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

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

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

Financial Highlights for First Quarter 2022:

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

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

Transaction with Thoma Bravo

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

Operating Metrics

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

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

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

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

Forward-Looking Statements:

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

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

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

About SailPoint

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


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31, 2022			March 31, 2021
Revenue
Licenses	$	15,271		$	19,235
Subscription ⁽¹⁾		85,591			59,242
Services and other		14,558			12,285
Total revenue		115,420			90,762
Cost of revenue
Licenses⁽²⁾		1,378			1,247
Subscription⁽²⁾⁽³⁾		19,966			11,304
Services and other⁽³⁾		13,837			11,799
Total cost of revenue		35,181			24,350
Gross profit		80,239			66,412
Operating expenses
Research and development ⁽²⁾⁽³⁾		31,046			19,566
General and administrative ⁽³⁾		13,987			11,267
Sales and marketing ⁽²⁾⁽³⁾		65,730			51,162
Total operating expenses		110,763			81,995
Loss from operations		(30,524	)		(15,583	)
Other expense, net:
Interest income		24			200
Interest expense		(899	)		(789	)
Other expense, net		(660	)		(1	)
Total other expense, net		(1,535	)		(590	)
Loss before income taxes		(32,059	)		(16,173	)
Income tax (expense) benefit		(1,025	)		882
Net loss	$	(33,084	)	$	(15,291	)
Net loss per share
Basic	$	(0.35	)	$	(0.17	)
Diluted	$	(0.35	)	$	(0.17	)
Weighted average shares outstanding
Basic		93,939			91,684
Diluted		93,939			91,684


(1) Subscription revenue is further disaggregated as follows:

	Three Months Ended
	March 31, 2022		March 31, 2021
Subscription revenue
SaaS	$	41,127	$	21,889
Maintenance and support		42,332		35,474
Other subscription services		2,132		1,879
Total subscription revenue	$	85,591	$	59,242


(2) Includes amortization of acquired intangibles as follows:

	Three Months Ended
	March 31, 2022		March 31, 2021
Cost of revenue - licenses	$	829	$	1,008
Cost of revenue - subscription		1,552		857
Research and development		169		168
Sales and marketing		1,627		1,220
Total amortization expense	$	4,177	$	3,253

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

	Three Months Ended
	March 31, 2022		March 31, 2021
Cost of revenue - subscription	$	1,317	$	746
Cost of revenue - services and other		1,186		882
Research and development		4,643		2,454
General and administrative		2,665		2,303
Sales and marketing		6,628		4,756
Total stock-based compensation expense	$	16,439	$	11,141


CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	As of
	March 31, 2022			December 31, 2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	414,640		$	435,445
Restricted cash		6,712			6,719
Accounts receivable, net of allowances of $348 and $564		108,470			147,156
Deferred contract acquisition costs, current		27,555			25,966
Contract assets, current		35,115			31,640
Prepayments and other current assets		22,496			17,806
Income taxes receivable		505			506
Total current assets		615,493			665,238
Deferred tax asset - non-current		4,047			4,047
Property and equipment, net		16,319			17,151
Right-of-use assets, net		24,882			23,806
Deferred contract acquisition costs, non-current		68,868			68,725
Contract assets, non-current, net of allowances of $2,365 and $2,386		18,877			16,991
Other non-current assets		1,369			983
Goodwill		289,430			289,430
Intangible assets, net		69,292			73,469
Total assets	$	1,108,577		$	1,159,840
Liabilities and stockholders' equity
Current liabilities
Accounts payable		8,263			6,097
Accrued expenses and other liabilities		54,577			89,972
Income taxes payable		1,305			1,413
Convertible senior notes, net		385,599			385,172
Deferred revenue		214,686			218,937
Total current liabilities		664,430			701,591
Long-term operating lease liabilities		29,585			28,817
Deferred revenue - non-current		27,122			25,193
Total liabilities		721,137			755,601
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value		9			9
Preferred stock, $0.0001 par value		—			—
Additional paid in capital		498,195			481,910
Accumulated deficit		(110,764	)		(77,680	)
Total stockholders' equity		387,440			404,239
Total liabilities and stockholders' equity	$	1,108,577		$	1,159,840


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Three Months Ended
	March 31, 2022			March 31, 2021
Operating activities
Net loss	$	(33,084	)	$	(15,291	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		5,712			4,784
Amortization of debt issuance costs		468			633
Amortization of contract acquisition costs		6,933			4,328
Loss on disposal of fixed assets		15			27
Provision for credit losses		(106	)		102
Stock-based compensation expense		15,801			10,073
Operating leases, net		(288	)		(205	)
Net changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable		38,771			27,854
Deferred contract acquisition costs		(8,665	)		(6,587	)
Contract assets		(5,340	)		(4,445	)
Prepayments and other current assets		(4,663	)		23
Other non-current assets		(427	)		1,473
Accounts payable		2,166			(369	)
Accrued expenses and other liabilities		(35,415	)		(22,161	)
Income taxes		(107	)		(2,228	)
Deferred revenue		(2,322	)		(10,177	)
Net cash used in operating activities		(20,551	)		(12,166	)
Investing activities
Purchase of property and equipment		(749	)		(818	)
Proceeds from sale of property and equipment		4			2
Purchase of intangibles		—			(40	)
Business acquisitions, net of cash acquired		—			(71,196	)
Net cash used in investing activities		(745	)		(72,052	)
Financing activities
Payments for partial conversion of convertible senior notes		—			(10,160	)
Taxes associated with net issuances of shares upon vesting of restricted stock units		(846	)		(1,293	)
Exercise of stock options		1,330			1,608
Net cash provided by (used in) financing activities		484			(9,845	)
Net decrease in cash, cash equivalents and restricted cash		(20,812	)		(94,063	)
Cash, cash equivalents and restricted cash, beginning of period		442,164			516,644
Cash, cash equivalents and restricted cash, end of period	$	421,352		$	422,581


RECONCILIATION OF NON-GAAP INCOME (LOSS) FROM OPERATIONS
(In thousands)
(Unaudited)

	Three Months Ended
	March 31, 2022			March 31, 2021
Loss from operations on a GAAP basis	$	(30,524	)	$	(15,583	)
Add back:
Stock-based compensation expense⁽¹⁾		16,439			11,141
Amortization of acquired intangibles		4,177			3,253
Acquisition related costs⁽²⁾		600			1,863
Impairment of intangible assets		—			—
Non-GAAP income (loss) from operations	$	(9,308	)	$	674

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


RECONCILIATION OF NON-GAAP NET INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31, 2022			March 31, 2021
Net loss on a GAAP basis	$	(33,084	)	$	(15,291	)
Add back:
Stock-based compensation expense⁽¹⁾		16,439			11,141
Amortization of acquired intangibles		4,177			3,253
Amortization of debt issuance costs		468			633
Acquisition related costs⁽²⁾		600			1,863
Impairment of intangible assets		—			—
Effect of income taxes associated with the above adjustments⁽³⁾		3,323			(1,150	)
Non-GAAP net income (loss)	$	(8,077	)	$	449
Non-GAAP net income (loss) per share
Basic	$	(0.09	)	$	0.00
Diluted	$	(0.09	)	$	0.00
Non-GAAP weighted average outstanding shares
Basic		93,939			91,684
Diluted		93,939			95,066

(1) Stock-based compensation expense includes employer related payroll tax expense.
(2) Acquisition related costs are transaction costs, which include legal, accounting and consulting professional service fees. The 2022 costs pertain to the pending recently announced go-private transaction with Thoma Bravo. The 2021 costs pertain to the prior year acquisitions of Intello and ERP Maestro.
(3) The GAAP effective tax rates were (3.2)% and 5.5% for the three months ended March 31, 2022 and 2021, respectively, compared to non-GAAP effective tax rates of 22.1% and 37.5% for the three months ended March 31, 2022 and 2021, respectively.


RECONCILIATION OF NON-GAAP WEIGHTED AVERAGE OUTSTANDING SHARES
(In thousands)
(Unaudited)

	Three Months Ended
	March 31, 2022	March 31, 2021
Weighted average outstanding shares used to compute net loss per share, basic and diluted, on a GAAP basis
Basic	93,939	91,684
Diluted	93,939	91,684
Non-GAAP weighted average outstanding shares
Basic	93,939	91,684
Effect of potentially dilutive securities	—	3,382
Diluted	93,939	95,066

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