Photo Credit: Teresa Wade from Pixabay

Earlier this week, corporate identity management software company Okta (Nasdaq: OKTA) announced its second-quarter results. While the performance outpaced market expectations, its weaker outlook failed to impress the market. The stock fell 10% in the after-hours trading session driven by the troubling outlook, and the continuing issues faced by the company in integrating its Auth0 acquisition.

Okta’s Financials

Revenues for the second quarter of fiscal 2023 grew 43% to $451 million, surging ahead of the market’s forecast by 4.93%. Non-GAAP loss of $0.10 per share was significantly better than the Street’s estimated loss of $0.30 per share.

By segment, subscription services revenues increased 44% to $435 million. Professional services revenues grew 32.3% to $14.4 million. Among key metrics, Remaining Performance Obligations (RPO) grew 25% to $2.79 billion.

Okta expects to end fiscal 2023 with $1.812-$1.82 billion in revenues and a non-GAAP net loss of $0.73-$0.70 per share.

For the third quarter, Okta forecast revenues of $463-$465 million and a net loss of $0.25-$0.24 per share. The market was looking for revenues of $466.19 million and a net loss of $0.27 per share for the quarter and revenues of $1.82 billion with a net loss of $1.10 per share for the year.

Okta’s Auth0 Integration

Last summer, Okta had announced its $6.5 billion acquisition of another identity management service provider Auth0. Earlier this year, Okta integrated the Auth0 sales teams. Okta believes that the Auth0 acquisition has helped it provide the most comprehensive identity platform in the market that creates powerful long-term network effects for it and for its customers. Organizations are looking for scalable and secure ways to digitally interact with the customers, and with Auth0, Okta will be able to win the customer identity market faster.

But integrations are not always easy, as Okta is figuring out. It reported that it experienced accelerated attrition within the go-to-market organization, along with confusion on the field that have impacted its business momentum. To address the high attrition, it is making changes to its organizational structure to better align on its strategy, increasing sales training and enablement, and improving the compensation structure of the go-to-market team. Additionally, to drive the go-to-market effectiveness, it recently unified the pricing, quoting, and opportunity management system across the two entities. The sales team now has access to an integrated CRM system, which was missing earlier. Finally, it has simplified its approach to the markets by releasing the Customer Identity Cloud and Workforce Identity Cloud with Auth0 powering the Customer Identity Cloud.

Meanwhile, Okta continues to improve its product line-up and vertical-focused offerings. One of its key focus areas this year has been to increase its presence in the federal vertical. It has seen significant adoption of its products within the government bodies, and it is looking forward to receiving the FedRAMP High Authorization and releasing the Okta Military cloud later this year.

Okta’s stock is currently trading at $60.6 with a market cap of $14.4 billion. It touched a 52-week high of $276.30 in August last year and hit a 52-week low of $58.12 this week.

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