Q1 2021 Ping Identity Holding Corp Earnings Call
[music].
Thank you for expanding by and welcome to the Ping identity first quarter 2021 earnings call.
This time, all participants lines are in a listen only mode. So.
So to speak of his presentation, there will be a question and answer session and to ask a question. During the session you will need to press star one on your telephone.
Today's conference is being recorded if you go out any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, David Banks VP of Investor Relations. Thank you. Please go ahead.
Thanks to everyone for joining us today and welcome to the Ping identity Conference call.
Where we will discuss results for the first quarter provide outlook for the second quarter and update our outlook for the full year of 2021.
Shortly after the market closed today, we issued a press release announcing our first quarter 2021 financial results.
In addition to those results, we will be presenting a live supplemental set of slides through the webcast portal.
These will be published to our website following the call.
You may access the press release and presentation on the Investor Relations section of Ping identity Dot com.
With me today is Andre Durand, our CEO and Raj Dani our CFO.
Today's discussion may include forward looking statements.
Please refer to our annual report on form 10-K for 2020, and our quarterly report on form 10-Q for the quarter ending March 31 2021 filed.
<unk> filed with the Securities and Exchange Commission.
There you will see a discussion of factors that could cause the company's actual results to differ materially from these statements.
I would also like to remind you that during the call. We will discuss some non-GAAP measures related to Ping Identity's performance.
You can find the reconciliation of those measures to the nearest comparable GAAP measures in our first quarter press release and the slides, we're posting on our website.
To assure we can address as many analyst questions as possible during the call. We ask that you. Please limit your questions to one.
Plus a follow up.
We will end the call after 60 minutes.
With that I'll turn the call over to Andre.
Thank you David we.
We had a strong start to the year with a solid performance against all our key financial metrics.
Annual recurring revenue grew 16% our growth uptick from Q4 to $266 $3 million.
Revenue of $68 $9 million grew 12% year over year.
Our dollar based net retention rate improved to 109% from Q4, and we generated $19 $5 million of Unlevered free cash flow, our best quarterly performance ever.
In short we feel good about these improving metrics, which raj will get into in more detail later in the call.
This performance was underpinned by a strengthening demand environment and a noticeable return of optimism amongst enterprises.
Our pipeline has improved and with it we've improved our outlook.
As I shared in prior quarters identity has become the new perimeter and is now recognized as the heart of security as a result, we see companies beginning their journey to zero trust with identity at the core.
We're also seeing an acceleration of all things digital cloud and a desire to achieve frictionless and password list user experiences.
Having spoken to one hundreds of our largest enterprises in the past few quarters, we have increased conviction that our vision and platform strategy are the right focus to fulfill the growing requirements for enterprises looking to secure access through identity.
To deliver on our vision Youll recall were focused on four core themes number one delivering our entire platform in the cloud.
For our customers. This allows them to deploy ping in the public or private cloud or consumed the entire ping platform as a service from our Ping one SaaS offering.
Number two delivering frictionless identity solutions for the customer identity use case.
Number three enabling the migration of legacy identity systems to pain, and lastly, embracing our partner network to help us deliver our solutions at scale.
Today I'd like to focus on our unified cloud platform and provide a progress update on our partner network.
We recently held Ping universe.
Our conference for customers and partners during this event.
We laid out our vision for the Ping intelligent identity platform and how we will help companies achieve their cloud zero trust customer use case and password list aspirations.
I hope some of you were able to listen in and if you missed it please reach out to our IR team for a link to the replay.
Our message with simple.
<unk> platform and vision has never been stronger.
And we're now in a position to transform the way people view security and identity through our unified cloud platform.
We're helping companies make the journey to the cloud in a way that allows them to transform their workforce and customer experiences while staying true to the zero Trust mandate.
With over $3 5 billion connected individuals.
And more than 350 billion digital identities connected to millions of applications. The.
The challenge for enterprises to connect the right users to the right applications with speed and ease has never been greater.
Today <unk> secured over 2 billion identities through our platform and we're pushing the boundaries of what's possible to secure the most complex enterprises wall-to-wall across their hybrid and multi cloud environments.
As our platform and capabilities have grown we're more focused than ever on our mission to be the very best provider of real time access management from initial verification through log in to log off and everything in between.
We believe this is the largest and fastest growing segment of the identity landscape and it's critical we meet the growing demands of our enterprise customers as their challenges continue to grow.
To achieve our mission, we are delivering our platform with more speed automation and flexibility than ever before allowing companies to run ping in their cloud of choice or consume ping as fast through Ping, one and our newly available advanced services.
Which now provide 100% feature parity with our core software capabilities.
To continue our commitment to being the most mission critical provider of identity.
We also recently announced that our <unk> SaaS offering is now available with four nines of availability.
A major milestone as our services have deployed active active around the globe.
Another announcement, we made at Ping universe with the trend, we're seeing towards the converged platform to solve both the customer and workforce use cases.
Companies are looking for leverage in their strategic vendor relationships.
They're looking to simplify their vendor and technology landscape and are seeing identity as a core to both workforce security, but also digital customer experiences.
As a result, while our business has been roughly split between workforce and customer use case since our inception, we're seeing a growing number of customers leverage paying for both use cases, and we expect this trend to continue.
In pursuit of Frictionless identity solutions, we continue to invest in our SaaS offerings to make it easier for those with cloud first or cloud only mandates to choose pain.
In our risk and intelligence services to reduce friction and improve security of our authentication and authorization solutions.
In a new no code experienced designer to speed integration.
In our dynamic authorization solutions to help companies centralized access to every resource and across their entire hybrid enterprise and.
And lastly in our password less technology to reduce friction for users.
Long term, we're re imagining identity to be more personal more privacy, enabling and more efficient than ever before our aspirations are to give individuals more control over their own identities and to completely reinvent how you engage with companies across your employment and customer relationships.
More to come on that later in the year during our Investor day.
In addition to the strides we've made on our cloud platform, we continue to make progress expanding and embracing our partner network. It.
It remains core to our operations and vital to our customer success and is now from a channel standpoint, taking on a more critical role in sales.
Our channel partners had a strong quarter influencing about half of our sales one of them opt in consistently ranks among our best strategic partners.
This quarter was no exception as they were involved in nearly a quarter of our influence sales, 60% more than on average each quarter for the last 12 months.
Increasingly we see these partners is critical to increasing our reach particularly among the portion of the global 3000 outside.
Outside of the Fortune 1000.
Later this month, we're launching our first partner sales certification program to enable hundreds of partners to sell all of our offerings.
For years, we've had extensive technical certification to ensure quality of delivery.
But this is the first concerted partner sales certification effort, a clear sign of the progress our new channel leader and her team are making.
Now I'd like to switch gears and highlight a few Q1 customer wins.
Much of the success this quarter was driven by existing customers, who are moving all in with pain.
We upsized our relationship with one of the largest managed health care companies in the U S.
With more than 12 million members this customer leverages Ping for both workforce and customer use cases and in Q1 added Ping, one risk and Ping intelligence for Apis to its portfolio.
The Ping solution will allow this healthcare provider to maintain a strict compliance based security posture, while driving a better authentication process for employees.
This is a great use case for one of our first Ping one risk customers.
One of the world's largest and most beloved retailers' expanded this relationship in the quarter.
With operations in multiple countries and 275000 employees the customer had been leveraging ping in concert with the Microsoft solutions, but we're getting the full value out of those offerings.
Employees were experiencing disjointed logging processes for workforce applications, sometimes requiring six to seven logins per day with disparate usernames and passwords.
To improve user experience the customer went all in with Ping to offer a password less experience for their employees, realizing significant savings and help desk cost improved security and a better user experience.
Another new customer win with <unk>.
An international provider of location intelligence identity verification and fraud and compliance management solutions, serving 20000 plus customers in more than 80 countries.
GBT verifies the identity of more than $4 4 billion people globally to AML and <unk> standards and.
Ensuring the businesses contrast that consumers are who they say they are and restrict fraudulent account openings.
Tpg's software brings together global identity data for its customers.
As such it was seeking a comprehensive solution that would provide a standard from multifactor authentication and role based access control in all of its solutions.
<unk> evaluated the market as an expert buyer and following a comprehensive evaluation of other leading vendors chosen ping one per customer single sign on and MFA.
With a multi year contract that creates future opportunity for both companies.
Another win for US was there for Genie retail group.
Which is a south African publicly listed retail clothing group that goes to market under various brands and has more than 3000 stores within its portfolio.
Offering a comprehensive portfolio of 18 retail brands that include clothing footwear jewelry sportswear mobile phones technology products and home stores.
The customer was seeking a comprehensive solution that would provide a standard from multifactor authentication and role based access controls in all of its solutions.
<unk> evaluated the market and following a comprehensive evaluation of other vendors chose ping one for customer single sign on and MFA.
In addition to the quarterly sales. We've also had some notable go live events.
Southside Bancshares, a $7 billion bank operating branches throughout Texas went live in Q1.
During the implementation, we successfully deployed ping in a highly secured environment to eliminate logging friction from their workforce.
This was a competitive win in which the customer opted for pain due to the robustness of our solution and our transparency.
In April we had two notable go live events first with a customer that we featured last quarter.
<unk>.
<unk> mission is to deliver immersive entertainment and compelling lifestyle enhancement that make their products the center of the connected home.
Two weeks ago, we brought them live.
Placing their legacy identity system, allowing them to reinvent the way services and advertisements are delivered through smart Tvs.
Vizio now uses Ping SaaS solution for the entire authentication and use our management system.
Allowing them to extend their reach into royalty based services with video on demand providers food providers and consumer Entertainment partners.
Also in April Volvo cars successfully went live with Ping in their European Union environment.
<unk> mission is to continue delivering vehicles with the highest level of security and the best in car experience.
We have enabled Volvo to authenticate secure and manage customer identities and securely build out the connectivity features which will ultimately serve and support entertain and guide the people who drive their cars.
Before I turn it over to Raj I'd like to share my excitement and announcing that later this month, we will welcome our new Chief revenue officer to Ping.
This gentleman checks many boxes and has significant enterprise sales international channel and cloud expertise.
We anticipate formally introducing him at our Investor day.
Building a strong leadership team is critical to our future success and I'm thankful to have recently added Peter Burke as senior VP of research and development.
Peter is an accomplished business leader with more than 25 years of technology experience as well as a published author in the field of artificial intelligence and.
Notably he brings is undeniable Scottish brogue to every zoom call.
In closing I'd like to thank our incredible team of attention more of them are showing up in person around the offices every day as we slowly emerge from the pandemic and its truly energizing to feel things returning to some level of normality.
And with that I'll now turn the call over to Raj to walk through the Q1 results in more detail and update our outlook for Q2 and the full year rush.
Thanks, Andre we had a fast start to 2021.
We ended Q1 with IRR of $266 3 million up 16% year over year Q1, net IRR of $7 $2 million grew by 63% compared with the midpoint of our guidance and 42% compared with the $5 1 million of net.
<unk> added in Q1 of 2020.
We feel good about this reacceleration.
Growth was driven by continued adoption of our SaaS solutions and solid sales, particularly among our strategic North American accounts, where we have seen an improvement in the overall enterprise spending environment.
First quarter total revenue grew by 12% to $68 9 million of which 93% with subscription based.
Growth was driven primarily by continued cloud adoption with SaaS revenue again growing by multiples of our total revenue and overall strong performance in Q1.
A ratable subscription SaaS and maintenance and support revenue grew by 23% in Q1 and represented 36% of our total subscription revenue up from 33% in Q1 2020.
Also within the subscription category, our one year term based license revenue grew 23% in Q1 to $17 $3 million with multiyear term based license revenue roughly flat compared with the year ago period.
Given the impact that deployment mix and contract duration had on GAAP revenue. We continue to believe that <unk> is the key growth metric of our subscription business.
As was the case last quarter, our AR once again outpaced the trailing 12 month revenue phenomenon, we expect to continue for several quarters before the two metrics converge more closely this reflects the ongoing SaaS transformation, we have been calling out for several quarters.
Our Q1 dollar based net retention rate was up slightly to 109% calculated on a trailing 12 month basis, and again tracking consistently with improving <unk> growth.
We ended the quarter with 265 customers of more than $250000, an IRR of 10% year over year.
Unless otherwise stated for the remainder of the P&L I will refer to non-GAAP metrics you can find a reconciliation of non-GAAP to GAAP numbers in the accompanying press release grew.
Gross margin for the first quarter was 80% and comparatively our GAAP subscription gross margin was 85% are SaaS.
Solutions continued to grow faster than the rate of the overall business and as a result, we saw slightly lower subscription gross margins then in Q1 of 2020.
Total operating expenses in the first quarter were $46 $8 million.
Unlevered free cash flow was a very strong $19 $5 million in the quarter. Our best results to date Q1 is historically one of our stronger cash flow quarters due to the timing of collections based on Q4 deal activity.
Operating cash flow was also strong at $24 $1 million per quarter.
Our annualized operating cash flow margin was 12% based on trailing 12 months operating cash flow of $33 million divided by IRR.
This is a notable improvement from our 2020 annualized operating cash flow margin, which average just seven 6% across the quarters.
We remain in a strong cash position at the end of the quarter with $55 million of cash on hand, and $91 million reduction driven by paying down $110 million.
Of our revolver in the quarter and putting us in a stronger net cash position.
These funds remain available to us.
<unk> borrowed in future periods as necessary.
Before I turn to guidance I'd like to provide an overview of stock comp impacts this quarter, which were more pronounced due to awards initially granted to certain employees under our legacy long term incentive plan or <unk>.
In Q1, we offered employees, who held awards under our <unk> the option to convert their rewards into restricted stock units with half of the units vesting on April one 2021, and the other half vesting when Dexter realizes a 149 1 billion dollar return of its investment in pain.
All else from holders elected to convert their rewards to RSV is resulting in the grant of approximately $950000 Skus as a result of the conversion the compensation expense associated with the award was converted from cash based compensation to noncash stock based compensation.
This resulted in incremental stock based compensation expense recognized in the quarter from the time based units of $12 $4 million with another $400000 that will be recognized in Q2.
We expect to recognize an additional $9 $5 million in future periods as the performance based portion of the awards become probable of vesting.
As a result of these awards, we anticipate our 2021 annual stock comp will represent between 18% and 20% of our anr versus about 8% normalized.
Moving now to guidance for the second quarter, we project, a $272 million to $274 million growth of 16% at the midpoint compared with Q2 of 2020.
We expect Q2 revenue was $65 to $67 million up from our Q1 guidance range, implying growth of 12% at the midpoint, we expect unlevered free cash flow of $2 million to $4 million in Q2.
We are raising our full year 2021, our estimate to between $298 $5 million and $305 million up 16% at the midpoint compared with full year 2020.
We now project annual revenue of $264 million to $272 million growth of 10% at the midpoint.
Call that its typical for Q3 revenue to be slightly lower than Q2 with a typical seasonal uptick in Q4.
We now expect Unlevered free cash flow for the year of $11 million to $15 million up 48% at the midpoint relative to our 2020 performance and despite ongoing investments we expect to make throughout the year.
We continue to expect total expense growth to track <unk> growth as a result of these investments which is reflected in our unlevered free cash flow guidance.
In closing, we feel encouraged about the start to 2021 and the sequential improvements we have seen in just 90 days. We believe we can sustain and build upon this momentum as the year progresses.
With that I'll turn it over to the operator for your questions.
As a reminder to ask the question you will need to press star one on your telephone <unk> Gladstone price dependent.
Thank you Stan bylaw, we compile the Q&A roster.
Your next question comes from the line of <unk> <unk> with Barclays. Your line is open.
Okay, Great Hey, guys. Thanks for taking my question is how are you.
Meanwhile, faggot.
Hey, excellent Andre maybe maybe for you.
As as more of the business starts to move to SaaS.
Can you just maybe talk about how the sales cycle is perhaps different versus traditional term subscription and maybe related to sort of the sales process overall, congrats on hiring a new chief revenue officer, what were some of the qualities that you were looking for one recruiting for that replacement for that position rather.
To your first question I would expect that we see two things as a result of the shift to more SaaS.
First I would say that we will land faster than new accounts.
As companies look to take the first step with Ping in the cloud and the motion is simply easier and simpler for those customers.
The second thing I would expect to see is that the expand from existing customers, taking the cloud journey with pain I would expect that those expands our larger so on the one and I would say faster lands.
And on the other I would say larger expands.
Okay.
The second part of your question with respect to what we were looking for I mentioned this one a little bit, but we had a lot of requirements for the new CRO position I think first and foremost.
We operate in the enterprise and the global 3000, and we wanted to see significant enterprise scale.
Secondly.
As more of our solution set is now offered as SaaS and in the cloud we wanted pretty significant cloud experience.
Additional growth vectors for us and points of.
Investment, where the international experience the channel experience and.
And federal experience so pretty excited about this individual they start at the end of May.
That's great that's great very helpful. Raj maybe from my follow up for you.
Understanding it's still very early in this journey to SaaS can you just go through some of the broad brushes on the economics of SaaS versus term subscription meaning.
How different is a SaaS deal from our traditional term subscription deal, particularly from an IRR perspective does that makes sense.
Sure happy to take that so generally I'll answer the question in broad brushes as you saw generally speaking SaaS prices SaaS.
SaaS does price at a premium because of the support and hosting costs that we have to incur right. So.
But ultimately competitive situations are what they are in the market dictates the price, but in generalities SaaS with price at a premium we are seeing that.
Very helpful. Thanks, guys.
Your next question comes from the line of Jonathan Ho with William Blair <unk> Company. Your line is open.
Hi, good afternoon, and congratulations on the strong results.
Just wanted to maybe start out with your comments around maybe from improved buying cadence that youre seeing from enterprises, and just general environmental improvement can you give us a little bit more color on what youre seeing there and maybe what that general pace of deal closures with looking like.
Jonathan So Andre speaking here, Yes, Q1 was a strong quarter.
As I also stated in earnings we are we do have a healthy pipeline it is tracking to plan.
We are seeing strong interest in Ping one advanced services.
Which is that feature parity of our software of our core software platform.
And we're also seeing some of the phase deals that we've spoken to in the past we're seeing some of those closed now at a quicker pace.
So I would say the energy and the tone.
Of our conversations.
Almost across the board.
Have have improved.
There is.
In a level of urgency and many of the conversations as the fog.
COVID-19 begins to lift on the budget and our plans for many of these companies and to some extent they had things on hold in 2020.
Yet the business requirements haven't changed and so we're seeing maybe the urgency represented in a lot of conversations was as a result of things not progressing as quickly as companies wanted in 2020. So all of that is very encouraging.
And then as a follow up.
Can you maybe give us a sense like you mentioned sort of the advanced services.
Like how does that sort of impact your win rates and can you talk a little bit about how that potentially.
Improved your competitive position as well thank you.
Okay.
I would say that there were deals in the past prior to having the availability of advanced services.
We were simply not in a position to win.
We deal with the largest most sophisticated enterprises, if they had a cloud first or cloud only mandate wanted to consume identity SaaS not deploy it in their own cloud.
We prior to this did not have an answer for those enterprises.
Now we're in a position where leveraging our strongest capabilities. We can say, yes to those enterprises with a SaaS solution. So I think we're number one we're winning deals that we would not have won prior to this.
We are more competitive in deals that have a cloud first mandate, but fairly sophisticated requirements and.
And I'd say lastly for existing customers looking to take the journey to the cloud and stay with Ping, we're offering them really the easy button for them to continue that journey with pain.
Great. Thank you.
Your next question comes from the lineup, Matt Hedberg with RBC. Your line is open.
Hey, guys. Thanks for taking my questions.
Congrats on the IRR acceleration, it's certainly exciting to see.
Andre.
Good to hear that the channel is now influencing I think you said half of your sales.
I'm curious.
That's a pretty big uptick from from even a couple of years ago.
What do you attribute that to is it is it easier to use easier to deploy.
And if we look forward I mean, where can that mix go to I mean is there a is there a ceiling on where you think that channel that channel impact could go.
I don't suspect it will ever go to a 100% nor nor that thats the healthy long term resting position, but I do see it moving north of 50%.
I would say the uptake.
We have seen is in direct relation to the investment and commitment that we do.
<unk> to the channel at the beginning part of this year.
We now have a full channel team under new leadership that we've spoken about in the past.
Okay.
And we've done a number of things as we entered this year.
Substantive things to demonstrate our commitment to the channel and the channel is feeling and seeing that.
And they're returning the returning the investment that we're making in them.
That's great that's great.
And then Raj I believe you said last quarter SaaS was about 15% of the <unk> mix and obviously, it's grown a lot faster. So I assume it's higher even after just one quarter here.
Can you remind us though there is a headwind to reported revenue with an increase in SaaS mix.
<unk>.
You still beat Q1 revenue I'm, just sort of wondering if you could sort of remind us on that dynamic.
Maybe.
Are you anticipating.
Yes, Matt so the original guidance that we provided last quarter.
Imply that there was a $30 million revenue impact from this ongoing cloud transformation and are not really that still holds today.
Q1, SaaS IRR did grow at multiples of the total.
Growth rate of the company.
In terms of the Q1 revenue upside we did see strong demand for software that was deployed in the in the customer's cloud so.
Some of that upside in Q1, but it was also a result of over.
But absolutely.
SaaS story holds it still growing at multiples of the overall growth growth rate of the business and.
It was always envisioned that most of that impact would be in the back half of the year simply because of the maturity of our SaaS offering.
As we continue down this journey and now we're just leaning much harder intuit as are our customers.
Got it great to hear thanks, guys.
Sure.
Your next question comes from the line with Brian and from Smith Goldman Sachs. Your line is open.
Great. Thank you and thank you for taking the question.
Maybe to kind of pile on just in previous questions about the revenue mix.
Andre could you here.
And how are you.
Level set our expectations as we look.
Forward to 2021, what that meant.
Might look like particularly as kind of.
<unk> is also kind of added into that.
So our growth in <unk>.
Q1 was driven by ratable subscription revenue right. So when you look at I think I mentioned it.
We continued to see that mix shift towards ratable and.
So when you think about Q1 ratable revenue really grew really drove the revenue growth and that was the ratable revenue grew at 23%.
Embedded in that is SaaS and <unk> in the SaaS business grew.
<unk> grew significantly faster than the.
Then the 23%.
It's sort of offset by a lower MMS growth.
In terms of.
Your question on renewal specifically most of the <unk>.
Most of the revenue in any given quarter is driven by renewals and we did have a handful of multiyear renewals but.
Nothing nothing.
Nothing way out of the ordinary for us in terms of.
Any quarter in particular.
Okay. Okay. That's helpful and then maybe to follow up on paint and advanced I think.
You previously talked about hitting feature parity in <unk>, So how should we expect.
That kind of work its way through the pipeline book with regard to sales force incentives, then whether they're kind of direct versus indirect.
Driven sales.
<unk> is now hitting its stride in the pipeline Sterling and making its way on it maybe one for one basis.
In each quarter or is that still have another quarter or two to go before it kind of like I.
Yes.
Full run rate.
Channels.
Hi.
Manger of this year to hit a run rate.
It is new.
Our own teams are learning how to sell it.
So not only sell it but also to deploy it on behalf of our customers. So net net.
Nothing in our space happens overnight in a quarter, it's a pretty significant advancement for us to be able to make that statement.
So live where customers are paying one advanced services. So those are those are big names and big customers and big deployments in <unk>.
We wanted to we wanted to get to.
The point to where we saw that success.
Before we really started to turn the crank, so suffice customers expect that to develop.
Gross patchy deployment cycles as well.
Well, let's see.
On some.
They are faster deployment cycles because.
We stand up the infrastructure is us.
And so there's less growth.
On their own teams.
Is it depends on.
Of the deployment.
So there is always an initial deployment phase.
And then there is a configuration and application Onboarding phase.
This absolutely faster for customers.
The onboarding of applications to the Ping one advanced services still requires that enterprises or our partners go through that configuration and that Onboarding phase and the speed of that is determined by the number of resources that the company puts behind it and how well coordinated the programmers.
Nothing of our SaaS services changes that requirement.
Got it helpful. Thank you very much.
Your next question from.
Your line is open.
Okay, great. Thanks for taking the question.
So have you have you seen any material change in deal.
Is there any side of the equation. So far this year and then just how should we think of how should we think of growth there versus your total AOR growth from 2021.
Okay.
The customer pipeline and the customer <unk> contribution is its both growing at a faster clip and it is contributing more to the <unk> now a lot of that is by design.
As we've leaned into the customer use cases, and we have a pretty differentiated solution, they're proven at pretty significant scale. So we see the market.
Mark.
Measured by the analysts but growing.
From faster.
We are.
Because also play out in both our pipeline and IRR, so growing faster our pipeline is growing.
On the customer use cases growing faster again, all by all by design and we would expect that that continues.
Got it that's really helpful and then.
I hate to ask a question about our competitor but.
Just how do you see <unk> acquisition about zero impacting the customer identity space This year.
Well our durable strategy.
I would say strategy and I'd say now more than ever we have the conviction.
<unk>.
We have deep conviction in our strategy is tested by that move Shaw acquisition the price does.
We did know that off zero competed.
Down market with Okta.
We focus on the enterprise IR Center.
And then.
Ping normally sales too, which is probably one of the other reasons that we did not come across off zero that model.
Much.
I would say the other places that our strategy.
Now begins to diverge after some convergence in the last couple of years.
Our belief one platform should serve both use cases, that's where companies are going to achieve leverage not just in their vendor relationships.
But in their technology choices, often now has two platforms as well as two buying centers.
So it is it is an interesting move we're moving in a different direction.
I do believe with respect to the future of identity that the future is no code.
Everyone wants to move faster and so engineering out.
Complexity and moving the value creation higher in the organization. So that they can consume identity wants to move faster and Thats where were going to take pain.
Understood that's perfect. Thank you very much for that.
And your next question comes from the line of Patrick <unk> with Deutsche Bank. Your line is open.
Thank you so much for taking my question.
Can I just ask about the guide.
<unk> growth for next quarter and for the fiscal year, maybe the rhetorical mckool, thus far has been pretty.
Pretty bullish.
Youre, saying Youre foster lands larger expands.
With the channel.
Firing all cylinders. So just help me understand I guess why.
When we look at the numbers net.
Quarter your forecast I think 16% growth at the midpoint and that's the same for the fiscal year. So.
No.
Just maybe.
That could be a disconnect between the rhetorical versus the actual guidance is there anything we should be aware of.
Yes, Patrick this is Raj I'll take that.
Our philosophy in general has always been to guide to what we can see in front of us and while we're seeing early indications of a stabilizing environment I E more rfps, some pent up demand coming back.
Still think its too early to call quote unquote normal.
With encouraging signs right.
And the environment. So that's the raise guidance across all the key metrics, but again I think it's too early to.
I appreciate it I guess in terms of net retention rate ticked up one percentage point.
Please proceed with your current guide quantitatively, but qualitatively.
Qualitatively kind of.
You see that kind of shaping out.
Yes, that's.
Thats fairly straightforward Patrick if you track our growth rate in <unk>, and our and our NRI.
Over the quarters Youll see that Theres, a pretty natural correlations points between the two so.
In Q1, we had.
16% IRR growth and 109% net retention rate.
Qualitatively I will say gross retention remains.
Remained strong we are mission critical to these enterprises.
And.
As <unk>.
Our growth stabilizes NRI should track accordingly.
Great. Thank you so much.
Sure.
Your next question comes from the line of Adam Tindle with Raymond James Your line is open.
Okay. Thanks, Good afternoon Andre since October has already brought up I, just I'll, just ask theyre going to bundle Iga and Tam in the coming quarters just curious.
Talk about your conversations with best of breed partners in these areas and also what Youre hearing from customers does it make sense for you to double down with a partner strategy or would it make more sense for you to kind of replicate that strategy and build your own products in these areas.
While competitive moves always have influence and shape, our thinking but I've always been a believer that you don't lead by following okta as announcements after we've analyzed it don't change anything of significance in our strategy you can't be the best at everything we're focused on.
Being the best at real time access management wishes, you can't be broad and shallow in the enterprise serving the world's largest so is that one platform to serve.
That itself is a strategy and doing that well so that companies can achieve leverage.
In the actual technology.
Requires investment and focus so yes, I would say partnering with the best of breed providers focusing on real time access management.
Bringing intelligence to our control plane.
<unk> is a significant effort and no small feat and doing that well at scale.
From the management changes.
From a sales transition I know that sometimes.
And that can lead to turnover changes across the sales force and cause.
Some disruption doesn't look like that's implied in your guidance, but feedback you've got.
And if you could touch on key metrics for our new CRO that he'll be tasked with.
A day Packard has been a wonderful leader for several years and and certainly has built a world class organization under him.
The transition with Dave has been orderly and smooth and Dave will parallel with this new leader for a period of time here in Q2.
Culture is a big deal here at Ping. So it's not just are you confident for any new leader and do you have a track record and the skills that we're looking to grow into its to do we feel that you are a good cultural fit for the organization. It is not a secondary requirement at the primary requirement. So I would expect the box on that dimension as well.
And just the experience side of the dimension.
So, yes as I come from.
This individual.
Do expect that there will be an orderly transfer.
Over the course of Q2 as the new individuals' starts and.
I'm not expecting any major surprises there.
Secondly, repeat the second part of your question. Please.
Key metrics and how those will be different.
You mean outside of AOR growth and channel contribution in <unk>.
Just kind of joke and there are low, but I would say.
There is as the company transitions to cloud, they're both as a higher velocity too.
True to the selling motion in cloud there is also.
Probably some experience in cloud transformation that this individual will bring and how we can make that transformation faster and I would I would look to track that transformation. There is also growth in investment in in.
New markets like the international market, so tracking the growth of our investment internationals important we're entering a new segment in federal So I would want to see his expertise applied to the penetration of federal here in the U S. So really kind of what we described is ticking the box in all the key areas.
Those would all be we would have kpis associated with growth in all of those areas.
Makes sense. Thank you.
Your next question comes from the line of Rob <unk> with Piper Sandler Your line is open.
Great. Thank you for taking the question.
Moving to technology.
<unk> is really starting to meet customers, where they want.
So.
Yes.
If the uptick that you guys are seeing within a function of increasing competitive win rates. When you think that's more indicative.
From a market niche that's happening.
As we're coming out of COVID-19.
And then secondarily.
Thoughts about leaning in on sales and marketing, especially given your spend relative to some of your competitors.
Especially if the market is starting to.
Thanks.
To the first part of your question.
I believe that we are.
It's my expectation and I also believe historical fact that we are going to see both okay. So there is.
I do believe a confidence returning to enterprises and appetite for some of the projects that we saw pre COVID-19 now and in some cases, maybe some urgency around those projects that did move in 2020.
I would also expect that and you are seeing this <unk> investment in our platform.
Is has been a multiyear journey.
And it will and it continues but I would say a lot of the heavy lifting things that we had to do that you just don't see any market or sales uplift or win rate changes through the early parts of that platform investment.
Those those investments are now beginning to meet the market.
And that's making us more competitive.
For companies that are transforming themselves to the cloud as well as new customers that are evaluating their options. So.
We are seeing in some segments win rate changes I do expect that that will continue.
I can take the second on the sales amortizing loans.
Rob I can take that this is raj.
Hi, So as you know this is an enormous market and Ping has pole position in the enterprise in this market and so we have been investing and leaning into that sales and marketing opportunity.
However, our philosophy is not growth at all cost that's focused on the ideal customer profile and the global free.
So we have we are in pretty good shape now in terms of our sales capacity and we've been seeing great early returns on our brand awareness campaign and our lead gen activity et cetera. So.
Youll see us continue to lean into that investment in <unk>.
Back at the track.
The growth of sales and marketing and track more closely with the <unk> growth rate going forward going forward.
Alright. Thanks.
Your next question comes from the line of Polyone with Bank of America. Your line is open great.
Great. Thanks, very much for letting me asking a question.
I wanted to ask about something you said at the beginning I'm trying to understand the.
The drivers for the change of tone change of free them. This quarter, it's clearly better than the trends we've seen before.
And I want to focus on one thing that you said at the beginning which was feature parity of the new product.
<unk> cloud based solution versus on Prem.
Can you take us through the product evolution just to understand.
When did you reach feature parity what were the kind of key aspects that were added to make it more attractive to investors to customers I'm trying to understand how important is the fact that you reached feature parity.
How important is it to the overall performance the performance and second timing of it when did you reach feature parity.
We've been investing in our cloud.
Offerings, and I say that plural now for several years Theres been a couple of components to tell that.
First is the SaaS platform that is delivering many of these brand new services that we're rolling out risk MFA and verify as an example that I spoke to last quarter three new services three new SaaS services that came out in three quarters.
The speed with which we're able to deploy those new services is as a direct result of several years of investment in our and essentially re architected, our SaaS platform around the most recent architectures of micro services and other things like that it turns out that the architecture and SaaS and the last five years has undergone.
Its own transformation.
Recognizing that that transformation, if we made the investment with speed our ability to roll out new services, we bit the bullet.
You didn't see anything for two to three years and then all of a sudden now youre starting to see us rollout new SaaS services, that's part one of the answer.
Part two of the answer is simultaneously.
<unk> had a number of customers growing number of them, especially new ones, who are deploying the ping software capabilities in one or more public or private clouds.
Some of our largest customers who are deploying today are deploying in the public cloud now it's it's the public cloud, but it's within their control they fully control the environment in the cloud and for those customers.
Customers, we have been developing in our Dev ops program. This is our docker kubernetes helm and other automation capabilities of our software.
It's been about a two to two five year investment that we've been maturing our software to take full advantage of cloud deployment.
And on the heels of having made those investments now that has given us the wherewithal to deliver advanced services on paying one so.
So we are leveraging the same technology that we have delivered to customers when they want to deploy ping in Amazon or azure or the private cloud I think I shared we had one bank recently deploy ping in the IBM private data center.
And Azure and AWS.
In a triple cloud deployment.
We leveraged that same technology to deliver advanced services.
Where does that have impact it has impacts for large complex enterprises that have advanced requirements, but they also have a cloud first mandate.
Now, we can say, yes to them and we can say, yes to them with SaaS.
The first part the second part is we have customers who are happy paying customers, who are starting their cloud journey, we'd like to do it with ping, but don't want to give up any of the capabilities that they currently have in their ping deployment.
For those customers. We can also say, yes, so closing that gap has been a big deal.
But it hasnt happened overnight.
If something happened recently that drove you closer to the ability to say that now your solution is complete I'm trying to understand the timing of it for example, if I ask you. The same question two quarters ago or three quarters ago did you have the same answer or would you would you say back than that.
Youre missing certain features or something I'm, just trying to understand the delta the change slightly.
While we were certainly working on it two quarters ago, but I would say that it became real in Q4 of last year.
So Q4 of last year was really so two quarters ago was really the first time, we started selling customers.
On the new advanced services and then as we just noted Q1 several of those customers went live so you kind of see building confidence.
In a new solution with.
The solution is non trivial.
We didn't build it overnight and we won't verify and validate it overnight either and so I would have given you the same answer.
But maybe with less of the conviction that comes with several large successful deployments on the new platform. The conviction. You are hearing now is that we have several of those checkbox is behind us.
So just a quick follow up so we hosted expert cycle expert calls in the past and one of the common themes that came back was.
Ping solution is not complete meaning the SaaS solution or the cloud solution is all complete.
On Prem is still way more complete than SaaS now I understand we pass this threshold.
What do you do on the marketing side do you first of all do you think that thats the notion in the market or that might be something you need to work on when it comes to positioning and understanding of customers of your solution is there anything you have to do on the marketing side to change the perception do you think there is a perception.
Nor does it mean that the sales cycle is very technical.
Clients don't care about perception day care more about.
Show Me show me the product I'm, okay with it.
Tao there is work that we have to do in the market to evolve the perception.
So that companies when they think cloud or cloud identity or SaaS identity.
That ping is in the top two or three companies that they will look to.
To reach out to to evaluate their solutions. Historically, we did not have that reputation for all the reasons that you mentioned, it's not for lack of investment in our SaaS offerings, but it was for lack of having full parity with the capabilities that built the reputation as being the leader in the global 3000, So now.
Now that we've delivered that and now that we've delivered several deployments and we have growing conviction that the platform is now approaching a level of maturity, where we can send that message to the market you will see us do that.
Got it great. Thank you.
Your final question comes from the line of Gregg Moskowitz with Mizuho. Your line is open.
Alright. Thank you for taking the question. Good afternoon, guys I'll just ask one I thought it was interesting Andre that earlier you mentioned you are seeing a growing number of customers leverage paying for both workforce and customer identity use cases are you able to provide a little more context around this including why you think thats occurring.
If you go back to the beginning of Ping, we always had the wheel.
Always have the vision that one identity platform should serve both use cases.
Consistent with that belief system, our business for the for the large part of our history was always split.
Roughly 50% of the business was workforce roughly 50% of the business was customer.
Some at some point in the last four or five years.
As identity was maturing the groups were maturing the expertise was becoming a little bit more strategic rather than tactical in the deployments.
We started to see a certain amount of cross pollination.
Between what was our workforce deployment and our customer deployments now we had always seen the security traversed both so meaning security was always implement.
Instrumental in technology selection on the work force side.
Whereas the customer side was driven by a line of business or.
Or an application owner.
As identity and privacy and the security breaches have become.
More visible.
Even the customer side started to consult the security organization and say Hey, do you endorsed the technology choices that we're making here for our customers do you feel that choice is going to keep our customers secure and our brand out of the headlines of a breach.
And so so.
We began to experience a cross pollination of of our champion the security organization.
Having a stake in it.
<unk>.
And some decision into that customer use case.
That has only accelerated and I would say in the last six to 12 months in particular.
I now have a growing number of conversations where.
Stand alone identity groups are being built.
And they are asking themselves whether the company is getting the most out of their technology choices. If they don't leverage a single vendor and a single platform to sit underneath both use cases.
So it is a trend that started several years ago.
But has been accelerating and my expectation is that driven on cost and technology leverage that conversation will continue to accelerate.
I don't think it will ever be 100% to be clear like I don't think every deployment is going to look for some sort of converged platform, but I think that it is we're going to see more not less of that going forward.
Alright, very clear very helpful. Thanks.
Thank you I would like to turn the conference back over time.
And I look forward to providing updates as the year progresses, including our second half Investor day. Thanks, everyone.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].