Okta got off to a strong start for its fiscal year in the first quarter (ended April 30), seeing revenue growth and solid demand for its secure identity management services, according to CEO Todd McKinnon.
“We’re seeing robust demand across the business, and we’re in early innings of a significant market opportunity,” he said on an earnings call June 7, noting the company “achieved record quarterly revenue in billings, while meaningfully improving operating margin.”
Okta’s shares were up 3.04% at $26.47 in morning trading June 8 after it reported total revenue grew 66.8% year-over-year to a record $53 million. Calculated billings increased 75% year-over-year to $60 million. But Okta’s loss widened to $28.9 million from $22.8 million.
“The rapid growth and expansion” that the company continues to see is a “result of the key role Okta plays in a constantly evolving cloud centric-world,” McKinnon said. He pointed out that, today, “you cannot avoid the buzz words ‘digital transformation’” as global organizations large and small are “rapidly adopting cloud applications and mobile technologies to move their companies forward.”
Okta’s first-quarter subscription revenue totaled $48.4 million, an increase of 75% year-over-year, and comprised 91% of total revenue, CFO Bill Losch said on the call. Professional services revenue was $4.7 million, an increase of 10% over the same period last year. About 86% of total first-quarter revenue came from the U.S. and roughly 14% came from outside the U.S., with the majority of that coming from the Europe, Middle East and Africa region, Losch said. He added: “We’re in the early stages of international expansion and we remain dedicated to growing our international sales footprint over time. We expect our mix of international revenue will continue to grow over the coming years.”
At the end of the first quarter, Okta had over 3,350 customers and continued to “see strong momentum with new customer additions,” Losch went on to say. The company also remains “focused on growing our large enterprise customer base and ended the quarter with 493 customers with an annual contract value above $100,000,” up 64% compared to the first quarter a year ago, he said.
R&D expenses in Q1 totaled $12.1 million, up from $8.1 million a year ago, Losch told analysts. But, as a percentage of total revenue, R&D declined to 23% from 26%, he said, adding: “Innovation remains a top priority for us and we will continue to invest in R&D for the foreseeable future.”
During the Q&A, Goldman Sachs analyst Heather Bellini asked why Okta continued to see such strong customer win rates compared to rivals. McKinnon replied: “I would say the big reason is the more cloud” services that companies are looking to use, in terms of cloud apps and infrastructure, “the more likelihood of Okta winning.” He explained that at least certain rivals still partially relied on on-premise services. Okta also tends to win among those companies that see the “strategic importance” of identity as something more than “just a slight adjunct or an add-on to a certain apps,” he said.