Summary
Okta's first quarter of fiscal 2023 showed rapid top-line growth and a much larger loss. Revenue rose 65.3% year over year to $414.9 million. Gross profit increased 53.5% to $283.8 million, but gross margin fell 5.3 percentage points to 68.4%. The company reported a GAAP operating loss of $239.7 million, and operating margin fell 21.6 percentage points to -57.8%. Net loss widened to $242.7 million, or $1.56 per diluted share. Those figures include the Auth0 acquisition, which closed in May 2021 and changed the company's cost structure.
Demand metrics were strong. Remaining performance obligations, or RPO, grew 43.4% year over year to $2.71 billion. Current RPO, the portion expected to be recognized in the next 12 months, was $1.41 billion, up 57% year over year. Deferred revenue, current portion, rose 55.3% to $952.2 million. Okta ended the quarter with more than 15,800 customers, including 3,305 customers with annual contract value above $100,000, up from 2,075 a year earlier. Dollar-based net retention rate for the trailing 12 months was 123%. Calculated billings were $389 million, up 7% year over year, or up 52% on a like-for-like basis that includes the full effect of billings process improvements made in the prior-year quarter.
Cash generation slowed. Operating cash flow was $18.8 million, down 66.4% year over year. Capital expenditures were $5.3 million, up 63.5%. Free cash flow, a non-GAAP measure, was $11 million, or 3% of revenue, compared with $53 million, or 21% of revenue, in the prior-year quarter. The gap between GAAP and non-GAAP results remained wide. Non-GAAP operating loss was $41 million, or 10% of revenue, while non-GAAP net loss was $43 million, or $0.27 per share.
Guidance points to slower growth and continued losses. For the second quarter of fiscal 2023, Okta expects revenue growth of 36% year over year. The company guided current RPO of $1.48 billion to $1.49 billion, up 35% to 36% year over year, along with non-GAAP operating loss of $44 million to $43 million and non-GAAP net loss per share of $0.32 to $0.31. For full fiscal 2023, Okta now expects revenue growth of 39% to 40% year over year, non-GAAP operating loss of $167 million to $162 million, and non-GAAP net loss per share of $1.14 to $1.11.
Risks remain. Management pointed to longer sales cycles, which have already appeared and could delay deal closings. That dynamic may create near-term headwinds for cash flow, RPO and billings growth, and it could affect future revenue growth on a trailing basis. The billings process improvements from the prior-year quarter distort the reported 7% calculated billings growth, which is why the company highlighted the 52% like-for-like figure. Gross margin pressure comes from Auth0, which carries a higher relative cost and lower gross margin, as well as higher amortization of acquired developed technology. Okta expects sales and marketing expenses to increase in absolute dollars as it returns to in-person events and invests in customer acquisition. COVID-19 and its variants still create uncertainty for operations and demand. The company also faces integration risk from Auth0 and the need to manage convertible notes.
The quarter showed a mix of strong demand and heavy losses. Okta grew revenue at a fast clip and expanded its customer base, but GAAP losses widened sharply and cash flow weakened. The next quarter's guidance calls for 36% revenue growth, a step down from the 65.3% reported this quarter, while the full-year outlook implies 39% to 40% growth. The company's ability to convert strong RPO and retention into revenue while controlling costs will determine whether the loss trajectory improves.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $414.9M | $383.0M | +8.3% | $251.0M | +65.3% |
| Gross profit | $283.8M | $263.5M | +7.7% | $184.9M | +53.5% |
| Gross margin | 68.4% | 68.8% | -0.4 pp | 73.7% | -5.3 pp |
| Research & development | $161.7M | $147.5M | +9.6% | $68.9M | +134.7% |
| Sales & marketing | $252.5M | $221.6M | +13.9% | $146.5M | +72.3% |
| General & administrative | $109.3M | $108.9M | +0.4% | $60.2M | +81.7% |
| Total operating expenses | $523.5M | $477.9M | +9.5% | $275.6M | +90.0% |
| Operating income (loss) | -$239.7M | -$214.4M | -11.8% | -$90.7M | -164.3% |
| Operating margin | -57.8% | -56.0% | -1.8 pp | -36.1% | -21.6 pp |
| Net income (loss) | -$242.7M | -$241.2M | -0.6% | -$109.2M | -122.2% |
| Net margin | -58.5% | -63.0% | +4.5 pp | -43.5% | -15.0 pp |
| Diluted EPS | -$1.56 | -$1.63 | +$0.07 | -$0.83 | -$0.73 |
| Customers | 15,800 | — | — | 10,650 | +48.4% |
Risks
Adverse general economic conditions, inflation and interest rates, recession risk and geopolitical issues such as Russia's invasion of Ukraine may reduce workforce identity and customer identity spending, lead customers to renegotiate contracts or fail to renew, and harm revenue and cash flows. Management also cites longer sales cycles creating near-term headwinds for cash flow, RPO and billings growth.
Sales cycles are lengthening in certain circumstances and becoming less predictable as Okta focuses on larger organizations and faces the current COVID-19 environment, which may delay deal closings and harm financial results. In the three months ended April 30, 2022, Calculated Billings increased 7% year over year, and on a like-for-like basis after adjusting for prior-year billing process changes it increased 52% year over year.
Ongoing integration of Auth0 may disrupt business relationships and divert management attention, and Okta may not realize anticipated benefits. The inclusion of Auth0 revenue, which carries a higher relative cost and lower gross margin, contributed to a decline in total gross margin to 68% for the quarter ended April 30, 2022 from 74% in the prior-year quarter.
The January 2022 compromise of one of Okta's third-party service providers, while not material and not a breach of its product or systems, was widely publicized, focused attention on the security of Okta and its providers, and has become the subject of a lawsuit. As a well-known identity and security provider, Okta remains an attractive target for future attacks that could harm reputation, create liability and increase costs.
The conditional conversion features of the 2023 Notes were triggered as of April 30, 2022, making them currently convertible at holder option between May 1, 2022 and July 31, 2022, and they are classified as current liabilities. Okta may not have sufficient cash to settle conversions or repurchase notes upon a fundamental change, and future conversions could dilute stockholders.
Okta faces intense competition, especially from larger well-established companies, with Microsoft named as its principal competitor; competitors may bundle products, sell at zero or negative margins or have greater resources. This could lead to pricing pressure, reduced revenue and gross margins, and loss of market share.
Okta depends on customers renewing subscriptions and purchasing additional products, and any material decline in Dollar-Based Net Retention Rate would harm future results. For the trailing 12 months ended April 30, 2022, Dollar-Based Net Retention Rate was 123%, up from 120% in the prior-year period, but customer growth could fall below expectations as the customer base matures and Okta focuses on larger organizations.
Okta depends on executive officers and key employees, and competition for engineers and sales professionals is intense. It experienced CFO turnover with the former CFO stepping down in June 2021 and an interim CFO until January 2022, and if the perceived value of equity awards declines, recruitment and retention could be harmed.
Operating cash flow decreased 66.4% to $18.8 million for the quarter ended April 30, 2022 from $56.1 million in the prior-year quarter, and free cash flow margin fell to 3% from 21%, reflecting net loss and working capital changes. Okta expects it may continue to incur operating losses and cash flows from operations that may fluctuate between positive and negative amounts.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Current Remaining Performance Obligations (cRPO)
Free Cash Flow Margin
Free Cash Flow
Non-GAAP Gross Margin
Total Customers
Calculated Billings
Summary, forecast, risks and KPIs are extracted from Okta, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.