Q3 2021 SailPoint Technologies Holdings Inc Earnings Call
[music].
Greetings welcome to these Sailpoint Technology Holdings, Inc. Third quite a 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the final presentation. If anyone should require operator assistance during the conference. Please press dies zero on your telephone keypad.
Note. This conference is being recorded.
I'll now turn the conference over to your host the Josh hurting senior Vice President of Finance and Investor Relations. Thank you you may begin.
Good afternoon, and thank you for joining us today to discuss Shellpoint third quarter of 2021 financial results. Joining me today are Sailpoint C E O and cofounder, Mark Mcclain, and our interim Chief Financial Officer can make Martin.
Please note that today's call will include forward looking statements and because these statements are based on the company's current intent expectations and projections, they're not guarantee as a future performance and a variety of factors could cause actual results to differ materially.
Since this call will include references to non-GAAP results, which excludes special items. Please reference this afternoon's press release and the Investor section of Sailpoint Dot Com for further information regarding forward looking statements and reconciliations of gap to non-GAAP results.
And now I'd like to turn the call over to Mark Mcclain.
Thanks, Josh and thanks to each of you for joining the call today.
I'm very pleased to share our strong third quarter fiscal year 2021 results with you.
We exceeded the high end of both R. A R R and revenue guidance driven by very strong growth from our SaaS and subscription based offerings.
We ended the quarter with approximately $324 million, that's a R. R O.
44% year over year.
And a subscription revenue approximately $71 million up 39% year over year.
Our outperformance this quarter can be attributed to two main factors first the demand environment for identity security continues to be very strong.
An increasing number of enterprises Ah realized that their current security staff does not sufficient to address today's threat landscape.
Recognizing that identity is core to their overall security strategy enterprises continue to select identity security is a top investment priority.
This is evidenced by the strategic conversations, we're having with customers and the quality and depth of our sales pipeline.
We believe this sets us up for many years of exciting growth.
Second our transition to a subscription based business model, which we outlined at our analysts day earlier. This year has happened well ahead of our initial expectations and cute 387% of the total new bookings came from our subscription based offerings up from 82% last quarter and.
72% in Q1.
This accelerated timeline has been driven by two key factors and.
Incredibly strong growth and demand for our staff platform and customer's desire to procure or other products on a subscription basis scam.
Okay, and we'll discuss later in the call our transition to a subscription model is in our view largely complete.
While our SaaS platform has been successful in the broader enterprise market one of the key drivers behind the accelerated growth we're experiencing with sauce is the traction we're now seeing if the upper end of the enterprise market.
It's well known that these large enterprise customers have incredibly challenging use cases, we believe the success, we're seeing in the segment of the market highlights the scalability ease of use and technical superiority a sale points SaaS platform.
To this point, we closed two bills in Q3, both with Fortune 100 brands that I've found to be great. Examples of the value weird delivering to complex enterprises today.
The first example is a multinational pharmaceutical company that needed an agile approach to identity security to replace their rigid legacy identity system.
They chose Sailpoint SaaS identity platform to manage and secure nearly 150000 identities and their access to thousands of applications.
<unk> rose above the competition for two reasons, one hour modern Multitenant SaaS architecture provided the agility and cost efficiencies they needed and.
And two sailpoint demonstrated the ability to meet at scale the requirements necessary to support their complex global business operations.
The second example is one of the world's largest telecommunications providers.
This fortune 100 company turned a sailpoint to replace a struggling legacy approach that failed to address security needs was difficult to use and created excessive operating costs.
They chose sale points identity platform alongside our a I enabled services to give them a comprehensive single view over there 1 million identities under management with access to more than 8000 applications the increased visibility and scalability of the solution plus the promise of a signal.
Difficult reduction and manual processes due to our a I enabled automation tip, the scales and failed points favor.
Another advantage of our transition to a subscription based model is that it simplifies selling additional solutions to our existing customers.
Our customer base is eager to double down on their identity strategy with us in addressing that demand is important to our growth strategy.
We saw great success in this area in the third quarter let.
Let me share two notable examples to add color to this point.
The large health care consortium is currently running their identity program on sale points SaaS platform to securely manage almost 400000 identities in Q3, they added shellpoint a I enabled access modeling access insights and recommendations services.
This powerful combination gives the organization and autonomous Modernised approach to identity.
Feeding identity decisions and providing intelligent recommendations unroll access drinks with this approach. They now have an adaptable identity security program that will be able to keep pace with the velocity of their business.
And another example, a leading property and casualty insurance customer needed broader visibility and to access overcloud resources and data stored in files.
To address the first issue they chose how points cloud access management capability to provide visibility into who has access to what at the cloud resource level, specifically and the as your environment.
To help protect their critical information. They also chose Sailpoint file access management capability for strong oversight of sensitive data stored in files.
[noise] Sailpoint delivered on both fronts, giving them the deeper and richer approach to identity security they required to fully protect their business.
While we're seeing great traction with our current product portfolio as evidenced by each of the examples I've just shared we're also very focused on expanding the depth and breadth of our industry, leading identity security platform.
During the quarter, we announced our new workflows capability, which is designed to help customer streamline and automate repetitive manual security tasks with minimal to no coding required.
This will allow customers to further embed identity security into the thousands of business processes, and a typical enterprise, enabling faster and broader adoption of identity security policies and controls.
Similar to our a I enabled services, we believe workflows will differentiate sailpoint in the market and will further simplify how our customers manage and control identity within their technology ecosystem.
As we turned the queue for and look ahead to 20 twenty-two shellpoint as well positioned across the board.
Market trends are favorable and customer interest in our identity security solutions has never been greater.
We're seeing very strong demand for our staff solutions and our transition to a subscription based model is largely complete.
We are confident that our laser focus on comprehensive intelligent identity security will continue to set us apart and the enterprise market.
In closing our team continues to be very excited about the opportunity. That's in front of us and believe we're building a very durable growth story for many years to come in.
And now I'd like to hand, it over to Cam to talk more in depth about our financial results for the quarter Kim.
<unk>.
Thank you Mark and thanks to everyone for joining us on the call today.
Before we're doing our outperformance for the quarter I'd like to note that we posted a few slides to the Investor Relations section of trail points website.
Weapons from throughout this call.
He's supplemental materials include additional disclosure that we believe further highlight the businesses continued strong performance and the success. We've had shifting the business to what is now almost entirely comprised of subscription revenue streams, which I'll discuss further as part of my prepared remarks.
As Mark noted earlier, we had a great chord those and significantly beat our prior guidance across every metric drill.
Driven by strong new bookings results are faster than expected mix shift to a subscription based offerings and retention that was better than plan total AOR grew by more than $32 million sequentially. This past quarter.
Ending the period at approximately $324 million.
This represents a 44% your be your growth rate and as a result, and a result that is $6.8 million above the high end of the guidance range, we provided on our last call.
As you will see in the slides I referenced earlier.
Provided a further break out a total AOR not only for this quarter, but for each quarter since the first quarter of 2020.
We ended the third quarter with $179 million from our subscription based offerings, which represents an 81% year over your increase.
Our subscription era consist of $132 million from SAS and approximately $47 million from occurring term licenses.
Further we ended the quarter with approximately $145 million coming from a recurring perpetual maintenance space.
As you can see in the supplemental materials perpetual maintenance Sarah grew by $3.6 million sequentially.
Despite only 13% of total new bookings coming from my perpetual licenses this past quarter.
We believe this highlights the fantastic economics, and Hank in a perpetual maintenance business, which continues to benefit from annual price increases and a gross renewal rate well above 95%.
In addition, we believe there's a meaningful opportunity to drive additional a R. R. As some of these maintenance customers move to our SaaS offering.
This opportunity is largely untapped.
That's the only a small number of existing identity I to customers have they made the move to our SaaS platform.
In addition to the solid are all grow up this past quarter total revenue was $110.1 million $6.1 million above the top end of our prior guidance range. This outperformance was driven by very strong new <unk> bookings growth, especially from our subscription based on.
Offerings.
In terms of your over your growth total reported revenue grew 17%, but as we have noted throughout this year the rapid shipped to a subscription model and more specifically fast continues to create a revenue growth headwind.
If our name bookings mix had been the same as you be delivered in two three of last year total revenue growth would've been over 30%.
We believe this mix adjusted metric when combined with a very healthy a are all growth discussed earlier provides investors Ah clear indication of the underlying growth momentum of our business.
In addition for the first time, we are providing a breakout of license revenue that we believe highlights the relatively small contribution a perpetual license revenue remaining in our business mix.
This past quarter, you recognize $26.1 million of license revenue nearly 60% of which was driven by recurring term licenses with the remaining roughly 40 per cent coming from perpetual licenses.
With over $110 million in total revenue this quarter less than 10% came from perpetual licenses further highlighting that our transition to a subscription revenue model is in our view largely complete.
While we expect to see the occasional new perpetual license transaction and ongoing expansion deals for current customers. Our entire teams principal focus is on selling SaaS and term licenses.
Moving past the license revenue total subscription revenue grew 39% year over year this quarter.
Which was largely driven by the strong sequential increase in SaaS revenue of approximately $4.5 million and continue to strengthen our maintenance space as noted earlier.
I'll now transition to expenses and operating profit for the quarter. Please.
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 gap to non-GAAP reconciliations provided in today's press release.
Operating income was point $9 million, which was ahead of our prior guidance due primarily to the outperformance in revenue noted earlier.
As we communicated at our analysts day in February and have highlighted each corner sense.
We are investing aggressively in the business given the large opportunity we see in front of us and it is continuing to pay off as demonstrated by the strong third quarter results.
Now I'd like to shift of how we're thinking about Q4 and are updated guidance for the full year.
Based upon our outperformance in Q3, a healthy queue for pipeline and a faster than expected shipped to subscription and specifically SAS well.
We're raising our full your outlook for total are allowed to $358 million to $360 million up from $343 million to $347 million. Previously this outlook represents a 43% growth rate your over here.
In addition to raising our guidance for total era. We are also raising our full your outlook for SaaS revenue by $5.5 million to $7.5 million to arrange a $110.5 million to $111.5 million or 65 to 67 per cent growth.
You're over you.
This is a result strong SaaS performance in Q3, and the increased contribution of new bookings, we expect from SAS in queue for.
Even in light of our expectation that more new bookings will come from subscription and specifically SAS offerings, which will primarily benefit revenue encourage beyond 2021, we are raising our full your total revenue outlook to $415.5 million to $417.5 million. This inquiry.
<unk> result of healthy new bookings growth in Q3, and higher bookings expectations for Q4.
To illustrate the impact it'd be additional mixture where now expecting.
A total.
<unk> revenue guidance would be approximately $7 million higher if our projected queue for mix was still in line with the mixed me assumed when providing full year guidance back in August.
In terms of full year profit, we know anticipate an operating loss of $6.5 million to $8.5 million roughly in line with our prior guidance.
Given the current performance of the business. How early we are in capitalizing on the market opportunity and the attractive or tons. We are generating from our growth initiatives, we intend to reinvest any profit outperformance back into the business to strengthen our durable growth strategy.
As I closed I'd like to reiterate our excitement for the opportunity in front of US and now. Please we are with the success, we have had and shifting the business to a subscription model.
That's gonna be compared to enter 2022, we have a business that is almost entirely comprised of subscription revenue streams, which we believe create so attractive longterm setup.
In addition, the identity security market opportunity offers as many years, a very exciting growth given a clear leadership.
We believe <unk>, making the right investments to grow the value, we can deliver to our customers and ultimately to our shareholders.
With that we now like to take your questions. Operator, you can start the Q&A.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press that one on your telephone keypad. The confirmation time I need to taint. Your line isn't a question can you may pass that to you. If you would like to remove your questions on an account that my taken anything secret.
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I first question, Rob Allen a paper Sandler. Please proceed with your question.
Great. Good afternoon, and thank you for taking my question I wanted to hone in a little bit, giving you gave us the breakout this quarter run perpetual maintenance and support and it's still grew at 15% I think year over year. So help us understand when that's going to flatten out maybe rollover number one and number two is there any incentive for those.
Customers, who bought the traditional perpetual owner on maintenance and support just start to move to term at this point or will you offer incentives to to ship them to term longer term. Thanks.
[laughter], Yeah, Hey, Rob Catholic Martin here, good to hear your voice Likewise scam look I think.
Look I think a couple of questions or let me see if I can take them in turn I think where you you did see a healthy growth rate in terms of the maintenance progression and a quarter. We're pleased with the overall contribution that I acute family continues to provide.
It's largely as you appreciate a business that on them alright.
Hi, acute family side has now shifted to term license business and that's our focus were selling term, but we are seeing good progression quarter on quarter in terms of expansion selling into the I Q installed base and the occasional as you as we saw in Q3 the occasional.
<unk> from from perpetual license transactions, you know and I expect that we'll continue going forward into 2022, that's our expectation is that we'll see a moderating contribution from perpetual licenses, but continued contribution from term licenses as it relates to incentives we do.
Not really at this point have any incentives in what we're doing in our installed base our customers continue to expand their implementations of I Q. Both those that are bought on a perpetual basis and those at about on a term basis and will continue to work with those customers to fill out if you will the <unk>.
<unk> breath of their identity security deployment in their enterprise as has been the case all along we typically see a good solid <unk>, if you'll land and then expand selling opportunity and that's continued in his representatives results you saw him this quarter.
Great and then if I may around the expansion I think mark made the comment about simplifying selling into the installed base and is this scene through reduced sales cycles is this scene through larger contracts and then I guess when things normalize here I would assume an acceleration in in business trends in in general.
Given them a lot of your revenue in any given quarters coming from that installed base.
Yeah, Rob Uhm. Good question, Yeah, we <unk>, we debated that term simplified for what it's worth I think what we're saying [laughter] good home Bentham does that too much information sorry, yeah.
Think we're seeing good momentum with a number of things with the modules, we developed and introduced to the market with some of the acquisitions. We did just that general censor quite often customers as we like to say buy less and everything on the trucks. So we have a nice motion to continue to add to your time, so what <unk> what it wasn't it was a brand new <expletive> from.
Things before we'd seen plenty of upsell cross-sell in our base of both I, Q and Ivy and but now I think we're seeing that as we shift to a more recurring revenue either term or staff model I think customers themselves or more of a mindset of buying more overtime sort of the discipline I think they've got more used to it. So I think it's as simple fine to me.
<unk> and Rob I'd, just to add a bit to that I think think of it as a richer expansion opportunity in that we continue not just fill out every identity needed. The enterprise in terms of the quantum of identities were selling but now with some of the additional products that mark referenced AI quite ask us management others.
We've got the opportunity to come back and have a more fulsome. If you will coverage of their identity security needs you. So in that sense. It's a richer follow an expansion opportunity then you might've seen historically whichever one.
Thank you both.
[noise] Thanks, Rob.
[noise] [noise] [noise]. Our next question is from that Hedberg RBC kept on that day. Please proceed with your question.
Okay Sandburg Superman hedberg. Thanks for taking our questions are are grocery impressive and a quarter 40 for 4% accelerator from last quarter.
I'll have a tougher comp guidance points to about a similar level for the fourth quarter.
Could you drill down a little more into what's driving the strength here I think like the supplemental slides help to visualize this but you know, what's enabling you to maintain and even accelerate that that growth right here.
[noise], Yeah mechanic Martin here again, good to talk to you I look I think it's multifaceted as you as you look at the supplemental materials. You provided we provided you today you know the the prior question I think points to one element, we continue with the strength of the eye acute family to be able to expand the perpetual maintenance a R. R.
Both in terms of the expansion selling and again that occasional follow on her occasional excuse me new perpetual license transaction, so that maintenance aor's growing nicely I think the motion in the enterprise for term licenses continues to be healthy as well there are or.
<unk> do prefer I I Q.
But the principle motion and the one that's really accelerated very nicely over the last you know six eight quarters and you see that in the supplemental materials SaaS. It.
The the the residents in the enterprise for a cloud <unk> identity security solution has picked up we think in a very healthy way one that we're pleased with its it's across the spectrum of enterprise size, it's across the Geographics.
If you will regions that we cover and so it is it is a depth and Brett story that we like and that we're seeing you know multiple subscription revenue lines growing nicely uhm uhm. The selling of those is also expanding and accelerating you saw that in some of the comments we made in the prepared marcher amount.
Around increasing uhm bookings mm mm objectives for Q4, so we're seeing I think overall the full spectrum of the of the business contributing to that are our expansion and the continued growth of the business.
Great. Thanks, and then you mentioned workflows in the prepared remarks could you just expand upon the concept of moving identity closer to the work flow of the business.
Sure Dennis Mark I'll take that one uhm, what we're what we're seeing there is you know historically, we have some more full capabilities and are on problem I've done the product I did a Q and that kinda led to the to the mindset I guess I'll call. It that in that environment people expect it to be able to extend.
The product to some level of them tying into their business processes and when we first introduced fast.
And that kind of market. We are focused on this account that mid market. They were more kind of prone to just say I'll I'll just kind of take what you're given me from a process management standpoint, as we move more into the mid to large and then very large scale enterprises typically we're writing in situations, where the customers either have more unique environments. They want a connection more unique applications what <unk>.
Complex business processes, where their ability to kind of quickly adapt to their business processes and policies was a little tougher frankly in the product initially with our SaaS product so with workflows, we're making it even simpler and more accessible for business people to kind of tie and various identity processes to.
Their regular business flow and that that can take the form of everything from you know not just the the traditional kind of joyner mover lever processes, we talk about other other flavors of either compliance or or producing processes, where they want to get the business people more into that policy slow and I think we're finding that.
Both are partners at our customers are really excited about the ability to use that capability to make it simpler to integrate the identity security processes into their traditional business process.
[laughter] helpful. Thanks.
You bet.
[laughter].
Alright next question is from how does that sound a lot of Morgan Stanley. Please proceed with your question.
<unk>. Thanks for taking my question [noise] Mark first question for you.
You talk a little bit about how you're seeing more traction in the upper end of the enterprise market.
I'm curious you know if you could expand on that a little bit and.
What inning of the.
Sort of legacy replacement cycle do you think that we're in and that obviously, there's still a lot of.
I can see Oracle and or IBM solutions being used out there prefer identity governance. So are you seeing more of a willingness uhm for customers to look at somebody's, new we're offering such as yourself and and and how would you like do you think that that that that's still has.
Yeah <unk>. Good question on the first part of your question I think a note kind of why are we seeing increased traction and that was a large scale enterprise. It. It really is kind of both a push poll. What I mean is I think we've continued to put a lot of engineering and development effort into broadening and deepening the capabilities of SaaS Oprey too.
Effectively you know make it kind of use case equivalent to that to the pro offering. So I think what I high end enterprise class customer looks for the things they expect to see in a product of this nature. They see those things now and our identity now products and so I think that's probably kind of open their their mind to it and then the pool.
Call if you well that's the push from us a and my metaphor here the pull from them is just I think it just increased openness overtime to accept this particular kind of technology from the cloud I think when things we always remind people of his you know or very market driven company. When we talk to the market 15 years ago when get this company started again.
10 to 12 years ago, I mean, sorry, eight to 10 years ago. It was just very clear that those high end customers were not really interested in getting this product delivered as a fast offerings that has shifted their preference it shifted to a kind of a SaaS burst expectation their confidence in the kind of bullet proof nature of the security environment.
Of the cloud providers like Amazon and Azure in Google is just very high and so I think they they trust and believe this is in fact, a very secure way to manage it and they get that sauce is just a really really smart way to do this to continue to allowed them and us to extend the product quickly and easily overtime. So I think it's a push pull their.
Your second part of the on the on the legacy environment I, you know I I used to play some baseball I guess I'll give you about a second or third anything on this deal [laughter] could I think we're certainly in the first third of the game has that I don't think way to the middle innings, yet I think when the first started the game in terms of the amount of legacy, particularly legacy implementations in these larger enterprises that is.
Still yet to be turned over and so we're we're pretty bullish on the number of places. We think we can still take the solution in the fortune Global 5000 around the World I think there's a lot of installed identity product out there still from the legacy players.
Maybe just a quick follow up we talked a lot about the attached for it'll be a I enabled services any color you can give us that too how penetrated the services are within your installed base.
Still pretty low penetration, yeah, uhm that not not heavily penetrated into the installed base. We've had good motion and both Ah what we call attach meaning you know putting it into the initial transaction with a lot of customers and we've had a pretty good level of activity and and the installed base you know what we would call in that case across cell.
<unk> b functionality, but both are still far from dominant any there are new selling motion or our installed base penetration so getting lots of headroom there to add value over the coming years.
Thank you.
You bet.
Our next question is from France style of Jeffrey. Please proceed with your question.
Hey, guys is Joe on for Bryant really appreciate the question. It seems like everything is firing on all cylinders and I know you guys made a lot of go to market changes early this year building out in inside sales team moving to more solutions oriented fails first transaction off we just get an update there and how hiring is trying to it throughout the year.
Yeah, I think in general good on both fronts, Joe, meaning where we're pleased with the momentum of the hiring I'll start with the second half I guess first you know we all know there's a pretty challenging talent environment out there right now probably even more so than the technical deep skills talents environment, but even in the technical selling.
And in traditional you'll sales roles ISR role, it's a pretty pretty property chocolate market pretty competitive we've been really pleased at the rate that we've been able to bring on really capable experienced talented people and in some cases more or early stage career folks into a lot of times are inside so hard in general I think we're running ahead of.
Had a plan on where we want it to be at this point in the year on quota carrying folks and so kind of feel good about the the prep preparedness for hitting 22 at a good momentum so very very good on that front on the hiring on the selling motion you know there was a pretty significant focus on on a new methodology that was Morgan.
Salt It did kind of designed to focus on more business value than just technical sales <unk>. If you will and I think Matt males would tell you. He feels really good about the leather shift there as well as hunter, how we're approaching the selling process I think it has to do with the the value we're getting from customers that they appreciate the value of deliver.
Bring in their environment. So overall pretty pleased with both the momentum of capacity building as well as the the motion to sell at a greater value in higher up in the organization Joan.
Great to hear and it's obviously evident an assassin AOR numbers I guess, it's a follow up can you guys provide some guardrails or maybe put them take on how to think about cash flow and the 22 and 23 when shall we see meaningful leverage I know, there's a term license overhang versus perpetual, but just any help there would be helpful.
Yeah. Joe This is calm I think we've not provide any guidance shed on 22, what what you saw say in the prepared remarks is that the transition to ascription base model principally are largely subscription based model. We see is now complete.
You know, we we will continue to invest aggressively in this business as we see topline perform you know Mark just commented about the success, we're having an expanding the capacity of the field salesforce in the 21 time frame to benefit twenty-two that's that's on track.
We're pleased with where we are and we continue to make investments in the Rd organization, because we believe the innovation that we're driving is yielding benefit in the selling motion and across the board and it will will continue to think about and and and be aggressive protesting. So I think as you as you look at it you you.
See continue to be thoughtful about how we invest but with the subscription transition I think what will I'll tell you is that will give you more color about that transition to cash flow break even and the timing of that and when we get out into the February timeframe.
That's helpful. Thanks, guys.
Thanks.
Our next question is from Brian Ethics of Goldman Sachs. Please proceed with your classroom.
Great. Good afternoon, and thank you for taking my question and thank you as well for the additional disclosure. That's very helpful. I was wondering if I could start with whatever the comic trying to the into the backlog I think he noted that you're building healthy backlog into the into the fourth quarter, how does that maybe I would like to know how that maybe gift.
First from prior periods is it a similar mix are there and I think it <unk> or the back half of your Kennedy might tend to be a little bit more seasonally heavy on the perpetual side do you still have you.
You know maybe some larger perpetual deals floating outdoor do you think it's gonna be mostly geared towards SaaS with a higher degree of visibility, allowing you today with it now or kind of guide rails around guidance.
[noise] sure. Thanks, Brian This scam good to meet you a few comments as it relates to the fourth quarter pipeline. We we did highlight that it's healthy you know as as a reminder of the second half of the year is generally are quote unquote seasonally strongest period of the year fourth quarter being with the enterprise orientations of business the <unk>.
Most seasonally help the period of the year and that's true this year I think cause we look across.
All the business across the globe, we're seeing you know real big.
Build a pipeline as we came into the queue for and it looks healthier cross all the product lines and across all the joggers geography's as well, it's a mature pipeline, we'd like to see that in queue for so we're we're pleased with the composition of the pipeline and a quarter in terms of mix. You know, it's it's historically has been a somewhat <unk> Uh huh.
<unk> perpetual <unk> mix in the quarter, but with a progression we've made in the selling of both fashion term licenses I would say that the the mix that we saw in Q3 and the way we commented on it being 10% from a professional standpoint or last for the quarter I think we'll continue to manifest itself in the coming quarters.
Fourth quarter included now anyone deal in any one quarter can move the percentage is around a little bit, but I think you can take away from the comments that we made in the prepared remarks that the profile of the business going forward is going to be essentially are effectively a subscription profile and that's the way you should think about it as you go forward.
Got that that's super helpful and maybe can't while you have you, giving you as well.
Could you provide a little bit of color on some of the puts and takes on a gross margin side. It looks like they moved around a little bit just but just as we kind of fine tune our models over the next couple of years, you know how how should we expect those margins to trend or in and was there anything anomalous and a quarter that caused them to shift a little bit.
Oh I would say there was nothing anomalous, let me start with the second half of your question by him first it was nothing anomalous in the in the quarterly profile as you would expect there's a bit of mix.
Effect, depending on the relative contribution of of purpose term versus versus ash in that sense. You you understand what those margin profiles typically look like so so that effect is true I was you know coming back into the business and and studying what the gross margin trends have been.
Then over recent quarters I'm I'm quite pleased with the way in which the team has been managing the overall margin progression in terms of in terms of SaaS, particularly with the scale of progression that we've seen in the business I'm pleased with what I see there you know we've had a bit of pressure from a margin standpoint on the service.
Aside and that really is getting the scale of that team and the process is right to service that accelerating SaaS contribution is that just the <unk> volume of the business. So I feel good about the overall position of the company on the gross margin basis in the aggregate I think as you go forward I think he.
Didn't expect us to continue to to manage it within the lines from from a mix standpoint to see you know progression and help but in terms of the overall trend again Ah basically points you have to February and let us get through the planning process and think about 22 to give you any more look them.
That okay.
Fair enough very good thank you.
You bet.
Our next question is from Andrew No Lynskey add well it's 515.
Proceed with your question.
Alright, thanks, and congrats on a nice quarter I just wanted to step back at a high level I'm wondering if you could just explain how the current threat landscape has influenced customers to deploy an iga solution and wise a higher priority now then maybe it was.
Even a year ago.
Hey, Uhm, Yeah look I think I think.
No no sudden inflection no shifts there, but just to continued higher level of focus and awareness is the way I would describe the progression yeah, there's definitely sensitivity to significant threat events, but I'd say in general this is more like a.
A sea change of people just recognizing that identity is a vector they work as is.
Focused on managing well and their enterprises that that only got exposed and highlighted a bit through the early stages or the pandemic COVID-19 environment and everybody went home or out of the office and is that we've come back partially to offices partially not.
All that did was just kind of leave that awareness in place and cause people to I think be more and more focused on closing that gap. If you will of how little they really do understand their identity landscape and most of these large enterprises today. So I think it's more of that than any particularly pointed you know inflections of growth <unk>.
To threats, it's just a a level of awareness that so many of the bad things that happen are related to some level of compromised identity and that's just driving a lot of a lot of folks in this area.
[noise], Okay got it and then as a follow up but damn it's good to chat with you again, but I'm wondering if you could just give us an update on the the current CFO search.
Yeah, I'm happy to any good first of all I'm going to talk to you again <unk>. The answer is is that we're pleased with the progress obviously with the transition one of me jumping back and lend a hand in this transition period.
We immediately began a search as you would expect we would have that searches underway. It it will be on the link for a bit of time, but we're pleased with the the candidate flow. We're pleased with the interest that we're seeing from candidates in the <unk> in the company and the opportunity and would expect in a reasonable period of time will we'll get that role filled in.
I'll I'll get the jump back in to what I was doing previously so I I think.
You, you'll see <unk>, you'll see a good answer here in the coming weeks and months.
Sounds good thanks, guys.
Thanks.
[laughter].
Question. It's unlike lastly at 10 o'clock annuity. Please proceed with your question.
Okay garage. Good afternoon, that's been going on for months. Thanks for taking my questions. So just wondering just given the solid are there are beat this quarter as well as the a strong I'm 43 per cent there are growth expectations for cute for you just provided us with some more color on maybe some of the level of conservatism your <unk>.
To be a total revenue guard I think this was actually and Martin was screwed up the harder you I just put the license revenue falling off a little bit faster than you have previously and for security.
[laughter] Yeah <unk>.
A couple of comments one you obviously did see the acceleration in the guide for the both of the fourth quarter in the full year as you as you will note in the prepared remarks, you know the the the full year guide now at 415, and a half to 417 and a half would've been about 7 million higher had bookings mix and cute.
Four been the same as bookings mix was in the August period, and so in that regard you know where the the revenue reflects that continuing if you will shifting mix more towards SaaS in totality and and even within the license line more towards term so.
You know, we're seeing the kind of progression, we Wanna see in the in the overall subscription lines from a revenue in bookings perspective at contributing in the right way. So we're we're we're pleased with the way total revenue was come out Uhm from a guide perspective again, given that if the mix. It been the same as we saw back.
In August we've been about 7 million higher.
Okay, great friends with the details and <unk>.
<unk> prepared remarks, you noted only a small number of them or.
Just in perpetual license customers admitted to transition over to assess so clearly there's obviously some room to expand here could you give us some details sort of how these conversations a trend that has come up with a renewal and you expect these customers to make the transition over time.
Yeah. So it is you recall, we have a very large installed base of identityiq customers where.
Obviously with the level of a our maintenance you see there about $145 million at the end of the period is so it's a big contributor overall to the business and as I highlighted in my prepared remarks were were retaining those customers a greater than 95 per cent and we do that is an indication of how satisfied those customers are what their identity.
Q installations today, we we have begun to have not surprising a small number of initial conversations with customers around the possibility of making transitions from from identity IQ identity now from a platform to platform perspective going into the cloud with.
Now so we're we're.
We're working with those customers identifying how we would transition them an L crosswort timeline or expectations in terms of the way to think about this is this this motion will begin in a bit to contribute to the business in 2022, but will be a multiyear contributor that is it won't be you won't eat.
A large scale move across platforms in any particular year I think what you'll see is a steady and a healthy progression of migration across a multiyear period and that is based both I think on our belief that many of our customers will remain IQ customers for a number of years to come and quite frankly the fact.
That we continue to make investments and you got any Q product portfolio to enrich and extend the value prop there. So in both ways. This will be a multiyear transition process. We we we included it in the comments this quarter only to point out that we're beginning to have those conversations and we expect there to be a if you will the beginning of that <unk>.
<unk> to contribute to the business for 2022, it does obviously overtime, representing a growth lever to total era <unk> will begin to comment on that as we get into 2022 as the ear progressive there, but at this point we were just trying to if you will give you that heads up that this is a motion that will begin.
Just a tiny little bit of color to add to that right. If you think about it you know we have customers that bought ideally I Q, let's say between eight and 14 years ago. When we didn't have a sass offering and some of those customers would probably have the size and scale and complexity that I get a now word available would have been the right answer.
And because they've had the product for that long there fully depreciated they've got good value from it they're open to it right, so kind of think smaller and or older customers with like the the I Q.
ER seeing some level of interest coming from those customers.
And we expect that will pick up as they get more confident that I do now is in fact, a great great transition option for them, but again, we really be whether we enforce we're not pressing people to make this move we're we're gonna increasingly think we'll hear more about their interest in it from from some subset of our base, but as Kam said, there's pressure on those customers to migrate that we do.
Do anticipate seeing a little more uptake over starting more next year and probably increasing frankly in the next few years, but still with a large I Q based calling for quite a long time in front of us.
Great. Thank you very much.
Our next question, it's been Alec Henderson I've made in my account.
Please proceed with that.
Thanks, <unk> I just want a couple of quick clarification stuff before I ask a question I think you said to one of the prior comments that.
The $7 million was based off of the level of.
The subscription that were in the period of August as opposed to earlier I thought you said that it versus your expectations for the year and fourthquarter percent subscription could you just clarify which which of those statements is true.
Sure Alex is calm so the answer is that what I was <unk> basically saying is that the contribution in queue for bookings from SaaS is increase versus our previous expectations. So as we as we look at the revenue guide and compared the current revenue guide to the fourth core to the August revenue got excuse me.
What we're seeing is is that there's Ah. If you will of 7 million dollar downward effect on what revenue otherwise would have been had a mix of bookings remain the same in our current forecast as was the case in August.
Right. So you didn't say that it was relative to the right of uhm subscription in the prior period you were saying Bruce is your ex didn't know fourthquarter, that's what kind of furniture Neanderthal.
Alright Uhm the second the second thing is that you talked about very strong hiring can you talk about any attrition rates. You know you are you seeing any turnover in your salesforce, what's going on with your wage rates as a result of you know obviously the great resignation period that we're in uhm and passing People's decision to stay.
There.
Or or move.
Yeah, Alex came here I would say that our our overall attrition rate is relative to what I'm seeing other places in the marketplace quite good you know we are it's it's definitely the case that the attrition rate has come up some in 2021 over what it was in 2020, not surprising given the realities of people's behavior, but.
I mean, those two years. So we have seen an increase in attrition, but in general I would say the the leadership team at the company believes that that attrition rate is better than we might have otherwise expected and better than what we're quite frankly reading and hearing from others in the marketplace. So we're pleased as it related I think you asked.
The sales force the sales right sales turnover rate excuse me is quite healthy. We're very pleased there I think the overall given the the tightness of talent in the marketplace. We match been able matte middles was able to do a great job of both attracting new talent is mark talked about in terms of growth of the size of the <unk>.
But also retaining the talent within the team. So the balance there is is really quite healthy and and we're pleased with where we're ending the year.
If I could do a follow up since the first one was just a clarification you mentioned earlier in the call that you were seeing more interest in upscale and better up so.
She's in teachers.
Can provide any data.
You know to help us to demonstrate that point to our clients are as we're writing a note. So it would be very helpful. If you have any supporting information.
Just until the claim.
[laughter] well and I also I think could be clear I think what we said was we're seeing it as a simplified process more than we said we'd ask you in an actual uptick I think we still see a fairly consistent level percentage wise.
The amount of business, we do into kind of new logos versus kind of upsell Cross Salvador installed base that actually it's been a fairly consistent percentage of let's just round it to roughly two thirds one third overtime I think our point was it as people are moving to a more subscription or the model, whether that's term or sauce, I think that model <unk>.
To lend itself to kind of a get more as you go kind of a mindset for the customer as much as our sales team. So I think that's going to make it it <unk> just to be clear out in contrast to the traditional.
For petrol licence sale big by wake some number of years and do an upgrade right I think there's a more iterative consistent motion to to both sell and buy I think in a in a <unk> <unk>.
Recurring repetitive selling motion there around based kind of affirmative SaaS offerings. So that was nine point I don't know that we'll be breaking out exactly kind of data on that any time too soon I think it is a it is an indicator that with all the things we've done to add to the portfolio new developed organically develop modules some of the products we've acquired all of those.
We see is creating great opportunity.