Exhibit 10.1

Execution Version

AMENDMENT NO. 1 TO CREDIT AGREEMENT

AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”), dated as of September 18, 2019, by and among SailPoint Technologies Holdings, Inc., a Delaware corporation (“Holdings”), SailPoint Technologies, Inc., a Delaware corporation (the “Borrower”), the other Loan Parties party hereto, Citibank, N.A., as administrative agent (in such capacity, the “Administrative Agent”), and certain Lenders party to the Credit Agreement referred to below.

RECITALS:

WHEREAS, Holdings, the Borrower, the other Loan Parties party thereto, each lender from time to time party thereto (the “Lenders”), and the Administrative Agent have entered into that certain Credit Agreement, dated as of March 11, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Credit Agreement”). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement.

WHEREAS, Holdings has advised the Administrative Agent and the Lenders that it intends to launch an offering of convertible bonds.

WHEREAS, pursuant to Section 9.02(b) of the Credit Agreement, Holdings and the Borrower have requested that the Administrative Agent and the Required Lenders amend certain provisions of the Credit Agreement to permit the intended convertible bonds offering;

NOW THEREFORE, the parties hereto hereby agree as follows:

SECTION 1. Amendments to Credit Agreement. Effective as of the Effective Date, the Credit Agreement is hereby amended as follows:

(a)    Section 1.01 of the Credit Agreement is hereby amended to add the following new defined terms in the appropriate alphabetical order:

“Convertible Debt” means debt securities or other Indebtedness, the terms of which provide for conversion into, or exchange for, Equity Interests (other than Disqualified Equity Interests) of Holdings or any other Loan Party, cash in lieu thereof or a combination of Equity Interests and cash in lieu thereof.

“Permitted Equity Derivatives” means any forward purchase, accelerated share purchase, call option transaction, capped call option transaction, bond hedge transaction, warrant transaction (whether such warrant is settled in Equity Interests (other than Disqualified Equity Interests) of Holdings, cash or a combination thereof) or other equity derivative transactions relating to any Convertible Debt of Holdings or any other Loan Party; provided, that any Restricted Payment made in connection with such transaction is permitted pursuant to Section 6.07, including any Swap Agreements executed in connection therewith (or deemed executed therewith).

(b)    The definition of “Equity Interests” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing, but excluding any Indebtedness convertible for, or exchangeable into, any of the foregoing.

(c)    The definition of “Specified Issuance” in Section 1.01 of the Credit Agreement is hereby amended by deleting the “.” after “notes” and replacing it with “, including for the avoidance of doubt, pursuant to the issuance of Convertible Debt and related Permitted Equity Derivatives.”.

(d)    Section 6.01(s) is hereby amended and restated in its entirety as follows:

“(s) other unsecured Indebtedness of Holdings, the Borrower or any other Loan Party, including Convertible Debt and related Permitted Equity Derivatives, so long as (i) no Event of Default has occurred and is continuing or would immediately result therefrom, (ii) the Total Net Leverage Ratio for the most recently ended Reference Period for which financial statements have been (or were required to be) delivered to the Administrative Agent does not exceed 6.00 to 1.00 on a pro forma basis (after giving effect to the incurrence of such Indebtedness) and (iii) such Indebtedness shall (x) not mature earlier than 91 days after the Stated Maturity Date, (y) have terms that are customary market terms for Indebtedness of such type and (z) not be mandatorily prepayable, repurchasable or redeemable (except for customary asset sale or change of control provisions and, in the case of Convertible Debt, customary provisions requiring Holdings or any other Loan Parties to repurchase or convert all or any portion of the Convertible Debt) prior to the date that is 91 days after the Stated Maturity Date;”

(e)    Section 6.04 is hereby amended to (i) remove the “and” at the end of clause (s), (ii) replace “.” with “; and” in clause (t) and (iii) add the following new clause:

“(u) to the extent constituting Investments, any Permitted Equity Derivatives.”

(f)    Section 6.06 is hereby amended and restated in its entirety as follows:

“Swap Agreements. No Loan Party will, nor will it permit any Restricted Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks (including foreign currency exchange risks) to which the Borrower or any Restricted Subsidiary has actual or reasonably anticipated exposure (other than those in respect of Equity Interests of the Borrower or any of its Restricted Subsidiaries), (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Restricted Subsidiary and (c) any Permitted Equity Derivatives.”

(g)    Section 6.07 is hereby amended to (i) remove the “and” at the end of clause (g), (ii) replace “.” with “;” in clause (h) and (iii) add the following new clauses:

“(i) the purchase of any Permitted Equity Derivatives in connection with the issuance of any Convertible Debt permitted under Section 6.01 (and the replacement of any such Permitted Equity Derivatives); provided, that the purchase price for such Permitted Equity Derivatives net of any proceeds relating to any concurrent sale or termination of any Permitted Equity Derivatives, in respect of any such Convertible Debt does not exceed the net cash proceeds from such issuances of Convertible Debt;

(j) required payments of interest, repurchases, exercises, redemptions, settlements, early terminations, early cancellations or conversions of (whether in whole or in part and including by netting or set-off) any Convertible Debt permitted under Section 6.01(s), whether settled in Equity Interests (other than Disqualified Equity Interests) of Holdings, cash in lieu thereof or a combination of Equity Interests (other than Disqualified Equity Interests) of Holdings and cash in lieu thereof; provided, that any cash payment made pursuant to this Section 6.07(j), other than required payments of interest, shall also be subject to compliance with Section 6.07(b), Section 6.07(e) or Section 6.07(f); and

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(k) the settlement or termination of (whether in whole or in part and including by netting or set-off) any Permitted Equity Derivatives by (i) delivery of Equity Interests (other than Disqualified Equity Interests) of Holdings, (ii) the delivery of cash, or (iii) the delivery of a combination of Equity Interests (other than Disqualified Equity Interests) of Holdings and cash, in lieu of the issuance of fractional shares; provided, that the entry into such Permitted Equity Derivative was not prohibited by this Agreement; provided, further, that any cash settlement or termination consummated pursuant to clause (ii) or clause (iii) hereof shall also be subject to compliance with Section 6.07(b), Section 6.07(e) or Section 6.07(f).”

(h)    Section 6.08 is hereby amended to (i) remove the “and” at the end of clause (d), (ii) replace “.” with “; and” in clause (e) and (iii) add the following new clause:

“(f) repurchases, exercises, redemptions, settlements, early terminations, early cancellations or conversions of (whether in whole or in part and including by netting or set-off) any Convertible Debt permitted under Section 6.01(s), whether settled in (i) Equity Interests (other than Disqualified Equity Interests) of Holdings, (ii) cash in lieu thereof or (iii) a combination of Equity Interests (other than Disqualified Equity Interests) of Holdings and cash in lieu thereof; provided, that any cash settlement or termination consummated pursuant to clause (ii) or clause (iii) hereof shall also be subject to compliance with Section 6.08(a), Section 6.08(b) or Section 6.08(c).”

(i)    Section 7(g) is hereby amended to (i) replace the “or” at the end of the second clause (i) with “,”, (ii) replace “;” with “or” at the end of the second clause (ii) and (iii) add the following new clause:

“(iii) repurchases, exercises, redemptions, settlements, early terminations, early cancellations or conversions of (whether in whole or in part and including by netting or set-off) or the right to do any of the foregoing to any Convertible Debt permitted under Section 6.01(s) (unless any such repurchase, exercise, redemption, settlement, early termination, early cancellation or conversion occurs as a result of a default by Holdings or any other Loan Party thereunder, an event of the type that constitutes an Event of Default or the inability to satisfy Sections 6.07(b), 6.07(e), 6.07(f), 6.08(a), 6.08(b) or 6.08(c) hereunder in connection therewith).”

SECTION 2. Representations and Warranties. The Borrower and the other Loan Parties hereby represent and warrant on the Amendment Effective Date that:

(a)    The execution, delivery and performance by each Loan Party of this Amendment is within such Loan Party’s corporate or limited liability company powers, as the case may be, and have been duly authorized by all necessary corporate or limited liability company and, if required, stockholder or member action. This Amendment has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b)    This Amendment (i) does not, on the part of any Loan Party or any of its Subsidiaries, require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (ii) will not violate any Requirement of Law applicable to any Loan Party or any of its Subsidiaries or any order of any Governmental Authority, (iii) will not violate or result in a default under, or give rise to a right to require

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any payment to be made by any Loan Party or any of its Subsidiaries under, (A) any documentation evidencing any Material Indebtedness, (B) any Swap Agreement or (C) any other material agreement, in each case which is binding upon any Loan Party or any of its Subsidiaries or its assets, and (iv) will not result in the creation or imposition of any Lien on any asset of any Loan Party or any of its Subsidiaries, except Liens created pursuant to the Loan Documents, except, solely in the case of clauses (i), (ii) or (iii)(C) hereof, as would not reasonably be expected to result in a Material Adverse Effect.

(c)    Both before and immediately after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

SECTION 3. Conditions to Effectiveness. This Amendment shall become effective as of the date on which the following conditions shall have been satisfied (or waiver) (the “Amendment Effective Date”):

(a)    The Administrative Agent shall have received counterparts to this Amendment, duly executed by (i) Holdings, the Borrower and the other Loan Parties party hereto and (ii) the Lenders constituting the Required Lenders;

(b)    As of the Amendment Effective Date, no Default or Event of Default shall have occurred and be continuing;

(c)     After giving effect to this Amendment, the representations and warranties of Holdings and the Borrower set forth in the Credit Agreement and the other Loan Documents, including this Amendment, shall be true and correct in all material respects on and as of the Amendment Effective Date, except that (i) to the extent that such representations and warranties specifically refer to an earlier date, such representations and warranties shall be true and correct in all material respects as of such earlier date and (ii) any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects;

(d)    To the extent invoiced one (1) Business Day prior to the Amendment Effective Date and to the extent provided for in accordance with Section 9.03 of the Credit Agreement, the Borrower shall have paid to the Administrative Agent all fees and reimbursable expenses (including all fees and expenses of Weil, Gotshal & Manges LLP) that have been incurred in connection with this Amendment.

SECTION 4. Governing Law.

(a)    THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(b)    The jurisdiction and waiver of jury trial provisions in Sections 9.09(b), 9.09(c), 9.09(d) and 9.10 of the Credit Agreement are hereby incorporated by reference into this Amendment and shall apply, mutatis mutandis, to this Agreement.

SECTION 5. Effect on Credit Agreement and the other Loan Documents.

(a)    On and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference, and each reference in any other Loan Document to “the Credit Agreement”, “thereof”, “thereunder”, “therein” or “thereby” or any other similar reference to the Credit Agreement shall refer to the Credit Agreement as amended hereby.

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(b)    Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of any Lender or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend, novate or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Loan Party to a future consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

SECTION 6. Counterparts; Effectiveness. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Amendment by telecopy, emailed “.pdf” or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment.    

SECTION 7. Miscellaneous.

(a)    Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

(b)    This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents. The provisions of this Amendment are deemed incorporated into the Credit Agreement as if fully set forth therein.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

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Exhibit 99.1

SailPoint Announces Proposed Private Offering of

$300 Million of Convertible Senior Notes

September 18, 2019

Austin, Texas—(BUSINESS WIRE)—SailPoint Technologies Holdings, Inc. (NYSE: SAIL) (“SailPoint” or the “Company”) today announced that it intends to offer, subject to market conditions and other factors, $300 million aggregate principal amount of convertible senior notes due 2024 (the “notes”) in a private offering (the “offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). SailPoint also intends to grant the initial purchasers of the notes a 13-day option to purchase up to an additional $50 million aggregate principal amount of notes.

The notes will be senior unsecured obligations of SailPoint and will accrue interest payable semiannually in arrears. The notes will be convertible into cash, shares of SailPoint’s common stock or a combination thereof, at SailPoint’s election. The interest rate, initial conversion rate and other terms of the notes will be determined at the time of pricing of the offering.

SailPoint intends to use a portion of the net proceeds of the offering to pay the cost of the capped call transactions described below. SailPoint intends to use the remainder of the net proceeds for general corporate purposes, including working capital, operating expenses and capital expenditures. If the initial purchasers exercise their option to purchase additional notes, SailPoint expects to use a portion of the net proceeds from the sale of the additional notes to enter into additional capped call transactions as described below and the remainder for general corporate purposes.

In connection with the pricing of the notes, SailPoint expects to enter into capped call transactions with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to SailPoint’s common stock upon any conversion of notes and/or offset, at least in part, any cash payments SailPoint is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap.

SailPoint expects that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates will purchase shares of SailPoint’s common stock and/or enter into various derivative transactions with respect to SailPoint’s common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of SailPoint’s common stock or the notes at that time.

In addition, SailPoint expects that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to SailPoint’s common stock and/or purchasing or selling SailPoint’s common stock or other securities of SailPoint in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of notes). This activity could also cause or avoid an increase or a decrease in the market price of SailPoint’s common stock or the notes, which could affect a noteholder’s ability to convert its notes and, to the extent the activity occurs during any observation period related to a conversion of notes, could affect the number of shares and value of the consideration that a noteholder will receive upon conversion of its notes.

Neither the notes, nor any shares of SailPoint’s common stock issuable upon conversion of the notes, have been, or will be, registered under the Securities Act or any state securities laws, and unless so registered, such securities may not be offered or sold in the United States absent an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

This press release is neither an offer to sell nor a solicitation of an offer to buy these or any other securities and shall not constitute an offer, solicitation or sale of these or any other securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About SailPoint

SailPoint, a leading provider of enterprise identity governance, brings the Power of Identity to customers around the world. SailPoint’s open identity platform gives organizations the power to enter new markets, scale their workforces, embrace new technologies, innovate faster and compete on a global basis. As both an industry pioneer and market leader in identity governance, SailPoint delivers security, operational efficiency and compliance to enterprises with complex IT environments.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed terms of the notes, the size of the proposed offering, the capped call transactions, expectations regarding actions of the option counterparties and their respective affiliates and the expected use of proceeds from the sale of the notes. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “will be,” “will likely result,” “should,” “expects,” “plans,” “anticipates,” “could,” “would,” “foresees,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are based on management’s current expectations, assumptions and beliefs concerning future developments and their potential effect on us, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct because of various risks, including those described in our reports and other documents filed with the Securities and Exchange Commission (“the SEC”), including under “Risk Factors” in Part I, Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on March 18, 2019, and including in Exhibit 99.2 of our Current Report on Form 8-K, which will be filed with the SEC on September 18, 2019. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise.

Investor Relations:

ICR for SailPoint

Brian Denyeau, 512-664-8916

[email protected]

or

Media Relations:

SailPoint Technologies Holdings, Inc.

Jessica Sutera, 978-278-5411

[email protected]

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Exhibit 99.2

Risk Factors Relating to the Notes

On September 18, 2019, SailPoint Technologies Holdings, Inc. (the “Company”) announced its intent to offer, subject to market conditions and other factors, $300 million in aggregate principal amount of convertible senior notes due 2024 (the “notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The following risk factors will be applicable if such offering is completed:

Servicing our future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to do so.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the notes and any future borrowings under our credit agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms. In addition, our credit facility and any of our future debt agreements may contain restrictive covenants that prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of our debt.

In addition, holders of the notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the indenture governing the notes) at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any. In such event, we may not have enough available cash or be able to obtain financing at the time to make repurchases of the notes surrendered therefor. In addition, our ability to repurchase the notes may be limited by our existing credit agreement or agreements governing our future indebtedness. Our failure to repurchase the notes at a time when the repurchase is required by the indenture governing the notes would constitute a default under such indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing credit facility or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes.

In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:

Any of these factors could harm our business, financial condition and operating results. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

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The conditional conversion feature of the notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The capped call transactions relating to the notes may affect the value of our common stock.

Our notes may become in the future convertible at the option of their holders under certain circumstances. The conversion of some or all of the notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such notes. If holders of the notes elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.

In connection with the pricing of the notes, we expect to enter into privately-negotiated capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. If the initial purchasers exercise their option to purchase additional notes, we expect to enter into additional capped call transactions with the option counterparties.

We expect that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates will purchase shares of our common stock and/or enter into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes. This activity could increase (or reduce the size of any decrease in) the market price of our common stock at that time. In addition, we expect that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock. Also, if any such capped call transactions fail to become effective, whether or not the offering of the notes is completed, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

The accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on our reported financial results.

In May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the notes is that the equity component is required to be included in the additional paid in capital section of stockholders’ equity on our consolidated balance sheet at issuance, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the notes to their face

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amount over the term of the notes. We will report larger net losses or lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes.

In addition, under certain circumstances, convertible debt instruments (such as the notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. For example, the Financial Accounting Standards Board recently published an exposure draft proposing to amend these accounting standards to eliminate the treasury stock method for convertible instruments and instead require application of the “if-converted” method. Under that method, if it is adopted, diluted earnings per share would generally be calculated assuming that all the notes were converted solely into shares of our common stock at the beginning of the reporting period, unless the result would be anti-dilutive. If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share would be adversely affected.

Other Risk Factors

The following risk factors update and supplement certain of the risk factors previously provided under “Risk Factors” in Part I, Item 1A. in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018:

A shift in our business from selling licenses to selling subscriptions could materially and adversely affect our financial condition, operating results and liquidity, and our business, financial condition, operating results and prospects could be materially and adversely affected if we fail to successfully manage this shift.

We believe the industry is experiencing a marked shift from purchasing software via licenses to purchasing software via subscriptions, and we are evaluating how and when to most effectively respond to this industry shift. As we make this transition and sell subscription-based arrangements, our license revenue will be negatively impacted and to a lesser extent our subscription revenue could be positively impacted.

We believe that continued growth of subscription revenue as a percentage of total revenue will lead to a more predictable revenue model and increase our visibility to future period total revenues. However, in a subscription-based arrangement with a customer, we typically:

As a result, during any period of significant shifts to subscription-based arrangements, our revenue and cash flows, financial condition, operating results and liquidity may be materially and adversely affected in such period. Additionally, if a greater percentage of our customers purchase our solutions through subscription-based arrangements than we expect in any period, our revenue and earnings will likely fall below expectations for that period and our cash flows may be lower than expected. Furthermore, our business, financial condition, operating results and prospects could be materially and adversely affected if we fail to successfully manage this industry shift, which depends upon our ability to, among other things, properly price our subscription-based arrangements, deliver software as a service, retain our customers, and further develop or acquire related technologies and infrastructure.

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In addition, in accordance with ASC 606, when a license of intellectual property is not distinct, it is combined with other goods and services as a single performance obligation. Our advanced identity analytics solution, IdentityAI, which is delivered as a subscription service, is designed to complement our IdentityIQ and IdentityNow solutions and is not intended to be utilized separately from those solutions. Accordingly, we believe that revenue from an IdentityIQ license that is sold with an IdentityAI subscription should generally be recognized ratably over the term of the IdentityAI agreement. Thus, as sales of IdentityAI increase, we expect that a greater proportion of our fees from IdentityIQ licenses will be recognized ratably rather than upfront, which, particularly when added to the effects of the shift to subscription-based arrangements on our revenues and earnings discussed above, could materially and adversely affect our business, financial condition, operating results and prospects.

Although we had positive net income of $3.7 million in 2018, we have a history of losses, and we may not be able to generate sufficient revenue to achieve and sustain profitability.

Until the year ended December 31, 2018, we incurred net losses in each prior year since our inception, including net losses of $7.6 million and $3.2 million for the years ended December 31, 2017 and 2016, respectively, and for the six months ended June 30, 2019, our net loss was $17.6 million. We cannot assure you that we will achieve profitability in the future or that we will be able to sustain profitability. We expect our operating expenses to increase significantly as we continue to expand our sales and marketing efforts, continue to invest in research and development, particularly for our cloud-based solutions, and expand our operations in existing and new geographies and vertical markets. While our revenue has grown in recent years, if our revenue declines or fails to grow at a rate faster than increases in our operating expenses, we will not be able to maintain profitability in future years. In particular, as discussed in the risk factor above, our revenues may be materially and adversely affected during any period of significant shifts to subscription-based arrangements, and as a result, we may again generate losses.

We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.

We have experienced rapid growth in recent years. Our revenue grew from $132.4 million to $248.9 million from the year ended December 31, 2016 to the year ended December 31, 2018. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. We believe our revenue growth depends on a number of factors, including, but not limited to:

If we are unable to achieve any of these requirements, our revenue growth will be adversely affected. In addition, as discussed above, our revenue growth may be materially and adversely affected during any period of significant shifts to subscription-based arrangements.

Any failure to offer high-quality customer support may adversely affect our relationships with our customers, which could adversely affect our business.

We typically bundle customer support with arrangements for our solutions. In deploying and using our platform and solutions, our customers typically require the assistance of our support teams to resolve complex technical and operational issues. We may be unable to modify the nature, scope and delivery of our customer support to compete with changes in product support services provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and adversely affect our operating results. We may also be unable to respond quickly enough to accommodate short-term increases in customer demand for support. Our sales are highly dependent on our reputation and on positive recommendations from our existing customers. Customer satisfaction will become even more important as our customers increasingly shift to subscription-based arrangements. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality product support, could adversely affect our reputation and our ability to sell our solutions to existing and new customers.

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We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions, and acquisitions, particularly of development stage companies, may adversely affect our operating results and liquidity as well as our ability to meet expectations.

Our success will depend, in part, on our ability to expand our solutions and services and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may choose to do so through the acquisition of, or investment in, new or complementary businesses and technologies rather than through internal development. As a function of the industry in which we operate, we may acquire development stage companies that are not yet profitable, and that require continued investment, which could adversely affect our results of operations and liquidity as well as our ability to meet expectations, particularly if they were formulated prior to such acquisitions. Development stage companies generally involve a higher degree of risk and have not been proven, require additional capital to develop, and typically do not generate enough revenue to offset increased expenses associated therewith.

The identification of suitable acquisition or investment candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions or investments. The risks we face in connection with acquisitions and/or investments include:

The occurrence of any of these risks could prevent us from realizing the anticipated benefits of an acquisition and could adversely affect our business, operating results and financial condition.

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