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No. of Recommendations: 23
I would like to start off with some numbers for OKTA first. They went public in Q118, the beginning of 2017.

in 000's Non-Gaap
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418
Rev 31,787 37,436 42,383 48,820 53,007 60,095 68,238 77,750
Growth% 66.8% 60.5% 61.4% 59.3%
EPS -1.04 -.90 -.89 -.66 -.50 -.16 -.19 -.10
Cash 70,169 54,968 42,133 37,672 224,226 213,219 223,618 229,714
Debt 0 0 0 0 0 0 0 0
FCF -15,962 -13,940 -10,144 -8,308 -12,134 -8,946 -9,885 -824
Customers 3350 3650 3950 4350
Cust ov/100,000 493 539 603 691

The cash went up in Q118 and that is when they IPO'd But as you can see they did gain a little cash in Q418 and they were almost FCF positive in that quarter also.

They are growing their customer QoQ at a rate of 8% to 10%, This is to short of a time to see how it is trending. Their customers with a spend of over 100,000 is growing QoQ too, this is trending up every quarter, starting at 9% growth from q218, and going to 14% growth between Q418 and Q318.

Their FCF is going in the right direction and I believe they will be FCF positive next quarter, This is very important because they will no longer be burning cash. The CEO stated that FCF will be bumpy, quarter over quarter.

So what does OKTA do? They are and IaaS company. (I know another acronym. It people love their acronyms because they think the more acronyms the smarter they are. You really want to have fun? Go into a meeting with a bunch of IT techs and start making up acronyms. See which ones nod their heads like they understand what you are saying. ) What this acronym means is Identity As A Service. OKTA puts their identity in the cloud. So all of the old companies had their identity on their servers and they all had a package that needed to be updated individually when ever there was a security breach. You had to buy the package and update it. What OKTA does if they have a breach of any type is upgrade one service in the cloud and everyone is patched at once.

They have six different products that operate as a unified platform and together make up the Okta Identity Cloud.

Okta Single Sign-On, which enables users to access all of their applications from any device with a single set of credentials.

Okta Universal Directory, which provides a centralized, cloud-based, flexible store to capture user application and device profiles as well as the relationships between those profiles.

Okta Adaptive Multi-Factor Authentication, provides an additional layer of security for data and applications while using modern authentication factors such as text messaging and push notifications.

Okta Lifecycle Management, is a provisioning product that automates IT processes and ensures user accounts are created and deactivated at the appropriate times.

Okta Mobility Management, uses identity to automate mobile device administration and provisioning across phones, tablets, and laptops, providing seamless and secure mobile access to any application without compromising security.

Okta API Access Management, enables organizations to connect custom Web and mobile experiences to cloud or on-premise services through APIs.

Gartner Magic Quadrant and now Forrester Wave, has consistently put them as the leader of IaaS with Microsoft a close second, but what was interesting, in Q318 one of Microsoft's customers replaced them with OKTA. Why would they do that? I suspect that nobody wants to be locked into Microsoft's ecosystem. OKTA plays with all security and web appliances. So if you are AWS, GOOGLE, Microsoft, Cisco, Palo Alto, F5, you name it, OKTA will work with you. They have over 1000's apps preloaded into their library and they even have a wizard that will allow you to put any other app they do not have, into your library. You only log in once and then it allows you to access any app for your company. This is the way everything is going, to the cloud, and this is the new way of security. You can still have a fob but that fob will work in tandem with OKTA. So lets say you have a key fob for every financial or business you interact with. Fidelity, Schwab, etc. Well this would cut you down to one. But then lets say you do not want a fob, well then go with multi-factor authentication. That's where you try to log in and then a sms text message is sent to your cell phone asking if you are trying to log in and when you say yes it gives you a password. Very easy and convenient.

They get their revenue through subscriptions and professional services, and charge a 2 to 3 year subscription to the large enterprises, and 1 to 2 years to small and medium size business.The biggest majority of their Revenue though is with subscriptions. They bill the customers usually a year ahead of time. OKTA business model is a land and expand, so when they get their foot in the door they usually end up selling more. This is shown by their dollar based retention rate which was at 123% in Q118, but is now at 121% in Q418. This needs to be watched.

So does OKTA have a moat? I would say very slight, they have a good product that is growing very fast and once they get someone into their ecosystem they keep selling them more products. I think they need to get them in as fast as possible because then they just keep billing them and the customer is reluctant to leave. So as they grow they suck all the air out of the space and gain bigger market share. I think there is a good chance that they will be bought out though, but right now they work with everyone and I think that is a big plus.

OKTA is working with business's and enterprises but I wouldn't be surprised if they move into the individual market. How many of us would like to have something like this that would allow us to securely log into all our financial sites. Also could you see instead of logging into sites using your google log in or facebook log in you could use OKTA. Also OKTA wouldn't track you or sell your information.

While this company does have a high P/S of 17, it is growing over 60% YoY. That's phenomenal.
Oh and for all my Extreme Conservative friends you will probably be glad to hear that at this years OKTANE (OKTA convention) The key note speaker is Barak Obama and just your luck you can still see the whole thing in Las Vegas on 5/22.

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