Ping Identity Ramps Up Sales In Anticipation Of Improved Prospects (NYSE:PING)

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Ping Identity Ramps Up Sales In Anticipation Of Improved Prospects (NYSE:PING)

Quick Take

Ping Identity (PING) went public in September, 2019, selling 12.5 million shares of its common stock at $15.00 per share.

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The firm provides organizations with security software enabling them to control access to information systems.

PING is investing in sales and marketing while annual revenue appears to be decelerating, as management bets on a return to normal conditions.

My outlook on the stock is Neutral, but it may present a buying opportunity for those who agree with management and wish to take advantage of an attractive entry point.

Company

Denver, Colorado-based Ping was founded in 2002 and has developed an Intelligent Identity Platform that analyzes device, network, application and user behavior data to make real-time authentication and security control decisions.

Management is headed by Founder, CEO and Director Andre Durand, who previously founded Jabber (CSCO).

The firm’s Intelligent Identity Platform is designed to detect anomalies and automatically apply additional security measures only when necessary, such as two-factor authentication, can secure all primary use cases, including customer, employee, partner and IoT, while supporting operations across cloud, hybrid and on-premise infrastructures.

Below is a brief video of the CEO talking about a ‘new security paradigm’:

Source: CNBC Television

The platforms’ feature is comprised of six solutions, namely secure single sign-on [SSO], adaptive multi-factor authentication [MFA], security control for applications and APIs [Access Security], personalized and unified profile directories [Directory], data governance to control access to identity data [Data Governance], as well as AI and machine learning-powered API security [API Intelligence].

Ping’s primary products include:

  • PingID

  • PingOne for Enterprise

  • PingOne for Customers

  • PingCloud Private Tenant

  • PingFederate

  • PingAccess

Source: Company website

In 2018, 44% of the company’s subscription revenue from its Intelligent Identity Platform accounted for the customer use case.

The company’s major customers include Accenture, Allegiant, Applied Materials, Burberry, Chevron, Cisco, eHealth, GlaxoSmithKline, and Hewlett-Packard among others.

Recent Performance

PING’s topline revenue by quarter has dipped from a Q4 2019 high of $68.2 million, as the chart shows here:

Gross profit by quarter has continued a downward trend since Q4 2019’s crest:

Operating income by quarter has worsened in the most recent reported quarter of Q3 2020:

Earnings per share (Diluted) posted an improved result in the current quarter, losing only one penny per share:

Source for chart data: Seeking Alpha

In the past 12 months, PING’s stock price has risen 64.5 percent vs. the U.S. Software index’ growth of 52.2 percent and the overall U.S. market’s rise of 15.3 percent, as the chart below indicates:

Source: Simply Wall Street

Valuation Metrics

Below is a table of relevant capitalization and valuation figures for the company:

Measure

Amount

Market Capitalization

$2,250,000,000

Enterprise Value

$2,240,000,000

Price / Sales

8.52

Enterprise Value / Sales

8.96

Enterprise Value / EBITDA

176.78

Free Cash Flow [TTM]

$8,420,000

Revenue Growth Rate

16.46%

Earnings Per Share

-$8.18

Source: Company Financials

As a reference, a relevant public comparable to Ping would be Okta (OKTA); shown below is a comparison of their primary valuation metrics:

Metric

Okta (OKTA)

Ping Identity (PING)

Variance

Price / Sales

41.84

8.52

-79.6%

Enterprise Value / Sales

41.03

8.96

-78.2%

Enterprise Value / EBITDA

-163.66

176.78

-208.0%

Free Cash Flow [TTM]

$183,810,000

$8,420,000

-95.4%

Revenue Growth Rate

42.7%

16.5%

-61.5%

Source: Seeking Alpha

Commentary

In its last earnings call, management highlighted a few Q3 customer wins, with TransUnion choosing Ping for its global workforce authentication system and the expansion of Sharp Healthcare’s usage of Ping’s services.

Additionally, the firm announced new solution offerings such as stand-alone SaaS services for its PingOne platform – PingOne MFA and PingOne Risk, which are also available via APIs.

Notably, the CEO touched on its recent acquisition of Symphonic, which promises to enhance its PingDataGovernance offering enabling organizations to ‘centralize authorization and extend identity controls to address global regulatory requirements for privacy, API and data security.’

As to its financial results, management noted that ‘contact durations for both new bookings and renewals have begun to normalize more closely to pre-Covid levels.’

Ping closed the third quarter with ARR of $242.6 million, a disappointing year-over-year growth rate of 17%.

Given the sharp turn toward decentralized work forces as a result of the Covid-19 pandemic, investors were likely expecting a stronger topline revenue growth result.

Management said it has been seeing a ‘phasing in’ of typically larger deals as a result of Covid-19, with a typical phasing in period of 4 to 6 quarters, effectively slowing the revenue ramp over an extended period.

Dollar-based net retention was 110%, still a healthy figure, but not exactly impressive.

Looking ahead, given management’s Q4 guidance, it indicates continued deceleration year-over-year for ARR while sales and marketing efficiency appears to be worsening against the new guidance.

In response, management believes that sales productivity will improve going forward, so it is continuing to invest accordingly, despite short-term headwinds.

However, investors have punished the stock in the aftermath of the financial report and call.

Ping appears to be in a period of significant uncertainty as management seeks to make the case that its investment restart in sales and marketing will pay off as conditions return to normal.

Given the unknowns ahead and the firm’s tentative revenue guidance, interested investors may wish to watch-list the stock, as it has dropped considerably and may present a buying opportunity before next quarter’s results are reported, if management is correct.

My outlook on the stock at this time is Neutral.


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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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