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SailPoint Announces Fourth Quarter and Full Year 2018 Financial Results

AUSTIN, Texas--(BUSINESS WIRE)--

  • Fourth quarter 2018 total revenue of $80.6 million and full year 2018 total revenue of $248.9 million (ASC 606)
  • 2018 GAAP operating income of $10.9 million (ASC 606); Non-GAAP operating income of $38.9 million (ASC 606)
  • 2018 GAAP net income of $0.04 per diluted share (ASC 606); Non-GAAP net income of $0.37 per diluted share (ASC 606)

SailPoint Technologies Holdings, Inc. (SAIL), the leader in enterprise identity governance, today announced financial results for the fourth quarter and full year ending December 31, 2018.

“As SailPoint closes our first full year as a public company, we’re pleased to report strong momentum across the business. Our 2018 revenues increased 34% year-over-year, and we were profitable on a GAAP and non-GAAP basis,” said Mark McClain, SailPoint CEO and Co-founder. “Our customer base grew 26% year-over-year to 1,173 enterprises who chose our comprehensive, open identity governance platform to address their security, compliance and business efficiency challenges.”

“As organizations of all sizes are pressing further on their digital transformation, CIOs are tasked with securing the foundation of their enterprise digitization,” added McClain. “To truly address the mounting security, compliance and efficiency demands, identity governance must govern all users, whether human or non-human bots, across all applications and all data. As we head into 2019, SailPoint is focused on driving innovation to help customers govern all, govern deep across their IT ecosystem, and govern smarter with insights from advanced analytics driven by artificial intelligence.”

See “ASC 606 Adoption” below for information regarding the Company’s adoption of ASC 606 revenue recognition accounting standard as of January 1, 2018 on a modified retrospective basis.

Financial Highlights for Fourth Quarter 2018:

  • Revenue: Total revenue was $80.6 million, a 19% increase over Q4 2017. License revenue was $40.6 million, an 11% increase over Q4 2017. Subscription revenue was $29.5 million, a 39% increase over Q4 2017. Services and other revenue was $10.5 million, a 7% increase over Q4 2017.
  • Operating Income: Income from operations was $11.2 million, compared to $10.5 million in Q4 2017. Non-GAAP income from operations was $18.4 million, compared to $16.7 million in Q4 2017.
  • Net Income: Net income was $5.1 million, compared to net income of $5.4 million in Q4 2017. Net income available to common stockholders per diluted share was $0.06 compared to net income available to common stockholders per diluted share of $0.03 in Q4 2017. Non-GAAP net income was $16.9 million, compared to non-GAAP net income of $13.1 million in Q4 2017. Non-GAAP net income per diluted share was $0.19 compared to non-GAAP net income per diluted share of $0.17 in Q4 2017.
  • Adjusted EBITDA: Adjusted EBITDA was $18.6 million, compared to $17.1 million in Q4 2017.

Financial Highlights for Full Year 2018:

  • Revenue: Total revenue was $248.9 million, a 34% increase year-over-year. License revenue was $105.0 million, a 33% increase year-over-year. Subscription revenue was $104.0 million, a 47% increase year-over-year. Services and other revenue was $39.9 million, an 11% increase year-over-year.
  • Operating Income: Income from operations was $10.9 million, compared to $9.9 million in 2017. Non-GAAP income from operations was $38.9 million, compared to $23.3 million in 2017.
  • Net Income (Loss): Net income was $3.7 million, compared to net loss of $(7.6) million in 2017. Net income available to common stockholders per diluted share was $0.04 compared to net loss available to common stockholders per basic and diluted share of $(0.55) in 2017. Non-GAAP net income was $33.6 million, compared to non-GAAP net income of $10.3 million in 2017. Non-GAAP net income per diluted share was $0.37, compared to non-GAAP net income per diluted share of $0.13, in 2017.
  • Adjusted EBITDA: Adjusted EBITDA was $39.5 million, compared to $25.5 million in 2017.
  • Balance Sheet and Cash Flow: As of December 31, 2018, cash and cash equivalents were $71.0 million. As of December 31, 2018, there was no outstanding debt. The Company generated $37.5 million in cash from operations in 2018 compared to $21.9 million of cash provided by operations in 2017.

The tables included in this press release present a reconciliations of non-GAAP income from operations to GAAP income from operations, non-GAAP net income to GAAP net income (loss), non-GAAP to GAAP weighted average shares outstanding and adjusted EBITDA to GAAP net income (loss) for the three months and year ended December 31, 2018 and 2017. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures." Additionally, the tables include impact of the Company’s adoption of ASC 606 on reconciliations of the income (loss) from operations for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. These tables are provided to give the reader additional understanding of the quarterly impact of adopting the revised standard. The cumulative impact on our Consolidated Balance Sheet as of January 1, 2018 is also presented.

Financial Outlook (under ASC 606):

For the first quarter of 2019, SailPoint expects:

  • Revenue in the range of $59.5 million to $61.0 million
  • Non-GAAP (loss) or income from operations in the range of $(0.5) million to $1.0 million
  • Non-GAAP net (loss) per diluted common share in the range of $(0.02) to $(0.00), based on estimated cash income tax payments of $0.4 million and 88.5 million basic common shares outstanding. Expectations of non-GAAP income from operations and non-GAAP net income per diluted common share exclude items outlined in the “Non-GAAP Financial Measures” section below.

For the full year 2019, SailPoint expects:

  • Revenue in the range of $293.0 million to $299.0 million
  • Non-GAAP income from operations in the range of $28.0 million to $31.0 million
  • Non-GAAP net income per diluted common share in the range of $0.25 to $0.29, based on estimated cash income tax payments of $2.0 million and 93.0 million diluted common shares outstanding. Expectations of non-GAAP income from operations and non-GAAP net income per diluted common share exclude items outlined in the “Non-GAAP Financial Measures” section below.

These statements regarding SailPoint’s expectations of its financial outlook are forward-looking and actual results may differ materially. Refer to “Forward-Looking Statements” below for information on the factors that could cause its actual results to differ materially from these forward-looking statements.

All of SailPoint’s forward-looking non-GAAP financial measures exclude estimates for stock-based compensation expense and amortization of acquired intangibles. SailPoint has not reconciled its expectations as to non-GAAP income from operations and non-GAAP net income per basic and diluted common shares to their most directly comparable GAAP measure due to the high variability and difficulty in making accurate forecasts and projections, particularly with respect to stock-based compensation expense. Stock-based compensation expense is affected by future hiring, turnover, and retention needs, as well as the future fair market value of our common stock, all of which are difficult to predict and subject to change. The actual amount of the excluded stock-based compensation expense will have a significant impact on SailPoint’s GAAP income from operations and GAAP net income (loss) per basic and diluted common share. Accordingly, reconciliations of our forward-looking non-GAAP income from operations and non-GAAP net income per basic and diluted common shares are not available without unreasonable effort.

ASC 606 Adoption

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification or ASC 606). ASC 606, the “revised standard”, supersedes the revenue recognition requirements in Revenue Recognition (ASC 605) or “prior standard” and requires the recognition of revenue as promised goods or services are transferred to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires deferred recognition of the incremental costs of obtaining a contract with a customer over the estimated life of the customer.

The Company adopted the revised standard as of January 1, 2018, utilizing the modified retrospective method for all contracts with remaining performance obligations as of the date of adoption. The Company is providing adjusted 2018 interim financial statements and recognized the cumulative effect of initially applying the revised standard as an adjustment to the opening balance of accumulated deficit on January 1, 2018. The comparative information for 2017 was prepared under the prior standard and our prior period results were not re-cast to reflect the revised standard. The reported results for the three-month and year to date periods ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018 in the tables included at the end of the press release reflect the application of the revised standard as indicated by the “Revised Standard (ASC 606)” notation.

The Company believes this additional information is vital during the transition year to allow readers of its financial statements to compare the financial results from the preceding years given the absence of restatement of 2018 interim financial statements. Our financial measures, as adjusted, should be considered in addition to, not as a substitute for, nor superior to or in isolation, from measures prepared in accordance with GAAP.

Conference Call and Webcast:

SailPoint will host a conference call today, March 5, 2019, at 5:00 p.m. Eastern Time to discuss its fourth quarter and full year 2018 financial results. The dial-in number will be 877-407-0792 or 201-689-8263. Additionally, a live webcast of the conference call will be available on SailPoint’s website at https://investors.sailpoint.com.

Following the conference call, a replay will be available until midnight on March 19, 2019. The replay dial-in number will be 844-512-2921 or 412-317-6671, using the replay pin number: 13688348. An archived webcast of the call will also be available at https://investors.sailpoint.com.

Non-GAAP Financial Measures:

In addition to SailPoint’s financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), SailPoint uses certain non-GAAP financial measures to clarify and enhance SailPoint’s understanding of past performance and future prospects. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that includes or excludes amounts that are included or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. SailPoint monitors the non-GAAP financial measures described below, and SailPoint’s management believes they are helpful to investors because they provide an additional tool to use in evaluating SailPoint’s financial and business trends and operating results. In addition, SailPoint’s management uses these non-GAAP measures to compare SailPoint’s performance to that of prior periods for trend analysis and for budgeting and planning purposes. In particular, SailPoint believes that non-GAAP income from operations, non-GAAP net income, non-GAAP net income available to common stockholders per basic share and per diluted share, and adjusted EBITDA, are important measures for evaluating SailPoint’s performance because they facilitate comparisons of SailPoint’s core operating results from period to period by removing, where applicable, the impact of SailPoint’s capital structure (net interest income or expense from SailPoint’s outstanding debt, as well as amortization of debt issuance costs and expenses related to call protection on early payment of debt), asset base (depreciation and amortization), income taxes, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation expense.

SailPoint’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry because they may calculate non-GAAP financial results differently than we do. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. SailPoint urges you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate its business.

Non-GAAP income from operations. SailPoint believes that the use of non-GAAP income from operations is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP income from operations is calculated as income from operations on a GAAP basis excluding (i) stock-based compensation expense and (ii) amortization of acquired intangibles.

Non-GAAP net income and non-GAAP net income available to common stockholders per basic and diluted share. SailPoint believes that the use of non-GAAP net income and non-GAAP net income available to common stockholders per basic and diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income is calculated as net income (loss) (a) excluding (i) stock-based compensation expense, (ii) amortization of acquired intangibles, (iii) amortization of debt issuance costs, (iv) expense related to call protection on early payment of debt and (v) income tax (benefit) expense and (b) including cash paid for income taxes. SailPoint defines non-GAAP net income available to common stockholders per basic and diluted share as non-GAAP net income divided by the non-GAAP weighted average outstanding common shares, which is calculated as if the conversion of our preferred stock, including related accumulated and unpaid dividend, occurred at the beginning of each respective period.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that SailPoint calculates as net income (loss) adjusted to exclude income taxes, net interest expense, depreciation and amortization, purchase accounting adjustments, acquisition and sponsor related costs and stock-based compensation expense.

The accompanying tables have more details on the reconciliations of non-GAAP financial measures to their nearest comparable GAAP measures.

Forward-Looking Statements:

This press release and statements made during the above referenced conference call may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including regarding the Company’s growth rate and its expectations regarding future revenue, operating income or loss or earnings or loss per share. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “will be,” “will likely result,” “should,” “expects,” “plans,” “anticipates,” “could,” “would,” “foresees,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are not guarantees of future performance, but are based on management's current expectations, assumptions and beliefs concerning future developments and their potential effect on us, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks.

Important factors, some of which are beyond our control, that could cause actual results to differ materially from our historical results or those expressed or implied by these forward-looking statements include the following: our ability to attract and retain customers and our ability to deepen our relationships with existing customers; our expectations regarding our customer growth rate; our ability to maintain successful relationships with our channel partners and further develop strategic relationships; our ability to develop or acquire new solutions, improve our platform and solutions and increase the value of and benefits associated with our platform and solutions; our ability to compete successfully against current and future competitors; our plans to further invest in and grow our business, and our ability to effectively manage our growth and associated investments; our ability to adapt and respond to rapidly changing technology, evolving industry standards, changing regulations and changing customer needs; our ability to maintain and enhance our brand or reputation as an industry leader and innovator; our ability to hire, retain, train and motivate our senior management team and key employees; our ability to successfully enter new markets and manage our international expansion; adverse economic conditions in the United States, Europe or the global economy; significant changes in the contracting or fiscal policies of the public sector; actual or perceived failures by us to comply with privacy policy or legal or regulatory requirements; our ability to maintain third-party licensed software in or with our solutions; and our ability to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies. These and other important risk factors are described more fully in our reports and other documents filed with the Securities and Exchange Commission (“the SEC”) including (i) under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 19, 2018, and (ii) under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which was filed with the SEC on May 9, 2018, (iii) under “Part II, Item IA. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which was filed with the SEC on August 8, 2018, and (iv) under “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, which was filed with the SEC on November 7, 2018.

Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

About SailPoint

SailPoint, the leader in enterprise identity governance, brings the Power of Identity to customers around the world. SailPoint’s open identity platform gives organizations the power to enter new markets, scale their workforces, embrace new technologies, innovate faster and compete on a global basis. As both an industry pioneer and market leader in identity governance, SailPoint delivers security, operational efficiency and compliance to enterprises with complex IT environments. SailPoint’s customers are among the world’s largest companies in a wide range of industries, including: 8 of the top 15 banks, 4 of the top 6 healthcare insurance and managed care providers, 9 of the top 15 property and casualty insurance providers, 5 of the top 13 pharmaceutical companies, and 11 of the largest 15 federal agencies.

More information on SailPoint is available at: www.sailpoint.com.

           

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 
Three Months Ended December 31, Year Ended December 31,
2018    

2017(1)

2018    

2017(1)

(In thousands, except share and per share data)
Revenue
Licenses $ 40,549 $ 36,657 $ 105,000 $ 79,209
Subscription 29,502 21,225 104,033 71,007
Services and other   10,537     9,886     39,887     35,840  

Total revenue

80,588 67,768 248,920 186,056
Cost of revenue
Licenses (2) 1,091 1,260 4,634 4,561
Subscription (2)(3) 5,905 4,873 20,734 16,406
Services and other (3)   7,514     6,549     29,302     23,623  
Total cost of revenue   14,510     12,682     54,670     44,590  
Gross profit 66,078 55,086 194,250 141,466
Operating expenses
Research and development (2)(3) 11,803 9,995 43,154 33,331
General and administrative (3) 10,618 6,790 34,781 17,678
Sales and marketing (2)(3)   32,468     27,781     105,402     80,514  
Total operating expenses   54,889     44,566     183,337     131,523  
Income from operations 11,189 10,520 10,913 9,943
Other expense, net:
Interest expense, net (527 ) (5,704 ) (4,707 ) (14,783 )
Other, net   (342 )   (203 )   (1,446 )   (459 )
Total other expense, net   (869 )   (5,907 )   (6,153 )   (15,242 )
Income (loss) before income taxes 10,320 4,613 4,760 (5,299 )
Income tax benefit (expense)   (5,177 )   769     (1,090 )   (2,293 )
Net income (loss) $ 5,143   $ 5,382   $ 3,670   $ (7,592 )
Net income (loss) available to common stockholders (4) $ 5,103   $ 2,175   $ 3,641   $ (28,721 )
Net income (loss) per common share
Basic $ 0.06   $ 0.03   $ 0.04   $ (0.55 )
Diluted $ 0.06   $ 0.03   $ 0.04   $ (0.55 )
Weighted average shares outstanding
Basic   87,171,161     65,870,258     86,495,301     52,339,804  
Diluted   90,234,993     69,166,069     90,002,752     52,339,804  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of the revised standard and is reported on an ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

(2) Includes amortization of acquired intangibles as follows:

           
Three Months Ended December 31, Year Ended December 31,
2018     2017 2018     2017
(In thousands)
Cost of revenue – license $ 1,008 $ 1,008 $ 4,032 $ 4,032
Cost of revenue – subscription 96 96 384 384
Research and development 34 34 136 149
Sales and marketing   1,069   1,068   4,273   4,276
Total amortization of acquired intangibles $ 2,207 $ 2,206 $ 8,825 $ 8,841
 

(3) Includes stock-based compensation expense and the related employer payroll tax expense as follows:

           
Three Months Ended December 31, Year Ended December 31,
2018     2017 2018     2017
(In thousands)
Cost of revenue – subscription $ 291 $ 100 $ 956 $ 133
Cost of revenue – services and other 404 398 1,528 458
Research and development 892 552 3,043 658
General and administrative 1,843 1,964 7,833 2,062
Sales and marketing   1,526   956   5,849   1,203
Total stock-based compensation expense $ 4,956 $ 3,970 $ 19,209 $ 4,514
 

(4) For the three months and year ended December 31, 2017, net income (loss) available to common stockholders is calculated by subtracting the accretion of undeclared and unpaid dividends on redeemable convertible preferred stock, and net income allocated to participating securities from net income (loss). For the three months and year ended December 31, 2018, net income available to common stockholders is calculated by subtracting the net income allocated to participating securities.

     

ASC 606 ADOPTION IMPACT ON CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

As of
December 31, 2017 (1)     Impact of ASC 606 adoption     January 1,

2018

(In thousands, except share data)
Assets
Current assets
Cash and cash equivalents $ 116,049 $ $ 116,049
Restricted cash 78 78
Accounts receivable 72,907 (355 ) 72,552
Prepayments and other current assets   10,013     5,848     15,861  
Total current assets 199,047 5,493 204,540
Property and equipment, net 3,018 3,018
Deferred tax asset - non-current 264 (264 )
Other non-current assets 3,542 13,232 16,774
Goodwill 219,377 219,377
Intangible assets, net   81,185         81,185  
Total assets $ 506,433   $ 18,461   $ 524,894  
Liabilities and stockholders’ equity
Current liabilities
Accounts payable $ 2,231 $ $ 2,231
Accrued expenses and other liabilities 22,636 22,636
Income taxes payable 1,688 1,688
Deferred revenue   73,671     (9,508 )   64,163  
Total current liabilities 100,226 (9,508 ) 90,718
Deferred tax liability - non-current 5,422 5,422
Long-term debt 68,329 68,329
Other long-term liabilities 27 27
Deferred revenue - non-current   9,454     786     10,240  
Total liabilities 178,036 (3,300 ) 174,736
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value 8 8
Preferred stock, $0.0001 par value
Additional paid in capital 353,609 353,609
Accumulated deficit   (25,220 )   21,761     (3,459 )
Total stockholders' equity   328,397     21,761     350,158  
Total liabilities and stockholders’ equity $ 506,433     18,461     524,894  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of revised standard and is reported on ASC 605 basis.

     

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 
As of December 31,
2018    

2017(1)

(In thousands, except share data)
Assets
Current assets
Cash and cash equivalents $ 70,964 $ 116,049
Restricted cash 6,272 78
Accounts receivable 101,469 72,907
Prepayments and other current assets   21,850   10,013  
Total current assets 200,555 199,047
Property and equipment, net 19,268 3,018
Deferred tax asset - non-current 264
Other non-current assets 20,374 3,542
Goodwill 219,377 219,377
Intangible assets, net   74,860   81,185  
Total assets $ 534,434 $ 506,433  
Liabilities and stockholders’ equity
Current liabilities
Accounts payable $ 4,636 $ 2,231
Accrued expenses and other liabilities 21,731 22,636
Income taxes payable 2,143 1,688
Deferred revenue - current   95,919   73,671  
Total current liabilities 124,429 100,226
Deferred tax liability - non-current 4,142
Long-term debt 68,329
Other long-term liabilities 9,788 27
Deferred revenue - non-current   18,382   9,454  
Total liabilities 156,741 178,036
Commitments and contingencies
Stockholders’ equity
Common stock, $0.0001 par value, authorized 300,000,000 shares, issued and outstanding 87,512,175 and 84,948,126 shares at December 31, 2018 and 2017, respectively 9 8
Preferred stock, $0.0001 par value, authorized 10,000,000 shares, no shares issued and outstanding at December 31, 2018 and 2017
Additional paid in capital 377,473 353,609
Retained earnings (accumulated deficit)   211   (25,220 )
Total stockholders' equity   377,693   328,397  
Total liabilities and stockholders’ equity $ 534,434 $ 506,433  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of the revised standard and is reported on an ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

     

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
Year Ended December 31,
2018    

2017(1)

(In thousands)
Operating activities
Net income (loss) $ 3,670 $ (7,592 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense 10,736 10,220
Amortization of loan origination fees 238 746
Amortization of contract acquisition costs 7,753 3,008
Loss on modification and extinguishment of debt 1,848 1,702
Gain on disposal of fixed assets (20 ) (20 )
Bad debt expense 2,332
Stock-based compensation expense 18,975 4,514
Deferred taxes (1,280 ) 69
Changes in operating assets and liabilities:
Accounts receivable (31,249 ) (24,116 )
Prepayments and other current assets (13,742 ) (5,182 )
Other non-current assets (3,599 ) (2,453 )
Accounts payable 2,406 1,443
Accrued expenses and other liabilities (882 ) 10,882
Income taxes 455 614
Deferred revenue   39,899     28,021  
Net cash provided by operating activities   37,540     21,856  
Investing activities
Purchase of intangibles (2,500 )
Purchase of property and equipment (8,389 ) (2,711 )
Proceeds from sale of property and equipment   33     190  
Net cash used in investing activities   (10,856 )   (2,521 )
Financing activities
Proceeds from term loan 50,000
Repayments of term loan (70,000 ) (90,000 )
Prepayment penalty and fees (387 ) (1,390 )
Dividend payments (50,387 )
Debt issuance costs (1,384 )
Proceeds from issuance of equity 3,351 171,980
Repurchase of equity shares (658 )

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

(348 )
Exercise of stock options   1,809     359  
Net cash (used in) provided by financing activities   (65,575 )   78,520  
(Decrease) Increase in cash (38,891 ) 97,855
Cash, cash equivalents and restricted cash, beginning of period   116,127     18,272  
Cash, cash equivalents and restricted cash, end of period $ 77,236   $ 116,127  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of revised standard and is reported on ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

           

RECONCILIATION OF NON-GAAP INCOME FROM OPERATIONS (UNAUDITED)

 
Three Months Ended December 31, Year Ended December 31,

2018(2)

   

2017(1)

2018(2)

   

2017(1)

(In thousands)
Income from operations $ 11,189 $ 10,520 $ 10,913 $ 9,943
Add back:
Stock-based compensation expense (3) 4,956 3,970 19,209 4,514
Amortization of acquired intangibles   2,207     2,206     8,825     8,841  
Non-GAAP income from operations $ 18,352   $ 16,696   $ 38,947   $ 23,298  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of the revised standard and is reported on an ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

(2) Non-GAAP income from operations under ASC 605 can be calculated by taking income from operations, presented in the table at the end of the press release under ASC 605 basis, with the add backs shown in the table above.

(3) Stock-based compensation expense includes employer related payroll tax expense.

           

RECONCILIATION OF NON-GAAP NET INCOME (UNAUDITED)

 
Three Months Ended December 31, Year Ended December 31,

2018

   

2017(1)

2018    

2017(1)

(In thousands)
Net income (loss) on a GAAP basis $ 5,143 $ 5,382 $ 3,670 $ (7,592 )
Add back:
Stock-based compensation expense (2) 4,956 3,970 19,209 4,514
Amortization of acquired intangibles 2,207 2,206 8,825 8,841
Amortization of debt issuance costs (3) 330 1,903 2,086 2,448
Expense related to call protection on early payment of debt 87 1,390 387 1,390
Income tax (benefit) expense 5,177 (769 ) 1,090 2,293
Less:
Cash paid for income taxes net of refunds received   977   973     1,631   1,612  
Non-GAAP net income $ 16,923 $ 13,109   $ 33,636 $ 10,282  
Non-GAAP net income per common share        
Basic $ 0.19 $ 0.17   $ 0.39 $ 0.14  
Diluted $ 0.19 $ 0.17   $ 0.37 $ 0.13  
Non-GAAP weighted average number of common shares outstanding
Basic 87,171,161 75,571,299 86,495,301 72,302,025
Diluted 90,234,993 78,867,111 90,002,752 76,079,258
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of the revised standard and is reported on an ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

(2) Stock-based compensation expense includes employer related payroll tax expense.

(3) Includes $0.3 million and $1.8 million of loss on the modification and extinguishment of debt for the three months and year ended December 31, 2018, respectively, and $1.7 million of loss on the modification and partial extinguishment of debt for both the three months and year ended December 31, 2017.

         

RECONCILIATION OF NON-GAAP WEIGHTED AVERAGE OUTSTANDING COMMON SHARES (UNAUDITED)

 
Three Months Ended December 31, Year Ended December 31,
2018       2017 2018       2017
Weighted average shares used to compute net income (loss) per share available to common stockholders, on a GAAP basis
Basic 87,171,161 65,870,258 86,495,301 52,339,804
Diluted 90,234,993 69,166,069 90,002,752 52,339,804
Add back:
Additional weighted average shares giving effect to conversion of preferred stock at the beginning of the period 9,701,041 19,962,221
Non-GAAP weighted average outstanding common shares
Basic 87,171,161 75,571,299 86,495,301 72,302,025
Effect of potentially dilutive securities 3,063,832 3,295,812 3,507,451 3,777,233
Diluted 90,234,993 78,867,111 90,002,752 76,079,258
 
           

RECONCILIATION OF ADJUSTED EBITDA (UNAUDITED)

 
Three Months Ended December 31, Year Ended December 31,
2018    

2017(1)

2018    

2017(1)

(In thousands)
Net income (loss) $ 5,143 $ 5,382 $ 3,670 $ (7,592 )
Stock-based compensation (2) 4,956 3,970 19,209 4,514
Amortization of acquired intangibles 2,207 2,206 8,825 8,841
Depreciation 552 444 1,911 1,379
Purchase price accounting adjustment (3) 18 15 68 141
Acquisition and sponsor related costs 164 1,142
Interest expense, net (4) 527 5,704 4,707 14,783
Income tax expense (benefit)   5,177   (769 )   1,090   2,293  
Adjusted EBITDA $ 18,580 $ 17,116   $ 39,480 $ 25,501  
 

(1) The comparative information for 2017 has not been adjusted to reflect the adoption of the revised standard and is reported on an ASC 605 basis. For additional information see “ASC 606 Adoption” discussion above.

(2) Stock-based compensation expense includes employer related payroll tax expense.

(3) Purchase accounting adjustment related to the fair value write down of deferred revenue from the acquisition of SailPoint Technologies, Inc. on September 8, 2014.

(4) Includes $0.3 million and $1.8 million of loss on the modification and partial extinguishment of debt for the three months and year ended December 31, 2018, respectively, and $1.7 million of loss on the modification and partial extinguishment of debt for both the three months and year ended December 31, 2017.

   

COMPARISON OF REVISED STANDARD (ASC 606) TO PRIOR STANDARD (ASC 605) (UNAUDITED)

 

Comparison of the three months ended March 31, 2018 and 2017

 
Three Months Ended
March 31, 2018     March 31, 2017
Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605)
(In thousands)
Revenue
Licenses $ 16,808 $ (179 ) $ 16,987 $ 12,236
Subscription 22,505 (500 ) 23,005 14,952
Services and other   9,628     (94 )   9,722     8,278
Total revenue 48,941 (773 ) 49,714 35,466
Cost of revenue (1)
Licenses 1,138 1,138 1,087
Subscription 4,658 4,658 3,575
Services and other   6,974         6,974     5,473
Total cost of revenue 12,770 12,770 10,135
Gross profit 36,171 (773 ) 36,944 25,331
Operating expenses (1)
Research and development 9,762 9,762 6,927
General and administrative 7,657 7,657 3,032
Sales and marketing   22,459     (1,356 )   23,815     15,173
Total operating expenses   39,878     (1,356 )   41,234     25,132
Income (loss) from operations $ (3,707 ) $ 583   $ (4,290 ) $ 199
 

(1) The stock-based compensation expense and amortization of acquired intangibles tables are not shown as separate footnotes to the tables presented above as there was no impact of ASC 606 adoption. Please refer to our previously filed press releases for that information.

         

Comparison of the three months and six months ended June 30, 2018 and 2017

 
Three Months Ended Six Months Ended
June 30, 2018     June 30, 2017 June 30, 2018     June 30, 2017
Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605) Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605)
(In thousands)
Revenue
Licenses $ 19,620 $ 492 $ 19,128 $ 13,341 $ 36,428 $ 313 $ 36,115 $ 25,577
Subscription 24,110 (941 ) 25,051 16,324 46,615 (1,441 ) 48,056 31,276
Services and other   9,926     (455 )   10,381     9,595     19,554     (549 )   20,103     17,873  
Total revenue 53,656 (904 ) 54,560 39,260 102,597 (1,677 ) 104,274 74,726
Cost of revenue (1)
Licenses 1,260 1,260 1,110 2,398 2,398 2,197
Subscription 4,919 4,919 3,938 9,577 9,577 7,513
Services and other   7,197         7,197     5,647     14,171         14,171     11,120  
Total cost of revenue 13,376 13,376 10,695 26,146 26,146 20,830
Gross profit 40,280 (904 ) 41,184 28,565 76,451 (1,677 ) 78,128 53,896
Operating expenses (1)
Research and development 10,115 10,115 7,966 19,877 19,877 14,893
General and administrative 7,743 7,743 3,442 15,400 15,400 6,474
Sales and marketing   23,774     (1,389 )   25,163     18,340     46,233     (2,745 )   48,978     33,513  
Total operating expenses   41,632     (1,389 )   43,021     29,748     81,510     (2,745 )   84,255     54,880  
Loss from operations $ (1,352 ) $ 485   $ (1,837 ) $ (1,183 ) $ (5,059 ) $ 1,068   $ (6,127 ) $ (984 )
 

(1) The stock-based compensation expense and amortization of acquired intangibles tables are not shown as separate footnotes to the tables presented above as there was no impact of ASC 606 adoption. Please refer to our previously filed press releases for that information.

       

Comparison of the three months and nine months ended September 30, 2018 and 2017

 
Three Months Ended Nine Months Ended
September 30, 2018     September 30, 2017 September 30, 2018     September 30, 2017
Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605) Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605)
(In thousands)
Revenue
Licenses $ 28,023 $ (108 ) $ 28,131 $ 16,975 $ 64,451 $ 205 $ 64,246 $ 42,552
Subscription 27,916 (545 ) 28,461 18,506 74,531 (1,986 ) 76,517 49,782
Services and other   9,796   (31 )   9,827   8,081   29,350     (580 )   29,930     25,954  
Total revenue 65,735 (684 ) 66,419 43,562 168,332 (2,361 ) 170,693 118,288
Cost of revenue (1)
Licenses 1,145 1,145 1,104 3,543 3,543 3,301
Subscription 5,252 5,252 4,020 14,829 14,829 11,533
Services and other   7,617       7,617   5,954   21,788         21,788     17,074  
Total cost of revenue 14,014 14,014 11,078 40,160 40,160 31,908
Gross profit 51,721 (684 ) 52,405 32,484 128,172 (2,361 ) 130,533 86,380

Operating expenses (1)

Research and development 11,474 11,474 8,443 31,351 31,351 23,336
General and administrative 8,763 8,763 4,414 24,163 24,163 10,888
Sales and marketing   26,701   (957 )   27,658   19,220   72,934     (3,702 )   76,636     52,733  
Total operating expenses   46,938   (957 )   47,895   32,077   128,448     (3,702 )   132,150     86,957  
Income (loss) from operations $ 4,783 $ 273   $ 4,510 $ 407 $ (276 ) $ 1,341   $ (1,617 ) $ (577 )
 

(1) The stock-based compensation expense and amortization of acquired intangibles tables are not shown as separate footnotes to the tables presented above as there was no impact of ASC 606 adoption. Please refer to our previously filed press releases for that information.

         

Comparison of the three months and year ended December 31, 2018 and 2017

 
Three Months Ended Year Ended
December 31, 2018     December 31, 2017 December 31, 2018     December 31, 2017
Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) (1) As Previously Reported (ASC 605) Revised Standard (ASC 606)     Impact of Adoption     Prior Standard (ASC 605) As Previously Reported (ASC 605)
(In thousands)
Revenue
Licenses $ 40,549 $ 3,102 $ 37,447 $ 36,657 $ 105,000 $ 3,307 $ 101,693 $ 79,209
Subscription 29,502 (513 ) 30,015 21,225 104,033 (2,499 ) 106,532 71,007
Services and other   10,537   217     10,320   9,886   39,887   (363 )   40,250   35,840

Total revenue

80,588 2,806 77,782 67,768 248,920 445 248,475 186,056
Cost of revenue (2)
Licenses 1,091 1,091 1,260 4,634 4,634 4,561
Subscription 5,905 5,905 4,873 20,734 20,734 16,406
Services and other   7,514       7,514   6,549   29,302       29,302   23,623
Total cost of revenue 14,510 14,510 12,682 54,670 54,670 44,590
Gross profit 66,078 2,806 63,272 55,086 194,250 445 193,805 141,466
Operating expenses (2)
Research and development 11,803 11,803 9,995 43,154 43,154 33,331
General and administrative 10,618 10,618 6,790 34,781 34,781 17,678
Sales and marketing   32,468   (1,155 )   33,623   27,781   105,402   (4,857 )   110,259   80,514
Total operating expenses   54,889   (1,155 )   56,044   44,566   183,337   (4,857 )   188,194   131,523
Income from operations $ 11,189 $ 3,961   $ 7,228 $ 10,520 $ 10,913 $ 5,302   $ 5,611 $ 9,943
 

(1) These balances have not previously been reported under the prior standard (ASC 605).

(2) The stock-based compensation expense and amortization of acquired intangibles tables are not shown as separate footnotes to the tables presented above as there was no impact of ASC 606 adoption. Please refer to our previously filed press releases for that information.

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