What changed in this filing

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Item 1. Financial Statements

2021-09-02 compared with 2021-05-27 · 271 added, 125 removed, 549 unchanged (42% of the section changed)

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of April 30, 2021 and January 31, 2021

Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2021 and 20 20

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended April 30, 2021 and 2020

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended April 30, 202 1 and 2 020

Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2021 and 2020

Condensed Consolidated Balance Sheets as of July 31 , 2021 and January 31, 2021

Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2021 and 2020

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended July 31 , 2021 and 2020

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 31 , 2021 and 2020

Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31 , 2021 and 2020

Notes to Condensed Consolidated Financial Statements

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(In thousands, except per share data)

April 30, 2021 January 31, 2021

July 31, 2021 January 31, 2021

Current assets:

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100,000 shares authorized;

no shares issued and outstanding as of April 30, 2021 and January 31, 2021

no shares issued and outstanding as of July 31, 2021 and January 31, 2021

Class A common stock, par value $ 0.0001 per share;

1,000,000 shares authorized;

125,056 and 122,824 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively

147,446 and 122,824 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively

Class B common stock, par value $ 0.0001 per share;

120,000 shares authorized;

7,524 and 8,159 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively

7,075 and 8,159 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively

Additional paid-in capital 7,391,169 1,656,096

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Subscription $ 303,121 $ 190,689 $ 543,179 $ 364,470

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Interest income and other, net 2,211 3,960 6,566 8,859

Loss on conversion of debt ( 136 ) —

Loss on early extinguishment and conversion of debt ( 43 ) ( 2,174 ) ( 179 ) ( 2,174 )

Interest and other, net ( 20,704 ) ( 15,145 ) ( 39,245 ) ( 21,010 )

Loss before provision for (benefit from) income taxes ( 109,222 ) ( 58,064 )

Provision for (benefit from) income taxes 10 ( 402 )

Loss before benefit from income taxes ( 284,144 ) ( 60,533 ) ( 393,366 ) ( 118,597 )

Benefit from income taxes ( 7,462 ) ( 433 ) ( 7,452 ) ( 835 )

Net loss $ ( 276,682 ) $ ( 60,100 ) $ ( 385,914 ) $ ( 117,762 )

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Net loss $ ( 276,682 ) $ ( 60,100 ) $ ( 385,914 ) $ ( 117,762 )

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Foreign currency translation adjustments ( 882 ) 2,843 151 1,059

Other comprehensive income 220 2,850

Other comprehensive income (loss) ( 1,235 ) 1,779 ( 1,015 ) 4,629

Comprehensive loss $ ( 277,917 ) $ ( 58,321 ) $ ( 386,929 ) $ ( 113,133 )

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Common stock and additional paid-in capital:

Balance, beginning of period $ 1,753,856 $ 1,168,140 $ 1,656,109 $ 1,105,576

Issuance of common stock and value of equity awards assumed in connection with business combination 5,409,344 — 5,409,344 —

Issuance of common stock upon exercise of stock options and other activity, net 34,697 28,046 52,911 42,754

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Stock-based compensation 187,923 48,808 252,035 86,846

Equity component of conversion of convertible senior notes 15,420 —

Equity component of convertible senior notes, net of issuance costs — 306,232 — 306,232

Equity component of early extinguishment and conversion of convertible senior notes 5,364 61,664 20,784 61,664

Proceeds from hedges related to convertible senior notes 1 195,046 2 195,046

Payments for warrants related to convertible senior notes — ( 175,399 ) — ( 175,399 )

Purchases of capped calls related to convertible senior notes — ( 133,975 ) — ( 133,975 )

Balance, end of period 7,391,185 1,498,562 7,391,185 1,498,562

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Balance, beginning of period 5,610 3,742 5,390 892

Other comprehensive income 220 2,850

Other comprehensive income (loss) ( 1,235 ) 1,779 ( 1,015 ) 4,629

Balance, end of period 4,375 5,521 4,375 5,521

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(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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Non-cash charitable contributions 3,663 2,417

Loss on conversion of debt 136 —

Loss on early extinguishment and conversion of debt 179 2,174

Other, net ( 5,561 ) 1,435

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Proceeds from sales of securities available for sale and other 906 89,620

Purchases of intangible assets ( 113 ) —

Net cash provided by investing activities 151,905 50,604

Payments for business acquisition, net of cash acquired ( 148,042 ) —

Net cash used in investing activities ( 311,561 ) ( 672,261 )

Cash flows from financing activities:

Payments for conversions of convertible senior notes ( 12 ) —

Proceeds from issuance of convertible senior notes, net of issuance costs — 1,135,418

Payments for repurchases and conversions of convertible senior notes ( 15 ) ( 181 )

Proceeds from hedges related to convertible senior notes 2 195,046

Payments for warrants related to convertible senior notes — ( 175,399 )

Purchases of capped calls related to convertible senior notes — ( 133,975 )

Proceeds from stock option exercises 31,829 27,517

Other, net — ( 5 )

Proceeds from shares issued in connection with employee stock purchase plan 17,417 12,821

Net cash provided by financing activities 49,233 1,061,247

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash 193 578

Net increase in cash, cash equivalents and restricted cash 224,806 102,340

Net increase (decrease) in cash, cash equivalents and restricted cash ( 208,668 ) 439,191

Cash, cash equivalents and restricted cash at beginning of period 448,630 531,953

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Non-cash activities:

Issuance of common stock and value of equity awards assumed in connection with business combination 5,409,344 —

Issuance of common stock for repurchases and conversions of convertible senior notes 126,144 260,368

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Operating lease right-of-use assets exchanged for lease liabilities 7,696 41,388

Property and equipment acquired through tenant improvement allowance — 3,852

Issuance of common stock for bonus settlement — 9,818

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The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the results of operations for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2022 or any future period.

The condensed consolidated financial statements include the results of operations for Auth0, Inc.

from the acquisition date of May 3, 2021 to July 31, 2021.

See Note 3 for additional details.

The Company’s fiscal year ends on January 31.

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Actual results could vary from those estimates.

The Company’s most significant estimates include the stand alone selling price (“SSP”) for each distinct performance obligation included in customer contracts with multiple performance obligations, the determination of the period of benefit for deferred commissions, the determination of the effective interest rate of the liability components of its convertible senior notes, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation of deferred income tax assets, and the valuation of acquired intangible assets.

In March 2020, the World Health Organization (“WHO”) declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic, which has continued to spread across the globe.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the condensed consolidated financial statements for the three months ended April 30, 2021 and 2020.

In March 2020, the World Health Organization (“WHO”) declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic, which has spread across the globe.

As events continue to evolve and additional information becomes available, the Company’s assumptions and estimates may change materially in future periods.

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Summary of Significant Accounting Policies” in Item 8.

Financial Statements and Supplementary Data of its Form 10-K for the fiscal year ended

January 31, 2021.

The Company further described its accounting policy for strategic investments below.

There have been no significant changes to the Company’s significant accounting policies for the three months ended April 30, 2021.

Financial Statements and Supplementary Data of its Form 10-K for the fiscal year ended January 31, 2021.

The Company has updated and further described its accounting policies for business combinations and strategic investments below.

There have been no other significant changes to the Company’s significant accounting policies for the six months ended July 31, 2021.

Business Combinations

When the Company acquires 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.

The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets.

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;

• 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 the Company’s product offerings;

• discount rates;

• uncertain tax positions and tax-related valuation allowances;

• fair value of assumed equity awards.

These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

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.

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.

Strategic Investments

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The Company’s impairment analysis encompasses an assessment of both qualitative and quantitative factors including the investee's financial metrics, market acceptance of the investee's product or technology, general market conditions and liquidity considerations.

Concentrations of Significant Customers

As of April 30, 2021 and January 31, 2021, no single customer represented greater than 10% of accounts receivable.

For the three months ended April 30, 2021 and 2020, no single customer represented greater than 10% of revenue.

Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU

2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

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The Company is currently evaluating the overall impact of this standard on its consolidated financial statements.

Business Combination

On May 3, 2021, the Company acquired all outstanding shares of privately-held Auth0, an Identity-as-a-Service company.

The Company expects to combine Auth0’s developer-centric identity solution with the Company’s Okta Identity Cloud to drive synergies, product options and value for current and future customers.

The acquisition date fair value of the consideration transferred for Auth0 was approximately $ 5,671.0 million, which consisted of the following (in thousands):

Estimated Fair Value

Cash $ 257,010

Common stock issued 5,175,623

Fair value of outstanding employee equity awards assumed 238,389

Total consideration $ 5,671,022

Cash consideration of $ 257.0 million includes $ 3.8 million held back as partial security for post-closing true-up adjustments as well as indemnification claims made within one year of the acquisition date.

Approximately 19.2 million shares of common stock valued at $ 5,175.6 million were issued to selling stockholders, which includes approximately 1.1 million shares valued at $ 294.6 million held back as partial security for post-closing true-up adjustments as well as any indemnification claims made within one year of the acquisition date.

The Company entered into revesting agreements with Auth0’s founders pursuant to which approximately 1.2 million additional shares of Okta’s Class A common stock issued to the founders as of the closing date will vest over three years .

The $ 332.1 million fair value of the unvested restricted stock is not included as purchase consideration above, as it has a post-combination service requirement and will be accounted for separately from the business combination as stock compensation expense.

The Company issued replacement equity awards with a fair value of $ 655.1 million, of which $ 238.4 million was allocated to the purchase consideration as it is attributable to pre-combination services rendered and $ 416.7 million was allocated to post-combination services and will be expensed over the remaining service periods as stock-based compensation.

The fair value of the stock options assumed by the Company was determined using the Black-Scholes option pricing model.

The Company also converted certain equity awards to unvested restricted cash awards totaling $ 13.5 million that will be expensed over the remaining service periods.

See Note 12 for a discussion of amounts related to post-combination services that will be expensed over the remaining service periods as stock-based compensation.

Acquisition costs of $ 29.0 million related to Auth0 were expensed by the Company in general and administrative expenses in its condensed consolidated statement of operations for the three and six months ended July 31, 2021.

The transaction was accounted for as a business combination.

The total purchase price of $ 5,671.0 million was allocated using information currently available to the Company.

As a result, the Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, and revisions of preliminary estimates.

Preliminary allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values is as follows (in thousands):

Estimated Fair Value

Cash and cash equivalents $ 107,425

Accounts receivable 28,572

Prepaid expenses and other current assets 12,748

Property and equipment, net 1,928

Operating lease right-of-use assets 6,873

Other assets 6,375

Intangible assets 334,300

Accounts payable ( 3,610 )

Accrued expenses and other current liabilities ( 10,946 )

Accrued compensation ( 19,187 )

Deferred revenue ( 65,339 )

Operating lease liabilities, noncurrent ( 5,694 )

Other liabilities, noncurrent ( 12,515 )

Net assets acquired $ 380,930

The excess of purchase consideration over the fair value of the net tangible assets and identifiable intangible assets acquired was $ 5,290.1 million and was recorded as goodwill, which is primarily attributable to expected synergies in sales opportunities across complementary products, customers and geographies, cross-selling opportunities, and improvements in the selling process.

None of the goodwill is expected to be deductible for U.S.

federal income tax purposes.

The estimated useful lives and fair values of the identifiable intangible assets are as follows (in thousands):

Preliminary Estimate

(in years) Amount

Developed technology 5 years

Customer relationships 2 - 6 years

Trade name 5 years

Total identifiable intangible assets $ 334,300

Developed technology represents the estimated fair value of the features underlying the Auth0 products as well as the platform supporting and providing services to Auth0 customers.

Customer relationships represents the estimated fair value of the underlying relationships with Auth0 customers, including the fair value of unbilled and unrecognized contracts yet to be fulfilled.

Trade name represents the estimated fair value of the Auth0 brand.

Revenue and earnings of Auth0 included in the Company’s consolidated income statement from the acquisition date through July 31, 2021 are as follows (in thousands):

For the period

May 3, 2021 to July 31, 2021

Revenue $ 37,606

Net loss ( 150,335 )

Pro forma consolidated revenue and earnings for the three and six months ended July 31, 2021 and 2020, calculated as if Auth0 had been acquired as of February 1, 2020 are as follows (in thousands):

Pro Forma Consolidated Statement of Operations Data

Three Months Ended

July 31, Six Months Ended

Revenue $ 320,532 $ 225,596 $ 610,295 $ 428,668

Net loss ( 214,738 ) ( 158,167 ) ( 414,569 ) ( 346,400 )

The pro forma financial information for all periods presented above has been calculated after adjusting the results of Auth0 to reflect certain business combination and one-time accounting effects such as fair value adjustment of deferred revenue, amortization expense from acquired intangible assets, stock-based compensation expense for unvested equity awards assumed, deferred commissions, release of deferred tax asset valuation allowance and acquisition costs as though the acquisition occurred as of the beginning of the Company’s fiscal 2021.

The historical consolidated financial information has been adjusted in the pro forma combined financial results to give effect to pro forma events that are directly attributable to the business combination, reasonably estimable and factually supportable.

The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal 2021.

Cash Equivalents and Investments

Cash Equivalents and Short-term Investments

The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and short-term investments as of April 30, 2021 and January 31, 2021 were as follows (in thousands):

As of April 30, 2021

The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and short-term investments as of July 31, 2021 and January 31, 2021 were as follows (in thousands):

As of July 31, 2021

Cash equivalents:

Money market funds $ 58,546 $ — $ — $ 58,546

Corporate debt securities 6,412 — ( 1 ) 6,411

Total cash equivalents 58,546 — — 58,546

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Total $ 2,430,865 $ 2,000 $ ( 24 ) $ 2,432,841

All short-term investments were designated as available-for-sale securities as of April 30, 2021 and January 31, 2021.

The following table presents the contractual maturities of the Company’s short-term investments as of April 30, 2021 (in thousands):

As of April 30, 2021

All short-term investments were designated as available-for-sale securities as of July 31, 2021 and January 31, 2021.

The following table presents the contractual maturities of the Company’s short-term investments as of July 31, 2021 (in thousands):

As of July 31, 2021

Due within one year $ 1,312,391 $ 1,312,979

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Total $ 2,242,828 $ 2,243,638

As of April 30, 2021 and January 31, 2021, the Company included $ 43.0 million and nil , respectively, of unsettled purchases of short-term investments in Accrued expenses and other current liabilities on the condensed consolidated balance sheets and nil and $ 31.0 million, respectively, of unsettled maturities of short-term investments included in Prepaid expenses and other current assets on the condensed consolidated balance sheets.

The Company included $ 9.5 million and $ 10.5 million of interest receivable in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of April 30, 2021 and January 31, 2021, respectively.

The Company did not recognize an allowance for credit losses against interest receivable as of April 30, 2021 and January 31, 2021 because such potential losses were not material.

The Company had 32 and 10 short-term investments in unrealized loss positions as of April 30, 2021 and January 31, 2021, respectively.

There were no material gross unrealized gains or losses from available-for-sale securities and no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three months ended April 30, 2021 or 2020.

As of July 31, 2021 and January 31, 2021, the Company included nil of unsettled purchases of short-term investments in Accrued expenses and other current liabilities on the condensed consolidated balance sheets and included $ 50.0 million and $ 31.0 million, respectively, of unsettled maturities of short-term investments in Prepaid expenses and other current assets on the condensed consolidated balance sheets.

The Company included $ 8.4 million and $ 10.5 million of interest receivable in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of July 31, 2021 and January 31, 2021, respectively.

The Company did not recognize an allowance for credit losses against interest receivable as of July 31, 2021 and January 31, 2021 because such potential losses were not material.

The Company had 53 and 10 short-term investments in unrealized loss positions as of July 31, 2021 and January 31, 2021, respectively.

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors.

Based on this evaluation, the Company determined that for short-term investments, there were no material credit or non-credit related impairments as of April 30, 2021 and January 31, 2021.

Based on this evaluation, the Company determined that for short-term investments, there were no material credit or non-credit related impairments as of July 31, 2021 and January 31, 2021.

Strategic Investments

The Company's investments also include strategic equity investments in privately held companies, which do not have a readily determinable fair value.

As of April 30, 2021 and January 31, 2021, the balance of such strategic investments was $ 7.8 million and $ 3.1 million, respectively.

As of July 31, 2021 and January 31, 2021, the balance of such strategic investments was $ 10.3 million and $ 3.1 million, respectively.

During the three and six months ended July 31, 2021, the Company recorded $ 2.4 million and $ 5.3 million, respectively, of realized gain and unrealized adjustments in the carrying values of strategic investments.

All gains and losses on strategic investments, whether realized or unrealized, are recognized in Interest and other, net on the condensed consolidated statements of operations.

Fair Value Measurements

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The following table presents information about the Company’s financial assets that were measured at fair value on a recurring basis using the above input categories (in thousands):

As of April 30, 2021

As of July 31, 2021

Level 1 Level 2

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Money market funds $ 58,546 $ — $ — $ 58,546

Corporate debt securities — 6,411 — 6,411

Total cash equivalents 58,546 — — 58,546

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The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments that are not recorded at fair value on the condensed consolidated balance sheets (in thousands):

As of April 30, 2021

As of July 31, 2021

Net Carrying Amount (1)

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The difference between the principal amounts and the respective net carrying amounts, before unamortized debt issuance costs, represents the unamortized debt discount (See Note 9 for additional details).

The estimated fair values of the Notes, which are Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of April 30, 2021, the difference between the net carrying amount of the Notes and their estimated fair values represented the equity conversion value premium the market assigned to the Notes.

Based on the closing price of the Company’s common stock of $ 269.70 on April 30, 2021, the if-converted values of the 2023 Notes, 2025 Notes and 2026 Notes exceeded the principal amounts of $ 23.1 million, $ 1,060.0 million and $ 1,150.0 million, respectively.

The estimated fair values of the Notes, which are

Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of July 31, 2021, the difference between the net carrying amount of the Notes and their estimated fair values represented the equity conversion value premium the market assigned to the Notes.

Based on the closing price of the Company’s common stock of $ 247.79 on July 31, 2021, the if-converted values of the 2023 Notes, 2025 Notes and 2026 Notes exceeded the principal amounts of $ 17.2 million, $ 1,060.0 million and $ 1,150.0 million, respectively.

Deferred Commissions

Sales commissions capitalized as contract costs totaled $ 14.9 million and $ 11.9 million in the three months ended April 30, 2021 and 2020, respectively.

Amortization of contract costs was $ 11.8 million and $ 8.7 million for the three months ended April 30, 2021 and 2020, respectively.

Sales commissions capitalized as contract costs totaled $ 40.0 million and $ 18.4 million in the three months ended July 31, 2021 and 2020, respectively, and $ 54.9 million and $ 30.3 million in the six months ended July 31, 2021 and 2020, respectively.

Amortization of contract costs was $ 13.3 million and $ 9.4 million for the three months ended July 31, 2021 and 2020, respectively, and $ 25.1 million and $ 18.1 million for the six months ended July 31, 2021 and 2020, respectively.

There was no impairment loss in relation to the costs capitalized.

Goodwill and Intangible Assets, net

As of April 30, 2021 and January 31, 2021, goodwill was $ 48.0 million.

No goodwill impairments were recorded during the three months ended April 30, 2021 and 2020.

As of July 31, 2021 and January 31, 2021, goodwill was $ 5,338.1 million and $ 48.0 million, respectively.

During the three months ended July 31, 2021, the Company recorded $ 5,290.1 million of goodwill in connection with the Auth0 acquisition that was completed in May 2021.

See Note 3 for further details.

No goodwill impairments were recorded during the three and six months ended July 31, 2021 and 2020.

Intangible Assets, net

Intangible assets consisted of the following (in thousands):

As of April 30, 2021

Gross Accumulated Amortization Write-offs Net

As of July 31, 2021

Gross Accumulated Amortization Net

Capitalized internal-use software costs $ 30,819 $ ( 21,966 ) $ 8,853

Purchased developed technology 200,800 ( 24,415 ) 176,385

Customer relationships 140,900 ( 8,800 ) 132,100

Trade name 21,400 ( 1,070 ) 20,330

Software licenses 239 ( 121 ) 118

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As of January 31, 2021

Gross Accumulated Amortization Write-offs Net

Gross Accumulated Amortization Net

Capitalized internal-use software costs $ 30,259 $ ( 19,478 ) $ 10,781

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$ 59,185 $ ( 32,176 ) $ 27,009

As of April 30, 2021, and January 31, 2021, the remaining weighted-average useful life of all purchased developed technology was 2.9 years and 3.1 years, respectively.

Amortization expense of intangible assets for the three months ended April 30, 2021 and 2020 was $ 2.9 million and $ 2.8 million, respectively .

During the three months ended July 31, 2021, the Company recorded $ 334.3 million of intangible assets in connection with the Auth0 acquisition.

See Note 3 for further details.

The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:

Weighted-Average Remaining Useful Life

July 31, 2021 January 31, 2021

Purchased developed technology 4.6 years 3.1 years

Customer relationships 4.4 years —

Trade name 4.8 years —

Amortization expense of intangible assets for the three months ended July 31, 2021 and 2020 was $ 21.3 million and $ 2.8 million, respectively, and $ 24.2 million and $ 5.6 million for the six months ended July 31, 2021 and 2020, respectively.

The expected future amortization expense for acquired intangible assets in connection with the Auth0 acquisition, as of July 31, 2021, is as follows (in thousands):

Fiscal Period:

Remaining six months of fiscal 2022 $ 36,939

Fiscal 2023 73,878

Fiscal 2024 64,391

Fiscal 2025 61,228

Fiscal 2026 59,222

Thereafter 20,172

Total amortization expense $ 315,830

Deferred Revenue and Performance Obligations

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Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.

Subscription revenue recognized during the three months ended April 30, 2021 and 2020 that was included in the deferred revenue balances at the beginning of the respective periods was $ 202.1 million and $ 147.0 million, respectively.

Professional services and other revenue recognized in the three months ended April 30, 2021 and 2020 from deferred revenue balances at the beginning of the respective periods was not material.

Subscription revenue recognized during the three months ended July 31, 2021 and 2020 that was included in the deferred revenue balances at the beginning of the respective periods was $ 245.4 million and $ 165.0 million, respectively, and $ 359.3 million and $ 261.9 million in the six months ended July 31, 2021 and 2020, respectively.

Professional services and other revenue recognized in the three and six months ended July 31, 2021 and 2020 from deferred revenue balances at the beginning of the respective periods was not material.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

As of April 30, 2021, total remaining non-cancelable performance obligations under the Company’s subscription contracts with customers was approximately $ 1,889.8 million .

As of July 31, 2021, total remaining non-cancelable performance obligations under the Company’s subscription contracts with customers was approximately $ 2,236.4 million .

Of this amount, the Company expects to recognize revenue of approximately $ 1,098.5 million, or 49 %, over the next 12 months, with the balance to be recognized as revenue thereafter.

Remaining performance obligations for professional services and other contracts as of April 30, 2021 were not material.

Remaining performance obligations for professional services and other contracts as of July 31, 2021 were not material.

Convertible Senior Notes, Net

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The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.25 % per year.

Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning

on August 15, 2018.

Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018.

The 2023 Notes mature on February 15, 2023 unless earlier repurchased or converted.

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The interest rates used in the 2023 Notes Partial Repurchases were based on the income and market based approaches used to determine the effective interest rate of the 2025 Notes and 2026 Notes, adjusted for the remaining tenor of the 2023 Notes.

As of April 30, 2021, $ 23.1 million of principal remained outstanding on the 2023 Notes.

As of July 31, 2021, $ 17.2 million of principal remained outstanding on the 2023 Notes.

The terms of the 2023 Notes are governed by an Indenture by and between the Company and Wilmington Trust, National Association, as Trustee (the “2023 Indenture”).

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• during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (and only during such fiscal quarter), if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2023 Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each trading day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day;

period was less than 98 % of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day;

• upon the occurrence of specified corporate events, as described in the 2023 Indenture.

On or after October 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2023 Notes regardless of the foregoing

circumstances.

For at least 20 trading days during the period of 30 consecutive trading days ended April 30, 2021, the last reported sale price of the Company’s common stock was equal to or exceeded 130 % of the conversion price of the 2023 Notes on each applicable trading day.

As a result, the 2023 Notes are convertible at the option of the holders during the fiscal quarter ending July 31, 2021 and were classified as current liabilities on the condensed consolidated balance sheet as of April 30, 2021.

During the three months ended April 30, 2021, the Company issued approximately 0.4 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $ 17.1 million principal amount of 2023 Notes.

For at least 20 trading days during the period of 30 consecutive trading days ended July 31, 2021, the last reported sale price of the Company’s common stock was equal to or exceeded 130 % of the conversion price of the 2023 Notes on each applicable trading day.

As a result, the 2023 Notes are convertible at the option of the holders during the fiscal quarter ending October 31, 2021 and were classified as current liabilities on the condensed consolidated balance sheet as of July 31, 2021.

During the six months ended July 31, 2021, the Company issued approximately 0.5 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $ 23.0 million principal amount of 2023 Notes.

The loss on early note conversion was not material.

During the three months ended April 30, 2021, the Company received additional conversion requests, and approximately $ 2.9 million aggregate principal amount of the 2023 Notes were primarily settled in shares of Class A common stock during the three months ending July 31, 2021.

During the three months ended July 31, 2021, the Company received additional conversion requests, and an immaterial aggregate principal amount of the 2023 Notes was settled in cash during the fiscal quarter ending October 31, 2021.

No requests to convert material amounts of the 2023 Notes are currently outstanding.

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Contractual interest expense $ 14 $ 52 $ 34 $ 127

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The 2023 Notes, net consisted of the following (in thousands):

As of April 30, 2021

As of July 31, 2021

Liability component:

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Net carrying amount $ 15,723

As of April 30, 2021

As of July 31, 2021

Equity component:

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The proceeds were recorded as an increase to Additional paid-in capital in the condensed consolidated balance sheets.

During the three months ended April 30, 2021, the Company exercised and net-share-settled Note Hedges corresponding to approximately $ 7.5 million principal amount of 2023 Notes and received approximately 0.1 million shares of Class A common stock and an immaterial cash payment.

During the three months ended April 30, 2021, the Company exercised Note Hedges corresponding to approximately $ 9.6 million principal amount of 2023 Notes that are expected to be net-share-settled in the second quarter of fiscal 2022, and subsequent to April 30, 2021, the Company further exercised an immaterial amount of Note Hedges.

As of April 30, 2021, Note Hedges giving the Company the option to purchase approximately 0.7 million shares (subject to adjustment), which excludes the exercised portion expected to be net-share-settled in the second quarter of fiscal 2022, remained outstanding.

During the six months ended July 31, 2021, the Company exercised and net-share-settled Note Hedges corresponding to approximately $ 20.0 million principal amount of 2023 Notes and received approximately 0.3 million shares of Class A common stock and an immaterial cash payment.

As of July 31, 2021, the Company had additionally exercised Note Hedges corresponding to approximately $ 3.0 million principal amount of 2023 Notes that are expected to be net-share-settled in the three months ending October 31, 2021.

As of July 31, 2021, Note Hedges giving the Company the option to purchase approximately 0.4 million shares (subject to adjustment), which excludes the exercised portion expected to be net-share-settled in the three months ending October 31, 2021, remained outstanding.

In connection with the issuance of the 2023 Notes, the Company also entered into separate warrant transactions pursuant to which it sold net-share-settled (or, at the Company’s election subject to certain conditions, cash-settled) warrants (the “Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.1 million shares over 80 scheduled trading days beginning in May 2023 of the Company’s Class A common stock at an initial exercise price of approximately $ 68.06 per share (subject to adjustment).

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The termination payments were recorded as a decrease to Additional paid-in capital in the condensed consolidated balance sheets.

As of April 30, 2021, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.

As of July 31, 2021, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.

2025 Convertible Senior Notes

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On or after June 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2025 Notes regardless of the foregoing circumstances.

During the three months ended April 30, 2021, the conditions allowing holders of the 2025 Notes to convert during the three months ending July 31, 2021 were no longer met, and as a result, the 2025 Notes were classified as noncurrent liabilities as of April 30, 2021.

During the three months ended July 31, 2021, the conditions allowing holders of the 2025 Notes to convert during the three months ending October 31, 2021 were not met, and as a result, the 2025 Notes were classified as noncurrent liabilities as of July 31, 2021.

No requests to convert material amounts of the 2025 Notes are currently outstanding.

The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after September 6, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

During the three months ended April 30, 2021, the Company did no t redeem any of the 2025 Notes.

During the three months ended July 31, 2021, the Company did no t redeem any of the 2025 Notes.

Holders of the 2025 Notes who convert their 2025 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the 2025 Indenture) or in connection with the Company’s issuance of a redemption notice are, under certain circumstances, entitled to an increase in the conversion rate.

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Contractual interest expense $ 331 $ 331 $ 662 $ 662

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The 2025 Notes, net consisted of the following (in thousands):

As of April 30, 2021

As of July 31, 2021

Liability component:

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Prior to the close of business on the business day immediately preceding March 15, 2026, holders of the 2026 Notes may convert all or a portion of their 2026 Notes only in multiples of $1,000 principal amount, under the following circumstances:

• during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending

on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2026 Notes on each applicable trading day;

including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2026 Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on such trading day;

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On or after March 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2026 Notes regardless of the foregoing circumstances.

During the three months ended April 30, 2021, the conditions allowing holders of the 2026 Notes to convert were not met.

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which we provide notice of redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

During the three months ended April 30, 2021, the Company did no t redeem any of the 2026 Notes.

During the three months ended July 31, 2021, the conditions allowing holders of the 2026 Notes to convert were not met.

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which the Company provides notice of redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

During the three months ended July 31, 2021, the Company did no t redeem any of the 2026 Notes.

Holders of the 2026 Notes who convert their 2026 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indenture) or in connection with the Company’s issuance of a redemption notice are, under certain circumstances, entitled to an increase in the conversion rate.

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Contractual interest expense $ 1,078 $ 575 $ 2,156 $ 575

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The 2026 Notes, net consisted of the following (in thousands):

As of April 30, 2021

As of July 31, 2021

Liability component:

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Operating lease cost (1)

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(1) Amounts are presented exclusive of sublease income and include short-term leases, which are immaterial.

The weighted-average remaining term of the Company’s operating leases was 6.6 years and 6.8 years as of April 30, 2021 and January 31, 2021, respectively, and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.6 % as of April 30, 2021 and January 31, 2021.

The weighted-average remaining term of the Company’s operating leases was 6.3 years and 6.8 years as of July 31, 2021 and January 31, 2021, respectively, and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.5 % and 5.6 %, respectively.

Maturities of the Company’s operating lease liabilities, which do not include short-term leases, were as follows (in thousands):

As of April 30, 2021

As of July 31, 2021

2022 $ 17,409

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Total operating lease liabilities $ 197,982

Cash payments included in the measurement of the Company’s operating lease liabilities were $ 9.1 million and $ 7.1 million for the three months ended April 30, 2021 and 2020, respectively.

No impairment charges for operating lease right-of-use assets were recorded during the three months ended April 30, 2021 and 2020, respectively.

Cash payments included in the measurement of the Company’s operating lease liabilities were $ 10.0 million and $ 7.8 million for the three months ended July 31, 2021 and 2020, respectively, and $ 19.1 million and $ 15.0 million in the six months ended July 31, 2021 and 2020, respectively.

Commitments and Contingencies

Letters of Credit

In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate amount of $ 10.8 million and $ 11.2 million were issued and outstanding as of April 30, 2021 and January 31, 2021, respectively.

No draws have been made under such letters of credit.

Noncurrent restricted cash of $ 8.6 million associated with these letters of credit is included in Other assets on the condensed consolidated balance sheets as of April 30, 2021 and January 31, 2021.

Noncurrent restricted cash of $ 8.6 million associated with these letters of credit is included in Other assets on the condensed consolidated balance sheets as of July 31, 2021 and January 31, 2021.

Legal Matters

From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings.

There were no such material matters as of April 30, 2021 .

There were no such material matters as of July 31, 2021 .

Employee Incentive Plans

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Three Months Ended

July 31, Six Months Ended

2021 2020 2021 2020

Cost of revenue

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the 2009 Stock Plan (“2009 Plan”) and the 2017 Equity Incentive Plan (“2017 Plan”).

In addition, the Company assumed Auth0, Inc.

equity incentive plans as described below.

All shares that remain available for future grants are under the 2017 Plan.

As of April 30, 2021, options to purchase 1,586,610 shares of Class A common stock and 6,522,253 shares of Class B common stock remained outstanding.

As of July 31, 2021, options to purchase 2,849,312 shares of Class A common stock and 6,227,690 shares of Class B common stock remained outstanding.

Shares of common stock reserved for future issuance were as follows:

April 30, 2021

July 31, 2021

Stock options and unvested RSUs outstanding 14,379,018

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Canceled ( 153,742 ) 141.64

Outstanding as of April 30, 2021 (unaudited) 8,108,863 $ 40.30 5.7 $ 1,863,785

As of April 30, 2021

Outstanding as of July 31, 2021 (unaudited) 9,077,002 $ 37.28 5.8 $ 1,928,223

As of July 31, 2021

Vested and exercisable (unaudited) 7,062,746 $ 12.33 5.0 $ 1,663,336

As of April 30, 2021, there was a total of $ 111.6 million of unrecognized stock-based compensation expense related to options, which is being recognized over a weighted-average period of 2.6 years.

As of July 31, 2021, there was a total of $ 293.8 million of unrecognized stock-based compensation expense related to options, which is being recognized over a weighted-average period of 2.7 years.

Restricted Stock Units

A summary of the Company’s RSU activities and related information was as follows:

A summary of the Company’s RSU activity and related information was as follows:

RSUs Weighted-

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Forfeited ( 470,489 ) 145.19

Outstanding as of April 30, 2021 (unaudited) 5,112,140 $ 156.75

As of April 30, 2021, there was $ 750.8 million of unrecognized stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average period of 2.7 years based on vesting under the award service conditions.

Outstanding as of July 31, 2021 (unaudited) 5,302,016 $ 182.44

As of July 31, 2021, there was $ 881.8 million of unrecognized stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average period of 2.7 years based on vesting under the award service conditions.

Equity Awards Issued in Connection with Business Combination

In connection with the May 3, 2021 Auth0 acquisition described in Note 3, the Company assumed the Auth0, Inc.

2014 Equity Incentive Plan and the Auth0, Inc.

Phantom Unit Plan (together, the “Auth0 Plans”) and certain outstanding options to purchase Auth0 common stock, RSUs settleable into shares of Auth0 common stock, and phantom units under the Auth0 Plans.

Certain assumed securities were converted into options (which in certain instances were automatically net exercised) or RSUs, as applicable, for shares of the Company’s Class A common stock, subject to adjustment as set forth in the Merger Agreement.

Such assumed and converted options and RSUs will continue to be outstanding and will be governed by the provisions of the Auth0 Plans.

Activity under the Auth0 Plans is included in the summaries of stock option and RSU activity above.

Included in the Granted total in the stock options activity table above are 1,850,079 options assumed at a weighted average exercise price per share of $ 24.21 .

Included in the Granted total in the RSU activity table above are 743,718 RSUs assumed at a weighted average grant date fair value per share of $ 269.70 .

The Company entered into revesting agreements with Auth0’s founders pursuant to which 1,231,372 restricted shares of Okta’s Class A common stock with a fair value per share of $ 269.70 issued to the founders as of the closing date will vest over three years .

As of July 31, 2021, there was $ 305.1 million of unrecognized stock-based compensation expense related to unvested restricted stock, which is being recognized over a weighted-average period of 2.8 years based on vesting under the award service conditions.

Employee Stock Purchase Plan

As of April 30, 2021, there was $ 6.7 million of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized over an average vesting period of 0.6 years.

For the three months ended April 30, 2021, the Company recorded an immaterial income tax provision on pretax losses of $ 109.2 million.

The effective tax rate for the three months ended April 30, 2021 was approximately 0.0 %.

The ESPP provides for 12-month offering periods beginning June 21 and December 21 of each year, and each offering period consists of up to two six-month purchase periods.

The Company estimated the fair value of ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:

Three and Six Months Ended July 31,

Expected volatility 47 %- 48 %

Expected term (in years) 0.5 - 1.0

Risk-free interest rate 0.06 % - 0.09 %

0.17 % - 0.18 %

Expected dividend yield — —

During the three and six months ended July 31, 2021, the Company’s employees purchased 88,160 shares of its Class A common stock under the ESPP.

The shares were purchased at a weighted-average purchase price of $ 197.60 per share, with total proceeds of $ 17.4 million.

As of July 31, 2021, there was $ 16.5 million of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized over an average vesting period of 0.8 years.

For the three and six months ended July 31, 2021, the Company recorded a tax benefit of $ 7.5 million and $ 7.5 million on pretax losses of $ 284.1 million and $ 393.4 million, respectively.

The effective tax rate for the three and six months ended July 31, 2021 was approximately 2.6 % and 1.9 %, respectively.

The effective tax rate differs from the statutory rate primarily as a result of not recognizing deferred tax assets for U.S.

losses due to a full valuation allowance against U.S.

deferred tax assets and income tax expense related to profitable foreign jurisdictions, U.S.

state taxes and excess tax benefits from stock-based compensation in the United Kingdom.

For the three months ended April 30, 2020, the Company recorded a tax benefit of $ 0.4 million on a pretax losses of $ 58.1 million.

The effective tax rate for the three months ended April 30, 2020 was 0.7 %.

deferred tax assets, release of the valuation allowance in the United States in connection with the Auth0 acquisition, a remeasurement of deferred tax assets in connection with a tax rate change in the United Kingdom, and excess tax benefits from stock-based compensation in the United Kingdom.

The tax benefit was partially offset by income tax expense in profitable foreign jurisdictions and U.S.

For the three and six months ended July 31, 2020, the Company recorded a tax benefit of $ 0.4 million and $ 0.8 million on pretax losses of $ 60.5 million and $ 118.6 million, respectively.

The effective tax rate for the three and six months ended July 31, 2020 was 0.7 %.

The effective tax rate differs from the statutory rate primarily as a result of not recognizing deferred tax assets for U.S.

losses due to a full valuation allowance against U.S.

deferred tax assets and excess tax benefits from stock-based compensation in the United Kingdom.

The tax benefit recognized for the three months ended April 30, 2020 was partially offset by income tax expense in profitable foreign jurisdictions and U.S.

assets and excess tax benefits from stock-based compensation in the United Kingdom.

The tax benefit was partially offset by income tax expense in profitable foreign jurisdictions and U.S.

Net Loss Per Share

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Three Months Ended

Class A Class B Class A Class B

July 31, Six Months Ended

2021 2020 2021 2020

Class A Class B Class A Class B Class A Class B Class A Class B

Net loss $ ( 263,151 ) $ ( 13,531 ) $ ( 56,090 ) $ ( 4,010 ) $ ( 364,976 ) $ ( 20,938 ) $ ( 109,774 ) $ ( 7,988 )

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Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):

As of April 30,

As of July 31,

Issued and outstanding stock options 9,077 9,919

Unvested RSUs issued and outstanding 5,302 5,262

Unvested shares subject to repurchase — 3

Unvested restricted stock awards issued and outstanding 1,231 —

Shares committed under the ESPP 227 141

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The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the Notes on diluted net income per share, if applicable.

The conversion options of the 2023,

2025 and 2026 Notes are dilutive in periods of net income on a weighted average basis using an assumed conversion date equal to the later of the beginning of the reporting period and the date of issuance of the respective Notes.

The conversion options of the 2023, 2025 and 2026 Notes are dilutive in periods of net income on a weighted average basis using an assumed conversion date equal to the later of the beginning of the reporting period and the date of issuance of the respective Notes.

The exercise rights of the Warrants will have a dilutive impact on net income per share of common stock under the treasury-stock method when the average market price per share of the Company’s Class A common stock for a given period exceeds the conversion price of $ 68.06 per share.

During the three months ended April 30, 2021, the average price per share of the Company’s Class A common stock exceeded the exercise price of the Warrants;

During the three months ended July 31, 2021, the average price per share of the Company’s Class A common stock exceeded the exercise price of the Warrants;

however, since the Company is in a net loss position, there was no dilutive effect during any period presented.

Subsequent Events

On May 3, 2021, the Company completed its acquisition of Auth0, Inc.

The Company provided total consideration, net of acquired cash and subject to final adjustments, of approximately $ 6.5 billion, including approximately 20.4 million shares of the Company's Class A common stock (the "Stock Consideration"), $ 268.7 million in cash, and equity awards convertible into shares with a fair market value of $ 700.2 million based upon our closing stock price as of April 30, 2021.

Approximately $ 325.0 million of the consideration was held back by the Company to secure the indemnification obligations of the Auth0 securityholders arising during the twelve months following the closing.

In addition, the Company established a retention pool in an aggregate amount of approximately $ 25.0 million that will be allocated to certain Auth0 employees in accordance with the terms of the Merger Agreement.

The retention awards will vest consistent with Okta’s standard RSU vesting periods and terms.

On August 2, 2021, the Company completed its acquisition of Townsend Street Labs, Inc.

(“atSpoke”), a modern workplace operations platform.

The Company provided total consideration, subject to final adjustments, of $ 89.0 million consisting of cash and the Company’s Class A common stock.

An agreed upon amount of consideration was held back by the Company to secure the indemnification obligations of the selling stockholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements