SailPoint Announces First Quarter 2019 Financial Results

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SailPoint
Technologies Holdings, Inc. (NYSE: SAIL), the leader in enterprise identity
governance, today announced financial results for the first quarter
ending March 31, 2019.

“Our Q1 results were in-line with our guidance, with total revenue
increasing 24% year-over-year. We added 46 net new customers during the
quarter with solid partner contribution and ongoing success with legacy
replacements. As organizations of all sizes move along their digital
transformation journey, identity governance is increasing in strategic
importance and our leading solutions are well positioned to meet the
needs of our customers,” said Mark McClain, SailPoint’s CEO and
Co-founder.

“We continue to be excited about the identity governance market and our
best-in-class solutions, but we’ve seen some recent changes in our
pipeline that are impacting our expectations for the second quarter and
remainder of 2019. We believe we have identified the challenges and are
making changes in our go-to-market initiatives. We are confident that we
are on a path that sets us up well for the future.”

Financial Highlights for First Quarter 2019:

Revenue: Total revenue was $60.6 million, a 24% increase over
Q1 2018. License revenue was $18.7 million, a 11% increase over Q1
2018. Subscription revenue was $31.8 million, a 41% increase over Q1
2018. Services and other revenue was $10.1 million, a 5% increase over
Q1 2018.
Operating Loss: Loss from operations was $(6.7) million,
compared to $(3.7) million in Q1 2018. Non-GAAP income from
operations was $0.5 million, compared to $3.6 million in Q1 2018.
Net Income (Loss): Net loss was $(8.4) million, compared to net
loss of $(2.3) million in Q1 2018. Net loss available to common
stockholders per basic and diluted share was $(0.10) compared to net
loss available to common stockholders per basic and diluted share of
$(0.03) in Q1 2018. Non-GAAP net loss was $(0.1) million, compared to
non-GAAP net income of $2.3 million in Q1 2018. Non-GAAP net
loss per basic and diluted share was $(0.00) compared to non-GAAP net
income per diluted share of $0.03 in Q1 2018.
Adjusted EBITDA: Adjusted EBITDA was $1.1 million, compared to
$3.9 million in Q1 2018.

The tables included in this press release present reconciliations of
non-GAAP income from operations to GAAP loss from operations, non-GAAP
net income (loss) to GAAP net loss, non-GAAP to GAAP weighted average
shares outstanding and adjusted EBITDA to GAAP net loss for the three
months ended March 31, 2019 and 2018. An explanation of these measures
is also included below under the heading “Non-GAAP Financial Measures.”

Financial Outlook:

For the second quarter of 2019, SailPoint expects:

Revenue in the range of $59.7 million to $61.2 million
Non-GAAP loss from operations in the range of $(3.5) million to $(3.0)
million
Non-GAAP net loss per basic and diluted common share of $(0.05), based
on estimated cash income tax payments of $0.8 million and 89.0 million
basic and diluted common shares outstanding. Expectations of non-GAAP
income (loss) from operations and non-GAAP net (loss) per basic and
diluted common share exclude items outlined in the “Non-GAAP Financial
Measures” section below.

For the full year 2019, SailPoint now expects:

Revenue in the range of $277.0 million to $281.5 million
Non-GAAP income from operations in the range of $17.1 million to $18.6
million
Non-GAAP net income per diluted common share in the range of $0.14 to
$0.16, based on estimated cash income tax payments of $2.0 million and
93.0 million diluted common shares outstanding. Expectations of
non-GAAP income from operations and non-GAAP net income per diluted
common share exclude items outlined in the “Non-GAAP Financial
Measures” section below.

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 and amortization of
acquired intangibles. 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 income (loss) from operations and GAAP net income
(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 8, 2019, at 5:00 p.m.
Eastern Time to discuss its first quarter 2019 financial results. The
dial-in number will be 877-407-0792 or 201-689-8263. Additionally, 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 22, 2019. The replay dial-in number will be 844-512-2921 or
412-317-6671, using the replay pin number: 13689391. 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 stockholders 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, asset base
(depreciation and amortization), income taxes, purchase accounting
adjustments and stock-based compensation expense.

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 from operations. SailPoint believes that
the use of non-GAAP income from operations is helpful to our investors
to clarify and enhance their understanding of past performance and
future prospects. Non-GAAP income 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 stockholders 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 stockholders 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 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 paid for income taxes.
SailPoint defines non-GAAP net income (loss) available to common
stockholders per basic and diluted share as non-GAAP net income (loss)
divided by the non-GAAP weighted average outstanding common shares.

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

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 strategy, future operations, financial
position, prospects, plans and objectives of management, 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 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. 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, including
larger organizations; our ability to deepen our relationships with
existing customers; our expectations regarding our customer growth rate;
our business plan and beliefs and objectives for future operations;
trends associated with our industry and 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 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 gross margin; our ability to generate sufficient
revenue to achieve and 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 benefit from
our corporate culture; our ability to successfully identify, acquire and
integrate companies and assets; our ability to successfully enter new
markets and manage our international expansion; and our ability to
maintain, protect and enhance our intellectual property and 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 Securities and Exchange Commission (“the SEC”) including
(i) under “Risk Factors” in Part I, Item 1A. in our Annual Report on
Form 10-K for the year ended December 31, 2018, which was filed with the
SEC on March 18, 2019, and (ii) under “Risk Factors” in Part II, Item
1A. in our Quarterly Report on Form 10-Q for the quarter ended March 31,
2019, which was filed with the SEC on May 8, 2019. 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, 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: 8 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 13
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, 2019			March 31, 2018
	(In thousands, except per share data)
	(Unaudited)
Revenue
Licenses	$	18,669		$	16,808
Subscription		31,835			22,505
Services and other		10,079			9,628
Total revenue		60,583			48,941
Cost of revenue
Licenses⁽¹⁾		1,059			1,138
Subscription ⁽¹⁾⁽²⁾		5,813			4,658
Services and other ⁽²⁾		7,997			6,974
Total cost of revenue		14,869			12,770
Gross profit		45,714			36,171
Operating expenses
Research and development ⁽¹⁾⁽²⁾		12,772			9,762
General and administrative ⁽²⁾		9,137			7,657
Sales and marketing ⁽¹⁾⁽²⁾		30,488			22,459
Total operating expenses		52,397			39,878
Loss from operations		(6,683	)		(3,707	)
Other expense, net:
Interest income (expense), net		11			(1,178	)
Other, net		(417	)		(147	)
Total other expense, net		(406	)		(1,325	)
Loss before income taxes		(7,089	)		(5,032	)
Income tax (expense) benefit		(1,301	)		2,730
Net loss	$	(8,390	)	$	(2,302	)
Net loss available to common stockholders	$	(8,390	)	$	(2,302	)
Net loss per share
Basic	$	(0.10	)	$	(0.03	)
Diluted	$	(0.10	)	$	(0.03	)
Weighted average shares outstanding
Basic		88,295			85,719
Diluted		88,295			85,719

(1) Includes amortization of acquired intangibles as follows:


	Three Months Ended
	March 31, 2019		March 31, 2018
	(In thousands)
Cost of revenue – license	$	1,008	$	1,008
Cost of revenue – subscription		96		96
Research and development		159		34
Sales and marketing		1,068		1,068
Total amortization of acquired intangibles	$	2,331	$	2,206

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


	Three Months Ended
	March 31, 2019		March 31, 2018
	(In thousands)
Cost of revenue – subscription	$	282	$	121
Cost of revenue – services and other		379		375
Research and development		969		641
General and administrative		1,404		2,340
Sales and marketing		1,836		1,662
Total stock-based compensation expense	$	4,870	$	5,139


CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
	March 31, 2019			December 31, 2018
	(In thousands, except share data)
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	86,223		$	70,964
Restricted cash		6,289			6,272
Accounts receivable		71,156			101,469
Prepayments and other current assets		22,691			21,850
Total current assets		186,359			200,555
Property and equipment, net		21,452			19,268
Right-of-use assets		32,243			—
Other non-current assets		22,488			20,374
Goodwill		219,377			219,377
Intangible assets, net		72,529			74,860
Total assets	$	554,448		$	534,434
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	3,395		$	4,636
Accrued expenses and other liabilities		18,655			21,731
Income taxes payable		3,263			2,143
Deferred revenue		92,630			95,919
Total current liabilities		117,943			124,429
Deferred tax liability – non-current		4,142			4,142
Long-term operating lease liabilities		39,696			9,788
Deferred revenue – non-current		17,516			18,382
Total liabilities		179,297			156,741
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value		9			9
Preferred stock, $0.0001 par value		—			—
Additional paid in capital		383,321			377,473
(Accumulated deficit) retained earnings		(8,179	)		211
Total stockholders’ equity		375,151			377,693
Total liabilities and stockholders’ equity	$	554,448		$	534,434


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31, 2019			March 31, 2018
	(In thousands)
	(Unaudited)
Operating activities
Net loss	$	(8,390	)	$	(2,302	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		3,303			2,628
Amortization of debt issuance costs		10			108
Amortization of contract acquisition costs		2,166			1,675
Gain on disposal of fixed assets		(3	)		(4	)
Stock-based compensation expense		4,639			5,139
Operating lease liabilities, net		251			—
Net changes in operating assets and liabilities		15,252			8,078
Net cash provided by operating activities		17,228			15,322
Investing activities
Purchase of property and equipment		(2,306	)		(530	)
Proceeds from sale of property and equipment		11			4
Net cash used in investing activities		(2,295	)		(526	)
Financing activities
Debt issuance costs		(829	)		—
Exercise of stock options		1,172			62
Net cash provided by financing activities		343			62
Net increase in cash, cash equivalents and restricted cash		15,276			14,858
Cash, cash equivalents and restricted cash, beginning of period		77,236			116,127
Cash, cash equivalents and restricted cash, end of period	$	92,512		$	130,985


RECONCILIATION OF NON-GAAP INCOME FROM OPERATIONS

	Three Months Ended
	March 31, 2019			March 31, 2018
	(In thousands)
Loss from operations	$	(6,683	)	$	(3,707	)
Add back:
Stock-based compensation expense ⁽¹⁾		4,870			5,139
Amortization of acquired intangibles		2,331			2,206
Non-GAAP income from operations	$	518		$	3,638

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


RECONCILIATION OF NON-GAAP NET INCOME (LOSS)

	Three Months Ended
	March 31, 2019			March 31, 2018
	(In thousands, except per share data)
Net loss on a GAAP basis	$	(8,390	)	$	(2,302	)
Add back:
Stock-based compensation expense⁽¹⁾		4,870			5,139
Amortization of acquired intangibles		2,331			2,206
Amortization of debt issuance costs		10			108
Income tax expense (benefit)		1,301			(2,730	)
Less:
Cash income taxes paid		210			94
Non-GAAP net income (loss)	$	(88	)	$	2,327
Non-GAAP net income (loss) per common share
Basic	$	(0.00	)	$	0.03
Diluted	$	(0.00	)	$	0.03
Non-GAAP weighted average number of common shares outstanding
Basic		88,295			85,719
Diluted		88,295			88,931

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


RECONCILIATION OF NON-GAAP WEIGHTED AVERAGE OUTSTANDING COMMON SHARES

	Three Months Ended
	March 31, 2019	March 31, 2018
	(In thousands)
Weighted average shares used to compute net loss per share available to common stockholders, basic and diluted, on a GAAP basis
Basic	88,295	85,719
Diluted	88,295	85,719
Non-GAAP weighted average outstanding common shares
Basic	88,295	85,719
Effect of potentially dilutive securities	—	3,212
Diluted	88,295	88,931


RECONCILIATION OF ADJUSTED EBITDA

	Three Months Ended
	March 31, 2019			March 31, 2018
	(In thousands)
Net loss	$	(8,390	)	$	(2,302	)
Stock-based compensation⁽¹⁾		4,870			5,139
Amortization of acquired intangibles		2,331			2,206
Depreciation		972			421
Purchase price accounting adjustment ⁽²⁾		—			13
Interest (income) expense, net		(11	)		1,178
Income tax expense (benefit)		1,301			(2,730	)
Adjusted EBITDA	$	1,073		$	3,925

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

(2) Purchase accounting adjustment related to the fair value write down
of deferred revenue from the acquisition of SailPoint Technologies, Inc.
on September 8, 2014.

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