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.

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 ~~87,219,160~~89,122,643 shares of common stock outstanding as of ~~May 4, 2018.~~August 1, 2019.

	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.

	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.

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.

	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.

	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.

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.

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 ~~disclosure~~disclosures 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, ~~2018~~2019 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, 2018~~18, 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.

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

The Company operates as one operating segment. The Company’s chief operating decision ~~maker is its chief executive officer, who reviews~~makers 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 ~~maker~~makers 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.

The following ~~tables~~table 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

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 is~~As of June 30, 2019, no ~~concentration of credit risk for customers as no individual~~single entity represented more than 10% of the balance in accounts ~~receivable as~~receivable. As of ~~March~~December 31, 2018, ~~and December 31, 2017 or~~11%, 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, 2018~~June 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.

~~There have been~~The 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.

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.

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 2~~amortized over each renewal’s contractual term. The Company does not pay sales commissions on renewals of ~~“Notes~~maintenance agreements related to ~~Consolidated Financial Statements” in the Annual Report.~~perpetual licenses.

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 ~~Standards~~Standard Update ~~(“ASU”) No~~. ~~2014-09~~(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 supersede~~which 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 obligations~~implementation 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 ~~reporting~~periods, 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. Early~~2019, 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 standard~~ASU 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.

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 asset~~liabilities 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 for~~we adopted ASC 842 using the ~~annual period beginning after December 15, 2019. This~~ ~~standard will be applied using a~~ modified retrospective transition ~~approach~~methodwith 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’s~~condensed 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 companies~~Improvements to ~~account~~Nonemployee 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 guidance~~accounting for share-based payments to employees, with certain exceptions. ASU 2018-07 is effective for ~~annual periods~~public companies for fiscal years beginning after December 15, 2018, including interim periods within that ~~reporting period. Early~~fiscal 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.

During the ~~FASB issued~~year ended December 31, 2018, we adopted ASU ~~No. 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718).~~ ~~This standard clarifies which changes~~2014-09, Revenue from Contracts with Customers (ASC 606) and subsequent amendments to the ~~terms~~initial 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 account~~related disclosures for the ~~effects~~comparative 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 all~~Significant Accounting Policies” and Note 3 “Revenue Recognition” in our Annual Report for accounting policy updates and adoption of ASC 606.

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

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

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 is~~Company’s contract assets and deferred revenue primarily results from the ~~same as~~timing difference between the ~~fair value (or value using an alternative measurement method) of~~Company’s performance and the ~~original award immediately before~~customer 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 inputs~~amount billed to the ~~valuation technique that~~customer, and the ~~entity uses~~right to ~~value~~payment is subject to more than the ~~award,~~passage of time. Contract assets are transferred to accounts receivable when the ~~entity~~rights become unconditional and the customer is ~~not required to estimate the value immediately before~~billed. 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 period~~condensed 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 guidance~~periods ended June 30, 2019 or 2018.

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.

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 plan~~remaining 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 evaluating~~respective periods. For the ~~effect~~three and six months ended June 30, 2018, amortization of ~~these provisions on~~deferred 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.

~~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.~~

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 months~~periods 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 ~~for~~of intangible assets during the ~~three months~~periods ended ~~March 31, 2018~~June 30, 2019 and ~~2017.~~2018.

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 of~~Additionally, these ~~agreements include a renewal option, and/or~~leases 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 between~~basis over the ~~recognized rental expense and amounts payable under~~full 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 ~~recorded~~recognized 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.

~~Rent~~Facilities 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 leases~~category. 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 Arrangements~~Other supplemental cash flow information related to operating leases is as follows:

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 made~~we 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 credits~~year 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 of~~table below:

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

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.

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 balance~~Credit 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, 2018~~any 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.

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, the~~The Company ~~amended its existing credit facility~~incurred 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 ~~consummation~~accompanying condensed consolidated balance sheet. These costs are being amortized to interest expense over the life of ~~its initial public offering. Such amendment required that~~the 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 under~~voluntarily prepaid on its term loan ~~facility to reduce~~during the ~~aggregate outstanding principal amount thereof to $70.0 million. This repayment~~quarter 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. As~~and 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 also~~were 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 loan~~three 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.~~

~~During the three~~six 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.

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, ~~500,000~~0.5 million shares of restricted stock and ~~250,000~~0.25 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, 468,956~~June 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, 333,999~~Plan 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.

In November 2017, the Company’s ~~board~~Board of ~~directors~~Directors 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 ~~8,856,876~~approximately 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 ~~4,428,438~~approximately 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, 6,482,775~~June 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.~~

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 ~~year~~six months ended ~~March 31,~~June 30, 2019 and 2018 ~~and 2017~~ was estimated at ~~the~~grant 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

The following table summarizes stock option activity ~~under~~for 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 ~~period~~six months ended ~~March 31,~~June 30, 2019 and 2018 was $12.06 and ~~2017 was $8.42 and $1.56,~~$9.19, respectively. ~~Compensation~~Stock-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 2017~~June 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 ~~2.71~~approximately 2.6 years as of ~~March 31, 2018.~~June 30, 2019.

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 and~~2019, 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 of~~three and six months ended June 30, 2019 and 2018.

As of March 31, ~~2018,~~ ~~the aggregate intrinsic value for 1,257,000 non-vested~~2019, 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 (“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.

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

The Company expects all outstanding RSUs to fully vest, except for RSUs related to ~~non-vested incentive~~the 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 for~~2019, the ~~three months ended March 31, 2018 and 2017, respectively.~~

~~The Company granted 382,427 restricted stock units during the three months ended March 31, 2018. As~~Board of ~~March 31, 2018, 1,270,966 units~~Directors approved accelerated vesting of restricted stock ~~is expected to vest over~~for an exiting board member that resulted in a ~~weighted average remaining contractual period of 2.1 years with~~modification 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 units~~RSUs for employee and non-employees was ~~$15.4~~$38.7 million as of ~~March 31, 2018~~June 30, 2019 and is expected to be recognized over a weighted average period of ~~3.57~~approximately 3.1 years. ~~Compensation~~

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 units~~the 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.

~~Stock-based~~Asummary of the Company’s stock-based compensation expense, which includes stock options, incentive units, restricted stock units and ~~incentive units, was~~ESPP, is presented below:

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

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, ~~reduces~~reduced the U.S. federal corporate tax rate from 35% to 21%. ~~There~~Upon 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 can~~Under GAAP, the Company is permitted to make an accounting policy election to either ~~recognize deferred~~treat taxes ~~for temporary basis differences expected to reverse as GILTI~~due on future inclusions in ~~future years or provide for the tax expense~~U.S. taxable income related to GILTI ~~in the year the tax is incurred~~ as a ~~period~~current-period expense ~~only. Given~~when incurred (the “period cost method”) or to factor such amounts into the ~~complexity~~Company’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 of~~new GILTI tax rules. For the ~~GILTI provisions~~periods 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 the~~no GILTI ~~provisions due to Section 956 inclusions~~.tax liability as of June 30, 2019 and 2018.

The provision for income taxes for ~~2018~~2019 and ~~2017~~2018 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.

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 ~~2013~~2015 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 attributable~~Loss Per Share Attributable to ~~common shareholders~~Common Stockholders

Basic and diluted net loss per share is computed by dividing net loss attributable to common ~~shareholders~~stockholders by the ~~weighted-average~~weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using our ~~weighted-average~~weighted 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 ~~shareholders~~stockholders for the periods presented because their effect would have been anti-dilutive. ~~For~~

As previously disclosed on Form 8-K, Howard Greenfield, the ~~period prior~~former Chief Revenue Officer of SailPoint Technologies, Inc., submitted his resignation from this position to ~~our initial public offering, convertible preferred stock~~the 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 ~~not~~scheduled 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.

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 ~~the~~our 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.

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, ~~and~~including larger organizations; our ability to deepen our relationships with existing customers; our expectations regarding our customer growth rate; our ~~ability to maintain successful relationships~~business plan and beliefs and objectives for future operations; trends associated with our ~~channel partners~~industry 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 ~~respond~~gross margin; our ability to ~~rapidly changing technology, evolving industry standards, changing regulations~~generate 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 ~~enhance~~benefit from our ~~brand or reputation as an industry leader and innovator;~~corporate culture; our ability to ~~hire, retain, train~~successfully identify, acquire and ~~motivate our senior management team~~integrate 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 with~~protect 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.

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 veterans~~using our products to ~~develop a new category of identity management solutions~~enable and ~~address emerging identity governance challenges. Since our inception, we have focused on driving innovation in~~secure digital identities across the ~~identity market, with our key milestones including:~~

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 premise~~on-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 maintain~~Maintaining 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.

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-based~~multi-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.

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”.

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

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

In addition to our financial information presented in accordance with GAAP, we use ~~adjusted EBITDA, a~~certain 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 EBITDA~~measures may not provide information that is directly comparable to that provided by other companies in our industry because they may calculate ~~adjusted EBITDA~~non-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 EBITDA~~non-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.

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

~~We believe that~~expense from adjusted EBITDA because it is ~~a measure widely used by securities analysts~~non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to ~~evaluate the financial performance~~make 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 evaluating~~also exclude amortization of acquired intangible assets, purchase price accounting adjustment and severance expense of certain key executives from our ~~performance~~non-GAAP financial measures because ~~it facilitates comparisons~~these are considered by management to be outside of our core operating ~~results from period~~results. Accordingly, we believe that excluding these expenses provides investors and management with greater visibility to ~~period by removing~~ the ~~impact~~underlying performance of our ~~capital structure (net interest income or expense from~~business 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

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.

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.

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.

The following table sets forth our ~~statement~~unaudited 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	)

	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

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	)%

	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 ~~increased~~decreased slightly by ~~$4.8~~$0.3 million, or ~~39%~~1%, for the three months ended ~~March 31, 2018~~June 30, 2019 compared to the three months ended ~~March 31, 2017. License~~June 30, 2018. Consistent with prior periods, license revenue from new customers ~~and~~was 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 license~~Company increased revenue ~~compared to March 31, 2017 was primarily attributable to sales to the~~from 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 2017~~license 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.

Subscription Revenue. Subscription revenue increased by ~~$8.1~~$9.6 million, or ~~54%~~40%, for the three months ended ~~March 31, 2018~~June 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 ~~725~~1,031 customers at ~~March 31, 2017~~June 30, 2018 to ~~984~~1,278 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, 2018~~June 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 due~~We continue to ~~our investment~~invest 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	%

	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 of~~Licenses. License ~~Revenue. The cost of license revenue increased slightly by 5%~~gross profit remained consistent for the three months ended ~~March 31, 2018~~June 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.

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 ~~three~~six months ended ~~March 31, 2018~~June 30, 2019 compared to the ~~three~~six 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, 2018~~June 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, 2018~~June 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.

	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, 2018~~June 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 expense~~amortization of intangibles, primarily from our acquisition of patents in the fourth quarter of 2018.

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, 2018~~June 30, 2019 compared to the three months ended ~~March 31, 2017. Approximately 82% of the~~June 30, 2018. This increase was ~~the result of an~~primarily driven by approximately $0.5 million increase in ~~corporate~~general and administrative headcount and related allocated overhead ~~to support~~expenses, which includes an increase in general and administrative facility expense associated with the expansion of our ~~transition to a public company~~offices 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, general~~subscription expenses.

General and administrative expenses increased ~~as a result~~by $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 ~~expenses~~expense 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, 2018~~June 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 based~~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 ~~$0.5~~$0.4 million, $0.6 million and ~~$0.4~~$1.6 million, respectively, for the three months ended ~~March 31, 2018~~June 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, ~~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 ~~refinancing~~paydown 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.

~~Provision~~Interest 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.

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 ~~have~~still maintain a full valuation allowance for ~~net deferred~~our Israel tax ~~assets, including net operating loss carryforwards, and tax credits related primarily to research and development for our operations in~~position due the ~~United States. We expect to maintain this full valuation allowance~~lack of taxable earnings for the foreseeable future.

Our income tax rate varies from the federal statutory rate due to the valuation allowances on ~~our~~certain 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.

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 have~~Prior 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. Our~~purposes. 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, 2018~~June 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 due~~period 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.~~

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 ~~jurisdictions~~jurisdictions. Prior to the Tax Cuts and ~~have~~Jobs 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.

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 ~~facility~~agreement 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 ~~facility~~agreement 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 agreement~~We may enter into agreements or ~~letter~~letters 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, as~~As 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 ~~facility~~agreement 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.

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 million~~sublimit, 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 tangible~~financial 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, subject~~the 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 our~~had no outstanding revolving credit ~~facility, payable quarterly~~loan 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.

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

During the ~~three~~six 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, ~~and~~amortization 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 decrease~~increase in prepayments and other assets, ~~of $1.4 million, and an increase in income taxes payable of $0.2 million, partially offset by an~~a decrease in accounts payable ~~of $0.4 million~~ due to timing of cash disbursements, ~~and an~~a 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 ~~three~~six 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 taxes~~amortization of ~~$0.1~~contract 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 decrease~~an 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.

During the ~~three~~six 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.

During the ~~three~~six 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 ~~three~~six 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.

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.

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.

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-based~~stock-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.

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.

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 ~~Qualitati~~veQualitative 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.

~~The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s~~Our disclosure controls and procedures (as ~~such term is~~ defined in Rules 13a-15(e) ~~and~~or 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. Based~~10-Q and, based on ~~such~~their 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 level~~as of such ~~that~~date due to the material ~~information required to be disclosed~~weaknesses 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 ~~Company~~Committee 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 under~~Company’s internal control over financial reporting:

Notwithstanding the ~~Exchange Act is (i) recorded, processed, summarized~~identified 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 within~~cash flows as of and for the ~~time~~ periods ~~specified~~presented in accordance with generally accepted accounting principles in the ~~SEC’s rules and forms, and (ii) accumulated and communicated~~United 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.

There were no changes to our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) ~~under~~of the Exchange Act) during the quarter ended ~~March 31, 2018~~June 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.

~~The effectiveness~~Internal control over financial reporting cannot provide absolute assurance of ~~any system~~achieving 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 intend~~However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to ~~continue~~design 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.

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.

~~Except for the additional risk factor set forth below, there~~There have been no material changes to ~~the~~risk 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.

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 ~~March~~June 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 ~~March~~June 30, ~~2018, all of~~2019, the remaining net proceeds are held in cash and have not been deployed.

~~The Company’s board~~Table 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.

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.

Delaware	47-1628077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~11305~~11120 Four Points Drive, ~~Building 2,~~ Suite 100, Austin, TX ~~78726~~	78726
(Address of principal executive offices)	(Zip Code)

	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 Flows~~Operations 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

	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

	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

	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

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

	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 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

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, ~~2017~~2018 (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, ~~2017~~2018 (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.

	SailPoint Technologies Holdings, Inc.,

Date: ~~May 9, 2018~~August 6, 2019	By:	/s/ Mark McClain
		Mark McClain
		Chief Executive Officer and Director (Principal Executive Officer)


Date: ~~May 9, 2018~~August 6, 2019	By:	/s/ ~~Cam McMartin~~Jason Ream
		~~Cam McMartin~~Jason Ream
		Chief Financial Officer (Principal Financial Officer)

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