In a discussion with TechCrunch last week, Ping Identity CEO Andre Durand and CFO Michael Sullivan detailed the company’s financial performance, including its forward projections.
The company, known for its identity management, multi-factor authentication and single sign-on tools also noted that it has seen growth in revenue share from newer products, and that it has transitioned successfully from a mostly license model to a mostly subscription revenue company.
What’s more, it appears to have avoided burning an ocean of cash in the process.
The company is clearly showing off, but in context and for good reason. Recently, Okta, a competitor to Ping, raised a $75 million round of capital, pushing its valuation north of the $1 billion mark. That makes Okta a Silicon Valley unicorn. Ping, naturally, doesn’t want to be left in the shade.
A Look At The Numbers
Regardless of motive, Ping’s numbers are noteworthy, due in no small part to the candor that the company was willing to impart1.
Let’s quickly summarize:
- Ping expects its annual recurring revenue (ARR) to surpass the $100 million mark in two to three quarters.
- A year ago, 5 percent of fresh bookings came from “new products.” That figure is now a third.
- The company has gross margins that it describes as “well ahead of industry norms.”
- It’s averaging 40 percent growth, on a yearly basis.
- More than 90 percent of its revenue, as counted on a normal basis (GAAP), is recurring.
- The company turned an operating profit last month.
All that and the company stressed a “responsible” profit and loss balance while moving from single-sale to recurring incomes.
This is an interesting set of data. The company is poised, as you have already guessed, to go public. However, Ping told TechCrunch that — and this is excellent — that there is no such thing as a good IPO, only good public companies. That’s mostly true.
And finally, Ping told TechCrunch that it does not forecast a need to raise more capital before it goes public, noting that it has a substantial portion of its raised cash — around $80 million since 2013 — in the bank.
What Does It All Mean?
Summing quickly, all that means that Ping has executed a shift to subscription revenue at a low implied cost. Many SaaS companies are noted for their quick revenue growth and yawning losses. Ping did it in three years on something approaching a budget and is now, mostly, in the black.
That’s a good thing. Ping appears healthier than other companies that we regularly speak to. At the same time, we do not have access to its forward projections on a growth basis. That’s to say we do not know precisely how fast the company is growing now.
Asked directly about an IPO, Ping’s leadership team told TechCrunch that late 2016, or early 2017 are reasonable targets.
If the firm is lowering spend to work toward profitability at the expense of growth, some investors may balk at a lower expansion rate. At the same time, Wall Street has recently shifted its focus to profits, and away from growth that may have been purchased at what it considers an unreasonably high cost.
It’s a question of taste.
Asked directly about an IPO, Ping’s leadership team told TechCrunch that late 2016 or early 2017 are reasonable targets. Those times would, and we are guessing a bit here, allow Ping to record more GAAP ARR, and show a quarter or two of GAAP profits; yes, you can go public when you are profitable, in case you forgot.
The Identity Market
While Ping Identity has been around for over a decade, it’s far from alone in the identity market. Okta has also received a lot of attention, and raised $230 million since its inception in 2009. Duo Security is also a player and recently added an enterprise mobile security platform. Okta and Duo have the advantage of being born in the cloud, but Ping had said it wants to drive security through identity, regardless of where your application lives. They all have multi-factor identification products.
While all three companies (and others not mentioned) come at a little differently (and Okta is also dabbling in mobile device management), the fact is that they are all playing in confined space around identity and trying to find a way to protect user log-in information from hackers. At the same time, they are all trying to make it as simple as possible to log on to your cloud services and enterprise applications and move freely among them without having to jump through identity hoops.
It’s not exactly a secret that in any given category, there can only be a couple of winners and clearly Ping wants to be among them — and it wants to show us that it’s growing carefully and not being careless financially.
Ping is surely trying to flash some cash, but it’s worth noting that a company more than a decade old can still pull off a shift from single-sale to subscriptions without setting fire to all the money on God’s Little Orb.
What we find most fascinating is the potential impact on Ping. Sharing this amount of information is unusual. Other firms to do so include Nexmo, and Egnyte, firms that we have covered extensively for that exact reason. Though, firms like Uber have managed similar press cycles, if by accident.
Ping has been at this for a long time, having launched way back in 2002. It has raised over $128 million. Thirteen years is a long time to stay private, but Ping officials stressed they wanted to do this the right way and have their financial ducks in a row before taking the company public. It seems like the responsible way of building a company, building it for the long haul.
Regardless of their motivation, it’s not every day a company opens like this about its financials and when they do, it’s probably worth paying attention.
1. PR protip: If you want the media to cover your company, get your two leading executives on the horn and have them dish.