Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                      

Commission File Number 001-38297

 

SailPoint Technologies Holdings, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

47-1628077

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

1130511120 Four Points Drive, Building 2, Suite 100,

Austin, TX 78726

78726

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (512) 346-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

SAIL

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  

As of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s equity was not listed on a domestic exchange or over-the-counter market.  The registrant’s common stock began trading on the New York Stock Exchange on November 17, 2017.

The registrant had 87,219,16089,122,643 shares of common stock outstanding as of May 4, 2018.August 1, 2019.

 

 

 

 


Table of Contents

SailPoint Technologies Holdings, Inc.
Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Page

 

 

Item 1.

Financial Statements (unaudited)(Unaudited)

1

Condensed Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017

1

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017

2

 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

2

Condensed Consolidated Statements of Cash FlowsOperations for the three and six months ended March 31,June 30, 2019 and 2018 and 2017

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018

4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

6

Notes to Unaudited Condensed Consolidated Financial Statements

47

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1219

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2430

Item 4.

Controls and Procedures

2430

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

2532

Item 1A.

Risk Factors

2532

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 5.

Other Information

2632

Item 6.

Exhibits, Financial Statement Schedules

2633

 

Signatures

2834

 


1


Table of Contents

 

iPART I


PART I

ITEM 1. Financial Statements

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated Balance sheets

 

 

As of

 

 

As of

 

 

March 31, 2018

 

 

December 31, 2017

 

 

June 30, 2019

 

 

December 31, 2018

 

 

(In thousands, except share and per share  data)

 

 

(In thousands, except per share data)

 

 

(Unaudited)

 

 

 

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

130,859

 

 

$

116,049

 

 

$

93,049

 

 

$

70,964

 

Restricted cash

 

 

126

 

 

 

78

 

 

 

6,303

 

 

 

6,272

 

Accounts receivable

 

 

55,997

 

 

 

72,907

 

 

 

70,613

 

 

 

101,469

 

Prepayments and other current assets

 

 

9,094

 

 

 

10,013

 

 

 

23,289

 

 

 

21,850

 

Total current assets

 

 

196,076

 

 

 

199,047

 

 

 

193,254

 

 

 

200,555

 

Property and equipment, net

 

 

3,126

 

 

 

3,018

 

 

 

21,524

 

 

 

19,268

 

Deferred tax asset - non-current

 

 

264

 

 

 

264

 

Right-of-use assets

 

 

31,330

 

 

 

 

Other non-current assets

 

 

3,106

 

 

 

3,542

 

 

 

22,973

 

 

 

20,374

 

Goodwill

 

 

219,377

 

 

 

219,377

 

 

 

219,377

 

 

 

219,377

 

Intangible assets, net

 

 

78,979

 

 

 

81,185

 

 

 

70,198

 

 

 

74,860

 

Total assets

 

$

500,928

 

 

$

506,433

 

 

$

558,656

 

 

$

534,434

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,872

 

 

$

2,231

 

 

$

3,444

 

 

$

4,636

 

Accrued expenses and other liabilities

 

 

12,012

 

 

 

22,636

 

 

 

21,768

 

 

 

21,731

 

Income taxes payable

 

 

1,918

 

 

 

1,688

 

 

 

591

 

 

 

2,143

 

Deferred revenue

 

 

75,883

 

 

 

73,671

 

 

 

95,496

 

 

 

95,919

 

Total current liabilities

 

 

91,685

 

 

 

100,226

 

 

 

121,299

 

 

 

124,429

 

Long-term debt

 

 

68,321

 

 

 

68,329

 

Other long-term liabilities

 

 

65

 

 

 

27

 

Deferred revenue non-current

 

 

13,175

 

 

 

9,454

 

Deferred tax liability - non-current

 

 

4,142

 

 

 

4,142

 

Long-term operating lease liabilities

 

 

38,813

 

 

 

9,788

 

Deferred revenue - non-current

 

 

19,928

 

 

 

18,382

 

Total liabilities

 

 

173,246

 

 

 

178,036

 

 

 

184,182

 

 

 

156,741

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, authorized 300,000,000 shares issued and

outstanding 85,953,041 shares at March 31, 2018 and 84,948,126 shares at

December 31, 2017

 

 

9

 

 

 

8

 

Preferred stock, $0.0001 par value, authorized 10,000,000 shares, no shares

issued and outstanding at March 31, 2018 and December 31, 2017

 

 

 

 

 

 

Common stock, $0.0001 par value, authorized 300,000 shares, issued and outstanding 89,050 shares at June 30, 2019 and 87,512 shares at December 31, 2018

 

 

9

 

 

 

9

 

Preferred stock, $0.0001 par value, authorized 10,000 shares, no shares issued and outstanding at June 30, 2019 and December 31, 2018

 

 

 

 

 

 

Additional paid in capital

 

 

358,858

 

 

 

353,609

 

 

 

391,841

 

 

 

377,473

 

Accumulated deficit

 

 

(31,185

)

 

 

(25,220

)

(Accumulated deficit) retained earnings

 

 

(17,376

)

 

 

211

 

Total stockholders' equity

 

 

327,682

 

 

 

328,397

 

 

 

374,474

 

 

 

377,693

 

Total liabilities and stockholders’ equity

 

$

500,928

 

 

$

506,433

 

 

$

558,656

 

 

$

534,434

 

 

See accompanying notes to unaudited condensed consolidated financial statements.


2


Table of Contents

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated STATEMENTS OF OPERATIONS

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

(In thousands, except share and per share  data)

 

 

(In thousands, except per share data)

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

$

16,987

 

 

$

12,236

 

 

$

19,333

 

 

$

19,620

 

 

$

38,002

 

 

$

36,428

 

Subscription

 

 

23,005

 

 

 

14,952

 

 

 

33,711

 

 

 

24,110

 

 

 

65,546

 

 

 

46,615

 

Services and other

 

 

9,722

 

 

 

8,278

 

 

 

10,010

 

 

 

9,926

 

 

 

20,089

 

 

 

19,554

 

Total revenue

 

 

49,714

 

 

 

35,466

 

 

 

63,054

 

 

 

53,656

 

 

 

123,637

 

 

 

102,597

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

1,138

 

 

 

1,087

 

 

 

1,015

 

 

 

1,260

 

 

 

2,074

 

 

 

2,398

 

Subscription

 

 

4,658

 

 

 

3,575

 

 

 

6,315

 

 

 

4,919

 

 

 

12,128

 

 

 

9,577

 

Services and other

 

 

6,974

 

 

 

5,473

 

 

 

8,379

 

 

 

7,197

 

 

 

16,376

 

 

 

14,171

 

Total cost of revenue

 

 

12,770

 

 

 

10,135

 

 

 

15,709

 

 

 

13,376

 

 

 

30,578

 

 

 

26,146

 

Gross profit

 

 

36,944

 

 

 

25,331

 

 

 

47,345

 

 

 

40,280

 

 

 

93,059

 

 

 

76,451

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

9,762

 

 

 

6,927

 

 

 

13,398

 

 

 

10,115

 

 

 

26,170

 

 

 

19,877

 

General and administrative

 

 

7,657

 

 

 

3,032

 

 

 

8,490

 

 

 

7,743

 

 

 

17,627

 

 

 

15,400

 

Sales and marketing

 

 

23,815

 

 

 

15,173

 

 

 

35,536

 

 

 

23,774

 

 

 

66,024

 

 

 

46,233

 

Total operating expenses

 

 

41,234

 

 

 

25,132

 

 

 

57,424

 

 

 

41,632

 

 

 

109,821

 

 

 

81,510

 

(Loss) income from operations

 

 

(4,290

)

 

 

199

 

Loss from operations

 

 

(10,079

)

 

 

(1,352

)

 

 

(16,762

)

 

 

(5,059

)

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(1,178

)

 

 

(2,657

)

Interest income (expense), net

 

 

261

 

 

 

(2,800

)

 

 

272

 

 

 

(3,978

)

Other, net

 

 

(147

)

 

 

(64

)

 

 

(306

)

 

 

(569

)

 

 

(723

)

 

 

(716

)

Total other expense, net

 

 

(1,325

)

 

 

(2,721

)

 

 

(45

)

 

 

(3,369

)

 

 

(451

)

 

 

(4,694

)

Loss before income taxes

 

 

(5,615

)

 

 

(2,522

)

 

 

(10,124

)

 

 

(4,721

)

 

 

(17,213

)

 

 

(9,753

)

Income tax (expense) benefit

 

 

(352

)

 

 

239

 

 

 

927

 

 

 

3,742

 

 

 

(374

)

 

 

6,472

 

Net loss

 

$

(5,967

)

 

$

(2,283

)

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

Net loss available to common shareholders

 

$

(5,967

)

 

$

(8,453

)

Net loss available to common stockholders

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.07

)

 

$

(0.18

)

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.20

)

 

$

(0.04

)

Diluted

 

$

(0.07

)

 

$

(0.18

)

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.20

)

 

$

(0.04

)

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

85,719,240

 

 

 

47,208,477

 

 

 

88,767

 

 

 

86,246

 

 

 

88,533

 

 

 

85,984

 

Diluted

 

 

85,719,240

 

 

 

47,208,477

 

 

 

88,767

 

 

 

86,246

 

 

 

88,533

 

 

 

85,984

 

 

See accompanying notes to unaudited condensed consolidated financial statements.


3


Table of Contents

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY

 

 

 

Three Months Ended

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(5,967

)

 

$

(2,283

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2,628

 

 

 

2,476

 

Amortization of loan origination fees

 

 

108

 

 

 

152

 

Gain on disposal of fixed assets

 

 

(4

)

 

 

(8

)

Stock-based compensation expense

 

 

5,139

 

 

 

158

 

Deferred taxes

 

 

 

 

 

(68

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

16,910

 

 

 

6,500

 

Prepayments and other current assets

 

 

919

 

 

 

1,058

 

Other non-current assets

 

 

436

 

 

 

(1,355

)

Accounts payable

 

 

(358

)

 

 

711

 

Accrued expenses and other liabilities

 

 

(10,651

)

 

 

(2,283

)

Income taxes payable (receivable)

 

 

230

 

 

 

(313

)

Deferred revenue

 

 

5,932

 

 

 

2,113

 

Net cash provided by operating activities

 

 

15,322

 

 

 

6,858

 

Investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(530

)

 

 

(382

)

Proceeds from sale of property and equipment

 

 

4

 

 

 

109

 

Net cash used in investing activities

 

 

(526

)

 

 

(273

)

Financing activities

 

 

 

 

 

 

 

 

Repurchase of equity shares

 

 

 

 

 

(267

)

Exercise of stock options

 

 

62

 

 

 

29

 

Net cash provided by (used in) financing activities

 

 

62

 

 

 

(238

)

Increase in cash

 

 

14,858

 

 

 

6,347

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

116,127

 

 

 

18,272

 

Cash, cash equivalents and restricted cash, end of period

 

$

130,985

 

 

$

24,619

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

884

 

 

$

2,513

 

Cash paid for income taxes

 

$

94

 

 

$

73

 

Conversion of prepaid incentive units to common stock (Note 7)

 

$

65

 

 

$

10

 

 

 

For the Three Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Number

of shares

 

 

Par

value

 

 

paid in

capital

 

 

Accumulated

deficit

 

 

Stockholders'

equity

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Balance at March 31, 2019

 

 

88,598

 

 

$

9

 

 

$

383,321

 

 

$

(8,179

)

 

$

375,151

 

Exercise of stock options

 

 

217

 

 

 

 

 

 

624

 

 

 

 

 

 

624

 

Restricted stock units vested, net of tax settlement

 

 

33

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,970

 

 

 

 

 

 

4,970

 

Common stock issued under employee stock plan

 

 

202

 

 

 

 

 

 

2,926

 

 

 

 

 

 

2,926

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(9,197

)

 

 

(9,197

)

Balance at June 30, 2019

 

 

89,050

 

 

$

9

 

 

$

391,841

 

 

$

(17,376

)

 

$

374,474

 

 

 

For the Six Months Ended June 30, 2019

 

 

 

Common Stock

 

 

Additional

 

 

Retained

earnings

 

 

 

 

 

 

 

Number

of shares

 

 

Par

value

 

 

paid in

capital

 

 

(accumulated

deficit)

 

 

Stockholders'

equity

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Balance at December 31, 2018

 

 

87,512

 

 

$

9

 

 

$

377,473

 

 

$

211

 

 

$

377,693

 

Exercise of stock options

 

 

488

 

 

 

 

 

 

1,796

 

 

 

 

 

 

1,796

 

Restricted stock units vested, net of tax settlement

 

 

124

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

9,609

 

 

 

 

 

 

9,609

 

Incentive units vested

 

 

724

 

 

 

 

 

 

37

 

 

 

 

 

 

37

 

Common stock issued under employee stock plan

 

 

202

 

 

 

 

 

 

2,926

 

 

 

 

 

 

2,926

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,587

)

 

 

(17,587

)

Balance at June 30, 2019

 

 

89,050

 

 

$

9

 

 

$

391,841

 

 

$

(17,376

)

 

$

374,474

 

 

See accompanying notes to unaudited condensed consolidated financial statements.


4


Table of Contents

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated STATEMENTS OF STOCKHOLDERS’ EQUITY

 

 

For the Three Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Number

of shares

 

 

Par

value

 

 

paid in

capital

 

 

Accumulated

deficit

 

 

Stockholders'

equity

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Balance at March 31, 2018

 

 

85,953

 

 

$

9

 

 

$

358,859

 

 

$

(5,761

)

 

$

353,107

 

Exercise of stock options

 

 

339

 

 

 

 

 

 

831

 

 

 

 

 

 

831

 

Restricted stock units vested, net of tax settlement

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,116

 

 

 

 

 

 

4,116

 

Incentive units vested

 

 

253

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(979

)

 

 

(979

)

Balance at June 30, 2018

 

 

86,596

 

 

$

9

 

 

$

363,817

 

 

$

(6,740

)

 

$

357,086

 

 

 

For the Six Months Ended June 30, 2018

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Number

of shares

 

 

Par

value

 

 

paid in

capital

 

 

Accumulated

deficit

 

 

Stockholders'

equity

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Balance at December 31, 2017

 

 

84,948

 

 

$

8

 

 

$

353,609

 

 

$

(25,220

)

 

$

328,397

 

Cumulative effect adjustment from the adoption of ASC 606

 

 

 

 

 

 

 

 

 

 

 

21,761

 

 

 

21,761

 

Exercise of stock options

 

 

365

 

 

 

 

 

 

893

 

 

 

 

 

 

893

 

Restricted stock units vested, net of tax settlement

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

9,255

 

 

 

 

 

 

9,255

 

Incentive units vested

 

 

1,232

 

 

 

1

 

 

 

60

 

 

 

 

 

 

61

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,281

)

 

 

(3,281

)

Balance at June 30, 2018

 

 

86,596

 

 

$

9

 

 

$

363,817

 

 

$

(6,740

)

 

$

357,086

 

See accompanying notes to unaudited condensed consolidated financial statements.

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Table of Contents

Sailpoint technologies Holding, Inc. and subsidiaries

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(17,587

)

 

$

(3,281

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

6,890

 

 

 

5,278

 

Amortization of debt issuance costs

 

 

51

 

 

 

191

 

Amortization of contract acquisition costs

 

 

4,691

 

 

 

3,401

 

Loss on modification and partial extinguishment of debt

 

 

 

 

 

1,536

 

Gain on disposal of fixed assets

 

 

(21

)

 

 

(48

)

Bad debt expense

 

 

89

 

 

 

175

 

Stock-based compensation expense

 

 

9,609

 

 

 

9,255

 

Operating leases, net

 

 

443

 

 

 

 

Net changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

30,767

 

 

 

17,869

 

Prepayments and other current assets

 

 

(6,131

)

 

 

(4,869

)

Other non-current assets

 

 

(1,820

)

 

 

(655

)

Accounts payable

 

 

(1,192

)

 

 

663

 

Accrued expenses and other liabilities

 

 

(3,531

)

 

 

(10,024

)

Income taxes

 

 

(1,552

)

 

 

(7,529

)

Deferred revenue

 

 

1,123

 

 

 

14,645

 

Net cash provided by operating activities

 

 

21,829

 

 

 

26,607

 

Investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,623

)

 

 

(1,405

)

Proceeds from sale of property and equipment

 

 

17

 

 

 

8

 

Net cash used in investing activities

 

 

(3,606

)

 

 

(1,397

)

Financing activities

 

 

 

 

 

 

 

 

Debt issuance costs

 

 

(829

)

 

 

 

Repayment of debt

 

 

 

 

 

(60,000

)

Prepayment penalty and fees

 

 

 

 

 

(300

)

Repurchase of equity shares

 

 

 

 

 

(1

)

Proceeds from employee stock purchase plan contributions

 

 

2,926

 

 

 

 

Exercise of stock options

 

 

1,796

 

 

 

893

 

Net cash provided by (used in) financing activities

 

 

3,893

 

 

 

(59,408

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

22,116

 

 

 

(34,198

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

77,236

 

 

 

116,127

 

Cash, cash equivalents and restricted cash, end of period

 

$

99,352

 

 

$

81,929

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


Table of Contents

Sailpoint technologies Holding, Inc. and subsidiaries

NOTES TO UNAUDITED CondensedCONDENSED Consolidated FINANCIAL STATEMENTS

1. Organization and Description of Business

SailPoint Technologies Holdings, Inc. (“we,” “our,” “the Company” or “SailPoint”) was incorporated in the state of Delaware on August 8, 2014, in preparation for the purchase of SailPoint Technologies, Inc. The purchase (the “Acquisition”) occurred on September 8, 2014.2014and our certificate of incorporation was amended and restated as of such date. SailPoint Technologies, Inc. was formed July 14, 2004 as a Delaware corporation. The Company designs, develops and markets identity governance software that helps organizations govern user access to critical systems and data. The Company currently markets its products and services throughout North America, Europe and the Asia Pacific regions.worldwide.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with Article 10 of Regulation S-X, “Interim Financial Statements” and the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosuredisclosures it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheet,sheets, statements of operations, statements of stockholders’ equityand the statements of cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 20182019 or any future period. Our unaudited condensed consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2018, which was filed with the SEC on March 19, 201818, 2019 (the “Annual Report”). These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report. All intercompany accounts and transactions have been eliminated in consolidation.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity of three months or less from date of purchase to be cash equivalents. The Company is required to maintain a small amount of restricted cash to guarantee rent payments in a foreign subsidiary.subsidiary as well as $6.0 million of cash collateral for an unconditional standby letter of credit related to the Company’s corporate headquarters lease.

 

 

As of

 

 

As of

 

 

March 31, 2018

 

 

December 31, 2017

 

 

June 30, 2019

 

 

December 31, 2018

 

 

(In thousands)

 

 

(In thousands)

 

Cash and cash equivalents per balance sheet

 

$

130,859

 

 

$

116,049

 

 

$

93,049

 

 

$

70,964

 

Restricted cash per balance sheet

 

 

126

 

 

 

78

 

 

 

6,303

 

 

 

6,272

 

Cash, cash equivalents and restricted cash per cash flow

 

$

130,985

 

 

$

116,127

 

 

$

99,352

 

 

$

77,236

 

 

Segment Information and Concentration of Credit and Other Risks

Segment Information

The Company operates as one operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviewsmakers review financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.


ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makermakers in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment, and derives revenues from licensing of software, subscription and renewals, sale of professional services, maintenance and technical support.

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Table of Contents

The following tablestable sets forth the Company’s consolidated total revenue by geography:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

(In thousands)

 

 

(In thousands)

 

United States

 

$

32,698

 

 

$

25,915

 

 

$

44,399

 

 

$

33,954

 

 

$

85,959

 

 

$

66,315

 

EMEA (1)

 

 

11,671

 

 

 

5,814

 

 

 

12,332

 

 

 

13,232

 

 

 

26,269

 

 

 

24,551

 

Rest of the World (1)

 

 

5,345

 

 

 

3,737

 

 

 

6,323

 

 

 

6,470

 

 

 

11,409

 

 

 

11,731

 

Total revenue

 

$

49,714

 

 

$

35,466

 

 

$

63,054

 

 

$

53,656

 

 

$

123,637

 

 

$

102,597

 

 

(1)

No single country represented more than 10% of our consolidated revenue.

Concentration of Credit Risk and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. There isAs of June 30, 2019, no concentration of credit risk for customers as no individualsingle entity represented more than 10% of the balance in accounts receivable asreceivable. As of MarchDecember 31, 2018, and December 31, 2017 or11%, of the Company’s accounts receivable was from one customer. Management considers concentration of credit risk to be minimal with respect to accounts receivable due to the positive historical collection experience of the Company despite the geographic concentrations related to the Company’s customers. No single customer represented more than 10% of revenue for three and six months ended March 31, 2018June 30, 2019 and 2017.2018. The Company does not experience concentration of credit risk in foreign countries as no single foreign country represents more than 10% of the Company’s condensed consolidated revenues or net assets.

Significant Accounting Policies

There have beenThe condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report, most notably Note 2 “Summary of Significant Accounting Policies”. In 2019, the Company adopted Accounting Standards Update 2016-02, “Leases” (“ASU 2016-02”) using the modified retrospective approach. For information regarding ASU 2016-02, please refer to Note 5 “Commitments and Contingencies”below.

Services and Other Revenues

While there are no significant changes to the Company’s significant accounting policies,policy, the Company provides the following additional clarification regarding the revenue for fixed price services and prepaids that are recognized over time using input methods to estimate progress to completion. For services that are contracted for at a fixed price, progress is generally measured based on hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations. For services that are contracted on a time and materials or prepaid basis, progress is generally based on actual hours expended. These input methods (e.g. hours incurred or expended) are considered a faithful depiction of our efforts to satisfy services contracts as they represent the performance obligation consumed by the customer and performed by the entity and therefore reflect the transfer of services to a customer under such contracts.

Deferred Contract Acquisition Costs

While there are no changes to the policy, the Company provides the following additional clarification regarding the incremental costs of obtaining a contract, such as deferred sales commission costs, in particular upon contract renewals. The Company typically pays sales commissions for both initial and follow-on sales of perpetual licenses, inclusive of initial maintenance, term licenses and subscription offerings. Initial commissions are allocated to each performance obligation within the contract. The portion allocated to the perpetual license element is expensed at the time the license is delivered. Commissions allocated to the remaining elements are capitalized and amortized over an expected period of benefit. The Company has determined the expected period of benefit to be approximately five years. In addition, the Company pays sales commissions for renewals of term licenses and subscription offerings at a lower rate, which is therefore not commensurate with commissions paid on an initial sale. These renewal commissions are discussed in Note 2amortized over each renewal’s contractual term. The Company does not pay sales commissions on renewals of “Notesmaintenance agreements related to Consolidated Financial Statements” in the Annual Report.perpetual licenses.

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Table of Contents

Recently Issued Accounting Standards Not Yet Adopted

Under the Jumpstart Our Business Startups Act (the “JOBS Act”), emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act until we are no longer an emerging growth company.

In May 2014,August 2018, the Financial Accounting Standards Board (“FASB”) (FASB) issued Accounting StandardsStandard Update (“ASU”) No2014-09(ASU) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15)Revenue from Contracts with Customers (Topic 606). This ASU will supersedewhich clarifies the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates guidance for when revenue should be recognized from the exchange of goods or services. ASU No. 2016-08 was issued in March 2016 to clarify the principal versus agent guidance in this new revenue recognition standard. ASU 2016-10 was issued in April 2016 to clarify the guidance on accounting for licenses of intellectual property and identifying performance obligationsimplementation costs in the new revenue recognition standard.cloud computing arrangements. ASU 2016-12 was issued in May 2016 to clarify the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes in the new revenue recognition standard. ASU 2016-20 was issued in December 2016 to make technical corrections and improvements on narrow aspects of this guidance. ASU No. 2015-14 was issued in August 2015 to defer the effective date of ASU 2014-09 for one year. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures. For public companies, the new standard2018-15 is effective for public entities, for annual reportingperiods, including interim periods within those annual periods, beginning after December 15, 2017, including interim periods within that reporting period. For all other entities, this standard is effective for annual reporting periods beginning after December 15, 2018. Early2019, and earlier adoption is permitted. The Company does not plan to early adopt, and therefore plans to adopt for the annual reporting period beginning after December 15, 2018.

2019 on a prospective basis. The Company is currently plans to adopt using the full retrospective approach; however, a final decision regarding the adoption method has not been made at this time. The Company’s final determination will depend on a number of factors such as the significance ofevaluating the impact of the new standardASU 2018-15, however does not expect a material effect on the Company’s financial results, system readiness, including that of software procured from third-party providers, and the Company’s ability to accumulate and analyze the information necessary to assess the impact on prior period financial statements, as necessary.


The Company is in the initial stages of its evaluation of the impact of the new standard on its accounting policies, and processes. The Company has assigned internal resources in addition to the engagement of third party service providers to assist in the evaluation. While the Company continues to assess all potential impacts under the new standard will have on our condensed consolidated financial statements and related disclosures there may be the potential for significant impacts to the timing of recognition of professional services revenue, and contract acquisition costs, with respect to the amounts that will be capitalized as well as the period of amortization.statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02 and subsequent updates thereafter in ASU 2017-13, ASU 2018-10 and ASU 2018-11, Leases (Topic (collectively, Accounting Standards Codification 842 or ASC 842). This standard requires lessees to recognize aright-of-use (“ROU”) assets and lease liability and a lease assetliabilities for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The standard also expands the required quantitative and qualitative disclosures surrounding leases. This standard is effective for annual periods beginning after December 15,

On January 1, 2019, including interim periods within that reporting period. Early adoption is permitted. The Company does not plan to early adopt, and therefore plans to adopt forwe adopted ASC 842 using the annual period beginning after December 15, 2019. This standard will be applied using a modified retrospective transition approachmethodwith certain practical expedients available for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Management is currently evaluating the effect of these provisions on the Company’scondensed consolidated financial statements. SailPoint evaluated whether any cumulative adjustment is required to be recorded to retained earnings as a result of applying the provisions set forth under ASC 842 for any existing arrangements not yet completed as of January 1, 2019. Adoption of ASC 842 did not result in a cumulative adjustment to retained earnings as of January 1, 2019. In addition, it is important to note that under the modified retrospective transition method, our prior period results were not recast to reflect the new standard. We elected certain practical expedients and implemented internal controls and key system functionality to enable the preparation of financial information upon adoption.

The adoption of the new standard represents a change in accounting principle with the intent to increase transparency and comparability among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We have made an accounting policy election not to recognize ROU assets and lease liabilities that arise from short-term leases for any class of underlying asset.

The standard did not have a material impact on our condensed consolidated statements of operations or statements of cash flows. However, upon adoption of ASC 842 the opening impact on our condensed consolidated balance sheets was not material, but it resulted in recording ROU assets and an increase in total lease liabilities of $3.5 million for operating leases for physical office space.

In October 2016,June 2018, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740)2018-07, Compensation—Stock Compensation (ASC 718)Intra-Entity Transfers of Assets Other Than Inventory. This standard requires companiesImprovements to accountNonemployee Share-Based Payment Accounting (ASU 2018-07), which simplifies the accounting for share-based payments to nonemployees by aligning it with the income tax effects of intercompany transfers of assets other than inventory when the transfer occurs. This guidanceaccounting for share-based payments to employees, with certain exceptions. ASU 2018-07 is effective for annual periodspublic companies for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Earlyfiscal year. We adopted the standard effective January 1, 2019, using the prospective approach. This adoption is permitted. The Company does not plan to early adopt and therefore plans to adopt for the annual period beginning after December 15, 2018. Management is currently evaluating the effect of these provisionsresulted in no material impact on the Company’s condensed consolidated financial statements.

In May 2017,3. Revenue Recognition

ASC 606 Adoption and Impact to Previously Reported Results

During the FASB issuedyear ended December 31, 2018, we adopted ASU No. 2017-09, Compensation—Stock Compensation (Topic 718). This standard clarifies which changes2014-09, Revenue from Contracts with Customers (ASC 606) and subsequent amendments to the termsinitial guidance collectively, ASC 606, utilizing the modified retrospective method of transition whereby the results and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. An entity is required to accountrelated disclosures for the effectscomparative 2018 periods presented in this Form 10-Q were recast and are now presented as if ASC 606 had been in effect beginning January 1, 2018 with modified retrospective adjustments applicable prior to January 1, 2018 included as a cumulative adjustment to retained earnings. Refer to Note 2 “Summary of a modification unless allSignificant Accounting Policies” and Note 3 “Revenue Recognition” in our Annual Report for accounting policy updates and adoption of ASC 606.

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Table of Contents

Disaggregation of Revenue

The Company’s revenue by geographic region based on the customer’s location is presented in Note 2 “Summary of Significant Accounting Policies” above.

The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control:

 

 

Three Months Ended June 30, 2019

 

 

Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Services

 

 

 

 

 

 

 

 

 

 

Services

 

 

 

License

 

 

Subscription

 

 

and other

 

 

License

 

 

Subscription

 

 

and other

 

 

 

(in thousands)

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue recognized at a point in time

 

$

19,333

 

 

$

 

 

$

 

 

$

19,620

 

 

$

 

 

$

 

Revenue recognized over time

 

 

 

 

 

33,711

 

 

 

10,010

 

 

 

 

 

 

24,110

 

 

 

9,926

 

Total revenue

 

$

19,333

 

 

$

33,711

 

 

$

10,010

 

 

$

19,620

 

 

$

24,110

 

 

$

9,926

 

 

 

Six Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Services

 

 

 

 

 

 

 

 

 

 

Services

 

 

 

License

 

 

Subscription

 

 

and other

 

 

License

 

 

Subscription

 

 

and other

 

 

 

(in thousands)

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue recognized at a point in time

 

$

38,002

 

 

$

 

 

$

 

 

$

36,428

 

 

$

 

 

$

 

Revenue recognized over time

 

 

 

 

 

65,546

 

 

 

20,089

 

 

 

 

 

 

46,615

 

 

 

19,554

 

Total revenue

 

$

38,002

 

 

$

65,546

 

 

$

20,089

 

 

$

36,428

 

 

$

46,615

 

 

$

19,554

 

Contract Balances

A summary of the following conditionsactivity impacting our contract balances during the period ended June 30, 2019 is presented below (in thousands):

 

 

Contract

acquisition costs

 

Balances at December 31, 2018

 

$

28,043

 

Additional deferred contract acquisition costs

 

 

5,283

 

Amortization of deferred contract acquisition costs

 

 

(4,691

)

Balances at June 30, 2019

 

$

28,635

 

 

 

Deferred revenue

(current)

 

 

Deferred revenue

(non-current)

 

Balances at December 31, 2018

 

$

95,919

 

 

$

18,382

 

Increase (decrease), net

 

 

(423

)

 

 

1,546

 

Balances at June 30, 2019

 

$

95,496

 

 

$

19,928

 

Deferred revenue, which is a contract liability, consists primarily of payments received in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met: (i)met. During the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used)three and six months ended June 30, 2019, revenue recognized that was previously deferred was approximately $39.0 million and $68.8 million, respectively, compared to revenue recognized that was previously deferred of approximately $26.2 million and $45.4 million during the three months ended June 30, 2018 and the period from January 1, 2018, the date of ASC 606 adoption, to June 30, 2018, respectively. The difference between the opening and closing balances of the modified award isCompany’s contract assets and deferred revenue primarily results from the same astiming difference between the fair value (or value using an alternative measurement method) ofCompany’s performance and the original award immediately beforecustomer billings.

Contract assets primarily relate to unbilled amounts, which are netted with deferred revenue at contract level, and typically result from sales contracts when revenue recognized exceeds the original award is modified. If the modification does not affect any of the inputsamount billed to the valuation technique thatcustomer, and the entity usesright to valuepayment is subject to more than the award,passage of time. Contract assets are transferred to accounts receivable when the entityrights become unconditional and the customer is not required to estimate the value immediately beforebilled. Contract assets are included in prepayments and after the modification; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified;other current assets and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permittedother non-current assets in the first periodcondensed consolidated balance sheets. During the periods ended June 30, 2019 and 2018, amounts reclassified from contract assets to accounts receivable were approximately $1.8 million and $1.6 million, respectively. There were no impairments of contract assets during the year this guidanceperiods ended June 30, 2019 or 2018.

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Table of Contents

Remaining Performance Obligations

Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These remaining performance obligations represent contract revenue that has not yet been recognized and is adopted.included in deferred revenue, the balance of which includes both invoices that have been issued to customers but have not been recognized as revenue and amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2019, amounts allocated to these additional performance obligations are $169.3 million, of which we expect to recognize $115.2 million as revenue over the next 12 months with the remaining balance recognized thereafter.

Assets Recognized from the Costs to Obtain our Contracts with Customers

As of June 30, 2019, and December 31, 2018, $9.0 million and $8.4 million, respectively, of our deferred contract acquisition costs are included in prepayments and other current assets as they are expected to be amortized within the next 12 months. The Company does not planremaining amount of our deferred contract acquisition costs are included in other non-current assets. The balance of deferred contract acquisition costs, which primarily consists of cumulative capitalized costs to early adopt,obtain contracts was $28.6 million and therefore plans to adopt$28.0 million at June 30, 2019 and December 31, 2018, respectively. For the three and six months ended June 30, 2019, amortization of deferred contract acquisition costs of $2.5 million and $4.7 million was recorded for the annual period beginning after December 15, 2017. Management is currently evaluatingrespective periods. For the effectthree and six months ended June 30, 2018, amortization of these provisions ondeferred contract acquisition costs of $1.7 million and $3.4 million was recorded for the Company’s consolidated financial statements.

In July 2017,respective periods. There were no material impairments of assets related to deferred contract acquisition costs during the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260). This standard addresses the complexity of accounting for certain financial instruments with down round features. This guidance is effective for fiscal years beginning after December 15,periods ended June 30, 2019 and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company does not plan to early adopt, and therefore plans to adopt for the annual period beginning after December 15, 2020. Management is currently evaluating the effect of these provisions on the Company’s consolidated financial statements.2018.

 

 

3. Goodwill and4. Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations.  The carrying amount of goodwill was $219.4 million for the periods ended March 31, 2018 and 2017 as there has been no acquisition activity in these periods. Goodwill and other intangible balances are tested for impairment on an annual basis during the fourth quarter, or sooner if an indicator of impairment occurs. No triggering events have occurred during the three-month period ended March 31, 2018 and 2017 that would indicate a potential impairment of goodwill and other intangible assets.


Intangible Assets

Total cost and amortization of intangible assets are comprised of the following:

 

 

 

 

As of

 

 

 

 

As of

 

 

Weighted Average

Useful Life

 

March 31, 2018

 

 

December 31,

2017

 

 

Weighted Average

Useful Life

 

June 30, 2019

 

 

December 31, 2018

 

Intangible assets, net

 

(In years)

 

(In thousands)

 

Intangible assets

 

(In years)

 

(In thousands)

 

Customer lists

 

15

 

$

42,500

 

 

$

42,500

 

 

15

 

$

42,500

 

 

$

42,500

 

Developed technology

 

9.6

 

 

42,000

 

 

 

42,000

 

 

9.6

 

 

42,000

 

 

 

42,000

 

Trade names and trademarks

 

17

 

 

24,500

 

 

 

24,500

 

 

17

 

 

24,500

 

 

 

24,500

 

Order backlog

 

1.5

 

 

1,100

 

 

 

1,100

 

 

1.5

 

 

 

 

 

1,100

 

Non-competition agreements and related items

 

4.4

 

 

810

 

 

 

810

 

Other intangible assets

 

4.9

 

 

3,310

 

 

 

3,310

 

Total intangible assets

 

 

 

 

110,910

 

 

 

110,910

 

 

 

 

 

112,310

 

 

 

113,410

 

Less: Accumulated amortization

 

 

 

 

(31,931

)

 

 

(29,725

)

 

 

 

 

(42,112

)

 

 

(38,550

)

Total intangible assets, net

 

 

 

$

78,979

 

 

$

81,185

 

 

 

 

$

70,198

 

 

$

74,860

 

 

Amortization expense of intangible assets was $2.2 million for the three months ended March 31, 2018 and March 31, 2017. Amortization expense is included in the condensed consolidated statements of operations for the three monthsperiods ended March 31,June 30, 2019 and 2018 and 2017, respectively,is as follows:

 

 

Three months ended

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

(In thousands)

 

Cost of revenue – license

 

$

1,008

 

 

$

1,008

 

Cost of revenue – subscription

 

 

96

 

 

 

96

 

Amortization expense (in thousands)

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Cost of revenue - licenses

 

 

 

$

1,008

 

 

$

1,008

 

 

$

2,016

 

 

$

2,016

 

Cost of revenue - subscription

 

 

 

 

96

 

 

 

96

 

 

 

192

 

 

 

192

 

Research and development

 

 

34

 

 

 

 

 

 

 

 

159

 

 

 

34

 

 

 

318

 

 

 

68

 

Sales and marketing

 

 

1,068

 

 

 

1,117

 

 

 

 

 

1,068

 

 

 

1,068

 

 

 

2,136

 

 

 

2,136

 

Total amortization of acquired intangibles

 

$

2,206

 

 

$

2,221

 

 

 

 

$

2,331

 

 

$

2,206

 

 

$

4,662

 

 

$

4,412

 

 

Periodically, the Company evaluates intangible assets for possible impairment. There were no impairments forof intangible assets during the three monthsperiods ended March 31, 2018June 30, 2019 and 2017.2018.

 

4.11


Table of Contents

5. Commitments and Contingencies

Operating Leases

Right-of-use (“ROU”) assets and lease liabilities are recognized at the present value of future lease payments over the lease term. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets include any upfront lease payments made and exclude lease incentives. The Company leases its facilities under non-cancelable operating lease agreements. The majority ofAdditionally, these agreements include a renewal option, and/orleases often require the Company to pay property taxes, insurance and maintenance costs, which are generally expensed as incurred and are not included in the table below. Certain of these facility leases contain predetermined fixed escalations of the minimum rentals, and the Company recognizes expense for these leases on a straight-line basis. The difference betweenbasis over the recognized rental expense and amounts payable underfull term of the lease arrangement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and short-term lease expense is recordedrecognized on a straight-line basis over the lease term. The depreciable life of related leasehold improvements is based on the lease term.

As of June 30, 2019, our leases have remaining lease terms of less than one year to ten years. Certain leases include early termination and/or extension options; however, exercises of these options are at the Company’s sole discretion. As of June 30, 2019, the Company determined it is not reasonably certain it will exercise the options to extend its leases or terminate them early. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and as deferred rent,of June 30, 2019, the Company is not subleasing to any third parties.

The rates implicit in the Company’s leases are not readily determinable. Therefore, in order to value the Company’s lease liabilities, the Company uses an incremental borrowing rate which reflects the fixed rate at which the Company could borrow a similar amount in the same currency, for the same term, and with similar collateral as in the lease at the commencement date. The result of adoption of ASC 842 was an increase in ROU assets and total lease liabilities of $3.5 million on the Company’s condensed consolidated balance sheet. ASC 842 did not have a material impact on our condensed consolidated statements of operations and statements of cash flows. As of June 30, 2019, the Company measures its lease liabilities at the net present value of the remaining lease payments discounted at the weighted average discount rate of 4.12%. The weighted average remaining term of the Company’s operating leases is 9.2 years. As of June 30, 2019, the total lease liabilities are $42.4 million, $3.6 million of which is included in accrued expenses and other current liabilities and $38.8 million is included as long-term operating lease liabilities on the accompanying condensed consolidated balance sheets.sheet. As of June 30, 2019, the ROU asset balance is $31.3 million.

Operating lease costs during the periods presented were as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2019

 

 

 

(in thousands)

 

Lease cost

 

 

 

 

 

 

 

 

Operating lease cost

 

$

1,469

 

 

$

2,787

 

Short-term lease cost

 

 

719

 

 

 

862

 

Total lease cost

 

$

2,188

 

 

$

3,649

 

RentFacilities costs (including rent and utilities) are considered shared costs and are allocated to departments based on headcount. As such, allocated shared costs are reflected in each cost of revenue and operating expense under all operating leasescategory. Total rent expense recognized was approximately $0.9$1.0 million and $0.5$1.9 million for the three and six months ended March 31,June 30, 2018, and 2017, respectively.

Indemnification ArrangementsOther supplemental cash flow information related to operating leases is as follows:

In the ordinary course

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2019

 

 

 

(in millions)

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

1.3

 

 

$

2.2

 

Right-of-use assets obtained in exchange for lease liabilities

 

 

 

 

 

 

 

 

Operating leases

 

$

 

 

$

30.4

 

12


Table of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scopeContents

At June 30, 2019, we have no financing leases and terms to customers, business partners and other parties with respect to certain matters, including, losses arising out of the breach of such agreements, intellectual property infringement claims madewe have non-cancelable operating lease commitments, excluding variable consideration. The undiscounted annual future minimum lease payments are summarized by third parties, and other liabilities with respect to our products and services and business. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in a particular contract.

The Company includes service level commitments to our cloud customers warranting certain levels of uptime reliability and performance and permitting those customers to receive creditsyear in the event that we fail to meet those levels. To date, the Company has not incurred any material costs as a result of these commitments and we expect the time between any potential claims and issuance oftable below:


Year Ending December 31,

 

(in thousands)

 

2019 (except the six months ended June 30)

 

$

2,485

 

2020

 

 

5,226

 

2021

 

 

5,499

 

2022

 

 

5,468

 

2023

 

 

4,972

 

Thereafter

 

 

27,030

 

Total minimum lease payments

 

 

50,680

 

Less: interest

 

 

(8,261

)

Total present value of operating lease liabilities

 

$

42,419

 

Less: operating lease liabilities - current

 

$

(3,606

)

Long-term operating lease liabilities

 

$

38,813

 

the credits to be short. As a result, we have not accrued any liabilities related to these commitments in our consolidated financial statements.

Litigation Claims and Assessments

The Company is subject to claims and suits that may arise from time to time in the ordinary course of business. In addition, some legal actions, claims and governmental inquiries may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial statements.

5.6. Line of Credit and Long-Term Debt

On March 11, 2019, SailPoint Technologies, Inc., as borrower, and certain of our other wholly owned subsidiaries entered into a credit agreement (the “Credit Agreement”). The outstanding balanceCredit Agreement is guaranteed by SailPoint Technologies Intermediate Holdings, LLC, a wholly owned subsidiary, and the Borrower’s material domestic subsidiaries (the “Guarantors” and, together with the Borrower, the “Loan Parties”) and is supported by a security interest in substantially all of the Loan Parties’ personal property and assets.

The credit agreement provides for an initial $150.0 million in commitments for revolving credit loans, with a $15.0 million letter of credit sublimit, which amount can be increased or decreased under certain circumstances and is subject to certain financial covenants. In addition, the credit agreement provides for the ability to incur uncommitted term loan facilities if, among other things, the Senior Secured Net Leverage Ratio (as defined in our credit agreement), calculated giving pro forma effect to the requested term loan facility, is no greater than 3.50 to 1.00, provided that such financial covenant level shall be increased to 4.00 to 1.00 during a fiscal quarter in which a Material Acquisition (as defined in the Credit Agreement) has been consummated. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions permitted under the Credit Agreement.

The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants, including certain restrictions on the ability of the Loan Parties and their Restricted Subsidiaries (as defined in the Credit Agreement) to incur additional indebtedness or guarantee indebtedness of others; create liens on properties or assets; merge, consolidate, or dissolve; make certain loans or investments; sell or dispose of assets; enter into sale and leaseback transactions; pay dividends and other restricted payments; or enter into transactions with affiliates. The agreement has established priority for the lenders party over all assets of the Company.

Borrowings under our credit agreement are scheduled to mature in March 2024. Any borrowing under our credit agreement may be repaid, in whole or in part, at March 31, 2018any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid may be reborrowed. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed the aggregate commitments of all lenders. Payment of the borrowings may be accelerated upon the occurrence of certain customary events of default specified in the Credit Agreement, which includes failure to make payments relating to the borrowings under the Credit Agreement when due, the material inaccuracy of representations or warranties, failures to perform certain affirmative covenants, failures to refrain from actions or omissions prohibited by negative covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events and a Change in Control (as defined in the Credit Agreement).

The interest rates applicable to revolving credit loans under our Credit Agreement are, at the borrower’s option, either (i) a base rate, which is equal to the greatest of (a) the Prime Rate (as defined in our credit agreement), (b) the Federal Funds Effective Rate (as defined in our Credit Agreement) plus 1/2 of 1%, and (c) the one-month Adjusted LIBO Rate (as defined in our Credit Agreement) plus 1%, in each case, plus an interest margin ranging from 0.25% to 0.75% based on the Senior Secured Net Leverage Ratio, or (ii) the Adjusted LIBO Rate plus an interest margin ranging from 1.25% to 1.75% based on the Senior Secured Net Leverage Ratio. The Adjusted LIBO Rate cannot be less than zero. The borrower will pay an unused commitment fee during the term of our Credit Agreement ranging from 0.20% to 0.30% per annum based on the Senior Secured Net Leverage Ratio.

13


Table of Contents

The Company had no outstanding revolving credit loan balance as of June 30, 2019 and December 31, 2017 was $70 million. There was no outstanding balance of the revolving line of credit at March 31, 2018 and December 31, 2017.2018. The Company was in compliance with all applicable covenants as of March 31, 2018 and December 31, 2017.June 30, 2019.

In 2017, theThe Company amended its existing credit facilityincurred total debt issuance costs of approximately $0.8 million in connection with this new Credit Agreement, which is included in other non-current assets on the consummationaccompanying condensed consolidated balance sheet. These costs are being amortized to interest expense over the life of its initial public offering. Such amendment required thatthe credit agreement on a straight-line basis. Amortization of debt issuance costs during both the three and six months ended June 30, 2019 was $0.1 million and was recorded in interest expense in the accompanying condensed consolidated statements of operations. Amortization of debt issuance costs under our prior credit agreement during the three and six months ended June 30, 2018 was approximately $0.1 million and $0.2 million, respectively. Under terms of the previous credit facility, the Company use a portion of its net proceeds to repay $90.0 million of borrowings outstanding undervoluntarily prepaid on its term loan facility to reduceduring the aggregate outstanding principal amount thereof to $70.0 million. This repaymentquarter ended June 30, 2018. The debt paydown was subject to a prepayment premium of 1.50% approximately $1.4$0.3 million, which is recorded as interest expense. Asand a result of this paydown, the Company incurred a $1.7 million loss on the modification and partial extinguishment of debt of $1.5 million, both of which was alsowere recorded as interest expense in the consolidated statements of operations for the years ended December 31, 2017. In October 2017, in connection with its new corporate headquarters lease, the Company executed a standby letter of credit in the amount of $6.0 million.  The term loanthree and the credit facility both bear interest based on the adjusted LIBOR rate, as defined in the credit agreement, with a 1% floor plus an applicable margin of 4.5%.

The Company has incurred total debt issuance costs of $4.5 million in connection with these loan and security agreements of which $1.4 million relates to the modified agreement as of December 31, 2017. These costs are being amortized to interest expense over the life of the debt on a straight-line basis, which approximates the interest method. Amortization of debt issuance costs for existing loan and security agreement as of March 31, 2018 and March 31, 2017, was approximately $0.1 million and $0.2 million, respectively, and was recorded in interest expense in the accompanying condensed consolidated statements of operations.  As of March 31, 2018, future principal payment for long-term debt, is $68.3 million, net of $1.7 million of unamortized debt issuance costs included in long-term debt. The maturity date on the term loan is August 16, 2021, with principal payment due in full on maturity date, and interest payments due quarterly. The rate prevalent at March 31, 2018 was 5.5% consisting of the 1% floor, plus an applicable margin of 4.5% for the term loan and the credit facility.

6. Related Party Transactions

During the threesix months ended March 31, 2018 and 2017, the Company engaged in ordinary sales transactions of $147,000, and $0 and purchase transactions of $101,000 and $382,000, respectively, with entities affiliated with its controlling entity. At March 31, 2018 and December 31, 2017, the accompanying condensed consolidated balance sheets included accounts payable balances of $400 and $3,400, as well as accounts receivable balances $91,000 and $516,000, respectively, associated with these transactions.

In September 2014, the Company entered into an advisory services agreement (the “Consulting Agreement”) with its controlling entity. The Consulting Agreement requires quarterly payments from September 8, 2014 through December 31, 2018 for business consulting services provided by the controlling entity to the Company. Consulting fees from the Consulting Agreement totaled $313,000 in the three months ended March 31, 2017 and were included in general and administrative expenses in the accompanying condensed consolidated statements of operations. Upon completion of the initial public offering, the Consulting Agreement ceased, and the Company was no longer required to make future payments.

June 30, 2018.

7. Stock Option Plans and Stock-Based Compensation

2015 Stock Option Plans

In 2015, the Company adopted (i) the Amended and Restated 2015 Stock Option and Grant Plan and (ii) the 2015 Stock Incentive Plan (together the “2015 Stock Option Plans”) under which it may grant incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), and restricted stock for the right to purchase shares of common stock.stock and grant restricted stock units. The 2015 Stock Option Plans reserve 5,000,000


5.0 million shares of common stock for issuance as ISOs, 500,0000.5 million shares of restricted stock and 250,0000.25 million shares for issuance under the 2015 Stock Incentive Plan. Under the 2015 Stock Option Plans, ISOs may not be granted at less than fair market value on the date of the grant and generally vest over a four-year period based on continued service. Certain options are subject to vesting based on certain future performance targets. Options generally expire ten years after the grant date.

At March 31, 2018, 468,956June 30, 2019, approximately 564,000 shares were available for issuance under the Amended and Restated 2015 Stock Option and Grant Plan. At March 31, 2018, 333,999Plan and includes approximately 90,000 shares which were available for issuance under the 2015 Stock Incentive Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.

2017 Long Term Incentive Plan

In November 2017, the Company’s boardBoard of directorsDirectors adopted the 2017 Long Term Incentive Plan (the “2017 Plan”) under which it may grant stock options, nonqualified stock options to purchase shares of common stock and restricted stock units (“RSUs”). As of December 31, 2017,June 30, 2019, the Company had reserved 8,856,876approximately 13.3 million shares of common stock available for issuance under the 2017 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2017 Plan will be increased on each January 1 hereafter by 4,428,438approximately 4.4 million shares of common stock. Options and RSUs granted to employees under the 2017 Plan generally vest over four years. Common stock subject to an award that expires or is canceled, forfeited, exchanged settled in cash or otherwise terminated without delivery of shares, and shares withheld or surrendered to pay the exercise price of, or to satisfy the withholding obligations with respect to an award, will become available for future grants under the 2017 Plan. At March 31, 2018, 6,482,775June 30, 2019, approximately 9.0 million shares were available for issuance under the 2017 Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.

In November 2017, the Company’s board of directors adopted the Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective on in November of 2017, after the date our registration statement was declared effective by the SEC. As of March 31, 2018, the participation in the ESPP is not effective and no shares were purchased.

Options Activity

The fair value for the Company’s stock options granted and Employee Stock Purchase Plan (the "ESPP") purchase rights, as discussed further below, during the yearsix months ended March 31,June 30, 2019 and 2018 and 2017 was estimated at thegrant date of grant using a Black Scholes option-pricing model using the following weighted average assumptions:

 

 

Stock Options

 

 

ESPP

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

Expected dividend rate

 

0%

 

 

0%

 

 

0%

 

 

0%

 

 

0%

 

 

NA

Expected volatility

 

41.0%

 

 

49.0%

 

 

39.3% - 39.8%

 

 

40.0% - 41.1%

 

 

39.8% - 46.0%

 

 

NA

Risk-free interest rate

 

2.63% - 2.73%

 

 

2.02% - 2.11%

 

 

1.84% - 2.59%

 

 

2.63% - 2.91%

 

 

2.29 - 2.44%

 

 

NA

Expected term (in years)

 

6.25 - 6.25

 

 

5.5 - 6.25

 

 

 

6.25

 

 

 

6.25

 

 

0.42 - 0.50

 

 

NA

14


Table of Contents

 

The following table summarizes stock option activity underfor the Plans and related information:period ended June 30, 2019:

 

 

 

Number

of Options

 

 

Weighted

Average

Exercise

Price

(per share)

 

 

Weighted

Average

Remaining

Contractual

Term

(years)

 

 

Aggregate

Intrinsic

Value

 

Balances at December 31, 2017

 

3,500,075

 

 

$

5.43

 

 

 

8.8

 

 

 

31,784,488

 

Granted

 

34,875

 

 

$

19.02

 

 

 

 

 

 

 

 

 

Exercised

 

 

(26,334

)

 

$

2.36

 

 

 

 

 

 

 

 

 

Forfeited

 

(53,579

)

 

$

2.77

 

 

 

 

 

 

 

 

 

Balances at March 31, 2018

 

3,455,037

 

 

$

5.64

 

 

 

8.6

 

 

 

52,025,934

 

Options vested and expected to vest at March 31, 2018

 

3,455,037

 

 

$

5.64

 

 

 

8.6

 

 

 

52,025,934

 

Options vested and exercisable at March 31, 2018

 

 

1,043,709

 

 

$

2.32

 

 

 

7.6

 

 

 

19,172,966

 

 

 

Number

of Options

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

(in thousands)

 

 

(per share)

 

 

(years)

 

 

(in thousands)

 

Balances at December 31, 2018

 

2,817

 

 

$

6.64

 

 

 

8.0

 

 

$

47,589

 

Granted

 

 

818

 

 

$

28.15

 

 

 

 

 

 

 

 

 

Exercised

 

 

(488

)

 

$

3.67

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(51

)

 

$

7.53

 

 

 

 

 

 

 

 

 

Balances at June 30, 2019

 

3,096

 

 

$

12.78

 

 

 

8.2

 

 

$

29,695

 

Options vested and expected to vest at June 30, 2019

 

3,096

 

 

$

12.78

 

 

 

8.2

 

 

$

29,695

 

Options vested and exercisable at June 30, 2019

 

1,108

 

 

$

5.55

 

 

 

7.2

 

 

$

16,098

 

 

The Company expects all outstanding stock options at March 31, 2018 to fully vest.vest, except for stock options related to the resignation of our Chief Revenue Officer. The weighted average grant date fair value per share for the periodsix months ended March 31,June 30, 2019 and 2018 was $12.06 and 2017 was $8.42 and $1.56,$9.19, respectively. CompensationStock-based compensation expense relating to stock options was approximately $1.7$1.4 million and $158,000$2.6 million for the three and six months ended March 31,June 30, 2019, respectively, compared to approximately $0.7 million and $2.5 million for the three and six months ended June 30, 2018, and 2017, respectively. The total fair value of shares vested during the three and six months ended March 31, 2018 and 2017June 30, 2019 was approximately $0.4$0.5 million and $98,000,$2.9 million, respectively, compared to approximately $0.2 million and $0.6 million for the three and six months ended June 30, 2018, respectively.


The total unrecognized compensation expense related to non-vested stock options granted is $9.2$14.5 million and is expected to be recognized over a weighted average period of 2.71approximately 2.6 years as of March 31, 2018.June 30, 2019.

Incentive Unit Plan

In 2014 and 2015, the Company granted shares of the Company’s common stock (the “incentive units”) to certain members of management pursuant to restricted stock agreements (the “RSAs”).

The incentive units were granted with an exercise price equal to the fair market value on the date of grant, are subject to vesting, and if exercised in advance of vesting were subject to the Company’s right to repurchase. Upon vesting,repurchase until vested. During the incentive units automatically convert to common stock. 50%first quarter of incentive units granted to executives vest based on performance meeting or exceeding EBITDA targets, as defined in the RSAs. Incentive units granted to non-executives and2019, all of the remaining 50%0.7 million units were vested with a weighted average grant date fair value of incentive units granted to executives vest 25% on the first anniversary date of the grant, and ratably over the remaining three years. The graded-vesting attribution method is used by the Company to determine the monthly stock-based compensation expense over the applicable vesting periods. In 2017, the Board of Directors waived the EBITDA criteria associated with the annual tranche of performance vesting stock options resulting in a modification.

$0.05 per share. The Company did not grant any additional incentive units during the first quarter ofthree and six months ended June 30, 2019 and 2018.

As of March 31, 2018, the aggregate intrinsic value for 1,257,000 non-vested2019, all incentive units were vested. Therefore, we incurred no additional stock-based compensation expense for the three months ended June 30, 2019. Stock-based compensation expense was $26.0$0.4 million for the six months ended June 30, 2019. Stock-based compensation expense was approximately $2.1 million and $4.3 million for the total unrecognized compensation three and six months ended June 30, 2018, respectively.

Restricted Stock Units

Restricted stock units (“RSUs”) are generally subject to forfeiture if employment terminates prior to the vesting date. We expense the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs on the date of grant, ratably over the period during which the vesting restrictions lapse.

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The following table provides a summary of the restricted stock unit for employees and non-employees for the period ended June 30, 2019:

 

 

Number of

Shares

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

(in thousands)

 

 

(per share)

 

 

(years)

 

 

(in thousands)

 

Balances at December 31, 2018

 

1,148

 

 

$

15.40

 

 

 

1.8

 

 

 

26,967

 

Granted

 

 

1,027

 

 

$

29.25

 

 

 

 

 

 

 

 

 

Vested

 

 

(124

)

 

$

19.26

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(66

)

 

$

19.95

 

 

 

 

 

 

 

 

 

Balances at June 30, 2019

 

1,985

 

 

$

22.18

 

 

 

1.8

 

 

 

39,777

 

Units expected to vest at June 30, 2019

 

1,985

 

 

$

22.18

 

 

 

1.8

 

 

 

39,777

 

The Company expects all outstanding RSUs to fully vest, except for RSUs related to non-vested incentivethe resignation of our Chief Revenue Officer. Stock-based compensation expense relating to restricted stock units granted was approximately $6.9$3.0 million and is expected$5.4 million for the three and six months ended June 30, 2019, respectively, compared to be recognized over a weighted-average remaining period of 0.8 years.approximately $1.3 million and $2.5 million for the three and six months ended June 30, 2018, respectively. During the first quarter of 2018, approximately 979,000 units vested. Compensation expense relating to incentive units was approximately $2.1 million and $10,000 for2019, the three months ended March 31, 2018 and 2017, respectively.

Restricted Stock Units

The Company granted 382,427 restricted stock units during the three months ended March 31, 2018. AsBoard of March 31, 2018, 1,270,966 unitsDirectors approved accelerated vesting of restricted stock is expected to vest overfor an exiting board member that resulted in a weighted average remaining contractual period of 2.1 years withmodification and an aggregate intrinsic value of approximately $26.3 million. immaterial decrease in stock-based compensation expense.

The total unrecognized compensation related to restricted stock unitsRSUs for employee and non-employees was $15.4$38.7 million as of March 31, 2018June 30, 2019 and is expected to be recognized over a weighted average period of 3.57approximately 3.1 years. Compensation

Employee Stock Purchase Plan

In November 2017, the Company’s Board of Directors adopted the Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective November of 2017, after the date our registration statement was declared effective by the SEC. The ESPP permits eligible employees to purchase shares by authorizing payroll deductions from 1% to 15% of employee’s eligible compensation during the offering period, which is generally six months, with an annual cap of $25,000 in fair market value, determined at the grant date. Unless an employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares after the closing of the offering period at a price equal to 85% of the closing price of the shares at the opening or closing of the offering period, whichever is lower. During the three and six months ended June 30, 2019, the Company issued and distributed approximately 0.2 million shares of common stock pursuant the ESPP offering spanning January 2, 2019 to June 3, 2019. The current offering period is June 4, 2019 through December 2, 2019.

The Company initially reserved 1.8 million shares of common stock for issuance under the ESPP. The number of shares available for issuance under the ESPP will increase each January 1 beginning in 2019 by 0.9 million shares of common stock. The ESPP will continue in effect until October 30, 2020; unless terminated prior thereto by the Company’s Board of Directors or compensation committee, each of which has the right to terminate the ESPP at any time.

Stock-based compensation expense relating to restricted stock unitsthe ESPP was approximately $1.2$0.5 million and $0$1.3 million for the three and six months ended March 31, 2018 and 2017,June 30, 2019, respectively. Stock-based compensation expense associated with ESPP purchase rights are recognized on a straight-line basis over the offering period.

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Table of Contents

 

Stock-basedAsummary of the Company’s stock-based compensation expense, which includes stock options, incentive units, restricted stock units and incentive units, wasESPP, is presented below:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(In thousands)

 

Stock options

 

$

1,392

 

 

$

709

 

 

$

2,636

 

 

$

2,487

 

Incentive units

 

 

 

 

 

2,137

 

 

 

351

 

 

 

4,269

 

RSUs

 

3,029

 

 

 

1,270

 

 

 

5,357

 

 

 

2,499

 

ESPP

 

549

 

 

 

 

 

 

1,265

 

 

 

 

Total stock-based compensation expense

 

$

4,970

 

 

$

4,116

 

 

$

9,609

 

 

$

9,255

 

A summary of the Company’s stock-based compensation expense as recognized on the condensed consolidated statements of operations is as follows:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

(In thousands)

 

 

(In thousands)

 

Cost of revenue – subscription

 

$

121

 

 

$

9

 

Cost of revenue – services and other

 

 

375

 

 

 

18

 

Cost of revenue - subscription

 

$

284

 

 

$

253

 

 

$

544

 

 

$

374

 

Cost of revenue - services and other

 

 

380

 

 

 

347

 

 

 

729

 

 

 

722

 

Research and development

 

 

641

 

 

 

30

 

 

 

916

 

 

 

652

 

 

 

1,833

 

 

 

1,293

 

General and administrative

 

 

2,340

 

 

 

30

 

 

 

1,644

 

 

 

1,695

 

 

 

3,015

 

 

 

4,035

 

Sales and marketing

 

 

1,662

 

 

 

71

 

 

 

1,746

 

 

 

1,169

 

 

 

3,488

 

 

 

2,831

 

Total stock-based compensation

 

$

5,139

 

 

$

158

 

Total stock-based compensation expense

 

$

4,970

 

 

$

4,116

 

 

$

9,609

 

 

$

9,255

 

 

8. Income Taxes

Impacts of the U.S. 2017 Tax Cuts and Jobs Act

The U.S. 2017 Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017 and effective January 1, 2018, reducesreduced the U.S. federal corporate tax rate from 35% to 21%. ThereUpon adoption, there was no net impact to the Company’s provision for income taxes or net deferred taxes due to the Company’s valuation allowance. The decrease in future tax assets via the reduced rate was offset by the decrease in our valuation allowance.

The Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity canUnder GAAP, the Company is permitted to make an accounting policy election to either recognize deferredtreat taxes for temporary basis differences expected to reverse as GILTIdue on future inclusions in future years or provide for the tax expenseU.S. taxable income related to GILTI in the year the tax is incurred as a periodcurrent-period expense only. Givenwhen incurred (the “period cost method”) or to factor such amounts into the complexityCompany’s measurement of its deferred taxes (the “deferred method”). The Company elected the GILTI


provisions, we are still evaluating"period cost method" as its accounting policy with respect to the effects ofnew GILTI tax rules. For the GILTI provisionsperiods ended June 30, 2019 and have not yet determined our accounting policy. As of March 31, 2018, the Company determined it was in an aggregated net loss position with respect to its controlled foreign corporations. Thus, there is not subject to theno GILTI provisions due to Section 956 inclusions.tax liability as of June 30, 2019 and 2018.

The provision for income taxes for 20182019 and 20172018 is generated from activity inrelated to stock option activity and certain foreign jurisdictions by our consolidated subsidiaries. The effective tax rate for the three and six months ended June 30, 2019 is (9.2)% and 2.2%, respectively, compared to (79.3)% and (66.4)% for the three and six months ended June 30, 2018, respectively. The primary drivers for the differences in the rates from the prior-year periods to the current-year periods are related to differences in forecasted pre-tax book income, the impact of stock compensation and an increase in foreign tax liabilities.

Provision for income taxes consists of U.S. and state income taxes and income taxes in certain foreign jurisdictions in which the Company conducts business. With the previous adoption of ASC 606 in 2018, the Company is in a deferred tax liability position and no longer requires a valuation allowance. The Company still maintains a full valuation allowance for our Israel tax position due the lack of taxable earnings for the foreseeable future.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the three and six months ended March 31,June 30, 2019 and 2018, and 2017 the Company did not record any material interest or penalties.

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Table of Contents

The Company files tax returns in the U.S. federal jurisdiction, in several state jurisdictions, and in several foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 20132015 and is no longer subject to state, local and foreign income tax examinations by tax authorities for years before 2012.2014. The Company is not currently under audit for income tax in a single foreign jurisdiction. The audit inis ongoing and is not expected to materially impact the consolidated financial statements. The Company has an Uncertain Tax Position reserve related to this foreign jurisdiction filing that should sufficiently cover any jurisdiction.related assessment.

9. Net loss per share attributableLoss Per Share Attributable to common shareholdersCommon Stockholders

Basic and diluted net loss per share is computed by dividing net loss attributable to common shareholdersstockholders by the weighted-averageweighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using our weighted-averageweighted average outstanding common shares including the dilutive effect of stock awards. In periods when the Company recognizes a net loss, the Company excludes the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an antidilutive effect.

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented:

 

 

 

Three months ended

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

(In thousands, except share data)

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(5,967

)

 

$

(2,283

)

Deemed dividends to preferred stockholders

 

 

 

 

 

(6,170

)

Net loss attributable to common shareholders

 

$

(5,967

)

 

$

(8,453

)

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic and diluted

 

 

85,719,240

 

 

 

47,208,477

 

Net loss attributable to common shareholders

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

(0.18

)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(In thousands, except per share data)

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

Net loss attributable to common stockholders

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

88,767

 

 

 

86,246

 

 

 

88,533

 

 

 

85,984

 

Diluted

 

 

88,767

 

 

 

86,246

 

 

 

88,533

 

 

 

85,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.20

)

 

$

(0.04

)

Diluted

 

$

(0.10

)

 

$

(0.01

)

 

$

(0.20

)

 

$

(0.04

)

 

The following weighted average outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common shareholdersstockholders for the periods presented because their effect would have been anti-dilutive.  For

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(in thousands)

 

Stock options to purchase common stock

 

 

1,458

 

 

 

3,316

 

 

 

3,108

 

 

 

3,392

 

Non-vested incentive units

 

 

 

 

 

1,098

 

 

 

 

 

 

1,288

 

RSUs issued and outstanding

 

1,941

 

 

 

1,281

 

 

 

1,791

 

 

 

1,189

 

ESPP

 

57

 

 

 

 

 

 

28

 

 

 

 

Total

 

 

3,456

 

 

 

5,695

 

 

 

4,927

 

 

 

5,869

 

10. Subsequent Events

As previously disclosed on Form 8-K, Howard Greenfield, the period priorformer Chief Revenue Officer of SailPoint Technologies, Inc., submitted his resignation from this position to our initial public offering, convertible preferred stockthe Company. In connection with his resignation, the Company and Mr. Greenfield entered into a Separation Agreement (the “Separation Agreement”) effective on April 26, 2019. As of July 31, 2019 Mr. Greenfield has satisfied the contingent conditions specified in the Separation Agreement, and therefore is notscheduled to receive, among other things, (i) a cash lump sum severance payment of $1.1 million, less applicable taxes and deductions payable in August 2019, and (ii) reimbursement for six months of insurance coverage under the Consolidated Omnibus Budget Reconciliation Act. At June 30, 2019, the total severance liability accrued was $1.1 million, which is included in this computation as it was contingently convertible based upon a future event.accrued expenses and other on the balance sheet.

 

 

 

Three months ended

 

 

 

March 31, 2018

 

 

March 31, 2017

 

Convertible preferred stock on an as-if converted basis

 

 

 

 

 

 

 

 

Stock options to purchase common stock

 

 

3,468,458

 

 

 

2,057,211

 

RSUs issued and outstanding

 

 

1,097,668

 

 

 

 

Non-vested incentive units

 

 

1,480,304

 

 

 

3,689,429

 

Total

 

 

6,046,430

 

 

 

5,746,640

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our Unaudited Condensed Consolidated Financial Statements and notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and theour Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on March 18, 2019 (the “Annual Report”), including the Consolidated Financial Statements and related notes included therein.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. All statements of historical fact included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” 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 based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. The forward-looking statements are contained principally in this Quarterly Report in “Management’s Discussion and Analysis of Financial Condition and Result of Operations” and “Risk Factors”.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors. 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: our ability to attract and retain customers, andincluding larger organizations; our ability to deepen our relationships with existing customers; our expectations regarding our customer growth rate; our ability to maintain successful relationshipsbusiness plan and beliefs and objectives for future operations; trends associated with our channel partnersindustry and further develop strategic relationships;potential market; benefits associated with use of our platform and services; our ability to develop or acquire new solutions, improve our platform and solutions and increase the value of and benefits associated with our platform and solutions; our ability to compete successfully against current and future competitors; our ability to further develop strategic relationships; our ability to achieve positive returns on investments; our plans to acquire complementary businesses, products or technology; our plans to further invest in and grow our business, and our ability to effectively manage our growth and associated investments; our ability to timely and effectively scale and adapt our existing technology, our ability to increase our revenue, our revenue growth rate and respondgross margin; our ability to rapidly changing technology, evolving industry standards, changing regulationsgenerate sufficient revenue to achieve and changing customer needs;sustain profitability; our future financial performance, including trends in revenue, cost of revenue, operating expenses, other income and expenses, income taxes, billings and customers; the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements; our ability to raise capital and the loans of those financings; our ability to attract, train and retain qualified employees and key personnel; our ability to maintain and enhancebenefit from our brand or reputation as an industry leader and innovator;corporate culture; our ability to hire, retain, trainsuccessfully identify, acquire and motivate our senior management teamintegrate companies and key employees;assets; our ability to successfully enter new markets and manage our international expansion; adverse economic conditions in the United States, Europe or the global economy; significant changes in the contracting or fiscal policies of the public sector; actual or perceived failures by us to comply with privacy policy or legal or regulatory requirements;and our ability to maintain, third-party licensed software in or withprotect and enhance our solutions;intellectual property and our ability to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies.not infringe upon others’ intellectual property. These and other important risk factors are described more fully in our reports and other documents filed with the SEC, including under “Risk Factors” in Part I, Item 1A in the Annual Report and “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q. Report. 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 Quarterly Report. 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.

The forward-looking statements made in this Quarterly Report relate only to events as of the date hereof. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

 


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Table of Contents

Business Overview

SailPoint is the leading provider of enterprise identity governance solutions. Our open identity platform provides organizations with critical visibility into who currently has access to which resources, who should have access to those resources and how that access is being used.

We offer both on-premises software and cloud-based solutions, which empower our customers to efficiently and securely govern the digital identities of employees, contractors, business partners and other users, and manage their constantly changing access rights to enterprise applications and data across hybrid IT environments, whether comprised of on-premises, cloud or mobile applications. We help customers enable their businesses with more agile and innovative IT, enhance their security posture and better meet compliance and regulatory requirements. We believe that our open identity platform is a critical, foundational layer of a modern cyber security strategy that complements and builds upon traditional perimeter-perimeter and endpoint-centric security solutions, which on their own are increasingly insufficient to secure organizations, and their applications and data. Our customers include many of the world’s largest and most complex organizations, including commercial enterprises, educational institutions and governments.

WeOur solutions address the complex needs of global enterprises and mid-market organizations. As of June 30, 2019, 1,278 customers across a wide variety of industries were founded by identity industry veteransusing our products to develop a new category of identity management solutionsenable and address emerging identity governance challenges. Since our inception, we have focused on driving innovation insecure digital identities across the identity market, with our key milestones including:

in 2007, we pioneered identity governance through our release of IdentityIQ, our on-premises identity governance solution;

in 2010, we revolutionized provisioning by integrating it with IdentityIQ into aglobe. No single solution;

in 2013, we introduced our cloud-based identity governance solution, IdentityNow;

in 2015, we extended identity governance by adding our identity governance for data stored in files solution, SecurityIQ, which manages user access to unstructured data, a rapidly growing area of risk; and

in 2017, we further extended identity governance with the introduction, on a limited release basis,customer represented more than 10% of our advanced identity analytics solution, IdentityAI, which is designedrevenue for each of the three and six months ended June 30, 2019 and 2018.

For the three and six months ended June 30, 2019 our revenue was $63.1 million and $123.6 million, respectively, compared to use machine learning technologies$53.7 million and $102.6 million for the three and six months ended June 30, 2018, respectively. For the three and six months ended June 30, 2019 our net loss was $(9.2) million and $(17.6) million, respectively, compared to enable rapid detection of security threats before they turn into security breaches.$(1.0) million and $(3.3) million for the three and six months ended June 30, 2018, respectively. For the six months ended June 30, 2019 and 2018, our net cash provided by operations was $21.8 million and $26.6 million, respectively.

Our success is principally dependent on our ability to deliver compelling solutions to attract new customers and retain existing customers. Delivering these solutions is challenging because our customers have large, complex IT environments, often rely on both legacy and innovative technologies, and deploy different business models, including on premiseon-premises and cloud solutions. Rising security threats and evolving regulations and compliance standards for cyber security, data protection, privacy and internal IT controls create new opportunities for our industry and require us to adapt our solutions to be successful. Our ability to continue to maintainMaintaining our historical growth rates is also challenging because our growth strategy depends in part on our ability to expand our global presence, increase the number of companies we can address with our current solutions, and invest in new vertical markets, while competing against much larger companies with more recognizable brands and financial resources. In the first quarter of 2019, we saw changes in our pipeline that impacted our expectations for the remainder of 2019. We believe we have identified the challenges and continue to make changes in our go-to-market initiatives. We believe these changes will address our execution shortfalls; however, it is too early to determine whether all of the shortfalls have been addressed. If we are unable to successfully address these challenges, our business, financial condition, and operating results could be adversely affected. Although we seek to grow rapidly, we also focus on delivering positive net cash from operations while continuing to invest in our platform and to deliver innovative solutions to our customers. Additionally, our gross margins vary depending on the type of solution we sell, and a shift in the mix of our solutions could affect our performance relative to historical results.

Our Business Model

We deliver an integrated set of solutions that supports all aspects of identity governance including provisioning, access request, compliance controls, password management and identity governance for data stored in files. Our solutions are built on an open identity platform which offers connectivity to a variety of security and operational IT applications, extending the reach of our identity governance processes and enabling effective identity governance controls across customer environments.

Our set of solutions currently consists of (i) IdentityIQ, our on-premises identity governance solution that can be delivered from the cloud or on-premises, (ii) IdentityNow, our cloud-based, multi-tenant Software-as-a-Service (“SaaS”) governance suite, which is delivered as a subscription service, and (iii) SecurityIQ, our on-premises identity governance for files solution that secures access to data stored in file servers, collaboration portals, mailboxes and cloud storage systems, and (iv) IdentityAI, our cloud-basedmulti-tenant advanced identity analytics solution.subscription service that delivers the SailPoint Predictive Identity vision by infusing artificial intelligence and machine learning into IdentityIQ and IdentityNow. See the section titled “Business—Products” in Part I, Item 1 “Business” of the Annual Report for more information regarding our solutions.

For our IdentityIQ and SecurityIQ solutions, our customers typically purchase a perpetual software license, which includes one year of maintenance. Our maintenance provides software maintenance as well as access to our technical support services during the maintenance term. After the initial maintenance period, customers with perpetual licenses may renew their maintenance agreement for an additional fee. For our cloud-based solutions, IdentityNow and IdentityAI, for a subscription fee, we offer customers access to this


solution and infrastructure support for the duration of their subscription agreement. Our standard subscription agreement for our IdentityNow solution has a duration of three years.

Pricing for each of our solutions is dependent on the number of digital identities of employees, contractors, business partners and other users that the customer is entitled to govern with the solution. We also package and price our IdentityIQ and IdentityNow solutions into modules. Each module has unique functionalities, and our IdentityIQ and IdentityNow customers are able to purchase one or more modules, depending on their needs. We package and price SecurityIQ, our identity governance for files solution, by target storage systems. Thus, our revenue from any customer is generally determined by the number of identities that the customer is entitled to govern as well as the number of modules (for our IdentityIQ and IdentityNow solutions) or target storage systems (for our SecurityIQ solution) purchased by the customer.

Our go-to-market strategy consists of both direct sales and indirect sales through our partnership network of systems integrators, value-added resellers and adjacent technology vendors. We work closely with systems integrators, many of whom have dedicated SailPoint practices (including Accenture, Deloitte, KPMG and PwC), with some dating back more than seven years, and resellers (including value-added resellers such as Optiv) to identify potential sales opportunities and help us increase our reach, and we frequently cooperate with systems integrators to make joint sales proposals to address our mutual customers’ requirements. We also collaborate with leading access management vendors by adding our identity governance capabilities to their access management services (e.g., Microsoft, Okta and VMware). We do not have any material payment obligations to systems integrators, resellers or our technology partners; nor do they have any material payment obligations to us, except that resellers typically purchase solutions directly from us and resell to customers. See the section titled “Business—Partnerships and Strategic Relationships” in Part I, Item 1 of the Annual Report for more information regarding our partnership network.

In addition to our solutions, we offer professional services to our customers and partners to configure and optimize the use of our solutions as well as training services related to the configuration and operation of our platform. Most of our professional services activity is in support of our partners, who perform a significant majority of all initial and follow-on implementation work for our customers. Most of our consulting services are priced on a time and materials basis; our training services are provided through multiple pricing models, including on a per-person basis (for courses provided at our headquarters and on-site at our customers’ offices) and a flat-rate basis (for our e-learning course).

We devote significant resources to acquire new customers, in both existing and new markets, in order to grow our customer base. In addition, we focus on three distinct opportunities to increase sales to existing customers: (i) expand the number of digital identities; (ii) up-sell additional modules or target storage systems, as applicable, within a single solution; and (iii) cross-sell additional solutions.

Key20


Table of Contents

On September 8, 2014, SailPoint Technologies Holdings, Inc. acquired all of the capital stock of SailPoint Technologies, Inc. We refer to this transaction as the “Acquisition”.

See “Key Factors Affecting Our Performance

Our historical financial performance has been,Performance” within “Management’s Discussion and we expect our financial performanceAnalysis of Financial Condition and Results of Operations” in the future to be, driven by our ability to:

Add New Customers Within Existing Markets. Based on data from S&P Global Market Intelligence, we believe that we have penetrated less than 2%Part II, Item 7 of the approximately 65,000 companies inAnnual Report for information regarding the countries where we have customers today and that as a result, there is significant opportunity to expandkey factors affecting our footprint in our existing markets through new, greenfield installations and displacement of our competitors’ legacy solutions. To do so, we plan to grow our sales organization, increase and leverage our indirect channel partners and enhance our marketing efforts.performance.

Generate Additional Sales to Existing Customers. We believe that our existing customer base provides us with a significant opportunity to drive incremental sales. In most cases, our customers initially purchase a subset of the modules or solutions we offer based on their immediate need. We focus on generating more revenue from the modules that our customers have already purchased from us as our customers grow the number of identities our solutions manage and govern and as our customers deploy our solutions across other business units or geographies within their organizations. Over time, we also identify up-selling and cross-selling opportunities and seek to sell additional modules and solutions to our existing customers.

Retain Customers. We believe that our ability to retain our customers is an important component of our growth strategy and reflects the long-term value of our customer relationships. For example, when we add a new customer, we generate new license revenue. If the customer renews, we generate incremental maintenance revenue. As we add new IdentityIQ customers, our high renewal rates result in incremental maintenance revenue. Our key strategies to maintain our high renewal rates include focusing on the quality and reliability of our solutions, customer service and support to ensure our customers receive value from our solutions, providing consistent software upgrades and having dedicated customer success teams.


Expand into New Markets. We expect to continue to invest significantly in sales, marketing and customer service, as well as our indirect channel partner network, to expand into new geographies and vertical markets. We believe that our market opportunity is large and growing and that the global cyber security market represents a significant growth opportunity for us.

Key Business Metrics

In addition to our GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Number of customers

 

 

984

 

 

 

725

 

 

 

1,278

 

 

 

1,031

 

 

 

1,278

 

 

 

1,031

 

Subscription revenue as a percentage of total revenue

 

 

46

%

 

 

42

%

 

 

53

%

 

 

45

%

 

 

53

%

 

 

45

%

Adjusted EBITDA (in thousands)

 

$

3,342

 

 

 

3,152

 

 

$

(653

)

 

$

4,931

 

 

$

420

 

 

$

8,856

 

 

Number of Customers. We believe that the size of our customer base is an indicator of our market penetration and that our net customer additions are an indicator of the growth of our business and our future revenue opportunity. We define a customer as a distinct entity, division or business unit of an organization that receives support or has the right to use our cloud-based solutions as of the specified measurement date.

Number of Customers. We believe that the size of our customer base is an indicator of our market penetration and that our net customer additions are an indicator of the growth of our business and our future revenue opportunity. We define a customer as a distinct entity, division or business unit of an organization that receives support or has the right to use our cloud-based solutions as of the specified measurement date.

Subscription Revenue as a Percentage of Total Revenue. Subscription revenue is a portion of our total revenue and is derived from (i) IdentityNow, our cloud-based solution where customers enter into SaaS subscription agreements with us, and (ii) IdentityIQ and SecurityIQ maintenance and support agreements, but not licenses. As we generally sell our solutions on a per-identity basis, our subscription revenue for any customer is primarily determined by the number of identities that the customer is entitled to govern as part of a SaaS subscription, and the ongoing price paid per-identity under a maintenance and support agreement or SaaS subscription. Thus, we consider our subscription revenue to be the recurring portion of our revenue base and believe that its continued growth as a percentage of total revenue will lead to a more predictable revenue model and increase our visibility to future period total revenues. Because we recognize our subscription revenue ratably over the duration of those agreements, a portion of the revenue we recognize each period is derived from agreements we entered into in prior periods. In contrast, we typically recognize license revenue upon entering into the applicable license, the timing of which is less predictable and may cause significant fluctuations in our quarterly financial results.

Subscription Revenue as a Percentage of Total Revenue. Subscription revenue is a portion of our total revenue and is derived from (i) IdentityNow, our solution where customers enter into SaaS subscription agreements with us, and (ii) IdentityIQ maintenance and support agreements, but not licenses. As we generally sell our solutions on a per-identity basis, our subscription revenue for any customer is primarily determined by the number of identities that the customer is entitled to govern as part of a SaaS subscription, and the ongoing price paid per-identity under a maintenance and support agreement or SaaS subscription. Thus, we consider our subscription revenue to be the recurring portion of our revenue base and believe that its continued growth as a percentage of total revenue will lead to a more predictable revenue model and increase our visibility to future period total revenues. Because we recognize our subscription revenue ratably over the duration of those agreements, a portion of the revenue we recognize each period is derived from agreements we entered into in prior periods. In contrast, we typically recognize license revenue upon entering into the applicable license, the timing of which is less predictable and may cause significant fluctuations in our quarterly financial results.

Adjusted EBITDA. We believe that adjusted EBITDA is a measure widely used by securities analysts and investors to evaluate the financial performance of our company and other companies. We believe that adjusted EBITDA is an important measure for evaluating our performance because it facilitates comparisons of our core operating results from period to period by removing the impact of our capital structure (net interest income or expense from our outstanding debt), asset base (depreciation and amortization), tax consequences, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation. In addition, we base certain of our forward-looking estimates and budgets on adjusted EBITDA. See the section titled “Non-GAAP Financial Measures” for more information regarding adjusted EBITDA, including the limitations of using adjusted EBITDA as a financial measure, and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

Adjusted EBITDA. We believe that adjusted EBITDA is a measure widely used by securities analysts and investors to evaluate the financial performance of our company and other companies. We believe that adjusted EBITDA is an important measure for evaluating our performance because it facilitates comparisons of our core operating results from period to period by removing the impact of our stock-based compensation, asset base (depreciation and amortization), purchase accounting adjustments, severance expense of certain key executives, capital structure (net interest income or expense) and income taxes. In addition, we base certain of our forward-looking estimates and budgets on adjusted EBITDA. See the section titled “Non-GAAP Financial Measures” for more information regarding adjusted EBITDA, including the limitations of using adjusted EBITDA as a financial measure, and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, we use adjusted EBITDA, acertain non-GAAP financial measure,measures to clarify and enhance our understanding of 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.

We monitor the non-GAAP financial measures described below and we believe they are helpful to investors. Our non-GAAP financial measure of adjusted EBITDAmeasures may not provide information that is directly comparable to that provided by other companies in our industry because they may calculate adjusted EBITDAnon-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures such as adjusted EBITDA, because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. In particular, interest expense, which is excluded from adjusted EBITDA, has been and will continue to be a significant recurring expense in our business for the foreseeable future. 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. We urge you to review the reconciliations of our adjusted EBITDAnon-GAAP financial measures to net loss, the comparable GAAP financial measure,measures included below, and not to rely on any single financial measure to evaluate our business.


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Table of ContentsWe

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we calculate adjusted EBITDA as net income (loss)loss adjusted to exclude income taxes, intereststock-based compensation expense, net,amortization and depreciation, and amortization, purchase accounting adjustments, acquisitionseverance expense of certain key executives, net interest (income) expense and sponsor related costs andincome taxes.

We exclude stock-based compensation expense.

We believe thatexpense from adjusted EBITDA because it is a measure widely used by securities analystsnon-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to evaluate the financial performancemake more meaningful comparisons between our operating results and those of our company and other companies. We believe that adjusted EBITDA is an important measure for evaluatingalso exclude amortization of acquired intangible assets, purchase price accounting adjustment and severance expense of certain key executives from our performancenon-GAAP financial measures because it facilitates comparisonsthese are considered by management to be outside of our core operating results from periodresults. Accordingly, we believe that excluding these expenses provides investors and management with greater visibility to period by removing the impactunderlying performance of our capital structure (net interest income or expense frombusiness operations and may also facilitate comparison with the results of other companies in our outstanding debt), asset base (depreciation and amortization), tax consequences, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation. In addition, we base certain of our forward-looking estimates and budgets on adjusted EBITDA.industry.

The following table reflects the reconciliation of GAAP to non-GAAP adjusted EBITDA to net loss calculated in accordance with GAAP:

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

(In thousands)

 

Net loss

 

$

(5,967

)

 

$

(2,283

)

Stock-based compensation

 

 

5,139

 

 

 

158

 

Amortization

 

 

2,206

 

 

 

2,221

 

Depreciation

 

 

421

 

 

 

255

 

Purchase price accounting adjustment (1)

 

 

13

 

 

 

55

 

Acquisition and sponsor related costs

 

 

 

 

 

328

 

Interest expense

 

 

1,178

 

 

 

2,657

 

Income tax expense (benefit)

 

 

352

 

 

 

(239

)

Adjusted EBITDA

 

$

3,342

 

 

$

3,152

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(In thousands)

 

Net loss

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

Stock-based compensation (1)

 

 

5,019

 

 

 

4,182

 

 

 

9,889

 

 

 

9,321

 

Amortization of acquired intangibles

 

 

2,331

 

 

 

2,206

 

 

 

4,662

 

 

 

4,412

 

Depreciation

 

 

1,256

 

 

 

445

 

 

 

2,228

 

 

 

866

 

Purchase price accounting adjustment (2)

 

 

 

 

 

19

 

 

 

 

 

 

32

 

Severance expense of certain key executives (3)

 

 

1,126

 

 

 

 

 

 

1,126

 

 

 

 

Interest (income) expense, net (4)

 

 

(261

)

 

 

2,800

 

 

 

(272

)

 

 

3,978

 

Income tax expense (benefit)

 

 

(927

)

 

 

(3,742

)

 

 

374

 

 

 

(6,472

)

Adjusted EBITDA

 

$

(653

)

 

$

4,931

 

 

$

420

 

 

$

8,856

 

 

(1)

Stock-based compensation includes employer related payroll tax expense.

(2)

Purchase accounting adjustment related to the fair value write down of deferred revenue from the Acquisition.

(3)

Severance expense of certain key executives includes employer related payroll tax expense.

(4)

Interest expense includes amortization of debt issuance costs, loss on the modification and extinguishment of debt and prepayment penalty.

 

Components of Results of Operations

See the section titled “Components of Results of Operations” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report for information regarding the components of our results of operations.


ASC 606 Adoption and Impact to Previously Reported Results

During the year ended December 31, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) and subsequent amendments to the initial guidance collectively, ASC 606, utilizing the modified retrospective method of transition whereby the results and related disclosures for the comparative 2018 periods presented in this Quarterly Report were recast and are now presented as if ASC 606 had been in effect beginning January 1, 2018 with modified retrospective adjustments applicable prior to January 1, 2018 included as a cumulative-effect adjustment to retained earnings. Refer to Note 2 “Summary of Significant Accounting Policies” and Note 3 “Revenue Recognition” in the financial statements included in the Annual Report for accounting policy updates and additional information on our adoption of ASC 606.

Seasonality

We generally experience seasonal fluctuations in demand for our products and services. Our quarterly sales are impacted by industry buying patterns. As a result, our sales have generally been highest in the fourth quarter of a calendar year and lowest in the first quarter. Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.

22


Table of Contents

Results of Operations

The following table sets forth our statementunaudited condensed consolidated statements of operations for the periods presented:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

(In thousands)

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

$

16,987

 

 

$

12,236

 

 

$

19,333

 

 

$

19,620

 

 

$

38,002

 

 

$

36,428

 

Subscription

 

 

23,005

 

 

 

14,952

 

 

 

33,711

 

 

 

24,110

 

 

 

65,546

 

 

 

46,615

 

Services and other

 

 

9,722

 

 

 

8,278

 

 

 

10,010

 

 

 

9,926

 

 

 

20,089

 

 

 

19,554

 

Total revenue

 

 

49,714

 

 

 

35,466

 

 

 

63,054

 

 

 

53,656

 

 

 

123,637

 

 

 

102,597

 

Cost of revenue:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

1,138

 

 

 

1,087

 

 

 

1,015

 

 

 

1,260

 

 

 

2,074

 

 

 

2,398

 

Subscription (1)

 

 

4,658

 

 

 

3,575

 

 

 

6,315

 

 

 

4,919

 

 

 

12,128

 

 

 

9,577

 

Services and other (1)

 

 

6,974

 

 

 

5,473

 

 

 

8,379

 

 

 

7,197

 

 

 

16,376

 

 

 

14,171

 

Total cost of revenue

 

 

12,770

 

 

 

10,135

 

 

 

15,709

 

 

 

13,376

 

 

 

30,578

 

 

 

26,146

 

Gross profit

 

 

36,944

 

 

 

25,331

 

 

 

47,345

 

 

 

40,280

 

 

 

93,059

 

 

 

76,451

 

Operating expenses:

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

9,762

 

 

 

6,927

 

 

 

13,398

 

 

 

10,115

 

 

 

26,170

 

 

 

19,877

 

General and administrative (1)

 

 

7,657

 

 

 

3,032

 

 

 

8,490

 

 

 

7,743

 

 

 

17,627

 

 

 

15,400

 

Sales and marketing (1)

 

 

23,815

 

 

 

15,173

 

 

 

35,536

 

 

 

23,774

 

 

 

66,024

 

 

 

46,233

 

Total operating expenses

 

 

41,234

 

 

 

25,132

 

 

 

57,424

 

 

 

41,632

 

 

 

109,821

 

 

 

81,510

 

(Loss) income from operations

 

 

(4,290

)

 

 

199

 

Loss from operations

 

 

(10,079

)

 

 

(1,352

)

 

 

(16,762

)

 

 

(5,059

)

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(1,178

)

 

 

(2,657

)

Interest income (expense), net

 

 

261

 

 

 

(2,800

)

 

 

272

 

 

 

(3,978

)

Other, net

 

 

(147

)

 

 

(64

)

 

 

(306

)

 

 

(569

)

 

 

(723

)

 

 

(716

)

Total other expense, net

 

 

(1,325

)

 

 

(2,721

)

 

 

(45

)

 

 

(3,369

)

 

 

(451

)

 

 

(4,694

)

Loss before income taxes

 

 

(5,615

)

 

 

(2,522

)

 

 

(10,124

)

 

 

(4,721

)

 

 

(17,213

)

 

 

(9,753

)

Income tax (expense) benefit

 

 

(352

)

 

 

239

 

 

 

927

 

 

 

3,742

 

 

 

(374

)

 

 

6,472

 

Net loss

 

$

(5,967

)

 

$

(2,283

)

 

$

(9,197

)

 

$

(979

)

 

$

(17,587

)

 

$

(3,281

)

 

(1)

Includes stock-based compensation expense as follows:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

(In thousands)

 

 

(In thousands)

 

Cost of revenue – subscription

 

$

121

 

 

$

9

 

Cost of revenue – services and other

 

 

375

 

 

 

18

 

Cost of revenue - subscription

 

$

284

 

 

$

253

 

 

$

544

 

 

$

374

 

Cost of revenue - services and other

 

 

380

 

 

 

347

 

 

 

729

 

 

 

722

 

Research and development

 

 

641

 

 

 

30

 

 

 

916

 

 

 

652

 

 

 

1,833

 

 

 

1,293

 

General and administrative

 

 

2,340

 

 

 

30

 

 

 

1,644

 

 

 

1,695

 

 

 

3,015

 

 

 

4,035

 

Sales and marketing

 

 

1,662

 

 

 

71

 

 

 

1,746

 

 

 

1,169

 

 

 

3,488

 

 

 

2,831

 

Total stock-based compensation

 

$

5,139

 

 

$

158

 

Total stock-based compensation expense

 

$

4,970

 

 

$

4,116

 

 

$

9,609

 

 

$

9,255

 

 


23


Table of Contents

The following table sets forth the unaudited condensed consolidated statements of operations data for each of the periods presented as a percentage of total revenue:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Revenue:

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

34

%

 

 

35

%

 

 

31

%

 

 

37

%

 

 

31

%

 

 

36

%

Subscription

 

 

46

 

 

 

42

 

 

 

53

 

 

 

45

 

 

 

53

 

 

 

45

 

Services and other

 

 

20

 

 

 

23

 

 

 

16

 

 

 

18

 

 

 

16

 

 

 

19

 

Total revenue

 

 

100

 

 

 

100

 

 

 

100

 

 

 

100

 

 

 

100

 

 

 

100

 

Cost of revenue:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

2

 

 

 

3

 

 

 

2

 

 

 

2

 

 

 

2

 

 

 

2

 

Subscription

 

 

10

 

 

 

10

 

 

 

10

 

 

 

10

 

 

 

10

 

 

 

9

 

Services and other

 

 

14

 

 

 

15

 

 

 

13

 

 

 

13

 

 

 

13

 

 

 

14

 

Total cost of revenue

 

 

26

 

 

 

28

 

 

 

25

 

 

 

25

 

 

 

25

 

 

 

25

 

Gross profit

 

 

74

 

 

 

72

 

 

 

75

 

 

 

75

 

 

 

75

 

 

 

75

 

Operating expenses:

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

20

 

 

 

19

 

 

 

21

 

 

 

19

 

 

 

21

 

 

 

19

 

General and administrative

 

 

15

 

 

 

9

 

 

 

13

 

 

 

15

 

 

 

14

 

 

 

15

 

Sales and marketing

 

 

48

 

 

 

43

 

 

 

56

 

 

 

44

 

 

 

53

 

 

 

45

 

Total operating expenses

 

 

83

 

 

 

71

 

 

 

90

 

 

 

78

 

 

 

88

 

 

 

79

 

(Loss) income from operations

 

 

(9

)

 

 

1

 

Loss from operations

 

 

(15

)

 

 

(3

)

 

 

(13

)

 

 

(4

)

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2

)

 

 

(8

)

Interest income (expense), net

 

 

0

 

 

 

(5

)

 

 

0

 

 

 

(4

)

Other, net

 

 

(0

)

 

 

(0

)

 

 

0

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

Total other expense, net

 

 

(2

)

 

 

(8

)

 

 

0

 

 

 

(6

)

 

 

(1

)

 

 

(5

)

Loss before income taxes

 

 

(11

)

 

 

(7

)

 

 

(15

)

 

 

(9

)

 

 

(14

)

 

 

(9

)

Income tax (expense) benefit

 

 

(1

)

 

 

1

 

 

 

1

 

 

 

7

 

 

 

0

 

 

 

6

 

Net loss

 

 

(12

)%

 

 

(6

)%

 

 

(14

)%

 

 

(2

)%

 

 

(14

)%

 

 

(3

)%

 

Comparison of the Three and Six months Ended June 30, 2019 and 2018

Revenue

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

 

(In thousands, except percentages)

 

 

(In thousands, except percentages)

 

Revenue:

 

 

 

Revenue

 

 

 

 

 

 

Licenses

 

$

16,987

 

 

$

12,236

 

 

$

4,751

 

 

 

39

%

 

$

19,333

 

 

$

19,620

 

 

$

(287

)

 

 

(1

)%

 

$

38,002

 

 

$

36,428

 

 

$

1,574

 

 

 

4

%

Subscription

 

 

23,005

 

 

 

14,952

 

 

 

8,053

 

 

 

54

%

 

 

33,711

 

 

 

24,110

 

 

 

9,601

 

 

 

40

%

 

 

65,546

 

 

 

46,615

 

 

 

18,931

 

 

 

41

%

Services and other

 

 

9,722

 

 

 

8,278

 

 

 

1,444

 

 

 

17

%

 

 

10,010

 

 

 

9,926

 

 

 

84

 

 

 

1

%

 

 

20,089

 

 

 

19,554

 

 

 

535

 

 

 

3

%

Total revenue

 

$

49,714

 

 

$

35,466

 

 

$

14,248

 

 

 

40

%

 

$

63,054

 

 

$

53,656

 

 

$

9,398

 

 

 

18

%

 

$

123,637

 

 

$

102,597

 

 

$

21,040

 

 

 

21

%

 

License Revenue. License revenue increaseddecreased slightly by $4.8$0.3 million, or 39%1%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017. LicenseJune 30, 2018. Consistent with prior periods, license revenue from new customers andwas higher than license revenue from existing customers were nearly equal for the three months ended March 31, 2018; however,June 30, 2019. However, while the increase in total licenseCompany increased revenue compared to March 31, 2017 was primarily attributable to sales to thefrom new customers, with 72%a 22% year over year growth.increase, the increase was offset by a 24% decrease in follow-on license revenue from existing customers. During the three months ended March 31,June 30, 2019 and 2018, and 2017license revenue from new customers was $8.4$11.8 million and $5.0$9.7 million, respectively;respectively, and license revenue from existing customers was $8.6$7.5 million and $7.2$9.9 million respectively.for the respective periods. Our revenue from any single customer is determined by the number of identities the customer is entitled to govern as well as the number of modules and solutions purchased.

License revenue increased by $1.6 million, or 4%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Consistent with prior periods, license revenue from new customers was higher than license revenue from existing customers for the six months ended June 30, 2019. This increase is primarily attributable to increased revenue from new customers, with a 33% year over year increase, partially offset by a 30% decrease in follow-on license revenue from existing customers. During the six months ended June 30, 2019 and 2018, license revenue from new customers was $26.3 million and $19.7 million, respectively, and license revenue from existing customers was $11.7 million and $16.7 million for the respective periods. 

24


Table of Contents

Subscription Revenue. Subscription revenue increased by $8.1$9.6 million, or 54%40%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. The increase was primarily a result of an increase in ongoing maintenance renewals and an increase in maintenance revenue derived from new licenses.license sales. Our customer base increased by 259,247, or 36%24%, from 7251,031 customers at March 31, 2017June 30, 2018 to 9841,278 customers at March 31, 2018.June 30, 2019. During the three months ended March 31,June 30, 2019 and 2018, and 2017, revenue from existing customers contributed to more than 95%90% of subscription revenue. During the three months ended June 30, 2019, subscription revenue from new and existing customers increased 30% and 41%, respectively, compared to three months ended June 30, 2018.


Subscription revenue increased by $18.9 million, or 41%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. The increase was primarily a result of an increase in ongoing maintenance renewals and an increase in maintenance revenue derived from new license sales. During the six months ended June 30, 2019 and 2018, revenue from existing customers contributed to more than 90% of subscription revenue. During the six months ended June 30, 2019, subscription revenue from new and existing customers increased 33% and 41%, respectively, compared to six months ended June 30, 2018.

Services and Other Revenue. Services and other revenue increased by $1.4$0.1 million, or 17%1%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. The increase is primarily a result of an increase in the number of customers using our consulting and training services.

Services and other revenue increased by $0.5 million, or 3%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. The increase is primarily a result of an increase in the number of customers using our consulting and training services.

Geographic Regions. Our operations in the United States were responsible for the largest portion of our revenue, and revenue growth, in each of the three and six months ended March 31,June 30, 2019 and 2018 and 2017 because of our larger and more established sales force and partner network in the United States as compared to our other regions. Revenue from both Europe, the Middle East and Africa (“EMEA”) and the rest of the world also increased for three months ended March 31, 2018 and 2017, primarily dueWe continue to our investmentinvest in increasing the size of our international sales force and strengthening partnerships with global system integrators and resellers worldwide. For the six months ended June 30, 2019, we continued to experience moderate revenue growth internationally although we experienced a minor decline during the three months ended June 30, 2019 compared to the three months ended June 30, 2018.

The following table sets forth a summary of our consolidated total revenue by geography and the respective percentage of total revenue:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

$

 

 

% of revenue

 

 

$

 

 

% of revenue

 

 

$

 

 

% of

revenue

 

 

$

 

 

% of

revenue

 

 

$

 

 

% of

revenue

 

 

$

 

 

% of

revenue

 

 

(In thousands, except percentages)

 

 

(In thousands, except percentages)

 

United States

 

$

32,698

 

 

66%

 

 

$

25,915

 

 

 

73

%

 

$

44,399

 

 

 

70

%

 

$

33,954

 

 

 

63

%

 

$

85,959

 

 

 

70

%

 

$

66,315

 

 

 

65

%

EMEA (1)

 

 

11,671

 

 

23%

 

 

 

5,814

 

 

 

16

%

 

 

12,332

 

 

 

20

%

 

 

13,232

 

 

 

25

%

 

 

26,269

 

 

 

21

%

 

 

24,551

 

 

 

24

%

Rest of the World (1)

 

 

5,345

 

 

11%

 

 

 

3,737

 

 

 

11

%

 

 

6,323

 

 

 

10

%

 

 

6,470

 

 

 

12

%

 

 

11,409

 

 

 

9

%

 

 

11,731

 

 

 

11

%

Total revenue

 

$

49,714

 

 

100%

 

 

$

35,466

 

 

 

100

%

 

$

63,054

 

 

 

100

%

 

$

53,656

 

 

 

100

%

 

$

123,637

 

 

 

100

%

 

$

102,597

 

 

 

100

%

 

(1)

No single country represented more than 10% of our condensed consolidated revenue.

Cost25


Table of RevenueContents

Gross Profit and Gross Margin

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

Cost of revenue:

 

(In thousands, except percentages)

 

 

(In thousands, except percentages)

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

$

1,138

 

 

$

1,087

 

 

$

51

 

 

 

5

%

 

$

18,318

 

 

$

18,360

 

 

$

(42

)

 

 

(0

)%

 

$

35,928

 

 

$

34,030

 

 

$

1,898

 

 

 

6

%

Subscription

 

 

4,658

 

 

 

3,575

 

 

 

1,083

 

 

 

30

%

 

 

27,396

 

 

 

19,191

 

 

 

8,205

 

 

 

43

%

 

 

53,418

 

 

 

37,038

 

 

 

16,380

 

 

 

44

%

Services and other

 

 

6,974

 

 

 

5,473

 

 

 

1,501

 

 

 

27

%

 

 

1,631

 

 

 

2,729

 

 

 

(1,098

)

 

 

(40

)%

 

 

3,713

 

 

 

5,383

 

 

 

(1,670

)

 

 

(31

)%

Total cost of revenue

 

$

12,770

 

 

$

10,135

 

 

$

2,635

 

 

 

26

%

Total gross profit

 

$

47,345

 

 

$

40,280

 

 

$

7,065

 

 

 

18

%

 

$

93,059

 

 

$

76,451

 

 

$

16,608

 

 

 

22

%

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

95

%

 

 

94

%

 

 

 

 

 

 

 

 

 

 

95

%

 

 

93

%

 

 

 

 

 

 

 

 

Subscription

 

 

81

%

 

 

80

%

 

 

 

 

 

 

 

 

 

 

81

%

 

 

79

%

 

 

 

 

 

 

 

 

Services and other

 

 

16

%

 

 

27

%

 

 

 

 

 

 

 

 

 

 

18

%

 

 

28

%

 

 

 

 

 

 

 

 

Total gross margin

 

 

75

%

 

 

75

%

 

 

 

 

 

 

 

 

 

 

75

%

 

 

75

%

 

 

 

 

 

 

 

 

 

Cost ofLicenses. License Revenue. The cost of license revenue increased slightly by 5%gross profit remained consistent for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017. During each of the three months ended March 31, 2018 and 2017, cost of license revenue included $1.0 million in amortization of intangibles acquired in business combinations.June 30, 2018.

Cost of Subscription Revenue. Cost of subscription revenue increased by $1.1 million, or 30%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. Approximately $0.8 million was attributable to an increase in headcount and related allocated expenses to support growth of our subscription cloud-based offering and ongoing maintenance for our expanding licensed customer base. Approximately $0.3 million was attributable to our increased cloud-based hosting costs.

Cost of Services and Other Revenue. Cost of services and other revenue increased by $1.5 million, or 27%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. Substantially all of the increase was the result of our increased services and training headcount, related allocated overhead and related stock based compensation expense.


Gross Profit and Gross Margin

 

 

Three Months Ended

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

variance $

 

 

variance %

 

 

 

(In thousands, except percentages)

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

$

15,849

 

 

$

11,149

 

 

$

4,700

 

 

 

42

%

Subscription

 

 

18,347

 

 

 

11,377

 

 

 

6,970

 

 

 

61

%

Services and other

 

 

2,748

 

 

 

2,805

 

 

 

(57

)

 

 

(2

)%

Total gross profit

 

$

36,944

 

 

$

25,331

 

 

$

11,613

 

 

 

46

%

Gross Margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses

 

 

93

%

 

 

91

%

 

 

 

 

 

 

 

 

Subscription

 

 

80

%

 

 

76

%

 

 

 

 

 

 

 

 

Services and other

 

 

28

%

 

 

34

%

 

 

 

 

 

 

 

 

Total gross margin

 

 

74

%

 

 

71

%

 

 

 

 

 

 

 

 

Licenses.License gross profit increased by $4.7$1.9 million, or 42%6%, for the threesix months ended March 31, 2018June 30, 2019 compared to the threesix months ended March 31, 2017.June 30, 2018. The increase was the result of increased license revenues with only minor increases in third party royalties.

Subscription. Subscription gross profit increased by $7.0$8.2 million, or 61%43%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. The increase was the result of growth in subscription revenue, as described above, coupled with growth in costs of subscription revenue at a rate lower than our revenue growth as we continue to build economies of scale within our customer support organization and our utilization of cloud-based hosting services.

Subscription gross profit increased by $16.4 million, or 44%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. The increase was the result of growth in subscription revenue, as described above, coupled with growth in costs of subscription revenue at a rate lower than our revenue growth as we continue to build economies of scale within our customer support organization and our utilization of cloud-based hosting services.

Services and Other. Services and other gross profit decreased by $0.1$1.1 million, or 2%40%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. This decrease was primarily attributable to the higher costs associated with expanding our infrastructure for our professional services and training organization to support an increasing number of customers.

Services and other gross profit decreased by $1.7 million, or 31%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. This decrease was primarily attributable to the higher costs associated with expanding our infrastructure for our professional services and training organization to support an increasing number of customers.

Operating Expenses

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31, 2018

 

 

March 31, 2017

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

 

June 30, 2019

 

 

June 30, 2018

 

 

variance $

 

 

variance %

 

Operating expenses:

 

(In thousands, except percentages)

 

 

(In thousands, except percentages)

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

9,762

 

 

$

6,927

 

 

$

2,835

 

 

 

41

%

 

$

13,398

 

 

$

10,115

 

 

$

3,283

 

 

 

32

%

 

$

26,170

 

 

$

19,877

 

 

$

6,293

 

 

 

32

%

General and administrative

 

 

7,657

 

 

 

3,032

 

 

 

4,625

 

 

 

153

%

 

 

8,490

 

 

 

7,743

 

 

 

747

 

 

 

10

%

 

 

17,627

 

 

 

15,400

 

 

 

2,227

 

 

 

14

%

Sales and marketing

 

 

23,815

 

 

 

15,173

 

 

 

8,642

 

 

 

57

%

 

 

35,536

 

 

 

23,774

 

 

 

11,762

 

 

 

49

%

 

 

66,024

 

 

 

46,233

 

 

 

19,791

 

 

 

43

%

Total operating expenses

 

$

41,234

 

 

$

25,132

 

 

$

16,102

 

 

 

64

%

 

$

57,424

 

 

$

41,632

 

 

$

15,792

 

 

 

38

%

 

$

109,821

 

 

$

81,510

 

 

$

28,311

 

 

 

35

%

 

Research and Development Expenses. Research and development expenses increased by $2.8$3.3 million, or 41%32%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. Approximately 83%95% of this increase was the result of an increase in headcount and related allocated overhead to optimize and expand our product offerings as well as pursue innovation in identity governance. Substantially all of the remaining increase in research and development expenses was the result of an increase in stock based compensation expenseamortization of intangibles, primarily from our acquisition of patents in the fourth quarter of 2018.

26


Table of Contents

Research and development expenses increased by $6.3 million, or 32%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Approximately 92% of this increase was the result of an increase in headcount and related allocated overhead to optimize and expand our product offerings as well as pursue innovation in identity governance. The remaining increase in research and development expenses was primarily the result of $0.3 million in increased amortization of intangibles due to patents acquired in the fourth quarter of 2018 and $0.2 million in increased software and maintenance expenses, primarily cloud-based hosting costs related to the development of our cloud-based offering.

General and Administrative Expenses. General and administrative expenses increased by $4.6$0.7 million, or 153%10%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017. Approximately 82% of theJune 30, 2018. This increase was the result of anprimarily driven by approximately $0.5 million increase in corporategeneral and administrative headcount and related allocated overhead to supportexpenses, which includes an increase in general and administrative facility expense associated with the expansion of our transition to a public companyoffices worldwide, as well as an approximately $0.4 millionincrease in software maintenance and the growth and scale of the business. During the first quarter of 2018, approximately $2.3 million of the increase was related to stock based compensation expense. Additionally, generalsubscription expenses.

General and administrative expenses increased as a resultby $2.2 million, or 14%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. This increase was primarily driven by approximately $1.7 million of increase in facility expense and professional services expensesexpense comprised of legal fees, accounting and consulting fees.fees associated with the implementation of ASC 606 and SOX. Substantially all of the remaining increase was attributable to software maintenance and subscription expenses.

Sales and Marketing Expenses. Sales and marketing expenses increased by $8.6$11.8 million, or 57%49%, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. Approximately $7.6$7.7 million, or 88%65%, of the increase was the result of our increased sales and marketing headcount, stock basedstock-based compensation expense and related allocated overhead, to support increased penetration into our existing customer base as well as expansion into new industry verticals and geographic markets. As our


headcount increased, we also experienced related increases in professional services expense, travel and advertising costs of $0.5$0.4 million, $0.6 million and $0.4$1.6 million, respectively, for the three months ended March 31, 2018June 30, 2019 compared to the three months ended March 31, 2017.June 30, 2018. Additionally, approximately $1.1 million, or 9%, of the increase is a result of severance expense related to the resignation of our Chief Revenue Officer.

Sales and marketing expenses increased by $19.8 million, or 43%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Approximately $13.3 million, or 67%, of the increase was the result of our increased sales and marketing headcount, stock-based compensation expense and related allocated overhead, to support increased penetration into our existing customer base as well as expansion into new industry verticals and geographic markets. As our headcount increased, we also experienced related increases in professional services expense, travel and advertising costs of $0.7 million, $1.2 million and $2.9 million, respectively, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Additionally, approximately $1.1 million, or 6%, of the increase is a result of severance expense related to the resignation of our Chief Revenue Officer.

Interest Expense,Income (Expense), Net

 

Interest expense,income (expense), net, of interest income, decreased by $1.5$3.1 million or 56%, for the three months ended March 31, 2018,June 30, 2019, compared to March 31, 2017.June 30, 2018. This decrease was primarily due to refinancingpaydown of our debt to lower the stated interest rate from 9.0% to 5.5%, as well as decrease in the term loan principal balance and related lower amortization of debt issuance cost.

ProvisionInterest income (expense), net, decreased by $4.3 million for the six months ended June 30, 2019, compared to June 30, 2018. This decrease was primarily due to paydown of our term loan principal balance and related amortization of debt issuance cost.

Income TaxesTax (Expense) Benefit

Provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. With the adoption of ASC 606 in 2018, we are in a deferred tax liability position and no longer require a valuation allowance. We havestill maintain a full valuation allowance for net deferredour Israel tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development for our operations inposition due the United States. We expect to maintain this full valuation allowancelack of taxable earnings for the foreseeable future.

Our income tax rate varies from the federal statutory rate due to the valuation allowances on ourcertain foreign deferred tax assets, and foreign withholding taxes; changing tax laws, regulations and interpretations in multiple jurisdictions in which we operate; changes to the financial accounting rules for income taxes; unanticipated changes in tax rates; and differences in accounting and tax treatment of our stock-based compensation and the tax effects of purchase accounting for acquisitions.compensation. We expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue.

27


Table of Contents

We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business including the United States and Israel.business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax if such earnings are distributed to the U.S. We havePrior to 2018, we incurred net losses in each fiscal year since our inception except during the fourth quarter of each year.inception. We have recorded insignificant U.S.since begun to utilize our net operating losses for federal income tax expense. Ourpurposes. Thus, our tax expense to date relates primarily to foreign income taxes mainly from our Israeli activities, and to a lesser extent, state income taxes. The effective tax rate for the three and six months ended March 31, 2018June 30, 2019 is 6.3%(9.2)% and 2.2%, respectively, compared to 9.4%(79.3)% and (66.4)% for the three and six months ended June 30, 2018, respectively. The main drivers for the differences in the rates from the prior period. The difference in effective tax rate is primarily dueperiod to the current period are related to a decrease in forecasted pre-tax book income, the impact of stock compensation and increase in foreign taxes and in worldwide pre-tax book loss.tax liabilities.

 

For further discussion regarding tax matters, see Note 8 of the “Notes to Consolidated Financial Statements” included in Part I, Item 1 of the Annual Report.

Liquidity and Capital Resources

As of March 31,2018, we had $131 million of cash and cash equivalents and $1.5 million of availability under our revolving credit facility. As of March 31, 2018, we had approximately $3.3 million of cash and cash equivalents held in our foreign subsidiaries. We do not consider the earnings of our foreign subsidiaries, with the exception of India, to be permanently reinvested in foreign jurisdictionsjurisdictions. Prior to the Tax Cuts and haveJobs Act, the Company had consistently applied Section 956 to its intercompany cash flows. Under the Act, beginning in 2018, global intangible low-taxed income (“GILTI”) provisions apply providing an incremental tax on low taxed foreign income. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the Internal Revenue Code of 1986, as amended, to such earnings.foreign subsidiary’s tangible assets. As a result of applying Section 956 consistently to our intercompany cash flows,these provisions, the majority of the earnings in our foreign subsidiaries represent income that was previously taxed in the United States. As a result, there would be no material income tax consequences to repatriating the cash currently held in our foreign subsidiaries. In India, we continue to invest and grow our research and development activities and have no plans to repatriate undistributed earning held in India back to the U.S. parent company, and therefore consider earnings in India to be permanently reinvested.

Liquidity and Capital Resources

As of June 30, 2019, we had approximately $93.0 million of cash and cash equivalents, $150.0 million of availability under the revolving Credit Agreement (as defined below) and $6.0 million in our irrevocable, cash collateralized, unconditional standby letter of credit, issued primarily in connection with our new corporate headquarters lease. See Item 2 “Properties” of the Annual Report for more information regarding our new corporate headquarters lease. As of June 30, 2019, we had approximately $4.5 million of cash and cash equivalents held in our foreign subsidiaries.

We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under our revolving credit facilityagreement will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities and the introduction of new solutions and product enhancements. To the extent existing cash and cash equivalents and borrowings under our revolving credit facilityagreement are not sufficient to fund future activities, we may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our equity securities and could contain covenants that restrict operations. Any additional equity financing may be dilutive to our existing stockholders. Although we are not currently a party to any agreementWe may enter into agreements or letterletters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources. We have no present understandings, commitments or agreements to enter into any such acquisitions. Also, asAs of March 31, 2018,June 30, 2019, we had no material commitments for capital expenditures.


Since inception, we have financed operations primarily through license fees, maintenance fees, subscription fees, consulting and training fees, borrowings under our prior credit facilityagreement and, to a lesser degree, the sale of equity securities including initial public offering.securities. Our principal uses of cash are funding operations and capital expenditures. Over the past several years, revenue has increased significantly from year to year and, as a result, cash flows from customer collections have generally increased. However, operating expenses have also increased as we have invested in growing our business. Our operating cash requirements may increase in the future as we continue to invest in the strategic growth of our company.

Our Credit Facility

 

Pursuant to a credit and guaranty agreement by and among

Credit Agreement

On March 11, 2019, SailPoint Technologies, Inc., as the borrower, and SailPoint Technologies Intermediate Holdings, LLC and SailPoint International, Inc., as guarantors, the lenders party thereto from time to time and Goldman Sachs Bank USA, as administrative agent and collateral agent, as amended, we havecertain of our other wholly owned subsidiaries entered into a senior secured credit facility (our “credit facility”agreement (the “Credit Agreement”) that consists of a term loan facility. The Credit Agreement provides for an initial $150.0 million in commitments for revolving credit loans, with a balance outstanding of $70.0$15.0 million as of March 31,2018, a $7.5 million revolving credit facility,  and a letter of credit sub-facility with an aggregate limit equal to the lesser of $7.5 millionsublimit, which amount can be increased or decreased under specified circumstances and the aggregate unused amount of the revolving commitments then in effect. Each of the term loan facility and revolving credit facility has a maturity of five years and will mature on August 16, 2021.

As of March 31, 2018, we had $1.5 million available under the revolving credit facility and $6.0 million in standby letters of credit outstanding, issued primarily in connection with our new corporate headquarters lease.

All of our obligations under our credit facility are guaranteed by our existing and future domestic subsidiaries and,is subject to certain exceptions, secured by a security interest in substantially all of our tangiblefinancial covenants. Borrowings pursuant to the Credit Agreement may be used for working capital and intangible assets.other general corporate purposes, including for acquisitions permitted under the Credit Agreement.

Borrowings under our credit facility bear interest at our option at (i) LIBOR, subjectthe Credit Agreement are scheduled to a 1.00% floor, plus a margin, or (ii) the base rate, subject to a 3.50% floor, plus a margin. For LIBOR borrowings, the applicable rate margin is 4.50%. For base rate borrowings, the applicable margin is 4.00%.mature in March 2024. We are also required to pay a 0.50% per annum fee on undrawn amounts under ourhad no outstanding revolving credit facility, payable quarterlyloan balance as of June 30, 2019 and December 31, 2018. We were in arrears.compliance with all applicable covenants as of June 30, 2019.

See Note 6 “Line of Credit and Long-Term Debt” in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding terms and conditions of the Credit Agreement.

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Table of Contents

Summary of Cash Flows

 

The following table summarizes our cash flows for the periods indicated:presented:

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

(In thousands)

 

Net cash provided by operating activities

 

$

21,829

 

 

$

26,607

 

Net cash used in investing activities

 

 

(3,606

)

 

 

(1,397

)

Net cash provided by (used in) financing activities

 

 

3,893

 

 

 

(59,408

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

$

22,116

 

 

$

(34,198

)

Cash Flows from Operating Activities

 

 

Three Months Ended

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

(In thousands)

 

Cash provided by operating activities

 

$

15,322

 

 

$

6,858

 

Cash used in investing activities

 

 

(526

)

 

 

(273

)

Cash provided by (used in) financing activities

 

 

62

 

 

 

(238

)

Net increase in cash, cash equivalents and restricted cash

 

$

14,858

 

 

$

6,347

 

During the threesix months ended March 31, 2018,June 30, 2019, cash provided by operating activities was $15.3$21.8 million, which consisted of a net loss of $6.0$17.6 million, adjusted by non-cash charges of $7.9$21.7 million and a net change of $13.4$17.7 million in our net operating assets and liabilities. The non-cash charges are primarily comprised of depreciation and amortization of $2.6$6.9 million, amortization of debt issuance costs of $0.1 million, andamortization of contract acquisition costs of $4.7 million, bad debt expense of $0.1 million, stock-based compensation of $5.1$9.6 million and net change in operating leases of $0.4 million. The change in our net operating assets and liabilities was primarily$17.7 million as a result of a decrease in accounts receivable due to the timing of receipts of payments from customers and an increase in deferred revenue of $5.9 million due to the timing of billings and cash received in advance of revenue recognition primarily for subscription and support services, partially offset by an decrease in accounts receivable of $16.9 million due to the timing of receipts of payments from customers, a decreaseincrease in prepayments and other assets, of $1.4 million, and an increase in income taxes payable of $0.2 million, partially offset by ana decrease in accounts payable of $0.4 million due to timing of cash disbursements, and ana decrease in accrued expenses and other liabilities of $10.7 million due primarily to accrual of additional commissions and bonuses.bonuses and a decrease in income taxes payable.

During the threesix months ended March 31, 2017,June 30, 2018, cash provided by operating activities was $6.9$26.6 million, which consisted of a net loss of $2.3$3.3 million, adjusted by non-cash charges of $2.7$19.8 million and a net change of $6.4$10.1 million in our net operating assets and liabilities. The non-cash charges are primarily comprised of depreciation and amortization of $2.5$5.3 million, amortization of debt issuance costs of $0.2 million, deferred taxesamortization of $0.1contract acquisition costs of $3.4 million, losses on modification and subsequent extinguishment of debt of $1.5 million, bad debt expense of $0.2 million, and stock-based compensation of $0.2$9.3 million. The change in our net operating assets and liabilities was primarily$10.1 million as a result of an increase in deferred revenue of $2.1 million due to the timing of billings


and cash received in advance of revenue recognition primarily for subscription and support services, a decrease in accounts receivable of $6.5 million due to the timing of receipts of payments from customers, an increase in accounts payable of $0.7 million due to timing of cash disbursements and an increase in deferred revenue due to the timing of billings and cash received in advance of revenue recognition primarily for subscription and support services, partially offset by a decreasean increase in prepayments and other assets, a decrease in accrued expenses and other liabilities due primarily to accrual of $0.3 million,additional commissions and bonuses and a decrease in income taxes payable of $0.3 million and a decrease in accrued expenses of $2.3 million due primarily to the payout of prior period commissions and bonuses.payable.

Cash Flows from Investing Activities

During the threesix months ended March 31,June 30, 2019, cash used in investing activities was $3.6 million, consisting primarily of purchases of property and equipment.

During the six months ended June 30, 2018, cash used in investing activities was $0.5$1.4 million, consisting primarily of $0.5 million in purchases of property and equipment, compared to three months ended March 31, 2017, cash used in investing activities was $0.3 million, consisting of $0.4 million in purchases of property and equipment, partially offset by $0.1 million in proceeds from sales of property and equipment.

Cash Flows from Financing Activities

During the threesix months ended March 31, 2018,June 30, 2019, cash provided by financing activities was $0.1$3.9 million, consisting of $1.8 million of proceeds from exercise of stock options.options and $2.9 million of proceeds from issuance of equity related to shares issued pursuant to our Employee Stock Purchase Plan, partially offset by debt issuance costs of $0.8 million associated with the new Credit Agreement.

During the threesix months ended March 31, 2017,June 30, 2018, cash used in financing activities was $0.2$59.4 million consisting of $60.0 million in repayment of debt and $0.3 million for the repurchase of common and preferred stock,in prepayment penalties partially offset by $0.9 million of proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

As of June 30, 2019, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Table of Contents

Contractual Obligations and Commitments

There have been no material changes in our contractual obligations and commitments, as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018. See Note 5 “Commitments and Contingencies” in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for disclosure of a table of our future minimum lease payments as of June 30, 2019.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the accounting policies associated with revenue recognition, share-basedstock-based compensation and income taxes are the most significant areas involving management's judgments and estimates. Therefore, these are considered to be our critical accounting policies and estimates. There have been no material changes to these estimates or the policies related to them during the three and six months ended March 31, 2018.June 30, 2019. For a full discussion of these estimates and policies, see the section titled “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report.

Recent Accounting Pronouncements

See Note 2 “Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in Part I, Item 1 included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial condition, and cash flows.

The JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, until we are no longer an emerging growth company. Our election to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the longer phase-in periods under the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to the JOBS Act.


Item 3. Quantitative and QualitativeQualitative Disclosures About Market Risk.

For a description of market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A inof the Annual Report. Our exposure to market risks has not changed materially from the exposure described in the Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’sOur disclosure controls and procedures (as such term is defined in Rules 13a-15(e) andor 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) should be designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and principal financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer (CEO) (our principal executive officer) and the Chief Financial Officer (CFO) (our principal financial officer), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based10-Q and, based on suchtheir evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of such date, the Company’s disclosure controls and procedures were not effective at a reasonable assurance levelas of such thatdate due to the material information required to be disclosedweaknesses in internal control over financial reporting, described below. 

As previously reported in our Annual Report, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control—Integrated Framework issued by the CompanyCommittee of Sponsoring Organizations of the Treadway Commission in 2013, and management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2018 based on those criteria. Based upon our management’s evaluation, we identified the following material weaknesses as of December 31, 2018, in the reports that it files or submits underCompany’s internal control over financial reporting:

1.

We determined that we did not maintain adequate controls over the accounting and reporting for certain complex, non-routine transactions affecting the adoption of new accounting standards and equity compensation

2.

Certain internal controls related to the recording and processing of revenue transactions are not designed or operating at a precise enough level to prevent or detect errors and insufficient documentation exists to support the operating effectiveness of these controls.

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Table of Contents

Notwithstanding the Exchange Act  is (i) recorded, processed, summarizedidentified material weaknesses, management believes the unaudited condensed consolidated financial statements as included in Item 1 of this Quarterly Report fairly represent, in all material respects, the Company’s financial condition, results of operations and reported withincash flows as of and for the time periods specifiedpresented in accordance with generally accepted accounting principles in the SEC’s rules and forms, and (ii) accumulated and communicatedUnited States. There were no changes to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.previously released financial results.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) underof the Exchange Act) during the quarter ended March 31, 2018June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standards related to leases on our financial statements to facilitate their adoption on January 1, 2019. There were no significant changes to our internal control over financial reporting due to the adoption of the new standards.

Inherent Limitations on Effectiveness of Controls

The effectivenessInternal control over financial reporting cannot provide absolute assurance of any systemachieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition,reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intendHowever, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to continuedesign into the process safeguards to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.reduce, though not eliminate, the risk.


31


Table of Contents

Part II. OTHER INFORMATION

We are not currently a party to, nor is our property currently subject to, any material legal proceedings. We are not aware of any governmental inquiries or investigations into our business.

Item 1A. Risk Factors

Except for the additional risk factor set forth below, thereThere have been no material changes to therisk factors. For a description of risk factors, disclosed in Part I,see Item 1A “Risk Factors” in the Annual Report.

If we lose emerging growth company status on December 31, 2018, we will incur substantial costs and significant demands will be placed upon management in connection with complying with non-emerging growth company requirements earlier than we had planned.

The aggregate worldwide market value of our common stock held by non-affiliates as of June 29, 2018 may equal or exceed $700 million, which would cause us to become a large accelerated filer on December 31, 2018. Based on the transition provisions outlined in Exchange Act Rule 12b-2, if we become a large accelerated filer on December 31, 2018, we will lose emerging growth company status on the same date, which will require us to significantly accelerate our compliance efforts to, for example, allow our independent registered public accounting firm to attest to the effectiveness of our internal controls as required by Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) in our Annual Report on Form 10-K for the year ending December 31, 2018.

Additionally, if we cease to be an emerging growth company on December 31, 2018, we will be required to implement ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) for the year ending December 31, 2018 instead of December 31, 2019, which is the date that emerging growth companies are first required to implement Topic 606. Because our revenue recognition process is complex, this accelerated timeframe would result in significant additional costs beyond that comprehended in our 2018 financial plan and require substantially burdensome efforts, which would include maintaining additional accounting records to allow us to track transactions on two revenue recognition standards, significantly accelerating our planned timeline for implementing appropriate policies and procedures for recording transactions on the new basis, and hiring additional personnel and consultants. Moreover, because it will take us a significant amount of time to fully implement Topic 606, we anticipate that such implementation will not be complete, and all historical transactions will not be analyzed under Topic 606, until after our Quarterly Report on Form 10-Q for the quarter ending September 30, 2018. Therefore, we do not expect to be able to provide investors with quantitative guidance regarding our expected financial results based on the new reporting standard in advance of releasing such results in connection with our Annual Report on Form 10-K for the year ending December 31, 2018. Consequently, our actual financial results for the year ending December 31, 2018, as reported in accordance with Topic 606, may differ substantially from what you may anticipate based on our historical results of operations and guidance.

In addition to the substantial additional expenses beyond what we had planned, our management would need to devote significant time and efforts to implement and comply with the additional standards, rules and regulations that would apply to us as a result of becoming a large accelerated filer and losing our emerging growth company status, diverting such time from the day-to-day conduct of our business operations.

Furthermore, due to the complexity and logistical difficulty of implementing the standards, rules and regulations that apply to non-emerging growth companies, such as Section 404 of the Sarbanes-Oxley Act and Topic 606, on an accelerated timeframe, there is an increased risk that we may be found to be in non-compliance with such standards, rules and regulations or to have significant deficiencies or material weaknesses in our internal controls over financial reporting.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 16, 2017, the Registration Statement on Form S-1 (File No. 333-221036) (the “Registration Statement”) relating to our initial public offering was declared effective by the SEC.SEC and we priced our initial public offering. Pursuant to the Registration Statement, we registered an aggregate of 23,000,000 shares of our common stock, of which 15,800,000 shares were sold by us and 7,200,000 shares were sold by certain selling stockholders named therein at a price to the public of $12.00 per share.share (for an aggregate offering price of $276.0 million). We received net proceeds of approximately $172.0 million, after deducting underwriting discounts and commissions of approximately $13.3 million and offering-related expenses.expenses of $4.4 million. No payments were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities or any affiliates. Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Jefferies LLC and RBC Capital Markets, LLC acted as book-running managers and KeyBanc Capital Markets Inc., Canaccord Genuity Inc. and Oppenheimer & Co. Inc. acted as co-managers (collectively, the “Underwriters”) for our initial public offering.

Our initial public offering closed in November 2017. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus dated November 16, 2017 and filed with the SEC on November 17, 2017 pursuant to Rule 424(b) of the Securities Act of 1933, as amended.Act. As of MarchJune 30, 2018,2019, we have used $90.0$160.0 million of the proceeds from our initial public offering to repay borrowings under our previous term loan facility and approximately $1.4$1.8 million of such proceeds to pay a related prepayment premium, both of which were made concurrently with the closing of our


initial public offering in the fourth quarter of 2017.premium. As of MarchJune 30, 2018, all of2019, the remaining net proceeds are held in cash and have not been deployed.

32


Item 5. Other Information

The Company’s boardTable of directors (the “Board”) has determined that it intends to hold the Company’s first Annual Meeting of Stockholders (the “2018 Annual Meeting”) on November 6, 2018, at a time and location to be specified in the Company’s proxy statement for the 2018 Annual Meeting (the “Proxy Statement”). The record date for determining stockholders eligible for notice of, and to vote at, the 2018 Annual Meeting has not yet been set by the Board and will also be included in the Proxy Statement.Contents

Because the 2018 Annual Meeting  will be the Company’s first annual meeting as a public company, pursuant to Rule 14a-8 (“Rule 14a-8”) under the Exchange Act, stockholders of the Company who wish to have a proposal considered for inclusion in the Company’s proxy materials for the 2018 Annual Meeting pursuant to Rule 14a-8 must ensure that their proposal is received by the Secretary of the Company at 11305 Four Points Drive, Building 2, Suite 100, Austin, Texas 78726 by June 6, 2018, which the Company has determined to be a reasonable time before it expects to begin to print and send its proxy materials. Rule 14a-8 proposals must also comply with the requirements of Rule 14a-8 and other applicable laws in order to be eligible for inclusion in the Company’s proxy materials for the 2018 Annual Meeting. The June 6, 2018 deadline will also apply in determining whether notice of a stockholder proposal is timely for purposes of exercising discretionary voting authority with respect to proxies under Rule 14a-4(c) under the Exchange Act.

In addition, in accordance with the requirements contained in the Company’s Second Amended and Restated Bylaws (the “Bylaws”), stockholders who wish to bring business before the 2018 Annual Meeting outside of Rule 14a-8 or to nominate a person for election as a director must ensure that written notice of such proposal (including all of the information specified in the Bylaws) is received by the Secretary of the Company at the address specified above no earlier than the close of business on July 9, 2018 and no later than the close of business on August 8, 2018. Any such proposal must meet the requirements set forth in the Bylaws in order to be brought before the 2018 Annual Meeting.

Item 6. Exhibits



Exhibit Index

 

Exhibit

Number

 

Description

 

 

 

3.1

 

Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 20172018 (File No. 001-38297)).

 

 

 

3.2

 

Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 20172018 (File No. 001-38297)).

 

 

 

31.1*  10.1+*

 

Amendment No. 1 to Amended and Restated Senior Management and Restricted Stock Agreement, dated as of April 2, 2019, among the Company, SailPoint Technologies, Inc. and Mark McClain.

  10.2+*

Separation Agreement, dated as of April 19, 2019, between SailPoint Technologies, Inc. and Howard Greenfield.

  10.3+*

Offer Letter, dated May 3, 2019, by and between SailPoint Technologies, Inc. and Jason Ream.

  31.1*

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002.

 

 

 

31.2*

 

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1**

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS***

 

XBRL Instance Document.Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

101.SCH***

 

XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL***

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF***

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.LAB***

 

XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE***

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

*

Filed herewith.

**

Furnished herewith (such certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference).

***+

To be furnished by amendment within the 30-day grace period provided by Rule 405(a)(2) of Regulation S-T.Management contract or compensatory plan or arrangement.

33



Table of ContentsSIGNATURES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

SailPoint Technologies Holdings, Inc.,

 

 

 

 

Date: May 9, 2018August 6, 2019

 

By:

/s/ Mark McClain

 

 

 

Mark McClain

 

 

 

Chief Executive Officer and Director

(Principal Executive Officer)

 

 

 

 

Date: May 9, 2018August 6, 2019

 

By:

/s/ Cam McMartinJason Ream

 

 

 

Cam McMartinJason Ream

 

 

 

Chief Financial Officer

  (Principal Financial Officer)

 

2834