Ping Identity Holding Corp.

Please stand by. We're about to begin. Good afternoon, ladies and gentlemen, and welcome to the Ping Identity First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a again and now this time i'd like to turn the call over to mr david bates vice president investor relations please go ahead sir thanks everyone for joining us today and welcome to the ping identity conference call where we'll discuss our first quarter 2022 results provide our outlook for the second quarter and update our outlook for the full year charlie after the market closed today we issued a press release announcing our first quarter financial results In addition to the financial results, we'll be presenting a live supplemental set of slides through the webcast portal. These will be published to our website following the call. You may access the press release and presentation on the investor relations section of PingIdentity.com. With me today is our CEO, Andre Durand, and our CFO, Raj Dhani. Today's discussion may include forward-looking statements. please refer to our annual report on Form 10-K for 2021 and our quarterly report on Form 10-Q for the quarter ended March 31, 2022, filed with the Securities and Exchange Commission. There, you'll see a discussion of factors that could cause the company's actual results to differ materially from these statements. I would also like to remind you that during the call, we will discuss certain non-GAAP measures related to Ping Identity's performance. you can find the reconciliation of those measures to the most closely comparable gap measures in our first quarter press release and the slides we're posting on our website. To assure we can address as many analyst questions as possible during the call, we ask that you please limit your questions to one plus a follow-up. We will end the call after 60 minutes. With that, I'll turn the call over to Andre. Thank you, David. We had a good start to the year. For the quarter, we delivered our fifth straight quarter of accelerated annual recurring revenue growth at 21%. Total revenue grew 23%, driven by robust SaaS revenue that surpassed $20 million and grew 6%. Net retention climbed by 2 percentage points sequentially from Q4 to 114%. We again grew our base of customers with 2%.

$250,000 or more in ARR by 21%, matching our overall ARR growth rate.

Our non-GAAP unlevered free cash flow was negative $6 million, a bit lower than originally expected, driven by cash collection timing and an acceleration of some investments, which Raj will address in our financial results. we continue to make progress in Q1 advancing our 2022 strategic initiatives that we've labeled our three Cs, cloud, the customer use case, and the channel. First, the cloud. We're accelerating adoption drove results this quarter. With 100% of our solutions available with SaaS, we see the acceleration in our SaaS revenue growth to 68% as a clear indicator of our growing strength. differentiation, and ability to sell our cloud solutions. For the third straight quarter, FAST drove more than half of overall sales versus software, and once again increased the total number of customers with at least one FAST solution. We also saw another solid increase in the number of Penguin Advanced Services customers with a commensurate uplift in ARR. And importantly, the newest addition to the Ping One SaaS identity platform, DaVinci, punctuated meaningful customer activity, both in terms of new sales and implementations, as customer excitement is building. One such customer is the U.S. federal government, where our sales activity and pipeline is strong. This quarter, we sold Ping One DaVinci to the General Services Administration. which, among other things, provides the U.S. government with real estate management, centralized acquisition, and other government-wide services. The GSA is also a conduit for U.S. citizens interacting with various federal agencies, including GSA, through their various websites. In order to verify citizens' identities, Penguin DaVinci gives the GSA an agile orchestration engine that integrates with various identification providers, such as LexisNexis and TransUnion, 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, engaging some 2 billion fans the world over. An existing user of our PingFederate and PingDirectory 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 DaVinci orchestration engine, 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 FIPA builds its digital capabilities. It's still early days for DaVinci, but with several clients deployed and others in pilot, we believe our bet on this new orchestration capability is already yielding the results we expected. In Q1, we successfully took a London-based customer live on Penguin Advanced Services. The customer is a European-based international provider of location intelligence, identity verification, and fraud and compliance management solutions, serving tens of thousands of customers in more than 80 countries, and that verifies the identity of billions of people globally. Atop our advanced services platform, the customer will also leverage MFA, which can scale into the future. Both Penguin Advanced Services and DaVinci are delivering compelling results for us in migrating customers into the cloud and driving this pillar of growth. The second of our three C's growth drivers, expanding in the customer use case, is increasingly contributing more ARR each quarter than the workforce use case. In Q1, by more than 2x. 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 Ping One MFA for M&T 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 M&T's Global Enhancements Initiative to enable future cloud capabilities as a complement to existing Ping software solutions. Great Southern Bank, Australia's largest customer-owned bank, successfully deployed their open banking platform using Ping One Advanced Services with Ping Identity's purpose-built Consumer Data Right Integration Kit. Within eight months of deployment, the bank was able to meet their consumer data right compliance requirements, which allows members to seamlessly share data with other banking providers. Turning to the channel, our third key growth driver. This quarter's progress was highlighted by the announcement of two important partner initiatives. In February, we announced the distribution partnership with Kerasoft Technology. the trusted government IT solutions provider at federal, state, and local levels. Kerasoft will serve as Ping's master government aggregator, enabling us to make our solutions more broadly available to the public sector through Kerasoft's reseller partners. In March, we announced a new partnership with TD Cinex, a leading distributor and solutions aggregator for the IT industry. They will become a major global distribution resource in the Ping Identity Global Partner Network. TD Cinex sports a significant global distribution footprint, supported by some 22,000 tech professionals. We continue to develop relationships with leading global systems integrators, or GSIs. One of those large, well-known GSIs told a 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 three Cs, cloud, customer, and channel, and we'll continue to report out on those each quarter. A few thoughts in closing. First, I focus a bit more than usual on our activity within the government vertical for good reason. We're making strong headway there. We'll have more to say about our U.S. government-related business as the year progresses as we add capabilities and authorizations to ping one for government and complete the final stages of authorization to operate under FedRAMP moderate level. Second, I'm pleased to announce two new additions to our board of directors, Anil Arora and Vikram Verma, both of whom were appointed by the board at their meeting yesterday. Anil was most recently CEO of InvestNet, Yodaly, a cloud-based leader in financial technology, data intelligence, and wealth management. Vic was previously CEO of 8x8, 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 staked 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. Raj? Thanks, Andre. We're pleased by our strong start to the year, highlighted by our fifth straight quarter of accelerating ARR growth and fourth straight quarter of accelerating SaaS revenue growth. First quarter ARR of $323.5 million grew 21% year-over-year, with net ARR in the quarter of 10.Q1 of 2021. First quarter revenue grew 23% year-over-year to $84.7 million, of which 95% was subscription-based. Revenue growth was driven by SAS as well as maintenance and support, or M&S. We generated $20.2 million of SAS revenue in Q1 of 68% year-over-year in 2018 when SAS was less than a quarter of its current size. This quarter, it represented 25% of subscription revenue.

We generated more than half of new ARR from SAS versus software for the third straight quarter.

M&S revenue grew 42% year-over-year in Q1, making up approximately 20% of subscription revenue. The SAS and M&S revenue categories together comprise 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. It represented 55% of subscription revenue. As we discussed last quarter, we forecasted these shifts in SAS, M&S, 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 $250,000 in ARR, up 21% year-over-year, and once again, in line with our ARR 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 SAS. 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 ARR 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 change 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, or 21% year-over-year growth at the midpoint. We are slightly raising and tightening our full-year ARR guidance to a new range of $380 million to $385 million, growth of 22% year-over-year at the midpoint.

As we look at revenue fluctuation support, our ongoing revenue fluctuation is the best metric for measuring revenue. In addition to the timing of collections this quarter's cash flow and expenses reflected more aggressive investments reduce case and the channel as the year progresses weeks as hosting expense become with accelerating fast growth additionally as we continue to develop new products such as risk 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 our growth. The impact on margins will be more significant due to the expected fluctuations in our revenues. 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. Our full year unlevered free cash flow estimate is unchanged at approximately breakeven. rapid acceleration of our SaaS business, we may invest further to take advantage of market opportunities during the second half of the year. We will also continue monitoring the threat landscape to invest ahead of the 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. Donnie. Ladies and gentlemen, at this time, if you do have any questions or comments, simply press star 1. And just as a reminder, we do ask that you please limit yourself to one question and one follow-up question. With that, we'll take our first question this afternoon from Jonathan Ho at William Blair.

Hi. Good afternoon. Just wanted to, I guess, 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? And, you know, why 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 a federal practice that coincided with our commitment to get FedRAMP certified. So as we've reported before, we've now built out a dedicated team for federal. We have been investing along with our sponsor, the Department of Energy. to get our FedRAMP certification to create a service that we call PING-1 for government. Along with that commitment, we announced a partnership with Kerasoft, and we do have a pretty exciting pipeline as well as some early customers as we just announced in the GSA. The federal government is a very large opportunity for us and for identity. The 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 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. And just in terms of your commentary around the customer use case, I think you said that there were two times either ARR or wins in the quarter that were associated with that use case. Can you talk a little bit about maybe what's driving the strength in that market? And do you expect that to continue to expand in terms of the customer side getting to 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. That was 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 there's a lot of room for innovation in that space. So it's a combination. Our interest in the space has to do with the TAM, 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 a la what we're doing with DaVinci across the omni-channel. So we see this as a long-term area of strategic focus and growth, and 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 go next now to Matt Hedberg of RBC Capital Markets. All right, thanks for taking my question. Andre, one for you and a quick one for Raj. You know, also great to hear about the progress in the U.S. Fed. You also mentioned DaVinci when you prepared the marks, and I think one of the things that we're watching is some of the orchestration capabilities of DaVinci really seem interesting to us, especially when we consider broader expansion, but also perhaps some legacy replacements. Could you talk maybe a little bit more on some of the successes you were seeing? I caught part of that, Matt. I think I got the essence, but you were breaking up just a little bit there. So question was around DaVinci and some of the successes we're seeing there, and I think you were asking to elaborate a little bit more. That's right. We have, yeah, we've commented in the past on enterprises. So if a large enterprise wants to make identity the center of security and and found really the control plane in this new distributed center of both security, personal experience for the customer use case.

Speed of integration is extremely important. DaVinci is a tool to elevate where they spend their time and identity, but integrating identity. It is a 10x or better improvement can achieve their outcome from their identity investments. Focused modified our go-to-market and put an orchestration as the starting point for every identity journey. It doesn't matter if you're pursuing

a passwordless or adaptive auth journey, whether you're trying to centralize authorization for a customer use case, whether you're trying to consolidate a bunch of siloed identity websites for end users, or whether or not you're trying to verify the real identity of the user before you enroll them or register them in your system. All of those use cases require integration, and DaVinci is becoming the steel thread that delivers on that experience. So it is a modification to what we lead with and our approach to the go-to-market, how we POC, and ultimately how we deliver value. And the customers are seeing and beginning to experience that now that we are in GA. So we announced that FIFA Plus, all about delivering an exceptional experience for a world

that measures ultimately into the billions. You're going to see and hear more of this over time, but 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 and heels about the competition. Super helpful. And then, Raj, one for you. Margin side, you're maintaining your unlevered free cash flow guidance to effectively break even for the year, but you talked a lot also about some additional spending this year. I presume that's just because of some of the pipeline that you're seeing, but wondering if you could break down a little bit more, you know, sort of what changed in this quarter to drive, you know, some higher spending levels. But again, it's not really impacting on local free cash flow this year, but maybe just unpack sort of the rationale on spending for the balance of the year. Yeah, absolutely, Matt. As you know, we're highly ROI focused and have a lot of rigor around spend around here, as we've proven over the last several years. However, we are seeing that surpass our expectations, and that acceleration does create some incremental spend.

Additionally, we're seeing great progress on the

As we've said, when we start to see these signs of fast 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, it's happening sooner in the year than we had thought, and that's actually a good thing from our perspective. But over the course of the year, we still expect to be breakeven. I will caveat that with, again, investing behind those three Cs as we've talked about.

If we do see opportunities to go after, we won't be afraid to lean in further. Thanks, guys. Thank you. We go next now to Andrew Nolinski at Wells Fargo.

Great. Thank you. like to start off with a question on the uh benefited at all from the octa security incident that they sustained and if the combination of that breach and and da vinci um and how it helps customers migrate the ping might be swaying some of those well i'll start by saying identity is 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 safe. As we become more competitive in the cloud, I would say overall we are seeing a benefit to our ability to compete in the but against other vendors with customers who have a cloud first. I think that that has 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, and our investment in

risk and fraud and verification and authorization are all now starting to significantly increase.

A number of factors, not just as you mentioned, the breach that occurred that has been leading to increased competitiveness for payments. That's great. Thank you. And maybe just a follow-up on, I want to ask about your net new ARR growth, specifically in Q2. You know, you just came off of Q1 with really strong net new ARR growth of 50%, and I realize Q2 last year looks like a fairly tough comp, but I'm wondering if you took Q2 last year to consider as to why net new ARR 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 we booked the single biggest deal in Pink's history in that quarter last year, and that's what's skewing the con. Yep, that makes sense. Thank you. Thank you. We go next now to Adam Kendall at Raymond James.

Okay, thanks. Good afternoon. I wanted to ask a question on NRR, 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 115 to 120 in that metric years ago. Is there like an updated range that you're thinking about the business can sustain?

I'll let Raj comment on the updated range. But in terms of a 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 continued, 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 Ping. When they do that, a number of the new services, which are SaaS only, also become available to them. So I think that you are seeing now the beginning of a trend. where Ping now has a unified SaaS and cloud platform and a number of new services that we've acquired and introduced in GA over the course of the last quarter or two. We don't expect that to slow down. It's kind of a new day in the chapter of the transformation of Ping to the cloud. And on the numbers itself, I mean, when you look at the 114%, we're really pleased with that, especially if you look at the evolution of net retention rate over the last four quarters. That's continued to increase. And it generally tracks with our ARR growth. So we're within the 7 to 800 basis point band range. between ARR and net retention. So as we continue to accelerate on the ARR line for the fifth straight quarter now, you've started to see net retention rate tick up along with that in that kind of range that we'd expect.

Got it. And maybe as a follow-up, the partnership with CrowdStrike and CloudFlare, 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 up front with an 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 of 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 that partnership. The early part of your question, how it came about, The world is clearly being attacked on the digital front. The Ukraine crisis and shields up as a result of Ukraine and anticipated increased attacks from Russia. That drumbeat has been growing over several quarters. It was just probably accentuated over the course of the last quarter or two as a result 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, where protecting the endpoint that a user is coming in from, strongly protecting the user's identity, that's Ping's role, and then protecting the cloud edge, Cloudflare's role, all three of these really are the pillars that make up the new fabric of of the zero trust security model. So we got a call. I got a call from Cloudflare 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. You've seen us do this before. Anytime there is a call to action to help protect our companies, Ping has risen to that challenge. We did it the last time with MFA. 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's strongly authenticated, everybody is appropriately authorized, but we need to connect it end-to-end in partnership with the endpoint and the edge, the new cloud edge, as defined in CloudFlare's business. Understood. Thank you. Thank you. We take our next question now from Placid Kalia at Barclays. Hi, guys. Thanks so much for taking my questions here. And apologies, I joined late, so apologies if these were already asked. Raj, 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 SAS mix, which is great to see, Clearly, ARR 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, Sackett, because we have the growth wave out there in 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 ARR 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 as being, you know, I don't necessarily want to say a trough quarter, but it certainly will be a low quarter as will Q3, and then we'll start to see some acceleration in Q4 back towards our full-year targets. And, you know, so we will kind of see that dip, and we'll see it re-accelerate. And, again, that's, you know, as you rightly pointed out, that's a, you know, byproduct of how we web rec. And the good news there is we're getting more ratable, right? So 45% of our revenue is ratable. you know, is now ratable. And, you know, when I think about the full year, I almost think about it sort of flip-flopping, right? So it's where it's 55% ratable and 45% upfront. So we're starting to see some meaningful shifts in that. And what happens through that process, as you all know, is, you know, it does impact, it does have a very near-term revenue impact, but it's a lot more predictable and a lot more ratable over the long run, which is a good thing for us. Got it. Got it. That's very helpful. Andre, maybe for you, just zooming out a little bit, I think 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 had changed 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 strategically, how is that channel focus, the increased channel focus, going to help with this SaaS transition? Sorry, there's a lot there, but does that make sense? Yeah, it does, Zach. I'll start by saying it's a top initiative for 2022, but it is a multi-year journey. to come from essentially a direct-to-market versus through the partner channel market. So we're in the middle, but all of the indications of continued strength in the channel are heading in the right direction. And actually our anticipation for the first half of this year is 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 GSIs, Accenture, KPMG, Deloitte, TD Cynics on the kind of the reseller side, Kerasoft for the federal government, the level of conversations, the depth is very, very significant. they see tremendous opportunity in where we are going as a company. They see tremendous opportunity in DaVinci, in authorization, and a whole slew of other things. So on every dimension, number of people trained, sourced 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. Thank you. We go next now to Tal Liani at Bank of America.

Hi. Here's Madeline on for Tal. Quick question for you guys. I wanted to just check in on the international segment and see what the results were for about this quarter.

I think I got that question, Madeline. It was around the international business and how that trended. That's correct. Yeah, so international is about, you know, 22% of revenue for the quarter and roughly flat year over year. International still continues to be, you know, a good contributor to our business. And, you know, we don't anticipate it sort of shifting a whole lot from that 25-75 international to domestic mix we've historically had.

Maybe just one follow-up to you on the net retention. I'm just wondering if you would be able to talk about the cross-selling motion, and what are you seeing in terms of natural steps for companies investing in that second or third product from you guys? Are there one or two solutions that companies are really going after, or is it a mix across the board on your offerings?

We tend to land in either 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, say, single sign-on and directory in the authentication use case, their expansion was into passwordless. So they would add MFA and RISC for an adaptive authentication or passwordless journey. the other uh 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 you know just under a quarter of our customers that use ping 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 leverage about that from that so i would say the typical expansion journey is they start in one or the other use case and over time they expand to the other use case and or they start in the simpler scenarios of either authentication or authorization, and they expand into more sophisticated authentication or authorization use cases.

Great. Thank you so much. That's it for me.

Thank you. We go next now to Adam Borg at Stifle. Hi, this is . Thank you for taking the question. Maybe for Andre on API security, can you talk about your role in API security and how you expect this market to evolve in coming 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? Exactly, yes. Okay. Well, 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 APIs. And Ping is a leader in that market. And there is a protocol called OAuth that is used by companies to basically gain access to APIs. A 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. for the APIs across multiple clouds, internal and external, and leverage machine learning to see the attacks against those APIs. And that is our API intelligence product. The third level of security is to, in essence, centralize the way companies authorize fine-grained access to those APIs and control what data. is returned from those apis so three levels of security and ping has essentially solutions across all three and we really are the only identity vendor that has gone that deep it's exceptionally important in certain regulated industries where their apis are now forced 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 one in healthcare open apis have to be secured and we're one of the only vendors that can provide that three layers of protection. Great. That's it for me. Thank you. Thank you. We'll go next now to Greg Howe at BTIG. All right, great. Thanks for taking the questions, and congratulations on the good numbers. Thank you, Greg. So, yeah, you speak. Absolutely. Yeah, so focusing in on the SaaS side, really good numbers there. Please tell me if I'm doing this incorrectly. But if I look at SaaS revenue, it increased by $3.3 million sequentially. That's like a $13 million annualized increase. If I look at ARR, it was up $11 million sequentially. So is it safe to say that SaaS is now driving almost all of your incremental ARR growth? Or is there something unique that just happened in the quarter? And then how should we think about that trend for the rest of the year? It's not driving substantially all of the incremental growth, but suffice it to say, it's in most deals. Either companies are going wholesale SaaS or a good chunk of the deal is SaaS-based. You know, I think there may have been a little bit of coincidence there in terms of the linkage you're drawing. But, you know, 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, five quarters, we kind of expect that to continue into the full year. And like I said, you know, we feel like that the the RADable to upfront RevRec at 45, 55 for the full year will likely flip to 55, 45 RADable to upfront, which, like I said, drives predictability and RADability, and that's a good thing.

Yep, that makes a lot of sense.

It's really helpful. And I guess just my follow-up question would be that given that there's at least a two-times uplift to ARR when a customer takes the SAS 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, you know, pure expansion with SaaS? Yeah. You know, right now we're still – we're close to 50-50. I'd say, you know, what we saw was probably about 40% new and 60% existing. So in the quarter, it will take a while, Gray, for our existing base. And we have a $300 million-plus base here of ARR. It'll take a while for migrations to occur. And so I think that, you know, 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, you know, as companies are renewing, we're having those discussions well in advance. And if it makes sense for them, we are putting them on that on-ramp to the cloud, and we are seeing sort of those benefits of the near 2X expansion potential. Got it. Okay, thank you very much. Sure. Thank you. We go next down to Brian Colley at Stevens.

Hi, thanks for taking my questions. So I was curious if you could provide some color on how the win rates progress specifically in 1Q, you know, against legacy vendors and modern SaaS competitors. I'm curious just if you've seen any acceleration in win rates in either of those buckets. Kind of, you know, as your SaaS platform continues to mature and gain awareness in the market and kind of where incremental net new and ARRs coming from, you know, between those two buckets when it comes to like net new customer ads as well.

You know, 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, say, SaaS or cloud competitor. You roll forward to today, and there are still legacy migrations taking place. And to the extent that their needs are hybrid or on-prem or maybe in their own cloud, you know, 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 almost take that for granted. We do exceptionally well there, rightfully so. What's changed is that now 100% of our offerings are SaaS. And today, for many enterprises, they are starting out in the cloud or they are planning to migrate to the cloud. and now ping is able to say yes across our entire platform and that's what's changed so wherein in the past we might have been less competitive or a disadvantage for not having a hundred percent of our capabilities offered as fast that has now materially changed. And as a result, our win rate, it's not just our win rate, but our ability to get past the first round of requirements, which is, is it cloud or is it SaaS, 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 your new cloud solution packages that you announced along with DaVinci and whether, you know, you're seeing those results and more customers landing with multiple products.

I think it's too early to tell on that one. We've had, you know, as you would imagine with a 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 a customer from zero in what the base package looked like, we had seen a number of products to know typically where their journeys began and what features they felt what more advanced features they would want in one of the higher tiers. We took all of that knowledge.

with a goal of simplifying our packaging and simplifying the way in which we provide it to those bundles. That strategic initiative to be competitive in landing new customers in the cloud.

Too early for us to report on that, but from everything that we've both heard from prior customers who have purchased our SaaS solution, it's a big step in the right direction.

Got it. Thank you.

Hey, guys. Thanks for taking the time. Probably going to Raj, but more about net new ARR, calendar 22, and seasonality, anything to think through on that front. I know we pretty much have the first half in hand, given the 1Q print and the 2Q guide. But when I look at historically the back half of the year from a net new ARR perspective, Q3 tends to be around a third of the total net new. Is that a fair way to think about the cadence when you guys are thinking through this year, or is it maybe just because of the environment we've been in with COVID over the last couple of years?

Yeah, you know, as you know, we don't have the Q3 right now, but, you know, I would say that when you look at the second half, it will be Q4 loaded, and that's it.

Okay.

And I know there was another question earlier on that point, but I think 2Q, we're seeing this impact year over year because of the difficult comp.

Obviously, you had mentioned that you got the largest deal in company history during 2Q. QQ of last year which benefited ARR. Is there anything else to think about as we put pen to paper on the second half of the year for ARR and how we're looking to model? I don't know. I don't think there'll be anything unusual.

Certainly as we've developed our platform, we have a ton more solutions now than we did 12 months ago and certainly 24 months ago. So naturally the deals are getting bigger. Ping One Advanced Services is driving larger deals. Ping One for Government will drive some larger deals. So it's more about sort of 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 the commentary that you guys have had on this call has obviously been positive. But 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 macro, the volatility, the geopolitical