What happened
Shares of Okta (OKTA -0.65%) slid 17.4% in March, according to data provided by S&P Global Market Intelligence.
The decline means that the identity management company's share price is down 32.2% for the year thus far.
Image source: Getty Images.
So what
Okta reported a sparkling set of earnings for its fiscal year 2022 ended Jan. 31, 2022. Total revenue surged by 56% year over year to $1.3 billion, with subscription revenue climbing 57% year over year to $1.25 billion. Total billings soared by 76% year over year to $1.72 billion, reflecting continued growth for the company as more customers subscribed to its cloud services. For the full fiscal year, Okta had a total of 15,000 customers and boasted an enviable dollar-based net retention rate of 124%.
Despite the strong top-line growth, the company reported that its operating loss more than tripled year over year from $204.2 million to $767.1 million. After factoring in higher finance costs, the net loss ballooned to $848.4 million from $266.3 million in the prior year.
Investors, however, were spooked by news of a potential data breach at Okta in late March. The company confirmed that it was investigating a breach that traced back to January, igniting complaints from customers that Okta had kept this under wraps for two whole months. Okta admitted that around 366 corporate customer accounts, making up 2.5% of its total customer base, could potentially be compromised.
Now what
Okta has since released a detailed account of what transpired in January and has apologized for its tardiness in conducting a more detailed investigation into the circumstances surrounding the purported breach. According to the company, it was Sitel, a third-party vendor providing customer support to Okta, that was alerted to the unauthorized activity.
It remains to be seen if customers and investors are satisfied with Okta's explanation. The delay in reporting this incident has led to intense criticism and scrutiny of the company as it is, after all, in charge of authentication and identity management for businesses. Granted, it may take a while for customers to regain their confidence in Okta, but it's good to note that no data was compromised, nor were passwords or sensitive information stolen.
What's certain is that there remains a huge addressable market for identity solutions, with Okta estimating its total addressable market stands at around $80 billion. Investors who believe the company can get over this short-term trouble should feel confident about its potential to continue growing its top line for the foreseeable future.
