SentinelOne and Okta deliver earnings beat but Auth0 integration sees Okta shares plunge

SentinelOne Inc. and Okta Inc. reported earnings beats and better-than-expected forecasts in their latest earnings reports, but problems with the integration of Auth0 Inc. saw Okta shares plunge in late trading.

For the quarter ending July 31, SentinelOne reported a non-generally accepted accounting principles net loss per share of 20 cents, down from a loss of 38 cents per share in the same quarter last year. Revenue came in at $102.5 million, up 124% year-over-year.

Analysts had expected a loss of 25 cents per share on revenue of $95.67 million.

SentinelOne saw its annualized recurring revenue grow 122% year-over-year to $438.6 million as of July 31 and its customer count grew 60% to 8,600. Customers with ARR over $100,000 were up 117% to 755 and the dollar-based net revenue rate was 137%. Cash, cash equivalents and short-term investments ended the quarter on $1.2 billion.

“We delivered hyper-growth and outperformance across all aspects of our business in Q2 – ARR, revenue, customer growth, net retention and margins,” Tomer Weingarten, chief executive officer of SentinelOne, said in a statement. “I’m proud of our team’s execution despite an evolving macro environment. Through Singularity XDR, we’re delivering what enterprises need the most: best-in-class protection and superior platform value.”

For the fiscal third quarter of 2023, SentinelOne is predicting revenue of $111 million and for fiscal 2023, revenue of $415 million to $417 million. Analysts had been expecting $108.2 million and $406.23 million respectively.

For the same quarter, Okta reported a non-GAAP net loss per share of 10 cents compared to 11 cents in Q2 2022. Revenue came in at $452 million, up 43% year-over-year. Analysts had expected a loss of 31 cents per share on revenue of $430.7 million.

Okta’s figures were positive across the board, with subscription revenue up 44% to $435 million. The company’s subscription backlog was $2.79 billion, up 25%, and contracted subscription revenue expected to be recognized over the next 12 months was $1.5 billion, up 36% year-over-year. Calculated billings were up 36% to $491 million.

Looking ahead, Okta expected a non-GAAP net loss per share of 24 cents to 25 cents in the third quarter of fiscal 2023 on revenue of $463 million to $465 million. Analysts had expected a loss of 28 cents per share on revenue of $464 million. For the full fiscal year 2023, Okta expects a net loss per share of 70 cents to 73 cents on revenue of $1.812 billion to $1.82 billion.

“Identity has become a critical component of every organization’s strategy around zero trust security, digital transformation, and cloud adoption. These three mega trends continue to drive the identity market,” Todd McKinnon, CEO and co-founder of Okta, said in a statement. “Looking at the second half of the fiscal year, we’re focused on refining the go-to-market strategy for the combined Auth0 and Okta sales organization, strengthening our teams, and making strategic reductions to our spend to improve profitability.”

Okta’s quarterly figures were a strong beat and its outlook was on the upside of what was expected, but shares in the company plunged in late trading, down 10.83% as of 6:30 p.m. EDT. The why was hinted at in McKinnon’s reference to integrating Auth0, which Okta acquired last year.

In an interview with MarketWatch after the earnings release, McKinnon said that “there are some short-term challenges” and that “there are a lot of things going really well, but the results were mixed.” In a conference call, McKinnon said that the integration of Okta’s sales force with sales reps from Auth0 had resulted in higher than expected attrition rates of 20% compared with a more usual 15% and that if he had to redo the integration, he would have been more moderate and less aggressive in growth.

McKinnon did add that the different sales organizations have only been integrating for around six months and the challenges have been factored into the company’s outlook.

Photo: SentinelOne

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