Enterprise identity management company Okta (NASDAQ:OKTA) reported strong fiscal third-quarter results this week, and also boosted its outlook for the full fiscal year. That's typically a recipe for a stock to pop, but investors largely shrugged off the beat and raise. That's likely due to the fact that Okta shares have already nearly doubled in 2019, stretching its valuation metrics in the process. The stock now trades at around 26.6 times sales.

Here's what investors need to know about Okta's stellar quarter.

Inside of Okta headquarters

Image source: Okta.

RPO tops $1 billion for the first time

Revenue in the third quarter jumped 45% to $153 million, which included $144.5 million of subscription revenue. Okta's total remaining performance obligations (RPO) soared 68% to top $1 billion for the first time, of which $515.9 million is expected to be recognized over the next year. RPO is a metric that many software-as-a-service (SaaS) companies use that is calculated as deferred revenue plus backlog. Calculated billings increased 42% to $175.6 million.

Okta has been working to bolster its cash flow, and generated $10.6 million in positive operating cash flow, a meaningful improvement from the $6.4 million it burned in negative operating cash flow a year ago. Like many modern tech companies, Okta outsources cloud infrastructure operations (to Amazon Web Services, in this case) as part of a capital-light strategy, saving on capital expenditures and leading to $9.2 million in free cash flow. The company finished the quarter with nearly $1.4 billion in cash.

That all resulted in an adjusted net loss of $8.1 million, or $0.07 per share. Analysts were expecting the company to report $0.12 per share in adjusted red ink.

"Our strong third quarter results reflect our expanding leadership position and the growing importance of identity," CEO Todd McKinnon said in a statement. "Industry leading growth in subscription revenue, remaining performance obligations, and billings were driven by strong execution and the continued secular tailwinds of increasing adoption of cloud applications, digital transformation as companies improve how they connect with their employees and customers, and deployment of zero trust security environments."

What goes up keeps going up

It gets better. Okta raised its outlook for the year, with fiscal 2020 revenue now expected in the range of $574 million to $575 million. Okta has been raising its guidance all year long, in part because it continues to beat its own revenue forecasts each quarter (including a $9 million beat in the third quarter).

Date Issued

Fiscal 2020 Revenue Guidance

March 7 

$530 million to $535 million

May 30 

$543 million to $548 million

Aug. 28 

$560 million to $563 million

Dec. 5

$574 million to $575 million

 Data source: SEC filings.

For the fourth quarter, Okta expects sales to be in the range of $155 million to $156 million, which should translate into an adjusted operating loss of $9.1 million to $10.1 million. Adjusted loss per share should be $0.04 to $0.05 in the coming quarter.