Summary
Okta reported third quarter fiscal 2023 revenue of $481.0 million, up 37.2% from the prior-year quarter. Gross profit was $343.4 million, up 42.5%. Gross margin rose to 71.4% from 68.7%, a 2.7 percentage point improvement. The company still posted a GAAP operating loss of $206.6 million, wider than the $198.6 million loss a year earlier. Operating margin was -42.9%, up 13.7 percentage points from -56.6%. GAAP net loss narrowed to $208.9 million from $221.3 million. Diluted EPS was -$1.32, a narrower loss than -$1.44. Non-GAAP operating income was $0.3 million, compared with a non-GAAP operating loss of $10 million. Non-GAAP net loss was $1 million, compared with $11 million. Non-GAAP diluted EPS was $0.00, compared with -$0.07.
Key metrics showed solid top-line momentum but weaker cash generation. Remaining performance obligations were $2.85 billion, up 21.4% year over year. Current remaining performance obligations were $1.58 billion, up 34%. Calculated billings were $532 million, up 37%. Current deferred revenue was $1.04 billion, up 37.5%. Customers with annual contract value above $100,000 totaled 3,740, up from 2,825. The dollar-based net retention rate was 122% for the trailing 12 months. Operating cash flow was $10.0 million, down 73.1% from $37.1 million. Free cash flow was $6 million, down from $33 million. Capital expenditures were $1.9 million, up 6.7%. For the nine months ended October 31, 2022, revenue was $1.35 billion, up 46.9%. Net loss for the nine months was $662.1 million, wider than the $607.2 million loss in the prior-year period. Diluted EPS for the nine months was -$4.21, a wider loss than -$4.17. Gross margin for the nine months was 69.8%, flat with the prior-year period. Operating margin for the nine months was -48.5%, up 11.7 percentage points. Operating cash flow for the nine months was $9.8 million, down 89.2% from $90.6 million.
Guidance points to slower growth in the next quarter. For the fourth quarter of fiscal 2023, Okta expects total revenue growth of 27% to 28% year over year. Current RPO is expected to be $1.63 billion to $1.64 billion, up 21% year over year. Non-GAAP operating income is expected to be $15 million to $17 million. Non-GAAP diluted net income per share is expected to be $0.09 to $0.10, assuming diluted weighted-average shares outstanding of approximately 175 million. For the full year fiscal 2023, the company now expects total revenue growth of 41% year over year. Non-GAAP operating loss is expected to be $41 million to $39 million. Non-GAAP net loss per share is expected to be $0.27 to $0.26, assuming weighted-average shares outstanding of approximately 158 million.
Management also announced that Susan St. Ledger, President, Worldwide Field Operations, will retire at the end of the fiscal year on January 31, 2023. If a successor is not in place by then, Todd McKinnon will act as interim leader of Worldwide Field Operations. The company cited an evolving macro environment and longer sales cycles, which could create near-term headwinds for cash flow, RPO, and billings growth, as well as potential future impacts on revenue growth. Okta continues to face integration risk from the Auth0 acquisition completed on May 3, 2021, along with broader risks such as a network or data security incident, service outages, COVID-19 related disruptions, and the need to manage convertible senior notes. As of October 31, 2022, more than 17,050 customers used Okta, and the Okta Integration Network had over 7,000 integrations. The company remains focused on go-to-market execution, spend efficiency measures, and increasing profitability.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $481.0M | $451.8M | +6.5% | $350.7M | +37.2% |
| Gross profit | $343.4M | $314.1M | +9.3% | $241.0M | +42.5% |
| Gross margin | 71.4% | 69.5% | +1.9 pp | 68.7% | +2.6 pp |
| Research & development | $148.5M | $155.8M | -4.7% | $130.5M | +13.8% |
| Sales & marketing | $290.0M | $264.7M | +9.6% | $203.9M | +42.2% |
| General & administrative | $111.5M | $101.7M | +9.7% | $105.1M | +6.1% |
| Total operating expenses | $550.0M | $522.2M | +5.3% | $439.6M | +25.1% |
| Operating income (loss) | -$206.6M | -$208.1M | +0.7% | -$198.6M | -4.1% |
| Operating margin | -43.0% | -46.0% | +3.1 pp | -56.6% | +13.7 pp |
| Net income (loss) | -$208.9M | -$210.5M | +0.7% | -$221.3M | +5.6% |
| Net margin | -43.4% | -46.6% | +3.1 pp | -63.1% | +19.7 pp |
| Diluted EPS | -$1.32 | -$1.34 | +$0.02 | -$1.44 | +$0.12 |
| Customers | 17,050 | 16,400 | +4.0% | 0 | — |
Risks
Adverse general economic conditions, including inflation and rising interest rates, may reduce workforce identity and customer identity spending. MD&A states longer sales cycles have been experienced and could create near-term headwinds for cash flow, RPO and billings growth.
Sales cycles are lengthening and becoming less predictable as Okta focuses on larger organizations. MD&A notes delays in deals closing could create near-term headwinds for cash flow, RPO and billings growth.
Okta faces intense competition from larger, well-established companies, with Microsoft named as principal competitor. Competitors may bundle products or sell at zero or negative margins, pressuring pricing and market share.
Ongoing integration of Auth0 may disrupt business and divert management. The filing states Okta's business was impacted by short-term execution challenges related to integrating the Auth0 and Okta sales organization earlier this year, and expected synergies may not be achieved.
Okta has experienced cybersecurity attacks, including the January 2022 compromise of a third-party service provider that was widely publicized and became subject of lawsuits. The filing notes such incidents could harm reputation, create liability and increase costs.
Operating cash flow decreased 73.1% to $9.98 million in FY2023 Q3 from $37.12 million in FY2022 Q3, and decreased 89.2% to $9.76 million for the nine months ended October 31, 2022. MD&A states operating losses and cash flows may fluctuate between positive and negative amounts for the foreseeable future.
The 2023 Notes are currently convertible at holders' option and were classified as current liabilities as of October 31, 2022. Conversion or required cash settlement could adversely affect liquidity and reduce net working capital.
Okta announced the upcoming retirement of its President, Worldwide Field Operations, appointed a new Chief Accounting Officer effective August 2022, and its Executive Vice Chairman, Chief Operating Officer and co-founder is on sabbatical from November 2022 through October 2023. Such changes may disrupt the business.
Okta's business depends on customers renewing subscriptions and purchasing additional products. Dollar-Based Net Retention Rate was 122% for the trailing 12 months ended October 31, 2022 and 2021, and any material decline would harm future results.
Customer growth could fall below expectations as Okta increases focus on sales to the world's largest organizations. The filing states it does not expect customer growth to continue at the same pace as previously, which could cause the stock price to fall.
Failure to comply with privacy or security provisions of privacy policy, contracts, or legal/regulatory requirements, including GDPR and CCPA, could result in proceedings, actions or penalties. International operations face disparate data privacy and cybersecurity regimes.
International revenue was 16% and 20% of total revenue in fiscal 2021 and fiscal 2022, respectively. International expansion exposes Okta to foreign laws, data privacy standards, geopolitical instability including Russia's invasion of Ukraine, and currency fluctuations.
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
Non-GAAP Operating Income
Customers with ACV Above $100,000
Summary, forecast, risks and KPIs are extracted from Okta, Inc.'s SEC filings for Q3 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 2, 2026.