You probably open Outlook and use some of its nifty features like flags, categorize, and archive on a daily basis. While these features already make it easy to manage your emails, there are other Outlook tools available that can take your email organization to the next level.
In this post, we'll tell you seven advanced Outlook tips and tricks that you may want to check out the next time you open your inbox.
Do you find yourself typing the same email content again and again? Probably your workmates ask the same question frequently, or you always make the same announcement every month. In that case, Quick Parts will be your best friend.
A collection of reusable pieces of content, Quick Parts, is one of the best ways to boost your workflow in Outlook. You can access this feature from the Insert tab every time you reply to (or create a new) email.
To add a new snippet to Quick Parts, simply open a new email, type your message or phrase, and highlight the text. Then, go to Insert > Quick Parts > Save Selection to Quick Part Gallery. You can start using this snippet whenever you please.
Similar to Quick Parts, email templates in Outlook help you save time by reusing previously composed messages. You no longer have to type the same email again, as you just need to pull up your premade email template. Its advantage over Quick Parts is that you can fill in the subject and recipients, too, not just the body.
To create an email template, simply create a new email and type your message. You can choose to leave the recipients, and subject lines blank. Then, go to File > Save As. Save the email as an Outlook Template in the default folder.
To use the template, click on New Items from your Home tab. Select More Items > Choose Form, and change the Look In field to User Templates in File System. There, you can pick an email template you've previously created.
Quick Steps are heaven-sent for people who constantly do the same series of actions to emails they receive. For instance, when you get an urgent email from a colleague after work hours, you flag them, change the status to high importance, and then send a reply saying, "I'll get back to you tomorrow."
This can be too tedious if you don't like spending more than 30 seconds attending to emails like these. So instead of doing the steps above manually, you can just automate your action with Quick Steps.
You can easily find this feature on the Home tab of your Outlook app. There are already default Quick Steps available here, such as "Done" that marks the email as complete, moves it to a folder, and marks it as read. "To Manager" that forwards the email to your manager; and "Reply & Delete" that sends a reply and deletes the original message. However, you can also customize your own series of actions.
Rules are somewhat similar to Quick Steps, as they also let you handle incoming (and outgoing) emails in a specific way. For instance, Rules can move emails from John Doe to the Archive folder and mark them as read. You can also use Rules to automatically CC or BCC yourself in Outlook.
However, unlike Quick Steps, where you need to choose a certain Quick Step before it can be applied to a message, Rules are automatic. As soon as you receive an email that fits the conditions you set in the rule, the actions you've selected will automatically apply. This makes organizing your inbox a lot less stressful. You can create your own rule by navigating to Home > Rule > Create Rule.
Unless you are a super workaholic and have a fear of missing out, you probably don't like checking your emails while you're on vacation. However, you also don't like leaving your workmates and clients hanging. That's why it's important to set Automatic Replies until you're back in work mode.
Automatic Replies are exactly what the name implies. When it's turned on for a specific duration, people who email you during that timeframe will automatically receive a reply with the message you've composed in your Automatic Replies setting. To create one, navigate to File > Info > Automatic Replies.
The last thing you want to see after coming back from vacation is an inbox full of hundreds of redundant emails. While you can't prevent this from happening, there is one way you can make Outlook less distracting: the Clean Up feature.
This deletes redundant messages from email threads, so you can read fewer messages but still understand the entire conversation. For instance, you and Claire received an email from Louie. Claire replied and included Louie's original message in her reply. Clean Up will then delete Louie's email because its contents can already be found in Claire's reply.
If you're panic that this feature might delete important emails, you can always head to the Deleted Items folder, where the duplicated messages are moved. To use Clean Up, go to the Home tab and click Clean Up in the Delete section.
If you're someone who receives hundreds of emails in a day, it's easy to lose track of the most important ones, like those from your boss or your client. This is where conditional formatting comes into play.
This Outlook feature lets you customize certain emails to make them pop out of your inbox. For instance, you can create a conditional format to change the font of your boss' emails to Comic Sans. You can also make it such that any messages with "Meeting" in the subject line become a vibrant shade of pink. You can find the conditional formatting settings in View > View Settings.
These seven advanced tips and tricks barely scratch the surface of Outlook's features. The more you use the app, the more you'll surely discover new and useful features that can help supercharge your email management.
Mid-September greetings from the Midwest, Georgia and Alabama, where we are wrapping up our Moundville Telephone Company acquisition. Pictured is Tuska, a 7-ton elephant statue that was recently moved to the Bryant-Denny stadium in Tuscaloosa. Legend has it that the association with elephants dates back to the 1930s when a fan proclaimed to a sportswriter “Hold your horses, the elephants are coming!”
After a full market commentary, we will dive into several questions that we think need to be covered in upcoming earnings calls. Speaking of which, here’s the earnings calendar as of October 14 (a.m. indicates the conference call will occur prior to the opening of financial markets, usually 8:30 a.m. ET. All other earnings calls will occur after the markets close, with most earnings calls beginning between 4 and 5 p.m. ET):
Note: Because of our efforts to pull inventory data at the same time each week, we will post the Apple iPhone 14 backlog charts on Sunday evening. Any reference to inventory levels in this Brief refers to those analyzed last weekend (link here).
Market capitalization losses from September continued into October, with the Fab Five down $102 billion and the Telco Top Five down $6 billion so far this month. Each Fab Five stock has lost at least $500 billion through the first 9.5 months of 2022, and total losses are firmly above $3 trillion for the year.
As bad as those accumulated totals look for the Fab Five (this price level on Apple stock has not been seen since June 2021, Microsoft and Google since January 2021, and Amazon since April 2020), the Telco Top Five (except for T-Mobile) are plumbing depths not seen in several years if not over a decade. With the exception of the March 2020 dip, Charter’s stock is at 2019 levels, Comcast at early 2016 levels, Verizon at late 2011 and AT&T (adjusted for many divestitures) at 2003 levels. Yes, excluding the impact of dividends (and nearly 20 years of dividends cannot be ignored), AT&T has roughly the same market capitalization as they did when Worldcom went bankrupt. And, with Warner Brothers Discovery (WBD ticker here) down 50% since it was spun off from AT&T in April (versus down 24% for T), that hasn’t gone well either. Here’s hoping for a DirecTV renaissance.
With the telecom industry struggling to create value, it’s not surprising to see management changes. Since our last report, Comcast announced that their current CFO, Mike Cavanagh (picture nearby), would assume an additional role as President (press release here). It’s a big announcement for the company given the longer Comcast tenures of Dave Watson (31+ years), Jeff Shell (16+ years), and Dana Strong (14+ years). Portfolio management will take a front seat as the company charts the waters of technological change (streaming vs. linear TV, migration to DOCSIS 4.0) and increased competitive threats. This leads us to think that company structural changes (namely divestitures) will drive value creation at least in the short to medium-term.
The Cavanagh announcement marks three major changes in the telecom industry. Kate Johnson will be replacing Jeff Storey at Lumen (down over 45% over the last year; current dividend yield of 15%), Chris Winfrey will be replacing Tom Rutledge at Charter (stock down a little over 50% over the last year but still at 2019 levels), and now Mike Cavanaugh likely replacing/ heavily supporting Brian Roberts in his quest to unlock value. One can only wonder when the next “retirement” will occur in the industry.
Speaking of structural changes, we could not help but raise an eyebrow to Dish’s request of the Conx shareholders to extend the time for their special purpose acquisition company (SPAC) to complete a transaction to acquire Dish’s retail business (press release here). For those of you who don’t remember, Dish purchased Boost from Sprint for $1.4 billion. Since then, Boost has lost slightly more than 1 million customers. On top of the Conx SPAC shareholder approval, the sale will need DOJ approval as well. According to this Bloomberg article, the SPAC will also have to raise additional monies from institutional shareholders. While the separation of retail and wholesale businesses makes sense, who will fund the additional SPAC investments required and at what cost of capital? The capital markets are stretched, and adding in additional DOJ approval requirements only makes it more complex and risky.
Speaking of risky investments and poor financing timing, it’s worth chronicling what happened with the Apollo/ Brightspeed financing (Reuters article here and Bloomberg article here). Brightspeed is the portion of the legacy CenturyLink/ Lumen network that the company decided to sell to fund a fiber to the home effort in what is mostly the legacy US West network. Faced with a lack of interest even at junk bond rates, Apollo’s banks (Bank of America and Barclays) pulled the plug on the debt offering, leaving Apollo to fund the remainder (through debt issued through the private equity firm). This is a bet that the financing environment gets better in a few years, but also leaves Brightspeed with higher uncertainty when they are applying for state monies. One person close to Apollo’s actions in Missouri put it bluntly: “If no savvy investors showed up to fund Brightspeed’s fiber to the home activities, why should our state issue them grants?” Food for thought.
Uncertain times heighten risks, but they also breed opportunities. Interest rates rising? Then let’s launch the Apple Card high-yield savings account, a white-labeling of the Marcus brand Goldman Sachs created six years ago and an extension of the Apple Card that was introduced just over three years ago. According to the press release (here), customers can go beyond earning interest on their Apple Cash to transferring other balances to their Apple Card savings account. Per the release:
“To expand Savings even further, users can also deposit additional funds into their Savings account through a linked bank account, or from their Apple Cash balance. Users can also withdraw funds at any time by transferring them to a linked bank account or to their Apple Cash card, with no fees.”
We liked the Apple Card when it was launched (Brief here) and saw it as a potential means to increase Apple’s presence as a replacement for Verizon, AT&T, or T-Mobile stores. Apple seems to have shifted from outright control of the retail experience to device financing (since there’s very little discounting between Apple and the carriers, this makes a lot of sense) and now to savings. This is a very wise move with an aligned financial services partner (despite this CNBC article from last month questioning the credit risk of Apple Card customers).
Next Thursday and Friday, the earnings parade starts with AT&T and Verizon. Here’s what we expect to hear:
We will also see some notable trends for each company/ sector:
After 30-40 minutes of generally upbeat talk, the analysts get to ask questions. Here are some we think are worth raising:
There are many more questions to think about, but our space is limited. In two weeks, we will try to make sense of what was said (and not discussed) to see who is sitting pretty and who is on the run. Until then, if you have friends who would like to be on the email distribution, please have them send an email to [email protected] and we will include them on the list (or they can sign up directly through the website). Enjoy the rest of October and Go Chiefs!
“When you’re asking these types of questions, they open up the imagination and the dialogue a little more,” he said Monday at the Investments and Wealth Forum in Toronto.
Berger is a proponent of what he calls “How might we?” questions. “How” is about figuring out solutions. “Might” implies there are possibilities, and “we” denotes working together and collaborating on a solution.
“You’re saying to the client, ‘This is not your problem. I’m not telling you what you should do about your problem. I’m not selling you something or giving you a spiel. This is a challenge we have together. We’re going to work on it,'” he said.
“You’re bringing them into the process. They’re part of answering the question. They feel ownership of the answer that eventually comes out of this.”
Berger noted that companies such as Google use “How might we?” questions to respond to client feedback and spur innovation.
The questions can be used to address multiple issues at once. He provided an example of a client who wants to retire at 50 but is concerned about running out of money or losing their sense of purpose.
Berger posed the following question: “How might we find a way for you to retire at 50, while also making sure you don’t run out of money, and at the same time, look at ways you can maintain a sense of purpose and direction?”
The question could guide your work over a number of meetings.
Some advisors may worry that asking questions undermines their expertise, since they’re used to being the ones with the answers.
“You’re the person who is valued for your knowledge,” Berger said.
However, he pointed to research showing that asking questions demonstrates your interest, which builds trust.
Another effective technique is for the advisor to paraphrase what the client is saying and ask them, “Have I got that right? Am I hearing you correctly?”
“It also shows the client that you’re listening and really paying attention,” Berger said.
Burnout among healthcare professionals is continuing to climb, an issue that could stem from disconnects between workers and their organizations, according to an Oct. 7 article from Harvard Business Review. Knowing how to talk about burnout can help break down the stigmas around it, paving a path to recovery — but it's up to leaders to know how and when to start these conversations.
Christina Maslach, PhD, a psychologist and researcher at the University of California Berkeley, identified six leading causes of burnout. Harvard Business Review developed three questions that correspond with each cause to help leaders address burnout at the source.
Harvard's 18 questions leaders should ask employees, listed beneath the cause of burnout each addresses:
Perceived lack of control
Insufficient rewards for effort
Lack of a supportive community
Lack of fairness
Mismatched values and skills
Microsoft plans to update its Office Pro Plus products by the end of April to address a series of privacy concerns raised in an audit commissioned by the Dutch justice ministry that flagged what the auditors called "high risks" to government users' privacy.
The update for many of the company's Office Pro Plus customers, which has been confirmed by Microsoft, will address concerns relating to a package of popular Microsoft programs — namely that they were sending diagnostic data from Europe to the United States without adequate documentation and user controls over what was sent.
Microsoft and the Dutch justice ministry agreed on the changes as part of an "improvement plan" with an April deadline. A ministry spokesman told POLITICO that if Microsoft's responses proved "unsatisfactory," the ministry could raise the concerns with European data protection authorities for further action that could include "enforcement measures."
In a statement, Microsoft's top privacy and regulatory counsel, Julie Brill, underscored that the Dutch ministry had commissioned the audit as a customer of Microsoft and had not sought regulatory action against the company.
“The ministry commissioned the report in its capacity as a customer to clarify how our services are run and we’re working with the ministry’s staff to share additional information and help resolve its questions as we would for all enterprise customers,” Brill said.
She added that the issues raised in the report, conducted by the Privacy Company, a Hague-based consultancy, relate to “diagnostic data in one product,” Office Pro Plus, and that the company is “confident this is consistent with Dutch law and GDPR,” Europe’s General Data Protection Regulation privacy law. Office Pro Plus includes a range of Microsoft programs.
“We feel good about what we’re doing to provide customers transparency and choice on the diagnostic data they share with us, but we always want to do more,” Brill said. “In the coming weeks we will take additional steps to make it easier for customers to understand what data needs to go to Microsoft to run our services and why, and where data-sharing is optional.”
When Microsoft updates products, the update usually takes place worldwide for users of the product and the company gave no indication that would be different in this case.
Under the EU's data protection laws, the Irish Data Protection Commission is the “lead supervisory authority” in charge of making sure Microsoft complies with the rules. If the Netherlands chose to escalate its concerns, it could forward a request on the relevant issues to the Irish regulator. Meanwhile, any issues would be closely monitored by the European Data Protection Board, which gathers all EU data regulators, and the European Data Protection Supervisor, which may in turn start their own investigations that could lead to enforcement action.
A spokesperson for the Irish Data Protection Commission said it is “aware of this matter and its significance to companies using the Microsoft product in question. On becoming aware, the DPC immediately engaged with Microsoft seeking further information on the processing of telemetry data, in response to which Microsoft is providing detailed responses.”
The Privacy Company, a consulting firm that the ministry contracted to do the audit, said in a blog summary of the findings that “Microsoft systematically collects data on a large scale about the individual use of Word, Excel, PowerPoint and Outlook.”
It added: “Covertly, without informing people ... Microsoft does not offer any choice with regard to the amount of data, or possibility to switch off the collection, or ability to see what data are collected, because the data stream is encoded.” A major concern of the Dutch was that the company sends the data back to its servers in the U.S.
Microsoft doesn't agree with some of the assertions of the Privacy Company's report but is making changes to its products as it routinely does to accommodate customers. The company has previously disclosed to customers its use of diagnostic data.
The new focus on privacy comes as different components of Microsoft, one of the world's most valuable companies, have recently faced scrutiny for a variety of privacy concerns, especially LinkedIn, which Microsoft bought in late 2016 for $26 billion.
Nicole Leverich, a spokesperson for LinkedIn, said “member data is never shared with customers on an individually identifiable level, only in aggregate for ad sales.” Last November, Ireland’s Data Protection Commission found that LinkedIn used the email addresses of around 18 million non-LinkedIn members to target individuals with ads on Facebook all in an effort to grow its customer base.
The regulators noted that LinkedIn’s actions violated its protection standards, although the dispute was amicably resolved.
Leverich said the company “fully cooperated with the DPC’s 2017 investigation of a complaint about a European advertising campaign and found the global processes and procedures we had in place were not followed. We took appropriate action and have made the internal changes to help protect against this happening again.” In Brazil last year, federal prosecutors said Microsoft had violated local laws with its collection of Windows 10 users’ data without getting proper consent. In 2016, France ordered Microsoft to cut back its collection of user data and to halt tracking of the web browsing habits of Windows 10 users without getting permission.
Despite these privacy dustups, Brill touted the exact steps Microsoft has made to Boost users’ privacy, including “new features in the Windows setup process, enhanced options for error data reporting in Xbox, a feature called Lockbox for Azure, and updates to our Privacy Dashboard including new tools for parents to manage their children’s settings,” she said.
Microsoft has been the subject of a number of complaints to the Irish Data Protection Commission, according to a commission spokesman, but none were serious enough to warrant a statutory investigation, and of the 16 open investigations into multinational tech companies, none are related to Microsoft. There have been 3,500 complaints to the commission in total.
Unlike other tech companies, like Facebook, that have drawn fire for privacy issues and problems spreading fake news, Microsoft has set itself up as a paragon of good behaviour, welcoming scrutiny into the company and the broader tech industry. Company leadership routinely highlights its proactive investments in privacy. Last year, the U.S. Supreme Court heard arguments after Microsoft challenged an American search warrant for a customer email that resided in Microsoft's servers in Ireland, and last May, the company announced it was extending the privacy rights that are at the core of GDPR to its worldwide consumer customer base.
“Having the scrutiny is actually good, I think,” CEO Satya Nadella told the Washington Post last October. He urged the tech sector to Boost its behavior. “Anyone who is providing a very critical service needs to raise the standards of the safety of that technology and the security of that technology.”
The huge problems affecting Facebook have touched other companies as well, including Microsoft. The New York Times reported in December that Facebook gave Bing, Microsoft’s search engine, the ability to view the names of almost all Facebook users’ friends without permission and also had data-sharing arrangements with companies including Netflix, Spotify, Amazon and Yahoo.
“Bing did not maintain profiles based on Facebook data for advertising or personalization purposes, and we took significant engineering steps beyond what Facebook required to ensure this could not happen,” said Brill.
“We ended our contract with Facebook in February 2016 and data stopped appearing in search results.”
The work-from-home period of the COVID-19 pandemic shifted collaboration tools from being a "nice-to-have" to a critical business application. The winding down of the pandemic has caused businesses to question whether they still need collaboration applications.
The reality is that few companies will bring all employees back into the office five days a week. ZK Research found that 51% of employees plan to work from home two to three days a week and another 24% at least one day a week. This indicates that three-quarters of the workforce will be hybrid.
It's important to understand that hybrid work is markedly different from remote work. Remote work requires a great collaboration experience in one location, while hybrid work is about creating that great experience across different locations. Collaboration tools obviously play a key role in this.
This raises the question of which collaboration vendor to use. The two heavyweights in this industry are Cisco Webex and Microsoft Teams. From an experience perspective, I find Webex to be significantly better. When I ask businesses why they continue to use Teams, I get responses such as "It's included in our Microsoft license, and it's good enough for most users." Teams was being used despite push-back from the workers. In this case, IT pros made the easy decision; Microsoft does make it compelling from an initial cost because Teams is free with Microsoft E3 license.
I would argue that in a hybrid work world, good enough is, in fact, not good enough, and IT pros need to fully understand the differences between the two platforms. The license cost advantage that Microsoft brings is well understood, but I've found Webex's benefits are less known. This is because much of the innovation in Webex has come in the past 12 to 18 months.
Cisco Systems is holding its virtual WebexOne event later this month, during which the company will highlight this innovation. Given that the event is around the corner (Oct. 25-26), I thought it would be helpful to write a post highlighting many of the exact innovations, so people attending could be looking for new features and capabilities.
From the research I have done, below are six areas where I believe Webex trumps Teams. Most of these can be experienced at WebexOne.
Both Webex and Teams are effective at enabling workers to communicate with other employees in the same company. However, Webex does a much better job with external collaboration. I experience this daily when doing a Teams call with another company. With Webex, users retain the functionality associated with their corporate accounts, whether they are internal or external. With Teams, guests lose access to their company services and can only access a limited number of features. This can be very frustrating for users when chat or other capabilities are available at some times but not at others.
Also, Webex is much faster to start up when video meetings are held. It is built on a shared microservices architecture, while Teams is a wrapper around multiple, legacy solutions. In a exact Teams call, it took nearly a minute for the video meeting to fully load, while with Webex it's always a few seconds.
I get that hardware isn't as sexy as software, but hardware certainly matters. In the consumer space, Apple has a big experience advantage over Android because it makes the hardware, software, and cloud backend themselves. The same holds for Webex over Teams, because Webex makes purpose-built collaboration devices with common software providing a high-quality and secure experience. Teams relies on third parties, and this leads to inconsistent capabilities that result in a scattered experience with several security holes.
Webex devices also have several integrated features, such as background noise elimination, virtual backgrounds, and an auto-panning camera. It's important to understand that Cisco designed the devices to be multi-vendor so Webex devices can natively run Teams meetings as well as Zoom and Google meetings.
Contrary to what many people think, calling is not dead. People still make calls and will do so for decades to come. Webex Calling has a marked advantage because it has been providing telephony for about 20 years longer than Teams. In fact, when customers add Teams Phone, the cost advantage of "free" goes away; Microsoft's own calling plans quickly get very expensive. Also, Teams Phone is missing several important calling features, such as call merge, call recording, and others.
Another issue is that Teams Phone is built on a separate platform from Teams Chat, and this can lead to disjointed experiences. Webex has built calling, meetings, messaging, and contact centers on a common cloud platform.
One workaround for Teams is to use a third-party solution, such as Webex Calling, to provide the calling capabilities for Teams. In general, almost every united communications (UC) vendor will offer a superior telephony experience when compared to Teams Phone. But this approach can add unnecessary complexity and integration challenges.
Given the history Microsoft has in being a platform vendor, Teams' weakness in application integrations is a bit shocking. With Webex, integration is bidirectional; it can be run inside other apps and other apps inside Webex. Teams supports only one-way integration, limiting user choice. Webex provides open APIs across calling, meetings, messaging, and devices to easily integrate with third parties, whereas Teams is much more limited.
One example is the bi-directional integration Webex has with Salesforce, which minimizes context switching. This enables customers to use Webex Messaging or Calling directly in Salesforce. Microsoft has a competing product with Salesforce and historically has shied away from building tight integrations with products that compete with it.
One irony with Teams is that third parties, such as Webex, work better with other Microsoft Apps than Teams itself does. Businesses can run Webex in Microsoft Apps; this isn't the case for Teams.
IT pros should be aware of this, because it impacts their jobs: Webex Control Hub is a single dashboard for all collaboration workloads, including meetings, calling, messaging, contact center, and devices. Teams only supports software management; devices need to be managed through their third-party manufacturer.
Since Cisco owns Webex, it has extensive real-time, network troubleshooting, and security capabilities and provides visibility into quality metrics, utilization, security, and environmental data. Teams does not have real-time notifications or alerts for meetings in progress, putting IT pros into firefighting mode more often than not.
Collaboration tools empower more than meetings. They are now being used for events and other experiences. Webex has complete hybrid event capabilities that scale up to 100,000 attendees. Teams is limited in this area and is not suitable as a large event management tool. Also, Webex has a fully featured cloud contact center for customer engagement. Microsoft has issued a statement of direction here but currently has no product. Another exact specialized app is the Webex Vidcast product for asynchronous video (video messaging).
I do want to make it clear that this was my experience; every company needs to do its own evaluation. Given the importance of collaboration tools, decision-makers should not make a choice based on licensing. Use the below as a checklist when selecting the right collaboration vendor:
Find a product that enables seamless collaboration with people outside of your organization.
Look for well-integrated software and hardware.
Make specialized use cases and adjacent applications—including cloud contact center, large event support, and audience engagement—part of the solution.
Seek a solution that provides fully featured enterprise calling, which is still a business-critical application.
Insist on a solution that can easily be embedded into existing applications, which will make collaboration easier and more widely adopted.
Ensure that the solution has a complete single interface to help manage and support your users.
Consider a solution that can scale smoothly with your organization, control access as needed, and accommodate the full range of employee workflow needs.
Ensure that the solution addresses the needs of all workers – regardless of their technical aptitude, whether they require accommodations of special needs in order to perform their jobs, or any other factor that may limit inclusiveness.
Restaurant data consultancy reveals consumer breaking point
TAMPA --News Direct-- Revenue Management Solutions
For restaurant operators facing record-high inflation this year, the question of pricing is a tricky one. Fortunately, new research by Revenue Management Solutions reveals how operators can find the sweet spot for pricing that works for both businesses and diners.
In the face of inflationary costs, raising prices is the first line of defense for restaurant operators. These businesses face severe bottom-line pressure due to lingering COVID concerns, food costs, supply chain troubles and dire labor shortages.
In response, quick service restaurant (QSR) prices have been steadily increasing, hitting a record 16.3% in August 2022. Consumers have taken the hit to date, but with wallet pressures looming, how much can QSR customers bear before breaking?
That’s the question Revenue Management Solutions set out to answer on behalf of its clients —some of the world’s largest QSR brands.
After analyzing in-store price increases by percentages year over year (Q2 2022 vs. Q2 2021) for 25,000 QSR locations in the US across numerous brands, RMS found that, yes, consumers have a breaking point.
“When price increases were between 10%-13%, traffic started to severely decline, negating some or all of the net sales benefits,“ stated Revenue Management Solutions Director of Consulting Services Scott Foxworth.
Chart 1 indicates the significant drops in traffic as prices hit the ceiling.
When looking at average price increases across observed locations, RMS found that most locations were beneath the threshold, with increases between 9% and 10%.
“Though the average price increases among observed brands fell below the threshold, the future is still uncertain,” said RMS Chief Operating Officer Mark Kuperman. “Some brands have an opportunity to increase margins with additional price increases, while others may have already hit the breaking point – even at a lower percentage increase.”
To determine a brand’s unique price increase ceiling, Kuperman recommends a careful analysis, by location, of the following pricing levers:
In a recent consumer survey, RMS found that the percentage of consumers trading down – ordering less expensive items or choosing less expensive restaurants – is rising. So too is trading out – of consumers that reported managing costs, 45% are ordering less often from restaurants.
“Consumers are beginning to perceive restaurant prices as higher, and about 1 in 3 believe they are getting less value from restaurants,” said Kuperman. “Brands will win if they can add to the value equation with great service, abundant value options and creativity.”
To obtain free sales, traffic and pricing trends from Revenue Management Solutions, go to revenuemanage.com/resources.
About Revenue Management Solutions
Revenue Management Solutions (RMS) is more than ever committed to supporting restaurants through these ever-changing times. Today, more than 50 major brands in 40-plus countries trust RMS. Its data-driven analytics and tech-enabled solutions optimize sales, menus and a brand’s financial health. RMS provides actionable insights to more than 100,000 restaurant locations worldwide to help them make informed business decisions that drive profitability and combat inflation and rising wages. The company holds five US patents on menu pricing and customer segmentation and supports ongoing academic research efforts. For more information on how RMS helps its clients, visit revenuemanage.com.
View source version on newsdirect.com: https://newsdirect.com/news/revenue-management-solutions-answers-the-question-how-much-price-is-too-much-727613954
Stocks have been cratering! IT stocks have been cratering more! Even shares of cyber-security companies have fallen with the HACK (HACK) ETF, which incorporates the major cyber-security vendors down by 30% on a year-to-date basis. But Okta (NASDAQ:NASDAQ:OKTA), the leader in the identity management category, has seen its shares fall far beyond average. Just how much? As of the close on Friday, Sept. 30th, the shares are down by no less than 76% since the start of the year, and by 81% since they made an all-time high less than a year ago. They were the worst performer on NASDAQ for the 3rd calendar quarter, falling 37% Compared to other leading cyber-security names such as CrowdStrike (CRWD), down 22% since the start of the year, Palo Alto (PANW), down 13% since the start of the year, and Zscaler (ZS) down 50% since the start of the year, the performance of Okta is far worse.
Okta, by comparison, is all about pivots and turning, and rectifying past miscues of various kinds.
I have recommended the shares of the leading cyber-security vendors as “safe havens” in the coming recession. The fact is that all of the 3 companies above have recently reported strong numbers and guided for acceleration in previously anticipated growth and margin performance. Cyber security is not optional, and cyber-criminal don’t recognize recessions. Threat surfaces keep enlarging, and the consequences of breaches continue to escalate.
I recommend the shares of Okta from a contrarian perspective. As a former owner of the shares, I think it is fair to say that the operational performance of the company has left a bad taste. The company executed a strategic merger, with AuthO and then basically fumbled the ball in terms of achieving sales synergies that were a key justification for the substantial purchase price. But all of that is now on view, and the shares reflect the disappointment surrounding the fumble, and no longer reflect the potential synergies and accretion from the merger. That, to my mind, is what makes a contrarian opportunity.
I don’t want to suggest that the cyber-security companies mentioned above are really quite analogs of Okta in terms of what they sell: CrowdStrike is still mainly a vendor of endpoint security although it recently has begun to sell an identity management module that has proven to be very successful. Zscaler sells zero trust protection for web based networks, while Palo Alto sells both a zero trust solution and next generation firewalls. None of those is identity management, and most users will need a combination of various solutions to develop reasonable protection against cyber-criminals. This is a very unforgiving market-the understatement of the year I suppose. Miscues are punished severely, while strong execution merely slows declines. Sadly, Okta has had its share of miscues including a couple of data breach and a flawed sales force integration strategy.
For some years I had been an Okta skeptic. Valuation and lack of profitability had kept me away. And I had wondered about the ability of a company to create a competitive moat around the identity management space. It’s an application that has been around a very long time. But then about a year ago, in the wake of Okta's merger with AuthO, a principal competitor with advanced technology in part of the identity management space, i.e customer identity management, and a different sales focus which was centered on the developer community, I thought I saw an opportunity. I really saw an iceberg, and abandoned my position, down sharply, but down far less than the loss could have been, at the start of this year. I had been concerned that the breach the company had suffered in January, 2022 had been poorly handled and was not satisfied with the Okta’s response. And then reports of sales force integration issues began to emerge, and those were finally confirmed during the company’s latest conference call. I have had to wonder just how it is that a founder led company could mishandle such a key undertaking, which had to be a priority.
As mentioned, and to be perfectly clear, I recommend the shares of Okta from a contrarian perspective. I think most of the problems the company has are on full view. And I believe most current investors are expecting that the company will reduce multi-year targets to some extent when it next reports results in early December. The company's latest guidance sets revenue growth goals at very modest levels. In this current quarter, its forecast is for sequential revenue growth of just greater than 2%-that metric was 11% in the same quarter of the prior year, followed by sequential growth of 5% in what will be a fiscal Q4 compared to 9% the prior year. Sequential revenue growth in the just reported quarter was actually 9%. The results of the quarter just reported were a 5% upside when compared to prior guidance for revenues, and non-GAAP profitability was noticeably improved as well compared to the prior forecast. The growth in RPO balances was below forecast, but apparently was mainly a function of duration, as the growth in cRPO, at 36% was certainly acceptable for that metric. That said, the cRPO balance rose just 6% sequentially, which was apparently below prior expectations.
This guidance would seem to incorporate the current state of both economic headwinds and the specific sales execution challenges that the company has acknowledged. While self-evidently, the company’s management structure has seen some upheaval, and sales turnover is elevated, with much sales force dysfunction, presumably that is why the shares are valued as they are.
There are many investment opportunities these days in the enterprise software space. Skepticism abounds about company forecasts. Just the other day, a forecast affirmation by Splunk (SPLK) brought on a relief rally, albeit of brief duration. The reason is that many commentators think that all forecasts are suspect and will have to be reduced. One well known hedge fund leader, Dan Niles, recently provided an interview forecasting that the estimates of software companies were still exposed and would see further cuts.. One economist, Nouriel Roubini, notorious or not, depending on the disposition of the reader, is forecasting a long and deep recession with the potential for a further 40% drop in the S&P.
At the moment, while Todd McKinnon, the company CEO remains in his position, Fred Kerrest, the company’s COO is taking a one year sabbatical. The company has realigned its product development efforts with the former AuthO CEO leading product development efforts for customer identity while the CRO leads the development of workforce identity cloud products. Lots of moving parts, and signs of organizational stress. That said, the company’s CFO, Brett Tighe has been with the company for more than 7 years, and before that he was with Salesforce (CRM) in senior financial roles for 11 years. And the company’s President of Field Operations, Susan St. Ledger has been in her position for about 2 years, while the company’s Chief Revenue Officer, Steve Rowland has been in his position for 18 months. . Ms. St. Ledger held a similar role at Splunk for 4 years, while Rowland, not terribly surprisingly, is also a Splunk alumni. Can this leadership team right this troubled ship?
Almost all companies make mistakes and miscues from time to time. The same obviously can be said about analysts except our mistakes are on full view every day from 4:01PM on and often earlier than that. Recently, the analyst at Guggenheim, John DiFucci upgraded the shares, while calling Okta, a company in disarray. Last week, the analyst at Cleveland Research, Ben Bollin, downgraded the shares from buy to hold. He feels that the company is facing more significant fundamental challenges, mainly competitive, and will have to reduce guidance more substantially than has already been the case. The company, during its most exact conference call, suggested it was revisiting its targets for FY ‘26 and I doubt that anyone either owning the shares or providing recommendations is doing so based on a target
My reason to revisit the investment thesis is simply that identity management is an enormous, and under-penetrated market, and Okta remains the leading participant in the space. And I have a strategic disposition to increase my portfolio weighting in the cyber-security space, as I believe it will be the most recession resistant segment within IT. There are certainly other choices in the cyber-security space these days other than the 3 companies I already own. Checkpoint (CHKP) has shown some signs of life in terms of its operational performance, and shares of Rapid7 (RPD), now substantially rerated, have interest. CyberArk (CYBR), is also a competitor with a very competitive solution in what is called privileged asset management. But it is infrequent that a software category leader also has the potential for really significant returns. But I think that Okta is one such company.
The questions, of course, are whether, and at what cadence, Okta’s leadership can restore its momentum and start to realize the opportunities inherent in the acquisition of AuthO and resume its share gains in the space. This is not a short-term project. Restoring a broken sales force, and crafting the right go-to-market strategy and messaging almost always takes longer than expected. But fortunately for Okta, cyber-security and identity management will be less affected by recessionary headwinds than most other segments of the IT space. That said, unlike most of the other cyber-security vendors, Okta did call out macro headwinds in its prepared remarks, although it is easy to question whether this was real, or an excuse for sales performance.
I am not going to uncover some existential valuation metric regarding Okta that hasn’t been analyzed and dissected many times already. After falling by 75%, even while continuing to grow, the EV/S ratio has dropped noticeably below average for the company growth cohort, even when haircutting the company’s expected growth rate to a cohort of around than 30%. But the company is projecting just a modest free cash flow margin, and that is a significant negative in the current investment environment.
Despite, or perhaps because of the valuation compression, the shares are not well loved by analysts. In addition to the Cleveland Research downgrade a couple of days ago, the MoffettNathanson analyst started coverage of the shares just a couple of days ago with a sell rating and a $71 price target. At the start of September, the Morgan Stanley analyst lowered his rating on the shares to hold, but set a $93 price target. One of the many reasons why I simply don’t set price targets on companies that I cover is that they frequently follow rather forecast stock prices. Of course, no one would reasonably have a price target 20%+ above a current valuation with a sell rating, and it more than a bit difficult to decipher the logic of a price target more than 60% above the current valuation with a hold rating. But one of the reasons I am reviewing Okta, and not something else, is that actually quantifying the outlook, and using some kind of DPV analysis, really does leave targets far, far above current levels. Therein lies the significant potential.
That said, other analysts do see some of the opportunities inherent in category leadership in a key part of the enterprise cyber-security paradigm. The Jefferies analyst, Joseph Gallo, described Okta shares as a “one-of-a-kind” buying opportunity with 50% upside. Of course the upside percentage is greater now, with the shares down more than 15% since the date of the research report.
I was recently accused of using touchy-feely analysis in my review of Adobe (ADBE). The problem with that recommendation, and this one as well, is that there isn’t some kind of specific valuation flag that says, “buy me.” One thing about buying wounded assets, as this one appears to be, is that forecasting the timing of a turn is basically impossible. When the sales force is fixed, and observers believe it to be fixed, the shares will most likely appreciate markedly in just a day or two. Much of that is because Okta is the kind of investment that can be very popular with hedge funds due to its size/liquidity and easy to understand functionality. Even now, over 80% of the shares are held by institutions. While that is a substantial percentage, there are no aggressive hedge funds listed as large holders, suggesting a potential significant source for share demand.
Another thing to note. Okta is not going to achieve a turn-around from its current condition in a quarter or two. The company has suffered from heightened sales turnover, basically because many previous AuthO sales contributors have felt that their sales targets were unattainable and that the comp plan was deeply flawed. About the most that one might expect in the short term is that the company stops digging. Fixing sales execution issues, which means dealing with lots of unhappy people, doesn’t happen at the flip of a switch. The odds are that Okta will right its ship. I have been surprised that a company of this stature, having a clear priority, which was to create a unified sales platform, failed to do so in a timely fashion. About the most I can say is that this is the opportunity to do so is what is being presented to subscribers/readers at this point.
Finally, I should mention Okta uses stock based compensation, and lots of it, and there are readers and commentators who refuse to consider companies using SBC. One of the things that need to be noted about SBC is how the calculation works out for that metric in particular quarters. SBC is calculated based on when an option is vested and not when an option is granted. Because of last year’s acquisition of AuthO, the level of options reaching their vesting conditions has increased. On the other hand, that increase is abating, and thus SBC expense fell year-on-year in the quarter recently reported, and it was flat sequentially. But it is still elevated at 38% of revenues, although the ratio will almost inevitably decline going forward, as the company has moderated its hiring plans. The reality is that SBC is tightly correlated with the number of hires, so a decline in hiring, as the CFO foreshadowed in the latest conference call, will lead to lower SBC. Since I do not use GAAP estimates or data in addressing valuation, it is necessary to adjust estimates and projections for dilution. This company does forecast outstanding shares on both a quarterly and an annual basis. Based on trends, I use annual dilution of 3.5% in calculating valuation metrics.
There is obviously lots to consider when a company which has achieved an organic growth rate in the high 30% range (actually in the mid 40% range-all organic-last quarter) for some time, sees growth atrophying to the mid-20% range in a single quarter. Looking at both Glassdoor reviews and reviews from Best Place to Work, Okta’s evaluations are fairly typical, maybe a bit above average for an relatively large enterprise software company.
While Okta’s management did call out macro headwinds in its prepared remarks on this latest conference call as one reason for its reduced guide, management went on to say that the preponderance of its guide down was a function of sales integration, and the concomitant issue of elevated sales turnover. At some level, I would suggest that the scenario being portrayed is quite similar to many of the problems that had upended the Alteryx (AYX) growth outlook before the company took some hard steps and remediated the problems that had crippled its growth.
I think at this point almost all investors are aware of demand headwinds for most IT vendors. The company wound up reducing its guidance; in terms of revenues, the guide down for the last 6 months of the year was about 2% ($17 million). It might be noted that because this guide down was 2% and not some considerably greater number, the company’s forecast for its full year non-GAAP operating loss didn’t change, although this was more a factor of the Q2 beat on that metric than any dramatic change in the trajectory of opex. The company suggested that the macro headwinds being experienced weren’t all that substantial, at least at the time that guidance was provided. The company is forecasting that it cRPO balance will increase by 3% sequentially, and that is where the issues of sales force integration and macro headwinds are most visible. While cRPO has its own limitations as a proxy for current bookings, it is the best metric available to portray the strength of demand growth, and the forecast reflects a sharp slowdown in expected sales performance.
Although it is difficult to really know, I imagine many investors believe that there are additional shoes to drop with regards to Okta’s guidance. And despite the published consensus that calls for 28% growth in what will be FY ’24, I doubt that many analysts covering the company really expect that kind of performance, although I think the likely trajectory of expected margin improvement as shown by the 1st call consensus will prove to be too conservative. Obviously the question was raised during the conference call. The answer isn’t particularly surprising:
Hey, guys. Thanks for squeezing me in. Just a quick one for Brett. Given all the challenges that you guys mentioned, what gives you the confidence that you're not going to have to take numbers down again in the back half of the year?
Look, we've baked everything in that we know at this point, right? We've taken into account from regardless of what number you're looking at, it's current RPO, revenue, billings, we baked in those headwinds that we've talked about today, whether it be the sales integration issues we've talked about the attrition or even the macro. So we do feel confident in the guidance and taking a similar approach and being very prudent about that like we have in the past.
The most significant issues for this company has essentially been that of sales force execution, and go-to-market messaging. These are the issues that have upended revenue projections for now. Those kinds of errors should never happen as they are entirely within the control of the company. That said, were there not these issues, the shares would never have imploded to this valuation, even in this toxic market for growth shares. I believe that the greatest percentage returns are going to come from identifying those companies with a strong competitive position in a hot space that is generally recession resistant and that is what Okta is, despite the unforced miscues.
The CEO had much to explain in terms of what has been happening to Okta and how it can be fixed. One issue, which seems to be very basic, relates to defining which product within the Okta offering is appropriate for which use case. There is overlap between identity management for employees and customer identity management and apparently the overlap has led to salesforce dissension and elevated turnover. The problem surfaced in the wake of combining the two sales forces at the start of this current fiscal year. Okta, before the merge, had a solution for customer identification, as well as a solution for employee identification, essentially its core business. AuthO only focused on identity management solutions that are incorporated by developers into web sites that customers access. The customer identity space is newer, and enjoys stronger growth. The TAM of both spaces is comparable. AuthO certainly has had marketplace momentum in the customer space, most often called CIAM (customer identity access management), and that continued long after the merger. When the sales forced were merged, it became very difficult to match use cases with solutions. The company needed to offer a single customer identity solution, and that solution needed to be transcendent for all B2B SaaS applications that developers are building.
While it sounds as though it ought to be a simple problem to remediate, like many other things the devil is in the details, and apparently, the details were not carefully considered in advance of combining the two sales forces. Even on the conference call, after explaining about the two product families that are offered by Okta, some analysts were a bit confused about how the integration of the two sales forces might actually work in practice. There was a need to consolidate and train the sales forces with messaging that identified which solution was appropriate for which use case.
One of the advantages that Okta has is that it is a platform neutral solution that offers enterprises the opportunity to optimize their identity management paradigm by standardizing on a single vendor. To sell that paradigm, the company has to reach the CEO level of its prospects to explain why identity management of both customers, and of a workforce are priorities that cannot be properly handled by software in which identity management is an afterthought. The message is simple; it is desirable to partner with a vendor who can offer the whole range of identity management solutions on a multiplicity of cloud deployments and for many different use cases. It seems obvious from afar, but part of the sales force integration issue was dysfunction in Okta’s go-to-market sales motion. At least the company has identified the problem; fixing the sales motion is not going to happen instantaneously but is more of a process.
The most visible element of the integration issue comes from the salesforce attrition/turnover rate. Depending on the place in the economic cycle, Okta indicated it had averaged about 15% turnover or a bit less in the years before the pandemic. Turnover is now a bit greater than 20%. And much of that turnover has been amongst the former salespeople of AuthO. Here is some of the comment from Todd Mackinnon specifically on the issue.
Like if you're working for Auth0, this pre-IPO company your -- it's smaller, your territory is probably eight states in the US. And now you're working for Okta and you're expected -- as of the first of this year, you're being asked to sell to these multiple buyers with multiple products and your number of states or your territory really got smaller, because we have this much more scale that sales team. I could see why some of them decided to go maybe work for a smaller company and so forth.
I have to confess that in listening to that part of the conference call, and contrasting it with my own experience, I got quite agitated. What’s being described is a rookie mistake, and seems… well the term unforced error comes to mind. I can personally guarantee that the combination of smaller territories with an aggressive hiring plan that will make territories even smaller will inevitably lead to massive sales turnover because salespeople can’t see how they will be able to achieve objectives and make any money-no commission accelerators to be found. About the best thing about that is that it is relatively easy to fix, and from what I gleaned from the conference call, the company is taking steps to remediate that issue. Again, from Mr. Mackinnon:
But we're starting to see a lot of these trends reverse already, which is great. We've talked about a lot of the things we're doing. I'm sure those are having some effect, although some of them are recent. But just in terms of the industry, I think a lot of small companies; especially the prospects don't look as good. The valuations aren't as high. The money is not flowing there as much as it was. I've already seen a few go-to-market folks that left for smaller companies, and they've come back and the grass wasn't always greener.
While I won’t accuse the rest of the answer as being the most articulate, it probably is reflecting some early trends in which salespeople are discovering that the environment has changed, and there prospects are currently better in a larger, more stable organization than in a start-up whose prospects of going public any time soon are limited. It isn’t terribly surprising that AuthO’s sales force has been composed of risk-takers who wanted to bet on a huge pay day from an IPO, and when, instead, the company was bought, and they weren’t catered to, they went to another situation that appeared to have a similar upside. Without the potential income from an IPO, selling identity management for Okta is probably a more attractive alternative currently than had been the case recently, particularly after some remediation of the comp plan as management has spoken about.
The other major issue is that of competition. Recently, Gartner held what it called an identity management conference. Yes, there really are such things as identity management summits. At the conference, some of the presenters and attendees talked about an increased presence by Microsoft (MSFT) in the space, and it was apparently these presentations that were a precipitating factor in the exact Cleveland Research downgrade cited earlier. The fact is, however, that the Microsoft solution is really focused on applications running in Azure. Microsoft has been in the space for almost 10 years at this point, and a company such as Microsoft that sells applications more or less has to have an identity management solution in order to be considered as a real vendor. Microsoft's solution was initially built for to be an on-prem product-there was no Azure back when the product was first launched. Although, of course, Microsoft has a cloud based solution, it is unlikely to have the competitive chops that Okta brings to this market.
Most customers, at least those who are serious about identity management, are going to want a specialist vendor because almost inevitably they have a multiplicity of clouds, and they need to work with a vendor whose specialty is a multi-cloud environment-and that obviously is not Microsoft. Identity management can get far more complicated than it might seem, and when the subtleties are properly presented and explained, Okta’s position is very strong. But of course, the issue is carefully crafting the right message and making sure that sales reps are well trained to explain that message carefully and to the right audience. Okta’s problem isn’t that Microsoft had an enhanced set of functionality, but that the company needs to do a better job with trained reps presenting the benefits the company offers to the appropriate audience.
Other presenters at Gartner's summit conference focused on what are called Identity Governance ('IGA') and Okta Privileged Access Management ('PAM') which are different sub-categories in the space, where Okta has introduced exact offerings. Of course I wouldn’t expect the CEO, especially given his role and history at Okta to ever admit to a competitive deficiency but I thought he response to the queries was credible and struck me as more likely to be accurate than some of what can be presented in Gartner forums.
And so when I hear people say that IGA is IGA light, it's great because that means it's working. That means it's so simple that employees can do these access requests and Boost these things just in their chat. They don't have to go to some legacy tool. It means that the integrations are a snap. It comes pre-integrated to thousands of apps. So I think there's -- I think you're going to -- I think the industry is going to see that first of all, IGA is much bigger than we think it is because the solutions have been constraining the size of the pie. It's kind of like everyone said that the ITSM market was very small in ServiceNow started, but a better product made the market bigger. I think you'll see a similar thing here.
Investor concerns about competition aren’t going to abate just because of company presentations. And outsiders making some competitive assessment are always in a position of having to avoid sensational claims, or stories based on an agenda. I confess to the temptation myself; I know a couple of very satisfied Okta users in a large enterprise. But looking at the preponderance of the evidence, as best as I can, I don’t think Okta’s problems are competitive, but self-inflicted wounds stemming from very flawed strategies to integrate two dramatically dissimilar sales paradigms.
There are two primary components to the access market, one having to do with the ability of employees to sign on to applications within their corporate firewalls, and the other market in which customers can sign on to manage their accounts and to order from vendors. There are obviously similarities between both markets, but until Okta bought AuthO competitors had focused on one segment or the other. As mentioned earlier, the key to Okta’s future operational performance is to present to CEO’s and other C-suite decision makers, the benefits they will enjoy by partnering with a leading vendor who has the most complete set of identity management solutions in both spaces and whose solutions are basically cloud-neutral. While market share data can be slippery at best, the Okta future is predicated on its ability to grab market share, and to achieve the kind of market dominance it enjoys in the Single User Sign-on market, a subset of employee identity management.
The employee identity management market where Okta started is currently estimated to have revenues of $13 billion rising to $37 billion by the end of the decade. Identity theft use cases continue to rise. They actually increased 45% in 2020, and rose further last year. Just in North America, the cost of identity theft was said to be $56 billion, according to the study linked here. Attackers use machine learning to generate multiple variants of malicious code every day.
The Consumer Identity Access Management market is thought to be a bit smaller at this time than the workforce identity market, but it is growing more rapidly. This linked analysis forecasts that CIAM, as it is often abbreviated, has a multi-year CAGR of 17%. Okta developed a solution of its own in CIAM. But with the acquisition of AuthO it now has the leading market share in the space. AuthO had been Okta’s leading competitor.
Okta’s investor presentation speaks to a TAM of $80 billion, composed of Workforce Identity+ IGA and PAM of $50 billion, with the TAM of the CIAM space being estimated at $30 billion. The TAM is based on estimates for 2025 Regardless of the precise number of the TAM, the identity management space is very large, and affords Okta a substantial growth opportunity for years to come. The issue is sales execution, messaging and overall go-to-market tactics and not demand opportunities for the solution.
Okta has the leading market share in both categories. The analysis linked here by a market research firm puts its market share at 37%. It has a higher share than that in Single User Sign-on, perhaps the most basic identity management solution. As the analysis linked here shows, there is considerable overlap in terms of functionality between CIAM and IAM, which plays strongly to Okta’s strength.
I have linked here to the latest Gartner Magic Quadrant analysis for Access Management which continues to show Okta and AuthO in the leaders quadrant along with Microsoft. I also have used Forrester’s Wave analysis which shows Okta with an unambiguous lead in the space. The Forrester Wave review basically suggests that Microsoft, despite efforts to move beyond its own base of Azure and other Microsoft-centric users is far better suited for Microsoft-centric users than as a general competitive offering.
There are, to be sure, many competitors in the identity management space. And there are even more analysis of the vendors in the space. I have chosen one to link here identifying many competitors, but there wasn’t anything particular about its analysis that makes it better than the others. For some years now, Okta has been gaining market share in the space as it continues its move upmarket and to add features, functions and integrations, which is a key differentiator for most users.
Okta has been able to gain market share because of best of breed functionality, and because it is platform/cloud neutral, and because it has always been a cloud first solution. So, when looking at CAGR estimates, it is important to note that they do not differentiate between on-prem and cloud. Thus, Okta’s CAGR estimates are always going to be greater than the CAGR for the market as a whole since cloud is growing far faster than on-prem in access management. In addition, almost all application software vendors have some kind of identity management built into their software. But increasingly, users want more sophisticated solutions with more features and which work across multiple clouds than are offered by stack application vendors. Most market research analysts highlight that trend, and it should, over time, be the other major factor in Okta’s market share gains.
Okta’s revenue forecast obviously should be considered as quite disappointing when considering the trends in the market. While it is probably impossible to identify which factor is causing a specific percentage of the decline in bookings (cRPO) balances, I think it is fair to conclude that even with such macro headwinds as their might be, the company should be able to grow its revenues by near-30%, so the forecast it has presented, of 2% sequential growth, followed by 5% in a quarter that usually has significant positive seasonality, is far below what I think ought to be a realistic goal for Okta.
Okta shares are so beaten down that they could have a dead cat bounce, and at these valuations rumors of PE interest and potential investment by activist investors are likely - it was a significant factor in the initiation of the shares at a buy rating by the Jeffries analyst. That said, the ability of the shares to achieve sustainable appreciation will await a more benign market environment for high growth IT shares. And that in turn will be a function of changes in macro conditions such as inflation, changes in employment, and the tenor of Fed speakers.
But beyond that, Okta will have to demonstrate that it is returning to sustained market share gains. The opportunity is there, and Okta certainly has the most complete and functional set of solutions particularly for larger enterprises. And the need to prevent identity theft just keeps growing, and the consequences for ignoring solutions to remediate the threat are also escalating. So, it is really a matter of basic blocking and tackling.
The company management has articulated the tactics to achieve that, but it will almost certainly be 2-3 quarters between the identification of problems and their remediation becomes discernible. Replacing and training lost salespeople and seeing them reach full productivity is always a process of some duration. Okta is still in the process of realizing some cost synergies inherent in the combination with AuthO, and a bit of that was discernible in the results of the previous quarter.
Non-GAAP gross margins ticked up slight on a sequential basis, rising to 77% last quarter. Non-GAAP research and development spending actually declined sequentially, and was about 21% of revenues. The Non-GAAP sales and marketing expense ratio also showed a small sequential decline, although at 37% of revenues, there is still much room for improvement. Although general and administrative expense also fell noticeably, at 14% of revenues, non-GAAP, that ratio is still very elevated. The company has a clear path to profitability, given the progress it has been making in that direction and the unit economics of its business, and so far as it goes, even SBC expense fell from year earlier levels, although much of that has to do with the timing for the recognition of option expenses which are recorded when they vest in accordance with the Black-Scholes paradigm. As mentioned, SBC expense last quarter was still elevated at 38% of revenue, down from 41% the prior quarter. The year earlier figure was much higher, but is not terribly relevant given the timing of vesting.
The company’s operating cash flow margin last quarter was about nil. The year over year comparison is not relevant because of the impact of AuthO on year earlier results. The biggest element of the performance in free cash flow this past quarter was the increase in A/R balances. The quarter, according to the CFO, was more back-end weighted than usual, reflecting extended decisioning on the part of some enterprise customers, and some large deals were with government agencies such that average duration of contracts in the quarter declined, and impacted the increase in deferred revenues. The current quarter is also likely to see an elevated proportion of Federal cyber-security spend as it extends beyond the end of the government’s fiscal year, and cyber-security spending by the government is apparently at rates of close to 40%.
Okta shares, even after their mini-bounce since the low that was made in the wake of the downgrade by Cleveland Research, sell at an EV/S of about 4.5X. That ratio is noticeably less than the average EV/S for a low 30% 3 year CAGR. I expect that the company, after it remediates its sales execution issues, and in a less stressed economic environment, can return to mid-high 30% revenue growth.
The company has forecast that it will achieve single digit free cash flow margins this year, considerably greater than its forecast for non-GAAP EPS. Part of that is seasonal and p[art will be a function of the likely fall in receivables days outstanding. Changes in free cash flow are often a function of duration of larger deals and are thus notoriously difficult to forecast, but the path to non-GAAP profitability that is discernible, will also encompass rising free cash flow margins.
Having written analysis for donkey’s years (donkeys have a life span of 40 years so I suppose I have exceeded that), it is often the custom to provide a catalyst to support a recommendation. I don’t really like to suggest that a catalyst for this recommendation is the percentage by which shares have fallen, although, to be sure, Okta screens well on that dubious distinction. This is a contrarian call. No one really likes recommending companies with so many moving parts in senior management, or whose management team has made some significant unforced errors. But that said, Okta is still the leading company in a hot space, and despite some assertions to the contrary, I don’t see any degradation in its competitive position. And as I see it, its position is such that its long term market share gains should resume once it addresses sales force turnover and improves its messaging to the enterprise.
Okta shares, as mentioned, have many attractions for institutional investors including size/liquidity and a very specific position within cyber-security, a market space that many institutions want to overweight in this very perilous macro environment. Despite my previous unpleasant experience in owning the shares, I am planning to return for what is hopefully a more favorable experience this time around. As with most contrarian calls, timing is never exact or guaranteed, but my view is that by the time everyone agrees that the company’s problems are solved, its relative valuation will balloon. This is one case in which I would rather be early than late.
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This as-told-to essay is based on a conversation with Amber Grewal, a managing director, partner, and the head of global talent at Boston Consulting Group in San Francisco, California. It has been edited for length and clarity.
My career focus has always been on people — teaching skills, developing new operating models, and building up global hiring-related priorities like recruiting and training. Before BCG, I was the chief talent officer at Intel, supporting their talent strategy and management, and before that, I was the corporate VP of global talent acquisition at IBM. Over the last 20 years, I've held several senior leadership positions at GE and Microsoft, among other companies.
I joined BCG as a lateral hire from my CTO role at Intel. Transitioning to BCG offered me the opportunity to transform our global recruiting organization in a first-of-its-kind role. It's a great honor for me to lead a function that's dedicated to attracting BCG's greatest asset: our people.
As we grow, we're constantly looking for the best and brightest talent across industries, skill sets, and experience levels. For us, it comes down to a combination of attitude and skills.
We receive more than one million applications a year and only 1% of them make the cut. The competition is fierce, and we have high expectations from candidates. Here's what it takes to get a job at BCG.
The best way for someone to demonstrate how they'd succeed at BCG is by sharing concrete examples of the impact they've made in their previous roles or projects. BCGers are inherently curious people, tenacious problem solvers comfortable with ambiguity, open to new and different points of view, and constantly on the quest to learn.
The easiest and most effective way to show curiosity is to ask questions. Good questions can leave a lasting impression on the interviewer. A good question to ask is one that's backed up by your research on the company, about the work you're expected to do, or about potential growth opportunities that demonstrate your ambition.
For consulting roles, we check problem-solving skills through our casework round, but it's important to showcase your aptitude by sharing concrete examples from past work experience or even from your personal life, clearly outlining your approach and the outcome.
Making your answers to interview questions, your resume, and your cover letter more results-oriented — highlighting outcomes of the projects you've worked on and not just listing tasks — is one way to go about it.
For example, if you helped a team grow their business in your previous role, it's important to quantify the impact by saying that you "supported X% revenue growth."
What inspires a candidate to join BCG in a particular role — and what they expect out of it — is important information that we as interviewers want to know. This is especially important to understand that the applicant is not applying for any open role, but has a focus and a fair idea of the direction they want to take in the future.
For example, it can be how they see themselves specifically contributing their experience or expertise to a particular role, or what project or aspect of BCG's purpose they connect to and why.
For example, I may ask, "How would you go about making a built-in coffee maker in a car?" When I ask questions like this, which may seem random and throw the candidate off, I'm looking forward to the approach the interviewee will take. It helps me gauge if the interviewee has a structured thought process, how they behave in an unexpected situation, and if they can look at a problem or situation from a 360-degree lens.
If I could provide one piece of advice to someone interviewing at BCG, it would be to be true to yourself — that's your biggest competitive advantage.