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

Full Report / May 05, 2022

Identity governance software company SailPoint (NYSE:SAIL) announced better-than-expected results in the Q1 FY2022 quarter, 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.

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.

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.

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.

More companies are digitizing their processes, leading to employees needing access to a growing number of applications, systems and data. Manually tracking who has access to what takes a lot of time, work and is prone to errors, resulting in new hires having to wait prolonged time to get access to the tools they need and employees who quit the company or changed roles being left with access to sensitive data. This can lead to productivity loss, risk of cyber security incidents, information theft and compliance problems.

To solve these problems, SailPoint provides a modern software platform to manage user profiles, passwords, and also grant and monitor access to business apps. SailPoint provides companies with a central dashboard where they have instant visibility into user permissions across the organization and can easily adjust access to applications as users change roles, take on new projects or leave the organization. The software also automatically manages approval processes and compliance enforcement, making sure that only employees passing required criteria, whether it is training or management permission are granted access. Using artificial intelligence based technology SailPoint also helps IT detect suspicious and risky activities, such as fake user accounts, irregular authentication, and weak security policies.

For example, whenever a company recruits a new employee, SailPoint ensures the individual is given all the necessary access on the minute they start, but only to the applications and data they need, nothing more. As the employee moves to a new department, SailPoint monitors and updates the apps and devices that can be accessed. This means a sales representative isn’t able to access apps and data in the legal department. Similarly, when an employee leaves an organization, SailPoint automatically revokes access to any asset owned by their former employer without the need to send IT helpdesk requests. This ensures that adequate security measures are maintained at all times.

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.

Competitors in the identity management space include Okta (NASDAQ:OKTA), Ping Identity (NYSE:PING) and Computer Associates (owned by Broadcom (NASDAQ:AVGO)).

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.


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, which is probably the opposite direction shareholders would like to see it go.

Cash Is King

If you follow StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. SailPoint burned through $21.3 million in Q1, increasing the cash burn by 64% year on year.

SailPoint Free Cash Flow

SailPoint has burned through $13.3 million in cash over the last twelve months, resulting in a negative 2.87% free cash flow margin. This below average FCF margin is a result of SailPoint's need to invest in the business to continue penetrating its market.

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.