Ping Identity Is Worth a Look Even After Its Post-Earnings Pop

With its first quarterly update since holding its IPO exactly two months ago, Ping Identity (PING) released significantly stronger-than-expected Q3 results last week. Shares of the smart identity solutions company soared a whopping 14% on Thursday as investors absorbed the news.

Now that the dust has settled, let's take a closer look at how Ping kicked off its life as a public company, starting with how its headline numbers fared relative to the same year-ago period:

Data source: Ping Identity. GAAP = generally accepted accounting principles. 

IMAGE SOURCE: GETTY IMAGES.

"Marketwide momentum for identity solutions..."

Those GAAP results included the impact of items like stock-based compensation and acquisition expenses. Adjusted for one-time items, Ping Identity achieved (non-GAAP) earnings of $8.9 million, or $0.13 per share, up from $0.02 per share in the same year-ago period. Also of note: Ping's annual recurring revenue (ARR) soared 23% to $206.7 million, offering encouraging perspective on the health and predictability of its subscription-based revenue streams.

For perspective -- and keeping in mind that Ping Identity only just held its initial public offering at $15 per share in mid-September -- the company hadn't provided specific financial guidance for Wall Street to better gauge its success in the third quarter. But that didn't stop an already optimistic chorus of analysts from taking their best shot: Leading into the report, their consensus estimates had called for far lower adjusted earnings of $0.01 per share on revenue of just $55 million.

Ping Identity founder and CEO Andre Durand called it a "strong" quarter that was "bolstered by marketwide momentum for identity solutions that enable digital transformation and simultaneously enhance security."

On Ping's advantage, growth potential

Of course, that's the beauty of Ping's products. With the help of its innovative artificial intelligence and machine learning algorithms, Ping is able to take a "layered security" approach to validate any given login attempt. Perhaps most interesting, that means Ping's platform is capable of dynamically applying multi-factor authentication (MFA) on an as-needed basis -- say, when a user accidentally types in an old password multiple times before finally getting it right, Ping might notice and decide to enforce MFA to ensure you're not a robot attempting to break in.

This smart but simplified approach is proving sticky for customers; Ping already secures over 2 billion identities globally, including contracts with more than half the Fortune 100 within its client base.

So how long can Ping keep up its heady growth? Note MFA solutions are only used for around 10% of all application access today. But according to Gartner, MFA could rise to 70% of all application access over the next five years alone, spurred by the adoption of more innovative, streamlined approaches to MFA like Ping's. If Ping is able to leverage the network effect of its already impressive customer base and secure any meaningful chunk of that growth, it could mean good tidings for patient shareholders willing to stick around and watch it all unfold.

On guidance

In the meantime, Ping told investors to expect fourth-quarter revenue of $64.7 million to $66.7 million, with total ARR rising to a range of $222.1 million to $223.1 million.

As such, Ping sees full-year 2019 revenue rising to a range of $239.3 million to $241.3 million -- up roughly 19.2% at the midpoint from 2018, and again well above analysts' consensus estimates for $231.3 million.

Given the combination of that solid forward guidance with Ping's relative outperformance in the third quarter, it was no surprise to see the stock respond in kind last week. But I suspect this will be only the start of a much longer-term positive trend for investors who buy now.