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Okta's (OKTA) Q4 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

Okta, Inc. OKTA reported fourth-quarter fiscal 2019 adjusted loss of 4 cents per share, which was narrower than the Zacks Consensus Estimate of 27 cents and the year-ago figure of 8 cents.

Nevertheless, total revenues surged 49.9% from the year-ago quarter to $115.5 million. The figure also surpassed the consensus mark of $107.9 million.

Investors should note that fourth-quarter fiscal 2018 results have been presented per new revenue standard ASC 606.

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Quarter Details

Subscription revenues (93.9% of its total revenues) surged 52.8% year over year to $108.5 million. Moreover, professional services and other revenues (6.1%) increased 15.1% year over year to approximately $7 million.

International revenues (15%) also increased 47% year over year.

Total calculated billings during the quarter were $158.9 million, up 52% year over year due to strength from new and existing, as well as commercial and enterprise customers. Trailing 12-month calculated billings came in at $488.2 million, up 55% year over year.

Additionally, total customer base increased 40% year over year to 6,100. Notably, Okta added 500 new customers during the quarter.

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

Notably, Cengage and a Fortune-10 company, included in the top 10 of the Fortune 500 list, chose Okta’s identity and workforce solutions in fourth-quarter fiscal 2019. The Fortune-10 company’s suitability to integrate its existing solutions from providers like Pivotal software PVTL, Oracle ORCL and Apigee with Okta’s identity standard solution is the reason behind its partnership with Okta.

Moreover, momentum in cloud, digital transformation and security is helping Okta retain long-time customers like Tyson Foods TSN, Major League Baseball, Jet Blue and Albertson.

Further, customers with more than $100,000 annual recurring revenues increased 50% year over year to 1,038. During the quarter, Okta added 101 net new customers with over $100,000 annual recurring revenues.

Dollar-based retention rate in the trailing 12 months ended Jan 31 was 120%. Headcount increased 33% year over year to 1,561 to support business growth.

Operating Details

Non-GAAP gross profit surged 54.9% year over year to $88.2 million. Gross margin expanded 250 basis points to 76.4%.

Non-GAAP research and development expenses increased 63.7% year over year to $23.2 million due to significant investments in Okta identity platform and integration network.

Additionally, non-GAAP sales and marketing (S&M), and general and administrative expenses increased 37.7% and 24.4% year over year to $55.5 million and $14.5 million, respectively. Costs to support increasing international presence and expenses from on-boarding additional customers were the reasons behind the increase in S&M expenses.

Consequently, total non-GAAP operating expenses increased 40.9% year over year to $93.1 million.

Non-GAAP operating loss was $4.9 million, narrower than the year-ago level of $9.1 million.

Balance Sheet and Cash Flow

Okta had $563.8 million in cash, cash equivalents and short-term investments as of Jan 31, 2018 compared with $546 million sequentially.

Cash flow from operations was $15.2 million in fiscal 2019. During the year-ago quarter, cash used in operations was $25.2 million.

Okta recorded positive free cash of $4.8 million in the reported quarter. The year-ago quarter’s free cash flow was negative $2.2 million.

Recent Updates

In first-quarter fiscal 2020, Okta entered into an agreement to acquire Azuqua, a “no-code, cloud-based integration platform that automates workflows between apps and services.” The company expects to close the acquisition in the current quarter.

Azuqua’s technologies are expected to help users easily automate and integrate identities between apps and services for all the parties involved. Additionally, the company’s solutions have the ability to provide organizations with an independent control center to automate the business process.

Okta believes that the acquisition may help it provide innovative and valuable solutions to customers.

Guidance

First-Quarter Fiscal 2020

Okta expects revenues in the range of $116-$117 million, indicating year-over-year growth rate of 39-40%. Non-GAAP operating loss is expected in the range of $25.5-$26.5 million and non-GAAP net loss per share is anticipated in the range of 21-22 cents, with shares outstanding of approximately 112 million.

Fiscal 2020

Revenues are expected in the range $530-$535 million, translating to year-over-year growth of 33-34%. Non-GAAP operating loss is expected in the range $63-$69 million and non-GAAP net loss per share is anticipated within 48-53 cents, with shares outstanding of approximately 115 million.

Okta currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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