Okta (OKTA) Q3 Earnings and Revenues Surpass Estimates

Okta, Inc. OKTA reported third-quarter fiscal 2019 adjusted loss of 4 cents per share that was much narrower than the Zacks Consensus Estimate of a loss of 11 cents and the year-ago quarter’s loss of 19 cents.

Revenues surged 57.8% from the year-ago quarter to $105.7 million. The figure also surpassed the consensus mark of $97 million.

Quarter Details

Subscription revenues (92.5% of total revenues) grew 57.9% year over year to $97.7 million. Professional services and other revenues (7.5%) surged 56.1% year over year to $7.9 million.

Total calculated billings for the quarter were $124 million, up 57.9% year over year due to better-than-expected bookings linearity. Trailing 12 months calculated billings came in at $434 million, up 59% year over year.

Total customer base increased 42% year over year to 5,600 mainly across enterprise customer base. Notably, Okta added 450 new customers during the quarter. The company’s ability to secure identities and digital assets across a variety of users and technologies helped it win customers.

Additionally, Okta Identity Cloud’s capability to consolidate all customer applications to a single-identity service without compromising security or stability is attracting customers. Companies like Deloitte and VMware VMW along with the U.S. Department of State chose Okta’s identity solutions in third-quarter fiscal 2019.

Moreover, momentum in cloud, digital transformation and security is helping Okta retain long-time customers like Adobe ADBE, Experian and Allergan AGN and attract new customers like Major League Baseball.

Further, customers with more than $100,000 annual recurring revenues increased 55% year over year to 937 due to increase in up sell activities. During the quarter, Okta added 100 net new customers with over $100,000 annual recurring revenues.

Dollar based retention rate for the trailing 12 months ended Oct 31 was 120%. Moreover, headcount increased 29% year over year to 1473 to support business growth.

Okta, Inc. Price, Consensus and EPS Surprise

Okta, Inc. Price, Consensus and EPS Surprise | Okta, Inc. Quote

Operating Details

Non GAAP gross profit increased 66% year over year to $80 million. Gross margin expanded 380 basis points (bps) to 75.8%.

Non GAAP research and development expenses increased 52% year over year to $21.3 million due to significant investments in Okta identity platform and integration network.

Additionally, non GAAP sales and marketing and general and administrative expenses increased 16.1% and 47.3% year over year to $50.7 million and $14.5 million, respectively. Therefore, total non GAAP operating expenses increased 28.1% year over year to $86.5 million.

Non GAAP operating loss was $6.5 million, narrower than the year-ago quarter’s loss of $19.4 million.

Balance Sheet and Cash Flow

Okta had $546 million of cash, cash equivalents and short-term investments as of Oct 31, 2018 compared with $536.3 million sequentially.

Cash flow from operations was $6.4 million. The year-ago quarter cash used in operations was $9.5 million.

Moreover, Okta recorded positive free cash of $1.4 million for the first time. The year-ago quarter’s free cash flow was negative $11.2 million.

Guidance

Fourth Quarter Fiscal 2019

Okta expects revenues in the range of $107 to $108 million, indicating year-over-year growth rate of 39% to 40%. Non GAAP operating loss is expected in the range of $12.5 to $11.5 million and non GAAP net loss per share is anticipated in the range of 8 to 9 cents with shares outstanding of approximately 110 million.

Fiscal 2019

Revenues are expected in the range $391 to $392 million, translating to year-over-year growth of 52% to 53%. Non GAAP operating loss is expected in the range $49 to $48 million and non GAAP net loss per share is anticipated in the range 36 to 37 cents with shares outstanding of approximately 107 million.

Okta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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