Okta has reported a solid set of second quarter results and raised its guidance for full year 2022, as the identity management firm accelerates its integration with Auth0, which it acquired for $6.5 billion back in May.
As organizations and individuals adjust to increased amounts of distributed work since the onset of the COVID-19 pandemic, identity management has played a critical role in ensuring safe and secure access to systems and information.
Okta is essentially targeting both ends of the identity management market with its acquisition of Auth0. Okta catering to identity and access management for companies and Auth0 supporting growth in the customer identity and access management segment.
Auth0 also has a strong developer community surrounding its platform, which Okta will likely look to utilize in its growth ambitions.
Okta CEO Todd McKinnon said that the combined company is "aggressively pursuing the $80 billion identity market opportunity". He added:
Our strong second-quarter results were driven by continued performance across Okta standalone business, as well as from Auth0. As a quick reminder, the transaction closed on May 3rd, so it's still very early days as a combined Company.
As the world continues to work through the ongoing pandemic, organizations have had to maintain fluid plans for returning to offices.
Regardless of the timeline, it's clear that most organizations are adopting plans that include more remote access. Organizations also realized that their interactions with customers will continue to shift more online and need to accelerate their digital transformation business plans.
These factors, combined with the ever-evolving security threats landscape, mean that the demand for Okta's modern identity solutions has never been greater.
The identity opportunity
Okta's top-level Q2 numbers include:
Total revenue at $316 million, an increase of 57% year-over-year
Subscription revenue totalling $303 million, an increase of 59% year-over-year
Remaining performance obligations (RPO), or subscription backlog, was $2.24 billion, an increase of 57% year-over-year.
Non-GAAP operating loss was $25 million, or 8% of total revenue, compared to $6 million, or 3% of total revenue, for the same period last year
Commenting on the RPO metrics, CEO McKinnon said:
RPO surpassed the $2 billion milestones. For reference, it took Okta 10 years to reach the $1 billion RPO milestone and less than 2 years to hit the $2 billion milestones. That's tremendous progress. The current RPO also reached a milestone by surpassing the $1 billion mark. Our total base of customers now stands at over 13,000.
Okta on its own added 750 customers this quarter, which was a new record, 160 of which were customers representing $100,000 plus average contract value.
McKinnon pointed to Okta's ongoing efforts to integrate Auth0 going forward and the opportunity to cross-sell. He said:
This is a tremendous developer community that is building customer identity tools using the Auth0 platform and further differentiates the Auth0 platform from anything else in the market.
It's been less than 4 months since we closed the acquisition of Auth0, but we've already made a lot of progress and learned quite a bit. We've made the decision to accelerate the timeline for integrating the sales organizations…at the beginning of the new fiscal year in February.
This move will allow the unified sales team to sell both platforms and benefits customers by providing more options to meet their unique use cases. It's this kind of progress that will help us realize our vision of identity as a primary card.
Zero trust security
McKinnon was keen to point to security in combination with remote work as being a key driver of Okta's future growth. He said that 83% of Global 2000 businesses have increased their budget for Zero Trust security initiatives in the past 12 months.
However, this point was clearly illustrated when talking to a new customer in recent weeks. McKinnon explained:
A couple of months ago I was talking to the CIO of a large three-letter federal agency, and they've been an Okta customer for a couple of years now in parts of the agency. And - but this was the CIO of the whole thing.
It was a pretty very compelling meeting from my perspective because they were basically giving me the Okta pitch and saying how identity was so critical with all these supply chain-based attacks, and ransomware attacks, and everyone being remote and having to adapt to this hybrid work environment.
Identity was really the center and it was the keystone of having a robust security strategy. And I'm thinking to myself, that's usually the pitch I give in this meeting. What they wanted from me was…they wanted my support. [But they said]: ‘Hey, we're going to really go wall-to-wall with Okta, make a huge investment, it's going to be the cornerstone of our strategy'.