What happened
Shares of Okta (OKTA -0.08%), the cloud-based identity software company, were moving higher today after the company posted a strong fourth-quarter earnings report, easily beating estimates on the top and bottom lines.
As of 2:57 p.m. EST, the stock was up 12.8%.
So what
Revenue in the quarter rose 33% to $510 million, topping expectations at $489.3 million.
Current remaining performance obligations (cRPO), a measurement of backlog over the next 12 months, rose 25% to $1.68 billion, while RPO was up just 12%, which is in part a reflection of customers signing shorter contracts.
Its net retention rate was 120%, showing that existing customers increased their spending by 20% over the last four quarters.
Total customers increased 17% to 17,600, and customers with more than $100,000 in annual contract value rose 27% to 3,930.
The company also showed significant improvement on the bottom line as its free-cash-flow margin reached 14.1%, its highest level since before the Auth0 acquisition nearly two years ago, and adjusted operating margin was its best in several years at 9%.
On the bottom line, the company reported adjusted earnings per share of $0.30, compared to a per-share loss of $0.18 in the quarter a year ago and well ahead of estimates at $0.09.
CEO Todd McKinnon said, "We're pleased with our fourth quarter financial performance and the continued improvement of our go-to-market execution."
Now what
For the first quarter, Okta expects revenue to grow 23% to $509 million to $511 million, ahead of estimates at $497.9 million. On the bottom line, it forecast adjusted earnings per share of $0.11 to $0.12, compared to the consensus at breakeven.
For the full year, it still expects revenue growth to slow to 16% to 17% to $2.155 to $2.17 billion, in line with estimates, but its bottom line forecast of $0.74 to $0.79 was much better than the consensus at $0.32.
The software stock fell sharply last year as its high valuation made it vulnerable in a rising interest rate environment, but the company has responded to investor concerns by reining in costs and improving its margins.
With free-cash-flow margins surging and the company pursuing an $80 billion addressable market, there could be more gains ahead for Okta if it can keep ramping up its profitability.
