Okta (OKTA), which provides cybersecurity relating to identity management, is trading nicely higher today after it reported Q1 (Apr) results last night and guided higher for Q2 (Jul).
The company is not yet profitable, but its non-GAAP loss in AprQ was narrower than expected at $(0.19) per share vs prior guidance of $(0.22)-(0.21). Revenue rose 49.8% yr/yr to $125.2 mln, well above prior guidance of $116-117 mln. Full year guidance for EPS was bumped higher to $(0.49)-(0.45) from $(0.53)-(0.48) and for revenue to $543-548 mln from $530-535 mln.
The upside in AprQ was good to see, but it's our sense that investors are most excited about the Q2 (Jul) guidance. Last quarter, Okta guided EPS well below expectations -- margins were expected to take a hit as Okta decided to increase spending to drive growth. This included hiring more people and investing more money into improving the product.
With that project laid bare, investors, we suspect, were holding their breath going into this report to see if margins compression would happen again. However, the Q2 (Jul) guidance was quite good at EPS of ($0.11)-(0.10) and revenue of $130-131 mln. Both ranges were well above market expectations.
A key metric for Okta is subscription revenue, which rose 52% yr/yr in AprQ to $117.2 mln. Okta also reports a small amount of professional services and other revenue, but subscription revenue is its core offering. CEO Todd McKinnon said that subscription revenue "was driven by our acceleration with enterprise customers."
Okta has also been making it a priority to pursue larger customers. On this point, McKinnon noted that Okta saw a 53% yr/yr increase in customers with over $100,000 in annual contract value. That was actually a slight increase from the 50% yr/yr growth achieved in Q4 (Jan), so it's clear that Okta is making progress here.
Overall, this was an impressive quarter for Okta. The main takeaway is that investors breathed a sigh of relief as there was not another guide-down this quarter. The stock is up sharply today, but the valuation looks pretty stretched (price/sales above 20x).