Okta Inc

NASDAQ:OKTA

Earnings Call Transcript 2022-Q1

[Dave Gennarelli, Vice President of Investor Relations]

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 Kourey, our Chief Financial Officer; Frederic Kerrest, our Executive Vice Chairman, Chief Operating Officer and Co-Founder, Brett Tighe, 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-Q.

In addition, during today's meeting, we will 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. A 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 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?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

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. When 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 of 650 customers in Q1, our base of large enterprise customers surpassed 2000 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 health care provider, Western Health selected Okta to secure the identities of its 6500 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. Learn 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 SLR group, the world leader in ophthalmic optics leveraging Okta's CIAM capabilities, SLR 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 shifted and 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 for 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 Oktane 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 were 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 CIAM solutions. Customer interest in recently introduced products like customer identity workflows remain strong and we're seeing more success than ever with our organic CIAM business.

Of course, our presence in the CIAM market just took a game changing leap forward with the closing of the Auth0 acquisition earlier this month. Okta and Auth0 have complimentary 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 back end 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 CIAM 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're incredibly excited about the breadth of use cases and coverage we offer. Everything we heard has reinforced our belief that Eugenio and team have built a very special company. The energy and enthusiasm has also resonating inside our organizations. And as we expected, the cultures are very much aligned. Since the closing of the transaction, and we've been able to do more detailed analysis on our existing base of customers and two things became very evident. First, there's even more opportunity to cross sell and upsell than expected. And second, there's a clear need for both the Okta low code approach and the Auth0 developer led approach to the CIAM 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 will 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 will 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 will 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 FY'24 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 FY'26, 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 FY'26. 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's staying on in an advisory capacity to assist with the transition. Michael 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 Tighe 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 Okta's sales force. 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.

[Michael Kourey, Chief Financial Officer]

Thanks, Todd, for those kind words, it has been my privilege to be a member of the Okta team since 2015. And I'm tremendously proud of the company's success today, and the significant growth opportunities in the future for the company. Over the past several months, I've enjoyed the opportunity to work more closely with the Okta organization and much of the Auth0 organization. I could not be more impressed with the strategic and operational expertise of both teams.

Notably, I've worked very closely with Brett since I joined the Board of Directors over five years ago and I've worked with him shoulder to shoulder since I've been the CFO. Brett is a strategic thinker and has a deep understanding of Okta and the identity industry. I have immense respect for Brett and I'm confident, he will be excellent in the job.

Lastly, before I discuss our results, note that I will be signing our Q1 quarterly report on Form 10-Q, which will be filed later today. And as Todd mentioned after next week, I will stay on as an advisor to the team to help ensure a smooth transition.

Now let's turn to our results.

As a reminder, Q1 results do not contain any impact from Auth0 as the transaction closed on May 3. Following my review of the quarter, Brett will provide the business outlook which will be inclusive of Auth0.

Regarding Q1, total revenue increased 37% driven by a 38% increase in subscription revenue. Subscription revenue represented 96% of our total revenue. RPO or backlog which for us is contracted subscription revenue both billed and unbilled that has not yet been recognized grew 52% to $1.89 billion. Current RPO which represents subscription revenue we expect to recognize over the next 12 months also experienced strong growth of 45% driven by continued strong demand and an uptick in early renewals. We believe year-over-year growth in current RPO is an important metric, especially when viewed along with the subscription revenue and billings growth. While we do not provide specific guidance for current RPO, we continue to believe that on an organic basis excluding Auth0 current RPO growth will outpace subscription revenue growth throughout this fiscal year.

Total and current calculated billings grew 74% and 73%, respectively. Calculated billings growth in the first quarter was driven by two factors. First, Okta experienced strength across both new and existing customers, as demand for our products remains robust, driven by the macro trends that Todd mentioned earlier.

Second, we implemented operational improvements to our billings process in Q1, which conforms with the practices of other large SaaS peers. These two improvements are one, we're now billing a contract signature rather than subscription start date, and two, subsequent annual payments are now due rather than build on the anniversary date. This has a favorable effect on both Billings and cash collections timing. Note that even without these process improvements, calculated billings would have been $293 million representing growth of 40%. Going forward, we expect the effect of these changes to be much more modest.

Turning to retention, our dollar base net retention rate for the trailing 12-month period remained strong at 120% at the high-end of our historical 115% to 120% range. It was down slightly from 121% last quarter, as new customers represented a larger portion of total business this quarter. Gross retention rates remain consistent with Q4 reflecting the value of our product to our customers. Additionally, upsells particularly with our enterprise customers were very strong. As a reminder, the retention rate may fluctuate from quarter-to-quarter and in the current environment it's possible that fluctuations and retention rates may be more pronounced.

Before turning to expense items and profitability, I'd like to point out that I will be discussing non-GAAP results here going forward. Now looking at operating expenses, total operating expenses grew 38%. The growth in expenses was partially offset by reduced travel and office-related spend. Headcount growth accelerated to 28% to over 3000 employees with the biggest increase in our go-to-market team as we continue to scale globally. We generate a record cash flow from operations and free cash flow of $56 million and $53 million, respectively, which yielded a record 21% free cash flow margin. This is a terrific illustration of the leverage in our model.

Free cash flow is driven by strong billings and collections during the quarter. Note that free cash flow was not impacted by the recent invoicing change as the change was implemented at the end of the first quarter.

We ended the first quarter with a strong balance sheet anchored by $2.69 billion in cash, cash equivalents and short term investments.

Now let me turn the call over to Brett to discuss our outlook.

[Brett Tighe, In-coming Interim Chief Financial Officer]

Thanks, Mike. Really appreciate the comments from both you and Todd. It has been a true pleasure to partner with you over the years. And I want to say thank you for all you have done for this company. I'm incredibly excited about the opportunity to step into this role.

Now let's get into our financial outlook for Q2 and FY'22.

We closed the acquisition of Auth0 on May 3, and will include financial results from Auth0 for the period from the close date going forward. Current and prospective customers are even more excited now that Auth0 is part of Okta and demand remains strong for both of our products.

This guidance is inclusive of Auth0 net of the purchase accounting adjustments. Keep in mind that Auth0 has a margin profile consistent with early stage high growth companies as it has been aggressively investing to capture the massive opportunity in CIAM. As the business scales, there will be opportunities for efficiencies. For the second quarter of fiscal '22, we expect total revenue of $295 million to $297 million, representing growth of 47% to 48% year-over-year, non-GAAP operating loss of $55 million to $53 million, non-GAAP net loss per share of $0.36, $0.35, assuming weighted average shares outstanding of approximately 154 million.

Given our strong Q1 results, we raised our organic revenue outlook for the full year beyond the [Q1b] [ph] and then added the expected contribution of Auth0, for the full year fiscal '22, we now expect total revenue of $1.215 billion to $1.225 billion representing growth of 45% to 47% year-over-year. We also now expect non-GAAP operating loss of $172 million to $167 million.

Non-GAAP net loss per share of $1.16 to $1.13, assuming weighted average shares outstanding of approximately 159. And while we don't provide explicit guidance for cash flow, given our strong cash flow generation in Q1, we now expect free cash flow to be slightly positive for the fiscal year. This is inclusive of integration and transaction related costs, which is an improvement from the view we provided last quarter.

We had a great quarter and a great start to the fiscal year. We are extremely excited about closing the Auth0 transaction and accelerating our growth together. Okta has developed a strong foundation and market leadership position. And we are confident we will be able to achieve $4 million in revenue in FY'26 with growth of at least 35% each year while targeting a 20% free cash flow margin in FY'26.

And as Todd mentioned, if we were to grow faster than these levels, we may elect to invest more, while balancing free cash flow margins as we continue to capitalize on the massive market opportunity in front of us.

Now I'll turn it back to Dave for Q&A. Dave?

[Dave Gennarelli, Vice President of Investor Relations]

All right. Thanks, Brett. To indicate that you have a question, please click on the raise hand icon. It looks like most of you have already. I will announce when it's your turn to ask a question. You have to unmute yourself at that time and in the interest of time, please limit yourself to one question and one follow up question. So that we're going to go to Adam Tindle at Raymond James. Adam?

[Adam Tindle, Raymond James]

Thanks, Dave. First time caller, longtime listener, so appreciate you putting me first. I do have a question probably for Todd and Eugenio. Thinking about this Auth0 margin profile, how it's consistent with early stage high growth company, trying to think about a way to ask the question. It's of similar size and scale to Okta, circa four or five years ago, when I'm comparing the implied operating loss for Okta at that scale versus Auth0, it looks like it's maybe 1.5x, or more than that on an operating loss profile basis. So I guess the question would be, what are the key similarities and differences that you've observed in the economic models of your own versus theirs? And how do you see the Auth0 profitability ramp versus Okta's from here?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

I think the first part of this answer would be just to know philosophically, this is a growth business. So both Okta organic and Auth0 were really, really investing for growth. This is a $30 billion customer identity, TAM, very dynamic market, the stakes are very high to win this market. So just in our philosophy, we're being very aggressive. And I think that we're seeing tremendous success on the Okta side. And I'll let Eugenio comment about what they're seeing on the Auth0 side in terms of success.

[Eugenio Pace, Chief Executive Officer of Auth0]

Yes. I would agree with the same high growth profile that was really described. What I would add, perhaps is that what was different from us, it's what makes the combination even stronger. Right? So we have a heavy international profile. In previous calls, we mentioned that, a large percentage of our revenue originates outside the U.S., almost 50% of that, in our case. We are also a developer oriented company, which has a slightly different go-to-market. But it's also complimentary to what Okta has been doing for years. And that's, and maybe a different audience and a bigger audience that we can now reach out jointly and continue to grow. We have great Q1. Our Q1 is slightly, one month, shifted from Okta's, but our Q1 was we beat the plan. And we are heading to what, really, really strong Q2, as well. So I couldn't be more excited.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

And one thing I'll add there, too, to give you more color, we actually went back and looked at the comparison, the past comparisons, kind of like what you did. I don't remember the exact numbers. But one of the qualitative differences between the two models was the developer model, that Auth0 has been very successful for required spending a little bit ahead of when the actual revenue ramped, because the developer got the word out there and started seeing a lot of deals, but it took an enterprise sales team to come in and really get that revenue engine running. And that's why one of the many reasons we're so excited about the combination because we have a great enterprise sales team. Auth0 does as well. It's just not as big as ours. And we're seeing a lot of in the first few weeks. We're seeing a lot of great synergy between how over time we'll really be able to leverage the sales teams together and make something much, much more than the sum of the parts.

[Adam Tindle, Raymond James]

Very helpful color. Maybe just as a quick follow up, Todd on the CFO search big picture here you have over 2.5 billion of cash on the balance sheet. When I look at your financial targets that were updated, fiscal '26, you're going to have nearly a billion dollars of annuity stream of cash that's highly recurring and resilient. So just wondering how you're thinking about key characteristics for the next CFO with that as the backdrop?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

I think the points you mentioned are definitely part of the equation, I would add that a significant M&A integration is imminent, the integration with Auth0 is very early. And it's very, very critical for the success of the company. So experienced with that, it will be helpful. And I also think just high growth, dynamic adaptable to change. Because one thing about our industry, we're defining the future of identity, we're working hard to make sure that identity has its rightful place as a primary cloud in the ecosystem of every organization in the world. And that's something that hasn't been done before in past generations of technology identity was really a part of other platforms. It was a part of windows or it was a part of Oracle. We're making this first class primary cloud. And that's different and unique. And so I think, not just the CFO, but the entire team has to be up for that challenge. And it's one invigorates me and it's one invigorates the whole team. So that's an important part of it, as well.

[Adam Tindle, Raymond James]

Appreciate the details and congrats on the strong start.

[Dave Gennarelli, Vice President of Investor Relations]

Next, we're going to go to Keith Bachman at BMO.

[Keith Bachman, BMO]

Hi. Thank you. I want to ask the question that was just asked a little more directly, can you tell us what the revenue contribution is for FY'22. And also what the cost structure that you're layering into most companies, when they do a deal provide this information, I'm a little confused on just why you're not laying it out more explicitly.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

It's good feedback. I'll pass it on to Brett to talk about the model, try to give you some more color there. But just in general, we felt this was the best high level way to communicate the business. And then, as we get feedback and as we go forward, we'll break other things out as we need to but that's kind of the high level thinking on it.

[Brett Tighe, In-coming Interim Chief Financial Officer]

Yes. Thanks, Todd. So I think a few things to keep in mind, when we're talking about the revenue components. First and foremost, like we said, Q1 for Okta-standalone was really solid. And we believe that strength is going to continue for the balance of the year. And so that's embedded in the revenue guide. We would have -- had we been a standalone company, raised the year, not just for Q1, but also for Q2 to Q4.

And then, just like Eugenio was saying, from an Auth0 perspective, they're tracking really well toward the goal that we've spoken about previously of being greater than $200 million in ARR, by the end of the year. And so that's embedded into the revenue guide, as well. And then, one thing we did talk about is also the deferred revenue haircut. As you guys know, we just closed the deal three weeks ago. And so we've got an estimate embedded in the revenue guide. But we're going to work through that with our auditors over the next few weeks. And we'll give you a little more color when we do Q2 earnings.

On the margin side of the house, once again, Q1, Okta-standalone had a great quarter. And we believe that's going to continue for the balance of the year. And it's just, we're really pleased with the performance from Okta by itself. And then, like we just were talking about, Auth0, obviously, we're going to invest into a massive opportunity on the CIAM side of the house. And then also what's great about Auth0, not only are they helping us with a $30 billion CIAM market, but there's also the cross sell opportunity into the $50 billion workforce market as well.

And then, obviously, the purchase accounting of deferred revenue and all the regular kind of standard acquisition accounting is putting a headwind on that operating margin. But I think the one-- I think another thing that would be a real positive for this group is, previously we talked about free cash flow being slightly positive without the acquisition and integration expenses. And now we're saying it will be slightly positive with acquisition and integration expenses. And as you as this group knows, those can be fairly sizable. So some really nice progress from a margin perspective and on that side.

[Keith Bachman, BMO]

Okay. Thank you, Brett. I mean, my two cents would be the next time you come on, as I think investors would certainly appreciate some cadence on what the organic growth was, whether it's billings or revenues, or what have you. Todd, maybe a question for you, if I could sneak my second one in. Could you just talk a little bit about, the competitive landscape, and it could be with Auth0 or without. But I'm just wondering, are you seeing anything more from Microsoft, particularly in the mid market category? Are you seeing your win rates changed any more from Microsoft versus [indiscernible]? I'm just wondering if you could speak more broadly to the competitive landscape also recognizing that Auth0 is now part of your arsenal, so hopefully you can include that in your response. Thank you.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

The competitive landscape has largely been vis-à-vis the major platform players like Google and Amazon and Microsoft has largely been consistent the last five or six years, ever since Microsoft launched a product, I think what is going on now, seven years now seven or eight years ago. And not for Okta when they launched their competing product, it was scary at the time. But it was really the best thing that ever happened to us. It really validated this concept of identity being this primary system that people had to invest in. So we haven't seen a change there. It's interesting. I think, in general, Microsoft is weaker -- relatively weak in the mid-market for their identity business. So, it's interesting that you'd mentioned that you had a question about them being strong there. I would say I would call that out as a weakness of Microsoft being the smaller companies they've been market, maybe it's because of their channel, maybe it's -- I don't know why, but they've tended to not show up very well in that segment.

The question about Auth0, the competitive dynamic on customer identity is really, it's a build versus buy conversation. And one of the -- if you think about the market is $30 billion, we're going to get to some of that with our low code approach with Okta organic CIAM. But a lot of that 30 billion was -- would have gone to people building their own solutions. And that's the power of this, from the ground up developer centric approach. It really increased the capability to take on some of those projects that would have been built your own. And then that leads to a virtuous cycle of, we get that customer, maybe we can sell them our events over access product, maybe we can sell them our Okta access gateway, maybe they need workforce. So not only as Brett was saying that the developer approach with Auth0 helped us in that $30 billion customer identity TAM, but also gives us a foothold to provide more customer value and sell more products and over time.

[Eugenio Pace, Chief Executive Officer of Auth0]

And Keith, if you think about it, the only companies that can afford to start from scratch, and not think about this problem as an existing problem. It's small startups, companies that just started today, anybody else already has a solution deployed, right? And so in our deals with customers, everybody has its own thing already. And some of the pushback, that we saw in the past has gone away, because the realization that they can do better than us, we know, with all the resources that we put in one solving this problem has gone away, the problem is getting complex attacks are getting more sophisticated, more things are being moved to the digital world. And so just the notion that adding a little bit more effort, and fixing your existing system, home build system to deliver on today's requirements is just going away very quickly. So what we are seeing on our side of the world, from a more developer perspective, is very consistent to that. The top number one competitor still is the, I already build this, can I just put a lot more effort and make it work. The answer is of course, no.

[Dave Gennarelli, Vice President of Investor Relations]

Next up, we're going to go Taz at Guggenheim.

[Taz Koujalgi, Guggenheim]

I have a question about the impact of Auth0 on the billings. You gave us the impact on revenues. But given the deferred revenue write down, I would assume that the impact on billings would be higher than the revenue impact, is that a fair statement that your growth impact on billings would be more than on revenues from Auth0.

[Brett Tighe, In-coming Interim Chief Financial Officer]

Yes. Taz let's talk about kind of how to think about billings for Q2 and FY'22. So a couple things going on there, just like I said on revenue and margin, Okta continues standalone to do very well there. So obviously as shown by the 40% Q1 billings growth, which we're very pleased with that, obviously that's excluding the operational billings change. And so a couple things for Q2 to Q4 that operational billings change, that's going to continue, now, it's not going to be that large Q1 was the biggest impact of any quarter really going forward. But Q2 into perpetuity will continue to modestly help us along because we're bringing billings forward and obviously free cash flow bringing that forward as well.

And then, the other side, obviously, Auth0 will be layering that on top. And when we talk billings with you in the future, we're going to talk net revenue acquired deferred revenue. So when you think about the billings number, obviously, Auth0 will add a bunch of DR into the number for Q2. We're going to back out any acquired DR. So we can get a true, more operational billings number.

And when you think about billings, in terms of growth going forward, we typically talk about it in relation to subscription revenue growth. And because of all those impacts that I just described in Q2, I'd probably say mid single digits that billings growth will be higher than subscription revenue growth. And then, for FY'22, primarily due to the Q1 operational change, that number will probably be high single digits of delta between billings growth and subscription revenue growth for FY'22.

[Taz Koujalgi, Guggenheim]

And just one more follow up. Can you just comment on the deferred revenue right now you're assuming for Q2, like what would have been the normal run rate of revenue for Auth0? And then how much haircut are you assuming in your guidance for Q2?

[Brett Tighe, In-coming Interim Chief Financial Officer]

Yes. The deferred revenue haircut, we've just obviously done the transaction a little over three weeks ago, we think it's probably in the range of plus or minus 20%. But we're going to work that out over the next a couple months before we talk to you guys after Q2.

[Taz Koujalgi, Guggenheim]

And does that go away completely in Q2? Or do we have some lingering write down in Q3 and Q4 as well know?

[Brett Tighe, In-coming Interim Chief Financial Officer]

No. It will linger along primarily because Auth0 being in a lot of ways very similar to Okta, they annually bill a lot of their customers. And so as you know, if it's built DR, it's more annual nature, so it will last likely into Q1 of FY'23. Obviously, the impact will be less in '23. But you guys know how the mechanics work.

[Dave Gennarelli, Vice President of Investor Relations]

Guys, next, we're going to Ittai at Oppenheimer.

[Ittai Kidron, Oppenheimer]

Thanks guys, a great quarter. Todd, I want to go back to the prepared remarks a little bit. And I think you mentioned that you see more opportunities now to cross sell with Auth0 versus what you expected in our last update, maybe you can give us a little bit more detail of what else did you find in there after you started digging in?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

There's a few things, first, we had an assumption about this $30 billion, CIAM, TAM, they're going after with the developer led approach. We're going after with a low code approach. We had an assumption that there wasn't much overlap between those two customer bases and prospects. And that's been validated. One thing we can do in the first three weeks is we finally get to see all the customer lists and the pipelines and so forth. So there's very little overlap there. Which means it really validates our thesis that these are two distinct parts of this $32 billion market. So that's really exciting.

So the second thing we're doing is, we're collaborating very well at the go-to-market level, to make sure where there is overlap and a prospect, we're quickly leading with the right solution. So we're not trying to sell low code to someone that wants developer and developer that someone wants to low code. So there's that synergy there. Then, the other two things I call out is, Okta has a couple products. One is advanced server access, which is the foundation for our PAM product that's going to be released in a few quarters. That is really perfect for dev shops for people that are have a lot of Linux servers that are dynamically starting server stopping servers, which really is overlapping with Auth0 customer base. So we think there's a big exciting upsell opportunity for our ASA and PAM products into the Auth0 customer base. And also on the Okta access gateway. This is a product that has been really helpful in helping us especially in large enterprise sell to companies that have hybrid IT, Auth0's customer base has the same challenge. And we think that's got a big opportunity to cross sell that as well. So those are some of the specifics. And I know Eugenio has been working on this close as well, he probably has some more things, anecdotes he can share.

[Eugenio Pace, Chief Executive Officer of Auth0]

Yes. Look, we only had like three weeks, it feels like three years already. But it's only been three weeks that we were able to kind of look into details. And our teams are uncovering tons of opportunities. Todd mentioned integration with ASA, server access with the Okta application gateway, there's opportunities between b2b and b2e, so workforce and business identity. So there's tons of connecting points that we are uncovering together. But perhaps what's even more interesting and exciting, frankly, is not it's not just our teams, finding those connecting points. In many cases, it's our customers that say, hey, can we use ASA here? I'm already using Auth0 for protecting my apps. Can I use ASA in my DevOps team. And so what is really exciting is that the excitement is not just on our side, which is also of course, great to see. But it's also great to see with our customer base and they are coming up with already opportunities of synergies.

[Ittai Kidron, Oppenheimer]

Right. That's great to hear. Maybe as a follow up, Todd on your prepared remarks, you mentioned that workforce identity performed for expectations, but it's certainly feels like in the way described it, it was not a source of upside. So maybe you can comment on what is the growth rate at this point in your workforce business? What is it down to? And how do we think about progress in that business -- growth in that business going forward from here?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Yes. In both of our organic businesses are very strong. The growth number and subscription revenue is 38%, billings was a little bit north of that. So they're both doing really well, I think that the workforce product continues, we saw the numbers the large the transactions over $100,000. Particularly one strong point was our advanced lifecycle management product, which is exciting, because it gives our customers more power, and it helps automate more of their processes. But also it is the foundation for our upcoming identity governance product. So lifecycle management is the foundation for identity governance, is the foundation for PAM. So these products doing well is a good harbinger of success in those broader product categories, which is important for this concept of, we're really trying to build the primary cloud for identity. So every use case customer has, whether it's customer identity, whether it's building an app, whether it's b2e, b2c, whether it's privilege access, whether it's IGA, whether it's workforce, we want to be that vendor, that primary cloud for them. And when you talk to customers, it's really resonating with them. This is a very complex landscape. They want all the use cases covered. They want answers on how it should work, they want to be steered through this complex landscape in a way that will be predictable and high value.

And then, another really good trend for the -- I mentioned in the prepared remarks as well, for the workforce businesses, what's happened in public sector, you have a public sector, environment, it's very strong. We've talked about in a press release -- recently we talked about the state of Iowa. And if you look at what's happened in the federal government, the Biden administration, basically told every federal agency, they have to have multi-factor authentication. It's like the perfect storm for Okta there in terms of having the right product at the right time. And at the same time, federal agencies have to go to cloud and have zero trust.

I was meeting with the Chief Security Officer at a very well known three letter agency. And the media was kind of -- the customer of Okta in a couple parts of their agency and sub parts. So I had met with them before, but I got an urgent meeting request from the CIO of the entire agency and the CISO as there as well. And basically, what they were saying is, it sounded like it literally a marketing script that Okta would say. They said, we were a victim of solo wins, we're worried about these other attacks, these exchange leaks, these exchange attacks, et cetera, we have to go to zero trust, and identity is at the core of it all. And it was, just a really good sign of how big the workforce opportunity is, when you put that together with the other product areas we're doing is, the future is very, very bright.

[Ittai Kidron, Oppenheimer]

That's great. Thank you very much. And I'll echo Keith's comments, [indiscernible] numbers. So hopefully we get something. Thank you.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

That was another vote for that, good to hear. Yes. Do we have a voting feature on Zoom?

[Dave Gennarelli, Vice President of Investor Relations]

All right. Next up, we're going to Rob Owens at Piper.

[Rob Owens, Piper]

Todd, you stated a little bit about [indiscernible], I was hoping you could elaborate on what you guys are seeing from a public sector standpoint maybe you can break out, do Auth0 have much of a public sector presence and for Freddie since he seems lonely, been it's been smiling, I will call on my Brady Bunch windows here. Just talk about channels to market for public sector and what you guys have in place?

[Frederic Kerrest]

Yes, absolutely. Thank you for the opportunity. I was just sitting here and really enjoying the conversation, taking some notes on my own. So happy to participate actively. I appreciate the opportunity, Rob. Yes. So certainly when it comes to -- just to expand a little bit on Todd's commentary there, certainly things are going very well. And we think the opportunity in the public sector, both federal, state and local, are very, very good. We talked a little bit about the federal business, it's important to remember that, federal authorizations are not something you can flip the switch on overnight. We've been working on them for years. So we have existing FedRAMP moderate authorization today. We just got DoD impact level for provisional authorization, which we announced today as well and FedRAMP highs on the near term roadmap. So you've got the Biden administration issuing this presidential executive order, saying hey, we have to improve the nation's cybersecurity posture. That he orders that the states, the federal government has to advance towards zero trust architecture and explicitly states the after [indiscernible] effect. So conveniently, they have to do that from an approved vendor. So obviously, that puts us in a pretty good spot number one.

Number two, when you think about what -- not just the private sector, but the public sector is trying to do, they're trying to consolidate, you heard a little bit the story that Todd was just telling you, but that's replayed over and over, they're trying to consolidate, they're not trying to get more vendors, they're trying to find the right vendors, they can build the right relationships with. And if you look at whether it's dollar based net retention, or new logo acquisition, or the customer momentum, press releases or otherwise, you clearly see that we're on our way to becoming a primary cloud. We're expanding our use cases, which is an important component of becoming our primary cloud. We're broadening our capabilities and workforce with PAM and IGA. We're expanding with CIAM and CIAM workflows and obviously, the Auth0 transaction. And identity is becoming the epicenter of the organizations -- of every organizations tech connections. Gartner has even come around, they recently noted in their state of access management conference, like last week or the week before they see clear convergence of identity as a foregone conclusion. So they're saying every organization is going to be buying access management, IJ PAM and possibly even fraud detection downline from one vendor. That's our goal.

So look, as an entrepreneur 12 years in, it's a billion dollar revenue business growing, what's current RPA, 45%, year-over-year, I'm very excited about that, then I look at an $80 billion TAM, and it feels like a quaint, small business compared to what it can be. So we're very excited about the results. It's another strong quarter. But we're focused on what's going to happen in the quarters, and frankly, the years ahead. And I think that's the exciting opportunity that we're really leading into.

And then, finally, on the last piece about channels, yes, I mean, in particular, for public sector. Susan St. Ledger, who recently joined as our President of Worldwide go-to-market is doing an amazing job in bringing a lot of kind of next level of thinking to our business. And that's certainly a place that we've talked about a bunch and she's already starting to make some moves. So when it comes to federal, in particular public sector in general, certainly we're continuing to have success. You saw the press release today about the success State of Iowa is having, but if you roll back a couple quarters, same is true for State of Montana, State of Illinois. And then when you look at state and county, whether it's Maricopa County, whether it's Clark County, you go down the list, they're all finding better ways to use the Okta Identity Cloud for their citizens and their employees. And I mean, who's got a bigger budget than the public sector? So I think it's a huge opportunity for us and when you're going to see us continue to invest in the times ahead, for sure.

[Rob Owens, Piper]

Great. Thanks, Freddy. And quick one for Brett, where are you profitable come Q2, what would be the fully diluted share count, you would be looking at?

[Brett Tighe, In-coming Interim Chief Financial Officer]

Maybe around 170 million.

[Rob Owens, Piper]

170, thank you.

[Dave Gennarelli, Vice President of Investor Relations]

Next we're going to Jonathan Ho at William Blair.

[Jonathan Ho, William Blair]

Hi, good afternoon. Yes, I wanted to ask, I guess, Mike, I think some investors would like a little bit more clarity on why you're stepping down after a relatively brief period in the seat. So could you maybe help us understand the timing and the rationale for the decision?

[Michael Kourey, Chief Financial Officer]

Thank you, Jonathan. Yes, as I mentioned, I've been on the board and as audit chair, I was starting in the fall of 2015, all the way through December of '20. So, more than five years, just having a terrific opportunity we thought, as it went from private to public and scaled dramatically, obviously, over that period of time. In that call, I think we guided for the first time over a billion in revenues, of course, guidance up quite a bit now. So that's been a fantastic experience and Okta one of the finest companies on the planet. And the management team, I would say the same.

Since I've been in the CFO, I've had the opportunity of working very closely with the team, continuing honestly but even deeper with Brett, certainly shoulder to shoulder. I'm excited about Brett having this role going forward. And I'm staying on as an advisor to the company. Todd has asked me to do that. And I'll be involved as an advisor in the future as well.

[Jonathan Ho, William Blair]

Thank you. And then, can you talk a little bit about some of the traction that you've gotten with your privilege in GRC Solutions. And I mean, I know it's early in terms of revenue contribution. But can you just give us a sense of maybe how often you're seeing that bought as part of a bundle or out of an initial purchase? Thank you.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Yes. So the way to think about this is the advanced server access product that we've had in market for a little bit like a year and a half is the foundation for PAM. And we're expanding that out over the next couple quarters. And then, we're going to release the full PAM product in the first quarter of next year. Same as for the advanced lifecycle management module, we've had that for a few -- we're about a year now for that we had regular lifecycle management, and we're going to be expanding that out over the next few quarters. And that'll be the first IGA product that we'll have it in the first quarter of next year as well.

So the there's two things that that are really good science for these products going forward. One is the results of both of these -- the advanced server access and the advanced lifecycle management. And I call that advanced lifecycle management, particularly as a strength in Q1. That product is -- did really well as people invest in automating more of the provisioning and the deprovisioning, and want to get a better automated process around what's happening with their identities across the enterprise. And then, the second thing is just the reception from customers. The reception from customers, when we talked about these products it was thank you. This is a no-brainer. We want this unified control plane, we want that integrated directory to the MFA to the everything Okta does today for us. And also, we don't want -- we call them PAM and we call them IGA. But we believe fundamentally that these markets are shifting. And just like, 10 years ago, Okta came with this new approach to identity, this was cloud centric approach with this pre integrated catalog, very easy to use, very easy to adopt, change the whole industry, none of the solutions were like that. We see the same thing happening for this IGA and the PAM market. There's vendors there, they're good companies like CyberArk, or SailPoint. But they're not what we're building. They're legacy software companies. And they have good businesses doing that. But we think when you look out five or 10 years, the massive winner and what will become the PAM and IGA categories, won't be legacy software companies. Just like, if you look around the rest of technology, the winners in the next five to 10 years aren't going to be legacy software companies.

So that's the lens we're bringing to it. It's this converged, integrated approach across core identity, IGA and PAM, for a cloud-centric world. And that's why we're so bullish and excited about this opportunity and customers based on feedback, share that enthusiasm. We'll have to see once we get the products out, we'll report back about how they're doing. But that's how we see it right now.

[Michael Kourey, Chief Financial Officer]

Yes. I was just going to add to that, as Todd said, at the end there. It's not as though we're sitting in our ivory towers coming up with these ideas. I mean, we are very customer driven company, we listen very closely to customers, of course, we have our own thesis on where things are going. And you see what the mega trends are about cloud and hybrid IT. I mean, I think everyone on this call understands where the future of enterprise software is going. It's clearly not going back to on premises legacy software. But we also listen closely to our customers. They've been asking for this kind of solution for a long time. It makes a lot of sense. Look, if you bring all of your identity information and you put it in the cloud -- in the public cloud in a service like Okta, you're not then going to want to bring -- what is IGA and what are PAM. PAM you could argue that privilege access basically in the cloud world, every access is privileged access, especially based on the security threats that we're seeing that are increasing these recent security events. So everyone's got to think about every access is privileged access, first of all.

And then, second of all, when you think about identity governance, what is it, it's basically derivative information off of core identity. It's not its own information. It's like reporting the news of what happened with your identity. If you brought all of your identity into the public cloud, it makes sense that over time, you're going to stop bringing all that identity information back on premises to run a bunch of reports to give to your auditors. And as customers are getting into that mode for both workforce, their employees, contractors, consultants, but also customers, right, if they're in highly regulated industries, financial services, where there's HIPAA constraints, they want to make sure that all that customer information that's running in the cloud, they need to run reports on that as well. And the governance happens there, too. It's going to run as a public cloud service. And it's going to be very tightly tied to your core access management service.

[Jonathan Ho, William Blair]

Thank you. I appreciate the additional color.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

You can ask your questions, but we can give you two answers.

[Dave Gennarelli, Vice President of Investor Relations]

Next, we're going to go to Matt Hedberg at RBC.

[Matt Hedberg, RBC]

I have another vote for additional Auth0 disclosures for those keeping track at home. I guess you know, Freddy, another one for you maybe, I guess certainly for Todd. But, CIAM gets all the attention these days, I think rightfully so. But, I wanted to ask about the workforce identity, opportunity. I mean, I think that, I guess some out there feel that maybe some of that replacement opportunity from a legacy perspective slowed last year due to COVID.

I mean, do you think a, that was true? And b, do you think there could be an acceleration in workforce identity replacement deals, I'm talking like legacy, the legacy sort of version or gen one data workforce identity players.

[Frederic Kerrest]

Yes. Thanks for bringing that up. I know we've given a lot of run to customer identity and access management on this call, and obviously makes sense given the Auth0 transaction that just closed a couple weeks ago. But that's a very important one. When it comes to workforce identity, first of all, it's where we started. So if you go back to the TAM that we had when we started -- when we went public, the TAM in the S1 registration document was 18 billion and that was entirely workforce. And it's very easy to understand why if you go back and you look at enterprise identity historically, if you call large organization, they've got a budget line item because it's been like you said, a legacy piece of software, an Oracle and IBM suite and RSA suite, a CA suite.

What's going to happen and it's still a huge TAM. It's the biggest part of our TAM. So take out PAM and IGA, takeout CIAM, it's still $35 billion. And that number is growing. And it's going to continue to grow because people are thinking about more and more ways to adopt technology and adopt software to improve their prophecy. So first of all, the answer is absolutely very important. Second of all, what your question about did it slow a little bit last year? I don't think so. I think people are just trying to react. And so the first thing they're trying to do, if you remember, a few quarters ago, our MFA usage went through the roof. And people started buying a lot of MFA because instantly everyone got shipped home. But what's happening is, as people are starting to go back into these hybrid environments, or back into the office, intelligent [CXOs] [ph], forward-thinking CIOs, forward-thinking CTOs been around the industry a long time and/or have a lot of political capital inside their own companies realize this is one of those technology, leapfrog moments. And I think what you're going to see is, over the coming quarters and the coming years, this workforce identity management is going to continue to be a great business. Over the next 3, 5, 10 years, we are going to slowly replace all of the legacy software that's out there, and we're going to eat into that TAM.

Our business is not about to show up and a rip and replace forklift upgrade of your Oracle stuff. We don't show up to a CIO and say, oh, yes, well, here's what's going to happen, and you can pay us $50 million, and then, you know, maybe 18 to 24 months from now you're going to see some value. That's not how our business works. Our business works, we show up, we say look, your stuffs running today, it's running mainframe don't touch it. What are some of the exciting new opportunities that you have that your existing infrastructure is not working for? Perfect, let us help you with that. We show them value in a quarter or two, we start to build that relationship. And then 12 or 24 months later, we've earned the right to go back to them and say, okay, now a little about us, our platform, our company, how we work. Now let's talk about the roadmap to turn the lights off on Oracle identity and Access Manager, or IBM, TIM and TAM, or whatever you have over the next 24 or 36 months. And we're going to go slow and steady.

And you see the examples time and time again, whether it's Federal Express, which we've talked about, which continues to expand their deployment wall to wall, whether it's T-Mobile, especially as they do acquisitions, like Sprint, and they're still doing that consolidation, expands our deployment, and slowly gets rid of all that infrastructure. And that's going to continue through all the -- it's going to continue to roll through. The final thing is the stencil is really understandable. If you're a sales rep and you show up, you're like, what am I selling? Oh, perfect, universal directory, I've got authentication, I've got lifecycle management, that's going to become PAM or IGA, I've got all these tools, I understand how it works, I can call these customers and they get it. CIAM, it's a little more nuanced, because a lot of it is build your own. And so you have to get people to understand why they should take it off the shelf and how it kind of goes, obviously, the business is going well, it's growing fast, but the stencil to ramp new reps and get them to take out workforce legacy deployments over the next 5, 10 years. That is a stencil that we're very excited about. And I think you're going to continue to see a lot of great progress there.

[Dave Gennarelli, Vice President of Investor Relations]

Great. I know we're running short on time, but we are going to go into overtime. We're going to take a few more questions. This is good stuff. So Hamza, we're going to go to you at Morgan Stanley.

[Hamza Fodderwala, Morgan Stanley]

Just a quick one from me from a go-to-market standpoint, preferred to you Todd, how are you guys are preparing to go-to-market organization to sell into some of these adjacent categories like broader PAM and IGA, ahead of the product rollout next year? Because I mean, generally, I think these solutions tend to be a little bit higher in complexity. So what kind of approach are you taking is a more direct approach with your own solutions consultants, is it, leveraging more of the partner ecosystem, any color you can give us there?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Yes, for sure. Well, the first thing is, the good news is, it's not like it's coming out of left field, it's not like we're going to start selling flying cars all of a sudden and reps need to figure that out. When you think about what's happening with identity and the convergence of this infrastructure, you're starting to get convergence of identity as a foregone conclusion use Garner statement, right, access management, IGA and PAM. And what that means is, if you think about adjacencies, these are very natural adjacencies. First of all, it's all about the same stuff, identity. Second of all, a lot of times it's the same buyer. Third of all, a lot of times they're trying to consolidate, they're trying to find the right vendors. I mean, you go and talk to some of these CEOs and CTOs and CIOs, and they're like, I have too many vendors, I need to find the right partners. And obviously, our results speak for themselves. We are becoming the right partner for more and more of these large organizations.

And so, yes, do we have to train our reps, they're going to have to learn a little bit of a new motion, absolutely. But it's similar buyer. It's something that's right in the line of fire what they're doing today. And then, finally, it's not like it's brand, brand new. I mean, obviously, PAM and IGA, they're going to be brand new SKUs, they're going to be upsell, it's going to be net new revenue, the company for sure. But also today, we're selling advanced server access. And people have been asking for a couple years now, hey, if I look kind of askance at ASA, is that kind of a modern PAM solution? It is, but we're not thinking about what are the magic quadrants, we're going to take down. We're thinking about what are the customer solutions and where is the world going? And how can we help them? So we're selling ASA today, it's doing well. Lifecycle management, we introduced the advanced lifecycle management SKU last year, it did phenomenally well. I mean, it's sold like hotcakes, it beat all of our internal plans. And I think that's continuing.

Now, we're going to obviously transition that over to CIAM and provide that for Auth0, which is going to be great. But that advanced lifecycle management, what is IGA, its advanced lifecycle management, it's some reporting, some entitlement management on top, which we're going to fine tune and we're going to get it out the door, again, similar buyer, similar motion, and something that we're already kind of stepping into. So yes, we're going to have to do training, of course, we're going to have to do training, but we have some pretty smart wraps, and I think they'll pick it up pretty quickly.

[Dave Gennarelli, Vice President of Investor Relations]

Next, let's go to Alexander Henderson at Needham.

[Alexander Henderson, Needham]

I was hoping we could talk a little bit more about machine-to-machine environments, cross domain environments and to what extent you're looking to extend into that realm, which is much more about Kubernetes, and modern micro service based application architectures. And to what extent you feel like you need to build out functionality and capabilities to delve into that arena.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Yes. I think it's really important, Alex, on the PAM side. I think -- and that's a big difference between legacy PAM and modern PAM. Legacy PAM doesn't really have a lot of features for containers, functions as a service, some of these modern DevOps concepts, where our solution is going to be very centered on that starting with events or access, which is very focused on virtualized servers and real servers, but really focused on connecting them at their native protocol. And then, when you go to containers, and then some of the other new workloads, that's really right where that product is headed.

[Alexander Henderson, Needham]

So if you could extend that conversation to, if you're talking about cloud vaulting in the like, obviously, HashiCorp is a major player in that space with exceptional traction and probably the dominant multi-cloud participant, how do you integrate with them? Do you compete with them? Or do you –

[Todd McKinnon, Chief Executive Officer and Co-Founder]

It's an integration story. HashiCorp is, we have a great partnership -- we've implemented some provider in their Terraform system. And in terms of that DevOps motion, how you're moving workloads, copying things around, it's -- they've done a great job there. And we're really good at integrating people -- integrating with people. If you look at our one of our hallmarks is our integration network. So we're going to be the most integrated, most easy to work with company out there as part of what we do.

[Alexander Henderson, Needham]

Are you planning on doing any vaulting?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

I think the PAM solution will have evolved in it. Yes, we're looking at different options on -- is that a partnership? Is that something we buy? We'll make that decision when the time is right.

[Dave Gennarelli, Vice President of Investor Relations]

Let's go to Andy Nowinski at D.A. Davidson.

[Andy Nowinski, D.A. Davidson]

Just a quick one for me. I was wondering if you could just give us an update on the development progress you've made with regard to the upcoming IGA and PAM products that you're soon to be releasing next year. And maybe like which one is more complicated to develop.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

They're going well. Teams are cranking away working with early customers, vetting the plans. Again, it's all building on our strength of these two products. So we have a really good, high quality signal from the market on what we need to do there.

In terms of complexity, I think they're both kind of about the same complexity. I wouldn't call out one is more complex than the other. They both have their -- I think the biggest, I think the biggest opportunity in both of them is to resist the temptation to just go out and implement things that have been implemented before because there are existing tools out there. And we really have to challenge ourselves to make sure we build the solution for the future. Not for the past, while still meeting the real requirements as the requirements are changing. That's probably the -- it's an engineering challenge. But it's also a product challenge, too. And that's what the teams are spending a lot of times on -- time on to make sure they get that right.

[Andy Nowinski, D.A. Davidson]

And then, Todd, do you think customers will be willing to deploy a good enough solution for both those two, for the benefit of managing just one platform and identity? Or do you actually have to be a market leader in both to really convince customers to move to your platform?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Well, I think it's a little bit semantics. I think we're going to be the market leader for the customers that want a modern solution. We're not going to go replace a bunch of CyberArk implementations. We're not going to go replace a bunch of SailPoint implementations. This is about of the 10-times the customers that don't have those things right now. And the companies that are going to need the modern version of the PAM and IGA in the future. Yes, I think it's going to be tough to go and say, you've been -- you have an Oracle legacy database and Sun server, and you have CyberArk doing the access to that. You're going to take that out for a new Okta product is unlikely. But I think there's 10 times the companies that are trending toward more modern technology that don't want the old technology to do privilege access around that.

[Dave Gennarelli, Vice President of Investor Relations]

And next, let's go to Joshua Tilton at Berenberg.

[Joshua Tilton, Berenberg]

I want to talk about -- we kind of think about the future where this identity market does converge. And customers are looking to buy one product or a unified bundle for access management PAM or governance, which of these three product features do you think are going to drive the purchasing decision for a customer to choose one vendor over the other?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

I think it's the core access management. So I think they might say core, it starts to get a little fuzzy between privilege access and core access management, just because it's fair to mention the -- with remote work and cloud and some so many things being sensitive, the number of accounts that are privileged are increasing. What is the most compelling to customers? When I was talking to that CISO and that CIO from that three letter federal agency, they wanted access control. So when the Biden administration says do MFA, it's access control. So that's the driver. So the degree that to which we can be the leader in, we secure your environment, we give you access control, while making it easier for your end users. That's the core in my view on the workforce side.

[Joshua Tilton, Berenberg]

And if I could just follow up on that public sector comments, the simple way to think about it is Fed Gov employs 2 million people and MFA is 76 bucks per user per year, which kind of implies a pretty sizable opportunity there. So anything directly that you guys are doing to kind of capitalize on that opportunity that is out there?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

We have dedicated sales team, we're ramping that up. We have the authorizations, the FedRAMP moderate and the IL4 provisional authorization, FedRAMP high is in the short-term plans. So yes, it's not something that you can just do, we've been working on it for a number of years and the timings good. And we've seen a lot of success there. So it's not like they just bought zero Okta now they're going to buy all Okta, we've seen a lot of progress there. So we have a very solid base to work from.

[Frederic Kerrest]

And I would just add to the question that was posed a little while ago, it's also not just direct, there's obviously a big channel component there. We've been working on that channel strategy for a number of years, and I think you're going to see it really start coming to fruition. So the more you can get, obviously, they buy from the exact same folks they buy from every time, more you can build those relationships. But again, you can't build those overnight. We've been working on them for a while, and I think you're going to start to really see the results.

[Dave Gennarelli, Vice President of Investor Relations]

Okay, we're running long. We're going to take one more question from Gray Powell at BTIG.

[Gray Powell, BTIG]

Hey, great. Thank you very much for working me in here at the last minute. Really appreciate it.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Make it a good one, Gray, make it a good one.

[Gray Powell, BTIG]

All right. I think I got one. So I'm going to follow up on the guidance questions. And just bear with me a second. So if I look at your Q1 results in a vacuum, the upsides of revenue was actually a little better than what you've seen in the last few quarters, and specifically, you beat on revenue by 13 million in Q1 versus more like 10 million in the prior few quarters. So if Q1 was a fairly standard auto revenue beat, is it safe to assume that the organic upsides of the full year guidance would have been a fairly standard auto raise maybe in the I don't know, 30 million to 40 million range?

[Todd McKinnon, Chief Executive Officer and Co-Founder]

I was going to say I think that's fair.

[Dave Gennarelli, Vice President of Investor Relations]

Okay. Good. Apologies to those that we didn't get you on the call. We will take your questions afterward, if you'd like. Before you go, we want to let you know. We'll be at two virtual conferences this quarter, we will be at the William Blair Growth Stock Conference on June 3 and the BofA Global Tech Conference on June 8, and we're also participating in a number of bus tours. So we hope to see you at one of those events. So that's it for today's meeting. If you have any follow up questions you can email us at [e-mail]. Thanks again.

[Todd McKinnon, Chief Executive Officer and Co-Founder]

Thanks, everyone.