Summary
Okta's fiscal 2024 third quarter revenue was $584 million, up 21.4% from the prior-year quarter. Gross profit was $439 million, up 28.0%, and gross margin rose 3.9 percentage points to 75.2%. The company posted a GAAP operating loss of $111 million, which narrowed 46.4% from a year earlier, and a GAAP net loss of $81 million, which narrowed 61.2%. Diluted EPS was -$0.49, an improvement of 62.9% from a year earlier. Operating margin was -19.0%, up 24.0 percentage points. On a non-GAAP basis, Okta reported record operating income of $85 million, a 15% non-GAAP operating margin, against $0 million a year earlier. Non-GAAP net income was $79 million, and non-GAAP diluted EPS was $0.44.
Cash generation stood out. Operating cash flow was a record $156 million, up 1460.0% from the prior-year quarter. Free cash flow, a separate measure that subtracts purchases of property and equipment and capitalized software from operating cash flow, was a record $150 million, against $6 million a year earlier. Capital expenditures were $3 million in the quarter. Deferred revenue, current portion, was $1.26 billion, up 20.2% from a year earlier. Remaining performance obligations were $3.07 billion, up 7.7%. Current RPO, the portion of subscription backlog expected to be recognized over the next 12 months, was $1.83 billion, up 16%. Cash, cash equivalents, and short-term investments totaled $2.13 billion at October 31, 2023.
Customer metrics were mixed. Okta counted more than 18,800 customers as of October 31, 2023, a 10% increase from more than 17,050 a year earlier. The number of customers with annual contract value above $100,000 was 4,365, compared with 3,740 a year earlier. Dollar-based net retention rate for the trailing 12 months ended October 31, 2023 was 115%, down from 122%. Management tied the decline to the macroeconomic environment, saying ACV from existing customers increased at a slower rate. Longer sales cycles, the company warned, could create near-term headwinds for cash flow and RPO growth and pressure revenue growth and other key metrics on a trailing basis.
Guidance factors in a stable but still challenging macro environment and the potential impact of the October 2023 security incident. For the fourth quarter of fiscal 2024, Okta guides to 15% year-over-year growth, current RPO of $1.875 billion to $1.880 billion, or 11% to 12% growth, non-GAAP operating income of $102 million to $104 million, for a non-GAAP operating margin of 17% to 18%, and non-GAAP diluted net income per share of $0.50 to $0.51, assuming roughly 180 million diluted shares and a non-GAAP tax rate of 26%. For the full fiscal year 2024, the company now expects 21% year-over-year growth, non-GAAP operating income of $283 million to $285 million, a non-GAAP operating margin of 13%, non-GAAP diluted net income per share of $1.47 to $1.48, and a non-GAAP free cash flow margin of 19%. Its preliminary fiscal 2025 outlook calls for 10% year-over-year growth, a non-GAAP operating margin of 17%, and a non-GAAP free cash flow margin of at least 19%.
The main risk is the October 2023 security incident. A threat actor accessed Okta's third-party customer support system and downloaded a report containing the names and email addresses of all users of that system. Every Workforce Identity Cloud and Customer Identity Solution customer is affected except those in FedRAMP High and DoD IL4 environments, which use a separate support system the threat actor did not access. The Auth0 CIC support case management system was not impacted. For 99.6% of users in the report, the only contact information recorded is full name and email address, and the report does not include user credentials or sensitive personal data. Okta sees an increased risk of phishing and social engineering aimed at administrators, many of whom are Okta administrators in their own organizations. The company notes that 94% of its customers already require MFA for administrators and recommends all customers adopt MFA and consider phishing-resistant authenticators. The 10-Q says the incident harmed reputation and customer relations, adversely affected financial results, and may create additional liabilities.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $584.0M | $556.0M | +5.0% | $481.0M | +21.4% |
| Gross profit | $439.0M | $407.0M | +7.9% | $343.4M | +27.8% |
| Gross margin | 75.2% | 73.2% | +2.0 pp | 71.4% | +3.8 pp |
| Research & development | $165.0M | $172.0M | -4.1% | $148.5M | +11.1% |
| Sales & marketing | $270.0M | $261.0M | +3.4% | $290.0M | -6.9% |
| General & administrative | $111.0M | $119.0M | -6.7% | $111.5M | -0.5% |
| Total operating expenses | $550.0M | $569.0M | -3.3% | $550.0M | +0.0% |
| Operating income (loss) | -$111.0M | -$162.0M | +31.5% | -$206.6M | +46.3% |
| Operating margin | -19.0% | -29.1% | +10.1 pp | -43.0% | +23.9 pp |
| Net income (loss) | -$81.0M | -$111.0M | +27.0% | -$208.9M | +61.2% |
| Net margin | -13.9% | -20.0% | +6.1 pp | -43.4% | +29.6 pp |
| Diluted EPS | -$0.49 | -$0.68 | +$0.19 | -$1.32 | +$0.83 |
| Customers | 18,800 | 18,400 | +2.2% | 17,050 | +10.3% |
| Net retention rate | 115.0% | 115.0% | ±0.0 pp | — | — |
Risks
In October 2023 a threat actor gained unauthorized access to and stole information from Okta's third-party customer support system. MD&A states past incidents harmed reputation and customer relations, adversely impacted financial results, and may create additional liabilities, with future impact uncertain.
Adverse general economic conditions and reductions in workforce identity and customer identity spending have reduced and may continue to reduce demand. MD&A notes longer sales cycles and delays in deal closings create near-term headwinds for cash flow and RPO growth.
Okta's sales cycles are lengthening and becoming less predictable as it focuses on larger organizations and faces the current macroeconomic environment. MD&A says delays in closing deals can create near-term headwinds for cash flow and RPO growth and may affect future revenue growth.
Dollar-Based Net Retention Rate for the trailing 12 months ended October 31, 2023 decreased to 115% from 122% a year earlier, primarily due to the macroeconomic environment with ACV from existing customers increasing at a slower rate. The risk factor states any material decline in this rate would harm future results.
Okta faces intense competition, especially from larger well-established companies such as Microsoft, which may bundle identity functionality or sell at zero or negative margins. The risk factor says competitive pressures could result in price reductions, fewer orders, reduced revenue and gross margins, and loss of market share.
During the first quarter of fiscal 2024 Okta announced a worldwide restructuring plan reducing its workforce by approximately 300 full-time employees. MD&A says it may incur additional charges from its ongoing real estate optimization plan and evolving corporate real estate market conditions.
During the nine months ended October 31, 2023 Okta repurchased $508 million principal of the 2025 Notes and $392 million principal of the 2026 Notes, resulting in a $91 million gain on early extinguishment. The risk factor says servicing debt may require significant cash and conversion features could adversely affect liquidity.
Increasing global data protection laws, including the EU-U.S. Data Privacy Framework and Standard Contractual Clauses, plus data localization laws, may require additional compliance costs and could inhibit Okta's ability to offer cloud services in some markets. Non-compliance can trigger significant fines.
Okta's former Chief Operating Officer did not return as an employee following his sabbatical, though he remains a director and Vice Chairman. The risk factor says loss of executive officers or key employees and failure to execute an effective succession plan could harm the business, and competition for personnel in the San Francisco Bay Area is intense.
Okta's customer growth could fall below expectations as it increases focus on sales to the world's largest organizations. The risk factor says it does not expect customer growth to continue at the same pace, which could cause the stock price to fall and lead to costly securities class action suits.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Current Remaining Performance Obligations (cRPO)
Free Cash Flow Margin
Free Cash Flow
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Customers with annual contract value (ACV) above $100,000
Total Customers
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from Okta, Inc.'s SEC filings for Q3 FY2024 (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.