I’ve got another one for you.
Yes, one of those early-stage tech growth companies that you should sock away in your tech portfolio only to peek at how much you are making every now and then.
This one is in the cybersecurity industry where business is booming.
Who would have thought that a pandemic crushing the global economy would stoke a mad rush into digital kleptomania?
Well, that is exactly where we find ourselves in late 2020 and that is why I undoubtedly need to recommend SailPoint Technologies Holdings, Inc. (SAIL) to my subscriber base.
Why should they be bought?
SailPoint Technologies Holdings, Inc. designs, develops, and markets identity governance software solutions.
Identity has become a critical part of the technology foundation businesses need to secure today's modern workforce.
A tech company that understands how to stoke the rate of adoption into higher SaaS platform numbers has my ear already and when you crossbreed this with customer interest and comfort in deploying their identity program in the cloud, then we are onto something.
Specifically, all signs flash green when increased adoption among larger enterprises this quarter has resulted in total revenue of approximately $92 million, representing 47% growth year-on-year.
Let’s list all the winner events that have made this company relevant recently.
For example, a large manufacturing company turned to SailPoint as part of their digital transformation efforts, shifting the majority of their business to the cloud, including their identity governance solution.
They chose SailPoint SaaS identity platform to help them govern their 65,000 users in an efficient, streamlined method while removing the nuisance of managing software updates and upgrades.
It’s clear to everyone that Sailpoint’s financial results in the quarter reflect broad-based accelerating adoption of the SailPoint platform and highlight the increasing criticality of the identity platform to today's distributed digital enterprise.
SailPoint stands out as the modern SaaS-native identity platform that can evolve with business, helping companies to sharpen decision-making and to support the workforce with greater velocity and efficiency.
Insatiable SaaS growth among Sailpoint’s existing customer base is a hallmark of Sailpoint as firms start to introduce a growing number of some of the newest SaaS services such as identity analytics and cloud governance.
Many companies are eager to extend and automate key areas of their identity program, giving Sailpoint another leg of growth within their SaaS business.
Another example is a large U.S. government agency that recently extended its identity program with SailPoint to ensure strong governance over the increasing number of cloud applications and infrastructure they manage across the business.
They selected SailPoint's cloud governance SaaS services to better protect and govern access over their various cloud resources, including their Azure cloud environment.
This is a critical next step for them in their journey with Sailpoint as much of their work relies on these cloud resources and needs to be properly governed and secured.
Deals were consummated at breakneck speed as of late, including many where Sailpoint replaced one of the large legacy vendors.
Closing this unbelievable volume of deals in the current precarious environment validates the criticality of Sailpoint’s products.
One of the world's largest multinational conglomerates that serve both commercial and government markets shifted to next-generation identity governance with Sailpoint. Sailpoint replaced a legacy identity vendor that could no longer meet their need for a much more dynamic, agile, and comprehensive approach to governing their 165,000 users worldwide.
These results were driven by strong bookings throughout the quarter and revenue upside in the next quarter is primarily in licensing, which for Sailpoint, comes primarily from sales of IdentityIQ.
Sailpoint IdentityIQ integrates provisioning and compliance features into a single solution. This product is able to address all the needs related to Identity and Access management such as access certifications, policy enforcement, account provisioning, and user life-cycle management.
A multitude of several large IdentityIQ deals was made in the quarter, and some of those were Sailpoint’s largest deals ever.
Most of the license outperformance was driven by term licenses that are effective subscriptions, just like Sailpoint’s SaaS and maintenance contracts.
Sailpoint also outperformed on SaaS bookings, driven primarily by SaaS first focus with IdentityNow and by sales of Sailpoint’s AI offerings to both IdentityNow and IdentityIQ customers.
Both sales to new logo customers and sales to existing customers helped subscription revenue increase by 36% year-over-year to $45.9 million or 50% of total revenue in the quarter.
Renewal rates remain strong across both maintenance and SaaS, and in a year where the pandemic has weakened sales, total gross margins for the quarter were 83% compared with 78% in Q2 of 2019.
The increase in gross margin was largely driven by the increased mix of license revenue in the quarter, although gross margins for other revenue lines continue to move in the right direction.
The cybersecurity company now expects total revenue to be between $341 million and $345 million with approximately $190 million driven by the subscription line, which represents 32% year-on-year subscription revenue growth.
An impressive feat in a year with outsized downward pressure on the macro environment.
To summarize, SailPoint Technologies Holdings, Inc. (SAIL) is a small player in the field with annual revenue south of half a billion dollars but growing revenue in the mid-30% range in a bad year and closer to 50% in good years.
The pathway to $1 billion annual revenue couldn’t be clearer for this company and is a buy on any dip.
