What Capital-Efficient Startup Should Okta Acquire Next?

According to a Grand View Research report published last year, the global identity and access management (IAM) market is estimated to grow 13% annually to $22.7 billion by the year 2025. The growth is expected to be driven by the rising adoption of cloud services and mobile devices and the continued need to drive compliance to manage insider threat. Billion Dollar Unicorn Okta (Nasdaq: OKTA) reported its third-quarter results last month that surpassed market expectations.

Okta’s Financials

Revenues for the quarter increased 58% to $105.7 million, ahead of the market’s forecast of $97 million. It ended the quarter with a non-GAAP net loss of $0.04 per share, compared with the Street’s forecast of a loss of $0.11 per share. This was also the first ever quarter that Okta reported a free-cash-flow-positive quarter with free cash flow of $1.4 million.

By segment, subscription services revenues increased 58% over the year to $97.7 million. Professional services and the other segment revenues grew 56% to $7.9 million.

During the quarter, Okta reported a 58% growth in calculated billings to $124 million. Trailing 12 months’ calculated billings grew 59% to $434 million. Its customer base increased 42% to 5,600 mainly across its enterprise customer base.

For the current quarter, Okta forecast revenues of $106-$107 million with a net loss of $0.08-$0.09 per share. The Street was looking for revenues of $99.9 million and a loss of $0.11 for the quarter. Okta expects to end the year with $391-$392 million in revenues and non-GAAP net loss per share of $0.36-$0.37. The Street was looking for revenues of $356.5 million and a net loss of $0.56 per share for the year.

Okta’s Growth Focus

Today, more and more organizations are shifting their business to the cloud and are trying to launch applications and services that can better engage with customers online – all while maintaining their high-security level. To cater to this demand, Okta is focused on three key offerings – Identity Cloud, Integration Network, and its security standard. Okta’s Identity Cloud service is offered as an independent platform. It is an integrated IAM service that offers its customers the flexibility to accommodate every type of user. Above all, the Identity Cloud can adapt to whatever technological investments the customer makes in the future, making it future-proof.

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Disclaimer: More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion ...

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