High-flying cloud software firm Okta has no plans to slow down.
Okta (OKTA) topped expectations for the second quarter, posting $140.5 million in quarterly revenue versus estimated of $131.2 million and a non-GAAP net loss of 5 cents per share versus estimates of a loss of 11 cents per share. Okta’s stock was volatile in after-hours trading, but overall dropped about 3% as investors digested the results.
Okta has been particularly focused on adding very large enterprise customers in recent quarters, writing in an earnings release that the company had a total of 1,222 customers with annual contract value above $100,000 as of last quarter.
In an interview with TheStreet, Okta CEO Todd McKinnon said that there’s more to those large deals than just dollar values — there’s a network effect as well.
“As we bring more of those customers on board, they can help us drive standardization in the ecosystem,” he said. “When those kinds of companies go to their big vendors and say your tech needs to work well with Okta, that’s very powerful.” He added that Okta is having increasing success in landing deals across its entire product line, which includes identity and access management software for employees and customers.
For the third quarter, Okta is forecasting revenue of $143 million to $144 million, representing growth of 35% to 36% year-over-year. That’s a lower growth rate than the second quarter and the first quarter, which came in at 49% and 50% respectively. McKinnon suggested that the lower quarterly growth rate is a conservative forecast because of the sometimes slower pace of closing large deals.
“The deals are very, very big, and there’s some lumpiness to them, so we’re planning prudently around that,” said McKinnon, noting that Okta raised its full-year revenue guidance to $563 million at the top end, representing growth of 41% year-over-year. “We’ve been able to overperform those numbers.”
So far, investors appear confident in Okta’s growth trajectory despite net losses — year to date, its stock is up 110%. McKinnon reiterated the company’s target of growing revenue by at least 30% for the remainder of this year, and continuing that level of growth as a baseline into fiscal 2024.
The precise timing on how soon they can turn a profit depends on “how fast we can keep growing,” he said, but he voiced confidence in Okta’s track record so far.
“We’ve demonstrated we can increase leverage, and operate at cash flow positive — between that, the long-term model we’ve communicated, and the large market opportunity, I think investors are confident,” McKinnon added.