SAIL SailPoint Technologies Holdings Inc

• Total ARR of $394.7 million, up 46% year-over-year
• First quarter 2022 subscription revenue of $85.6 million, up 44% year-over-year
• First quarter 2022 total revenue of $115.4 million, up 27% year-over-year

SailPoint Technologies Holdings, Inc. (NYSE: SAIL) (“SailPoint,” the “Company” or “we”), the leader in identity security, today announced financial results for the first quarter ended March 31, 2022.

“SailPoint delivered another excellent quarter, highlighted by 46% total ARR growth and 44% subscription revenue growth. The strong performance was driven by our sales execution and demand from global enterprises that recognize the strategic role identity security plays in securing their businesses,” said Mark McClain, SailPoint CEO and Founder.

Financial Highlights for First Quarter 2022:

• ARR: Total ARR at March 31, 2022 was $394.7 million, a 46% increase year-over-year.
• Revenue: Total revenue was $115.4 million, a 27% increase over Q1 2021. Subscription revenue was $85.6 million, a 44% increase over Q1 2021, of which SaaS revenue was $41.1 million, an 88% increase over Q1 2021.
• Operating Income (Loss): Loss from operations was $(30.5) million compared to loss from operations of $(15.6) million in Q1 2021. Non-GAAP loss from operations was $(9.3) million compared to non-GAAP income from operations of $0.7 million in Q1 2021.
• Net Income (Loss): Net loss was $(33.1) million compared to net loss of $(15.3) million in Q1 2021. Net loss per diluted share was $(0.35) compared to net loss per diluted share of $(0.17) in Q1 2021. Non-GAAP net loss was $(8.1) million compared to non-GAAP net income of $0.4 million in Q1 2021. Non-GAAP net loss per diluted share was $(0.09) compared to non-GAAP net income per diluted share of $0.00 in Q1 2021.

The tables included in this press release present a reconciliation of GAAP loss from operations to non-GAAP income (loss) from operations, GAAP net loss to non-GAAP net income (loss) and GAAP to non-GAAP weighted average outstanding shares, each for the three months ended March 31, 2022 and 2021. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures." In addition, see “Operating Metrics” for more information regarding Total ARR.

Transaction with Thoma Bravo

As announced on April 11, 2022, SailPoint has entered into a definitive agreement to be acquired by Thoma Bravo. In light of this transaction, SailPoint will not be hosting an earnings conference call or live webcast to discuss its first quarter 2022 financial results and SailPoint will not be providing guidance for the second quarter or full fiscal year 2022.

Operating Metrics

Total annual recurring revenue (“Total ARR”) represents the annualized value of the active portion of SaaS, term-based license, maintenance and support contracts and other subscription services at the end of the reporting period. We calculate Total ARR by dividing the active contract value by the number of days in the active portion of the overall contract term and then multiplying by 365. See Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, which was filed with the Securities and Exchange Commission (the “SEC”) on May 5, 2022 (our “First Quarter Quarterly Report”) for more information regarding SailPoint’s utilization of the Total ARR metric.

Non-GAAP Financial Measures

In addition to SailPoint’s financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), this press release includes certain non-GAAP financial measures to clarify and enhance investors’ understanding of SailPoint’s past performance and future prospects. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that includes or excludes amounts that are included or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. SailPoint’s management believes the non-GAAP financial measures described below provide useful information to investors regarding the Company’s financial condition and results of operations because they facilitate comparisons of SailPoint’s core operating results from period to period. In addition, SailPoint’s management uses non-GAAP income (loss) from operations for budgeting and planning purposes.

Our non-GAAP financial measures are adjusted for the following factors:

Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, the use of assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Amortization of acquired intangible assets. We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over the useful life, which can be several years after the acquisition.

Amortization of debt issuance costs. The expense for the amortization of debt issuance costs, which relate to SailPoint’s credit agreement (which is undrawn) and the convertible senior notes issued in 2019, is a non-cash item, and we believe the exclusion of this component of interest expense provides a more useful comparison of our operational performance from period to period.

Acquisition related costs and impairment of intangible assets. We exclude these expenses because they are unrelated to our current operations and are neither comparable to the prior period nor indicative of future results. See Note 14 “Subsequent Events” in the notes to the consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 for information about our pending transaction with Thoma Bravo and recent acquisitions.

SailPoint’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry because they may calculate non-GAAP financial results differently. In addition, there are limitations to using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. SailPoint urges you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate its business.

Non-GAAP income (loss) from operations. SailPoint believes that the use of non-GAAP income (loss) from operations is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP income (loss) from operations is calculated as income (loss) from operations on a GAAP basis excluding (i) stock-based compensation expense, (ii) amortization of acquired intangibles, (iii) acquisition related costs and (iv) impairment of intangible assets.

Non-GAAP net income (loss) and non-GAAP net income (loss) per basic and diluted share. SailPoint believes that the use of non-GAAP net income (loss) and non-GAAP net income (loss) per basic and diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income (loss) is calculated as net income (loss) on a GAAP basis (a) excluding (i) stock-based compensation expense, (ii) amortization of acquired intangibles, (iii) amortization of debt issuance costs, (iv) acquisition related costs and (v) impairment of intangible assets, and (b) adjusted for the effect of income taxes associated with such non-GAAP adjustments. SailPoint defines non-GAAP net income (loss) per basic and diluted share as non-GAAP net income (loss) divided by the non-GAAP basic and diluted weighted average outstanding common shares.

SailPoint’s presentation of non-GAAP net income (loss) includes the effect of income taxes associated with the non-GAAP adjustments, which is calculated using an estimated effective income tax rate that is commensurate with our non-GAAP pre-tax income (loss). The non-GAAP effective income tax rate is adjusted from the GAAP effective income tax rate to reflect the impact of non-GAAP income (loss) adjustments. Due to the adjustments, the non-GAAP estimated income taxes may differ from GAAP estimated income taxes and actual tax liabilities. Estimated income taxes and tax liabilities reflect currently available information, as well as other factors and assumptions, including current operating structure, existing tax positions in various jurisdictions and key tax legislation in jurisdictions where SailPoint currently operates. Non-GAAP estimated income taxes may change for a variety of reasons, including global tax environment, significant changes to geographic earnings mix, acquisitions, or other changes to SailPoint’s strategy or business operations. SailPoint re-evaluates its non-GAAP estimated income taxes at least annually, or more frequently if significant events occur, which may materially impact our non-GAAP income tax calculation.

The accompanying tables have more details on the reconciliations of non-GAAP financial measures to their nearest comparable GAAP measures.

Forward-Looking Statements:

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including regarding our strategy, future operations, financial position, business outlook, prospects, plans and objectives of management, growth rate and our expectations regarding future revenue, operating income or loss or earnings or loss per share. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “will be,” “will likely result,” “should,” “expects,” “plans,” “anticipates,” “could,” “would,” “foresees,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “outlook,” “look forward” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These forward-looking statements are not guarantees of future performance, but are based on management's current expectations, assumptions and beliefs concerning future developments and their potential effect on us, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks.

Important factors, some of which are beyond our control, that could cause actual results to differ materially from our historical results or those expressed or implied by these forward-looking statements include the following: the effect of the COVID-19 global pandemic and its aftermath, as well as governmental, business and other actions in response, on the global economy and on our business; our ability to achieve and sustain profitability; our ability to sustain historical growth rates; our ability to attract and retain customers and to deepen our relationships with existing customers; an increased focus in our business from selling licenses to selling subscriptions; breaches in our security, cyber-attacks or other cyber-risks; interruptions with the delivery of our SaaS solutions or third-party cloud-based systems that we use in our operations; our ability to compete successfully against current and future competitors; the length and unpredictable nature of our sales cycle; delayed effects on our operating results from ratably recognizing some of our revenue; fluctuations in our quarterly results; our ability to maintain successful relationships with our channel partners; the increasing complexity of our operations; real or perceived errors, failures or disruptions in our platform or solutions; our ability to adapt and respond to rapidly changing technology, industry standards, regulations or customer needs, requirements or preferences; our ability to achieve and maintain an effective system of disclosure controls and internal control over financial reporting; our ability to comply with our privacy policy or related legal or regulatory requirements; our ability to accurately forecast our estimated annual effective tax rate for financial accounting purposes; our ability to successfully identify, acquire and integrate companies and assets; our ability to maintain high-quality customer satisfaction; and our ability to maintain and enhance our brand or reputation as an industry leader. More information on these risks and other potential factors that could affect our financial results is included in our filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

About SailPoint

SailPoint is the leader in identity security for the modern enterprise. Harnessing the power of AI and machine learning, SailPoint automates the management and control of access, delivering only the required access to the right identities and technology resources at the right time. Our sophisticated identity platform seamlessly integrates with existing systems and workflows, providing the singular view into all identities and their access. We meet customers where they are with an intelligent identity solution that matches the scale, velocity and environmental needs of the modern enterprise. SailPoint empowers the most complex enterprises worldwide to build a security foundation grounded in identity security.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Revenue

 

 

 

Licenses

$

15,271

 

 

$

19,235

 

Subscription (1)

 

85,591

 

 

 

59,242

 

Services and other

 

14,558

 

 

 

12,285

 

Total revenue

 

115,420

 

 

 

90,762

 

Cost of revenue

 

 

 

Licenses (2)

 

1,378

 

 

 

1,247

 

Subscription (2)(3)

 

19,966

 

 

 

11,304

 

Services and other (3)

 

13,837

 

 

 

11,799

 

Total cost of revenue

 

35,181

 

 

 

24,350

 

Gross profit

 

80,239

 

 

 

66,412

 

Operating expenses

 

 

 

Research and development (2)(3)

 

31,046

 

 

 

19,566

 

General and administrative (3)

 

13,987

 

 

 

11,267

 

Sales and marketing (2)(3)

 

65,730

 

 

 

51,162

 

Total operating expenses

 

110,763

 

 

 

81,995

 

Loss from operations

 

(30,524

)

 

 

(15,583

)

Other expense, net:

 

 

 

Interest income

 

24

 

 

 

200

 

Interest expense

 

(899

)

 

 

(789

)

Other expense, net

 

(660

)

 

 

(1

)

Total other expense, net

 

(1,535

)

 

 

(590

)

Loss before income taxes

 

(32,059

)

 

 

(16,173

)

Income tax (expense) benefit

 

(1,025

)

 

 

882

 

Net loss

$

(33,084

)

 

$

(15,291

)

Net loss per share

 

 

 

Basic

$

(0.35

)

 

$

(0.17

)

Diluted

$

(0.35

)

 

$

(0.17

)

Weighted average shares outstanding

 

 

 

Basic

 

93,939

 

 

 

91,684

 

Diluted

 

93,939

 

 

 

91,684

 

 

(1) Subscription revenue is further disaggregated as follows:

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Subscription revenue

 

 

 

SaaS

$

41,127

 

$

21,889

Maintenance and support

 

42,332

 

 

35,474

Other subscription services

 

2,132

 

 

1,879

Total subscription revenue

$

85,591

 

$

59,242

 

(2) Includes amortization of acquired intangibles as follows:

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Cost of revenue - licenses

$

829

 

$

1,008

Cost of revenue - subscription

 

1,552

 

 

857

Research and development

 

169

 

 

168

Sales and marketing

 

1,627

 

 

1,220

Total amortization expense

$

4,177

 

$

3,253

 

(3) Includes stock-based compensation expense and the related employer payroll tax expense as follows:

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Cost of revenue - subscription

$

1,317

 

$

746

Cost of revenue - services and other

 

1,186

 

 

882

Research and development

 

4,643

 

 

2,454

General and administrative

 

2,665

 

 

2,303

Sales and marketing

 

6,628

 

 

4,756

Total stock-based compensation expense

$

16,439

 

$

11,141

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

As of

 

March 31, 2022

 

December 31, 2021

 

(Unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

414,640

 

 

$

435,445

 

Restricted cash

 

6,712

 

 

 

6,719

 

Accounts receivable, net of allowances of $348 and $564

 

108,470

 

 

 

147,156

 

Deferred contract acquisition costs, current

 

27,555

 

 

 

25,966

 

Contract assets, current

 

35,115

 

 

 

31,640

 

Prepayments and other current assets

 

22,496

 

 

 

17,806

 

Income taxes receivable

 

505

 

 

 

506

 

Total current assets

 

615,493

 

 

 

665,238

 

Deferred tax asset - non-current

 

4,047

 

 

 

4,047

 

Property and equipment, net

 

16,319

 

 

 

17,151

 

Right-of-use assets, net

 

24,882

 

 

 

23,806

 

Deferred contract acquisition costs, non-current

 

68,868

 

 

 

68,725

 

Contract assets, non-current, net of allowances of $2,365 and $2,386

 

18,877

 

 

 

16,991

 

Other non-current assets

 

1,369

 

 

 

983

 

Goodwill

 

289,430

 

 

 

289,430

 

Intangible assets, net

 

69,292

 

 

 

73,469

 

Total assets

$

1,108,577

 

 

$

1,159,840

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities

 

 

 

Accounts payable

 

8,263

 

 

 

6,097

 

Accrued expenses and other liabilities

 

54,577

 

 

 

89,972

 

Income taxes payable

 

1,305

 

 

 

1,413

 

Convertible senior notes, net

 

385,599

 

 

 

385,172

 

Deferred revenue

 

214,686

 

 

 

218,937

 

Total current liabilities

 

664,430

 

 

 

701,591

 

Long-term operating lease liabilities

 

29,585

 

 

 

28,817

 

Deferred revenue - non-current

 

27,122

 

 

 

25,193

 

Total liabilities

 

721,137

 

 

 

755,601

 

Commitments and contingencies

 

 

 

Stockholders’ equity

 

 

 

Common stock, $0.0001 par value

 

9

 

 

 

9

 

Preferred stock, $0.0001 par value

 

—

 

 

 

—

 

Additional paid in capital

 

498,195

 

 

 

481,910

 

Accumulated deficit

 

(110,764

)

 

 

(77,680

)

Total stockholders' equity

 

387,440

 

 

 

404,239

 

Total liabilities and stockholders’ equity

$

1,108,577

 

 

$

1,159,840

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Operating activities

 

 

 

Net loss

$

(33,084

)

 

$

(15,291

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization expense

 

5,712

 

 

 

4,784

 

Amortization of debt issuance costs

 

468

 

 

 

633

 

Amortization of contract acquisition costs

 

6,933

 

 

 

4,328

 

Loss on disposal of fixed assets

 

15

 

 

 

27

 

Provision for credit losses

 

(106

)

 

 

102

 

Stock-based compensation expense

 

15,801

 

 

 

10,073

 

Operating leases, net

 

(288

)

 

 

(205

)

Net changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:

 

 

 

Accounts receivable

 

38,771

 

 

 

27,854

 

Deferred contract acquisition costs

 

(8,665

)

 

 

(6,587

)

Contract assets

 

(5,340

)

 

 

(4,445

)

Prepayments and other current assets

 

(4,663

)

 

 

23

 

Other non-current assets

 

(427

)

 

 

1,473

 

Accounts payable

 

2,166

 

 

 

(369

)

Accrued expenses and other liabilities

 

(35,415

)

 

 

(22,161

)

Income taxes

 

(107

)

 

 

(2,228

)

Deferred revenue

 

(2,322

)

 

 

(10,177

)

Net cash used in operating activities

 

(20,551

)

 

 

(12,166

)

Investing activities

 

 

 

Purchase of property and equipment

 

(749

)

 

 

(818

)

Proceeds from sale of property and equipment

 

4

 

 

 

2

 

Purchase of intangibles

 

—

 

 

 

(40

)

Business acquisitions, net of cash acquired

 

—

 

 

 

(71,196

)

Net cash used in investing activities

 

(745

)

 

 

(72,052

)

Financing activities

 

 

 

Payments for partial conversion of convertible senior notes

 

—

 

 

 

(10,160

)

Taxes associated with net issuances of shares upon vesting of restricted stock units

 

(846

)

 

 

(1,293

)

Exercise of stock options

 

1,330

 

 

 

1,608

 

Net cash provided by (used in) financing activities

 

484

 

 

 

(9,845

)

Net decrease in cash, cash equivalents and restricted cash

 

(20,812

)

 

 

(94,063

)

Cash, cash equivalents and restricted cash, beginning of period

 

442,164

 

 

 

516,644

 

Cash, cash equivalents and restricted cash, end of period

$

421,352

 

 

$

422,581

 

 

RECONCILIATION OF NON-GAAP INCOME (LOSS) FROM OPERATIONS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Loss from operations on a GAAP basis

$

(30,524

)

 

$

(15,583

)

Add back:

 

 

 

Stock-based compensation expense (1)

 

16,439

 

 

 

11,141

 

Amortization of acquired intangibles

 

4,177

 

 

 

3,253

 

Acquisition related costs (2)

 

600

 

 

 

1,863

 

Impairment of intangible assets

 

—

 

 

 

—

 

Non-GAAP income (loss) from operations

$

(9,308

)

 

$

674

 

 

(1) Stock-based compensation expense includes employer related payroll tax expense.

(2) Acquisition related costs are transaction costs, which include legal, accounting and consulting professional service fees. The 2022 costs pertain to the pending recently announced go-private transaction with Thoma Bravo. The 2021 costs pertain to the prior year acquisitions of Intello and ERP Maestro.

 

RECONCILIATION OF NON-GAAP NET INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Net loss on a GAAP basis

$

(33,084

)

 

$

(15,291

)

Add back:

 

 

 

Stock-based compensation expense (1)

 

16,439

 

 

 

11,141

 

Amortization of acquired intangibles

 

4,177

 

 

 

3,253

 

Amortization of debt issuance costs

 

468

 

 

 

633

 

Acquisition related costs (2)

 

600

 

 

 

1,863

 

Impairment of intangible assets

 

—

 

 

 

—

 

Effect of income taxes associated with the above adjustments (3)

 

3,323

 

 

 

(1,150

)

Non-GAAP net income (loss)

$

(8,077

)

 

$

449

 

Non-GAAP net income (loss) per share

 

 

 

Basic

$

(0.09

)

 

$

0.00

 

Diluted

$

(0.09

)

 

$

0.00

 

Non-GAAP weighted average outstanding shares

 

 

 

Basic

 

93,939

 

 

 

91,684

 

Diluted

 

93,939

 

 

 

95,066

 

 

(1) Stock-based compensation expense includes employer related payroll tax expense.

(2) Acquisition related costs are transaction costs, which include legal, accounting and consulting professional service fees. The 2022 costs pertain to the pending recently announced go-private transaction with Thoma Bravo. The 2021 costs pertain to the prior year acquisitions of Intello and ERP Maestro.

(3) The GAAP effective tax rates were (3.2)% and 5.5% for the three months ended March 31, 2022 and 2021, respectively, compared to non-GAAP effective tax rates of 22.1% and 37.5% for the three months ended March 31, 2022 and 2021, respectively.

 

RECONCILIATION OF NON-GAAP WEIGHTED AVERAGE OUTSTANDING SHARES

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

March 31, 2022

 

March 31, 2021

Weighted average outstanding shares used to compute net loss per share, basic and diluted, on a GAAP basis

 

 

 

Basic

93,939

 

91,684

Diluted

93,939

 

91,684

Non-GAAP weighted average outstanding shares

 

 

 

Basic

93,939

 

91,684

Effect of potentially dilutive securities

—

 

3,382

Diluted

93,939

 

95,066

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220505005756/en/

Investor Relations Brian Denyeau ICR for SailPoint investor@sailpoint.com 512-664-8916 Media Relations SailPoint Technologies Holdings, Inc. Natalie Reina Natalie.reina@sailpoint.com 956-878-9176