Okta, Inc. (NASDAQ:OKTA) Q3 2019 Earnings Conference Call Transcript

Dec 06, 2018 • 05:00 pm ET

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Okta, Inc. (NASDAQ:OKTA) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Okta Third Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Catherine Buan, Vice President of Investor Relations. Please go ahead, ma'am.

Executive
Catherine Buan

Good afternoon, and thank you for joining us on today's conference call to discuss Okta's fiscal third quarter 2019 financial results. My name is Catherine Buan, VP of Investor Relations at Okta. With me on today's call are Todd McKinnon, Okta's Co-Founder and Chief Executive Officer; Bill Losch, the company's Chief Financial Officer; and Frederic Kerrest, the company's Co-Founder and Chief Operating Officer.

(Forward-Looking Cautionary Statements)

In addition, during today's call, 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. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation between GAAP and non-GAAP financial measures is available on our earnings release.

(Forward-Looking Cautionary Statements)

Now, I'd like to turn the call over to Todd McKinnon. Todd?

Executive
Todd McKinnon

Thanks, Catherine, and thanks everyone for joining us today. Before we begin the call, I'd like to take a moment to recognize this day of memorial for the late President George H. W. Bush. We honor his Presidency and lifetime of public service to our country and our thoughts are with his family today.

Our third fiscal quarter was another outstanding quarter for Okta with total revenue and calculated billings both up 58% 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. 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% 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 imperative for organizations in every industry and validates Okta's approach to helping organizations manage all their identities through our independent cloud platform. As a reminder, we address two markets: workforce identity, the identities of employees, contractors and partners; and customer identity, the identities of our customers' customers.

We closed a number of significant deals in the quarter. I'll highlight a few of them. First, Hertz Global Holdings, a car-rental company, that operates in 150 countries is an exciting new deal for us. The company chose Okta to securely connect all of