Okta Inc. Executives are expected to report adjusted fourth-quarter earnings on Tuesday and, surprisingly, forecast profitability for all of the next fiscal year, raising profit concerns stemming from recent sales-operations issues.
For the fourth quarter, Okta OKTA;
It guided for adjusted earnings of 9 cents to 10 cents a share on revenue of $488 million to $490 million. Analysts on average were expecting an adjusted loss of 12 cents a share on sales of $488.3 million, according to FactSet.
In a surprise announcement during the conference call, Chief Financial Officer Brett Tighe also revealed a full-year forecast for fiscal 2024, as most software companies shy away from such practices when macroeconomic conditions are uncertain. Okta executives said they are aiming for a full-year adjusted profit of $2.13 billion to $2.15 billion. Analysts on average had expected an adjusted loss of 30 cents on sales of $2.3 billion, which broadly beat profit forecasts but missed sales estimates by more than $100 million.
Shares rose as much as 18% in after-hours trading after the results were released, but those gains were pared to a steady 12% after Teague informed analysts of his outlook on a conference call following the earnings announcement. They have fallen 76% so far this year, compared with a 27% decline in the tech-heavy Nasdaq Composite Index COMP;
Okta CEO and founder Todd McKinnon said in an exclusive interview with MarketWatch ahead of the company’s conference call that sales reps are the lowest they’ve been in several quarters, following an increase last quarter. Okta also announced that Susan St. Ledger, president of global field operations, will retire and McKinnon will take over her role on an interim basis.
“What we’ve done in the last six months is slow hiring, reassessing real estate, doubling down on things that we know are high-value, and maybe some things that aren’t. We’re doing less, so that’s where we see the profitability come,” McKinnon told MarketWatch. He said.
Much of the acquisition comes from the company’s struggle to integrate Okta’s sales force with sales reps to focus on direct-to-consumer sales rather than Okta Corporate, which acquired identity platform Auth0 (pronounced “Auth Zero”) in May 2021. Attention.
“The problem wasn’t that we didn’t have good sales people,” McKinnon told MarketWatch. “The problem is that we’re enabling them and not making things clear to them.”
Depth: Okta’s CEO says ‘short-term challenges’ have led to massive layoffs
“We still have work to do,” MacKinnon said. “After a quarter of a positive trend, we don’t think we’ve solved it, but I think it’s progress.”
“The biggest reason we’ve done a much better job of explaining the products and the positioning and saying we have two clouds: We have the Workforce Identity Cloud and the Customer Identity Cloud, and it’s very clear when it’s going to sell,” he said.
Okta reported a third-quarter loss of $208.9 million, or $1.32 a share, compared with a loss of $221.3 million, or $1.44 a share, a year earlier. After adjusting for stock-based compensation expense and other items, the company reported diluted earnings per share, compared with a loss of 7 cents a share last year. Revenue rose to $481.4 million from $350.7 million in the previous quarter.
Analysts had forecast an adjusted loss of 24 cents to 25 cents a share on sales of $463 million to $465 million, with the company forecasting an adjusted loss of 24 cents a share on revenue of $465.4 million.
For the current year, Okta forecast an adjusted loss of 27 cents to 26 cents a share on revenue of $1.84 billion, compared with the Street forecast of 73 cents a share on revenue of $1.82 billion.
So far in November, cloud software stocks are dropping. While the S&P 500 SPX,
The iShares Expanded Tech-Software Sector ETF IGV gained 5.4%, and the Nasdaq rose 4.4%.
Global X Cloud Computing ETF CLOU rose 1.6 percent.
First Trust Cloud Computing ETF SKYY rose 0.8%;
and Wisdomtree Cloud Computing Fund WCLD, which fell 2%;
It decreased by 6.9 percent.