SailPoint (SAIL) Q4 2026 Earnings Transcript

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Date

Wednesday, March 18, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Mark McClain
• Chief Financial Officer — Brian Carolan
• President — Matthew Mills

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Takeaways

• Annual recurring revenue (ARR) -- $1.125 billion, representing 28% year-over-year growth and exceeding initial guidance by more than 500 basis points.
• SaaS ARR -- $746 million, growing 38% year over year, and comprising 90% of net new ARR for the fourth quarter.
• ARR per SaaS customer -- Over $380,000 average, up 19% year over year, and more than double the figure from four years prior.
• Customer expansion -- 215 customers with ARR exceeding $1 million, a 34% increase from the previous year, attributed to both new enterprise wins and existing account growth.
• Emerging products -- Contributed approximately 17% of net new ARR for the fourth quarter, with net new ARR from these products more than doubling sequentially from the prior quarter.
• AI identity solutions ARR growth -- ARR from existing customers adopting AIS, MIS, and DAS expanded by more than 50% year over year.
• SaaS customer count -- Grew by 16% year over year.
• Non-human identities -- Accounted for approximately 25% of SaaS identity growth in Q4 and now represent 11% of SaaS identities under governance.
• Retention metrics -- Gross retention steady at 97% and net revenue retention at 113%.
• Fourth quarter revenue -- $295 million, a 23% year-over-year increase, with SaaS revenue up 37%.
• Operating margins -- Adjusted operating margin for Q4 was 20.6%, up 160 basis points year over year; full-year adjusted operating margin was 18.1%, expanding 270 basis points.
• Free cash flow -- $57 million in Q4, equating to a 19.5% margin; full year operating cash flow was $64 million.
• Full-year revenue -- $1.071 billion, up 24% year over year; SaaS revenue increased 35% for the year.
• Q1 2027 guidance -- ARR expected at $1.155 billion (up 25% year over year), revenue at $275 million (up 19% year over year), and adjusted operating margin at 11.1%.
• Fiscal 2027 guidance -- ARR projected at $1.361 billion (up 21% year over year), revenue at $1.265 billion (up 18% year over year), adjusted operating margin estimated at 18.5%, and free cash flow targeted at $200 million. (Fiscal year ending Dec. 31, 2027.)
• SaaS-driven growth outlook -- Fiscal 2027 guidance assumes 90%-95% of net new ARR will come from SaaS products.
• Migration pipeline -- Perpetual and term license customers represent approximately $350 million in ARR with management stating a typical 2x-3x uplift is realized upon migration to SaaS.
• Transactions from innovation -- Over 500 deals closed tied to new innovations, with Fortune 1000 companies among early AI solution adopters.

Summary

SailPoint (NASDAQ:SAIL) reported acceleration in cloud-based identity security adoption, with record SaaS ARR growth and sharp expansion in both customer base and deal sizes. Management emphasized surging demand for securing non-human identities driven by the rapid proliferation of AI agents, positioning SailPoint for market expansion as emerging identity types shift the security landscape. Guidance for fiscal 2027 (ending Dec. 31, 2027) features significant SaaS focus in revenue mix, ongoing migration from on-premise to cloud offerings, and expectations for further growth in AI-driven ARR contributions.

• “We crossed the $1 billion ARR threshold” was referenced by McClain to underscore market position scale in identity security.
• Carolan stated, “net new ARR from our emerging products more than doubled quarter over quarter, accounting for approximately 17% of our net new ARR in fiscal Q4.”
• Adoption of SailPoint’s AI identity solutions by existing customers “expanded by more than 50% year over year,” indicating early traction of new modules within the install base.
• Management noted the new flexible pricing model and focused go-to-market approach as key drivers for accelerated customer migration and expansion dynamics.

Industry glossary

• AIS: Agent Identity Security — SailPoint module managing access by autonomous software agents and bots.
• MIS: Machine Identity Security — Products focused on governance of non-human, machine-based identities within IT infrastructure.
• DAS: Data Access Security — Module for detailed entitlements and rights management across sensitive data assets.
• IGA: Identity Governance and Administration — Processes and tools for managing digital identities, entitlements, and compliance across complex organizations.
• PAM: Privileged Account Management — Solutions designed to control and monitor privileged administrative access, particularly for sensitive systems.

Full Conference Call Transcript

Mark McClain: Thank you, Scott. Good morning, everyone, and thank you for joining us today. We just completed fiscal year 2026 with outstanding results that underscore our ability to deliver growth at scale. This has been a remarkable year for SailPoint as we continue to perform at an exceptionally high level. Our performance puts us at a level that we believe few companies in software and cybersecurity can claim. To back that up, let's look at the key metrics for fiscal year 2026. We crossed the $1 billion ARR threshold. We delivered 28% overall ARR growth and a consistently strong 38% SaaS ARR growth. These are incredible results.

To put this in perspective, our ARR growth of 28% year-over-year plus our adjusted operating margin of 18% gives us a Rule of 46. This places us in a rare stratum of high-performing companies at greater than $1 billion in scale. Our journey to this point is the result of relentless innovation and unwavering execution. These efforts have enabled us to effectively meet the increasing demand for modern, adaptive identity solutions. The combination of visionary product development and operational excellence has positioned SailPoint as a leader in the market, driving our continued success and instilling confidence in our ability to deliver value to our customers well into the future.

This past year was also defined by a rapid pace of product advancement. We believe we pushed our industry forward, making identity security more adaptive, more real time and more integrated within security operations. At a time when organizations are being pressure tested due to the extraordinary rise of Agentic AI, we believe we are delivering the modern security foundation they need. Our 38% year-over-year SaaS ARR growth is a powerful indicator of both new and existing customers actively choosing to modernize with SailPoint. Our SaaS customer count grew by 16% year-over-year, and our ARR per SaaS customer accelerated to 19% year-over-year growth in fiscal '26.

Our recently introduced flexible pricing model and new AI-fueled innovations are turning customer interest into tangible growth and reinforcing the clear momentum in our SaaS business. The second piece of context for our performance is the topic at the top of everyone's mind, AI. Now there is a very active debate happening in the market right now about what AI means for the future of software. I want to address this head on because from our perspective, the answer is clear. The more autonomous and Agentic software becomes, the more essential enterprise identity security becomes. This isn't just about human users anymore. We are experiencing an era defined by an expansive non-human workforce.

Armies of AI agents are being built by business users operating at machine speed and creating an explosion of identities and access points that legacy static security models simply cannot handle. But while the scale of this Agentic workforce is new, the core challenge of securing non-human identities is not new to us. We have been governing service accounts, bots and other machine identities for years. For us, securing this new army of AI agents isn't a reactive pivot, but a natural evolution for a platform architected for this very complexity. In this new world, you cannot secure what you cannot see and you cannot govern what you cannot define.

The fundamental question of who or now what has access to what doesn't go away. It becomes exponentially more critical and complex. For SailPoint, this isn't a disruption to be managed. We believe it is the single greatest market expansion driver we have ever seen, and that solidifies our position as a foundational security control plane for the modern AI-powered enterprise. Because now enterprise security is identity security, and we believe no one is better positioned than SailPoint to help customers navigate into this new world. That is why we believe SailPoint is a significant beneficiary of the AI revolution. Our confidence rests on 4 deep compounding advantages that we believe are unique to us. First, experience.

We have spent 2 decades exclusively focused on solving the most complex identity challenges for many of the world's largest organizations. It's a deeply vertical and horizontal challenge that cannot be solved by general purpose AI alone. Second, data and context. Our experience has allowed us to build a strategic moat through our use of data and context to deliver unparalleled precision and intelligence. Third, ecosystem. We are the control plane for enterprise security, deeply woven into our customers' operations with thousands of entitlement level integrations. New AI agents don't replace this. They must plug into it, making our platform the essential foundation. And finally, all of this culminates in our most valuable asset, trust.

Many of the world's most complex organizations choose us because we are proven and battle-tested. This trust is our currency in a market that cannot afford to risk its enterprise on unproven technology. We believe AI, coupled with our extensive domain knowledge built over decades, will prove itself a true game changer in the coming years. Today, our solution for solving the AI identity challenge integrates AIS, MIS and DAS solutions with more capabilities coming. We packaged these for easier adoption as part of our Digital Identity Flex pricing package. This approach is rooted in our long-standing philosophy of securing every identity, not just counting seats.

It aligns our business model directly with the explosion of both human and non-human identities, helping to ensure we grow and benefit as our customers' Agentic workforce expands. Therefore, when you think about our role as an AI beneficiary, it's critical that you look beyond a single product line. The right mental picture is to see how the vast majority of our portfolio is built with AI to secure the AI movement. From our extensive connectivity framework to our entire AI-enabled platform, we believe that all that we've developed has prepared us to be the guardrails for the Agentic future. We believe we are built for this new world. And our customers are validating this strategy with their investments.

In total, we closed more than 500 transactions directly tied to our new innovations. In Q4 alone, our AI solutions have seen remarkably fast uptake with numerous Fortune 1000 companies among the early customers. In fact, non-human identities accounted for approximately 25% of our SaaS identity growth in Q4 and now represents 11% of our SaaS identities under governance. In parallel, our Navigators Flex pricing model also continues to gain traction, helping to accelerate adoption of our new offerings. And finally, let me share 2 examples from the quarter around how our customers are adopting our latest innovations to tackle these emerging identity challenges. First, take the example of a global semiconductor leader.

As they undertake a massive modernization initiative to reduce technical debt, they face a critical challenge, securing their highly automated environments. They chose SailPoint to govern their explosion of AI agents, service accounts and machine identities at scale. In addition to modernization as a main driver, their decision hinged on a desire to innovate at full speed, knowing that every identity, human and non-human is secure and under control. And second, a major technology infrastructure provider chose SailPoint's agent and machine identity security solutions to meet a mandate centered around preventing overpermissed access between human users and AI agents while enhancing compliance with regulatory requirements such as SOX and GDPR.

These proof points support our belief that our strategic advantage is real. So now let's pivot to how we plan to capitalize on this momentum and convert our unique position into even greater scale. Looking ahead, we expect FY '27 will be the year of AI adoption. This is a reality being shaped by a market that is rapidly evolving and a platform built for this exact moment. For us, this isn't a single motion, but a two-pronged engine for durable growth. First, we plan to deepen our footprint within our existing customer base.

As customers accelerate their shift to SaaS and confront the explosion of AI identities, we believe we are the right partner to help them navigate this shift. Our adoption of a flex pricing model and our AI-powered platform are designed to help our customers expand their programs and modernize with us. Second, we believe our platform's power and clarity of vision make us more attractive to new customers than ever before. We are seeing increasing demand from organizations that want to build their security program on the right foundation from day 1. The same advantages that make us essential to many of the world's largest companies are creating a clear opportunity for SailPoint in the era of AI.

Our ability to drive both of these motions is enabled by our platform's true moat, our governance foundation. In a world of AI agents operating at machine speed, static periodic governance is no longer sufficient. We are defining the new standard of adaptive identity, a standard that ultimately drives toward real-time governance. For us, that means enabling 2 critical states, least privileged access and wherever possible, zero standing privilege. This is made possible by our differentiated ability to link users, machines, agents, applications and pieces of data in a single correlated data model. And the power of that foundation creates what we call identity context. This comes to life in 2 critical dimensions: visibility and intelligence.

We provide the visibility to extend the governance across the entire universe of identities, confronting application sprawl and securing every entitlement. We've recently extended this visibility to help customers explore the depths of AI usage across their enterprise with our just announced SailPoint Shadow AI Remediation solution. But visibility is just noise without context. That's why we also deliver the deep intelligence to understand the meaning behind that access. Moving beyond who has access to answer what they can do, when and at what risk level. This identity context combination of visibility and deep intelligence is our most significant advantage.

It's what enables our customers to move from simply asking who has access to confidently being able to answer whether that access is appropriate, safe and being used correctly right now. Competitors may offer a fraction of one or the other. We deliver both with the granularity and depth that have always been the hallmark of SailPoint. This is such an exciting moment for the company. We believe we have the right strategy, the platform and the team to continue defining the market through our leadership for years to come. Now to walk you through the financial details of this outstanding year, I'll hand it over to Brian, our CFO.

Brian Carolan: Thanks, Mark. Good morning, everyone, and thank you for joining us today. We finished the year with a great fourth quarter, bringing our annual recurring revenue to $1.125 billion. This represents 28% year-over-year growth, a rate we have consistently maintained for the past 3 quarters, underscoring the strong and sustained demand for our identity security platform at scale. This growth rate is more than 500 basis points better than our initial FY '26 ARR guidance. Our SaaS ARR continues to be a powerful growth engine, delivering ARR of $746 million, an increase of 38% year-over-year and accounting for 90% of our net new ARR for fiscal Q4.

This strong performance is a testament to our SaaS-first strategy and growth in our emerging products. In fact, net new ARR from our emerging products more than doubled quarter-over-quarter, accounting for approximately 17% of our net new ARR in fiscal Q4. And what's even more impressive is that the total ARR from existing customers who adopted our AI identity solutions, which includes AIS, MIS and DAS or DAS, expanded by more than 50% year-over-year. We believe this is an excellent leading indicator of our future growth, demonstrating that as customers prioritize a comprehensive identity security strategy, they are turning to SailPoint for innovation. As a result, we're seeing customers commit to larger deals to secure their environment.

This past fiscal year, our average ARR per SaaS customer grew to over $380,000. That's an increase of 19% from last year and more than double what it was 4 years ago. We closed the fiscal year with 215 customers exceeding $1 million in ARR. That's a 34% increase from the previous year and a clear indicator of our success in both landing large new enterprise customers and expanding our relationships with existing ones. Our customers are increasingly choosing to modernize by migrating from our on-premise IdentityIQ solution to our Identity Security Cloud, or ISC. They are making the strategic move to leverage the continuous innovation we are building into our cloud platform.

This trend is not only growing but also broadening. Initially, it was primarily our perpetual license customers moving to SaaS. Now we are engaging in more of these strategic conversations with our term license customers as well. This expanded migration trend represents a significant opportunity for growth. Our existing perpetual and term license customers combined represent approximately $350 million in ARR. With a typical 2 to 3x uplift upon migration, this translates into an opportunity approaching $1 billion. We view this as a durable growth tailwind and confirmation that the market is moving toward our strategic vision. It reinforces the incredible momentum we see in our SaaS business and the significant interest from customers ready to modernize their identity programs.

Importantly, our gross retention has remained strong and steady at 97% this year. We believe this speaks volumes about the value our platform provides and the trust we've earned from our customers in addition to representing an exciting path to ARR expansion. In the fourth quarter, our net revenue retention remained strong at 113%. Looking at our overall financial performance for the fiscal fourth quarter, we delivered revenue of $295 million, an increase of 23% year-over-year, with SaaS revenue growing 37%. Our adjusted operating margin in Q4 was 20.6%, an expansion of 160 basis points year-over-year.

We also continue to generate strong cash flow with $64 million of cash from operating activities and $57 million of free cash flow, which represents a 19.5% free cash flow margin. For our fiscal year 2026, we delivered revenue of $1.071 billion, an increase of 24% year-over-year, with SaaS revenue growing 35%. Our adjusted operating margin for the year was 18.1%, an increase of 270 basis points. Turning now to guidance. For simplicity, I will refer to the midpoint of our guidance ranges where applicable. Full details can be found in this morning's press release and supplemental earnings deck, where you can also find additional modeling notes.

For the fiscal first quarter of 2027, we expect ARR to be $1.155 billion, up 25% year-over-year. We expect revenue to be $275 million, an increase of 19% year-over-year, with adjusted operating margin of 11.1%. We expect our diluted share count to be approximately 568 million shares and adjusted EPS to be $0.04 to $0.05. For our fiscal year 2027, we expect ARR to be $1.361 billion, up 21% year-over-year. We expect revenue to be approximately $1.265 billion, an increase of 18% year-over-year, with adjusted operating margin of 18.5%. We expect our diluted share count to be approximately 580 million shares and adjusted EPS to be $0.32.

We expect to generate approximately $200 million of free cash flow in fiscal year 2027. Our guidance assumes a continued shift towards our cloud platform with 90% to 95% of net new ARR coming from SaaS in FY '27. If we assumed no change in SaaS mix relative to FY '26, our guidance for revenue growth would be approximately 300 basis points higher and our adjusted operating margin would be approximately 200 basis points higher. We believe making a more conservative assumption with our term forecast is the right approach given the increased interest in our SaaS solutions.

In summary, we believe our strong results, consistent growth at scale and innovative product road map position us well for continued success in the AI-powered future. We remain committed to driving durable, profitable growth, and we are optimistic about our ability to deliver long-term value to our shareholders. With that, let's invite Matt Mills, our President, to join us and open the call for questions. Operator?

Operator: [Operator Instructions] Our first question comes from the line of Saket Kalia of Barclays.

Saket Kalia: Brian, maybe for you. I'd love to jump right into the ARR guide here for fiscal '27. I think the moving parts in the revenue guide make a ton of sense just given the strength you're seeing in SaaS and what that means for rev rec on term. But from an ARR perspective, can you just talk about how you're thinking about the on-prem component next year in terms of churn versus conversion? And zooming out, whether the guidance philosophy on ARR is different going into fiscal '27 versus fiscal '26?

Brian Carolan: Okay. Good to hear from you. Thanks for your question. First of all, we feel like this is the appropriate place to start the year for our initial guidance to start the year out. We obviously have strong momentum heading into the year. We've demonstrated 28% ARR growth for the past 3 quarters in a row. We're doing this at scale, well above $1 billion at this point with 38% SaaS ARR growth. So I think we're demonstrating healthy demand. We have a strong pipeline. We've demonstrated strong and steady gross retention at 97%, which is a great place to be. And I think the innovation is really driving customers towards SaaS, both new customers and existing customers.

We do have a very strong migration pipeline. As I mentioned on the script or call, we have a $350 million opportunity. That's broken down between about $210 million of term with the remainder of $140 million coming from perpetual maintenance. I think we've said in the past, we typically see a 2 to 3x multiplier on that at the time of migration, and then it grows from there with emerging products and other add-on and cross-sell opportunities. There's really no fundamental change in our business. There's no change in the competition or win rates. We feel like we're simply taking a prudent approach to start the year. We feel good about this.

We feel it's the right place to start, and we'll take it from there.

Operator: Our next question comes from the line of Matt Hedberg of RBC.

Matthew Hedberg: You guys launched Navigators recently, and it really does feel like that's going to help customers think through even longer-term usage of SailPoint, whether it's humans or non-human identities. And so I guess I'm curious kind of initial reaction to that. And when we think about AIS' impact to fiscal '27, how have you thought about the impact of that, I guess, Brian, from kind of that initial guide?

Mark McClain: Matt, take the pricing one.

Brian Carolan: Yes. Matt, Look, I think like any of these new pricing models. It takes a bit to get them going. We really showed -- it showed up big in our fourth quarter. I think we'll talk about this later, but the migration -- it was a strong migration quarter. And our Flex modernization was pretty significant in driving a lot of that. And just to remind you what that is, it's kind of taken the economics of having 2 sets of IP being the SaaS and the perpetual, right, and running it into a single economic stream. So it makes it much, much easier for these customers to get going. And quite frankly, it's always year 1, right?

Year 1, maybe year 1.5 that they try to get through from an economic perspective. And this Flex premier modernization has been instrumental in helping us really get through that and accelerating our migrations.

Mark McClain: And Matt, I'll take the other one just in terms of the AI identity solutions. So I think I mentioned on the call, about 17% of our net new ARR came from what we call emerging products and a good portion of that, significant portion comes from the AI identity solutions that includes AIS, MIS and also DAS or DAS data access security. We're actually to start the year, we're factoring in a little into our initial guide. We expect that to ramp throughout the year as we go along.

Operator: Our next question comes from the line of Rob Owens of Piper Sandler.

Robbie Owens: I wanted to build on Saket's question a little bit. And Mark, I appreciate your commentary around this being the single greatest market expansion driver you've ever seen. But if we look at fiscal '26, we saw moderating ARR beat throughout the year. And then if we look at the initial guide for ARR, it's not really showing durable growth. So maybe help us understand just how this year played out relative to your expectations. And then as you look forward in the coming fiscal year, just what's in the guide for AI and Agentic and that potential inflection? Or have you discounted all of that out of the guide?

Brian Carolan: Rob, it's Brian here. I'll start, and I think Mark might add some color commentary on this. So I think we've been able to demonstrate very consistent growth throughout the year. So we feel good about doing this in a very balanced manner. So it's a balanced growth in terms of half of that came from new customers and half came from existing. So we view that as durability going out to the future. And certainly, there's going to be an inflection point with a lot of the emerging identity types on the non-human identity side. When that inflection point happens, we can't pinpoint precision with that, but we do know it's going to happen.

We're factoring very little into the initial guide, but we do think it's going to build over time. So we feel like this is the right place to start the year. I think we've been able to demonstrate an outperformance as the year went along in FY '26. Hopefully, we can continue that into FY '27, but we simply want to be prudent with the starting point and then build from there.

Mark McClain: Rob, thanks again for the question. Good to talk to you. Yes, look, you known us long time. We're not kind of prone to overhyping things. And I think when we talk about this being a significant TAM expansion, it's because of the momentum we see building with these large strategic customers where we spend the great majority of our time. And obviously, as Brian says, we see some ramp coming from the customers as they get into "The year of deployment".

We talked a lot about how last year was a lot of -- I don't know if I call it experimentation, but a lot of trying out various parts of the Agentic and AI world in these mid- to large customers and now people seem to be ready to move into more production. So they are talking to us very actively, very actively about how they need to secure this Agentic environment. And so that's the kind of demand curve we see building. But again, it's just prudent in our minds not to kind of build that into an initial commitment to the Street here, but we see it coming.

And we don't think anybody actually in the market doubts that honestly, Rob. I think what everybody is questioning is who's going to be the winners. And our contention continues to be to manage this well, you have to have the things that are kind of unique to our traditional value, which is a breadth of understanding all the identities in the landscape and the depth of the detailed entitlements and data those identities can access. And that just gives more complex and much more real time in this emerging world of Agentic. And we just feel like we are very well positioned to capture that opportunity.

And our customers and prospects, and Matt probably can pick this up later in the conversation, maybe, but that's what we're hearing from them, and we're seeing that interest and they're talking to lots of vendors, obviously, they seem to be very pleased with what we're describing as where we're headed here and we're already delivering. We've been out in the market for a few months in many cases, where people are now just making announcements with future delivery dates. So I would kind of highlight that.

Operator: Our next question comes from the line of Brian Essex of JPMorgan.

Brian Essex: Maybe, Brian, I know we're going to get a lot of questions on this today. So I just wanted to put a finer point on the ARR guidance. And maybe from the perspective of what you saw this year versus what you're contemplating for next year, I think if I look at what you delivered this year, $248 million of net new ARR growing 27%, which was phenomenal. Gross retention rates are best-in-class, so we don't really -- it seems as though we don't have to worry about filling the leaky bucket. But the top end of your guide implies maybe $241 million of net new ARR.

So I just want to understand from what you were able to deliver this year from a sales productivity perspective, how should we think about the levers that you have in place and the assumptions with the guidance next year, just so we can get a sense of the level of conservatism and how much effort from sales productivity and investment in sales and marketing is required to kind of like exceed that expectation.

Brian Carolan: Sure. Thanks, Brian. So I think we've demonstrated that durability in the growth profile. And I think that's what gives us a lot of confidence going into this year. Again, we feel like this is the right starting point. We hope to build from there as the year goes along. So -- but we still see a lot of opportunity, both in new logo acquisition. We still see a lot of opportunity in what we call our target account list. We're about 15% penetrated. That's a 15,000 named account list that we continue to go after, lots of white space there. We are landing larger deals.

We're up about 20% on average for ARR per customer for the past 2 years. Once we land them, we keep them. We have a 97% gross retention rate, and then we expand with them consistently in that 113% to 115% range throughout the year. And we still feel like it's early in terms of the emerging products and cross-sell opportunities that we're seeing, not only the explosion of identity growth, especially non-human identities. And again, we started seeing contributions right away from the emerging modules, which contributed 17% of our net new ARR growth. And then let's not forget about the migration opportunity.

So we have about a $350 million opportunity that means only about 15% of our on-prem ARR has been penetrated. We still have $350 million to go. You start doing a 2 to 3x multiple on that at the time of migration, and then it grows from there over the next several years. I think we look out into FY '27 and beyond, and we have a lot of tailwinds in our favor, a lot of opportunity, again, from new logos and also expansion within our existing customer base.

Operator: Our next question comes from the line of Meta Marshall of Morgan Stanley.

Meta Marshall: I wanted to ask a question. The 50% uplift in ARR from those adding the new modules that was particularly interesting. I guess I just wanted to get a sense, is that kind of what we would expect as the normal uplift or they might have just adopted 1 of the 3 products. And so that's not kind of a fair necessarily kind of total uplift potential calculation, if that makes sense.

Brian Carolan: Meta, it's Brian here. I would say it's still early days. We're very pleased with the early traction and early success that we're seeing. And hopefully, that's a leading indicator of what's to come in FY '27 and beyond. So -- but I think it's resonating with customers. I mean these emerging products, many of which were just unveiled over the last 6 months are starting to take hold. And more importantly, I think they're showing up in customer conversations and funnel and pipeline opportunities.

Operator: Our next question comes from the line of Keith Bachman of BMO.

Keith Bachman: And sorry to go back to the guide for a second, but I wanted to -- what is compressing? If I think about the formula, you've been growing ARR, as you mentioned, 28% and you're getting about half 114 net retention rate. So if you think about the guide, 21% and all the attributes that go with it, -- is it -- is the assumption that the net retention rate will continue to compress and/or new logos will slow because all the characterization that you've given about the on-premise migration potential new products, I'm just a little bit surprised about the implied rate of deceleration even if we assume some conservatism.

So is it a slowing of the retention rate or new logos or both? Any color you could give there would be appreciated.

Brian Carolan: Keith, it's Brian. I'll take that. Again, we feel this is the right place to start. There is no fundamental change in the business. There's no change in competition or win rates. We're simply taking a conservative approach to start the year. We feel good about this. I would say that we are leaning more towards SaaS and term migrations. We probably would see a little less new term business in FY '27 if we had to call one thing out because I think customers are going right to SaaS. One example is in Europe. They doubled their SaaS business year-over-year in FY '26. They have really leaned into it in terms of the customer base and our selling motion.

And so that's going to be very strong, and we're counting on that to be very strong. So again, no fundamental change in the business. We understand that the starting point is probably a little bit lower, but we feel it's the right place to start. We feel good about it, and we hope to build from here.

Keith Bachman: And just to be clear, should we expect the net retention, though, to slow a little bit from the 113% level?

Brian Carolan: I would not. I would not.

Operator: Our next question comes from the line of Jonathan Ruykhaver of Cantor Fitzgerald.

Jonathan Ruykhaver: So I wanted to ask about some announcements from last week around expanding visibility across privileged access and non-human identities. I think, Mark, you did touch on this to some extent, but I'm curious specifically what the gaps are that these upgrades address. And then just looking at the strategy related to privilege, can you just elaborate on how you're thinking of that? Is it a situation where you see the opportunity to compete directly against the PAM vendors? Or is it a broader opportunity just based on privileged controls across human and non-human identity it's not necessarily a direct competitive situation against legacy PAM. How are you thinking of that?

Mark McClain: Yes. Thanks, Jonathan. You're right on it there at the end of your comments question there, I'd say, in that we are not focused at this point on the traditional PAM market, which is kind of a static privilege assignment. The acronym unpack to privileged account management, right? Like an account is sort of permanently privileged in that model. And it's obviously, as we all know, kind of the history of that was permanently privileged users like database administrators and systems administrators.

And what we're all talking about, and I'd say this is coming from even the folks at Palo who bought cyber and others in the market that the world is shifting to a much more universal sense of managing privilege across all identities and a much more dynamic sense of privilege, not static. And so when we look at that evolution and by the way, Jonathan, particularly now applied on that dynamic vector to agents, which will probably be so dynamic as to potentially be almost ephemeral. There might be agents that literally exist for seconds and do a job and go away again.

Well, in that environment, obviously, we think it is going to be that breadth and depth capability that we possess, we think as strong as anyone in the market, if not stronger. And that is to see that range of identities, and we're doing tons of investment in technology to see to have visibility to all of that range of identities and then to have the breadth -- excuse me, the depth to go deeply into the detailed entitlements or data access rights that allow a particular identity to get to particular data.

And again, we've differentiated this since our IPO about a year ago that the other 2 parts of the traditional identity market, the access part, which is very wide, covers a lot of identities. They're certainly talking to those vendors about covering the new Agentic identity world, but they would struggle, I would argue, to go into the depth that's required to really control these things at a granular level. And on the other side, those coming from the privilege heritage, obviously, very deep in their coverage of human identities, and I think they're going to certainly claim to be able to provide that to non-human. Their challenge is breadth.

They just have typically covered, I think the quote from the leader at Palo Alto was that typical CyberArk shop that covered 3% to 5% of the identities in that enterprise, and we've covered 10% of those identities in those enterprises. So it's just a very different starting point to go after this market. And we do believe that those fundamental characteristics and then the ways in which we're leaning into this dynamic need is going to put us in a very good position as these markets unfold and as customers go to volume, right?

And we do think that's kind of a unique position we're starting from and others are saying a lot of words and not necessarily we're sure how they're going to deliver on those words. So I think this game is going to be a proof game in our fiscal '27 this calendar '26. It's going to be a proof of who can deliver what the customers actually need and the technology they need to solve these problems. And we do kind of encourage you to keep watching how that unfolds this year. As Brian said, for a lot of reasons, we think we're starting from the right place with our financial guide.

We're making sure you hear us clearly on our confidence in our technical abilities and where we're going. And so that's where I would say that's true. Hopefully, that's helpful.

Operator: Our next question comes from the line of Gabriela Borges of Goldman Sachs.

Gabriela Borges: Mark, I wanted to get your thoughts on what Anthropic has announced on being able to accelerate COBOL migration through the lens of we knew that IGA migrations are sort of painful for your enterprise customers to switch on to SailPoint and then for SailPoint to the implementation as well. So my question for you is, how does AI make those types of migrations easier? The potential opportunity seems to be around your classic market share gains in IGA. The risk would potentially be the pushing cost goes down. So yes, I would love to hear you chat about that a little bit.

Mark McClain: Yes. I think if I understood it, Gabriela, part of that Brian was a little choppy, but I think I got most of that question. I apologize if I didn't quite completely clarify. But no, I think what we're seeing is, yes, the AI tools being released rapidly and then evolving rapidly in the market certainly help us do a lot of things to be more efficient and effective at moving customers forward. We're leveraging those tools, right? We always talk about AI for us has 3 or 4 characteristics, right? It is potentially enabling bad actors and threat actors to be more effective. We have to protect against that.

It's enabling us to be far more effective in what we do, and it's creating this demand curve that we talked about with Rob earlier about our customers are deploying it, and we think we can be there to help them manage it. So it's got a lot of characteristics in the sense that what does it do to help us do what we do more effectively, which I believe was your question. And how do we, therefore, maybe potentially fend off kind of newer competitors who are coming, say, from a pure AI Agentic world.

I think a term we're all going to be talking about a lot this year, Gabriela, not just in our space, but in a lot of spaces is domain knowledge, right? You can't enter a space with 0 domain knowledge and be that threatening to a partner who's already in that space and also leveraging AI, right? I think our secret sauce and many vendor secret sauce, this is the whole software AI debate will be as we leverage these amazing technologies and filter them through our very deep and rich understanding of what it takes to be successful in these enterprise environments, we think that puts us in a very good position.

So yes, we're actively looking at ways to use AI to discover agents and technologies, how to quickly leverage policies and put them into our product, how to quickly help customers define security policies. There's some new guidelines from this out recently, very recently that start to define what's going to be needed to audit agents something we've been telling people get ready, this is coming, right? You're not going to see this explosion of agents without auditors wanting to ensure you can defend what agent was getting, what power and why.

So I think there's just going to be a ton of aspects of this market that are unfolding, and we're going to leverage all kinds of AI technology in our products to go after that, but also make sure we are helping customers protect themselves as they deploy AI. So it's really a both end here, but is that Gabriela make sure that I get at the question you were really asking?

Gabriela Borges: Yes.

Operator: Our next question comes from the line of Patrick Colville of Scotiabank.

Patrick Edwin Colville: I mean lots of drivers that you guys have called out, SailPoint cloud transition, the SKU upgrade motion, more identities, Agentic. I think there have been a lot of questions on the fiscal year '27 guide. So actually, I would want to ask my question about 4Q specifically. 4Q ARR, the beat was a little bit skinnier than we might have hoped. So was there anything unusual in 4Q of like push or pull in ARR into different quarters? And then actually, similarly, when I look at operating margin, the outperformance there versus the guide provided 3 months ago was perhaps a little bit less than we've seen throughout fiscal '26.

So again, like with cost, was there anything that kind of pushed or pulled in the quarter?

Brian Carolan: Patrick, I'll go first. This is Brian here. So I think we look at this, and we think the business is very healthy, and we're pleased with the results. We are in line to slightly above all of our guided metrics. We grew net new ARR 34% year-over-year. That was the best quarter ever by at least $20 million, and that was driven by SaaS, which that net new ARR was up 41% year-over-year. So I think we demonstrated growth at scale. We had a steady gross retention rate and net revenue retention rate. New products are ramping. We're seeing momentum there. As I mentioned, 17% of our net new ARR, net new ARR came from emerging customers.

Margins improved 270 basis points over the course of the year. So we're doing this at growth in a very responsible manner, and we also demonstrated significant free cash flow movement. As I mentioned, a lot of customers now are starting with SaaS. So that's in accordance with our strategy. This is playing out as we expected with an intentional shift to SaaS with 90% of our net new ARR in Q4 coming from SaaS. I think I mentioned that more new customers are starting with SaaS, especially in geographies like Europe. EMEA, SaaS net new ARR doubled in FY '26.

We possibly saw it's like a little bit of less on-prem expansion bookings through term business, but we're not reading into that. Actually, I think we're viewing this as a positive in terms of now customers embracing SaaS going right to it and also migration opportunities are going to be a tailwind for us, as I mentioned, moving forward.

Matthew Mills: Patrick, this is Matt. I would just add. I mean, I think since Navigate where we announced a ton of new innovations, it's really kind of accelerated this migration process. And I think that was probably some of the curtailing of or maybe some of the slowness you saw in perpetual licenses add-on. But I think our business is strong. I'd also call out new logos. I know that's always a concern, but it continues to grow. The largest companies in the world are selecting almost every day SailPoint to help them with this challenging Agentic security landscape. And our ASP, our new logo ASP for this last quarter was 22% growth.

So we had a really, really good fourth quarter as it relates to new logos and new logos ASP.

Operator: Our next question comes from the line of Joseph Gallo of Jefferies.

Annick Baumann: This is Annick Baumann on for Joe Gallo. Non-human identities seem to be making deals larger and more complex. Any changes to the sales cycles? And then can you talk about pricing previously? I think you talked about a 40% pricing for non-human identity relative to human.

Matthew Mills: This is Matt. I'll just -- I'll give it a shot and then the other guys can add in if they want. Look, I do think sales cycles have elongated a little bit over the last 6 quarters, but I don't think there's anything that we've seen as a late that's changed that narrative. I think when you look at our approach to pricing these agents, we kind of start with the fundamental basis of that the simple principle that agents need to be deployed securely and their life cycle will be intrinsically tied to the human identities, right? I think there's a lot of companies that are looking at it very similar to us.

You cannot secure one without governing the other. And our aim really is to meet our customers and prospects where they are. This is still relatively new to a lot of these folks. And they're looking for some approaches to be able to get into this that helps them mitigate in their mind, a potential risk of moving forward with Agentic AI. So our model and our approach to this, it starts with humans and then we apply some level of a ratio to it. And if you remember the Jensen Huang theory, right, that his company is going to add 2,000 agents to every 1 employee.

Well, that's a little bit of an extreme example, but it gives you a point of reference on how we're thinking about that. And then the last part of this thing is how do you charge for this? And it's a bit of a consumption model because we want these customers to be able to deploy it without limits over the period of time of the contract. And the contracts we've done like this basically all start with a price point and then it's what does the renewal look like.

And so this gives us a pretty solid foundation to be able to say, here's the cost point, here's the ability to access and to deploy over the period and then here's how the follow-up of the renewal would come. And those are the long polls in the tent. The last piece I'll add because it's very important is a fair use policy. All of our -- all these proposals have a fair use policy for sustainability to make sure that if a customer is using it outside of our expectations, right? And the way you should think of it is anything over 95% of the broader customer base, right?

There's some components in there that actually protect us from runaway costs. And so that's -- I don't know if that's helpful or not. I hope it is, but it gives you a little bit of a view in terms of how we're looking at pricing this non-human world.

Operator: Our next question comes from the line of Peter Levine of Evercore.

Peter Levine: Maybe to -- Matt, the last question, maybe to a finer point and maybe for you as well, Brian, is how should we think about monetization in a more consumption flex-driven model, right? Are there directional metrics you can share with us if it's revenue per identity or per AI workflow, just to kind of help frame the opportunity or for us to kind of just see what the revenue build looks like. Again, it's just -- I guess it's more so just quantify for us as you're securing more AI agents, just how that translates into revenue, higher attach rates, increased assumption or again, just metrics like revenue per identity. How should we best think about that?

Brian Carolan: Yes. So this is all about flexibility and adoption for us. We want to get customers going on whatever their non-human identity footprint is, being able to secure that right away. And so those flex models that we've introduced -- and yes, we do view this as more akin to consumption-based, but that's not how we're going to recognize it. We're going to actually just have a fixed fee for a period of time, let them deploy as they need to and then monitor them and then come back to them with any kind of overusage.

Mark McClain: Yes. I would -- it's not a metered model, Peter. It's -- we recognize it financially just like we would any other kind of deal.

Brian Carolan: And certainly, this is going to be incremental. I mean it's hard to put an exact pinpoint precision on that. But we know that the ratio of non-human to human is going to be significant. And this will play itself out over time in terms of price and volume, but we do know it's going to be incremental.

Matthew Mills: Yes. And our point of view on this is we're trying to make this really, really easy for companies to do business with us and mitigate the risk, as I mentioned before. But this is all about adoption and the customers that we've seen thus far, once they get in, they start to understand what they can do, what they can't do, it becomes far easier for these to make greater investments in the move. These kind of flexible pricing models that we're talking about kind of take that away and says, let's get on with the business of the Agentic AI.

Operator: Our next question comes from the line of Gray Powell of BTIG.

Gray Powell: So yes, just what are you seeing in terms of the appetite for customers to replace legacy IGA solutions this year from folks like Oracle and IBM. And are you seeing AI playing a bigger role in those conversations? Is it potentially driving any acceleration of legacy product migration?

Matthew Mills: Yes. Gray, this is Matt. I'll give you a perspective. I mean, we've really seen -- I'll just use our own migrations as a point of reference, right? Once we announced all the innovations here at Navigator last year, significant difference in these customers that are large customers that have probably made a lot of customizations even with our own tools, feeling this overwhelming urge that they got to move I think these agents and Agentic AI, I think they all realize this is not going to be a, we want to do it or not. It is coming back to 100 miles an hour.

And so I think it caused not only the legacy ones that you're talking about, the Oracles and maybe the CAs of the world, but anybody who's not on a platform that can actually handle this accelerated Agentic AI that's coming at them, they're [indiscernible].

Operator: Our next question comes from the line of Shrenik Kothari of Baird.

Shrenik Kothari: So you closed 500-plus deals tied to new innovations and emerging products contributing 17% net new ARR, which is clearly a very strong start and encouraging early signal. But just given your own commentary, many of these are still in early innings, on the go-to-market side, right, how do you view the current transition from selling a more core governance sales motion towards this more complex multiproduct expansion playbook? Do you feel from training, enablement, field structure? How are you viewing you are already in place to sell this broader platform from day 1?

Mark McClain: Yes. I'll take a shot at that, and Matt may jump on, too. I think a couple of things, right? We just had, as you all know, our Navigate conference in the fall, and then we just had our sales kickoff just lit a few weeks ago. And big focus on a couple of different things. One is making sure people feel confident that as any customer wants to move forward with, well, I'll call it, traditional IGA, they're very confident in what we're doing vis-a-vis our kind of current competitors and the legacy players we've seen.

But I think particularly on that kind of continuing to add fuel to the fire, that 17% of our ARR coming from these emerging products, a large portion of the enablement at [indiscernible] this year was around making sure people are ready and equipped you don't have those conversations. And then I'll point to one particular thing Matt and the team have done and maybe Matt will give a little more color here. For the first time, we've put kind of a focused targeted sales team around the Agentic topic area.

We've been bringing in new reps and SEs who come from that kind of a heritage, and that's really opening up a different sales motion to the Chief AI Officer or whatever the company calls their lead AI person, right? We're still obviously engaged with CISOs and identity leaders about that. We're finding that some of these -- some of the pull, the demand we've been talking about is actually coming from that AI part of the organization. And shockingly, maybe not shockingly, sometimes they aren't as connected to the identity team as they probably should be. And sometimes we're the ones helping that bridge get built.

But Matt and [ Gary ] leads our whole field team have kind of put a focused effort on that. Matt maybe expand a little bit on what we're doing there and what we hope to accomplish there.

Matthew Mills: Yes. Yes. It's -- think of them as product-oriented sellers, right? So they walk in the door with a set of skills to be able to talk about Agentic and not only the value prop, but also the challenges these companies have in deploying it. I think the other thing is that's really important is that, as Mark said, it feels to us that a lot of the budget now is locked up in this Head of AI or Chief AI Officer, whatever they call it. And that going through that route, we're unlocking a lot more budget and a lot more opportunity than maybe just simply going up the traditional type of identity up to the CISO.

So that's become very interesting.

Operator: Thank you. I would now like to turn the conference back over to Mark McClain for closing remarks. Sir?

Mark McClain: Well, thanks, everyone, again, for the time. We really appreciate it. Again, we'll kind of end where we started. We feel very good about the results for all of last year. We feel very good about the starting position for this year and the tailwinds we see coming from these technological shifts to our customers and we're in position to win. So we invite you to kind of go on the journey with us this year. We feel very good about where we're at and where we're headed and look forward to continuing to engage with a lot of you individually. Thanks for the time this morning.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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