SailPoint Inc.

06/10/2026 | Press release | Distributed by Public on 06/10/2026 14:23

Quarterly Report for Quarter Ending April 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report.
Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2027 and January 31, 2026 are referred to herein as "fiscal 2027" and "fiscal 2026," respectively.
Overview
We deliver solutions to enable adaptive identity security for the enterprise. We do this via the SailPoint Platform that unifies identity data across systems and identity types, including employee identities, non-employee identities, machine identities, and AI agents for real-time governance. Our SaaS and customer-hosted offerings leverage intelligent analytics to provide organizations with critical visibility into which identities currently have access to which resources, which identities should have access to those resources, and how that access is being used. Our solutions enable organizations to establish, control, and automate policies that help them define and maintain a robust security posture and achieve regulatory compliance. Powered by AI, our solutions enable organizations to overcome the scale and complexity of managing identities in real-time across dynamic, complex IT environments. Our solutions empower organizations to maintain a robust security posture and achieve regulatory compliance. Today, we offer a range of solutions to meet the varied needs of our customers across a broad set of deployment options including: Identity Security Cloud, our SaaS-based cloud solution built on our unified SailPoint Platform, and IdentityIQ, our customer-hosted identity security solution. These solutions are designed to enable our customers to make more effective decisions regarding access, improve security processes, and provide them with a deeper understanding of identity and access.
Recent Developments: Launch of SailPoint Agentic Fabric
In May 2026, we announced the launch of SailPoint Agentic Fabric, a new solution designed to address one of the fastest-growing challenges in enterprise security: securing AI agents and other non-human identities at scale. AI agents and other non-human identities now vastly outnumber human identities at many organizations. We see this shift happening on our own platform-non-human identities accounted for approximately 40% of our identity growth during the three months ended April 30, 2026.
The rapid growth of non-human identities has created a critical new risk profile. Autonomous agents can make independent decisions, execute code, and access highly sensitive data at machine speed. Because they are often spun up outside of traditional IT purview, they can operate with excessive, unmanaged privileges. Consequently, the blast radius of a compromised agent can be extensive.
Agentic Fabric is designed to address this identity challenge and extend our Identity Security Cloud model to provide agentic governance and protection, helping organizations to manage and secure every identity type-human or non-human-across the enterprise. By combining discovery, visibility, governance, authorization, and protection in a unified platform, SailPoint can help organizations maintain control over security, compliance, and accountability as they accelerate AI adoption. Agentic Fabric's identity-centric approach is designed to connect identities, access, and activity, giving organizations the context needed to understand what AI agents can access, who is responsible for them, and how to govern them at scale. We believe Agentic Fabric represents a meaningful, incremental go-to-market opportunity for us and will enable us to capitalize on the rapid growth of non-human identities. We have begun to experience accelerating demand across our AI and machine identity portfolio and expect our agentic pipeline to continue to grow.
Our Business Model
Our customers include many of the world's largest and most complex organizations, including large enterprises across all major verticals and governments. The approximate number of customers at each annual recurring revenue ("ARR") level are as follows:
April 30, 2026 April 30, 2025
Customers
3,250 3,040
Customers less than $250,000 in ARR
1,980 2,010
Customers greater than $250,000 in ARR
1,270 1,025
Customers greater than $1,000,000 in ARR
225 170
The number of customers with $250,000 or more of ARR as of April 30, 2026 increased 24% on a year-over-year basis, and the number of customers with over $1,000,000 of ARR as of April 30, 2026 increased 32% on a year-over-year basis.
For Identity Security Cloud, our SaaS-based cloud solution, and IdentityIQ, our customer-hosted solution, our customers typically enter into three-year contracts, with annual billing upfront.
For Identity Security Cloud, our pricing is tiered and based on the suite, with the option for the customer to purchase additional products and capabilities a-la-carte. We price our IdentityIQ term subscriptions based on a number of factors, including the number of digital identities governed with the solution. Customers also have the option to purchase additional products and capabilities.
Key Factors Affecting Our Performance
Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:
Add New Customers within Existing Markets. Countless organizations still use a combination of legacy solutions and home-grown tools. Furthermore, we estimate that over 60% of organizations in our target market still have a fragmented identity experience or use a mostly manual process based on our internal research. As a result, we believe that there is a significant opportunity for us to accelerate the growth of our customer base by enhancing our marketing efforts, increasing our sales capacity and productivity, and expanding and further leveraging our use of channel partners, including managed service providers. Our ability to attract new customers depends on a number of factors, including the effectiveness and pricing of our solutions, our ability to drive awareness of them, and the offerings of our competitors.
Generate Additional Sales to Existing Customers. We believe that our existing customer base provides us with a significant opportunity to expand incremental sales. Most new customers initially purchase one of our SaaS suites (Standard, Business, or Business Plus). We focus on expanding our customer relationships over time through up-selling and cross-selling opportunities, including suite upgrades and additional products. Additionally, we are focused on continuing to migrate customers of our customer-hosted solution to our SaaS suites, which typically results in increased ARR because of the additional functionality that our SaaS suites offer. Our ability to increase sales to existing customers will depend on a number of factors, including our customers' satisfaction with our products, competition, pricing, and overall changes in our customers' spending levels.
Increase Share of Revenue Derived from SaaS. Our go-to-market motion is focused primarily on Identity Security Cloud, our SaaS offering. While we expect that an increase in SaaS contracts will drive growth in ARR, it is also expected to have a near term negative impact on revenue growth, driven by differences in revenue recognition policies between SaaS subscriptions and term subscriptions, and gross margins, as we incur hosting costs for our SaaS offering. Our ability to increase our revenue from SaaS subscriptions will depend on a number of factors, including our customers' specific circumstances, some of which necessitate their preference for our customer-hosted identity governance solution, IdentityIQ.
Deepen our Penetration in International Markets. We expect to continue to invest in our sales and marketing efforts and channel partner network to expand our reach and deepen our presence in existing geographies and to expand into new geographies. We believe that our global market opportunity is large and growing in response to the evolving IT and threat landscapes. For the three months ended April 30, 2026, we generated 64% of our revenue from the United States, 22% from Europe, the Middle East and Africa ("EMEA"), and 14% from the rest of the world. For the three months ended April 30, 2025, we generated 66% of our revenue from the United States, 21% from EMEA, and 14% from the rest of the world, billed primarily in U.S. dollars. Our ability to deepen our penetration in international markets will depend on a number of factors, including the competitiveness of our solutions, the efficacy of our channel partner network, and our sales and marketing efforts.
Sustain Technology Leadership Through Extending Identity Security Portfolio. We recently launched new offerings in agentic security, non-employee risk management, data access security, access risk management, and cloud infrastructure
entitlement management. We are thoughtfully investing in AI, both to increase the capabilities of our solutions, as well as to help our customers protect their organizations while adopting AI for their own use cases. We intend to continue investing to extend our position as the leader in identity security by developing or acquiring new products and technologies and extending our portfolio into additional identity security use cases. Our future success is dependent on our ability to successfully develop, identify, market, and sell existing and new products to both new and existing customers.
Factors Affecting the Comparability of Our Results of Operations
Our historical results of operations may not be comparable from period to period or going forward. During fiscal year 2026, we incurred a significant increase in equity-based compensation expense due to the conversion and vesting of equity awards issued prior to the IPO as well as the issuance of equity awards to certain employees in connection with the IPO. On January 31, 2025, the Board approved modifications to accelerate the vesting of certain incentive units, EARs, and cash-settled awards subject to the pricing and closing of the IPO. Upon the IPO, the vested incentive units were considered redeemable. As a result of the modifications and the closing of the IPO during our fiscal year 2026, we recognized $113.8 million of equity-based compensation expense in the consolidated statement of operations, which was comprised of $61.5 million, $12.6 million, and $39.8 million of expense for the modified incentive units, EARs, and cash-settled awards, respectively, with no comparable activity in the current fiscal year. See Note 9 "Equity-Based Compensation" in the notes to our consolidated financial statements for additional information.
Impact of Current Economic Conditions
Worldwide economic and political uncertainties and negative trends, including financial and credit market fluctuations, tariffs and increasing trade protectionism, changes in government spending levels, uncertainty in the banking sector, rising interest rates, inflation and other impacts from the macroeconomic environment have, and could continue to, adversely affect our business operations or financial results. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic and political events on our business, results of operations, and overall financial position remain uncertain. See the section titled "Risk Factors'' included under Part I, Item 1A of the fiscal 2026 Form 10-K for further discussion of the possible impact of these factors and other risks on our business.
Key Business Metrics
In addition to our financial information prepared in accordance with GAAP, we monitor the following key business metrics to help us measure and evaluate the effectiveness of our operations. Although we believe we have a reasonable basis for each of these metrics, we caution you that these metrics are based on a combination of assumptions that may prove to be inaccurate over time. Please see the section titled "Risk Factors" included under Part I, Item 1A of the fiscal 2026 Form 10-K for more information.
Annual Recurring Revenue
We believe ARR is a key metric to measure our business performance because it measures our ability to generate sales with new customers and to maintain and expand spend with existing customers. The way we define ARR normalizes the impact of revenue recognition differences between SaaS contracts and term subscription agreements. In recent years, ARR has grown faster than revenue, as a greater share of incremental ARR (which we define as the increase in ARR from the prior period to current period) has been driven by SaaS contracts which have ratable revenue recognition compared to term subscription agreements where a portion of the contract value is recognized as revenue upfront.
We define ARR as the annualized value of SaaS, maintenance, term subscription, and other subscription contracts as of the measurement date. To the extent that we are actively negotiating a renewal or new agreement with a customer after the expiration of a contract, we continue to include that contract's annualized value in ARR until the customer notifies us that it is not renewing its contract. The amount included in our ARR calculation related to these contracts was less than 1% as of the dates shown in the ARR table below. We calculate ARR by dividing the active contract value by the number of days of the contract and then multiplying by 365. ARR should be viewed independently of revenue, as ARR is an operating metric and is not intended to be combined with or to replace revenue. ARR is not a forecast of future revenue, which can be impacted by ASC 606 allocations, and ARR does not consider other sources of revenue that are not recurring in nature.
ARR does not have a standardized meaning and is not necessarily comparable to similarly titled measures presented by other companies. The following table presents our ARR as of the dates noted below (dollars in millions):
April 30, 2026 April 30, 2025
ARR
$ 1,162.7 $ 924.7
SaaS Annual Recurring Revenue
In recent years, we have transitioned our business to a SaaS-first subscription model. As a result of those efforts, the share of SaaS ARR to total ARR has increased to 67% as of April 30, 2026 from 62% as of April 30, 2025. We believe the share of ARR generated by our SaaS solution will continue to increase over time.
We define SaaS ARR as the annualized value of SaaS contracts as of the measurement date. To the extent that we are actively negotiating a renewal or new agreement with a customer after the expiration of a contract, we continue to include that contract's annualized value in SaaS ARR until the customer notifies us that it is not renewing its contract. The amount included in our ARR calculation related to these contracts was less than 1% as of the dates shown in the SaaS ARR table below. We calculate SaaS ARR by dividing the active SaaS contract value by the number of days of the contract and then multiplying by 365.
SaaS ARR should be viewed independently of subscription revenue as SaaS ARR is an operating metric and is not intended to be combined with or replace subscription revenue. SaaS ARR is not a forecast of future subscription revenue, which can be impacted by ASC 606 allocations and renewal rates and does not consider other sources of revenue that are not recurring in nature. The following table presents our SaaS ARR as of the dates noted below (dollars in millions):
April 30, 2026 April 30, 2025
SaaS ARR
$ 781.1 $ 573.5
Dollar-Based Net Retention Rate
Our dollar-based net retention rate has decreased to 113% as of April 30, 2026 from 115% as of April 30, 2025. We continue to focus on growing our product portfolio, increasing our SaaS mix, and expanding customer relationships over time through cross-selling and up-selling.
We define dollar-based net retention rate as the comparison of our ARR from our subscription customers against the same metric for those subscription customers from the prior year. For the purposes of calculating our dollar-based net retention rate, we define a subscription customer as a separate legal entity that has entered into a distinct subscription agreement. Our dollar-based net retention rate reflects customer expansion, contraction, and churn. We calculate our dollar-based net retention rate as of period end by starting with the ARR from all subscription customers as of 12 months prior to such period end "prior period ARR"). We then calculate the ARR from these same subscription customers as of the current period end ("current period ARR"). We then divide the current period ARR by the prior period ARR to arrive at our dollar-based net retention rate. The dollar-based net retention rate at the end of any period is the weighted average of the dollar-based net retention rates as of the end of each of the trailing four quarters. The following table presents our dollar-based net retention rate as of the dates noted below:
April 30, 2026 April 30, 2025
Dollar-based net retention rate
113 % 115 %
Components of Results of Operations
Revenue
Subscription Revenue
The majority of our revenue relates to subscription revenue which consists of (i) fees for access to, and related support for, the SaaS offerings, (ii) fees for term subscriptions, (iii) fees for ongoing maintenance and support of perpetual license solutions, and (iv) other subscription services such as cloud managed services, and certain professional services. Term subscriptions include the term licenses and ongoing maintenance and support. Maintenance and support agreements consist of
fees for providing software updates on a when and if available basis and for providing technical support for software products for a specified term.
Subscription revenue, including support for term licenses, is recognized ratably over the term of the applicable agreement. Revenue related to term subscription performance obligations, excluding support for term subscriptions, is recognized upfront at the point in time when the customer has taken control of the software license.
Over time, we expect subscription revenue will increase as a percentage of total revenue as we continue to focus on increasing our subscription revenue, specifically our SaaS offering, as a key strategic priority.
Services and Other Revenue
Services and other revenue consist primarily of fees from professional services provided to customers and partners to configure and optimize the use of our solutions as well as non-subscription training services. Our professional services are structured on a time-and-materials or fixed priced basis, and the related revenue is recognized as the services are rendered.
Services and other revenue also consists of revenues from perpetual license performance obligations and is recognized upfront at the point in time when the customer has taken control of the software license. All perpetual license transactions include maintenance and support performance obligations which are included in subscription revenue.
Over time, we expect our professional services revenue as a percentage of total revenue to decrease as we increasingly rely on partners to help our customers deploy our software and we focus on increasing subscription revenue.
Cost of Revenue
Cost of Subscription Revenue
Cost of subscription revenue consists primarily of third-party cloud-based hosting costs, software, amortization expenses for developed technology acquired, amortization expense for capitalized software development costs, equity-based compensation, employee-related costs (which we define as salaries, benefits, bonuses, and allocated overhead) for providing subscriptions, third party royalties, facilities costs, and contractor costs to supplement staff levels. We expect third-party cloud-based hosting costs to increase as our SaaS subscriptions continue to grow.
Cost of Services and Other Revenue
Cost of services and other revenue consists primarily of (1) employee-related costs of professional services and training organizations, equity-based compensation, travel-related costs, facilities costs, and contractor costs to supplement staff levels; and (2) amortization expense for developed technology acquired and third-party royalties related to perpetual licenses.
Gross Profit and Gross Profit Margin
Gross profit is revenue less cost of revenue, and gross profit margin is gross profit as a percentage of total revenue. Gross profit has been and will continue to be affected by various factors, including the mix of our revenue, the costs associated with third-party cloud-based hosting services and software for our SaaS offering, and the extent to which we expand our customer support, professional services, and training organizations. We expect that our overall gross profit margin will fluctuate from period to period depending on the mix of these various factors.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of employee-related costs, equity-based compensation, software and hosting arrangement expenses, facilities costs, professional services expense, and amortization expense for acquired intangible assets.
We believe that continued investment in our offerings is vital to the growth of our business, and we intend to continue to invest in product development. We expect our research and development expenses to continue to increase on an absolute basis in the foreseeable future but to decrease as a percentage of revenue as our business grows.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of employee-related costs (which includes commissions), equity-based compensation, costs for events and travel, facilities costs, costs of general marketing and promotional activities, payment processing fees, amortization expense for acquired intangible assets, and contract acquisition costs.
We expect our sales and marketing expenses to increase on an absolute basis for the foreseeable future as we continue to invest in our sales force for expansion to new geographic and vertical markets. We expect sales and marketing expenses to continue to be our largest operating expense category.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related costs related to the corporate functions such as executive and internal administrative operations, as well as equity-based compensation, third-party professional fees, bad debt expense, travel, and facilities costs.
We expect our general and administrative expenses to increase on an absolute basis as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. However, we expect that our general and administrative expense will decrease as a percentage of our revenue as our revenue grows over the longer term as our business grows.
We also expect to incur higher equity-based compensation, which will result in an increase in costs of revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income and interest expense. Interest income consists primarily of interest received on cash equivalents, which we expect will fluctuate based on our cash balances and interest rates. We expect interest expense to be insignificant unless we begin to utilize our 2025 Revolving Credit Facility.
Income Tax Benefit
Our income tax benefit (expense) consists of U.S. and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. Our income tax rate varies from the federal statutory rate due to state income taxes, differences in accounting and tax treatment of our equity-based compensation, research and development credits, and changes in the valuation allowance. We expect fluctuation in effective income tax rates, as well as its potential impact on our results of operations, to continue.
Seasonality
We generally experience seasonal fluctuations in demand for our products and services. Our quarterly sales are impacted by industry buying patterns. As a result, our sales have generally been highest in the fourth fiscal quarter and lowest in the first fiscal quarter. Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.
Results of Operations
The following table sets forth our results of operations for the periods presented and as a percentage of revenue(1) (in thousands, except for percentages and per share amounts)(2). The period-to-period comparison of results is not necessarily indicative of results for future periods.
Three Months Ended April 30,
2026 2025
Revenue
Subscription $ 265,821 95 % $ 215,323 93 %
Services and other 14,321 5 15,145 7
Total revenue 280,142 100 230,468 100
Cost of revenue
Subscription (3) (4)
80,220 29 75,491 33
Services and other (3) (4)
18,810 7 27,322 12
Total cost of revenue 99,030 35 102,813 45
Gross profit 181,112 65 127,655 55
Operating expenses
Research and development (3) (4)
61,686 22 67,270 29
Sales and marketing (3) (4)
154,276 55 164,530 71
General and administrative (3)
44,976 16 80,820 35
Total operating expenses 260,938 93 312,620 136
Loss from operations (79,826) (28) (184,965) (80)
Other income (expense), net
Interest income 3,049 1 3,226 1
Interest expense (265) - (22,389) (10)
Other income (expense), net (3,006) (1) (191) -
Total other income (expense), net (222) - (19,354) (8)
Loss before income taxes (80,048) (29) (204,319) (89)
Income tax benefit 5,374 2 17,007 7
Net loss $ (74,674) (27) % $ (187,312) (81) %
Class A yield $ - $ (23,786)
Net loss attributable to common stockholders $ (74,674) $ (211,098)
Net loss per share attributable to common stockholders, basic and diluted (2)
$ (0.13) $ (0.42)
Weighted average shares outstanding, basic and diluted (2)
564,548 500,029
_______________
(1) Certain percentages may not foot due to rounding.
(2) Amounts for the period during February 2025 prior to the Corporate Conversion have been retrospectively adjusted to give effect to the Corporate Conversion described in Note 1 in this Quarterly Report. These amounts do not consider the shares of common stock sold in our IPO or the Class A Units considered preferred shares that were converted into common stock and issued upon the closing of our IPO.
(3) Includes equity-based compensation expense as follows:
Three Months Ended April 30,
2026 2025
(In thousands)
Cost of revenue
Subscription $ 4,611 $ 11,264
Services and other 1,918 10,328
Operating expenses
Research and development 15,475 27,839
Sales and marketing 22,470 53,503
General and administrative 24,648 57,525
Total equity-based compensation expense, net of amounts capitalized $ 69,122 $ 160,459
(4) Includes amortization expense of acquired intangible assets as follows:
Three Months Ended April 30,
2026 2025
(In thousands)
Cost of revenue
Subscription $ 26,831 $ 26,058
Services and other - 2
Operating expenses
Research and development 137 95
Sales and marketing 23,797 23,757
Total amortization expense $ 50,765 $ 49,912
Comparison of the Three Months Ended April 30, 2026 and 2025
Revenue
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Revenue
Subscription
SaaS $ 178,479 $ 131,815 $ 46,664 35 %
Maintenance and support 34,563 37,389 (2,826) (8) %
Term subscriptions 43,916 40,040 3,876 10 %
Other subscription services 8,863 6,079 2,784 46 %
Total subscription 265,821 215,323 50,498 23 %
Services and other 14,321 15,145 (824) (5) %
Total revenue $ 280,142 $ 230,468 $ 49,674 22 %
Subscription Revenue. Subscription revenue increased by $50.5 million, or 23%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025 primarily due to an increase in SaaS revenue and term subscription revenue from our shift in focus on selling subscriptions to new customers and expanding our footprint with existing customers.
Services and Other Revenue. Services and other revenue decreased by $0.8 million, or 5% for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. This decrease was primarily a result of a strategic shift toward selling a higher proportion of professional services and training on a subscription basis.
Cost of Revenue
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Cost of revenue
Subscription $ 80,220 $ 75,491 $ 4,729 6 %
Services and other 18,810 27,322 (8,512) (31) %
Total cost of revenue $ 99,030 $ 102,813 $ (3,783) (4) %
Cost of Subscription Revenue. Cost of subscription revenue increased $4.7 million, or 6%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025 primarily due to an increase in employee-related costs of $5.6 million due to higher headcount and increased investments in existing employees, an increase in software and hosting costs of $4.1 million from the increase in sales of SaaS subscriptions, an increase in amortization of intangible assets of $0.8 million, an increase in third-party royalties of $0.7 million, and an increase in amortization of capitalized software of $0.4 million. This increase was partially offset by a decrease of $6.7 million in equity-based compensation related to the acceleration of equity-based awards from the completion of our IPO and a decrease in partner costs of $0.3 million.
Cost of Services and Other. Cost of services and other decreased by $8.5 million, or 31%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025, primarily due to a decrease of $8.4 million in equity-based compensation related to the acceleration of equity-based awards upon the completion of our IPO.
Gross Profit and Gross Margin
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Gross profit
Subscription $ 185,601 $ 139,832 $ 45,769 33 %
Services and other (4,489) (12,177) 7,688 63 %
Total gross profit $ 181,112 $ 127,655 $ 53,457 42 %
Three Months Ended April 30,
2026 2025
Gross profit margin
Subscription 70 % 65 %
Services and other (31) % (80) %
Total gross profit margin 65 % 55 %
Subscription. Subscription gross profit increased by $45.8 million, or 33%, during the three months ended April 30, 2026 compared to the three months ended April 30, 2025. The increase was primarily due to the growth in subscription revenue. Subscription gross profit margin was 70% for the three months ended April 30, 2026 and 65% for the three months ended April 30, 2025. The increase was primarily due to the overall increase in subscription revenue, which was partially offset by the decrease in employee-related costs related to acceleration of equity-based awards from the completion of our IPO.
Services and Other. Services and other gross profit increased by $7.7 million during the three months ended April 30, 2026 compared to the three months ended April 30, 2025. The increase in gross profit and gross profit margin was primarily due to the decrease in employee-related costs related to acceleration of equity-based awards from the completion of our IPO.
Total gross profit increased by $53.5 million, or 42%, during the three months ended April 30, 2026 compared to the three months ended April 30, 2025. The increase was primarily due to the growth in total revenue. Total gross profit margin was 65% for the three months ended April 30, 2026 and 55% for the three months ended April 30, 2025. Total gross profit margin increased primarily due to the overall increase in subscription revenue, which was partially offset by the decrease in employee-related costs related to acceleration of equity-based awards from completion of our IPO.
Operating Expenses
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Operating expenses
Research and development $ 61,686 $ 67,270 $ (5,584) (8) %
Sales and marketing 154,276 164,530 (10,254) (6) %
General and administrative 44,976 80,820 (35,844) (44) %
Total operating expenses $ 260,938 $ 312,620 $ (51,682) (17) %
Research and Development Expenses. Research and development expenses decreased by $5.6 million, or 8%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. This decrease was primarily driven by a $12.4 million decrease in equity-based compensation related to the acceleration of equity-based awards from the completion of our IPO, partially offset by a $5.8 million increase in employee-based costs due to continued investment in talent related to the development of our products, and a $1.0 million increase in software and hosting costs.
Sales and Marketing Expenses. Sales and marketing expenses decreased by $10.3 million, or 6%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. This decrease was primarily driven by a $31.0 million decrease in equity-based compensation related to the acceleration of equity-based awards from the completion of our IPO, partially offset by a $14.4 million increase in employee-related costs to support deeper penetration into our existing customer base and expansion into new industry verticals and geographic markets, a $4.7 million increase in advertising and promotion costs, a $0.6 million increase in software and hosting costs, a $0.4 million increase in professional services fees and a $0.1 million increase in travel expenses.
General and Administrative Expenses. General and administrative expenses decreased by $35.8 million, or 44%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. This decrease was primarily driven by a $32.9 million decrease in equity-based compensation related to the acceleration of equity-based awards from the completion of our IPO, a $2.8 million decrease in employee-based costs due to lower contract labor costs, a $2.4 million decrease in provision for credit losses compared to prior year, and a $0.3 million decrease in professional services fees. This decrease was partially offset by a $1.9 million increase in software and hosting costs.
Other Income (Expense), Net
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Other income (expense), net
Interest income $ 3,049 $ 3,226 $ (177) (5) %
Interest expense (265) (22,389) 22,124 99 %
Other income (expense), net (3,006) (191) (2,815) **
Total other income (expense), net $ (222) $ (19,354) $ 19,132 99 %
** Percentage not deemed meaningful
Total other income (expense), net decreased by $19.1 million, or 99%, for the three months ended April 30, 2026 compared to the three months ended April 30, 2025. This decrease was primarily due to a $22.1 million net decrease in interest expense due to the full repayment of our Term Loans in the prior year, which included a $15.3 million loss on the
extinguishment of debt and $6.7 million in related interest expense, partially offset by a $2.8 million increase in other expense related to foreign currency exchange loss.
Income Tax Benefit
Three Months Ended April 30,
2026 2025 $ Change % Change
(In thousands, except percentages)
Income tax benefit $ 5,374 $ 17,007 $ (11,633) (68) %
The Company recorded an income tax benefit of $5.4 million for the three months ended April 30, 2026 compared to an income tax benefit of $17.0 million for the three months ended April 30, 2025, leading to a net benefit decrease of $11.6 million, or 68%, year-over-year. The decrease was primarily due to the decrease in loss before income taxes and discretely recorded tax expense for equity-based compensation in the three months ended April 30, 2026.
For further information, refer to Note 11 "Income Taxes" in our notes to our condensed consolidated financial statements included in this Quarterly Report.
Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, we use certain "non-GAAP financial measures" to clarify and enhance our understanding of past performance.
Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry because they may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below and not to rely on any single financial measure to evaluate our business.
Our non-GAAP financial measures exclude items that do not reflect our ongoing, core operating or business performance, such as equity-based compensation, payroll taxes related to awards that were accelerated upon the closing of our IPO, payroll taxes related to RSUs, amortization of acquired intangible assets, and acquisition-related expenses (including fair value adjustments to acquisition-contingent consideration). We believe these adjustments enable management and investors to compare our underlying business performance from period to period and provide investors with additional means to evaluate cost and expense trends. We also believe these adjustments enhance comparability of our financial performance against those of other technology companies. Accordingly, we believe the presentation of our non-GAAP financial measures provides useful information to investors regarding our financial condition and results of operations. In addition, we use adjusted income (loss) from operations for budgeting and planning purposes, including with respect to our corporate bonus plan.
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define adjusted gross profit as gross profit excluding equity-based compensation expense, payroll taxes related to awards that were accelerated upon the closing of our IPO and payroll taxes related to RSUs, amortization of acquired intangible assets, which includes impairment charges, impairment of intangible assets, acquisition-related expenses and restructuring expenses.. We define adjusted gross profit margin as adjusted gross profit divided by total revenue.
The following table reflects the reconciliation of adjusted gross profit to gross profit:
Three Months Ended April 30,
2026 2025
(In thousands, except percentages)
GAAP gross profit $ 181,112 $ 127,655
GAAP gross profit margin 65 % 55 %
Equity-based compensation expense 6,529 21,592
Payroll taxes for IPO-accelerated awards and RSUs
244 634
Amortization of acquired intangible assets 26,831 26,060
Adjusted gross profit $ 214,716 $ 175,941
Adjusted gross profit margin 77 % 76 %
Our adjusted gross profit margin has remained generally consistent in recent periods and reflects the high value-added nature of our offerings.
Adjusted Subscription Gross Profit and Adjusted Subscription Gross Profit Margin
We define adjusted subscription gross profit as subscription gross profit excluding equity-based compensation expense, payroll taxes related to awards that were accelerated upon the closing of our IPO and payroll taxes related to RSUs, all of which were issued after the closing of the IPO, amortization of acquired intangible assets, which include impairment charges, impairment of intangible assets, acquisition-related expenses and restructuring expenses. We define adjusted subscription gross profit margin as adjusted subscription gross profit divided by subscription revenue.
The following table reflects the reconciliation of adjusted subscription gross profit to subscription gross profit:
Three Months Ended April 30,
2026 2025
(In thousands, except percentages)
GAAP subscription gross profit $ 185,601 $ 139,832
GAAP subscription gross profit margin 70 % 65 %
Equity-based compensation expense 4,611 11,264
Payroll taxes for IPO-accelerated awards and RSUs 136 332
Amortization of acquired intangible assets 26,831 26,058
Adjusted subscription gross profit $ 217,179 $ 177,486
Adjusted subscription gross profit margin 82 % 82 %
Our adjusted subscription gross profit margin for the three months ended April 30, 2026 and 2025 has remained generally consistent and reflects the high value-added nature of our offerings.
Adjusted Income from Operations and Adjusted Operating Margin
We define adjusted income from operations as income (loss) from operations excluding equity-based compensation expense, payroll taxes related to awards that were accelerated upon the closing of our IPO and payroll taxes related to RSUs, all of which were issued after the closing of the IPO, amortization of acquired intangible assets which includes impairment charges, impairment of intangible assets, benefit from amortization related to acquired contract acquisition costs, acquisition-related expenses (including fair value adjustments to acquisition-contingent consideration), Thoma Bravo monitoring fees (which were annual service fees for consultation and advice related to corporate strategy, budgeting of future corporate investments, acquisition and divestiture strategies, and debt and equity financings), and restructuring expenses. The Thoma Bravo monitoring fees were incurred pursuant to a services agreement that was terminated upon the closing of the IPO, and we do not expect to receive similar services in the future or enter into a similar arrangement again in the future.
The following table reflects the reconciliation of adjusted income (loss) from operations to operating income (loss):
Three Months Ended April 30,
2026 2025
(In thousands, except percentages)
GAAP loss from operations $ (79,826) $ (184,965)
GAAP loss from operations margin (28) % (80) %
Equity-based compensation expense 69,122 160,459
Payroll taxes for IPO-accelerated awards and RSUs 1,697 3,399
Amortization of acquired intangible assets 50,765 49,912
Amortization of acquired contract acquisition costs (1)
(3,915) (5,764)
Acquisition-related expenses and Thoma Bravo monitoring fees - 580
Adjusted income from operations $ 37,843 $ 23,621
Adjusted operating margin 14 % 10 %
(1) In accordance with GAAP reporting requirements, the Company has written off its contract acquisition costs at the time when the Company was acquired in an all-cash take-private transaction by Thoma Bravo on August 16, 2022. Therefore, GAAP commissions expense related to contract acquisition costs after August 16, 2022 do not reflect the commissions expense that would have been reported if the contract acquisition costs had not been written off. Accordingly, the Company believes that presenting the approximate amount of acquisition-related commission expenses (so that the full amount of commission expense is included) provides a more appropriate representation of commission expense in a given period and, therefore, provides readers of the Company's financial statements with a more consistent basis for comparison across accounting periods.
Our adjusted income from operations and adjusted operating margin increased for the three months ended April 30, 2026 compared to the three months ended April 30, 2025, primarily due to the growth in our overall business and increased operating leverage.
Free Cash Flow
We define free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment, and capitalized software development costs. We use free cash flow as a measure of financial progress in our business, as it balances operating results, cash management, and capital efficiency. We believe information regarding free cash flow provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to fund ongoing operations, and to fund other capital expenditures. Free cash flow can be volatile and is sensitive to many factors, including changes in working capital and timing of capital expenditures. Working capital at any specific point in time is subject to many variables including the discretionary timing of expense payments and fluctuations in foreign exchange rates.
The following table summarizes our free cash flow for the periods presented:
Three Months Ended April 30,
2026 2025
(in thousands)
GAAP net cash provided by (used in) operating activities
$ 38,241 $ (96,807)
Less: Purchase of property and equipment
(969) (2,191)
Less: Capitalized software development costs
(4,752) (1,706)
Free cash flow
$ 32,520 $ (100,704)
Our free cash flow for the three months ended April 30, 2026 increased when compared to the three months ended April 30, 2025, primarily due to a lower net operating loss from higher revenue growth compared to the prior period. Free cash flow for the three months ended April 30, 2025 includes $78.5 million of cash paid to settle equity related awards, cash awards and their associated payroll taxes upon the closing of our IPO, $36.6 million in cash paid for interest expense related to our 2022 Credit Agreement, and $9.3 million of cash paid for fees under our advisory services agreement with Thoma Bravo, which was terminated upon the closing of our IPO.
Liquidity, Capital Resources and Cash Requirements
We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in the longer term. Our primary sources of liquidity are cash flows from operations and proceeds from the IPO, which are supplemented by our undrawn 2025 Revolving Credit Facility. As of April 30, 2026, we had cash and cash equivalents totaling $390.8 million. Our primary uses of liquidity are operating expenses, working capital requirements, capital expenditures and acquisitions.
Although cash flows from operations have been historically negative, in each fiscal quarter since the three months ended July 31, 2025 through the three months ended April 30, 2026, we have had positive cash flows from operations. We expect to continue to incur positive cash flows from operations in the foreseeable future.
Our future capital requirements will depend on many factors, including but not limited to our revenue growth rate, timing of cash receipt and payments, and the timing and extent of spending to support strategic initiatives. We may also enter into arrangements to acquire or invest in complementary businesses, services, and technologies.
To the extent existing cash and cash equivalents are not sufficient to fund future activities, we may borrow under our 2025 Revolving Credit Facility or seek to raise additional funds through equity, equity-linked or debt financings. We may enter into agreements or letters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, which could also require us to seek additional equity financing, incur indebtedness or use cash resources. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.
2025 Credit Agreement
On June 25, 2025, we entered into the 2025 Credit Agreement, which provides for a five-year $250.0 million secured revolving credit facility, including a letter of credit sub-facility of up to $10.0 million. The 2025 Revolving Credit Facility matures on June 25, 2030. Borrowings under the 2025 Revolving Credit Facility may be used to provide ongoing working capital as well as for other general corporate purposes of the Company. The Company had no outstanding 2025 Revolving Credit Facility balance and was in compliance with all applicable covenants as of April 30, 2026. See Note 7 "Credit Agreement and Debt" in the notes to our condensed consolidated financial statements included in this Quarterly Report for more information regarding the 2025 Credit Agreement.
2022 Credit Agreement
On August 16, 2022, we entered into the 2022 Credit Agreement. The 2022 Credit Agreement provided for (i) a six-year $125.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $5.0 million and (ii) the Term Loans. On June 25, 2025, the 2022 Credit Agreement was terminated upon our entry into the 2025 Credit Agreement.
Summary of Cash Flows
As of April 30, 2026, we had $390.8 million of cash and cash equivalents, $250.0 million of availability under the 2025 Credit Agreement, and $734.8 million in net working capital, which we define as current assets less current liabilities, excluding deferred revenue. As of January 31, 2026, we had $358.1 million of cash and cash equivalents, $250.0 million of availability under the 2025 Credit Agreement, and $723.4 million in net working capital. The change in cash and cash equivalents and net working capital was driven primarily by a lower net operating loss from higher revenue growth.
The following table summarizes our cash flows for the periods presented:
Three Months Ended April 30,
2026 2025
(in thousands)
Net cash provided by (used in) operating activities $ 38,241 $ (96,807)
Net cash used in investing activities (5,721) (3,897)
Net cash provided by financing activities - 210,649
Net change in cash, cash equivalents and restricted cash $ 32,520 $ 109,945
Cash Flows from Operating Activities
During the three months ended April 30, 2026, cash provided by operating activities was $38.2 million, which consisted of a net loss of $74.7 million, adjusted by non-cash charges of $126.3 million and a net cash outflow of $13.4 million from changes in our net operating assets and liabilities. The non-cash charges are primarily comprised of equity-based compensation of $69.1 million, depreciation and amortization expense of $53.1 million, amortization of contract acquisition costs of $12.6 million, amortization of debt discount and issuance costs of $0.1 million, and provision for credit losses of $1.0 million, partially offset by deferred taxes of $9.8 million. The net cash outflow from changes in operating assets and liabilities was primarily a result of a decrease in accrued expenses and other liabilities of $44.5 million due to the timing of cash disbursements primarily related to bonuses and commissions, a decrease in deferred revenue of $19.9 million, an increase in deferred contract acquisition costs of $18.5 million due to an increase in our sales, an increase in contract assets of $3.7 million primarily due to growth in our revenue and the timing of invoices and payments, and an increase in prepayments and other current assets of $13.0 million. The outflows were partially offset by a decrease in accounts receivable of $78.4 million due to the timing of receipts of payments from customers and an increase in accounts payable of $7.7 million due to the timing of invoicing and payments made to vendors.
During the three months ended April 30, 2025, cash used in operating activities was $96.8 million, which consisted of a net loss of $187.3 million, adjusted by non-cash charges of $159.8 million and a net cash outflow of $69.3 million from changes in our net operating assets and liabilities. The non-cash charges are primarily comprised of depreciation and amortization expense of $52.1 million, equity-based compensation of $105.7 million, amortization of contract acquisition costs of $8.2 million, amortization of debt discount and issuance costs, including the early write-off of issuance costs related to the repayment of the Term Loans of $15.6 million, and provision for credit losses of $3.6 million, partially offset by deferred taxes of $25.3 million. The net cash outflow from changes in operating assets and liabilities was primarily a result of an increase in deferred contract acquisition costs of $9.5 million due to an increase in our sales, an increase in contract assets of $3.8 million primarily due to growth in our revenue and the timing of invoices and payments, an increase in prepayments and other assets, current and non-current, of $14.9 million primarily due to the implementation of cloud computing arrangements, a decrease in deferred revenue of $11.1 million due to the timing of billings and cash received in advance of revenue recognition primarily for subscription and support services, and a decrease in accrued expenses and other liabilities of $90.6 million due to the timing of cash disbursements primarily related to bonuses and commissions, the settlement of vested EARs and cash-settled awards, interest payments, and fees paid to Thoma Bravo. The outflows were partially offset by a decrease in accounts receivable of $60.0 million due to the timing of receipts of payments from customers.
Cash Flows used in Investing Activities
During the three months ended April 30, 2026, cash used in investing activities was $5.7 million, consisting primarily of $4.8 million for capitalized software development costs and $1.0 million in purchases of property and equipment.
During the three months ended April 30, 2025, cash used in investing activities was $3.9 million, consisting primarily of $1.7 million for capitalized software development costs and $2.2 million in purchases of property and equipment.
Cash Flows from Financing Activities
During the three months ended April 30, 2026, there was no cash provided by financing activities.
During the three months ended April 30, 2025, cash provided by financing activities was $210.6 million primarily due to the proceeds from our IPO, net of underwriting discounts and commissions of $1.3 billion, partially offset by the repayment of our Term Loans of $1.0 billion, and payments of deferred offering costs of $8.4 million.
Material Cash Commitments
On February 1, 2026, the Company entered into a new amendment with its cloud storage provider, terminating the previous arrangement. The new agreement, effective February 1, 2026 through January 31, 2031, requires the Company to commit to minimum annual purchases of $107.0 million, $127.0 million, $147.0 million, $162.0 million, and $178.0 million in contract years one through five, respectively, for a total commitment of $721.0 million. If the Company does not meet the minimum purchase obligation during any contract year, it will be required to pay the difference. There have been no further amendments or material developments related to this agreement since its execution.
There were no additional significant changes outside the ordinary course of business to our material cash requirements disclosed in our fiscal 2026 Form 10-K.
We did not have any material off-balance sheet arrangements during the periods presented or as of April 30, 2026.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting estimates for the three months ended April 30, 2026 from those disclosed in our fiscal 2026 Form 10-K.
Recent Accounting Pronouncements
Refer to Note 1 "Description of Business and Summary of Significant Accounting Policies" in the notes to our condensed consolidated financial statements.
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