Hey everyone,
Apologies for being a bit absent on the board lately. Anyway, I was just thinking about PVTL’s subscription revenues and how its growth is in the ballpark of OKTA’s and the operating losses are both pretty big. So I want to compare the two to put PVTL’s valuation into perspective.
Here are PVTL’s numbers:
Fiscal year ended Jan 16 Jan 17 Jan 18
Revenue
Subscription Revenue $ 95 mil $150 mil $260 mil
Services Revenue $186 mil $286 mil $250 mil
Total Revenue $281 mil $416 mil $509 mil
Gross Cost of Revenue
Cost of Subscription Rev $ 34 mil $ 31 mil $ 30 mil
Cost of Services Rev $ 154 mil $ 203 mil $ 198 mil
Total Cost of Revenue $ 187 mil $ 234 mil $ 228 mil
Gross Margin Profit
Gross Margin dollars $ 94 mil $182 mil $281 mil
Gross Margin percent 33% 44% 55%
Operating Expenses
S&M $187 mil $194 mil $221 mil
R&D $120 mil $152 mil $161 mil
G&A $ 58 mil $ 62 mil $ 67 mil
Total Operating Expense $366 mil $408 mil $449 mil
Operating Loss
Operating Loss dollars $273 mil $227 mil $168 mil
Operating Loss percent -97% -55% -33%
Net Loss
Net Loss dollars $283 mil $233 mil $164 mil
Net Loss percent -101% -56% -32%
Here are OKTA’s:
Fiscal year ended Mar 17 Mar 18
Revenue
Subscription Revenue $ 143 mil $ 239 mil
Services Revenue $ 18 mil $ 21 mil
Total Revenue $ 161 mil $ 260 mil
Gross Cost of Revenue
Cost of Subscription Rev $ 34 mil $ 52 mil
Cost of Services Rev $ 22 mil $ 28 mil
Total Cost of Revenue $ 56 mil $ 80 mil
Gross Margin Profit
Gross Margin dollars $ 104 mil $ 179 mil
Gross Margin percent 65% 69%
Operating Expenses
S&M $119 mil $173 mil
R&D $ 39 mil $ 71 mil
G&A $ 30 mil $ 52 mil
Total Operating Expense $188 mil $296 mil
Operating Loss
Operating Loss dollars $83 mil $116 mil
Operating Loss percent -52% -46%
Net Loss
Net Loss dollars $83 mil $114 mil
Net Loss percent -52% -45%
More Facts:
Expansion Rate in latest quarter:
OKTA: 124%
PVTL: 158%
Number of Customers:
OKTA: Around 4,000
PVTL: 319
More Observations
If we look at just the subscription numbers they are actually more similar than I realized.
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Revenues: $260 mil for PVTL vs. $239 mil for OKTA
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Subscription gross margin: 88% for PVTL vs. 78% for OKTA
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OKTA has a wider operating loss though OKTA is closing the free cash flow negative gap quickly.
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OKTA doesn’t have as much customer concentration as it is spread out over 4,000 customers.
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Subscription revenue growth: 73% for PVTL vs. 67% for OKTA
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Market Cap: PVTL 4.7 billion vs. OKTA 5.2 billion
Conclusion
These facts definitely lean towards PVTL I must say. Starting out I would’ve picked OKTA for sure, but these figures tell an interesting story.
PVTL’s subscription numbers are higher, growing more quickly, have a higher margin, cost less to market and yet, OKTA trades for a higher valuation. And this isn’t even counting PVTL’s additional $250 million in services revenue (which may not be worth a whole lot anyway though). Saul may be onto something…but what’s new!!
Very best,
Fish