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Okta's (OKTA) Q3 Earnings and Revenues Surpass Estimates

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Zacks Equity Research
·5 min read
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Okta, Inc. OKTA reported third-quarter fiscal 2021 adjusted earnings of 4 cents per share versus the Zacks Consensus Estimate of a loss of 38 cents per share. The company reported a loss of 3 cents per share in the year-ago quarter.

Total revenues have surged 42% from the year-ago quarter’s levels to $217.4 million and surpassed the consensus mark by 7.1%. The upside can be attributed to higher subscription revenues.

Quarter Details

Subscription revenues (95.1% of total revenues) surged 43.1% year over year to $206.7 million. Moreover, professional services and other revenues (4.9% of total revenues) increased 24.8% year over year to approximately $10.6 million.

Remaining Performance Obligations (RPO) totaled $1.58 billion, up 53% year over year. Current RPO, contracted subscription revenues expected to be recognized over the next 12 months, was $753.2 million, up 46% year over year.

Okta, Inc. Price, Consensus and EPS Surprise

 

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% of total revenues) in fiscal third quarter were $182.6 million, up 40.5% year over year. Non-U.S. revenues (16% of total revenues) increased 50.7% year over year to $34.8 million.

Notably, Okta announced its continued global expansion with the launch of an office in Japan and the hiring of its first Japan country manager, Takashi Watanabe.

Total calculated billings during the quarter were $217.4 million, up 42% year over year. The uptick was driven by new and existing commercial as well as enterprise customers and increased bookings.

Dollar-based retention rate in the trailing 12 months was 123%, which increased 2% sequentially.

User Details

Okta added 450 new customers in the reported quarter, taking the total customer count to 9400, up 27% year over year.

Okta Identity Cloud’s capability to consolidate and easily integrate 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.

During fiscal third quarter, Okta announced its partnership with salesforce.com, inc. CRM and new integration between the Okta Identity Cloud and Salesforce Work.com. It is designed to help organizations and communities build trust with their employees and customers.

Okta’s strategy to constantly improve its solutions is also a key reason for increasing adoption its solutions.

During the quarter, Okta announced the launch of Okta Customer Identity Workflows, a new product that enables product builders and IT professionals to automate the most complex digital transformation identity processes.

Moreover, the company announced Customer Identity and Okta Access Gateway Specializations within Okta Partner Connect.

Also, customers with more than $100,000 annual contract value (ACV) increased 34% year over year to 1780 driven by new enterprise customers.

Operating Details

Non-GAAP total gross profit surged 43% year over year to $170.3 million. Gross margin expanded 50 basis points (bps) to 78.3%.

Non-GAAP research and development expenses increased 31.2% year over year to $40.6 million. Additionally, non-GAAP sales and marketing (S&M) and general and administrative expenses increased 25.1% and 43.7% year over year to $95.4 million and $28.7 million, respectively.

Non-GAAP total operating expenses increased 29.5% year over year to $164.8 million owing to a shift to virtual events, including Oktane and a 23% year-over-year increase in headcount to almost 2,604, primarily in customer-facing and innovation teams amid coronavirus outbreak.
 
Non-GAAP operating income was $5.5 million against operating loss of $8.1 million in the year-ago quarter.

Balance Sheet and Cash Flow

Okta had $2.48 billion in cash, cash equivalents and short-term investments as of Oct 31, 2020 compared with $2.5 billion in the prior quarter.

Cash provided by operations was $43.4 million in the reported quarter compared with $10.9 million provided in the year-ago period.

Okta recorded free cash of $41.6 million in the reported quarter compared with $9.2 million reported in the year-ago quarter.

Guidance

For fourth-quarter fiscal 2021, Okta expects revenues in the range of $221-$222 million, which indicates year-over-year growth of 32-33%.

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

For fiscal 2021, revenues are expected in the range of $822-$823 million, indicating year-over-year growth of 40%.

Non-GAAP operating loss is expected in the range of $1.3-$2.3 million and non-GAAP net loss is anticipated within 4-5 cents per share.

Zacks Rank & Stocks to Consider

Currently, Okta carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA and Arrow Electronics ARW, each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for NVIDIA and Arrow is currently pegged at 20.4% and 9.8%, respectively.

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