$19.7m follower assets
RPO: Useful or Nah?
I find myself looking at remaining performance obligations (RPO) for all my SaaS companies and perhaps caring a bit too much if RPO is growing faster/slower than revenue. Or maybe I'm not caring enough? I don't know! What's your stance?
Example's:
- $APPN's RPO was up 32% in their recent quarter while revenue growth of 20%.
- $NCNO's RPO was up 28% in their recent quarter while revenue growth of 50%.
Edit: Fresh example since their 10-K was just released a few minutes ago... $OKTA grew revenue at 33% in their recent quarter but RPO is up just 12% YoY. That seems like a very yellow flag to me.
How much weight do you put into RPO for SaaS companies?
22%A lot
44%A little
11%None at all
22%Results (Just vote instead!)
9 VotesPoll ended on: 3/6/2023
@interrobangbros RPO serves as a proxy for future revenue, the RPO growth rate provides a leading indicator of growth. In essence, RPO is similar to Total Contract Value (TCV) so it's of high importance, especially for companies relying on future accelerated growth such as SaaS businesses.
@kostofff Precisely. That's why I find myself using that as a KPI. I see Okta reporting RPO growth of just 12% YoY and I can't help but feel like their revenue growth is going to decelerate even more quickly than it already is (up 65% YoY in Q1, to 43%, to 37%, to 33% in Q4).
@interrobangbros Seems like that's the case with Okta $OKTA.
I write about RPO on my blog Consume Your Own Tech Investing recently, along with some of the nuances that go with this metric.
I think it is an important indicator. There is also a distinction to be made between cRPO and total RPO. For many SaaS customers, they are just more cautious committing to spend now, so shorter contractual tenure will diminish total RPO growth, though less impact on cRPO.
@consumeowntech I appreciate the link. I tagged it to read later!
I love to see RPO growing faster than revenue. I do think a slowdown in RPO spells near-term trouble for a high-multiple SaaS and if I saw that I'd be digging into management's commentary and guidance on the conference call for more color about what's on the horizon.
Would love to hear the opinion of the person who voted none at all.
Author
Related
Already have an account?