SailPoint (NYSE:SAIL) Posts Better-Than-Expected Sales In Q1

Jabin Bastian 2022/05/05 4:44 pm EDT

Identity governance software company SailPoint (NYSE:SAIL) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 27.1% year on year to $115.4 million. SailPoint made a GAAP loss of $33 million, down on its loss of $15.2 million, in the same quarter last year.

Is now the time to buy SailPoint? Access our full analysis of the earnings results here, it's free.

SailPoint (SAIL) Q1 FY2022 Highlights:

  • Revenue: $115.4 million vs analyst estimates of $111.8 million (3.2% beat)
  • EPS (non-GAAP): -$0.09 vs analyst estimates of -$0.11 (16.8% beat)
  • Free cash flow was negative $21.3 million, down from positive free cash flow of $8.82 million in previous quarter
  • Gross Margin (GAAP): 69.5%, down from 73.1% same quarter last year
  • SailPoint has previously entered into a definitive agreement to be acquired by Thoma Bravo, a leading software investment firm, in an all-cash transaction that values SailPoint at approximately $6.9 billion.

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

Started by Mark McClain after his previous identity management company got acquired by Sun Microsystems, SailPoint (NYSE:SAIL) provides software for organizations to manage the digital identity of employees, customers, and partners.

As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.

Sales Growth

As you can see below, SailPoint's revenue growth has been strong over the last year, growing from quarterly revenue of $90.7 million, to $115.4 million.

SailPoint Total Revenue

This quarter, SailPoint's quarterly revenue was once again up a very solid 27.1% year on year. But the revenue actually decreased by $20.1 million in Q1, compared to $25.4 million increase in Q4 2021. SailPoint's sales do seem to have a seasonal pattern to them, however the management is guiding for a further drop in revenue in the next quarter, so we think it is worth keeping an eye on the situation.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.6% over the next twelve months.

There are others doing even better than SailPoint. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. SailPoint's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 69.5% in Q1.

SailPoint Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.69 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year.

Key Takeaways from SailPoint's Q1 Results

With a market capitalization of $6.04 billion SailPoint is among smaller companies, but its more than $414.6 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

It was good to see SailPoint outperform Wall St’s revenue expectations this quarter. And we were also glad to see good revenue growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin. The company currently trades at $63.86 per share.

SailPoint may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.