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Okta's (OKTA) Q2 Earnings and Revenues Surpass Estimates

Okta, Inc. OKTA reported second-quarter fiscal 2021 adjusted earnings of 7 cents per share in contrast to the Zacks Consensus Estimate of a loss of 2 cents per share. The figure also increased 40% from the year-ago quarter.

Total revenues surged 42.7% from the year-ago quarter to $200.4 million and surpassed the consensus mark by 7.7%. The growth was driven by higher subscription revenues.

Quarter Details

Subscription revenues (95.1% of total revenues) surged 43.9% year over year to $190.7 million. Moreover, professional services and other revenues (4.9% of total revenues) increased 22.2% year over year to approximately $9.8 million.

Remaining Performance Obligations (RPO) totaled $1.43 billion, an increase of 56% year over year. Current RPO, contracted subscription revenues expected to be recognized over the next 12 months, was $684.5 million, up 48% 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 (83.9% of total revenues) in second-quarter fiscal 2021 were $168.2 million, up 41.8% year over year. Non-U.S. revenues (16.1% of total revenues) increased 47.2% year over year to $32.2 million.

Notably, Okta collaborated with CrowdStrike CRWD, Netskope, and Proofpoint to help organizations implement an integrated, zero-trust security strategy required to protect the remote working environment as a result of the coronavirus outbreak.

Total calculated billings during the quarter were $198.1 million, up 27.2% 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%, which remained flat sequentially.

User Details

Okta added 550 new customers in the reported quarter, taking the total customer count to 8950, 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.

Markedly, FedEX FDX implemented the Okta Identity Cloud to securely enable its global workforce of essential employees to remotely access the critical applications required to successfully deliver goods and services to customers during the COVID-19 pandemic.

Moreover, Okta announced new and expanded partnerships with customers including Australian Red Cross, Moody’s, Mouvement Edouard Leclerc, Parsons, Servus Credit Union, State of Illinois, T-Mobile, Workday, and Zoom in the quarter under review.

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, this Zacks Rank #4 (Sell) company announced a new native integration with Amazon’s AMZN Amazon Web Services Single Sign-On (AWS SSO), providing Okta customers with improved security, user experience, and provisioning capabilities.

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 38% year over year to 1685 driven by new enterprise customers.

Operating Details

Non-GAAP total gross profit surged 45.7% year over year to $158.1 million. Gross margin expanded 160 basis points (bps) to 78.9%.

Non-GAAP research and development expenses increased 25.7% year over year to $38.9 million. Additionally, non-GAAP sales and marketing (S&M) and general and administrative expenses increased 13.1% and 50.6% year over year to $85.2 million and $27.5 million, respectively.

Non-GAAP total operating expenses increased 28% year over year to $151.6 million owing to a shift to virtual events, including Oktane and a 28% year-over-year increase in headcount to almost 2,489, primarily in customer-facing and innovation teams amid coronavirus outbreak.
 
Non-GAAP operating income was $6.5 million in contrast to the year-ago operating loss of $9.9 million.

Balance Sheet and Cash Flow

Okta had $2.5 billion in cash, cash equivalents and short-term investments as of Jul 31, 2020 compared with $1.45 billion in the prior quarter.

Cash provided by operations was $10.9 million in the reported quarter compared with $1.1 million provided in the year-ago period.

Okta recorded free cash of $6.9 million in the reported quarter. The year-ago quarter’s negative free cash flow was $4.3 million.

Guidance

For third-quarter fiscal 2021, Okta expects revenues in the range of $202-$203 million, indicating year-over-year growth of 32-33%.

Non-GAAP operating loss is expected in the range of $2-$3 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 $800-$803 million, indicating year-over-year growth of 37%.

Non-GAAP operating loss is expected in the range of $11-$13 million and non-GAAP net loss is anticipated within 1-2 cents per share.

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