Okta
DreamstimeOkta shares are losing ground in late trading Wednesday despite reporting better-than-expected financial results for the fiscal third quarter ended on October 31.
The provider of identity management software posted revenue for the quarter of $351 million, up 61% from a year ago, and ahead of both the company’s guidance range of $325 million to $327 million and the Street consensus at $327 million.
Okta (ticker: OKTA) posted a non-GAAP loss of 7 cents a share, narrower than the guidance range of a loss of 24 cents to 25 cents a share. Under generally accepted accounting principles, the company lost $221 million, or $1.44 a share.
The company said revenue excluding its recently completed acquisition of Auth0 was $305 million, up 40%, accelerating from 39% growth one quarter earlier.
Okta said remaining performance obligations (RPO) were $2.35 billion, up 49% from a year ago, but down from 57% in the July quarter. That could be a sensitive data point, given that Salesforce (CRM) included lighter-than-expected guidance on that measure for the January quarter late Tuesday.
CEO Todd McKinnon said in an interview with Barron’s that the company is seeing a leveling out of average contract length at a little over two years, after gradually ratcheting up from 18 months. (By definition, longer contracts means higher RPO.) He suggests investors focus on current RPO — covering results for the next 12 months – which was up 57% in the October quarter, down just slightly from 60% growth in the July quarter.
Billings were $389 million, up 54%, slowing from 83% growth in the July quarter. McKinnon said billings data tends to fluctuate based on invoice timing, and suggests again that current RPO is a better measure of future performance.
“Our strong third quarter results reflect the continued shift to Identity-First architectures and the critical adoption of Zero Trust security environments, which are both propelling our market leading position,” McKinnon said in a statement.
For the fiscal fourth quarter ending in January, the company sees revenue of $358 million to $360 million, with a non-GAAP loss of 24 cents to 25 cents a share. Street consensus calls for $354.8 million and a loss of 28 cents a share.
Okta raised its full year forecast to a range of $1.275 billion to $1.277 billion, from a previous range of $1.243 billion to $1.25 billion. Okta now sees a non-GAAP loss for the quarter of 52 cents to 53 cents a share, narrowing from a previous forecast of a loss of 74 cents to 77 cents a share.
McKinnon also said the company added about 900 customers in the quarter, boosting the total to about 14,000. The Okta CEO said he “feels great” about the outlook for IT spending, noting that fiscal fourth quarter tends to be the company’s biggest sales quarter.
He said the pipeline looks strong for the quarter, driven by three key trends — increased adoption of cloud computing, security software and digital transformation. “More and more we see identity software unlocking success in those trends,” he says. “We’re very bullish.”
Okta shares, which fell 8% to $198.08 in the regular session Wednesday, are down another 7.6% to $182.87 in late trading. The S&P 500 closed down 1.2%, and the Dow Jones Industrial Average lost 1.3%.
Write to Eric J. Savitz at eric.savitz@barrons.com
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December 02, 2021 at 05:33AM
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Okta Shares Slide Despite Strong October Quarter Results - Barron's
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