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Okta (OKTA) Reports Q4: Beats Analyst Estimates But Guidance For FY2022 Is Weak


Adam Hejl /
2021/03/03 4:08 pm EST
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Identity management software maker Okta (OKTA) announced better-than-expected results in the Q4 FY2021 quarter, with revenue up 40.29% year on year to $234.7 million. Okta made a GAAP loss of $75.81 million, down on its loss of $50.47 million, in the same quarter last year.

Okta (OKTA) Q4 FY2021 Highlights:

  • Revenue: $234.7 million vs analyst estimates of $222.0 million (5.7% beat)
  • EPS (non-GAAP): $0.06 vs analyst estimates of -$0.01 ($0.07 beat)
  • Revenue guidance for Q1 2022 is $238.0 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for FY2022 of $1.085 billion at the midpoint, predicting 29.87% growth (vs 43.48% in FY2021)
  • Free cash flow of $32.49 million, down 21.88% from previous quarter
  • Gross Margin (GAAP): 73.95%, in line with previous quarter

"The importance of identity and zero-trust security have only been elevated over the past year as companies around the world are accelerating their adoption of cloud and digital transformation projects. Okta's unmatched identity platform is still in the early innings of a massive addressable market and we are incredibly excited about the opportunity for years to come," said Todd McKinnon, Chief Executive Officer and co-founder of Okta.

Identity As A Service


Similar to many other great tech businesses Okta was founded during the aftermath of the financial crisis in 2009. The founders Todd McKinnon and Frederic Kerrest were working at Salesforce at that time and saw how cloud is changing the world of enterprise software but also how companies struggle to keep track of all the logins for the new services they just subscribed to. Okta is a cloud-based software as a service platform that helps companies manage identity for their employees and customers.

Instead of managing separate login details for each of the many software tools an employee is using, Okta provides them with a single account (Single Sign-On) which employees then use to login into any service. That makes it a lot easier for companies to then through a centralized system manage who has access to what, setup automated rules to make sure that when employees leave access is withdrawn, and enforce policies around passwords and account security. Okta also provides companies with software that in similar fashion handles authentication and account details storage of their customers.

As you can see below, Okta's revenue growth has been impressive over the last twelve months, growing from $167.3 million to $234.7 million.


Okta Total Revenue

And unsurprisingly, this was another great quarter for Okta with revenue up an absolutely stunning 40.29% year on year. Quarter on quarter the revenue increased by $17.36 million in Q4, which was in line with Q3 2021. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

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 Gross Margin (GAAP)

Okta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 73.95% in Q4. That means that from every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the average what we typically see in SaaS businesses, but it is good to see that the gross margin is staying stable which indicates that Okta is doing a good job controlling costs and is not under a pressure from competition to lower prices.

Key Takeaways from Okta's Q4 Results


With market capitalisation of $34.93 billion, more than $2.556 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 enjoyed seeing Okta’s impressive revenue growth. And we were also excited to see it that it outperformed Wall St’s revenue expectations. On the other hand, it was disappointing that the revenue guidance for next year was quite weak. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. Therefore, Okta continues to be a decent growth stock to watch, even more so than before.

The author has no position in any of the stocks mentioned.