It’s best to learn the next dialogue and evaluation of our monetary situation
and outcomes of operations along with the consolidated monetary statements
and associated notes which might be included in Merchandise Eight on this Annual Report on Kind 10-Ok
(this “Annual Report”). This dialogue comprises forward-looking statements that
contain dangers and uncertainties. Our precise outcomes might differ materially from
these anticipated in these forward-looking statements because of varied
components, together with, however not restricted to, these set forth within the part titled
“Threat Components” in Half I, Merchandise 1A and in different elements of this Annual Report. Our
historic outcomes usually are not essentially indicative of the outcomes that could be
anticipated for any interval sooner or later.
The Firm has elected to omit a dialogue and evaluation of the monetary
situation and outcomes of operations of sure 2019 objects and year-to-year
comparisons between 2020 and 2019. Such dialogue and evaluation may be present in
“Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations” in Half II, Merchandise 7 of the Firm’s Annual Report on Kind 10-Ok for
the 12 months ended December 31, 2020, which was filed with the Securities and
Change Fee on February 25, 2021.
Overview
SailPoint Applied sciences Holdings, Inc. (“we,” “our,” the “Firm” or
“SailPoint”) is the main supplier of enterprise identification safety options.
Our identification safety options present organizations with important visibility
into who presently has entry to which sources, who ought to have entry to
these sources and the way that entry is getting used.
We provide each software program as a service (“SaaS”) and software program platforms, which
present organizations visibility and the intelligence required to each
seamlessly empower customers and securely handle their entry to methods,
purposes and knowledge throughout hybrid info expertise (“IT”) environments,
spanning on-premises, cloud and cellular purposes and file storage platforms.
We assist prospects allow their companies with extra agile and frictionless IT,
streamline and speed up the supply of entry to their companies, improve
their safety posture and higher meet compliance and regulatory necessities.
Our prospects embody most of the world’s largest and most complicated
organizations, together with industrial enterprises, monetary establishments and
governments.
30
——————————————————————————–
Desk of Contents
Our set of identification safety options presently consists of:
•IdentityNow: our cloud-based, multi-tenant identification safety platform, which
gives prospects with a set of totally built-in companies for compliance,
provisioning and password administration for purposes and knowledge hosted
on-premises or within the cloud;
•IdentityIQ: our on-premises identification safety resolution, which may be hosted in
the general public cloud or deployed in a buyer’s knowledge middle, that gives giant,
complicated enterprise prospects a unified and extremely configurable identification safety
resolution; and
•SailPoint Identification Providers: delivered as multi-tenant SaaS subscription
companies that may be utilized along with IdentityNow and IdentityIQ and
presently consisting of:
•Entry Insights: collects a wealth of identification info and turns that
info into actionable insights and gives business-oriented dashboards
and studies to trace the effectiveness of consumers’ identification applications;
•Entry Modeling: makes use of synthetic intelligence (“AI”) and machine studying
(“ML”) to counsel roles based mostly on related entry between customers and provides
prospects insights to verify the right entry for every function;
•Entry Threat Administration: our cloud-based entry controls resolution that allows
our prospects to handle their threat by automating entry controls for enterprise
purposes with complicated safety necessities;
•Cloud Entry Administration: makes use of AI and ML to routinely study, monitor and
safe entry to cloud infrastructure;
•Suggestion Engine: makes use of AI, ML, peer group evaluation, identification attributes
and entry exercise to assist prospects resolve whether or not entry ought to be granted or
eliminated; and
•SaaS Administration: our cloud-based resolution that helps prospects uncover, handle
and safe their SaaS purposes.
Our options tackle the complicated wants of worldwide enterprises and mid-market
organizations. Our success is principally depending on our capability to ship
compelling options to draw new prospects and retain current prospects.
Rising safety threats and evolving laws and compliance requirements for
cyber safety, knowledge safety, privateness and inner IT controls create new
alternatives for our business and require us to adapt our options to be
profitable. Sustaining our historic progress charge can also be difficult as a result of
our progress technique relies upon partly on our capability to drive new buyer progress
inside current geographic markets, additional penetrate our current buyer
base, proceed to put money into our platform, leverage and develop our community of
companions, develop market and product funding throughout current vertical markets,
and proceed to develop our world presence, whereas competing towards a lot bigger
firms with extra recognizable manufacturers and monetary sources. Though we
search to develop quickly, we additionally concentrate on working leverage and effectivity whereas
persevering with to put money into our platform to ship progressive options to our
prospects.
We imagine enterprises are more and more embracing the cloud to deal with their
important safety infrastructure. Consequently, a rising variety of enterprises
are altering their strategy to identification safety and now desire to make use of a SaaS
resolution fairly than buy software program outright and set up it in their very own
infrastructure. This business shift aligns nicely with our present product
technique. Our product technique is to (1) speed up innovation inside our core
identification safety SaaS choices, (2) ship continued innovation as we execute
towards our imaginative and prescient for SailPoint identification safety, and (3) make sure that as we
ship these new improvements, they work in live performance with our SaaS choices in
addition to our on-premises choices.
IdentityNow and our SailPoint Identification Providers are supplied in change for a
subscription price and provide prospects entry to those options and
infrastructure assist in the course of their subscription settlement. Our
normal subscription settlement for our SaaS choices has a period of three
years. For our IdentityIQ options, our prospects both buy a perpetual
software program license, which incorporates one 12 months of upkeep and assist, or a time period
license, bought as bundled preparations that embody the rights to a time period license
and upkeep and assist sometimes for a three-year time period. Accordingly, we
allocate the transaction value to every efficiency obligation. Our upkeep
gives software program upkeep in addition to entry to our technical assist
companies through the upkeep time period. After the preliminary upkeep interval,
prospects with perpetual licenses might renew their upkeep and assist
settlement for an extra price.
Pricing for every of our options depends on the variety of digital
identities of staff, contractors, enterprise companions, software program bots and different
human and non-human customers that the client is entitled to manipulate with the
resolution. We additionally package deal and value our IdentityNow and IdentityIQ options
into modules. Every module has distinctive functionalities, and our prospects are ready
to buy a number of modules, relying on their wants. We additionally provide
superior integration modules for key purposes and methods which may be
bought along with our base resolution modules. They’re additionally priced based mostly
on
31
——————————————————————————–
Desk of Contents
the whole variety of identities, as are our SailPoint Identification Providers. Thus,
our income from any buyer is mostly decided by the variety of
identities that the client is entitled to manipulate in addition to the variety of
modules bought by the client for our IdentityIQ and IdentityNow options
and which, if any, of the SailPoint Identification Providers that the client
purchases.
Along with our options, we provide skilled companies to our prospects
and companions to configure and optimize the usage of our options in addition to
coaching companies associated to the configuration and operation of our platform.
Most of our skilled companies exercise is in assist of our companions, who
carry out a big majority of all preliminary and follow-on implementation work
for our prospects. Most of our consulting companies are priced on a
time-and-materials foundation, whereas our coaching companies are supplied by means of
a number of pricing fashions, together with on a per-person foundation for teacher led
programs and a flat-rate foundation for our e-learning programs.
Over the previous a number of years, our income combine has modified as demand for our
services has shifted from gross sales of perpetual licenses to gross sales of
SaaS and time period licenses, and in 2021, we largely accomplished our transition to a
subscription mannequin, with our principal concentrate on promoting subscription-based
preparations, together with SaaS and time period licenses, with income from perpetual
licenses representing an more and more smaller portion of our whole income.
Though we anticipate to sometimes see perpetual license transactions with new
prospects and ongoing enlargement offers for present prospects, our principal focus
is on promoting subscription-based preparations. For patrons that also want to
buy and function non-SaaS software program, we’re more and more promoting our software program
by means of subscription-based time period licenses, fairly than by means of perpetual
licenses, and over time, we anticipate that gross sales to new prospects will likely be
completely comprised of SaaS, time period licenses and different subscriptions.
Our acceleration towards subscription-based choices, which occurred extra
quickly than anticipated, has resulted in and is prone to proceed to lead to
short-term income headwind. Particularly, our transition to a subscription
mannequin has impacted, and can proceed to affect, the timing of our recognition
of income as an rising proportion of our gross sales develop into acknowledged ratably,
in addition to affect our working margins as subscription income turns into a bigger
proportion of our gross sales. Nonetheless, we imagine that continued progress of SaaS,
term-based license and upkeep and assist income will result in a extra
predictable income mannequin and improve our visibility to future interval whole
revenues. Nonetheless, our income and gross margins range relying on the sort
of resolution we promote, and we anticipate that in a primarily subscription-based mannequin,
retention charges for our subscription prospects might be barely decrease than the
retention charges for assist and upkeep for our perpetual prospects. As a
end result, a shift within the gross sales mixture of our options might have an effect on our efficiency
relative to historic outcomes. Our shift to a subscription mannequin has fluctuated
between durations, and our capability to foretell our income and margins in any
explicit interval has been, and will proceed to be, restricted.
Key Components Affecting Our Efficiency
Our historic monetary efficiency has been, and we anticipate our monetary
efficiency sooner or later to be, pushed by our capability to:
•Add New Prospects Inside Present Markets. There may be vital alternative to
develop our footprint in our current markets by means of new, greenfield deployments
and displacement of our rivals’ legacy options. We plan to develop our gross sales
group, develop and leverage our channel companions and improve our advertising and marketing
efforts.
•Generate Extra Gross sales to Present Prospects. We imagine that our current
buyer base gives us with a big alternative to drive incremental
gross sales. Generally, our prospects initially buy a subset of the modules
or choices we offer based mostly on their fast want. We concentrate on producing
extra income from the modules that our prospects have already bought from us
as our prospects develop the variety of identities our options handle and govern
and as our prospects deploy our options throughout different enterprise models or
geographies inside their organizations. That is very true on the subject of
our new and expanded SaaS choices, together with AI and cloud governance. Over
time, we additionally determine up-selling and cross-selling alternatives and search to
promote further modules and choices to our current prospects.
•Retain Prospects. We imagine that our capability to retain our subscription-based
buyer contracts is a vital part of our progress technique and displays
the long-term worth of our buyer relationships. With the intention to preserve excessive
renewal charges, we put money into the standard and reliability of our options and our
customer support and assist features to assist drive excessive ranges of buyer
success.
•Increase into New Markets. We anticipate to proceed to take a position considerably in
gross sales, advertising and marketing and customer support, in addition to our oblique channel accomplice
community, to develop into new geographies and vertical markets. We imagine that
our market alternative is giant and rising and that the worldwide cyber safety
market represents a big progress alternative for us. In 2021, we generated
solely 31% of our income exterior of
32
——————————————————————————–
Desk of Contents
the US. We plan to leverage our current sturdy relationships with
world system integrators and channel companions to develop our presence in Europe,
Asia Pacific and different worldwide markets.
Influence of COVID-19
In mild of the continued unfold of COVID-19 in the US and overseas,
together with the continued emergence of recent variants of the coronavirus, authorities
and public well being authorities proceed to suggest and impose varied
laws and restrictive measures on giant parts of the inhabitants,
together with measures directed at companies. Whereas supposed to guard human life,
these restrictions have had and are anticipated to proceed to have critical hostile
impacts on home and international economies of unsure period. We now have made
sure changes to our operations as we proceed to supply our choices to
new and current prospects in response to those measures. For instance, as a
results of the COVID-19 pandemic, we shifted all buyer occasions to virtual-only
experiences starting in early 2020. In 2021, we resumed sure in-person and
hybrid occasions, however we anticipate that for the foreseeable future a few of our
buyer occasions will likely be virtual-only or hybrid occasions.
Whereas we imagine that the pandemic has not had a direct materials hostile
affect on our monetary efficiency, our enterprise might but be negatively impacted
by the COVID-19 pandemic because the period of the pandemic and the long-term scope
of its results finally stay unknown. For instance, the situations brought on by
the COVID-19 pandemic might materially adversely have an effect on the speed of IT spending by
our present and potential prospects, together with our prospects’ capability or
willingness to buy our choices, delay potential prospects’ buying
selections, delay the provisioning of our choices, or trigger prospects to fail
to make well timed funds. We now have seen an immaterial variety of buyer requests,
and will proceed to see related requests, to elongate cost phrases or cut back
the worth or period of subscription contracts, however this has not resulted in a
materials hostile affect on our renewal charges. As well as, throughout 2020 and the
first a part of 2021, we usually weren’t in a position to present on-site consulting
companies to our prospects attributable to native and regional restrictions associated to the
pandemic, and such restrictions stay in place for a few of our prospects.
Nonetheless, this has not resulted in any significant hostile affect on our capability
to ship such companies as a result of a good portion of our consulting
companies have traditionally been supplied remotely and most on-site tasks
transitioned to a distant supply mannequin.
However the potential and precise hostile impacts described above, because the
pandemic has precipitated extra of our prospects to shift to a digital workforce, we
imagine the worth and scalability of our identification platform has develop into much more
evident. We imagine that the pandemic has not had a cloth hostile affect on
our monetary efficiency, and certainly, our income and buyer base grew
all through 2020 and 2021. We anticipate to proceed to see wholesome demand for our
options; however, we acknowledge that the uncertainty associated to COVID-19
might lead to elevated volatility within the monetary projections we use because the
foundation for estimates and assumptions utilized in our monetary statements.
The challenges posed by COVID-19 on our enterprise and our prospects’ companies
might evolve quickly, and the velocity, trajectory and energy of a restoration in
common financial situations stays extremely unsure and might be slowed or
reversed by plenty of components, together with the emergence or unfold of recent
variants of the coronavirus and the effectiveness and acceptance of vaccines and
therapeutics for the illness as they proceed to be developed and distributed.
Consequently, we are going to proceed to guage our monetary place and outcomes of
operations in mild of future developments, significantly these referring to
COVID-19, and we are going to proceed to watch the worldwide affect of the pandemic on
our prospects and our enterprise. See the part titled “Threat Components” in Half I,
Merchandise 1A. on this Annual Report for extra info relating to the doable
results of COVID-19 on our enterprise.
Key Enterprise Metric
Along with our monetary info ready in accordance with accounting
ideas usually accepted in the US of America (“GAAP”), we
monitor the next key metric to assist us measure and consider the
effectiveness of our operations:
12 months Ended
December 31,
2021 2020
2019
Whole annual recurring income (in 1000’s) $ 370,442 $ 250,951
$ 178,953
We use whole annual recurring income (“Whole ARR”) to watch the expansion of our
recurring enterprise as we have now shifted to a subscription mannequin. Whole ARR
represents the annualized worth of the lively portion of SaaS, term-based
license, upkeep and assist contracts and different subscription companies at
the tip of the reporting interval. We calculate Whole ARR by dividing the lively
contract worth by the variety of days within the lively portion of the general
contract time period after which multiplying by 365. Whole ARR ought to be seen
independently of income and deferred income as Whole ARR is an working
33
——————————————————————————–
Desk of Contents
metric and isn’t supposed to be mixed with or change these things. Whole ARR
isn’t a forecast of future income, which may be impacted by contract begin and
finish dates and renewal charges, and doesn’t embody income from perpetual
licenses, coaching, skilled companies or different sources of income which might be
not deemed to be recurring in nature.
Parts of Outcomes of Operations
Income
License Income. We generate license income by means of the sale of our on-premises
software program license agreements to new prospects and gross sales of further licenses to
the prevailing prospects who should purchase further customers for current licenses
or buy new licenses. Prospects might also buy time period license agreements,
below which we acknowledge the quantity allotted to the licenses upfront. Perpetual
license transactions usually embody an quantity for first-year upkeep and
assist, which we acknowledge as subscription income. We sometimes acknowledge
license income upon delivering the relevant license. Over time, we are going to
proceed to anticipate license income to lower as a proportion of our whole
income as we proceed to concentrate on rising our subscription income as a key
progress initiative.
Subscription Income. Our subscription income consists of (i) charges for entry
to, and associated assist for, our SaaS choices, (ii) charges for ongoing
upkeep and assist of our licensed options and (iii) different subscription
companies, which incorporates our cloud managed companies. We sometimes bill
subscription charges upfront, in annual installments, and acknowledge subscription
income ratably over the time period of the relevant settlement. Over time, we anticipate
subscription income will improve as a proportion of whole income as we
proceed to concentrate on rising subscription income as a key progress initiative.
Providers and Different Income. Providers and different income consists primarily of
charges from skilled companies supplied to our prospects and companions to
configure and optimize the usage of our options in addition to coaching companies
associated to the configuration and operation of our platform. Most of our
skilled companies are priced on a time-and-materials foundation and we usually
bill prospects month-to-month because the work is carried out. We usually have standalone
worth for our skilled companies and acknowledge income as companies are
carried out based mostly on an estimated truthful worth as a separate unit of accounting.
Most of our skilled companies exercise is in assist of our companions, who
carry out the numerous majority of all preliminary and follow-on configuration and
optimization work for our prospects. Over time, we anticipate our skilled
companies income as a proportion of whole income to lower as we more and more
depend on companions to assist our prospects deploy our software program.
Value of Income
Value of License Income. Value of license income consists of amortization
expense for developed expertise acquired and third-party royalties.
Value of Subscription Income. Value of subscription income consists primarily of
employee-based prices (which consists of worker compensation and allotted
overhead), prices of our buyer assist group, contractor prices to
complement our employees ranges, amortization expense for developed expertise
acquired and third-party cloud-based internet hosting prices.
Value of Providers and Different Income. Value of companies and different income consists
primarily of employee-based prices of our skilled companies and coaching
organizations, travel-related prices and contractor prices to complement our employees
ranges.
Impairment of Intangible Belongings. Impairment of intangible belongings consists of
impairments costs for developed expertise acquired. It is a part of
value of subscription income that’s damaged out for monetary assertion
functions.
Gross Revenue and Gross Margin
Gross revenue is income much less value of income, and gross margin is gross revenue
as a proportion of whole income. Gross revenue has been and can proceed to be
affected by varied components, together with the combo of our license, subscription, and
companies and different income, the prices related to third-party cloud-based
internet hosting companies for our SaaS choices, contractor prices to complement our
employees ranges and the extent to which we develop our buyer assist and
skilled companies and coaching organizations. We anticipate that our general
gross margin will fluctuate from interval to interval relying on the interaction of
these varied components. Additionally, we anticipate our funding in expertise to develop
the potential of our companies, enabling us to enhance our gross margin over
time.
34
——————————————————————————–
Desk of Contents
Working Bills
Analysis and Improvement Bills. Analysis and growth bills consist
primarily of employee-based prices, software program and internet hosting association bills
(which incorporates cloud-based internet hosting prices associated to the event of our
cloud-based resolution), skilled companies expense and amortization expense
for acquired intangible belongings. We imagine that continued funding in our
choices is significant to the expansion of our enterprise, and we intend to proceed to
put money into product growth. We anticipate our analysis and growth bills
to proceed to extend on a greenback foundation for the foreseeable future, as our
enterprise grows.
Common and Administrative Bills. Common and administrative bills consist
primarily of employee-based prices for company personnel. As well as, common
and administrative bills embody skilled companies expense, software program and
internet hosting association bills and all different company bills not allotted to
different departments. We anticipate our common and administrative bills to extend
on a greenback foundation for the foreseeable future, as our enterprise grows.
Gross sales and Advertising Bills. Gross sales and advertising and marketing bills consist primarily of
employee-based prices, prices of common advertising and marketing and promotional actions,
skilled companies expense, software program and internet hosting association bills,
amortization expense for acquired intangible belongings and travel-related bills.
Gross sales commissions earned by our gross sales drive and the associated payroll taxes, a
main part of “deferred contract acquisition prices”, are thought of
incremental and recoverable prices of acquiring a contract with a buyer which
are deferred after which amortized on a straight-line foundation over a interval of
profit that we have now decided to be usually 5 years. We anticipate our gross sales
and advertising and marketing bills to extend on a greenback foundation for the foreseeable future
as we proceed to put money into our gross sales drive for enlargement to new geographic and
vertical markets, and we anticipate gross sales and advertising and marketing bills to proceed to be
our largest working expense class.
Allotted Overhead. We allocate shared prices, equivalent to services prices
(together with lease, utilities and depreciation on belongings shared by all
departments), info expertise prices and recruiting prices, to all
departments based mostly on headcount. As such, allotted shared prices are mirrored in
every value of income and working expense class.
Different Earnings (Expense), Web
Different earnings (expense), internet consists primarily of curiosity earnings, curiosity
expense and international foreign money transaction positive aspects and losses associated to the affect
of transactions denominated in a international foreign money. Curiosity earnings consists of
curiosity earned on our money equivalents, which we anticipate to fluctuate attributable to
money steadiness and rates of interest.
Curiosity expense consists primarily of contractual curiosity expense,
amortization of debt low cost and issuance prices, loss on the modification and
extinguishment of debt and prepayment penalties on our Credit score Settlement and
Notes (every as outlined under). We anticipate our non-cash elements of curiosity
expense to lower on a greenback foundation for the foreseeable future because of the
early adoption of Accounting Requirements Replace (“ASU”) 2020-06. For extra
info on the early adoption of ASU 2020-06, seek advice from Be aware 1 “Description
of Enterprise and Abstract of Important Accounting Insurance policies” in our notes to our
consolidated monetary statements included on this Annual Report.
As we have now expanded our worldwide operations, our publicity to fluctuations
in foreign currency has elevated and we anticipate this pattern to proceed.
Earnings Tax (Expense) Profit
Our provision for earnings taxes consists of U.S. and state earnings taxes and
earnings taxes in sure international jurisdictions through which we conduct enterprise. Our
earnings tax charge varies from the federal statutory charge attributable to international
withholding taxes; altering tax legal guidelines, laws and interpretations in
a number of jurisdictions through which we function; modifications to the monetary accounting
guidelines for earnings taxes; unanticipated modifications in tax charges; variations in
accounting and tax remedy of our stock-based compensation and analysis and
growth credit. We anticipate this fluctuation in earnings tax charges, in addition to
its potential affect on our outcomes of operations, to proceed.
Seasonality
We usually expertise seasonal fluctuations in demand for our merchandise and
companies. Our quarterly gross sales are impacted by business shopping for patterns. As a
end result, our gross sales have usually been highest within the fourth quarter of a
calendar 12 months and lowest within the first quarter. Though these seasonal components
are widespread within the expertise business, historic patterns shouldn’t be
thought of a dependable indicator of our future gross sales exercise or efficiency.
35
——————————————————————————–
Desk of Contents
Outcomes of Operations
The next desk units forth our outcomes of operations for the durations
offered:
12 months Ended December 31,
2021 2020 2019
(In 1000’s)
Income
Licenses $ 113,004 $ 120,874 $ 102,800
Subscription 273,197 196,817 143,390
Providers and different 52,753 47,563 42,325
Whole income 438,954 365,254 288,515
Value of income
Licenses 5,212 4,467 4,239
Subscription (1) 58,790 37,644 26,877
Providers and different (1) 50,486 38,517 34,359
Impairment of intangible belongings 744 5,119 –
Whole value of income 115,232 85,747 65,475
Gross revenue 323,722 279,507 223,040
Working bills
Analysis and growth (1) 98,255 71,191 56,120
Common and administrative (1) 48,979 37,783 39,816
Gross sales and advertising and marketing (1)
235,564 169,656 136,537
Whole working bills 382,798 278,630 232,473
Earnings (loss) from operations (59,076) 877
(9,433)
Different earnings (expense), internet
Curiosity earnings 775 2,019 2,468
Curiosity expense (2,680) (18,612)
(5,041)
Different earnings (expense), internet (467) 33 (1,082)
Whole different expense, internet (2,372) (16,560) (3,655)
Loss earlier than earnings taxes (61,448) (15,683) (13,088)
Earnings tax (expense) profit (186) 4,920 4,588
Web loss $ (61,634) $ (10,763) $ (8,500)
36
——————————————————————————–
Desk of Contents
(1)Contains stock-based compensation expense as follows:
12 months Ended December 31,
2021 2020
2019
(In 1000’s)
Value of income – subscription $ 3,688 $ 1,758 $
1,142
Value of income – companies and different 3,733 1,963 1,379
Analysis and growth 12,827 6,282 3,517
Common and administrative 10,563 6,802 5,990
Gross sales and advertising and marketing 20,946 12,252 6,686
Whole stock-based compensation expense $ 51,757 $ 29,057 $ 18,714
The next desk units forth the outcomes of operations for every of the durations
offered as a proportion of whole income:
12 months Ended December 31,
2021 2020 2019
Income
Licenses 26 % 33 % 35 %
Subscription 62 54 50
Providers and different 12 13 15
Whole income 100 100 100
Value of income
Licenses 1 1 2
Subscription 13 10 9
Providers and different 12 11 12
Impairment of intangible belongings – 1 –
Whole value of income 26 23 23
Gross revenue 74 77 77
Working bills
Analysis and growth 22 19 20
Common and administrative 11 10 14
Gross sales and advertising and marketing 54 47 47
Whole working bills 87 76 81
Earnings (loss) from operations (13) 1 (4)
Different earnings (expense), internet
Curiosity earnings – 1 1
Curiosity expense (1) (6) (2)
Different earnings (expense), internet – – –
Whole different expense, internet (1) (5) (1)
Loss earlier than earnings taxes (14) (4) (5)
Earnings tax (expense) profit – 1 2
Web loss (14) % (3) % (3) %
37
——————————————————————————–
Desk of Contents
Comparability of the Years Ended December 31, 2021 and 2020
Income
12 months Ended December 31,
2021 2020 variance $ variance %
(In 1000’s, besides percentages)
Income
Licenses $ 113,004 $ 120,874 $ (7,870) (7) %
Subscription
SaaS 112,720 66,913 45,807 68 %
Upkeep and assist 153,621 126,792 26,829 21 %
Different subscription companies 6,856 3,112 3,744 120 %
Whole subscription 273,197 196,817 76,380 39 %
Providers and different 52,753 47,563 5,190 11 %
Whole income $ 438,954 $ 365,254 $ 73,700 20 %
License Income. License income decreased by $7.9 million, or 7%, for the 12 months
ended December 31, 2021 in comparison with the 12 months ended December 31, 2020 primarily
attributable to SaaS choices changing into a bigger portion of recent gross sales. Throughout the years
ended December 31, 2021 and 2020, license income from new prospects was $67.2
million and $76.Eight million, and license income from current prospects was $45.8
million and $44.1 million for the respective durations.
Subscription Income. Subscription income elevated by $76.Four million,
or 39%, for the 12 months ended December 31, 2021 in comparison with the 12 months
ended December 31, 2020 primarily attributable to a rise in SaaS income as we
proceed to see sturdy momentum in our SaaS enterprise and a rise in ongoing
upkeep and assist income from our elevated put in base. Throughout the
years ended December 31, 2021 and 2020, SaaS and different subscription companies
income from new prospects was $25.Three million and $13.7 million, and SaaS and
different subscription companies income from current prospects was $94.Three million
and $56.Four million for the respective durations. Throughout the years ended
December 31, 2021 and 2020, upkeep and assist income from new prospects
was $9.5 million and $8.Three million, and upkeep and assist income from
current prospects was $144.1 million and $118.5 million for the respective
durations.
Providers and Different Income. Providers and different income elevated by $5.2
million, or 11% for the 12 months ended December 31, 2021 in comparison with the 12 months ended
December 31, 2020. This improve is primarily a results of a rise within the
variety of prospects utilizing our consulting and coaching companies.
Geographic Areas. Our prospects in the US contributed the biggest
portion of our income in every year ended December 31, 2021 and 2020 as a result of we
have extra market momentum associated to our bigger and extra established gross sales
drive, gross sales pipeline and model recognition and consciousness in the US
as in comparison with our different areas. Income is classed by the next main
geographic areas: (i) United States, (ii) Europe, the Center East and Africa
(“EMEA”) and (iii) remainder of the world. We proceed to put money into rising the
dimension of our worldwide gross sales drive and strengthening partnerships with world
system integrators and resellers worldwide, and because of this, our worldwide
revenues are rising as a proportion of whole revenues. For the 12 months ended
December 31, 2021, income in the US, EMEA and the remainder of the world
elevated year-over-year.
38
——————————————————————————–
Desk of Contents
The next desk units forth our consolidated whole income by geography and
the respective proportion of whole income for the durations offered:
12 months Ended December 31,
2021 2020
$ % of income $ % of income
(In 1000’s, besides percentages)
United States $ 302,524 69 % $ 263,332 72 %
EMEA (1) 80,838 18 % 62,249 17 %
Remainder of the World (1) 55,592 13 % 39,673 11 %
Whole income $ 438,954 100 % $ 365,254 100 %
(1)No single nation exterior of the US represented greater than 10% of
our income.
Gross Revenue and Gross Margin
12 months Ended December 31,
2021 2020 variance $ variance %
(In 1000’s, besides percentages)
Gross revenue
Licenses $ 107,792 $ 116,407 $ (8,615) (7) %
Subscription
Subscription 214,407 159,173 55,234 35 %
Impairment of intangible belongings (744) (5,119) 4,375 (85) %
Whole subscription 213,663 154,054 59,609 39 %
Providers and different 2,267 9,046 (6,779) (75) %
Whole gross revenue $ 323,722 $ 279,507 $ 44,215 16 %
Gross margin
Licenses 95 % 96 %
Subscription 78 % 78 %
Providers and different 4 % 19 %
Whole gross margin 74 % 77 %
Licenses. License gross revenue decreased by $8.6 million, or 7%, through the 12 months
ended December 31, 2021 in comparison with the 12 months ended December 31, 2020. The
lower in gross revenue was the results of decreased license revenues with solely
minor will increase in third social gathering royalties. Gross margin remained materially
in line with the prior interval.
Subscription. Subscription gross revenue elevated by $59.6 million, or 39%,
through the 12 months ended December 31, 2021 in comparison with the 12 months ended December 31,
2020. The rise was primarily the results of elevated subscription revenues,
as described above, partially offset by an roughly $16.Eight million improve
in value in income in comparison with the prior interval. The rise in value of income
through the 12 months ended December 31, 2021 was pushed by a $10.5 million improve
in employee-based prices attributable to will increase in headcount and associated allotted
overhead to assist the expansion of our SaaS choices and ongoing upkeep and
assist for our increasing put in buyer base, an $8.7 million improve in
cloud-based internet hosting prices to additional assist the scalability of our SaaS
choices and a $2.Zero million improve in amortization expense for developed
expertise acquired, partially offset by a lower of $4.Four million in
impairment of intangible belongings.
Providers and Different. Providers and different gross revenue decreased by $6.Eight million,
or 75%, through the 12 months ended December 31, 2021 in comparison with the 12 months ended
December 31, 2020. The lower in gross revenue is primarily attributable to a
$12.Zero million improve in value of companies supplied in comparison with the prior
interval, partially offset by elevated revenues attributable to buyer progress. The
improve in value of companies supplied through the 12 months ended December 31, 2021
was primarily pushed by an $9.Four million improve in employee-based prices to
assist an rising variety of prospects and a $3.1 million improve in accomplice
prices attributable to greater accomplice utilization in our skilled companies and
coaching group.
39
——————————————————————————–
Desk of Contents
Working Bills
12 months Ended December 31,
2021 2020 variance $ variance %
(In 1000’s, besides percentages)
Working bills
Analysis and growth $ 98,255 $ 71,191 $ 27,064 38 %
Common and administrative 48,979 37,783 11,196 30 %
Gross sales and advertising and marketing 235,564 169,656 65,908 39 %
Whole working bills $ 382,798 $ 278,630 $ 104,168 37 %
Analysis and Improvement Bills. Analysis and growth bills elevated
by $27.1 million, or 38%, for the 12 months ended December 31, 2021 in comparison with the
12 months ended December 31, 2020. This improve was primarily pushed by a $25.3
million improve in employee-based prices to optimize and develop our product
choices in addition to pursue innovation in identification safety. Considerably all
of the remaining improve in analysis and growth bills was the results of
a $2.1 million improve in software program and internet hosting association bills, partially
offset by a $0.Four million lower in skilled companies expense.
Common and Administrative Bills. Common and administrative bills
elevated by $11.2 million, or 30%, for the 12 months ended December 31, 2021
in comparison with the 12 months ended December 31, 2020. This improve was primarily pushed
by a $4.Three million improve in skilled service charges related to our
acquisitions of Intello Inc. and ERP Maestro, Inc. and consulting companies, a
$3.Eight million improve in employee-based prices for stock-based compensation, a
$2.Three million improve in provision for credit score losses and a $0.7 million improve
in software program and internet hosting bills.
Gross sales and Advertising Bills. Gross sales and advertising and marketing bills elevated by $65.9
million, or 39%, for the 12 months ended December 31, 2021 in comparison with the 12 months ended
December 31, 2020. This improve was primarily pushed by a $60.Zero million
improve in employee-based prices, together with commissions, to assist elevated
penetration into our current buyer base and enlargement into new business
verticals and geographic markets, in addition to a $0.9 million improve in
skilled companies expense relating primarily to advisory companies, a $2.7
million improve in software program and internet hosting association bills primarily to
assist elevated headcount and a $1.Eight million improve in intangible
amortization.
Curiosity Earnings and Curiosity Expense
Curiosity Earnings
Curiosity earnings decreased by $1.2 million for the 12 months ended December 31, 2021
in comparison with the 12 months ended December 31, 2020. This lower was primarily attributable to
a lower in rates of interest on our cash market accounts and a lower in our
money steadiness.
Curiosity Expense
Curiosity expense decreased by $15.9 million for the 12 months ended December 31, 2021
in comparison with the 12 months ended December 31, 2020. This lower was primarily attributable to
decrease amortization expense associated to the Notes because of our adoption of
ASU 2020-06, which eradicated the embedded conversion characteristic of the Notes. See
Be aware 1 “Description of Enterprise and Abstract of Important Accounting Insurance policies”
in our notes to our consolidated monetary statements included on this Annual
Report for extra info relating to the adoption of ASU 2020-06.
Earnings Tax (Expense) Profit
The Firm recorded an earnings tax expense of $0.2 million for the 12 months ended
December 31, 2021 in comparison with an earnings tax advantage of $4.9 million for the 12 months
ended December 31, 2020, resulting in a internet expense improve of $5.1 million
year-over-year. That is primarily attributable to present 12 months losses and a rise in
valuation allowance. We acknowledge deferred tax belongings to the extent that we
imagine these belongings are extra seemingly than to not be realized and proceed to
preserve a valuation allowance to cut back our deferred tax belongings to the quantity
realizable. The overall valuation allowance is $47.Three million and is primarily
associated to loss and credit score carryforwards.
The efficient tax charge for the years ended December 31, 2021 and 2020 have been
(0.3)% and 31.4%, respectively. The principle drivers for the variations within the
charges from the prior interval to the present interval are associated to a rise in
pre-tax e book
40
——————————————————————————–
Desk of Contents
loss, the affect of inventory compensation and the rise in valuation allowance.
Our tax expense up to now relates primarily to state in addition to international earnings
taxes. For additional info, seek advice from Be aware 15 “Earnings Taxes” in our notes to
our consolidated monetary statements included on this Annual Report.
We function in a number of tax jurisdictions and are topic to taxes in every nation
or jurisdiction through which we conduct enterprise. Earnings from our non-U.S.
actions are topic to native nation earnings tax and could also be topic to U.S.
earnings tax if such earnings are distributed to the U.S.
We don’t think about the earnings of our international subsidiaries, with the exception
of India, to be completely reinvested in international jurisdictions. We proceed to
make investments and develop our analysis and growth actions in India and don’t have any
plans to repatriate undistributed earnings held in India again to the U.S. dad or mum
firm.
Liquidity, Capital Assets and Money Necessities
As of December 31, 2021, we had $435.Four million of money and money equivalents (of
which $7.5 million is held in our international subsidiaries) and $75.Zero million of
availability below the Credit score Settlement. As of December 31, 2021, we had $182.6
million in internet working capital, which we outline as present belongings much less present
liabilities, excluding deferred income. As of December 31, 2020, we had $510.3
million of money and money equivalents (of which $4.Eight million is held in our
international subsidiaries) and $75.Zero million of availability below the Credit score
Settlement. As of December 31, 2020, we had $278.7 million in internet working
capital. The lower in money and money equivalents and internet working capital is
due primarily to money paid for the acquisitions of Intello Inc. and ERP Maestro
Inc. See Be aware 5 “Enterprise Mixtures” in our notes to our consolidated
monetary statements included on this Annual Report for extra info
relating to these enterprise acquisitions.
On March 11, 2019, SailPoint Applied sciences, Inc., as borrower, and sure of our
different wholly owned subsidiaries entered right into a credit score settlement (as amended, the
“Credit score Settlement”). In September 2019, the Firm amended the Credit score Settlement
in reference to the issuance and sale of the Notes. Such modification included a
lower within the commitments for revolving credit score loans from an preliminary $150.0
million to $75.Zero million, with a $15.Zero million letter of credit score sublimit, which
quantity may be elevated or decreased below specified circumstances and is
topic to sure monetary covenants. Borrowings pursuant to the Credit score
Settlement could also be used for working capital and different common company functions,
together with for acquisitions permitted below the Credit score Settlement. The Credit score
Settlement is scheduled to mature on March 11, 2024. We had no excellent
revolving credit score mortgage steadiness and we have been in compliance with all relevant
covenants as of December 31, 2021. See Be aware 9 “Credit score Settlement” in our notes to
our consolidated monetary statements included on this Annual Report for extra
info relating to phrases and situations of the Credit score Settlement.
In September 2019, we issued $400.Zero million combination principal quantity of 0.125%
convertible senior notes due 2024 (the “Notes”) in a non-public providing (the
“Providing”) to certified institutional consumers. The web proceeds from the
Providing have been roughly $391.2 million, after deducting reductions and
commissions and different charges and bills payable by the Firm in connection
with the Providing. Together with the issuance of the Notes, and train
in stuffed with the preliminary purchasers’ choice, the Firm used roughly $37.1
million of the web proceeds to pay the price of the privately negotiated capped
name transactions (the “Capped Name Transactions”) to cut back our publicity to
more money funds above principal balances within the occasion of a money
conversion of the Notes. The Notes will mature on September 15, 2024, except
earlier redeemed, repurchased or transformed. The Notes bear curiosity at a hard and fast
charge of 0.125% per 12 months payable semiannually in arrears on March 15 and
September 15 of every 12 months. As of December 31, 2021, we had an combination of $1.3
million in contractual curiosity funds, of which $0.5 million are due inside
the subsequent 12 months.
As of December 31, 2021, the Notes are convertible on the choice of the holders.
We now have the flexibility to settle conversions of the Notes in money, shares of our
widespread inventory, or a mixture of money and shares of our widespread inventory at our personal
election. The affect of the Notes on our liquidity will rely on whether or not we
elect to settle any conversion in shares of our widespread inventory or a mixture of
money and shares. It’s our present intent to settle conversions of the Notes
by means of mixture settlement, which entails compensation of the principal
portion in money and any extra of the conversion worth over the principal quantity
in shares of our widespread inventory. Throughout the 12 months ended December 31, 2021, the
Firm settled conversion requests within the combination principal quantity of $10.2
million and terminated corresponding Capped Name Transactions. In connection
with these transactions, we paid $10.2 million in money to the changing holders
for the principal quantity, issued to the changing holders 181,629 shares of the
Firm’s widespread inventory with a good worth of roughly $10.1 million, and
acquired 37,301 shares of the Firm’s widespread inventory bearing a good worth of
$1.9 million, pursuant to the terminated Capped Name Transactions. As of the
date of this submitting, no different holders of the Notes have submitted requests for
conversion. See Be aware 10 “Convertible Senior Notes and Capped Name Transactions”
in our notes to our consolidated monetary
41
——————————————————————————–
Desk of Contents
statements included on this Annual Report for extra info relating to phrases
and situations of the Notes and Capped Name Transactions.
As of December 31, 2021, we had in combination $18.2 million in contractual
commitments related to agreements which might be enforceable and legally binding,
of which $12.Three million are due inside the subsequent 12 months. Such quantities don’t
embody obligations below contracts that we are able to cancel with out vital
penalty and buy orders as the acquisition orders signify authorizations to
buy fairly than binding agreements. We additionally anticipate that we might spend a
minimal of $48 million over the subsequent three years for internet hosting companies below a
most popular pricing internet hosting association that’s in anticipation of the expansion in
our SaaS enterprise. Forecasts are topic to vary, and accordingly, so is our
anticipated use of the popular pricing.
As of December 31, 2021, we had $2.5 million of tax liabilities associated to our
unsure tax positions. We can’t fairly estimate the interval which this
obligation could also be incurred, if in any respect.
The Firm has working lease obligations for our places of work, primarily our
company headquarters in Austin, Texas, that consists of future non-cancelable
minimal rental funds within the combination quantity of $38.7 million. As of
December 31, 2021, we had an excellent letter of credit score within the quantity of $6.0
million, which is classed as restricted money, primarily associated to our
company headquarters. For extra info on our working leases, seek advice from
Be aware 7 “Leases” in our notes to our consolidated monetary statements included
on this Annual Report.
We imagine that current money and money equivalents, any constructive money flows from
operations and out there borrowings below our Credit score Settlement will likely be
adequate to assist working capital, capital expenditure and different money
necessities for a minimum of the subsequent 12 months and, based mostly on our present
expectations, for the foreseeable future thereafter. Our future capital
necessities, each near-term and long-term, will rely on many components,
together with our progress charge, the timing and extent of spending to assist analysis
and growth efforts, the continued enlargement of gross sales and advertising and marketing
actions, the introduction of recent options and product enhancements, the
persevering with market acceptance of our choices and companies, the prices of any
future acquisitions in complementary companies and applied sciences and the affect
of the COVID-19 pandemic to our and our prospects’, distributors’ and companions’
companies. To the extent current money and money equivalents usually are not adequate
to fund future actions, we might borrow below our Credit score Settlement or search to
elevate further funds by means of fairness, equity-linked or debt financings. Any
further fairness financing could also be dilutive to our current stockholders. We might
enter into agreements or letters of intent with respect to potential investments
in, or acquisitions of, complementary companies, companies or applied sciences,
which might additionally require us to hunt further fairness financing, incur
indebtedness or use money sources. Within the occasion that further financing is
required from exterior sources, we might not be capable of elevate it on phrases
acceptable to us or in any respect. If we’re unable to boost further capital when
desired, or if we can’t develop our operations or in any other case capitalize on our
enterprise alternatives as a result of we lack adequate capital, our enterprise,
working outcomes and monetary situation can be adversely affected.
Since inception, we have now financed operations primarily by means of license charges,
SaaS subscription charges, upkeep and assist charges, consulting and coaching
charges, borrowings below our prior credit score settlement and, to a lesser diploma, the
sale of our fairness securities. Our principal makes use of of money are funding
operations, capital expenditures, and making strategic enterprise acquisitions.
Over the previous a number of years, income has elevated considerably from 12 months to
12 months and, because of this, money flows from buyer collections have elevated.
Nonetheless, working bills have additionally elevated considerably as we have now
invested in rising our enterprise. Our working money necessities might improve
sooner or later as we proceed to put money into key initiatives to drive the Firm’s
long-term progress.
Abstract of Money Flows
The next desk summarizes our money flows for the durations offered:
12 months Ended December 31,
2021 2020 2019
(In 1000’s)
Web money supplied by (utilized in) working
actions $ (957) $ 57,949 $ 50,091
Web money utilized in investing actions (75,021) (3,973) (38,906)
Web money supplied by financing actions 1,498 12,548 361,699
Web improve (lower) in money, money
equivalents and restricted money $ (74,480) $
66,524 $ 372,884
42
——————————————————————————–
Desk of Contents
Money Flows from Working Actions
Throughout 2021, money utilized in working actions was $1.Zero million, which consisted
of a internet lack of $61.6 million, adjusted by non-cash costs of $96.Zero million
and a internet lower of $35.Three million in our internet working belongings and liabilities.
The non-cash costs are primarily comprised of stock-based compensation of
$51.Eight million, depreciation and amortization expense of $22.Four million,
amortization of debt low cost and issuance prices of $2.Zero million, provision for
credit score losses of $3.Zero million and amortization of contract acquisition prices of
$20.2 million, partially offset by a internet lower in working leases of $0.7
million and a discount in deferred tax liabilities of $3.5 million. The
lower in our internet working belongings and liabilities was primarily a results of
a rise in deferred contract acquisition prices of $60.Eight million which has
accelerated as subscription gross sales proceed to develop, a rise in prepayments
and different belongings of $27.Four million primarily for elevated contract belongings, an
improve in accounts receivable of $34.6 million because of the timing of receipts
of funds from prospects, partially offset by a rise in deferred income
of $57.7 million because of the timing of billings and money acquired upfront of
income recognition primarily for subscription and assist companies, a rise
in accrued bills of $28.Three million due primarily to accrual of further
commissions and bonuses and a rise in accounts payable of $1.Three million due
to timing of money disbursements.
Throughout 2020, money supplied by working actions was $57.9 million, which
consisted of a internet lack of $10.Eight million, adjusted by non-cash costs of $76.7
million and a internet lower of $8.Zero million in our internet working belongings and
liabilities. The non-cash costs are primarily comprised of depreciation and
amortization expense of $18.Three million, amortization of debt low cost and
issuance prices of $17.Eight million, amortization of contract acquisition prices of
$13.7 million, loss on disposal of fastened belongings of $0.2 million, provision for
credit score losses of $0.6 million, impairment of intangible belongings of $5.1 million
and stock-based compensation of $29.1 million, partially offset by a internet
lower in working leases of $0.Four million and a discount in deferred tax
liabilities of $7.6 million. The lower in our internet working belongings and
liabilities was primarily a results of a rise in deferred contract
acquisition prices $32.6 million, a rise in prepayments and different belongings of
$18.1 million, a rise in accounts receivable of $6.Eight million because of the
timing of receipts of funds from prospects and a lower in earnings taxes
payable of $1.Zero million, partially offset by a rise in deferred income of
$32.7 million because of the timing of billings and money acquired upfront of
income recognition primarily for subscription and assist companies, a rise
in accrued bills of $16.Three million due primarily to accrual of further
commissions and bonuses and a rise in accounts payable of $1.5 million due
to timing of money disbursements.
Money Flows utilized in Investing Actions
Throughout 2021, money utilized in investing actions was $75.Zero million, consisting
primarily of $71.Zero million in money paid for enterprise acquisitions, internet, and $4.1
million in purchases of property and gear.
Throughout 2020, money utilized in investing actions was $4.Zero million, consisting
primarily of $3.9 million in purchases of property and gear.
Money Flows from Financing Actions
Throughout 2021, money supplied by financing actions was $1.5 million, consisting
of $10.1 million of proceeds from issuance of fairness associated to share points
pursuant to our Worker Inventory Buy Plan and $7.6 million of the proceeds
from train of inventory choices, partially offset by $10.2 million in funds
for partial conversion of the Notes and $6.1 million in vesting of restricted
inventory models, primarily associated to tax funds funded within the type of internet
issuances.
Throughout 2020, money supplied by financing actions was $12.5 million, consisting
of $7.Four million of proceeds from issuance of fairness associated to share points
pursuant to our Worker Inventory Buy Plan and $6.Zero million of the proceeds
from train of inventory choices, partially offset by $0.Eight million in vesting of
restricted inventory models, primarily associated to tax funds funded within the type of
internet issuances for sure govt officers.
Essential Accounting Estimates
Our consolidated monetary statements are ready in accordance with GAAP. The
preparation of those monetary statements requires our administration to make
estimates and assumptions that have an effect on the reported quantities of belongings,
liabilities, income, prices and bills and associated disclosures. Our estimates
are based mostly on our historic expertise and on varied different components that we
imagine are cheap below the circumstances, the outcomes of which kind the
foundation for making judgments concerning the carrying worth of belongings and liabilities
that aren’t readily obvious from different sources. Precise outcomes might differ from
these judgments and estimates below completely different assumptions or situations and any
such variations could also be materials. To the extent that there are variations
between our estimates and precise outcomes, our future monetary assertion
presentation, monetary situation, outcomes of operations and money flows will likely be
affected.
43
——————————————————————————–
Desk of Contents
We imagine that the accounting insurance policies related to truthful worth allocation of
a number of efficiency obligation in income recognition, the anticipated interval of
advantage of deferred contract acquisition prices, earnings taxes, and the valuation,
impairment and estimated helpful lives of long-lived belongings and goodwill arising
from enterprise mixtures are essentially the most vital areas involving administration’s
judgments and estimates. Due to this fact, these are thought of to be our important
accounting insurance policies and estimates. For additional info on all of our
vital accounting insurance policies, see Be aware 1 “Description of Enterprise and Abstract
of Important Accounting Insurance policies” in our notes to our consolidated monetary
statements included on this Annual Report.
Income Recognition
Income consists of charges for perpetual and time period licenses for our software program
merchandise, SaaS subscriptions, post-contract buyer assist (known as
upkeep and assist), different subscription companies, skilled companies
which incorporates coaching and different income. We derive license income by means of the
sale of our on-premises software program license agreements. We sometimes acknowledge
license income upon delivering the relevant license. We derive subscription
income by means of the sale of our SaaS subscription, upkeep and assist and
different subscription companies choices. We sometimes acknowledge subscription
income ratably over the contract time period. We derive companies and different income
primarily by means of the sale {of professional} companies. We sometimes acknowledge
companies and different income over time because the companies are carried out.
We apply judgment relating to contracts with a number of product and repair
obligations to find out whether or not every services or products is able to being a
distinct efficiency obligation within the contract. If services are
not distinct, they’re mixed till a single distinct obligation is created.
Figuring out whether or not services are thought of distinct efficiency
obligations that ought to be accounted for individually versus collectively might require
vital judgment. We now have contracts with prospects which will have a number of
efficiency obligations, together with some or the entire following: software program
licenses, SaaS subscriptions, upkeep and assist, different subscription
companies {and professional} companies.
Judgment is required to find out the standalone promoting value (“SSP”) for every
distinct efficiency obligation. We use a single quantity to estimate SSP for
objects that aren’t bought individually. We use a spread to find out SSP based mostly on the
promoting value of the services when bought individually. The SSP vary
is used to allocate the whole transaction value to every efficiency obligation
in a contract and to use a reduction that will likely be allotted based mostly on the
relative SSP of the assorted services.
After we should not have a immediately observable SSP for a specific product or
service, we estimate SSP by our general pricing targets, taking into
consideration market components, pricing practices together with historic
discounting, historic standalone gross sales of comparable merchandise, buyer
demographics, geographic places, and the quantity and forms of customers inside our
contracts. The dedication of SSP utilizing the adjusted market evaluation
strategy is made by the Firm’s administration.
Though our SSP has not modified materially from 2020 to 2021, we might modify our
go-to-market practices sooner or later, which can lead to modifications to SSP for one
or extra of our efficiency obligations. Any such modifications to SSP might affect the
sample and timing of income recognition for equivalent preparations executed in
future durations however is not going to change the whole income acknowledged for any given
association.
The Firm usually has standalone worth for our skilled companies and
acknowledge income as companies are carried out based mostly on an estimated truthful worth as
a separate efficiency obligation.
We allocate the transaction value to every efficiency obligation recognized in
the contract on a relative SSP foundation and acknowledge income when or as we fulfill
a efficiency obligation by transferring management of a services or products to a
buyer.
Deferred Contract Acquisition Prices
Gross sales commissions paid to our gross sales drive and the associated employer payroll
taxes, collectively “deferred contract acquisition prices,” are thought of
incremental and recoverable prices of acquiring a contract with a buyer. The
Firm capitalizes and amortizes deferred contract acquisition prices over an
anticipated interval of profit. The Firm has decided the anticipated interval of
profit to be 5 years. The anticipated interval of profit was decided by
considering our buyer contracts, buyer turnover charges, the
lifetime of our expertise and different components. As well as, the Firm pays gross sales
commissions for renewals of time period licenses and subscription choices at a decrease
charge, which is due to this fact not commensurate with commissions paid on an preliminary
sale and are amortized over every renewal’s interval of profit. The Firm
periodically evaluations the amortization durations of its deferred contract
acquisition prices and can replace such amortization interval when there’s a
44
——————————————————————————–
Desk of Contents
vital change in its anticipated timing of switch to the client of the
services or products. Such modifications within the amortization interval might materially
have an effect on amortization quantities of deferred contract acquisition prices.
Earnings Taxes
We account for unsure tax positions based mostly on these positions taken or
anticipated to be taken in a tax return. We decide if the quantity of accessible
assist signifies that it’s extra seemingly than not that the tax place will likely be
sustained on audit, together with decision of any associated appeals or litigation
processes. We then measure the tax profit as the biggest quantity that’s extra
than 50% prone to be realized upon settlement. We modify reserves for our
unsure tax positions attributable to altering info and circumstances. To the extent
that the ultimate final result of those issues is completely different than the quantities recorded,
such variations will affect our tax provision in our consolidated statements of
operations within the interval through which such dedication is made.
Deferred tax belongings are repeatedly assessed to find out the chance they’ll
be realized from future taxable earnings. Valuation allowances are established if
it’s extra seemingly than not that some or the entire deferred tax belongings is not going to
be realized. In evaluating our capability to understand deferred tax belongings, we
think about all out there constructive and detrimental proof together with historic and
projected pre-tax e book earnings, scheduled reversals of deferred tax
liabilities, and the affect of any possible and prudent tax planning methods.
Goodwill, Intangibles, and Different Lengthy-Lived Belongings
We allocate the truthful worth of buy consideration to the tangible belongings
acquired, liabilities assumed, and intangible belongings acquired based mostly on their
estimated truthful values on the acquisition date. The surplus of the truthful worth of
buy consideration over the truthful values of those identifiable belongings and
liabilities is recorded as goodwill. Acknowledged goodwill pertains partly to the
worth of the anticipated synergies to be derived from combining the operations of
the companies we purchase together with the worth of the acquired workforce. Such
valuations require administration to make vital estimates and assumptions,
particularly with respect to intangible belongings. Important estimates in valuing
sure intangible belongings might embody, however usually are not restricted to, future anticipated
money flows from acquired customers, acquired expertise, and commerce names from a
market participant perspective, helpful lives and low cost charges. Administration’s
estimates of truthful worth are based mostly upon assumptions believed to be cheap,
however that are inherently unsure and unpredictable and, because of this, precise
outcomes might differ from estimates. It’s doable that the judgments and
estimates described above might change in future durations.
We use estimates, assumptions, and judgments when assessing the recoverability
of goodwill and bought intangible belongings. We check for impairment on an annual
foundation, or extra regularly if a big occasion or circumstance signifies
impairment. We additionally consider the estimated remaining helpful lives of acquired
intangible belongings for modifications in circumstances that warrant a revision to the
remaining durations of amortization. For functions of assessing potential
impairment of goodwill, we estimate the truthful worth of the reporting unit, based mostly
on our market capitalization, and examine this quantity to the carrying worth of
the reporting unit. If we decide that the carrying worth of the reporting
unit exceeds its truthful worth, an impairment cost can be required. We now have
decided that we function as one reporting unit and will first assess
qualitative components to find out whether or not the existence of occasions or
circumstances point out that an impairment check on goodwill is required. Goodwill
is examined on an annual foundation as of October 31, or sooner if an indicator of
impairment happens. The Firm internally displays enterprise and market
situations for proof of triggering occasions for goodwill and bought
intangible belongings. Such occasions or modifications in circumstances embody, however usually are not
restricted to, a big lower within the truthful worth of the underlying asset or
asset group, a big hostile change within the extent or method through which a
long-lived asset or asset group is getting used or in its bodily situation, an
accumulation of prices and sources in extra of the unique expectation, or a
vital change within the operations of the acquired belongings or use of an asset
or asset group. Adjustments in these estimates and assumptions might materially
have an effect on the dedication of truthful worth and goodwill impairment for our reporting
unit.
Throughout the 12 months ended December 31, 2021, the Firm recorded an impairment
cost of $0.7 million associated to sure developed expertise belongings attributable to a
lower within the truthful worth of the underlying belongings. Throughout the 12 months ended
December 31, 2020, the Firm recorded an impairment cost of $5.1 million
associated to sure developed expertise belongings attributable to our strategic determination to
discontinue additional funding and enhancements within the standalone current
expertise.
Latest Accounting Pronouncements
For an outline of our lately adopted accounting pronouncements and lately
issued accounting requirements not but adopted, see Be aware 1 “Description of Enterprise
and Abstract of Important Accounting Insurance policies” in our notes to our consolidated
monetary statements included on this Annual Report.
45
——————————————————————————–
Desk of Contents
© Edgar On-line, supply Glimpses