Release Date: December 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Okta Inc (NASDAQ:OKTA) reported strong profitability and cash flow in Q3, highlighting efficient spending.

• The company saw significant involvement from partners, with all top 10 deals in Q3 involving partners, contributing approximately $20 million in annual contract value.

• Okta Inc (NASDAQ:OKTA) experienced strong growth in upsell and cross-sell activities, particularly in workforce and customer identity products.

• The company was recognized as a leader in the Gartner Magic Quadrant for access management for the eighth consecutive year.

• Okta Inc (NASDAQ:OKTA) is planning further specialization in its global go-to-market strategy to better align with distinct buying centers, aiming to reignite growth.

Negative Points

• The macro environment remains challenging, with organizations scrutinizing budgets and rationalizing software spend.

• Net retention rates are under pressure due to lower seat and monthly active user assumptions.

• The company is facing ongoing seat and MAU pressures, impacting visibility into future growth.

• There is a need for more growth in new logo acquisition, as current growth is primarily driven by cross-sells.

• Okta Inc (NASDAQ:OKTA) is still recovering from the impact of a security incident in October 2023, although no quantifiable impact was noted in Q3 results.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Sign with OKTA.

Q: Can you explain the decision to no longer incorporate additional conservatism in your guidance due to last year's security incident? A: Brett Tighe, CFO, explained that last year, Okta had to incorporate conservatism due to the security incident, which was an unknown factor at the time. However, as they have not seen any quantifiable impact from the incident in recent quarters, they have decided to remove this conservatism from their guidance. They are now focusing on balancing optimism about new product momentum and customer growth with prudent guidance.

Q: Are you seeing an increase in RFPs for consolidated identity platform offerings, and how is this affecting your pipeline? A: Todd McKinnon, CEO, noted that Okta is indeed seeing more RFPs for consolidated identity platforms, which is reflected in their pipeline. He highlighted a significant win with a large North American technology company, emphasizing the complexity and value of identity solutions. Okta's partnerships with global systems integrators (GSIs) are crucial in these complex deals, and they are seeing a strong alignment with partners due to Okta's independent and neutral position in the market.