Okta, Inc. (NASDAQ:OKTA) BMO 2025 Virtual Software Conference June 10, 2025 11:30 AM ET Company Participants Brett Tighe - Chief Financial Officer Conference Call Participants Keith Frances Bachman - BMO Capital Markets Equity Research Keith Frances Bachman All right. Good morning, good afternoon, everybody. It's Keith Bachman here from BMO. We're continuing on our virtual software conference. Thrilled to have Okta and Brett. And we're just going to go ahead and launch into it, normal format. [Operator Inst ...

Summary of Conference Call Company and Industry - **Company**: Okta - **Industry**: Identity and Access Management (IAM) Software Key Points and Arguments Strategic Focus Areas - Okta aims to become one of the world's most secure companies, emphasizing four key areas: security, new product introduction, partner ecosystem penetration, and go-to-market specialization [2][3][7] - Go-to-market specialization is highlighted as the most exciting area for growth in the next 12 to 18 months, with a focus on deepening product knowledge and specialization in various geographies and segments [3][6][7] Market Segmentation and Performance - The U.S. public sector accounts for less than 10% of Okta's total business, with federal contracts being a small subset of that [9][10] - Despite short-term turbulence due to macroeconomic uncertainties, Okta believes it is well-positioned for long-term growth in the federal sector, aligning with government priorities of security, modernization, and efficiency [12] Guidance and Growth Expectations - Okta's guidance reflects a more conservative approach compared to previous years, with a focus on reducing variability in revenue growth expectations [15][20] - The company is targeting revenue growth rates of 9% to 10%, which is a shift from the higher growth rates seen in previous years [18][21] New Logo Growth and Market Opportunities - Okta sees significant opportunities for new logo growth, particularly in the identity solution market, despite concerns about market saturation [23][24] - The company emphasizes the importance of both quantity and quality in new logos, with a focus on accounts generating over $100,000 in Annual Contract Value (ACV) [26][27] Competitive Landscape - Microsoft is identified as the primary competitor in the workforce identity space, with Okta maintaining a competitive edge through product differentiation [35][37] - The competitive dynamics remain stable, with no significant changes noted in the strategies of competitors like Ping and ForgeRock since they went private [40] Governance and Lifecycle Management - Governance is seen as a key growth area, with Okta aiming to increase its penetration from the current 1,300 governance customers out of over 20,000 total customers [41][42] - Lifecycle management is considered a subset of governance, with upsell opportunities from existing customers [65][66] Product Development and Future Outlook - Okta acknowledges that its Privileged Access Management (PAM) capabilities are still developing but sees potential for growth in this area over the next 12 to 18 months [75][78] - The nonhuman identity market is viewed as an emerging opportunity, with Okta positioned to address the challenges associated with managing nonhuman identities [80][85] Financial Guidance and Market Trends - The recent guidance for CRPO (Contracted Recurring Revenue) was weaker than expected, reflecting the company's cautious approach to market conditions and the costs associated with specialization [97][99] - Okta is optimistic about long-term growth despite current challenges, with a focus on execution and market adaptation [99][100] Additional Important Insights - Okta's strategy includes a cohesive platform approach that integrates various identity management solutions, which is expected to enhance customer value and ROI [56][58] - The company is aware of the technology sprawl in the market and aims to consolidate offerings under a single provider model over time [59][60]

With the increased use of NHIs and AI agents, especially with machine identities, there is a huge opportunity for Okta. This goes the same for the Total addressable market (TAM). As of now, Okta (NASDAQ: NASDAQ: OKTA ) is amongAnalyst’s Disclosure:I/we have a beneficial long position in the shares of OKTA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have ...

Summary of CyberArk Conference Call Company Overview - **Company**: CyberArk - **Industry**: Identity Security and Cybersecurity Key Points and Arguments Corporate Strategy and Development - CyberArk's strategy focuses on expanding its identity security platform, driven by the need to address identity as a significant attack vector [5][6][7] - The company has made strategic acquisitions, including Venafi and Zillow, to enhance its capabilities in certificate lifecycle management and identity governance [5][6][9][17] - CyberArk aims to integrate these acquisitions into a broader identity security solution, leveraging existing partnerships and sales channels [9][10][54] Market Position and Competitive Landscape - CyberArk is positioned to capitalize on the growing demand for modern identity governance and administration (IGA) solutions, particularly among mid-market and large enterprises [17][18][28] - The company emphasizes a "consolidation of trust," where customers prefer fewer strategic vendors to manage their cybersecurity needs [30][31] - CyberArk differentiates itself through its privileged access management (PAM) solutions and modern controls, which are seen as essential in a competitive landscape that includes major players like Microsoft [34][35][36] Product Development and Innovation - CyberArk is developing its agentic AI strategy, focusing on securing AI agents that operate in both machine and human roles, with plans for a solution launch by year-end [25][26][27] - The company is committed to enhancing its product offerings, including zero standing privilege technology, which minimizes the attack surface by granting access only upon request [41][42][43] Growth Opportunities - There is a significant cross-sell opportunity with existing customers, as approximately 9,500 CyberArk logos do not currently utilize the Venafi solution [54] - CyberArk sees potential for new customer acquisition through its expanded product portfolio, particularly in machine identity and secrets management [54][57] Challenges and Risks - The primary concern for CyberArk is the need to stay ahead of sophisticated cyber adversaries, including nation-state attackers and organized cybercrime [51][52] - Continuous execution and development of a robust platform are critical to maintaining growth and relevance in the rapidly evolving cybersecurity landscape [53] Additional Important Content - The discussion highlighted the importance of modern applications and the need for agile solutions that can adapt to changing security requirements [15][16] - CyberArk's focus on training and enabling its sales force is crucial for effectively selling its expanded product suite [53][54] - The competitive environment for certificate lifecycle management is shifting, with traditional methods becoming less viable, creating opportunities for CyberArk's solutions [35][36][37]

Summary of Datadog (DDOG) 2025 Conference Company Overview - **Company**: Datadog (DDOG) - **Event**: 2025 Conference (Dash) - **Date**: June 10, 2025 Key Points Industry Focus - Datadog operates in the software and observability industry, focusing on monitoring and security solutions for cloud applications and infrastructure [3][39][115]. Core Themes and Innovations 1. **Investment in R&D**: The CEO emphasized the importance of continuous investment in research and development to keep pace with rapid technological changes, particularly in AI [3][4]. 2. **AI Integration**: Datadog is leveraging AI to enhance its products, including the introduction of autonomous agents like Bits AI, which assist in troubleshooting and incident response [20][49][50]. 3. **Observability and Security**: The company is integrating observability with security through its Cloud SIEM, which has processed over 230 trillion log events, doubling from the previous year [40][115]. Product Developments 1. **Bits AI SRE**: An autonomous AI agent that helps troubleshoot production issues, significantly reducing the time required for root cause analysis [10][20]. 2. **Datadog OnCall**: A tool that has gained over a thousand users, enhancing incident response processes beyond traditional alerting methods [22][36]. 3. **Bits AI Security Analyst**: This feature automates the investigation of security signals, reducing triage time from 30 minutes to 30 seconds [48]. 4. **Bits AI Dev Agent**: A new development tool that autonomously detects issues and creates context-aware pull requests, saving thousands of engineering hours per week [50][58]. 5. **APM Investigator**: A tool designed to help engineers debug latency issues more efficiently, providing insights and proposed fixes [60][71]. 6. **Internal Developer Portal (IDP)**: A fully managed portal that helps engineers manage infrastructure and track best practices, enhancing development speed [75][84]. Customer Use Cases - **Toyota Connected**: Highlighted the use of Datadog for monitoring over 12.5 million connected vehicles, achieving high reliability and operational excellence [113][115]. - **Cursor**: A customer that has scaled rapidly, utilizing Datadog for observability to enhance their AI coding tools [88][90]. Additional Features 1. **FlexLogs**: A product that allows teams to manage log storage effectively, now storing over 100 petabytes of data per month [120]. 2. **Flex Frozen**: A new long-term storage tier for logs, designed for compliance and historical reporting [121]. 3. **Datadog Archive Search**: A feature that simplifies log discovery and analysis across different storage locations [122]. Future Directions - Datadog is focused on enhancing its AI capabilities and integrating them into various aspects of its platform to improve user experience and operational efficiency [3][49][73]. Important Metrics - **Log Events Processed**: Over 230 trillion in the past year, more than double the previous year [40]. - **Connected Vehicles**: Over 12.5 million vehicles monitored by Toyota Connected using Datadog [113]. - **PRs Generated by Dev Agent**: Over 1,000 per month, significantly reducing engineering workload [58]. Conclusion Datadog is positioning itself as a leader in the observability and security space by integrating advanced AI capabilities into its products, enhancing user experience, and providing robust solutions for monitoring and incident response across various industries.

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Industry Overview - The digital economy has elevated cybersecurity from a background IT concern to a top priority for businesses, as they face increasing cyber threats such as ransomware, data breaches, and phishing attacks [1] - The global cybersecurity market is projected to grow from $193.73 billion in 2024 to $562.72 billion by 2032, reflecting a strong CAGR of 14.3%, driven by the complexity of IT systems, tighter regulations, and the need to protect sensitive data [2] Technological Advancements - Traditional security tools are becoming inadequate against smarter and faster cyberattacks, leading to a shift towards artificial intelligence (AI) for proactive threat detection and response [3] - AI is being integrated into cybersecurity solutions to analyze large volumes of data, enabling companies to automate detection and response processes [3] Company Highlights - **CyberArk Software (CYBR)**: Focuses on identity security solutions, leveraging AI to enhance its leadership in the identity security space with innovations like the Secure AI Agent solution [6][8] - **Qualys (QLYS)**: Specializes in vulnerability management and cloud security, enhancing its AI capabilities to improve threat detection and remediation [9][10] - **Okta (OKTA)**: Concentrates on identity and access management, ramping up AI capabilities to address the complexities of digital identities, with innovations like Identity Threat Protection with Okta AI [12][13] - **A10 Networks (ATEN)**: Advances its AI-driven cybersecurity strategy through acquisitions and scalable solutions, positioning itself for growth in AI data center deployments [15][16][17] Market Positioning - CyberArk's unified platform offers critical capabilities for identity security, enhancing its market relevance and customer value proposition [7][8] - Qualys' AI-powered platform is expected to drive customer adoption and long-term revenue growth [11] - Okta's growing customer base, particularly among Fortune 500 clients, positions it as a compelling long-term investment [14] - A10 Networks is well-placed to benefit from the intersection of AI and cybersecurity, supported by strong margins and disciplined capital allocation [17]

Industry Overview - The Zacks Security industry is experiencing strong demand for cybersecurity products due to the increasing need for secure networks and cloud-based applications, particularly in hybrid work environments [1] - The surge in demand is driven by a significant rise in data breaches, leading companies to seek comprehensive IT security solutions [1] - The industry encompasses both on-premise and cloud-based security solutions, including identity access management, infrastructure protection, integrated risk management, malware analysis, and Internet traffic management [3] Major Trends - Rising cyber threats are escalating the need for robust security solutions, impacting not only individual companies but also national security [4] - The shift towards digital transformation and cloud migration is driving demand for cybersecurity solutions across various sectors, including education, healthcare, and entertainment [5] - Macroeconomic headwinds and geopolitical issues may lead enterprises to delay significant IT investments, potentially affecting the security market in the short term [6] Company Performance - Companies like CyberArk Software, Okta, and Qualys are benefiting from the trends in the cybersecurity market [2] - CyberArk Software is experiencing growth due to rising demand for privileged access security solutions, with a strong presence across various sectors [21] - Qualys is well-positioned to navigate market challenges with its diverse customer base and continuous innovation in information security solutions [28] - Okta's identity security solutions are gaining traction as organizations adopt digital transformation strategies, serving approximately 20,000 customers [33] Financial Outlook - The Zacks Security industry holds a Zacks Industry Rank of 19, placing it among the top 8% of nearly 250 Zacks industries, indicating solid near-term prospects [8] - The industry's bottom-line estimate for 2025 has increased to $1.45 from $1.35, reflecting analysts' optimism about earnings growth potential [10] - Over the past year, the Zacks Security industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500, with a return of 38.3% compared to 11.8% and 11.9% respectively [13] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-sales ratio of 14.77, significantly higher than the S&P 500's 5.12 and the sector's 6.37 [16] - Over the last five years, the industry's price-to-sales ratio has ranged from a high of 19.36X to a low of 6.92X, with a median of 12.56X [17]

Core Insights - The average brokerage recommendation (ABR) for Okta (OKTA) is 1.92, indicating a consensus between Strong Buy and Buy based on 40 brokerage firms' recommendations [2] - Of the 40 recommendations, 21 are Strong Buy (52.5%) and 2 are Buy (5%) [2] - Analysts' optimism regarding Okta's earnings prospects is reflected in a recent 11.5% increase in the Zacks Consensus Estimate for the current year, now at $3.28 [13] Brokerage Recommendations - Brokerage recommendations are often influenced by the vested interests of the firms, leading to a bias in favor of positive ratings [6][10] - For every "Strong Sell" recommendation, there are five "Strong Buy" recommendations, indicating a potential misalignment with retail investors' interests [6][7] - The ABR is calculated based on brokerage recommendations and may not always be up-to-date, while the Zacks Rank is more timely and driven by earnings estimate revisions [12] Zacks Rank Comparison - The Zacks Rank categorizes stocks into five groups based on earnings estimate revisions, with Okta currently holding a Zacks Rank 2 (Buy) [14] - The Zacks Rank is considered a more effective indicator of stock price performance compared to the ABR, as it reflects timely changes in earnings estimates [11][12] - The ABR for Okta aligns with the Zacks Rank, providing a useful guide for investors [14]

Core Insights - Okta, a leading cybersecurity firm specializing in identity and access management, has seen a stock decrease of approximately 10% over the last month despite reporting strong first-quarter earnings that exceeded analyst expectations [2][3] - The company's stock has increased nearly 30% year-to-date, presenting an attractive opportunity for investors [2] Financial Performance - In Q1, Okta's revenue grew 12% year-over-year to $688 million, surpassing the forecast of $678 million to $680 million [3] - Subscription revenue also rose 12% to $673 million, while adjusted EPS increased 24% year-over-year to $0.86 [3] - The company reported positive free cash flow of $238 million for the quarter, marking an 11% year-over-year growth [3] - The net dollar retention rate was 106%, down from 111% a year prior [3] Growth Forecast - Okta has maintained its fiscal 2026 revenue forecast of $2.85 billion to $2.86 billion, indicating a growth of 9-10% [4] - For Q2, the company projects revenue growth of 10% to $710-$712 million, with adjusted EPS of $0.83-$0.84 [4] Market Outlook - The overall cybersecurity market is expected to grow significantly, with investments projected to exceed $298 billion annually by 2028 [5] - Okta's identity management platform is crucial for securing access across various applications, especially as companies adopt cloud-based solutions [5] - Management has noted strong demand for new offerings, such as Identity Governance and Privileged Access [5] Valuation Analysis - Okta has a market capitalization of $17 billion and a price-to-sales (P/S) ratio of approximately 6x based on fiscal 2026 revenue estimates, which is reasonable compared to other cybersecurity stocks [6] - However, trading at 25 times its trailing free cash flow, Okta stock appears somewhat expensive given its low-teens revenue and free cash flow growth [6]