Total operating expenses for the quarter were lower than expected. The better-than-expected profitability is due to the combination of revenue over performance and our continued focus on spend efficiency measures. Total headcount at the end of Q3 slightly increased sequentially to approximately 5,900. Q3 free cash flow was a record $150 million, yielding a free cash flow margin of 26%. Free cash flow was significantly better than expected, driven by billings and strong collections. During the third quarter, we opportunistically repurchased $150 million of our 2026 convertible debt notes. This resulted in an $18 million GAAP-only gain. Over the past three quarters, we’ve repurchased $900 million of debt, resulting in a $91 million GAAP-only gain.
We will continue to regularly evaluate our capital structure and capital allocation priorities. Our balance sheet remains strong, anchored by $2.13 billion in cash, cash equivalents and short-term investments. Our cash, cash equivalents and short-term investments position, net of remaining convertible debt, is $820 million. Now, let’s turn to our business outlook for Q4 and FY ’24 and a preliminary look at FY ’25. As always, we take a prudent approach to forward guidance. We are factoring in a stable but still challenging macro environment. We’re also factoring in the recent security incident. For the fourth quarter of FY ’24, we expect total revenue of $585 million to $587 million, representing growth of 15%; current RPO of $1.875 billion to $1.880 billion, representing growth of 11% to 12%; non-GAAP operating income of $102 million to $104 million, which yields a non-GAAP operating margin of 17% to 18%; and non-GAAP diluted net income per share of $0.50 to $0.51, assuming diluted weighted average shares outstanding of 180 million.
For FY ’24, we are raising our revenue outlook by $30 million at the high-end of the range. We now expect revenue of $2.243 billion to $2.245 billion, representing growth of 21%. We are raising our outlook for non-GAAP operating income by $65 million at the high-end to $283 million to $285 million, which yields a non-GAAP operating margin of 13%. Non-GAAP diluted net income per share is raised to $1.47 to $1.48, assuming diluted weighted average shares outstanding of $179 million. And we are raising our free cash flow margin outlook for FY ’24 to 19% from 15% previously. On a dollar basis, that’s a raise of over $90 million and sets us up to close the year achieving the Rule of 40. While we are still in the early phases of financial planning, we would like to provide a preliminary view of FY ’25.
I’ll reiterate that we are prudently factoring in a stable but challenging macro environment as well as potential impacts from the recent security incident. We continue to focus on expense control and estimate a non-GAAP operating margin of approximately 17%. We’re also targeting free cash flow margin to be at least 19%. From a revenue perspective, we estimate total revenue to be in the range of $2.460 billion to $2.470 billion or growth of approximately 10%. We are applying a static 26% non-GAAP effective tax rate for FY ’24 and FY ’25. To wrap things up, we are confident that we’ve set the path of profitable growth for years to come. We continue to focus on initiatives to drive the top-line while making significant progress to drive improvements to our operating and cash flow margins.
With that, I’ll turn it back over to Dave for Q&A. Dave?
A – Dave Gennarelli: Thanks, Brett. I see that there are quite a few hands raised already, so I’ll take them in order. And in the interest of time, please limit yourself to one question so that we can get to everyone, and then you’re welcome to queue back up for additional questions. And with that, we’ll go to Brian Essex at JPMorgan.
Brian Essex: Great. Thank you, and thanks for taking my question. I guess I’ll start off with the easy one, and that’s the preliminary fiscal ’25 outlook. And I just want to ask you in the context of, I guess, taking into consideration two issues in particular. One would be the impact, as you guys alluded to of the most recent breach on your pipeline, close rates, customer relationships. And the other would be, I guess, the need for you to improve your relationship with channel partners in order to drive better growth. So, with regard to that preliminary outlook, how should we think about assumptions baked into that outlook, particularly as it relates to traction or churn with customers and contribution from partners considering these issues? And where in the spectrum of guidance being [“kitchen-sinked”] (ph) can we consider this forecast to be?
Todd McKinnon: Hey, Brian, thanks for the question, and thanks for jumping on the release this morning early before the market. That was a little bit atypical given the situations of the customer advisory, but we appreciate you covering and everyone else that covered it as well. We know it’s extra something you weren’t planning for us. We appreciate it. I’ll comment just on the business strategy behind the guidance first of all, I think that might be helpful. The — we have — it’s very important and it’s very clear to everyone at Okta that security is the top priority. We’ve prioritized securities at some level over the years. And it’s been balanced with other priorities, growth, new product development and various things to run the business.
And those efforts, I’m simplifying a little bit, but often have gone into product security, infrastructure, making sure that was very, very solid. And we know now that we — that’s not good enough. We have to do more. We know that Okta is one of the most targeted companies in the world because of the leadership position we have in this important market of identity access management, and that makes us, along with other cybersecurity companies, extremely targeted and relentlessly attacked. And we have to raise our game to be able to defend ourselves and our customers against those attacks. So, we’re really upping the level of priority, and it’s very clear to everyone at Okta that for the end of this year and going into next year, that the number one priority is securing Okta and securing our customers, full stop.
