Q2 2020 SailPoint Technologies Holdings Inc Earnings Call

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[noise] Corporate center, maybe your name please.

First name Gavita last November on.

And are you going for the cell point conference.

Yes right.

And what company are you calling on behalf of.

IRA A. I era.

Perfect all Johnny writer.

Right.

In deploying their identity program in the cloud.

In particular, we were pleased to see increased adoption among larger enterprises this quarter.

For example, a large manufacturing company turned to sale point as part of their digital transformation efforts shifting the majority of their business to the cloud, including their identity guard at solution.

They chose our SAS identity platform to help govern their 65000 users in an efficient simplified way, while removing the burden from the <unk> <unk> for managing software updates and upgrades.

Joe point stood out as the modern SAS native identity platform that could evolve with their business, helping the company to accelerate decision, making and to support the workforce with greater velocity and deficiency.

In addition, we're seeing SAS growth among our existing customer base as they start to adopt a growing number of some of the newest SaaS services, we now offer such as identity analytics and cloud governance we.

We believe more companies are eager to extend and automate key areas of their identity program, giving us another leg of growth within our SaaS business.

For example, a large government agency recently extended their identity program would sell point to ensure a strong governance over the increasing number of cloud applications and infrastructure they manage across the business.

Selected sale points cloud governance, SAS services to better protect and covered access over their various cloud resources, including their azure cloud environment.

This is a critical next step for them and their journey with us as much of their work relies on these cloud resources and needs to be properly governor and secured.

As I mentioned, we closed some very large deals this quarter, including many where we replaced one of the large legacy vendors. We believed that the closing of these deals in the current environment reinforces the criticality of identity governance for enterprises today.

In addition to the manufacturing customer I mentioned earlier, what are the world's largest multinational conglomerates that serves both commercial and government markets shifted to next generation identity governance with Sailpoint.

We replaced the legacy identity vendor that could no longer meet their need for a much more dynamic agile and comprehensive approach to governing they're 165000 users worldwide.

In addition to seeing our solutions streamlined approach to managing the many audits the company's required to complete throughout the year.

They valued our innovative approach to identity governance with identity.

And our vision for sale point predictive identity.

Turning to the second half of 2020, we intend to build upon our significant momentum in the market and our clear technology leadership position to support that goal. We're focused on three key priorities first driving broad adoption of cell points identity platform with a continued focus on SAP.

Second delivering innovation and identity that extend sale points market leadership and further differentiates our value to enterprises around the world.

And third consistent execution, despite external macro dynamics outside of our control.

We're excited by the level of customer interest and activity, we're seeing presale points predictive identity platform and our AI driven solutions.

These demand trends are encouraging and reflect a meaningful opportunity Purcell point over the long term.

In closing I would like to thank the entire sell point team for their commitment to excellence and serving our customers are customers turned to us for their ever evolving identity needs and we continue to meet and exceed those needs no matter, what maybe happening in the world around US we delivered strong results. This quarter that I believe sets us up to continue to provide.

Value to the entire Sailpoint ecosystem as we head into the second half of 2020.

With that I'd like to handed over to Jason who will discuss the finer details of our financial performance and results in Q2.

Thank you Mark and thank you everyone on the line for joining us today.

I will review our second quarter results and then update you on our expectations for the remainder of 2020.

As Mark mentioned earlier, we're very pleased with our performance in second quarter and our momentum in the market.

Total revenue for the first quarter was $92.5 million, 47% increase over Q2 of 2019.

These results were driven by strong bookings throughout the quarter, along every metric that we watch.

Obviously revenue upside in the quarter, it's primarily in license, which for US comes primarily from sales of identity Q.

Several large identity I few deals in the quarter and some of those were amongst our largest feels ever.

While most of the license outperformance was driven by term likely booth that are effectively subscriptions, just like our south and maintenance contract under six so six accounting as you're probably aware a lot of the term license contract value gets recognized upfront as license revenue.

We also outperformed on south bookings driven primarily by our SaaS first focus with identity now and by sales of our AI offerings to both identity now and identity Q customers.

And for both our SaaS and on time offerings. We saw good results across both sales to new logo customers and sales to existing customers.

Subscription revenue increased 36% year over year to $45.9 million or 50% of total revenue in the quarter.

We continue to expect subscription revenue to be more than half of our total revenue going forward, though there can be from quarter to quarter variation that we have a particularly strong license revenue quarter.

Our renewal rates remained strong across both Mason maintenance and although we did see some impacts which we believe attributable to covert 19 during the quarter.

We believe that most of the impact is due to timing of renewals with companies, especially those impacted hardest by the current situation trying to maintain its much flexibility as they can't will be managing this very closely as we all make our way through the situation.

As I transition to the remainder of our income statement. Please note that unless otherwise stated all references to expenses and operating results are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in todays press release.

On a combined basis total gross margins for the quarter were 83% compared with 78% in Q2 of 2019.

The increase in gross margin was largely driven by the increase mix of license revenue in the quarter, Although gross margins for other revenue lines continue to move into right direction.

Operating expenses were $58.3 million up 6% sequentially.

On a year over year basis operating expenses were up 15% from $50.7 million in Q2 of 2019, we continued to do an effective job balancing investing in our gross initiatives, while applying a rigorous decision lens to our spending.

Operating in operating income was $18.4 million, which largely reflects our revenue outperformance in the quarter.

Turning to our outlook for the remainder of 2020 I'll layout, how we're approaching the business over the medium term and then give you our expectations for the third quarter and second half of 2020, I'll start with a few key points.

First customer interest in our SaaS platform continues to grow and we're particularly encouraged by the traction our SaaS solution is having with larger customers. We remain committed to leading with staff and believe that a significant portion of our new business will transition to fast over the coming quarters in years.

We do not however expect to be through this transition quickly and so the effect of the transition on revenue will be with us through at least the rest of this year and the following.

Second as you can imagine we're pleased with our performance in the first half of the ER and the momentum were seeing in the business. We believe that this is reflective of the market opportunity for our predictive identity vision and of our position as the best solution in the market, we are aggressively investing against that opportunity, particularly in our product or organization.

And in our go to market capabilities.

Over the medium term as the business continues to transition to SAP, we plan to invest in the business at a rate that will likely exceed revenue growth more closely paralleling new bookings growth.

Third and lastly, we continue to face an uncertain macro market.

We feel enough confidence in our ability to predict our results for the second half of the year that we are once again, providing quarterly and annual guidance, but wants to acknowledge that we remain in an unprecedented environment. One we're doing our best to steer safely through.

With that said our outlook for the second half of your is as follows.

In the third quarter of 2020, we expect total revenue to be in the range of $82 million to $84 million.

We expect subscription revenues to be approximately $49.5 million or nearly 60% of total revenue.

And services revenues come in at around $10.5 million.

For the third quarter of 2020, we expect a non-GAAP operating loss of between $5 million to $7 million.

For the full year, we now expect total revenue to be between 341 and $345 million with approximately $190 million driven by the subscription line, which represents 32% year on year subscription revenue growth.

And for the year, we expect non-GAAP operating income to be in the range of $10 million to $14 million.

I wanted to point out so we are significantly raising our operating income expectations for the year on the breakeven guidance that we gave at the beginning of the year.

And at the same time, you may notice that our expense outlook for the second half is higher than what was implied in that original guidance.

This guidance reflects the better than originally expected revenue, which was partially offset by a higher bonus accrual based on the performance expectations for the business and in part due to the more aggressive investment in the business that I mentioned previously.

Now I would like to close by saying that you'll probably knows theres a lot going on in our business.

We have made significant additions to our team we have evolved our strategy and positioning in a very exciting way and we're in the process of transitioning our business model to staffing subscription.

We've been talking about these developments for a little while now want to be able to walk you through them and much more detail. So we will be holding sell points first ever analyst day during the first quarter.

We will announce more details as we get closer to the date, but we're looking forward to the operated an opportunity to introduce you to more of the team walks through our strategy and business review and dive more deeply into the details.

With that I'd now like to turn to the operator to begin the Q and a portion of the call operator.

Thank you at this time will be conducting a question and answer session. If you would like to ask your question. Please press star one telephone keypad a confirmation total indicate your line is in the question Q.

You mean press star too if you like to remove your question from the Q for participants using speaker equipment. It may be necessary to pick up your handset before.

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Our first question comes from the line of Matt Hedberg with RBC capital markets. Please proceed with your question.

Yes, Thanks is actually much launch on for Matt Congratulations on the quarter guys. Jason I can start with you to bring back guidance for the quarter into year, obviously very strong results can you give us a little more detail on how you feel visibility has changed since the time when we report in Q1 and.

Then just kind of a level up and.

Certainty or conservativeness that you're still taking towards the macro when you're thinking through the rest of the year.

Yeah. Thanks, Matt.

I think probably the best way to say it as a theres still a lot of uncertainty about the world.

But that we've seen a fair amount of consistency in our execution over the last three or four months and I think when we were here three months ago.

And the cobot situation has just sort of rolled out over the past six eight weeks or are the previous six eight weeks, but just hadn't had enough history of execution under our belts and since that development to say.

We know we know what you know we feel comfortable predicting what's going to happen.

You know today, we've had a.

Three months of Ah of Q2, and a month of of Q4.

Q3 to see how things are gone and feel pretty good about about a trend that we're seeing so which isn't to say there isn't a lot of uncertainty going forward.

And you know, there's there's always a the possibility that something dramatically changes in the world that affects us or affects the entire world right, but right now we're sort of looking at our own execution and saying, okay that seems to be on a more predictable path and feel comfortable then putting a stake in the ground and thing here is it will do.

For the rest of the year.

Yeah. That's that's really helpful. And then market. It was really great to hear about all the large deals in the quarter could you talk just a little bit more about what drove companies to close deals in this environment about size I know you mentioned some legacy displacement is there any sense that maybe some of the pain points those solutions.

Maybe more painful and which environment.

Hi, Matt Good question keep in mind that as you'd expect we always talk about our sales cycle being six to 12 months and obviously, sometimes that correlates in generally does with larger deals I think some of what we talked about in terms of the general demand trends drilling like we have increased in this environment people, having a higher.

Level of awareness.

Certainly helped to make sure those deals got through through the cycle in completed on on this general sense of timing, we thought we'd see.

I can't say that there was something certainly those were not deals of those that scale that started post cobot right. Those were deals that we had been working on but I do think that the heightened awareness of the importance of identity and governance in this context, certainly insured those deals would kind of holder value and get done in a timely fashion and that's generally two of the large.

Sales we saw this quarter there were just a handful of particularly large ones that we've been focused on a release.

Hi, Thank you.

Thanks.

Thank you our next question comes from.

Well with Jefferies. Please proceed with your question.

Hey, guys as Joe on for Brian. Thanks for the question you guys blatantly called out predictive identity for the strength in the quarter in the press release can you just talk qualitatively about with the contribution was there any metrics there to kind of help us age the underlying trend from a product.

Yes, just this mark I'll take that one just to be cleared predictive is not a single product and Paul days, we have had some confusion about the past.

It's really an approach it does get instantiated in a couple of core I AI related products, but it's really at approach that's using AI and machine learning across our entire product line to deliver more automation more visibility you know shift more of the of the work away from wrote repetitive things.

Onto things it takes a will thought and policy and strategy from from the professionals in our company organizations. So it's really that said there is no like a line item associated with predictive.

We talked about some nice momentum with a couple of the products that are in that particular focus family like cloud access covenants and we'll come back as management excuse me.

But I think in general what we're seeing is just that that AI and machine learning approach is very much resonating in that idea using using intelligence to get more predictive to stay in front of the curve that feel behind the curve in our customer organizations is definitely resonating.

All right I appreciate that clarification, and then just as a follow up we're pretty much lapping some of the structural changes you guys made last year with management and sells possibly is there anything left to do there and then you called out higher expenses in the second half on maybe you could just parse out kind of where some of those investments are I mean, we would be investing to if we put up results like you did this quarter. So any color there would be helpful. Thank.

Hey, Jason why don't you were in separate places I'm sure everybody knows in today's project Jayson Once you take the investment piece and I'll, just kind of come back to a follow up from a year ago.

Yeah sure. So thanks, Brent the investment I think that there's two ways to look at it one is obviously with with higher expectations for the year than we started off with.

We're putting a higher bonus accrual than we otherwise would have had and that's raising our expense forecast for the second half a year, but in terms of investing in the business, which is which was the larger part of it it's going to sort of where we started the year talking about our investment priorities, which is into our engineering organization primarily phone.

Based on our SaaS products as you as you would expect and into our go to market capabilities and capacity.

Thank you. Our next question comes from the line of Hamza Fodderwala with Morgan Stanley. Please proceed with your question.

Hi, guys. Thank you for taking my question, so clearly you're seeing.

Strong.

Results for the south products, particularly in this environment I'm wondering how you see that mix shift.

Accelerating.

It's really into the environment and what are some of the limiting factor in terms of making a.

A full transition to more.

Subscription delivery.

And are there any metric that we should in particular be focusing on to really track.

The progress towards the top product.

Mark do you want to talk about the product side of things and then I'll talk about the numbers.

Yeah Fair point and Byway, if you guys don't mind I apologize I had a mute fail I started to answer the second half that question.

Yes, and so we moved to the next question, let me come back and they former when really quickly you guys still buying on the on a year ago thing just to pick up the back into that other question. Yeah, I'd say that we saw some execution issues around you know demand Gen that we called out and things like that and obviously put a lot of work into that had actually started working on it.

The time that call and as you all saw some pretty good results for the following few quarters and very strong results. This quarter. So I'd say yet in general we feel like we have tuned up both the targeting and messaging and our demands and processes and to that it to the correct and best prospects and also tuned up a lot of that field execution once customers.

Become a really valid prospects moving that opportunity through the pipeline to closure so apologize for for the mute fail. Okay back to this question [laughter] and SAS I'd say, we are seeing increasingly high levels of interest not only in the in the place where we've been strong with SaaS for the last few years were just kind of in that mid.

Enterprise segment, primarily again, we always say there are exceptions, where smaller companies and you might think we'll choose our software offering identity that Q and a larger companies than you might think would choose our SaaS offering what we have seen as big an increasing level of interest from the mid to higher ends of the customer range or for the SaaS product and really.

I think it's fairly simple, we boiling down to both the increase capabilities and functional coverage use case coverage and the product and an increasing comfort level with SaaS in those larger companies for this product area. We've tried to highlight each quarter I think now that we certainly understand that many larger ones.

Patients had been comfort with SaaS products for quite some time, but there was definitely some hesitancy in the larger enterprise customers that we talked to about using SaaS products for governance that seems to be dissipating. Some now and we are seeing the interest and the ability to product to meet those needs. So we feel good about both of those things last thing I'll say.

Before I turn the Jason is to keep in mind, we're going to see Sosh performance. It sailpoint both from the platform choice customers make many identity now as opposed to identity I Q, but both are still performing well, but we will also see SaaS revenue from these newer and we can quite exciting modules around.

Predictive identity capabilities, as we said that someone product, but a number of products that kind of fulfill that vision and so all of those offerings today are coming a SaaS offerings. So we get SAS.

Performance into both our identity Ikea and identity now core customer bases as well as new customers choosing identity now as a core platform sorry, that's plenty and back out on sugar chasing to run that the financial [laughter], yes in terms of of pace of the transition how's that.

I didn't say anything different than what we've said before we're leaning into it. This year. It is sort of the direction the mark to market is going.

And you know the direction our product capabilities are going I don't know that the current environment has changed that any.

As we've said before SAS is a lot of advantages both for customers and to us as the vendor but.

For all practical purposes on Prem software for the most part of now deployed a native U.S. or azure or wherever it might be and so I don't know the current environment has made that much of a difference there.

In terms of metrics in ways, you can get a handle on that you know look obviously you can you can look at the the license side of things and we did have a big license quarter in Q2, and as I mentioned in the script.

Part of that is is some perpetual license that booked part of it was term license.

But as you probably know six so six accounting requires us to take a fair amount of that upfront and the way our income statement lays out that that shows up in license, but you can still see sort of how much of the business is going there. It's a perpetual license in terms of specifically breaking out SAS from a larger subscription line that we have.

It's not something we're doing now or you know obviously, that's that's something people have asked about in its definitely on our radar.

As potentially one of the you know the next metrics to come out.

For us, but more on that to come up you know in the near future.

All right I'll stay tuned thank you very much.

Thank you our next question comes online.

With Goldman Sachs. Please proceed with your question.

Hi, good afternoon, and thanks for taking the question congrats on the results I just wanted to ask about you know Gary I Q versus identity now and you know from the perspective of.

Obviously, there are certain customers out there there, they're not going to be multitenant customers and and I was wondering you know.

How did that strength play out a great Danny I Q in a quarter and and.

Is there a way whether it's you know I.

I guess billing methodology, notwithstanding but delivery methodology.

To kind of migrate those customers on the SAS. It just sounds it just sounds like in the quarter. You just had them anomalous customers that were I'm. Just just die hard you know from the perspective not wanting to go multi tenant but you know just just wondering what the outlook was there for deals, particularly on a large large deal front.

I guess, Jason I'll start Brian I think I understand the question, but if I didn't get a quite right actually me out, but I think what you're asking is are we going to continue to see larger organizations. You know go with the with the software offering on single tenant just by the way by Weve comment on this before.

These days is quite unusual for someone to buy our single tenant software solution and and deploy it themselves as opposed to quite confident they will put it into a private or public cloud I was I'd say when the customer standpoint, that's a cloud off right that it's going to their cloud from our standpoint, it's not SAS right, but it into the cloud offering to the customer, but I think.

It's still generally by in the case, where most of the customers that are leaning still toward ideally I Q and we don't discouraged that in any way because it does have a very rich set of used case coverages and the ability to be frankly more flexible for the very complex environments that are typical a very large enterprises, sometimes there are smaller enterprises that still.

Lean that way, but that's less common I will comment on something you may not have exactly that asking by would address it which is well that really seeing much movement, nor are we encouraging that movement of transitioning from i. acute am I getting you now meaning customers, who by the acuity deployed it recently and even further back for the most part.

Feeling any compulsion to move to SAS. They still have most of those customers still have lots of non hsas and their environments and they're looking at which of those kinds of products to move towards SaaS, but but we aren't feeling much pressure nor are we encouraging those customers who have I know the acute to move towards SaaS, but as we approach new customers today, we certainly want to customers.

Just in the breadth and capabilities of I get to go to ensure that they are comfortable that probably can meet their needs up to probably getting some of the largest most complex shops on the planet Arsenal Bill probably not quite a great fit yet by doing now.

Got it okay, Yeah, I mean, I guess, what I was getting too is also the fact that I guess coming into this year you guided down five 8% on the license revenue side, it probably can't help but be positive now.

And maybe just a tail onto that you know how much of this was legacy displacement and do you have a good kind of road map of the potential for legacy displacement, particularly given that some of the larger legacy vendors out there seem to be quite a substantial pain point in this environment.

Yes, Jason maybe I'll take the first part on just that topic of legacy displacements. If you want to talk about kind of the change potentially at our regional outlook for license over the year, Brian on the legacy displacement one thought to keep in mind is quite typically I mean, there are exceptions, but quite typically in a.

You know Fortune 10000, you know the larger enterprises, we are almost always displacing some portion of the product line you know getting into some legacy you know footprint. There. It can be very widened very deep that can be fairly not [laughter], but we generally in that mode in terms of.

Is there a lot left to do there is and I think one of things we have been commenting on since we announced that a year goes if the predictive identity vision does seem to have a unlock some of the folks that were not not terribly satisfied with their legacy offering, but nothing to say filling their compulsion to move off of that because I think they thought Oh sure.

So point looks better, but it's still kind of a better version of the same thing I've got that was quite artful product positioning that quite as well right now they're seeing some things that we're doing with AI email and saying Oh that is quite different than what I've got and that is more compelling a reason to move and I'd say the other side of it for these legacy displacements is.

You know the customers environment continues to evolve and it can change more mobile more cloud more of that and those legacy solutions are just so.

In F adapting to those new things that backwards increased pressure on those customers to get off of those legacy solutions is the environment keeps becoming more cloudy more sassy all that stuff. So it's probably both of those factors.

And I say, how the credit on the yeah. The license yet and then kind of comes and.

Yeah, and our original guidance back in February was for license to decline for the year.

Obviously, the current guidance what not obviously as you pointed out.

You know it we expected to be an increase year over year.

Look at say, that's a bit of an anomaly as we sort of called out in the script, it's hard to predict some of those big deals and when they do go with identity, arguing that ends up being recognizes license that can throw things off a little bit.

Overtime, I expect that decline and and you know we don't know yet exactly how long that decline period will be the.

You know the business is shifting to the fasten subscription overtime for sure right.

Okay. Thank you very much.

Sure.

Thank you. Our next question comes from the line.

With Citi. Please proceed with your question.

Hi, This is actually drew foster on for Walter Thanks for taking your questions.

First one for Mark and you partially answered.

To answer the first part of this question do you started the year out with a prediction that you see a significant step up an interest in the identity now on site SaaS solutions for larger enterprises and sounds like that was generally the case in Q2. The first part of the question was whether you've done anything to help incentivize that behavior. It doesn't sound like you have but can you remind us when those two flat.

Forms will be more.

At parity and whether we should expect at some point in the future for the SaaS solution to surpass the identity to platform and sort of help naturally lead people towards identity, now or or Conversely, why you won't pursue that strategy.

And yes, let me take that on drew I think we tend to talk I'm not so much about feature parity, but kind of functional coverage and use case coverage because what we what we find is as the world has continued to evolve them right. He was first developed over a decade ago.

Expectations of what the product should be able to do in the and the customize ability.

Of that product have changed in the customers mind, I think thats been the general trend as fast and become more prevalent customers are now, making more trade offs than they were a decade ago on on how much flexing customary visibility I get with a software on from product, but I patches maintain it and you know have all the.

Hardware to run it versus I might get somewhat less flexibility from a SaaS product I should still get a lot of ability to adapt it like I mean, great SaaS products are well design to adopt it have configurability well, that's what we're finding as people are getting more comfortable with that and so we are going to mislead put everything into identity now that was in I didnt.

Key because we don't go to market driving us to do that that said I think we feel like by the early part of 21, it will be less likely that a customer would say there's just you know I just can't get the job that I need to do done with identity now there will be we think.

Well into next year and beyond some subset of customers for whom that will be the right answer for reasons of maybe the there their view of their need to customize more more to their product environments or whatever but I think we tend to say that through most of this year. In early next we're closing the gap as the customers would perceive it got but we're not nestle sheeting.

For full parity.

Per se and I think the other thought is that we're also putting some significant effort into opening up the identity now SaaS platform to make it easier to connect with the rest of the cuts that we haven't was closed before we just put more energy into exposing a T. I see the putting into place it kind of a developer developer program to make it easier for.

Customers and other vendors to tie into that so it's all that's happening I think that's also getting people's comfort level up at moving forward. So we don't we don't think of it is a full feature parity kind of discussion, but but a coverage of the use cases.

Customers care about and and the other side of his their definition of what they care about continues to to more that as well. So it's really both of those factors.

Really helpful color. Thanks, Mark Jason just have one follow up on the guide what to make sure. We're clear on the moving pieces there on the upside at least to us on what we're thinking seems more concentrated to Q3 versus the implied Q4, so I'm kind of sounds and you did add some color here, but sounds like button.

And another strong license quarter and just wondering if you can provide us and any other information about the complexity of the pipeline right now in terms of nicks large deals or seasonality potentially impacting that Q3 guidance and anything else the impacts there. Thanks.

Yes I.

I mean look Q3 in Q4 or.

Typically large quarters for us and for a lot of enterprise software companies.

And tend to get larger deals during those quarters than we do during the rest of a year or typically and so given that as we've just talked about you know the functionality is not we're not quite at the same coverage was identities now a lot of those deals may end up going towards identity our Q.

You know that being said the pipeline has shifted over the course of the year as we expected.

But shifted very positively towards toward fastened towards identity now.

We've seen a a clear demonstration of that is as we've gone sort of into this year and made our way through so you know, we'll see how that how that plays out over the course of the next couple of quarters. I think we're still you know obviously as you know we don't have a a quick sale cycle right typically nine month on average.

Rich.

So it does take some time for something that's supposed to work through the pipeline, but we've definitely seen a shift.

Great. Thank you.

Thank you, ladies and gentlemen, as a reminder, if he'd like to join the question can you. Please press star one.

Our next question comes online.

Andrew Nowinski with D.A. Davidson. Please proceed with your question.

Great. Thank you and congrats on an amazing quarter just had a few questions for you. So maybe first as we head into the fiscal year ended for the federal government just wondering how you're feeling about the U.S. federal pipeline and are the agencies that you sell into more skewed identity, a Q or or iden the now.

Sure Mark you want me to start there yeah, we're just starting out with yeah yeah.

You know looked at the fed has always been a good market for us and continues to be so you know I would say, we typically do a little bit more.

Identity Q there than we do I did any now, but there's a mix I'm certainly across the number of different customers that we work with within effect. So.

That continues to be a good opportunity for us and you know I think we could certainly see that shift over time, but we're feeling good about that market currently.

That's great and then just as a follow up I was wondering if you could put a finer point on the competitive landscape. I know you mentioned that AI or artificial intelligence would potentially loosen up the CA and Oracle installed bases, but I'm wondering if you're actually you know are you seeing more gains from one or the other or.

As perhaps both and then whether you're seeing vendors like octa potentially moving into the space with their lifecycle management solution. Thanks.

Okay, Andy Yeah, I think on the former we continue to see a good cadence of activity around this placements of the legacy vendors as we said earlier I'd say that we're we're pricing a little bit of uptick in interesting activity there I can't point to a.

Significantly bigger result that we'll see in no particular, a quarter or something but I'd say the the cadence is still there and may have picked up a bit. There's a couple of us large global systems integrators that are that are working with us on some some legacy displacement programs, where they see opportunity to go in and then you know convert those customers who are more modern.

And platform that helps them.

Moving to the future so I'd say still good momentum in not not to.

Neither curve change tipping point kind of a change to just continued good progression that probably is picked up a little.

I'd say then on the other side and the arc decide you know we really are seeing them much I know they made more of a have a move into that lifecycle management space and again, we still feel like the bulk of their market presence is in the mid to low end to the market and so we don't focus as much. There you know, we just don't see it as much.

The capabilities I think they have today.

You know are not not is reaching in as deep as ours, and therefore as and when we're focused on those mid to high end parts of the market. We we've seen to generally being the compared to the situation with other vendors who are seem has also haven't got a robust enterprise grade solutions for that market. So not not seeing a lot. There certainly hearing some of the the commentary in the markets.

Place, but in terms the actual deal not seeing a lot there yet.

That's great keep up good work as me thanks Denny.

Thank you. Our next question comes from the line Rob Owens with Piper. Please proceed with your question.

Hi, guys. This is Ben Schmidt on for Rob. Thanks for taking my question a quick one just wanted to get a little bit more color on the investment and go to market. That's coming up is there a geographic focus or is it primarily reps or a will we see more of these developer programs in the effort.

That mark was talking about to connect with the customers. Thanks.

Yes, I'll start with that Mark.

Yes. Good question, Ben it's primarily on classic or go to market capacity in other words, you know reps sort of being the sort of the lions share of that although you know the go to market capability doesn't just mean wrap them in it includes the season sales management and and all sorts of other stuff. So.

But you know look reps are the biggest piece of that so I think I think that's the way to think about where its focus in terms of geographies.

No no nothing in particular to call out there or you know we you know we are in many places around the world at this point there are times, when we add a little bit capability here and there, but I wouldn't say theres, a big strategic thrust from a geographic perspective from the second after the year really just.

You know I think.

I think it was brand to said earlier, you know where the quarter like that.

I don't want to actually pendant on one quarter I think weve felt for a long time that we have a huge opportunity in front of us.

And you know this quarter is a nice proof point of that obviously, but you know theres theres a sort of when we think about what we think we can do as a business in 2021, what we can think we can do and 2022 and beyond we've got a lot more capacity to build to be able to deliver on that so were.

We're getting going.

Got it thanks.

Thank you. Our next question comes on line of Josh.

Please proceed with your question.

Hi, Thanks for taking my questions I just wanted to clarify in earlier comment. So you initially guided the license revenue to decline for the year and but you also reminded us of the six to 12 month sales cycles, so where some of the larger deals from this quarter initially supposed to close as fast and then they were switched back to on Prem later in the sales cycle.

Yes, Josh good good question and the answer is no you know I think what we saw this quarter I was just a higher close rate than we normally would've expected. We actually we didn't even have a lot of Poland from future quarters. Most most the deal to close we're always sort of.

Thought to close in Q2, we just closed a lot more of them.

Then we normally do.

At a much higher close rate and no there was not a any sort of pivot from customers thinking that they would buy them in our us thinking that they would buy if there's any now and then the many up but I mean Q we just.

Ended up closing more deals than we thought we would.

Good good problem to have obviously.

Yeah I agree that.

It was helpful. And then you know obviously SAS with strong you mentioned it was strong in her remarks, but was it with a strong across the board or did you say dynamic where maybe there was some weakness down market, but it was made up by larger enterprises, just opting for Hsas and this quarter.

Mark you want.

Taking a guy I'll jump in just to give any comments to know Josh I would say, we didn't see any weakness down market. We again, because we're not targeting much weighed down market and Downmarket every after the fine right I think crust generally when we're going down below what two or 3000 person enterprise. We do go below that kind of a.

Line sound, but it generally is in a fairly I T. Intense industry, you know typically no no well known in the folks on this call right financial services kind of firmly even thousand person from can have pretty complex environments and be regulated and some of those are public and so that can be a kind of its shop and still makes sense for us for sure.

But in general no we didn't see any shift up market per say an idea and we're just we're noting I think is that idea is continuing to do well and the part of the middle upper middle market, Weve targeted and probably reaching up into some larger enterprises that people might have not expected it to serve but in general no I wouldn't say.

Hey, there was any sort of Oh, we did well up up up in the mid enterprise and not well down in the mid enterprise, we're just not targeting that that smaller enterprise customer in general other than in some targeted industries.

Got it thanks, congrats on those okay.

Thanks, John Thank you.

Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Mclean for any final comment.

Thank you and again I would just a thank everyone for joining us today and also I would again I'd be remiss I didnt through a shout out to our team as many of you know these are somewhat trying times in which to operate in general and people spend into working from home mode. All around the globe and I'm, just very very proud of our team for the for the weather.

They they work hard to stay on track and delivered not just kinda. Good results are great results in the face if somebody's challenges so kudos to the team and to all of our partners without whom we [laughter] we could not achieve these kind of result, so we're we're feeling very good about the momentums in her to say today, we're thankful for everybody's efforts and we will look forward to continuing the dialogue with all of you.

Thanks for joining us today.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.