SailPoint, Inc. Q3 FY2021 earnings call

• Demand for identity security is extremely strong as enterprises recognize identity is core to their security strategy, evidenced by strategic conversations with customers and strong sales pipeline. • The transition to a subscription-based business model is largely complete, with 87% of Q3 new bookings from subscription offerings, up from prior quarters. • Had success in the upper end of the enterprise market with deals from Fortune 100 brands, demonstrating the SaaS platform's scalability, ease of use, and technical superiority. • Expanded the product portfolio with the new workflows capability, designed to streamline and automate repetitive manual security tasks with minimal coding required, enabling faster adoption of identity security policies and controls.

Total ARR for the quarter reached approximately $324 million, representing a 44% year-over-year growth. Subscription revenue was approximately $71 million, up 39% year-over-year. The subscription ARR was composed of $132 million from SaaS and around $47 million from recurring term licenses. Perpetual maintenance ARR stood at approximately $145 million, with perpetual maintenance ARR increasing by $3.6 million sequentially despite only 13% of total new bookings coming from perpetual licenses. The subscription-based offerings contributed 87% of total new bookings in Q3, showing a faster shift to subscription than initial expectations.

• Raised full-year total ARR guidance to $358 million to $360 million, up from the previous range of $343 million to $347 million, representing a 43% year-over-year growth. • Increased full-year SaaS revenue guidance by $5.5 million to $7.5 million, with SaaS revenue expected to range from $110.5 million to $111.5 million, a 65% to 67% year-over-year growth. • Raised full-year total revenue guidance to $415.5 million to $417.5 million, $6.1 million above the prior top-end guidance, driven by healthy new bookings growth in Q3 and expectations for Q4.

Q: Rob Owens of Piper Sandler asked about perpetual maintenance growth and incentives for customers to move to term.

A: Cam McMartin responded that the maintenance progression was healthy, the focus is on selling term licenses, and there are no current incentives but continued expansion selling into the installed base.

Q: Matt Hedberg of RBC Capital Markets asked about ARR growth drivers.

A: Cam McMartin said ARR growth is multifaceted, driven by strength in maintenance, term licenses, and SaaS, fueled by market demand and product expansion.

Q: Hamza Fodderwala of Morgan Stanley asked about traction in the upper enterprise market and AI-enabled services penetration.

A: Mark McClain said upper enterprise market traction is due to SaaS capabilities and the legacy replacement cycle, and AI-enabled services have low penetration in the install base.

Q: Brent Thill of Jefferies asked about cash flow and hiring.

A: Cam McMartin said the subscription transition is largely complete, hiring is on track, and investments will continue.

Q: Brian Essex of Goldman Sachs asked about backlog and gross margin.

A: Cam McMartin said the backlog is healthy with a subscription mix, and gross margin is managed with mix effects and SaaS scale progression.

Q: Andrew Nowinski of Wells Fargo asked about threat landscape impact and CFO search.

A: Mark McClain said the threat landscape drives identity security focus, and Cam McMartin said the CFO search is underway.

Q: Mike Walkley of Canaccord Genuity asked about revenue guide conservatism and perpetual to SaaS transitions.

A: Cam McMartin said the revenue guide reflects the mix shift, and there is room for perpetual customers to transition to SaaS over time.

Q: Alex Henderson of Needham & Co. asked about attrition and upsell data.

A: Cam McMartin said attrition is better than market average, and upsell is simplified with the subscription model.

Q: Joshua Tilton of Wolfe Research asked about bookings mix and maintenance in licenses.

A: Cam McMartin explained that bookings mix includes maintenance and term licenses will continue to grow.

Q: Yun Kim of Loop Capital asked about SaaS adoption in Europe vs US.

A: Mark McClain said SaaS adoption is similar in Europe and the US, with a consistent go-to-market approach.