Okta's Q1 results

Okta just reported some pretty solid numbers.

  • Revenue of $251M, was +37% YoY vs consensus of 30.8%, beating expectations and guidance. So, yes, they’re now at a $1B annual revenue run rate (!)

  • EPS a bit down from, though, from last year ($0.10) vs ($0.06)

  • RPO (Remaining Performance Obligations, or subscription backlog) +52% to $1.89B

  • Current RPO (=for next 12 months) +45% to $899M.

  • Billings were up 74% to $364M.

  • Adjusted gross margin was 78% versus the 77.8% estimate.

  • For Q2, the company forecasts revenue of $295-297M (consensus: $ 260.5M) and adjusted loss per share of $0.35-0.36 (consensus: $0.11 loss).

Overall, I’m pleased with these results, and feel that the Auth0 acquisition will fuel their growth further.

Long Okta since Feb 2018.


Hey Ron - I sold out earlier this year after they re-affirmed guidance of 30% growth very late in the quarter which sounded like a huge drop in growth. 37% was probably the best that could have been hoped for given the timing of that guidance and that’s where it landed.

I’ve lost track of the closing of Auth0 transaction, but did this feature in the revenue and growth number? If so then it really is shabby. If not then one should be expecting growth to turn upwards as it was a growth accretive transaction.


Definitely good results but I don’t like my portfolio have anyone who just behind the 40% growth rate. That’s only my rules, probably not suitable for anyone.

But at this revenue and during this “zero trust “ hot topic season. I little surprised OKTA “only” delivered under 40% growth. Still love this company and their CEO Todd, but I’ll be back when their growth accelerates back up to 40’s% again.



The revenue numbers for this quarter did not include the Auth0 acquisition – which didn’t close until May 3. So the 37% YoY was Okta growth only – below the +40% we like to see here, but not “shabby”. The rest of the numbers such as subscript rev growth of 38% Y0Y and RPO growth of 52% are further indications of solid and healthy continued growth – but again not quite enough to drive +40% YoY.

Forecast for the year is now at a midpoint of $1.22B – 47% YoY. That does include 3 quarters of Auth0 rev which I believe was running at ~$200M/yr and growing. So using the prior to acquisition forecast of $1.09B, that is 30% core Okta growth and the rest from acquisition. Factor in a few % points because they continually under-forecast and we are looking at ~34% core Okta growth and 50% total YoY (inclusive of Auth0 revenues).

I personally don’t totally discount growth from acquisition like some here do. Companies grow through investment - acquisition and development. And some companies do it well – especially when 1+1=>2. So I give some credit to Okta for the forecasted 47% growth this fiscal year but discount it a bit because the acquisition was financed by stock dilution.

Long term forecast from Okta execs is ~37% growth for the next 4 years. This is solid but not like some of the other companies here. Again, adding a fudge factor and it is possibly more like 40% a year on average - borderline for a “Saul Stock”.

Also, I’d like to know more about the departure of the CFO. Not much was said and a CFO leaving could be a smoke signal of trouble ahead. So will be keeping an eye out for more info there.

So for me, since Okta growth is not at the higher levels looked for, I am not adding to my position - choosing to put new $’s elsewhere. But I am not selling at this point either. Solid growth is in the forecast for Okta, and I think it has more room to run from here. But any more slippage in growth numbers, and I’m taking my money and running eleswhere.


Long Okta - since Mar 2019


Jeff - Whilst I’ve personally sold out given the growth drop off and need for capital to support opportunities with other holdings, it’s great that you guys are keeping tabs on this and I agree it’s a solid company with good prospects and your evaluation and Okta that might be well deserving of re-investing into in the near future for those on the sidelines or on pause.

Hi Ant,

The Auth0 acquisition closed just 3 weeks ago, on May 3. So the Q1 results did not include any dollars from Auth0, and Okta’s 37% YoY revenue growth was all organic.

For this current (2nd) quarter, they’re expecting to hit $297M, of which Auth0 will contribute 2 months worth of its revenue. Assuming Okta by itself grows 7% QoQ, we can calculate that Auth0 will contribute another $30M this quarter, or about $15M per month. For 3Q, assuming Okta again grows 7% QoQ and Auth0 conservatively grows 10% QoQ, we can estimate total revenue to be at least $336M. So, by 3Q this year, this company should be at an annualized $1.35B revenue run rate.

Auth0 has always been a private company, but we know it grew revenues 70% YoY in 2019. Was the $6.5 billion that Okta paid to acquire Auth0 worth it? I think the answer is yes, because Auth0 doubles Okta’s TAM. Let me explain.

Workforce Identity vs Customer Identity
Okta started out as a Workforce Identity provider. What does that mean? Well, let’s say you work at American Megacorp, Inc, and your company has arranged benefits where you have to log into cloud provider Concur to submit expense reports, log into the Teladoc portal to video chat with a doctor, and log into ADP to look into what got taken out of your paycheck, and cry about it.

Well, the last thing they want is for you to retain access to all those accounts when you leave the company. That’s a big security risk. And you want to have the convenience of logging in to various benefits portals without having to remember 10 different passwords. That’s where Okta comes in. Your company stores its employee directory in Microsoft AD (or in Okta’s directory), and you go to a special URL where Okta authenticates you, and redirects you to the Website you want, without you having to enter a password.

Okta saves your company’s development team (and the benefits providers’ development teams) from having to build all these custom identity integrations. If you leave the company, they just remove you from the Microsoft AD, and Okta ensures that you automatically lose access to all the benefits Websites.

That’s what Workforce Identity is all about, and the TAM for this is estimated at $20B annually. This is what the original Okta excelled at.

So why did Okta spend $6.5B to acquire Auth0, whose revenue was less than $200M but growing rapidly? The reason is that Auth0 is a leader in customer identity And customer identity is all about you using your Web or mobile device to sign up or log in to a brand new app (like, say, Tinder), without entering a password. Because Auth0 made it easy for the app developer to allow you to choose to log in via Google or Facebook or LinkedIn. Auth0 does all the authentication with the social identity provider, and even gives you the code to implement “Forgot password”, or send a code to your mobile for 2-factor authentication (through Twilio, of course). (If you have any other questions about Tinder, I know nothing about it, OK? :slight_smile:

Now, it turns out that the TAM for customer identity is about $30B annually. So that’s why Okta paid $6.5B for Auth0. They are more than doubling their TAM, from $20B to about $50B. Given that their revenue now is only at a $1B run rate, you can see how early things are in the world of workforce and customer identity. There’s a huge runway ahead.

I also wrote some time ago that Twilio grows virally because developers download it, try it out, get stuff running with minimal code and tell their friends about it. No Twilio sales team needed. Auth0 is growing virally among developers in exactly the same way. I know, because I was one of those developers.



Ron - we are aligned on the belief in the rationale for the acquisition and the investment opportunity. I had planned to keep my holding but really didn’t like the tailing off in the growth in the ex Okta side of the business which has been an extreme drop-off.

Effectively buying into Okta now is really an investment in Auth0 if you leave aside the 6x the market cap and the 4x in revenue size of ex Okta vs Auth0. Auth0 is 2x the revenue growth and >2x the TAM and potentially a superior tech.

I agree the acquisition was excellent and the prospects interesting but it doesn’t get away from the fact that Octa growth is plummeting.

I will monitor and potentially return if my portfolio allows me the opportunity but in the meantime I have prioritised money elsewhere.