Q2 2025 Okta Inc Earnings Call

GAAP and non-GAAP financial measures is available on our earnings press release.

Wave organizations meeting their business imperatives of growing revenues, while cutting costs in a secure and compliant manner.

Todd Mckinnon: Identity is the technology that solves this challenge and Okta has the most comprehensive identity platform in the market today. Okta's vision is to free everyone to safely use any technology. We're advancing that vision through incredible product innovation and extending our unmatched portfolio of identity solutions for workforce and customer identity.

Speaker Change: The entity is the technology that solves this challenge and Okta has the most comprehensive identity platform in the market today.

Speaker Change: <unk> vision is to free everyone to safely use any technology, we're advancing that vision through incredible product innovation and extending our unmatched portfolio of identity solutions for workforce and customer identity.

Todd Mckinnon: Just this past quarter, we launched the general availability of three highly anticipated additions. The first is identity threat protection with Okta AI for workforce customers, which is powered by insights from across an organization security stack. Identity threat protection continuously detects and responds to identity threats both during and post authentication, amplify security signal sharing, and orchestrates remediation actions to support identity threat detection and response strategies. Also for workforce customers, we launched identity security posture management, the solution empowers customers to take control of their identity sprawl and harden their security posture through identity focus risk analysis and prioritized insights that help drive remediation.

Speaker Change: This past quarter, we launched the general availability of three highly anticipated additions.

Speaker Change: The first is identity theft protection with Okta AI for workforce customers, which is powered by insights from across an organization's security stack.

Speaker Change: Identity threat protection continuously detects and responds to identify threats, both during and post authentication amplifies security signal sharing and orchestrates remediation actions to support identity threat detection and response strategies.

Speaker Change: Also for workforce customers, we launched identity security posture management. This solution empowers customers to take control of their identity sprawl and harden their security posture through identity focused risk analysis, and prioritized insights that help drive remediation.

Todd Mckinnon: For the customer identity market, we released highly regulated identity. This solution delivers financial grade identity with elevated security, privacy, and UX controls for sensitive customer operations beyond login. That's tremendous innovation we're delivering to our customers.

For the customer identity market, we released highly regulated identity. This solution delivers financial great identity with elevated security privacy and UX controls for sensitive customer operations beyond Logan.

Speaker Change: That's tremendous innovation, we're delivering to our customers we have a strong pipeline of new products and features that we'll talk more about at octane, which takes place October 15th to 17th.

Todd Mckinnon: We have a strong pipeline of new products and features that we'll talk more about at Okta which takes place October 15 to 17. Come join us in Las Vegas for the biggest identity event of the year. You'll hear from Okta's leadership team along with fellow industry experts to discuss the future of identity and why it's not just the first line of defense, but the backbone of a company's holistic security strategy will also be hosting a Q&A session for analysts and investors at the event. Feature myself, Brett, Eugeniel, pace, or president of business operations, and John Addison, our CRO.

Speaker Change: Come join us in Las Vegas for the biggest I didn't even have a year, you'll hear from okta as leadership team along with fellow industry experts to discuss the future of identity and why it's not just the first line of defense, but the backbone of our company's holistic security strategy.

Speaker Change: We'll also be hosting a Q&A session for analysts and investors at the event featuring myself, Brett you Hany outpace our president of business operations and John Addison, Our CRO as we head into the second half of FY 'twenty five the priorities. We started the year with remain our top priorities today security growth and scale will take a moment to.

Todd Mckinnon: As we head into the second half of FY 25, the priorities we started the year with remain our top priorities today, security, growth, and skill. I'll take a moment to touch on the first two priorities. On the security front, in addition to delivering world class identity solutions, Okta is driving change with the Okta secure identity commitment, which is our long term pledge to lead the industry in the fight against identity. Since announcing this commitment, we've made significant progress in implementing new security measures and solutions.

Speaker Change: On the first two priorities on the security front. In addition to delivering World class identity solutions Okta is driving change with the okta secure identity commitment, which is our long term pledge to lead the industry in the fight against identity attacks.

Speaker Change: Since announcing this commitment we've made significant progress in implementing new security measures and solutions. These investments our raising the bar for identity security and further establishing us as a trusted partner.

Todd Mckinnon: These investments are raising the bar for identity security and further establishing us as a trusted partner. On the product security front, we released enhanced bot detection features across customer identity cloud. We've reduced credential stuffing attempts and malicious bot traffic by more than 90% for some of our largest customers. Our unwavering focus on security helps elevate the entire industry and the fight against identity based attacks.

Speaker Change: On the product security front, we released enhanced bot detection features across customer at any club, we've reduced credential stuffing attempts and malicious bot traffic by more than 90% for some of our largest customers. Our unwavering focus on security helps elevate the entire industry in the fight against identity based attacks.

Todd Mckinnon: Check out our updated Okta secure identity commitment white paper that was just published on our website today for more details. What's really interesting is how Okta secure identity commitment has triggered a new type of conversation with customers in process. As we improve ourselves, we help elevate the industry. Organizations are now reaching out to Okta to better understand the enhancements we've made to our own security posture so that they can take these best practices and implement them in their own environments. These best practices combined with Okta's products are helping our customers be more secure and do it faster. These types of conversations are incredible for building long term partnerships of trust with our customers.

Speaker Change: Check out our updated okta secure identity come in a white paper that was just published on our website today for more details.

Speaker Change: What's really interesting is how okta secure identity commitment has triggered a new type of conversation with customers and prospects as we improve ourselves we help elevate the industry organizations are now reaching out to okta to better understand the enhancements we've made to our own security posture. So that they can take these best practices and implement them in.

Speaker Change: Their own environments. These best practices combined with artist products are helping our customers be more secure and do it faster. These.

These types of conversations are incredible for building long term partnerships of trust with our customers.

Todd Mckinnon: Our second priority re-igniting growth includes several problems. The primary initiative is growth through our new and existing product offerings. Okta offers customers a platform of identity solutions for a holistic approach including passwordless access management, governance, privilege access, threat protection, posture management, and customer identity. A great success story for our new products is the rapid uptake and contribution of Okta identity governance in less than two years. Okta's OIG already has over 1,000 customers.

Speaker Change: Our second priority Reigniting growth includes several pronged. The primary initiative is growth through our new and existing product offerings Okta offers customers a platform of identity solutions for a holistic approach, including password list access management governance privilege access threat protection posture management and customer identity Ah.

Speaker Change: Success story for our new products is the rapid uptake in contribution of okta identity governance and less than two years, Oh Gee already has over 1000 customers. Another key growth initiative is deepening our relationships with key channel partners, especially global systems integrators.

Todd Mckinnon: Another key growth initiative is deepening our relationships with key channel partners, especially global systems integrators and leveraging them to enhance our global expansion. In Q2, the average size of deals conducted through partners was over three times larger than our average direct deal. Furthermore, eight of our top 10 global deals had partner contribution. Today, more than 40% of our revenue mix is generated through indirect channel partners and we believe we can drive that number meaningfully higher.

Speaker Change: And leveraging them to enhance our global expansion in Q2. The average size of deals conducted through partners was over three times larger than our average direct deal.

Speaker Change: Furthermore, eight of our top 10 global deals had partner contribution today more than 40% of our revenue mix is generated through indirect channel partners and we believe we can drive that number meaningfully higher to wrap things up we're really excited about expanding our modern identity platform with new products and features identity is.

Todd Mckinnon: To wrap things up, we're really excited about expanding our modern identity platform with new products and features. Identity is security. Okta has an unmatched array of identity products that are helping to solve critical security needs, drive customer experience, and optimize technology infrastructure for our customers. We're taking the right steps to advance our position as a leader in the identity market, while remaining focused on investing for growth while driving spin deficiencies in cash flow.

Security and Okta has an unmatched array of identity products that are helping to solve critical security needs drive customer experience and optimize technology infrastructure for our customers. We're taking the right steps to advance our position as a leader in the identity market, while remaining focused on investing for growth while driving spend efficiencies.

Todd Mckinnon: I look forward to seeing many of you at Okta in Las Vegas in about six weeks.

Brett: <unk> cash flow I look forward to seeing many of you at octane in Las Vegas in about six weeks now here's Brett to cover the financial commentary and talk about how we're positioned for long term profitable growth. Thanks, Todd and thank you everyone for joining US today, just a quick reminder, that most of my typical commentary on the quarterly financials was published on Okta.

Brett Tighe: Now here's Brett to cover the financial commentary and talk about how we're positioned for long term profitable growth. Thanks Todd and thank you everyone for joining us today. Just a quick reminder that most of my typical commentary on the quarterly financials was published on Okta's investor relations website at the same time as the press release.

Brett: Investor Relations web site at the same time as the press release I'll cover a few of the financial highlights, but will focus my commentary on broader topics before getting into our business outlook.

Brett Tighe: I'll cover a few of the financial highlights, but we'll focus my commentary on broader topics before getting into our business outlook. The challenging macro environment continues to show up in our business in a couple of notable ways. First, it's impacting our mix of new business versus upsells, which remains weighted more towards upsells. And second, organizations are scrutinizing budgets and rationalizing their software spend, resulting in lower MAU assumptions in our customer identity business, and fewer seats within our workforce identity business. These actions are relatable because Okta has been going through the same exercise of rationalizing our own software spend over the past two years. We expect this trend to continue in the current economy.

Brett: The challenging macro environment continues to show up in our business in a couple of notable ways.

Brett: It's impacting our mix of new business versus Upsells, which remains a weighted more towards upsells and second organizations are scrutinizing budgets and rationalizing their software spend resulting in lower <unk> assumptions and our customer identity business and fewer seats within our workforce identity business.

These actions are related because okta has been going through the same exercise of rationalizing our own software spend over the past two years. We expect this trend to continue in the current economy.

Brett Tighe: On the positive side, our platform strategy is working. We're selling more products to our new and existing customers, including new products like Okta identity governance and Okta privileged access. And our data tells us that customers that adopt more products have the highest retention rate. Before getting into the Q2 financial review, I'll note that similar to the prior two quarters, as we have analyzed our key metrics, we could not attribute a quantifiable impact from the security incident on our Q2 results. And we'll not quantifiable the event likely had some level of impact. We will continue to monitor this as we move through the rest of FY25.

Brett: On the positive side, our platform strategy is working we're selling more products to our new and existing customers, including new products like okta identity governance, and okta privileged access and our data tells us that customers that adopt more products have the highest retention rates.

Before getting into the Q2 financial review I'll note that similar to the prior two quarters as we have analyzed our key metrics, we could not attribute a quantifiable impact from the security incident on our Q2 results and will not quantifiable. The event likely had some level of impact we will continue to monitor.

Brett: As we move through the rest of FY 'twenty five.

Brett Tighe: Moving on to some financial highlights. We continue to build on the efficiency initiatives that we've been implementing over the past two years. Our Q2 financial performance was highlighted by record operating profitability, including achieving gap profitability for the first time. Cash flow was strong as well. Once again, the primary area of strength was with large customers. Our fastest growing cohort was $1 million plus ACV customers. Global 2000 companies typically have the most challenging identity needs because of the complexity of their infrastructure.

Brett: Moving on to some financial highlights.

Brett: We continue to build on the efficiency initiatives that we've been implementing over the past two years, our Q2 financial performance was highlighted by record operating profitability, including achieving GAAP profitability for the first time cash flow was strong as well once again the primary area of strength was with large customers are fast.

Just growing cohort was $1 million plus HEV customers global 2000 companies typically have the most challenging identity needs because of the complexity of their infrastructure.

Brett Tighe: This is where Opta shines and is another great proof point of our success with large organizations. We now count over 40% of the Global 2000 as Okta customers. That's great progress, but it also represents a lot of runway to increase our overall penetration of this group, as well as a tremendous opportunity to expand our footprint within these accounts. We're also seeing continued positive trends around weighted average contract term length for contracts signed in the quarter, which increased year over year, particularly with new customers. That's a great sign of customer confidence with Okta.

Brett: This is where after shines and is another great proof point of our success with large organizations, we now count over 40% of the global 2000 as okta customers. That's great progress, but it also represents a lot of runway to increase our overall penetration of this group as well as a tremendous opportunity to expand our.

Brett: Footprint within these accounts.

Brett: We're also seeing continued positive trends around weighted average contract term lengths for contracts signed in the quarter, which increased year over year, particularly with new customers. That's a great sign of customer confidence with okta.

Brett Tighe: Now let's turn to our business outlook for Q3 and FY25. As always, we take a prudent approach to forward guidance and we have not made any changes in our approach. We are factoring in a challenging macro environment, consistent with what we've experienced in Q2. We also continue to incorporate some conservatism into our outlook for the remainder of this fiscal year related to potential impacts from last year's security incident. For the third quarter of FY25, we expect total revenue growth of 11%, current RPO growth of 9%, non-gap operating margin of 18%, and free cash flow margin of approximately 20%.

Brett: Now, let's turn to our business outlook for Q3, and FY 'twenty five.

Speaker Change: As always we take a prudent approach to forward guidance and we have not made any changes in our approach. We are factoring in a challenging macro environment consistent with what we've experienced in Q2. We also continued to incorporate some conservatism into our outlook for the remainder of this fiscal year related to potential impacts from last year's of Sig.

Speaker Change: <unk> incident.

Speaker Change: For the third quarter of FY 'twenty five we expect total revenue growth of 11% current <unk> growth of 9% non-GAAP operating margin of 18% and free cash flow margin of approximately 20%.

Brett Tighe: We are raising our outlook across the board for the full year FY25. We now expect total revenue growth of 13%, non-gap operating margin of 21%, and a free cash flow margin of approximately 23%.

Speaker Change: We are raising our outlook across the board for the full year FY 'twenty five we now expect total revenue growth of 13% non-GAAP operating margin of 21% and a free cash flow margin of approximately 23%.

Brett Tighe: To wrap things up, we're pleased with the progress we've made to drive operational efficiencies. We've demonstrated exceptional leverage in our model over the past two years, and we remain focused on delivering profitable growth for years to come.

Speaker Change: To wrap things up we're pleased with the progress we've made to drive operational efficiencies, we've demonstrated exceptional leverage in our model over the past two years and we remain focused on delivering profitable growth for years to come with that I'll turn it back to Dave for Q&A Dave.

Dave Gennarelli: With that, I'll turn it back to Dave for Q&A. Dave?

Dave Gennarelli: If you have quite a few hands raised already, I'll take them in order, and in the interest of time, please living yourself to one question so that we can get to everyone, and then you're welcome to queue back up with additional questions.

Dave: There's quite a few hands raised already and I'll take them in order and in the interest of time. Please limit yourself to one question. So that we can get to everyone and then you're welcome to queue back up with additional questions.

John DiFucci: So that will take our first question with John DeFouci of Guggenheim. Thanks, thanks everybody.

Dave: So with that we'll take our first question with John <unk> of Guggenheim.

Dave: Thanks, Thanks, everybody.

John DiFucci: Listen, I don't normally say this, but the results look good. I don't say a nice job, guys. I'm on my quarter, but you guys are doing a good job, especially given what happened a year ago on how you've done things with the company focused on things. We hear it in the field, we see it in the results.

Speaker Change: So listen I don't normally say this but.

Speaker Change: The results were good.

Speaker Change: I don't say nice job guys.

<unk> quarter, but but it is like you guys are doing a good job, especially given what happened a year ago on how you've done things with the company.

Focused on things like we all we hear it in the field, we see it in the results.

John DiFucci: Well, I didn't come back to something that's going to make Brett laugh a little bit. I hope it makes him laugh and not cry. The one thing that people don't like about your results is your guidance for CRPO. I know Dave's going to not going to take me first ever again, but there's so many things that affect that. You're only one of four companies out of 30 that actually tell people to look at that.

Speaker Change: But I didn't come back to something that's gonna make Brett laugh, a little bit I hope it makes them laugh cry I don't the one thing that.

That people don't like about your results is your guidance for CRP O. I know, Dave is going to take me first ever again, but but.

Speaker Change: And there's so many things that affect that you're only one of four companies out of 30 that actually tell people to look at that so you're pretty much saying, hey, listen we're going to go down to single digits over the next year and growth.

John DiFucci: So you're pretty much saying, hey, listen, we're going to go down there. We're going to single digits over the next year in growth and revenue. And I don't believe that. And you don't either. But I think people look at that and they're like, oh, well, the CRPO is the leading indicator of what the growth is going to be in revenue going forward.

Speaker Change: And revenue and I don't believe that and you don't either.

Speaker Change: And I, but.

Speaker Change: But I think people look at that and I'm like Oh, well the CRP owes the leading indicator of what the growth is going to be in revenue going forward.

John DiFucci: I just want you guys to reconsider that. You're only one of four companies that do it. And two out of those other three. They get on the calls every every quarter and they explain why it doesn't work.

Jessica she guys reconsider that you're only one of four companies that do it in two out of those other three they get on the calls every every every quarter. It may explain why it doesn't work. So I don't want to sound like the Hunter here because I think you did really good job I really do and I think everybody does.

John DiFucci: So I don't want to sound like a downer here because I think you did really good job. I really do. And I think everybody does. But that one thing makes, you know, it's a little bit of a numbers game. And I know you don't want to do that. You don't run your business that way.

Speaker Change: But the one thing and it makes.

Speaker Change: It's a little bit of a numbers game and I know you don't want to do that you don't run your business that way you shouldn't run it that way.

Brett Tighe: You shouldn't run it that way. Yeah, it's really good feedback, John. Really appreciate to do that. I think when we look at the business, there are lots of really good things going on. There's the success with large enterprises, fastest growing cohort. There's the new products. I think we look out and think about guidance and where the opportunity is going in the long term. We're super bullish and lots of things going right.

It's really good feedback I really appreciate it I think when we look at the business. There are lots of really good things going on there is the success with large enterprises fastest growing cohort. There is the new products I think we will look out and think about guidance and where the opportunity is going in the long term, we're super bullish and lots of things going right I think in the medium term or the next quarter.

Brett Tighe: I think in the medium term or the next quarter or two, where we have some fruits in there in there to really lap the security incident. We've done a lot of work with customers and we've done a lot of work internally to short security and make sure that we take that from a negative to a positive in terms of being proactive about that. But I think when you look at our outlook, we're going to be conservative there in terms of lapping that in terms of guidance.

Speaker Change: There are two where we have some prudence in there and there really lap the security incident.

Speaker Change: We've done a lot of work with customers and we've done a lot of work internally to sharp security and make sure that we take that from a negative to a positive in terms of being proactive about that but I think when you look at our outlook, where we are going to be conservative there in terms of lapping that in terms of guidance.

Brett Tighe: I think that's just a pretty big to do. And the second thing is that the economy is still consistent with what we've seen in the past three quarters is still, you know, there's headlines and there's challenges. So we want to see that stabilized before more confident with raising that guy.

Speaker Change: It's the prudent thing to do and then the second thing is that the economy is still consistent with what we've seen in the past few quarters or so.

Speaker Change: Those headwinds and those challenges so we want to see that stabilize before we're more confident with the resin that guy.

John DiFucci: Okay, and I think no issues at all with the revenue guy because you said a precedent. It's the CRP open anyway.

Speaker Change: Okay, and I think no issues at all with the revenue guide because you've set a precedent CRC, but anyway I'll get it I understand and I do appreciate the feedback.

Brett Tighe: I'll go ahead and say no, I do appreciate the feedback, John. I look forward to our continued debates. Thanks, bro.

Speaker Change: John I look forward to our continued debates.

Brett: Thanks, Brett Thanks, everybody.

Unknown Executive: Thanks, everybody.

Shrenik Kothari: Okay, let's go to Shrinikatari at there. Yeah, thanks for taking my question. So good to see you. When you guys called out the indirect channel partners, contributing more than 40% and just in the light of the commentary on the macro, right? Discover stable, but still kind of challenging, which is impacting the new business and the upsells just curious. What specific like to say initiatives in place to deepen the relations with the GS size, right?

Speaker Change: Okay, Let's go to shrink authority of Baird.

Speaker Change: Yeah. Thanks.

Speaker Change: For taking my question so.

Speaker Change: Good to see you guys called out the indirect channel blockers.

Speaker Change: Garnering more than 40 per fan.

Speaker Change: Just in light of your commentary on the macro right because that's kind of a stable, but still challenging which is impacting the business and the upsells.

Speaker Change: Just curious.

Speaker Change: What specific like they'll clear initiatives.

Speaker Change: To deepen the relationship with the GSI is right you know that banks are about it.

Shrenik Kothari: You did mention about it. And can you just share like how the GS emotion is kind of taking place in terms of our guys are engaging with a number of deals, deals sizes, any, any insight into kind of cycle lens around those kind of deals and those kind of metrics that would be great. Partners overall are really important to us. We've talked about it in the last few calls about the investments in the focus we've had on the partner program.

Got it and then I'll just share like how that GSI emotion.

Speaker Change:

Speaker Change: Kind of taking place in terms of our guys are engaging.

Speaker Change: Number of deals deal sizes, any any insight into kind of a cycle lengths are on those kind of deals in and those kind of metrics separately Greg.

Speaker Change: Partners overall are really important to us we've talked about it in the last few calls about the investments and the focus we've had on the partner program. We have our elevate partner program and launched a few quarters ago, which is all about making sure. We focus our channel partners in terms of which ones, we're prioritizing and making sure that they can they are equipped to do end to end servicing pre sales post.

Shrenik Kothari: We have our Elevate Partner Program in the last few quarters ago, which is all about making sure we focus our channel partners in terms of which ones were prioritizing and making sure that they can they're equipped to do end-to-end servicing, pre-sales, post-sales, and on and on. So the staff on the partner overall are really good. We have about 40% of our businesses goes through partners in terms of building and on their paper, which is good.

Speaker Change: Yes.

Speaker Change: And on and on so the stack on the partner overall are really good we have about 40% of our businesses goes through partners in terms of billing.

Speaker Change: On their paper, which is good we think we can do better than that we think our involvement in the ecosystem more of that and were pushing hard to make that happen you called out there's other parts of the partner program, particularly Isps IAC partnerships, where one of our security Ics particular, and it goes on one of our most important workforce deals. This quarter was a fortune 500 transportation.

Shrenik Kothari: We think we could do better than that. We think that our involvement in the ecosystem warrants that and we're pushing hard to make that happen. You called out, there's other parts of the partner program, particularly ISVs, ISV partnerships where one of our security ISVs, particularly goes in. One of our most important workforce deals in this quarter was a 4 to 500 transportation company, and that deal was sourced through a security ISV partner.

Speaker Change: Company and that deal was sourced through our security is any partner so they're in that deal.

Shrenik Kothari: So there in that deal saying, this customer wants to go zero trust, wants to have a broad security suite, plus a broad identity suite, that ISV brings us in, that's a great partnership there. We have MSPs we can talk about, but the thing you highlight that I'm most excited about is the GSI's. So it's really, we're really starting to get strong momentum with global systems integrators, and I think they're seeing the customer's demand, help modernizing identity and pivoting their technical infrastructure is a better identity story.

Speaker Change: This customer wants it goes into a trust and want to have a broad security suite plus abroad identity suite that vendor that obviously bring us and that's a great partnership there. We have MSP is we can talk about but the thing you highlight that I'm. Most excited about is the <unk>. So it's really we're really starting to get strong momentum with global systems integrators, and I think they are seeing.

Shrenik Kothari: And then when those GSI's look around the market, what they see is they see two visions. They see platform companies like Microsoft that want you to buy everything from them, and you're really locking the customer into their stack, and then you see independent neutral identity platforms. And in that world, you see really legacy software companies that have their own challenges, and then you see Octane. It's a pretty stark contrast, and I think that's why those GSI's leading in.

Speaker Change: In the customer's demand help modernizing identity and pivoting their technical infrastructure has done a better either new story and then when those GSI is look around the market what they see as they see two visions of the market. They see platform companies like Microsoft that want you to buy everything from them and you're really lock in the customer end.

Speaker Change: Their stock and then you see independent neutral as any platforms and in that World you see really legacy software companies that are have their own challenges and then use the okta and it's a pretty stark contrast, and I think that's why.

Speaker Change: Those GSI.

Speaker Change: And its something Ive personally been working on and we are a high priority and I'm excited to make progress and share more actually quantitative progress over the next several quarters.

Todd Mckinnon: It's something I've personally been working on, and we have a high priority on, and I'm excited to make progress and share more actually quantitative progress over the next several quarters. Yeah, I would just add that not just Todd working on it's the entire management team and good example would be one of those GSI's coming to our executive leadership off site actually a couple of weeks ago to go spend time with us, be able to align better, be able to say, hey, this is where we have a can partner better, we obviously have teens dedicated to each one of these partners.

Yes, I would just add that not not just hard working honest the entire management team and good example would be one of those GSI is coming to our.

Executive leadership off site actually a couple of weeks ago to go spend time with us to be able to align better Bill say Hey, This is where we are.

Speaker Change: How we can partner better we obviously have teams dedicated to each one of these partners and so it's really diving into even trying to go through the tactical of okay, you're going to do this we're going to do that how can we help each other.

Todd Mckinnon: And so it's really us diving in deep and trying to go through the tactical level. Okay, you're going to do this. We're going to do that. How can we help each other both make each other a bunch of money? And so that's, I mean, we're giving the example for GSI's, but that exists in a lot of the areas that Todd was just talking about across the business. So we're just we're diving in deeper and investing the time and energy and show in the partner community that we're really serious about, you know, partnering together and driving this opportunity forward together.

Speaker Change: Make each other a bunch of money.

Speaker Change: And so that's I mean, we're giving the example for GSI is that that exists in a lot of the areas that Todd was just talking about.

Speaker Change: Across the businesses. So we're just we're diving in deeper in <unk>.

Speaker Change: And the time and energy in and showing the partner community that we're really serious about.

Speaker Change: You know partnering together and driving this opportunity forward together.

Todd Mckinnon: Yeah, and hopefully I know a lot of the folks on the call on the notes I've read are picking up with better partner sentiment about octa in terms of our ability to effectively work with octa partner effectively with the community. And that's something very good to hear and we continue to focus on that to make that even better and make the ecosystem of even stronger supporter of octa. Come on, thanks.

Speaker Change: Hopefully I know a lot of the folks on the call on the notes I've read are picking up with better partner sentiment about okta and just in terms of our ability to effectively work with okta and partner effectively with the community and that's something very good to hear and we continue to focus on that to make that even better and make the ecosystem even stronger supporter of ours.

Speaker Change:

Speaker Change: Got it thanks.

Shrenik Kothari: Thanks, Renek.

Speaker Change: Thanks, Brian next up we have annick Bowman from Jefferies.

Annak Bowman: Next up, we have Annak Bowman from Jeffries. Hi guys, I'm on for a joke out today.

Annick Bowman: Thank you Paul.

Annak Bowman: I just want to ask where are you and yourself and the woman journey that relates to science specifically any key milestones to call out and how does that impact performance is quarter. I think it's we're still working hard on that. It's very important. I think it's getting better, but it's still not where it needs to be, which basically means we can still do better and sells productivity. And that's really it's overall go to it's really when I say sales productivity that's the end result of the full go to market from marketing to conversions of sales prosecution to so I think we can still get better in terms of productivity there and we're, you know, we're saying like it's turning the red direction, but we're still not the levels I think we can get to in terms of particularly driving growth and also driving efficiency and overall business.

Annick Bowman: Just on <unk>.

Annick Bowman: Women journey.

Speaker Change: Anything to call out and how does that impact.

Yeah.

Speaker Change: I think it's we're still working hard on that is very important I think it's getting better, but it's still not where it needs to be which basically means we can still do better in sales productivity.

Speaker Change: Really.

Speaker Change: Overall, it's really when I say sales productivity. That's the end result of.

Speaker Change: Before.

Speaker Change: Go to market from marketing to conversion to sales prosecution. So.

Speaker Change: I think we can still get better in terms of productivity, there and where we're sitting like it's turning in the right direction, but we are.

Speaker Change: Filling out the levels I think we can get to in terms of.

Speaker Change: Predict, particularly driving growth and also driving efficiency in the overall business.

Todd Mckinnon: Yeah, the one metric that we have tracked for a long time on that is participation by the field. Inside and deals both from a closed one deals and also a pipeline, the participation in the pipeline. We obviously track it by workforce as well. So we track it by product to see how we're trending. It's something we talked about for several quarters. That number continues to go up into the right. But just like Todd said, it's not exactly where we want it to be.

Yes, the one metric that we have tracked for a long time on that is participation by the field.

Speaker Change: In <unk> deals both from a closed one deals and also our pipeline.

Speaker Change: Participation in the pipeline, we obviously track it by workforce as well so we track it by product to see how we're trending it's something we've talked about for several quarters that number continues to go up into the right, but just like Todd said, it's not exactly where we wanted to be we feel like we can execute better in this market. It's a massive market and we're very optimistic in the long term, but these changes that we've been implementing.

Todd Mckinnon: We feel like we can execute better in this market. It's a massive market and we're very optimistic in the long term. But these changes that we've been implementing, whether it be more enablement, the way we're organized from a farmer perspective or specialization. You can we feel like that's going to help us in the long run, despite the macro headwinds that we've been facing here in the short term.

Todd Mckinnon: Great.

Todd: It would be more enablement the way, we're organized from a hunter farmer perspective or.

Speaker Change: Specialization.

Speaker Change: We feel like Thats going to help us in the long run despite the macro headwinds that we've been facing here in the short term.

Speaker Change: Great next up we have Marilyn Brooks from Bofa.

Madeline Brooks: Next up, we have Madeline Brooks from B.Vay. Great. Thanks so much for taking my question. Two quick ones for me. The first bread was more on your rationalization commentary. I guess I understand the science side, but on the workforce side, we've been hearing about a lot of breaches in the news and pretty, you know, big notable ones like snowflake 18 TV stem not just from pan security, but just basic identity security, not having MFA enabled right.

Marilyn Brooks: Great. Thanks, so much for taking my question two quick ones from me.

Marilyn Brooks: First Brent linked more on your rationalization commentary.

Madeline Brooks: So I guess, you know, I'm struggling a little bit to see why companies would rationalize something like workforce identity spend. So if you just give it a little bit more color in terms of maybe where they're rationalizing or also two, it's a market, maybe just more mature and saturated. And then I've one more follow-up question after that. Yeah, Madeline, maybe Brad, if I could jump on you real quick. First of all, our one thing that's interesting is that if you look at overall breaches 85% of them are involved some kind of compromise identity, which really is staggering.

Speaker Change: They understand the science side, but on the workforce side now we've been hearing about a lot of breaches in the news and pretty big notable ones like Snowflake AT&T has done not just from Pam security, but just basic identity security not not having MSA anymore right now.

Speaker Change: I guess I'm struggling a little bit to see why companies would rationalize something like workforce identity and so if you could just give us a little bit more color in terms of maybe where they're rationalizing or offer to you is the market maybe gets more mature and operate it and then for my follow up question after that.

Speaker Change: I don't know maybe.

Speaker Change: And if I could jump on it.

First of all one thing Thats interesting is that.

Speaker Change: If you look at overall breaches, 85% of them are involve some kind of compromise that entity.

Speaker Change: Which really is staggering when you think about it so if a company or organization or and shore up their identity security Theyre going to go a very long way toward potentially solve in almost all of their branches, which was pretty interesting I think one of the things in the past it's been a challenge is that <unk>.

Madeline Brooks: You think about it. So if a company or organization are can shore up their identity security, they're going to go a very long way toward potentially solving, you know, almost all of their breaches, which is pretty interesting. I think one of the things in the past has been a challenge is that modernizing identity has been a forklift upgrade. You had to modernize the whole thing. And that was certainly true with legacy identity technologies.

Madeline Brooks: And I think October years has made that adding on something like multifactor authentication is easier. But it's still too much of a heavy lift to set for organizations to go through. And so one of the things with these new products we have like identity governance or identity security posture management or privilege access is you basically it's a shorter time to that concrete security ROI. Security ROI is always a little bit tricky because you know that if you have no breach is the ROI.

Speaker Change: Modern is an identity has been a forklift upgrade you've had you had to modernize the whole thing.

Speaker Change: And that was certainly true with legacy technologies in I think October there is made that.

Speaker Change: Adding on something like multifactor authentication is easier.

Speaker Change: But it's still too much of a heavy lift for organizations to go through and so one of the things with these new products, we have like identity governance or is it a security posture management are privileged access is basically it's a shorter.

Speaker Change: Time to that concrete security ROI.

Speaker Change: Security ROI is always a little bit tricky because you know if you have no breaches or ROI, it's kind of like the <unk>.

Madeline Brooks: It's kind of like the return is sometimes nothing happens, which is a little bit a little bit challenging to justify sometimes you have to make a risk based decision. But these new products like for example, identity security posture management right when you install this product, it tells you your security vulnerabilities and your identity stagger across multiple systems and identity providers. So that's a very quick time to, you know, from buying the product to seeing risk reduction, even in the demonstration cycle.

Speaker Change: Return is sometimes nothing happens, which is little bit a little bit challenging to justify sometimes.

Speaker Change: You have to make a risk based decision, but these new products like for example are there any security posture management.

Speaker Change: Right when you install this product. It tells you your security vulnerabilities in here at any stack across multiple systems.

Speaker Change: And then any provider. So that's a very quick time to from buying the product are seeing risk reduction even in the demonstration cycle.

Madeline Brooks: You know, and I think that's one of the things about our product portfolio that will drive growth even though in the past, we've seen, you know, security breaches happening more and more identity based security breaches happening more and more yet it hasn't really changed the speed and urgency, which companies are upgrading their entire identity stacks like you would expect it would. And just more on the rationalization point, what I'm talking about really is around if you're going to go do an upsell and originally let's say two, three years ago this company had aspirations of hiring another 15% of people right they go and buy 15% more licenses and you'd see that reflected in their attention, current IPO, revenue, all that good stuff.

Speaker Change: And I think that's one of the things about our product portfolio that will drive growth.

Speaker Change: Even though in the past we've seen some.

Speaker Change: Acuity breaches happening more and more of an identity based security breaches have been more and more.

Speaker Change: It hasn't really changed the speed and urgency which companies are upgrading their entire identity stocks like you would expect it would.

Speaker Change: And just more on the rationalization point when I'm talking about really is around.

Speaker Change: If youre going to do an upsell and originally let's say two or three years ago. This company had aspirations of hiring another 15% of people.

Speaker Change: They've grown by 15% more licenses and you'd see that reflected in our retention incur an IPO revenue all that good stuff.

Madeline Brooks: Right now people's expectations around hiring is not 15% higher right so we're not getting that upsell like we used to. So yeah, they're not you know declining but they're just not buying as much as they as they have historically done, made contract or at renewal and so that's really what we're saying when they say rationalizing the licenses on the workforce side and also on the monthly act as you use your side on the customer and any side as well so it just feels very macro oriented that people are a little bit more cautious at this point about their contractual agreements and not getting too much out over their skis given the uncertainty out there with the economy.

Speaker Change: Right now people's expectations around hiring is not 15% higher right. So we're not getting that upsell like we used to so yes. They are not declining, but they're just not buying as much as they as they have historically done mid contract or at renewal and so that's really what we're saying when I say rationalizing the licenses on the workforce side and also on the monthly active.

Speaker Change: User side on the customer side as well so it just feels very macro oriented that people are a little bit more cautious at this point about their contractual agreements and not getting too much out over their skis.

Speaker Change: Given the uncertainty out there with the economy, yes, a couple of years ago. A couple of years ago. So we think this customer at any project is going to grow 15% will buy 30% more mouse now we think it might grow at 10%, so what about 5% more and see if it grows 10% if we really need those.

Madeline Brooks: Yeah, a couple years ago, a couple years ago, yeah, we think this customer day project is going to grow 15% will buy 30% more mouse now it's we think it might grow 10% so we'll buy 5% more and see if it grows 10% see if we really need those with a different little bit of different world. Got it and then maybe just one more quick one two changing gears federal and I kind of agree with John's comments right now we all hear really positive things on the channel.

Speaker Change: A different little different world.

Speaker Change: Got it and then maybe just one more quick one kid changing gears Saturn I.

John: I kind of agree with John's comments right as you know, we we all hear really positive things in the channel I guess I'm just trying to pair the CRP a guide and kind of outlook for next year and versus what happened in this quarter or was this more of an outsized federal quarter is that kind of what those numbers are pointing to or which I don't know if this is kind of more normalized what we've seen previously.

Madeline Brooks: So I guess I'm just trying to pair the CRPO guide and kind of outlook for next year versus what happened this quarter with this more of an outside federal quarter is that kind of what those numbers are pointing to or with federal business kind of more normalized what we've seen previously. Federal is definitely more normalized for what we've seen it's not that I can outsized impact and that's impacting current IPO I think the one thing to keep in mind with us.

Speaker Change: Federal is definitely more normalized for what we've seen them, it's not like an hour.

Speaker Change: Outsized impact and thus impacting current IPO I think the one thing to keep in mind with US I think with some other companies current RVO average duration inside current RVO can fluctuate pretty heavily or is it can a little bit, but not very much and I think that's some of the weakness that others talk about.

Madeline Brooks: I think with some other companies current IPO average duration inside current IPO can fluctuate pretty heavily ours does it can a little bit but not very much and I think that's some of the weakness that others talk about. But ultimately when we think about the guidance there's really two factors like Todd was talking about earlier was which is the macro which is what we just talked about with upsell just not being there like they used to be on the license count ma you count new logos being more challenging although we did have a better net new customers in the quarter it's still not as high as we would like it to be and we do believe it's pressured by the macro and then the second component is the security incident.

Speaker Change: But ultimately when we think about the guidance Theres really two factors like Todd was talking about earlier, which is the macro which is what we just talked about with Upsells just not being there like they used to be on the license count Mou counts.

New logos being more challenging although we did have a better net new customers in the quarter, it's still not as high as we would like it to be and we do believe it's pressured by the macro and then the second component is the security incident. Despite the fact that we haven't found any quantifiable evidence that our financials have been impacted our performance has been impacted by the security incident, we're still being prudent about that.

Madeline Brooks: Despite the fact that we haven't found any quantifiable evidence that our financials had been impacted or performance has been impacted by the security incident we're still being prudent about that as we go through the back half of the year. One thing to keep in mind is Todd was talking about earlier right security remains the top priority for us from an investment perspective we've made a ton of progress toward becoming one of the you know goal of becoming one of the world's largest world's most secure companies.

Speaker Change: As we go through the back half of the year one.

Speaker Change: One thing to keep in mind as Todd was talking about earlier, great security remains a top priority for us from an investment perspective.

Speaker Change: We've made a ton of progress towards becoming one of the goal of becoming one of the world's largest worlds.

Speaker Change: Most secure companies, but hopefully today you saw we updated the okta secure identity commitment talked about what we've done over the last 90 days and then what we're going to do out into the future. We're putting a lot of resource into that because we view that as a very high importance strategic initiatives.

Madeline Brooks: But hopefully today you saw we updated the octa secure identity commitment talked about what we've done over the last 90 days and then what we're going to do out into the future we're pointing a lot of resource into that because we view that as a very high importance strategic initiative. To drive growth or absolutely drive growth absolute just be one of the most secure companies out there that's you know we're obviously you know an identity company that in security is really important obviously as an offshoot of identity so we we clearly want to be one of the most world's most secure company.

Speaker Change: To drive growth or absolutely drive growth absolutely just be one of the most secure companies out there.

Speaker Change: We're obviously.

Speaker Change: And identity company that in security is really important obviously is an offshoot of identity. So we clearly want to be one of the most one of the world's most secure company Sir.

Brett Tighe: Lisa, Great, thanks so much for the time, team.

Speaker Change: Great. Thanks, so much for the time frame.

Unknown Attendee: Okay, let's go to Charlotte Beddick at JPMorgan. Hi, thank you so much for taking the question. Hi, I'm on for Brian Essex. Yeah, you guys are welcome for that. We understand. Great, quick question. So I know you spoke about strength, large enterprise. You speak about, I guess, how, what you're seeing after being at the market.

Speaker Change: Okay, Let's go to Charlotte <unk> at Jpmorgan.

Charlotte: Hi, Thank you so much for taking the question.

Sure.

Speaker Change: Hi, I'm.

Charlotte: I'm on for Brian Essex.

Speaker Change: We understand that.

Speaker Change: Quick question I know you spoke about.

Speaker Change: Strength in large enterprise.

Speaker Change: Yes.

Speaker Change: Youre seeing.

Speaker Change: Yeah.

Speaker Change: Yes.

Our core areas.

Speaker Change: Alright, thank you.

Brett Tighe: Yeah, I can take that one. SMB continues to be impacted by the macro. If you look at net retention, for example, the enterprise net retention rate is higher than the overall rate and SMB is below it. We have seen that trend over the last several quarters as you've heard us talk about. Her enterprise is stronger. SMB has been weaker and we believe that's directly related to that. The macro embedded in the guidance here today, we, we continue to believe the macro has been stable for several quarters now.

Speaker Change: Yes, I can take that one.

Speaker Change: SMB continues to be impacted by the macro.

Speaker Change: If you look at net retention for example, the.

Speaker Change: Enterprise net retention rate is higher than the than the overall rate in SMB is below and we have seen that trend over the last several quarters as you've heard us talk about her enterprises stronger SMB has been weaker and we believe that's directly related to the macro.

Speaker Change: Embedded in the guidance here today.

Speaker Change: We continue to believe the macro as well it's been stable for several quarters now we believe it stays in this.

Brett Tighe: We believe it stays in this environment. The macro stays the same over the back half. And that's what embedded in the guidance, all of our commentary here today. And with that, do you expect like net dollar retention to stay pretty much level up where it is right now, you know, well, first let's start with where the most important factor is on that retention, which is grocery attention, that remains healthy. And then in Q2, really Q2, the decline 111 down to 110.

The environment the macro stays the same over the back half and Thats what is embedded in the guidance all of our commentary here today.

Speaker Change: And with that do you expect like net dollar retention to stay pretty much where it alright.

Right now.

Speaker Change: Well first let's start with where the most important factor is our net retention, which is gross retention that remains healthy.

Speaker Change: And then in Q2 really Q2, the decline 111 down to 110.

Brett Tighe: That's on the back of these seat up cells that are not there like we talked about a couple of times on this call. We do expect that trend to continue into into the back half and we do we do see a little pressure on the net retention. We see it ticking down for those reasons, the macro reasons we talked about and also SMB putting some pressure on the on the net retention rate and total.

Speaker Change: That's on the back of the seat up cells that are not there like we talked about a couple of times on this call.

Unknown Attendee: Question.

Speaker Change: We do expect that trend to continue into.

Speaker Change: Into the back half and we do we do see a little pressure on the net retention, we see it ticking down for those reasons. The macro reasons, we talked about and also SMB, putting some pressure on the on the net retention rate in total.

Speaker Change: That's right.

Brett Tighe: Next, let's go to Joe Vandrick at Scotia Bank. All right. Yeah, this is Joe on for Patrick Colville. So congrats on reaching gap profitability. Should we expect that to be the new normal going forward in fiscal 25 and fiscal 26. And then it looks like sales and marketing declined in the quarter. Is that going to be a continued source of leverage this year?

Speaker Change: Great next let's go to Joe Vendrick at Scotiabank.

Joe Vendrick: Alright, Yes. This is Joe on for Patrick Colville said, congrats on reaching GAAP profitability should we expect that to be the new normal going forward in fiscal 'twenty five in fiscal 'twenty six.

And then it looks like sales and marketing declined in the quarter.

Speaker Change: Is that going to be a continued source of leverage this year.

Brett Tighe: So the first question around gap profitability and we don't we don't guide gap profitability, but we're very pleased with the overall results are becoming gap profitable. Frankly, it's a result of all the work we've been doing over the last several years around rationalizing software, spend rationalizing costs, real estate moving people into lower cost regions. To be able to allow us to invest back into other areas like security, you've heard us talk about security a lot.

Speaker Change: So the first question around GAAP profitability, and we don't we don't guide GAAP profitability, but we're very pleased with the overall results are becoming GAAP profitable frankly, it's a result of all the work we've been doing over the last several years around.

Rationalizing software has been rationalizing costs real estate moving people into lower cost regions to be able to allow us to invest back into other areas like security you've heard us talk about security a lot we've been able to improve these margins while also putting a lot of money into security to become one of those.

Brett Tighe: We've been able to improve these margins while also putting a lot of money into security to to become one of those, you know, great security comes one of the world's most secure companies out there. And so, you know, as we continue to to go forward, I don't have any expectations one way or the other in terms of gap in terms of guidance, but we are continuing to improve margins. As you can see by the guidance today, we increase our expectations for FY 25 in terms of sales and marketing as a percentage revenue, yes, that has definitely created some leverage for us as part of getting to gap profitability and as part of the margin improvements we've seen.

Speaker Change: Great Security comes one of the world's most secure companies out there and so.

Speaker Change: As we continue to go forward I don't have any expectations, one way or the other in terms of GAAP in terms of guidance, but we are continuing to improve.

Speaker Change: Improved margins as you can see by the guidance today, we increased our expectations for FY 'twenty five in terms of sales and marketing as a percentage of revenue. Yes that is definitely created some leverage for us as part of getting to GAAP profitability and as part of the margin improvements we've seen.

Brett Tighe: Right now, the way we look at it is we want to be able to invest correctly to be able to drive growth, but doing also in a responsible way. So driving that possible growth as best we can. So please look at the progress we've made on both margins and also sales and marketing as a percentage revenue and we'll execute against our targets for the balance of the year.

Speaker Change: Right now the way we look at it is we want to be able to invest correctly to be able to drive growth, but doing also in a responsible way so driving our profitable growth as best we can so.

Speaker Change: Pleased with the progress we've made on both margins and also sales and marketing as a percentage of revenue.

Speaker Change: We will execute against our targets for the balance of the year and I'll just add the way the way we think about it at a high level is we want to plan the company in.

Brett Tighe: It does add the way the way we think about it at the high level is we want to plan the company and target in terms of our planning and investment assumptions really 40. And then within that it's we prioritize growth, you know, one of our top priorities is re-ag dining growth. So we think about how we can invest in that framework to re accelerate growth. That's important. And then we're always thinking about stock-based compensation and shareholder delusion, and that's, you know, a big driver of that differentiation gap and on gap in our business. So while we don't, you know, the gap profitability is kind of the end result. It's not the primary thing we're planning on. Thanks, Todd and Brett.

Speaker Change: The target in terms of our planning and investment assumptions rule of 40, and then within that.

Speaker Change: We prioritize growth.

One of our top priority is reigniting growth.

Speaker Change: Think about how we can invest in that framework.

Speaker Change: Reaccelerate growth that's important and then we're always thinking about stock based compensation and shareholder dilution.

Speaker Change: A big driver of that difference between GAAP and non-GAAP in our business. So while we don't.

The GAAP profitability is kind of the end result is that the primary thing we.

Speaker Change: We're planning on.

Speaker Change: Our planning framework on the plan.

Todd: Thanks, Todd and Brad.

Manrajon: Okay, let's go to Meneroj Bellevue at Bernstein. Hi, thanks, guys. There's Manrajon for Peter Weed from Bernstein.

Raj Belvia: Okay, Let's go to men Raj Belvia Bernstein.

Raj Belvia: Hi, Thanks, guys, there's been a drag on <unk> from Bernstein.

Manrajon: Firstly, congrats on a great quarter, but a quick question here. Wanted to be trying to improve the average land ARR for a new customer, right? And it seems that that's growing and it's growing pretty quick, despite challenging macro. So firstly, just wanted to understand, is the tip of the sphere or the land product kind of changing? What is causing that land ARR to expand?

Speaker Change: Firstly, congrats on a great quarter, but.

Speaker Change: Question here.

Speaker Change: The B Tran.

Speaker Change: The average.

Speaker Change: <unk> III by Neurovascular right it seems that that.

Speaker Change: It's growing and it's growing pretty quick despite challenging macro.

Speaker Change: So first I just wanted to understand is the tip of the spear of the lung product kind of changing what is causing that land.

Speaker Change: To expand number one.

Todd Mckinnon: Number one, and have a follow-up question, sure. Yeah, in terms of the dynamics, I'm not sure the math what you're doing, but the way we run the company here is really land and expand. So we're not as worried about the first land. We're really focused on getting customers in, making them successful. And driving value for them, and then ultimately they add licenses, they add products over time. That's why we've had such strong in our ARR over the years.

Speaker Change: No questions.

Speaker Change: Yeah in terms of the dynamics I'm not sure the math, where youre doing but.

Speaker Change: The way we run the company here is really land and expand so we're not as worried about the first land, we're really focused on getting customers in making them successful in driving.

Speaker Change: Value for them and then ultimately they add licenses they add products over time, that's why we've had such strong and our over the years.

Todd Mckinnon: And really, you know, that's really the way we operate the company. So I can't comment one way or the other in here. You're the math you're doing, but ultimately our goal is to get as many customers, try success for them, and ultimately they'll become long-term customers for us.

Speaker Change: And really that's really the way we operate the company. So I can't comment one way or the other in your your the math you're doing but ultimately our goal is to get as many customers drive success for them.

Speaker Change: And ultimately they will become long term customers for us.

Todd Mckinnon: Just to give you some, I'll just give you more insight in how we think about things internally, we, the large enterprise is, is, is the success there is very encouraging it's a big part of our future. 40% of the goal of 2000 now is has some kind of Octa, like, you know, Octa purchased somewhere in the organization. And those may have been bigger than other SMB ones just because they're big organizations with big IT budgets.

Speaker Change: Just to give you some understand give you more insight in how we think about things internally we.

Speaker Change: The large enterprise is is.

Speaker Change: The success, there is very encouraging and it's a big part of our future 40% of the global 2000, now has some kind of okta.

Speaker Change: Okta purchase somewhere in their organization and those may have been bigger than other SMB ones, just because they're big organizations with big IQ budgets, but the terms of the potential of what they could be as just you know.

Todd Mckinnon: But the terms of the potential of what they could be is just, you know, scratching the surface. So, you know, what I mentioned the when we had in the quarter of 80,000 employees at a Fortune 500 transportation company. That that deal could get materially bigger with, with, you know, selling them customer identity and selling them other capabilities within the product. So I would say that, you know, two things can be true deals can be getting bigger on land as we sell the large enterprise and we could have even much more upsell opportunity because the overall potential in those bigger counts is so big.

Speaker Change: Scratching the surface. So you know what.

The win we had in the quarter of 80000 employers and a fortune 500 transportation company that that deal could get materially bigger with.

Speaker Change: With customer identity, and selling them other capabilities within our products. So I would say that.

Speaker Change: Two things can be true deals can be getting bigger on land as we sell to large enterprises and we could have even much more upsell opportunity because the overall potential in those big accounts or something.

Brett Tighe: Oh, thank you. And a quick one property to ask about this before, but we saw oxidation and IPO recently, right, yet to sort of see that drop in CRBO, when can we, when can we see acceleration CRBO as well. Well, we're excited about the total IPO acceleration, right? I mean, we've seen it go from below the growth of current IPO to above the growth of current IPO. And that's really on the back of what Todd has been talking about, which is, you know, longer contract duration primarily because we're doing deals with the enterprise and strategic and large organizations.

Speaker Change: Alright. Thank you had a quick one probably people asked about this before but.

Speaker Change: We saw acceleration in the IPO.

Speaker Change: Yet you sort of see that drop since the IPO when can we when can we see acceleration and cips right.

Brett Tighe: And typically they buy for longer term, longer term than the SMBs, which, you know, they usually a little shorter. And so, you see the overall effect in the, in the total IPO numbers, you can see it in the numbers we talked about earlier about the global 2k. We're now greater than 40% of the global 2k that's up from 33% of the global 2k less than two years ago. And like Todd was saying, a lot of those are starter deals in that global 2k.

Speaker Change: We're excited about the total RVO acceleration right I mean, we've seen it go from below the growth of current RVO to above the growth of current RP O and that's really on the back of what Todd has been talking about which is longer contract duration, primarily because we are doing.

Todd: Deals with the enterprise and strategic in large organizations and typically they buy for longer term longer term than the smbs, which.

Todd: They usually low shorter and so.

Speaker Change: Do you see the overall effect in the total ARPA numbers you can see it in the numbers we've talked about earlier about global two K, we're now greater than 40% of the global two K, that's up from 33% of the global two K less than two years ago.

Speaker Change: And like I was saying there are a lot of those are starter deals in that global two K, there's a lot of room to run as we as we.

Brett Tighe: There's a lot of room to run as we, as we, you know, solve more and more identity use cases inside those accounts, let alone all the other 60% that we don't have right now. There's a lot of opportunity. And so we're pleased with the outcomes in terms of the contract duration. This is the third quarter in a row. We've seen a good trend. The contract duration getting a little bit longer. And I do see it in the results here from a total IPO perspective.

Solve more and more identity use cases inside those accounts, let alone all the other 60% that we don't have right now there's a lot of opportunity and so we're pleased with the outcomes in terms of the contract duration. This is the third quarter in a row, we've seen a good trend of contract duration getting a little bit longer and I do see it in the results here from a total arps perspective.

Michael Richards: Joseph, perfect, so the total average contractations and the ends of it, all right, thanks guys. You're welcome.

Speaker Change: Okay. So the total average contract.

Speaker Change: Alright, thanks, guys.

Speaker Change: Youre welcome.

Todd Mckinnon: Go to Mark Kess, Raymond James. All right, thanks Dave, you had a smart one for Adam. Yes, so Todd, you've been talking about the platform consolidation opportunity across workforce, customer IGA and for a while now. The now considering the future concerns some organizations may have with consolidating at the crosser IT outage. Do you think this concern plays into the identity? Maybe space or give you office salary shop for these still fully intact?

Mark Cash: Go to Mark cash of Raymond James.

Mark Cash: Right, Thanks, Pat Dave Yes.

Mark Cash: It's mark on for Adam.

Speaker Change: You've been talking about.

Patricia: Ill patient opportunity across workforce customer Iga and for a while now and now considering Patricia concern some organizations may have.

Speaker Change: With consolidating the project actually outage do you think this concern place into the identity space or do you view the <unk> shopper that is still fully intact.

Todd Mckinnon: Yeah, I think it's a really I think it's a really good question because when I talk to customers, they're they're thinking about they know that they have thousands and thousands of vendors, I mean, even a small medium-sized company has a thousand vendors across their entire technology stack. So they they know they want to standardize up in some area on some dimension. And but they also don't they also know that they can't go too far down into too few vendors because that would lead to lock in and lock of choice, et cetera, et cetera.

Speaker Change: I think it's a really I think it's a really good question because when I talk to customers, they're they're thinking about.

Speaker Change: So that they have thousands and thousands of vendors I mean, even a small medium sized company has 1000 vendors across our entire technology stack.

Speaker Change: Hey.

They want to standardize and some areas on some dimension and but they also do they also know that.

Speaker Change: They can't go too far down into two few vendors because that would mean to lock in and.

Speaker Change: Backup choice et cetera, et cetera. So the case were making is that one of the right dimensions is identity and that gives you.

Todd Mckinnon: So the case we're making is that one of the right dimensions is identity, and that gives you good integration across your identity stack. It improves tree outcomes, it decreases cost, it increases revenue, et cetera, et cetera. I think the reliability thing and the risk associated with the sickle vendor is a factor that people think about. And I think it comes down to how the products are architected, how the backup plans are in one of the fallbacks and how the demonstrated record of reliability and how you put that together over the years.

Speaker Change: Good integration across short any stock improves security outcomes and decreases costs. It increases revenue et cetera, et cetera, I think the reliability thing.

Speaker Change: The risks associated with a single vendor is a factor that people think about and I think it comes down to how the products are architected, how the backup plans are and what are the fallback. So.

Speaker Change: Our demonstrated record of reliability and.

Speaker Change: How do you put that together over the years.

Speaker Change: Okta scores well on that score as well on our history. There I think if you asked 20 Ceos and Cfos.

Todd Mckinnon: Octa scores well on that scores well on our history there. I think if you asked, you know, 20 CIOs and CISOs to rate octa on security and on reliability, we want the answer to that to be industry defining on both. And that's why we're focused on maintaining our reliability and our robustness and our trust on that regard and making sure we put all these investments and making sure that we can confidently say that we're truly industry leading and world class on all things security.

Unknown Attendee: Great.

Okta: Right Okta.

Okta: Security and on reliability.

Okta: Want the answer to that to be industry defining on both and that's why we're focused on maintaining our reliability and our robustness in our trust on that regard and making sure. We put all of these investments and making sure that we can confidently say that we're.

Okta: Truly industry, leading into world class on all things security.

Okta: Great.

Trevor Rambo: Next up, let's go to Trevor Rambo at BTIG. Great. Thanks, guys.

So that drove a rainbow of BTG.

Trevor: Great. Thanks, guys. This is Trevor on for Greg Powell P J J.

Trevor Rambo: This is Trevor on for a great pile of BTIG. So maybe switching back to products. What have you guys been doing to help train up the sales reps on the pan product? I know it often targets a different buying center than your core identity access management. I'm just trying to parse out here thinking about the potential ramp in Pam versus OIG. I know you guys said, OIG is now in a thousand customers, which is great.

Speaker Change: So maybe switching back to products.

Speaker Change: Well have you guys been doing help train up the sales reps on the Pam product and they would often targets a different buying center than your core identity access management.

Speaker Change: I'm, just trying to parse out how you're thinking about the potential ramp and Pam versus <unk>. I know you guys said <unk> now at a thousand customers, which is great.

Trevor Rambo: So there's more color on how Pam is going and maybe also some have a more color on how initial demand for IPTR IPTR is going as well be helpful. On Pam, it seems to be playing out similar to how OIG is a little different. So I don't think it's playing out exactly like OIG in terms of how the enablement and how the sales team is taking it up. OIG was very adjacent and a very natural thing for the sales people to take up and take the market.

Speaker Change #100: So some more color on how that's going and maybe also some more.

Speaker Change #101: More color on how initial demand for ITT or ITD ours going as well will be helpful.

Pam: On Panama.

Speaker Change #103: It seems to be playing out similar to how are you.

Speaker Change #104: He is.

Speaker Change #105: Little different so I don't I don't think it's playing out exactly like <unk> in terms of how the enablement and how the sales team has taken it up Oh Gee was very adjacent and a very natural.

Speaker Change #106: Thing for the salespeople to take up and take the market I think Pam reminds me more many years ago. When we first introduced multifactor authentication multi factor.

Trevor Rambo: I think Pam reminds me more of many years ago and we first introduced multi factor authentication. Multi factor authentication. So it's been a long time ago so you might not remember we didn't have it first. And we started selling it as part of Octa and it was really our first true security offering and the way that the way that the sales team started selling it, which would make sense is they sold it as really a bundle or a full capability identity plus multi factor.

Speaker Change #105: Factor authentication.

Speaker Change #105: Been a long time ago. So you might not remember we didn't have at first and we started selling it as part of Okta and it was really our first true security offering and the way that the the way that the sales team started selling it.

Speaker Change #105: What makes sense as they they sold it is really a.

A bundle or a full capability identity, plus multi factor when they go out there and so I'll try to felt like it was an independent multifactor security solution. It was like we're going to say the whole thing where I say the directory, we're going to say it.

Trevor Rambo: They didn't go out there and sell try to sell it like it was an independent multi factor security solution. It was like we're going to say the whole thing we're going to say the directory we're going to say the user management and we're going to say the multi factor authentication. So I see Pam playing out the same way. If you look at this corner, I mentioned this deal with this global 2000 or global Fortune 500 transportation company.

Speaker Change #105: The user management, and we're going to say the multi factor authentication. So I see Pam playing out the same way. If you look at this corner I mentioned this deal with this global 2000 are global.

Speaker Change #105: Fortunate 500 Transportation company. This was a deal that had per minute. So it was a new customer there was from an RSV and a lot of exciting things about it its a new customer sourced very nicely and it was it included both <unk> and Pam and the workforce core single sign on and fast pass multi factor authentication. So.

Trevor Rambo: This was a deal that had Pam in it. So it was a new customer. It was from an ISV and a lot of exciting things about as a new customer source through an ISV. And it was it included both OIG and Pam and the workforce core single sign on and fast pass multi factor authentication. So that's pretty compelling because that rep and that sales team sold it as part of the complete solution, which is where we're differentiated because it's harder for us as a newer Intra and Pam to say we're going to go down the list of gardener things about a Pam solution.

Speaker Change #107: That's pretty compelling because that rep in that sales team sold it as part of the complete solution, which is where we're differentiated because it's harder for us a newer entrant and Pam to say, we're going to go down the list of Gartner things about our Pam solution as much we have a much better right to win when we say hey, here's why it's so much better that it's integrated with governance.

Trevor Rambo: It's much we have a much better right to win when we say, hey, here's why it's so much better that it's integrated with governance. It's integrated with your core access management, the platform, you know, and love, et cetera. So I see it playing out the same way. We're very optimistic about it. It's both from just a pure, you know, size of the market and they are, but also as a compelling differentiation is making the whole workforce sweet. Even more that compellingly differentiated.

Speaker Change #107: Greater with your core access management.

Platform, you know and love et cetera, So I see it playing out the same way, we're very optimistic about it both from just a pure <unk>.

Speaker Change #107: Size of the market and they are but also as a compelling differentiation is.

Speaker Change #107: Making the whole workforce suite, even more compelling and differentiated.

Brett Tighe: Awesome, thank you for anything else on the ITTR. Yeah, ITTR, ITTR, I did a threat detection response is the industry term for it. Our product in there is, we're very excited about its identity threat production, we call it ITP, and it's, this product is think of it as, it's like, it's like advanced multi-factor authentication, but times 10. It has integrations, details, integrations with the entire security ecosystem from CrowdStrike, disease killer, to Netscope, to Palo Alto Networks, and it doesn't just work at login, it continuously detects threats after login, so you log in, and you're on your way, working in your apps, and if Palo Alto or CrowdStrike detect an issue, you get malware, it actually, our product detects that signal and logs you out of all your apps, even if you, you know, even, you weren't about to log in, you'd already log in, so like during the session, it kills the session,[inaudible] Great, thank you.

Speaker Change #108: Awesome. Thank you anything else on a <unk>.

Dr <unk>: Dr <unk>.

Speaker Change #110: The threat detection responses the industry term for it.

Speaker Change #110: Our product and there is we're very excited about it.

Speaker Change #110: So I don't even try protection, we call ICD and it's this product is think of it as.

Speaker Change #111: That's like multi fact advanced multi factor authentication, but times 10.

Speaker Change #111: Has integrations deep integrations with the entire security ecosystem from crowd strike disease, Golar to Mexico to Palo Alto networks and not just it doesn't just work it logging that continuously detects threats. After logging. So you can log in and Youre on your way working on your apps.

Speaker Change #111: Palo Alto or cross Dr. Ptak, an issue you get malware that actually.

Speaker Change #111: Our product detects that signal and logged you out of all your ops, even if you even you worried about the long end you'd already love. It so like during the session that kills the session, which is very powerful and so.

Speaker Change #111: This is I would say a very it's a very natural adjacency to advanced multi factor authentication.

Speaker Change #111: And it's like the next upsell from there.

Speaker Change #112: I think the reality of the world is that too. Many companies are just getting into a multifactor authentication and fishing resistant biometric authenticator. So I think if theres going to be something that impedes the ramp of that it would be just the maturity of organizations, but one of the most exciting things in Q2 is that some of the wins for that product.

Speaker Change #113: I didn't even for our protection, we're well known security companies. So I mean, one on security companies like they are going to be the most advanced security than they were.

Speaker Change #113: By that product because they're so excited about the enhanced protections it provides.

Speaker Change #114: Thanks, so much for the color yeah happy to help.

Speaker Change #114: Thanks, Trevor Okay, we'll go to Brian Wilcox Cleveland.

Thanks, guys.

Brian Wilcox: Brian on for Ben Bolan today.

Brian Wilcox: Brett you had mentioned the new logos, maybe not exactly where you would like them to be and largely attributable to the macro.

Brian Wilcox: What gives you confidence that it's the macro and it's not the security incident from last year, that's pressuring new logos.

Speaker Change #116: It helps to have new myself.

Brian: Good question Brian.

Speaker Change #118: Look we look at all of the key indicators and we can't see anything associated with that.

Speaker Change #119: A quantifiable note.

Speaker Change #119: In the math associated with the security incident.

We've said that for the last three quarters.

Speaker Change #119: And so for US we look at all the math look at all decline. It does point to macro I mean, theres a bunch of there's a few indicators that show that we've talked about upsells.

Speaker Change #119: We look at win rates, we look at pipe create we look at a lot of different things and frankly, it all points to macro rather than the security incident now with that said, we're obviously keeping a very close eye on it and if there is something that does pop up we will definitely inform you guys, but through three quarters, we can't seem to find it.

Speaker Change #120: From a new logo perspective, and yes, we do want to do better than 200, net new <unk> in the quarter I mean, just it's an improvement but.

Speaker Change #120: We believe we can grow much faster than this and that's why we've talked to all of you about this.

Speaker Change #120: Three main areas of growth initiatives.

Speaker Change #120: It would be the partner Oregon.

Speaker Change #120: Partner side that we talked about already the new products that we've talked about already here today.

Speaker Change #120: Specialization in the field with the Hunter farmer model that we've run for now two quarters and we believe those are all long term growth accretive.

Speaker Change #120: Obviously, we are facing a challenging macro environment.

Speaker Change #120: It's been that way for for several quarters now.

Speaker Change #121: Great. Thank you.

Brett Tighe: One follow-up if I could, just on the, if you back out, kind of the headwinds from seats not expanding, not as much hiring or adding as many customers, like, can you comment on what the pricing environment looks like with renewals and the ability to take price or customers pushing back on price increases? The pricing environment really hasn't changed on either side. So the real headwind is from the license council we've been talking about on both workforce and customer identity side. Thank you, bro.

Speaker Change #122: One follow up if I could.

Speaker Change #122: Just on the <unk>.

Speaker Change #123: If you back out kind of the headwinds from seats not expanding that as many as much hiring or adding as many customers like can you comment on what the pricing environment looks like with renewals and the ability to take price or customers pushing back on price increases the pricing environment really hasn't changed on either side. So.

Speaker Change #123: The real headwind is from from the license count So we've been talking about them, both workforce and customer identity side.

Speaker Change #123: Okay.

Brian: Thank you Brian.

Michael Richards: Zachary, I have one more question from Michael Richards at RBC.

Speaker Change #124: In fact, we have one more question from Michael Richards at RBC.

Michael Richards: Hi guys, I'm for Matt Hebverga, thanks for taking the question. Maybe going back to the expectations and, you know, is there any expectation that this will move to other parts of the business in terms of different customer segments other than asking me?

Michael Richards: Hey, guys on for Matt Hedberg, Thanks for taking the question.

Michael Richards: Maybe going back to the Hunter farmer model.

Michael Richards: Just curious on how that's trended relative to your expectations.

Speaker Change #126: Is there any expectation that this will move to other parts of the business in terms of different customer segments.

Speaker Change #126: Thanks.

Brett Tighe: Thanks. Yeah, I mean, right now it's a little too early to tell. I mean, we're only two quarters in and as you guys know, the first quarters, you know, there's a lot of change in the first quarter with new territories and everybody getting new teams and patches and all that sort of stuff. So it's only really been a couple quarters and probably even a little less than that, really functionally how the farmer has been operating.

Speaker Change #127: Yes, I mean right now it's a little too early to tell I mean, we're only two quarters in and as you guys know the first quarters.

Speaker Change #127: You know theres a lot of.

Speaker Change #127: Change in the first quarter with new territories, and everybody getting new teams and patches and all that sort of stuff. So it's only really been a couple of quarters and probably even a little less than that really functionally how the hunter farmers been model.

Speaker Change #127: Has been operating.

Brett Tighe: But we are optimistic about it in the long term. You know, we believe specialization is something that will help us. I mean, you just heard Todd talk over this talk about over the length of this call how many new products we have, right? Also, how big our customer base is 19,300. We realize that specialization is important. And we believe it's one of those drivers of long-term growth. And yeah, we'll have more information as we get through the year on how successful it's been. But we think it's going to take another couple quarters at this point. Right.

Speaker Change #127: But we are optimistic about it in the long term.

Dave Gennarelli: Well, I don't see any more hands raised.

Speaker Change #127: We believe specialization is something that will help us.

Speaker Change #127: You just heard Todd talk over this you talk about over the length of this call how many new products. We have great also how big our customer base is 19300 <unk>.

Todd: We realized that specialization is important and we believe it's one of those drivers of long term long term growth.

Speaker Change #129: Yes, we will have more information as we get through the year on on how successful it's been but we think it's going to take another couple of quarters at this point.

Speaker Change #129: Yeah.

Speaker Change #130: Great well I don't see any more hands raised so with that before you go I just wanted to let you know that in addition to hosting several onsite.

Dave Gennarelli: So with that, before you go, I just want to let you know that in addition to hosting several onsite virtual and virtual bus tours this quarter, we'll be attending the city conference in New York on September 5th, the Goldman Sachs conference in San Francisco on September 10th, the Piper conference in Nashville also on September 10th, the JPMorgan software form in Napa on October 8th.

Speaker Change #130: Virtual and virtual bus tours this quarter, we will be attending the Citi Conference in New York on September 5th.

Speaker Change #130: Goldman Sachs Conference in San Francisco on September 10th the Piper Conference in Nashville also on September 10th JP Morgan software form in Napa in October 8th and of course as I've mentioned, we've got the octane conference in Las Vegas October 15 to 17, So we hope to see you at one of those events. Thanks, everyone.

Dave Gennarelli: And of course, this doesn't mention we've got the Octane conference in Las Vegas, October 15th to 17th. So we hope to see you at one of those events.

Unknown Executive: Thanks, everyone. [inaudible][inaudible] right, it's all right, it's all right, it's all right,[inaudible]

Speaker Change #130: Thanks, everyone.

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