 286,053 46 % Gross margin: Subscription 74 % 79 % Professional services and other (32) (23) Total gross margin 70 % 74 % Cost of subscription revenue increased by $159.0 million, or 93%, for the year ended January 31, 2022 compared to the year ended January 31, 2021, primarily due to an increase of $77.5 million in employee compensation costs related to higher headcount to support the growth in our subscription services, including the Auth0 acquisition, an increase in amortization of acquired developed technology of $28.0 million primarily in connection with the Auth0 acquisition, an increase of $26.6 million in third-party hosting costs as we expanded capacity to support our growth and an increase of $11.8 million in software license costs. 60 Our gross margin for subscription revenue decreased to 74% from 79% during the year ended January 31, 2022, compared to the year ended January 31, 2021 primarily due to the inclusion of Auth0 revenue, which carries a higher relative cost and lower gross margin as well as an increase in amortization of acquired developed technology primarily in connection with the Auth0 acquisition.
Biggest changeCost of Revenue, Gross Profit and Gross Margin Year Ended January 31, 2023 2022 $ Change % Change (dollars in millions) Cost of revenue: Subscription $ 464 $ 329 $ 135 41 % Professional services and other 82 67 15 22 Total cost of revenue $ 546 $ 396 $ 150 38 % Gross profit $ 1,312 $ 904 $ 408 45 % Gross margin: Subscription 74 % 74 % Professional services and other (27) (32) Total gross margin 71 % 70 % For fiscal 2023, cost of subscription revenue increased primarily due to an increase of $69 million in employee compensation costs related to higher headcount to support the growth in our subscription services, an increase of $26 million in third-party hosting costs as we expanded capacity to support our growth, an increase of $17 million in software costs and an increase in amortization of acquired developed technology of $11 million. 59 OKTA, INC.
No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.
No material demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.
These estimates can include, but are not limited to: • future expected cash flows from subscription contracts, professional services contracts, other customer contracts and acquired developed technologies; • person hours required in recreating certain acquired technologies; • historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; • royalty rates applied to acquired developed technology platforms and other intangible assets; • obsolescence curves and other useful life assumptions, such as the period of time and intended use of acquired intangible assets in our product offerings; • discount rates; • uncertain tax positions and tax-related valuation allowances; and 69 • fair value of assumed equity awards.
These estimates can include, but are not limited to: • future expected cash flows from subscription contracts, professional services contracts, other customer contracts and acquired developed technologies; • person hours required in recreating certain acquired technologies; • historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; • royalty rates applied to acquired developed technology platforms and other intangible assets; • obsolescence curves and other useful life assumptions, such as the period of time and intended use of acquired intangible assets in our product offerings; • discount rates; • uncertain tax positions and tax-related valuation allowances; and • fair value of assumed equity awards.
The principal limitation of these non-GAAP financial measures is that they exclude significant expenses 62 that are required by GAAP to be recorded in our financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses are excluded or included in determining these non-GAAP financial measures.
The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in our financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses are excluded or included in determining these non-GAAP financial measures.
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. 66 A significant majority of our customers pay in advance for annual subscriptions.
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.
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the preparation of these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. In the preparation of these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
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.
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.
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 cost of revenue and operating expense category.
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.
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.
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. 55 OKTA, INC.
As of January 31, 2022, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure and security vendors. We employ a Software-as-a-Service ("SaaS") business model, and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings.
As of January 31, 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.
Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings, the continuing market adoption of our platform, and the costs associated with integration of acquired businesses.
Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings, and the continuing market adoption of our platform.
We expect to continue to incur operating losses and cash flows from operations that may fluctuate between positive and negative amounts for the foreseeable future. In February 2018, we completed our private offering of the 2023 Notes due on February 15, 2023 and received aggregate proceeds of $345.0 million, before deducting costs of issuance of $10.0 million.
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. In February 2018, we completed our private offering of the 2023 Notes due on February 15, 2023 and received aggregate proceeds of $345 million.
A discussion regarding our financial condition and results of operations for the year ended January 31, 2021 compared to the year ended January 31, 2020 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 4, 2021, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.okta.com.
A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on March 7, 2022, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.okta.com.
Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance . We use the below referenced non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
Non-GAAP Financial Measures In addition to our results determined in accordance with accounting principles generally accepted in the United States (“GAAP”), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the below referenced non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K. Our fiscal year ends January 31. Overview Okta is the leading independent identity provider.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K. Our fiscal year ends January 31.
Developers leverage our platform to securely and efficiently embed identity into the software they build, allowing them to focus on their core mission. Employees and contractors sign into the Okta Identity Cloud to seamlessly and securely access the applications they need to do their most important work.
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 mission.
Calculated Billings in any particular period reflect sales to new customers plus subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support and professional services. We typically invoice customers in advance in annual installments for subscriptions to our platform.
Calculated Billings in any particular period reflect sales to new customers plus subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support and professional services. We typically invoice customers in advance in annual installments for subscriptions to our platform. Calculated Billings increased 24% in fiscal 2023 over fiscal 2022.
Our approach to identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer facing applications. As of January 31, 2022, more than 15,000 customers across nearly every industry used the Okta Identity Cloud to secure and manage identities around the world.
Our approach to identity allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer facing applications. As of January 31, 2023, more than 17,600 customers across nearly every industry used Okta to secure and manage identities around the world.
Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile and web applications, on-premises servers, application program interfaces, IT infrastructure providers and services from a multitude of devices.
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.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Amounts reported in millions are rounded based on the amounts in thousands.
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.
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.
As of January 31, 2022, we had deferred revenue of $996.2 million, of which $973.3 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.
As of January 31, 2023, we had deferred revenue of $1,260 million, of which $1,242 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.
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. We expect our research and development expenses will increase in absolute dollars as our business grows. Sales and Marketing.
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.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements “Summary of Significant Accounting Policies — Recently Adopted Accounting Pronouncements" and " — Recently Issued Accounting Pronouncements Not Yet Adopted” for more information. 70
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements “Summary of Significant Accounting Policies — Recently Adopted Accounting Pronouncements" for more information. 69
During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill.
During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to 68 OKTA, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) goodwill.
Business Combinations When we acquire a business, the purchase price is allocated to the net tangible and identifiable intangible assets acquired based on their estimated fair values. Any residual purchase price is recorded as goodwill.
Business Combinations When we acquire a business, the purchase price is allocated to the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their respective estimated fair values. Any residual purchase price is recorded as goodwill.
On May 3, 2021, we completed the acquisition of Auth0. In connection with this acquisition, consideration included cash of $149.6 million, net of cash acquired of $107.4 million, and approximately 19.2 million shares of our common stock with an estimated fair value of $5,175.6 million. In addition, we assumed outstanding employee equity awards with vested fair value of $238.4 million.
In connection with this acquisition, consideration included cash of $150 million, net of cash acquired of $107 million, and approximately 19 million shares of our common stock with an estimated fair value of $5,176 million. In addition, we assumed outstanding employee equity awards with vested fair value of $238 million.
Our accumulated deficit as of January 31, 2022 was $1,815.9 million. 54 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.
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.
Larger enterprises often implement a limited initial deployment of our platform before increasing their deployment on a broader scale. 55 Remaining Performance Obligations (RPO) RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
Remaining Performance Obligations ("RPO") RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
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. We expect our general and administrative expenses will increase in absolute dollars as our business grows.
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.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.
A reconciliation is provided below for 61 OKTA, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.
For the years ended January 31, 2022, 2021 and 2020, our revenue was $1,300.2 million, $835.4 million and $586.1 million, respectively, representing a growth rate of 56% and 43%, respectively. For the years ended January 31, 2022, 2021 and 2020, we generated net losses of $848.4 million, $266.3 million and $208.9 million, respectively.
For fiscal 2023, 2022 and 2021, our revenue was $1,858 million, $1,300 million and $835 million, respectively, representing a growth rate of 43% and 56%, respectively. For fiscal 2023, 2022 and 2021, we generated net losses of $815 million, $848 million and $266 million, respectively. Our accumulated deficit as of January 31, 2023 was $2,475 million.
Year Ended January 31, 2022 2021 2020 (in thousands) Total revenue $ 1,300,201 $ 835,424 $ 586,067 Add: Deferred revenue (end of period) 996,222 513,598 371,450 Unbilled receivables (beginning of period) 2,604 1,026 1,457 Acquired unbilled receivables 2,327 — — Less: Deferred revenue (beginning of period) (513,598) (371,450) (254,390) Unbilled receivables (end of period) (3,228) (2,604) (1,026) Acquired deferred revenue (66,239) — — Calculated billings $ 1,718,289 $ 975,994 $ 703,558 Liquidity and Capital Resources As of January 31, 2022, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,501.8 million, which were held for working capital and general corporate purposes, including future acquisition activity.
Year Ended January 31, 2023 2022 2021 (dollars in millions) Total revenue $ 1,858 $ 1,300 $ 835 Add: Deferred revenue (end of period) 1,260 996 514 Unbilled receivables (beginning of period) 3 3 1 Acquired unbilled receivables — 2 — Less: Deferred revenue (beginning of period) (996) (514) (371) Unbilled receivables (end of period) (2) (3) (3) Acquired deferred revenue — (66) — Calculated Billings $ 2,123 $ 1,718 $ 976 Liquidity and Capital Resources As of January 31, 2023, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,580 million, which were held for working capital and general corporate purposes, including potential future acquisition activity.
As of January 31, 2022 2021 2020 (dollars in thousands) Customers with annual contract value ("ACV") above $100,000 3,100 1,950 1,467 Dollar-based net retention rate for the trailing 12 months ended 124 % 121 % 119 % Current remaining performance obligations $ 1,350,534 $ 841,797 $ 592,309 Remaining performance obligations $ 2,694,262 $ 1,796,949 $ 1,209,659 Year Ended January 31, 2022 2021 2020 (in thousands) Calculated billings $ 1,718,289 $ 975,994 $ 703,558 Total Customers and Number of Customers with Annual Contract Value Above $100,000 As of January 31, 2022, we had over 15,000 customers on our platform.
As of January 31, 2023 2022 2021 (dollars in millions) Number of customers 17,600 15,000 10,000 Customers with annual contract value ("ACV") above $100,000 3,930 3,100 1,950 Dollar-based net retention rate for the trailing 12 months ended 120 % 124 % 121 % Current remaining performance obligations $ 1,684 $ 1,351 $ 842 Remaining performance obligations $ 3,007 $ 2,694 $ 1,797 Calculated billings $ 2,123 $ 1,718 $ 976 Total Customers and Number of Customers with Annual Contract Value Above $100,000 As of January 31, 2023, we had over 17,600 customers on our platform.
The increase in professional services revenue was primarily related to an increase in implementation and other services associated with growth in the number of new customers purchasing our subscription services, as well as the inclusion of Auth0 revenue from the acquisition date.
For fiscal 2023, professional services revenue increased primarily due to an increase in implementation and other services associated with growth in the number of new customers purchasing our subscription services.
Interest and Other, Net Interest and other, net consists of interest expense, which primarily includes amortization of debt discount and issuance costs and contractual interest expense for our 2023 Notes, convertible notes due in 2025 ("2025 Notes") and convertible notes due in 2026 ("2026 Notes", together with the 2023 Notes and 2025 Notes, the "Notes"), interest income from our investment holdings, gains and losses from our strategic investments and loss on early extinguishment and conversion of debt.
Interest and Other, Net Interest and other, net consists of interest expense, which primarily includes amortization of debt discount (in comparative periods prior to the adoption of Accounting Standards Update ("ASU") No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06")), amortization of debt issuance costs, contractual interest expense for our 2023 Notes, convertible notes due in 2025 ("2025 Notes") and convertible notes due in 2026 ("2026 Notes", together with the 2023 Notes and 2025 Notes, the "Notes"), interest income from our investment holdings, and gains and losses from our strategic investments.
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.
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.
Of this amount, $13.4 million of consideration was held back as partial security for any adjustments and indemnification obligations and will be paid within 18 months of the closing date.
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 will be paid within 18 months of the closing date.
Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Goodwill on our consolidated balance sheets totaled $5,401.3 million and $48.0 million as of January 31, 2022 and 2021, respectively.
Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended January 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 104,119 $ 127,962 $ 55,603 Net cash used in investing activities (366,812) (1,305,146) (688,041) Net cash provided by financing activities 89,066 1,091,598 853,385 Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash (2,347) 2,263 (209) Net (decrease) increase in cash, cash equivalents and restricted cash $ (175,974) $ (83,323) $ 220,738 Operating Activities Our largest source of operating cash is cash collections from our customers for subscription and professional services.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended January 31, 2023 2022 2021 (dollars in millions) Net cash provided by operating activities $ 86 $ 104 $ 128 Net cash used in investing activities (130) (367) (1,305) Net cash provided by financing activities 48 89 1,092 Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash (6) (2) 2 Net decrease in cash, cash equivalents and restricted cash $ (2) $ (176) $ (83) Operating Activities Our largest source of operating cash is cash collections from our customers for subscription and professional services.
Year Ended January 31, 2022 2021 2020 (dollars in thousands) Net loss $ (848,411) $ (266,332) $ (208,913) Add: Stock-based compensation expense 565,480 196,181 126,624 Non-cash charitable contributions 7,238 9,292 1,746 Amortization of acquired intangibles 64,000 6,373 5,488 Acquisition and integration-related expenses (1) 56,667 — 3,449 Amortization of debt discount and debt issuance costs 86,461 68,424 25,892 Loss on early extinguishment and conversion of debt 179 2,263 14,572 Non-GAAP net income (loss) $ (68,386) $ 16,201 $ (31,142) Net margin (65) % (32) % (36) % Non-GAAP net margin (5) % 2 % (5) % Weighted-average shares used to compute net loss per share, basic and diluted 148,036 127,212 117,221 Non-GAAP weighted-average effect of potentially dilutive securities — 15,171 — Non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, diluted 148,036 142,383 117,221 Net loss per share, basic and diluted $ (5.73) $ (2.09) $ (1.78) Non-GAAP net income (loss) per share, basic $ (0.46) $ 0.13 $ (0.27) Non-GAAP net income (loss) per share, diluted $ (0.46) $ 0.11 $ (0.27) (1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close. 64 Free Cash Flow and Free Cash Flow Margin We define Free cash flow as net cash provided by operating activities, less cash used for purchases of property and equipment, net of sales proceeds, and capitalized internal-use software costs.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Year Ended January 31, 2023 2022 2021 (dollars in millions, shares in thousands, except per share data) Net loss $ (815) $ (848) $ (266) Add: Stock-based compensation expense 677 566 195 Non-cash charitable contributions 4 8 9 Amortization of acquired intangibles 85 64 7 Acquisition and integration-related expenses 7 56 — Amortization of debt discount and debt issuance costs 6 86 69 Loss on early extinguishment and conversion of debt — — 2 Restructuring costs 29 — — Non-GAAP net income (loss) $ (7) $ (68) $ 16 Net margin (44) % (65) % (32) % Non-GAAP net margin — % (5) % 2 % Weighted-average shares used to compute net loss per share, basic and diluted 158,023 148,036 127,212 Non-GAAP weighted-average effect of potentially dilutive securities — — 15,171 Non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, diluted 158,023 148,036 142,383 Net loss per share, basic and diluted $ (5.16) $ (5.73) $ (2.09) Non-GAAP net income (loss) per share, basic $ (0.04) $ (0.46) $ 0.13 Non-GAAP net income (loss) per share, diluted $ (0.04) $ (0.46) $ 0.11 Free Cash Flow and Free Cash Flow Margin We define Free cash flow as net cash provided by operating activities, less cash used for purchases of property and equipment, net of sales proceeds, and capitalized internal-use software costs.
Employee compensation costs include salaries, bonuses, benefits and stock-based compensation for each cost of revenue and operating expense category, sales commissions for sales and marketing and any compensation 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.
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 .
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.
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. 54 OKTA, INC.
The Okta Identity Cloud is powered by our category-defining platform that enables our customers to securely connect the right people to the right technologies and services at the right time.
References to fiscal 2023, for example, refer to the fiscal year ended January 31, 2023. 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.
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 entered into capped call transactions ("2026 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 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.
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 entered into capped call transactions ("2025 Capped Calls") with respect to our Class A common stock.
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.
We focus on acquiring and retaining our customers and increasing their spending with us through expanding the number of users who access the Okta Identity Cloud 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.
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.
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.
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 .
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.
We base subscription fees primarily on the products used and the number of users on our platform. We typically invoice customers in advance in annual installments for subscriptions to our platform. Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 97% of total revenue for fiscal 2023.
The cost of the Note Hedges was partially offset by proceeds of $52.4 million from the sale of warrants to purchase shares of our Class A common stock ("Warrants") in connection with the issuance of the 2023 Notes. 65 In September 2019, we completed our private offering of the 2025 Notes due on September 1, 2025 and received aggregate proceeds of $1,060.0 million, before deducting issuance costs of approximately $19.3 million.
The cost of the Note Hedges was partially offset by proceeds from the sale of warrants to purchase shares of our Class A common stock ("Warrants") in connection with the issuance of the 2023 Notes.
In addition, Non-GAAP net income (loss) per share, diluted, includes the anti-dilutive impact of our note hedge and capped call agreements on convertible senior notes outstanding. Accordingly, we did not record any adjustments to Non-GAAP net income (loss) for the potential impact of the convertible senior notes outstanding under the if-converted method.
In addition, Non-GAAP net income (loss) per share, diluted, includes the impact of our note hedge and capped call agreements on convertible senior notes outstanding, as applicable. The note hedge and capped call agreements are intended to offset potential dilution to our Class A common stock upon any conversion or settlement of the convertible senior notes under certain circumstances.
Cost of professional services and other revenue increased by $19.7 million, or 41%, for the year ended January 31, 2022, compared to the year ended January 31, 2021, primarily due to an increase of $15.5 million in employee compensation costs related to higher headcount, including the Auth0 acquisition.
For fiscal 2023, cost of professional services and other revenue increased primarily due to an increase of $11 million in employee compensation costs related to higher headcount.
We expect our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense category for the foreseeable future as we expand our sales and marketing efforts and as we return to in-person sales formats and experiences for future annual user conferences.
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.
The interest rate on the 2023 Notes is fixed at 0.25% per annum and is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018. In connection with the issuance of the 2023 Notes, we entered into convertible note hedges ("Note Hedges") with respect to our Class A common stock.
Nearly all of the 2023 Notes have been repurchased or converted as of January 31, 2023. The interest rate on the 2023 Notes is fixed at 0.25% per annum and is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018.
We intend to continue to invest additional resources in our platform infrastructure and our platform support organizations. As we continue to invest in technology innovation, we anticipate that capitalized internal-use software 56 costs and related amortization may increase. We expect our investment in technology to expand the capability of our platform enabling us to improve our gross margin over time.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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.
The number of customers who have greater than $100,000 in ACV with us was 3,100, 1,950 and 1,467 as of January 31, 2022, 2021 and 2020, 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 expect this trend to continue as larger enterprises recognize the value of our platform and replace their legacy identity access management infrastructure.
Sales and Marketing Expenses Year Ended January 31, 2022 2021 $ Change % Change (dollars in thousands) Sales and marketing $ 770,326 $ 427,350 $ 342,976 80 % Percentage of revenue 59 % 51 % Sales and marketing expenses increased $343.0 million, or 80%, for the year ended January 31, 2022, compared to the year ended January 31, 2021 primarily due to an increase of $208.7 million in employee compensation costs related to headcount growth, including the Auth0 acquisition, an increase in marketing and event costs of $65.7 million primarily due to increases in demand generation programs, advertising and brand awareness efforts aimed at acquiring new customers and higher production and advertising costs for our virtual format annual customer conference, an increase in amortization expense of $29.6 million for acquired customer relationships and trade names in connection with the Auth0 acquisition incurred in the year ended January 31, 2022, but not in the year ended January 31, 2021, an increase in software license costs of $5.6 million, an increase in consulting expenses of $4.0 million and an increase in travel expenses of $3.1 million.
Sales and Marketing Expenses Year Ended January 31, 2023 2022 $ Change % Change (dollars in millions) Sales and marketing $ 1,066 $ 771 $ 295 38 % Percentage of revenue 58 % 59 % For fiscal 2023, sales and marketing expenses increased primarily due to an increase of $217 million in employee compensation costs related to headcount growth, an increase in travel expenses of $19 million, an increase in marketing and event costs of $16 million primarily due to increases in demand generation programs, advertising and brand awareness efforts aimed at acquiring new customers and an increase in amortization expense of $10 million for acquired customer relationships and trade names.
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. Over time, larger customers have constituted a greater share of our total revenue, which has contributed to an increase in average revenue per customer.
Increasing awareness of our platform and capabilities, coupled with the mainstream adoption of cloud technology, has expanded the diversity of our customer base to include organizations of all sizes across all industries. The number of customers who have greater than $100,000 in ACV with us was 3,930, 3,100 and 1,950 as of January 31, 2023, 2022 and 2021, respectively.
Financing Activities Cash provided by financing activities during the year ended January 31, 2022 of $89.1 million was primarily attributable to proceeds from the exercise of stock options of $53.5 million, and proceeds from employee purchases under our employee stock purchase plan ("ESPP") of $35.6 million.
The decrease was primarily attributable to a decrease in proceeds from the exercise of stock options and a decrease in proceeds from employee purchases under our employee stock purchase plan ("ESPP").
Revenue for our professional services is recognized as services are performed in proportion with their pattern of transfer. Contracts with Multiple Performance Obligations Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct.
A description of our revenue recognition policies is included in Note 2 to our consolidated financial statements "Summary of Significant Accounting Policies." Our contracts with customers often contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct.
The 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.
Gross margin is gross profit expressed as a percentage of total revenue.
In addition, we issued unvested restricted stock valued at $332.1 million and assumed unvested equity and restricted cash awards valued at $430.2 million, which are subject to future vesting and will be recorded as expense over the period the services are provided.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) restricted cash awards, which are subject to future vesting and will be recorded as expense over the period the services are provided.
The acquisition date fair value, net of acquired cash and subject to final adjustments, was approximately $5,671.0 million, including approximately 19.2 million shares of our Class A common stock valued at $5,175.6 million, $257.0 million in cash, and assumed equity awards with an initial fair market value of $238.4 million.
Acquisition of Auth0 On May 3, 2021, we completed the acquisition of Auth0, Inc. ("Auth0"). The acquisition date fair value, net of acquired cash, was approximately $5,671 million, including shares of our Class A common stock, cash, and assumed equity awards. In addition, we issued unvested restricted stock and assumed unvested equity and 53 OKTA, INC.
Non-GAAP Net Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted We define Non-GAAP net income (loss) and Non-GAAP net margin as GAAP net loss and GAAP net margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt. 63 We define Non-GAAP net income (loss) per share, basic, as Non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.
We define Non-GAAP net income (loss) per share, basic, as Non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.
Organizations use our platform to collaborate with their partners, and to provide their customers with more modern and secure experiences online and via mobile devices. 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.
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.
Operating Expenses Research and Development Expenses Year Ended January 31, 2022 2021 $ Change % Change (dollars in thousands) Research and development $ 469,259 $ 222,826 $ 246,433 111 % Percentage of revenue 36 % 27 % Research and development expenses increased $246.4 million, or 111%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.
Operating Expenses Research and Development Expenses Year Ended January 31, 2023 2022 $ Change % Change (dollars in millions) Research and development $ 620 $ 469 $ 151 32 % Percentage of revenue 33 % 36 % For fiscal 2023, research and development expenses increased primarily due to an increase of $139 million in employee compensation costs related to higher headcount.
The increase was primarily due to the addition of new customers, an increase in users and sales of additional products to existing customers, and the inclusion of Auth0 revenue from the acquisition date of May 3, 2021, Professional services and other revenue increased by $12.2 million, or 31%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.
Comparison of the Years Ended January 31, 2023 and 2022 Revenue Year Ended January 31, 2023 2022 $ Change % Change (dollars in millions) Revenue: Subscription $ 1,794 $ 1,249 $ 545 44 % Professional services and other 64 51 13 27 Total revenue $ 1,858 $ 1,300 $ 558 43 % Percentage of revenue: Subscription 97 % 96 % Professional services and other 3 4 Total 100 % 100 % For fiscal 2023, subscription revenue increased primarily due to the addition of new customers, an increase in users and sales of additional products to existing customers.
Year Ended January 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 104,119 $ 127,962 $ 55,603 Less: Purchases of property and equipment (12,310) (13,083) (15,442) Capitalization of internal-use software costs (4,336) (4,159) (3,888) Free cash flow $ 87,473 $ 110,720 $ 36,273 Net cash used in investing activities $ (366,812) $ (1,305,146) $ (688,041) Net cash provided by financing activities $ 89,066 $ 1,091,598 $ 853,385 Free cash flow margin 7 % 13 % 6 % Calculated Billings We define Calculated billings as total revenue plus the change in deferred revenue, net of acquired deferred revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.
Year Ended January 31, 2023 2022 2021 (dollars in millions) Net cash provided by operating activities $ 86 $ 104 $ 128 Less: Purchases of property and equipment (12) (13) (13) Capitalization of internal-use software costs (9) (4) (4) Free cash flow $ 65 $ 87 $ 111 Net cash used in investing activities $ (130) $ (367) $ (1,305) Net cash provided by financing activities $ 48 $ 89 $ 1,092 Free cash flow margin 3 % 7 % 13 % 64 OKTA, INC.
Year Ended January 31, 2022 2021 2020 (dollars in thousands) Gross profit $ 903,796 $ 617,743 $ 426,685 Add: Stock-based compensation expense included in cost of revenue 61,415 29,978 20,087 Amortization of acquired intangibles 34,391 6,373 5,488 Acquisition and integration-related expenses (1) 1,889 — — Non-GAAP gross profit $ 1,001,491 $ 654,094 $ 452,260 Gross margin 70 % 74 % 73 % Non-GAAP gross margin 77 % 78 % 77 % (1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.
Year Ended January 31, 2023 2022 2021 (dollars in millions) Gross profit $ 1,312 $ 904 $ 617 Add: Stock-based compensation expense included in cost of revenue 83 61 30 Amortization of acquired intangibles 46 34 7 Acquisition and integration-related expenses 1 2 — Non-GAAP gross profit $ 1,442 $ 1,001 $ 654 Gross margin 71 % 70 % 74 % Non-GAAP gross margin 78 % 77 % 78 % Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin We define Non-GAAP operating income (loss) and Non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses and restructuring costs related to severance and termination benefits and lease impairments in connection with the closing of certain leased facilities.
Approximately 5% of the total consideration was held back by us to secure the indemnification obligations of the Auth0 securityholders arising during the twelve months following the closing.
A portion of the total consideration was held back by us to secure the indemnification obligations of the Auth0 securityholders and was paid in full during fiscal 2023. Financial Information and Segments We operate our business as one reportable segment.
Interest income and other, net decreased $3.1 million, or (24)%, for the year ended January 31, 2022 compared to the year ended January 31, 2021, primarily due to a decrease of $8.4 million in interest income resulting from lower interest rates and an increase of $2.9 million in foreign currency exchange losses, partially offset by an $8.2 million change in net realized gains and unrealized adjustments in the carrying value of our strategic investments.
Interest and Other, Net Year Ended January 31, 2023 2022 $ Change % Change (dollars in millions) Interest expense $ (11) $ (91) $ 80 (88) % Interest income and other, net 22 9 13 126 Interest and other, net $ 11 $ (82) For fiscal 2023, the change in interest and other, net was primarily due to a decrease in interest expense resulting from the adoption of ASU 2020-06 and an increase in interest income from our short-term investments.
Our gross margin for professional services and other revenue decreased to (32)% during the year ended January 31, 2022 from (23)% during the year ended January 31, 2021 and includes Auth0.
Our gross margin for professional services and other revenue improved to (27)% during fiscal 2023 from (32)% during fiscal 2022 primarily due to increases in professional services and other revenue at a faster rate than increases in associated costs.
We also terminated a portion of our existing Note Hedges and Warrants in amounts corresponding to the principal amount of the Second Partial Repurchase of 2023 Notes for net proceeds of $19.6 million.
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. Concurrent with the private offering of the 2025 Notes, we repurchased a portion of the 2023 Notes and terminated a portion of our existing Note Hedges and Warrants.
Removed
Impact of COVID-19 Pandemic The extent of the impact of COVID-19 on our future operational and financial performance remains uncertain and will depend on certain developments, including the duration and spread of COVID-19 and variants of concern, related public health measures, including vaccine mandates, the manufacture, distribution, efficacy and public acceptance of treatments and vaccines, and their impact on the macroeconomy, our current and prospective customers, employees and vendors.
Added
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.
Removed
None of these impacts can be predicted with certainty. Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 96% of total revenue for the year ended January 31, 2022.
Added
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.
Removed
While we see risks associated with more highly impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly 53 changing work and business environments. 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.
Added
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) 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.
Removed
We believe we will be able to continue to deliver our cloud-based platform and support to our customers, without compromising our employees’ safety. For most of fiscal 2021, we established mandatory work-from-home procedures for our global office locations, and our employees had the necessary tools and technology to remain connected and productive.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+1 added−0 removed8 unchanged
Biggest changeSubsequent to January 31, 2022, the Company received conversion requests for approximately $2.0 million aggregate principal amount of the 2023 Notes. In September 2019, we issued the 2025 Notes due September 1, 2025 with a principal amount of $1,060.0 million. Concurrently with the issuance of the 2025 Notes, we entered into separate capped call transactions.
Biggest changeIn 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.
Concurrently with the issuance of the 2023 Notes, we entered into separate Note Hedges and Warrant transactions, a portion of which were terminated in September 2019 and June 2020 in connection with the 2023 Notes Partial Repurchases. The Note Hedges were completed to reduce the potential dilution from the conversion of the 2023 Notes.
Concurrently with the issuance of the 2023 Notes, we entered into separate Note Hedges and Warrant transactions, a portion of which were terminated in September 2019 and June 2020 in connection with the partial repurchases of the 2023 Notes. The Note Hedges were completed to reduce the potential dilution from the conversion of the 2023 Notes.
The 2025 Capped Calls were completed to reduce the potential dilution from the conversion of the 2025 Notes. In June 2020, we issued the 2026 Notes due June 15, 2026 with a principal amount of $1,150.0 million. Concurrently with the issuance of the 2026 Notes, we entered into separate capped call transactions.
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.
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 5 to our consolidated financial statements for more information. 72
The fair value was determined based on the 70 quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. See Note 5 to our consolidated financial statements for more information.
As of January 31, 2022, 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.
As of January 31, 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.
Additionally, through January 31, 2022, we received and completed requests to convert approximately $33.4 million principal amount of 2023 Notes (not in connection with the 2023 Notes Partial Repurchases) and exercised and net-share-settled Note Hedges corresponding to approximately $33.4 million principal amount of 2023 Notes.
Additionally, through January 31, 2023, we received and completed requests to convert approximately $51 million principal amount of 2023 Notes (not in connection with the partial repurchases of the 2023 Notes) and exercised and net-share-settled Note Hedges corresponding to approximately $45 million principal amount of 2023 Notes.
Convertible Senior Notes In February 2018, we issued the 2023 Notes due February 15, 2023 with a principal amount of $345.0 million, of which $224.4 million and $69.9 million were repurchased in September 2019 and June 2020, respectively.
Convertible Senior Notes In February 2018, we issued the 2023 Notes due February 15, 2023 with a principal amount of $345 million, of which $224 million and $70 million were repurchased in September 2019 and June 2020, respectively.
Interest Rate Risk We had cash, cash equivalents and short-term investments totaling $2,501.8 million as of January 31, 2022, of which $2,393.9 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.
Interest Rate Risk We had cash, cash equivalents and short-term investments totaling $2,580 million as of January 31, 2023, of which $2,449 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.
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 71 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.
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.
During the years ended January 31, 2022, 2021 and 2020, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.
During fiscal 2023, 2022 and 2021, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.
The 2026 Capped Calls were completed to reduce the potential dilution from the conversion of the 2026 Notes. The 2023 Notes, 2025 Notes and 2026 Notes have a fixed annual interest rate of 0.25%, 0.125% and 0.375%, respectively; accordingly, we do not have economic interest rate exposure on the Notes.
The 2023 Notes, 2025 Notes and 2026 Notes have a fixed annual interest rate of 0.25%, 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.
Added
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. 71

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