According to a market report by Zion Market research, the global identity and access management market is estimated to grow at 12.5% annually over the next few years to $15.92 billion by 2022. The industry was valued at $7.85 billion in 2016.

SailPoint’s Financials

Austin-based SailPoint Technologies (NYSE: SAIL) is a newly listed company in the identity governance space. It was founded in 2005 by Mark McClain and Kevin Cunningham to provide innovative solutions to business problems concerning identity access management. The company was set up to empower customers to efficiently and securely govern the digital identities of employees, contractors, business partners, and other users, and manage their constantly changing access rights to enterprise applications and data. SailPoint operates an open identity platform that provides organizations with visibility into who currently has access to which resources, who should have access to those resources, and how that access is being used. Its solutions are both on-premise-based and cloud-based solutions.

Its products have seen strong adoption in the market. Revenues have grown 41% annually over the period 2011 through 2016. Revenues grew from $95.4 million for fiscal 2015 to $132.4 million for fiscal 2016. During the same period, net loss has reduced from $10.8 million to $3.2 million.

More recently, SailPoint announced its fiscal 2017 results. Fourth quarter revenues grew 53% over the year to $67.8 million. It ended the quarter with an operating income of $10.5 million and an EPS of $0.11. The market was looking for revenues of $55.75 million with an EPS of $0.09 for the quarter. By segment, license revenues grew 65% to $36.7 million and subscription revenues grew 50% to $21.23 million. Revenues from other services grew 23% to $9.9 million.

Its fiscal 2017 revenues grew 41% to $186.1 million. During the year, operating expenses also grew 42% driven by a 37% growth in research and development to $33.3 million and 83% growth in general and administrative costs to $17.7 million. Net income grew from $3.3 million a year ago to $5.4 million.

For the current quarter, SailPoint expects revenues of $44-$45 million, a non-GAAP operating loss of $500,000 to $1.5 million, and an adjusted loss of $0.04-$0.03 per share. For the current year, it expects revenues of $220-$224 million and non-GAAP income of $12-$14 million. The Street was looking for fourth quarter revenues of $43 million and a loss of $0.06 per share.

Till recently, SailPoint was privately held. It had raised an undisclosed amount of funding from investors including Austin Ventures, Lightspeed Venture Partners, Origin Ventures, Silverton Partners, and Thoma Bravo. In 2014, Thoma Bravo bought out its original investors to become the majority stakeholder in the company. In November, the company went public at a valuation of $1.8 billion.

SailPoint’s Okta Tie-up

SailPoint has been expanding its footprint through new partnership and product upgrades. Recently, it announced a tie-up with another identity access management company, Okta. The strategic partnership will provide end-to-end identity for organization by providing secure user access while meeting complex compliance and security requirements. Together, the two companies are looking to provide organizations with a stronger identity solution that securely and effectively authenticates, provisions, and governs access to all applications and data across the enterprise. Enterprises will be able to manage a user’s access throughout the entire lifecycle, including initial onboarding, providing secure single sign-on and multi-factor authentication for application access, and automated off-boarding as users change roles or leave an organization.

The tie-up will ensure authorization policies are enforced, and that user access activity is documented, secure and compliant. While both companies are big players in the same space, Okta’s strength lies in securely connecting and managing people and technology, and SailPoint’s strength is in identity governance to provide a seamless experience for customers across industries. The integration of the two services will help make security and compliance easier.

The partnership may also be a leading indicator of an M&A in the offing.

Questions for SailPoint’s Board

The integration that SailPoint announced with Okta is an indicator of the trend of consolidation in the market. SailPoint also has an unprecedented opportunity in the SaaS space. Its other rival, Ping Identity, has been adding to its portfolio through several acquisitions. Is SailPoint looking to go the similar way by adding other “rough diamonds” to its portfolio?

Its stock is trending at $22.91 with a market capitalization of $2 billion. Within the few months that the stock has been public, it has had quite a ride. It had fallen to a low of $12.82 in November last year after soaring to a high of $25.04 soon after listing. The stock had listed at $12 when it went public to raise $240 million in November last year.