Okta, Inc.

Hi, everyone. Welcome to Okta's fourth quarter of fiscal 2026 earnings webcast. I'm Dave Gennarelli, Senior Vice President of Investor Relations at Okta. Presented in today's meeting will be Todd McKinnon, our Chief Executive Officer and co-founder, and Brett Tai, our Chief Financial Officer. Eric Kelleher, our President and Chief Operating Officer, will join the Q&A portion of the meeting. At around the same time that the earnings press release hit the wire, we posted supplemental commentary to the IR website. 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 day made. Information on factors that could affect our 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-Q. In addition, during today's meeting, we will discuss non-GAAP financial measures. Though we may not state it explicitly during the meeting, all references to profitability are non-GAAP. 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 are 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 will 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 thank you everyone for joining us this afternoon. We're pleased with the strong finish to FY26, which was highlighted by continued strength with large enterprises, partner engagement, and contribution from our newer products. Identity is fast becoming the most important aspect of security, with AI acting as a catalyst. In today's call, I'll cover the success we're having with our new products, how Okta secures AI, including some early success we're having in that new market, and close with our top priorities for FY27. We continue to see strong performance from our portfolio of new products. This group consists of Okta Identity Governance, Okta Privilege Access, Identity Security Posture Management, Identity Threat Protection, Okta Device Access, and Fine Grain Authorization. And new to this group are our products Auth0 for AI Agents and Okta for AI Agents. The value of a unified identity system with a single control plane is resonating with customers. In aggregate, these new products represented approximately 30% of Q4 bookings, which is a meaningful increase from prior quarters. And when these new products are included in a deal, the average contract uplift is approximately 40%. Okta Identity Governance continues to be the biggest of these new products and is building on its early success. OIG now has over 2,000 customers. That's remarkable progress in just over three years. And it underscores the market demand for a modern governance solution. Customers are choosing OIG because it's a full IGA cloud data solution built into our unified platform, not a siloed point solution. I mentioned that our portfolio of new products now includes our AI products, Auth0 for AI agents and Okta for AI agents. It's still early for this developing market, but as the leading modern identity solution for workforce and customer identity, Okta is uniquely positioned to help organizations combat the growing security threat that AI agents represent. The reality is that the AI revolution has moved faster than today's security frameworks. According to Okta's AI at Work report, 91% of surveyed organizations are already using AI agents, but only 10% have a governance strategy in place. In meetings that I've had with customers and prospects over the past six months, the vast majority of the conversations revolve around their AI initiatives and how Okta can help them build and manage agent security. As AI becomes embedded in more workflows and automations, the growing number of exploitable entry points, from non-human identities to unsecured integrations, expand the attack service for threat actors. It's clear that in order to get AI right, you have to get identity right. Okta was built to meet this challenge. Identity isn't just a feature for us, it's our foundation. AI agents are simply a new identity type and protecting them as a natural extension of what we do best. Okta's neutral and independent identity solution is uniquely positioned to secure and govern the entire agentic lifecycle and gives customers the freedom to deploy on any agent platform without ecosystem lock-in, all while strengthening their security posture. Our two-pronged solution with Auth0 and Okta for AI Agents treats AI agents with the same importance as humans and gives customers everything they need to secure this powerful new technology. We're still in the early stages, but we believe that in a few years, agents and agentic systems won't be the exception to how enterprise software is built and operated. They'll be the rule. We believe that AI agents represent nothing less than the future of software. That's why AI security is identity security. I'd like to highlight a couple of AI deals we closed in Q4 that illustrate how we're addressing the AI market. An existing off-zero customer is building AI agents as part of their leading financial services platform. These agents will help the firm's advisors make better and faster decisions. But to do so, the agents need access to sensitive customer information, which must be least privileged. And they need to work with existing systems and third-party services inside the financial institution. The customer picked Auth0 for AI agents as it met their stringent requirements for a secure, extensible platform to build and deploy agentic systems. They needed a solution that offered enterprise-grade identity for humans and agents while providing secure access to third-party MCP servers, all while acting as a single source of truth. Another notable deal that included Okta for AI agents, which became available in early access in January, was with a top global business and technology services provider. They chose Okta for AI agents to help them discover, control, and govern identities for their growing sprawl of agents. Rolling out AI agents across multiple agent platforms is key to their ongoing transformation. and centralizing agentic identities in an independent agent agnostic platform like Okta will strengthen their cybersecurity posture. This is the very beginning of the AI opportunity. Building and protecting AI agents is inherent to Okta's position as the world's system of record for identity management. With our solutions, developers, administrators, and IT teams can ensure that the entire lifecycle of an AI agent, from initial design through active deployment, is observable, governable, and secure. For more information on how Optus secures AI, be sure to register and join our showcase event on March 16th. In this live streamed event, you'll hear from myself as well as our AI product leaders as we unveil our latest innovations for AI agents. And finally, I always like to take time on the Q4 call to share our priorities for the new fiscal year. It shouldn't be surprising that all of these priorities are focused on driving growth. The first priority is Okta Secures AI, which is all about how we win, grow, and become the standard for securing agentic AI. By building on our early success with Okta and Auth0 for AI agents, we will further our vision of freeing everyone to safely use any technology. The second priority is increasing our focus on landing bigger and growing faster with large customers. We want these organizations to think of Okta first when it comes to identity security and securing AI. This is a global effort across both the Okta and Auth0 platforms. And our third priority is becoming the default identity security solution for the U.S. federal vertical and highly regulated industries. The public sector has been one of our fastest growing verticals over the past couple of years, but we've only begun to scratch the surface of the overall opportunity. To wrap things up, we're pleased with the strong finish to FY26. We're excited about the momentum we've built for the year ahead as we look to surpass $3 billion in revenue on our way to $5 and then $10 billion. Identity is security, and we're building on our position as the leading modern identity solution to win the emerging market for securing AI. It's an exciting opportunity, and we're going after it aggressively. I want to thank the entire Okta team for their tireless effort, and also thank our loyal customers and partners who put their trust in us every day. And now here's Brett to cover the financial commentary.

Thanks, Todd, and thank you, everyone, for joining us today. We're pleased to close out another fiscal year achieving Rule of 40. which we've done every year since going public. It's also satisfying to see our investments to drive growth paying off. These focus areas include new product innovation, go-to-market specialization, large customers and our partner network. My commentary will provide insights into our Q4 performance and then move into our outlook for Q1 and FY27. The increased go-to-market specialization that we implemented at the beginning of the fiscal year continues to make progress. Strong execution has led to positive go-to-market KPI improvements, including sales productivity. Our focus on large customers and large deals continues to drive our financial results. In Q4, we closed a record amount of total contract value of nearly $1.3 billion. We also surpassed a major milestone of $3 billion in annual contract value. Another key aspect of our go-to-market motion is our channel partners. When our partners are involved, the average deal size is bigger and the close rates improve. Channel partners were engaged in 18 of our top 20 deals in Q4. Total contract value generated through our strategic go-to-market channel, AWS Marketplace, grew over 45% in FY26 to approximately $750 million. Moving on to our balance sheet and capital allocation. We had another strong quarter of cash flow in Q4 and ended the quarter with a very healthy balance sheet consisting of over $2.5 billion in cash, cash equivalents, and short-term investments. We continue to regularly evaluate Okta's capital allocation priorities to ensure we're well-positioned to deliver sustainable long-term value to shareholders. Consistent with this focus, we announced a $1 billion share repurchase program in early January, taking advantage of what we believe to be an undervalued share price. Over the course of the remainder of January, we repurchased and retired over 875,000 shares for a total cost of $79 million. We're proud to return value to our shareholders and are focused on capturing the clear opportunity in front of us. The investments Okta has been making to drive growth acceleration span all areas of our business. These disciplined areas remain, investing in our go-to-market teams, relentless product innovation, further leveraging our channel partners, and keeping Okta one of the most secure companies in the world. Our improved go-to-market execution coupled with a healthy demand environment led us to begin adding quota-carrying sales capacity starting in Q2, and we continue to do so through the fourth quarter and now into the current Q1. Now let's turn to our business outlook. Our guidance philosophy is unchanged as we continue to take a prudent approach to forward guidance that factors in current market conditions. For the first quarter of FY27, we expect total revenue growth of 9%, current RPO growth of 10%, non-GAAP operating margin of 23% to 24%, and free cash flow margin of 33% to 35%. For the full year FY27, we expect total revenue growth of 9%, non-GAAP operating margin of 25% to 26%, and a free cash flow margin of 27% to 28%. I want to call out three important points pertaining to this guidance. First, reflected in the 9% FY27 revenue guidance is about a one-point impact related to a decision we made to shift more of our professional services business to our partners, specifically global system integrators. This change will result in lower professional services revenue. We believe this will lead to greater long-term benefits to fuel top-line growth by deepening the relationship with these important partners and increasing our business with large enterprises. The second point is that the FY27 free cash flow margin guidance reflects about a one-point headwind related to lower interest income relative to the combined impact from the stock repurchase program, our intent to settle the remainder of the 2026 notes in cash, and the interest rate environment. And finally, we've updated our non-GAAP tax rate assumption for Q1 and FY27 to 21% from 26% based on the recent changes to the federal tax laws. To wrap things up, we're pleased with what we accomplished in FY26 and are enthusiastic about the trends we're seeing in our business. The investments we're making are paying off and position Okta to extend its leadership and identity security. We've demonstrated exceptional leverage in our model and are positioned to deliver profitable growth for years to come. With that, I'll turn it back to Dave for Q&A. Dave?