Identity management software maker Okta (OKTA) announced better-than-expected results in the Q1 FY2023 quarter, with revenue up 65.3% year on year to $414.9 million. Guidance for next quarter's revenue was $429 million at the midpoint, which is 1.45% above the analyst consensus. Okta made a GAAP loss of $242.7 million, down on its loss of $109.2 million, in the same quarter last year.
Is now the time to buy Okta? Access our full analysis of the earnings results here, it's free.
Okta (OKTA) Q1 FY2023 Highlights:
- Revenue: $414.9 million vs analyst estimates of $388.7 million (6.72% beat)
- EPS (non-GAAP): -$0.27 vs analyst estimates of -$0.34
- Revenue guidance for Q2 2023 is $429 million at the midpoint, above analyst estimates of $422.8 million
- The company lifted revenue guidance for the full year, from $1.78 billion to $1.81 billion at the midpoint, a 1.4% increase
- Free cash flow of $11 million, up 118% from previous quarter
- Gross Margin (GAAP): 68.3%, down from 73.6% same quarter last year
Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software as a service platform that helps companies manage identity for their employees and customers.
As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.
As you can see below, Okta's revenue growth has been incredible over the last year, growing from quarterly revenue of $251 million, to $414.9 million.
This was another standout quarter with the revenue up a splendid 65.3% year on year. Quarter on quarter the revenue increased by $31.9 million in Q1, which was roughly in line with the Q4 2022 increase. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.
Guidance for the next quarter indicates Okta is expecting revenue to grow 35.9% year on year to $429 million, slowing down from the 57.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 31.1% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Okta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 68.3% in Q1.
That means that for every $1 in revenue the company had $0.68 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.
Key Takeaways from Okta's Q1 Results
With a market capitalization of $13.3 billion, more than $2.48 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
We were impressed by the exceptional revenue growth Okta delivered this quarter. And we were also excited to see that the guidance outperformed Wall St’s expectations. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $93.66 per share.
Okta may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.