But it’s a lot of time, it’s a lot of focus, a lot of conversations, a lot of managing, and in sales cycles especially, a lot of our deals are strategic and they can get complex and any time you have to manage through an escalation about a security issue, it’s — you kind of — it kind of slows things down and that’s the headwind to closing deal. So it’s — it clearly had some impact, but it’s just — it’s hard to quantify it when you look at close rates, when you look at the results versus guidance, when you look at growth, it’s hard to quantify it. So we’re happy with the results and continuing even being more vocal and more proactive about communicating about security and specifically around how we can do more to help against overall identity-based attacks.
And people don’t realize that every — the last 30 days, we blocked 2 billion malicious attacks against our customers. So identity attacks are, we had an identity attack against us in October and they happen all the time. And we all need to do a better job of stepping up and proactively defending our customers and the entire industry against them. And that’s — you’ll see a lot of the focus shifting toward that proactive level of dialogue and discourse versus more of the reactive that we started from in October.
Peter Levine: All right. Thank you.
Dave Gennarelli: Let’s go to Madeline Brooks at BofA.
Madeline Brooks: Hi, team. Thanks for taking my question. I guess if I look at results of 16% CRPO growth versus 12%, that’s a pretty sizable beat, especially given today’s economy. So I’m just wondering if there were any, one-off more large deals? I know you mentioned just larger deals in general, but any that were kind of more larger than just that $1 million mark versus — or was it just more of a broader base pick up in the pipeline? I mean, I guess I’m just trying to marry the size of the beat and seeing if there’s anything that could be like a one-time factor versus going forward, a trend that’s reversing?
Todd McKinnon: We had nothing, I mean the overall trend of million dollar deals was strong as we mentioned, growing 30%. There wasn’t a one-off big deal that was really outsized compared to prior periods. So yeah, I would say it’s more of a broad range or broad based strength in the large customers.
Brett Tighe: Yeah, I would just add in there, Madeline, just echoing what Todd said, we just had a really good quarter from large deals in general. But when I say large deals, it’s not just the million dollar deals, but a lot of deals from $100,000 up, right? Because if you think about the $100,000 customers, the average ACV is the largest it’s ever been. So going and penetrating those large customers and getting good size deals out of them in addition to those million dollar contracts, the ARR contracts, which was a record in the quarter, it’s just all around. There was a lot of good momentum in large deals. Just really nice job market team just in general across the board. I’m going to echo on what Todd said. I should have said in the first answer, which is go-to-market did a great job and we’re both super proud of them.
Madeline Brooks: And just to clarify, I mean, I guess this is more of a surprise on your end or was it like kind of pull-forward demand that you could see?
Todd McKinnon: I think the large deal pipeline was healthy. So it was nice to see it materialize, especially with — given some uncertainty with the security issue. It was nice to see it materialize, but it wasn’t unforeseen. We knew we had a healthy large-deal pipeline. And that’s true for the pipeline overall going into FY ‘25. The pipeline overall for FY ‘25 is quite a bit stronger than it was going into FY ‘24. So it’s one of the reasons why as we guide to FY ’25, we have a level of comfort in that guidance.
Madeline Brooks: Great. Thank you so much.
Dave Gennarelli: Next up, let’s go to Rudy Kessinger at DADCO.
Rudy Kessinger: Hey, guys. Thanks for taking my question. Not much commentary, I think in the prepared remarks you posted or the early part of the call here about Privileged Access. I know it’s only been out a few months now, but just what’s been the early traction with it? What kind of pricing uplift are you seeing with customers who are adopting it and any other color you can share on that front?
Todd McKinnon: Yeah I would say it’s on track, maybe exceeding expectations. It’s is very early We were successful in converting the early access customers that we had targeted. They’re liking the product, they’re seeing results with the product. And more importantly, I think it’s — they’re seeing the synergy with the rest of our platform. That’s the idea. It’s really a new kind of privileged access. It’s a privileged access that’s modern, it’s quicker to deploy, it’s cloud-native, and it’s integrated to governance and the rest of the access management stack that Okta provides. So it’s a — not only just a — if you think about the privileged access market and a potential TAM for us, and we’ve talked about this before, I think the better way to think about it is really a new TAM, which is the companies that really don’t have a privileged access solution today versus the companies that have deployed legacy on-prem privileged access solutions that they host as software in their own data centers.
This is like a new kind of product, and it’s built for more modern infrastructures with cloud-based servers and Kubernetes clusters. And most importantly, it’s built to really sit next to Okta Access Management and phishing resistant authentication into these things and governance products that’s modern and connects into collaboration tools to make the governance process seamless. That’s the target. And we’re seeing early, but positive indications of customers having that kind of value proposition. And we think that just to quantify the potential uplift, we think the normal workforce spend is x, we think governance can be a 30% uplift over that, and then privilege can be another 30% as well. So that’s kind of how we’re thinking, and we’re seeing early indications that that’s true.
Obviously, we have much more data on the governance side, which is at a full year in GA, and we’ve seen very strong track record of 30% plus uplift for the governance product over and above workforce. And the early indications are — from PAM are similar in terms of the potential uplift.
Brett Tighe: The other thing I might add is what Todd was talking about having this product suite across access management, governance and PAM, having a single pane of glass, if you will, we’ve already got a handful of customers that have all three this early on and see that vision and believe in that strategic direction that we’re going. So exciting early times for us in terms of that, the three pillars on the workforce side of the house.
Todd McKinnon: Yeah, that’s — one more on that. Sorry, Dave. That is very differentiated. No one else has that. No one else has access management, privilege access and governance. CyberArk has privilege, of course, super strong in that. And they have some access management with an acquisition they did and governance is lacking. Other vendors don’t have privilege as well as governance and we’re the first vendor to have all three. So if this theory is right and customers want this converged platform and it can lead to better security outcomes and more flexibility, we’re going to benefit from that for a long time.
Dave Gennarelli: Super. Let’s go to Rob Owens at Piper.
Rob Owens: Great. Thanks for taking my question. I was hoping you could drill down a little bit around that NRR metric? And just noting that it had been flattish kind of the prior three quarters. So with this fall off, just kind of trying to understand that that point in time NRR relative to a lot of your commentary in terms of seeing no fall off and/or kind of the upsell cross-sell motion that you saw success with. Thanks.
Brett Tighe: Yeah, thanks Rob. In terms of NRR, I know Rob you’ve been following along but for everybody else, there’s a lot of — there’s been several quarters now we’ve talked about how this is going to decline. I think we started talking about in late FY ‘23, and it’s on the back of the macro challenges that we’ve seen out there in terms of what I was talking about earlier around seat upsells, right? Cross-sells have been doing well, but we’re not doing as well on those seat upsells or MAU upsells on the customer identity side, and that creates a headwind to the NRR metric. And so we did land roughly in the range where we expected to. So nice job by the finance team predicting that, but it landed right at 111%. And I think probably the question behind the question, Rob, is like, where do we think it’s going to go from here? Right?
Rob Owens: Yeah, absolutely.
Brett Tighe: Yeah. I mean, like we said today earlier, we had good gross retention, mid 90s, like we’ve talked about for several quarters now. And so where do we think it’s going in FY ‘25? Based on our new business versus upsell mix expectations in FY ‘25, based on what we can see in the pipeline today, based on how the business has performed throughout FY ‘24, we see us kind of trending in this 111% range. Now there’s a potential for the balance of FY ‘25. We haven’t done anything beyond FY ‘26. But there is a potential it could swing a couple points either direction, and that’s really going to boil down to how good our new business versus upsell mix assumptions are. So if we have more new business in a quarter and it crowds out upsell, well, that’s going to be a little bit of a headwind to net retention.
If we have a little bit better upsell quarter than we expected in terms of mix, well, it’s going to be a little bit of a tailwind to net retention. So we think we trend in this kind of channel of a couple of points plus or minus this 111% where we are today for the balance of FY ‘25.
Rob Owens: Thanks for the color, Brett.
Brett Tighe: No problem.
Dave Gennarelli: Let’s go to Joe Gallo at Jefferies.
Joe Gallo: Hey, guys. Thanks for the question and nice fourth quarter. I understand conservative, but maybe just walk us through your CRPO guide in 1Q, which I think is the first ever sequential decline. And then Todd, your second priority was reigniting growth. What are the biggest upside catalysts there? Is it international, CIAM, IGA, PAM, cross-sell? Maybe just help us unpack where the highest ROI upside catalysts are in the top…
Todd McKinnon: Yeah, I’ll start with that one. We’re super focused on that. I think the biggest catalyst is sales productivity. We’ve talked about this for a while. The pattern of ramping tenure of the sales team, the familiarity with both of our major product lines, workforce and customer. And we’re seeing sales productivity, it’s really at a nice place now in terms of, I’m sorry, we’re seeing sales tenure really at a nice place now. And we’re also starting to see the productivity ramp into that. It still has a — I think we could still see more ramp over the next couple quarters. But that’s going to be a nice boost overall for growth. I would say that’s the most near-term, most quantifiable potential driver there, which is something we’ve managed in terms of enabling salespeople and making sure they have a chance to be successful and stick around.
We focused a lot on the transition into this fiscal year in terms of keeping stability, in terms of quota-carrying reps and assigning them to territories and targets and having continuity there to get off to a fast start the first half of this year. Again, coming off what I thought the team did a great job in Q4. So I’d say that’s a big driver, particularly in the short term. I think after that, I would say the biggest driver is opportunity in the large deals, large enterprise. It’s an area where, relatively speaking, Okta has a lot of potential. I would call us really a enterprise — mid-enterprise company in global 2000 largest enterprises in the world. We’ve made good progress, but we can do a lot more. And I think that’s a big growth driver going forward.
I think maybe it’s kind of a parallel to that second one, which is customer identity is still a big opportunity for us. We think over time it could be half of the business and the stats we talked about today, it’s still 40% of the business and growing faster than workforce, but I think it could grow even faster than it is now. So I think those are a couple three I would highlight, but there’s a lot that goes into all those from just broadly speaking, running a highly efficient, highly effective go-to-market organizations, continuing to have the products of all, so that the products can address the really compelling use cases both in customer identity and workforce identity. They can address the needs of small companies, medium companies, large companies across the board.
There’s a lot that goes into those growth drivers, but we are very focused on growth. We think this is a big market opportunity. We think there’s various reasons why our growth is decelerated. We’re not satisfied with that. We want to get it going the other direction as fast as we can.
Brett Tighe: Yeah, I would just add before I get into the current RPO question. On the customer identity side, you heard me talk about earlier about the percentage of reps selling customer identity continues to go up into the right. But it’s still not, to Todd’s point about if we want to be a 50-50 business, it’s still not 50-50. Right? So we can improve there. And one of the things we did actually last week, at our sales kickoff, we spent a good amount of time enabling the field around customer identity. We took almost all Friday to do that. So it’s an important area for us. We’re also going to change some of the ways we do operations internally, like when you’re talking about deals, you’re talking about pipeline management, putting a little bit more of a tilt on customer identity versus workforce identity.
So it’s — there’s some things under the covers that we’re doing that, that effectively are very operational in nature, but ultimately we believe will result in better productivity from a customer identity perspective. Because like I said, the trends are in the right direction, but if we keep tweaking and make a few changes, we think we can do even better. Back to your question on current RPO. Q1, just as a reminder, at these growth levels, we will see, it’s kind of like revenue. There’s — Q1 has some interesting dynamics to it. In terms of current RPO, because Q1 is our seasonally smallest bookings quarter compared to Q4 is our seasonally usually the largest bookings quarter, you can get this mechanic of a quarter-over-quarter decline in terms of dollars.
And so that’s something to expect not just this year, but in years going forward. So this won’t be hopefully a surprise when we talk in 12 months time that this mechanic is likely going to happen. Again, just because of the seasonality of our business and as Todd and I have talked about a lot over today, we’re an enterprise focused business and that usually means — the seasonal trends mean that Q4 is the biggest one and Q1 is the smallest one in terms of bookings.
Joe Gallo: Thanks guys.
Dave Gennarelli: Let’s go to Trevor Rambo at BTIG.
Trevor Rambo: Hi guys, this is Trevor on Gray. Thanks for taking my question and congrats on a great quarter. Maybe touching back on OIG, so it’s been live for a little over a year now. When do you think you guys are going to give out any stats on ACV or revenue as it becomes kind of a more material part of the business? And kind of what’s — in a broader sense, what’s your longer term vision for the product and how big do you think it could get relative to your core workforce IAM in the next two, three, four years?
Todd McKinnon: We’re very excited about it and it’s really has, since we put it into GA a year ago, it’s exceeded our expectations quarter after quarter after quarter. The — one part of the impact of it is, it not only is an upsell, and we’ve talked about the 30% plus upsell it could be for a workforce customer, it also just makes the whole vision more compelling and makes our product suite, especially once you add PAM to the mix, it makes the whole product suite more compelling. So I think even beyond the revenue from that SKU, it has even a bigger impact strategically to our workforce business than that. So that’s one interesting thing. And I think over time, that is also the answer to your question about how big could it be.
I think we could kind of size it out, but I think the — and you can look at IDC and IDC breaks down the various segments of identity and they gave it a certain portion. But I think over time, it’s going to be harder to really — it’s going to be harder to tease out the, how many new customers were landed because we had this suite, how many customers were really the killer thing they wanted was privileged access, and they bought the other, the access management and the features and capabilities there, and the identity governance, how much that was kind of along for the ride. You’re going to kind of think about it as just one compelling offer for workforce. But that’s kind of how we think about it.
Trevor Rambo: Great. Thank you.
Dave Gennarelli: Yeah, let’s go to Peter Weed at Bernstein.
Peter Weed: Thank you. [And glad to see the] (ph) expanding free cash flow, I know it’s been a long effort and it’s really great to see that direction going on. I think this quarter, the one thing that that kind of jumped out at me was kind of the more modest number of kind of net new customers that were landed. And particularly you’ve emphasized, it’s not like churn went up. And so like, technically you landed the same number, but it was just — because there was drag from fewer businesses coming in. When you look at that result, is that kind of a new normal? Or Is that something where you’d anticipate it start starting to step back up that the sales programs that that you’re putting into place with the hunters versus the farmers that this gets back into the last few quarters?
We’ve been plus or minus 50 around 400 that new customers. Like, what was unique about Q4, where, like, I would have thought Q4 is a period where you could outperform, right? Because that is where there’s more bookings, more customers doing deals, that period. What was unique about this fourth quarter where that really kind of [drag] (ph) down?
Todd McKinnon: Yeah, we don’t want this to be the case. This is not the new normal. We want to drive growth, and we’re aggressively trying to work on and prioritize and focus on things that will drive growth. And customer account is one of those areas. So I think we have a — we’ve talked about the focus of the go-to-market team in the corporate segment in North America to be focused on upselling in existing customers versus going out and attracting new customers. And that’s a big structural change. And I think you’re seeing it’s one of many changes that we’ve made coming into this fiscal year that are — really you’re seeing John and Eric and Eugenio really lay down what they think are the strategic priorities for go-to-market.
Brett talked about a couple of them in addition, whether it’s the operational changes and the — to make it easier, more effective to sell customer identity, whether it’s the hunter-farmer change in corporate North America is really important. A lot of the pipeline and marketing execution changes have been done by Eric and Kerry and the marketing team. So you’re seeing a lot of very strategic thoughtful programs put in place that are going to have this goal which is to reignite growth which is incredibly important. Specifically on customer account, I think when I look at the numbers, Q4 is, I think it’s just an example of, for whatever reason, the big companies perform better than the customer account in the smaller companies. Maybe just a one-off.
I don’t think it’s, like I said, I don’t think it’s a new normal. I do think we have to remember that the customer account is largely driven by smaller customers. The variations there show up much bigger in that cohort of customers. The specific things we’re doing for customer account, we mentioned beyond hunter-farmer are, one of the things is that we have a program we’re really excited about is this managed service provider program. We mentioned SoftBank, and they now have a custom, or a MSP version of Okta, the workforce products, that they are selling as a managed service to their 16,000 companies in Japan. Now, we’re not going to report those as our customers. We’re not — that would be maybe not really apples to apples. But it is an example of something we’re prioritizing to broaden our reach.
Now, we will have the capability as we do more of those MSP deals around the world over time, those will not only impact the number of customers that those MSPs can move over to Okta, but also we will have some opportunities depending on how those deals flush out over time and how we arrange them. We’ll have the opportunity to upsell those customers. So it’ll be like a channel to gain customers in a more scalable way than direct, which is pretty powerful. The last thing I’ll mention on customer count, it’s kind of like MSPs, but we have many, many customers that are actually self-service customer identity customers that don’t show up in our customer accounts. And they do, well, they don’t show up in our customer accounts when they’re paying us as a self-service customer, but when they upgrade to enterprise, they do.
