Okta, Inc.

Hi, everyone. Welcome to Okta's first quarter of fiscal year 2022 earnings webcast. I'm Dave Gennarelli, Vice President of Investor Relations at Okta. With me in today's meeting, we have Todd McKinnon, our Chief Executive Officer and Co-Founder, Mike Corey, our Chief Financial Officer, Frederick Karist, our Executive Vice Chairman, Chief Operating Officer and Co-Founder, Brett Tai, our incoming interim CFO, and Eugenio Pace, CEO of Auth0. Today's meeting will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook and market positioning. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in our filings with the SEC from time to time, including the section titled Risk Factors in our previously filed Form 10-K. In addition, during today's meeting, we'll discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalents is available in our earnings release. You can also find more detailed information in our supplemental financial materials, which include trended financial statements and key metrics posted on our investor relations website. In today's meeting, we'll quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year over year comparison. And now I'd like to turn the meeting over to Todd McKinnon. Todd.

Thanks Dave and thanks everyone for joining us this afternoon. With our strong first quarter results and the recent closing of the Auth0 transaction, the new fiscal year is off to a fantastic start. There are so many exciting developments at Okta happening right now that I've never been more excited about the future and about our business. I'll start with a quick recap of our Q1 results and then get into some of the other notable highlights including the closing of the Auth0 transaction. Our team has executed exceptionally well at helping customers and organizations safely secure access to technology from anywhere. While we are not yet in a normalized business environment, we are optimistic about the recovery. One thing is clear, the importance of identity will continue to accelerate as global economies continue to recover. To highlight just a few of our first quarter financial metrics, RPO grew 52%, current RPO grew 45%, total revenue grew 37%, subscription revenue grew 38%, and we generated a quarterly record $53 million in free cash flow. We added a record 650 customers in Q1. Our base of large enterprise customers surpassed 2,000 with the addition of 125 customers with an annual contract value greater than $100,000 in the quarter. Consistent with prior quarters, half of these $100K ACV additions were from new Okta customers. Here are just a few notable examples of large enterprise wins and upsells in Q1, which come from a wide range of industries. A fantastic new customer identity win was a Fortune 10 company that chose Okta as the identity layer for its new digital application. As part of a highly regulated industry, the organization needed to secure customer access and maintain data privacy while also providing a unified omni-channel experience for millions of customer interactions via the app and in person. The Okta Identity Cloud will give the organization a unified 360-degree view of its customers. Okta's adaptive multi-factor authentication will allow the organization to build personalized contextual access policies and Okta lifecycle management will automate progressive profiling and provisioning to ensure customers are only accessing the data they need. A competitive workforce identity win was Western Health, an Australian hospital and community-based healthcare provider. Western Health selected Okta to secure the identities of its 6,500 staff as a part of its new identity and access management strategy to modernize its IT processes, deliver a better experience to its staff, and provide a single source of truth for identity across the business. Western Health will also use Okta Access Gateway to secure access to key legacy applications. Land and expand is a key part of Okta's growth strategy. A great example of this is an upsell we closed with an existing workforce identity customer, Essilor Group. The world leader in ophthalmic optics, leveraging Okta's SIAM capabilities, Essilor selected the Okta platform to manage its distribution partners' identities, helping the company to engage securely with their partners' eye care professionals. A common thread with all of these customer examples? is that their organizations can identify with at least one, if not all three of the mega trends that have been driving Okta's business for the past several years. The deployment of cloud and hybrid IT, digital transformation projects, and the adoption of zero trust security environments. Organizations are not just adapting to the pandemic environment, but are retooling their digital strategy and their shift to the dynamic work environments will remain integral to their businesses going forward. Also driving customer conversations are the frequent high-profile cybersecurity attacks. While this month, the Biden administration issued a presidential executive order on improving the nation's cybersecurity posture, which further highlighted the need for a solution like Okta's. The order states that the federal government must advance toward a zero-trust architecture and explicitly states that government agencies must adopt MFA, which is critical to a zero-trust environment. We've had some great recent wins across the public sector and see growing opportunity, particularly with federal agencies, given our existing FedRAMP moderate authorization and recent DOD impact level four provisional authorization. Achieving FedRAMP high is also on the near term roadmap. Turning to our recent product announcements, at our investor day last month, you heard me talk about the Okta Identity Cloud and the platform we're building. Our unified, extensible, and integrated platform is our foundation to build incredible new products and features, while also making those identity capabilities more accessible to everyone in an organization. This is why I'm so passionate about ensuring that Okta's platform enables us to become a primary cloud. In a cloud-centric world, identity has become even more important and strategic than infrastructure or collaboration clouds because it is the connection to these other clouds. Identity is the epicenter of an organization's tech connections, and it offers freedom of choice to adopt any technology. Expanding our use cases is an important component of becoming a primary cloud. The announcements we made at Octane about broadening our capabilities in both privileged access and identity governance represent further expansion into the workforce identity market. Importantly, we're building privileged access for the way critical infrastructure is today and will be in the future, cloud deployed and just in time. And we're reimagining identity governance for a cloud-first world. where the number of resources accessed by an organization has dramatically transformed. We've received positive feedback from customers as they are excited about our goal to unify identity with one control plane. These are exciting developments, and I can't wait to update you on our progress. In the meantime, our core products in both customer and workforce identity continue to perform very well. Once again, growth in the quarter was led by our SIAM solutions, Customer interest in recently introduced products like customer identity workflows remains strong, and we're seeing more success than ever with our organic SIAM business. Of course, our presence in the SIAM market just took a game-changing leap forward with the closing of the Auth0 acquisition earlier this month. Okta and Auth0 have complementary strengths and expertise. And together, we can now give customers more choice to meet every identity need. In the short term, we're going to focus on integrating Okta backend systems, such as those around accounting and other administrative processes. On the product side, we are going to maintain and invest in both platforms. And over time, we'll be integrating our technologies to provide even more innovation to ensure that customers have a cohesive experience. Our main goal is to maintain the strong momentum we are experiencing in SIAM today across all offerings. We've been a combined company for only a few weeks, and we couldn't be happier with the feedback we've received from customers and partners at both Auth0 and Okta. They are incredibly excited about the breadth of use cases and coverage we offer. Everything we heard has reinforced our belief that Yohenio and team have built a very special company. The energy and enthusiasm is also resonating inside our organizations. And as we expected, the cultures are very much aligned. Since the closing of the transaction, we've been able to do more detailed analysis on our existing base of customers, and two things became very evident. First, there is even more opportunity to cross-sell and up-sell than expected. And second, there is a clear need for both the Okta low-code approach and the Auth0 developer-led approach to the SCIA market. Okta is well-positioned to become the standard for digital identity, The Okta and Auth0 platforms are made up of core technologies that are flexible, extensible, and incredibly customizable to make that spectrum possible. By building a platform that connects with everything and meets every identity use case, over time, we'll push the technology ecosystem to be safer and create more value for everyone. Together, Okta and Auth0 create a powerful combination. We've strengthened our position as the world's leading independent identity cloud. we'll create even more powerful network effects that will drive platform innovation, allowing us to better serve our customers with a broader range of use cases and audiences. And as a result, we'll capture more of the massive and growing $80 billion identity market opportunity even faster. The world is still in the early stages of modernizing its identity infrastructure. The secular trends I mentioned earlier that have been driving our business will continue to drive our business for years to come. With that as a backdrop, we're establishing a new long-term financial target, which is a significant step up from our prior FY24 framework. Given our market leading position, unmatched technology portfolio, and the massive market opportunity, we're confident that we can grow our revenue base to achieve $4 billion in FY26. With growth of at least 35% each year, along the way, we will continue to invest in driving product innovation and our go-to-market initiatives while targeting a free cash flow margin of 20% in FY26. Of course, if we were to grow faster than these levels, we may elect to invest more while balancing free cash flow margins. Before turning it over to Mike, I want to acknowledge his significant contributions to Okta. Over the five plus years, he was the chair of our audit committee and for his leadership as CFO. Over the past several months, Mike has made a significant impact, especially with the acquisition of Auth0 and operational improvements that he's already implemented. While he'll be stepping down as CFO next week, we are grateful that he is staying on in an advisory capacity to assist with the transition. Mike will always be a friend and considered a member of the Okta family, and we wish him all the best in his future endeavors. We are initiating a search process to fill the position. In the meantime, I'm very happy to have Brett Tai as interim CFO. Brett is our senior vice president of finance and treasurer. He's made countless contributions to Okta over the past six years. He also spent almost 11 years with growing responsibilities in the finance org at Salesforce. Having worked closely with Brett, I know that he is a terrific finance leader and has the experience to be a great CFO and will be considered in the search process. Now I'll pass it over to Mike to share a few words and then discuss our Q1 financials in more detail.

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