Last Wednesday, Okta (NASDAQ: OKTA), a San Francisco-based identity software provider, reported record revenue for the third quarter of fiscal year 2019 for the period ended October 31, 2018. Okta reported total revenue of $105.6 million, a 58 percent increase over the same period last year. Subscription revenue was $97.7 million, also a 58 percent increase year-over-year. Subscription revenue currently represents 92.5 percent of total revenue for the SaaS company. Professional services and other make up the remaining $7.9 million of revenue, or 7.5 percent.

“Our third fiscal quarter was another outstanding quarter for Okta, with total revenue and calculated billings both up 58 percent year-over-year. We continued to invest across our business while improving our bottom line. Operating margin improved over 22 points. And free cash flow margin improved more than 18 points year-over-year, making us free cash flow positive for the first time,” said Todd McKinnon, Okta co-founder, chairman and CEO on the December 5 earnings call.

“We also had a record quarter in terms of customer growth. We added over 450 new customers in Q3, bringing our total to over 5,600 customers. Even more exciting is the momentum with our largest customers. We saw 55 percent growth in customers with over $100,000 in annual recurring revenue, which represents a record 100 net new adds in a quarter. This momentum is an indicator that identity is an increasingly strategic comparative for organizations in every industry and validates Okta’s approach to helping organizations manage all their identities through our independent cloud platform,” McKinnon added.

“We are very excited about the customer momentum in the quarter. Not only are we seeing more deals, we’re also seeing broader adoption of our technology. And we’ll continue to innovate and expand on our platform,” McKinnon said. “The market is validating our belief that identity is the foundation for securely connecting people and technology.”

Other highlights from the quarter include:

• Net cash from operations was $6.4 million, or 6.1 percent of total revenue.
• Free cash flow was $1.4 million, or 1.3 of total revenue.
• The company’s GAAP net loss was $29.5 million, or $0.27 per share, compared to $33.1 million, or $0.35 per share, in the third quarter of fiscal 2018.
• Total cash, cash equivalents and short-term investments on October 31, 2018 were $546.0 million.
• The company added more than 450 new customers, including Hertz Global Holdings and an international financial services company with more than 750,000 members. In addition, the U.S. Department of State expanding its Okta service to include its entire workforce, a significant upsell for Okta.

The company provided the following financial guidance for the fourth quarter of fiscal 2019:

• Total revenue between $107 million and $108 million, or growth of 39 percent to 40 percent year-over-year
• Non-GAAP operating loss of $11.5 million to $12.5 million
• Non-GAAP net loss per share of $0.08 to $0.09, assuming 110 million shares outstanding

For the full fiscal year 2019, Oka estimates the following results:

• Total revenue between $391 million and $392 million, or growth of 52 percent to 53 percent year-over-year
• Non-GAAP operating loss of $48 million to $49 million
• Non-GAAP net loss per share of $0.36 to $0.37, assuming 107 million shares outstanding

Insider Take:

Okta is filling a growing need for organizations – providing data security through a variety of products, services and solutions including single sign-on, multi-factor authentication, lifecycle management and more. They have amassed an impressive list of clients including Experian, JetBlue and 21^st Century Fox, and they are growing. As data breaches like Marriott continue to make headlines, the need for companies like Okta will only increase, and they are well positioned to fill that need.