OKTA - Earnings call transcript Q4 2019

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Operator

Good day, and welcome to the Okta Fourth Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Bill Losch. Please go ahead, sir.

Bill Losch

you Okta's us Fiscal Fiscal XXXX Results. thank call today's Full and Financial discuss to Fourth afternoon for on joining conference Year Good Quarter and Chief at I Financial Bill Losch, Okta. am Officer Executive Officer. today's call Company's McKinnon, and Kerrest, With me Officer; Chief are Frederic Operating on and and Okta's Todd Co-Founder Chief Co-Founder the outlook, including of Securities Litigation financial Reform Today’s call pursuant market statements regarding Private forward-looking our limited to the statements of derived our the close XXXX, but our and will include Safe not to, Harbor that pending acquisition. ability provisions the and positioning Act from may our to be benefits

or risks, results, statements. by statements known to the different achievements Forward-looking may expressed cause materially uncertainties performance and implied or our actual unknown forward-looking be involve those that from

and including the our filed Risk and company’s its Securities sections affect time-to-time year. with XX-Q could assumptions as Form that XX-K Commission represent factors Information in of titled Report the and the made. statements on its management's included be the filings XXXX will Factors on is filed only date Forward-looking filed fiscal that report Exchange the financial Annual results from the for beliefs previously quarterly and

earnings and will we in accordance is substitute with non-GAAP to closest and our call, financial GAAP of available prepared versus using our performance for measures and non-GAAP today's GAAP release. non-GAAP financial measures limitations non-GAAP are of equivalents not or GAAP. during in addition, reconciliation financial measures. These a discuss discussions measures In measures financial addition superior in between on to, A

statement Investor key which information in Relations metrics includes find posted more trended supplemental our You our detailed financial can website. on materials and financial also

McKinnon. the call like Todd? to Todd I’d Now, to over turn

Todd McKinnon

with growing year-over-year. improved We Thanks, Bill, million ever positive taking seven percentage high We calculated our billings free subscription year-over-year. cash XX% note us for our with everyone $X.X time fiscal XX% flow strongest today. points the quarter margin revenue revenue and growing total growing and of on join XXXX finished a XX%, to thanks generated as

off cloud, transformation, the that plays Okta help them rapid capped total added net XXXX. a customers and of areas count growth the and important trends, digital the add concurrent bringing their a annual they momentum initiatives are Identity an basis And on role our each and improving to in a recognized for results of XXX technology This for Our year who a seeing. fueled central security. the quarter new over and we can spend number with of operating as customer a we and customers growth to Okta. increase are because massive us XXX. examples I’ll record critical quarter few turning highlights leverage these $XXX,XXX customer by totals of strong three in organizations We us their year from sense XX% make the over a record that the now year-over-year share momentum business. is an of most that drive being significantly most X,XXX, of

by for Fortune-XX employees, Pivotal, quarter. and environment hybrid its with existing an customers. its company systems. identity will multiple in Apigee for was Okta access partners was be us workforce Okta Okta its company’s improving for replacing solutions Oracle, win and selected and cost including the a across complex deep standard First, the legacy integrations identity exciting reduce identity company the the for will customer

Their to a monthly quality a a critical is than higher access Cengage’s teaching XX an publisher and education identity Cengage, of a lifecycle Okta’s the process Identity users deal industry company. management user directory, students, the They learning learning the new from data. authentication chose in single was and affordable sign-on, help more and digital leader can largest and multi-factor products for customer U.S.-based active transformation ecosystem products and employee their corporate type Second, universal in to to automate modernize materials administrators. including workforce is every effectively provider part team including, our secure and quarter. million workforce customer professors of because identity and of chose IT traditional Cengage secure materials. manage print offering their Okta’s platforms identity provisioning

its easily deployment Tyson their this Fortune-XXX a tools improve to authentication an for portal technology capacity which to customers, applications the set Foods, correlated provides We selected the customers. its workers. or of Tyson a noteworthy company’s It’s for workers identity its Tyson. to and need more ensures hear XXX,XXX quarter. Tyson team provider its better partners in every Third, organization’s over is digital program reducing success. learning a as network is active to knowledge they expanded initially with company while today tools enable empower to the for in responsibility the these to its be to workforce. access the and was business and capacity XX,XXX resources experience Tyson their and is able for becoming securely company. Recently, Whether members. to workforce, diverse employees in transforming Most upsell engage use online Academy to the its they the for that for Upward our directly its in-plant users Okta Okta costs technology of maximize XX,XXX include more are hourly launched successful. company partner build its recently, that our company The they its

broader a number market strategic the focused on mentioned we capitalizing are identity depth, and of platform, that few I’d like As customer I to identified priorities of we ahead. in the think world’s Today security. the our network year about on discuss in organizations, way these a continue the more earlier, we’ve largest effects trends, best of the specifically, to

identity will that use unfold play a the this point environments. deliver These technologies for ensure legacy a Identity delivered so a conflict to to the the the users talked able secure recognize and platform. customers time. not their this seamless connection materialize hybrid seamless infrastructure They their in critical at ability to and to to cloud cloud. them. inherent applications we’ve one a become and save independent over year years identity enable connect for experience broad its seeing is an to and were This organizations is solutions had need their caught calls weren’t our important. our neutral access in understandably which to will the environments. to them platform has our they but with are offer in runs secure the despite built and need the isn’t the access own connect this approaching many them for it’s new because environments, our preserve are customers acknowledging you as of organizations’ the largest lot below solutions Customers identity and a management need the is can every technologies. infrastructure. First, part diverse built But to that a that transition results. dollars about we’ve Okta that in choose this on-premise locations right want can over range of are be retire time. in IT to stack technology Okta the we heterogeneous organizations We their are But choice, and The it the cloud software the legacy sense tipping millions to complexity scalable customers recognizing a use organizations, people momentum on necessity for and right and world that why most organization’s enterprise and This solutions and and identity is make right identity we to that with identity these single-vendor up to we direct the of that role choose surface, both a

strengthening network over Our extensive is effects that priority pre-built network and platform. The integrations XXXX with partnerships. the second are powerful in our this effect foundation inherent technology Okta integration is of our the strategic

right certain going a about workflows through organization’s between excited we It’s effects an signed and We them. to our users And about better a network forward. not to suited of of to the it’s subject securely plan in believe we how in our than am proposed acquire more them to that anyone is see we we the platform these We in for are and integrate. it’s those differentiators to connect company called drivers spirit closing of function them integrations, strengthen and as automating acquisition or we So further of today, us provide investing scenarios, applications better and partnerships conditions. deeply continue make integrations, technologies. just also to our enabling many an key by breadth announce I that Azuqua. agreement provisioning We to our access securely don’t of number our just

transaction Azuqua the automates close to expect QX. that cloud-based integration workflows apps services. and We between platform is in no-code,

their As Okta’s more customers and technologies, are they to it at new scale. adopt and secure automation architectures demanding manage modernize

of deliver connecting more more cases workflows. technology we rapidly With by advanced complex the Azuqua’s to supporting integration platform, our into use more plan and apps

deeper can value acquisition by enable customers. innovation accelerate how excited and for are We our our this

to We are family. the thrilled the to team Okta Azuqua welcome

Albertson this, customer-facing be an of like We organization MLB, partners easy It to Okta The the and everything and identity help its We and third is for customer and Blue we applications Because on secure platform. only that of and the of help protect strategic same identity. customers. workforce priority touch to their secure connect leveraged customers can organization’s flexible, the independent and is and millions on. do to Jet identities customers. through our believe I’d very an technology like their is neutral manage build for companies extensible, to

platform We get can Okta compelling these their implement power can applications scale the they developer identity and deliver the Our and identity themselves. faster. capabilities layer to very more conserve to alternative applications, scarce massive market their they of to offers their them same resources as securely with a as build

workforce standard in customers a secure we their every As uniquely serve and identity can ecosystem. use for to identity them as we of for of our many manage well, believe user as type Okta single

access I’d to framework identity a the the protect capabilities contextual the the acquisition in trust Lastly, address capabilities already identity-centric the security. look across The nucleus which longer forward like Okta our this year, firewall authentication. to of no of number zero made for includes We’ve entire we for ScaleFT network-centric and security strategic continuous to foundation portfolio. like of can these as The priority final for a and lays cloud including enterprise. one security expanding shifting from investments area architecture management advanced our

the to around visibility tuned companies are contextual data and detailed unique the because are position gather this we zero We threats a the to make have in we and area. announcements of user a Stay reality more facing. in the for trust the

I our to of huge that started in and positioned want also and employees, day. Before it is the up, far has us When thank highlights to celebrated transformation the personal our now partners still their from proud created very capture. Okta its the the cloud am in wrap of early, opportunities digital we it’s movement to inevitable our are relatively place one trust our on playing security bet sure role my we and customers well who company, that I a and every thing that was XX-year anniversary while cloud the February. today Okta was in and is

you announcements walk over forward will we to number momentum I your side. now begin call our looking and share month to like Thanks for am for we at a Conference Bill? to would next have Okta the plans where Customer to FY through fiscal As and of again beyond. we on XXXX, seeing and detailed our in more of results. financial many our time Annual new Bill XXXX turn I

Bill Losch

go quarter for million, thanks XX% quarter Subscription finished first of $XXX.X XX% Revenue year. joining total and fourth our year-over-year from with year-over-year fourth revenue totaled from the million QX the last for XX% a quarter last and approximately revenue, represented U.S. results through year-over-year. grew a of XX% year. successful quarter, Todd discussing outlook. our fiscal our with everyone year of Thanks, XX% our strong in totaling QX fourth and the representing $XXX.X to increase consistent revenue in outside again revenue before XX% I’ll fourth We an growing up XXXX year us. of

investing to to continue long-term international international view our footprint. are driver as a business growth our We we and expand

billings current on and year. Moving to the billings, XX% over both quarter calculated growth billings calculated QX increased for last

existing in net recurring was over customers XXXX, made that quarter. the would to growing across We the increased to the in customer from strongest percentage We previous revenue still a greater are record XXXX, logos calculated partner new customer to early note enterprise the new sourced billings in pleased year-over-year customers with the Also our as by large base traction up XX% total customer up Strength our while in of quarter. XXXfrom year-over-year a at continued deals. channel adds XXX and of number both growth stages, our across see the with these partnered annual year-over-year the additions market. the traction increase enterprise XX% majority with and I of with enterprise be with quarter demonstrating broad The in came commercial. we billings $XXX,XXX seasonally also driven significant quarter. landing of deals end increased a continued of customers quarter large than new and additions our

results strong trailing strong continued dollar-based by our base customer our XXX%. at the the existing a driven in remains months we ended retention were success for as also having Our rate QX are XX

Before items would expense turning point that out going and be to discussing results I non-GAAP profitability, like forward. will to I

last at up XX.X% Our up and results Relations fourth GAAP in non-GAAP XXX year. margin million, continues on between along the supplemental with materials points as profit our the well the quarter up as fourth posted to found release reconciliation XXX be was Investor gross Gross points earnings gross GAAP financial $XX.X year-over-year. be was our Subscription website. results can XX.X%, margin strong year-over-year. in basis versus XX% basis the quarter, Total

fourth $XX.X operating now million from and QX last more improvement This for revenue, year was in XX% the continue Turning $XX.X winning compared marketing expense expenses, sales to in and represents total as fourth XX% to QX in organizations compared of to $XX.X expense R&D R&D $XX.X increased the expense year. year. in the Okta to the percentage year an million million integration QX from QX invest a XX% continue expanding invest last last world’s to more quarter largest to quarter, and the in year. $XX.X compared Okta quarter we million, network. cloud as was geographically. addressable of to and million, was of XX% XX% an XX% was capturing large revenue market, of million flat as our in QX the identity QX year. revenue, last last to in G&A platform $XX.X improvement fourth of last from for from QX G&A in

of Our our our the XXXX growing accelerate January total headcount as last was X,XXX to support as board of year business. continue XX, growth across growing XX% headcount to over QX we rapidly

continued to was margin cash XXX QX cash an of flow basic $XX.X $X.XX year, in for negative QX a in last XXX outstanding. in growth margin million with share X.X%, million for have of XXX a as a in improvement. cash margin on the period with basis was net fourth a $X.X to was basic loss making. per Operating points million, basis a shares improvement. compared Operating in QX positive capitalize negative a positive per share basis was begin X.X%, to shares for in in same $X.XX QX. X.X%, our quarter was the million, point million a we XXX significant compares This flow year model last XXX was leverage the outstanding. Net quarter second row. operating to compared are flow XX.X% of a durable last in year, loss cash to we improvement Free year. positive QX loss to X.X% see last and Free of $X.X scale negative We the investments point X.X% Operating an compared

margin solid collections Our strong improvement and top-line outperformance drove cash flow our performance. cash

due by to While in we growth continued are enterprise and the ongoing see expect factors. the encouraged seasonal our variability the in margins in in performance we quarter, fluctuations working flow cash capital, business to

to $XXX senior equivalents, financial net highlights on for million the cash ended Quickly convertible million year, This XX% year. quarter our revenue and a Revenue momentum QX. year-over-year same across totaled moving and in model. sheet. issued and up fourth billings improved XXXX. notes $XXX $XXX cash, XX% the includes of we from margin improving of proceeds million, the demonstrated by revenue free short-term today, negative our of from today increased an loss the Gross and Turning revenue cash million from of touching balance fiscal flow to or We with investments. significant Subscription leverage board the $XX At respectively. in or strong in over that year margin full in XX% Todd of customers fiscal cloud, combined being and for $X which XX% million to their Operating of in with is the time, to a XX% past fiscal year the full organizations the their XX% security operating contributed this finally, last strengthening XX% our execution from improving meaningfully discussed XXXX. experience was we driven XXXX. fiscal posture XX%, negative digital the increase outperformance revenue revenue was calculated X%

point forecasting year. both close, the expected the impact basis approximately guidance our the which and As impact Azuqua for that we revenue consideration of and Todd of close In total QX want impact $XX.X conditions. we for QX that to particular, agreement and I margin an will million, year. includes operating given subject approximately to closing to cash in QX acquire anticipated mentioned, in we announced the are certain timing signed to the minimal have we expect highlight fiscal XXX full an for today

long-term will of the our network. remind we like and team platform the and opportunity Oktane everyone experiences to integration We to acquisition moved each of looking taxes welcoming kick-off. also would Okta year. to our to payroll this Okta acceleration I bring QX from are forward that to the year last sales Azuqua to that our QX annual Also and your QX margin for seasonality operating year, the models note worldwide due this reset has expect

on guidance. Moving to

to million, assuming XX% $XX.X net first of total million, of XXXX, of XXX representing of approximately the of $X.XX, share $X.XX of non-GAAP million we $XXX fiscal non-GAAP to million per $XX.X growth loss quarter to $XXX outstanding to expect For operating year-over-year, shares revenue loss a rate million. XX%

targets growth In five profitability. a to fiscal growth million For great $XX to $XX top-line of the I outstanding a on XX% investing track $XXX Todd opportunity to we clearly non-GAAP $XXX million conviction we Okta’s XXX representing last Since loss of targets only the outlined net for shares priorities believe non-GAAP total million. year to year of and year-over-year, strong expect summary, share a full $X.XX strategic of achieve XX% these million, operating October, loss strengthened fiscal we and Analyst year. of our shared growth today. to are in XXXX, time, our sustainable Day that million, of At we our revenue per approximately $X.XX, rate has in strong quarter and while had assuming

that the cloud, security. key secular A capitalize in reason celebrated early XX pleased transformation the we our As a demonstrated year last success Okta Okta you we the made public its with anniversary. know, enough growth two way particularly recently last are a digital to tailwinds and be years we in of has first as the one investments to company. and the the in decade of for have right is come long

systems continuing will scalable plan growth are that can’t early capitalize by you platform in We the I that, In many with drive approaching and secure expanding shift, adding just are seeing focus by Oktane. Operator? month and on make realize to further opportunity to and and of invest believe and We need take our to look still With we world’s for fulfill. next solution on investments. order I both enhancing of customer-facing network Frederic stages headcount Todd, are the continuing a at to they forward the point effects organizations we a your to our now security. to questions. legacy particular innovate the this as with tipping identity right largest our

Operator

we Auty [Operator from Morgan. Instructions] today And JP our will first question take Sterling with

Sterling Auty

Hi, thanks. Yes, guys.

Street looks So, but I anticipated. is is X% margins to even than worst if stock the acquisition, that like in a the better reacting I’d think back had from is The it modestly read guide to after it’s hit what hours margin guide the out better. margin the the

to that some extra tougher. growth type read drive think I of Street is a taking are level an it was So that’s the same investment little jeez, getting already is things happening maybe bit expecting, the the of of

kind of respond just helpful? could or takes will your you be give that If on us that

Todd McKinnon

world, we’ve the question. even The we architecture our more I are opportunity trends Hey, Sterling. profitable super measured and just rethink own super that about I more well. also at prospects look are plan That’s do When as way the way. the that’s can about in and we it’s strategic having the bigger their their a and getting the we on trends we opportunity growth how more excited long-term we marching that to that think and is bigger past, digital the through even in are going an talked a and identity-centric and excited cloud and are do have organizations transformation exciting interesting security getting and in organizations they how

Sterling Auty

go Great. And am one ahead. sorry, right. I then, All follow-up.

Bill Losch

model XX% just this Investor No, presented clearly Sterling year say, add consistent we to margins those to is on we we with that I at are of these that, we Bill. to Day XXXX. feel that by XX% year that five hit I like and target investments would fiscal still making operating would are are

investments making manner that’s happen in a future. tremendous is So and we always the believe benefited and what’s opportunity. in us to the past timely that’s us We’ve from going a this really in seeing market benefited

Sterling Auty

Gotcha. And one follow-up. then

obviously market. can world a helpful? example together? the real your real maybe but example gave I think expand would of description it world be you give a does Azuqua, But Because Just, addressable work how the just you will technologies

Todd McKinnon

the about they that. super, do excited joining Azuqua team we business service. basically was a Yes, integration the Azuqua is And in are as Okta. platform super were to Happy

data a integration it’s cloud-based integration no would applications. workflows different automate code and between their So, customers help platform that

So, for business from revenue our acquisition us, many is technology what results. customers. for those The customers have they successful were and did immaterial

about is acquisition. we is and going that any this think amazing the it to and technology management are �� market business a going should And this take are allows So really customize our process to way opportunity. on extend to you this lifecycle we technology you focus

So, and taking the and significant expressability pre-integrated know, you market. as way our because and many, whole product the business to in a want leading and able about in of Azuqua you fully attribute lifecycle little It can very that as in management many a for product degree technology and very product code talk It’s think level, of those very to is, it is you automate. new deep a process any cloud-based. be to the system, expensive to breadth already with the depth any Okta it’s comes you and a integration identity, workflow the will high fully to as control that applications systems

world that So, systems has say applications of several back-end. and hundreds are you global several very is, concrete real you desperate the on HR company let’s for example

technology to that and of released all our back-ends subsidiary those newly in processes or employees identities different of workflow services right. or of need in back-end between HR company you applications, your integrate this that basically here businesses hired As terms let that you customers express that know your copied so those companies, different requires. month directories the type trying be can on any of average, company our the report and large a in hundreds industry to ago, largest And different have work systems Azuqua the to, have that you from imagine

super it’s take really product why the help really that capture and and to opportunity. really going lifecycle us charge that management that’s So big

Sterling Auty

you. Thank Got it.

Todd McKinnon

questions. Thanks for the

Operator

from Next Henderson Needham. we’ll hear Alex with

Alex Henderson

dynamics critical of to the seems me Could that to become in hitting and bit competitive talk you So, it point a standard reaching the on your us clear or are seeing an with then, the planning what are you about granularity what the players? pull What terms scale if be, Thanks space. accelerated are competition pretty more to the from investments other a you a in could just follow-up less are to competition? on away of like? fact And little you you little seeing A relative rate inflection international whether bit give about second really question little win side? would bit you competition more guys looks

Todd McKinnon

interesting. super It’s

look months that I would you changed the of thing last, say the main If business overall, are that’s the kind in XX is at more we in deals.

for So, there are happening investment companies. These a identity and faster. it’s these deals it’s are big, basically happening they strategic more and are selections a

be going are You about digital are talking advantage are How they how their and they going transformation of secured. to to accelerate take journey to the cloud.

are So, make. they important decisions they

at independent it’s it’s versus we is legacy vendor whether which been a platform players vendor and that’s platform. look a they newer are the So or different consistent, versus a and neutral what vendor

are consistently what look at they consistent they been. like that So, and win hasn’t our and have changed rates the very all players

is see I customer They talk success cloud the dynamics this smart. difference to of from a But are healthcare jobs the customer I digital broad people company adoption successful is that new there big success of our buyer these talked everything talk about. basically Fortune-XX They community is significant you that job. And about think a for in and stories, you to Foods These or platform it can successful word quickly. was great. our that’s is with the thing. They base, with help examples time say most Tyson we out the are you I we It’s Okta be can that help transformation with And reputation to when talk more people think in go there that, that, like their our is they accelerated underlying old their But happen really is peers. security. So to would driving faster. to one the this. the and dynamics a deals lot that

this fortunate hard So, up to been it’s build pretty a we’ve we’ve worked and reputation. position

now benefits we reaping are I think it. of the

Frederic Kerrest

would we of I focus a customer of think I that is $XXX,XXX done at natural base number base. a what in Alex, only our base, customers terrific customer enterprise year. talk in the see growth a of which what why I customers look win I in then see is, really and that enterprise And the and if about add successful not Vendors is, not you lot and making add, is What job the that specifically prospect would Frederic, specifically and new you this that us don’t generically the but customer customers over set in to on paying you we and in history you the think IT see changing identity. of have

morning successful going if example, Brink’s. And not if solutions and put think Fortune-XXX with, you For out a press CSO these a what of just two this be go releases Hitachi thinking you buy you about but with successful company to about you we at technology, just are are about deployment to and both to are deployments.

point employees and was the of Sales release I you got found he I successful he running starting some company mean Global see in partnering was are value point as can and are we and up Hitachi successful our getting the he Okta in looking we they I very think how that solution the said true it’s in get these work to as deployment with. the And company the to to XXX,XXX of You quickly are with. that think technology for be finding that penetration folks around fortunate these you are the as talked world to largest more the organizations, buying with really are into CIO of world’s that to inflection are which starting examples. and to and we of their an interesting they that about press and more partners look

Bill Losch

international, And think talked question we is are think extent, to the I relates this the that, about. making as that I to innovation it in your about we to investments think

enhancing effects, platform, that and on focused our all benefit impacts our the the investments U.S. the areas network those from both one will making So and going worldwide are are platform we it’s us security to us Todd in standpoint that innovative enhancing benefit international. was our

investments benefit So, will those international. that

specific we to your to question, to think in investing go I are international market.

investing are headcount. customer-facing We more

implementation a and starting partnered internationally. the coming from traction channel the fact lot with I When of partners, sourced channel that doing was the we for to customers. that lot talked investing deals fact lot I are the our implementations When we in is getting partnered a international. are from channel see are of We partnered seeing talking traction, partners a the that earlier it about of was more the the we are about that of

internationally. those are the investing all we are focused on areas So that

Alex Henderson

strongly buy into Great. your Thanks. success. We certainly

Todd McKinnon

very you Thank to you. much. Nice hear from

Operator

with hear Capital Owens we’ll Markets. from Rob KeyBanc Next

getting not response that are a We line. from

to move Heather Sachs. will We Bellini with Goldman

Heather Bellini

Thank hear hear very Can Great. you you Hello. me? much. me? you Can

Todd McKinnon

clear. hear We you. I am can

Heather Bellini

perfect. Oh,

Sorry about that.

two so, questions. Okay,

years, as CIOs about but finally you wanted First, have way were secure the security what And I think is there technology rid to need and for for a zero customers of of them something able follow-up. as talking giving your many have their you achieve. about then in a opening getting I to the goal you some to platform Todd, the legacy changes one comments? they is of guess, been of what’s haven’t notion confidence that achieve and that can notion that said trust

Todd McKinnon

you would I Okta seen whole it ago, security a necessarily is as for think have the zero in years be become if wouldn’t that, the it’s broad the whole area. as good opportunity at looked trust example, have you several

about means details there. talking that in what So

understand we really to we it. think commensurately make about why can capture sure market are it’s to why the investing bullish and helpful opportunity are so we I

a case it’s study. So good

zero that trust, the not So, old you inside was trust wasn’t in had to a you the is if don’t don’t what down way about you outside you concept that security of zero means all to securing perimeter network and it that, means The zero right. individual happen secured everything to world is rules perimeter level. this, trust and the world think the you trust network, where put your all your everything and trust your to a you and is, outside essentially, had like, term a the VPN security firewall moving

to access, And from wrong that It system the have it doesn’t bad things. and person is experience. now. and a keeps like patterns, fidelity security with make access decision identify source also real-time doing the what what measure things do people the to patterns trying past the high how you to make the the So a has can block user that of good can device, have sure person, have access the looked they

point the like, happened, reaching it and idea. the And with is So things. do now the why is tried really One they’ve people that’s to tipping had two it the forget. that, to say where it and mentioned I’d you forever move cloud

IT global is all about cloud only only market billion, only you $X add trillion. the XX% It’s that that. all It’s stuff. the SaaS infrastructure of still to if service, apps, But is the all up XX%. So, $XXX

tipping So have the trust choice. They so really their have in we are perimeter aren’t can’t a because companies that point basically where at much perimeter. they now XX% cloud no things

It it’s you mean, you have point demonstrated seen – a a manage thing. you is, been ways. like thing get to second system requirements record. have this are better people So there to tipping they a that I identity the a system like if gets of and have Okta, good are

build You have that point a pivot nice to around.

that have identities system together. you integrated a good record are So, of

on doing decision what policy possible. make are could a based and You it’s people

best we pitch then it one what’s problem the think identity-centric of solutions I really solutions, That’s seen Okta, the a I and have So the reaching am of kind delivering that solution. tip. combination like biased think obviously finger I

Heather Bellini

which we follow-up Great. initial said, one you on your lands And larger? Are agree just getting with. then, quick based everything

Todd McKinnon

Yes, Heather are. they

what’s that last show if or year, customers significantly couple numbers, those, quarter. is, numbers So, of us that most metric did within pretty actually those those you the $XXX,XXX a we will new growth look we quarter, are But at net happening past also than see last the you more have that paying you deals XX% at grown look and logos. where this most of quarters additions those

So initially bigger are coming getting sizes in. we deal

Frederic Kerrest

that, to platform what's verticals, rich. this And is happening now adding is, as you across Heather, only very across but really I not think becoming the see I geographies. very, exciting just think And

customers So landing all there is not a of that workforce in with, only management, different but our can help different points. the customer also products identity, in we identity access means lot and

company, in ways they we they then and about what Fortune-XX landed about So that augment doing and with were Customer Identity Access found – to with remarks talk you the heard workforce they prepared Management.

about solve realize then the at which heard Cengage were You to same opportunity see examples And Tyson, finally, they workforce these good include and they what a identity customer were way. the other the themselves partners. side. a you to workforce doing time And They think augment upsold was I to from are problem things. of just then looking they management couple and access on with the a everything are that of very doing

all, First larger larger we of and lands. are seeing

opportunity for invest ahead then world's is echo the use think ways, and to early. number mean, organizations how number are are, happy results. are how think are two, good what to our do I would exciting company of we and the are technology the ahead different that to very the we the that But with going to the to are three, able products, their about to underpinnings ones we for largest these and and a opportunities about started customers. very, really said, that they excited very times security, in And about. help with are I transform as are and the different very, are We years results those a fortunate quarters interactions we because company cloud, they the it getting with just very and very become and cases, think of I these different going be companies every huge just has customers number business the again, Todd we and with

Heather Bellini

much. Thank you so

Todd McKinnon

Heather. Thanks,

Operator

Stanley. Franchi Next, we'll Morgan Lisa hear from with

Lisa Franchi

into plan Todd, I I you Azuqua Thanks wondering Great. to Is about little question. will the color thanks standalone the it? is management for just going you going more if could am bit solution? products? it Or just lifecycle a know said on you how that monetizing be you products. management it are maybe for on the integrate And lifecycle acquisition. to taking talk it my something enhance the a

Todd McKinnon

a great it's question. So

it, make the and as it a we keep lifecycle more lifecycle enhanced to of that and the possibility product land drive us enhances benefit industry-leading management. but time a advantage separate But going really we'll lifecycle there even be as customers penetration more it yet, product, I actually and an management we'll new think customer independent products. And integrated is break customers, what's able out valuable execution that decision management the that is get it there. really that, to will there definitely and see base, something basic strategic is the for help customers made be haven't possibility over of we the a that

Lisa Franchi

on Bill, a Okay, just on thanks. the for follow-up And conversation margin the operating guidance.

still then trend should investors FY you terms track guide about XXXX, how But and how which are think your your XXXX for we of FY study sort So more guide have will we leverage? think on have through beyond for for. margins do XXXX? XXXX a in XXXX? FY FY leverage of XXXX of FY loaded trend Is FY beyond we through back-end it Or like

Bill Losch

way or the talk it, I market to especially is it's largest we about think organizations, we Melissa, the see opportunities here, – the the world's think that, as worldwide early. about

big So, early. think that we there is opportunity. It's a

realize We investments are that. making to

linear now I back-ended, operating is be So going also that that and to wouldn't to then. I say but the be margin think I between say that going it's wouldn't

that think terms. it would in I So about more

margin I margin flow. made - operating leverage we historically and significant model. cash our have free operating we improvement we year think will that in We seen to that non-GAAP – demonstrated start in with our the last

We have our model. that in inherent

So you improvement. are margin going to that see

it's leverage going through. and coming wouldn't see I that then. say be to linear now are But going to between You

Lisa Franchi

you very much. Thank Makes sense.

Operator

Our next Davidson. from will D. come Jaluria question A. Rishi with

Hannah Rudoff

Hi, guys. is for Hannah This Rishi. on Rudoff

Todd McKinnon

up, coming are faintly. pretty through You turn or. Maybe volume your

Hannah Rudoff

me now? Yeah. hear Can you

Todd McKinnon

better. you. That's better. That's Thank

Hannah Rudoff

Okay.

I security, were domestically? transformation pervasive you different and seeing on than are was abroad or about, these tailwinds are digital talking were are you if as wondering a Just them cloud, as seeing pace the domestically three they you at first seeing them you if question,

Frederic Kerrest

Thank you absolutely. Yes, the for question.

mean, customers are out partners trends. these I can global trends. with better I happening opportunities and global and are They how and there, – people into these everywhere. the cloud, their interact security people move think I threats thinking are about obviously, these mean they

see cloud, North are not in base. And America businesses. In medium quickly. in modern our little terms Europe ahead adoption of terms that I in world's that adoption organizations of customer small and of do think bit some largest But is Asia-Pacific you of pace, these of a We of picking that just The international. see it's We are the see and up technologies. business.

ours one If right you based customers ENGIE, world, companies the is successful in success and having are look traditionally they at there. in the energy of of the like very France technology with modern largest

America customer. to be a bit the little chance get success rest cost So the of lower. of as The advantage is And an world, going think from trend, those might not be and there everyone overall that on but the return quicker. much better better of is I taking it's to North again, It's just solutions technology, investments The they lag the are these significant. much higher much of is opportunities. for

call, state see a local So largely governments very sector not excited reasons are is in federal, early, as great lot that. we The North But the going but been for to us. there opportunity is same. It's on the internationally again, and of businesses but only and is have private talked about that. a lot not of but America, about the this sector to we’ve know, continue it's are you you there public

Hannah Rudoff

is large that side? strategy really I And helpful. growth how such was on then in wondering customer. could talk to enterprise That's And see the it's nice go-to-market different you your if Great. second, about

Frederic Kerrest

for about, good the tipping understanding have mean, But only I in them. is, as is what's think business to of are there talking segments, starting enterprise. we absolutely. and have changing value lot done now accelerating in Yes, you get of I this are point are that historically small we where a medium and a commercial not really organizations job so large

investing all support, go-to-market. pay-off in more dividends account more board engineering, hiring are very named going executives, But we particular, more those are to across our We in are enterprise and quickly. in and in sales accounts, of the

and I more bullish kick-off The of think jobs. ago and to our their partners success very, to We and the was doing I that, more weeks that exciting. the it. our and very attend and on was we are worldwide of on continue up lot event the I fact of past we years we also the it And to see and I see in were to relationships sales quarters had they XX more lot executives have and and to senior sure from continue am meet am a We of you our just am had last started to a from going team, very to thrilled couple are who a it of are benefiting think and very to make friends level seen team they what momentum frankly, are grow, I building attracted be paid starting best than are excited the we to about. about sellers sales for palpable. the just side quality we've which talent the acceleration. those seen as go-to-market ever think we the I talking going

Hannah Rudoff

That's you. good hear. Thank to

Operator

Humphrey has SunTrust next Tillman our question. Robinson Terry with

Terry Tillman

Hey, job and on Bill. way, can me? Frederic, hear By the you the Todd, Nice quarter.

Todd McKinnon

Terry. Thanks,

Frederic Kerrest

Terry. you, Thank

Terry Tillman

Yes. awesome. Great,

love businesses with breath bated report, waited read I that. at to So work the

about IT in and earlier IT. I some you prepared hybrid great I've read. there in heard about had points am IT noticed you visuals What Todd, remarks. some it's business your new around is, today, hybrid hybrid and So curious I mentioned data in talk cases use cloud deal are cloud IT in terms hybrid your hybrid focus securing much IT to way, a securing cloud And a follow-up. coming I for just have it's that's it then as apps? – opposed of straight-up has of how just now that

Todd McKinnon

the world's largest more But And how XXX% especially hybrid. is hybrid it's degree the to in – have just important. much hybrid. so, organizations,

because the just kind over heavily and want platform, not to thing they so VPNs apps sure in cover to way digital whole and the transformation want apps we've systems and of years, largest be is their every one in So everything. and different to of they development device security SaaS Identity about the it. comprehensive world's just why a Cloud it few to can network or that's integrated they one different and move kind enterprise the Okta and Not every the that be or of invested do SaaS past part cloud, making organizations, secure when but do

Azuqua deeply model means as level. different our why to to It the us important, strategy accrues much So about one benefit that is and a more. integrating various if I've this right, even enables talked mentioned to that haven't to systems actually very that's the of it, you Azuqua, depth think more customers call, even look the everything this way I about and at you comprehensive critical. and it's can Azuqua do being those deeper integrations, more integrated of integration And things, on which also when so the is whole at Okta you

results. about kind up it's the our everything. what connecting them showing about of to need So on-premise in do, letting it's It's it's cloud do or they whether and on

We are very excited about it.

Terry Tillman

lot I guidance. I because all pinpoint about to if about fine operating you XXXX? on just losses the But to to could that am better am see asking on curious that But know, I you for maybe too. just flow how than give cash want progression, billings not the of cash free think at you. but will thank and assume just – FY kind talk I cash free look the Bill, And would Great, be that flow. a of free necessarily for flow

Bill Losch

Yes, Terry.

expect this slightly cash to for better flow year than fiscal year XXXX, fiscal for positive free be We breakeven.

we've do fluctuations because for and the of working have billings There plan seasonality free some we do be there be in the collections be about quarters, to will talked variability capital seasonality also So, The it. have billings. before, to because year. – we cash our is typically we some as flow positive in may

So there expectation to be be year. quarter-to-quarter may But cash this positive impacts. free flow our – our right expectation is

Terry Tillman

All Nice right, job. thanks.

Todd McKinnon

Thank you Appreciate very much. it.

Operator

question comes Andrew from next Our Piper Jaffray. with Nowinski

Andrew Nowinski

congrats on quarter. and you nice a Thank Great.

So…

Todd McKinnon

it. Thanks, Andrew. Appreciate

Andrew Nowinski

to of should elaborate want one will how on contributing the to I Maybe rank seeing are order, made within in we think your back traction largest partner-sourced partner you script you deals if Bill the comments ones in go just contribution fiscal the have could XXXX? perhaps about that and the network the nicely. about that

Frederic Kerrest

the take question. Yes, Thanks, absolutely. for that. I'll Andrew,

to just everything with, their different start have different But companies mean and and very think, people excited on we partners. with partners is things are grabbled. about the going different use I for we

set system of about system So, just we organizations way everyone, partners level the transformation but there our also their a of all, again integrators is digital Accenture, starting ago. practices, to like and Deloitte, few And is, starting kind Okta. are of group kick-off for a weeks integrators, first of around think global large practices the not security that standardize PwC to their really the they some biggest identity sales of only sponsors with were

the where start provide of introductions Paris value Palo in these Okta and like was worldwide are really very can provide of around not starting I or looking on. are and organizations have terms Software-as-a-Service partners are are a but this of to of can in broader new you into to have, solution accounts, would I for then was more or they joint into these we the strategic for the excited we integrating in the are technology they thing of value office testament point that also is, opportunities to together, a where to service. last that Networks think just solutioning Head the we standards in and lot mobility. that are about only lot that Secondly, opening VMware, where France whether a more there to best-of-breed joint these larger infrastructure it's other see And finally, customer. that we And get November partnerships going the about think really technology large they organizations European VMware like with our you partners I for and partners, fact all identity that some Alto

for organizations right Security are more I early are us Shape building Cloud or that are traction who with already and So, gaining that to Okta are of these very see brand looking the their going that companies like lifecycle more there whether it's out are their Okta are Identity and actually we BetterCloud that in new solutions. integrate the to huge opportunities continue of you middle into and platform, invest mean, that. the as to are on

in organizations Global-XXXX Specifically also it that are all think organizations. to the provide see really to And integrators prepared But last those starting Fortune-XXX, for I any with organizations, you looking mean, going in growth pieces. think as large particular, the not system and to we to relationships to in we continued as think momentum long-term going about build durable tipping there bringing And and the Bill's organizations. I quarter, ahead, the in world's inflection and this know, just comments, of to a more and point more see I are of GSIs. has plays there. largest they practices, us one and are And I if that's all really times are those in

customer's and be so expansion, just the That's own there when countries, we about we at we networks ourselves are Europe not really and that that do. think you us can't good very companies having parcel very, strong cultural and and part make their different successful, many success. is of but those very expand international on partner when with help because standards, in only into those Asia-Pacific Finally, to what everywhere countries focused

long-winded of folks a there We as clear to is simple lot complexity but answer, possible. So, sorry, of make as kind and that a for want there.

Andrew Nowinski

just DSOs increased quick Thank for It one a then looks you much. significantly in quarter. Bill. And like the great. That's very maybe

might wondering deals due if pulled linearity or to quarter? Just if large was perhaps January are there that any Thanks. simply have the that into

Bill Losch

What the is, quarter. the really a we very collection No, you of came cash strong had actually lot billings quarter. that tail-end the at of the a are looking at in

the it's at the So, of which really is tail-end quarter that. the linearity driving

Andrew Nowinski

guys. much, you Thank it. very Got

Operator

comes with question next Koujalgi Guggenheim Our from Partners. Taz

Taz Koujalgi

for guys. questions. taking Hey, Two my Thanks questions.

go what bit went quarter. drove that? from at First QX revenue, to one, if usually comment on I QX. they up a sequentially your services look They quite Any in down this

Bill Losch

especially we continuing a our seeing trend with saw at U.S. very of think the partners are in what is doing which when Yes, are positive saw with size. it traction the U.S. was and lifecycle internationally services, we internationally you the the and tracking our partners, seeing here that implementation are faster I thing. a the We think services actually, we looking - we is in than same

investing services positive in for a those development the us. partnered been channel working toward implementation or implementation and partners something partner for it's we've and far us working more with our So as as our of to do

Taz Koujalgi

larger. function if of being deals thanks. more getting the buying – function bigger about initial up the initial Got products on clarify of versus upfront? Or getting a Can question a following customers it you that's it, the customers deals is then, And prior? now your

Frederic Kerrest

Yes, the question. for thanks

a which use we dozens means is software functions help and year features, lot cases think just they remember like coming software organizations certainly new challenges, the a customers out, model large we of that are year, case. But times those Software-as-a-Service into they budgets more both have a of much I there of a can of combination opportunities have means tap it's in dozens larger that. Certainly, things. as more solve. That's a and ours, releases that can releasing you XX do more to

we more environments small businesses complex more help find them. even ways or more are mid-market there with really can So we and and and that can more integrate

So combination our it's companies ways coming Okta use Identity on more of Bigger of two. a the the and the Cloud bat. finding all they can companies way sizes off

Taz Koujalgi

are forward deals just And or retention how helpful. going if initially? with about the rate you that the one you last upsell landing I That's do now one, bigger could, think

Frederic Kerrest

you've point Well, a QX at consistent I which think would net seen is retention dollar-based rate, the I XXX%. with to

think that and products. really that opportunity are we the I use expands. one that's are landing across you expanding seeing deals, and customers bigger see cases So and as a bigger but And continue trend on with side the also grows both more more expect to as company to

Taz Koujalgi

helpful. Very guys. Thanks,

Operator

hear Markets. now We'll Rob Owens KeyBanc from with Capital

Mike Casado

This Owens. guys. Hey, is Rob for Mike on Casado

Todd McKinnon

Hey, Mike.

Mike Casado

opportunity. My apologies for the wanted I the the double-click and asked broadening relative user that error last on larger the first question go deals on initial to to around. the was

With the strength you initial internal relative quarter, versus how to saw external business perform did this expectations? your the

Frederic Kerrest

obviously better customer it in environment company, got become obviously, access transformation company technology provide company, has to paired business, mean, I two is their Workforce, talked identity every the enterprise more but I very a do see also every and very customers, as and board, cloud the their management cases partners, to think a for very, well, software for identity you'll their strong those suppliers. traditional vendors, digital But and continues company the contractors and much management, of as and across it's workforce sets consistent. very are very more continue interfaces large their about. as has you growth customers the think across entire across I to employees strong business. as closely to use and to

see which your in to own. to build management, customer been You identity the and are traditionally going continue opportunities has more more

to that which those very continuing excited doing think we about. very, But So very are well two different dynamics both are grow, they in markets. and I

Mike Casado

And ahead how the being of Okay. now? Thank to years How differentiation acquisition talked you circling Azuqua about acquisition. competitive today sand in guys terms of really of far three Microsoft. also In the you. previously then, as the just change competition. back integrations did that to pre-bill source past drawn key Todd, a being And you've you line the are the that two in that ahead versus gap?

Todd McKinnon

around per It's the – the se. you se the connectors per the I how process. it's can change big think I integrations or orchestrate think those in not it’s business

process. industry. business have, it's like the you that in all of to events Workday, one So years in And have connectors. data richness So the ahead in breadth connector of of multiple are, the connector, Workday, connectors into the number we of we and the It to those something a all and terms like Workday connector those the supports expansive supports the very thing lead the far, It by as mentioned, right? best inside inside we've and maintained fields. of a

a gets simple you could the processing the workflow, do all here can different. together, when a want in employee the type So of of hard steps you not easy, what some new lot do permissions. a hired, detailed are on or enhanced files around over happen to where way from application it's user way, those say, a right? listen, you example, easy in to can chain other with specific get it, but connectors want brings, this this change say something of data very really you or data to with hey, Azuqua a very something create development that here copy So, you It's kind group for have

connectors So it's those chain together. like you how

to So - game while the in connectors, catch what it's link the like to trying it's are the by process. together a like changing means we up those connectors almost it kind competition changing is of on

I it. the helpful think the to way way that's about think – most that's

Mike Casado

understand. Thank me. for context, That's helpful totally That's I it you. Todd.

Todd McKinnon

bringing for Thanks Sure. that up.

Operator

from question Jonathan William will last Ho Our with come Blair.

Jonathan Ho

just on all where quick maybe Hi. I of Congratulations are on acquisition, strong first wanted the that? maybe a to quarter. update and ScaleFT with the get we just

Todd McKinnon

new, product ScaleFT, a company is they last for around So securing servers. access we a was product that year. that their folks acquired may to be – were And

are and data security the your ScaleFT very if to Zero those be servers So and the have have use you you to do you Trust user security. bunch servers. infrastructure-as-a-service to of good And at in login do provider, or the a administrators that, center for login cloud you to management

posture who what the is, who device servers have you is user sensitive – security detecting at of a user's an the to very because into thing. the administrator logging be good So the

that, and products is and sign-on single So of take other identity authentication very that products. this portfolio, apply acquisition and we excited technology, are it customer our a about Trust reasons. entire that can from we even across couple Zero One to workforce multi-factor technology the for broadly

So about just also are Oktane category technology we that's Conference and in excited April. we make opportunity announcements the at exciting, up coming our are around the some new product going to

So that. in a little there we tuned of what But a are it's bit products. do can about terms pretty stay new – excited of it's for we

Jonathan Ho

Azuqua just into need Thank make integrated business the you. offering? do you us Excellent. see scale kind to investments in timeframe for in order And of the Azuqua. And on it? one what sort to last What then, one of the to

Todd McKinnon

how One – When interesting. think it's was. this this our what – one the about of so here you approach on

all, on our main R&D organically. of do First is philosophy things

want to innovate. So we

have one core track innovating. We values. strong of a very of record It's our

same can You are build quite of kind found philosophy, that give companies basically Azuqua we service and we organically, at this and fortunate that's for at created and innovate new are things cloud, always the going to the kind But us. – success identity pretty more our in to same products. so the quickly roadmap, looked continue space on we've lookout team engineering and of we new lot time, vision customers category of It's accelerate with and born actually are as more process like-minded this built a of have talked the built identity for workflow and different products, of a to deliver bit to a so a world. found same automation the the

fortunate. So very it's

are that. very to fortunate We do

So, lifecycle quickly. product able that integrate management also means to that, relatively product we'll be our this into

not yet. actually has deal the – just are closed We

we do and We are that But the of also the to less have some you year. internal do in to product about go-to-market, than closing the to have we concrete integration are people starting we All terms talking couple – closes. actually you final s planning. it integration know in in detailed of a it have conditions delivered the before And being a today. are marketplace a then, things

knows how to successful and how the knows product brand to that team current around sales a marketing market that bunch of a sell a and set. have and We team a customers

to it's versus this supercharge take longer. market sweet motion and technology that existing the can which, that's spot product in So, where where in trying to do scratch take it something the case, we that were if go from really existing that would

Jonathan Ho

helpful. That's you. Thank

Operator

turn additional over session. like will remarks. Todd today's McKinnon conclude closing for time, to this the I'd conference That question-and-answer to any At or

Todd McKinnon

year. to today without us that joining a been. results I for can now years last future doubt and everyone, QX ever been Thanks, We've the say, more public our excited am about for I've two for than I talk now and about

been seeing with management that what the And incredibly opportunities think it's around myself is are whole the laser-focused marketplace in incredibly the we motivating, I up and and team exciting. are seeing we open us, that's about have the we then, execution. and which that more on execute throughout because we've strategy sure articulated making we today call been on importantly, always right we it, this a company

to And on with and so future big we very high thrilled it couldn't with we capitalize prudently the of are on and It's and we excited responsibility ahead. a to about laser-focused on and execute be degree these success aggressively opportunities. take invest sure a very more are making

much. talk all month. this are And, we So stuff last about next is, Oktane very thank going I'll at you to thing say more

you wait you have again of possibly, scenario, worst-case the Thank be bunch a for speaking seeing to until tuned of for and next the next we'll I the or much. road stay We'll to there. So with you coming out announcements call that look forward the on very in conference quarter.

Operator

Thank conclude participation. will conference your call. today’s for That you

may now You disconnect.

Okta (OKTA) 7 Mar 192019 Q4 Earnings call transcript