OKTA - Earnings call transcript Q2 2020

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Operator

Good day. And welcome to the Okta Second Quarter Fiscal 2020 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Dave Gennarelli. Please go ahead.

Dave Gennarelli

afternoon. Good for results today's of of you discuss call fiscal us financial the Okta's joining thank conference for to XXXX. And second quarter Co-Founder Officer. Bill on Chief Kerrest, Financial the me today's and are Frederic McKinnon, With Chief Co-Founder Operating call Officer; and Executive the Losch, Okta's Officer; Company's Company’s Chief Todd and

outlook including of Securities Litigation financial Reform Today’s call pursuant market statements regarding Private forward-looking and limited to the statements of the XXXX, but will include Safe not to, Harbor provisions position. Act our

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

and its the section Forward-looking SEC Company’s affect previously of only including the as made. filing from XX-Q. results time-to-time, Factors that Risk statements filed beliefs the included is with Form could represent financial our the in assumptions its in Information management's titled date on factors

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

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

a number a each financial represents quote numeric such we’ll our noted, performance. as comparison. call, today’s otherwise discuss year-on-year growth unless On of or changes And we reference

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

Todd McKinnon

for everyone, thanks, us joining and today. Dave, Thanks,

XXX new XX%, to with customers financial momentum X,XXX than we these billings customers exceptional increasingly XX% revenue again, strategic our have in the quarter, count quarter additions Total in customer that revenue XX%, made plays our of And remaining We growth RPO once half obligations bringing X,XXX. the Our enterprise environment. results or annual grew We enterprise performance Once grew in added over grew customer broad XX%. performance. grew $XXX,XXX-plus demonstrates across XX%, another $XXX,XXX. from greater total execution new subscription customers’ of over and calculated and mark contract with our Okta our and base customers. were now value which additions customers, role of these again,

and transformation to the most momentum is companies each are shifts a today, to in inevitable Okta cloud cases the trying rapid environment. Identity role megatrends, broader plays of by and we're growth digital of are massive enveloping uniquely the because Our across and powered critical the organizations technology and hybrid that use even able security. these of IT, set complex address

from Now, wins I share quarter. will customer the a few

cloud-based its first improve Trust global system ever, hundreds covers access It security existing access a contracts application, well to to support secure company to environment, of The that customer Okta its over products with our replace contractors solution Fortune with while would strategy. as identity for and was deploying also workforce partner hybrid that largest as is wanted a on-prem employees XXX,XXX XX to of Okta identity and its portal. a Zero identity cloud, and one

provisioning visibility automating also applications. IT by of usage of and friction application provide Deploying will reduce the Okta cloud

website their Okta company leading a with system of identity multinational to and customer customers. Next, and both identity The is electric identity platform authentication step-up identity A and was relationship This solve provide provide application. for a Okta's selected both experience are to company identify upsell will great with fantastic with secure and workforce French customer illustration the a mobile Okta upsell utility. a replace needs. seamless American to win. expanding its a its their XXX new a login customer manager authentication customer retail ENGIE, XXX,XXX was its for The Century registration cloud-based asset identity help legacy global Investments, that and global chose how products company over customers

first quickly deliver and facilitated employees. infrastructure adopted to cloud workforce identity that support products first among Okta's its ENGIE reliable a strategy scalable, collaboration its

products This an of of Okta's customer array large quarter ENGIE purchased transformation BXB accelerate users its for identity its digital to the customers.

the units. business be all will Okta ENGIE forward, across Going identity standard

including short an And ago, finally, Server a some notable GolfTV. Food and Access launched Network, a had Discovery, TLC, company Channel, Advanced includes just Fortune portfolio global already XXX with a months HDTV, entertainment Eurosport upsell few while we with that Discovery we've wins,

new use its Discovery customers. support cloud mobile It’s a our how of example initiatives. expand our existing to adopted diverse Okta serve and first workforce first products help great cases with its

Discovery to extend protect Server quarter, and help to Windows purchased Advanced its This authentication seamless workflows Linux Access the infrastructure machines. and

focus their quickly tip that we company the just believe wins organizations. Identity customers. our technology the securely require. world's to largest winning We built adopt become technologies on needs and Okta best that concerted customer flexibility our the customers recognizing Cloud their on a enable are making scale, to to and the the that transition these a workforces great and Companies of their to with security success that's for are that Every speed, why And company. like energy are effort and depends the we iceberg, ability

of in winning deal and our larger overall our term the largest are sizes world's This longer. getting progress lengths evidence the RPO. is indicator total A that the contract organizations XX% getting good and is are strength with growth

when the year. size fact, in compared last the when total at In QX to top value, contract XX booked contracts doubled looking QX by average contract

expand a business progress, organizations. opportunity our have these large further great still we to with significant that’s While

our into expanding largest better overall continues building what be products to focused world's products customers more refresh virtuous more which and attracts we more and data we focused a more are be of leverage to It's to integrations. customers Doing so cases, strategy, so To about an translates more on Wining that use build can part our generates customer that important that organizations cycle success them. where insights serve the I’ve unlocks platform success to on translates talked and features make more customer and on. successful. before, more remain our customer can more better wins, harnessed

So, we’re customers. more winning

to this that introduced and Identity increasing to number to functionality Hooks. the base use really about enable componentized Okta customer offering extensibility access let’s Okta critical cases from opened the our the infrastructure I products Engine. Access creating the the use are We're We’ve and extend a Oktane. unlimited how platform new we made blocks area Server to with Now, platforms the customers. of Access new We’ve like are Okta platform, to products products preeminent added have adopt examples new introduced bear we like to that starting Advanced about in fruit. secure Identity cases customers and any Okta also to we Cloud products the our up of to We’ve that Gateway great customizable technology. with are investments into all successfully talk apps. on-prem our Okta a are Last transitioning with features help quarter, These that talked at

the with mentioned earlier. level We're that enhancements with encouraged large especially customers but of very each enterprise our still early these, and new days I by these seen of products in like in interest we’re we’re Discovery

as Okta making forward on as well We to product San Okta new event. sharing the for called to enhancements at event, October new that this details of look momentum Please stay additional Showcase XXth some we’re tuned platform on in more customer Francisco. more

as in I for hand say Okta before last defined analyst I’d been ability Access month, very thing the leader this vision, a to execute. was we're and community that is quadrant since created. once Gartner's Quadrant Magic it category our be Okta to and recognized like Management. to for Earlier The named strategy to leader a this this was the Bill, by again over leader we’ve pleased

to the recognizing from is heels Okta to have are recognition Quadrant where pulling having ahead competition. graphic validation we’re that see replaced year's because have really us sustained we’re Forrester a striking of and our serves analysts. further with Magic for reference this Support. our in the because the leadership industry value Enterprise the analysts in absolutely their Okta the that comes of on this confidence as leader Research by and it’s This with what success great customers means recognition really the as Identity-As-A-Service We You it

that, by summarize saying very driven quarter market With and us, for I'll it strong execution by was a momentum. continued

massive us. the great focused fronts capturing front of on and opportunity on seeing are in We traction all remain

again your Bill to to the now, to through results. Thanks turn for And financial call I’d Bill? walk over our like time.

Bill Losch

for thanks Todd, us. joining everyone, again and Thanks, to

outlook business quarter the I’ll then and go results the our through second full-year. and our for QX for discuss

areas, QX exiting better had billings strong expected board As revenue, including than Todd strength in growth we we mentioned, across maintained experienced RPO. and many the with momentum calculated and

of in revenue, from with in by and is U.S. driven Total revenue revenue, XX% revenue XX% grew of Subscription QX an up was increase $XXX XX%, which year. of growth total XX% the subscription last represents from QX XX% now our XX% outside Revenue represented revenue. of million, last consistent year.

are international view to long-term opportunity expand footprint. international investing We continue a strategically our business our and as to

the benefited Total bookings existing Billings be and strength calculated billings The quarter. billings customers by and in enterprise XX%. XX% increased across both also to billings and new grew calculated stronger-than-expected continues driven current within commercial. from

both revenue, recognized, and backlog, of Total that for been billed yet $XXX has is subscription XX%. unbilled representing contracted was RPO which million, not a growth or us

contracts total total the length, with cases. in mentioned, where five the years large some RPO in much reflects to been tend enterprise value and growth we’ve success in to be longer customers Todd in experiencing larger As up contract exceptional the

length with the we size average winning expect As success to see time. contract we largest trend continue world's upwards and the organizations, term to over

million. XX we represents over of XX% experienced which RPO, the next expect subscription strong to also revenue months, recognize $XXX to growth Current

some RPO variability should and as in changes seen because quarter. it to can As in I variances in growth. growth these year-over-year gauge is our when be invoice viewed RPO billings revenue timing, last with quarter, billings an metric the sustain the current metric more performance Billings in invoice additional caused variability along and in The invoice meaningful by eliminates RPO while dynamics. mentioned duration subscription can a reduce of viewed

be contract However, renewal as such factors influenced by and RPO cycles. duration can

to retention. Turning

and represents point at and XX-month slight achieving and deal customers. Our dollar-based we’re the decrease large as The remained rate net strong sizes the decrease. enterprise retention is large sequential by is X impacted trailing with for initial XXX% expected period

quarter, bit to mentioned a the retention I fluctuate last rate quarter. As may net from quarter

We as growth to we in experience initial expect to continue deal very sizes. it remain healthy

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

XX%. grew points, was XX.X%, gross up margin. XXX margin margin basis gross Gross up to XX.X%, was Subscription gross Turning basis profit XXX and points. total

The operating grew operating the our Okta QX Identity world's overall at with and prior commitment market world's quarters, growth primarily more Identity in as was the Cloud. with largest expanding with investing Total looking expenses include which by expenses. Consistent platform, Now, largest increase our to of network addressable presence and organizations, investments we geographically. strategic of priorities, more and the in business organizations effects with expand for security look driven of with expense sales our made the aligns to XX%. marketing large our the Customer the driving we’ve invest strengthening with capture

support talent, the retaining spend successful increase headcount the XX%. scaling to strategic great been is headcount As initiatives. of and grew and We've to total component attracting usual, related in biggest these

favorable our growth. in invest as business to scale we continue We

Operating last of for compared was than versus to negative as operating shares per the driven was year. $X.XX in loss to held net to revenue $X.XX basic of by year-over-year Oktane with per loss year QX QX Net year XXX XX% million shares period X% this this of the loss a compared also negative basic QX second and the compare share benefited and last in timing of million quarter year. margin QX. This share outstanding margin our better XXX same with in outstanding expected primarily which million outperformance. The $XX a is in narrowed last

to flow was flow year. negative XX% a or of million $X.X typical negative was cash negative negative Turning Free in negative compared expected $X.X seasonality. due year. last to to flow X% QX margin was cash X% million. last to improved X% compared as cash cash flow. cash for QX Operating Operating Free flow negative to negative margin

$XXX and variability expect in to year positive expect margins million growth with end due in continue with seasonal working business continued to also second free cash equivalents capital, in and flow short-term flow cash cash, the We enterprise fluctuations ongoing factors. see to We the the investments. quarter in cash ended and to

approach Moving the second investments this raising on platform, demand results, on growth, we current this full innovate with further our remain year, to our business outlook. experiencing optimistic quarter about we’re strong enhance Consistent outlook. using upside our positioning. year Based are the fuel opportunity reinvest We our our our we're environment. to to and in competitive throughout

increased while profitability. our we full year, we've QX invest QX a result, some profitability our outlook for As outlook adjusted to expected better than of our the

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

loss rate growth expect operating $X.XX to XX% shares fiscal XXX revenue million; loss of are full outstanding $XX of the total to $XX to $XXX XX%; ‘XX, year of to non-GAAP $X.XX, For net million, and approximately of assuming guidance non-GAAP of our per a now million $XXX million. million we of representing share raising

quarter, making standard years, In achieved future forward had the extend as we The for market. to on half our and and leadership started. another our the looking the uniquely we're position are workforce of We're summary, we’re capitalize believe getting building Okta's propel solidify this we we both momentum tailwinds just and second the past positioned in We’ve year. great will progress customer several and to on strong growth and Difficulty]. help [Technical investments over today the the in

the on opportunity front market in look We achieved are and capitalizing progress we've to of us. tremendous encouraged forward by the

Frederic that, take will I Operator? With Todd, questions. and your

Operator

will Goldman Sachs. And to go instructions] we Bellini first [Operator Heather with

Heather Bellini

competitive starting maybe kind bit, given that out to of could a little also are cloud Thank see a talk ask of and I are wanted have how about you. about changes follow-up. you today. just there share bit I if be a out playing how to you heritage, dynamics and can competitive that and any about your you products the if deployed react how if could the on-premise, that see then, customers And little little environment that share native the to you a

Todd McKinnon

differentiated good It’s the company really very when do for how cloud. because differentiated really they every be are to to upgraded, thousands last cloud can’t they to the part company good Yes. the not. pre-integrated we they well. world. think us about Company's dynamic in of industry is has to of organization, everything cloud, we're in weren’t the or The is This the is that, built moving -- moving they very, a is everything they between for a the And is very solutions environment. most can’t several very And services, a important question. very, the connected been, be news competitive we weren’t very, And continuously between the we years major to moving cloud, are

think back I to does you’re really added And the customers little a announced to our at referring Gateway. conference that called So, at We that's faster that what that Oktane. over tremendously bridge from. we’ve Heather, it’s cloud. those Access a benefited We something move product help to bit Okta

early to it connects a next it's cloud. still into gets their and journey that connect So, and accelerates months and start. environment, early big but more into over seeing years. Okta on-premise that off back on-premise success it’s the we’re the we're product it, easily more their strong Okta for of and And it things And expecting really environment very with

Heather Bellini

some might guys months still you ago? sales quarter, of from the change share in Bill. or than perspective, Bill, obviously, more in that a But, just And you. just And any make you I about mode. very you just environment. hyper are a little that is then, you your environment growth say three cycles would demand the was concern with growth wondering have a challenging strong slowdown there's think late in noticed bit us, it guys overall anything follow-up this if mean, macro Thank been Great. RPO for

Bill Losch

those Yes. Heather, type any we're not seeing of things. of

like tailwinds macro digitally very security, themselves, enjoying cloud, we product. these our for on now, the seeing have We’re moving transforming that companies feeling demand while a We're to because for strong been we are priorities. as a result a And these demand us. tailwinds, to remain that standpoint, we’re think that, -- C-level continue will demand strong for going is focusing we to from feeling of very

Todd McKinnon

One across federal the terms Heather. the is about it very business very like board, just segments thing thing geographically or of two balanced. was I'd quarter two in that, our -- business, about the whether success add the quarter it to balanced was or One

one another in was board balanced by So, very if across the all was success. an underperformance performance it covered area, there was area, the

Operator

William go to next We’ll Blair. Jonathan Ho with

Jonathan Ho

sense the out, getting you -- on some maybe congrats I Hi. more when afternoon. a mainly it wanted I what of the color, start multi-product to Good what helpful just deals? outperformance strong deals, stronger some about And little drivers on bit bit further give can cross-sell think, or a was of little you penetration, results. to by? it'd the just this that's just the a talked larger Is upsell, of were? driven being us maybe be understand

Frederic Kerrest

kind is words. This for Jonathan. Hey, Thanks Frederic. the

progress are As and those the with we're there. the deal mentioned, the and we're that are largest overall The world's very organizations longer. that you sizes RPO contract traction strength getting seeing getting about in indicates excited lengths our larger,

TCB, compared average if piece year, of doubled. contracts booked In -- the that to at QX last we contracts in a and XX you as of mentioned, by to size fact, data, look top give Todd

about either for adopting workforce, are their do so, that workforce about see more starting a customer they're entirely that the Fortune that good organizations a for in, They example is of cloud ours, to really you upsell. you're or see what and internally to identity customer thinking and of going and how that how deployment. large of new they And put that was Zero Trust XX management, strategy think more lot

across the now Management. workforce innovation, over is new land seeing long organizations. opportunities they've platform, So, strong that different example the a to happened not couple Customer where customer seeing you're ENGIE talked what also the last so for the really Identity much that continue been introduction with a are in we with years and But, but has time places and to can large Access we use products of only of about new products, these in in and

win our was was looking for a Pacific Life, do cases the That of where for type new example, really So, customer. started identity with customer us. Cloud, brand those Okta some portals a place of new new a they're And Fortune XXX a complex Identity that And quarter of the way. where for in Network wanted customer with to new they in now. Integration lot new and innovation for the breadth use certain and we depth for address the management, can

Todd McKinnon

only have deals across so over adopting but But, and can too help And Yes. are of the large, lot of first them a add lot And in with. -- friction help speed their initial organizations space I'll technology a smooth technology, time, a they much they we need. not all, time largest lot white to a that there. of of complex to because There's we can a value things, of there's are there very lot -- The have just is their that. board. it's

time. only the accounts potential but about over not size we're these excited about just of deals grow the in the we're So, to excited initially,

Jonathan Ho

on the bit a some -- the potential access some of particularly maybe breaches wondering, the as a recent just Got it. benefit more cloud, public little to interest, pertains quick you follow-up it just has to is And any I'm out led concerns server as talked the of about to there have or inbound product. guys then, there? from

Todd McKinnon

and doing get code development the There's really processes, particularly agile where strong and and being a products. in they're more down interest that's trying in it's moving they DevOps, breaches they're the SX lot of the are they some sometimes servers And so or fast they seeing out. shops down in iterate how to And modern of And innovate that like don't lock buckets lock where these should. you're happen. people

it's world. is fits -- close for modern a security these fit Advanced processes into maintained So, shared, development Access and user using It and down weak credentials, it created great the software that. great help help in this some risks, we that servers, servers, and Server shore can of passwords, these whether it's up, fit development modern this not accounts can administration a on software

Jonathan Ho

Thank you.

Operator

next go with we’ll to And Alex Needham. Henderson

Alex Henderson

very you thank much. Great,

one quick deal the lengths. on question Just

I for incenting their incentive five-year So, that basically assume you’re opposed just not fact term when you a providing Is longer because as that to you’re extending sign deals deal, desire that any in correct? that.

Frederic Kerrest

cases larger is complex environments, because is to what for used identity long-term for really correct. the and we are them. with Okta we scalable secure address partnership they across That be are Yes. hybrid that us, finding where I the mean, looking can standard their we’re can them now, evolve to enterprises, for address they use as cases looking really

really the over standpoint for So, the of contracts the a is time. partnership lengths they’re it from deep ones that driving them really the

Alex Henderson

of sure like long from a many delivered is some incredibly question sense it’s people it And give of impressed I leads show around just book continue now point? is be pipeline. that running close to your that that you that by takes How that we’re Could sense at make what I you’re wanted leads down. conference. Great. generating this pipeline that looks to was the how to the my up us I wanted accurate. substantial Oktane lead The to primary tradeshow? for ask

Todd McKinnon

for customers are about of both numbers. that don’t tremendously the learning I existing the platform. that breadth know I have Oktane is those influential, the do

big so to that of we to value very of Oktane they a the know there we the broad, need will can our provide. our and platform customers products are lot of about of mind it, do is telling the we sure our efforts spend things One and in breadth make in try we keep

important too -- an in new we of and story then, of the So, just product the are the addition we it, and there the the and sure time, as part for explaining that make that value, prospects message learning about we convey to well, the first provide core that’s try to lot product. the impact breadth invest see funnel very -- marketing We why of from the and every on is of of a a on sales and the do continue the for reasons year see that strategic Oktane, we to event event. in we the is It which results one grow us.

with it So, have positive with happy we’re -- share, confident and we’re we’re going happy it’s happy -- how with impact wins we’re a the that to again.

Alex Henderson

run One or Ping, The public. last question to how if might you color position them they around How they’re quick I say them? setting -- filing obviously any us often do against can could. you you go give competing, how what see you do Ping might into Thanks.

Todd McKinnon

niche basically world like is vendor are the major thing they’re earlier the to everyone twice the now, are they But of the And either talked I is or or all they that market strategic size legacy see the mostly suite Ping. are They’re growing, bucket. software best know the that’s that’s over standalone part or future, legacy want and future. get the to of products so that I us IBM maybe legacy like cloud the the identity happened think, the that fast and cloud Ping. in they future companies, I the competitors want the why -- think in has cloud. they’re cloud o-premise separated the someone decided Computer That’s last the the about, into as we there twice direction. see our as like products, five in to really And Associates years So, the And is they results software. you world to or

Alex Henderson

Great Thank much. quarter. you Perfect. very

Todd McKinnon

you. Thank

Operator

next with Auty will Morgan. JP to We go Sterling

Sterling Auty

guys. Thanks. Yes. Hi,

how process to the how pricing What to works structured it packaging actually and had do So, mentioned nature relative procurement Todd, of the previously? componentized the and you kind does the change of and to products of you that it.

Todd McKinnon

use about Turning platform cases. the componentizable products into is really a more addressing

So, maybe have seamlessly cases flexibility not or it’s possible giving very may the to use that before. difficult a Okta use for before customers been

so, they products -- for it’s the And the platform do make use it’s do like the just the multi-factor get proofing, used authentication every right? and or do has. maybe right, verification call, be use identity really to by all that on part maybe started, our making of want they case can and those we to they a infrastructure not the identity that scenario and where customer the Whether what are very a sure but small repricing, want cases to our addressed authentication, engine to address will of we rely that use third-party It's it powerful. it’s

more power flexibility, basically it's So, use sold. products address more to more more cases, which means users and more

Sterling Auty

but of purchase do head-to-head landscape, follow-up. in access said customers on competitive what you that that terms before actually is the server if solutions? your is are there it an one you considering competition, what solution, the then, or And if alternative I other Excellent. missed RFP see they

Todd McKinnon

security. competing great Really, a question. bad we're it’s It's -- Yes. with

if and their shared that have company workflows DevOps or all and in engineers, across we So, go credentials has. they easy, that they're environment fine-grained put using one not, or flexible, we of an account can admin their all in the access into works there very admin all control, go very operators

the products. and really type development IT, in really So, PAM for PAM other of more a workloads, that are it's DevOps of or traditional is Greenfield. CyberArk We're like workflows. evolving partner with DevOps environment competing the really not more modern on modern those. people we some Those We're development on focused

Operator

we’ll Stanley. with to go And next Melissa Morgan Franchi

Hamza Fodderwala

the days, currency outside revenue did it's QX. there, Melissa Then, for Hamza or and Yes. the up for XX% questions. a international into early underinvestment? notice U.S. the my I to growth follow it’s in question. that's Franchi. still Obviously, I Fodderwala companies know top I is taking This you the wanted bit, follow-up. guys. a of mind that versus decelerated have whether in Hi, quite read Thank macro on investors. but for to year-on-year Anything

Todd McKinnon

remains Yes. I strong. mean, international the growth

One things is about think you the to of outperformance U.S. of the have the

percentage it a the of as So, consistent. remained business,

very still is it So, strong.

companies I as that us. still focused transforming in U.S. high is far and we themselves on believe macro digitally made from the key think benefiting that and demand the we’re that to having We U.S., true earlier of the comments these as be for believe environment, I here to we’re that's outside going cloud, and the given on the both C-level worldwide they're moving key priorities. tailwinds things security that

having about the talking when organizations. we're In we the are largest largest talk addition to about that world's organizations, in success we world's

So, outside U.S. mentioned we companies in seeing of those the being are Todd of ENGIE Europe. one success

So, across very board. demand we’re strong the seeing

Hamza Fodderwala

Got it. XX%, current was QX maybe, that XX% above understand subscription year-on-year. takes billings you Could a you the just around of could follow-up. growth puts RPO some just well, as there And duration? and Is if that were know us I in in us sort help came and square early there? help renewals

Todd McKinnon

Yes, sure.

is and it this quarters So, RPO that we do billings growth. very last do the that meaningful metric we current when with said a in couple of think -- you

is invoice reasons with for it's good QX, QX the that Our you over of see some at looking invoices, a we with in current with that in invoice eliminates because billings current see timing a to just is we is and you’ll billings which that conjunction type reason RPO, period. and it the direction, that really eliminates timing RPO RPO timing did look actually did metric grow think said, really meaningful of conjunction the XX%. And metric

Operator

with Yoshida-Are And go we will to Capital next Markets. Berenberg Francois

Berenberg Capital Markets

businesses on Hi. integrators specifically I’m have now Can system believe and quarter? was from contribution business you Josh partners Tilton. until on direct. driving I enterprise the large been comment -- Joshua this enterprise just what for mostly

Todd McKinnon

Yes, happy to that. do

investments mean, to we're off. in partner the that channel, I the seeing been we’ve making continue So, pay

both we scale an investing part global We’re and going as and those domestically especially internationally, strategy. our important of find reach, more to is be

of parts all is, the those have in You always talk we and examples with very talked the like Deloitte, world's of Accenture PwC when of partners strong the least ours. continue at largest specifically be organization. reality to as relationships they one if organizations, different integrators about about system not The

system their posture help but think practices build thinking can Deloitte, practices All their too. security can what and also enhance them those how about. both are how enhance That's identify transformation about PwC of of they’re large integrators thinking digital the customers, they Accenture, they about

can so Okta with of partners think they adopt with and Identity relationships things. the helping vendors. we both enhancing as becomes that easily, more become Conveniently, about Both their help strategic customers but also the those customers and them their Cloud more secure, cloud

days excited well had And and from number partnerships conferences very We’ve partnerships. at of of our very and getting grow are continued certified those are We're there to to we as going the bright Okta those on very go events that are So, fast. that well. about theirs trained ahead. service, as employees very them strong support I the continues think

Berenberg Capital Markets

just Thank you for And one that. more follow-up.

in but from what into highly product like be product As enterprise, demand is we think the sign-on single management, think disruptive, enterprises do of going and it's a authentication? to the enough there, do functionality as you move positioning to the with suite that and view how perspective? regards that We multifactor about the lifecycle competitive

Todd McKinnon

new is the in Gartner by Magic influenced at see that already. world's -- feedback talking position just if and largest take largely the largest organizations some mean, is our are our competitive happy Quadrant, of look Gartner there comes we're with very very The world's customers which the I to position And solid. a organizations, out. how that if you you

a to and good it's talk Gartner, the willing we're having So, they're they're delivering. testament success, to it with really about value

into many, that specific working is integrated a move -- the bridge have -- right? single cloud have it. large infrastructure management lifecycle we're all use lifecycle connect use sign-on cases, And Okta many large Specific they way single have gateway to to and about it's cases. board across cases, a And cases, really they make want to Gateway, enhance sense, is to their the sign-on, the the back organizations it the make continue use them talked makes way where cloud. to -- multifactor products as like whether go, It's it’s on-premise the cases, and use all the and it Okta sure on they the use ability more organizations to for multifactor, address products a products, keep that more management. every that goes they're use And from which case. they And to across flexible, earlier move help these I legacy to it's board, to which Access

So, across lot we're leaders we a -- board. value of focused though can making there's on the even in industry, because focused on even them the product making deliver they by are the we're better far

Frederic Kerrest

one was the that would that were for they as Two customer the the first reducing things prepared of mentioned the add remarks provisioning things XX specifically in automating new ours, friction Fortune by of of applications. IT I looking big we to around are

lot HR there. addition speaks for cases And we’ve provide employee large for new capabilities specifically going as that are their to strengthen There interest. to And as for workflows, and to on-boarding just that a multi-application, we that, continue excited off-boarding. in value management use automating to organizations. our opportunity end-to-end to master, large discussed then, So, of lifecycle can organizations workflows, a provide multi-step is very we're the

Operator

go Nowinski Andrew with to Jaffray. next Piper We’ll

Andrew Nowinski

Great. Thank congrats great quarter. and you a on

in versus the on Really You that enterprise workforce contributed the which you customers? your us deals internal getting just they're customer give color to if wondering how historical more customers into Can any deals RPO is relative large and versus large talked large growth. using mix product those about to base. external enterprise your different just

Todd McKinnon

talk Thanks Yes, the absolutely happy to comments. Andrew about that. for

there trends more addressing. are is these are they more think, again help three opportunities organizations. that about, what I and Think for macro you're us seeing large to

to really revenue trying it's more the access those components -- customer their of accelerate customer security, them and their and workflow workforce and accelerate reduce identity it's whether to use think whether both management. you're streams the with and more platform sorry, identity cloud, use management, and seeing costs it's business, both cases, whether of the trying about growing So, using enhancing in

happened the past. than nothing in significantly different So, what's there's

organizations had We large have as customers for some time.

are is I a digital good to fall learning, fall access and quickly Cengage, example A they parts learning semesters the all to deploy of application the new about our grow put we identity specific now. I the think, starting a of find ours, organization what large today and customer customer new students commentary ours is, one were for suite, are out to of and of the of university from there. of ways that then value is of the able been in largest a exciting providers they have of and college management for quarters within quarters, right tens millions students. and couple just mean, six we just that able customer months with

started help value market and time well to to that And ahead. can is speed that fact is think think the get find grow I and that then value pertains find success, very attractive. that I something them So, the we with for times quickly, us,

Andrew Nowinski

And you. Thank great. follow-up. one That’s maybe just then,

increasing new getting your Your relatively Thanks. customer these again, XXX enterprise over I'm a new but growth consistent surprisingly into now. or considering the seasonality perhaps in of why last in is adds not were is more customers very segment customer five of quarter. just of regardless large new strong it the the quarters, wondering these you’re accelerating,

Bill Losch

that about XX% have greater in enterprise, but I’d than we on reflected XXX than right. the the year-over-year enterprise between with in that XXX,XXX, these in the doing the booked What it you’re large even talking we Yes. term customers, to quarter larger booked and also growth we’re fairly in more historical really what we that double is XX% were is enterprise, bigger doing customers, XX continue that we’re grew the XXX, the lengths. longer last new we we we about, quarter. point a it’s that remained fact largest XXX deals, to consistent growth and I the the mean, a significant reflected with that quarter That’s talked RPO line the every has is metric trend. have this customers, in The contracts and where we’ve larger growth the been rate

organizations. also about obviously the And world’s largest And those seeing focused sizes, so, enterprise customers on is adding business, focusing deal customers success and we’re lengths, with on as larger winning but where we value. lot adding longer a we that, we’re think contract with new as of we’re overall about, the talked large

Operator

And we’ll Gray Deutsche Bank. to go with Powell next

Gray Powell

thanks for the taking Great, questions.

couple. Just a

almost I focus off pace the look maybe I doubled know, metrics I'm lot on, dollar growth subscription it in of of at the and oversimplifying there in absolutely So, revenue to things. a are QX. if But, QX,

in that how driver of the can there, So, you the seasonality about is main versus sales productivity normal interim execution quarter? and much talk

Todd McKinnon

where total accelerated of you metrics talking is that business we by the all that current being long-term mean, continue really when I I that’s quarter-over-quarter. being with that growth but traction, growth all the continue been RPO, RPO, think, specific driven not we’ve the the fact to being, RPO, the And we that Yes. seeing see RPO, we’re see the about again -- to the large the what to actually a primarily accelerated from enterprise. that

lengths, things seeing. those you’re value, of really the what what’s larger All -- contract much because of longer larger lengths is or driving contract

Gray Powell

how overall of with it’s think advanced know And quickly, uplift products? the And helpful. on about I far, just so really that of customers have Got it. side, the That’s are build then product we what seeing on opportunity server kind should access the Okta? up the you signed the but

Todd McKinnon

trend good ago a the to future early transformation strong, or is big before area that expansion new customers. selling businesses, agile time a about success like services available judge development. and place as answer powerful product companies a deploy get of a over way a a we very building a trend And to where security also and most and using what think existing onto think I often modern is software. to the are success had We’ve And and And lot. I about in we product early digital land macro the positive. The excited the cloud at our doing is was It's on the of generally another or place indications they And mentioned to that that software very it -- infrastructures major is lot hooked right with or really as -- development there. be. It’s see previous of are question, but understand. months at to It's Oktane. so time the we're we made both something to macro term, few in other right long customers, is just a new with

So, we're that about one. very excited

Operator

And Moskowitz to with Mizuho. we Gregg will go next

Gregg Moskowitz

Most are basis it good a quarter. you Bill, how your little have Thank this Okay. what wondering But duration possible expectations average color I quarter on were if the around a or of as contract much around congratulations much so? next as well year-over-year over two on to been my very was changed your duration and a asked. questions provide more quarters

Bill Losch

picking these Yes. up X-year lengths Gregg, X so, as enterprise Because contract in what contract as was of we’ve -- know our range. has earlier, driving within the that customers and I the large that far average to range. duration what RPO, is longer said you was been

believe pick we will long as that that I will contract think, world's that continue, more we believe average up over we which more continue, length largest organizations and we as win do to time.

Gregg Moskowitz

it follow-up, you year-over-year. at higher headcount, grew a continue expect you rate to if about XX% the look as end Do back accelerate to again the just then, And in growth helpful. That's Okay. half?

Bill Losch

in related in QX. to said -- take will I my saw remarks, upside. and in as invest of later make additional in by be you we as revenue -- and or upside primarily customer-facing headcount headcount that primarily aside QX, it half We're when the Those in innovation driven So, investments talked and about we prepared innovation. going second year, primarily

in half So, second expectation the the in accelerate growth our year. the will headcount is, of

Operator

with Montreal. And of Bank Keith go next we’ll Bachman to

Keith Bachman

over the about terms you couple unfolding on very variances think the larger next the the segments? could ask employee wondering you was you give you much. How this if incremental pricing In the customer, very employee then, which of the customer see TAM in between dimensions years two Thanks in between really versus I And could if Hi. I particular, about Thank any market being segments? much. how growth see you of a and rates terms opportunities? us segments.

Todd McKinnon

be addressable piece our our we So, identity to strong. the call continues which those upside incremental and customer and think exciting is very many is we’re two markets also workforce market The for in which the on both big, is be or and because growing also markets. identity platform growth well. largest very market contributes is what that ways one workforce We what's of those continues still to business, to us services

to lot identity when And then new allows with them do potentially our with to between it customers customers a those and of of us synergies a vice and two customer versa. there's so, that upsell cross-sell comes lot existing to and workforce, moving

So, we feel really positive that. about

I of the pricing. standpoint think from

think workforce Just we because feel based user is grab ability said, users. from I of are to structure nature active for user like good our different us they structure, based an on overall about on big the But pricing and a pricing both just identity named is opportunities. structure opportunities an those the customer pricing and

Bill Losch

thing… One

Keith Bachman

Okay.

Just -- go as ahead. a follow-up sorry,

Bill Losch

both real conversations those just was lot that is I in competitive to we’re say company one of of a in only thing scale missed that quickly, going is has businesses. the the times

are report. you Gartner to very if -- we the back differentiated, So, coming

One of a those. value found of is really the can things they that vendor that provide customers both

in strategy. land it’s of of and both means upsell a So, about because we about and can an we're more it important variety the really works part excited very have ability our both, avenues, offer to ways, we more

Keith Bachman

that statement of about I customer Okay. from tease meaningful my a fairly to out a size want And actually terms in registration the little just the revenues follow-up talks the because side. of Ping competitive in was bit. Well, dynamic

or your I a legacy between It or question. sounds the the ForgeRock yourselves different at you think if look competitive you competitive employee landscape you see see Do don’t and any the players? of the from customer like some you really or answered Pint side? difference landscape,

Todd McKinnon

the customer there I see more do -- that you is on think side. ForgeRock like

that that don’t you the bigger solve in versus them, problem of it’s -- proven themselves. identity, So, there on build have think slight fact people solution and customer buy. a there this scalable difference set The educated difference a the competitive it I can to is they a build see. competitors We're more is for of

On no do can one the Okta pretty workforce that there leading side, That’s It’s understood. for vendors like is well them. themselves. built it it --

Operator

D.A. We’ll to Jaluria Davidson. next go Rishi with

Hannah Rudoff

for Hi, for Thank guys. you my is This taking on Hannah Rishi. questions.

I tightening an to with new full First, And just following ramp how if the up long about earlier you productivity. to on market? wondering facing you talk challenges any takes are it if was question. labor could hires

Todd McKinnon

talk to about that. Yes, happy

see In executives we're success in ramping and our internally in customer-facing very Obviously of with other. market, the new we learning employees, the to organization. account continue having development the talk each that to customer-facing, strong terms

we’re getting better day. quality talent better and And every so, of

you think XX So, do level, their salesperson coming that’s we about we of Okta the just who's that certainly and are months to the attracting when to first thing is ago. quality were not interest able

well-employed. terms it’s in to whether customer-facing, R&D, the of what Secondly, the are tightening hire When trying people across do, organization we're engineering you the best labor or people to about market. always think trying otherwise. entire we're Those

And we always so, for best are the folks. looking

in our We any change significant approach in haven't the or seen results.

strong very the growth throughout rest And to the we XX% continue strong year. that half in the that. excited the expect very of see and we're headcount first You about

Hannah Rudoff

sizes. in especially talk that Is how there deal larger know to that as rate, retention slight there's that net land dollar-based continue impacted think second was about a larger customers? you the could initial you and then, we question. by about going larger should And a forward, I decel and anything

Todd McKinnon

deal this I right, by I -- we impacted larger as was you're talked sizes. Yes. think about mean, initial

RPO longer where metric we back but contracts we and talked as only with deals the top referring earlier, think, XX% not talked to term deals we growing XX I we're learning bigger about at when last initial significant QX a contract size, net portion large, new meaning net therefore, to compared new in year, business business doubled lands. the of those QX of average booked and were contracts the

past a going remaining it bit at have like up range an initial down or at it fluctuate XXX%, quarter continue level, of larger deals are a think those will net healthy further, remain a to few very in may points. this that impact. rate healthy fluctuating the So, but And did we retention this to

Operator

we question And take will our Shaul Eyal last from with Oppenheimer.

Yi Fu Lee

for is gents. quarter. on Yi congrats you taking the in And my Thank This for Shaul. question,

two questions. quick Just

the what of compared to terms larger the size ones? first the ones The the large one in between deals, terms sales duration in of as small SMB cycle is, is the

Todd McKinnon

we and Yes. we're That’s with those contract overall about as lengths larger organizations, talked that a getting question, longer. good obviously sizes are the are the large seeing strength deal getting

it identity you If think in years. obviously about they're three becoming of these five decisions, for how kinds organizations, strategic they making large is make to when

multiyear that's of to medium build see we're at all starting very business. we small important decisions. to more upfront, these least different see. do across and business, And more the We we so, comes -- And but segments contracts are contracts it when, still and what see annual the

Yi Fu Lee

the a, SMB deal to guess estimate how In larger versus long the have terms for of it of close sales you duration, like takes cycle, do like I enterprise sales team an deal?

Todd McKinnon

Yes. that decision. just obviously, more more enterprise involved I take Typically, whereas organization, have folks less it's there's touch parts in deals that are larger there in the you more involved; folks mean, strategic; organizations, frankly, do are longer. of smaller to

companies So, like it's enterprise pretty what typical you'd in see Software-as-a-Service us.

Yi Fu Lee

CA, that Okta Okay, it estimate I magnitude the displacement as opportunity as is, well you have many can you do an the the on-premise fair this of enough. legacy vendors guess how And opportunity in customers about advantage last could of mentioned take question like be on IBM of?

Todd McKinnon

of about think only think every It technologies, of organizations could world with millions legacy some our in dollars broadly. the the that identity the of tens implementation. spend company. of I very it sold on of opportunity, I largest When some was problem And the wasn't

it’s broader up -- are opportunity wouldn't on And I the keep much, than for I those the of is I what broader think that. in now delivering just to the keep robust is than doing. us, away So, and much up that the desire and focused in from move world’s that Those help that largest the a us, desire executing industry-leading much to terms organizations, strategically that’s our for world. organizations get we’re platform to but important think it’s -- really can it’s there technology customers And in high. legacy largest

Operator

closing At hand I additional Dave call like to back remarks. time, any would over this for or the to Gennarelli,

Dave Gennarelli

operator. Thanks,

bus commentary, our XXth, more next As we’re event to can at Todd headquarters We’ll look called tours and San attending York opening and Conference be hosting and Francisco Angeles New for source New Berenberg, his be customer going on as mentioned week. hosting in the number you a as of in be also in a U.S. Showcase this York on Xrd. that on in marketing Los quarter, Stockpicker information October well we’ll Boston, October

we So, hope you one see events. at those to Thanks. of

Operator

That conclude conference. you does today’s participation. for We your thank

Okta (OKTA) 28 Aug 192020 Q2 Earnings call transcript