SailPoint Announces First Quarter 2018 Financial Results

  • Q1 total revenue of $49.7 million, up 40% year-over-year

AUSTIN, Texas--()--SailPoint Technologies Holdings, Inc. (NYSE: SAIL), the leader in enterprise identity governance, today announced financial results for the first quarter ended March 31, 2018.

We are pleased to announce our first quarter 2018 financial results, reflecting solid total revenue growth of 40% year-over-year and profitability on a non-GAAP operating income basis,” said Mark McClain, SailPoint’s CEO and Co-founder. “As we talk to global organizations around the world, there’s an increasing awareness that identity governance is critically important for today’s security, compliance and IT productivity efforts. SailPoint now has 984 customers from around the world committed to our identity governance platform.”

As the amount of data created and shared by business users explodes and regulations like the European General Data Protection Act elevate the discussion around identity controls over that data, organizations are realizing that identity governance must include managing access to data stored in files,” added McClain. “SailPoint’s vision has always been to secure and enable the digital identities of all users, across all applications and all data. We are expanding the scope of identity governance in the market to ensure that all data, including unstructured data found in emails, intranets and cloud storage applications, has the same level of oversight and governance as structured data found in applications. We believe our innovative approach of delivering comprehensive identity governance in any way that an enterprise wants to consume it will help us continue our global growth in 2018.”

Financial Highlights for First Quarter 2018:

  • Revenue: Total revenue was $49.7 million, a 40% increase over Q1 2017. License revenue was $17.0 million, a 39% increase over Q1 2017. Subscription revenue was $23.0 million, a 54% increase over Q1 2017. Services and other revenue was $9.7 million, a 17% increase over Q1 2017.
  • Operating (Loss) Income: Loss from operations was $(4.3) million, compared to income from operations of $0.2 million in Q1 2017. Non-GAAP income from operations was $3.1 million, compared to $2.6 million in Q1 2017.
  • Net (Loss) Income: Net loss was $(6.0) million, compared to $(2.3) million in Q1 2017. Net loss available to common shareholders per basic and diluted share was $(0.07), compared to $(0.18) in Q1 2017. Non-GAAP net income was $1.7 million, compared to non-GAAP net loss of ($0.1) million in Q1 2017. Non-GAAP net income per diluted share was $0.02, compared to non-GAAP net loss per basic and diluted share of ($0.00) in Q1 2017.
  • Adjusted EBITDA: Adjusted EBITDA was $3.3 million, compared to $3.2 million in Q1 2017.
  • Balance Sheet and Cash Flow: As of March 31, 2018, cash and cash equivalents were $130.9 million. During Q1 2018, we generated $15.3 million in cash from operations, compared to $6.9 million during Q1 2017.

The tables at the end of this press release include reconciliation of non-GAAP net income to GAAP net loss, non-GAAP income from operations to GAAP income (loss) from operations, non-GAAP to GAAP weighted average shares outstanding and adjusted EBITDA to GAAP net loss for the three months ended March 31, 2018 and 2017. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Financial Outlook:

For the second quarter of 2018, SailPoint expects:

  • Revenue in the range of $49.5 million to $50.5 million
  • Non-GAAP (loss) income from operations in the range of $(0.5) million to $0.5 million
  • Non-GAAP net loss per basic and diluted common share in the range of $(0.03) to $(0.02), based on estimated cash income tax payments of $0.7 million and 87.5 million basic and diluted common shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP net loss per basic and diluted common share exclude stock-based compensation expense and amortization of acquired intangibles.

For the full year 2018, SailPoint expects:

  • Revenue in the range of $225 million to $229 million
  • Non-GAAP income from operations in the range of $14.0 million to $16.0 million
  • Non-GAAP net income per diluted common share in the range of $0.07 to $0.09, based on estimated cash income tax payments of $1.8 million and 93 million diluted common shares outstanding. Expectations of non-GAAP income from operations and non-GAAP net income per diluted common share exclude stock-based compensation expense and amortization of acquired intangibles.

These statements regarding SailPoint’s expectations of its financial outlook are forward-looking and actual results may differ materially. Refer to “Forward-Looking Statements” below for information on the factors that could cause its actual results to differ materially from these forward-looking statements.

All of SailPoint’s forward-looking non-GAAP financial measures exclude estimates for stock-based compensation expense. SailPoint has not reconciled its expectations as to non-GAAP income (loss) from operations and non-GAAP net income (loss) per basic and diluted common shares to their most directly comparable GAAP measure due to the high variability and difficulty in making accurate forecasts and projections, particularly with respect to stock-based compensation expense. Stock-based compensation expense is affected by future hiring, turnover, and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to change. The actual amount of the excluded stock-based compensation expense will have a significant impact on SailPoint’s GAAP loss from operations and GAAP net loss per basic and diluted common share. Accordingly, reconciliations of our forward-looking non-GAAP income (loss) from operations and non-GAAP net income (loss) per basic and diluted common shares are not available without unreasonable effort.

Conference Call and Webcast:

SailPoint will host a conference call today, May 9, 2018, at 5:00 p.m. Eastern Time to discuss its first quarter 2018 financial results. The dial-in number will be 877-407-0792 or 201-689-8263. A live webcast of the conference call will be available on SailPoint’s website at https://investors.sailpoint.com.

Following the conference call, a replay will be available until midnight on May 23, 2018. The replay dial-in number will be 844-512-2921 or 412-317-6671, using the replay pin number: 13678480. An archived webcast of the call will also be available at https://investors.sailpoint.com.

Non-GAAP Financial Measures:

In addition to SailPoint’s financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), SailPoint uses certain non-GAAP financial measures to clarify and enhance SailPoint’s 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. SailPoint monitors the non-GAAP financial measures described below, and SailPoint’s management believes they are helpful to investors because they provide an additional tool to use in evaluating SailPoint’s financial and business trends and operating results. In addition, SailPoint’s management uses these non-GAAP measures to compare SailPoint’s performance to that of prior periods for trend analysis and for budgeting and planning purposes. In particular, SailPoint believes that non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) available to common shareholders per basic share and per diluted share, and adjusted EBITDA, are important measures for evaluating SailPoint’s performance because they facilitate comparisons of SailPoint’s core operating results from period to period by removing, where applicable, the impact of SailPoint’s capital structure (net interest income or expense from SailPoint’s outstanding debt, as well as amortization of debt issuance costs and expenses related to call protection on early payment of debt), asset base (depreciation and amortization), income taxes, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation.

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

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

Non-GAAP net income (loss) and non-GAAP net income (loss) available to common shareholders per basic and diluted share. SailPoint believes that the use of non-GAAP net income (loss) and non-GAAP net income (loss) available to common shareholders per basic and diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income (loss) is calculated as net income (loss) (a) excluding (i) stock-based compensation expense, (ii) amortization of acquired intangibles, (iii) amortization of debt issuance costs, and (iv) income tax expense (benefit) and (b) including cash income taxes paid. SailPoint defines non-GAAP net income (loss) available to common shareholders per basic and diluted share as non-GAAP net income (loss) divided by the non-GAAP weighted average outstanding common shares, which is calculated as if the conversion of our preferred stock, including related accumulated and unpaid dividend, occurred at the beginning of each respective period.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that SailPoint calculates as net loss adjusted to exclude income taxes, net interest expense, depreciation and amortization, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation expense.

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

Forward-Looking Statements:

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

Important factors, some of which are beyond our control, that could cause actual results to differ materially from our historical results or those expressed or implied by these forward-looking statements include the following: our ability to attract and retain customers and our ability to deepen our relationships with existing customers; our expectations regarding our customer growth rate; our ability to maintain successful relationships with our channel partners and further develop strategic relationships; 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 plans to further invest in and grow our business, and our ability to effectively manage our growth and associated investments; our ability to adapt and respond to rapidly changing technology, evolving industry standards, changing regulations and changing customer needs; our ability to maintain and enhance our brand or reputation as an industry leader and innovator; our ability to hire, retain, train and motivate our senior management team and key employees; 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; our ability to maintain third-party licensed software in or with our solutions; and our ability to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies. These and other important risk factors are described more fully in our reports and other documents filed with the Securities and Exchange Commission (“the SEC”) including (i) under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 19, 2018, and (ii) under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which was filed with the SEC on May 9, 2018, and could cause actual results to vary from expectations.

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

About SailPoint

SailPoint, the leader in enterprise identity governance, brings the Power of Identity to customers around the world. SailPoint’s open identity platform gives organizations the power to enter new markets, scale their workforces, embrace new technologies, innovate faster and compete on a global basis. As both an industry pioneer and market leader in identity governance, SailPoint delivers security, operational efficiency and compliance to enterprises with complex IT environments. SailPoint’s customers are among the world’s largest companies in a wide range of industries, including: 7 of the top 15 banks, 4 of the top 6 healthcare insurance and managed care providers, 9 of the top 15 property and casualty insurance providers, 5 of the top 15 pharmaceutical companies, and 11 of the largest 15 federal agencies.

More information on SailPoint is available at: www.sailpoint.com.

     

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three months ended
March 31, 2018     March 31, 2017
(In thousands, except share and per share data)
(Unaudited)
Revenue
Licenses $ 16,987 $ 12,236
Subscription 23,005 14,952
Services and other   9,722     8,278  
Total revenue 49,714 35,466
Cost of revenue
Licenses (1) 1,138 1,087
Subscription (1)(2) 4,658 3,575
Services and other (2)   6,974     5,473  
Total cost of revenue   12,770     10,135  
Gross profit 36,944 25,331
Operating expenses
Research and development (1)(2) 9,762 6,927
General and administrative (1)(2) 7,657 3,032
Sales and marketing (1)(2)   23,815     15,173  
Total operating expenses   41,234     25,132  
(Loss) income from operations (4,290 ) 199
Other expense, net:
Interest expense, net (1,178 ) (2,657 )
Other, net   (147 )   (64 )
Total other expense, net   (1,325 )   (2,721 )
Loss before income taxes (5,615 ) (2,522 )
Income tax (expense) benefit   (352 )   239  
Net loss $ (5,967 ) $ (2,283 )
Net loss available to common shareholders (3) $ (5,967 ) $ (8,453 )
Net loss per common share
Basic and diluted $ (0.07 ) $ (0.18 )
Weighted average shares outstanding
Basic and diluted   85,719,240     47,208,477  
 

(1) Includes amortization of acquired intangibles as follows:

     
Three months ended
March 31, 2018     March 31, 2017
(In thousands)
Cost of revenue – license $ 1,008 $ 1,008
Cost of revenue – subscription 96 96
Research and development 34
Sales and marketing   1,068   1,117
Total amortization of acquired intangibles $ 2,206 $ 2,221
 

(2) Includes stock-based compensation expense as follows:

     
Three Months Ended
March 31, 2018     March 31, 2017
(In thousands)
Cost of revenue – subscription $ 121 $ 9
Cost of revenue – services and other 375 18
Research and development 641 30
General and administrative 2,340 30
Sales and marketing   1,662   71
Total stock-based compensation $ 5,139 $ 158
 

(3) Net loss available to common shareholders is calculated by subtracting the accretion of undeclared and unpaid dividends on redeemable convertible preferred stock from net loss.

     

CONDENSED CONSOLIDATED BALANCE SHEETS

 
As of
March 31, 2018     December 31, 2017
(In thousands, except share data)
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 130,859 $ 116,049
Restricted cash 126 78
Accounts receivable 55,997 72,907
Prepayments and other current assets   9,094     10,013  
Total current assets 196,076 199,047
Property and equipment, net 3,126 3,018
Deferred tax asset - non-current 264 264
Other non-current assets 3,106 3,542
Goodwill 219,377 219,377
Intangible assets, net   78,979     81,185  
Total assets $ 500,928   $ 506,433  
Liabilities and stockholders’ equity
Current liabilities
Accounts payable $ 1,872 $ 2,231
Accrued expenses and other liabilities 12,012 22,636
Income taxes payable 1,918 1,688
Deferred revenue   75,883     73,671  
Total current liabilities 91,685 100,226
Long-term debt 68,321 68,329
Other long-term liabilities 65 27
Deferred revenue non-current   13,175     9,454  
Total liabilities 173,246 178,036
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value 9 8
Preferred stock, $0.0001 par value
Additional paid-in capital 358,858 353,609
Accumulated deficit   (31,185 )   (25,220 )
Total stockholders' equity   327,682     328,397  
Total liabilities and stockholders’ equity $ 500,928   $ 506,433  
 
     

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
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:
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  
 
     

RECONCILIATION OF NON-GAAP INCOME FROM OPERATIONS

 
Three months ended
March 31, 2018     March 31, 2017
(In thousands)
(Loss) income from operations $ (4,290 ) $ 199
Add back:
Stock-based compensation expense 5,139 158
Amortization of acquired intangibles   2,206     2,221
Non-GAAP income from operations $ 3,055   $ 2,578
 
     

RECONCILIATION OF NON-GAAP NET INCOME (LOSS)

 
Three months ended
March 31, 2018     March 31, 2017
(In thousands)
Net loss on a GAAP basis $ (5,967 ) $ (2,283 )
Add back:
Stock-based compensation expense 5,139 158
Amortization of acquired intangibles 2,206 2,221
Amortization of debt issuance costs 108 152
GAAP income tax expense (benefit) 352 (239 )
Less:
Cash income taxes paid   94     73  
Non-GAAP net income (loss) $ 1,744   $ (64 )
Non-GAAP net income (loss) per common share
Basic $ 0.02   $ (0.00 )
Diluted $ 0.02   $ (0.00 )
Non-GAAP weighted average number of common shares outstanding
Basic 85,719,240 69,622,775
Diluted 88,931,296 69,622,775
 
     

RECONCILIATION OF NON-GAAP WEIGHTED-AVERAGE OUTSTANDING COMMON SHARES

 
Three months ended
March 31, 2018     March 31, 2017
Weighted average shares used to compute net loss per share available to common shareholders, basic and diluted, on a GAAP basis 85,719,240 47,208,477
Add back:
Additional weighted average shares giving effect to conversion of preferred stock at the beginning of the period - 22,414,298
Non-GAAP weighted average outstanding common shares
Basic 85,719,240 69,622,775
Effect of potentially dilutive securities 3,212,056 -
Diluted 88,931,296 69,622,775
 
     

RECONCILIATION OF ADJUSTED EBITDA

 
Three months ended
March 31, 2018     March 31, 2017
(In thousands)
Net loss $ (5,967 ) $ (2,283 )
Stock-based compensation 5,139 158
Amortization of acquired intangibles 2,206 2,221
Depreciation 421 255
Purchase price accounting adjustment 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  

Contacts

Investor Relations:
ICR for SailPoint
Staci Mortenson, 512-664-8916
investor@sailpoint.com
or
Media Relations:
SailPoint Technologies Holdings, Inc.
Jessica Sutera, 978-278-5411
Jessica.Sutera@sailpoint.com

Contacts

Investor Relations:
ICR for SailPoint
Staci Mortenson, 512-664-8916
investor@sailpoint.com
or
Media Relations:
SailPoint Technologies Holdings, Inc.
Jessica Sutera, 978-278-5411
Jessica.Sutera@sailpoint.com