Enterprise security provider Okta, in its first quarterly report since its successful April IPO, posted better than expected Q1 2018 revenue of $53 million as its net losses narrowed to $0.50 a share. Analysts had projected a $0.62 per share loss on sales of $49 million.
In response, investors drove the identity access management (IAM) company’s stock price about six percent higher in after hours trading yesterday to $27.15. In mid-day trading today, Okta’s issues slid back to $25.92.
Okta’s operating loss for the quarter was $19.7 million, slightly more than the $19.3 million it posted in the same period last year.
Subscription services, at $48.4 million, accounted for 90 percent of the company’s overall revenue and a 75 percent spike from last year, driven ahead by its flagship Okta Identity Cloud platform. As might be expected, Okta’s research and development costs rose 50 percent to $12.1 million for the quarter.
A particularly revealing metric was the company’s $59.9 million in billings, an indication of its market potential.
Most of Okta’s sales at this point (86 percent) are in the U.S.
Okta Executive Perspective
Todd McKinnon, co-founder and CEO, said the Okta Identity Cloud platform, which consists of six individual products that address the IAM market for employees, customers, partners and suppliers, gives it a competitive advantage in the crowded market.
“We believe we are just scratching the surface of our overall market opportunity and are focused on broadening our footprint within both existing customers and into new customers and markets,” McKinnon said on a conference call.
“Not only are we well-positioned to capture share in what we estimate to be an $18 billion market for internal use cases, but we believe our opportunity with customers using Okta for external used cases is significant and largely untapped,” he said.
McKinnon disclosed that Okta had landed FedRAMP certification earlier this year, a badge that likely will result in increased adoption of its cloud-based platform.
Okta Future Expectations
Flush with its Q1 performance, Okta guided to Q2 revenue of $55 million to $56 million, which would amount to a 47 percent to 50 percent bump year-over-year. The company said it expects non-GAAP operating loss in the range of $24 million to $23 million and a non-GAAP net loss per share in the range of $0.26 to $0.25 for the period.
For the full fiscal year, Okta is projecting sales in the range of $233 million to $236 for a growth rate of 45 percent to 47 percent year-over-year, a non-GAAP operating loss in the range of $91.2 million to $88.2 million, and a non-GAAP net loss per share of between $1.15 to $1.11 a share.
Pacific Crest (via Barron’s) is bullish on Okta’s prospects, writing in an investors’ note that “although we expect continued internal use-case traction to be driven by the displacement of legacy IAM vendors and greenfield opportunities downmarket, management noted increasing traction in landing initial deals with external use cases."