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No. of Recommendations: 9
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No. of Recommendations: 14
The earnings look pretty good. Subscription backlog growing strong still at 56% YoY. Also FY guidance was raised from $780->$803mil.

Billings growth was reported at 27% which is probably why the stock got hit. They were explaining it as COVID headwinds, headwinds from beneficial invoice timing from Q1, and impact from strong upsell activity (creates headwind for current Q, tailwind for future Qs). CFO was saying YoY growth in current RPO is more important metric to follow as it eliminates variances in billings numbers.

Bnh
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No. of Recommendations: 41
This (after) market reaction is interesting: perhaps a classic case of the market misreading the reality of the situation... or maybe putting too much emphasis on the GAAP EPS number... or the slowing revenue growth acceleration foretasted for Q3.

I mean OKTA executed a revenue beat and (adj.) EPS beat and increased 2020 guidance, but the market had apparently priced in a higher (GAAP) EPS or maybe expected a higher guide. The Q3 number suggests the acceleration of revenue growth is slowing down, from +43% (Q2'19->Q2'20) to +33%(Q3'19->Q3'20), but +33% is still good, and they'll beat it, but it won't be near +43%.

Let's review

Q2 Revenue actual: $200.4M, +43% YoY. (consensus estimates: $186.4M, so a $14M beat)
Adj EPS actual: +$0.07/share (consensus estimate: -$0.02/share, so a +0.09 beat!)
==> sure, they missed their GAAP EPS by $0.07, but that's not the most accurate proxy, as we know.
Adj. GM: 79% (consensus of 77.8%, so a 120BP beat = 1.2%)
Billings +27% Y/Y to $198.1M, (consensus: $188.5M, so a $19.6M beat)

Guided Q3=> $202M to $203M, which would represent flatish sequential growth, so even if they beat revenue, which they will, guarantee, it will be a very modest sequential revenue growth number.

Guided 2020 => $800M to $803M (was $770M to $780M) note the resolution of the new 2020 guidance became more accurate; was 1.3% = (780-770)/770, now is (803-800)/800 = 0.4%
Shows they have a very good idea of what revenue they will achieve, and maybe they added some sand to ensure a strong beat.

All in all, this was a good quarter and a good forecast for OKTA. The term "Success is a cruel master" comes to mind with OKTA today.
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No. of Recommendations: 16
This (after) market reaction is interesting: perhaps a classic case of the market misreading the reality of the situation... or maybe putting too much emphasis on the GAAP EPS number... or the slowing revenue growth acceleration foretasted for Q3.

To take this discussion to a meta level, don't we have similar situations with a number of our stocks? For instance, after ZM's last quarter I got spooked by the guidance given and sold. Luckily, Saul patiently explained his view of both the undertone of conservatism in the CFO's comments and his view that Zoom's business wasn't going to decline as much as was predicted in the call. I actually got to buy back in a few bucks cheaper than when I sold. Go figure.

Since then ZM has increased about 50% (from $200 to about $300), but that's so much that even if they beat their guidance the stock may drop - IF they don't beat it enough. And even if they do handily beat guidance, if future guidance remains conservative, the stock might take a (perhaps temporary) hit. And that might be frustrating for Zoom management, because after all, they did guide conservatively and so to have the stock bid up too much only to decline when the reality hits is a bad look that isn't their fault. NOT that that's going to happen with Zoom, I'm still very positive.

Sigh, it makes things complicated. There's so much information, and so much meta-data on the information that we no longer can take what the company says as gospel and invest relative to that, we have to invest based on what we think about the company will actually do, and invest relative to what Mr. Market thinks about what company might do.

It may be easy to say that "Mr. Market's expectations were wrong," but the situation we find ourselves in is always trying to predict the future better than Mr. Market, since Mr. Market sets the stock prices. So, not only are we tracking the business relative to what the company says, we're tracking it to what the market is saying, which we hear mostly though the stock price (but also through the usual media sources and analyst interviews).
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No. of Recommendations: 6
I wasn’t going to post my take after the call; but, Smorgasbord just set this up too well when he said, “ we have to invest based on what we think about the company will actually do, and invest relative to what Mr. Market thinks about what company might do.“.

Last quarter, Q1 FY21, I wrote, Todd McKennon refers often to growing depth as well as breadth. Perhaps those at OKTA need to take more time (grow revenue more slowly) to integrate more deeply with their existing customers and to do otherwise would, as they have also repeatedly said, ‘be irresponsible’. That Zm, CRWD and DDOG are able to grow so fast.....is it that their products are not as deeply integrated with their customers as OKTAs products? Answering my own question from my limited understanding is yes this the truth of it.

This quarter CC Fred Kerrest, COO and Co Founder, said,’Q3 will show proof-points for what we said in Q1”. He also said again in this CC, “We’re now going directly to c-suits in the biggest Enterprises in the world, in the initial phase of our sales motion”.
I’ll reiterate here that I’m sticking to my interpretation of the CC I made last Q. I believe Q3 will show acceleration in Revenue growth, despite the Guidance.

But that’s just the way I see it. Anyone....
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No. of Recommendations: 31
Or maybe as pointed out here many times with many stocks after earnings, why are you reacting to an after hours move? Why would that be disappointing to you.

Ok, a drop back to where it was on what, on Tuesday? Two days ago? Were you disappointed on Tuesday
that the stock price opened at 205? An entire 5 points lower then where it may or not open in the morning?

Worry about the earnings report, not the stock price reaction after hours.

If you like the earnings and the conference call then hold the stock or add more. If you don’t well then you may have a bit more thinking to do.


TMB
Simple isn’t stupid
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No. of Recommendations: 8
Newbie poster alert - first time post on Saul's board, longtime lurker.

Some points I gleaned from the EC that initially I think support WillO2028's thinking that Q3 earnings may be likely to improve (subject to further review):


Non-GAAP GM improvement (160 basis points) to 78.9% (economy of scale?)

Upsell to a Fortune 100 tech co. w/100K workforce intending to use OKTA w/it's millions of customers and coupled with the statement (not sure if by CEO of CFO) that they are seeing more interaction w/C suite executives and therefore (my thought) this may not be an isolated event.

1,685 customers >$100K ACV up 38% YOY

CIAM (customer ID) is 24% of ACV and grew 72% YOY

RPO $1.427B up 56%


OKTA is currently an 8% position in my portfolio. After COUP reports on 9/8 I will reassess (maybe sooner if new information/developments warrant it).

Best,
Mike
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