Why I bought SailPoint Technologies (SAIL)

Fair warning… I didn’t utilize a lot of financial analysis to inform my decision. My research and decision-making was definitely more informal.

So, this is the first near-IPO stock I have bought since TWTR and ADNC. Twitter was good for day-traders, and I held for years and took a loss. Audience Inc was simply a terrible choice (too reliant on being an iPhone vendor, and Apple eventually moved on from them). Since those two, I have been focused on companies that have been on the market for at least a year or two so that I can get a handle on multiple earnings reports. SAIL broke the mold for me. I bought in December at $14/share.

The first thing I researched was ‘identity governance’ because that is SailPoint’s focus. Essentially, this is the process of controlling the flow of identity info (names, addresses, SSN, etc). It includes the flow of info both within an organization and from one organization to another. It seems that there are Sarbanes-Oxley regulations tied to this, as well. I know the current federal administration is attempting to roll back the amount of regulations out there. So, that might be a risk point. However, this business need is currently backed by government regulation that mandates identity governance. Technology is key to maintaining appropriate identity governance and staying compliant with regulations. Bottom line, this is a necessary technology solution for tons of businesses.

Second, I researched the competitive landscape. SailPoint exists solely to provide identity governance solutions. There seems to be a mix of competitor types: companies who focus on this solution, and companies who offer this solution among many other areas of focus. The risk here is that larger companies like Oracle can apply tons of resources to be a major player; however, identity governance is not Oracle’s core competency (you can’t even find it in the main menu of their website). Based on SailPoint’s case studies and client roll, I get the impression that they are a key player in this space.

Their solutions drive recurring revenue from their clients, which is something that is a plus in my eyes. I do not have an understanding of SailPoint’s moat yet (if they have one), and am still trying to determine that.

Like I said at the beginning of this, my reasoning is light on financial analysis. I simply feel that they have a long, diverse list of clients who are proving that SailPoint has staying power. Combine that with the fact that this technology is required for so many companies, and I decided to pull the trigger. Their first public quarterly earnings release on Wednesday made me feel more confident in this stock pick. I hope to hold for a long time.

Some things that I learned from their earnings release:
•YoY revenue up 41% for 2017 vs 2016, and up 53% when comparing Q4 YoY
•933 total clients
•2017 revenue was $186.1M
•The revenue and client numbers mean that the average annual revenue per client is around $200K.

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Thanks for bringing this, Elon. I’m interested in Sailpoint, especially since they’ve just partnered with Okta. They’re not growing as fast as Okta, but the valuation isn’t as rich either. Anyone else have any thoughts on SAIL? Wonder why they’re planning to grow so much slower in 2018…just sandbagging?

Note: One thing to look out for is that their lockup expiration isn’t until 5/16/2018.

Bear

I’m also a believer in SailPoint and purchased shares on the IPO day.

My background is in s/w development. I’ve worked on systems similar to SailPoint at the DOD and for Silicon Valley startups, so I have some knowledge in this area.

The moat I see is that adopting and integrating SailPoint within an enterprise is a big endeavor that requires C-level buy-in and a corporate-wide commitment. So a serious engineering evaluation and trial is required before making that commitment. Leading companies with strong technical abilities (in finance, aerospace, and Healthcare) have gone thru that process and have jumped aboard the SailPoint ship. Once that commitment is made, SailPoint becomes the single/centralized solution for corporate identity management. It becomes core to their IT infrastructure, as a secure access door to their systems, making it difficult and costly to subsequently switch.

Also, SailPoint’s solution is a clever combination of world class security systems integrated with social networking features/concepts. The social network enables and enhances the corporate-wide involvement of customer employees. This is a critical aspect to successfully securing corporate IT systems (it requires not just technology - it requires technology plus people acting responsibly).

Also, by having industry leaders as customers, SailPoint gets to understand key/difficult/common customer issues and develop cutting edge solutions as their partners.

On top of this, protecting IT assets is obviously a huge global issue that requires solutions like SailPoint’s.

So the future is very, very bright for a continued upward climb in this stock, imo. Their revenue growth rate will most likely be limited mainly by their ability to add staff with technical skills.

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