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Okta CEO: ‘We’re Really, Really Lucky’ To Join With ‘Amazing Company’ Auth0

‘They [Auth0] built the company from the ground up to be focused on developers, and that manifests itself in a lot of different ways. But the biggest way is almost a cultural way,’ says Okta CEO Todd McKinnon.

The $6.5 billion acquisition of Auth0 will help make Okta the identity standard across organizations by supporting more use cases that developers need, Okta CEO Todd McKinnon said.

McKinnon said the colossal Auth0 purchase will ensure identity becomes one of the most important clouds inside an organization for the decade to come alongside collaboration, CRM, infrastructure, and ERP. The Okta-Auth0 combination can serve as the connective tissue to all these other clouds by facilitating choice and flexibility while enhancing security and reducing risks, according to McKinnon.

“Auth0 is an amazing company, and we’re really, really lucky to join up with them,” McKinnon (pictured above) told investors Wednesday. “They built the company from the ground up to be focused on developers, and that manifests itself in a lot of different ways. But the biggest way is almost a cultural way. It’s an ethos of the flexibility and the expressiveness that developers need.”

[Related: Okta To Acquire Red-Hot Identity Vendor Auth0 For $6.5B]

Bellevue, Wash.-based Auth0 is on a trajectory to generate more than $200 million in annual recurring revenue in the fiscal year ending Jan. 31, 2022, representing growth of more than 50 percent, McKinnon said. Buying Auth0 will allow Okta to support more customer identity use cases around developers security operations, IT and digital transformation, ensuring that Okta remains strategic for customers.

To be a strategic cloud for customers, McKinnon said Okta needs to execute around both workforce identity – where the company historically has been strongest – as well as customer identity, which is what Auth0 was founded to address. Customer identity represents a quarter of Okta’s business today, and buying Auth0 will double the size of this business in a $25 billion total addressable market.

Okta has some unique capabilities from the customer identity side around integrations with certain data stores and applications, McKinnon said. But Auth0 is loved by developers for its flexible, extensible platform, which McKinnon said will make the combination a more compelling choice for customers.

“As we started talking to each other over the last year or so, it became clear that it was time to work together, instead of independently,” McKinnon said. “Together, we could catalyze this market faster than either of us could do it independently.”

Okta and Auth0 competed against one another relatively infrequently, but in cases where that happened, Auth0 would almost always win if the developers were the decision-maker while Okta would emerge victorious if the CIO, CTO or CISO was deciding, said Okta COO Frederic Kerrest. He said it became clear customers wanted both Auth0’s flexibility as well as everything Okta brought to the table.

Auth0 could have independently realized its vision and ambition for the identity market in five-to-ten years, according to CEO Eugenio Pace. But by joining forces with Okta, Pace said the combined company can achieve this vision in just a couple of years, delivering more to customers faster.

“We are completely vested and committed to seeing this happen in the long run,” Pace told investors Wednesday. “Because this is an infinite game. There’s no end to this game. It’s a game where we’re going to be around for a long, long time.”

Okta’s revenue for the quarter ended Jan. 31 skyrocketed to $234.7 million, up 40.3 percent from $167.3 million the year prior. That beat Seeking Alpha’s estimate of $222 million.

The company’s net loss worsened to $75.8 million, or $0.58 per diluted share, 50.2 percent larger than a net loss of $50.5 million, or $0.42 per diluted share, last year. On a non-GAAP basis, Okta recorded net income of $8 million, or $0.06 per diluted share, improved from a net loss of $1.1 million, or $0.01 per share, the year prior. That beat Seeking Alpha’s non-GAAP net loss estimate of $0.01 per share.

On a full-year basis, Okta’s revenue soared to $835.4 million, up 42.5 percent from $586.1 million the year prior. Net loss worsened to $266.3 million, or $2.09 per diluted share, 27.5 percent worse than a net loss of $208.9 million, or $1.78 per diluted share.

Okta’s stock is down $25.90 (10.74 percent) to $215.32 per share in after-hours trading Wednesday. That’s the lowest the company’s stock has traded since Nov. 10, 2020.

For the company ending April 30, Okta expects non-GAAP net loss of $0.20 to $0.21 per share on revenue of $237 million to $239 million. Analysts had been expecting non-GAAP net loss of $0.06 per share on earnings of $237.6 million, according to Seeking Alpha.

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