Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had ~~89,211,098~~90,185,976 shares of common stock outstanding as of ~~October 31, 2019.~~April 30, 2020.

	As of					As of
	September 30, 2019			December 31, 2018		March 31, 2020			December 31, 2019
	(In thousands, except per share data)					(In thousands, except per share data)
	(Unaudited)					(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	464,332		$	70,964	$	461,191		$	443,795
Restricted cash		6,317			6,272		6,321			6,325
Accounts receivable		73,671			101,469
Accounts receivable, net of allowance							74,658			106,428
Prepayments and other current assets		25,932			21,850		26,246			27,870
Income tax receivable		2,465			—
Total current assets		572,717			200,555		568,416			584,418
Property and equipment, net		21,616			19,268		19,998			21,300
Right-of-use assets		30,321			—
Other non-current assets		23,389			20,374
Right-of-use assets, net							30,224			31,104
Other non-current assets, net of allowance							30,371			30,554
Goodwill		219,377			219,377		241,121			241,051
Intangible assets, net		67,867			74,860		78,404			81,651
Total assets	$	935,287		$	534,434	$	968,534		$	990,078
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	2,632		$	4,636	$	2,508		$	3,224
Accrued expenses and other liabilities		28,937			21,731		25,629			40,214
Income taxes payable		—			2,143		1,120			1,994
Deferred revenue		103,317			95,919		120,782			127,132
Total current liabilities		134,886			124,429		150,039			172,564
Deferred tax liability - non-current		16,073			4,142		8,787			8,900
Convertible senior notes, net		304,777			—		313,377			309,051
Long-term operating lease liabilities		37,889			9,788		36,929			38,035
Other long-term liabilities							2,500			2,500
Deferred revenue - non-current		20,521			18,382		24,198			24,901
Total liabilities		514,146			156,741		535,830			555,951
Commitments and contingencies (Note 5)
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.0001 par value, authorized 300,000 shares, issued and outstanding 89,196 shares at September 30, 2019 and 87,512 shares at December 31, 2018		9			9
Preferred stock, $0.0001 par value, authorized 10,000 shares, 0 shares issued and outstanding at September 30, 2019 and December 31, 2018		—			—
Common stock, $0.0001 par value, authorized 300,000 shares, issued and outstanding 90,169 shares as of March 31, 2020 and 89,676 shares as of December 31, 2019							9			9
Preferred stock, $0.0001 par value, authorized 10,000 shares, 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019							—			—
Additional paid in capital		434,840			377,473		449,760			442,407
(Accumulated deficit) retained earnings		(13,708	)		211
Accumulated deficit							(17,065	)		(8,289	)
Total stockholders' equity		421,141			377,693		432,704			434,127
Total liabilities and stockholders’ equity	$	935,287		$	534,434	$	968,534		$	990,078

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
	(In thousands, except per share data)												(In thousands, except per share data)
	(Unaudited)												(Unaudited)
Revenue
Licenses	$	26,825		$	28,023		$	64,827		$	64,451		$	21,004		$	18,669
Subscription		37,383			27,916			102,929			74,531			43,881			31,835
Services and other		11,671			9,796			31,760			29,350			10,557			10,079
Total revenue		75,879			65,735			199,516			168,332			75,442			60,583
Cost of revenue
Licenses		1,083			1,145			3,157			3,543			1,080			1,059
Subscription		6,862			5,252			18,990			14,829			8,476			5,813
Services and other		8,985			7,617			25,361			21,788			9,006			7,997
Total cost of revenue		16,930			14,014			47,508			40,160			18,562			14,869
Gross profit		58,949			51,721			152,008			128,172			56,880			45,714
Operating expenses
Research and development		14,148			11,474			40,318			31,351			15,808			12,772
General and administrative		10,192			8,763			27,819			24,163			9,514			9,137
Sales and marketing		33,274			26,701			99,298			72,934			36,860			30,488
Total operating expenses		57,614			46,938			167,435			128,448			62,182			52,397
Income (loss) from operations		1,335			4,783			(15,427	)		(276	)
Loss from operations														(5,302	)		(6,683	)
Other expense, net:
Interest income (expense), net		10			(202	)		282			(4,180	)
Interest income														1,272			46
Interest expense														(4,532	)		(35	)
Other, net		(295	)		(388	)		(1,018	)		(1,104	)		(324	)		(417	)
Total other expense, net		(285	)		(590	)		(736	)		(5,284	)		(3,584	)		(406	)
Income (loss) before income taxes		1,050			4,193			(16,163	)		(5,560	)
Loss before income taxes														(8,886	)		(7,089	)
Income tax (expense) benefit		2,618			(2,385	)		2,244			4,087			469			(1,301	)
Net income (loss)	$	3,668		$	1,808		$	(13,919	)	$	(1,473	)
Net income (loss) available to common stockholders	$	3,668		$	1,793		$	(13,919	)	$	(1,473	)
Net income (loss) per share
Net loss													$	(8,417	)	$	(8,390	)
Net loss available to common stockholders													$	(8,417	)	$	(8,390	)
Net loss per share
Basic	$	0.04		$	0.02		$	(0.16	)	$	(0.02	)	$	(0.09	)	$	(0.10	)
Diluted	$	0.04		$	0.02		$	(0.16	)	$	(0.02	)	$	(0.09	)	$	(0.10	)
Weighted average shares outstanding
Basic		89,143			86,825			88,739			86,268			89,862			88,295
Diluted		90,808			90,355			88,739			86,268			89,862			88,295

See accompanying notes to unaudited condensed consolidated financial statements.

For the Three Months Ended September 30, 2019

Common Stock

Additional

Number
of shares

Par
value

paid in
capital

Accumulated
deficit

Stockholders'
equity

(In thousands)

(Unaudited)

Balance at June 30, 2019

89,050

$
9

$
391,841

$
(17,376
)

$
374,474

Exercise of stock options

130

—

764

—

764

Restricted stock units vested, net of tax settlement

16

—

—

—

—

Stock-based compensation expense

—

—

4,489

—

4,489

Equity component of convertible senior notes, net of issuance costs

—

—

86,764

—

86,764

Purchase of capped calls

—

—

(37,080
)

—

(37,080
)
Deferred tax liability related to issuance of convertible senior notes and capped calls

—

—

(11,938
)

—

(11,938
)
Net income

—

—

—

3,668

3,668

Balance at September 30, 2019

89,196

$
9

$
434,840

$
(13,708
)

$
421,141

	For the Three Months Ended March 31, 2020
	Common Stock				Additional
	Number of shares		Par value		paid in capital			Accumulated deficit			Stockholders' equity
	(In thousands)
	(Unaudited)
Balance at December 31, 2019		89,676	$	9	$	442,407		$	(8,289	)	$	434,127
Cumulative effect adjustment from the adoption of ASC 326, net of tax		—		—		—			(359	)		(359	)
Exercise of stock options		228		—		1,317			—			1,317
Restricted stock units vested, net of tax settlement		265		—		(155	)		—			(155	)
Stock-based compensation expense		—		—		6,191			—			6,191
Net loss		—		—		—			(8,417	)		(8,417	)
Balance at March 31, 2020		90,169	$	9	$	449,760		$	(17,065	)	$	432,704

For the Nine Months Ended September 30, 2019

Common Stock

Additional

Retained
earnings

Number
of shares

Par
value

paid in
capital

(accumulated
deficit)

Stockholders'
equity

(In thousands)

(Unaudited)

Balance at December 31, 2018

87,512

$
9

$
377,473

$
211

$
377,693

Exercise of stock options

618

—

2,560

—

2,560

Restricted stock units vested, net of tax settlement

140

—

—

—

—

Stock-based compensation expense

—

—

14,098

—

14,098

Incentive units vested

724

—

37

—

37

Common stock issued under employee stock plan

202

—

2,926

—

2,926

Equity component of convertible senior notes, net of issuance costs

—

—

86,764

—

86,764

Purchase of capped calls

—

—

(37,080
)

—

(37,080
)
Deferred tax liability related to issuance of convertible senior notes and capped calls

—

—

(11,938
)

—

(11,938
)
Net loss

—

—

—

(13,919
)

(13,919
)
Balance at September 30, 2019

89,196

$
9

$
434,840

$
(13,708
)

$
421,141

	For the Three Months Ended March 31, 2019
	Common Stock				Additional		Retained earnings
	Number of shares		Par value		paid in capital		(accumulated deficit)			Stockholders' equity
	(In thousands)
	(Unaudited)
Balance at December 31, 2018		87,512	$	9	$	377,473	$	211		$	377,693
Exercise of stock options		271		—		1,172		—			1,172
Restricted stock units vested, net of tax settlement		91		—		—		—			—
Stock-based compensation expense		—		—		4,639		—			4,639
Vested incentive units converted to common stock		724		—		37		—			37
Net loss		—		—		—		(8,390	)		(8,390	)
Balance at March 31, 2019		88,598	$	9	$	383,321	$	(8,179	)	$	375,151

See accompanying notes to unaudited condensed consolidated financial statements.

For the Three Months Ended September 30, 2018

Common Stock

Additional

Number
of shares

Par
value

paid in
capital

Accumulated
deficit

Stockholders'
equity

(In thousands)

(Unaudited)

Balance at June 30, 2018

86,596

$
9

$
363,817

$
(6,740
)

$
357,086

Exercise of stock options

152

—

364

—

364

Restricted stock units vested, net of tax settlement

3

—

—

—

—

Stock-based compensation expense

—

—

4,883

—

4,883

Incentive units vested

254

—

15

—

15

Net income

—

—

—

1,808

1,808

Balance at September 30, 2018

87,005

$
9

$
369,079

$
(4,932
)

$
364,156

For the Nine Months Ended September 30, 2018

Common Stock

Additional

Number
of shares

Par
value

paid in
capital

Accumulated
deficit

Stockholders'
equity

(In thousands)

(Unaudited)

Balance at December 31, 2017

84,948

$
8

$
353,609

$
(25,220
)

$
328,397

Cumulative effect adjustment from the adoption of ASC 606

—

—

—

21,761

21,761

Exercise of stock options

517

—

1,257

—

1,257

Restricted stock units vested, net of tax settlement

54

—

—

—

—

Stock-based compensation expense

—

—

14,138

—

14,138

Incentive units vested

1,486

1

75

—

76

Net loss

—

—

—

(1,473
)

(1,473
)
Balance at September 30, 2018

87,005

$
9

$
369,079

$
(4,932
)

$
364,156

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

	Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
	(In thousands)						(In thousands)
	(Unaudited)						(Unaudited)
Operating activities
Net loss	$	(13,919	)	$	(1,473	)	$	(8,417	)	$	(8,390	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		10,562			7,977			4,586			3,303
Amortization of debt discount and issuance costs		376			220			4,367			10
Amortization of contract acquisition costs		7,346			5,556			3,004			2,166
Loss on modification and partial extinguishment of debt		—			1,536
Loss (gain) on disposal of fixed assets		17			(36	)		124			(3	)
Bad debt expense		183			299
Credit loss expense								127			—
Stock-based compensation expense		14,098			14,138			6,191			4,639
Operating leases, net		301			—			(71	)		251
Deferred taxes		(7	)		—			(113	)		—
Net changes in operating assets and liabilities
Accounts receivable		27,615			1,487			31,284			30,313
Prepayments and other current assets		(11,430	)		(8,140	)		(1,380	)		(3,007	)
Other non-current assets		(2,279	)		(1,567	)		142			(1,296	)
Accounts payable		(2,004	)		805			(716	)		(1,241	)
Accrued expenses and other liabilities		3,866			(5,155	)		(14,742	)		(6,482	)
Income taxes		(4,608	)		(5,087	)		(874	)		1,120
Deferred revenue		9,537			19,798			(7,053	)		(4,155	)
Net cash provided by operating activities		39,654			30,358			16,459			17,228
Investing activities
Purchase of property and equipment		(5,096	)		(4,030	)		(239	)		(2,306	)
Proceeds from sale of property and equipment		21			25			10			11
Net cash used in investing activities		(5,075	)		(4,005	)		(229	)		(2,295	)
Financing activities
Payment of debt issuance costs		(9,572	)		—			—			(829	)
Proceeds from issuance of convertible senior notes		400,000			—
Purchases of capped calls		(37,080	)		—
Repayment of debt		—			(60,000	)
Prepayment penalty and fees		—			(300	)
Repurchase of equity shares		—			(1	)
Proceeds from employee stock purchase plan contributions		2,926			—
Taxes associated with net issuances of shares upon vesting of restricted stock units								(155	)		—
Exercise of stock options		2,560			1,257			1,317			1,172
Net cash provided by (used in) financing activities		358,834			(59,044	)
Net increase (decrease) in cash, cash equivalents and restricted cash		393,413			(32,691	)
Net cash provided by financing activities								1,162			343
Net increase in cash, cash equivalents and restricted cash								17,392			15,276
Cash, cash equivalents and restricted cash, beginning of period		77,236			116,127			450,120			77,236
Cash, cash equivalents and restricted cash, end of period	$	470,649		$	83,436		$	467,512		$	92,512

See accompanying notes to unaudited condensed consolidated financial statements.

1. ~~Organization and~~ Description of Business and Summary of Significant Accounting Policies

SailPoint Technologies Holdings, Inc. (“we,” “our,” “the Company” or “SailPoint”) was incorporated in the state of Delaware on August 8, 2014, in preparation for the purchase of SailPoint Technologies, Inc. The purchase occurred on September 8, 2014 and our certificate of incorporation was amended and restated as of such date. SailPoint Technologies, Inc. was formed July 14, 2004 as a Delaware corporation. The Company designs, develops and markets identity governance software that helps organizations govern user access to critical systems and data. The Company currently markets its products and services worldwide.

The accompanying unaudited condensed consolidated ~~interim~~ financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with ~~Article 10 of Regulation S-X, “Interim Financial Statements”~~U.S. generally accepted accounting principles (“GAAP”) as well as the instructions to Form 10-Q and the rules and regulations ~~for Form 10-Q~~ of the U.S. Securities and Exchange Commission (the “SEC”)~~. Pursuant to those rules and regulations,~~, for interim reporting. Accordingly, the Company has condensed or omitted certain information and footnote disclosures it normally ~~includes~~included in ~~its annual consolidated~~the financial statements prepared in accordance with ~~U.S. generally accepted accounting principles (“GAAP”).~~GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of stockholders’ equity and the statements of cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, ~~2019~~2020 or any future period. Our unaudited condensed consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on March 18, 2019 (the “Annual Report”).

These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and accompanying notes ~~thereto~~included in the Company’s Annual ~~Report. All intercompany accounts and transactions have been eliminated in consolidation.~~Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 24, 2020 (the “Annual Report”).

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, we make estimates with respect to the fair value allocation of multiple performance obligation in revenue recognition, the valuation allowance based on expected credit losses and the collectability of accounts receivable, valuation and estimated useful lives of long-lived assets, fair value of the liability and equity components of the Notes (as defined below), stock-based compensation expense and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon periodic evaluation. Actual results could differ from those estimates.

We consider all highly liquid investments with an original maturity of three months or less from date of purchase to be cash equivalents. The Company is required to maintain a small amount of restricted cash to guarantee rent payments in a foreign subsidiary as well as $6.0 million of cash collateral for an unconditional standby letter of credit related to the Company’s corporate headquarters lease.

The Company operates as 1 operating segment. The Company’s chief operating decision makers review financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment, and derives revenues from licensing of software, subscription and renewals, sale of professional services, maintenance and technical support.

~~The following table sets forth the Company’s consolidated revenue by geography:~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. As of ~~September 30,~~March 31, 2020 and December 31, 2019, no single ~~entity~~customer represented more than 10% of the balance in accounts receivable. ~~As of December 31, 2018, 11%, of the Company’s accounts receivable was from one customer.~~ Management considers concentration of credit risk to be minimal with respect to accounts receivable due to the positive historical collection experience of the ~~Company despite the geographic concentrations related to the Company’s customers.~~Company. No single customer represented more than 10% of revenue for the three ~~and nine~~ months ended ~~September 30, 2019 and 2018.~~March 31, 2020 or 2019. The Company does not experience concentration of credit risk in foreign countries as no single foreign country represents more than 10% of the Company’s consolidated revenues or net assets.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report, most notably Note 2 “Summary of Significant Accounting Policies”. ~~In 2019, the Company adopted Accounting Standards Update 2016-02, “Leases” (“ASU 2016-02”) using the modified retrospective approach. For information regarding ASU 2016-02, please refer to~~ ~~Note 5 “Commitments and Contingencies”below.~~

~~As previously disclosed in the Company’s Quarterly Report on Form 10-Q~~Except for the ~~quarter ended June 30, 2019, which was filed with the SEC on August 6, 2019 (the “Second Quarter Quarterly Report”), while~~adoption of ASU 2016-13 described below, there ~~are~~have been no changes to ~~the~~our significant accounting ~~policy the Company provides the following additional clarification regarding the revenue for~~ ~~fixed price services~~policies described in our Annual Report that have had a material impact on our consolidated condensed financial statements and prepaids that are recognized over time using input methods to estimate progress to completion. For services that are contracted for at a fixed price, progress is generally measured based on hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations. For services that are contracted on a time and materials or prepaid basis, progress is generally based on actual hours expended. These input methods (e.g. hours incurred or expended) are considered a faithful depiction of our efforts to satisfy services contracts as they represent the performance obligation consumed by the customer and performed by the entity and therefore reflect the transfer of services to a customer under such contracts.

~~As previously disclosed in the Second Quarter Quarterly Report, while there are no changes to the accounting policy~~ the Company provides the following additional clarification regarding the incremental costs of obtaining a contract, such as deferred sales commission costs, in particular upon contract renewals. The Company typically pays sales commissions for both initial and follow-on sales of perpetual licenses, inclusive of initial maintenance, term licenses and subscription offerings. Initial commissions are allocated to each performance obligation within the contract. The portion allocated to the perpetual license element is expensed at the time the license is delivered. Commissions allocated to the remaining elements are capitalized and amortized over an expected period of benefit. The Company has determined the expected period of benefit to be approximately five years. In addition, the Company pays sales commissions for renewals of term licenses and subscription offerings at a lower rate, which is therefore not commensurate with commissions paid on an initial sale. These renewal commissions are amortized over each renewal’s contractual term. The Company does not pay sales commissions on renewals of maintenance agreements related to perpetual licenses.notes.

Recently ~~Issued~~Adopted Accounting ~~Standards Not Yet Adopted~~Pronouncements

In August 2018, the Financial Accounting Standards Board ~~(FASB)~~(“FASB”) issued Accounting Standard Update ~~(ASU)~~(“ASU”) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15), which clarifies the accounting for

implementation costs in cloud computing ~~arrangements.~~arrangements (“CCAs”). ASU 2018-15 is effective for public entities for annual periods, including interim periods within those annual periods beginning after December 15, 2019 and earlier adoption is permitted. We adopted the standard effective January 1, 2020, using the prospective approach. This adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The Company evaluates if the CCA includes a license to internal-use software. If the CCA includes a software license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the CCA does not ~~plan to early adopt, and therefore plans to adopt~~include a software license, the Company accounts for the ~~annual period beginning after December 15, 2019 on~~arrangement as a ~~prospective basis. The Company is currently evaluating~~service contract (or hosting arrangement) and hosting costs are generally expensed as incurred.

With the ~~impact~~adoption of ASU 2018-15, ~~although it does~~the Company evaluates upfront costs including implementation, set-up or other costs (collectively, implementation costs) for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized. Capitalized implementation costs are recorded in prepayments and other current assets or other non-current assets and amortized over the expected term of the arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewal options. During the three months ended March 31, 2020, the Company’s capitalized implementation costs related to hosting arrangements were not ~~expect a material effect on the consolidated financial statements.~~material.

In June 2016, the FASB issued ASU 2016-13, “~~Financial~~“Financial Instruments—Credit Losses ~~(Topic~~(Accounting Standards Codification or ASC 326).” This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ~~ASU 2016-13 is effective for public entities for annual periods, including interim periods within those annual periods beginning after December 15, 2019 and earlier adoption is permitted.~~ The Company does not plan to early adopt, and therefore plans to adopt for the annual period beginning after December 15, 2019 on a modified retrospective basis. The Company is currently evaluating the impact of the pending adoption of ASU 2016-13 on our consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02 and subsequent updates thereafter in ASU 2017-13, ASU 2018-10 and ASU 2018-11,~~ ~~Leases~~ (collectively, Accounting Standards Codification 842 or ASC 842). This standard requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities for all leases, including operating leases, with a term greater than 12 months on its balance sheet. Thenew standard also expands the required quantitative and qualitative disclosures surrounding ~~leases.~~expected credit losses.

On January 1, ~~2019,~~2020, we adopted ASC ~~842~~326 using the modified retrospective transition method,with certain practical expedients available for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the condensed consolidated financial statements. SailPoint evaluated whether any which requires a cumulative adjustment, ~~is required~~if applicable, to be recorded to retained earnings as a result of applying the provisions set forth under ASC 842 for any existing arrangements not yet completed as of January 1, 2019. Adoption of ASC 842 did not result in a cumulative adjustment to retained earnings as of January 1, 2019.accumulated deficit. In addition, it is important to note that under the modified retrospective transition method, our prior period results were not recast to reflect the new standard. We ~~elected certain practical expedients and~~ implemented internal controls and key system functionality to enable the preparation of financial information upon adoption.

~~The adoption of the new standard represents~~We recorded a change in accounting principle with the intent to increase transparency and comparability among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet. Most prominent among the changescumulative adjustment in the ~~standard is the recognition~~amount of ~~ROU assets and lease liabilities by lessees for those leases classified~~$0.4 million, net of tax impact, to accumulated deficit as ~~operating leases. Under the standard, disclosures are required to meet the objective~~ of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We have made an accounting policy election not to recognize ROU assets and lease liabilities that arise from short-term leases for any class of underlying asset.

~~The standard~~January 1, 2020. This adoption did not have a material impact on our condensed consolidated ~~statements~~statement of operations or ~~statements~~statement of cash flows. ~~However, upon adoption of ASC 842 the opening impact on our condensed consolidated balance sheets was not material, but it~~ ~~resulted in recording ROU assets and an increase in total lease liabilities of $3.5 million~~ ~~for operating leases for physical office space.~~

In ~~June 2018,~~December 2019, the FASB issued ASU ~~2018-07,~~ ~~Compensation—Stock Compensation (ASC 718): Improvements~~2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes.” The guidance removes exceptions to ~~Nonemployee Share-Based Payment Accounting (ASU 2018-07), which simplifies~~ the general principles in Topic 740 for allocating tax expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments and interim period income tax accounting for ~~share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. ASU 2018-07 is~~year-to-date losses that exceed projected losses. The guidance becomes effective for ~~public companies for fiscal years~~annual reporting periods beginning after December 15, ~~2018, including~~2020 and interim periods within ~~that~~those fiscal ~~year.~~years with early adoption permitted in the first period of the year this guidance is adopted. We adopted the standard effective January 1, ~~2019,~~2020, using the prospective approach except for hybrid tax regimes, which we adopted using the modified retrospective approach. This adoption ~~resulted in no~~did not have a material impact on the Company’s condensed consolidated financial statements.

~~During the year ended December 31, 2018, we adopted ASU 2014-09,~~ ~~Revenue from Contracts with Customers (ASC 606)~~ and subsequent amendments to the initial guidance collectively, ASC 606, utilizing the modified retrospective method of transition whereby the results and related disclosures for the comparative 2018 periods presented in this Form 10-Q were recast and are now presented as if ASC 606 had been in effect beginning January 1, 2018 with modified retrospective adjustments applicable prior to January 1, 2018 included as a cumulative adjustment to retained earnings. Refer to Note 2 “Summary of Significant Accounting Policies” and Note 3 “Revenue Recognition” in our Annual Report for accounting policy updates and adoption of ASC 606.

The Company’s revenue by geographic region based on the customer’s location is presented in Note ~~2 “Summary of Significant Accounting Policies” above.~~13 “Segment and Geographic Information”.

The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of ~~control:~~control and cash flows:

	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
					Services						Services		Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	License		Subscription		and other		License		Subscription		and other		Licenses		Subscription		Services and other		Licenses		Subscription		Services and other
	(in thousands)												(In thousands)
Timing of revenue recognition
Revenue recognized at a point in time	$	64,827	$	—	$	—	$	64,451	$	—	$	—	$	21,004	$	—	$	—	$	18,669	$	—	$	—
Revenue recognized over time		—		102,929		31,760		—		74,531		29,350		—		43,881		10,557		—		31,835		10,079
Total revenue	$	64,827	$	102,929	$	31,760	$	64,451	$	74,531	$	29,350	$	21,004	$	43,881	$	10,557	$	18,669	$	31,835	$	10,079

A summary of the activity impacting our contract balances during the ~~nine months ended September 30, 2019~~reporting periods is presented ~~below (in thousands):~~below:

	Contract acquisition costs			Contract Acquisition Costs
Balances at December 31, 2018	$	28,043
				Three Months Ended
				March 31, 2020			March 31, 2019
				(In thousands)
Beginning Balance				$	35,152		$	28,043
Additional deferred contract acquisition costs		9,700			2,806			2,052
Amortization of deferred contract acquisition costs		(7,346	)		(3,004	)		(2,166	)
Balances at September 30, 2019	$	30,397
Ending Balance				$	34,954		$	27,929

As of March 31, 2020, and December 31, 2019, $11.0 million and $10.9 million, respectively, of our deferred contract acquisition costs are included in prepayments and other current assets as they are expected to be amortized within the next 12 months. The remaining amount of our deferred contract acquisition costs are included in other non-current assets.There were 0 material impairments of deferred contract acquisition costs for the periods ended March 31, 2020 or 2019.

Deferred revenue, which is a contract liability, consists primarily of ~~payments received~~amounts invoiced in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, revenue recognized that was previously deferred was ~~approximately $47.2~~$46.8 million and ~~$94.4~~$37.5 million, respectively, compared to revenue recognized that was previously deferred of approximately $29.8 million and $62.6 million during the three months ended September 30, 2018 and the period from January 1, 2018, the date of ASC 606 adoption, to September 30, 2018, respectively. The difference between the opening and closing balances of the Company’s contract assets and deferred revenue primarily results from the timing difference between the Company’s performance and the customer billings.

Contract assets primarily relate to unbilled amounts, which are netted with deferred revenue at contract level, and typically result from sales contracts when revenue recognized exceeds the amount billed to the customer, and the right to payment is subject to more than the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional and the customer is billed. Contract assets are included in prepayments and other current assets and other non-current assets in the condensed consolidated balance sheets. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ amounts reclassified from contract assets to accounts receivable were ~~approximately $2.5~~$1.5 million and ~~$4.8~~$1.4 million, respectively. There were 0 material impairments of contract assets during the periods ended ~~September 30, 2019~~March 31, 2020 or ~~2018.~~2019.

Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These remaining performance obligations represent contract revenue that has not yet been recognized and is included in deferred revenue, the balance of which includes both invoices that have been issued to customers but have not been recognized as revenue and amounts that will be invoiced and recognized as revenue in future periods. As of ~~September 30, 2019,~~March 31, 2020, amounts allocated to these additional performance obligations are ~~$181.5~~$215.9 million, of which we expect to recognize ~~$122.8~~$143.6 million as revenue over the next 12 months with the remaining balance recognized thereafter.

The allowance for expected credit losses is a valuation account that is deducted from the ~~Costs~~financial asset’s amortized cost basis to ~~Obtain our Contracts with Customers~~

As of September 30, 2019, and December 31, 2018, $9.7 million and $8.4 million, respectively, of our deferred contract acquisition costs are included in prepayments and other current assets as they arepresent the net amount expected to be ~~amortized within~~collected on contracts with customers. Accounts receivable and contract assets are written off when management believes non-collectability is confirmed. Recoveries of financial assets previously written off shall be recorded when received against the ~~next 12 months.~~credit loss expense.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts over a financial asset’s contractual term. The remaining amount of our deferred contract acquisition costs are included in other non-current assets. The balance of deferred contract acquisition costs, which primarily consists of cumulative capitalized costs to obtain contracts was $30.4 million and $28.0 million at September 30, 2019 and December 31, 2018, respectively. ForCompany’s historical credit loss experience provides the ~~three and nine months ended September 30, 2019, amortization of deferred contract acquisition costs of $2.6 million and $7.3 million was recorded~~basis for the ~~respective periods. For~~estimation of expected credit losses. Adjustments to historical loss information are made from qualitative and quantitative factors if economic conditions at the ~~three and nine months ended September 30, 2018, amortization~~reporting date reflect stronger or weaker economic performance than the historical data implies based on management’s expectations of deferred contract acquisition costs of $2.2 million and $5.6 million was recorded for the respective periods. There were 0 material impairments of assets related to deferred contract acquisition costs during the periods ended September 30, 2019 and 2018.economic conditions on certain

indicators of the Company, industry and economy. We review factors such as past collection experience, age of the accounts receivable balance, significant trends in current balances, internal operations and macroeconomic conditions. As of March 31, 2020, SailPoint evaluated these economic conditions and made adjustments to historical loss information for certain economic risk factors, such as COVID-19.

In development of the expected credit loss model, we evaluated our financial assets with similar risk characteristics on a collective (pool) basis for their respective estimated and expected credit loss allowance. A financial asset will be measured individually only if it does not share similar risk characteristics with other financial assets. We believe that historical credit loss patterns by aging bucket and invoice type for accounts receivable are the most significant risk characteristics. We believe that invoice type historical loss patterns differ between renewals and new business. The Company notes expected credit loss is developed for the contractual life of the financial asset, which accounts receivable and contract assets can be viewed as one financial asset. However, a low percentage of our contract assets do not convert to accounts receivable. Therefore, we consider all contract assets as a single pool.

The following table presents the changes in the allowance for expected credit losses for financial assets measured at amortized cost:

The following tables present the Company’s financial assets that are measured at fair value on a recurring basis:

The Company’s carrying amounts of financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses are considered Level 1 and approximate their fair values due to their short maturities as of March 31, 2020 and December 31, 2019 and are excluded from the fair value tables above.

See Note 9 “Convertible Senior Notes and Capped Call Transactions” for the carrying amount and estimated fair value of our Notes (as defined below) as of March 31, 2020.

On October 15, 2019, the Company acquired 100% of the equity interest in Orkus, Inc. (“Orkus”), a Delaware corporation engaged in the development and license of software products to assist customers in monitoring and controlling access and authorization across hybrid cloud assets. Total consideration related to the acquisition was $16.5 million in cash, of which $2.0 million is to be paid upon the lapse of an indemnification period of 12 months and 24 months of the acquisition date. As of March 31, 2020 and December 31, 2019, $1.0 million of holdback amount is reflected within accrued expenses and other liabilities and $1.0 million is included in other long-term liabilities in the consolidated balance sheets.

The following table summarizes the final purchase price allocation as of the date of acquisition:

The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:

On October 15, 2019, the Company acquired 100% of the equity interest in Overwatch.ID, Inc. (“Overwatch.ID”), a Delaware corporation engaged in the development and license of software products focused on access controls security for cloud applications, cloud computing, hybrid IT environments, and on-premises infrastructure. The consideration related to the acquisition was $20.9 million in cash, of which $3.0 million is to be paid upon the lapse of an indemnification period of 12 months and 18 months of the acquisition date. As of March 31, 2020 and December 31, 2019, $1.5 million of holdback amount is reflected within accrued expenses and other current liabilities and $1.5 million is included in other long-term liabilities in the consolidated balance sheets.

The following table summarizes the final purchase price allocation as of the date of acquisition:

The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:

The operating results of the acquired companies are included in our consolidated statements of income from the respective dates of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our consolidated statement of operations.

These acquisitions have been accounted for as business combinations. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the respective acquisition date. The Company finalized the purchase price within the required one-year measurement period as of the dates of acquisition.

The fair value of developed technology was estimated using the replacement cost method (Level 3), which utilized assumptions for the cost to replace, such as the workforce, timing and resources required, as well as a theoretical developer’s profit margin and entrepreneurial incentive and opportunity cost. The Company believes that for each acquisition, the acquired companies will provide opportunities for growth through investing in additional products and capabilities, among other factors. This contributed to a purchase price in excess of the estimated fair value of each acquired company’s net identifiable assets acquired and, as a result, goodwill was recorded in connection with each acquisition. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. Goodwill arising from these acquisitions are not deductible for tax purposes.

The following table reflects goodwill activity for the three months ended March 31, 2020:

There were 0 impairments of goodwill during the periods ended March 31, 2020 or 2019.

Total cost and amortization of intangible assets are comprised of the following:

		As of							As of
	Weighted Average Useful Life	September 30, 2019			December 31, 2018			Weighted Average Useful Life	March 31, 2020			December 31, 2019
Intangible assets	(In years)	(In thousands)
Intangible assets, net								(In years)	(In thousands)
Customer lists	15	$	42,500		$	42,500		15	$	42,500		$	42,500
Developed technology	9.6		42,000			42,000		8.9		58,370			58,440
Trade names and trademarks	17		24,500			24,500		17		24,500			24,500
Order backlog	1.5		—			1,100
Other intangible assets	4.9		3,310			3,310		4.8		3,689			3,689
Total intangible assets			112,310			113,410				129,059			129,129
Less: Accumulated amortization			(44,443	)		(38,550	)			(50,655	)		(47,478	)
Total intangible assets, net		$	67,867		$	74,860			$	78,404		$	81,651

Amortization expense ~~included in the condensed consolidated statements of operations~~ for the following periods ~~ended September 30, 2019 and 2018~~ is as follows:

	Three Months Ended				Nine Months Ended				Three Months Ended
Amortization expense (in thousands)	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
									March 31, 2020		March 31, 2019
									(In thousands)
Cost of revenue - licenses	$	1,008	$	1,008	$	3,024	$	3,024	$	1,008	$	1,008
Cost of revenue - subscription		96		96		288		288		910		96
Research and development		159		34		477		102		191		159
Sales and marketing		1,068		1,068		3,204		3,204		1,068		1,068
Total amortization of acquired intangibles	$	2,331	$	2,206	$	6,993	$	6,618
Total amortization expense									$	3,177	$	2,331

Periodically, the Company evaluates intangible assets for possible impairment. There were 0 impairments of intangible assets during the periods ended ~~September 30, 2019 and 2018.~~March 31, 2020 or 2019.

5.The total estimated future amortization expense of these intangible assets as of March 31, 2020 is as follows:

~~Right-of-use (“ROU”) assets and lease liabilities~~ ~~are recognized at the present value of future lease payments over the lease term.~~ ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets include any upfront lease payments made and exclude lease incentives. The Company leases its facilities under non-cancelable operating lease agreements. Additionally, these leases often require the Company to pay property taxes, insurance and maintenance costs, which are generally expensed as incurred and are not included in the table below. Certain of these facility leases contain predetermined fixed escalations of the minimum rentals, and the Company recognizes expense for these leases on a straight-line basis over the full term of the lease arrangement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and short-term lease expense is recognized on a straight-line basis over the lease term. The depreciable life of related leasehold improvements is based on the lease term.

As of ~~September 30, 2019,~~March 31, 2020, our leases which primarily consist of office leases, have remaining lease terms of less than one year to ~~ten~~nine years. Certain leases include early termination and/or extension options; however, exercises of these options are at the Company’s sole discretion. As of ~~September 30, 2019,~~March 31, 2020, the Company determined it is not reasonably certain it will exercise the options to extend its leases or terminate them early. ~~Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and as of September 30, 2019, the~~

~~The rates implicit~~restricted cash to guarantee rent payments in a foreign subsidiary as well as $6.0 million of cash collateral for an unconditional standby letter of credit related to the Company’s leases are not readily determinable. Therefore, in order to value the Company’s lease liabilities, the Company uses an incremental borrowing rate which reflects the fixed rate at which the Company could borrow a similar amount in the same currency, for the same term, and with similar collateral as in the lease at the commencement date. The result of adoption of ASC 842 was an increase in ROU assets and total lease liabilities of $3.5 million on the Company’s condensed consolidated balance sheet. ASC 842 did not have a material impact on our condensed consolidated statements of operations and statements of cash flows. corporate headquarters lease.

As of September 30, 2019, the Company measures its lease liabilities at the net present value of the remaining lease payments discounted at the weighted average discount rate of 4.12%. The Company's incremental borrowing rate is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located. The weighted average remaining term of the Company’s operating leases is 9.0 years. As of September 30, 2019, the total lease liabilities are $41.3 million, $3.4 million of which is included in accrued expenses and other current liabilities and $37.9 million is included as long-term operating lease liabilities on the condensed consolidated balance sheet. As of September 30, 2019, the ROU asset balance is $30.3 million.

Facilities costs (including rent and utilities) are considered shared costs and are allocated to departments based on headcount. As such, allocated shared costs are reflected in each cost of revenue and operating expense category. Total rent expense recognized prior to our adoption of ASC 842 was approximately $1.0 million and $2.9 million for the three and nine months ended September 30, 2018, respectively.

~~Other supplemental cash flow information related to operating leases is as follows:~~

~~At September 30, 2019,~~March 31, 2020, we have 0no financing leases and we have non-cancelable operating lease commitments, excluding variable consideration. The undiscounted annual future minimum lease payments are summarized by year in the table below:

Year Ending December 31,	(in thousands)			(in thousands)
2019 (except the nine months ended September 30)	$	1,191
2020		4,975
2020 (except the three months ended March 31)				$	4,039
2021		5,511			5,795
2022		5,478			5,758
2023		4,978			5,272
2024					4,958
Thereafter		27,030			22,283
Total minimum lease payments		49,163			48,105
Less: interest		(7,868	)		(7,068	)
Total present value of operating lease liabilities	$	41,295		$	41,037
Less: operating lease liabilities - current	$	(3,406	)

Current operating lease liabilities				$	4,108
Long-term operating lease liabilities	$	37,889			36,929
Total operating lease liabilities				$	41,037

In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers, business partners and other parties with respect to certain matters, including losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities with respect to our products and services and business. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in a particular contract.

The Company includes service level commitments to customers of our cloud-based products warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. To date, the Company has not incurred any material costs as a result of these commitments, and we expect the time between any potential claims and issuance of the credits to be short. As a result, we have not accrued any liabilities related to these commitments in our condensed consolidated financial statements.

The Company is subject to claims and suits that may arise from time to time in the ordinary course of business. In addition, some legal actions, claims and governmental inquiries may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our condensed consolidated financial statements.

~~On March 11,~~In 2019, SailPoint Technologies, Inc., as borrower, and certain of our other wholly owned subsidiaries entered into a credit agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Credit Agreement”). The Credit Agreement is guaranteed by SailPoint Technologies Intermediate Holdings, LLC, a wholly owned subsidiary, and the Borrower’s material domestic subsidiaries (the “Guarantors” and, together with the Borrower, the “Loan Parties”) and is supported by a security interest in substantially all of the Loan Parties’ personal property and assets.

~~In September~~Later in 2019, the Company amended the Credit Agreement in connection with the issuance and sale of the Notes (as defined below). Such amendment included a decrease in the commitments for revolving credit loans from $150.0 million to $75.0 million, with a $15.0 million letter of credit sublimit, which amount can be increased or decreased under certain circumstances and is subject to certain financial covenants. In addition, the Credit Agreement provides for the ability to incur uncommitted term loan facilities if, among other things, the ~~Total~~Senior Net Leverage Ratio (as defined in the Credit Agreement), calculated giving pro forma effect to the requested term loan facility, is no greater than ~~6.00 to 1.00 (amended from~~ 3.50 to ~~1.00).~~1.00. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions permitted under the Credit Agreement.

The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants, including certain restrictions on the ability to create liens on properties or assets; merge, consolidate, or dissolve; make certain loans or investments, except under certain circumstances; sell or dispose of assets; enter into sale and leaseback transactions; pay dividends and other restricted payments; or enter into transactions with affiliates.covenants. The agreement has established priority for the lenders party over all assets of the Company.

Borrowings under the Credit Agreement are scheduled to mature in March 2024. Any borrowing under the Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid may be reborrowed. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed the aggregate commitments of all lenders. Payment of the borrowings may be accelerated upon the occurrence of certain customary events of default specified in the Credit Agreement, which includes failure to make payments relating to the borrowings under the Credit Agreement when due, the material inaccuracy of representations or warranties, failures to perform certain affirmative covenants, failures to refrain from actions or omissions prohibited by negative covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events and a Change in Control (as defined in the Credit Agreement).

The interest rates applicable to revolving credit loans under the Credit Agreement are at the borrower’s option, either (i) a base rate, which is equal to the greatest of (a) the Prime Rate (as defined in the Credit Agreement), (b) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 1/2 of 1%, and (c) the one-month Adjusted LIBO Rate (as defined in the Credit Agreement) plus 1%, in each case, plus an interest margin ranging from 0.25% to 0.75% based on the Senior Secured Net Leverage Ratio, or (ii) the Adjusted LIBO Rate plus an interest margin ranging from 1.25% to 1.75% based on the Senior Secured Net Leverage Ratio. Company’s option. The ~~Adjusted LIBO Rate cannot be less than zero. The borrower will pay~~Company pays an unused commitment fee during the term of the Credit Agreement ranging from 0.20% to 0.30% per annum based on the Senior Secured Net Leverage Ratio. Borrowings under the Credit Agreement are scheduled to mature in March 2024.

The Company had 0 outstanding revolving credit loan balance under the Credit Agreement as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The Company was in compliance with all applicable covenants as of ~~September 30, 2019.~~March 31, 2020.

The Company incurred total debt issuance costs of ~~approximately~~ $0.8 million in connection with the Credit Agreement, which the net balance is included in other non-current assets onin the accompanying condensed consolidated balance ~~sheet.~~sheets. These costs are being amortized to interest expense over the life of the Credit Agreement on a straight-line basis. Amortization of debt issuance costs during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~approximately $0.1 million and $0.2 million~~not material and was recorded in interest expense in the accompanying condensed consolidated statements of operations. Under the terms of the previous credit facility, the Company voluntarily prepaid on its term loan during the nine months ended September 30, 2018. The debt paydown was subject to a prepayment premium of approximately $0.3 million and a loss on the modification and partial extinguishment of debt of $1.5 million, both of which were recorded as interest expense in the consolidated statements of operations for the nine months ended September 30, 2018.

In September 2019, the Company issued and sold $400.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2024 (the “Notes”) in a private offering (the “Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”)~~, including the exercise in full by the initial purchasers of their option to purchase up to an additional $50.0 million aggregate principal amount of the Notes on the same terms and conditions.~~. The net proceeds from the Offering were ~~approximately~~ $391.2 million, after deducting discounts and commissions and other fees and expenses payable by the Company in connection with the Offering. The Company used ~~approximately~~ $37.1 million of the net proceeds from the Offering to pay the cost of the Capped Call Transactions (as defined below).

The Notes were issued pursuant to an indenture (the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The Notes are senior unsecured obligations of the Company and will mature on September 15, 2024, unless earlier redeemed, repurchased or converted. The Notes ~~will~~ bear interest at a fixed rate of 0.125% per year payable semiannually in arrears on March 15 and September 15 of each ~~year, beginning on March 15, 2020.~~year.

The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2024, only under the following circumstances:

On or after March 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. It is the Company’s current intent to settle the principal amount of the Notes with cash. The Notes are convertible at an initial conversion rate of ~~approximately~~ 35.1849 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of ~~approximately~~ $28.42 per share of common stock, subject to adjustment upon the occurrence of specified events. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be. For example, upon the occurrence of a make-whole fundamental change, as defined in the purchase agreement, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or during the relevant redemption period.

The Company may not redeem the Notes prior to September 20, 2022. The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2022, if the last reported sale price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes, which means that the Company is not required to redeem or retire the Notes periodically.

If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable. The Company was in compliance with all applicable covenants as of ~~September 30, 2019.~~March 31, 2020.

As of ~~September 30, 2019,~~March 31, 2020, the conditions allowing holders of the Notes to convert have not been met since issuance, and therefore, the Notes were classified as long-term debt on our condensed consolidated balance ~~sheet.~~sheets.

In accounting for the issuance of the Notes, we separated the Notes into liability and equity components. The carrying amounts of the liability components of the Notes were calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The carrying amounts of the equity components, representing the conversion option, were determined

by deducting the fair value of the liability components from the par value of the Notes. This difference represents the debt discount that is amortized to interest expense over the terms of the Notes using the effective interest rate method. The carrying amount of the equity components representing the conversion options was ~~approximately~~ $88.8 million for the Notes and is recorded in additional paid in capital and are not remeasured as long as they continue to meet the conditions for equity classification.

The Company allocates transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the liability component were ~~approximately~~ $6.8 million and are being amortized to interest expense at an effective interest method rate of 5.25% over the term of the Notes. Transaction costs attributable to the equity component were ~~approximately~~ $2.0 million and are netted with the equity component of the Notes in additional paid in capital.

For tax purposes, the capped call hedge is treated as integrated with the Offering, resulting in tax deductible original issuance discount (“OID”). Thus, a deferred tax asset of $8.9 million has been established that will accrete through additional paid in capital over the life of the Notes. The OID for GAAP purposes resulted in a deferred tax liability of $21.3 million for tax purposes and will accrete through additional paid in capital over the life of the Notes. The transaction costs are deductible for tax purposes over the life of the Notes; thus, a deferred tax asset of $0.5 million has been established for these costs, which is net of the amount allocated to equity for GAAP.

As of ~~September 30, 2019,~~March 31, 2020, the Notes have a remaining life of ~~approximately 60~~54 months.

The net carrying amount of the liability and equity components of the Notes ~~as of September 30, 2019 was~~for the periods presented is as follows:

	As of			As of
	September 30, 2019			March 31, 2020			December 31, 2019
	(in thousands)			(In thousands)
Liability component
Principal	$	400,000		$	400,000		$	400,000
Unamortized discount		(88,480	)		(80,553	)		(84,542	)
Unamortized issuance costs		(6,743	)		(6,070	)		(6,407	)
Net carrying amount	$	304,777		$	313,377		$	309,051

Equity component, net of issuance costs	$	86,764		$	86,764		$	86,764

The interest expense recognized related to the Notes for the ~~periods~~period presented ~~was~~is as follows:

	Three Months Ended		Nine Months Ended		Three Months Ended
	September 30, 2019		September 30, 2019		March 31, 2020
	(in thousands)				(In thousands)
Contractual interest expense	$	8	$	8	$	125
Amortization of debt discount		261		261		3,989
Amortization of debt issuance costs		22		22		337
Total	$	291	$	291	$	4,451

As of ~~September 30, 2019,~~March 31, 2020, the total estimated fair value of the Notes was ~~approximately $380.9~~$352.0 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates. The fair value of the Notes is considered a Level 2 within the fair value hierarchy and was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, and quoted ~~price~~prices of the Notes in an over-the-counter market.

In September 2019, in connection with the pricing of the Notes and in connection with the initial purchasers’ exercise in full of their option to purchase additional Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with the initial purchasers or their respective affiliates and another financial institution. The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, ~~approximately~~ 14.1 million shares of common stock. The Capped Call Transactions are generally expected to reduce potential dilution to common stock upon any conversion of the Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial strike price of ~~approximately~~ $28.42 per share, which corresponds to the initial conversion price of the Notes and is subject to certain adjustments. The cap price of the Capped Call Transactions is initially $41.34 per share, which is subject to certain adjustments. For accounting purposes, the Capped Calls Transactions are separate transactions and not part of the terms of the Notes. As the Capped Call Transactions are considered indexed to our own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of ~~approximately~~ $37.1 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid in capital.

In 2015, the Company adopted (i) the Amended and Restated 2015 Stock Option and Grant Plan and (ii) the 2015 Stock Incentive Plan (together the “2015 Stock Option Plans”) under which it may grant incentive stock options (“ISOs”), nonqualified stock options (“NSOs”) for the right to purchase shares of common stock and grant restricted stock ~~units.~~units (“RSUs”). The 2015 Stock Option Plans reserve 5.0 million shares of common stock for issuance as ISOs, 0.5 million shares of ~~restricted stock~~RSUs and 0.25 million shares for issuance under the 2015 Stock Incentive Plan. Under the 2015 Stock Option Plans, ISOs may not be granted at less than fair market value on the date of the grant and generally vest over a four-year period based on continued service. Options generally expire ten years after the grant date.

~~At September 30, 2019, approximately 592,000~~As of March 31, 2020, 0.6 million shares were available for issuance under the ~~Amended and Restated~~ 2015 Stock Option ~~and Grant Plan and includes approximately 90,000~~Plans, including less than 0.1 million shares ~~which were~~ available for issuance under the 2015 Stock Incentive Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.

In November 2017, the Company’s Board of Directors adopted the 2017 Long Term Incentive Plan (the “2017 Plan”) under which it may grant stock options, ~~nonqualified stock options~~NSOs to purchase shares of common stock and ~~restricted stock units (“RSUs”).~~RSUs. As of ~~September 30, 2019,~~March 31, 2020, the Company had reserved ~~approximately 13.3~~17.7 million shares of common stock available for issuance under the 2017 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2017 Plan ~~will be~~is increased on each January 1 ~~hereafter~~ by ~~approximately~~ 4.4 million shares of common stock. Options and RSUs granted to employees under the 2017 Plan generally vest over four years. Common stock subject to an award that expires or is canceled, forfeited, exchanged or otherwise terminated without delivery of shares, and shares withheld or surrendered to pay the exercise price of, or to satisfy the withholding obligations with respect to an award, will become available for future grants under the 2017 Plan. At ~~September 30, 2019, approximately 8.9~~March 31, 2020, 11.8 million shares were available for issuance under the 2017 Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises.

The fair value for the Company’s stock options granted and Employee Stock Purchase Plan (the "ESPP") purchase rights, as discussed further below, during the ~~nine months ended September 30, 2019 and 2018 was~~periods presented were estimated at grant date using a Black Scholes option-pricing model using the following weighted average assumptions:

	Stock Options				ESPP		Stock Options				ESPP
	September 30, 2019		September 30, 2018		September 30, 2019	September 30, 2018	March 31, 2020		March 31, 2019		March 31, 2020		March 31, 2019
Expected dividend rate	0%		0%		0%	0%	0%		0%		0%		0%
Expected volatility	38.8% - 39.8%		40.0% - 41.1%		39.8% - 46.0%	40.0%	56.2%		39.8%		48.1%		46.0%
Risk-free interest rate	1.39% - 2.59%		2.63% - 2.91%		2.29 - 2.44%	2.0%	1.53%		2.48% - 2.59%		1.57%		2.44%
Expected term (in years)		6.25		6.25	0.42 - 0.50	0.50		6.25		6.25		0.50		0.42

The following table summarizes stock option activity for the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:

Number
of Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

(in thousands)

(per share)

(years)

(in thousands)

Balances at December 31, 2018

2,817

$
6.64

8.0

$
47,589

Granted

993

$
27.05

Exercised

(618
)

$
4.13

Forfeited

(200
)

$
14.57

Balances at September 30, 2019

2,992

$
13.40

8.0

$
23,981

Options vested and expected to vest at September 30, 2019

2,992

$
13.40

8.0

$
23,981

Options vested and exercisable at September 30, 2019

1,149

$
5.74

6.9

$
14,986

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)			(Per share)		(Years)		(In thousands)
Balances at December 31, 2019		2,786		$	13.67		7.7	$	31,489
Granted		524		$	25.42
Exercised		(228	)	$	5.77
Forfeited		(136	)	$	19.04
Balances at March 31, 2020		2,946		$	16.13		7.8	$	12,663
Options vested and expected to vest at March 31, 2020		2,946		$	16.13		7.8	$	12,663
Options vested and exercisable at March 31, 2020		1,210		$	9.27		6.3	$	9,703

The Company expects all outstanding stock options to fully vest. ~~During the three and nine months ended September 30, 2019, approximately $0.2 million of vested stock options were forfeited related to the resignation of our former Chief Revenue Officer.~~ The weighted average grant date fair value per share for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 was $13.74 and 2018 was $11.48 and $9.92, respectively. Stock-based compensation expense relating to stock options was approximately $1.2 million and $3.9 million for the three and nine months ended September 30, 2019, respectively, compared to approximately $0.7 million and $3.2 million for the three and nine months ended September 30, 2018,$12.92, respectively. The total fair value of shares vested ~~during the three and nine months ended September 30, 2019 was approximately $0.8 million and $3.7 million, respectively, compared to approximately $0.2 million and $0.7 million~~ for the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2020 and 2019 was $3.0 million and $2.4 million, respectively.

The total unrecognized compensation expense related to non-vested stock options granted is ~~approximately $13.6~~$16.5 million and is expected to be recognized over a weighted average period of ~~approximately 2.6~~2.8 years as of September 30, 2019. During the three and nine months ended September 30, 2019, approximately $0.9 million of unrecognized compensation expense related to non-vested stock options was forfeited due to the resignation of our former Chief Revenue Officer.March 31, 2020.

In 2014 and 2015, the Company granted shares of the Company’s common stock (the “incentive units”) to certain members of management pursuant to restricted stock agreements (the “RSAs”).

The incentive units were granted with an exercise price equal to the fair market value on the date of grant, are subject to vesting, and if exercised in advance of vesting were subject to the Company’s right to repurchase until vested.

The Company did 0t grant any additional incentive units during the three months ended March 31, 2020 or 2019. During the first quarter of 2019, all of the remaining 0.7 million incentive units were vested with a weighted average grant date fair value of $0.05 per share. ~~The Company did 0t grant any additional incentive units during the nine months ended September 30, 2019 and 2018.~~

~~As of March 31, 2019, all incentive units were vested.~~ Therefore, subsequent to the first quarter of 2019, we incurred 0 additional stock-based compensation ~~expense. Stock-based~~expense and there is no further unrecognized compensation expense was approximately $0.4 million for the nine months ended September 30, 2019. Stock-based compensation expense was approximately $2.2 million and $6.4 million for the three and nine months ended September 30, 2018, respectively.or intrinsic value related to non-vested incentive units.

Restricted stock units (“RSUs”) are generally subject to forfeiture if employment terminates prior to the vesting date. We expense the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs on the date of grant, ratably over the period during which the vesting restrictions lapse.

The following table summarizes the RSU activity for ~~employees and non-employees~~the Company for the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:

	Number of Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value			Number of Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)			(per share)		(years)		(in thousands)			(In thousands)			(Per share)		(Years)		(In thousands)
Balances at December 31, 2018		1,148		$	15.40		1.8		26,967
Balances at December 31, 2019										Balances at December 31, 2019		1,881		$	23.08		1.6	$	44,386
Granted		1,197		$	28.19							1,219		$	25.39
Vested		(140	)	$	20.00							(271	)	$	26.41
Forfeited		(183	)	$	20.32							(111	)	$	22.98
Balances at September 30, 2019		2,022		$	22.21		1.7		37,783
Units expected to vest at September 30, 2019		2,022		$	22.21		1.7		37,783
Balances at March 31, 2020										Balances at March 31, 2020		2,718		$	23.79		1.8	$	41,361
Units expected to vest at March 31, 2020										Units expected to vest at March 31, 2020		2,718		$	23.79		1.8	$	41,361

The Company expects all outstanding RSUs to fully vest. ~~During the three and nine months ended September 30, 2019,~~approximately $0.1 million of vested RSUs were forfeited related to the resignation of our former Chief Revenue Officer. Stock-based compensation expense relating to RSUs was approximately $2.8 million and $8.2 million for the three and nine months ended September 30, 2019, respectively, compared to approximately $1.5 million and $4.0 million for the three and nine months ended September 30, 2018, respectively. During the first quarter of 2019, the Board of Directors approved accelerated vesting of RSUs for an exiting board member that resulted in a modification and an immaterial decrease in stock-based compensation expense.

The total unrecognized compensation related to RSUs ~~for employee and non-employees~~ was ~~approximately $37.2~~$59.5 million as of ~~September 30, 2019~~March 31, 2020 and is expected to be recognized over a weighted average period of ~~approximately 2.9~~3.2 years. During the three and nine months ended September 30, 2019, approximately $1.0 million of unrecognized compensation expense related to non-vested RSUs was forfeited due to the resignation of our former Chief Revenue Officer.

In November 2017, the Company’s Board of Directors adopted the Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective November of 2017, after the date our registration statement was declared effective by the SEC. The ESPP permits eligible employees to purchase shares by authorizing payroll deductions from 1% to 15% of employee’s eligible compensation during the offering period, which is generally six months, with an annual cap of $25,000 in fair market value, determined at the grant date. Unless an employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares after the closing of the offering period at a price equal to 85% of the closing price of the shares at the opening or closing of the offering period, whichever is lower. During the three months ended September 30, 2019, there was no ESPP activity as the current offering period is June 4, 2019 through December 2, 2019. During the nine months ended September 30, 2019, the Company issued and distributed approximately 0.2 million shares of common stock pursuant to the ESPP offering spanning January 2, 2019 to June 3, 2019.

The Company initially reserved 1.8 million shares of common stock for issuance under the ESPP. The number of shares available for issuance under the ESPP ~~will increase~~increases each January 1 ~~beginning in 2019~~ by 0.9 million shares of common stock. The ESPP will continue in effect ~~until October 30, 2020;~~ unless terminated prior thereto by the Company’s ~~Board~~board of ~~Directors~~directors or compensation committee, each of which has the right to terminate the ESPP at any time. ~~At September 30, 2019, approximately 2.5~~As of March 31, 2020, 3.0 million shares were available for issuance under the ESPP Plan.

19During the three months ended March 31, 2020, there was no ESPP activity as the current offering period is December 3, 2019 through June 3, 2020. During the three months ended March 31, 2019, there was no ESPP activity as the offering period was January 2, 2019 to June 3, 2019.

Stock-based compensation expense relating to the ESPP was approximately $0.4 million and $1.7 million for the three and nine months ended September 30, 2019, respectively, compared to approximately $0.5 million for the three and nine months ended September 30, 2018, respectively. Stock-based compensation expense associated with ESPP purchase rights are recognized on a straight-line basis over the offering period.

A summary of the Company’s stock-based compensation expense, which includes stock options, incentive units, RSUs and ESPP, is presented below:

		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018			March 31, 2020		March 31, 2019
		(In thousands)									(In thousands)
Stock options		$	1,232	$	723	$	3,868	$	3,210		$	1,391	$	1,244
Incentive units			—		2,160		351		6,429			—		351
RSUs	RSUs		2,819		1,457		8,176		3,956	RSUs		4,198		2,328
ESPP	ESPP		438		543		1,703		543	ESPP		602		716
Total stock-based compensation expense		$	4,489	$	4,883	$	14,098	$	14,138		$	6,191	$	4,639

A summary of the Company’s stock-based compensation expense as recognized on the condensed consolidated statements of operations is as follows:

	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018		March 31, 2020		March 31, 2019
	(In thousands)								(In thousands)
Cost of revenue - subscription	$	286	$	284	$	830	$	658	$	389	$	260
Cost of revenue - services and other		337		394		1,066		1,116		427		349
Research and development		820		852		2,653		2,145		1,501		917
General and administrative		1,710		1,953		4,725		5,988		1,002		1,371
Sales and marketing		1,336		1,400		4,824		4,231		2,872		1,742
Total stock-based compensation expense	$	4,489	$	4,883	$	14,098	$	14,138	$	6,191	$	4,639

The U.S. 2017 Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017 and effective January 1, 2018, reduced the U.S. federal corporate tax rate from 35% to 21%. Upon adoption, there was no net impact to the Company’s provision for income taxes or net deferred taxes due to the Company’s valuation allowance. The decrease in future tax assets via the reduced rate was offset by the decrease in our valuation allowance.

The Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or to factor such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company elected the "period cost method" as its accounting policy with respect to the new GILTI tax rules. For the periods ended September 30, 2019 and 2018, the Company determined it was in an aggregated net loss position with respect to its controlled foreign corporations. Thus, there is 0 GILTI tax liability as of September 30, 2019 and 2018.~~The provision for income taxes for 2019 and 2018 is generated from activity related to stock options and certain foreign jurisdictions by our consolidated subsidiaries.~~ The effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 is ~~(249.3)%~~5.3% and ~~13.9%~~(18.4)%, ~~respectively, compared to 56.9% and 73.5% for the three and nine months ended September 30, 2018,~~ respectively. The primary drivers for the differences in the rates from the prior-year ~~periods~~period to the current-year ~~periods~~period are related to differences in forecasted pre-tax book income, the impact of stock compensation, ~~and~~ an increase in foreign tax ~~liabilities.~~liabilities and the impact of valuation allowance build.

Provision for income taxes consists of U.S. and state income taxes and income taxes in certain foreign jurisdictions in which the Company conducts business. ~~With the previous adoption of ASC 606 in 2018,~~While the Company is in aan overall deferred tax liability position for the period ended March 31, 2020, based on the full-year forecast, the Company expects to be in a gross deferred tax asset position as of the year ended December 31, 2020. Based on an analysis of the utilization of its federal and ~~no longer requires~~state deferred tax assets, the Company has included in its FIN18 forecasted effective tax rate a valuation ~~allowance.~~allowance build for the portion of deferred tax assets for which there is not sufficient offsetting future deferred tax liabilities. The Company still maintains a full valuation allowance for ~~our~~its Israel tax position due to the lack of taxable earnings for the foreseeable future.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company did ~~not~~0t record any material interest or penalties.

The Company files tax returns in the U.S. federal jurisdiction, in several state jurisdictions, and in several foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2015 and is no longer subject to state, local and foreign income tax examinations by tax authorities for years before 2014. The Company is currently under audit for income tax in a single foreign jurisdiction. The audit is ongoing and is not expected to materially impact the consolidated financial statements. The Company has an Uncertain Tax Position reserve related to this foreign jurisdiction filing that should sufficiently cover any related assessment.

Basic and diluted net ~~income (loss)~~loss per share is computed by dividing net ~~income (loss)~~loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using our weighted average outstanding common shares including the dilutive effect of stock awards. In periods when the Company recognizes a net loss, the Company excludes the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an anti-dilutive effect.

The following table sets forth the calculation of basic and diluted net ~~income (loss)~~loss per share ~~during~~for the periods presented:

	Three Months Ended					Nine Months Ended						Three Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
	(In thousands, except per share data)											(In thousands, except per share data)
Numerator
Net income (loss)	$	3,668	$	1,808		$	(13,919	)	$	(1,473	)
Earnings allocated to unvested incentive units		—		(15	)		—			—
Net income (loss) attributable to common stockholders	$	3,668	$	1,793		$	(13,919	)	$	(1,473	)
Net loss												$	(8,417	)	$	(8,390	)
Net loss attributable to common stockholders												$	(8,417	)	$	(8,390	)

Denominator
Weighted average shares outstanding
Basic		89,143		86,825			88,739			86,268			89,862			88,295
Diluted		90,808		90,355			88,739			86,268			89,862			88,295

Net income (loss) attributable to common stockholders per share
Net loss attributable to common stockholders per share
Basic	$	0.04	$	0.02		$	(0.16	)	$	(0.02	)		(0.09	)	��	(0.10	)
Diluted	$	0.04	$	0.02		$	(0.16	)	$	(0.02	)		(0.09	)		(0.10	)

The following weighted average outstanding shares of common stock equivalents were excluded from the computation of the diluted net ~~income (loss)~~loss per share attributable to common stockholders for the periods presented because their effect would have been ~~anti-dilutive.~~anti-dilutive:

		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018			March 31, 2020		March 31, 2019
		(in thousands)									(in thousands)
Stock options to purchase common stock			907		33		3,062		3,264			2,994		3,080
Non-vested incentive units			—		—		—		1,139
RSUs issued and outstanding	RSUs issued and outstanding		969		4		1,855		1,224	RSUs issued and outstanding		2,492		1,638
ESPP	ESPP		—		—		67		57	ESPP		179		192
Total			1,876		37		4,984		5,684			5,665		4,910

As we expect to settle the principal amount of the Notes in cash and any excess in shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread of ~~approximately~~ 14.1 million shares will have a dilutive impact on diluted net income per share of common stock when the average market price of our common stock for a given period exceeds the conversion price of $28.42 per share.

On October 15, 2019, SailPoint Technologies, Inc., a Delaware corporation and wholly owned subsidiary of the Company, completed its acquisition of (i) Orkus, Inc., a Delaware corporation (“Orkus”) and (ii) Overwatch.ID, Inc., a Delaware corporation (“Overwatch.ID”) (collectively, the “Acquisitions”). The consummation of each Acquisition was not conditioned on the consummation of the other Acquisition.

Orkus is engaged in the development and license of software products to assist customers in monitoring and controlling access and authorization across hybrid cloud assets. Pursuant to the terms of that certain Agreement and Plan of Merger (the “Orkus Merger Agreement”), Whaler Merger Sub merged with and into Orkus with Orkus continuing as the surviving corporation. The aggregate consideration paid for Orkus was approximately $16.5 million, subject to certain adjustments with respect to Orkus’ debt, cash and net working capital balances at the closing and the deduction of a portion of the consideration as partial security for the indemnification obligations of the equity holders of Orkus under the Orkus Merger Agreement.

Overwatch.ID is engaged in the development and license of software products focused on access controls security for cloud applications, cloud computing, hybrid IT environments, and on-premises infrastructure. Pursuant to the terms of that certain Agreement and Plan of Merger (the “Overwatch Merger Agreement”), Osprey Merger Sub merged with and into Overwatch.ID with Overwatch.ID continuing as the surviving corporation. The aggregate consideration paid for Overwatch.ID was approximately $21.0 million, subject to certain adjustments with respect to Overwatch.ID’s debt, cash and net working capital balances at the closing and the deduction of a portion of the consideration as partial security for the indemnification obligations of the equity holders of Overwatch.ID under the Overwatch Merger Agreement.

~~The transactions were funded with cash on hand. The Company is in the process of completing our initial accounting for these Acquisitions.~~

ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of 1 reportable segment and derives revenues from licensing of software, sale of professional services, maintenance and technical support. Revenue is classified by the following major geographic areas: (i) Americas, (ii) Europe, the Middle East and Africa (“EMEA”) and (iii) rest of the world.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our Unaudited Condensed Consolidated Financial Statements and notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which was filed with the ~~SEC~~U.S. Securities and Exchange Commission (the “SEC”) on ~~March 18, 2019~~February 24, 2020 (the “Annual Report”), including the ~~Consolidated Financial Statements~~consolidated financial statements and related notes included therein.

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. All Statements included in this Quarterly Report, other than statements of historical fact, ~~included in~~ ~~this Quarterly Report~~ are forward-looking statements. This includes statements regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of ~~management are forward-looking statements.~~management. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “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 forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. The forward-looking statements are contained principally in this Quarterly Report in “Management’s Discussion and Analysis of Financial Condition and Result of Operations” and “Risk Factors”.expressions.

You should not rely upon forward-looking statements as predictions of future ~~events.~~events or place undue reliance thereon. We have based the forward-looking statements contained this Quarterly Report primarily on our current expectations and projections, in light of currently available information, about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors. 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: the effect of the novel coronavirus disease (“COVID-19”) global pandemic and its aftermath, as well as governmental, business and other actions in response, on the global economy and on our business; our ability to achieve and sustain profitability; our ability to sustain historical growth rates; our ability to attract and retain customers ~~including larger organizations; our ability~~and to deepen our relationships with existing customers; ~~our expectations regarding our customer growth rate;~~an increased focus in our business ~~plan and beliefs and objectives for future operations; trends associated~~from selling licenses to selling subscriptions; breaches in our security, cyber-attacks or other cyber-risks; interruptions with ~~our industry and potential market; benefits associated with use~~the delivery of our ~~platform and services;~~SaaS solutions or third-party cloud-based systems that we use in our ~~ability to develop or acquire new solutions, improve our platform and solutions and increase the value of our platform and solutions;~~operations; our ability to compete successfully against current and future competitors; the length and unpredictable nature of our sales cycle; delayed effects on our operating results from ratably recognizing some of our revenue; fluctuations in our quarterly results; our ability to ~~further develop strategic relationships;~~maintain successful relationships with our channel partners; the increasing complexity of our operations; real or perceived errors, failures or disruptions in our platform or solutions; our ability to adapt and respond to rapidly changing technology, industry standards, regulations or customer needs, requirements or preferences; our ability to achieve ~~positive returns on investments; our plans to acquire~~ and ~~integrate complementary businesses, products or technology; our plans to further invest in~~maintain an effective system of disclosure controls and ~~grow our business, and~~internal control over financial reporting; our ability to ~~effectively manage~~comply with our growth and associated investments; our ability to timely and effectively scale and adapt our existing technology, our ability to increase our revenue, our revenue growth rate and gross margin; our ability to generate sufficient revenue to achieve and sustain profitability; our future financial performance, including trends in revenue, cost of revenue, operating expenses, other income and expenses, income taxes, billings and customers; the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditureprivacy policy or related legal or regulatory requirements; our ability to ~~raise capital and the loans of those financings;~~accurately forecast our ability to service the interest on our convertible notes and repay such notes with cash (which could adversely affect liquidity) or common stock (which would cause dilution to our existing shareholders), to the extent required; our ability to attract, train and retain qualified employees and key personnel; our ability to maintain and benefit from our corporate culture;estimated annual effective tax rate for financial accounting purposes; our ability to successfully identify, acquire and integrate companies and assets; our ability to ~~successfully enter new markets and manage our international expansion;~~maintain high-quality customer satisfaction; and our ability to maintain ~~protect~~ and enhance our ~~intellectual property and not infringe upon others’ intellectual property. These~~brand or reputation as an industry leader. More information on these risks and other ~~important risk~~potential factors ~~are described more fully~~that could affect our financial results is included in our ~~reports and~~ other ~~documents filed~~filings with the SEC, including ~~under~~in the “Risk Factors” ~~in Part I, Item 1A in~~and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Annual Report and “Risk Factors” in Part II, Item 1A in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly ~~Report~~.Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date hereof. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. ~~We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.~~ Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

SailPoint Technologies Holdings, Inc. (“SailPoint,” “the Company” or “we”) is the leading provider of enterprise identity governance solutions. Our ~~open identity~~team of visionary industry veterans launched SailPoint to empower our customers to efficiently and securely govern the digital identities of employees, contractors, business partners, software bots and other human and non-human users, and manage their constantly changing access rights to enterprise applications and data. Our SailPoint Predictive Identity platform provides organizations with critical visibility into who currently has access to which resources, who should have access to those resources, and how that access is being used.

We offer both ~~on-premises~~ software and ~~cloud~~software as a service (“SaaS”) solutions, which ~~empower our customers~~provide organizations with the intelligence required to ~~efficiently and securely govern the digital identities of employees, contractors, business partners, software bots and other human or non-human~~empower users and ~~manage~~govern their ~~constantly changing~~ access ~~rights~~ to ~~enterprise~~systems, applications and data across hybrid IT environments, ~~whether comprised of~~spanning on-premises, cloud orand mobile ~~applications.~~applications and file storage platforms. We help customers enable their businesses with more agile and innovative IT, streamline delivery of access to their businesses, enhance their security posture and better meet compliance and regulatory requirements. Our customers include many of the world’s largest and most complex organizations, including commercial enterprises, financial institutions and governments.

Organizations globally are investing in technologies such as cloud computing and mobility to improve employee productivity, business agility and competitiveness. Today, enterprise environments are more open and interconnected with their business partners, contractors, vendors and customers. Business users have driven a dramatic increase in the number of applications and amount of data that organizations need to manage, much of which sits beyond the traditional network perimeter. Because of these trends, the attack surface is expanding while well-funded cyber attackers have significantly increased the frequency and sophistication of their attacks. As a result, IT professionals need to manage and secure increasingly complex hybrid IT environments within these extended enterprises.

Attackers frequently target the identity vector as it allows them to leverage user identities to gain access to high-value systems and data while concealing their activity and movements within an organization’s IT infrastructure. The consequences of a data breach can be extremely damaging, with organizations facing significant costs to remediate the breach and repair brand and reputational damage. In addition, governments and regulatory bodies have increased efforts to protect users and their data with a new wave of regulatory and compliance measures that are further burdening organizations and levying severe penalties for non-compliance. As a result of these trends, enterprises are struggling to efficiently manage and secure their digital identities.

We believe that our ~~open identity~~SailPoint Predictive Identity platform is a critical, foundational layer of a modern cyber security strategy. Its open architecture allows it to complement and build upon traditional ~~perimeter~~perimeter- and endpoint-centric security solutions, which on their own are increasingly insufficient to secure organizations, and their applications and data. ~~Our customers include many~~

We deliver a user-centric security platform that combines identity and data governance solutions to form a holistic view of the ~~world’s largest~~enterprise. In combination with our technology partners, we create identity awareness throughout our customers’ environments by providing valuable insights into, and ~~most~~incorporating information from, a broad range of enterprise software and security solutions. Our governance platform provides a system of record for digital identities across our customers’ IT environments while allowing them to remain agile and competitive. Our adaptable solutions integrate seamlessly into existing technology stacks, allowing organizations to maximize the value of their technology investments. Our professionals work closely with customers throughout the implementation lifecycle, from documentation to development to integration.

IdentityIQ provides large, complex ~~organizations,~~enterprise customers a unified and highly configurable identity governance solution that consistently applies business and security policies as well as role and risk models across applications and data. It can be used in conjunction with our SailPoint Identity Services, including ~~commercial enterprises, educational institutions~~Access Insights, Recommendation Engine, Access Modeling, Cloud Access Management and ~~governments.~~Workload Privilege Management.

Our solutions address the complex needs of global enterprises and mid-market organizations. As of ~~September 30, 2019, 1,341~~March 31, 2020, 1,516 customers across a wide variety of industries were using our products to enable and secure digital identities across the globe. ~~No single customer represented more than 10% of our revenue for each of the three and nine months ended September 30, 2019 and 2018.~~

For the three and nine months ended September 30, 2019 our revenue was $75.9 million and $199.5 million, respectively, compared to $65.7 million and $168.3 million for the three and nine months ended September 30, 2018, respectively. We had net income of $3.7 million and net loss of $(13.9) million for the three and nine months ended September 30, 2019, respectively, compared to net income of $1.8 million and net loss of $(1.5) million for the three and nine months ended September 30, 2018, respectively. For the nine months ended September 30, 2019 and 2018, our net cash provided by operations was $39.7 million and $30.4 million, respectively.

Our success is principally dependent on our ability to deliver compelling solutions to attract new customers and retain existing customers. Delivering these solutions is challenging because our customers have large, complex IT environments, often rely on both legacy and innovative technologies, and deploy different business models, including on-premises and cloud ~~solutions.~~models. Rising security threats and evolving regulations and compliance standards for cyber security, data protection, privacy and internal IT controls create new opportunities for our industry and require us to adapt our solutions to be successful. Maintaining our historical growth rates is also challenging because our growth strategy depends in part on our ability to expand our global presence, increase the number of companies we can address with our current solutions, and invest in new vertical markets, while competing against much larger companies with more recognizable brands and financial resources. In the first quarter of 2019, we saw changes in our pipeline that impacted our expectations for the remainder of 2019. We believe we have identified the challenges and continue to make changes in our go-to-market initiatives. We believe these changes will address our execution shortfalls; however, it is too early to determine whether all of the shortfalls have been addressed. If we are unable to successfully address these challenges, our business, financial condition, and operating results could be adversely affected. Although we seek to grow rapidly, we also focus on ~~delivering positive~~managing our net cash from operations while continuing to invest in our platform and to deliver innovative solutions to our customers. ~~Additionally,~~

We believe enterprises are increasingly embracing the cloud to house their critical security infrastructure. As a result, a growing number of enterprises are changing their approach to identity governance and now prefer to use a SaaS solution rather than purchase software outright and install it in their own infrastructure. This industry shift aligns well with our current product strategy. Our product strategy is to (1) accelerate innovation within our core identity governance SaaS offerings, (2) deliver continued innovation as we execute against our vision for SailPoint Predictive Identity, and (3) ensure that as we deliver these new innovations, they work in concert with our on-premises offerings in addition to our SaaS offerings. We believe that continued growth of subscription revenue, which includes revenue from our SaaS offerings, as a percentage of total revenue will lead to a more predictable revenue model and increase our visibility to future period total revenues. Nevertheless, our revenue and our gross margins vary depending on the type of solution we ~~sell, and~~sell. As a result, a shift in the sales mix of our solutions could affect our performance relative to historical results.

We deliver an integrated set of solutions that supports all aspects of identity governance including provisioning, access request, compliance controls, password management and identity governance for data stored in files. Our most recent innovation, SailPoint Predictive Identity, embeds artificial intelligence and machine learning into our open identity platform to deliver actionable insights and recommendations to reduce risk, speed up deployment and simplify administration. Because our solutions are built on an open identity platform, which offers connectivity to a variety of security and operational IT applications, we extend the reach of our identity governance processes and enable effective identity governance controls across customer environments.

Our set of solutions currently consists of (i) IdentityIQ, our identity governance solution that can be delivered from the cloud or on-premises, (ii) IdentityNow, our multi-tenant Software-as-a-Service (“SaaS”) governance suite, which is delivered as a subscription service, and (iii) IdentityAI, our multi-tenant advanced artificial intelligence and machine learning subscription service that delivers the SailPoint Predictive Identity vision by infusing intelligent insights and recommendations into IdentityIQ and IdentityNow. See Item 1 “Business” of the Annual Report for more information regarding our solutions.

We devote significant resources to acquire new customers, in both existing and new markets, in order to grow our customer base. In addition, we focus on three distinct opportunities to increase sales to existing customers: (i) expand the number of digital identities; (ii) up-sell additional modules or target storage systems, as applicable, within a single solution; and (iii) cross-sell additional solutions.

~~On September 8, 2014, SailPoint Technologies Holdings, Inc. acquired all of the capital stock of SailPoint Technologies, Inc.~~ ~~See Note 1 “Organization and Description of Business” in our notes to condensed consolidated financial statements included in this Quarterly Report for more information.~~

As part of our growth strategy of the SailPoint Predictive Identity, on October 15, 2019, we acquired Orkus, Inc. (“Orkus”) and Overwatch.ID, Inc. (“Overwatch.ID”) (collectively, the “Acquisitions”). Orkus is engaged in the development and license of software products to assist customers in monitoring and controlling access and authorization across hybrid cloud assets. Overwatch.ID is engaged in the development and license of software products focused on access controls security for cloud applications, cloud computing, hybrid IT environments, and on-premises infrastructure.

See “Key Factors Affecting Our Performance” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report for information regarding the key factors affecting our performance.

In December 2019, COVID-19 was identified in Wuhan, China. In March 2020, as the disease began to spread around the world, the World Health Organization subsequently declared the COVID-19 outbreak a pandemic. In light of the rapid spread of COVID-19 in the United States and abroad, government and public health authorities have recommended social distancing and imposed various quarantine and isolation measures on large portions of the population, including mandatory business closures. Although some of the restrictions have begun to be lifted, these and other measures, while intended to protect human life, have had and are expected to continue to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. In response to these measures, we have made certain adjustments to our operations, but we are not yet certain how these changes or the broader effects of COVID-19 on global economies will affect our financial performance going forward.

For example, as a result of the COVID-19 pandemic, we have shifted certain customer events to virtual-only experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events or otherwise alter our marketing efforts in the future. It is unclear what effect this trend may have on our sales cycle, conversion rate or the quantity and quality of our customer pipeline.

We believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future, but the challenges posed by COVID-19 on our business and our customers’ businesses may evolve rapidly. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19. See “Risk Factors” in Part II, Item 1A of this Quarterly Report for information regarding the possible effects on our business of COVID-19.

In addition to our GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:

	Three Months Ended						Nine Months Ended						As of
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
Number of customers		1,341			1,090			1,341			1,090			1,516			1,219
Subscription revenue as a percentage of total revenue		49	%		42	%		52	%		44	%		58	%		53	%
Adjusted EBITDA (in thousands)	$	10,053		$	12,044		$	10,473		$	20,900

In addition to our financial information presented in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our 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. We monitor the non-GAAP financial measures described below and we believe they are helpful to investors. Our 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. 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. We urge 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 our business.

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss) adjusted to exclude stock-based compensation expense, amortization and depreciation, purchase accounting adjustments, acquisition related costs, severance expense of certain key executives, net interest (income) expense and income taxes.

We exclude stock-based compensation expense from adjusted EBITDA because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. We also exclude amortization of acquired intangible assets, purchase price accounting adjustment, acquisition related costs and severance expense of certain key executives from our non-GAAP financial measures because these are considered by management to be outside of our core operating results. Accordingly, we believe that excluding these expenses provides investors and management with greater visibility to the underlying performance of our business operations and may also facilitate comparison with the results of other companies in our industry.

~~The following table reflects the reconciliation of GAAP to non-GAAP adjusted EBITDA~~ ~~to net income (loss) calculated in accordance with GAAP:~~

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

(In thousands)

Net income (loss) on a GAAP basis

$
3,668

$
1,808

$
(13,919
)

$
(1,473
)
Stock-based compensation ⁽¹⁾

4,531

4,932

14,420

14,253

Amortization of acquired intangibles

2,331

2,206

6,993

6,618

Depreciation

1,341

493

3,569

1,359

Purchase price accounting adjustment ⁽²⁾

—

18

—

50

Acquisition related costs⁽³⁾

810

—

810

—

Severance expense of certain key executives⁽⁴⁾

—

—

1,126

—

Interest (income) expense, net ⁽⁵⁾

(10
)

202

(282
)

4,180

Income tax expense (benefit)

(2,618
)

2,385

(2,244
)

(4,087
)
Adjusted EBITDA

$
10,053

$
12,044

$
10,473

$
20,900

See “Components of Results of Operations” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report for information regarding the components of our results of operations.

~~During the year ended December 31, 2018, we adopted ASU 2014-09,~~ ~~Revenue from Contracts with Customers (ASC 606)~~ and subsequent amendments to the initial guidance collectively, ASC 606, utilizing the modified retrospective method of transition whereby the results and related disclosures for the comparative 2018 periods presented in this Quarterly Report were recast and are now presented as if ASC 606 had been in effect beginning January 1, 2018 with modified retrospective adjustments applicable prior to January 1, 2018 included as a cumulative-effect adjustment to retained earnings. Refer to Note 2 “Summary of Significant Accounting Policies” and Note 3 “Revenue Recognition” in the financial statements included in the Annual Report for accounting policy updates and additional information on our adoption of ASC 606.

We generally experience seasonal fluctuations in demand for our products and services. Our quarterly sales are impacted by industry buying patterns. As a result, our sales have generally been highest in the fourth quarter of a calendar year and lowest in the first quarter. Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.

The following table sets forth our unaudited condensed consolidated statements of operations for the periods presented:

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
	(In thousands)												(In thousands)
Revenue
Licenses	$	26,825		$	28,023		$	64,827		$	64,451		$	21,004		$	18,669
Subscription		37,383			27,916			102,929			74,531			43,881			31,835
Services and other		11,671			9,796			31,760			29,350			10,557			10,079
Total revenue		75,879			65,735			199,516			168,332			75,442			60,583
Cost of revenue
Licenses		1,083			1,145			3,157			3,543			1,080			1,059
Subscription⁽¹⁾		6,862			5,252			18,990			14,829			8,476			5,813
Services and other⁽¹⁾		8,985			7,617			25,361			21,788			9,006			7,997
Total cost of revenue		16,930			14,014			47,508			40,160			18,562			14,869
Gross profit		58,949			51,721			152,008			128,172			56,880			45,714
Operating expenses
Research and development ⁽¹⁾		14,148			11,474			40,318			31,351			15,808			12,772
General and administrative⁽¹⁾		10,192			8,763			27,819			24,163			9,514			9,137
Sales and marketing ⁽¹⁾		33,274			26,701			99,298			72,934			36,860			30,488
Total operating expenses		57,614			46,938			167,435			128,448			62,182			52,397
Income (loss) from operations		1,335			4,783			(15,427	)		(276	)
Loss from operations														(5,302	)		(6,683	)
Other expense, net:
Interest income (expense), net		10			(202	)		282			(4,180	)
Interest income														1,272			46
Interest expense														(4,532	)		(35	)
Other, net		(295	)		(388	)		(1,018	)		(1,104	)		(324	)		(417	)
Total other expense, net		(285	)		(590	)		(736	)		(5,284	)		(3,584	)		(406	)
Income (loss) before income taxes		1,050			4,193			(16,163	)		(5,560	)
Loss before income taxes														(8,886	)		(7,089	)
Income tax (expense) benefit		2,618			(2,385	)		2,244			4,087			469			(1,301	)
Net income (loss)	$	3,668		$	1,808		$	(13,919	)	$	(1,473	)
Net loss													$	(8,417	)	$	(8,390	)

The following table sets forth the unaudited condensed consolidated statements of operations data for each of the periods presented as a percentage of total revenue:

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
Revenue
Licenses		35	%		43	%		32	%		39	%		28	%		31	%
Subscription		49			42			52			44			58			53
Services and other		16			15			16			17			14			16
Total revenue		100			100			100			100			100			100
Cost of revenue
Licenses		1			2			2			2			2			2
Subscription		9			8			9			9			11			10
Services and other		12			11			13			13			12			13
Total cost of revenue		22			21			24			24			25			25
Gross profit		78			79			76			76			75			75
Operating expenses
Research and development		19			17			20			19			21			21
General and administrative		13			13			14			14			13			15
Sales and marketing		44			41			50			43			49			50
Total operating expenses		76			71			84			76			83			86
Income (loss) from operations		2			8			(8	)		0
Loss from operations														(8	)		(11	)
Other expense, net:
Interest income (expense), net		0			0			0			(2	)
Interest income														2			0
Interest expense														(6	)		0
Other, net		0			(1	)		0			(1	)		0			(1	)
Total other expense, net		0			(1	)		0			(3	)		(4	)		(1	)
Income (loss) before income taxes		2			7			(8	)		(3	)
Loss before income taxes														(12	)		(12	)
Income tax (expense) benefit		3			(4	)		1			2			1			(2	)
Net income (loss)		5	%		3	%		(7	)%		(1	)%
Net loss														(11	)%		(14	)%

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

	Three Months Ended										Nine Months Ended									Three Months Ended
	September 30, 2019		September 30, 2018		variance $			variance %			September 30, 2019		September 30, 2018		variance $		variance %			March 31, 2020		March 31, 2019		variance $		variance %
	(In thousands, except percentages)																			(In thousands, except percentages)
Revenue
Licenses	$	26,825	$	28,023	$	(1,198	)		(4	)%	$	64,827	$	64,451	$	376		1	%	$	21,004	$	18,669	$	2,335		13	%
Subscription		37,383		27,916		9,467			34	%		102,929		74,531		28,398		38	%		43,881		31,835		12,046		38	%
Services and other		11,671		9,796		1,875			19	%		31,760		29,350		2,410		8	%		10,557		10,079		478		5	%
Total revenue	$	75,879	$	65,735	$	10,144			15	%	$	199,516	$	168,332	$	31,184	��	19	%	$	75,442	$	60,583	$	14,859		25	%

License Revenue. License revenue ~~decreased~~increased by ~~$1.2~~$2.3 million, or 4%13%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended September 30, 2018. While we increased revenue in follow-on license revenue from existing customers, with a 16% year-over-year increase, the increase was offset by a 15% year-over-year decrease from new customers.March 31, 2019. During the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ license revenue from new customers was ~~$15.4~~$11.4 million and ~~$18.2~~$14.5 million, respectively, and license revenue from existing customers was ~~$11.4~~$9.6 million and ~~$9.8~~$4.2 million, ~~for the respective periods. Our revenue from any single customer is determined by the number of identities the customer is entitled to govern as well as the number of modules and solutions purchased.~~respectively.

License revenue increased by $0.4 million, or 1%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Consistent with prior periods, license revenue from new customers was higher than license revenue from existing customers for the nine months ended September 30, 2019. This increase is primarily attributable to increased revenue from new customers, with a 10% year-over-year increase, partially offset by a 13% year-over-year decrease in follow-on license revenue from existing customers. During the nine months ended September 30, 2019 and 2018, license revenue from new customers was $41.7 million and $38.0 million, respectively, and license revenue from existing customers was $23.1 million and $26.5 million for the respective periods.

Subscription Revenue. Subscription revenue increased by ~~$9.5~~$12.0 million, or ~~34%~~38%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018. The increase was~~March 31, 2019 primarily ~~a result of~~due to an increase in ongoing maintenance ~~renewals~~revenue from our increased installed base and ~~an increase in maintenance revenue derived from~~ new ~~license sales. Our customer base increased by 251, or 23%, from 1,090 customers at September 30, 2018 to 1,341 customers at September 30, 2019.~~sales of our SaaS offerings. During the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018, revenue from existing customers contributed approximately 85% of subscription revenue. During the three months ended September 30,~~ 2019, subscription revenue from new customers was $1.4 million for both periods and ~~existing customers increased 52% and 31%, respectively, compared to the three months ended September 30, 2018.~~

Subscription revenue increased by $28.4 million, or 38%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase was primarily a result of an increase in ongoing maintenance renewals and an increase in maintenance revenue derived from new license sales. During the nine months ended September 30, 2019 and 2018,subscription revenue from existing customers ~~contributed to approximately 90% of subscription revenue. During the nine months ended September 30, 2019, subscription revenue from new~~was $42.5 million and ~~existing customers increased 43% and 38%, respectively, compared to the nine months ended September 30, 2018.~~$30.4 million, respectively.

Services and Other Revenue. Services and other revenue increased by ~~$1.9~~$0.5 million, or ~~19%,~~5% for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018. The increase is primarily a result of an increase in the number of customers using our consulting and training services.~~March 31, 2019.

Services and other revenue increased by $2.4 million, or 8%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase is primarily a result of an increase in the number of customers using our consulting and training services.

Geographic Regions. Our ~~operations~~customers in the United States ~~were responsible for~~contributed the largest portion of our revenue ~~and revenue growth,~~ in each ~~of the three~~reporting period ended March 31, 2020 and ~~nine months ended September 30,~~ 2019 ~~and 2018~~ because ofwe have more market momentum related to our larger and more established sales force, sales

pipeline and ~~partner network~~brand recognition and awareness in the United States as compared to our other regions. Revenue is classified by the following major geographic areas: (i) Americas, (ii) Europe, the Middle East and Africa (“EMEA”) and (iii) rest of the world. We continue to invest in increasing the size of our international sales force and strengthening partnerships with global system integrators and resellers worldwide. For ~~the nine months ended September 30, 2019, we continued to experience moderate revenue growth internationally although we experienced a minor decline in revenue during~~ the three months ended ~~September 30, 2019 compared to~~March 31, 2020, revenue in the ~~three months ended September 30, 2018.~~United States and the rest of the world increased year-over-year, while EMEA remained consistent year-over-year.

The following table sets forth, ~~a summary~~for each of the periods presented, our consolidated total revenue by geography and the respective ~~percentage~~percentages of total revenue:

	Three Months Ended										Nine Months Ended										Three Months Ended
	September 30, 2019					September 30, 2018					September 30, 2019					September 30, 2018					March 31, 2020					March 31, 2019
	$		% of revenue			$		% of revenue			$		% of revenue			$		% of revenue			$		% of revenue			$		% of revenue
	(In thousands, except percentages)																				(In thousands, except percentages)
United States	$	56,071		74	%	$	45,693		70	%	$	142,030		71	%	$	112,008		67	%	$	54,499		72	%	$	41,560		69	%
EMEA⁽¹⁾		12,499		16	%		11,754		18	%		38,768		19	%		36,305		22	%		13,728		18	%		13,937		23	%
Rest of the World ⁽¹⁾		7,309		10	%		8,288		12	%		18,718		10	%		20,019		11	%		7,215		10	%		5,086		8	%
Total revenue	$	75,879		100	%	$	65,735		100	%	$	199,516		100	%	$	168,332		100	%	$	75,442		100	%	$	60,583		100	%

	Three Months Ended												Nine Months Ended												Three Months Ended
	September 30, 2019			September 30, 2018			variance $			variance %			September 30, 2019			September 30, 2018			variance $			variance %			March 31, 2020			March 31, 2019			variance $			variance %
	(In thousands, except percentages)																								(In thousands, except percentages)
Gross profit
Licenses	$	25,742		$	26,878		$	(1,136	)		(4	)%	$	61,670		$	60,908		$	762			1	%	$	19,924		$	17,610		$	2,314			13	%
Subscription		30,521			22,664			7,857			35	%		83,939			59,702			24,237			41	%		35,405			26,022			9,383			36	%
Services and other		2,686			2,179			507			23	%		6,399			7,562			(1,163	)		(15	)%		1,551			2,082			(531	)		(26	)%
Total gross profit	$	58,949		$	51,721		$	7,228			14	%	$	152,008		$	128,172		$	23,836			19	%	$	56,880		$	45,714		$	11,166			24	%

Gross margin
Licenses		96	%		96	%								95	%		95	%								95	%		94	%
Subscription		82	%		81	%								82	%		80	%								81	%		82	%
Services and other		23	%		22	%								20	%		26	%								15	%		21	%
Total gross margin		78	%		79	%								76	%		76	%								75	%		75	%

Licenses. License gross profit ~~decreased~~increased by ~~$1.1~~$2.3 million, or 4%13%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~decrease was primarily the result of decreased license revenues.~~

~~License~~increase in gross profit ~~increased by $0.8 million, or 1%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase~~ was the result of increased license revenues ~~and decreases~~with only minor increases in third party ~~royalties due to satisfaction of our previous agreement.~~royalties.

Subscription. Subscription gross profit increased by ~~$7.9~~$9.4 million, or ~~35%~~36%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018.~~March 31, 2019. The increase in gross profit was the result of growth in subscription revenue, as described ~~above, partially offset by higher costs~~above. Gross margin went down slightly due to a shift in sales mix as ~~we expand~~ our ~~subscription-based product offerings and customer support organization.~~

Subscription gross profit increased by $24.2 million, or 41%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase was the result of growth in subscriptionSaaS revenue ~~as described above, coupled with growth in costs of subscription revenue at~~has a ~~rate~~ lower margin than our ~~revenue growth as we continue to build economies of scale within our customer support organization.~~maintenance revenue.

Services and Other. Services and other gross profit ~~increased~~decreased by $0.5 million, or ~~23%~~26%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018.~~March 31, 2019. This ~~increase~~decrease in gross profit was primarily attributable to increased revenues due to customer growth, partially offset by higher costs associated with expanding our infrastructure for our professional services and training organization to support an increasing number of customers.

Services and other gross profit decreased by $1.2 million, or 15%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This decrease was primarily attributable to the higher costs associated with expanding our infrastructure for our professional services and training organization to support an increasing number of customers, partially offset by increased ~~revenues due to customer growth.~~revenues.

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2018

variance $

variance %

September 30, 2019

September 30, 2018

variance $

variance %

(In thousands, except percentages)

Operating expenses

Research and development

$
14,148

$
11,474

$
2,674

23
%

$
40,318

$
31,351

$
8,967

29
%
General and administrative

10,192

8,763

1,429

16
%

27,819

24,163

3,656

15
%
Sales and marketing

33,274

26,701

6,573

25
%

99,298

72,934

26,364

36
%
Total operating expenses

$
57,614

$
46,938

$
10,676

23
%

$
167,435

$
128,448

$
38,987

30
%

Research and Development Expenses. Research and development expenses increased by ~~$2.7~~$3.0 million, or ~~23%~~24%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018. Approximately 97% of this~~March 31, 2019. This increase was ~~the result of an~~primarily driven by a $1.8 million increase in ~~headcount~~employee-based costs primarily consisting of deferred stock compensation and ~~related~~severance payments, and $0.9 million increase in allocated overhead expenses primarily related to ~~optimize~~facilities cost and expand our product offerings as well as pursue innovation in identity governance. Substantially all of the remaining increase in research and development expenses was the result of an increase in amortization of intangibles, primarily from our acquisition of patents in the fourth quarter of 2018.depreciation.

Research and development expenses increased by $9.0 million, or 29%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Approximately 93% of this increase was the result of an increase in headcount and related allocated overhead to optimize and expand our product offerings as well as pursue innovation in identity governance. The remaining increase in research and development expenses was primarily the result of an increase in amortization of intangibles, primarily due to patents acquired in the fourth quarter of 2018.

General and Administrative Expenses. General and administrative expenses increased by ~~$1.4~~$0.4 million, or ~~16%~~4%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018.~~March 31, 2019. This increase was primarily driven by an approximately $0.9 million increase in professional services expense comprised of legal fees and consulting fees associated with the issuance and sale of the Notes (as defined below) and Capped Call Transactions (as defined below) and acquisition related costs, an approximately $0.5a $1.0 million increase in software maintenance and subscription expenses and ~~an approximately $0.2~~$0.5 million increase in general and administrative headcount and related allocated overhead ~~expenses. See Note 7 “Convertible Senior Notes~~expenses, and, Capped Call Transactions” and Note 11 “Subsequent Events” in our notes to condensed consolidated financial statements included in this Quarterly Report for more information regarding the issuance and salepartially offset by a decrease of ~~the Notes and Capped Call Transactions and Acquisitions, respectively.~~

~~General and administrative expenses increased by $3.7~~$1.1 million ~~or 15%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This increase was primarily driven by approximately $2.6 million of increase~~ in professional services expense ~~comprised of~~related to legal, ~~fees,~~ accounting and consulting fees incurred in the prior year associated with the implementation of ASC 606 ~~SOX, issuance~~ and ~~sale~~the Sarbanes-Oxley Act of the Notes and capped call transactions and acquisition related costs. Substantially all of the remaining increase was attributable to software maintenance and subscription expenses. See Note 7 “Convertible Senior Notes and Capped Call Transactions” and Note 11 “Subsequent Events” in our notes to condensed consolidated financial statements included in this Quarterly Report for more information regarding the issuance and sale of the Notes and Capped Call Transactions and Acquisitions, respectively.2002.

Sales and Marketing Expenses. Sales and marketing expenses increased by ~~$6.6~~$6.4 million, or ~~25%~~21%, for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018. Approximately $5.6 million, or 85%,~~March 31, 2019. Substantially all of the increase was the result of our increased sales and marketing headcount, stock-based compensation expense and related allocated overhead, to support increased penetration into our existing markets and customer base as well as expansion into new industry verticals and geographic markets. ~~As our headcount~~

Interest income increased ~~we also experienced related increases in travel and advertising costs of $0.5 million and $0.6 million, respectively, partially offset~~ by ~~a decrease in professional services expense of $0.4~~$1.2 million for the three months ended ~~September 30, 2019~~March 31, 2020, compared to March 31, 2019. This increase was primarily due to interest income earned on our money market accounts in which we have invested a significant portion of the ~~three months ended September 30, 2018.~~net proceeds from the Notes issuance in the third quarter of 2019.

Interest expense increased by $26.4 million, or 36%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Approximately $18.9 million, or 72%, of the increase was the result of our increased sales and marketing headcount, stock-based compensation expense and related allocated overhead, to support increased penetration into our existing customer base as well as expansion into new industry verticals and geographic markets. As our headcount increased, we also experienced related increases in travel and advertising costs of $1.6 million and $3.5 million, respectively, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Additionally, approximately $1.1 million, or 4%, of the increase is a result of severance expense related to the resignation of our former Chief Revenue Officer.

~~Interest income (expense), net, decreased by $0.2~~$4.5 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~September 30, 2018.~~March 31, 2019. This ~~decrease~~increase was primarily due to ~~the paydown~~$4.0 million of our term loan principal balance and related amortization of issuance costs under the previous credit facility for the three months ended September 30, 2018 and increase in interest income earned on our cash deposits for the three months ended September 30, 2019, partially offset by the amortization of debt discount and $0.3 million of debt issuance costs related to the Notes ~~and amortization of issuance costs related to the Credit Agreement~~ for the three months ended ~~September 30, 2019.~~

Interest income (expense), net, decreased by $4.5 million for the nine months ended September 30, 2019, compared to September 30, 2018. This decrease was primarily due to the paydown of our term loan principal balance and related amortization of issuance costs under the previous credit facility for the nine months ended September 30, 2018 and increase in interest income earned on our cash deposits for the nine months ended September 30, 2019, partially offset by the amortization of debt discount and issuance

~~costs related to the Notes and amortization of issuance costs related to the Credit Agreement for the nine months ended September 30, 2019.~~ 2020.

~~Provision~~The Company recorded an income tax benefit of $0.5 million for the three months ended March 31, 2020 compared to an income ~~taxes consists~~tax expense of ~~U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. With~~$1.3 million for the ~~adoption~~three months ended March 31, 2019, leading to a net benefit of ~~ASC 606 in 2018, we are in a deferred tax liability position and no longer require a valuation allowance. We still maintain~~$1.8 million year-over-year. The Company maintains a full valuation allowance for our Israel tax position due the lack of taxable earnings for the foreseeable future.

Our income tax rate varies from the federal statutory rate due to the valuation allowances on certain foreign deferred tax assets, regulations and interpretations in multiple jurisdictions in which we operate; unanticipated changes in tax rates; and differences in accounting and tax treatment of our stock-based ~~compensation.~~compensation, foreign withholding taxes and research and development credits. We expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue.

We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax if such earnings are distributed to the U.S. ~~Prior to~~With the exception of 2018 and 2019, we have incurred net operating losses for federal income tax purposes each year since our inception. We have since begun to utilize some of our net operating losses for federal income tax purposes. Thus, our tax expense to date relates primarily to state as well as foreign ~~income taxes and to a lesser extent, state~~ income taxes. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 is ~~(249.3)% and 13.9%, respectively,~~5.3% compared to ~~56.9% and 73.5%~~(18.4)% for the three ~~and nine~~ months ended ~~September 30, 2018, respectively.~~March 31, 2019. The main drivers for the differences in the rates from the prior period to the current period are related to a decrease in forecasted pre-tax book income, the impact of stock compensation and increase in foreign tax ~~liabilities.~~

~~Our income tax rate varies from the federal statutory rate due to~~liabilities and impact of the valuation allowances on certain foreign deferred tax assets, regulations and interpretations in multiple jurisdictions in which we operate; unanticipated changes in tax rates; and differences in accounting and tax treatmentallowance build.

We do not consider the earnings of our foreign subsidiaries, with the exception of India, to be permanently reinvested in foreign jurisdictions. ~~Prior to the Tax Cuts and Jobs Act, the Company had consistently applied Section 956 to its intercompany cash flows. Under the Act, beginning in 2018,~~The global intangible low-taxed income (“GILTI”) ~~provisions apply providing an incremental tax on low taxed foreign income. The GILTI~~ provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. AsThe Company is currently in a ~~result of applying these provisions, the majority of the earnings in our foreign subsidiaries represent income that was previously taxed in the United States. As~~tested loss and does not incur a ~~result, there would be no material income tax consequences to repatriating the cash currently held in our foreign subsidiaries.~~GILTI tax. In India, we continue to invest and grow our research and development activities and have no plans to repatriate undistributed earning held in India back to the U.S. parent company, and therefore consider earnings in India to be permanently reinvested.

As of ~~September 30, 2019,~~March 31, 2020, we had ~~approximately $464.3~~$461.2 million of cash and cash equivalents, $4.4 million of cash and cash equivalents held in our foreign subsidiaries, $75.0 million of availability under the Credit Agreement (as defined below) and $6.0 million in our irrevocable, cash collateralized, unconditional standby letter of credit, issued primarily in connection with our ~~new corporate headquarters lease. See Item 2 “Properties” of the Annual Report for more information regarding our new~~ corporate headquarters lease. As of ~~September 30, 2019,~~March 31, 2020, we had ~~approximately $4.2~~$539.2 million ~~of cash and cash equivalents held~~ in ~~our foreign subsidiaries.~~working capital, which we define as current assets less current liabilities, excluding deferred revenue.

We believe that existing cash and cash equivalents, any positive cash flows from operations and available borrowings under ~~the~~our Credit Agreement ~~and the Notes~~ will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities and the introduction of new solutions and product enhancements. To the extent existing cash and cash equivalents ~~and borrowings under the Credit Agreement and the Notes~~ are not sufficient to fund future activities, we may borrow under our Credit Agreement or seek to raise additional funds through equity, equity-linked or debt financings. Any additional equity financing may be dilutive to our existing stockholders. We may enter into agreements or letters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, which could also require us to seek additional equity financing, incur indebtedness or use cash resources. As of ~~September 30, 2019,~~March 31, 2020, we had no material commitments for capital expenditures. The Company has entered into merger agreements with two companies subsequent to the end of the reporting period for this Quarterly Report. For more information, see Note 11 “Subsequent Events” in our notes to condensed consolidated financial statements included in this Quarterly Report.

Since inception, we have financed operations primarily through license fees, maintenance fees, SaaS subscription fees, consulting and training fees, borrowings under our prior credit agreement and, to a lesser degree, the sale of equity securities. Our principal uses of cash are funding operations and capital expenditures. Over the past several years, revenue has increased significantly from year to year and, as a result, cash flows from customer collections have ~~generally~~ increased. However, operating expenses have also increased as we have invested in growing our business. Our operating cash requirements may increase in the future as we continue to invest in key initiatives to drive the ~~strategic growth of our company.~~Company long-term growth.

OnIn March ~~11,~~ 2019, SailPoint Technologies, Inc., as borrower, and certain of our other wholly owned subsidiaries entered into a credit agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Credit Agreement”). In September 2019, the Company amended the Credit Agreement in connection with the issuance and sale of the Notes. Such amendment included a decrease in the commitments for revolving credit loans from an initial $150.0 million to $75.0 million, with a $15.0 million letter of credit sublimit, which amount can be increased or decreased under specified circumstances and is subject to certain financial covenants. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including for acquisitions permitted under the Credit Agreement.

Borrowings under the Credit Agreement are scheduled to mature in March 2024. We had no outstanding revolving credit loan balance as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. We were in compliance with all applicable covenants as of ~~September 30, 2019.~~March 31, 2020.

See Note ~~6 “Line of Credit and Long-Term Debt”~~8 “Credit Agreement” in our notes to condensed consolidated financial statements included in this Quarterly Report for more information regarding terms and conditions of the Credit Agreement.

In September 2019, we issued $400.0 million aggregate principal amount of 0.125% convertible senior notes due 2024 (the “Notes”), ~~including the exercise in full by the initial purchasers of their option to purchase $50.0 million aggregate principal amount of the Notes,~~ in a private offering to qualified institutional buyers. In connection with the issuance of the Notes and exercise in full of the initial purchasers’ option, the Company used ~~approximately~~ $37.1 million of the net proceeds to pay the cost of the privately negotiated capped call transactions (the “Capped Call Transactions”).

See Note 79 “Convertible Senior Notes and Capped Call Transactions” in our notes to condensed consolidated financial statements included in this Quarterly Report for more information regarding terms and conditions of the Notes and Capped Call Transactions.

	Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
	(In thousands)						(In thousands)
Net cash provided by operating activities	$	39,654		$	30,358		$	16,459		$	17,228
Net cash used in investing activities		(5,075	)		(4,005	)		(229	)		(2,295	)
Net cash provided by (used in) financing activities		358,834			(59,044	)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	393,413		$	(32,691	)
Net cash provided by financing activities								1,162			343
Net increase in cash, cash equivalents and restricted cash							$	17,392		$	15,276

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, cash provided by operating activities was ~~$39.7~~$16.5 million, which consisted of net loss of ~~$13.9~~$8.4 million, adjusted by non-cash charges of ~~$32.9~~$18.2 million and a net change of ~~$20.7~~$6.7 million in our ~~net~~ operating assets and liabilities. The non-cash charges are primarily comprised of depreciation and amortization of ~~$10.6~~$4.6 million, amortization of debt discount and issuance costs of ~~$0.4~~$4.4 million, amortization of contract acquisition costs of ~~$7.3~~$3.0 million, ~~bad debt~~loss on disposal of fixed assets of $0.1 million, credit loss expense of ~~$0.2~~$0.1 million, stock-based compensation of ~~$14.1~~$6.2 million, a net decrease in operating leases of $0.1 million and a net ~~change~~decrease in ~~operating leases~~deferred taxes of ~~$0.3~~$0.1 million. The change in our net operating assets and liabilities was ~~$20.7~~$6.7 million as a result of a decrease in accounts receivable due to the timing of receipts of payments from customers, partially offset by an increase in prepayments and other assets primarily due to increase in deferred contract acquisition costs, a decrease in accounts payable due to timing of cash disbursements, a decrease in accrued expenses and other liabilities due primarily to payment of commissions and bonuses, a decrease in income taxes payable, and a decrease in deferred revenue due to the timing of billings and cash received in advance of revenue recognition primarily for subscription and support services and an increase in accrued expenses and other liabilities due primarily to accrual of additional commissions and bonuses, partially offset by an increase in prepayments and other assets due to increases in deferred contract acquisition costs and contract assets, a decrease in accounts payable due to timing of cash disbursements and a change in income taxes payable to income tax receivable.services.

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, cash provided by operating activities was ~~$30.4~~$17.2 million, which consisted of a net loss of ~~$1.5~~$8.4 million, adjusted by non-cash charges of ~~$29.7~~$10.4 million and a net change of ~~$2.2~~$15.2 million in our ~~net~~ operating assets and liabilities. The non-cash charges are primarily comprised of depreciation and amortization of ~~$8.0 million, amortization of debt issuance costs of $0.2~~$3.3 million, amortization of contract acquisition costs of ~~$5.6~~$2.2 million,~~loss on modification and partial extinguishment of debt of~~ ~~$1.5 million, bad debt expense of $0.3 million, and~~ stock-based compensation of ~~$14.1~~$4.6 million and a net change in operating leases of $0.3 million. The change in our net operating assets and liabilities was ~~$2.2~~$15.2 million as a result of an increase in accrued expenses and other liabilities due primarily to accrual of deferred rent and lease liabilities due to adoption of ASC 842 and a decrease in accounts receivable due to the timing of receipts of payments from customers, partially offset by an increase in prepayments and other assets, a decrease in accounts payable due to timing of cash disbursements and ~~an increase~~a decrease in deferred revenue due to the timing of billings of revenue recognition and cash received in advance of revenue recognition primarily for subscription and support services, partially offset by an increase in prepayments and other assets due to increases in deferred contract acquisition costs and contract assets, a decrease in accrued expenses and other liabilities primarily due to less bonus, commissions and payroll tax accruals and a change in income taxes payable to income tax receivable.services.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, cash used in investing activities was ~~$5.1~~$0.2 million, consisting primarily of purchases of property and equipment.

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, cash used in investing activities was ~~$4.0~~$2.3 million, consisting primarily of purchases of property and equipment.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, cash provided by financing activities was ~~$358.8~~$1.2 million, consisting of ~~$400.0 million of proceeds from issuance of the Notes, $2.6~~$1.3 million of proceeds from exercise of stock options, ~~and $2.9 million of proceeds from issuance of equity related to shares issued pursuant to our Employee Stock Purchase Plan,~~ partially offset by $0.2 million in vesting of restricted stock units, primarily related to tax payments funded in the form of ~~debt issuance costs of $9.6 million associated with the Credit Agreement and issuance of the Notes and $37.1 million of purchases of capped calls associated with the issuance of the Notes.~~net issuances for certain executive officers.

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, cash ~~used in~~provided by financing activities was ~~$59.0~~$0.3 million, consisting of ~~$60.0 million in repayment of debt and $0.3 million in prepayment penalties partially offset by $1.3~~$1.2 million of proceeds from exercise of stock ~~options.~~options partially offset by debt issuance costs of $0.8 million associated with the new credit agreement.

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities, which includes special purposes entities and other structured finance entities.

As of September 30, 2019, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

There have been no material changes outside the ordinary course of business in our contractual obligations and commitments, as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018, except for those disclosed in Note 5 “Commitments and Contingencies” and Note 7 “Convertible Senior Notes and Capped Call Transactions” in our notes to condensed consolidated financial statements included in this Quarterly Report.

The Company has entered into merger agreements with two companies subsequent to the end of the reporting period for this Quarterly Report. For more information, see Note 11 “Subsequent Events” in our notes to condensed consolidated financial statements included in this Quarterly Report.

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the accounting policies associated with revenue recognition, the valuation allowance based on expected credit losses and the collectability of accounts receivable, ~~valuation of long-lived assets,~~stock-based compensation expense, fair value of the liability and equity components of the Notes, ~~stock-based compensation expense~~income taxes and ~~income taxes~~valuation of long-lived assets and goodwill are the most significant areas involving management's judgments and estimates. Therefore, these are considered to be our critical accounting policies and estimates. ~~There have been no material changes to these estimates or the policies related to them during the three and nine months ended September 30, 2019, except~~

Except for the ~~addition surrounding~~ f~~air value~~adoption of ~~the liability and equity components of the Notes due to issuance in September 2019. For a full discussion of these estimates and policies,~~ASU 2016-13, see “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report for a full discussion of these estimates and policies. See Note ~~2 “Summary~~1 “Description of Business and Summary of Significant Accounting Policies” and Note ~~7 “Convertible Senior Notes and Capped Call Transactions”~~3 “Allowance for Expected Credit Losses” in our notes to condensed consolidated financial statements included in this Quarterly Report for more ~~information.~~information on the adoption of ASU 2016-13.

See Note ~~2 “Summary~~1 “Description of Business and Summary of Significant Accounting Policies” in our notes to ~~our~~ condensed consolidated financial statements ~~included in Part I, Item 1~~ included in this Quarterly Report for a description of recent accounting pronouncements, including the ~~expected~~ dates of adoption and estimated effects on our results of operations, financial condition, and cash flows.

For a description of market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of the Annual Report. Our exposure to market risks related to ~~foreign currency exchange risk and~~ inflation risk has not changed materially from the exposure described in the Annual Report.

~~As of September 30, 2019, we~~We had ~~approximately $464.3 million of~~ cash and cash equivalents of $467.5 million as of March 31, 2020. Included in our cash and cash equivalence balance is restricted cash of ~~approximately~~ $6.3 ~~million.~~million as of March 31, 2020. Our cash and cash equivalents ~~and restricted cash~~ are held in cash ~~deposits.~~deposits and money market funds. Due to the short-term nature of ~~the cash deposits,~~these instruments, we believe that we do not ~~believe that we~~ have ~~any~~ material risk of exposure to changes in the fair value of our cash and cash equivalents as a result of changes in interest rates. As of March 31, 2020, we do not believe a hypothetical 10% relative change in interest rates would have a material impact on the value of our cash equivalents.

In September 2019, we issued and sold $400.0 million aggregate principal amount of 0.125% convertible senior notes due 2024 ~~(the “Notes”),including the exercise in full by the initial purchasers of their option to purchase $50.0 million aggregate principal amount of the Notes,~~ in a private offeringto qualified institutional buyers. The fair value of the Notes is subject to interest rate risk, market risk and other factors due to the conversion feature. The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized discount and debt issuance costs on our balance ~~sheet,~~sheets, and we present the fair value for required disclosure purposes only.

Our reporting currency is the U.S. dollar. Due to our international operations, we have foreign currency risk related to operating expenses denominated in currencies other than the U.S. dollar, primarily the Euro, British pound, Australian dollar, Singaporean dollar, Israeli shekel and the Indian rupee. As of March 31, 2020, our cash and cash equivalents included $4.4 million held in currencies other than the U.S. dollar. Decreases in the relative value of the U.S. dollar to other currencies may negatively affect our operating results as expressed in U.S. dollars. These amounts are included in other expense, net, on our consolidated statements of operations.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates because, although substantially all of our revenue is generated in U.S. dollars, our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, Europe and Asia. Our results of operations and cash flows could therefore be adversely affected in the future due to changes in foreign exchange rates. We do not believe that a hypothetical 10% change in the relative value of the U.S. dollar to other currencies would have a material effect on our results of operations or cash flows, and to date, we have not engaged in any hedging strategies with respect to foreign currency transactions. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates, and we may choose to engage in the hedging of foreign currency transactions in the future.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) orand 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”)) should be~~Act) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the ~~Securities and Exchange Commission~~SEC and to ensure that information required to be disclosed is accumulated and communicated to management, including our ~~principal executive~~Chief Executive Officer (“CEO”) and ~~principal financial officers,~~Chief Financial Officer (“CFO”), to allow timely decisions regarding disclosure. ~~The Chief Executive Officer (CEO) (our principal executive officer)~~Our CEO and ~~the Chief Financial Officer (CFO) (our principal financial officer),~~CFO, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act)~~ as of ~~the end of the period covered by this Quarterly Report on Form 10-Q~~March 31, 2020 and, based on their evaluation, have concluded that the disclosure controls and procedures were ~~not~~ effective as of such ~~date due to~~date.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the ~~material weaknesses in~~Exchange Act. Our internal control over financial reporting ~~described below.~~ is designed to provide reasonable assurance regarding the reliability of financial reporting and the presentation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

In connection with the preparation of this Quarterly Report on Form 10-Q, our ~~Annual Report, we conducted an evaluation of~~management assessed the effectiveness of our internal control over financial reporting ~~based on~~as of March 31, 2020. In making this assessment, it used the criteria ~~in Internal Control—Integrated Framework issued~~set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in ~~2013, and~~Internal Control—Integrated Framework (2013 framework). Based on such assessment, our management concluded that, ~~the Company’s~~as of March 31, 2020, our internal control over financial reporting was ~~not~~ effective ~~as of December 31, 2018~~ based on those criteria. ~~Based upon our management’s evaluation, we identified the following material weaknesses as of December 31, 2018, in the Company’s internal control over financial reporting:~~

Notwithstanding the identified material weaknesses, management believes the unaudited condensed consolidated financial statements as included in Item 1 of this Quarterly Report fairly represent, in all material respects, the Company’s financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles in the United States. There were no changes to previously released financial results.

~~There were no changes to our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f)~~During the first quarter of ~~the Exchange Act) during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We~~2020, we implemented internal controls to ensure that we ~~adequately evaluated our contracts and~~ properly assessed the impact of the new accounting standards related to ~~leases~~credit losses and implementation costs of cloud computing arrangements on our financial statements to facilitate their adoption on January 1, ~~2019. There~~2020. However, there were no significant changes to our internal control over financial reporting due to the adoption of ~~the~~such new standards.

~~Internal~~ There were no changes in the Company’s internal control over financial reporting ~~cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process~~as defined in Exchange Act Rule 13a-15(d) and 15d-15(d) during the quarter ended March 31, 2020 that ~~involves human diligence and compliance and is subject~~materially affected, or are reasonably likely to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis bymaterially affect, our internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk.

We are not currently a party to, nor is our property currently subject to, any material legal proceedings. We are not aware of any governmental inquiries or investigations into our business.

Except with respect to the risk ~~factors~~factor set forth below, there have been no material changes to the risk factors disclosed in Part I, Item 1A in the Company’s Annual Report.

The ~~following risk factors include risk factors originally set forth in Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed on September 18, 2019, as updated to reflect the issuance~~effects of the ~~Notes. The Company is also updating~~COVID-19 pandemic may materially affect how we and ~~supplementing a risk factor~~our customers operate, and the duration and extent to ~~reflect updates in privacy regulations.~~

~~Servicing~~which this may impact our future ~~debt~~results of operations and overall financial performance remains uncertain.

In December 2019, COVID-19 was identified in Wuhan, China. In March 2020, as the disease began to spread around the world, the World Health Organization declared the COVID-19 outbreak a pandemic. In light of the rapid spread of COVID-19 in the United States and abroad, government and public health authorities have recommended social distancing and imposed various quarantine and isolation measures on large portions of the population, including mandatory business closures. Although some of the restrictions have begun to be lifted, these and other measures, while intended to protect human life, have had and are expected to continue to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. Our business may ~~require~~also be negatively impacted by the COVID-19 pandemic.

As a ~~significant amount~~result of ~~cash,~~the COVID-19 pandemic, we have temporarily closed our offices (including our corporate headquarters in Austin, Texas) in the United States, India, Israel and the United Kingdom and implemented certain travel restrictions. We have shifted certain of our customer events to virtual-only experiences and we may ~~not have sufficient cash flow from~~deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events and otherwise alter our ~~business to do so.~~

~~Our~~marketing efforts in the future. This trend could materially and adversely affect our sales cycle, conversion rate, the quantity and quality of our customer pipeline and our ability to effectively deliver our products and services to our customers.

The conditions caused by the COVID-19 pandemic may also affect the rate of IT spending by our current and prospective customers and could adversely affect their ability or willingness to attend our events or to purchase our offerings, delay prospective customers’ purchasing decisions, adversely impact our ability to provide on-site consulting services to our customers, delay the provisioning of our offerings, result in customer requests to lengthen payment terms or reduce the value or duration of subscription contracts, cause customers to fail to make ~~scheduled~~timely payments or affect attrition rates, all of which could adversely affect our future bookings, revenue mix, operating results and overall financial performance. For example, our performance and operations during the first quarter of 2020 were negatively affected by the impact of COVID-19 in March, and we could experience similar or more dramatic effects in future periods. The impacts of COVID-19 have made it difficult to accurately forecast our future financial performance. Many experts predict a severe global economic recession as a result of the ~~principal~~COVID-19 pandemic. A significant weakening of ~~to pay interest on or to refinance our indebtedness, including~~ the ~~Notes~~global economy, and any future borrowings under the Credit Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operationseven more so in the ~~future sufficient to service our debt~~United States, more limited availability of credit, a reduction in business confidence and ~~make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one~~activity, or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms. In addition, our credit facility and any of our future debt agreements may contain restrictive covenants that prohibit us from adopting any of these alternatives. Our failure to comply with these covenantseconomic uncertainty could result in ~~an event of default, which, if not cured or waived, could result~~reductions in ~~the acceleration~~sales of our ~~debt.~~solutions, longer sales cycles, slower adoption of new technologies and increased price competition, which could have an adverse effect on our business, operating results and financial position.

~~In addition, holders~~Given the nature and significance of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. In such event,events described above, we ~~may~~are not ~~have enough available cash or be~~ able to ~~obtain financing at~~enumerate all potential risks to our business; however, we believe that in addition to the ~~time to make repurchases~~possible impacts described above, other potential impacts of ~~the Notes surrendered therefor. In addition, our ability to repurchase the Notes may be~~these recent events include, but are not limited by our existing Credit Agreement or agreements governing our future indebtedness. Our failure to repurchase the Notes at a time when the repurchase is required by the indenture governing the Notes would constitute a default under such indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing credit facility or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes.

~~In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:~~to:

Any of these factors could harm our business, financial condition and operating results. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

~~The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.~~

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy

our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portionThe duration and extent of the ~~outstanding principal of~~impact from the ~~Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.~~

~~The Capped Call Transactions relating to the Notes may affect the value of our common stock.~~

~~Our Notes may become in the~~COVID-19 pandemic depends on future ~~convertible~~developments that cannot be accurately predicted at the option of their holders under certain circumstances. The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such Notes. If holders of the Notes elect to convert their Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.

In connection with the pricing of the Notes, we entered into privately negotiated Capped Call Transactions with the option counterparties. The Capped Call Transactions will generally reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

In connection with establishing their initial hedges of the Capped Call Transactions, the option counterparties or their respective affiliates have purchased shares of our common stock and/or enter into various derivative transactions with respect to our common stock, including with certain investors in the Notes. Such activity could increase (or reduce the size of any decrease in) the market price of our common stock. In addition, we expect that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock. Also, if any such Capped Call Transactions fail to become effective, whether or not the offering of the Notes is completed, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

~~The accounting method for convertible debt securities that may be settled in cash,~~this time, such as the ~~Notes, could have a material effect~~severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our ~~reported~~employees, customers, partners and vendors. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed. To the extent the COVID-19 pandemic adversely affects our business and financial results,.

In May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that it may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid in capital section of stockholders’ equity on our consolidated balance sheet at issuance, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes. We will report larger net losses or lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the Notes.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method,also have the effect of ~~which is that~~heightening many of the ~~shares issuable upon conversion of such Notes are not included~~other risks set forth in “Risk Factors” in the ~~calculation of diluted earnings per share except~~Annual Report, such as those relating to the extent that the conversion value of such Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. For example, the Financial Accounting Standards Board recently published an exposure draft proposing to

amend these accounting standards to eliminate the treasury stock method for convertible instruments and instead require application of the “if-converted” method. Under that method, if it is adopted, diluted earnings per share would generally be calculated assuming that all the Notes were converted solely into shares of our common stock at the beginning of the reporting period, unless the result would be anti-dilutive. If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

A shift in our business from selling licenses to selling subscriptions could materially and adversely affect our financial condition, operating results and liquidity, and our business, financial condition, operating results and prospects could be materially and adversely affected if we fail to successfully manage this shift.

We believe the industry is experiencing a marked shift from purchasing software via licenses to purchasing software via subscriptions, and we are evaluating how and when to most effectively respond to this industry shift. As we make this transition and sell subscription-based arrangements, our license revenue will be negatively impacted and to a lesser extent our subscription revenue could be positively impacted.

We believe that continued growth of subscription revenue as a percentage of total revenue will lead to a more predictable revenue model and increase our visibility to future period total revenues. However, in a subscription-based arrangement with a customer, we typically:

As a result, during any period of significant shifts to subscription-based arrangements, our revenue and cash flows, financial condition, operating results and liquidity may be materially and adversely affected in such period. Additionally, if a greater percentage of our customers purchase our solutions through subscription-based arrangements than we expect in any period, our revenue and earnings will likely fall below expectations for that period and our cash flows may be lower than expected. Furthermore, our business, financial condition, operating results and prospects could be materially and adversely affected if we fail to successfully manage this industry shift, which depends upon our ability to, among other things, properly price our subscription-based arrangements, deliver software as a service, retain our customers, and further develop or acquire related technologies and infrastructure.

In addition, in accordance with ASC 606, when a license of intellectual property is not distinct, it is combined with other goods and services as a single performance obligation. Our advanced identity analytics solution, IdentityAI, which is delivered as a subscription service, is designed to complement our IdentityIQ and IdentityNow solutions and is not intended to be utilized separately from those solutions. Accordingly, we believe that revenue from an IdentityIQ license that is sold with an IdentityAI subscription should generally be recognized ratably over the term of the IdentityAI agreement. Thus, as sales of IdentityAI increase, we expect that a greater proportion of our fees from IdentityIQ licenses will be recognized ratably rather than upfront, which, particularly when added to the effects of the shift to subscription-based arrangements on our revenues and earnings discussed above, could materially and adversely affect our business, financial condition, operating results and prospects.

~~Although we had positive net income of $3.7 million in 2018, we have a history of losses, and we may not be able to generate sufficient revenue to achieve and sustain profitability.~~

Until the year ended December 31, 2018, we incurred net losses in each prior year since our inception, including net losses of $7.6 million and $3.2 million for the years ended December 31, 2017 and 2016, respectively, and for the nine months ended September 30, 2019, our net loss was $13.9 million. We cannot assure you that we will achieve profitability in the future or that we will be able to sustain profitability. We expect our operating expenses to increase significantly as we continue to expand our sales and marketing efforts, continue to invest in research and development, particularly for our cloud-based solutions, and expand our operations in existing and new geographies and vertical markets. While our revenue has grown in recent years, if our revenue declines or fails to grow at a rate faster than increases in our operating expenses, we will not be able to maintain profitability in future years. In

particular, as discussed in the risk factor above, our revenues may be materially and adversely affected during any period of significant shifts to subscription-based arrangements, and as a result, we may again generate losses.

~~We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.~~

We have experienced rapid growth in recent years. Our revenue grew from $132.4 million to $248.9 million from the year ended December 31, 2016 to the year ended December 31, 2018. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. We believe our revenue growth depends on a number of factors, including, but not limited to:

If we are unable to achieve any of these requirements, our revenue growth will be adversely affected. In addition, as discussed above, our revenue growth may be materially and adversely affected during any period of significant shifts to subscription-based arrangements.

~~Any failure to offer high-quality customer support may adversely affect our relationships with our customers, which could adversely affect our business.~~

We typically bundle customer support with arrangements for our solutions. In deploying and using our platform and solutions, our customers typically require the assistance of our support teams to resolve complex technical and operational issues. We may be unable to modify the nature, scope and delivery of our customer support to compete with changes in product support services provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and adversely affect our operating results. We may also be unable to respond quickly enough to accommodate short-term increases in customer demand for support. Our sales are highly dependent on our reputation and on positive recommendations from our existing customers. Customer satisfaction will become even more important as our customers increasingly shift to subscription-based arrangements. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality product support, could adversely affect our reputation and our ability to sell our solutions to existing and new customers.

We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions, and acquisitions, particularly of development stage companies, may adversely affect our operating results and liquidity as well as our ability to meet expectations.

Our success will depend, in part, on our ability to expand our solutions and services and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may choose to do so through the acquisition of, or investment in, new or complementary businesses and technologies rather than through internal development. As a function of the industry in which we operate, we may acquire development stage companies that are not yet profitable, and that require continued investment, which could adversely affect our results of operations and liquidity as well as our ability to meet expectations, particularly if they were formulated prior to such acquisitions. Development stage companies generally involve a higher degree of risk and have not been proven, require additional capital to develop, and typically do not generate enough revenue to offset increased expenses associated therewith.

The identification of suitable acquisition or investment candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions or investments. The risks we face in connection with acquisitions and/or investments include:

~~The occurrence of any of these risks could prevent us from realizing the anticipated benefits of an acquisition and could adversely affect our business, operating results and financial condition.~~

Any actual or perceived failure by us to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us.

Our customers’ storage and use of data concerning, among others, their employees, contractors, customers and partners is essential to their use of our platform and solutions. We have implemented various features intended to enable our customers to better comply with applicable privacy and security requirements in their collection and use of data, but these features do not ensure their compliance and may not be effective against all potential privacy and data security concerns.

A wide variety of domestic and foreign laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, disposal and other processing of personal data. These data protection and privacy-related laws and regulations are evolving and may result in regulatory and public scrutiny and escalating levels of enforcement and sanctions. Our failure to comply with applicable laws and regulations, or to protect any personal data, could result in enforcement action against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could adversely affect our business, operating results, financial performance and ~~prospects.~~

Domestically, California enacted the California Consumer Privacy Act (the “CCPA”) which will take effect on January 1, 2020, imposing an additional regulatory burden on our company and providing for both civil penalties as well as a private right of action for data breaches.

In jurisdictions outside of the United States, we may face heightened data protection and privacy requirements. In the EU, for example, the European General Data Protection Regulation (“GDPR”) regulates the collection, use and disclosure of personal data that is subject to GDPR (“Personal Data”), including the transfer of such Personal Data to third countries, such as the United States. Due to ongoing legal challenges regarding the methods for transferring Personal Data to third countries, we face uncertainty as to whether our efforts to comply with such transfer restrictions are adequate and, as a result, we and our customers may be at risk of enforcement actions taken by EU data protections authorities until such point in time that we may be able to ensure that all transfers of Personal Data to us in the United States from the EU are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices. The GDPR also imposes significant penalties for non-compliance and may continue to cause our company to incur increased compliance costs. The CCPA and the GDPR are subject to differing interpretations and may cause us to incur substantial compliance costs and/or to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall.

In addition, we are subject to certain contractual obligations and privacy policies and practices regarding the collection, use, storage, transfer, disclosure, disposal or processing of personal data. Even the perception of a failure by us to comply with such contractual obligations and/or privacy policies and practices or other privacy concerns, whether or not valid, may harm our reputation, inhibit adoption of our solutions by current and future customers or adversely impact our ability to attract and retain workforce talent.

Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims. In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our

customers’ ability to collect, use or disclose data relating to individuals, which could decrease demand for our platform and solutions, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.debt obligations.

Around the world, there are numerous lawsuits in process against various technology companies that process personal data. If those lawsuits are successful, it could increase the likelihood that our company may be exposed to liability for our own policies and practices concerning the processing of personal data and could hurt our business. Furthermore, the costs of compliance with, and other burdens imposed by laws, regulations and policies concerning privacy and data security that are applicable to the businesses of our customers may limit the use and adoption of our platform or solutions and reduce overall demand for them. Privacy concerns, whether or not valid, may inhibit market adoption of our platform. Additionally, concerns about security or privacy may result in the adoption of new legislation that restricts the implementation of technologies like ours or requires us to make modifications to our platform, which could significantly limit the adoption and deployment of our technologies or result in significant expense to modify our platform.

We publicly post our privacy policies and practices concerning our processing, use and disclosure of the personally identifiable information provided to us by our website visitors. Our publication of our privacy policies and other statements we publish that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive or misrepresentative of our actual policies and practices or if our practices are found to be unfair.

Evolving and changing definitions of what constitutes “Personal Information” and “Personal Data” within the EU, the United States and elsewhere, especially relating to classification of IP addresses, machine or device identification numbers, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting technology alliance relationships that may involve the sharing of data.

On November 16, 2017, the Registration Statement on Form S-1 (File No. 333-221036) relating to our initial public offering was declared effective by the SEC and we priced our initial public offering. Pursuant to the Registration Statement, we registered an aggregate of ~~23,000,000~~23.0 million shares of our common stock, of which ~~15,800,000~~15.8 million shares were sold by us and ~~7,200,000~~7.2 million shares were sold by certain selling stockholders named therein at a price to the public of $12.00 per share (for an aggregate offering price of $276.0 million). We received net proceeds of ~~approximately~~ $172.0 million, after deducting underwriting discounts and commissions of ~~approximately~~ $13.3 million and offering-related expenses of $4.4 million. No payments were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities or any affiliates. Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Jefferies LLC and RBC Capital Markets, LLC acted as book-running managers and KeyBanc Capital Markets Inc., Canaccord Genuity Inc. and Oppenheimer & Co. Inc. acted as co-managers (collectively, the “Underwriters”) for our initial public offering.

Our initial public offering closed in November 2017. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus dated November 16, 2017 and filed with the SEC on November 17, 2017 pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”). As of ~~September 30, 2019,~~March 31, 2020, we have used $160.0 million of the proceeds from our initial public offering to repay borrowings under our previous term loan facility and ~~approximately~~ $1.8 million of such proceeds to pay a related prepayment ~~premium. As of September 30, 2019,~~premium; the remaining net proceeds are held in cash and have not been deployed.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware	47-1628077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11120 Four Points Drive, Suite 100, Austin, TX	78726
(Address of principal executive offices)	(Zip Code)

	PART I. FINANCIAL INFORMATION	Page

Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	2
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	65
	Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3632
Item 4.	Controls and Procedures	3632

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3834
Item 1A.	Risk Factors	3834
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4335
Item 6.	Exhibits, Financial Statement Schedules	4436
	Signatures	4637

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
	(in thousands)
Lease cost
Operating lease cost	$	790	$	3,577
Short-term lease cost		884		1,746
Total lease cost	$	1,674	$	5,323

	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
					Services						Services
	License		Subscription		and other		License		Subscription		and other
	(in thousands)
Timing of revenue recognition
Revenue recognized at a point in time	$	26,825	$	—	$	—	$	28,023	$	—	$	—
Revenue recognized over time		—		37,383		11,671		—		27,916		9,796
Total revenue	$	26,825	$	37,383	$	11,671	$	28,023	$	27,916	$	9,796

	Deferred revenue (current)		Deferred revenue (non-current)
Balances at December 31, 2018	$	95,919	$	18,382
Increase, net		7,398		2,139
Balances at September 30, 2019	$	103,317	$	20,521

	Accounts Receivable			Contract Assets
	As of March 31, 2020
	(In thousands)
Beginning Balance	$	—		$	—
Adoption of ASC 326		407			65
Credit loss expense, net of recoveries		112			15
Write-offs		(181	)		—
Ending Balance	$	338		$	80

	As of March 31, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	380,532		—		—	$	380,532
Total cash equivalents	$	380,532		—		—	$	380,532

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	364,127		—		—	$	364,127
Total cash equivalents	$	364,127		—		—	$	364,127

	As of
	October 15, 2019
	(In thousands)
Cash and cash equivalents	$	—
Prepayments and other current assets		34
Right-of-use assets		90
Goodwill		7,637
Intangible assets		9,760
Accounts payable		(21	)
Accrued expenses and other liabilities		(133	)
Deferred tax liability - non-current		(861	)
Total fair value of assets acquired and liabilities assumed	$	16,506

	Amount		Estimated Useful Life
	(In thousands)		(In years)
Developed technology	$	9,760	5

	(In thousands)
Balance, December 31, 2019	$	241,051
Measurement period adjustments		70
Balance, March 31, 2020	$	241,121

Exhibit Number		Description

2.1***		Agreement and Plan of Merger, by and among SailPoint Technologies, Inc., Whaler Merger Sub, Inc., Orkus, Inc., and Aspect Ventures II, L.P., dated as of October 7, 2019 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on October 16, 2019).

2.2***		Agreement and Plan of Merger, by and among SailPoint Technologies, Inc., Osprey Merger Sub, Inc., Overwatch.ID, Inc., and Shareholder Representative Services LLC, dated as of October 10, 2019 (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on October 16, 2019).

3.1		Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-38297)).

3.2		Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 001-38297)).

~~4.1~~		Indenture, dated as of September 24, 2019, between SailPoint Technologies Holdings, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on September 25, 2019).

~~4.2~~		Form of 0.125% Convertible Senior Notes due 2024 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on September 25, 2019).

10.1+*		~~Offer Letter,~~Confidential Separation Agreement, dated ~~August 19, 2019,~~March 31, 2020, by and between SailPoint Technologies Holdings, Inc. and ~~Matt Mills.~~Andrew Kahl.

10.2+*		~~Summary of Non-Employee Director Compensation.~~

~~10.3~~		~~Amendment No. 1 to Credit Agreement,~~Offer Letter, dated ~~as of September 18, 2019, among the Company,~~March 6, 2020, by and between SailPoint Technologies, Inc.~~, the other loan parties party thereto, the lenders party thereto, Citibank, N.A., as administrative agent,~~ and certain lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on September 18, 2019).

10.4***		Purchase Agreement, dated September 19, 2019, between SailPoint Technologies Holdings, Inc. and Morgan Stanley & Co. LLC and Citigroup Global Markets Inc., as representative of the several initial purchasers named in Schedule I attached thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on September 25, 2019).

~~10.5~~		Form of Capped Call Confirmation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-38297), filed with the Securities and Exchange Commission on September 25, 2019).Grady Summers.

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~Exhibit~~ ~~Number~~		~~Description~~
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

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101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Inline Cover Page Interactive Data File (embedded within the Inline XBRL document)

	SailPoint Technologies Holdings, Inc.,

Date: ~~November 6, 2019~~May 7, 2020	By:	/s/ Mark McClain
		Mark McClain
		Chief Executive Officer and Director (Principal Executive Officer)


Date: ~~November 6, 2019~~May 7, 2020	By:	/s/ Jason Ream
		Jason Ream
		Chief Financial Officer (Principal Financial Officer)

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