SailPoint Inc(SAIL) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company closed the quarter with $982 million in annual recurring revenue (ARR), a 28% year-over-year increase, with SaaS ARR growing 37% year-over-year [4][21] - Total Q2 revenue increased 33% year-over-year, with subscription revenue growing 36% year-over-year [21][23] - Adjusted operating margins expanded 980 basis points to 20.4%, with a record cash flow from operating activities of $50 million [21][24] Business Line Data and Key Metrics Changes - The company saw a 48% year-over-year increase in customers with ARR greater than $1 million, indicating strong demand for identity security solutions [4] - New SaaS customers had a 40% attach rate of add-on modules, up from 25% in the same quarter last year, contributing to the growth of emerging add-on modules [22][24] - ARR from emerging add-on modules more than doubled year-over-year, contributing to a net revenue retention (NRR) of 114% [22][24] Market Data and Key Metrics Changes - The company is experiencing strong demand across various industry verticals, with a notable increase in average ARR per new SaaS customer by 30% [22] - The company is positioned to lead in the evolving market of identity security, particularly with the rise of AI and machine identities [5][10] Company Strategy and Development Direction - The company aims to build a foundation for the next generation of enterprise security, focusing on real-time protection and governance of all identities, including human and machine [14][15] - The company is enhancing its platform with innovations like SailPoint Accelerated Application Management and SailPoint Machine Identity Security to address emerging challenges [16][17] - The company emphasizes the importance of integrating identity, data, and security to provide a comprehensive solution for enterprises [12][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position heading into the second half of the year, citing strong performance and record free cash flow [31] - The company anticipates ARR to cross the billion-dollar mark in Q3 2026, with an expected growth rate of 26.5% year-over-year [25] - Management acknowledged the challenges posed by the current macroeconomic environment but remains optimistic about continued growth and modernization efforts among customers [60][61] Other Important Information - The company is one of the only independent, enterprise-scale identity security platforms, which allows it to offer flexibility and extensibility to large complex enterprises [12][19] - The company is actively pursuing partnerships to expand its market reach, including a new partnership with HCL Technologies [19] Q&A Session Summary Question: Can you provide more details on the guidance and the impact of federal term renewals? - Management confirmed a 100% renewal rate for term-based federal renewals in Q2, which resulted in a $7 million timing shift in revenue recognition from Q3 to Q2, with no impact on ARR [30][31] Question: What are the dynamics between Q3 and Q4 regarding net new ARR? - Management noted that Q2's net new ARR was consistent with last year, and they feel confident heading into Q3, expecting to maintain or increase the rate of movement to SaaS [37][38] Question: Can you elaborate on the opportunities in machine identity? - Management highlighted the importance of discovering and assigning ownership of machine identities, noting that customers are increasingly recognizing these as part of the attack vector [42][43] Question: How does the company view the integration of AI-driven connector integration? - Management acknowledged the need for a tight alignment between identity and data access, emphasizing the importance of understanding the characteristics of agents and their access to data [48][49] Question: What is the current state of legacy systems among customers? - Management indicated an acceleration in migrations from legacy systems, with a sense of urgency among customers to modernize their identity solutions [54][55] Question: How does the company view the competitive landscape? - Management noted that while there is increased competition in the governance space, their win rates against traditional competitors remain strong, particularly in the mid-to-large enterprise market [78][79]