Despite the disruption from the pandemic, it was mostly business as usual for Okta (NASDAQ:OKTA) as the identity-and-access management company delivered another strong quarter.
Shares of the SaaS (software-as-a-service) company had surged in recent months, more than a doubling from their bottom in March, as investors saw Okta as one way to play the work-from-home trend as enterprises and organizations are turning to the company to help facilitate remote access.
Let's review some of the highlights from the quarter:
- Revenue jumped 46% to $182.9 million, well ahead of the company's guidance of $171 million to $173 million and analysts' expectation of $171.4 million.
- Remaining Performance Obligations (RPO), a measure of the company's backlog, increased 57% to $1.24 billion, while current RPO, which encompasses bookings for the next year, rose 49% to $619.1 million.
- On the cost side, margins continue to improve as the company benefited in some ways from the work-from-home protocols, which cut down on some marketing expenses such as travel and converted its annual Oktane event to a virtual one. Adjusted operating loss narrowed from $24.9 million in the quarter a year ago to $12.3 million, and its adjusted loss per share narrowed from $0.19 to $0.07, beating the company's own guidance of a loss of $0.24 to $0.23 per share.
- Free cash flow more than doubled year over year from $13.2 million to a record $29.8 million, showing cash generation remains strong and growing.
Momentum continues to build
Okta's growth continues to be broad-based, as its total customer count was up 28% to 8,400, and the number customers with annual contract value worth more than $100,000 grew 38% to 1,580. With trends like work-from-home and e-commerce accelerating during the pandemic, Okta is seeing growing demand for its products.
As COO Frederic Kerrest explained, some of Okta's customers are executing their adoption of its identity management platform faster than planned. FedEx, for example, had planned to transition to Okta with a phased deployment over several months. However, given the demands of the pandemic, FedEx asked to roll out the deployment in one weekend. Okta got it done in 36 hours, deploying access to 80,000 employees and 250 cloud apps.
The cloud company has seen similar interest in areas like e-commerce, since businesses have needed to adapt quickly during the pandemic as customer needs and the ways of doing business have changed.
Plenty of room to grow
Okta sees many of the trends emerging during the pandemic, such as remote work, sticking around after the crisis, and the company itself is moving toward a work-from-home structure, which also expands the talent pool it can hire. The virtualization of the world that's being accelerated by the pandemic should only expand the market opportunity for Okta. Currently, it sees a total addressable market of $55 billion with $30 billion in workforce identity management and $25 billion in customer identity management. For a company targeting $770 million to $780 million in revenue this year, that represents a huge opportunity.
Okta's product suite is also improving, which should help extend its lead as the independent provider of identity management solutions. The company announced an expanded integration with Amazon Web Services that enhances single sign-on and improves speed and functionality as AWS Management Console is one of the top three applications on the Okta Integration Network. Access to AWS has also become even more important during the pandemic.
Additionally, at its recent Oktane conference, the company introduced a new product called Fast Pass, taking a step toward eliminating passwords altogether. The technology allows users to bypass the standard password entry when they are logging on from their usual IP address or have already entered their credentials elsewhere manually or through biometrics, a process it calls contextual authentication. Okta notes that passwords are "responsible for countless hours of lost productivity and some of the biggest security breaches on record," showing the new technology could be a game-changer.
It also introduced a no-code lifecycle management workforce feature, enhancing its lifecycle management tool to allow administrators to seamlessly enable and disable access for new and outgoing employees.
With secular tailwinds in its favor, strong momentum in its business with a diversified set of new customers, expanding operating leverage, and new products strengthening its platform, Okta looks set to continue outperforming the market.