Dave Gennarelli: Yes, let’s go to Shaul Eyal at Cowen.
Shaul Eyal: Thank you. Good afternoon, folks. Congrats. I want to double-click on Brett’s commentary on contract duration, seeing sort of stability, maybe even improvement, is that driven by additional modules? Is that driven by pricing? And maybe, Todd, just a word about the competitive landscape, Microsoft, some other companies out there? I appreciate it. Thank you.
Brett Tighe: Yes, I’ll take the first part and let Todd take the second part. Around the contract duration, contract duration did tick up slightly in the quarter. It’s really a product of those big deals, right. So, you heard about all the big deals we closed in the quarter and bigger deals typically come with bigger duration. So, the success we had in enterprise and strategic and of those large deals, that’s really lending itself to have a slight uptick to that contract duration in the quarter. So we’re pleased with how things trended there.
Todd McKinnon: Yes, on the competition question, something we obviously think about a lot. I think every company in the enterprise market thinks about it. And we analyze a lot of data and the — I’ll give you the kind of the quantitative answer. The quantitative answer is that the competitive environment is very stable, has been for few years now. And I think that the numbers we look at are win rates and so forth, we also look at the gross retention rate, which remains healthy. We look at — you’re always kind of looking around at the deals you’re not in, it’s hard to get a sense for the deals you’re not in, but what we’re seeing is that, based on all the numbers we see, especially in large enterprises, the pipeline is there, we’re able to convert it, we’re able to offer a broad solution that gives customers choice and flexibility.
Those are all the numbers we look at. On the qualitative side, it’s really a — and this is more like when I have conversations with big customers, big government agencies, what they’re trying to do, that it’s really — two things are really important competitively. One thing is that, companies and organizations are seeing Identity as critical. They’re seeing it as the way they can get really tight on their cyber posture, they’re seeing it as a way they can innovate quicker, deliver better solutions on the Customer Identity side and it’s — it really matters. When you’re talking about being a strategic partner with a strategy to try to have a broad platform and deliver all these use cases, the first thing that has to happen is that the customers have to really think it matters and because of all these trends we’ve talked about and the value we can provide, Identity really matters.
The second thing that’s really important, which is, is the — how integrated the Identity system is to the rest of the ecosystem. Do customers perceive that as facilitating choice and flexibility? And that is — the conversations are really positive on that. They’re really starting to see that we announced earlier this week, this capability called Okta for the Global 2000 and this is a really, really important architectural advantage we have, particularly versus Microsoft. And this resonates very well with large companies, which is Microsoft built its Identity technology as a part, as an integral bundled part of e-mail in collaboration. And so the result of that is if you want to have the flexibility that you can do with Okta, where you can have Okta for a business unit or a company you want to buy or a company you want to divest or you want to have parts of Okta that govern rules for the whole organization and parts of it that govern rules just for a subdivision or a distributed part of the IT department, you can do that with Okta.
We have flexibility in our architecture, and we have capabilities. We have at-scale customers like NTT and others doing this. And Okta for Global 2000, really, we’ve added some capabilities to make it easier to manage and do some better visibility across the different domains, and it’s really powerful. With Microsoft, if you do that, you have to essentially have different e-mail systems because of the way they bundle their e-mail to their identity. So if you want to have a distributed rules about who can do what, you basically have to have two e-mail domains, which — and you have to have two teams domains, which doesn’t make any sense. You would never want to have for a company you buy, you never want to have a different teams address for those users.
And that’s just the trade-off they made when they decided to bundle their identity with their apps, and I understand why they did it. Their strategy is, hey, use the whole bundle, use Microsoft apps, use Microsoft Tech, use Microsoft Security. We’re all going to do it all for you. And that certainly does appeal to some companies, but it’s mostly the companies that are super cost conscious, don’t see the strategic value of identity, maybe are more reacting in their posture in their markets and their strategy versus being aggressive and building new things and trying to expand and grow. And we’re able to provide that flexibility to give that real that business agility with our architecture. So that really resonates with particularly with big companies and the flexibility and seeing identity as a thing that matters, independence matters.
And that’s what — for longer term, we’re all in the — we’re all in this for the long term at Okta. We want to build this important company that’s going to provide value and really be an iconic company in the future. So to believe that’s true. You have to believe a couple of things. One is you have to believe that identity is going to matter. And for the reasons we’ve talked about, it truly does. And the second thing is you have to believe that the independent neutral company is going to win. And if you look at everything we do, whether it’s broad platform capabilities, different identity markets, whether it’s focusing on the ecosystem integration and the flexibility, that’s why what we’re doing is resonating. And that’s why we think it’s pretty different from some of the big cloud platforms and some of the other legacy players out there as well.
Shaul Eyal: Thank you so much. Appreciate it.
Todd McKinnon: Happy to help.
Dave Gennarelli: Next up, we have Scotiabank.
Bill Vandrick: Hey, you’ve got Bill Vandrick on for Patrick Colville. So just looking at the cRPO guide, it calls for 13% growth next quarter. How should we think about how that will translate to fiscal ’25 revenue growth?
Brett Tighe: Yes, it’s a good question. Thank you. I would actually correlate a couple of things. Well, first and foremost, like before I get into the correlation, the way you should look at a reminder at Q3 earnings, we’re going to stick with our historical precedent, and we’re going to give you an early look on FY ’25 revenue. It will be a prudent look at us five quarters out. So just a reminder, we’ll do that. But in the meantime, if you want to bridge that gap between now and then I would look at a couple of things, yes, I would look at the dollars of current RPO right? And they will roll off into subscription revenue over the next 12 months. You can look at historical correlation and figure that out. And then I would pair that with the trend of revenue in FY ’24, 23% growth that we just produced in Q2, $560 million and 16% growth in Q3, and then Q4, you can imply that based on our fiscal year guide, that’s about 14% year-over growth.
So I would combine that trend with the current RPO historical correlations to get you in the rough area for FY ’25 but we will come out with our first look, like I said, in the Q3 earnings in about 90 days’ time on FY ’25.
Bill Vandrick: Thanks, Brett.
Brett Tighe: No problem.
Dave Gennarelli: Go to Ray at Guggenheim.
Ray McDonough: Great, thanks. Todd, you mentioned a couple of times that you continue to be surprised by the types of accounts that we’re deploying the government solution. And last quarter, we talked about OIG potentially accelerating PAM adoption. So as you think about the general availability of PAM later on in 4Q, do you see the same potential with that product and potentially displacing existing solutions or penetrating larger accounts? Or do you still expect the PAM solution to kind of attack this greenfield opportunity more down market?
Todd McKinnon: Yes. I don’t necessarily agree or — it sounds like we’re arguing, we’re not arguing. I don’t know if the greenfield is really a down market thing. I think there’s big companies that it’s greenfield as well. See different maturities on different — especially parts of big companies. And so I think that one of the things — one of the lessons that OIG is that I think that the segmentation of what we thought would be the applicability of solution was pretty awful. We thought it kind of would be mid-market and below. We’ve seen success in really large companies, organizations like Kyndryl, for the global company I mentioned with — in terms of the leading the — one of the leading customer experience and support solutions standardizing on OIG as a net new customer.
