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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 September 30, 2021
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
(State or other jurisdiction of
incorporation or organization)
11120 Four Points DriveSuite 100,
AustinTX
(Address of principal executive offices)
47-1628077
(I.R.S. Employer
Identification No.)
78726
(Zip Code)
Registrant’s telephone number, including area code: (512) 346-2000
_____________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.0001 per shareSAILNew 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  x   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  x   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 filerxAccelerated filer
Non-accelerated filerSmaller 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  x
The registrant had 93,263,655 shares of common stock outstanding as of November 3, 2021.


SailPoint Technologies Holdings, Inc.
Table of Contents
Page
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

1

PART I
ITEM 1. Financial Statements (Unaudited)
SAILPOINT TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
As of
September 30, 2021December 31, 2020
(Unaudited)
Assets
Current assets
Cash and cash equivalents$421,847 $510,289 
Restricted cash6,707 6,355 
Accounts receivable, net of allowances of $411 and $376
117,828 112,255 
Deferred contract acquisition costs, current20,696 15,592 
Prepayments and other current assets41,843 26,027 
Income taxes receivable2,876  
Total current assets611,797 670,518 
Property and equipment, net17,655 19,443 
Right-of-use assets, net24,541 27,048 
Deferred contract acquisition costs, non-current51,375 38,510 
Other non-current assets, net of allowances of $47 and $50
10,253 15,016 
Goodwill289,437 241,103 
Intangible assets, net77,656 63,962 
Total assets$1,082,714 $1,075,600 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable$1,376 $4,753 
Accrued expenses and other liabilities66,904 59,460 
Income taxes payable 978 
Convertible senior notes, net384,744 326,672 
Deferred revenue182,440 165,995 
Total current liabilities635,464 557,858 
Deferred tax liability - non-current22 1,329 
Long-term operating lease liabilities29,765 33,080 
Deferred revenue - non-current23,305 18,723 
Total liabilities688,556 610,990 
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.0001 par value, authorized 300,000 shares, issued and outstanding 93,234 shares as of September 30, 2021 and 91,386 shares as of December 31, 2020
9 9 
Preferred stock, $0.0001 par value, authorized 10,000 shares, no shares issued and outstanding as of September 30, 2021 and December 31, 2020
  
Additional paid in capital462,723 484,012 
Accumulated deficit(68,574)(19,411)
Total stockholders' equity394,158 464,610 
Total liabilities and stockholders’ equity$1,082,714 $1,075,600 
See accompanying notes to unaudited condensed consolidated financial statements.
2

SAILPOINT TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Revenue
Licenses
$26,087 $30,864 $69,772 $86,748 
Subscription
70,796 51,004 194,393 140,807 
Services and other
13,227 12,145 39,193 34,358 
Total revenue
110,110 94,013 303,358 261,913 
Cost of revenue
Licenses
1,994 1,083 4,596 3,269 
Subscription
15,711 9,794 40,731 26,927 
Services and other
13,408 9,922 37,726 27,597 
Total cost of revenue
31,113 20,799 83,053 57,793 
Gross profit78,997 73,214 220,305 204,120 
Operating expenses
Research and development
26,879 19,314 69,478 52,775 
General and administrative
12,192 8,846 33,920 27,731 
Sales and marketing
58,624 44,092 168,194 119,886 
Total operating expenses
97,695 72,252 271,592 200,392 
Income (loss) from operations(18,698)962 (51,287)3,728 
Other expense, net
Interest income
223 349 635 1,790 
Interest expense
(630)(4,639)(2,051)(13,757)
Other income (expense), net(122)214 (342)(222)
Total other expense, net(529)(4,076)(1,758)(12,189)
Loss before income taxes(19,227)(3,114)(53,045)(8,461)
Income tax (expense) benefit(669)2,438 1,116 2,410 
Net loss$(19,896)$(676)$(51,929)$(6,051)
Net loss per share
Basic
$(0.21)$(0.01)$(0.56)$(0.07)
Diluted
$(0.21)$(0.01)$(0.56)$(0.07)
Weighted average shares outstanding
Basic
93,032 90,764 92,398 90,320 
Diluted
93,032 90,764 92,398 90,320 
See accompanying notes to unaudited condensed consolidated financial statements.
3

SAILPOINT TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
For the Three Months Ended September 30, 2021
Common StockAdditional
paid in
capital
Accumulated
deficit
Stockholders'
equity
Number
of shares
Par
value
Balance at June 30, 202192,804 $9 $446,579 $(48,678)$397,910 
Exercise of stock options215 — 3,014 — 3,014 
Restricted stock units vested, net of tax settlement215 — (1,274)— (1,274)
Stock-based compensation expense— — 14,404 — 14,404 
Net loss— — — (19,896)(19,896)
Balance at September 30, 202193,234 $9 $462,723 $(68,574)$394,158 

For the Nine Months Ended September 30, 2021
Common StockAdditional
paid in
capital
Accumulated
deficit
Stockholders'
equity
Number
of shares
Par
value
Balance at December 31, 202091,386 $9 $484,012 $(19,411)$464,610 
Cumulative effect adjustment from the adoption of ASU 2020-06— — (65,517)2,766 (62,751)
Exercise of stock options500 — 5,981 — 5,981 
Restricted stock units vested, net of tax settlement1,060 — (4,336)— (4,336)
Stock-based compensation expense— — 37,349 — 37,349 
Common stock issued under employee stock plan143 — 5,234 — 5,234 
Partial conversion of convertible senior notes182 — — — — 
Settlement of capped calls related to partial conversion of convertible senior notes(37)— — — — 
Net loss— — — (51,929)(51,929)
Balance at September 30, 202193,234 $9 $462,723 $(68,574)$394,158 



4

SAILPOINT TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
For the Three Months Ended September 30, 2020
Common StockAdditional
paid in
capital
Accumulated
deficit
Stockholders'
equity
Number
of shares
Par
value
Balance at June 30, 202090,607 $9 $461,785 $(14,023)$447,771 
Exercise of stock options225 — 2,102 — 2,102 
Restricted stock units vested, net of tax settlement52 — (195)— (195)
Stock-based compensation expense— — 7,838 — 7,838 
Net loss— — — (676)(676)
Balance at September 30, 202090,884 $9 $471,530 $(14,699)$456,840 

For the Nine Months Ended September 30, 2020
Common StockAdditional
paid in
capital
Accumulated
deficit
Stockholders'
equity
Number
of shares
Par
value
Balance at December 31, 201989,676 $9 $442,407 $(8,289)$434,127 
Cumulative effect adjustment from the adoption of ASC 326— — — (359)(359)
Exercise of stock options648 — 4,909 — 4,909 
Restricted stock units vested, net of tax settlement384 — (431)— (431)
Stock-based compensation expense— — 21,179 — 21,179 
Common stock issued under employee stock plan176 — 3,466 — 3,466 
Net loss— — — (6,051)(6,051)
Balance at September 30, 202090,884 $9 $471,530 $(14,699)$456,840 
See accompanying notes to unaudited condensed consolidated financial statements.
5

SAILPOINT TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30, 2021September 30, 2020
Operating activities
Net loss$(51,929)$(6,051)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense17,307 13,758 
Amortization of debt discount and issuance costs1,569 13,260 
Amortization of contract acquisition costs14,074 10,127 
(Gain) loss on disposal of fixed assets37 (12)
Provision for credit losses384 435 
Stock-based compensation expense37,349 21,179 
Operating leases, net(514)(297)
Deferred taxes (113)
Net changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable(4,956)4,421 
Deferred contract acquisition costs(32,043)(20,116)
Prepayments and other current assets(15,781)(5,820)
Other non-current assets6,121 (7,633)
Accounts payable(3,377)1,033 
Accrued expenses and other liabilities5,286 8,122 
Income taxes(3,733)(4,944)
Deferred revenue19,291 7,057 
Net cash provided by (used in) operating activities(10,915)34,406 
Investing activities
Purchase of property and equipment(2,923)(2,434)
Proceeds from sale of property and equipment29 18 
Purchase of intangibles(40) 
Business acquisitions, net of cash acquired(70,960) 
Net cash used in investing activities(73,894)(2,416)
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(4,336)(431)
Proceeds from employee stock purchase plan contributions5,234 3,466 
Exercise of stock options5,981 4,909 
Net cash provided by (used in) financing activities(3,281)7,944 
Net increase (decrease) in cash, cash equivalents and restricted cash(88,090)39,934 
Cash, cash equivalents and restricted cash, beginning of period516,644 450,120 
Cash, cash equivalents and restricted cash, end of period$428,554 $490,054 
See accompanying notes to unaudited condensed consolidated financial statements.
6

SAILPOINT TECHNOLOGIES HOLDINGS, 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 on July 14, 2004 as a Delaware corporation. The Company designs, develops and markets identity security 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, 2021 or any future period.
These financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 25, 2021 (the “Annual Report”).
Use of Estimates
The preparation of unaudited condensed 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 obligations in revenue recognition, the expected period of benefit of deferred contract acquisition costs, the collectability of accounts receivable, stock-based compensation expense, income taxes, and the valuation, useful lives and impairment of intangible assets and goodwill arising from business combinations. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such 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. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. As of September 30, 2021 and December 31, 2020, 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 and nine months ended September 30, 2021 or 2020. 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.
7

Significant Accounting Policies
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report, most notably Note 1 “Description of Business and Summary of Significant Accounting Policies.” Except for the adoption of Accounting Standards Update ("ASU") 2020-06 described below, there have been no changes to our significant accounting policies described in the Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes.
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change will reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Notes (as defined in Note 9 "Convertible Senior Notes and Capped Call Transactions"). Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either the fully retrospective or modified retrospective basis.
The Company early adopted ASU 2020-06 effective January 1, 2021 using the modified retrospective approach, which requires a cumulative adjustment to be recorded to accumulated deficit. Adoption of ASU 2020-06 resulted in a material effect on the unaudited condensed consolidated balance sheet as the Company no longer separately presents in equity an embedded conversion feature. The impact to the unaudited condensed consolidated balance sheet was an increase of the Notes by $66.8 million, a decrease of our deferred tax liability by $4.0 million, a decrease of our additional paid in capital by $65.5 million and a decrease of our accumulated deficit by $2.8 million. Interest expense recognized will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. This adoption did not have a material impact on the Company's unaudited condensed consolidated statement of cash flows. The Company will prospectively utilize the if-converted method to calculate the impact of convertible instruments on diluted earnings per share.
2. Revenue Recognition
Disaggregation of Revenue
The Company’s revenue by geographic region based on the customer’s location is presented in Note 13 “Geographic Information and Major Customers.”
8

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:
Licenses
SaaS (1)
Maintenance and Support (1)
Other Subscription Services (1)
Services and Other
(In thousands)
Three Months Ended September 30, 2021
Revenue recognized at a point in time$26,087 $— $— $— $— 
Revenue recognized over time— 29,842 39,361 1,593 13,227 
Total revenue$26,087 $29,842 $39,361 $1,593 $13,227 
Three Months Ended September 30, 2020
Revenue recognized at a point in time$30,864 $— $— $— $— 
Revenue recognized over time— 17,407 32,511 1,086 12,145 
Total revenue$30,864 $17,407 $32,511 $1,086 $12,145 
Nine Months Ended September 30, 2021
Revenue recognized at a point in time$69,772 $— $— $— $— 
Revenue recognized over time— 77,100 112,139 5,154 39,193 
Total revenue$69,772 $77,100 $112,139 $5,154 $39,193 
Nine Months Ended September 30, 2020
Revenue recognized at a point in time$86,748 $— $— $— $— 
Revenue recognized over time— 46,780 91,735 2,292 34,358 
Total revenue$86,748 $46,780 $91,735 $2,292 $34,358 
(1) Subscription revenue is further disaggregated into SaaS, Maintenance and Support and Other Subscription Services revenue in the table above.
Contract Balances
A summary of the activity impacting our contract balances during the reporting periods is presented below:
Contract Acquisition Costs
Nine Months Ended
September 30, 2021September 30, 2020
(In thousands)
Beginning Balance$54,102 $35,152 
Additional deferred contract acquisition costs
32,043 20,117 
Amortization of deferred contract acquisition costs
(14,074)(10,127)
Ending Balance$72,071 $45,142 
There were no material impairments of deferred contract acquisition costs for the periods ended September 30, 2021 or 2020.
9

Deferred Revenue
Nine Months Ended
September 30, 2021September 30, 2020
(In thousands)
Beginning Balance$184,718 $152,033 
Increase, net21,027 7,057 
Ending Balance$205,745 $159,090 
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. Revenue recognized that was previously deferred was $71.1 million and $167.5 million during the three and nine months ended September 30, 2021, respectively, compared to $54.0 million and $122.3 million during the three and nine months ended September 30, 2020, 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 obligations and customer billings.
Contract assets primarily relate to unbilled amounts, which are netted with deferred revenue at the contract level, and typically result from sales contracts where 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 in the amount of $24.5 million and $10.7 million and other non-current assets in the amount of $9.3 million and $14.2 million on the unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. During the nine months ended September 30, 2021 and 2020, amounts reclassified from contract assets to accounts receivable were $17.7 million and $4.0 million, respectively.
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 September 30, 2021, amounts allocated to these additional performance obligations are $455.4 million, of which we expect to recognize $252.4 million as revenue over the next 12 months with the remaining balance recognized thereafter.
3. 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 September 30, 2021
Level 1Level 2Level 3Total
(In thousands)
Assets
Cash equivalents
Money market funds$22,810   $22,810 
Total cash equivalents$22,810   $22,810 

10

As of December 31, 2020
Level 1Level 2Level 3Total
(In thousands)
Assets
Cash equivalents
Money market funds$9,757   $9,757 
Total cash equivalents$9,757   $9,757 
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 September 30, 2021 and December 31, 2020 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 the Notes as of September 30, 2021.
4. Business Combinations
2021 Acquisitions
Intello
On February 22, 2021, the Company acquired Intello Inc. ("Intello"), a Delaware corporation, pursuant to an Agreement and Plan of Merger whereby Intello became a wholly owned subsidiary of the Company. Intello is an early-stage software as a service ("SaaS") management company that helps organizations discover, manage, and secure SaaS applications. The aggregate consideration paid in connection with this acquisition was $42.9 million, net of cash acquired.
The following table summarizes the final purchase price allocation as of the date of acquisition:
As of
February 22, 2021
(In thousands)
Cash and cash equivalents$1,143 
Accounts receivable146 
Prepayments and other current assets43 
Property and equipment17 
Goodwill32,417 
Intangible assets12,300 
Accrued expenses and other liabilities(97)
Deferred tax liability - non-current(1,401)
Deferred revenue(536)
Total fair value of assets acquired and liabilities assumed
$44,032 
The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
AmountEstimated Useful Life
(In thousands)(In years)
Developed technology$9,500 5
Customer lists$2,800 3
The fair value of developed technology was estimated using the relief from royalty method (Level 3) utilizing assumptions for annual obsolescence, royalty rates, tax rate and discount rate. The fair value of customer lists was estimated
11

using the replacement cost method (Level 3), which utilized assumptions for the cost to recreate the relationships, such as the timing and resources required, distributor's profit mark-up and opportunity cost.
ERP Maestro
On March 15, 2021, the Company acquired ERP Maestro, Inc. ("ERP Maestro"), a Florida corporation, pursuant to an Agreement and Plan of Merger whereby ERP Maestro became a wholly owned subsidiary of the Company. ERP Maestro is an early-stage SaaS governance, risk and compliance solution that provides separation-of-duty controls monitoring for an organization’s most critical applications. The aggregate consideration paid in connection with this acquisition was $28.1 million, net of cash acquired.
The following table summarizes the final purchase price allocation as of the date of acquisition:
As of
March 15, 2021
(In thousands)
Cash and cash equivalents$924 
Accounts receivable850 
Prepayments and other current assets59 
Property and equipment152 
Right-of-use assets223 
Goodwill15,917 
Intangible assets13,900 
Accrued expenses and other liabilities(503)
Deferred tax liability - non-current(1,329)
Deferred revenue(1,200)
Total fair value of assets acquired and liabilities assumed$28,993 
The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
AmountEstimated Useful Life
(In thousands)(In years)
Developed technology$10,000 5
Customer lists$3,900 3
The fair value of developed technology was estimated using the replacement cost method (Level 3) utilizing assumptions for the cost to replace, such as the workforce, timing and resources required, annual obsolescence, as well as a theoretical developer’s profit margin and entrepreneurial incentive and opportunity cost. The fair value of customer lists was estimated using the replacement cost method (Level 3), which utilized assumptions for the cost to recreate the customer relationships, such as the timing and resources required, distributor's profit mark-up and opportunity cost and customer age.
Additional Acquisition Related Information
The operating results of the acquired companies are included in our unaudited condensed consolidated statement of operations from the respective dates of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our unaudited condensed consolidated statement of operations. During the nine months ended September 30, 2021, acquisition related costs were $2.2 million, which included primarily legal, accounting and consulting professional service fees and have been included in general and administrative expenses on the unaudited condensed consolidated statement of operations.
These acquisitions have been accounted for as business combinations. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the respective acquisition date. The Company finalized the purchase price within the required one-year measurement period as of the dates of acquisition.
12

The Company believes that for each acquisition, the acquired companies will provide opportunities for growth through investing in additional products and capabilities, among other factors. This contributed to a purchase price in excess of the estimated fair value of each acquired company’s net identifiable assets acquired. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill in connection with each acquisition. Goodwill arising from these acquisitions is not deductible for tax purposes.
5. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired less liabilities assumed arising from business combinations. The change in the carrying amounts of goodwill for the nine months ended September 30, 2021 is due to the acquisitions of Intello and ERP Maestro. For additional information regarding the acquisitions, see Note 4 “Business Combinations.”
The following table reflects goodwill activity for the nine months ended September 30, 2021:
(In thousands)
Balance, December 31, 2020$241,103 
Goodwill acquired
47,307 
Measurement period adjustments1,027 
Balance, September 30, 2021$289,437 
There were no impairments of goodwill during the periods ended September 30, 2021 or 2020.
Intangible Assets
Total cost and amortization of intangible assets are comprised of the following:
As of
Weighted Average
Useful Life
September 30, 2021December 31, 2020
Intangible assets, net(In years)(In thousands)
Customer lists
14.6$49,200 $42,500 
Developed technology
8.666,260 51,760 
Trade names and trademarks
17.024,500 24,500 
Other intangible assets
4.82,975 3,746 
Total intangible assets
142,935 122,506 
Less: Accumulated amortization
(65,279)(58,544)
Total intangible assets, net
$77,656 $63,962 
Amortization expense for the periods presented is as follows:
Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(In thousands)
Cost of revenue - licenses$829 $1,007 $2,845 $3,023 
Cost of revenue - subscription1,562 921 3,976 2,742 
Research and development169 162 506 543 
Sales and marketing1,628 1,069 4,474 3,206 
Total amortization expense$4,188 $3,159 $11,801 $9,514 
13

Periodically, the Company evaluates intangible assets for possible impairment. We recorded an impairment charge of $0.7 million related to certain developed technology assets in Cost of revenue - licenses on the accompanying unaudited condensed consolidated statements of operations during the three months ended September 30, 2021. There were no impairments of intangible assets during the three or nine month period ended September 30, 2020.
The total estimated future amortization expense of these intangible assets as of September 30, 2021 is as follows:
Year Ending December 31,(In thousands)
2021 (except the nine months ended September 30, 2021)$4,187 
202216,719 
202316,557 
202412,674 
20258,175 
Thereafter19,344 
Total amortization expense$77,656 
6. Leases
Letters of Credit
As of September 30, 2021 and December 31, 2020, the Company had an aggregate of $6.0 million of cash collateral for an unconditional standby letter of credit related to the Company’s corporate headquarters lease. The Company is also required to maintain a small amount of restricted cash to guarantee rent payments for our subsidiaries.
Operating Leases
As of September 30, 2021, our leases, which primarily consist of office leases, have remaining lease terms of less than one year to eight years. Certain leases include early termination and/or extension options; however, exercise of these options is at the Company’s sole discretion. As of September 30, 2021, the Company determined that it is not reasonably certain that it will exercise the options to extend its leases or terminate them early. As of September 30, 2021, we have no financing leases and no material sub-leases, and our non-cancelable operating lease commitments exclude variable consideration.
The undiscounted annual future minimum lease payments are summarized by year in the table below:
Year Ending December 31,(In thousands)
2021 (except the nine months ended September 30, 2021)$1,539 
20225,983 
20235,148 
20245,040 
20254,890 
Thereafter17,393 
Total minimum lease payments39,993 
Less: interest(5,453)
Total present value of operating lease liabilities$34,540 
Current operating lease liabilities$4,775 
Long-term operating lease liabilities29,765 
Total operating lease liabilities$34,540 
14

7. Commitments and Contingencies
Indemnification Arrangements
In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers, business partners and other parties with respect to certain matters, including losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities with respect to our products, services and business. In these circumstances, payment may be conditioned on the other party making a claim pursuant to the procedures specified in a particular contract.
The Company includes service level commitments to customers of our cloud-based products warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. To date, the Company has not incurred any material costs as a result of these commitments, and we expect the time between any potential claims and issuance of the credits to be short. As a result, we have not accrued any liabilities related to these commitments in our unaudited condensed consolidated financial statements.
Litigation Claims and Assessments
The Company is subject to claims and suits that may arise from time to time in the ordinary course of business. In addition, some legal actions, claims and governmental inquiries may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our unaudited condensed consolidated financial statements.
8. Credit Agreement
On March 11, 2019, SailPoint Technologies, Inc., as borrower (the "Borrower"), and certain of our other wholly owned subsidiaries entered into a credit agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Credit Agreement”). The Credit Agreement is guaranteed by SailPoint Technologies Intermediate Holdings, LLC, a wholly owned subsidiary of the Company, and the Borrower’s material domestic subsidiaries (the “Guarantors” and, together with the Borrower, the “Loan Parties”) and is supported by a security interest in substantially all of the Loan Parties’ personal property and assets.
In September 2019, the Company amended the Credit Agreement in connection with the issuance and sale of the Notes. Such amendment included a decrease in the commitments for revolving credit loans from $150.0 million to $75.0 million, with a $15.0 million letter of credit sublimit, which amount can be increased or decreased under certain circumstances and is subject to certain financial covenants. In addition, the Credit Agreement provides for the ability to incur uncommitted term loan facilities if, among other things, the Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), calculated giving pro forma effect to the requested term loan facility, is no greater than 3.50 to 1.00. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions permitted under the Credit Agreement. The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants.
The interest rates applicable to revolving credit loans under the Credit Agreement are at the Company’s option. The Company pays an unused commitment fee during the term of the Credit Agreement ranging from 0.20% to 0.30% per annum based on the Senior Secured Net Leverage Ratio. Borrowings under the Credit Agreement are scheduled to mature on March 11, 2024.
The Company had no outstanding revolving credit loan balance under the Credit Agreement as of September 30, 2021 or December 31, 2020. The Company was in compliance with all applicable covenants as of September 30, 2021.
The Company incurred total debt issuance costs of $0.8 million in connection with the Credit Agreement, the net balance of which is included in other non-current assets in the accompanying unaudited condensed consolidated balance sheets. These costs are being amortized to interest expense over the life of the Credit Agreement on a straight-line basis. Amortization of debt issuance costs for the periods ended September 30, 2021 and 2020 were not material and were recorded in interest expense on the accompanying unaudited condensed consolidated statements of operations.
9. Convertible Senior Notes and Capped Call Transactions
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In September 2019, the Company issued and sold $400.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2024 (the “Notes”) in a private offering (the “Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the Offering were $391.2 million, after deducting discounts and commissions and other fees and expenses payable by the Company in connection with the Offering. The Company used $37.1 million of the net proceeds from the Offering to pay the cost of the privately negotiated capped call transactions (the "Capped Call Transactions") it entered into with the initial purchasers of the Notes or their respective affiliates and another financial institution.
The Notes were issued pursuant to an indenture (the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The Notes are senior unsecured obligations of the Company and will mature on September 15, 2024, unless earlier redeemed, repurchased or converted. The Notes bear interest at a fixed rate of 0.125% per year payable semiannually in arrears on March 15 and September 15 of each year.
The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2024, only under the following circumstances:
during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of common stock and the conversion rate for the Notes on each such trading day;
if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
upon the occurrence of specified corporate events as set forth in the Indenture.
On or after March 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The Notes are convertible at an initial conversion rate of 35.1849 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of $28.42 per share of common stock, subject to adjustment upon the occurrence of specified events. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.
In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be. For example, upon the occurrence of a make-whole fundamental change, as defined in the purchase agreement, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or during the relevant redemption period.
The Company may not redeem the Notes prior to September 20, 2022. The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2022, if the last reported sale price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes, which means that the Company is not required to redeem or retire the Notes periodically.
If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal
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amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable. The Company was in compliance with all applicable covenants as of September 30, 2021.
For at least 20 trading days during the period of 30 consecutive trading days ended September 30, 2020, the last reported sale price of the Company’s common stock was equal to or exceeded 130% of the conversion price of the Notes on each applicable trading day. This conversion trigger has been met each quarter since then, including the quarter ended September 30, 2021. As a result, the Notes continue to be convertible at the option of the holders during the fiscal quarter ended September 30, 2021 and remained classified as current liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2021.
During the three months ended March 31, 2021, upon the request of certain holders, the Company settled the conversion of the $10.2 million in aggregate principal amount of the Notes (the "2021 Converted Notes") with cash and settled all other amounts owed to the respective holders through the issuance of 181,629 shares of the Company's common stock with an aggregate fair value of approximately $10.1 million. The Company recognized an immaterial amount related to the acceleration of unamortized debt issuance costs related to these early note conversions, which was recorded in interest expense on the accompanying unaudited condensed consolidated statements of operations. As of the date of this filing, no other holders of the Notes have submitted requests for conversion.
Transaction costs related to the issuance of the Notes were $8.8 million and are being amortized to interest expense at an effective interest method rate of 0.57% over the term of the Notes.
As of September 30, 2021, the Notes have a remaining life of 36 months.
The net carrying amount of the liability and equity components of the Notes for the periods presented is as follows:
As of
September 30, 2021December 31, 2020
(In thousands)
Liability component
Principal$389,840 $400,000 
Unamortized discount (1)
 (68,270)
Unamortized issuance costs (1)
(5,096)(5,058)
Net carrying amount$384,744 $326,672 
Equity component, net of issuance costs (1)
$ $86,764 
(1)    See Note 1 "Description of Business and Summary of Significant Accounting Policies" for more information regarding the effect of adoption of ASU 2020-06.
The interest expense recognized related to the Notes for the periods presented is as follows:
Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(In thousands)
Contractual interest expense$122 $125 $362 $375 
Amortization of debt discount (1)
 4,094  12,125 
Amortization of debt issuance costs (2)
426 337 1,444 1,011 
Total
$548 $4,556 $1,806 $13,511 
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(1)    See Note 1 "Description of Business and Summary of Significant Accounting Policies" for more information regarding the effect of adoption of ASU 2020-06.
(2)    Amortization of debt issuance costs includes the acceleration of unamortized debt issuance costs related to the partial conversion of the Notes.
As of September 30, 2021, the total estimated fair value of the Notes was $629.8 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates. The fair value of the Notes is considered Level 2 within the fair value hierarchy and was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, and quoted prices of the Notes in an over-the-counter market.
Capped Call Transactions
In September 2019, in connection with the pricing of the Notes and in connection with the initial purchasers’ exercise in full of their option to purchase additional Notes, the Company entered into the Capped Call Transactions. The Capped Call Transactions are generally expected to reduce potential dilution to common stock upon any conversion of the Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial strike price of $28.42 per share, which corresponds to the initial conversion price of the Notes and is subject to certain adjustments, and an initial cap price of $41.34 per share, which is subject to certain adjustments. For accounting purposes, the Capped Call Transactions are separate transactions and not part of the terms of the Notes. As the Capped Call Transactions are considered indexed to our own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $37.1 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid in capital.
The Capped Call Transactions initially covered, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, 14.1 million shares of our common stock. In connection with the settlement of the 2021 Converted Notes during the three months ended March 31, 2021, the Company terminated a pro rata amount of the Capped Call Transactions pursuant to the terms thereof. As a result of this pro rata termination, the Company received 37,301 shares of its common stock with an aggregate value of approximately $1.9 million based on the trading price of our common stock at that time. As of September 30, 2021, the Capped Call Transactions cover, subject to anti-dilution adjustments, 13.7 million shares of our common stock.
10. Stock-Based Compensation
2015 Stock Option Plans
In 2015, the Company adopted (i) the Amended and Restated 2015 Stock Option and Grant Plan and (ii) the 2015 Stock Incentive Plan (together the “2015 Stock Option Plans”) under which it may grant incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”) for the right to purchase shares of common stock and restricted stock units (“RSUs”). The 2015 Stock Option Plans reserve 5.0 million shares of common stock for issuance pursuant to ISOs, 0.5 million shares of common stock for issuance pursuant to RSUs and 0.25 million shares of common stock for issuance under the 2015 Stock Incentive Plan. Under the 2015 Stock Option Plans, ISOs may not be granted at less than fair market value on the date of the grant and generally vest over a four-year period based on continued service. Options generally expire ten years after the grant date.
As of September 30, 2021, 0.7 million shares were available for issuance under the 2015 Stock Option Plans, including less than 50 thousand shares available for issuance under the 2015 Stock Incentive Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.
2017 Long Term Incentive Plan
In November 2017, the Company’s Board of Directors (the "Board") adopted the 2017 Long Term Incentive Plan (the “2017 Plan”) under which it may grant stock options to purchase shares of common stock and RSUs. As of September 30, 2021, the Company had reserved 22.1 million shares of common stock available for issuance under the 2017 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2017 Plan is increased on each January 1 by 4.4 million shares of common stock. Options and RSUs granted
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to employees under the 2017 Plan generally vest over four years. Common stock subject to an award that expires or is canceled, forfeited, exchanged or otherwise terminated without delivery of shares, and shares withheld or surrendered to pay the exercise price of, or to satisfy the withholding obligations with respect to an award, will become available for future grants under the 2017 Plan.
As of September 30, 2021, 13.9 million shares were available for issuance under the 2017 Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.
The fair values for the Company’s stock options granted and Employee Stock Purchase Plan (the "ESPP") purchase rights, as discussed further below, during the periods presented were estimated at grant date using a Black Scholes option-pricing model using the following weighted average assumptions:
Stock OptionsESPP
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Expected dividend rate0%0%0%0%
Expected volatility
47.3% - 50.8%
50.0% - 56.2%
50.0% - 50.8%
48.1% - 56.2%
Risk-free interest rate
0.80% - 1.14%
0.36% - 1.53%
0.04% - 0.09%
0.18% - 1.57%
Expected term (in years)6.256.250.50
0.50
Stock Options
The following table summarizes stock option activity for the nine months ended September 30, 2021:
Number
of Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(In thousands)(Per share)(In years)(In thousands)
Balances at December 31, 20202,404 $17.85 7.7$85,064 
Granted304 $60.57 
Exercised(500)$11.97 
Forfeited(154)$