0001564590-20-022921.txt : 20200507 0001564590-20-022921.hdr.sgml : 20200507 20200507163214 ACCESSION NUMBER: 0001564590-20-022921 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 86 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200507 DATE AS OF CHANGE: 20200507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Sailpoint Technologies Holdings, Inc. CENTRAL INDEX KEY: 0001627857 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 471628077 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38297 FILM NUMBER: 20856986 BUSINESS ADDRESS: STREET 1: 11120 FOUR POINTS DRIVE STREET 2: SUITE 100 CITY: AUSTIN STATE: TX ZIP: 78726 BUSINESS PHONE: (512) 346-2000 MAIL ADDRESS: STREET 1: 11120 FOUR POINTS DRIVE STREET 2: SUITE 100 CITY: AUSTIN STATE: TX ZIP: 78726 10-Q 1 sail-10q_20200331.htm 10-Q sail-10q_20200331.htm
false Q1 0001627857 --12-31 Large Accelerated Filer 2024-03-31 P4Y P5Y P5Y P15Y P8Y9M18D P17Y P4Y9M18D P6Y3M P6Y3M P6M P5M1D 0.0248 0.0259 P7Y8M12D P7Y9M18D P7Y9M18D P6Y3M18D P1Y7M6D P1Y9M18D P1Y9M18D 0001627857 2020-01-01 2020-03-31 xbrli:shares 0001627857 2020-04-30 iso4217:USD 0001627857 2020-03-31 0001627857 2019-12-31 iso4217:USD xbrli:shares 0001627857 us-gaap:LicenseMember 2020-01-01 2020-03-31 0001627857 us-gaap:LicenseMember 2019-01-01 2019-03-31 0001627857 us-gaap:MaintenanceMember 2020-01-01 2020-03-31 0001627857 us-gaap:MaintenanceMember 2019-01-01 2019-03-31 0001627857 us-gaap:TechnologyServiceMember 2020-01-01 2020-03-31 0001627857 us-gaap:TechnologyServiceMember 2019-01-01 2019-03-31 0001627857 2019-01-01 2019-03-31 0001627857 us-gaap:CommonStockMember 2019-12-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001627857 us-gaap:RetainedEarningsMember 2019-12-31 0001627857 us-gaap:RetainedEarningsMember us-gaap:AccountingStandardsUpdate201613Member 2020-03-31 0001627857 us-gaap:AccountingStandardsUpdate201613Member 2020-03-31 0001627857 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001627857 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001627857 us-gaap:CommonStockMember 2020-03-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001627857 us-gaap:RetainedEarningsMember 2020-03-31 0001627857 us-gaap:CommonStockMember 2018-12-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001627857 us-gaap:RetainedEarningsMember 2018-12-31 0001627857 2018-12-31 0001627857 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001627857 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001627857 us-gaap:CommonStockMember 2019-03-31 0001627857 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001627857 us-gaap:RetainedEarningsMember 2019-03-31 0001627857 2019-03-31 0001627857 us-gaap:ConvertibleDebtMember 2020-01-01 2020-03-31 0001627857 sail:OrkusMember 2020-01-01 2020-03-31 0001627857 sail:OverwatchIDMember 2020-01-01 2020-03-31 xbrli:pure 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:AccountsReceivableMember 2020-01-01 2020-03-31 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:AccountsReceivableMember 2019-01-01 2019-12-31 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:NetAssetsGeographicAreaMember 2020-01-01 2020-03-31 0001627857 us-gaap:CreditConcentrationRiskMember us-gaap:NetAssetsGeographicAreaMember 2019-01-01 2019-03-31 0001627857 us-gaap:AccountingStandardsUpdate201613Member 2020-01-01 0001627857 us-gaap:LicenseMember us-gaap:TransferredAtPointInTimeMember 2020-01-01 2020-03-31 0001627857 us-gaap:LicenseMember us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-03-31 0001627857 us-gaap:MaintenanceMember us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 0001627857 us-gaap:TechnologyServiceMember us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 0001627857 us-gaap:MaintenanceMember us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0001627857 us-gaap:TechnologyServiceMember us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0001627857 sail:DeferredContractCostsExpectedToBeAmortizedWithinNext12MonthsMember 2020-03-31 0001627857 sail:DeferredContractCostsExpectedToBeAmortizedWithinNext12MonthsMember 2019-12-31 0001627857 2019-01-01 2019-12-31 0001627857 2020-04-01 2020-03-31 0001627857 us-gaap:AccountsReceivableMember 2020-01-01 2020-03-31 0001627857 us-gaap:AccountsReceivableMember 2020-03-31 0001627857 sail:ContractAssetsMember 2020-01-01 2020-03-31 0001627857 sail:ContractAssetsMember 2020-03-31 0001627857 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2020-03-31 0001627857 us-gaap:MoneyMarketFundsMember 2020-03-31 0001627857 us-gaap:FairValueInputsLevel1Member 2020-03-31 0001627857 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0001627857 us-gaap:MoneyMarketFundsMember 2019-12-31 0001627857 us-gaap:FairValueInputsLevel1Member 2019-12-31 0001627857 sail:OrkusMember 2019-10-15 2019-10-15 0001627857 sail:OrkusMember 2019-10-15 0001627857 sail:OrkusMember us-gaap:OtherCurrentLiabilitiesMember 2020-03-31 0001627857 sail:OrkusMember us-gaap:OtherCurrentLiabilitiesMember 2019-12-31 0001627857 sail:OrkusMember us-gaap:OtherNoncurrentLiabilitiesMember 2020-03-31 0001627857 sail:OrkusMember us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001627857 sail:OrkusMember us-gaap:DevelopedTechnologyRightsMember 2019-10-15 0001627857 sail:OrkusMember us-gaap:DevelopedTechnologyRightsMember 2019-10-15 2019-10-15 0001627857 sail:OverwatchIDMember 2019-10-15 2019-10-15 0001627857 sail:OverwatchIDMember 2019-10-15 0001627857 sail:OverwatchIDMember us-gaap:OtherCurrentLiabilitiesMember 2020-03-31 0001627857 sail:OverwatchIDMember us-gaap:OtherCurrentLiabilitiesMember 2019-12-31 0001627857 sail:OverwatchIDMember us-gaap:OtherNoncurrentLiabilitiesMember 2020-03-31 0001627857 sail:OverwatchIDMember us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001627857 sail:OverwatchIDMember us-gaap:DevelopedTechnologyRightsMember 2019-10-15 0001627857 sail:OverwatchIDMember us-gaap:DevelopedTechnologyRightsMember 2019-10-15 2019-10-15 0001627857 us-gaap:CustomerListsMember 2020-01-01 2020-03-31 0001627857 us-gaap:DevelopedTechnologyRightsMember 2020-01-01 2020-03-31 0001627857 us-gaap:TrademarksAndTradeNamesMember 2020-01-01 2020-03-31 0001627857 us-gaap:OtherIntangibleAssetsMember 2020-01-01 2020-03-31 0001627857 us-gaap:CustomerListsMember 2020-03-31 0001627857 us-gaap:CustomerListsMember 2019-12-31 0001627857 us-gaap:DevelopedTechnologyRightsMember 2020-03-31 0001627857 us-gaap:DevelopedTechnologyRightsMember 2019-12-31 0001627857 us-gaap:TrademarksAndTradeNamesMember 2020-03-31 0001627857 us-gaap:TrademarksAndTradeNamesMember 2019-12-31 0001627857 us-gaap:OtherIntangibleAssetsMember 2020-03-31 0001627857 us-gaap:OtherIntangibleAssetsMember 2019-12-31 0001627857 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-03-31 0001627857 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-03-31 0001627857 us-gaap:SellingAndMarketingExpenseMember 2020-01-01 2020-03-31 0001627857 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-03-31 0001627857 srt:MinimumMember 2020-03-31 0001627857 srt:MaximumMember 2020-03-31 0001627857 us-gaap:FinancialStandbyLetterOfCreditMember 2020-03-31 0001627857 us-gaap:LetterOfCreditMember sail:NewCreditAgreementMember 2019-12-31 0001627857 us-gaap:LetterOfCreditMember sail:NewCreditAgreementMember 2020-03-31 0001627857 srt:MaximumMember sail:NewCreditAgreementMember 2020-03-31 0001627857 srt:MinimumMember sail:NewCreditAgreementMember 2020-01-01 2020-03-31 0001627857 srt:MaximumMember sail:NewCreditAgreementMember 2020-01-01 2020-03-31 0001627857 sail:NewCreditAgreementMember 2020-01-01 2020-03-31 0001627857 us-gaap:RevolvingCreditFacilityMember sail:NewCreditAgreementMember 2020-03-31 0001627857 us-gaap:RevolvingCreditFacilityMember sail:NewCreditAgreementMember 2019-12-31 0001627857 sail:NewCreditAgreementMember 2020-03-31 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2019-09-30 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2019-09-01 2019-09-30 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2020-01-01 2020-03-31 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2020-03-31 sail:Day 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember us-gaap:CommonStockMember 2020-03-31 0001627857 sail:LiabilityComponentMember sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2020-03-31 0001627857 sail:EquityComponentMember sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2020-03-31 0001627857 sail:ConvertibleSeniorNotesDueTwoThousandTwentyFourMember 2019-12-31 0001627857 sail:CappedCallTransactionsMember 2019-09-30 0001627857 sail:CappedCallTransactionsMember 2019-09-01 2019-09-30 0001627857 sail:IncentiveStockOptionsAndNonqualifiedStockOptionsMember 2015-12-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2015-12-31 0001627857 sail:TwentyFifteenStockIncentivePlanMember 2015-12-31 0001627857 sail:IncentiveStockOptionsAndNonqualifiedStockOptionsMember srt:MaximumMember 2015-01-01 2015-12-31 0001627857 sail:IncentiveStockOptionsAndNonqualifiedStockOptionsMember 2015-01-01 2015-12-31 0001627857 sail:TwentyFifteenStockOptionAndGrantPlanMember 2020-03-31 0001627857 sail:TwentyFifteenStockIncentivePlanMember srt:MaximumMember 2020-03-31 0001627857 sail:TwentySeventeenLongTermIncentivePlanMember 2020-03-31 0001627857 sail:TwentySeventeenLongTermIncentivePlanMember 2020-01-01 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-03-31 0001627857 us-gaap:EmployeeStockMember 2020-01-01 2020-03-31 0001627857 us-gaap:EmployeeStockMember 2019-01-01 2019-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2019-12-31 0001627857 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001627857 sail:IncentiveUnitPlanMember 2019-01-01 2019-03-31 0001627857 sail:IncentiveUnitPlanMember 2020-01-01 2020-03-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2020-03-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0001627857 us-gaap:EmployeeStockMember 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-03-31 0001627857 us-gaap:RestrictedStockMember 2020-01-01 2020-03-31 0001627857 us-gaap:RestrictedStockMember 2019-01-01 2019-03-31 0001627857 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-03-31 0001627857 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-03-31 0001627857 us-gaap:DomesticCountryMember 2019-01-01 2019-03-31 0001627857 us-gaap:ForeignCountryMember 2019-01-01 2019-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001627857 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-03-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001627857 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-03-31 sail:Segment 0001627857 country:US 2020-01-01 2020-03-31 0001627857 country:US 2019-01-01 2019-03-31 0001627857 us-gaap:EMEAMember 2020-01-01 2020-03-31 0001627857 us-gaap:EMEAMember 2019-01-01 2019-03-31 0001627857 sail:RestOfTheWorldMember 2020-01-01 2020-03-31 0001627857 sail:RestOfTheWorldMember 2019-01-01 2019-03-31

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2020

OR

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

FOR THE TRANSITION PERIOD FROM                      TO                      

Commission File Number 001-38297

 

SailPoint Technologies Holdings, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

47-1628077

(State or other jurisdiction of

incorporation or organization)

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

 

 

11120 Four Points Drive, Suite 100,

Austin, TX

78726

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (512346-2000

 

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

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

SAIL

 

New York Stock Exchange

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes      No 

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

The registrant had 90,185,976 shares of common stock outstanding as of April 30, 2020.

 

 

 

 


Table of Contents

 

SailPoint Technologies Holdings, Inc.
Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Page

 

 

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

2

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019

4

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6.

Exhibits, Financial Statement Schedules

36

 

Signatures

37

 


1


Table of Contents

 

PART I

ITEM 1. Financial Statements (Unaudited)

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated Balance sheets

 

 

 

As of

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

(In thousands, except per share data)

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

461,191

 

 

$

443,795

 

Restricted cash

 

 

6,321

 

 

 

6,325

 

Accounts receivable, net of allowance

 

 

74,658

 

 

 

106,428

 

Prepayments and other current assets

 

 

26,246

 

 

 

27,870

 

Total current assets

 

 

568,416

 

 

 

584,418

 

Property and equipment, net

 

 

19,998

 

 

 

21,300

 

Right-of-use assets, net

 

 

30,224

 

 

 

31,104

 

Other non-current assets, net of allowance

 

 

30,371

 

 

 

30,554

 

Goodwill

 

 

241,121

 

 

 

241,051

 

Intangible assets, net

 

 

78,404

 

 

 

81,651

 

Total assets

 

$

968,534

 

 

$

990,078

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,508

 

 

$

3,224

 

Accrued expenses and other liabilities

 

 

25,629

 

 

 

40,214

 

Income taxes payable

 

 

1,120

 

 

 

1,994

 

Deferred revenue

 

 

120,782

 

 

 

127,132

 

Total current liabilities

 

 

150,039

 

 

 

172,564

 

Deferred tax liability - non-current

 

 

8,787

 

 

 

8,900

 

Convertible senior notes, net

 

 

313,377

 

 

 

309,051

 

Long-term operating lease liabilities

 

 

36,929

 

 

 

38,035

 

Other long-term liabilities

 

 

2,500

 

 

 

2,500

 

Deferred revenue - non-current

 

 

24,198

 

 

 

24,901

 

Total liabilities

 

 

535,830

 

 

 

555,951

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, authorized 300,000 shares, issued and outstanding 90,169 shares as of March 31, 2020 and 89,676 shares as of December 31, 2019

 

 

9

 

 

 

9

 

Preferred stock, $0.0001 par value, authorized 10,000 shares, no shares issued and outstanding as of March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Additional paid in capital

 

 

449,760

 

 

 

442,407

 

Accumulated deficit

 

 

(17,065

)

 

 

(8,289

)

Total stockholders' equity

 

 

432,704

 

 

 

434,127

 

Total liabilities and stockholders’ equity

 

$

968,534

 

 

$

990,078

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


Table of Contents

 

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

 

(In thousands, except per share data)

 

 

 

(Unaudited)

 

Revenue

 

 

 

 

 

 

 

 

Licenses

 

$

21,004

 

 

$

18,669

 

Subscription

 

 

43,881

 

 

 

31,835

 

Services and other

 

 

10,557

 

 

 

10,079

 

Total revenue

 

 

75,442

 

 

 

60,583

 

Cost of revenue

 

 

 

 

 

 

 

 

Licenses

 

 

1,080

 

 

 

1,059

 

Subscription

 

 

8,476

 

 

 

5,813

 

Services and other

 

 

9,006

 

 

 

7,997

 

Total cost of revenue

 

 

18,562

 

 

 

14,869

 

Gross profit

 

 

56,880

 

 

 

45,714

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

15,808

 

 

 

12,772

 

General and administrative

 

 

9,514

 

 

 

9,137

 

Sales and marketing

 

 

36,860

 

 

 

30,488

 

Total operating expenses

 

 

62,182

 

 

 

52,397

 

Loss from operations

 

 

(5,302

)

 

 

(6,683

)

Other expense, net:

 

 

 

 

 

 

 

 

Interest income

 

 

1,272

 

 

 

46

 

Interest expense

 

 

(4,532

)

 

 

(35

)

Other, net

 

 

(324

)

 

 

(417

)

Total other expense, net

 

 

(3,584

)

 

 

(406

)

Loss before income taxes

 

 

(8,886

)

 

 

(7,089

)

Income tax (expense) benefit

 

 

469

 

 

 

(1,301

)

Net loss

 

$

(8,417

)

 

$

(8,390

)

Net loss available to common stockholders

 

$

(8,417

)

 

$

(8,390

)

Net loss per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

 

$

(0.10

)

Diluted

 

$

(0.09

)

 

$

(0.10

)

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

89,862

 

 

 

88,295

 

Diluted

 

 

89,862

 

 

 

88,295

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


Table of Contents

 

Sailpoint technologies Holding, Inc. and subsidiaries

Condensed Consolidated STATEMENTS OF STOCKHOLDERS’ EQUITY

 

 

For the Three Months Ended March 31, 2020

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Number

of shares

 

 

Par

value

 

 

paid in

capital

 

 

Accumulated

deficit

 

 

Stockholders'

equity

 

 

(In thousands)

 

 

(Unaudited)

 

Balance at December 31, 2019

 

89,676

 

 

$

9

 

 

$

442,407

 

 

$

(8,289

)

 

$

434,127

 

Cumulative effect adjustment from the adoption of ASC 326, net of tax

 

 

 

 

 

 

 

 

 

 

(359

)

 

 

(359

)

Exercise of stock options

 

228

 

 

 

 

 

 

1,317

 

 

 

 

 

 

1,317

 

Restricted stock units vested, net of tax settlement

 

265

 

 

 

 

 

 

(155

)

 

 

 

 

 

(155

)

Stock-based compensation expense

 

 

 

 

 

 

 

6,191

 

 

 

 

 

 

6,191

 

Net loss

 

 

 

 

 

 

 

 

 

 

(8,417

)

 

 

(8,417

)

Balance at March 31, 2020

 

90,169

 

 

$

9

 

 

$

449,760

 

 

$

(17,065

)

 

$

432,704

 

 

 

 

For the Three Months Ended March 31, 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

 

271

 

 

 

 

 

 

1,172

 

 

 

 

 

 

1,172

 

Restricted stock units vested, net of tax settlement

 

91

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

4,639

 

 

 

 

 

 

4,639

 

Vested incentive units converted to common stock

 

724

 

 

 

 

 

 

37

 

 

 

 

 

 

37

 

Net loss

 

 

 

 

 

 

 

 

 

 

(8,390

)

 

 

(8,390

)

Balance at March 31, 2019

 

88,598

 

 

$

9

 

 

$

383,321

 

 

$

(8,179

)

 

$

375,151

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


Table of Contents

 

Sailpoint technologies Holding, Inc. and subsidiaries

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

 

(In thousands)

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(8,417

)

 

$

(8,390

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

4,586

 

 

 

3,303

 

Amortization of debt discount and issuance costs

 

 

4,367

 

 

 

10

 

Amortization of contract acquisition costs

 

 

3,004

 

 

 

2,166

 

Loss (gain) on disposal of fixed assets

 

 

124

 

 

 

(3

)

Credit loss expense

 

 

127

 

 

 

 

Stock-based compensation expense

 

 

6,191

 

 

 

4,639

 

Operating leases, net

 

 

(71

)

 

 

251

 

Deferred taxes

 

 

(113

)

 

 

 

Net changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

31,284

 

 

 

30,313

 

Prepayments and other current assets

 

 

(1,380

)

 

 

(3,007

)

Other non-current assets

 

 

142

 

 

 

(1,296

)

Accounts payable

 

 

(716

)

 

 

(1,241

)

Accrued expenses and other liabilities

 

 

(14,742

)

 

 

(6,482

)

Income taxes

 

 

(874

)

 

 

1,120

 

Deferred revenue

 

 

(7,053

)

 

 

(4,155

)

Net cash provided by operating activities

 

 

16,459

 

 

 

17,228

 

Investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(239

)

 

 

(2,306

)

Proceeds from sale of property and equipment

 

 

10

 

 

 

11

 

Net cash used in investing activities

 

 

(229

)

 

 

(2,295

)

Financing activities

 

 

 

 

 

 

 

 

Payment of debt issuance costs

 

 

 

 

 

(829

)

Taxes associated with net issuances of shares upon vesting of restricted stock units

 

 

(155

)

 

 

 

Exercise of stock options

 

 

1,317

 

 

 

1,172

 

Net cash provided by financing activities

 

 

1,162

 

 

 

343

 

Net increase in cash, cash equivalents and restricted cash

 

 

17,392

 

 

 

15,276

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

450,120

 

 

 

77,236

 

Cash, cash equivalents and restricted cash, end of period

 

$

467,512

 

 

$

92,512

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


Table of Contents

 

Sailpoint technologies Holding, Inc. and subsidiaries

NOTES TO UNAUDITED CONDENSED Consolidated FINANCIAL STATEMENTS

1. Description of Business and Summary of Significant Accounting Policies

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 occurred on September 8, 2014 and 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 worldwide.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), for interim reporting. Accordingly, the Company has condensed or omitted certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of stockholders’ equity and 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, 2020 or any future period.

These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 24, 2020 (the “Annual Report”).

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, we make estimates with respect to the fair value allocation of multiple performance obligation in revenue recognition, the valuation allowance based on expected credit losses and the collectability of accounts receivable, valuation and estimated useful lives of long-lived assets, fair value of the liability and equity components of the Notes (as defined below), stock-based compensation expense and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon periodic evaluation. Actual results could differ from those estimates.

Concentration of Credit Risk and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. As of March 31, 2020 and December 31, 2019, no single customer represented more than 10% of the balance in accounts receivable. Management considers concentration of credit risk to be minimal with respect to accounts receivable due to the positive historical collection experience of the Company. No single customer represented more than 10% of revenue for the three months ended March 31, 2020 or 2019. 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 consolidated revenues or net assets.

Significant Accounting Policies

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”. Except for the adoption of ASU 2016-13 described below, there have been no changes to our significant accounting policies described in our Annual Report that have had a material impact on our consolidated condensed financial statements and related notes.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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), which clarifies the accounting for

6


Table of Contents

 

implementation costs in cloud computing arrangements (CCAs). ASU 2018-15 is effective for public entities for annual periods, including interim periods within those annual periods beginning after December 15, 2019 and earlier adoption is permitted. We adopted the standard effective January 1, 2020, using the prospective approach. This adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The Company evaluates if the CCA includes a license to internal-use software. If the CCA includes a software license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the CCA does not include a software license, the Company accounts for the arrangement as a service contract (or hosting arrangement) and hosting costs are generally expensed as incurred.

With the adoption of ASU 2018-15, the Company evaluates upfront costs including implementation, set-up or other costs (collectively, implementation costs) for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized. Capitalized implementation costs are recorded in prepayments and other current assets or other non-current assets and amortized over the expected term of the arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewal options. During the three months ended March 31, 2020, the Company’s capitalized implementation costs related to hosting arrangements were not material.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Accounting Standards Codification or ASC 326).” This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The new standard also expands the required quantitative and qualitative disclosures surrounding expected credit losses.

On January 1, 2020, we adopted ASC 326 using the modified retrospective transition method, which requires a cumulative adjustment, if applicable, to be recorded to accumulated deficit. 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 implemented internal controls and key system functionality to enable the preparation of financial information upon adoption.

We recorded a cumulative adjustment in the amount of $0.4 million, net of tax impact, to accumulated deficit as of January 1, 2020. This adoption did not have a material impact on our condensed consolidated statement of operations or statement of cash flows.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes.” The guidance removes exceptions to the general principles in Topic 740 for allocating tax expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments and interim period income tax accounting for year-to-date losses that exceed projected losses. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted in the first period of the year this guidance is adopted. We adopted the standard effective January 1, 2020, using the prospective approach except for hybrid tax regimes, which we adopted using the modified retrospective approach. This adoption did not have a material impact on the Company’s condensed consolidated financial statements.

2. Revenue Recognition

Disaggregation of Revenue

The Company’s revenue by geographic region based on the customer’s location is presented in Note 13 “Segment and Geographic Information”.

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

 

 

 

Three Months Ended March 31, 2020

 

 

Three Months Ended March 31, 2019

 

 

 

Licenses

 

 

Subscription

 

 

Services and other

 

 

Licenses

 

 

Subscription

 

 

Services and other

 

 

 

(In thousands)

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue recognized at a point in time

 

$

21,004

 

 

$

 

 

$

 

 

$

18,669

 

 

$

 

 

$

 

Revenue recognized over time

 

 

 

 

 

43,881

 

 

 

10,557

 

 

 

 

 

 

31,835

 

 

 

10,079

 

Total revenue

 

$

21,004

 

 

$

43,881

 

 

$

10,557

 

 

$

18,669

 

 

$

31,835

 

 

$

10,079

 

 

7


Table of Contents

 

Contract Balances

A summary of the activity impacting our contract balances during the reporting periods is presented below:

 

 

 

Contract Acquisition Costs

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

 

(In thousands)

 

Beginning Balance

 

$

35,152

 

 

$

28,043

 

Additional deferred contract acquisition costs

 

 

2,806

 

 

 

2,052

 

Amortization of deferred contract acquisition costs

 

 

(3,004

)

 

 

(2,166

)

Ending Balance

 

$

34,954

 

 

$

27,929

 

 

As of March 31, 2020, and December 31, 2019, $11.0 million and $10.9 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 remaining amount of our deferred contract acquisition costs are included in other non-current assets. There were no material impairments of deferred contract acquisition costs for the periods ended March 31, 2020 or 2019.

 

 

 

Deferred Revenue

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

 

(In thousands)

 

Beginning Balance

 

$

152,033

 

 

$

114,301

 

Decrease, net

 

 

(7,053

)

 

 

(4,155

)

Ending Balance

 

$

144,980

 

 

$

110,146

 

 

Deferred revenue, which is a contract liability, consists primarily of amounts invoiced in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met. During the three months ended March 31, 2020 and 2019, revenue recognized that was previously deferred was $46.8 million and $37.5 million, respectively. The difference between the opening and closing balances of the Company’s contract assets and deferred revenue primarily results from the timing difference between the Company’s performance and the 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 amount billed to the customer, and the right to payment is subject to more than the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional and the customer is billed. Contract assets are included in prepayments and other current assets and other non-current assets in the condensed consolidated balance sheets. During the three months ended March 31, 2020 and 2019, amounts reclassified from contract assets to accounts receivable were $1.5 million and $1.4 million, respectively. There were no material impairments of contract assets during the periods ended March 31, 2020 or 2019.

Remaining Performance Obligations

Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These remaining performance obligations represent contract revenue that has not yet been recognized and is 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 March 31, 2020, amounts allocated to these additional performance obligations are $215.9 million, of which we expect to recognize $143.6 million as revenue over the next 12 months with the remaining balance recognized thereafter.

3. Allowance for Expected Credit Losses

The allowance for expected credit losses is a valuation account that is deducted from the financial asset’s amortized cost basis to present the net amount expected to be collected on contracts with customers. Accounts receivable and contract assets are written off when management believes non-collectability is confirmed. Recoveries of financial assets previously written off shall be recorded when received against the credit loss expense.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts over a financial asset’s contractual term. The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made from qualitative and quantitative factors if economic conditions at the reporting date reflect stronger or weaker economic performance than the historical data implies based on management’s expectations of economic conditions on certain

8


Table of Contents

 

indicators of the Company, industry and economy. We review factors such as past collection experience, age of the accounts receivable balance, significant trends in current balances, internal operations and macroeconomic conditions. As of March 31, 2020, SailPoint evaluated these economic conditions and made adjustments to historical loss information for certain economic risk factors, such as COVID-19.

In development of the expected credit loss model, we evaluated our financial assets with similar risk characteristics on a collective (pool) basis for their respective estimated and expected credit loss allowance. A financial asset will be measured individually only if it does not share similar risk characteristics with other financial assets. We believe that historical credit loss patterns by aging bucket and invoice type for accounts receivable are the most significant risk characteristics. We believe that invoice type historical loss patterns differ between renewals and new business. The Company notes expected credit loss is developed for the contractual life of the financial asset, which accounts receivable and contract assets can be viewed as one financial asset. However, a low percentage of our contract assets do not convert to accounts receivable. Therefore, we consider all contract assets as a single pool.

The following table presents the changes in the allowance for expected credit losses for financial assets measured at amortized cost:

 

 

Accounts Receivable

 

 

Contract Assets

 

 

 

As of March 31, 2020

 

 

 

(In thousands)

 

Beginning Balance

 

$

 

 

$

 

Adoption of ASC 326

 

 

407

 

 

 

65

 

Credit loss expense, net of recoveries

 

 

112

 

 

 

15

 

Write-offs

 

 

(181

)

 

 

 

Ending Balance

 

$

338

 

 

$

80

 

 

4. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the Company’s financial assets that are measured at fair value on a recurring basis:

 

 

As of March 31, 2020

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

380,532

 

 

 

 

 

 

 

 

$

380,532

 

Total cash equivalents

$

380,532

 

 

 

 

 

 

 

 

$

380,532

 

 

 

As of December 31, 2019

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

364,127

 

 

 

 

 

 

 

 

$

364,127

 

Total cash equivalents

$

364,127

 

 

 

 

 

 

 

 

$

364,127

 

 

The Company’s carrying amounts of financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses are considered Level 1 and approximate their fair values due to their short maturities as of March 31, 2020 and December 31, 2019 and are excluded from the fair value tables above.

See Note 9 “Convertible Senior Notes and Capped Call Transactions” for the carrying amount and estimated fair value of our Notes (as defined below) as of March 31, 2020.

9


Table of Contents

 

5. Business Combinations

2019 Acquisitions

Orkus

On October 15, 2019, the Company acquired 100% of the equity interest in Orkus, Inc. (“Orkus”), a Delaware corporation engaged in the development and license of software products to assist customers in monitoring and controlling access and authorization across hybrid cloud assets. Total consideration related to the acquisition was $16.5 million in cash, of which $2.0 million is to be paid upon the lapse of an indemnification period of 12 months and 24 months of the acquisition date. As of March 31, 2020 and December 31, 2019, $1.0 million of holdback amount is reflected within accrued expenses and other liabilities and $1.0 million is included in other long-term liabilities in the consolidated balance sheets.

The following table summarizes the final purchase price allocation as of the date of acquisition:

 

 

 

As of

 

 

 

October 15, 2019

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

 

Prepayments and other current assets

 

 

34

 

Right-of-use assets

 

 

90

 

Goodwill

 

 

7,637

 

Intangible assets

 

 

9,760

 

Accounts payable

 

 

(21

)

Accrued expenses and other liabilities

 

 

(133

)

Deferred tax liability - non-current

 

 

(861

)

Total fair value of assets acquired and liabilities assumed

 

$

16,506

 

 

 

The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:

 

 

 

Amount

 

 

Estimated Useful Life

 

 

(In thousands)

 

 

(In years)

Developed technology

 

$

9,760

 

 

5

 

Overwatch.ID

On October 15, 2019, the Company acquired 100% of the equity interest in Overwatch.ID, Inc. (“Overwatch.ID”), a Delaware corporation engaged in the development and license of software products focused on access controls security for cloud applications, cloud computing, hybrid IT environments, and on-premises infrastructure. The consideration related to the acquisition was $20.9 million in cash, of which $3.0 million is to be paid upon the lapse of an indemnification period of 12 months and 18 months of the acquisition date. As of March 31, 2020 and December 31, 2019, $1.5 million of holdback amount is reflected within accrued expenses and other current liabilities and $1.5 million is included in other long-term liabilities in the consolidated balance sheets.

The following table summarizes the final purchase price allocation as of the date of acquisition:

 

 

 

As of

 

 

 

October 15, 2019

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

45

 

Accounts receivable

 

 

66

 

Prepayments and other current assets

 

 

103

 

Deferred tax asset - non-current

 

 

687

 

Right-of-use assets

 

 

175

 

Goodwill

 

 

14,107

 

Intangible assets