First HCP - bottom line: the bad part is that beat to guidance rate implies next Q revenue decelerates from 51% y/y growth to 45% y/y. That AND total RPO increased 1% q/q, which is unusually soft. Some details:
- Better F1Q revenue at $101M vs us $99M and Street $94M
- cRPO Billings sustained 50% y/y
- Customer growth accelerated, adding 525 q-q, a record high
- Accelerated y/y % growth of $100K customers
- Sequential cloud revenue increase accelerated from $1.6M per Q last 2 quarters to $1.9M this Q
- Only slight increase in Street F2Q revenue from $101M to $102M per guidance midpoint and the 'beat to guide' pace implies ~$109M real revenue next Q which is just below us at $111M and a decel from 51% rev growth to 45%
Our view: HCP started with an enterprise version of their free software which was mainly geared to large companies self-hosting the product. With the October 2021 launches of cloud products across each of their individual licensed software products, the company has made the hard pivot towards monetization via a cloud service which is lower upfront $/customer, and that is why, despite accelerating customer adoption, you are still netting weaker $ backlog than would be reflected just from customer adoption growth. We think all this works out but we realize that new, high growth software companies reporting a blemish aren't treated well, plus there is a lockup in the coming days. Call us knuckleheads (calling ourselves that right now) but we direct your attention to innovation, adoption, category creation, and massiveness ahead. We'll have our moment in HCP, just not this day.
OKTA - bottom line: perhaps we need to spend more time here but first blush the numbers are mostly below our own expectations as we did not expect a sudden collapse this quarter, which was the final easy comp quarter of the Auth0 acquisition. We will listen for more here and come back with comments as appropriate.
- RPO up 43% y/y to $2.71B vs Street $2.786, cRPO up 57% y/y to $1.41B vs us $1.43B
- Revenue $415M above Street of $388M but below us $417M
- Billings $389M vs us $384M
- OP ~in-line slight better, OCF weak
- Added 800 new customers vs 1k the prior quarter, and 950 the quarter before that
- Guide: Revenue $429M vs Street $424M (we were above), cRPO $1.485B up 35% y/y, FY revenue $1.81B vs Street $1.784B but if we back out F2Q guidance upside it implies lower than Street 2H revenue. Perhaps that is only nominal but 2H is guided to $966M in revenue vs Street at $971
Our view: our Bearish stance on Okta centers on our thesis that innovation has slowed, competitors are catching up, ‘good enough’ is increasingly available, it is super expensive to spread Okta across entire environments so customers are using other good-enough product where necessary which limits upsell, the company just acquired a deflator, oddly hasn’t decided which platform to carry, messaging from acquired CEO vs CFO of Okta on why it was acquired are at odds…and discount remains thanks to AWS. The bull case on Okta, in our view, is if a) Okta uses the termination of a deflator in the market to reset its customers higher, b) the innovation curve sprouts wings to separate the co from the pack again and open new revenue territory.
Ami Joseph
Managing Director
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Yosef Vaitsblit
Director
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