Q1 2021 Earnings Call
[music] Good day, everyone and welcome to the old stuff first quarter fiscal 2021 Conference. Today's conference is being recorded no like you're trying to call over to Dave generally head of Investor Relations Mr. generally please go ahead.
Good afternoon. Thank you for joining today's conference call to discuss what's actually jokes buckets first quarter fiscal year 2021.
Looking at today's call or trying to generate pockets CEO and co corridor.
Wash the company's Chief Financial Officer.
The company's executive Vice Chairman Chief Oh.
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Today's call will include forward looking statements pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act, that's actually 95.
Maybe but not limited to your statements regarding our financial outlook and market position.
Forward looking statements involve known and unknown risks and uncertainties that metrology <unk> actual results performance or achievements to be totally different amounts expressed or implied.
Forward looking shirt much.
Well, the teaching which represent management's beliefs and assumptions only adds up to date night.
She might doctors that could affect the country's cannot your results is included in that silence or do you actually see trying to try according infrastructure entitled risk factors and its previously filed form 10-K.
In addition, during today's call will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition, true no substitute for or superior true Nurtures Openedge performance prepared in accordance with GAAP.
Reconciliation between GAAP and non-GAAP financial measures and a discussion at the limitations of using non-GAAP measures persons are closest GAAP equivalents is available in that range, which you can also find more detailed information in our supplemental can actually trials, which include trended financial statements that key metrics posted on our Investor Relations website.
On today's call will quote a number of miracle Gro changes as we discussed optimetrics formats, and unless otherwise noted each such weapons represents the year on year comparison, and now I'd like to turn call over to John you Ken Dodd.
Thanks, David Thanks, everyone for joining us I hope that you your families and your colleagues are safe and healthy like us I expect that many of you continue to work remotely dependent access creed unprecedented challenges for businesses around the world with millions of people suddenly working for girls many <unk>.
The first time this in turn means thousands of organization, it's got to adapt quickly to maintain productivity and security for employees, allowing them to easily connect to collaborate with colleagues. Additionally, as web and app traffic surge organizations need to modernize and strengthen their security that any posture.
This afternoon I'll talk about what Dr. has done to adapt to this new environment.
Highlights some of our strong Q1 results.
Recap the exciting innovations, we announced that aren't paying 20 live last month.
Talk a little about what we're doing to help our customers in communities get through this crisis.
The leadership team our first priority is the health and safety of our employees.
We need the early decision to closer offices around the world and transition 100% of our 2000 plus employees to work from home.
We were able to transition rapidly and seamlessly because over a year ago. We began the workplace of the future initiatives that we call dynamic work in which our employees utilize our core technology to enable secure access to any technology from anywhere.
NAMIC work has allowed us to build a more agile flexible work style into our culture, ensuring our employees around the world can be successful regardless of their location.
This agility helped us continue to execute as we entered this new environment and we're very pleased with our Q1 results.
Total first quarter revenue grew 46%.
Subscription revenue grew 48% remaining performance obligations or RPL grew 57% and we generated record free cash flow.
Billings growth was also a solid despite some pressure as customers are trying to adjust to the new environment.
One of our strengths is that we have a diversified customer base and we're not overly weighted in any one industry vertical right any one particular customer the vast majority of our overall business has generated from large enterprise companies.
With these large enterprise customers and prospects, we did experience some projects getting more scrutiny I believe in most cases the project implementation indoor purchase decisions have been pushed out to later date rather than cancel these delayed decisions were primarily within the industry's most impacted by the pandemic.
Much smaller portion of our overall business has generated from small and medium sized businesses or smbs as expected. We did see some business activity slow in this sector, but this sector has less impact on our overall business.
Whether for enterprise or an SMB customer, we're doing what we can't to be flexible and work with these impacted businesses to help support them through this period.
We also experienced demand from both new and existing customers that needed to fast track their identity and access management plans as a key element there emergency response.
We are working hard to partner with all of our customers and prospects to help to navigate this environment as they transition some or all of their employees to remote access.
A great example of this is what we did with the state of Illinois, which was a notable wins in the quarter for both workforce and customer identity.
With the onset of the pandemic, Illinois needed to ensure a can securely manage its remote workers insecurity identity and access of several state agencies to state had numerous disparate legacy identity systems across its agencies, which cost friction for its employees contractors and citizens, Illinois selected octet to be.
Their identity standard, which will streamline their operations with a single unified identity platform.
With octopus customer at any solutions, Illinois citizens will have a secure seamless experience when accessing their government resources.
And with octopus workforce identity, the state's employees and contractors will be able to more efficiently do their jobs. Additionally, octa advanced server access will also help protect the states current on Prem and new cloud hosted servers.
The ease of deployment ability to manage cloud administrative capabilities and automated provisioning for accounts and policies will provide significant security benefits over.
Over the years Optus technology hazard, a reputation for its ease of deployment, especially in large and complex environments. That's become more critical however, as we help enable our existing and new customers with identity and access management solutions. During this time of unprecedented challenges. There's no better example than what we did.
To help our valued customers Fedex and just 36 hours, we helped Fedex deployed the octa identity cloud to enable more than 85000 remote and the central employees to connect the critical applications amid increased demand during the crisis.
This was a massive deployment composition, just days and exemplifies our commitment to customers because we tie our success directly to their success.
One of the areas that we've been investing is growing our base of large enterprise customers. We're seeing those investments pay off and it's reflected in the addition of 113 customers with an annual contract value greater than $100000 in the first quarter. Once again over half of these additions were from new customers.
The total number of 100000 cash plus customers is now nearly 1600, an annual contract value of this cohort increased nearly 50%.
These large enterprise wins across a wide range of industries.
To provide some insight into the diversity of our customer base and the types of challenges our products, helping them solve I'll share. Some details in a few notable wins and upsells from the first quarter.
Parsons Corporation as a global 2000 solutions provider for intelligence defense and critical infrastructure markets and the new customer for both workforce and customer identity.
Person was looking for a secure and scalable cloud solution to replace its existing fragmented legacy identity platforms October will provide universal directory single site.
Advanced lifecycle management, multifactor authentication and octa access gateway for Parsons 16000 employees.
We'll also provide authentication an authorization for its growing software as a service offering to its global customer base.
The opt out any cloud and its extensible prebuilt integrations will make it easy for persons to integrate applications that supports rapidly growing business and create user workflows that reduce RG friction.
An exciting upsell in the quarter with T mobile the company originally selected doctor to be its identity standard for building frontline applications and providing corporate retail customer care employs the seamless access to the tools and resources they need.
Recently T mobile successfully completed its merger with sprint, creating the second largest U.S. wireless provider now as a unified company it needs to ensure that both T mobile and sprint employees can access critical frontline applications to best serve its customers.
Given its prior success with Dr. T mobile is relying on October to be a foundational part of their day, one architecture, helping onboard an additional 30000 employees.
The Mega trends have increased adoption of cloud and hybrid I T digital transformation and zero Trust securities have been driving our business for the past several years and we'll continue to drive our business well into the future in fact, once we emerge from the crisis stage of this pandemic, we expect to see an acceleration of these trends these trade.
And that resonate now more than ever and our leadership position going into this crisis will be further enhanced as we expand our presence and product offerings.
That's a good segue to recap some of the great product announcements, we've had octane 20 lied last month.
We were one of the first companies to host and larger virtual event two events. If you include our Investor day.
It was an unexpected and challenging task, but both events were incredibly successful and our customer and investor feedback was amazing.
We had nearly 20000 registrations for octane 20 live which is over three times, what we had been expecting for the in person event.
We operate in a world, where innovation agility and adaptability have always been important and our ability to quickly pivot to virtual events exemplifies what makes octa successful.
Product perspective, we had a lot of fantastic news that showcase our innovation, we doubled down on further expanding a trusted platform introducing aka platform services foundational part of the OCC identity club.
The platform services enable octa to meet unlimited workforce and customer I Didnt use cases.
Two new key components within octa platform services, or octa workflows, which makes the octa identity cloud programmable and Hoctor devices, which ensure seamless secure access across all your devices.
The lifecycle management workflows uses the workflows service to automate the most complex processes across the enterprise.
And with no code.
Dr. Fastpath built upon the devices service will be that beginning of the end for passwords at work.
All this functionality and innovation as well as expanded octa identity engine capabilities joint Octa integrations Octa directories.
The insights platform services to further evolved the industry's leading independent and neutral cloud identity platform.
During octane, we also announced important new strategic technology partnerships with leading endpoint protection and management providers via more carbon black crowd strike containing.
The new integration partnerships to provide a broad set of device risk signals to the OCC identity cloud enables enterprises to combine inpoint risk detection with user identity to deliver unparalleled security and open the door to really innovative ways to deliver on the promise of zero Trust security.
Well, we're excited about the current state of our business and believe the future is extremely bright for October we understand that were in the midst of an uncertain economic environment and that millions of people and businesses around the world are facing difficult times.
We are grateful for our strong position as a company under as committed as ever giving back to our communities and helping small businesses. Our mission is to enable anyone to use bidding technology that really resonates and we believe any organization that can benefit from leveraging the octa identity cloud to keep their workforces productive over.
Working remotely during this crisis should be able to do so at no cost. That's why we made some of our core services free to new customers for up to five apps.
For all users through our October for emergency remote work program.
Active for good our social impact initiative is focused on supporting nonprofit organizations on the frontline to this crisis through rapid response grants and matching funds.
Much of this to local organization, serving some of our most vulnerable. In addition, we recently announced that octopus committing $10 million out of the octa for good fund to support grandson investments nonprofits working at the intersection of social good and technology.
We will also continue to support local organizations and octaves global communities and further empower our employees to get back.
As we look forward to the rest of this year and beyond when this crisis over we don't expect organizations to revert to their prior ways of working we have no doubt that a much higher percentage of workforces will be connecting remotely.
And we see that as an inevitable long term trend actions that organizations are taking today are accelerating that long term arc towards using more technology for more flexible work, that's a positive trend for the world Interactive.
Okay is there any reputation as a thought leader on the future of how people work.
And we are helping our customers move down this path in the accelerated timeframes.
Despite the current environment in the near term uncertainty it brings.
We'll continue to invest to drive long term growth and innovation Doctor.
We've also taken action to conserve cash where appropriate and doing so well allow us to maintain our agility and move rapidly to capitalize on growth opportunities with the time is right.
Our commitment to our customer success will help us navigators environment.
Lead the new wave work in seized the opportunity to emerge and even stronger position.
And lastly, I want to mentioned that Charles Race Act as President worldwide field operations is planning to retire early next fiscal year since joining dr. almost four years ago. Charles has been instrumental in building out a strong bench top notch go to market organization position octa for success well into the future Charles what country.
Italy, the field organization, while we undertake the search and Onboarding process of our next global go to market leader.
Obviously this gives us a long runway to track the best candidate, while ensuring continuity and success of our customers and channel partners during the transition period.
Thanks again for your time and now I'd like to turn the call over to build to walk through more details of our first quarter financial results as well as guidance Bill.
Thanks and.
Thank you everyone for joining us.
A reminder, we've posted an earnings presentation that is available on our Investor Relations website, you can change our detailed financial results.
You'll find it to be useful summary.
I will only cover a few the notable highlights our common starting this afternoon.
As Tom mentioned, we had a strong first quarter with particular strength in revenue operating margin cash flow potentially bad.
As expected we also experienced some pandemic related business headwinds as we exited the quarter in April.
I'll now touch on some of the first quarter highlights the go into our outlook for the rest of the fiscal year.
Turning to our Q1 results total revenue increased 46% driven by a 48% increase in subscription revenue.
Subscription revenue represented 95% of our tool revenue.
ARPU over backlog, which for US is contracted subscription revenue booked billed and unbilled. It has not yet been recognized grew 57% to $1.24 billion.
Currently our which represents contract subscription revenue, we expect to recognize over the next 12 months also experienced strong growth of 29%.
Year over year growth in current Archeo, some more meaningful metric when viewed along with subscription revenue and billings, though.
Total calculated billings grew 42% in the current calculated billings grew 41%.
The strength in billings was driven by both new weapons system customers as well as beneficial invoice timing.
Don't strength was partially offset by delays in purchase decisions as organizations adjusted to the current environment.
We expect Q1's beneficial invoice timing become a modest headwind to second quarter billings growth.
Turning to retention our dollar based networks mentioned, but for the trailing 12 month period was 121%.
Point increase from last quarter.
The increase was primarily driven by strong customer up sell particularly with our enterprise customers as we grow our business with within the loans largest organizations.
You mentioned at Investor Day last month, our strong retention rate is built on strong gross retention.
Q1, we also experienced a slight increase in numerous retention rate within our enterprise customer base, which makes up the vast majority of our business.
Gross retention SMB customers was consistent with the last four quarters.
As I mentioned in the past the retention rate they fluctuate from quarter to quarter.
Current environment, it's possible that fluctuations in retention rates, maybe more pronounced.
Before turning to expense items and profitability I would like to point out that I will be discussing non-GAAP results going forward.
Now looking at operating expenses total operating expenses grew 29%, which was lower than expected primarily due to a change to virtual events, including auction as well as a reduction in Asia.
We also saw lower employee related costs as a piece of hiring has moderated due to the current environment.
Based on increased 34% to almost 2400, we increased primarily in our customer facing innovation teams as we continue to staff to support our strategic initiatives.
We generated record cash flow from operations and free cash flow of $39 million $30 million, respectively, which yielded a 16% free cash flow margin.
The strong free cash flow was driven by strong collections from business booked in the fourth quarter, which is typically our margins corner of activity as well as the lower cash outlays due to a reduction in expenses related to dependent.
We ended the first quarter really strong balance sheet anchored by 1.4 or $5 billion in cash cash equivalents and short term investments.
Moving onto our business outlook, we remain optimistic about the demand for our products and our maintaining our full year 2021 revenue outlook. We provided of our recent Investor day on April one.
Our revenue guidance is critical to our strong first quarter results, but also our expectation dependent women since we began to see during the first quarter will persist.
In Q2 in Q3.
We see a return to more normal business activity as we execute more.
Our guidance is based on current assumptions about the macro environment and impacts from dependent.
As a SaaS based business, we have a strong base of business that is already contracted in backlog, we will recognize as revenue.
For the full year fiscal 2021, we continue to expect total revenue of 770 $780 million, representing a growth rate of 31% to 33% year over year.
While we are maintaining our revenue outlook, we are improving our outlook for operating loss and loss per share as we incorporate are better than expected first quarter results into our current expectations.
We now expect non-GAAP operating loss of 37 $30 million non-GAAP loss per share or 23 to 18 cents, assuming weighted shares outstanding approximately 125 known.
We could you do expect to be free cash flow positive in fiscal 2001, we're now planning on capital expenditures to $15 million to $20 million in fiscal 21 down from our outlook of $35 million. The decrease was related to reduce facilities needs as we accelerate or dynamic Merck strategy.
For the second quarter fiscal 2021, we expect total revenue of $185 million to $187 million, representing a growth rate or 30% to 33% year over year.
Non-GAAP operating loss of $5 million to $4 million non-GAAP net loss per share of two cents to one side, assuming weighted shares outstanding of approximately 125.
In summary, we executed and formed well given the current environment, while we believe there'll be some business impact from the pandemic near term the value of our products is more clearer than ever organizations shift to a more decentralized work environment.
Our industry, leading cloud based platform he dressing more and more complexity shipments across both workforce and customer identity. We continue to innovate to address those cases that you saw a docking last month.
It has developed a strong foundation market leadership position, we plan to further capitalize on the tremendous market opportunity in front of us.
With that pop further demand will take your questions.
If you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using speakerphone. Please make sure. Your mute function is turned off 12 signal to reach our estimate.
We're going to give elements as Ron chez to signal for questions.
Well take our first question from Rob Owens from 5% Burkart. Please go ahead.
Great. Thanks for taking my question guys. Todd wanted you to drill down a little bit around customer purchase decisions.
Whether they are from a tactical perspective versus a strategic perspective, we all here about the acceleration that digital transformation in great digital awakening coming out of this and I. Appreciate your comments when acceleration of trends in the near term where are they from a tactical perspective versus the strategic perspective, and if I think about when people tend to go in and change or under identity.
Steve potentially move to cloud is there a lagging effect is that typically done at the same time. Thanks.
I think that one thing that's interesting about the environment is.
At a high level I believe that this pandemic as fast forwarded the adoption or at least the mindset around adoption of cloud and general by five years, I mean, I think that people thinking about cloud and the inevitable migration to cloud that has been fast forwarded People's minds significantly now as you mentioned, it's about how do they tactically.
Execute to that and how does that more specifically dr., how does that impact our business I think you're seeing a couple of different.
In the customer base and in the prospects, we've seen a couple of different scenarios, one scenario as inside impacted industries.
And it impacted industry, if you're a cruise line or an airline.
Really just triage in your business and trying to.
Trying to survive right now.
And then initiate it's not impacted your your working from home and your real tactical concrete acceleration of projects around identity, specifically because people at home or outside of your parameter and that security model doesn't work. So you have to get something like unlocked in place and that's what we're seeing customers do.
I think the other thing you're seeing is that people are.
Deciding on the medium term now what is the next three to six months through year end what projects can they pull forward and what what can they reprioritize to to do this inevitable move to better customer websites better mobile apps that are tools for their employees I think they're starting to really figure out that identity as a big part of that which puts us in a pretty advantageous position.
Sure and then the obligatory guidance question for built here given the.
At the annual guidance I think it was on March 15 were heading into this obviously very strong first quarter, you talked about some timing, but obviously upselling is going well as well given that renewal rates. So I guess the delta about 90 days later or whatever it is what's changed in your mind relative to some of the headwinds.
You've seen given the strength in the first quarter why does that translate through for the remainder of the year. Thanks.
Right so.
So we did have a very strong first quarter Im very pleased with that.
The reality is no one really has clear visibility right now.
What we based our forecasting assumptions are on the.
The prevailing views of what the current macro trends are from the next six to 12 months.
And those trends indicate that.
You know the macro environment. The current macro environment is going to be more negative in Q2 Q3. So as we think about the headwinds from pandemic Thats, how we think about those headwinds being stronger Q2 Q3.
And then.
Coming out of it as we as we exit Q4 as more normal Biz Maxim activity is expected to come back. So that's really how we thought about it from a really tops down.
Active from a bottoms up perspective, we also looked at it.
Yeah, we looked at pipeline, which has been very strong or our pipeline is strong and we're very pleased about that.
We've looked at.
Some of the thing we saw at the end of this quarter as far as.
Todd said earlier as far as purchasing decisions.
Getting delayed.
It's the.
Small and medium size business, even though not as a very small piece of our business.
Something impacted industries.
Risk. So we took a conservative view, both looking on a per month tops down and a bottoms up approach and that's really how we derive forecast that we get to that.
Great. Thank you.
Thank you for a question where next going Jonathan Ho from William Blair. Please go ahead.
Hi, Good afternoon, I, just wanted to get a sense from new first of all in terms of the size of the impacted industries and your potential exposure there and are you seeing any set of churn.
Those industries as well.
Yes, I think that I'm sorry.
I would see going to address specifically the active industries and the size and that sorry, Tom.
I think the.
As we look at impacted industries, and we define them consistently I think with others in what they're saying you know its consumer retail hospitality and travel food and beverage.
That makes up about 12% of our our business.
So it's still you know.
Relatively small part of our overall customer base.
And I think it.
As we mentioned in Q1, our Q1 results.
We had very strong.
You know not retention and very strong gross retention as I said my comments and that gross retention is both.
On the enterprise, where it actually picked up again and even small business would stay probably consistent so so far we're seeing pretty good strength on retention.
But as I said earlier and last question as we think about.
Those heavier stronger headwinds against us as we go into Q2 Q3.
You know these medium term, we think there there could be.
Sure situations, where customers coming up for normals.
You know, we do see some some risk.
But we factored that into.
But the guidance we get to them.
Great and then just maybe relative to some of the products that have benefited a little bit more from work from home or maybe a little bit less it can you help us understand whether things like I say, maybe benefited a little bit more or maybe other things like lifecycle management, which are more complex those.
Impacted a little bit more in terms of the deal delays or any color around the product set performance would be great. Thank you.
Well one of the things that's interesting overall is just that we can talk about the sales and.
Customers and prospects by new products, but just usage overall is really accelerating which is exciting. We're a company built on customer success and we're seeing our usage of all our products as people work from home shoot up particularly in the multi factor authentication product, that's a very tangible mapping from.
Working from home and security beyond the network perimeter and the need for that product. So thats customers I'm at a time as excess about which is great I would say, we don't break out the sales of sub products as you know, but I'd say that it is it's very interesting in the pandemic related pull forwards activities, which we've seen a lot of is it.
Really been a workforce phenomenon so far.
You're seeing the workforce products be pulled forward, it's pretty obvious. It's the result of remote work and needing more security whether it's an affair just basic access management.
On the customer identity I see that those projects are built right Theyre whatsapp mobilize being built so the lead times on those projects as longer but I see as we move in the medium term.
Covert 19, you're seeing customers building things that are going to come out in the next quarter too.
So I anticipate that the benefit of pull forwards will be across entire product why not not more focused on.
The the workforce related products that we saw in the first quarter.
Great. Thank you and Jonathan I was just add to it.
Rick.
Just that if you look at some specific examples in the quarter, we add some very large organizations that are really starting to move a lot of their work online very quickly for remote perspective, Rob you asked about specific tangible examples I think the Fedex go live is one that I would really point to global 2000 company had been working with us for awhile.
Really planning their move to remote work and then all the second call that that instead of doing that in a few months, we want to do that next weekend and we're going to 36 hours they transitioned over 80000.
Please to accessing hundreds of cloud applications remotely and that's the kind of thing that you can only do with modern identity and I think we're going to see more and more of that in the times ahead as people really look to move to a modern cloud solution.
Thank you well next tech Heather Bellini from Goldman Sachs.
Thank you this caroline on for how there.
My first question is more on that partnership with.
Hey, just announced with that new native integration with assets. So.
Okay, and you can provide more details on that and then.
Is there going to be go to market or sales line that and then how does that change that competitive landscape or some other on cloud service providers such as Microsoft Azure.
It's a it's important integration for us.
I think that Caroline I think that if you look at a customer they are thinking about their technology strategy and they know they have to they know they have a cloud alternative in every in every part of the stock from infrastructure is going to be Microsoft is going to be Google is going to be Amazon.
To the development layers are going to be Java is going to be another language environment up to the applications. As it were you know as it Microsoft applications at Oracle is it workday that salesforce to have all these choices and for what they want from US is a neutral third party that connects them to everything and so it's no surprise, we have the industry.
Leading integration catalog were integrated integrated to 6500, plus systems and not only broad integrations, but very deep ones and the NWS integration announcement is significant for a couple of reasons. One is that it's its something customers want and they want choice and they don't want to be locked into one infrastructure provider in the degree to which we can connect.
Amazon and at both a functional away and a very complete and deep way is something that's very important them and then the second reason its importance because it's it shows that our ability the ability of our companies to work together. So Amazon contributed to the integration we work closely with them to make sure that it was adopted our platform and you see too.
Leading vendors working together and building a solution.
The the customers really want so we're excited about this this.
This integration.
Got it that's super helpful and then ill.
A follow up for you on current IPO and believe Im curious, how we should think about.
That that gap between those metrics I noticed that this quarter I think thats Cabot decrease to keep that endpoints right last quarter's 12 points any color on how we should think about it trending over the next few quarters or even next year be super helpful. Thank you.
Yes, I mean, I think that the you know as you think about billings as you're thinking about RPM. So.
One of the things we pointed out before is that current archeo specifically.
Has the advantage from a metric standpoint.
Kind of eliminates the variability that you see in billings with invoice timing as I as I mentioned in.
My prepared remarks, we saw some.
Preferential invoice time timing in the first quarter.
That will cause some headwinds for Q2 I think good.
When we kind of work through it.
You should think about that and you should think about the fact that.
The current Archeo.
Really I think does eliminate that variability and probably has.
In conjunction with looking at sub revenues in conjunction with would be billings as we certainly think about the business.
But there is always that variability in billings that makes it challenging to.
Per unit to.
To map it so to speak with RPL.
Got it thank you.
Thanks for question were next come with Walter Pritchard from Citigroup.
Hi. This is actually is your thoughts are on for Walter Thanks for taking my questions first one is for other tighter totter Fred.
With all the announcements coming out of octane. This year and is considering that it was a virtual event.
How would you characterize the lead gen from that compared to what it was last year and just more broadly on your pipeline.
How are you feeling about it right now and what sort of qualitative pressure test 70 done to give you confidence in the outlook for the rest of the year.
Absolutely happy to take that so as you mentioned, we were very pleased with the results from octane 20 lives as we converted from an increase into a virtual event. We had three times the attendance over 20000 attendees, including 3000 for our security Roadmaps session alone.
Which really speaks to the relevance of what we're doing right now for customers. So that's exciting when you combine that with US looking at the pipeline, we have a very strong and robust pipeline right now not just for Q2, but also Q3 in Q4.
I think the opportunity for us across the board are really good so as Todd and Bill talked a little bit about we're trying to figure out specifically in Q2 in Q3 of how these decisions are going to be made but everyone is moving to the remote work environment, There's a lot of opportunity to help them with.
Their workforce project and that's not just net new customers, but there are some very strong upsells this quarter as well any enterprise based you saw that reflected quantitatively and the dollar based net retention, but if you also look at some of the examples organizations like T mobile, which was a great up sell in the quarter just adding.
North East or you look at organizations like Workday, that's been a workforce customer of ours now cross selling themselves into customer identity, I think a lot of our existing customers how confident with us on our platform in our service and that playing out in the times ahead. The other thing I would add that I think it's very exciting it specifically Q2 and.
Then into Q3 in Q4, you're starting to see more interesting customer gain access management from large organization I think if you look at some of the metrics around E. Commerce in North America, I know that E. Commerce has been kind of trending up from 10 11, 12% over the last few years, a total commerce I think it's just jumped to something like 25 20.
7% of all commerce that trend is not going away and all organizations need to find better ways to interact with their prospects in their customers online in particular on commerce, and I think thats going to be a big opportunity that had the head for us.
Really helpful. Thanks, a lot and then my last question for Bill.
Just in light of the solid execution, despite a more challenging macro backdrop wondering if it's caused you to reconsider the margin framework over a longer timeframe.
Specifically in terms of improving sales and marketing efficiency and whether you think.
Thats a sustainable trend as we look out beyond this year and how you're able to go to market differently or spend sales and marketing dollars more efficiently. Thanks.
I'll jump in here quickly I think I think it's really important that the company. This give give you some color on how I think about the framework for how we manage both in general and just in time like over 19, I think it's really important that we.
First of all we have big markets are going after as we've talked about at our Investor day $50 billion market for across customer and workforce. So we need to invest aggressively but we also need to make sure. We're official efficient and we don't we want to build something thats sustainable and has a level of efficiency built in so it's important to balance those in the last few much.
Bonds and going forward, we want to make sure we preserve agility. So we're really balancing growth with a a world that's more uncertain than we want to make sure. We preserve agility in terms of our investments so that when the time is right. We can really double down and capture this big opportunity, which we think the longer term is is gonna be bigger because of all this.
Yes, I would add to that we set.
Long term model that we talked about it at Investor day out through fiscal year 24, It's a touch point really was.
Looking at growth and balancing that with profitability and we gave three different scenarios.
When we did that which the soon areas are dependent on what happens in the macro environment.
But we're confident.
About the targets, we set at Investor day, as far as the growth and and the profitability and we're still operating to that.
Thanks, guys.
Operator, we'll take next question.
Well operator.
Hey, Bill I have a question for you.
Just kidding just.
At this moment and I'd like turn thanks.
Okay.
Okay.
So your line is open.
Well it was I mean.
I think I heard Morgan Stanley is that right.
I think yeah, sorry, I didn't hear the operator, no worries has gotten out.
Yes, Tom that from Morgan Stanley. Thank you for taking my question.
Is that a couple of questions. So Todd the first one for you I'm wondering if you can dig in a little bit more on the.
Increasing prioritization of identity and the current environment and also specifically.
Whether or not you're seeing an increased appetite from customers looking to consolidate to single identity platform.
Identity as a is a fundamental thing a foundational thing and it if you get it right. It can free up your technology strategy for years and years to come and say you on the right path. If you get it wrong. It can really hamper you and I think that so what's shifted now in the last couple of months is that.
And then he has always been a foundational thing thats. It thats people have gotten their head around but what's more heightened now is the tactical short term requirements. So you have to deliver MFS because your workers are not on the DTN or you have to provide a simple single log and because they don't have.
Network to rely on in terms of log and so I would say those tactical pressure points that are driving these pull forwards are more heightened than they've ever been.
But that being said the fundamental true is that a good identity Foundation set you up for technology progress for years and years is also becoming more true to people is those are clear to people's those as those tactical pinpoints get solved.
I think the reality is that it's a complex landscape, especially in the large enterprise. So there's a lot of different tools that company. The companies have that serve identity functions, but as we talked about at octane. Our vision is to build a platform that concern that can support any use case that accompany a large enterprise or small enterprise has read identity.
From workforce to customer to server access.
And make it powerful and extensible because ultimately we think one unified neutral an independent identity platform is the best for customers and which is why I think we've had so much momentum.
And just to follow up question on on on the.
Expansion rate was really strong I'm wondering how much of that is coming from customers kind of more tactically be pulling forward are accelerating some of their investment.
And how sustainable is that you know a net retention above on or 20% going forward.
All right. We do think certainly into Q1, we did have instances where people were pulling forward and trying to rapidly deployed.
For remote access capabilities. So we saw some benefit there.
We do think though that.
You know the projects and fundamentally what we do for for companies with our identity and access management.
It's still so you know something that.
Theres big demand for we have strong pipeline, we feel like will continue to see expansion within our customers I think that you know as I've said before with net retention rate.
I can fluctuate.
You know from quarter to quarter and I think as we you know in this environment. We're in this macro environment, we think those functions could be more pronounced as we go through the year.
Thank you very much.
Your next question.
Thank you. Our next question comes from Andy No Winski from D.A. Davidson. Please go ahead.
Hi, This is Hana on Bobby just a question on the competitive dynamics are you thinking more directly with Cyberark song their recent acquisition of adaptive which puts them into the single sign on multi factor authentication spaces given office Iraq. The solution. Thank you.
Yes, absolutely happy to talk about that.
We do see that swim lanes are starting to blur a little bit specifically when it comes to some of the legacy privileged access management companies look our leadership position in identity.
Positioned us really well and I think you see a very large bifurcation in the market. It was clear before the recent pandemic, but if anything you see an accelerating now and prospects and customers are really differentiating between legacy on premise is vendors, where it's difficult to implement difficult to maintain and anything else.
It's difficult to even access your servers and modern cloud solution. If you look at our advanced server access product, which we introduced last year. It does very very well and if you think about how people are going to be not only looking to provide modern identity solutions for their employee base and their customer base, but also infrastructure.
Sure down the road advanced server access it's starting to get widely deployed a great example, this quarter was we had enough fill it in the video conferencing company, where they obviously were massively expanding the number of service that they were using as well service under management and they turn into our advanced server access product for thousands of servers.
Multiple different platforms that they have because it's a very easy scalable way to deploy a modern next generation technology, I think you're just thinking more and more than that.
And one of the one of the things that served us really well here in thinking about competition or partnerships first of all is we're very customer centric. So instead of trying to dictate to the customers. What the swim lanes are we try to build the best products and the most integrated products and let the customers decide what's best for them.
And that's been powerful because a lot of time vendors, especially an idea and identity can get really excited about what's the exact swim lane and what is your market and what is Gartner say about you know my market versus your market, but it did today the customers trying to solve a problem and if zoom wants to wants to deploy tens of thousands of servers quickly.
And they think our advance or axis is the best way to do it that's great right and that they want that integrated their identity provider and so it's we try to be very customer centric and not get too hung up in what we think and try to integrate to everything and do what's right for the customers.
Great. Thank you for the color.
Thank you.
Next question comes from Sterling Auty from JP Morgan. Please go ahead.
Yeah. Thanks, Hi, guys just wonder if you can give us a little bit of color on what the plan is with Lake Charles race retiring is that going to be you know internal promotion you got to look to the outside is there going to be any kind of changes in the go to market management structure.
Charles is done a great job first of all I mean he's.
I'm really proud to work for them and the grain is it he's done a great job is going to be around for a while so he's going to be around.
For the next few quarters, while we do a search and the searches trying to find the best candidate in the world. So we're really going into it with a constant abroad, net and not trying to get any pre conceived notions about where that personal come from and it's going to be the person that can take us.
Over the growth over the next several years and help US continue our transformation into a broad platform that address addresses many use cases and also accelerates our geographic expansion and.
Accentuates our relationships partners. So it's a it's a big job and he's done a great job and I'm excited to.
To fund the next candidate that's the best in the World to take us forward and.
We have I really.
Proud and thankful Charles for would have done but also the fact that he's.
Doing this in a very orderly manner and give me a lot of time to.
Find the best person fructose and not only find the person, but integrate them into the team. So it's a it's a pretty fortunate position for for us to Ben.
Yeah that makes sense and then you know with the broadening our portfolio as we look at the success you're having in the enterprise segment, specifically is there a new common theme in terms of what the tip of the spear that getting you into those enterprise accounts are.
You know today versus even a year ago.
Yes, I'll jump in it.
And comment on that I think that what you're really seeing is that we talked about this a couple times in the past.
Earnings calls is with.
Yes, the different products, we're really starting to get the opportunity to land in a whole bunch of different way and that's why you're seeing a lot of these products, becoming so feature complete that.
You can land with something like multi factor authentication you can land with a customer gain access management project and then crossover. So I think in general you are seeing us continues to expand and deepen those product I would say that specifically right now to our comments earlier, you're seeing a lot of landing with workforce I gain access management as people.
We're just trying to either again, a good handle on how they're going to make this transition or sometimes they've made the transition but to accelerate it I'll give you a good example, we work with a large financial services organization.
Typically had about 20000 of their 100000, hi employees working remotely call. It two quarters ago. So they were used to managing that kind of load over their VPN to ask a standard application and obviously within 10 days. It went from 20000 100000 that brought their VPN services down at the new.
And basically we help them get that situation back up and running transform into a much more modern solution for them and then augment that with multi factor authentication. That's a big an example of how they were using a number of products that they were able to increase that at the same time I would point back to a number of a different cross sells and upsells.
This quarter that are symptomatic of what we're doing on whether it's M&A like T mobile and they're trying to integrate new organizations very quickly or whether its organizations like moodys, who had been a smaller customer of ours when an expanded not only workforce, but also at the customer today management and I think it as we go ahead.
And as we broaden out the platform and the suite of products, there's going to be more and more opportunity to land and I think thats nothing has been a portend well for us and the prospective customers as well.
Sounds good thanks, guys.
Thank you. Our next question comes from Alex Henderson from Needham. Please go ahead.
Great. Thank you very much I wanted to ask a question on.
The concept of multi asset so.
I've noticed a number of companies, particularly a recent the cloud player announcement, but also see scholars out with one as well as some in the container space.
Where people are talking about the ability to bring in multiple sign on single sign on systems from various vendors and the aggregate them across the platforms now as I bought understood you guys. The path of always thought you being.
The the definition a of the dominant player in the category and the best player always wins, the dominant market share, but it seems like multi single sign on has.
The opportunity to allow smaller players to last longer and have how better play can you talk to the positives and negatives.
Of the adoption of multi.
Single sign on functionality across a different platforms.
I don't really know what multi single sign on means it sounds like kind of an oxymoron to me I do know that it's a come it's a pretty complex thing that we do there's especially when you look at it from like a lot of vendors do and I think this is a weakness of a lot of vendors. They look at it from a technology perspective, and I think about how the protocols, but the.
Gather and then think about the bits and bytes flow and they forget to think about the user and a user doesn't Juan molta anything user wants to get to their work faster.
By the new you're talking about what not knowing what they're referring to is when organizations have multiple systems that various.
Groups used to access into their organization for instance, a contractor may have a different sign on system, then say and then turn on employee versus a sign on system. That's used in one part of a company versus another part of a company and obviously, it's better to have.
One that that makes no sense, but that's not real world real World is there are lots of different sign on systems at various companies various partners various contractors and so how do you federate, though that sounded to me that sounds like single sign on.
It doesn't sound like multi single I understand we're talking about semantics or but to me that sounds like customers want single sign on and that's what we do.
And we have a bunch other people that try to do it too, but we think we're the best and where the most integrated and we're continuing to invest in the platform to make it even easier and simpler and.
We're pretty confident about our ability to to deliver customer satisfaction around this problem segment.
Yeah, Alex I would just add if you look at some of the customers. Examples that we talked about last few learning caused one kind of at the mine in particular is Albertsons company, obviously, one of the largest food retailers in United States as over 20, plus banners right Safeway bonds Jewel osco and they turned to us to creating.
Exactly what you're talking about a streamlined omnichannel experience for the millions of shoppers they interact with each week. So that you as a end consumer are going to have one way to authenticate, whether you're going into a safe way or whether you're paying with your bonds card at the gas station and again albertsons on the backend benefits because they get.
One view of Alex Henderson, whether your shopping online in person works with third party and so exactly that kind of Federation scenario plays out all the time. It plays out also internally as you mentioned in the M&A environments, where people by company sell companies and they want to make sure that they have one central.
Federated system. So yes, the power of a cloud based I'd solution is exactly what you're talking about and we're very fortunate that we can offer those kinds of opportunities for to our customers.
Hey, Alex you May note I'm sure B note about a specific announcement from a company and I'll try to address it down email more more specifically I don't mean to kind of try to sized up but.
Well take our next question from Gray Powell from BTG. Please go ahead.
All right yeah. Thanks for Thanks work me I really appreciate it.
So I guess one of things I'm, just trying to figure out as I mean, there's multiple customer conversations it sounds like demand for into say has really been I I've had a couple of customers somebody that its penetration.
Was it at 100, perfect, 100% before covert 19, it probably is now so I mean, just to extent that I know you don't want to give an exact number but just sort of like ballpark can you talk about where you saw in that say penetration across your customer base or even just the industry.
Before cobot 19, and in roughly speaking, whereas it now and then and then how much of a growth opportunity do you think is left on that component of the product set.
One I think it's still I mean, I think it if you look at the pull forward deals the interesting thing in my mind has been that.
It's like the deal is moves fast and it's the.
Poignant requirement as NFV, but the more of the products than just NFV gets sold.
So it's like in a big it's it's the pain point, but you can.
Really do that quickly and effectively you need the core a directory product and you need. The you know the course single sign on product. So it's more than just and I say alone and I think that we're still it's you know even with the acceleration. It's still been you know not this acceleration has been going longer longer. So there's a lot of lots of running them effect.
Lot of companies still don't have there, especially in a borderless world, where you're outside the network and you want in play flexibility the penetration of MFS overall is still relatively early.
Got it that's really helpful. Thank you very much.
This concludes the question answer session for today I'd like to him back the conference over to the speakers for closing remarks.
Thanks, operator, well, thanks again for joining us today will be participating in a number of conferences this quarter, including the B B of a global Tech Conference. There Tech Conference William Blair growth Stock Conference and the Morgan Stanley Zero Trust conference. So it won't be numerous opportunities to further gauge.
This quarter. So we hope to see you online at one of those events. Thanks.
That concludes today's call. Thank you for your participation you may not go ahead, and just kind of.
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