Earnings Outlook: Okta shares rally as results top Street, revenue rises faster than sales expenses

Okta Inc. shares rallied in the extended session Wednesday after the identity-management company’s quarterly results and outlook topped Wall Street estimates and revenue grew faster than sales and marketing expenses.

Okta OKTA, +0.35%  shares surged 4.9% to $29.85 after hours. Shares, which trade 76% above their April initial public offering price of $17, are still 11% off their all-time high of $33.64 set back in September.

The San Francisco-based company reported a third-quarter loss of $33.8 million, or 35 cents a share, compared with a loss of $21.9 million, or $1.14 a share, in the year-ago period. After taking out stock-based compensation expenses and charitable contributions, the company reported an adjusted loss of $18.6 million, or 19 cents a share for the third quarter. Analysts surveyed by FactSet had estimated a loss of 24 cents a share.

Revenue rose 61% to $68.2 million, up from $42.3 million in the year-ago period, compared with the Wall Street consensus of $62.8 million.

Subscription revenue rose 64% to $62.7 million from $38.1 million in the year-ago period. Analysts had forecast subscription revenue of $57.7 million.

Sales and marketing expenses rose 53% to $49.6 million from $32.4 million in the year-ago period, and accounted for 73% of revenue compared with 77% in the year-ago quarter.

Okta Chief Operating Officer and co-founder Frederic Kerrest said in an interview Okta was able to grow revenue faster than what it spent on sales and marketing because existing customers are renewing and expanding services more.

Kerrest said Okta added about 300 new customers in the past quarter to bring its count up to 3,950, a 30% increase from a year ago. Also, customers spending more than $100,000 on services annually rose by more than 60 in the quarter to a total of 600 customers.

“We still have a lot of organizations thinking about internal identity management,” Kerrest said. “We’re in the very early innings of a much larger opportunity.”

For the fourth quarter, Okta estimates an adjusted loss of 18 cents to 17 cents a share on revenue of $70 million to $71 million. Analysts expect a loss of 20 cents a share on revenue of $67.9 million.

For the year, Okta now sees an adjusted loss of 87 cents to 86 cents a share on revenue of $252 million to $253 million. Analysts had estimated a loss of 96 cents a share on revenue of $244.7 million.

Regarding the recent initial public offering of identity governance companySailpoint Technologies Holdings Inc. SAIL, +0.82% , Kerrest called it a good thing for the industry, adding that Okta and Sailpoint have already partnered to ensure their services work together for customers who subscribe to both services. While Okta focuses on identity-access services, Sailpoint provides gatekeeping services to ensure the right individuals within an organization are allowed that access.

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