Q4 2021 Ping Identity Holding Corp Earnings Call
Okay.
[music].
Good day and thank you for standing by welcome to the Ping identity Q4, 2021 earnings conference call. At this time, all participants in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.
On your telephone.
I'd now like to turn conference over to your Speaker today, David. Thanks. Thank you. Please go ahead.
Thanks to everyone for joining us today and welcome to the Ping identity Conference call, where we will discuss our fourth quarter and full year 2021 results and provide our outlook for 2022.
Shortly after the market closed today, we issued a press release announcing our fourth quarter and year end 2021 financial results.
In addition to the financial results will be presenting our lives supplemental set of slides through the webcast portal.
These will be published to our website following the call.
They access the press release and presentation on the Investor Relations section of Ping identity Dot com.
With me today is our CEO Andre Durand, our CFO Raj Dani.
Today's discussion May include forward looking statements. Please refer to our annual report on Form 10-K , our 2021 for the year ended December 31, 2021 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 certain non-GAAP measures related to Ping Identity's performance you can find a reconciliation of those measures to the most closely comparable GAAP measures in our fourth 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'll end the call after 60 minutes with that.
I will turn the call over to Andre.
Thank you David we had a solid finish to 2021 with strong performance this year against all our key metrics we.
We ended this year with annual recurring revenue growth of 21% well above our initial outlook of 15% and accelerating for the fourth straight quarter year over year.
We grew full year revenue by 23% Reenergized by solid sales results and lengthening contract durations throughout the year.
Our 2021, SaaS revenue grew 51% compared with 2020 and accelerated for the third straight quarter we.
We now have more than 55% of customers, taking at least one SaaS solution.
25% of our IRR is now coming from our SaaS solutions.
Our largest customers continue to deepen their footprints with pain, driving improved net retention and growth of 21% in customers with $250000 or more in <unk>.
Finally, we drove very strong unlevered free cash flow of 21 billion for the year or 7% of IRR in short it was a great year for paying Raj will go into more detail on the financials and guidance shortly.
In December we hosted our first Investor day, as a public company and laid out a roadmap to $1 billion in IRR over the coming years are.
Our journey will be driven by three key areas of focus will referred to as the <unk> supported by our large growing and increasingly important market for us.
First cloud.
We have a maturing unified cloud identity platform increasingly differentiated by our investments in AI fraud, and no code low code delivery of extraordinary and user experiences.
Second the customer use case.
We are laser focused on expanding our leadership in the customer use case, which is now our largest and fastest growing use case.
Third the channel.
Our commitment to the channel and our partner ecosystem aims to drive expanded reach and our sales force.
These three areas of focus are underpinned by a shift from products to our platform and the rapid delivery of solutions to drive business value and exceptional customer experiences.
We made significant progress on each in 2021.
Last year marked a key milestone in our transformation to the cloud as we significantly enhanced our paying one unified cloud platform and now offer 100% of our solutions SaaS.
We also expanded our solutions in several highly differentiated areas to strengthen our position in the customer use case zero trust password less authentication and the orchestration of extraordinary and user experiences.
While many customers begin their identity journey focused on legacy migration single sign on and Multifactor authentication are.
Our maturing identity program quickly evolved into a focus on authorization risk fraud identity verification API security and no code orchestration.
All areas in which we are a differentiated platform provider given our recent investments and acquisitions.
The <unk> cloud platform is now positioned for accelerated growth as the market for legacy modernization accelerates.
And this is reflected in our results our SaaS business is now 25% of total IRR and growing at north of 50%.
In support of this acceleration in our cloud business, we signed a multiyear agreement with a $4 5 billion dollar mobile computing company to migrate from on premise to pinpoint advanced services.
A customer since 2014.
Perm approached us in 2021 with a mandate to migrate to the cloud and.
And we will now leverage paying one advanced services for both workforce and customer use cases.
For our largest and most complex enterprise customers are paying one advanced services offering has really taken off.
Nearly tripled our advanced services customers in 2021, with an average IRR about two and half times, our average customer and five of our six largest deals in 2021 included sales of advanced services.
With the acceleration in rising importance of digital channels through the pandemic, we continue to extend our leadership as a leading provider for the customer identity use case.
<unk> from our customer facing solutions now makes up more than 55% of they are relative to the workforce use case.
And it is growing faster for good reason.
Your personal identity as a consumer consists of hundreds of customer relationships versus just one as an employee many of this quarter sales highlights this trend.
A great New customer addition, this quarter was sports bet and Australian online Wagering company with more than 2 million customers and north of $1 $5 billion in revenue.
Sports that experienced 50% plus volume spikes following COVID-19 lockdowns, starting mid 2020 and were concerned about the ability to scale and avoid fraudulent behavior by individuals creating multiple accounts.
In a win against a competitor who was an incumbent on the workforce use case.
Ports that purchased our single sign on directory, MFA and risk solutions to better secure their customer's account and significantly improve the user experience.
Trans Union, a leading global information and insights company, who purchased our workforce solution in 2020 and added a small customer use case capability early in 2021 significantly expanded their customer use case to 2 million customers. This expansion across both solutions and use case.
This is quite common amongst our largest <unk> customers, who increasingly leverage our unified platform for multiple use cases.
As the leader in private student lending Sallie Mae loans more than 20 trillion dollars to over 2 million borrowers and co signers.
They were running customers through a legacy competitor solution, but upgraded to a new customer experience portal.
<unk> competitive deal Sallie Mae selected <unk> to migrate their customer experience portal onto our single sign on access and Directory solutions. In addition to paying one MFA.
As one of the largest and most integrated health systems in Georgia, well start provides care to 1% and six Georgia across 11 hospitals, <unk> health partners and more than 300 medical office locations.
In Q4, we'll start became a new customer signing up for our paying one for customer solution to create seamless digital experiences from logging to log off and reduced patient abandonment rates.
Our channel partner proof Heidi was closely involved in both the Sallie Mae and well start transactions.
While direct sales will always be critical to building and growing our customer base increasingly we are prioritizing the channel as a source of accelerated growth.
In early February we hosted our annual sales kickoff and welcomed more than 150 partners.
The event, we honored our partners of the year, recognizing global partners dedicated to working with pain to salt digital business challenges.
Those were proof Heidi as our delivery partner of the year for the fourth consecutive year.
<unk> security as a rising star as they drove a fivefold increase in sourced opportunities in 2021.
Octave as our North American partner of the year.
Tcs as our international partner of the year, which is engaged in EMEA and APAC. In addition to North America.
And KPMG as our global systems integrator partner of the year.
As we enter 2022, we now have more than 180 partners certified to sell Ping solutions and more than 360 delivery approved technical reps to install and integrate them.
To show, our increasing confidence and commitment to the channel we've modified our sales compensation structure in 2022 to offer additional incentives for driving partner activity.
Recall in Q3, we acquired singular key to allow for no code integration of identity through more than 100 individual identity connectors.
At our sales kickoff I was pleased to announce the introduction and general availability of <unk> da Vinci.
As the embodiment of our new orchestration capability.
The Vinci as the name implies represents a new era of innovation for pain and our customers.
Unlocking and unleashing the potential of identity and accelerating the pace of integrations da Vinci provides the blank canvas from which architects and developers can now create identity solutions with simple drag and drop these little to no coding required.
As a vendor agnostic tool da Vinci allows organizations to integrate and orchestrate identity services from a wide range of vendors not simply pain.
It features a library of 100 plus out of the box connectors for a whole range of identity.
<unk> and automation services.
In Q4, two global brands purchased our solutions led by orchestration.
One of these is among the world's most recognized brands associated with global sporting events the world over.
The other proliferates digital organization solutions to hundreds of millions of people in 25 languages around the world.
We believe da Vinci will greatly improve our go to market velocity, while also improving customer experience streamlining integration and transforming the way companies and end users experience identity in the years to come.
Thank you to all of our customers and partners for another great quarter, expanding the boundaries of identity security.
A few final thoughts first I'm pleased to welcome <unk> Sharma, as our new Chief legal officer.
<unk> has more than 20 years of international corporate legal experience. Most recently as general counsel with vantage data centers and before that for many years with Broadridge financial solutions.
<unk> will also act as secretary to our board of Directors. She is an important addition to our leadership team.
Second I'm also pleased to report that late in the year. We've received our in process designation for the federal risk and authorization management program or fed ramp.
And currently are targeting a mid year completion of our moderate authorization under the program.
We also took our paying one for government solution live in late December and are actively working our pipeline of federal contracting opportunities through our resellers and distribution partners.
Third I'm delighted we were recently recognized as a 2022 best place to work in both Denver and Austin are two largest employment centers by built in.
Our culture is based on a 10 10 philosophy, where attitude is equally important as performance.
Our people exhibited both in 2021.
Finally, I know you've heard me talk before about the movie of pain.
And I couldnt be more excited about where we are today. We recently passed our 20 year Mark as a company and in the Grand arc of our trajectory over the past two decades I can honestly say I've never been more excited about our future.
Raj will provide a bit more detail about the financial path will be taking as we move toward our objective over the next three years on route to reaching a growth of 25% to 30% exiting 2024 on our way to our $1 billion.
Start.
With that I'll now turn it over to Raj to walk through our results and outlook rush.
Thanks, Andre as a reminder, before I get started I encourage you to follow along with our supplemental presentation, which is being webcast live as I will refer to a few important slides during my discussion.
We once again delivered strong results above our guided ranges for all key metrics. This is the fourth consecutive quarter in which we've driven accelerating <unk> growth, which outpaced our initial guidance.
Our year, ending <unk> of $312 $7 million was up 21% year over year, we generated a record $23 1 million and net <unk> in the quarter up 40% compared with the fourth quarter of 2020.
Okay.
We crossed another important milestone in the quarter with SaaS IRR now representing more than 25% of total IRR.
This highlights our continuing strong SaaS growth trends SaaS IRR had just crossed the 15% threshold of total IRR in Q4 of 2020.
Fourth quarter revenue grew 19% year over year to $75 4 million of which 93% with subscription based growth was driven by SaaS and maintenance and support.
Which was $16 $9 million of SaaS revenue in the quarter growth of 56% year over year and consistent with Q3.
As was the case in Q3 more than half of our newly IRR in Q4 was from SaaS versus software for.
For the year SaaS revenue grew 51% versus 2020 to $57 6 million.
Maintenance and support revenue grew 25% year over year in Q4.
License revenue was up 10% in the quarter with 26% growth in multiyear term license revenue offset by a reduction in single year license revenue due to the very strong single year license performance in Q4 of 2020.
This is indicative of the longer average contract durations, we've seen throughout 2021.
We ended the quarter with 315 customers with at least $250000 in IRR of 21% year over year and in line with our IRR growth.
In 2021, we also added 20 customers with more than $1 million in IRR, bringing the total to 71 up 39% year over year.
All of these improvements to our large customer penetration rates continue to reflect our ability to more deeply drive value to our existing base of customers.
We ended the year with 52% of our customers, having adopted at least two pain solutions and 26% with three or more.
Our customer base now totals <unk> hundred 68 up 4% year over year, we added more new logos in Q4 than we have since Q4 of 2019.
We now have more than 830 customers using at least one SaaS solution up 20% year over year.
In addition, we nearly tripled the number of customers leveraging our Penguin advanced services in 2021 more.
More than 80% of new customers in 2021 purchased at least one SaaS solution.
Our Q4 dollar based net retention rate was 112% calculated on a trailing 12 month basis note that this was a sequential improvement compared with Q3, even though both figures rounded to 112%.
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.
Gross profit margin for the fourth quarter was 76% compared with 80% in Q4, 2020, and driven primarily by our high growth SaaS and compared with our GAAP subscription gross margin of 82%.
Total non-GAAP operating expenses in the fourth quarter were $62 7 million.
We ended the year with more than $220 million in cash improving our liquidity and adding flexibility by successfully refinancing our debt, we executed a $300 million seven year term lumpy and a new $150 million five year revolver in late November .
This improves our optionality to drive growth through both internal investment and M&A.
Full year operating cash flow was $41 $7 million.
Up 86% year over year this.
This resulted in Unlevered free cash flow of $21 million for the year nearly $10 million better than our expectation as Q4 cash collections were extremely strong.
Even with our continued investments to drive innovation and growth we remain in a strong cash position as we enter the first quarter of 2022.
Now turning to guidance as Andre mentioned in his comments. We are excited about the growth Reacceleration, we achieved in 2021, which gives us increased confidence going forward.
We expect annual recurring revenue of $320 million to $324 million in the first quarter growth of 21% at the midpoint versus Q1 of 2021.
We also expect.
Our a 378 million to $385 million for the full year growth of 22% year over year at the midpoint and above the preliminary 20% plus rate we provided at Investor day.
As was the case when we entered 2021, we expect GAAP reported revenue growth to be lower than <unk> growth due chiefly to accelerating SaaS market adoption and growth.
Faster adoption and growth in SaaS is reflective of increasing investment in our SaaS solutions.
We have also been investing in maintenance and support of our software as such we expect that we will now begin recognizing an increasing percentage of revenue ratably over the life of a contract versus upfront.
You'll see that change reflected going forward in our disaggregated revenue footnote, which you can also find in the appendix of our supplemental earnings presentation.
We expect this will shift our reported revenue percentages between term licenses SaaS and maintenance and support our MMS for 2022 and beyond.
<unk> thousand 21 term license revenue made up just over 60% of our subscription revenue with SaaS, just over 20% and maintenance and support just under 20% in.
In 2022, we expect a shift in this composition with term license revenue declining as a percentage of total subscription revenue and both SaaS and MFS, increasing as a percentage of revenue.
The overall result of des as our full year revenue expectation of $330 million to $340 million year over year growth of 12% at the midpoint. We expect Q1 revenue in the range of $78 million to $82 million growth of 16% at the midpoint versus Q1 2000.
One.
And the impact of this revenue shift becomes more apparent in Q2, our preliminary Q2 revenue estimate is 70 million to $75 million.
Call that Q2 of 2021 was exceptionally strong, especially within our multi year term license category.
Overtime, we expect that difference between our trailing 12 month revenue and <unk> will shrink.
With growth rates roughly converging.
We've said for several quarters. These revenue fluctuations support our ongoing belief that annual recurring revenue or <unk> is.
It's the best metric for measuring things growth trajectory.
With the maturing cloud platform growth in our customer use case and strong SaaS performance. We plan to further invest in our go to market and continue our SaaS investments within a growing demand environment. As a result, we expect our unlevered free cash flow to be approximately breakeven for the year with first quarter Unlevered free cash flow.
<unk> of between negative $5 million and breakeven.
Our cash flow outlook for 2022 is predicated on several factors first we had strong over performance for Q4, and 2021, driven primarily by collections, which shifted roughly $10 million forward into 2021.
This also affects our Q1 view second we are seeing strong signals that our cloud maturity bolstered by our recent acquisitions is improving our competitiveness and want to leverage these improvements with very targeted impact based spending.
Similar to our multi year revenue trajectory, we expect to invest more earlier in this multi year period with free cash flow yields improving over time.
In closing, we feel great about 2021 performance and our expectation for acceleration of <unk> growth in 2022.
With that I'll turn it over to the operator for your questions.
As a reminder to ask a question you will need.
One on the telephone and Tim you're turning your question press the pound key.
The timeline of compile the Q&A roster.
Our first question you have Matt.
From RBC capital markets.
Tiffany.
Hi, This is Jeff or Matt Hedberg. Thanks for taking my question and congratulations on the strong quarter and a really impressive right.
I had a question on the guidance could you talk more about the assumptions, which gives you the confidence in your ability to axon equal to 22%. This year and then as a follow up how should we think about the go to market investments in 2022 to potentially drive faster growth in 2020 and beyond.
Sure.
This is Raj I'll take that so in terms of our guidance. Our philosophy is to guide to numbers, where we have a high degree of confidence and we do have a consistent track record of meeting or beating that guidance. So that is first and foremost what gives us confidence.
Secondly, we have a backdrop with improving demand in spending environment.
Sort of call that out over the last few quarters, we continue to see that.
And.
The biggest thing is that we're focused on driving our strategic initiatives that Andre laid out.
His prepared remarks around our focus on cloud.
The costs upon the customer use case and the channel and those three sees a really important they've been really important to our historical growth and we continue to see great signs.
In terms of our future growth as well.
And I believe the second one was around the go to market investments.
Can you just repeat that question for me please.
Yeah.
How we should think about the go to market investments in 2022 to potentially drive faster growth in 'twenty and beyond.
Sure Okay.
I can take that well so built upon both the.
The performance that we've seen in our cloud offering and the maturing platform. The numbers that we've seen on the channel the strength that we had in the pipeline generation. In 2021, we are now investing in our go to market, both sales and marketing capacity and pipeline generation to take advantage of that opportunity.
Yes.
And I'm going to suggest that you think.
This is the first time in some years, where we are now taking that position based upon the confidence in the numbers and the results we're seeing in our cloud platform.
Got it thank you.
Our next question, we have engineering and Lewinsky from Wells Fargo. Andrew Your line is open.
Wonderful. Thank you on throughout some nice close to 2021.
I wanted to start with a question on maybe your large deal activity I know you had.
71 customers that spend over $1 billion I think you added <unk>.
In 2021 as well, but.
But I'm wondering if you had any particularly abnormally large deals in Q4.
And what might be driving sort of that.
The uptick in in large customers.
I'll take that this is Andre speaking, we had a number of.
Nice size deals in Q4 that is historically consistent with what we've seen in prior years end of year budget Flushing people getting their act together throughout the year and wanted to start off the year at a series of new digital transformation projects a number of those projects have been celebrate accelerated is.
As you've heard around zero Trust.
And then on the customer side, a growing awareness that customer experience is foundational for digital transformation. So all of that has historically been consistent there was no. There was no one deal say that skewed or skewed the numbers in any one direction. It was a healthy mix of customers consistent with the themes.
Cloud migration cloud transformation the acceleration in the customer use case and a few of those large deals where both sourced.
<unk> directly from the channel that is that is relatively do shall I say to have sizable material Q4 deals sourced by the channel.
That's great to hear I know you have a focus on.
Growing that channel.
Contribution so see some some large ones coming through there.
I have a follow up question as it relates to maybe competition certainly Aqua has made a large acquisition in the customer identity space and investors seem to be concerned with maybe Microsoft pushing more again in the security space. So I'm wondering if it's certainly doesn't seem to be having any impact on your results youre growing subscription streaming on so I'm wondering.
If you could just comment on that.
What's changed in the competitive landscape if anything.
That's a good question I'll start with Microsoft and Microsoft is obviously, a very important part of the security and identity ecosystem. They.
They do have particular strength in the workforce use case and with enterprises that are neither highbred, nor necessarily strategically pursuing a multi cloud strategy.
We do partner with Microsoft on several fronts.
We're very focused on helping our large enterprises succeed with Microsoft just not exclusively Microsoft So where Microsoft test strength is where a good enough solution for companies that have taken a Microsoft centric approach to their to their entire cloud strategy. Microsoft has particular strength and paying is.
Strengthening as.
As they go to four large enterprises with either a hybrid or multi cloud mandate.
And I've given hundreds of vision sessions over the course of the last nine months and I am now regularly hearing that built upon resiliency companies are viewing a multi cloud strategy is extremely strategic.
That is an incoming trend that I'm hearing regularly with respect to off zero.
We do see the eight.
A future shift and where value is both perceived and realized.
If you go back 510 years, I would say the cloud first mandate realized a pretty significant uptick inefficiency at zero focused on developers who are looking to embed identity in their applications and do so through Apis.
We believe that the future of value capture is not going to be cloud first or developer first we see that shifting to experience first so we do focus on the different segment of the market with respect to offer zero the large enterprises with centralized.
Board level mandates.
Essentially cleanup and consolidate siloed identity systems across business units to create a better user experience those tend to be top down led initiatives not bottom upload initiatives not meant to say that developers are an extremely important in the decision making process with the needs of the large.
Enterprises to consolidate identity plays directly into our wheelhouse.
That makes sense.
Our guys.
Thank you.
Our next question, we have Mike comes from Needham and co.
Anthony Mike your line of thinking.
Hey, guys. Thanks for taking my questions here.
For Raj I know that we spoke to the growth that you guys are seeing in some of the commentary on <unk> versus term licenses can you help us think about what the headwind to revenue in calendar 'twenty two as a result of this shifting.
I guess revenue mix that we're talking to.
Then part two of that question would be the gross margin pressures that you guys are seeing.
Scale.
Should we expect further degradation from current levels or is this a good place to be when we're thinking about calendar 'twenty two.
Sure Mike So in terms of the headwind.
We're not really quantifying that because I think it's a little difficult to tell in terms of what the mix would be what the deployment.
Would be on those what the durations would be theres, just so much that goes into it but certainly there is a <unk>.
Revenue impact Greg to your point around.
The fact that SaaS is accelerating.
Posting up.
<unk> 50, plus percent growth quarter over quarter, and you do tend to have that that sort of impact and we also are software stack is mostly complete and and we're investing more in and the new feature functionality on the SaaS side of the house and more on the maintenance and support on the.
On the software side. So we do expect an impact that's baked into the to our projections and our guidance and.
But we're super excited about the fact that this will lead to more variability and more predictability over the over the longer term.
And then in terms of your question on gross margin degradation.
When youre growing SaaS at the at the rate that we are.
We were certainly building out our infrastructure and our capability is ahead of the curve. So.
So we will.
We would expect a little bit of compression.
On gross margin as we continue to build that out and we think that that's really important to do.
Because.
We want to accommodate that SaaS growth without a hitch and.
But over time, we do expect that to kind of normalize that.
We're looking at in terms of current levels. One thing I'd just point to is we put up those growth wave charts in the earnings presentation, I think thats really important to get the to understand the true movie of what's going on here at <unk> and.
In terms of the.
Some of the revenue impacts this year and next and then.
The eventual convergence, we expect that's a really important graphic.
Great that makes a lot of sense real quick.
Andre I know that you had called out I think it was 55% of your AOR today is coming from the customer use case.
To help us maybe on a relative basis at 55% of totally or today.
Does that compare to where we were a year ago or a quarter ago. Just so we have something to compare it because I know that has been obviously a key focus of yours.
Well, we've been fairly balanced since the beginning of paying so there's always been a small percentage of our use case focus on the partner situation. So.
This is this is pulling from memory. So don't hold me to this exact number but I think for a number of years, we were like 45% workforce, 45% customer in the 8% to 10% partner.
I think the message and story is that we believe the market opportunity for customer is ultimately both larger we believe and we are experiencing that it is faster growing. We also appreciate that the investments that we've made in the platform and the acquisitions that we've made differentiate us in.
The customer use case.
We think that that market long term doesn't have say it incumbent like Microsoft with a particular strength for workforce built around their Azure office 365 anchor tenants in large enterprises. So the customer use cases really largely up for grabs so all of that is to say that our.
And that's there the market opportunity all the external analysis, we've seen all the internal metrics that we're experiencing speak to this market is very very exciting with being very well positioned.
Thank you again I'll cede the floor.
Okay.
For our next question we have.
<unk> <unk> from Goldman Sachs, Brian Your line is open.
Okay.
Great. Thank you. Thank you for taking the question and nice set of results.
I was wondering if maybe we could just touch on how to think about balancing growth and profitability as you kind of transition into like next year and as we kind of.
Fine tune our models for the next several years, maybe not just maybe not a multiyear guidance framework, but maybe a rule of thumb in terms of how youre thinking about throttling investment and growth to the business relative to what you may let trickle down to the bottom line just to kind of get that kind of ballpark in the right direction.
Yes sure Brian Great question. This is Raj I'll take that.
So, let's just rewind to 2021 for a minute rate, we drove 21% growth.
Significantly higher than what we had expected when we provided guidance a year ago and.
And did that wood, while generating record operating cash flow for the year. So we're confident that we can we can drive growth and profitability. That's been our mantra here for a long time, we're at a point in time, when we feel like it's time depressant to the investment and.
As you've seen with us were.
We're very responsible and take that very seriously and we're going to invest for high impact return everything we do is on an ROI basis and if you.
I can just refer you back to our earnings presentation.
And the growth wave that we have on there. We also have a wave chart for the Unlevered free cash flow line, where you see it.
You see us pressing into growth.
On the sales and marketing side will continue to press into the.
On the R&D side of things and continue to innovate.
And and really sort of prepare ourselves for that.
Growth acceleration so so in the near term, we will press into it and then as that curve shows and Thats for illustrative purposes only but.
We expect to have more operating leverage in the model next year on our eventual.
Yes.
Target of around 10% to 15%, which is what we laid out in our investor day for 2024.
Got it that's super helpful and maybe to follow up.
I think we've had this question comp performed previous previous quarters, but let us know what your visibility is in the installed base with regard to <unk>.
Maybe any potential churn based customers and those you may migrate onto SaaS and what the outlook looks like for conversion there.
I'll take that so.
You, obviously see is highlighting an increasingly strong in cloud.
Past performance here at <unk>.
And I'll reiterate north of 25% of our <unk> is coming from SaaS, it's growing at north of 50%.
Second quarter bookings this was our second quarter, where our SaaS bookings outpaced software.
North of 55% of our customers are taking on at least one SaaS solution.
And we've seen a tremendous uplift in the uptake of our advanced services we.
We do see an opportunity.
To grow the company and the IRR, both with new customers and migrating existing customers and we actually had a very very healthy balance of both.
In terms of new logos Q4, new logos was the strongest it's been since Q4 of 2019 SaaS played a significant role in that and for the customers that are migrating existing customers say to advanced services or a combination of advanced services and paying one we are seeing an uplift.
They make.
Significant commitments to the journey to cloud with pig and once they make that leap. They start looking at our entire portfolio of which a 100% of our offerings are now offered as SaaS.
What is the what is the impact in that case.
Maybe HCV and what Theyre, taking on upfront is there a lift there or is it more kind of over a breakeven period over a couple of years.
Yeah, So Brian I can give you a little bit of an anecdotal.
Some something more anecdotal here because it.
It's really difficult to do a like for like comparison because of the nature of the deals they just get much bigger.
So what we're what we are seeing.
Yes.
As almost a doubling of the IRR. If you go from software to Penguin and advanced services now the reason why I kind of caveat that a little bit is because.
There is puts and takes one when a customer makes that migration.
There was more products and solutions that are in the bundle so.
So.
The best of our ability what we're seeing is that.
We're approaching two excellent like for like basis.
Alright, that's helpful color. Thank you very much.
Yes.
Our next question, we have Brian Colley from Stephens, Brian Your line is open.
Hey, Thanks for taking my question and congrats on a great quarter.
I wanted to ask about.
Pace of new logo adds.
The SaaS platform continuing to mature.
And the channel.
On channel partners, playing a bigger role should we expect the pace of new logo wins to accelerate in 2022 and then also.
Should we expect the mix of new <unk> coming from new customers to increase this year as well.
I'll take the at least the first part of that.
So we are beginning to focus now on our new logo and customer adds now that our SaaS platform is approaching a level of maturity. So unquestionably we do we do believe that new customers beginning their journey are often starting in the cloud.
And so having a 100% of our capabilities in the cloud makes us increasingly competitive to be in every deal.
In prior years, we would get eliminated if we didn't have all of our capabilities offered as SaaS.
So the answer is absolutely we are focused on it and be expect to see improvement on new customer acquisition as a result of SaaS. The second part of that was channel.
We've been very strong with the systems integrators, helping customers both succeed and deploy.
And facilitating during the sales cycle, but not necessarily introducing us into the sales cycle.
So as our channel program has matured so too has our metrics, we kpis now or look at.
Influence channel influence now we look at channel sourced as our sole metric and there are two areas or two types of channel partners that we are very optimistic about the first one is the GSI and we have a growing set of relationships with the large global systems integrators and the second are the are there.
There are essentially the bars and we have a growing number of relationships on that side of the equation as well, but they're kind of both ends of the typical deployment integrators. We've had both upstream the large advisors and then I'll say kind of downstream focus on moving product in the bars. So we are making investments on.
On the channels from both of those directions that combined with our SaaS maturity leads us to want to.
Look at the growth and invest in the growth, which you are seeing us doing at the beginning part of this year.
Got it that's helpful. Thank you.
And then just as a follow up I was wondering if you could provide an update on how your efforts are going to expand more down market with the global 3000, I mean are you seeing improving success there and are there any penetration stats you could share on what that penetration looks like today versus say a year ago.
We're not sharing the penetration stats, but as we've reported before we do have a growth team focused on the cohort of customers below the 3000.
So when we say <unk> 5000, this is roughly companies a $500 million in revenue or greater.
And that team that we've had now for over two years had an exceptional year last year. So matter of fact, a lot of our new logos came from that team last year.
As our again is our cloud product has matured its made us increasingly.
Both optimistic and wanting to invest in our ability to go downmarket and I'm going to say Downmarket don't think SMB. These are these are all solidly enterprises to be clear there just enterprises below the <unk> 3000.
Alright that makes sense.
Well I appreciate the time, thanks for taking my question.
Thank you Brian .
Thank you. Your next question, we have John Mayer from William Blair and company John Your line is open.
Hi, Yes. This is John <unk> for Jonathan Thanks for taking our question very strong quarter.
<unk>.
Sure.
Yeah.
A lot of my questions have been answered all of our questions have been answered but.
Sales cycles.
Can you talk about the sales cycle recently, the last quarter or two how it's compared historically.
The extent to which you might see that change if you're investing in going through the channel more et cetera over the next two to four quarters.
Sales cycles have been improving throughout 2021 again, partially as a result of a maturing channel organization that has been essentially trained.
Both in how to sell our solutions as well as how to deploy our solutions.
As well as the SaaS sales cycle and the digital land is just a different motion than we've traditionally experienced we've also invested pretty heavily in sales enablement that has improved the tooling the demos and.
Poc's that has also materially improved the sales cycle. The last piece of this is that da Vinci is a game changer for us in terms of how we POC and demo technology. We can now do in hours with what used to take legitimately weeks, if not a month or more in terms of delivering a very targeted very.
Personalized.
Demonstration of all of our technology August traded into the same environment look and feel of what the customer is looking to actually accomplish and we could do that would drag and drop is we've never been able to do that before.
Believe that is going to have a material impact on sales cycles and win rates.
Excellent. Thank you chair of elaboration and it sounds like certainly it sounds like.
Last question is.
On investments in sales and marketing, so clearly youre going to be investing in channel and you change your cost structure.
I'm curious.
<unk>.
It sounds like you've done a lot of investing in process and such do you anticipate more investment this year in <unk>.
Obviously continued process towards more process, where people or more channel can you just elaborate a little bit on that.
We've made a lot of investments in infrastructure and process to date, I think youre going to see a heavier investment on quota carrying capacity and investments in the channel and especially around channel marketing programs.
Thank you very much.
Our next question, we have Patrick Colville from DB, Patrick Your line is open.
Thank you so much taking my question.
Congrats on a very impressive and for the fiscal year.
Asks about the channel I mean throughout the cool to.
<unk> is a message has come out pretty well in place channel channel channel.
Has changed.
Now.
Channel is so important and has been especially if equity because.
I think we having this conversation two years ago.
Yes.
There's been this kind of slight paper.
What is that customer buying behavior has changed is that because the channel has come a really meant in the identity management just help us understand what it is.
There's real emphasis on channel now.
If you go back prior to two years ago <unk> had played half court on the channel speaking to a bit never committing to it for years.
And.
As our platform grew and.
The sophistication of our solutions grew.
And as the size and commitment in duration by large enterprises grew.
There was a moment in time to which it became very clear that team's ability to penetrate at the time global 3000, much less global 5000.
There was no way that we were going to do that alone.
Not at the size and scale and sophistication of the programs. The companies were looking to undertake with pain.
And so really I am going to point to two years ago.
We made a decision to not play half court, we were going to be completely committed to the channel and as you know.
That's a couple of year journey at least when you make that decision.
We had to build a team.
And we had to train the channel. So I would say that we have certainly moved towards the channel driven by a commitment to the channel. That's number one number two I would say the channel has come towards us.
Because they also see in the market that the scale of these zero trust customer experience.
Transformation that these larger enterprises are undergoing.
They are significant and they are just arent providers like paying dedicated to them with proven solutions that they know that they can succeed upon for years to come.
So it was our commitment to them starting a couple of years ago. It's the market maturing and then coming to US based upon our platform and the success that we demonstrated with large enterprises that they see in their accounts.
So all of that has matriculated to this moment in time to where now we are seeing that we are beginning to see the results of that commitment.
That's extremely helpful.
When we talk about the channel.
I'm talking about.
Global systems integrators or.
Is.
Is the kind of Volte channel also important just help us understand like.
Where is the focus in terms of the channel.
And if it is.
Most consistent Thats great news.
Talking about the kind of big four or.
Yes, just kind of any color kind of double click in that space would be interesting.
Historically, we've been in kind of the more regional or national integrators in the last 12 months.
As you would say the big for it.
It actually extends beyond the big four, but but I liked that vernacular the big four had definitely come to pain and are now making significant investments to train their teams and to train their salesforce on our solutions and at the same time, well I would say, especially in the last six months or so a number of very significant borrowers have come to.
US and said that they want to represent our products.
Both to both sides of the National integrator that has traditionally been strong with the company's focus on identity and identity integration on both sides, both up to the big four and.
And the channel they have come to us.
And we are now building in responding with programs that will essentially enable them to sell our solutions.
Great that's very clear thank you so much.
Our next question, we have Ben Smith from Piper Sandler Ma'am your line is open.
Hey, guys on for Rob Owens, Thanks for taking our questions.
First.
Really strong net new IRR in the quarter.
I guess more than half of that from SaaS.
But looking at the quarter over quarter increase in SaaS revenue I guess, we would have expected to see.
Higher conversion there into revenue is that a function of linearity in the quarter or how should we think about that.
Yes keep in mind that your <unk> is going to outpace your revenue rate. That's the kind of the core thesis around the ratable model so the more <unk>.
Bookings you have later in the quarter to your point around linearity.
That doesn't Rev rec in the actual quarter so.
But you do get visibility into that going forward.
Makes sense okay.
Yes.
Great year over year growth in million dollar customers.
Wondering if we can add some color too.
The SaaS penetration and the Siam penetration into that that cohort.
Large enterprise customers is that still a big conversion opportunity for SaaS or do we already see a lot of SaaS deployments in that group.
And <unk> as well wondering about up sell capacity there.
While the larger the.
The larger the deal the more apt they are to have paying one advanced services Thats typically.
Emblematic of larger deals you've also got some element of of hybrid deployments are they may also have software in there.
And certainly the customer use case, which has been growing faster for us.
We are highly differentiated there we've been investing there and customer budgets are also going there. So so.
There is still plenty of room for us to penetrate our customers with additional solutions around that.
Cloud and around the customer use case, but certainly when we think of bigger deals.
Lot of them do center around the customer use case in Ping, an advanced services SaaS.
<unk> solution.
Yes, Matt Thanks Helane.
I was just going to say once you're north of $1 million.
We're one used case chances are it was a customer of <unk> focusing use case keep in mind, 25% of our customers use us for both workforce and customer.
So I'm sure a lot of those have now expanded from one use case to both and they are using they are essentially using the platform as a unified platform for both use cases.
Which is also a kind of a unique differentiator of the way we've designed the platform.
Got it thanks guys.
Sure Ben.
For our next question, we have Alexander Frank Lee from Raymond James Alexander Your line is open.
Thanks for taking my question.
I was wondering to double click on one da Vinci for a second I'm just wondering kind of how customers are using DOCSIS is moving.
So it helps in proof of concepts and discounts sort of stacks up against Okta workflows.
Yes. So this was the acquisition of <unk>.
Singular T and we did announce two wins in Q4 that we attribute the win essentially to the strength of the da Vinci platform. When we've spoken about da Vinci, becoming foundational to our platform. We really mean it we think that the future will hold every prospect that every future.
Customer that is attempting to integrate identity to create and experience.
Secure experience for their customers that workforce.
Are going to begin and end by wanting to design essentially a flow of workflow if that makes sense.
And so one of the things that we really liked about singular T now da Vinci.
They are focused on an integration layer that sat above every identity product and service by the way it even extends beyond that but im just can focus on the identity and products and services. So they had a 100 existing out of box connectors.
To multiple providers of nearly every piece of technology that fits within the identity stack.
It's extremely strong and integration tool not just for paying but for customers leveraging pain trying to integrate other legacy or cloud technologies into an overall experience for their end users.
The speed with which you can do that da Vinci is really pretty unbelievable I don't think that we.
We've seen for the sales engineers here at paying I don't think I've seen the more excited about any one technology in the history of the company in the last 20 years and it's because they can go into any complex environment.
And design, a solution with nearly drag and drop ease and demonstrate that to the customer.
Matter of hours.
It will play a significant role in our go to market.
Okay.
And then just kind of one last thing on.
Increasing increasing liquidity do you have any targets in mind in terms of M&A are you looking for more technology or adding to revenue and then sort of just what type of technology might be looking at here.
Well I don't know I don't know that were going to divulge that on our M&A roadmap and strategy, but if you look at the history of purchases. We definitely haven't acquired any revenue inorganic revenue per se. We are building a platform. We're not building a collection of companies that serve the identity market a unified cloud platform that.
It's a cohesive and our ability to.
Troll identity from logging to log off and everything in between we believe the customers will proceed that value. When we do the hard work of integrating that technology into a single platform. So they don't have to do it and.
And so we have I will say this however, the acquisitions that we've made over the course of the last 18 months have largely realized division of an intelligent identity platform that leverages risk and fraud signals.
To strongly authenticate any user to appropriately authorized that user into any environment.
And to have that entire thing orchestrated with no code low code.
Said another way the acquisitions that we've made largely complete the vision of a real time identity control plane that can be integrated with extreme ease relative to the way it's been done with legacy systems.
Thank you.
For our next question, we have Austin Wilkie from.
Your line is open.
Alright, Thanks Qian trailer park.
Maybe just a quick one from me.
Andrea on the International front, what are you seeing the most success internationally and regular kits investing the most in calendar 'twenty two.
Well, we have efforts both in EMEA.
Headquartered out of the UK and we have efforts in Australia. Both of those markets have performed well for us we're not done in either one of those markets. So we continue to invest both in EMEA in our Australia and efforts there has been some conversations now kind of in the APAC region.
We won't go into details of where we're looking to expand but let's just say, we still have growth opportunity in both of those primary markets.
And we'll continue to invest in both of those markets.
Great International revenue right now is 24% of our revenue in Q4 that is up 41% year over year.
Awesome. Thank you very much.
And alright have any further questions at this time I will hand, it back to Anthony.
Ron.
King remarks.
Yes. Thank you. So that concludes today's earnings call. In summary, 2021 was a really exciting year of growth acceleration for paying.
Especially with regards to maturing SaaS platform as we spoke about here today, we look forward to continued growth in 2022, and we'll keep you updated on our progress as we move throughout the year. Thank you everyone for joining us.
Ladies and gentlemen, this concludes today's conference call. Thank you all.
You may now disconnect.
Yes.
Okay.
[music].
Yes.
[music].
Okay.
[music].