Todd McKinnon: The Okta for Global 2000, it’s — you mentioned the competitive differentiation, which is true. What I explained about that is relevant. It’s also — there’s also something more important about it, which is if you think about what Okta is trying to do, we are — we’re the leader in identity. We want to make sure everyone in the world knows how important identity is. And traditionally identity has been sold at a — as part of other platforms, you kind of got it when you bought the Windows network, you got it when you bought Oracle and some junior person in IT made the decision. But it’s so important now with all the things it can do for companies. And one of the most important parts about Okta for Global 2000 is what we’re saying to the world is identity can actually impact your business strategy.
As a CEO, I know this. As a CEO, I think about all the time, like what things I want to do centrally, like do I want to do function centrally, do I want to have the HR team be central or do I want to decentralize it? Do you want to buy this company? Do I want to take part of a group that is centralized and decentralized it? And those are strategic decisions and CEOs and Boards care about those. And you can’t make one of those decisions today unless you’re also making the technology decision because when you decentralize that HR department or you buy that company, you’re making a decision about how the technology is going to work, what — how the apps are going to work, how the security is going to work on that. And to do that effectively, you have to have an identity system that’s flexible and lets you roll out things quickly across the whole company, make policies across the whole company when you really want to lock down security, free up parts of the organization, do their own things.
They can use their own HR system. They can use their own rules, and they can use their own platforms to be effective. Those are identity decisions. So I would say that is more important on the message. And when we say we have Okta for the Global 2000, we want to make sure that message gets across. You actually what you buy, you actually buy Okta’s products. So you buy Okta’s products. They’re licensed in a way that’s convenient and works for all of these capabilities working together. But the way I would think about the business driver is Okta identity is more relevant. People know about the relevance of it. We can differentiate it effectively and the overall workforce and customer product suite will be sold more effectively at scale to the biggest companies in the world.
Shrenik Kothari: Got it. Thanks, Todd.
Dave Gennarelli: Yes, let’s go to Peter Weed at Bernstein.
Peter Weed: Thank you. Appreciate you going in overtime here. I’d love to go back to kind of — you started the conversation, emphasizing the strength with some of your largest customers, obviously frustrating that maybe the SMB side hasn’t been as strong and that sits some of the logo and hopefully, that comes back. But I’d love to dig in on those larger customers a little bit more and understand where the growth is coming from. Are we hearing about set reacceleration there? Or is this mostly about the kind of excitement of the Broader Okta platform and selling through more functionality. And we may even get a bigger boost from seat re-expansion in the future? And then kind of like when you look out at the pipeline, obviously, the sales team is kind of stacking up stuff coming into the future like how unusual is this quarter?
Is this — was this like a big bubble in the pipeline? Are you seeing similar type of setup in the next couple of quarters where we could see really good expansion on kind of similar types of execution?
Todd McKinnon: On the seed expansion question, I think seat expansion definitely is muted with the macro. So I think the success in large enterprise is more products. And I mentioned the OIG new business land at the global customer experience company. We have — another example I can think of it was a big transaction in a well-known online real estate company, that was an addition of customer identity cloud. So selling the customer identity cloud to what was already a workforce customer. And then there’s examples in the customers and large customers of selling expansions of products, whether it’s upsells to advance multifactor authentication on the workforce side. So I would say it’s more use case expansion versus seat expansion.
The pipeline is interesting. The pipeline for the current quarter we’re in, in the fourth quarter are very strong. And I think the thing we have to really think about is in this macro environment, how that’s going to translate? We’ve seen in the past few quarters that the typical conversion rates and the close rates, not the competitive rates but the close rates of how much the pipeline goes into actual closed deals has changed since the economic times of a few years ago. So that’s the part we have to be prudent about. There’s stabilization in the macro. We’ve talked about the numbers. But I think we’re taking a little bit of a wait-and-see approach before we assume that those pipeline numbers are going to fall down into the closed business category at the rates that were — maybe you saw a year or so ago?
Peter Weed: Well, that’s exact. Hopefully, signals of no churn and salespeople and these types of things means people think they can make their quota numbers, which will turn into some results for us.
Todd McKinnon: Yes. No, I agree with you there.
Dave Gennarelli: Great. Let’s go to Madeline Brooks at BofA.
Madeline Brooks: Hi, can you guys hear me?
Todd McKinnon: Yes, we can loud and clear, Madeline.
Madeline Brooks: I would start my video, but we’re moving floors in our office. I don’t have a camera currently finishing the up video. But I just you could go back to — and I’m not going to ask for any forward-looking guidance, but I’m just trying to think about floor as we go into next year, what would need to change for cRPO growth could be maybe high single digit. Is that win rate tough to really drastically be cut? Is that more of a factor of macro?
Brett Tighe: Yes. I mean, we’re definitely not going to give guidance today for next year for current RPO. So thank you for saying that, but…
Madeline Brooks: Fine, yes.
Brett Tighe: But ultimately, when we’re thinking about next year, really, we’re focused on the second-half of this year. If you think about current RPO, even more important to revenue is really the second-half of fiscal year ’24, given our subscription model. So we’re obviously excited and optimistic about the second-half, but we need to execute inside this macro headwind. I think the biggest factor in this next half or even if you stretch it out even to next year, it’s really what does the macro do? Because we do believe that the broader go-to-market team and the total company is really executing well, both on the top line and on the bottom line. So really pleased with how everyone is performing at this point through Q2 and as we enter into the second-half of the year.
Madeline Brooks: So just a quick follow-up to that, if I may. So if I think about over just thinking into next year, the growth though and for the fourth quarter as well, just in terms of translating to historical, maybe like seasonal norms of budget flush. What are the thoughts feel that this year maybe budget flush is going to be stabilized. And if I think to like taking down cRPO guidance 5% from this quarter to next quarter versus your comments on stability. How do we kind of marry those two?
Brett Tighe: Yes. It’s purely — even though the macro is stabilizing, it is still a significant headwind. And so we’re factoring that into Q3. And in terms of the budget flush in Q4, obviously, we’ll update you guys with our Q4 guidance on the next earnings call and now, obviously, how the results go at the end of Q4. But we are expecting the macro to still be a considerable headwind to the second-half. And so we are adjusting our expectations or giving you expectations accordingly.
Madeline Brooks: Okay, great. Thanks so much.
Brett Tighe: No problem.
Dave Gennarelli: And last but not least, we’ve got Brian Essex at JPMorgan.
Brian Essex: All right. Great. Thanks, guys and thanks for squeezing me in here. Maybe, Brett, on that last comment. Can you maybe just clarify because I might have missed it during the prepared remarks. But are you thinking about the macro deteriorating in the second-half of the year? Is it staying the same? And then I just have a quick follow-up for Todd.
Brett Tighe: Yes, we view it as stabilizing. So in other words, what we saw in Q2, we believe it stays that way in Q3 and Q4.
Brian Essex: Got it. And then maybe, Todd, just I think last quarter you noted and it was just noted a couple of questions ago that just better sales retention. Is this the fourth quarter of better sales force retention? And what are the plans for hiring productivity and any kind of executive changes on the sales force front through the rest of the year? Just trying to get a sense of what the overall kind of like cultural environment is like there from a sales perspective.
Todd McKinnon: Yes, it’s a great question. The attrition has been a healthy level for a couple of quarters now. And then obviously, if attrition is a healthy level, you get ramps. People start to ramp. And the data we see that one of the points we look to is the participation in customer identity cloud deals, and that’s at a healthy level as well. But the productivity can still be better and we think the productivity is really macro related. And so I think the last thing that could improve is productivity, but we have to see what the macro does. But it’s — we are working very hard to get better. It’s not like we’re just waiting around waiting for the macro to get better. We’re — as we always do, we’re enabling, we’re making sure that people — the processes and the handoffs and the marketing funnel is running well.
And so we’re doing a lot of stuff. And it’s really a testament to, I think, the leadership we have on the sales side. We have John Addison running the sales team globally on an interim basis. We have a search out for a new President go-to-market, and we’re going to get the right — it’s very important. We put the right person in that job because that’s going to be the person that takes us over the next three to five years to new heights, and we’re going to get the right person there. So I think overall, the vibe is positive in the ultimately, I think the attrition is kind of a good metric for that. But even beyond that, I think just anecdotally when you talk to people and see how people are feeling and seeing success and how they’re seeing success.
It’s a positive odd. So that portends well for the second-half of the year and beyond.
