Q1 2022 ForgeRock Inc Earnings Call
Good day, ladies and gentlemen, and welcome to four drugs first quarter earnings Conference call. As a reminder, this call's being recorded I would now like to turn the call over to you.
Mark King for drugs head of Investor Relations. Please go ahead.
Hello, everyone. Welcome to Boardwalks Q1, 2022 earnings conference call on the call with me today are Fred Rosh CEO of Boardwalk, and John Fernandez, Our Chief Financial Officer, and EVP of global operations before we begin I'd like to remind you that our discussion today includes forward looking statements.
And the meaning of the federal Securities laws forward looking statements include statements related to our expected results for Q2.
Full year 2022, our future offerings and enhancements to our current offerings the market for our offerings customer demand for our offerings and other matters and actual results could differ materially from those indicated by these forward looking statements. We encourage you to review the risk factors that we included in our SEC filings, including our annual report on form.
<unk> 10-K filed with the SEC on March nine 2022 for some of the factors that could cause actual results to differ from those indicated by the forward looking statements. All non-GAAP numbers referenced in today's call are reconciled in our press release and slides are available on our Investor Relations website.
I'll hand, the call over to Fran.
Thanks, Mark and thanks to everyone for joining us to discuss our first quarter 2022 results later.
We had a fantastic start to 2022 and once again outperformed our guidance across all metrics.
Highlighted by AOR growth, 35% year over year for the second consecutive quarter.
Our air our growth accelerated year over year by five percentage points, and we delivered $10 1 million sequential net new where our in Q1 versus $7 2 million in the same quarter last year, representing a 41% growth year over year.
We continue to see strong demand across our portfolio.
Particularly for our SaaS offering which continues to beat our expectations.
The strength of our customer demand gives us confidence to raise our full year 2022 guidance for air are and our expected SaaS adoption.
John will discuss this further in his remarks.
Recent cyber security events have reminded us again that I've done is critical to both securing the enterprise and enhancing customer experience.
The threat landscape remains as challenging as ever and security spending in general which includes identity remains a top priority for <unk>.
But it's not just about security.
Digital transformation initiatives are driving enterprises to enhance customer and employee experience.
Modernize their it infrastructure.
Therefore, heightening demand for both our science and workforce solutions.
We differentiate ourselves by approaching the market with an integrated platform across identity access and governance for Siam workforce and Iot use cases that supports all identity types.
We empower our customers to choose how they want to deploy our software in their heterogeneous environments, such as self managed public and private cloud environments.
<unk> offering affordable Danny cloud or hybrid deployments.
The adoption of our SaaS offering among our customers is strengthening reps.
Representing 65% of air are from new customers in Q1, a new record for us.
In the past.
You've heard us talk about our multi tenant SaaS architecture, the tenant isolation, which is unique in the identity market.
Our differentiated SaaS architecture is a few distinct advantages.
First we believe our performance is unmatched.
It's important to note that we designed our SaaS offerings from the ground up to support the largest enterprises during their busiest times like Black Friday cyber Monday.
Unlike a typical multi tenant approach art in isolation means we don't throttle traffic to guard against noisy neighbor issues, which is the de facto approach.
Jerry Danni providers.
Boardwalk has delivered an average of four nines of availability, you're seeing inception of our SaaS offering we are now committing to this level of service in our agreements.
But not everyone delivers four nine for the same way.
And for now and it doesn't matter if it comes with heavy throttling caveats, which are so common in the industry.
<unk> says architectures for a large number of enterprise customers in a single shared pod.
Meaning that if one enterprise is a massive scale event all other enterprises in the pod three.
Throttled to ensure the resilience of shared resources.
Technically that's still considered four nines.
It doesn't feel like it because it's a throttling activity causes service disruptions creates latency.
Hinders the experience of their end users.
Second we provider SaaS customers with data isolation that meets the regulatory requirements.
We enable our customers to choose where their data resides in the cloud.
For example for some customers it's critical for the data to reside on the server located in their country or region.
We don't share endpoints, something thats very important from a security and availability standpoint.
Third we believe we have the most modern SaaS platform among major identity providers today.
We leveraged technology, such as kubernetes and elasticity that wasn't available 10 years ago to build our tenant isolation approach.
Our approach enables us to offer our customers massive scale without the typical noisy neighbor of throttling issues and it's also cost effective for us.
We believe we are extremely well positioned for the road ahead due to our SaaS offering.
Which has been purpose built for the enterprise market.
And we continue to evolve our platform with cutting edge technologies.
Our market opportunity is massive and continues to expand.
Driven by our culture of product innovation and the passion of our <unk> experts.
Today, we are excited to announce four drug autonomous access.
Another AI driven solution.
So organizations prevent cyber attacks and fraud in real time.
Many of US have had our identity stolen or worse, we've had cybercriminals actually accessing our accounts.
Attacks involving user names and passwords increased a staggering 450% in the last year.
Translating into more than 1 billion compromise records in the U S alone.
As companies digitally transform and expand their online presence the attack surface also increases and bad actors will attempt to take advantage of it.
Congress acts as a new threat protection solution that helps enterprises eliminated account takeovers and prevent fraud in real time using.
Using the powerful combination of artificial intelligence machine learning and advanced pattern recognition.
We continuously evaluate access behavior and assigns at risk scores to prevent known attacks and to take new threats.
With today's announcement <unk> continues to deliver on its AI strategy with a new solution that enables smarter access decisions delivering better protection, along with seamless experiences for trusted users.
Delivered from the <unk> identity cloud.
MS access empowered teams to create any number of personalized user access journeys with a simple drag and drop yokota interface.
<unk> access is that applicable to both science and workforce use cases, and our sales team will begin selling the solution by the end of this month.
We have a great pipeline of product innovation, and we will share updates with you in future quarters.
The momentum we are seeing across our business is being driven by broader adoption of our platform across both science and workforce use cases for self managed SaaS or hybrid deployments.
We continue to see diverse mix of customer wins across industry verticals.
I'd like to take a few minutes to highlight five customer wins from the first quarter.
All five of these wins are with the <unk> cloud and three of them are fortune 100 companies.
Our first customer. One example is an Asia based multinational insurance and Finance Corporation with over 30 million customers.
This customer is revamping their customer loyalty platform in Australia and selected the four directed to any cloud because unlike boardwalk the existing identity provider could not provide full data residency in Australia.
<unk> was also selected because of our ability to easily integrate with a large number of existing applications and we can deliver customizable MFA to our identity trees.
Our next customer win is a fortune 100 leader in shipping.
This customer is migrating 40 million users some CA site minder to the store drag is there any cloud to streamline the login and authentication process.
<unk> was selected because of our ability to deliver more than a dozen ways to improve the customer experience, while also reducing cost and fraud. So the company.
Moving on yet another fortune 100 customer win but in the energy sector.
This customer has numerous brands and wants to ensure a consistent user experience across brands globally.
To meet these requirements on a global scale the customer is implementing the four drag identity cloud to support multiple brands and languages on one platform and important.
And differentiator for us.
For our next Fortune 100 wins like many global investment banks and financial institutions. This customer has numerous <unk> systems throughout the world.
Theyre consolidating many of these systems in order to better understand customers and improve the user experience.
They selected for drug identity cloud to achieve its customer goals.
As well as realized potentially hundreds of millions and cost savings.
For our final customer one example.
We have an existing customer who expanded their existing portschach identity cloud deployment.
This global manufacturing conglomerate experienced rapid success with our SaaS offering for one of its leading brands in it.
It is expanding to support another mass consumer application.
They are expanding with the four drugs that any cloud because alright, Denny trees enabled numerous authentication journeys such as social media Logins and Theyre also looking at the strength in security and reduce costs.
Our demand continues to be strong across both science and workforce.
We tend to land on the science side and as at the end of Q1, 43% of our customers use us for both <unk> and workforce.
37% for Sim, only and 20% for workforce.
Our customers expand with us through more identities more use cases, where product modules and more deployments.
This has resulted in our ability to drive sales productivity by double digit increases year over year.
Grow air or by 35% in 2021, and our non-GAAP sales and marketing expense currently 15% in 2021.
And deepen relationships and increased sales leverage with our alliances and partners.
Before I conclude I am very excited about our upcoming user conference I'd live it.
It kicks off on May 23rd in Austin, before heading to London and Melbourne This summer.
Loves this event, because it's a chance to exchange ideas with our customers and partners.
We will welcome hundreds of attendees from a variety of industries.
We'll get a sneak peek at our new products and learned from identity leaders from customers like U S Bank Toyota Humana Navy Federal credit Union and Alliance partners, Accenture, Pwc and Deloitte.
Finally, we remain deeply concerned about the war in Ukraine.
<unk> doesn't operate in Ukraine, or Russia, and our business is unaffected is a terrible situation.
We are hoping for a peaceful resolution soon.
With that I'll turn the call over to Jon to walk through our financial results in more detail John .
Thank you Fran I am pleased to announce our first quarter results exceeded our guidance across all metrics as we look back over the past nine quarters. The first seven were consistent at 29% to 30% growth and we saw acceleration to 35% over the last two quarters.
Q1, <unk> at $193 2 million.
We continue to see strong demand across our regions globally as it pertains the seasonality Q2, and Q4 were our strongest quarters last year for net new <unk> and we currently expect Q2 and Q4 of this year you experienced similar seasonality Q1 was a record SaaS quarter for us 47% of our new <unk>.
Customers in Q1 purchased our SaaS offering and 65% are from new customers with SaaS.
As a reminder, 25% and 40% of our new customers purchased SaaS in Q3, and Q4 of last year, respectively, and our SaaS Air are represented 50% and 38% of <unk> from new.
Customers in those respective periods.
Average SaaS they are from new customers, who purchased apps in Q1 was greater than 350000.
Moving on to customers. We are extremely proud of the customer base. We have built that includes many of the world's leading brands. We continue to experience very high retention and are seeing great results from our investments in customer success. We ended Q1 with 404 large customers defined as customers with 100, K M a R or greater.
Our large customer base grew 20% year over year and they represented 91% of our IRR as of the end of Q1.
Our net retention rate for Q1 was 111% over the last few quarters. The majority of our <unk> acceleration has been driven by new logos.
While we expect new product uptake from solutions, such as autonomous access and existing customers adopting SaaS to increase our net retention rate over time, we believe it will stay in the 110% to 112% range for the remainder of this year.
Moving to revenue revenue recognition for self managed deals is significantly different in ratable revenue recognition for SaaS deal under ASC 606. This is best explained through an example, let's take a three year 200000, or our self managed deal. So thats 600000 of total contract value.
If the start date was on the last day of the quarter, we would recognize approximately 297000 in that quarter. If we take the same three year 200000, there are deals that we would recognize approximately $550 in the quarter or one 366.
Of the IRR this.
This example shows what are our best reflects our growth while GAAP revenue is reflecting a temporary deceleration due to SaaS, increasing as a percentage of the new <unk> mix over time.
Total revenue for Q1 was $48 1 million, an increase of 18% year over year, we ran a like for like comparison and if we did the same dollars of new SaaS <unk> in Q1 2022 that we did in Q1 2021 was the difference made up with self managed.
We estimate our total revenue growth would have been approximately 30% year over year or approximately $5 million of impact.
Professional services revenue grew from 850000 in Q1 2021 to $2 2 million in Q1 of this year.
Before turning to profitability on expense items I'd like to point out that I will only be discussing non-GAAP results going forward non-GAAP results exclude stock based compensation for all periods discussed our press release contains our GAAP results and reconciliations for our non-GAAP results.
Q1, gross profit was $39 9 million and gross margin was 83% as we continue to scale, our SaaS offering we expect to see increasing the investment in cloud infrastructure and incur higher hosting call. Our professional services margins significantly improved year over year driven by higher utilization.
And higher professional services revenue.
Turning now to operating expenses, we remain focused on investing strategically for growth, while achieving our operating margin goals and our path to profitability sales and marketing expense for Q1 was $24 7 million compared to $19 8 million in Q1 last year. This represents 51% of total revenue for.
Q1, compared to 49% in Q1 of last year.
R&D expense in Q1 was $13 1 million compared to $10 2 million in Q1 last year. This represents 27% of total revenue for Q1 versus 25% in Q1 of last year.
G&A expense in Q1 was $11 3 million compared to $7 5 million in Q1 last year G&A was 23% of revenue versus 18% of revenue last year.
Operating loss was $9 2 million versus a loss of $3 1 million in Q1 last year, representing an operating margin of negative 19% versus negative 8% a year ago. It is important to note that the biggest impact to our operating margin year over year as our rapidly growing SaaS business and the resulting impact your revenue.
Under ASC 606, using the same analysis that I described earlier.
We did the same dollars of new SaaS IRR in Q1, 2022 that we did in Q1 2021 with the difference made up with self manage their IRR, we estimate the impact to revenue would be approximately a positive 5 million delta, resulting in an operating margin would've been approximately negative eight.
Please refer to the Q1 2022 investor presentation on our Investor Relations website for more information.
Turning to the balance sheet, we ended the quarter with 364 million in cash cash equivalents and marketable securities. We have a rock solid balance sheet that is many multiples of what we need until we achieve a sustained positive non-GAAP operating margin.
Before we turn to guidance I'd like to provide some comments that should provide additional context for the remainder of this year.
First we continue to see strong demand from our pipeline and we are raising our annual <unk> guidance SaaS.
SaaS has significantly exceeded our expectations and this is hugely positive for the future growth trajectory of our company.
Accordingly, we are raising our expected ending SaaS a range from 20% to 25% to 22% to 27% of total <unk> for this year.
Because SaaS revenue is ratable and upfront revenue recognition for self managed deals is materially different for the example, I previously gave and thus contribute significantly less revenue in the near term we are maintaining our full year revenue guidance and revising our operating income slightly.
Our full year revenue guidance now has less upside due to our rapid SaaS adoption at our P&L also contain some additional expenses with that higher SaaS adoption. Therefore, as you have heard US say previously we run our business focus its growth on its the best metric by which to measure our business performance.
Especially as a SaaS offering experienced rapid growth.
We expect Q2 to be the trough in terms of revenue growth in 2022, we expect revenue growth to begin meaningful reacceleration in Q3, with Q4 being our strongest seasonal quarter for growth.
We remain confident in our ability to achieve non-GAAP operating margin profitability in the second half of 2023, no. Our progress between now and that may not be linear primarily due to seasonality.
And lastly, we've considered FX impact to AOR and revenue using april's FX rates. The impact is relatively small and we have factored into our quarterly and annual guidance.
Now turning to guidance for the second quarter of 2022, we expect total <unk> of $203 million to 204 million, representing 31% year over year growth at the midpoint.
Revenue of $46 5 million to $47 5 million non-GAAP operating loss of $17 5 million to $16 5 million and non-GAAP net loss per share of 23 to 21, assuming weighted average shares outstanding of approximately $84 3 million.
For the full year 2022, we expect total IRR of $240 million to $243 million, representing 32% year over year growth at the midpoint total revenue of $212 million to $215 million, representing 21% year over year growth at the midpoint non.
GAAP operating loss of 32 million to $28 million, representing an operating margin range of negative 15% to negative 13% and non-GAAP net loss per share of 45 to <unk> 41.
Assuming weighted average shares outstanding of approximately $84 8 million Q.
Q1 was a great start to the year and I'll turn the call back to France for closing remarks, Brian .
Thank you John .
Are we open for questions I'd like to close with the fact that our business is firing on all cylinders.
Confidence in our ability to execute to our plan and to meet our growth targets are.
Our SaaS offering continues to exceed our expectations.
We continue to deliver world class innovation to the market.
Highlights by today's announcement of autonomous access.
We continue to help the world's largest enterprises with the most strategic identity initiatives and.
And we had a fantastic first quarter.
Look forward to reporting on our continued success.
And thanks to all of the four drivers who helped us to deliver a fantastic quarter.
Look forward to welcoming new Ford rockers until the family to help us keep the momentum going.
Operator, you May now open the call for questions.
Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad star one for questions. Please make sure to mute function on your phone is turned off so the signal can be read by our equipment.
Sorry, one for questions, we'll pause a moment to assemble the phone queue.
Yeah.
We will take our first question from Rob Owens with Piper Sandler. Please go ahead.
Great. Good afternoon. Thanks for taking my questions just one for me today.
You were to decompose. The strike you saw an ear are this quarter between Siam in workforce can you give us a sense of how much of the basis I am in the aggregate are are and in the net new air or what kind of trends are you seeing thanks.
Hey, Rob Yes, so we saw really strong demand for both Siam in workforce.
Evidenced by that we continue to have 43% of our customers leverage the platform for both consumer and workforce, 30% consumer only and 20%.
For workforce, so we see strong demand across both now we do continue to land with Siam, most often leaving the same as the largest part of the identity Margaret the kind of the most exciting one and one that's growing the fastest.
So again this quarter most of our lands most of our new customers came in in the science and we have now our opportunity to cross sell the workforce portfolio into those customers now of course, we still have some good workforce lands.
But generally we're seeing the strongest market demand and the science space.
But with good general market demand for all of it.
And relative to competition in pricing anything changing on that front as you look between the two discrete markets.
Yeah, No I think we haven't seen any big dramatic changes in competition.
We continue to hold pricing and don't see a lot of pricing pressure at this time.
And you know when we really think about this market demand, whether it's driven by increasing cyber threats and everything that's going on in the world or the continued digital transformation with more and more companies looking to develop better right than any relationships. Even in these challenging times digital identity is really going to the top of the.
Q for investments in these companies.
And from a competitive position I've seen the investments that we've made especially in that kind of product. The project identity cloud you know that's really continuing to help us improve our traction and accelerate that growth in the market I mean, 65% of that new are new logos came in on <unk>, that's a new record for us So that's real.
Helping us to improve our competitive position in the market I think the new innovation, we launched today, whether it's harmless access will contribute to that so no big changes in dynamics no big changes in pricing just responding to really strong market demand.
Great. Thanks for the color.
We'll take our next question from Hamzah <unk> with Morgan Stanley . Please go ahead.
Yeah.
Hey, guys. Thank you for taking my question I will I will try to keep it to one question too.
John .
Want to ask about the the mechanics around the revenue accelerates later this year. So you're obviously seeing a higher mix of SaaS, which is what you want and I believe that's a generally a two to three X uplift versus your self managed offering.
So eventually that that up by it gets reflected in your revenue.
At the same time I I don't think you want to stop at 27% of your air are being from Fab I imagine you would actually want to get to the majority. So how do you think about the puts and takes there between yes, youll recognize that upside on the revenue eventually, but then you know maybe that's also offset by the fact that you have a growing mix of.
All of that there are for net new deals.
Yeah Yeah.
That's great. Great question, you know I think couple of things as every quarter. Obviously, we got a lot better visibility yeah. We saw really strong SaaS, obviously as we were standing at this point last quarter and guided accordingly, and where we sit today, yeah, we see that strength to guide to 22% to 27, there is variability.
And if you look to our IR website, and we tried it out the last three quarters of the dollars of SaaS. In every period you can see there's quite variable period to period that said as we look out over the next several quarters. It is growing quite substantially and quite fast and so we know that all the variable will continue.
To grow quite fast and so we have raised those percentages of SAS in the mix for each of the quarters Q2, Q3, and Q4 for this year and thus the guidance as we continue to get closer to quarter to quarter, if we see that variable variability, reducing and in fact that growing even faster.
We will continue to raise that range as appropriate at a future periods in time, I think where we sit today as it relates to the Reacceleration and importantly, we have the visibility into the fact that this is the trough for US we believe here with Q2 in revenue because we can see that revenue waterfall all the SaaS.
We've been doing in all of the support and maintenance from our existing business that falls into Q3 and Q4 for the rest of this year gave us a very high level of confidence in that revenue reacceleration.
When we think about driving and what mix.
I just wanted to say really importantly, and especially for those that have joined the call maybe for the first time for for Jacques why SaaS. So great well first of all it gives our customers. Another option. We go to them with choice. So they can go self managed or SaaS. That's powerful remembering though that also SaaS. There are companies out there who mandated cloud only.
So that's opening up our Tam we have shorter sales cycles on average for SaaS strong close rates as you mentioned two to three X on converting customers, but two to five X increase in price per user for identities on new customers. So higher ASP piece, it's just a great business for us.
To give customers choice, we're not going to try and steer in that direction, but our sales reps and our customers. You know they are coming first in many circumstances with a cloud first strategy. So that's how we're looking at the Reacceleration for the year, the linearity and our mix of SaaS and you and I would just add to that.
As we raise this guidance of ending year.
<unk> 20, 27% I mean, just remember this is only our second year of having our SaaS offering in the market and it's really a very rapid adoption really driven by that differentiation in that architecture that ability to give our enterprise customers the confidence in scale and performance and no throttling performance due to noisy neighbors.
The ability to be able to ensure that their data resides in their country. These are real differentiators and other cloud products on the market.
What we're really seeing that rapid growth.
And we're as you said over the long term that is the right thing that's why we continue to focus on.
As a key growth metric for the company.
Thank you Hamzah.
We will take our next question from Gray Powell with BTG. Please go ahead.
Okay, great. Thank you very much and congratulations on the strong result was really good to see the.
Or the accelerated mix shift to the SaaS side of things.
So yes on that point.
It was really it was really helpful. How you disclose the impact of the mix shifts to Q1 operating income can you just help us think through.
How thats impacting the full year operating loss guidance, we're just just any directional color.
There would be really helpful.
Yeah, Yeah. So yeah. Thank you Yeah, Q1 was a great quarter again really exciting on all levels and I think indicative.
The trends of the business as it relates to you know the operating loss on the year, Yeah, I think first and foremost we look at the fact, we raised our guidance right now on the year as we think about it $2 42 to 43, and a 32% the best metric by which to measure the growth of the business. Obviously this transition to SaaS.
65% in Q1, and we're raising that in each of the periods Q2 through Q4. It has got to obviously have a level of more ratable Rev. Rec and so then putting that pressure on revenue and yet we feel incredibly confident in our revenue guide for the year. So I think that's just that topline narrative looking at <unk>.
There are raising that and then noting more SaaS in our in our topline revenue as it relates to the rest of the P&L I think importantly, with more SaaS, we have incorporated a level of higher hosting costs. So as we think about that as that flows through also importantly, and as you look at Q1 gross.
Margins as well as we're doing more SaaS really got a hold on those cost per ton at cost per customer SaaS. So we've added more hosting costs. We've also realized reduced costs on a per customer basis for our SaaS business I'd say, a little bit earlier than we probably thought we think theres still a lot of opportunity in the year for that at the end of the <unk>.
Day, we're going to manage our P&L to that negative 15% to negative 13% operating margin on the year and really focused on delivering that topline ALR and that results in revenue as a result of what we're predicting much higher SaaS mix.
Okay, I think that makes sense and then I guess this might be a tough one but is it safe to say that if your SaaS mixed were unchanged relative to the.
Prior guidance that Youre operating loss guidance would've been also unchanged or maybe even slightly better.
Yeah.
Yeah, I think that that has us very excited because we have raised that mix considerably and and so yes that is a very very stated another way I'd put that statement is.
Secondly of course, our business things have remained the same outside of the one very large change that SaaS is much much more successful much earlier and much stronger in our pipeline than we had thought originally.
Understood Okay, great. Thank you very much.
Yeah.
We will take our next question from Patrick Colville with Deutsche Bank. Please go ahead.
Thank you so much for taking my question.
My question is about <unk> I mean, the the.
The print this quarter was very impressive.
And I'm not mistaken you guys beat the midpoint of your guidance by 6 million Bucks, which is.
This is very impressive and you also lifted the fiscal 'twenty two guidance.
I, if I calculate it correctly you lifted the midpoint by about $2 million.
I don't understand.
Why buy dot amounts you know given the kind of 6 million beats.
Encouraging that you missed it.
Fiscal 'twenty two guidance, but how come.
It was that level that was chosen.
No I think what we look at it is we printed a as you said a very strong Q1 and when we look at our annual plan, we raised that guidance based on what we think the full year will deliver now that's a modestly conservative guidance and obviously as we look at our pipeline and our sales capacity you know, we're going to look to over.
She that AMR has continued to execute on the plan, but we felt at this time. It's early in the year, we're still burning pipeline, we're still releasing new technology that we felt this was the prudent raise to do at this time, we will continue to evaluate the business.
We go forward.
Great. Thank you and I guess my follow up is just about fiscal first quarter.
<unk>.
So L D.
Would they need.
Large deals that closed this quarter or whether you kind of dynamics that we should be aware of.
Just go the whole picture about the <unk>, but thank you so much.
It's a great question and really we looked a lot into all the data into all of the results of our key be ours and its really consistent performance across all areas versus any one thing we had great strong in the Americas Europe a P J.
The one thing that obviously really stands out is the SaaS adoption can be even stronger than we thought but we saw good growth in financial services. Some great public sector wins, some strong healthcare growth continues so it's very vertical spread we continued to see strong asps.
That continued to grow and stay strong healthy growth in our large customer count. So it was really a very balanced quarter that really execute across all elements of the business without any one thing shifting it and that's what I think has given us confidence to raise that guide and IRR. This year, both in total and SaaS.
As we said the first part of your question that is a modest increase it modestly conservative guidance and were able to overachieve throughout the year. So it was really well balanced.
Quarter all around.
Thank you so much.
We will take our next question from Jonathan Ho with William Blair. Please go ahead.
Hi, Good afternoon, just wanted to I guess understand a little bit more about the new AI driven autonomous access capability and can you maybe give us a sense of how much. This could you know maybe help your differentiation as well as potentially what that upsell opportunity looks like.
Absolutely and I think we did is really to continue to drive customer value and differentiation.
And you know many of you have heard me talk about the importance of bringing AI to their entire identity journey. So we can have more intelligent identity system that can help recognize the legitimate user and get them easy access while using signals to block potential malicious actors.
Launched Tom is identity, a couple of years ago, and now autonomous access continues to build on that foundation across the full identity lifecycle.
Hunter with taxes is targeted bringing that intelligence, Serbia fabrication part of their identity journey.
Many companies are dealing with identity theft with account takeover with fraud, it really happens through.
User impersonation asked that authentication process. So the value that we're focused on delivering for our customers here, it's really reduce that account takeover reduce that authentication related fraud.
Now the product is three ways that it really differentiates.
From what other things out there in the market.
First it is a really powerful heuristics or rules based engine, where we can help our customers protect in real time from known fraud capabilities like credential stuffing or IP reputation all of that helps really blocked those known threats yeah.
Yeah part of the component it really helps with the unknown threats things you can't predict so by looking at signals of user and device behavior. We can bring intelligence to say wait. This is like a strange transaction or a strange user behavior. Let's go ahead and put up a higher level of indication or block that access. So it's really a unique combination of both.
Rules based on heuristics and this AI driven model.
I think the other really important thing about this is all of this technology of course is homegrown here at <unk> Engineering Department. So it's already fully integrated as an add on module to the four drag identity cloud.
It's part of our identity trees customers can turn on very easily and start taking advantage of this right in line as part of that developer interface, our identity trees. So its different as it's more powerful across both curious kicks in AI and it's different because it's already integrating those identity journeys so it would be.
And for a lot of our customers. They are really struggling with this account takeover due to the weakness of user names and passwords, obviously theres brings that intelligent she really solve a big problem for our customers right in line with the platform. So a lot of excitement a lot of great pipeline building.
And so we think this can really help continue to drive that acceleration of our growth for the rest of the year.
Got it and then just relative to the 11% net retention in the the revised sort of range or our current range around net retention.
Should we think about this trending over time, especially as your SaaS customers start to come up for renewal you know when do we maybe start to see that tick up a bit. Thank you.
Yeah, Yeah, I think importantly, and just for the context of why we are where we are going to talk about the future is in this period as we look at the 111% our customer retention.
Is really strong and remains at record highs. So that's just a continuous result of this customer success investment. We've made we're incredibly pleased with that level of customer retention, we don't see that changing.
We are seeing this skewing of our new App New E. L. R toward new logo acquisition, and that's really been dysfunction of SaaS. So we've seen that opportunity, we're taking that market share.
And I think over time that balances out more as we look toward the future Johnson, but I think there's some things that that are in the wings right. Now so we've talked about autonomous accessories that product coming out is going to help us get to the future state I'll talk about in a moment I think as it relates to governance continuing to up sell that one of the big things you've.
Talked about in the past was the software and SaaS opportunity, which is that conversion of our installed base on self manage over to SaaS, which is we've experienced is about a two to three X of AOR. We think that's a multi hundred million dollar opportunity.
Still in the early days and develop the tooling develop all the pass in journeys that they go through all the things we need to do and we've gotten out there and we've seen a great interest from our customers. We are building that pipeline quite quickly.
Prices take time, though this level of decision at the level, we play out the enterprises. It can be a multi quarter decision and then a multi quarter launch process to figure out how to get there. So I think Indiana. So this year, we still think through the end of this year will be about 110 to $1 12 range I see we have goals and targets to get that.
Expansion of those items really the software to SaaS initiative more governance more Thomas accessing that just loss get that out there really through our customer success matches and drive that north of 112 in the future likely outside of this fiscal year.
Thank you.
Ladies and gentlemen, as a reminder, star one for questions Star one.
Our next question from Shaul Eyal with Cowen. Please go ahead.
Thank you.
Good afternoon, Frank Cowen Mark.
Great progress with the SaaS offering indeed, how would you characterize the sales cycle associated with this product and I havent follow up.
Sure. So I think what I would say is the first our sales cycle doesn't start with cloud or self managed it starts with understanding the customer needs related to identity, what challenges, they're trying to solve around whether it's consumer or workforce or Iot and that's the way we start the conversation with our customers and then as we can.
Go to understanding what they want to try to accomplish that we talked about how they want to do it and we give them choice whether they want to go self managed or SaaS. So typically that ends up later in the sales cycle, but overall, we do see that the sales cycles with SaaS are shorter.
And that goes down to when we deliver a science boardwalk takes on a lot of the work right run the operate the security so customers don't have to deal with a planning about building all of that infrastructure because they can just take advantage of for drugs rich functionality as a service. So we are seeing shorter sales cycle with our science.
We are seeing higher asps significantly higher asps.
As we really deliver more value.
We're seeing you know not only strong demand from our customers, but internally our sales team really sees the benefits of positioning size and the benefits of that to the customers. So shorter sales cycle higher asps.
More differentiation and I think that's what's driving that accelerated adoption of the SaaS.
And you had a follow up.
Sure.
Here, we are sitting we're getting really close.
To.
Midway through the quarter.
Have you detected any change in demand pattern.
<unk> tracking to similar levels.
Mike.
21, and I know you know last year, you were preparing to go public on the one hand, but then quarter was absolutely fine.
Maybe some color along these lines.
Yeah, we see it.
I look back a year ago, we are seeing increasing demand for drugs for sure I think some of that is driven externally. The market has cyber threats and identity has become more important even in challenging times. These are the things that she says and CIO are prioritizing their business because it protects the company and reduce cost.
And it proves the topline of the business. So externally, we see increasing demand from this time last year.
And second we changed a lot as a company we've gone public obviously, which gives us good additional market recognition, we maintain top grades from the analysts like Gartner Forrester and covered your cold and we're doing more to kind of hone our go to market engine around creating creating awareness and demand for off.
So we're seeing increasing pipeline.
At this time, obviously much bigger than it was last year helped support our scaling and growing business. So overall feeling it in a good position here.
Here to achieve the growth targets for the company.
Thank you guys.
Thank you all.
Our last question will be from Eric case with Keybanc. Please go ahead.
Great. Thanks for taking the question and congrats on the strong results and continued acceleration there are.
So Fran I guess just to start with you.
Usually land with <unk> and most of the our acceleration rates suddenly is coming from net new customers. So I'm just curious what's happening in the market that might be taking these large companies to adopt Siam and are those mostly replacement of homegrown solutions.
Yeah, I think the science space is really hot right now now workforces as well, but I do think there's a lot of energy in the science space and it is driven by these demands I think that these technology professionals are under from the business line to create these better more frictionless experience without <unk>.
<unk> security or fraud or or compliance at risk. So there's really strong demand in that area. Many cyan deals that we win are companies, who have a homegrown identity platform.
Not able to scale not even have the functionality to create a self service or easy experience are at customer dashboards for them to manage their own privacy settings. So these homegrown solutions.
A really ripe for replacement, so that's where we see a lot of our growth.
But we definitely see some of the legacy platforms I talked about in the script you know one of the transportation companies that we're looking to replace a legacy Sidewinder identity solution for 40 million identities talked about in Q4, one of the largest global banks.
Replaces CA signed Minder, Susan so we see that as a lot of opportunity.
But definitely we see when we focus at this enterprise large enterprise level. Many of our customers just haven't prioritized identity like they should have over the past several years. So they find themselves with dozens of point solutions, maybe for different divisions or different parts of the identity lifecycle and we talked about one of our final.
So services customers that went to Florida rock identity cloud in Q1, they're going to consolidate literally dozens of different Danny point solutions. All on this comprehensive platform. So it's really about.
A homegrown legacy platforms, but all of these point solutions players, who really prefer a single solution across all of the guys any lifecycle.
A single platform for all of our Denny's consumer workforce partners supply chain, physical things and services and really that enterprise grade of the platform. So that's kind of what we see is really driving but there's definitely consumer.
The consumer space is hot as you pointed out.
Great. Yeah. That's helpful. And then just given the strong momentum in size I'm. Just curious if there was any update on.
The competitive standpoint.
Things are on the win rates.
So have you seen any change there.
I think generally we'd consider there's not been a dramatic change.
In the competitive environment at this point, we're going to continue to make some exciting investments across four truck. This year, we're going to continue to invest in our cloud maturity, we announced this past quarter. The four nines reliability will be scaling the service to go to 50 to 100 million identities.
Continuing to focus on the penetration throughput from a performance standpoint, so as we continue to focus on the enterprise grade nature of the cloud that's going to continue to help our win rates. So we win more we're focusing more in some vertical specific solutions health care has been a really growing part of our portfolio.
As a lot of people have gone to telemedicine and they have some unique requirements around patient privacy and data we launched our HIPAA certification last year, we're now working on bringing out some unique capabilities to help health care it keeps information private.
We're also making good investments on the workforce side as we continue to bring that full offering to the cloud because I think most customers today want there's convergence, Florida. It was really a pioneer in this converged model of having.
Identity access MSA SSO governance in a single platform for all identity. So we've got a lot of cool things coming out this year, but I think we will continue to help us position competitively and continue to accelerate that growth, which is why we wanted to raise that guidance.
And there are this year.
Great I appreciate that and congrats on the quarter.
Thank you.
Ladies and gentlemen. This concludes today's question and answer session. At this time for closing remarks, I'd like to turn the conference back to Frank Rush.
Great. Thanks, everybody again for joining the call and thanks for helping us.
About a fantastic Q1 or.
Our business is really firing on all cylinders.
Given the strong confidence in our ability to execute on our plan to meet these growth targets, even with our accelerated <unk> guidance.
We continue to exceed our expectations on SaaS and that's not by accident. We've got the toughest to enterprise customers in the world are taking a deep look at our architecture compared to what other things are on the market and they are choosing for drug.
We continue to deliver world class innovation to the market highlighted again today by autonomous access would you think it can be great accelerator of our business in the latter half of the year. So again congratulations to all of the forward Rockers will help make this a great quarter and we look forward to continued dialogue in the weeks and months ahead. So thanks so much.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
[music].