Ping Identity Holding Corp.
Q4 2021 Earnings Call Transcript

Published: 24 Feb 2022

[Operator:]

Good day and thank you for standing by. Welcome to the Ping Identity Q4 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to hand the conference over to your speaker today, David Banks. Thank you. Please go ahead.

[David Banks:]

Thanks, everyone, for joining us today. And welcome to the Ping Identity conference call, where we will discuss results our fourth quarter and full year 2021 results and provide our outlook for 2022. Shortly after the market close today, we issued a press release announcing our fourth quarter year end 2021 financial results. In addition to the financial results, we will be presenting a live supplemental set of slides through the webcast portal. These will be published to our website following the call. You may access the press release and presentation on the Investor Relations section of pingidentity.com. With me today is our CEO, Andre Durand; and our CFO, Raj Dani. Today's discussion may include forward-looking statements. Please refer to our annual report on Form 10-K for 2021 for the year ended December 31, 2021 filed with the Securities and Exchange Commission. There you will see a discussion of factors that could cause the company's actual results to differ materially from these statements. I would also like to remind you that during the call, we will discuss certain non-GAAP measures related to Ping Identity's performance. You can find the reconciliation of those measures to the most closely comparable GAAP measures in our fourth quarter press release and the slides we are posting on our website. To ensure 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 will turn the call over to Andre.

[Andre Durand:]

Thank you, David. We have solid finish to 2021 with strong performance this year against all our key metrics. We ended this year with annual recurring revenue growth of 21%. Well above our initial outlook of 15% and accelerating for the fourth straight quarter year-over-year. We grew full year revenue by 23% reenergized by solid sales results and lengthening contract durations throughout the year. Our 2021 SaaS revenue grew 51% compared with 2020 and accelerated for the third straight quarter. We now have more than 55% of customers taking at least one SaaS solution. 25% of our ARR is now coming from our SaaS solutions. Our largest customers continued to deepen their footprints with Ping, driving improved net retention, and growth of 21% in customers with $250,000 or more in ARR. Finally, we drove very strong unlevered free cash flow of $21 million for the year, or 7% of ARR. In short, it was a great year for Ping. Raj will go into more detail on the financials and guidance shortly. In December, we hosted our first Investor Day as a public company, and laid out a roadmap to $1 billion in ARR over the coming years, our journey will be driven by three key areas of focus will refer to as the three C's supported by our large growing increasingly important market. First, cloud. We have a maturing unified cloud identity platform increasingly differentiated by our investments in AI fraud, and no code low code delivery of extraordinary end user experiences. Second, the customer use case, we are laser focused on expanding our leadership in the customer use case, which is now our largest and fastest growing use case. Third, the channel, our commitment to the channel and our partner ecosystem aims to drive expanded reach in our Salesforce. These three areas of focus are underpinned by a shift from products to a platform, and the rapid delivery of solutions to drive business value, and exceptional customer experiences. We made significant progress on each in 2021. Last year marked a key milestone in our transformation to the cloud as we significantly enhanced our PingOne Unified Cloud Platform, and now offered 100% of our solutions as SaaS. We also expanded our solutions in several highly differentiated areas to strengthen our position in the customer use case, zero trust password less authentication, and the orchestration of extraordinary and user experiences. While many customers begin their identity journey focused on legacy migration, single sign on, and multifactor authentication. A maturing identity program quickly evolved into a focus on authorization, risk, fraud, identity verification, API security, and no code orchestration. All areas in which we are a differentiated platform provider, given our recent investments and acquisitions. The PingOne cloud platform is now positioned for accelerated growth, as the market for legacy modernization accelerates and this is reflected in our results. Our SaaS businesses now 25% of total ARR and growing at north of 50%. In support of this acceleration in our cloud business, we signed a multi-year agreement with a $4.5 billion mobile computing company to migrate from on- premise to PingOne advanced services, a customer since 2014, the firm approached us in 2021 with a mandate to migrate to the cloud, and will now leverage PingOne advanced services for both workforce and customer use cases. For our largest and most complex enterprise customers, our PingOne advanced services offering has really taken off, we nearly tripled our advanced services customers in 2021 with an average ARR, about 2.5x our average customer. And five of our six largest deals in 2021 included sales of advanced services. With the acceleration and rising importance of digital channels through the pandemic, we continue to extend our leadership as a leading provider for the customer identity use case. ARR from our customer facing solutions now makes up more than 55% of ARR relative to the workforce use case and it's growing faster for good reason. Your personal identity as a consumer consists of hundreds of customer relationships, versus just one as an employee. Many of this quarter sales highlight this trend. A great new customer edition this quarter was Sportsbet, an Australian online wagering company with more than 2 million customers and north of $1.5 billion in revenue. Sportsbet experienced 50% plus volume spikes following COVID lockdowns starting mid-2020, and we're concerned about their ability to scale and avoid fraudulent behavior by individuals creating multiple accounts. In a win against their competitor, who was an incumbent on the workforce use case, Sportsbet purchased our Single Sign-On directory MFA and Risk Solutions to better secure their customers’ accounts and significantly improved the user experience. TransUnion, a leading global information and insights company, who purchased our workforce solution in 2020, and added a small customer use case capability early in 2021 significantly expanded their customer use case to 2 million customers. This expansion across both solutions and use cases is quite common amongst our largest Ping customers who increasingly leverage our unified platform for multiple use cases. As the leader in private student lending, Sallie Mae loans more than $20 trillion to over 2 million borrowers and CO signers. They were running customers through a legacy competitor solution, but upgraded to a new customer experience portal. In a highly competitive deal, Sallie Mae selected Ping to migrate their customer experience portal onto our Single Sign-On access, and directory solutions in addition to PingOne MFA. As one of the largest and most integrated health systems in Georgia WellStar provides care to one in six Georgians across 11 hospitals, five health parks, and more than 300 medical office locations. In Q4, WellStar became a new pink customer signing up for our PingOne for customer solution to create seamless digital experiences from login to log off and reduce patient abandonment rates Our channel partner ProofID was closely involved in both the Sallie Mae and WellStar transactions. While direct sales will always be critical to building and growing our customer base, increasingly, we are prioritizing the channel is a source of accelerated growth. In early February, we hosted our annual sales kickoff and welcomed more than 150 partners. At the event, we honored our partners of the year recognizing global partners dedicated to working with Ping to solve digital business challenges. Among those were ProofID as our delivery Partner of the Year for the fourth consecutive year. Guidepoint Security as a Rising Star as they drove a fivefold increase in sourced opportunities in 202. Optive as our North American Partner of the Year, TCS, as our International Partner of the Year, which is engaged in EMEA, and APAC in addition to North America, and KPMG as our Global Systems Integrator Partner of the Year. As we entered 2022, we now have more than 180 partners certified to sell Ping solutions, and more than 360 delivery approved technical reps to install and integrate them. To show our increasing confidence and commitment to the channel, we've modified our sales compensation structure in 2022 to offer additional incentives for driving partner activity. Recall in Q3, we acquired Singular Key to allow for no code integration of identity through more than 100 individual identity connectors. At our sales kickoff, I was pleased to announce the introduction and general availability of PingOne DaVinci as the embodiment of our new orchestration capability. DaVinci as the name implies, represents a new era of innovation for Ping and our customers unlocking and unleashing the potential of identity and accelerating the pace of integrations. DaVinci provides the blank canvas from which architects and developers can now create identity solutions with simple drag and drop ease. Little to no coding required. As a vendor agnostic tool DaVinci allows organizations to integrate and orchestrate identity services from a wide range of vendors, not simply Ping. It features a library of 100 plus out-of-the-box connectors for a whole range of identity, IT and automation services. In Q4, two global brands purchase our solutions led by orchestration. One of these is among the world's most recognized brands associated with global sporting events the world over. The other proliferates digital organization solutions to hundreds of millions of people in 25 languages around the world. We believe DaVinci will greatly improve our go-to-market velocity while also improving customer experience, streamlining integration, and transforming the way companies and end users experience identity in the years to come. Thank you to all of our customers and partners for another great quarter expanding the boundaries of identity security. A few final thoughts. First, I'm pleased to welcome Shalini Sharma as our new Chief Legal Officer Shalini has more than 20 years of international corporate legal experience, most recently as General Counsel with Vantage Data Centers. And before that for many years with Broadridge Financial Solutions. Shalini will also act as secretary to our board of directors. She's an important addition to our leadership team. Second, I'm also pleased to report that late in the year, we received our in process designation for the Federal Risk and Authorization Management Program, or FedRAMP, and currently are targeting a mid-year completion of our moderate authorization under the program. We also took our PingOne for government solution live in late December, and are actively working our pipeline of federal contracting opportunities through our resellers and distribution partners. Third, I'm delighted we were recently recognized as a 2022 Best Place to Work in both Denver and Austin, our two largest employment centers, by Built In. Our culture is based on a 10

[Raj Dani:]

Thanks Andre. As a reminder, before I get started, I encourage you to follow along with our supplemental presentation, which is being webcast live. As I will refer to a few important slides during my discussion. We once again delivered strong results above our guided ranges for all key metrics. This is the fourth consecutive quarter in which we've driven accelerating ARR growth, which outpaced our initial guidance. Our year ending ARR of $312.7 million was up 21% year-over-year, we generated a record $23.1 million in net ARR in the quarter, up 40% compared with the fourth quarter of 2020. We crossed another important milestone in the quarter with SaaS ARR now representing more than 25% of total ARR. This highlights our continuing strong SaaS growth trends as SaaS ARR had just crossed the 15% threshold of total ARR in Q4 of 2020. Fourth quarter revenue grew 19% year-over-year to $75.4 million, of which 93% was subscription based. Growth was driven by SaaS and maintenance and support. We drove $16.9 million of SaaS revenue in the quarter, growth of 56% year-over-year and consistent with Q3. As was the case in Q3, more than half of our new ARR in Q4 was from SaaS versus software. For the year SaaS revenue grew 51% versus 2020 to $57.6 million. Maintenance and support revenue grew 25% year-over-year in Q4, term license revenue was up 10% in the quarter, with 26% growth in multi-year term license revenue offset by a reduction in single year license revenue due to the very strong single year licensed performance in Q4 of 2020. This is indicative of the longer average contract durations we've seen throughout 2021. We ended the quarter with 315 customers with at least $250,000 in ARR, up 21% year-over-year, and in line with our ARR growth. In 2021, we also added 20 customers with more than $1 million in ARR, bringing the total to 71, up 39% year-over-year. All of these improvements to our large customer penetration rates continue to reflect our ability to more deeply drive value to our existing base of customers. We ended the year with 52% of our customers having adopted at least two Ping solutions and 26% with three or more. Our customer base now totals 14,168, up 4% year-over-year. We added more new logos in Q4 than we have since Q4 of 2019. We now have more than 830 customers using at least one SaaS solution 20% year-over-year. In addition, we nearly tripled the number of customers leveraging our PingOne Advanced Services in 2021. More than 80% of new customers in 2021 purchase at least one SaaS solution. Our Q4 dollar based net retention rate was 112% calculated on a trailing 12-month basis. Note that this was a sequential improvement compared with Q3, even though both figures rounded to 112%. Unless otherwise stated for the remainder of the P&L, I will refer to non- GAAP metrics. You can find a reconciliation of non-GAAP to GAAP numbers in the accompanying press release. Gross profit margin for the fourth quarter was 76% compared with 80% in Q4 2020 and driven primarily by our high growth SaaS and compared with our GAAP subscription gross margin of 82%. Total non-GAAP operating expenses in the fourth quarter were $62.7 million. We ended the year with more than $220 million in cash, improving our liquidity and adding flexibility by successfully refinancing our debt. We executed a $300 million, seven year term loan B and the new $150 million, five year revolver in late November. This improves our optionality to drive growth to both internal investment and M&A. Full year operating cash flow was $41.7 million, up 86% year-over-year. This resulted in unlevered, free cash flow of $21 million for the year, nearly $10 million better than our expectation as Q4 cash collections were extremely strong. Even with our continued investments to drive innovation and growth, we remain in a strong cash position as we enter the first quarter of 2022. Now turning to guidance. As Andre mentioned in his comments, we are excited about the growth we acceleration we achieved in 2021, which gives us increased confidence going forward. We expect annual recurring revenue of $320 million to $324 million in the first quarter growth of 21% at the midpoint versus Q1 of 2021. We also expect ARR of $378 million to $385 million for the full year, growth of 22% year-over-year at the midpoint and above the preliminary 20% plus rate we provided at Investor Day. As was the case when we enter 2021, we expect GAAP reported revenue growth to be lower than ARR growth due chiefly to accelerating SaaS market adoption and growth. The faster adoption and growth in SaaS is reflective of increasing investment in our SaaS solutions. We have also been investing in maintenance and support of our software. As such, we expect that we will now begin recognizing an increasing percentage of revenue ratably over the life of a contract versus upfront. You'll see that change reflected going forward in our disaggregated revenue footnote, which you can also find in the appendix of our supplemental earnings presentation. We expect this will shift our reported revenue percentages between term licenses, SaaS and maintenance and support or M&S for 2022 and beyond. In 2021, term license revenue made up just over 60% of our subscription revenue, with SaaS just over 20% and maintenance and support just under 20%. In 2022, we expect a shift in this composition, with term license revenue declining as a percentage of total subscription revenue, and both SaaS and M&S increasing as a percentage of revenue. The overall result of this is our full year revenue expectation of $330 million to $340 million, year-over-year growth of 12% at the midpoint, we expect Q1 revenue in the range of $78 million to $82 million, growth of 16% at the midpoint versus Q1, 2021. As the impact of this revenue shift becomes more apparent in Q2, our preliminary Q2 revenue estimate is $70 million to $75 million. Recall that Q2 of 2021 was exceptionally strong, especially within our multi-year term license category. Over time, we expect that difference between our trailing 12-month revenue and ARR will shrink with growth rates roughly converging. As we've said for several quarters these revenue fluctuations support our ongoing belief that Annual Recurring Revenue or ARR is the best metric for measuring Ping’s growth trajectory, with the mature and cloud platform growth in our customer use case and strong SaaS performance, we plan to further invest in our go-to-market and continue our SaaS investments within a growing demand environment. As a result, we expect our unlevered free cash flow to be approximately breakeven for the year with first quarter unlevered free cash flow of between negative $5 million and breakeven. Our cash flow outlook for 2022 is predicated on several factors. First, we have strong over performance for Q4 and 2021, driven primarily by collections, which shifted roughly $10 million forward into 2021. This also affects our Q1 view. Second, we are seeing strong signals that our cloud maturity bolstered by our recent acquisitions is improving our competitiveness and want to leverage these improvements with much targeted impact based spending. Similar to our multiyear revenue trajectory, we expect to invest earlier in this multi-year period with free cash flow yields improving over time. In closing, we feel great about 2021 performance and our expectation for acceleration of ARR growth in 2022. With that, I'll turn it over to the operator for your questions.

[Operator:]

For our first question, we have Matt Hedberg from RBC Capital Markets.

[Anushtha Mittal:]

Hi, this is Anushtha for Matt Hedberg. Thanks for taking my question. And congratulations on the strong quarter and a really impressive guide. I had a question on the guidance. Could you talk more about the assumptions, which gives you the confidence in your ability to accelerate through to 22% this year? And then as a follow up how should we think about the go-to-market investments in 2022, to potentially drive faster growth in 2020 and beyond? Thank you.

[Raj Dani:]

Sure, hey, this is Raj, I'll take that. So in terms of our guidance, our philosophy is to guide to numbers where we have a high degree of confidence, and we do have a consistent track record of meeting or beating that guidance. So that is first and foremost with what gives us confidence. Secondly, we have a backdrop with improving demand and spending environment. We've sort of call that out of the last few quarters, we continue to see that. And the biggest thing is that we're focused on driving are our strategic initiatives that Andre laid out in his prepared remarks around our focus on cloud, on the customer use case and the channel. And those three C's are really important. They've been really important to our historical growth. And we continue to see great signs in terms of our future growth as well. And I believe the second one was around the go-to-market investments. Could you just repeat that question for me, please?

[Anushtha Mittal:]

Yes, just how we should think about the go-to-market investments in 2022, to potentially drive faster growth in ‘22 and beyond.

[Andre Durand:]

Okay, yes, I'll go ahead and take that. Well, so built upon both the performance that we've seen in our cloud offering and the maturing platform, the numbers that we've seen on the channel, the strike that we had in the pipeline generation in 2021. We are now investing in our go-to-market both sales and marketing capacity and pipeline generation to take advantage of that opportunity. And I'm going to suggest that this is the first time in some years, where we are now taking that position based upon the confidence and the numbers and results we're seeing in our cloud platform.

[Operator:]

For our next question, we have Andrew Nowinski from Wells Fargo.

[Andrew Nowinski:]

Wonderful, thank you. Good afternoon, nice close to 2021. I want to start with a question on maybe your larger deal activity. I know you had 71 customers have spent over a $1 million I think you added 20 in 2021 as well. But I'm wondering if you had any particularly abnormally large deals in Q4 and what might be driving sort of that uptick in large customers.

[Andre Durand:]

I'll take that. This is Andre speaking. We had a number of nice sized deals in Q4 that is historically consistent with what we've seen in prior years and that we are budget flushing, people getting their act together throughout the year and wanting to start off the year on a series of new digital transformation projects. A number of those projects have been accelerated as you've heard around zero trust. And then on the customer side, a growing awareness that customer experience is foundational for digital transformation. So all of that has historically been consistent. There was no one deal, say that skewed, or skewed the numbers in one direction, it was a healthy mix of customers, consistent with the themes of cloud migration, cloud transformation, the acceleration in the customer use case, and a few of those large deals were both sourced -- were sourced directly from the channel that is relatively new, shall I say, to have sizable material Q4 deals forced by the channel.

[Andrew Nowinski:]

That's great to hear. I know you have a focus on growing that channel contribution. So it's great to see some large ones coming through there. I have a follow up question as it relates to maybe competition certainly Auth0 made a large acquisition in the customer identity space, and your investors seem to be concerned with maybe Microsoft pushing more into the identity security space. So I'm wondering if it certainly doesn't seem to be having any impact on your results, you're growing subscription extremely high. So I'm wondering if you could just comment on, maybe what's changed in the competitive landscape, if anything.

[Andre Durand:]

It's a good question, I'll start with Microsoft. And so Microsoft is obviously a very important part of the security and identity ecosystem. They do have particular strengths in the workforce use case, and with enterprises that are neither hybrid nor necessarily strategically pursuing a multi cloud strategy. We do partner with Microsoft on several fronts, we're very focused on helping our large enterprises succeed with Microsoft, just not exclusively Microsoft. So where Microsoft has strength is where a good enough solution for companies that have taken a Microsoft centric approach to their entire cloud strategy. Microsoft has particular strength. And Ping is strengthening, as they go to for large enterprises with either a hybrid or multi cloud mandate. And I've given hundreds of vision sessions over the course of the last nine months. And I am now regularly hearing that built upon resiliency companies are viewing a multi cloud strategy is extremely strategic. That is an incoming trend that I'm hearing regularly. With respect to Auth0, we do see a future shift, and where value is both perceived and realized. If you go back 5-10 years, I would say the cloud first mandate, realized a pretty significant uptick in efficiency, Auth0 focused on the developers who were looking to embed identity in their applications, and do so through APIs. We believe that the future of value capture is not going to be cloud first or developer first, we see that shifting to experience first So we do focus on the different segment of the market with respect to Auth0, the large enterprises with centralized board level mandates to essentially clean up and consolidate siloed identity systems across business units to create a better user experience. Those tend to be top down led initiatives, not bottom up led initiatives. It's not meant to say that developers aren't extremely important in the decision making process, but the needs of the large enterprises to consolidate identity plays directly into our wheelhouse.

[Operator:]

For our next question we have Mike Cikos from Needham & Company.

[Mike Cikos:]

Hey, guys, thanks for taking the questions here. For Raj, I know that we spoke to the growth in SaaS that you guys are seeing and some of the commentary on SaaS versus term licenses. Can you help us think about what the headwind to revenue is in calendar ‘22 as a result of this shifting, I guess revenue mix that we're talking to. And then part two of that question would be the gross margin pressures that you guys are seeing, as SaaS scales. Should we expect further degradation from current levels? Or is this a good place to be when we're thinking about calendar ‘22?

[Raj Dani:]

Sure, Mike, so in terms of the headwind, we're not really quantifying that because I think it's a little difficult to tell in terms of what the mix would be, what the deployment would be on those, what the durations would be. There's just so much that goes into it. But certainly there is a revenue impact right to your point around the fact that SaaS is accelerating and posting up 50 plus percent growth quarter-over-quarter, you do tend to have that sort of impact and we also, our software stack is mostly complete, and we're investing more in the new feature functionality on the SaaS side of the house and more on the maintenance of support on the software side. So we do expect an impact that's baked into the -- to our projections and our guidance. And we're, but we're super excited about the fact that this will lead to more ratability and more predictability over the longer term. And then, in terms of your question on gross margin degradation, when you're growing SaaS at the rate that we are, we were certainly building out our infrastructure and our capabilities ahead of the curve. So we will -- we would expect a little bit of compression on gross margin as we continue to build that out. And we think that that's really important to do. Because we want to accommodate that SaaS growth without a hitch. And but over time, we do expect that to kind of normalize it, and we're looking at in terms of current levels. One thing I just point to is we put up those growth wave charts in the earnings presentations, I think that's really important to get, to understand the true movie of what's going on here at Ping in terms of the some of the revenue impacts this year next, and then the eventual convergence weeks back that's really important graphic.

[Mike Cikos:]

Great, that makes a lot of sense. And then real quick for Andre, I know that you would call out I think it was 55% of your ARR today is coming from the customer use case, just to help us maybe on a relative basis that 55% of total ARR today, how does that compare to where we were a year ago or a quarter ago, just so we have something to compare it to, because I know that has been obviously a key focus of yours?

[Andre Durand:]

Well, we've been fairly balanced since the beginning of Ping. So there's always been a small percentage of our use case focused on the partner situation. So this is pulling from memory. So don't hold me to this exact number. But I think for a number of years, we were like 45% workforce, 45% customer and 8% to 10% partner. I think the message in story is that we believe the market opportunity for customer is ultimately both larger, we believe, and we are experiencing that it is faster growing. We also appreciate that the investments that we've made in the platform and the acquisitions that we've made differentiate us in the customer use case, we think that market long term doesn't have say an incumbent like Microsoft with a particular strength for workforce built around their Azure office 365 anchor tenants in large enterprises. So the customer use case is really largely up for grabs. So all that is to say that our investments there, the market opportunity, all the external analysis, we've seen all, the internal metrics that we're experiencing, speak to this market is very, very exciting with being very well positioned.

[Operator:]

For our next question, we have Brian Essex from Goldman Sachs.

[Brian Essex:]

Great, thank you, thanks for taking the question and nice set of results. I was wondering if maybe we could just touch on how to think about the balance of growth and profitability as you kind of transition into like next year. And as we kind of fine tune our models for the next several years, maybe not just leaving out a multi-year guidance framework. But maybe a rule of thumb in terms of how you're thinking about throttling investment in growth to the business relative to what you may let trickle down to the bottom line, just kind of get that kind of ballpark in the right direction.

[Raj Dani:]

Yes, sure. Brian, great question. This is Raj. I'll take that. So let's just rewind to 2021 for a minute, right. We drove 21% growth significantly higher than what we had expected when we provided guidance a year ago and did that while generating record operating cash flow for the year. So we're confident that we can drive growth and profitability. That's been our mantra here for a long time, we're at a point in time where we feel like it's time to press into the investment. And as you've seen with us, we're very responsible and take that very seriously. And we're going to invest for high impact return, everything we do is on an ROI basis. And if you, if I can just refer you back to our earnings presentation, and the growth wave that we have on there, we also have a wave chart for the unlevered free cash flow line where you see it, where you see us pressing into growth on the sales and marketing side, we'll continue to press into the R&D side of things and continue to innovate and really sort of prepare ourselves for that ARR growth acceleration. So in the near term, we will press into it. And then as that curve shows, and that's for illustrative purposes only, but we expect to have more operating leverage in the model next year on our eventual target of around 10% to 15%, which is what we laid out in our Investor Day for 2024.

[Andre Durand:]

Got it, that's super helpful. And maybe to follow up. I think we've had this question came before in previous quarters, but let's know what your visibility is in the installed base with regard to maybe potential term based customers and those you may migrate on to SaaS and what the outlook looks like for conversion there.

[Andre Durand:]

I'll take that. So you obviously see us highlighting an increasingly strong and cloud SaaS performance here at Ping, I'll reiterate, north of 25% of our ARR is coming from SaaS, it's growing at north of 50%. Second quarter booking, this was our second quarter where our SaaS bookings outpaced software, north of 55% of our customers are taking on at least one SaaS solution. And we've seen a tremendous uplift in uptake of our advanced services, we do see an opportunity and to grow the company and the ARR, both with new customers and migrating existing customers. And we actually had a very, very healthy balance of both. In terms of new logos, Q4 new logos was the strongest it's been since Q4 of 2019, SaaS played a significant role in that. And for the customers that are migrating existing customers say to advanced services, or a combination of advanced services and PingOne, we are seeing an uplift. And they make significant commitment to the journey to cloud with Ping. And once they make that leap, they start looking at our entire portfolio of which 100% of our offerings are now offered as SaaS.

[Brian Essex:]

What is the impact in that case of up maybe ACV? Or what they're taking on upfront, is there a lift there? Is it more kind of over breakeven period over a couple of years?

[Raj Dani:]

Yes, so Brian, I can give you a little bit of an anecdotal, something more anecdotal here because it's really difficult to do a like for like comparison, because the nature of the deals, they just get much bigger. And so what we're seeing is almost a doubling of the ARR if you go from software to PingOne Advanced Services. Now, the reason why I kind of caveat that a little bit is because there's puts-and-takes when a customer makes that migration and there's more products and solutions that are in the bundle so to the best of our ability, what we're seeing is that we're approaching 2x on like for like basis.

[Operator:]

Our next question, we have Brian Colley form Stephens.

[Brian Colley:]

Hey, thanks for taking my question. And congrats on a great quarter. I wanted to ask about just the pace of new logo adds with the SaaS platform continuing to mature in the channel and channel partners playing a bigger role. Should we expect the pace of new logo wins to accelerate in 2022? And then also should we expect a mix of new ARR coming from new customers to increase this year as well?

[Andre Durand:]

I'll take at least the first part of that, so we are beginning to focus now on our new logo and customer adds now that our SaaS platform is approaching a level of maturity. So unquestionably we do believe that new customers beginning their journey are often starting in the cloud. And so having 100% of our capabilities in the cloud makes us increasingly competitive to be in every deal, in prior years, we would get eliminated if we didn't have all of our capabilities offered to SaaS. So the answer is absolutely we are, a, focus on it and b, expect to see improvement on new customer acquisition as a result of SaaS. The second part of that was channel, we've been very strong with the systems integrators helping customers both succeed and deploy and facilitating during the sales cycle, but not necessarily introducing us into the sales cycle. So as our channel program has matured, so too has our metrics, we don't KPI now, or look at influence, channel influence. Now we look at channel sourced as our sole metric. And there are two areas or two types of channel partners that we are very optimistic about. The first one is the GSIs. And we have a growing set of relationships with the large global systems integrators and the second are essentially the VARS. And we have a growing number of relationships on that side of the equation as well, they're kind of both ends of the typical deployment integrators, we've had both upstream, the large advisors, and then I'll say kind of downstream focus on moving product in the bars. So we are making investments on the channel from both of those directions. That combined with our SaaS maturity, leads us to want to look at the growth and invest in the growth which you're seeing us doing at the beginning part of this year.

[Brian Colley:]

Got it. That's helpful. Thank you. And then just as a follow up, I was wondering if you could provide an update on how your efforts are going to expand more down market with the Global 3,000? I mean, are you seeing improving success there? And are there any penetration stats, you could share on what that penetration looks like today versus say a year ago?

[Andre Durand:]

We're not sharing the penetration stats. But as we've reported before, we do have a growth team focused on the cohort of customers below the 3,000. So when we say G5000 this is roughly companies of $500 million in revenue or greater. And that team, we've had now for over two years had an exceptional year last year, as a matter of fact a lot of our new logos came from that team last year, as our -- again as our cloud product has matured is made us increasingly both optimistic and wanting to invest in our ability to go down market. Now when I say down market don't think SMB, these are all solidly enterprises to be clear. They're just enterprises below the G3000.

[Operator:]

For the next question we have John Mayer from William Blair and Co.

[Jon White:]

Hi, yes, this is Jon White. I am here for Jonathon Ho. Thanks for taking our question. Very strong quarter. A lot of my questions have been answered. But sales cycles, can you talk about the sales cycle, recently the last quarter or two how it's compared historically, and the extent to which you might see that change if you're investing in going through the channel more, et cetera, over the next two to four quarters.

[Andre Durand:]

Sales cycles have been improving throughout 2021. Again, partially as a result of a maturing channel organization that has been essentially trained, both in how to sell our solutions as well as how to deploy our solutions, as well as the SaaS sales cycle. And the digital land is just a different motion than we've traditionally experienced. We've also invested pretty heavily in sales enablement that has improved the tooling, the demos, and the POCs that has also materially improved the sales cycle. The last piece to this is that DaVinci is a game changer for us in terms of how we POC and demo our technology, we can now do in hour's what used to take legitimately weeks, if not a month or more in terms of delivering a very targeted, very personalized demonstration of all of our technology orchestrated into the same environment, look and feel of what the customer is looking to actually accomplish and we can do that with drag and drop ease we've never been able to do that before. I believe that's going to have a material impact on sales cycles and win rates.

[Jon White:]

Excellent. Thank you for the elaboration. And it sounds like well, certainly it's not like, my last question is on investments in sales and marketing. So clearly, you're going to be investing in channel and you change your cost structure. I'm curious, it sounds like you've done a lot of investing in process and such. Do you anticipate more investment this year in, obviously, continued process, but more process or more people or more channel? Can you just elaborate a little bit on that?

[Andre Durand:]

We've made a lot of investments in infrastructure and process to date, I think you're going to see a heavier investment on quota carrying capacity, and investments in the channel, and especially around channel marketing programs.

[Operator:]

For our next question, we have Patrick Colville from DB.

[Patrick Colville:]

Thank you so much for taking my question. And congrats on a very impressive end to the fiscal year. Can I just ask about the channel, I mean, throughout the call, for me, there's a message has come out pretty loud and clear. It's, channel, channel, channel, what has changed that now the channel is so important, and has been such a great vector for you guys. That like if we were having this conversation two years ago, there's been this kind of slight pivot, why is that, is that customer buying behaviors change because the channel has kind of really lent into identity management, just to help us understand why there's this real emphasis on channel now.

[Andre Durand:]

If you go back prior to two years ago, Ping had played half court on the channel speaking to it, but never committing to it for years. And as our platform grew, and the sophistication of our solutions grew. And as the size and commitment and duration by large enterprises grew, there was a moment in time to which it became very clear that Ping’s ability to penetrate at the time Global 3,000, much less Global 5,000, that there was no way that we were going to do that alone, not at the size and scale and sophistication of the programs the companies were looking to undertake with Ping. And so really, I'm going to point to two years ago, we made a decision to not play half court, we were going to be completely committed to the channel. And as you know, that's a couple of your journey, at least, when you make that decision. We had to build a team, and we had to train the channel. So I would say that we have certainly moved towards the channel driven by a commitment to the channel, that's number one, number two, I would say the channel has come towards us. Because they also see in the market, that the scale of these zero trust, customer experience, transformations that these larger enterprises are undergoing, that they're significant. And there just aren't providers, like paying dedicated to them with proven solutions that they know that they can succeed upon for years to come. So it was our commitment to them starting a couple of years ago, it's the market maturing, and then coming to us based upon our platform, and the success that we've demonstrated with large enterprises that they see in their accounts. So all of that has matriculated to this moment in time to where now we are seeing that we are beginning to see the results of that commitment.

[Patrick Colville:]

That’s extremely helpful. And when we talk about the channel, are we talking about global systems integrators or is the kind of VAR channel also important, just help us understand like where is the focus in terms of the channel? And if it is mostly systems integrators are we talking about the kind of big four, or yes, just kind of any color to kind of double click in that space would be truly interesting.

[Andre Durand:]

Historically, we've been in kind of the more regional or national integrators in the last 12-months, as you would say, the big four, it actually extends beyond the big four, but I like that vernacular. The big four had definitely come to Ping and are now making significant investments to train their teams and to train their salesforce on our solutions. At the same time, well, I would say, especially in the last six months or so, a number of very significant VARs have come to us and said that they want to represent our products. So both -- to both sides of the national integrator that is Ping has traditionally been strong with, those are companies focused on identity and identity integration on both sides, both up to the big four. And in the channel, they have come to us, and we are now building and responding with programs that will essentially enable them to sell our solutions.

[Operator:]

For our next question, we have Bench Minch from Piper Sandler.

[Unidentified Analyst:]

Hey, guys, on for Rob Owens, thanks for taking our questions. First, really strong net new ARR in the quarter with, I guess more than half of that from SaaS. But looking at the quarter-over-quarter increase in SaaS revenue, I guess we would have expected to see a bit higher conversion there into revenue. Is that a function of linearity in the quarter? Or how should we think about that?

[Andre Durand:]

Yes, keep in mind that your ARR is going to outpace your revenue, right? That's the kind of the core thesis around the ratable model. So the more bookings you have later in the quarter, to your point or on linearity a lot of that doesn't in the actual quarter. So but you do get visibility into that going full.

[Unidentified Analyst:]

Makes sense, okay. And great year-over-year growth in $1 million customers. Wondering if we can add some color to the SaaS penetration and the Sign-On penetration into that cohort of large enterprise customers? Is that still a big conversion opportunity for SaaS? Or do we already see a lot of SaaS deployments in that group and Sign-On as well, wondering about upsell capacity there?

[Andre Durand:]

Well, the larger the deal, the more apt they are to have PingOne Advanced Services that's typically emblematic of larger deals, you've also got some element of hybrid deployment. So they may also have software in there. And certainly the customer use case, which has been growing faster for us as we're highly differentiated there, we've been investing there. And customer budgets are also going there. So there's still plenty of room for us to penetrate our customers with additional solutions around the cloud and around the customer use case. But certainly when we think of bigger deals, a lot of them do center on the customer use case and PingOne Advanced Services or SaaS parody solution.

[Unidentified Analyst:]

Got it, thanks a lot.

[Andre Durand:]

Yes, I would imagine that, I was just going to say watch our north of a million, if you were one use case, chances are it was a customer focusing use case keep in mind, 25% of our customers use us for both workforce and customer. So I'm sure a lot of those have now expanded from one use case to both and they're using, they're essentially using the platform as a unified platform for both use cases, which is also kind of a unique differentiator of the way we've designed the platform.

[Operator:]

For our next question, we have Alexander Frankiewicz from Raymond James.

[Alexander Frankiewicz:]

Thank you for taking my questions. I just want to double click on PingOne DaVinci for a second. I was just wondering kind of how customers are using it, how adoption is moving? And then you said, it helps in proof of concepts, this can also help sort of stacks up against after workflows?

[Andre Durand:]

Yes, so this was the acquisition of Singular Key. And we did announce two wins in Q4 that we attribute the win, essentially to the strength of the DaVinci platform. When we've spoken about DaVinci becoming foundational to our platform, we really mean it, we think that the future will hold every prospect and every future customer that is attempting to integrate identity to create an experience, a secure experience for their customers and workforce are going to begin in and by wanting to design essentially a flow, a workflow, if that makes sense. And so one of the things that we really liked about Singular Key now DaVinci was their focus on an integration layer that sat above every identity product and service, by the way, even extends beyond that. But I'm just going to focus on the identity of products and services. So they had a 100 existing out-of-box connectors, to multiple providers of nearly every piece of technology that sits within the identity stack. So it's extremely strong as an integration tool, not just for Ping but for customers leveraging Ping trying to integrate other legacy, or cloud technologies into an overall experience for their end users. The speed with which you can do that DaVinci is really pretty unbelievable. I don't think that we've seen for the sales engineers here at Ping, I don't think I've seen them more excited about any one technology in the history of the company in the last 20 years. And it's because they can go into any complex environment, and design a solution with nearly drag and drop ease, demonstrate that to the customer in a matter of hours, it will play a significant role in our go-to-market.

[Alexander Frankiewicz:]

Fantastic. And then just kind of one last thing on increasing liquidity. Do you have any targets in mind in terms of M&A, are you looking for more technology or adding to revenue, and then sort of just what type of technology might be looking at here?

[Andre Durand:]

Well, I don't know that we're going to divulge that on our M&A roadmap and strategy. But if you look at the history of purchasing, we definitely haven't acquired any revenue in organic revenue, per se. We are building a platform, we're not building a collection of companies that serve the identity market, a unified cloud platform that is cohesive in our ability to control identity from login to log off and everything in between. We believe that customers will perceive that value when we do the hard work of integrating that technology into a single platform. So they don't have to do it. And so we have I will say this, however, the acquisitions that we've made over the course of last 18 months, have largely realized the vision of an intelligent identity platform that leverages risk and fraud signals to strongly authenticate any user to appropriately authorize that user into any environment. And to have that entire thing orchestrated with no code or low code. So said another way, the acquisitions that we've made largely complete the vision of a real time identity control plane that can be integrated with extreme ease relative to the way it's been done with legacy systems.

[Operator:]

For our next question, we have from Stifel.

[Unidentified Analyst:]

Hi, thanks. This is on for Adam Borg. Maybe just a quick one from me, maybe for Andre, on the international front. Were you seeing the most success internationally and where do you interest in investing the most in calendar ‘22?

[Andre Durand:]

Well, we have efforts both in EMEA, headquartered out of the UK, and we have efforts in Australia, both of those markets have performed well for us. We're not done in either one of those markets. So we continue to invest both in EMEA and in our Australian efforts. There has been some conversations now kind of in the APAC region. I won't go into details of where we're looking to expand. But let's just say we still have growth opportunity in both of those primary markets. And we'll continue to invest in both of those markets. Great, international revenue right now is 24% of our revenue in Q4. That is up 41% year-over-year.

[Operator:]

And we don't have any further questions at this time. I’ll handed back to Andre Durand for closing remarks.

[Andre Durand:]

Yes, thank you. So that concludes today's earnings call. In summary, 2021 was a really exciting year of growth acceleration for Ping, and especially with regards to maturing SaaS platform as we spoke about here today. We look forward to continued growth in 2022. And we'll keep you updated on our progress as we move throughout the year. Thank you everyone for joining us.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.