Founded in 2009, Okta (OKTA) describes itself as the pioneer and leader of identity for the enterprise. It has developed a category-defining platform called "Okta Identity Cloud" which enables customers to securely connect people to technology from anywhere at anytime and from any device. OKTA designed the Identity Cloud to provide organizations an integrated approach to managing and securing all of their identities. The platform allows its customers to easily provision internal and external users, enabling any user to connect to any device, cloud or application, all with a simple, intuitive and consumer-like user experience.
Its core product is the Okta Identity Cloud. The Identity Cloud is used as the central system for an organization's connectivity, access, authentication and identity lifecycle management needs spanning all of their users and applications. Moreover, the platform is used in two distinct ways: 1). to manage and secure internal users (employees); and 2). to connect and secure a customers external users (partners, suppliers, customers) via the APIs it has developed.
Like many other cloud software providers, OKTA uses a "land and expand" business model. In other words, it seeks to gain new subscribers by offering base products at a lower price. Then, as those customers implement and integrate the initial application into their business processes, it sells additional products to increase the value of those customers. It monetizes its platform through subscriptions that provide recurring revenue over the contract terms. As its financials illustrate, OKTA has invested heavily (hence the high Sales & Marketing Costs) in growing its customer base.
Taking a look at its most recent results, revenue grew 87% year/year in FY17 (ending Jan. 31) to $160.3 million. This was due to a 40% increase in customers, as well as an increase in users and sales of additional products to existing customers as reflected by the Dollar-Based Retention Rate of 123% for the year ended January 31, 2017. Additionally, gross margin improved to 65% from 58%. This has been driven by economies of scale as its subscription revenue grows.
Total operating expenses climbed by 49% year/year to $187.5 million. However, on a percentage of revenue basis, operating expenses declined to 117% from 147% in 2016 and 198% in 2015.