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SailPoint Technologies Holdings, Inc. (NYSE:SAIL)
Q1 2020 Earnings Call
May 7, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the SailPoint Technologies Holdings, Inc. First Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Josh Harding, Vice President of Financial Planning, Analysis and Investor Relations. Please go ahead, sir.

Josh Harding -- Vice President of Financial Planning, Analysis and Investor Relations

Good afternoon, and thank you for joining us today to discuss SailPoint's first quarter financial results. Joining me today are SailPoint's CEO and Co-Founder, Mark McClain; and our Chief Financial Officer, Jason Ream.

Please note, today's call will include forward-looking statements. And because these statements are based on the Company's current intent, expectations and projections, they are not guarantees of future performance, and a variety of factors could cause actual results to differ materially. Since this call will include reference to non-GAAP results, which exclude special items, please reference this afternoon's press release in the Investors section of sailpoint.com for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.

And now, I'd like to turn the call over to Mark McClain.

Mark McClain -- Chief Executive Officer and Co-Founder

Thanks Josh, and good afternoon, everyone. Thank you for joining the call today. Before we go into Q1 performance, I'd like to acknowledge that we are collectively facing unprecedented time, not just among our own customers, but across the country and the world at large. I'd like to highlight how we've reacted to the COVID-19 pandemic as I'm both grateful and humbled by our team and our response.

SailPoint pivoted quickly to a virtual workforce, while continuing to execute across the board from engineering to marketing and sales, and as I'll point out in a moment, especially around customer services and support.

Over the course of Q1, customer success remained our core focus, and we quickly mobilized to support our customers worldwide, especially those requiring additional help during these unprecedented times. We've added the concept of virtual office hours to give customers the professional service and support they need and have worked hard to maintain an open line of communication with all customers to ensure their continued success.

As our customers have shifted to a virtual workforce, the value and scalability of our identity platform has become more evident. For example, a longtime SailPoint customer in the investment advisory business needed to ensure workforce continuity amid their rapid shift to a virtual workforce. Their identity and security technical lead shared that, "We tripled our user account and provisioning over the past few weeks, and SailPoint worked beautifully. During this time, we had to respond quickly to the unusually high systems integration and SailPoint handled three times our normal workload. We're are grateful that less thing we have to worry about during the pandemic."

In another instance, we helped a large retail organization and longtime customer to shift all of their retail location meetings to virtual meetings in six days, thanks to the automation they had built into their SailPoint identity program. This enabled them to swiftly and securely deploy videoconferencing across the business for 10,000 users.

As a third example, a large insurance company quickly pivoted from a 20% virtual workforce to nearly 100% virtual workforce. With the help of SailPoint's identity platform, they offloaded a significant amount of work around access request needs during their shift to virtual. In their words, "This was one less headache to worry about during COVID, the speed of now granting access is a win."

While these are just a few examples among many, we believe our identity platform will continue to prove out its value during these challenging times.

Now, let's turn to our financial performance in Q1. We were able to exceed the top end of our guidance on revenue and operating income. Q1 total revenue was $75 million, which represents a 25% increase year-over-year. Our financial results were largely driven by solid sales execution and ongoing customer investment in identity across the markets that we serve.

While we were pleased with our performance in Q1, it was somewhat dampened in March by the impact of COVID-19, as that created an uncertain environment for businesses around the world. While we don't believe this near-term uncertainty will impact the importance of identity governance and our attractive market opportunity long term, we are prepared to see some of the buying trends that materialized in March persist in the near term. As Jason will discuss in more detail later, we will balance this near-term dynamic with the exciting long-term opportunity ahead of us as we think about the appropriate level of investment in the business. We are fortunate to have a strong balance sheet and disciplined approach to spending, which will allow us to continue investing in 2020 to support our long-term strategic priorities. We believe this is the right strategy for long-term value creation.

As we discussed on the last earnings call, our strategic priorities include: number one, aligning our broader business and go-to-market efforts with our increased focus on selling staff; number two, continuing to make our customers successful at every stage of their identity journey. And number three, expanding the depth and breadth of our SailPoint Predictive Identity platform.

First, as we continue to shift our business toward SaaS, we extended our leadership team welcoming Grady Summers to Executive Vice President of Solutions and Technology and Asanka Jayasuriya to Senior Vice President of Engineering and Chief Technology Officer. Their SaaS and security expertise will enhance our product innovation and strengthen our entire identity portfolio [Technical Issues] and invaluable insight and leadership to help us chart our next phase in growth and innovation as we continue to execute against our vision for the market.

Second, from a customer success standpoint, we recently received the Gartner Peer Insights Customers' Choice for IGA distinction. What makes this accolade even more compelling is that this was entirely driven by reviews submitted to Gartner by our customers, sharing their experience working with us as they selected, deployed and implemented our identity platform across their business. We were the only identity vendor that qualified for this distinction, further setting us apart as the best choice for identity today.

And third, to address the accelerated move to the cloud we're seeing among enterprises worldwide, we released our new cloud governance services, which are built on the technology we acquired last year. These services extend the depth of our identity governance platform to cloud infrastructure such as AWS, Microsoft Azure and the Google Cloud platform. As part of the SailPoint Predictive Identity platform, these services extend identity governance to include both cloud platforms and workload, all from a single identity solution.

As we look ahead to Q2 and the rest of 2020, we will continue to provide world-class support to our customers and to execute on our strategic priorities during this uncertain time.

Jason will discuss in detail in his section, but we are planning for a more uncertain selling environment in 2020 than originally expected. Our focus as a leadership team is on balancing and navigating through these near-term challenges, while ensuring we will remain well positioned to capitalize on our long-term opportunity, which remains very attractive.

For example, in the near term, we expect some level of ongoing uncertainty within the enterprises that we target. While identity continues to be a top priority for the enterprises in our sales pipeline, certain industries have obviously been hit harder than others. For these industries, their ability to sustain current projects or push new projects forward will ultimately depend on factors that are hard to predict and remain somewhat unknown for all of us at this time. However, in the long term and even in the near term, in certain cases, we believe COVID-19 will accelerate existing trends among enterprises where identity governance plays a critical role. These trends include the rapid digital transformation under way and the increasingly dispersed virtual workforce. We believe that to ensure their workforce is enabled and their business is secured, organizations will pivot quickly in the face of these two trends, recognizing how critical identity is to their overall security stack.

In closing, I remain particularly proud of how the entire SailPoint team has come together in these very challenging times to support our customers and stay true to our core value. We remain focused on executing on our strategic priorities that will extend SailPoint's leadership position in the identity market.

With that, I'll hand it off to Jason, who will share more details on our financial results for the quarter.

Jason Ream -- Chief Financial Officer

Thank you, Mark, and thank you to everyone on the line for joining us today. On the call, I'll review our first quarter results and then update you on our expectations for the rest of the year. Before I get to the quarter, I'll share some thoughts about SailPoint that I would ask you to keep in mind as we all face this unprecedented time of uncertainty.

First, we have an annualized recurring revenue base in excess of $175 million and have historically had good success in retaining that base. Our recurring revenue is highly profitable and a significant asset for the Company. Second, we are in a very strong liquidity position with a cash-generative business and $467 million of cash on hand. And third, we have good gross margins and a disciplined approach to spending, providing us with the ability to adjust our cost structure if required, based on changing circumstances. Given our financial strength, clear leadership position in the market and ongoing product innovation, we remain confident in our ability to manage through any macro challenges, while continuing to execute on our long-term vision.

Now, turning to our first quarter results, total revenue for the first quarter was $75 million, a 25% increase over Q1 of 2019. From a new bookings perspective, we had a very strong January and February, and we're pleased to exceed the high end of our revenue guidance for the quarter. We believe that we did see some impact from the uncertainty in March as the COVID situation began to unfold. Without this impact, we probably would have had an even stronger quarter, reflecting the fundamental demand for our identity governance solutions and the market's excitement around our product direction.

Subscription revenue increased 38% year-over-year to $44 million or 58% of total revenue in the quarter. As we mentioned last quarter, we expect subscription revenue to be more than half of our total revenue going forward. Renewal rates were consistent with what we've seen historically, which we believe to be attractive relative to industry norms. While we did not see any change in renewal rates in the quarter, we are watching renewals closely, given the impact the current economic situation could have on our customers.

As I transition through to the remainder of our income statement, please note that unless otherwise stated, all references to expenses and operating results are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release.

On a combined basis, total gross margin for the quarter was 79% compared with 78% in Q1 of 2019. We were pleased with the improvement in gross margin, which reflects the ongoing improvement in subscription gross margin and a decrease of professional services as a percent of total revenue.

Operating expenses were $55.3 million, down 5% sequentially, reflecting lower sales commissions in our seasonally slowest quarter, offset by payroll tax resets and first quarter marketing events like RSA. On a year-over-year basis, operating expenses were up 18% from $47 million, a little bit behind what was implied in our guidance from the last call, largely due to reduced spending in areas such as travel and in-person marketing events.

Operating income was $4.4 million, well ahead of our expectations, reflecting our revenue outperformance and expenses below plan in the quarter.

I would now like to talk about how we are approaching the rest of the year. We entered the year with strong momentum, and demand trends throughout the first quarter and into Q2 have been very strong. Our predictive identity vision is resonating with the market, and we are seeing growing interest in our SaaS platform. Most of the feedback from potential customers is that their identity governance projects have top priority and still have the green light in the current environment. Nevertheless, the high level of macro uncertainty makes it very difficult for us or even for our customers to accurately predict the timing of deals getting done. Given this level of uncertainty, we are not providing guidance for the second quarter and are withdrawing our previously issued guidance for the full year.

I want to be clear that our decision to not provide guidance does not reflect any lack of confidence in the business, either on a long or even on a short-term basis. Our new bookings in April were very strong, and our sales pipeline continues to grow and improve in quality, indicating that we could have a very good outcome in Q2. However, it is simply too difficult to predict what close rates will be in this uncertain environment. Hence, our decision to not provide guidance at this time.

From an expense perspective, like everyone else, we have and will continue to realize some natural cost savings from lower travel expense. We are also working to make sure we are nimble as a business, able to respond quickly as the situation continues to evolve. At the same time, we're continuing to execute the strategic investments in product development and sales and marketing that we identified at the beginning of the year as we believe those are the best levers for us to capitalize on our long-term opportunity. We are mindful of the challenges posed by current market conditions, and all parts of our business are prepared to manage through the current situation and whatever we face over the coming months. As Mark said earlier, we believe that despite the near-term uncertainty, the SailPoint opportunity is more attractive than it has ever been.

With that, I'd now like to turn to the operator to begin the Q&A portion of the call. Operator?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Matt Hedberg with RBC Capital Markets. Please proceed with your question.

Matt Swanson -- RBC Capital Markets -- Analyst

Yeah, thanks for taking my question. This is actually Matt Swanson for Matt. Jason, you talked about the idea of kind of controlling costs while still remaining well positioned to capture demand when it comes back. Could you just get a little bit more granular on kind of how you're striking that balance?

Jason Ream -- Chief Financial Officer

Yes. Thanks Matt. I think the best way to phrase it is that we're making sure that we know the priority of our investments and are putting our sort of efforts and focus on the hires, the programs and overall spend where it has the most direct connection to our long-term investment plan and will have benefit for us regardless of the environment. And so naturally, that gives us sort of an automatic bias toward nimbleness, so to speak, in sort of an environment like this. And then generally, also, we're looking at what sort of constraints particular programs might have, making sure force majeure language is in our contracts and generally not putting ourselves in a position where we would reduce our flexibility if we needed it. But today [Phonetic], we're in a position where we have the ability to make investments and to continue to fund the plan that we set out for this year. And so, we're just making sure we have the flexibility and the capability if we need it.

Matt Swanson -- RBC Capital Markets -- Analyst

Thanks.

Mark McClain -- Chief Executive Officer and Co-Founder

Matt, this is Mark McClain. Matt, if I could interject you. You said, when demand comes back, I didn't want you to leave with the impression that demand has gone away. We still are seeing tremendous demand out there in the market for conversations and even including moving business through pipelines. We're just highlighting a level of uncertainty to close. That's all we wanted to highlight in the call. [Indecipherable] I would like to clarify that.

Matt Swanson -- RBC Capital Markets -- Analyst

Yeah. No, that's a helpful clarification. And then, Mark, what was also really helpful is kind of some of your examples about how you helped kind of enable your customers to make the transition to remote. This might not be the easiest time for displacements of legacy tools, but you have to think that some customers who aren't using a SailPoint weren't able to make these transitions so smoothly. Do you see this as an opportunity, maybe if it is six months or a year when people are ready to make some of those larger displacements, for that to kind of accelerate from the lessons learned from going through this process?

Mark McClain -- Chief Executive Officer and Co-Founder

Yeah. Matt, to build on your point, I think it is highlighted for some customers, which we commented before that we think some of the legacy solutions are fairly brittle, is the term you heard us use in some of these calls in the past. I think that's maybe what got highlighted in some of this sudden need for change and accelerated movement of working from home, remote, virtual and all that, as the customers, who have those older legacy solutions, found they really were not very nimble. And customers who had solutions like ours were able to pivot fairly quickly to adjust some of their processes or even just the volume, as you heard in my example of three times, four times normal volumes. And that's just going to be, I think, something that as the dust settled, so to speak, and some of these customers, they're going to want to revisit whether their current solutions are really going to be nimble enough to help them as they, in many cases, continue to accelerate in their digital transformation and/or make some permanent shift in their whole working approach with more virtual work.

Matt Swanson -- RBC Capital Markets -- Analyst

Thank you.

Mark McClain -- Chief Executive Officer and Co-Founder

Thanks Matt.

Operator

Your next question comes from the line of Melissa Franchi with Morgan Stanley. Please proceed with your questions.

Hamza Fodderwala -- Morgan Stanley -- Analyst

This is Hamza Fodderwala in for Melissa Franchi. Thank you for taking question. I was hoping for a little bit more color on the lack of the Q2 guide. It seems like from your commentary that April was a strong start. So I'm just wondering, where is it that you're seeing the most risk as you progress through Q2? Is it renewal rate, the longer sales cycles, closing new deals, it seems like? If you can just give a little bit more color on each of those factors?

Jason Ream -- Chief Financial Officer

Yeah, sure. This is Jason. As I mentioned in the script, our renewal rates have been good. We didn't see really any deviance in Q1 from what we've seen historically, which I think, as you know, are very good. I also wouldn't say close times are necessarily different nor, as Mark just mentioned in the last question, are we seeing any change in demand. If anything, maybe a better demand environment than even before. I think really it's just a question of uncertainty and not knowing what might happen. And I think we're in that situation, many of our customers are in that situation. And so, there's just some uncertainty about whether deals will close. But we're not seeing a particular slowing. We're not seeing a falloff of demand or anything like that. It's just given the uncertainty right now. And frankly, given that there still is a license component to our model, although we're increasingly more SaaS and more recurring, there's license component [Phonetic] in the model. And so, that introduces some uncertainty for Q2.

Hamza Fodderwala -- Morgan Stanley -- Analyst

Got it. And maybe just a follow-up question, if I may. As you look through your product portfolio, which parts are holding up really well in this environment and which parts maybe are you seeing a bit more of a drag, and specifically, maybe IdentityNow and some of the other products that you have?

Jason Ream -- Chief Financial Officer

Mark, do you want to take that one?

Mark McClain -- Chief Executive Officer and Co-Founder

Yeah. Guys, apologies, on the phone -- we've never done one of these in separate places before, so we can't look at each other and say, you take that one. Yes. Let me start, and I'll pass it to Jason after opening thoughts there. I think in general, we're seeing increased call in the market for IdentityNow and really all of our SaaS products. One of the things we highlighted is that IdentityNow is kind of our core SaaS platform, and then some of the newer offerings, which work both with IdentityNow and IdentityIQ are SaaS based. And in general, we are still feeling very good demand for IdentityNow in the traditional kind of mid to smaller end of the enterprise market, but increasingly into the mid to larger part of the enterprise market, and then, still good demand for IdentityIQ in mostly the very large end of the market, and as we heard from some of the positive customer reactions we get with our installed base, continued good demand for installed base up-sell in both platforms. So honestly, we're not really feeling any weakness in any part of the product line and are just obviously not at a point where we're kind of seeing a lot of sales because it's so early in the cycle from some of the newly introduced products, but a lot of excitement both in our field and our customer base about some of the newly introduced products. So no, really nothing to comment on from a concerning area. I don't know, Jason, if you have anything to add to that.

Jason Ream -- Chief Financial Officer

Yeah. No, I agree. I think, part of your question is, is there a concern around IdentityIQ's on-prem? Look, most of our customers are deploying it in the cloud. Professional services work done around our products is, for the most part, done remotely anyways. And so, I don't think we've seen any extra concern there. But the overall backdrop, as Mark was talking about, is that there is a shift toward IdentityNow and the newer SaaS products that we've launched recently and a ton of momentum in our own sales force and what we're doing from the product side, but also on the customer side and among our partners as well.

Hamza Fodderwala -- Morgan Stanley -- Analyst

Thank you.

Mark McClain -- Chief Executive Officer and Co-Founder

Thanks.

Operator

Your next question comes from the line of Dan Ives with Wedbush Securities. Please proceed with your question.

Strecker Backe -- Wedbush Securities -- Analyst

Hi, this is Strecker on for Dan. And thanks for taking our question. Can you talk about what you guys are seeing spending-wise throughout the different verticals in your customer base? And has anything surprised you there? And then one follow-up is, any color you can give us on conversations with customers thus far in the quarter would be great. Thanks.

Mark McClain -- Chief Executive Officer and Co-Founder

Jason, let me take the first question -- or go ahead, Jason.

Jason Ream -- Chief Financial Officer

Okay, yeah, go ahead.

Mark McClain -- Chief Executive Officer and Co-Founder

Okay. This will happen on every question. Hopefully not, some will be very clear. Yeah, I think, to response -- I think, in general, we would see at least some level of further discipline analysis around customers that are in what we call the heavily hit verticals, the travel and entertainment and somewhat retail, depends on the retail. Some of those folks have pivoted and are actually seeing quite a positive [Technical Issues] circumstances. But in general, our feel [Phonetic] has been very, very thorough about kind of betting business in those verticals. And in many cases, as Jason said in his opening comments, we're seeing customers who are still very committed to moving forward. In some cases, they are having to "let the dust settle a little more" before they are able to proceed either with an upgrade or expansion project or a new project.

That said, we still are doing business in some of those verticals, absolutely. And then in the other verticals that are not as heavily hit by what's happened, really, if anything, neutral to accelerating from moving things forward and putting this kind of a program in their kind of tier 1 priority. So, I'd say, in general, nothing to report that would surprise anyone. Your question was, anything surprised us? No, I think in the verticals that have been most heavily hit, there's at least some pausing and reassuring us and themselves that they have the ability to move forward, and in many cases, [Technical Issues]. So, Jason, do you want to add anything more to that?

Jason Ream -- Chief Financial Officer

Yeah. I was actually going to say just about the same thing. And I can say that we've actually signed some deals, new deals with customers that we would think would be the hardest hit. And I think part of that is because we're -- that people talk about us sometimes, we may be a bucket one priority for them, part of the enablement of this digital transformation and putting -- making a remote workforce get possible but -- and secure at the same time. So, we've also had our customer base, which is over 1,500 customers, it's -- we've got customers in every industry, every vertical and around the world. Obviously, some of them are in very hard-hit industry, but we've had great conversations with them, and in some cases where they have been conversations, and they're very committed to us. We didn't see, as I mentioned, any impact to renewals in Q1, including with some customers that were in pretty tough places. I think we're mission-critical for their environment and especially at a time like this.

Strecker Backe -- Wedbush Securities -- Analyst

Thank you.

Mark McClain -- Chief Executive Officer and Co-Founder

Thanks.

Operator

Your next question comes from the line of Brian Essex with Goldman Sachs. Please proceed with your question.

Brian Essex -- Goldman Sachs -- Analyst

Hi, good afternoon, and thank you for taking may question. I was wondering if you could drill in a little bit to some of the commentary around what those customer conversations have been like, particularly with regard to some of those customers that are maybe pausing a little bit, but still very committed. Are there any points of hesitation that they might have in terms of needing to get greater level of approvals or issues -- not issues, but considerations that need to be made for the business process involved, given the complexity of the deal?

Matt Swanson -- RBC Capital Markets -- Analyst

Brian, it's Mark. I'll jump in on that and probably Jason will have a couple of thoughts, too. I'd say what we saw in that early March into mid-late March time frame was definitely a set of folks where clearly either the Head of Procurement and/or the CFO hits the pause button. We were just going through a fair amount of, I'll call it, chaos, in that time where people trying to sort out what are we really going to do here, and we definitely felt some of that. As Jason said, we're pleased with our Q1 results, and we kind of left you with the impression, they probably could have been a little stronger because there were definitely some things that were affected in the last part of March.

That said, I think your question was sort of what have those conversations been like [Indecipherable]. And I can tell you with a very high probability, most of those conversations moved [Phonetic] right back to where they left off through kind of a pause model. So, we haven't seen, in most cases, some different process that was instituted necessarily. We definitely -- as I think Jason highlighted, we've had some customers call us and talk about, hey, is there anything you can do to help us through this, if they are in one of those industries. But not a significant amount, and nothing that we anticipate having much effect on our financial results anytime soon.

So, I'd say, in general, our suspicion is everybody hit the pause, which you would expect in that time of what the heck is happening here. And for the most part, they have reengaged, and in some cases, as we're indicating, we really don't want anyone to misread the lack of a guide for Q2. They're very engaged. It's just the uncertainty [Indecipherable] exactly how that will play out in May and June. By the way, there's a lot of conversation about whether there might be a sudden resurge in certain areas. [Indecipherable] coming back to the level of uncertainty, not any sense that people aren't engaging. If anything, they've engaged even stronger.

Brian Essex -- Goldman Sachs -- Analyst

Got it. And then, I think you noted on some of the legacy issues that prospective customers might be having, how brittle they might be. Maybe if you could expand on that a little bit? And where are the most significant pain points where they might actually push forward at a more aggressive pace?

Mark McClain -- Chief Executive Officer and Co-Founder

I think there's a couple of different things there, Brian. One is, quite often, a lot of these companies are still -- even some of those that aren't in the challenging industries, but particularly those that are, are still doing lots of what we call joiner-mover-leaver processes. People joining the organization, that could be an employee, it could be a contractor or partner, and moving around, making changes, getting promoted, transferred and then leaving. And that's -- not all of that kind of stuff totally stopped even in this crisis and certainly is back. In some of those companies, while they're working remotely, all those processes are still happening. Well, what they're finding is, their flexibility to handle those processes smoothly when the volume is higher and the interactions are potentially more challenging as well, finding -- they're working over remote on Zoom, but it's a little challenging at times compared to normal. And I think they found that they couldn't adapt and flexibly deal with those ongoing processes. But then in some cases, there were brand-new things, where they send a bunch of people home and gave them access to new things to do their work remotely that they hadn't had before. So that's, in the techie speak of our space, that's called provisioning. You're giving people access to things they need to do their work. Well, they figure -- a lot of them told us they figured out that it was particularly hard to do something new and fast and at scale, in some cases. And so that's where they recognize, oh, the solution I've got just can't quickly adapt to onboarding either at much higher volume or a new set of applications or targeting a new set of users. That's the kind of things they run into.

Brian Essex -- Goldman Sachs -- Analyst

Got it. That's super helpful. Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Andrew Nowinski with D.A. Davidson. Please proceed with your question.

Hannah Baade -- D.A. Davidson -- Analyst

Hi, this is Hannah Baade on for Andy. Last quarter, you said you expect the majority of new customer bookings to be SaaS by the second half of 2020. To what extent have you seen customer demand shift to the cloud-based products? And has this accelerated due to the outbreak?

Jason Ream -- Chief Financial Officer

Yeah. This is Jason. I'll start there. We expect by the second half of this year that the majority of our new customer bookings will be SaaS. Q1, it came out about as expected in the course of our plan when it comes to a mix perspective. It's not the best quarter to judge by. It's in terms of mix of new customers versus existing. We typically do a little bit more existing in the first quarter than we do, say, in the fourth quarter. But I think the transition that we expected over the course of this year is basically on pace from a results perspective. But what I would say is that the excitement level -- and I mentioned this a little bit before, the excitement level among our field team, among partners and what we're hearing from customers or potential customers in feedback and engagement is maybe more than we expected. There's a lot of excitement around SaaS and what we're planning to do with our SaaS product and what we already have done with it and the way we're standing behind it. So, I would say, if anything, to date, sort of on pace for what we expected, but certainly lots of confidence that the market feels that's the right direction.

Hannah Baade -- D.A. Davidson -- Analyst

Thank you. And just one follow-up. From a competitive standpoint, have you seen any material impact from Okta beginning to edge into the government space with their life cycle management product?

Mark McClain -- Chief Executive Officer and Co-Founder

I'll start on that one. This is Mark. No, we have not seen any material impact. I think that they've definitely started to comment more about some capabilities in the -- in one part of the governance space. I think we should make that clear. It's one part of the governance space, called life cycle management or -- the last question from Brian about provisioning is the old term for that. And what we're finding is, at the very low end of the market, which I think is where office strength initially lied, it's certainly moved upmarket, I think, credibly with their single sign-on and multifactor authentication solutions. But in that segment of the market, which is historically our strength, we really haven't seen them much there because I think that sophisticated customers in that segment understand the complexity of the processes there. And I think they understand what it takes to really solve those problems. So no, we really haven't felt that too much at all yet.

Hannah Baade -- D.A. Davidson -- Analyst

Thank you.

Operator

Your next question comes from the line of Rob Owens with Piper Sandler. Please proceed with your question.

Ben Schmidt -- Piper Sandler -- Analyst

Hi, this is Ben Schmidt on for Rob. Thanks for taking may question. Wondering if you could add a bit of color to the changes you're seeing to the prioritization of identity, the puts and takes there in the short term. And more broadly, maybe if you can just share how you're thinking about prioritization of identity in the long term and if there are any changes given factors like work-from-home could persist beyond the short term? Thanks.

Mark McClain -- Chief Executive Officer and Co-Founder

Yeah. Let me give you an anecdote -- this is Mark, again -- to start on that one. I was talking to a CSO of a, I think, Fortune 20. I don't know exactly where they lie, but they're certainly comfortably in that top 20, very, very, very large global organization. And that CSO told me, he said, look, obviously, when this thing hits, in many cases, our top priority, as Jason referred to, we call it bucket 1. In this case, I think it was bucket 1a, which was get people effectively working from home. So, if they didn't already have it, give them a laptop, make sure they're on a VPN. And in some cases, make sure they had single sign-on or particularly multifactor authentication. So, kind of get people working remotely and reasonably securely to logging in, hopefully, to get their work done. But he said, look, my second concern right behind that is, are they, in fact, accessing the right stuff. Are they correctly provisioned, over-provisioned? Generally, there is similar problem with under provisioning because that means someone doesn't have something they need to do their job. So, they typically have what they need. It's much more common, they have way more than what they need as a result of either bad processes or just keeping access to things they no longer need. And so that was a great anecdote for me of a very large organization with a security officer concerned that the lack of visibility to understanding who has access to what just got worse in a remote virtual working from home environment because the risk goes up.

And so, I think in terms of a short-term demand acceleration -- again, we're not going to sit here and tell you our demand spiked or something. I wouldn't use that term. We're not Zoom, went up 15 times in a month or whatever the crazy numbers are. But we certainly had heard from a lot of customers that same kind of sentiment that as I'm moving very rapidly into this new world -- and to your point, they're going to stay somewhat in that world. I think everybody is assuming we're going to see more virtual, more working from home as part of our normal business mode -- that in that environment, the sophisticated customers we deal with understand that this just accelerated the concern they already had about how accurately they can determine who has access to what and are they correctly set up. So, the security risk there, I think, is a factor.

And as to the other question, there's an operational aspect to this. How rapidly can you bring people up to get them productive? So, kind of the front end of the process and the back end, taking people out when they need to be removed from systems and the security that ensures that we, in fact, understand that the right people have access to the right stuff, all those questions are kind of getting brought to the forefront in this context. And I think I'll just use that to segue to your second question, which is, so what does that mean for identity in the long run?

I think we're increasingly hearing some of the same buzzword across the landscape, particularly in the security landscape. Zero trust is kind of the next game and the next way people are going to be thinking about this, which has this sort of secondary effect of identity is the new perimeter. That's another term you'll hear. So, I'm not cordoning people off based on a network segment or inside or outside my firewall or all those things I used to do. I'm now trying to use identity as kind of the fundamental determination of whether this person is a valid actor and are able to do the things we're asking to do in our systems. And I think all of that is just a good secular tailwind for identity increasing in importance over time. And people are really pretty clear that there are different dimensions of identity now. And that one of the big dimensions is good governance, which includes life cycle management and compliance and operational efficiency. And I think we're very well positioned to help people with those problems.

Ben Schmidt -- Piper Sandler -- Analyst

Great. Thank you. That's very helpful.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Mark McClain for closing remarks.

Mark McClain -- Chief Executive Officer and Co-Founder

Well, thank you, and thank you to everyone. I know it's a busy day of earnings. And I know in some cases, we have folks who are covering multiple companies today. So, thank you to those that made time for the call and for the Q&A. We certainly wish all of you and your families and loved ones, colleagues safety in this difficult time. And again, we're super grateful for our own team and our partners in the way they handled this, and we're hopeful that you're in the same position of feeling like you're getting through this difficult time. So, thanks for all the questions. I'm sure we'll be talking to many of you soon, but we won't be seeing you soon, only talking to you soon. So, thanks for the time today. Appreciate it.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Josh Harding -- Vice President of Financial Planning, Analysis and Investor Relations

Mark McClain -- Chief Executive Officer and Co-Founder

Jason Ream -- Chief Financial Officer

Matt Swanson -- RBC Capital Markets -- Analyst

Hamza Fodderwala -- Morgan Stanley -- Analyst

Strecker Backe -- Wedbush Securities -- Analyst

Brian Essex -- Goldman Sachs -- Analyst

Hannah Baade -- D.A. Davidson -- Analyst

Ben Schmidt -- Piper Sandler -- Analyst

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