Q1 2022 Ping Identity Holding Corp Earnings Call
One day Vinci against the GSA and agile orchestration engine that integrates with various identification providers, such as lexis, nexis and Trans Union to verify tens of thousands of citizens per month scalable for millions.
One of our integration partners easy dynamics will help in our development as we ramp the GSA.
We were very pleased to have grown our relationship early this year with FIFA, the well known Zurich based world governing body of football or soccer as we in the U S call. It.
Beginning in November FIFA will host the 22nd FIFA World Cup tournament in Qatar and.
Engaging some 2 billion fans the world over.
An existing user of our pain federate and pain Directory software.
FIFA is in the early phases of a digital transformation that will leverage its FIFA plus platform.
After viewing various use case opportunities available through our da Vinci orchestration engine <unk>.
FIFA decided to engage more deeply through Penguin SSO as an entry point to cloud enable more digital services.
In early April we successfully brought an initial set of users live with a plan to significantly scale in the coming months as FIFA builds as digital capabilities.
It's still early days for da Vinci, but with several clients deployed and others in pilot, we believe our bet on this new orchestration capabilities already yielding the results we expected.
In Q1, we successfully took a London based customer live on Penguin advanced services the.
The customers are European based international provider of location intelligence identity verification and fraud and compliance management solutions.
Serving tens of thousands of customers and more than 80 countries.
And that verifies the identity of billions of people globally.
The top of our advanced services platform, the customer will also leverage MFA, which can scale into the future.
Both Penguin advanced services and da Vinci are delivering compelling results for us in migrating customers into the cloud and driving this pillar of growth.
The second of our three six growth drivers expanding in the customer use case is increasingly contributing more each quarter from the workforce use case.
In Q1 by more than two X.
This is consistent with the strong customer use case growth trend, we've seen over the last several quarters.
Two customer use case implementations in Q1 offer great examples.
We went live with <unk> MSA for <unk> Bank, a $6 billion Fortune 500 financial institution headquartered in Buffalo, serving millions of customers in 12 states across the northeast and the district of Columbia.
A customer since 2011. This launch is a part of <unk> global enhancements initiative to enable future cloud capabilities as a complement to existing <unk> software solutions.
Great Southern Bank Australia's largest customer owned bank successfully deployed their open banking platform using <unk> advanced services with Ping Identity's purpose build consumer data right integration kit.
Within eight months of deployment the bank was able to meet their consumer data REIT compliance requirements, which allows members to seamlessly share data with other banking providers.
Turning to the channel our third key growth driver. This quarter. This progress was highlighted by the announcement of two important partner initiatives.
In February we announced the distribution partnership with <unk> technology.
<unk> trusted government IP solutions provider at federal state and local levels.
<unk> will serve as <unk> master government aggregator, enabling us to make our solutions more broadly available to the public sector through care source reseller partners.
In March we announced a new partnership with TD <unk> a.
A leading distributor in solutions aggregators for the industry.
It will become a major global distribution resource in the Ping identity Global partner network.
TD <unk> exports, a significant global distribution footprint.
Courted by some 22000 tech professionals.
We continue to develop relationships with leading global systems integrators or gsi's.
One of those large well known Gsi's total group of our leaders recently that they hope to unseat one of our existing GSI partners to become our 2022 recipient of the GSA partner of the year.
We are deemed to facilitate the competition between them.
We know the channel can be an important driver of growth. The channel is a great source of new logos and deals that are both bigger and more often customer use case focused.
As we develop our channel expertise, we plan to release metrics to help track more routinely the progress we're making.
We are pleased with the ongoing progress, we're making against our <unk> cloud customer and channel and we'll continue to report out on those each quarter.
A few thoughts in closing.
First I focused a bit more than usual on our activity within the government vertical for good reason we're.
We're making strong headway there.
I'll have more to say about our U S government related business as the year progresses.
As we add capabilities and authorizations to pin one for government.
And complete the final stages of authorization to operate under fed ramp moderate level.
Second I'm pleased to announce two new additions to our board of directors are Neil Aurora and Vikram Verma.
Both of whom were appointed by the board at their meeting yesterday.
Aneel was most recently CEO of invest net yodlee.
Cloud based leader in financial Technology data intelligence and wealth management.
<unk> was previously CEO of eight by eight.
An integrated cloud Communications SaaS company.
With their collective experience in the technology space and ability to lead companies through periods of massive change their contributions to our board will be critical.
I'd also like to recognize Lisa Hook, who stepped down from our board at yesterday's annual stockholder meeting after helping lead us through a transition period from private to public status over her three year term.
Her insights were invaluable.
Third we surpassed an important milestone with the recent publication of our inaugural environmental social and governance or ESG report.
It highlights our efforts to promote diversity and inclusion in the workplace build strong corporate governance practices and promote social and environmental stewardship.
We have work to do in some areas, but we're pleased to have state some commitments in the ground.
Finally, I want to emphasize our ongoing and stepped up level of vigilance, given the war in Ukraine, and the shields up cyber alertness, we're having to maintain here in the U S.
Identity and access management remains the basis for driving Zero Trust.
And we are committed to doing our part at Ping identity.
With that I'll now turn it over to Raj to walk through our results and outlook rush.
Thanks, Andre we're pleased by our strong start to the year highlighted by our fifth straight quarter of accelerating <unk> growth and fourth straight quarter of accelerating SaaS revenue growth.
First quarter IRR of $323 $5 million grew 21% year over year with net <unk> in the quarter of 10 for Q1 of 'twenty one.
First quarter revenue grew 23% year over year to $84 7 million of.
Of which 95% of the subscription based revenue growth was driven by SaaS as well as maintenance and support or <unk>.
We generated $22 million of SaaS revenue in Q1 up 68% year over year 2018, when SaaS was less than a quarter of its current size.
This quarter.
And represented 25% of subscription revenue.
We generated more than half of them.
New IRR from SaaS versus software for the third straight quarter.
<unk> revenue grew 42% year over year in Q1, making up approximately 20% of subscription revenue.
The SaaS and MMS revenue categories together comprise all of our subscription revenue and 42% of total revenue in Q1.
Term license revenue was $44 3 million in Q1 up approximately 8% year over year.
Presenting 55% of subscription revenue.
As we discussed last quarter, we forecasted these shifts and SaaS and term license revenue percentages and we expect a more pronounced change as the year progresses more on that in a moment when I update our 2022 outlook.
Professional services revenue was lower than expected at $4 5 million in Q1, a year over year decline of 5% driven primarily by customer delayed implementations.
We ended the quarter with 321 customers with at least $250000 in <unk> up 21% year over year and once again in line with our AOR growth.
Our first quarter dollar based net retention rate calculated on a trailing 12 month basis was 114% a sequential improvement of two percentage points compared with Q4 of 2021, driven by strong base expansion in the quarter.
Unless otherwise noted 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.
Our non-GAAP gross profit margin for the first quarter was 77% compared with 80% in Q1, 2021, driven primarily by our high growth SaaS.
Our GAAP subscription gross margin this quarter was 83%.
Total non-GAAP operating expenses in the first quarter were $61 2 million.
We ended Q1 with more than $213 million in cash with cash used in operating activities of $3 3 million in the quarter.
This resulted in Unlevered free cash flow of negative $5 7 million in Q1 slightly below the bottom end of our guidance range.
Now turning to guidance for the second quarter, we are maintaining our revenue outlook range of $70 million to $75 million as we start to see the more meaningful impact of the mix shift between license revenue and maintenance and support take effect.
We anticipate the impact of this mix shift will persist in Q3 before revenue re accelerates further in Q4 as you can see in the growth wave.
Given our outperformance in Q1, we are raising our full year revenue outlook to a new range of 332 million to.
$342 million up 13% year over year at the midpoint.
We continue to expect GAAP reported revenue growth to be lower than <unk> growth due chiefly to accelerating SaaS market adoption and growth.
We are now recognizing an increasing percentage of revenue ratably over the life of a contract versus upfront.
That chain showed up partially in Q1, you'll continue to see it reflected going forward in our disaggregated revenue footnote, which you can also find in the appendix of our supplemental earnings presentation.
We expect to end Q2 with annual recurring revenue in a range of 337 million to $340 million.
Our 21% year over year growth at the midpoint.
We are slightly raising and tightening our full year <unk> guidance to a new range of 380 million to 385 million growth of 22% year over year at the midpoint.
Frank.
As we can.
New fluctuation support are ongoing.
Is the best metric for measuring.
In addition to the timing of it.
The collection this quarter's cash.
Progressive investments to continue driving.
Growth in our three focus areas the cloud the customer use case and as the year progresses.
<unk> is hosting expense.
With accelerating fast growth.
Additionally, as we continue to.
Developed new products, such as risk fraud and da Vinci.
And marketing and R&D spending well above historical growth levels.
We are also investing to ensure the resiliency and durability of our platform and to harden our security infrastructure, given the heightened risk environment.
G&A should track growth.
Yes.
The impact on margins will be more significant due to the expected fluctuations in our revenue.
From an unlevered free cash flow standpoint, due to timing of both payments and collections. We expect Q2, unlevered free cash flow of between negative $12 million and negative $8 million.
Paul estimate is unchanged.
Given the rapid acceleration of our SaaS business, we may invest further to take advantage of market opportunities during the second half of the year.
We'll also continue monitoring the threat landscape.
To invest ahead of it.
Curve as needed.
In conclusion, we've had a strong start to the year and expect to experience growth acceleration driven by continued execution against our three strategic focus areas of cloud customer use case and channel.
With that I'll turn it over to the operator for your questions.
Thank you Mr Donahue, ladies and gentlemen at this time to do you have any questions or comments simply press star one and just as a reminder would be one.
Yourself to one question and one follow up question with that we'll take our first question from Jonathan Ho at William Blair.
Hi.
Good afternoon, just wanted to dig in a little bit in terms of your commentary around the U S.
Government are there any specific programs or directives that you potentially could benefit more from when it comes to the U S government vertical.
I'd now like why the decision to sort of accelerate the investment here.
Jonathan This is Andre.
We've had our eye on the federal market for years.
We made a conscious decision a couple of years ago to build out our federal practice that coincided with our commitment to get <unk>.
Fed ramp certified.
So as we've reported before we have now built out a dedicated team for federal we have been investing along with our sponsor the department of energy to get our fed ramp certification to create a service that we call <unk> for government.
Along with that commitment we obviously.
We announced a partnership with Cara soft.
And we do have a pretty exciting pipeline as well as some early customers as we just announced and the GSA.
Federal government is is a very large opportunity for us and for identity.
Commitment was not driven by any one particular regulation or mandate that has come out although obviously as we've watched in the last six months. There is growing concern and a growing number of of mandates like MFA and other things that are coming out as guidance by the federal government. So.
We're watching it closely we think the timing is good.
Got it.
Just in terms of your commentary around the customer use case I think you said that there were two times.
Are there either.
Or wins in the quarter that were associated with that use case can we talk a little bit about maybe what's driving the strength in that market than you do.
That to continue to expand in terms of the customer side getting it can be an even larger portion of revenue or is this going to remain somewhat consistent. Thank you.
We do expect that the.
So let me step back as a company one of our strategic growth focus areas is the customer use case.
Was it a very deliberate and conscious choice that we made that is part of our long term strategic focus we do see this market as both ultimately larger than the workforce use case and stickier.
If you look at the competitive landscape and the current dynamics in the market.
Most of the customer use cases have historically been homegrown.
And the need now to consolidate the user experience across a very complex, but digital omnichannel is driving new requirements. So theres a lot of room for innovation in that space. So it's a combination of our interest in the space has to do with the Tam.
It has to do with the growth has to do with the historical reality that much of what has been done there has been homegrown and is ready now for commercial products.
It has to do with there is tremendous room for innovation.
Across risk fraud verification and a focus on exceptional user experience all of what we're doing with da Vinci across the Omnichannel.
So we see this as a long term area of strategic focus and growth.
What you are seeing reported is that.
That focus that we've had the investments that we've made are now beginning to pan out materially in our business, we do expect that to continue.
Thank you.
Thank you we'll go next to Matthew Matt Hedberg of RBC capital markets.
Alright, Thanks for taking my questions Andrea <unk>.
One for Raj.
I also great to hear about the progress in the U S. But you also mentioned da Vinci period of months and only one of the things that we're watching is the orchestration capabilities with Vinci really seem interesting to us, especially when we can see.
Global expansion, but also from a legacy replacement.
Maybe a little bit more.
As yours.
Part of that Matt I think I got the essence, but you were breaking up just a little bit. There. So question is around da Vinci and some of the successes, we're seeing there and I think you were asking to elaborate a little bit more.
We have yes, we've commented in the past enterprises. So if a large enterprise wants to make identity to center of security and found.
This new distributed Zero Trust World.
Center of both security personnel.
Experience for the customer use case.
Speed of integration is exceptional is extremely important.
Da Vinci is a tool.
That allows companies to al identity, but integrating identity needs.
It is a.
And X or better improvement.
Can achieve their outcomes.
From their identity investments.
Focused market.
Modified our go to market and put focus.
Da Vinci in August .
Pursuing a password list or adaptive off journey.
So they are trying to centralize author.
The nation for customer use case, whether you're trying to consolidate.
<unk> of Siloed identity.
Web sites for end users.
Or whether or not you are trying to verify the real identity of the user before you enroll in the register them in your system. All of those use cases require integration and da Vinci is becoming the steel thread.
That delivers on that experience.
It is a a modification to what we lead with what we and our approach to the go to market, how we POC ultimately, how we deliver value and the customers are seeing and beginning to experience that now that we are MGA, So we announced that FIFA plus.
All about delivering an exceptional experience for a worldwide base of fans that measures okay.
Completely into the billions.
Youre going to see and hear more of this over time.
Got it.
It is an extremely important component of our platform and it is highly differentiated.
And coming back from both the partners and the customers heads in heels above the competition.
Super Helpful. And then Raj one for you on the margin side, you're maintaining your unlevered.
Unlevered free cash flow guidance effectively breakeven for the year, but you talked a lot also about <unk>.
Additional spending this year I presume thats, just because of some of the pipeline that youre seeing but wondering if you could break down a little bit more sort of what changed in this quarter to July .
Some higher spending levels, but again, its not really impacting our cash flow this year, but into some past sort of the rationale on spending for the balance of the year.
Yeah, absolutely Matt as you know we're highly ROI focus then and have a lot of rigor around spend around here as we've proven over the last several years.
However, we are seeing.
That surpassed our expectations.
And.
That acceleration.
It does create some some incremental spend additionally, we're seeing great progress on that.
The channel as we've said when we see when we start to see the signs of SaaS acceleration and channel adoption and acceleration, we are going to lean into that I think.
We've been fairly clear on that and this is the time now.
Happening sooner in the year than we had thought and that's actually a good thing.
Our perspective, but over the course of the year, we still expect to be breakeven I will caveat that with our gas thing behind those three seasons, we've talked about if we do see opportunities to go after.
Be afraid settling in and further.
Thanks, guys.
Thank you we'll go next.
Now to Andrew Nowinski at Wells Fargo.
Great. Thank you.
I would like to start off with a question on the benefited at all from the Arctic Securities.
And then that may sustain and if the combination of that breach in da Vinci.
And how it helps customers migrate the pain might be swings mills.
Well I'll start by saying identity as the gate.
And obviously.
We and everyone in this industry work hard to earn customer Trust every day.
And I'll also say, we are investing to ensure that we maintain that customer.
We're safe.
As we become more competitive in the cloud.
I would say overall.
We are.
Seeing a benefit to our ability to compete in.
After but against other vendors with customers, who have a cloud first mandate.
And I think that that has.
But it's been.
Benefited by all the acquisitions that we've made in the last couple of years and the fact that our cloud platform a truly unified cloud platform.
Okay.
And our.
<unk>.
Risk and fraud and verification.
Asian and authorization.
I'll now starting to significantly.
Number of factors not just.
As you mentioned the breached debt that occurred that has been leading to increased competitiveness.
<unk>.
That's great. Thank you and maybe just a follow up on I wanted to ask about your net <unk> growth.
Specifically in Q2 now you just came off of Q1 with really strong net where our growth of 50% and I realize Q.
Q2 last year looks like a fairly tough comp, but I am wondering if there was anything abnormal in Q2 last year.
Or would you consider soi net there are growth might decelerate so much in Q2 based on your guidance. Thanks.
Andy It's Raj.
Q2 was just a particularly strong year in fact.
I believe it was.
Book.
Our single biggest deal in paints history.
That quarter last year and that is that's what's skewing the comp.
Yes that makes sense. Thank you.
Thank you we'll go next nasty, Adam Tindle Raymond James.
Okay. Thanks, Good afternoon, I wanted to ask a question on NR, obviously up nicely 200 basis points sequentially back to 114% could you just touch on the key attribution for that between gross retention upsell and I think we used to think $1 15 to 120 in that metric years ago is there like an updated range that youre thinking about the business can sustain.
Okay.
I'll, let raj comment on the updated range.
But in terms of the little color commentary on the two percentage point increase.
We did a lot of base expansion in Q2 as a result of a number of the new SaaS service offerings that we've had so when we talk about <unk>.
<unk>.
I'll say growth and acceleration of the adoption of our platform and our cloud vision. So we had a number of customers.
Decide to go take the journey to the cloud with pain when they do that a number of the new services, which are SaaS only also become available to them. So.
So I think that you are seeing now the beginning of a trend. We're paying now has a unified SaaS and cloud platform and a number of new services that we've acquired and introduced NGA over the course of the last quarter or two we don't expect that to slow down kind of a new day in the chapter.
Of the transformation of paint to the cloud.
Okay.
And on the on the numbers itself I mean when.
When you look at the 114% were.
Really pleased with that especially if you look at the evolution of net retention rate over the last four quarters.
That has continued to increase and it generally tracks with our AOR growth. So we're within the seven to 800 basis point band.
Between <unk> and net retention so as we've continued to accelerate on the on the <unk> line for the fifth straight quarter now.
You've started to see net retention rate tick up along with that in and that kind of range that we'd expect.
Got it and maybe as a follow up the partnership with crowd striking cloud player. Andre those are two really impressive names in terms of the partners maybe you could just.
Help us understand how that partnership came about in the first place and secondly, it's a little bit different in terms of the motion, where you're offering a product essentially for free upfront with the intention to I would assume convert to a paid customer at some point.
Can you talk about how you're planning to implement some sort of conversion funnel and any early indications.
<unk>.
Wins in terms of converting customers to paid thank you.
I'll start with the last part of that question, we actually are starting to see pipe now develop around with that partnership.
The early part of your question how it came about.
The World is.
Clearly being attacked on the digital front.
Grain crisis, and shields up as a result of Ukraine and anticipated.
Increase the tax from Russia that drum.
That drumbeat has been growing over several quarters. It was probably the accentuated over the course of the last quarter or two as a result of of the conflict in Ukraine.
But what we're seeing is a shift in the way companies think about securing themselves and it is a shift towards zero trust, we're protecting the endpoint.
Their users coming in from.
Strongly protecting the user's identity that's painful.
And then protecting the cloud edge cloud players roll all three of these really are the pillars that make up the new fabric of.
Of the Zero Trust security model.
We got a call.
I got a call from cloud player.
Before we obviously announced that week.
Saying that in contact with the government and with the shields up mandate. They were looking for companies that were instrumental in zero trust to step up and build some awareness around protecting our critical infrastructure.
<unk> seen us do this before.
Anytime.
There is a call to action to help protect.
Our company's Ping has risen to that challenge we did it the last time with MSA.
We're really proud to have been selected as a partner by those two companies, we see a lot of opportunity.
Not just in what we announced right in the critical infrastructure project, but we see a lot of opportunity growing in the secular shift towards zero Trust, where we play a very important and central role in making sure everybody is strongly authenticated everybody is appropriately authorized.
But we need a connected end to end in partnership with the endpoint and the edge the new cloud edge as defined in our <unk> business.
Understood. Thank you.
Thank you we take our next question now comes bucket colleagues at Barclays.
Hi, guys. Thanks, so much for taking my questions here.
I apologize I joined late so apologies if these were already asked.
Roger maybe just to start with you.
Can you just talk a little bit about the shape.
Of revenue this year, I guess with the increasing SaaS mix, which is great to see clearly <unk> is the cleanest metric to look at but for those of us that.
Care about revenue, how do you sort of think about the shape of revenue for this year.
Well, it's interesting you say the word shape socket, because we have the growth wave out there and the earnings presentation.
And I'd really like to kind of call attention to that because we've been pretty thoughtful about how we think.
Revenue.
Not just revenue, but our revenue and cash flow is going to evolve towards our end of 2024 targets. So when you think about.
About revenue, we do think of.
Q2 is being.
I don't necessarily want SaaS trough quarter, but it certainly will.
He will be a low a low quarter as well in Q3, and then we'll start to see some acceleration in Q4 back towards our full year targets.
And so.
So we will kind of see that Deb and I will see it reaccelerate and again Matt.
Again as you rightly pointed out let's say.
Byproduct.
How we Rev Rec and.
And the good news there is we're getting more ratable rates of 45% of our of our revenue.
As you know.
That's now ratable and when I think about the full year I almost think about it sort of flip flopping rates up to where it's 55% ratable and 45% upfront. So we're starting to see some meaningful shifts in that and what happened through that process. As you all know is.
It does impact it does have a very near term revenue impact, but it's a lot more predictable on a lot more ratable over the long run which is a good thing for us.
Got it got it that's that's very helpful. Andre maybe maybe for you just just zooming out a little bit.
Thank you started this year really with just a lot more focus on working with the channel. This year in fact, I think some sales comp change to reflect that.
I guess the question for you is can you talk about some of the early data points that you've seen from that increased focus and and strategically how does that channel how is that channel focus the increase channel focus.
Kind of help with the SaaS transition sorry, there's a lot there, but does that makes sense.
Yes, it does.
I'll start by saying its a top initiative for 2022, but it is a multiyear journey.
To come from essentially a direct to market versus a through the partner channel market. So.
We're in the middle but all of the indications of continued strength in the channel.
Are headed in the right direction actually our anticipation for the first half of this year because it will be above our targets on all the major kpis that we track for acceleration within the channel.
The anecdotal data that we're getting back.
And the level of conversations the number of conversations the number of people in the conversations.
From the largest gsi's accenture KPMG Deloitte PD cynics on on on the kind of the reseller side Cara soft for the federal government.
The level of conversation the debts.
It's very very significant.
See tremendous opportunity and where we're going as a company they see tremendous opportunity in da Vinci and authorization and a whole slew of other things. So on every dimension number of people trained.
First pipeline attach rate. Our aim is to have a partner in every deal and we will be sharing more stats in the future around that but all of the indicators of our commitment there are positive and on track.
Very helpful. Thanks, guys.
Okay.
Thank you we'll go next to Matthew <unk> at Bank of America.
China is now gone on for Tom quick question for Brian , Brian just checking on the international segment.
Arthur Arthur Bryan.
Yeah.
I think I got that question modeling it was around the.
International business and how that trended.
Correct.
Yes, So international is about 22% of revenue for.
For the quarter and.
Roughly flat year over year international sell continues to be good.
Good.
A good contributor to our business and.
We don't anticipate it sort of shifting a whole lot from that $25 75 international for domestic mix, we've historically had.
Thanks, and maybe just one follow up on the net retention and just wondering if you would be able to talk about the cross selling motion and what are you seeing in terms of natural step score companies investing in that second or third product for me are there one or two solutions.
That convinced they're really going after or is it a mix across the board on your offerings.
We tend to land in either of the workforce use case or the customer use case.
And historically, we tended to land with authentication in one of those two use cases.
Expansion took two dimensions.
For our existing customers one was if they started with single sign on and directory.
The authentication use cases theyre expansion wasn't the password less.
So they would add MFA and risk for.
And adaptive authentication a password list journey.
The other the.
The other dimension of expansion is if they started in one use case and were successful they would expand into the other use case.
And we have roughly just under a quarter of our customers that use paying for both use cases. That's the reason we're very focused on a unified cloud platform that can serve both use cases companies can get leveraged about that from that so I would say the typical expansion journey as they starting one or the other use case and over time they expanded the other use case.
And or they start in the simple our scenarios of either authentication or authorization and they expand into more sophisticated authentication and authorization use cases.
Okay.
Great. Thank you so much that's it for me.
Thank you we'll go next Nancy Adam Borg with Stifel.
Hello. This is awesome goes beyond proud and board. Thank you for taking the question.
Most of the <unk> <unk> can you talk about your volatile itself clearly cypress markets will evolve in time periods.
I'm sorry, you broke up on that one I think you were asking about API security and how we anticipate the market evolving.
Yes.
Okay.
While we see three things that companies have to do to secure their Apis number one they have to secure the front door.
That is who can access the API is an opinion as a leader in that market and.
There is a protocol called off that is used by companies to basically gain access to Apis lot of our major enterprises use us for API access security.
The second thing is we believe we must have complete visibility into all transactions.
40, API across multiple clouds internal and external and.
And leverage machine learning to see the tax against those Apis and that is our API intelligence product.
The third level of security is to in essence.
Centralize the way companies authorized.
Fine grained access to those Apis.
And control what data.
Is returned from those Apis, so three levels of security and <unk> has essentially solutions across all three and we really are the only identity vendor that has gone that deep is exceptionally important.
Certain regulated industries, where their Apis are now.
Just to be open and accessible by third parties. So whenever you hear us talk about open banking or the Cures Act one in the financial services and healthcare.
And API is have to be secured and we're one of the only vendors that can provide that three layers of protection.
Great. Thank you.
Thank you the magnitude Gray Powell at AIG.
Alright, great. Thanks for taking the questions and congratulations on the good numbers.
Thank you Brian .
Absolutely.
Yes, so focused again on the SaaS side.
Really good numbers there.
Please tell me if im doing this incorrectly, but if I look at SaaS revenue.
Increased by $3 $3 million sequentially, that's like a $13 million annualized increase.
It <unk> it was up $11 million sequentially. So is it safe to say that SaaS is now driving almost all of your incremental growth.
Or is there something unique that just happened in the quarter and then how should we think about that trend for the.
The rest of the year.
Great, it's not driving substantially all of the incremental growth, but it's suffice it to say it's in most deals right either.
Other companies are going wholesale a SaaS or a good chunk of the of the deal is SaaS based so.
I think there may have been a little bit of coincidence there in terms of the linkage youre drawing but.
The way I think about it for the rest of the year is if you just think about the growth rates on a CAGR basis over the last three four or five quarters, we kind of expect that to continue into into the full year and like I said the.
But we feel like that the.
With that.
Ratable too to upfront Rev rack of $45 55.
For the full year will likely flip to 50 545 ratable too.
The upfront, which like I said drive predictability and reliability and that's a good thing.
Yes.
That's really helpful and I guess, just my follow up question would be okay.
Given that there is at least the two times uplift to IRR when a customer takes a SaaS product is there a way to quantify how much of the growth is from the conversion of existing customers versus just sort of pure net new expansion, either new customers or existing customers taking.
Sure expansion of SaaS.
Yes.
Right now we're so we're close to 50 50 I would say.
What we saw was probably about 40% new and 60% existing.
So in the quarter.
It will take a while gray for for our existing base and one of the three.
$300 million plus.
Base here of IRR right I will take a while for for migrations to occur.
And and.
So I think that.
When you look at it over a longer period of time, Yes, you would see more contribution from these migrations, but for the near term as companies are renewing we're having those discussions while in advance and if it makes sense for them, we are putting them on that on ramp to the cloud and we are seeing the benefits of.
The <unk> expansion potential.
Got it okay. Thank you very much.
Sure.
Thank you well go next thank you Brian .
<unk>.
Hi, Thanks for taking my questions.
So I was curious if you could provide some color on how the win rates progress specifically in <unk>.
Against legacy vendors and modern SaaS competitors I'm curious just if you're seeing any acceleration in win rates in either of those buckets.
Kind of.
As your SaaS platform continues to mature and gain awareness in the market.
And kind of where.
Incremental net new <unk> is coming forth coming from.
Between those two buckets when it comes to like net new customer adds as well.
If you go back a couple of years I think there was probably a pretty healthy mix of we were winning against the legacy incumbent.
And on occasion, depending on the requirements of the enterprise, we may or may not be competing with a modern SaaS.
SaaS or cloud.
Competitor.
You roll forward to today and.
There are still legacy migration, taking place and to the extent that their needs are hybrid or on prem or maybe in their own cloud.
It's a very short list of companies that have the proven track record to kind of meet their scale and meet their hybrid deployment needs.
So I will take that for granted we do exceptionally well there rightfully. So what's changed is that now a 100% of our offerings our SaaS.
And kids.
Today for many enterprises.
They are starting out in the cloud or they are planning to migrate to the cloud and now <unk> is able to say yes.
Across our entire platform.
And thats whats changing so whereas in the past we might have been less competitive or a disadvantage for not having a 100% of our capabilities offered as SaaS that has now materially changed and as a result, our win rate our win rate, but our ability to get past the first round of <unk>.
Requirements, which is is it cloud or is it fast we're able to say, yes to that so it's improving our competitiveness and win rate is improving.
As.
Our SaaS maturity has improved.
Got it and then I also wanted to ask about.
Cloud solution packages that you announced along with da Vinci, and whether Youre seeing those results and more customers landing with multiple products.
I think it's too early to tell on that one we've had as you would imagine with the SaaS offering it's all about simplicity and ease of use and that includes simplicity of packaging and pricing.
And so as an initial onboard to take customers from zero in the base package will look like we had seen enough customers buy enough products to know typically.
We were their journeys began.
And what features they felt.
It needed to be the base package versus what more advanced.
Advanced features they would want in one of the higher tiers, we took all of that knowledge with the goal of simplifying our packaging and simplifying the way in which we land new customers in the cloud and we applied it to those bundled strategic initiative to be competitive in landing new customers.
The cloud.
Sure.
Early for us to report on that but from.
From everything that we've both heard from prior customers, who have purchased our SaaS solution is a big step in the right direction.
Got it thank you.
Hey, guys. Thanks for taking the questions here.
I wanted to ask was probably going to.
Calendar 'twenty, two and seasonality anything that takes through on that front I know.
We pretty much have the first half in hand, given the <unk> print in the <unk> guide.
But when I look at historically.
Yeah.
The back half of the year from a net new AOR perspective, Q3 tends to be around a third of the total net.
Is that a fair way to think about.
Or is it maybe just more.
Because of the environment, we've been in with.
Over the last couple of years.
Yes.
Q3, right now but.
I would say that when.
When you look at the second half it will be.
It will be Q4 loaded and that's fairly typical for us.
Okay and I know there was another question earlier on that point, but I think <unk>, we're seeing this impact year over year because of the difficult comp. Obviously, you had mentioned that you guys signed you.
Possibly the largest deal in <unk> or anything else to think about.
As we.
Put pen to paper on the second half of the year for <unk> and how we're looking to model.
I don't think there'll be anything unusual certainly as we've.
As we've developed our platform we have a ton more solutions now than we did 12 months ago and certainly am.
24 months ago, so naturally the deals are getting bigger.
Advanced services is driving larger deal it's been run for government will drive some larger deals so.
It's more about sort of getting getting more strategic with existing and new customers than anything else.
Awesome Awesome and then if I could just tack on one more please but.
I didn't get that.
Commentary that you guys have on has had on this call has obviously been positive one of the things that I did and I want to make sure I'm not misunderstanding this but obviously you're operating in this difficult environment, whether it's from a macro volatility the geopolitical concerns.
But can you talk to.
The impact that that has had on you if any.
Okay.
On the prepared remarks, there was a comment that professional services.
With lower than expected this quarter in relation to customer delayed implementations.
And I just wanted to see.
But I did want to make sure that those were addressed.
<unk> been a public forum.
Okay.
Now those are not connected by the way generally speaking or is it.
The macro market conditions have been a tailwind.
It's putting more focus.
With an idea, it's putting more urgency on identity at the hole with respect to seeing and experiencing.
Very healthy acceleration in.
Of interest from the channel.
And we are leveraging professional services is a strategic on just.
To support the successful go live of very large reference about cloud customers.
And to accelerate the learning and the training of our partners to do the same at scale and Thats, mostly what you're seeing there.
Understood. Thank you for clearing that up for me I really do appreciate it. Thank you and we'll go next matching Moody kessinger at da Davidson.
Great. Thanks for taking my questions guys. It looks like in the quarter you did a really nice job pushing for multiyear license.
Newell's for years, one year license was down 34% year over year multiyear terms up 30.
One year.
Switching to SaaS.
The.
It really doesn't have anything to do it one year switching to SaaS.
What we saw was more.
What's normal for us, which is customers opting in for longer duration contracts. So.
The theme that correlation over time.
Where customers sign up to that I think it's a confidence in the roadmap obviously the environment has improved a little bit there is some correlation when they go cloud with pain. It does kind of opened up the future runway.
But all of it is.
I would say.
Embodied in confidence in paying in our roadmap.
Got it and then Rob.
So is there any kind of bounce you can put around the globe.
More specifically and then.
Anything you guys can share maybe quantify the incremental sales capacity tend to average here.
Beyond the quota carrying reps Rudy.
I will say that we've made a commitment to.
Who.
Certainly to the channel and we're investing across the board in September marketing awareness, all the way to.
The channel enablement and.
The customer success and quota carrying less so.
We're fairly well balanced across sales and marketing spend.
What I will tell you is the.
Through the balance.
For the year, you will see us invest in sales and marketing.
And in R&D, primarily those are the two areas.
And then.
And just the two other areas I would say is one and continuing to build out our SaaS infrastructure. So we can accommodate that kind of growth that we're seeing in our.
SaaS, but that's a constantly evolving.
Investment that we make to to make sure that we're out ahead of the curve on the security internally.
Alright, great. Thanks, guys congrats on the quarter.
Thanks.
Thank you we have time for one further question will create that amount from <unk> at Keybanc.
Great. Thanks for squeezing me in here I guess just to follow up on the delayed implementation of the.
Called out on the professional services side does that have any impact to IRR in the quarter.
On the delayed implementations now.
Would be pro serv revenue.
Not.
<unk>.
You can see that in the in the <unk> revenue line that impact.
Okay. Thanks for the clarification Thats it from me.
Thank you and at this time I would like to turn the call back over to Mr. <unk> for any further and final comments.
So that concludes today's earnings call Q1 was a strong start to the year, but most importantly, we're making really solid progress against all three of our strategic growth drivers cloud the customer use case and the channel like.
I'd like to thank our team for all their hard work this quarter, it's paid off well.
And for all who tuned in today, we look forward to talking with you throughout the quarter. Thank you.
Thank you Mr. <unk>, ladies and gentlemen that will conclude <unk> first quarter 2022 earnings call, we'd like to thank you all so much for joining us and wish you all a great goodbye.
Okay.
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