Okta Q420

OKTA - Q420

PR: https://investor.okta.com/news-releases/news-release-details…
PR slides: https://investor.okta.com/static-files/7958b289-f0da-41c5-9e…
Fool take (Bowman): https://www.fool.com/amp/investing/2020/03/07/okta-remains-o…
CC transcript: https://www.fool.com/amp/earnings/call-transcripts/2020/03/0…
Saul on op highlights: https://discussion.fool.com/it-doesn39t-look-as-though-the-okta-…
Stocknovice historical numbers : https://discussion.fool.com/i-like-the-report-but-i-struggle-wit…

Revenue 167.3M +45%

  • Sub Rev 158.5M +46%
    – Intl Rev +52% ^^ +1500bps seq !!
    … 16% of total
    RPO 1.2B +66% !!
  • Current RPO 592M +54% ^^
    Billings 225M +42%
    Adj Gross Margins 77.6% +120bps
  • Sub Gross Margins 82.0% -40bps
    Adj Op Loss -5.6M (vs -4.9M)
    … margin -3.3% (vs -4.3%)
    Adj EPS -0.01 (vs -0.04)
    Opex 167.3M +49.7%
    CFFO 24.8M +146%
    FCF 18.1M +277% !!
    … margin 10.8% (vs 4.1%) +670bps ^^
    Cash 1.4B
    Custs 7950 +30%
  • Custs >100K 1467 +41%
    Empl 2200 +44%
    $NER 119% -100bps, +200bps seq
  • strong RPO growth due to increase in larger enterprise custs w larger contracts for longer periods
  • contracts >1M +80%, with avg term 4Yr (+50% over overall avg term)
  • $NER has been dropping last few Q (due to bigger initial deals) but jumped back up this Q on stronger cust upsell
  • per COO, 73% custs expect to expand spend, 0% expect to decrease
  • new custs Autodesk, Global 2000 power co for 100k empl/partners, Euro film/tv co for 8m custs
  • new partnerships w Netflix and Disney+ for auth login
  • Oktane conf 3/30-4/2 will now be virtual; sure to have new products announced
  • already increasing FY21 guidance from last Q
  • will continue to invest in Int’l sales
    expansion in FY21; guiding for positive cashflow but continued losses due to investment (with >1/2 of losses due to facility expansion alone)

CC Q&A tidbit: If you look at the best of breed, I mean of our customers and we have many, many large deployments of Office 365, right? Organizations like Hitachi that roll out hundreds and thousands of employees of Office 365 in three months using Okta. But over 75% of our Office 365 customers are using another collaboration best of breed applications. So Zoom or Slack or something like that. And what that really means is that, the future is this, hybrid, multi-cloud, lots of applications, heterogeneous environment. And you need to have the ability to connect deeply and broadly into all the technologies that people use, and not be wedded to one specific application or one stack. … Okta Access Gateway is doing very, very well. And I think having that as an embedded part of the Okta Cloud Identity suite, having that be the pre-integrated solution that we provide to allow our legacy large enterprise customers, who have legacy infrastructure to connect that in a modern way to the cloud is very differentiated.

My stance: They veered into positive FCF 2 Qs ago, a good sign countering the slowly dropping revenue growth. I continue to have a strong position in this hypergrowth company as it transitions into a cash machine. There is a lot to like from this sticky SaaS provider. Larger and larger enterprises are signing up with longer and longer terms. Customers want the new products, as shown in re-strengthening of $NER. Their new Zero Trust solution went GA last Q, new auto-scaling feature Dynamic Scale was heavily mentioned as a selling feature in new customer wins, and the next-gen of products/features are coming soon (which always debut at Oktane event, happening later this month). Even Intl is back on track, with a strong re-acceleration after dipping from 60% to 37% over last 3Qs, now jumping back to +52%. Opex still expanding as their Int’l footprint continues to scale up. Intl is still only 16% (so roughly 25.4M of 158.5M sub rev) but I expect the last year of sales facility & headcount expansion to bear fruit, and that we will continue to see Intl become a bigger and bigger slice. Stellar execution over past year, and I see signs of current products taking off as they expand their platform (and TAM) into new directions, as PAM (Server Access) and Zero Trust (App Access) help bridge systems in hybrid environs. CC Q&A bit quoted above mentioned how their new Access solutions are helping them sell into large enterprises, by allowing companies to bridge on-premise with cloud infrastructure. I cannot wait to see what is coming next down the product pipeline as they continue to leverage their Okta Cloud and Integration network into these great new directions.

Highly recommend reading the CC Q&A for a taste of all the exciting things happening in Okta’s storyline: customers are getting larger and larger; Intl is just getting started; new products are expanding platform in very compelling ways while helping them sell into larger enterprises; how customers with complex integrations are onboarding quickly.

-muji
long OKTA 15%

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