Okta Recovers from Data Breach Issues

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Corporate identity management software company Okta (NASDAQ: OKTA) recently announced its quarterly results that continued to outpace market expectations. The company’s focus on profitability is paying off as it delivered record non-GAAP profitability and cash flow in the quarter.

Okta’s Financials

Revenues for the fourth quarter grew 19% to $605 million, ahead of the market’s forecast of $587 million. EPS was $0.68 compared with $0.33 a year ago and was significantly better than the Street’s estimate of $0.51 per share.

By segment, subscription services revenues increased 20% to $591 million.

Among key metrics, Remaining Performance Obligations (RPO) grew 13% to $3.385 billion.

Okta’s annual revenue grew 22% to $2.263 billion with subscription revenues increasing 23% to $2.205 billion. Net EPS came in at $1.75 compared to a loss of $0.04 reported last year.

Okta expects to end the first quarter with revenue of $603-$605 million and non-GAAP net income per share of $0.54-$0.55. The market was looking for revenues of $584 million and an EPS of $0.41.

For the full year, Okta forecast revenues of $2.495-$2.505 billion and an EPS of $2.24-$2.29 per share. The market was looking for revenues of $2.47 billion and a net income of $1.96 per share. 

Okta’s Product Enhancement

Earlier this month, Okta announced the general availability of Fine Grained Authorization (FGA) to address authorization complexities for developers. Focused on the developer world, FGA will allow them to design authorization models in a way that is centralized, flexible, scalable, and easy to use. Development teams will be able to spend less time building and maintaining authorization and focus their efforts instead on building and shipping products and features. FGA provides developers with more visibility and control thus driving security and efficiency.

FGA was launched as a limited early access version last year. Since its launch it has seen adoption by several Fortune 500 firms and has continued to improve its features. Some of the features added in the offering include scalability as the service allows developers to manage approximately 100 billion relationships and over 1 million requests per second, access to attribute-based access control, and includes development kits for popular languages.

Despite the strong financials, the market is still wary of Okta’s data breach incidents. Last October, the company had warned that its support system was breached by hackers using stolen credentials. Hackers were able to steal cookies and authentication for some customers. But an internal investigation completed in late November revealed that the incident impacted all users of the customer support system. Okta acknowledged that hackers had downloaded a report containing names and email addresses of all clients that use its customer support system.

Okta has added security features since and enhanced location-based access controls for its system. It now has zero standing privileges for Okta admins to ensure that admin roles are requested, approved, and assigned to authorized users only for the duration that access is needed. It added MFA requirements for protected actions in admin console, an ability to detect and block requests from anonymizers to Okta endpoints, enforced an allowlisted network zone for APIs and initiated IP binding capabilities to Okta products and admin console.

Okta’s stock is currently trading at $104.62 with a market cap of $17.5 billion. It touched a 52-week high of $114.50 soon after results announcement, and has recovered from the 52-week low $65.04 that it had fallen to on the news of the data breach in October.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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