OKTA Earnings

For those interested. I’ve owned OKTA for 2+ years, currently ~2% of overall portfolio. They’re still showing good growth, but not enough for me to add or trim right now. AH pricing is unimportant.

R4M

https://investor.okta.com/news-releases/news-release-details…

"Q2 revenue grew 57% year-over-year; subscription revenue grew 59% year-over-year
Remaining performance obligations (RPO) grew 57% year-over-year to $2.24 billion
Increases revenue and operating profit outlook for fiscal 2022
SAN FRANCISCO–(BUSINESS WIRE)–Sep. 1, 2021-- Okta, Inc. (Nasdaq: OKTA), the leading independent identity provider, today announced financial results for its second quarter ended July 31, 2021.

“In our first quarter as a combined company with Auth0, we’re off to a fantastic start,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta. “Execution remained sharp with strong demand for Okta’s workforce and customer identity solutions, as well as Auth0’s developer-centric identity solutions. As organizations advance on their journey of improving their customers’ digital experience, adopting zero-trust security environments, and deploying more cloud applications, they continue to turn to Okta to deliver an unmatched array of modern identity solutions to meet these challenges.”

Second Quarter Fiscal 2022 Financial Highlights:

Revenue: Total revenue was $316 million, an increase of 57% year-over-year. Subscription revenue was $303 million, an increase of 59% year-over-year. On an Okta standalone basis (excluding $38 million attributable to Auth0), total revenue grew 39%.
Remaining Performance Obligations (RPO): RPO, or subscription backlog, was $2.24 billion, an increase of 57% year-over-year. Current RPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.10 billion, up 60% compared to the second quarter of fiscal 2021. On an Okta standalone basis (excluding Auth0), RPO and current RPO increased 42% and 43% year-over-year, respectively.
Calculated Billings: Total calculated billings, net of acquired deferred revenue, was $362 million, an increase of 83% year-over-year. Calculated billings includes the effect of billings process improvements that were enacted at the end of the first quarter of fiscal 2022. Excluding these changes, calculated billings would have been $345 million, an increase of 74% year-over-year. On an Okta standalone basis, excluding Auth0 and the effect of the billings process improvements, calculated billings increased 47% year-over-year.
GAAP Operating Loss: GAAP operating loss was $263 million, or 83% of total revenue, compared to a GAAP operating loss of $45 million, or 23% of total revenue, in the second quarter of fiscal 2021.
Non-GAAP Operating Income/Loss: Non-GAAP operating loss was $25 million, or 8% of total revenue, compared to non-GAAP operating income of $6 million, or 3% of total revenue, in the second quarter of fiscal 2021.
GAAP Net Loss: GAAP net loss was $277 million, compared to a GAAP net loss of $60 million in the second quarter of fiscal 2021. GAAP net loss per share was $1.83, compared to a GAAP net loss per share of $0.48 in the second quarter of fiscal 2021. GAAP net loss and GAAP net loss per share include $150 million and $0.99, respectively, attributable to Auth0.
Non-GAAP Net Income/Loss: Non-GAAP net loss was $16 million, compared to non-GAAP net income of $10 million in the second quarter of fiscal 2021. Non-GAAP basic and diluted net loss per share was $0.11, compared to non-GAAP basic net income per share of $0.08 and non-GAAP diluted net income per share of $0.07 in the second quarter of fiscal 2021.
Cash Flow: Net cash used in operations was $3 million, or (1)% of total revenue, compared to net cash provided by operations of $11 million, or 5% of total revenue, in the second quarter of fiscal 2021. Free cash flow was negative $4 million, or (1)% of total revenue, compared to $7 million, or 3% of total revenue, in the second quarter of fiscal 2021.
Cash, cash equivalents, and short-term investments were $2.47 billion at July 31, 2021.
The section titled “Non-GAAP Financial Measures” below contains a description of the non-GAAP financial measures, and reconciliations between GAAP and non-GAAP information are contained in the tables below.

Financial Outlook:

Okta’s financial outlook for the third quarter and full year fiscal 2022 includes the expected contribution from the acquisition of Auth0, net of purchase accounting adjustments. The acquisition closed on May 3, 2021.

For the third quarter of fiscal 2022, the Company expects:

Total revenue of $325 million to $327 million, representing a growth rate of 50% year-over-year;
Non-GAAP operating loss of $35 million to $34 million; and
Non-GAAP net loss per share of $0.25 to $0.24, assuming weighted-average shares outstanding of approximately 153 million.
For the full year fiscal 2022, the Company now expects:

Total revenue of $1.243 billion to $1.250 billion, representing a growth rate of 49% to 50% year-over-year;
Non-GAAP operating loss of $119 million to $114 million; and
Non-GAAP net loss per share of $0.77 to $0.74, assuming weighted-average shares outstanding of approximately 147 million.
These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Okta has not reconciled its expectations as to non-GAAP operating loss and non-GAAP net loss per share to their most directly comparable GAAP measures because certain items are out of Okta’s control or cannot be reasonably predicted. Accordingly, reconciliations for forward-looking non-GAAP operating loss and non-GAAP net loss per share are not available without unreasonable effort."

27 Likes

Thanks for the details Rael, I am going through the numbers now while listening to the earnings call and agree with your general assessment.
I have a 3% position which I have had for 18 months – so not quite the gains you have seen but still reasonable. I have slowly added to my position and picked up another 10% in the dip after hours - I have liquidated a few smaller positions over the past week to free up some cash. I also picked up a little more CRWD in AH yesterday.

Items from Earnings call today
(Note: these are as I captured during the call, not direct quotes from transcript):
Financial Highlights

  • Hit $2B RPO level – form $1B in 2 years
  • 2610 cust w/ > $100K ACV – up from ~1675 1 year ago – 55% growth
  • OKTA added 160 $100K customers in Q2, Auth0 brought in 300
  • Unifying Okta and Auth0 sales teams with target of integration at beginning of next FY – I personally believe this will help drive growth
  • Net retention rate Total 124% / Okta 122% (+2%) / Auth0 127% - solid #’s
  • Raised guidance to 50% Q3 QoQ growth (8%-9% Q2 to Q3) and 49%-50% YoY FY22 growth – raise due to solid performance of both OKTA and Auth0
  • Expect business to be cash flow positive for the year

A few Q&A items:
o Why didn’t they break out guidance between Okta and Auth0?

  • Answer - want flexibility in packaging and integration going forward. Focusing on synergy. Gave visibility for this quarter to show both are performing very well. But as unifying into a single company, breakouts not needed going forward.
    o What is the overall opportunity for selling Workforce into Auth0 customers?
  • Answer - had 300 common customers, only 2% of customer base. Teams just started working together but already seeing results. So lots of upside for cross selling. Examples, Warby-Parker was Okta customer and adopted Auth0. SalesForce was Auth0 and became OKTA customer.
    o $200M ARR existing run rate for Auth0 at end of year - is accelerating needed to achieve that?
  • Answer - yes, that is the target and no acceleration not needed as we are on track for that.
    o Organic international growth - can you break it out?
  • Answer - no, we aren’t breaking that out. That said, OKTA is up and to the right and growing faster than the overall business. We are very optimistic in this area.
    o Personal note regarding sales integration since several questions came up about this - I have been in a SW sales environment for 20 years and have experienced the integration from an acquirer side and more recently in a large scale acquisition (my company was acquired). True integration of sales organizations is a lot of work and must be planned to prevent disruption. I was pleased with the answers from Okta management on how they are handling this.

3 more observations that has little bearing on the stock price, just a nice change of pace from other calls:

  • They presented and discussed the OKTA & Auth0 standalone metrics so we don’t have to jump through hoops to figure that out – the transparency was refreshing, though made it clear it will likely be a one time event
  • I like that they play upbeat rock music while waiting for the call to start – keeps you energized for the call
  • The CEO, COO, and others are on screen for some of the prepared remarks and all the Q&A – nice to see a face with the voice vs many other calls that are still slides only

OKTA is in my 2nd tier and I may sell out at any time – but for now I feel continued growth warrants holding at my current levels (after my small AH addition).

Jeff

aka bornGiantsFan - Who is a little bummed out by the Giants losing 2 straight to the Brewers and will be at the ballpark again tonight

19 Likes

Okta’s beat-and-raise results were good enough for me to decide to continue to hold the shares, as I’ve done for almost 4 years now. Last year during this same Q they were at a $800M annualized revenue run rate. This year they’re at a $1.1B run rate without Auth0. So they’re still growing sales organically at a near 40% YoY clip.

Sequentially, again excluding Auth0, they grew revenues almost 11%, from Q1 to Q2 this year. No signs of any slowing there.

Ok, now let’s look at what Auth0 brought to the table. The acquisition was completed on May 3, and Auth0 contributed $38M during the last 2 months of the Q. So Auth0 is adding an annualized $228M to Okta’s revenues. The new, beefed up Okta is therefore operating at a $1.3B annual run rate.

There’s very little intersection between Okta’s customers and Auth0’s customers. But the combined company can integrate their workforce identity and customer identity products, and create some pretty synergistic offerings. Auth0 is one of those products, like Twilio and MongoDb, that is growing virally among developers because it costs nothing to try out, and is so easy to use as a building block for their apps. With Auth0, developers don’t need to build login and signup logic with multi-factor authentication and Active Directory integration from scratch.

And remember, the TAM for the type of customer identity solution that Auth0 offers is $30B, which is more than the $20B TAM of Okta’s original workforce identity products. So Auth0 will likely help accelerate Okta’s revenue growth.

Some other highlights:

  • RPO is at a whopping $2.2B, up 57%
  • Net Dollar Based Expansion Rate = 124%
  • They now have 13,000 customers, including 2,000 enterprises that pay them over $100K annually

Cheers,
Ron

45 Likes

I have looked back at the reasons as to why Saul sold OKTA - I believe post number 76794 sets out the main reason which was that the AuthO acquisition would not give a noticeable boost to revenue until the October results are released in December ‘21 (in addition to having better places to put his money at the time)

https://discussion.fool.com/reflections-on-okta8217s-reiteration…

I also compared the Q2 results to the results that were announced in March ’21 – at that time Saul was particularly impressed with the RPO number which was 1.8Billion, increase 49% yoy, and “eight times this quarter’s all-time-high subscription revenue!”. In the latest Q2 results RPO was $2.24 billion, increase 57% yoy, which is 7.4 times the subscription revenue – similarly impressive results.

So the combination of a great Q2 results; the contributions of AuthO to look forward to; the costs of the AuthO merger passing; and the cyber-security tail winds, I don’t see why I should add OKTA to my portfolio once again.

4 Likes

Moneyspin–I follow your logic, but not your conclusion. Did you mean to say “shouldn’t” rather than should?

2 Likes

BetterFool, Yes there is a typographical error in my conclusion. Apologies. It should read “I don’t see why I should not add OKTA to my portfolio once again.” (I noticed the typo after I had posted – but there is no “edit” option and I didn’t want to clog the board with posts, but rather hoped that the typo error might be obvious in view of the overall context of the rest of the post. I will take more care in future when posting). Thanks.

6 Likes