Okta's (OKTA) Q1 Earnings and Revenues Surpass Estimates

Okta, Inc. OKTA reported first-quarter fiscal 2021 adjusted loss of 7 cents per share that was narrower than the Zacks Consensus Estimate of a loss of 18 cents per share. The figure was also narrower than the year-ago quarter loss of 19 cents.

Total revenues surged 46% from the year-ago quarter to $182.9 million and surpassed the consensus mark by 6.3%. The growth was driven by higher subscription revenues.

Quarter Details

Subscription revenues (95% of total revenues) surged 48.3% year over year to $173.8 million. Moreover, professional services and other revenues (5% of total revenues) increased 12.6% year over year to approximately $9.1 million.

Remaining Performance Obligations (RPO) totaled $1.24 billion, an increase of 57% year over year. Current RPO, contracted subscription revenues expected to be recognized over the next 12 months, was $619.1 million, up 49% year over year.

Okta, Inc. Price, Consensus and EPS Surprise

Okta, Inc. Price, Consensus and EPS Surprise

Okta, Inc. price-consensus-eps-surprise-chart | Okta, Inc. Quote

Location wise, revenues from the United States (84.1% of total revenues) in first-quarter fiscal 2021 were $153.7 million, up 46.4% year over year. Non-U.S. revenues (15.9% of total revenues) increased 46.4% year over year to $29.3 million.

Notably, on Apr 2, Okta signed strategic partnerships with leading endpoint protection and management solution providers, VMware VMW Carbon Black, CrowdStrike as well as Tanium, which provided a broad set of device risk signals to the Okta Identity Cloud. This enabled enterprises to combine endpoint risk detection with user identity to deliver unparalleled access security.

Total calculated billings during the quarter were $209.5 million, up 42.3% year over year driven by new and existing commercial and enterprise customers and increased bookings.

Dollar-based retention rate in the trailing 12 months was 121%, increasing 2% sequentially.

User Details

Okta added 450 new customers in the reported quarter, taking the total customer count to 8400, up 28% year over year.

Okta Identity Cloud’s capability to consolidate and easily integrate customers’ existing applications, without compromising security or stability, is attracting customers. Okta products’ ability to automate process, secure data and reduce costs is also a positive.

Notably, Autodesk ADSK selected Okta’s Identity Cloud to centralize identity and access management for its customers in the to-be-reported quarter.

Meanwhile, Zurich North America, one of the largest providers of insurance solutions and services, implemented the Okta Identity Cloud to securely manage and streamline access to critical technology for its global workforce and customer base in the to-be-reported quarter.

Moreover, Illinois selected Okta to be its identity standard, which will streamline its operations with a single unified identity platform. With Okta's Customer Identity solutions, Illinois citizens will have a secure, seamless experience when accessing government resources, and with Okta's Workforce Identity, state employees and contractors will be able to more efficiently do their jobs.

Okta’s strategy to constantly improve its solutions is also a key reason behind the increasing adoption of the company’s solutions.

During the quarter, the company introduced foundational, service-oriented technologies – Okta Platform Services at the heart of the Okta Identity Cloud. Okta Platform Services enables Okta to meet unlimited workforce and customer identity use cases that customers and partners can access through APIs, integrations and other products.

Moreover, Oracle ORCL validated integration of Okta Access Gateway with Oracle E-Business Suite 12.2 during the reported quarter. Notably, this Zacks Rank #2 (Buy) company is a Gold level member of Oracle PartnerNetwork (OPN). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, customers with more than $100,000 annual contract value (ACV) increased 50% year over year to 1600 driven by new enterprise customers. During the quarter, Okta added 113 net new customers with over $100,000 ACV.

Operating Details

Non-GAAP total gross profit surged 49.5% year over year to $141.8 million. Gross margin expanded 180 basis points (bps) to 77.5%.

Research and development expenses increased 42.5% year over year to $48.5 million. Additionally, sales and marketing (S&M), and general and administrative expenses increased 26.7% and 32.1% year over year to $104 million and $34 million, respectively.

Consequently, total operating expenses increased 31.5% year over year to $186.6 million owing to a shift to virtual events, including Oktane and a 34% year-over-year increase in headcount to almost 2,400, primarily in customer-facing and innovation teams amid coronavirus outbreak.
 
Non-GAAP operating loss was $12.3 million, narrower than the year-ago loss of $24.9 million.

Balance Sheet and Cash Flow

Okta had $1.45 billion in cash, cash equivalents and short-term investments as of Apr 30, 2020 compared with $1.4 billion in the prior quarter.

Cash provided by operations was $38.7 million in the reported quarter compared with $55.6 million provided in the year-ago period.

Okta recorded free cash of $29.8 million in the reported quarter. The year-ago quarter’s free cash flow was $13.2 million.

Guidance

For second-quarter fiscal 2021, Okta expects revenues in the range of $185-$187 million, indicating year-over-year growth of 32-33%.

Non-GAAP operating loss is expected in the range of $4-$5 million and non-GAAP net loss is anticipated in the range of 1-2 cents per share.

For fiscal 2021, revenues are expected in the range of $770-$780 million, indicating year-over-year growth of 31-33%.

Non-GAAP operating loss is expected in the range of $30-$37 million and non-GAAP net loss is anticipated within 18-27 cents per share.

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