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Q2'21 results: Beat (+7%) and raise (+1%), long-term 5-year growth CAGR expects to be 35%, driven by growth in CIAM with Auth0's combination, international expansion (also thanks to Auth0's strength), continued expansion of partnership (OKTA's strength) and enterprise customers (OKTA's strength).

- Near-Term: 3Q22 Rev +50% FY22 +50%

- Long-Term: Rev 35% CAGR and FCF 20% margin

The long-term trajectory looks really good!

One attention from this Q2'21 results and onwards is the inclusion of Auth0, an acquisition completed on May 3rd, 2021 ($6.5B in stock). As a result, the Y/Y comparison of Q2 FY22 has a full impact from Auth0's financials.

+Revenue grew +57% to $316M (vs. +37%Y/Y in Q1) vs. guidance of 47%-48%.

+The revenue growth was +39% Y/Y organically (excluding Auth0), which was a slight re-acceleration.

+Subscription revenue grew +59% to $303M (vs. +38% Y/Y in Q1).

+RPO (the subscription backlog), grew +57% Y/Y to $2.24B (vs. +52% Y/Y in Q1). The growth acceleration of RPO is indicating the continued momentum of high growth.

+Gross margin was 68% (-6pp Y/Y).

+Operating loss margin was -83% of revenue (vs. -23% in Q2 FY21). The large GAAP net loss included $150M attributable to Auth0.

+Non-GAAP Operating loss margin was (8)% (-11pp Y/Y).

+Net cash used in operations was $3M or (1)% of revenue (vs. 5% in Q2 FY21).

+Cash and short-term investments on its balance sheet were $2.5B.

+Guidance for Q3 FY22 is a revenue growth of 50% (showing a continued acceleration).

+Full-year guidance was increased from $1.23B to $1.25. OKTA remains on a fantastic growth trajectory 5year CAGR of 35%.

Todd McKinnon, CEO, and co-founder of Okta, said:

"In our first quarter as a combined company with Auth0, we're off to a fantastic start. Execution remained sharp with strong demand for Okta's workforce and customer identity solutions, as well as Auth0's developer-centric identity solutions. As organizations advance on their journey of improving their customers' digital experience, adopting zero-trust security environments, and deploying more cloud applications, they continue to turn to Okta to deliver an unmatched array of modern identity solutions to meet these challenges."

Short-term risks but not of a long-term issue, margins worsened this quarter, due to sales & marketing expenses growing +102% Y/Y and G&A exploding +270% Y/Y driven by costs attributed to Auth0 acquisition. However, the strength of the balance sheet and the mostly break-even free cash flow margin allow Okta to continue to invest in growth.

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