Earnings Call Transcript - SAIL Q4 FY2026

Operator

Thank you for standing by, and welcome to CellPoint's fourth quarter fiscal and full year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Scott Schmitz, VP of Investor Relations. Please, go ahead.

Scott Schmitz, Head of Investor Relations

Good morning, and thank you for joining us today to discuss SalePoint's fiscal fourth quarter and full year 2026 financial results. Joining me today are SalePoint's founder and CEO, Mark McClain, and our chief financial officer, Brian Carolin. For the Q&A portion of today's call, we will also be joined by our president, Matt Mills. Please note that 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. This call will also include references to non-GAAP results, which exclude certain items that do not reflect our underlying business performance. Please reference this morning's press release and our supplemental earnings presentation posted on investors.salepoint.com for further information regarding our forward-looking statements and non-GAAP financial measures, including reconciliations of such financial measures to the nearest comparable GAAP financial measures. And with that, I'd like to turn the call over to Mark.

Mark McClain, CEO

Thank you, Scott. Good morning, everyone, and thank you for joining us today. We just completed fiscal year 2026 with outstanding results that underscore our ability to deliver growth at scale. This has been a remarkable year for SailPoint as we continue to perform at an exceptionally high level. Our performance puts us at a level that we believe few companies in software and cybersecurity can claim. To back that up, let's look at the key metrics for fiscal year 2026. We crossed the $1 billion ARR threshold, we delivered 28% overall ARR growth, and a consistently strong 38% SAS ARR growth. These are incredible results. To put this in perspective, our ARR growth of 28% year-over-year, plus our adjusted operating margin of 18%, gives us a Rule of 46. This places us in a rare stratum of high-performing companies at greater than $1 billion in scale. Our journey to this point is the result of relentless innovation and unwavering execution. These efforts have enabled us to effectively meet the increasing demand for modern, adaptive identity solutions. The combination of visionary product development and operational excellence has positioned SailPoint as a leader in the market, driving our continued success and instilling confidence in our ability to deliver value to our customers well into the future. This past year was also defined by a rapid pace of product advancement. We believe we've pushed our industry forward, making identity security more adaptive, more real-time, and more integrated within security operations. At a time when organizations are being pressure tested due to the extraordinary rise of agentic AI, we believe we are delivering the modern security foundation they need. Our 38% year-over-year SaaS ARR growth is a powerful indicator of both new and existing customers actively choosing to modernize with SailPoint. Our SaaS customer count grew by 16% year-over-year, and our ARR per SaaS customer accelerated to 19% year-over-year growth in fiscal 26. Our recently introduced flexible pricing model and new AI-fueled innovations are turning customer interest into tangible growth and reinforcing the clear momentum in our SaaS business. The second piece of context for our performance is the topic at the top of everyone's mind, AI. Now, there is a very active debate happening in the market right now about what AI means for the future of software. I want to address this head-on, because from our perspective, the answer is clear. The more autonomous and agentic software becomes, the more essential enterprise identity security becomes. This isn't just about human users anymore. We are experiencing an era defined by an expansive non-human workforce. Armies of AI agents are being built by business users operating at machine speed and creating an explosion of identities and access points that legacy static security models simply cannot handle but while the scale of this agentic workforce is new the core challenge of securing non-human identities is not new to us we have been governing service accounts bots and other machine identities for years for us securing this new army of ai agents isn't a reactive pivot but a natural evolution for a platform architected for this very complexity. In this new world, you cannot secure what you cannot see, and you cannot govern what you cannot define. The fundamental question of who, or now what, has access to what doesn't go away. It becomes exponentially more critical and complex. For SailPoint, this isn't a disruption to be managed. We believe it is the single greatest market expansion driver we have ever seen. And that solidifies our position as a foundational security control plane for the modern AI-powered enterprise. Because now, enterprise security is identity security. And we believe no one is better positioned than SailPoint to help customers navigate into this new world. That is why we believe SailPoint is a significant beneficiary of the AI revolution. Our confidence rests on four deep compounding advantages that we believe are unique to us. First, experience. We have spent two decades exclusively focused on solving the most complex identity challenges for many of the world's largest organizations. It's a deeply vertical and horizontal challenge that cannot be solved by general purpose AI alone. Second, data and context. Our experience has allowed us to build a strategic mode through our use of data and context to deliver unparalleled precision and intelligence. Third, ecosystem. We are the control plane for enterprise security, deeply woven into our customers' operations with thousands of entitlement-level integrations. New AI agents don't replace this. They must plug into it, making our platform the essential foundation. And finally, all of this culminates in our most valuable asset, trust. Many of the world's most complex organizations choose us because we are proven and battle-tested. This trust is our currency in a market that cannot afford to risk its enterprise on unproven technology. We believe AI, coupled with our extensive domain knowledge built over decades, will prove itself a true game changer in the coming years. Today, our solution for solving the AI Identity Challenge integrates AIS, MIS, and DAS solutions with more capabilities coming. We've packaged these for easier adoption as part of our Digital Identity Flex pricing package. This approach is rooted in our longstanding philosophy of securing every identity, not just counting seats. It aligns our business model directly with the explosion of both human and non-human identities, helping to ensure we grow and benefit as our customers' agentic workforce expands. Therefore, when you think about our role as an AI beneficiary, it's critical that you look beyond a single product line. The right mental picture is to see how the vast majority of our portfolio is built with AI to secure the AI movement. From our extensive connectivity framework to our entire AI-enabled platform, we believe that all that we've developed has prepared us to be the guardrails for the agentic future. We believe we are built for this new world. And our customers are validating this strategy with their investments. In total, we closed more than 500 transactions directly tied to our new innovations. In Q4 alone, our AI solutions have seen remarkably fast uptake with numerous Fortune 1000 companies among the early customers. In fact, non-human identities accounted for approximately 25% of our SaaS identity growth in Q4 and now represent 11% of our SaaS identities under governance. In parallel, our Navigators Selects pricing model also continues to gain traction, helping to accelerate adoption of our new offerings. And finally, let me share two examples from the quarter around how our customers are adopting our latest innovations to tackle these emerging identity challenges. First, take the example of a global semiconductor leader. As they undertake a massive modernization initiative to reduce technical debt, But they face a critical challenge, securing their highly automated environments. They chose SailPoint to govern their explosion of AI agents, service accounts, and machine identities at scale. In addition to modernization as a main driver, their decision hinged on a desire to innovate at full speed, knowing that every identity, human and non-human, is secure and under control. And second, a major technology infrastructure provider chose SailPoint's agent and machine identity security solutions to meet a mandate centered around preventing over-permissive access between human users and AI agents while enhancing compliance with regulatory requirements such as SOX and GDPR. These proof points support our belief that our strategic advantage is real. So now let's pivot to how we plan to capitalize on this momentum and convert our unique position into even greater scale. Looking ahead, we expect FY27 will be the year of AI adoption. This is a reality being shaped by a market that is rapidly evolving and a platform built for this exact moment. For us, this isn't a single motion, but a two-pronged engine for durable growth. First, we plan to deepen our footprint within our existing customer base. As customers accelerate their shift to SaaS and confront the explosion of AI identities, we believe we are the right partner to help them navigate this shift. Our adoption of a flex pricing model and our AI-powered platform are designed to help our customers expand their programs and modernize with us. Second, we believe our platform's power and clarity of vision make us more attractive to new customers than ever before. We are seeing increasing demand from organizations that want to build their security program on the right foundation from day one. The same advantages that make us essential to many of the world's largest companies are creating a clear opportunity for SailPoint in the era of AI. Our ability to drive both of these motions is enabled by our platform's true moat, our governance foundation. In a world of AI agents operating at machine speed, static, periodic governance is no longer sufficient. We are defining the new standard of adaptive identity, a standard that ultimately drives toward real-time governance. For us, that means enabling two critical states, least privilege access, and wherever possible, zero standing privilege. This is made possible by our differentiated ability to link users, machines, agents, applications, and pieces of data in a single correlated data model. And the power of that foundation creates what we call identity context. This comes to life in two critical dimensions visibility and intelligence we provide the visibility to extend the governance across the entire universe of identities confronting application sprawl and securing every entitlement we've recently extended this visibility to help customers explore the depth of ai usage across their enterprise with our just announced sailpoint shadow ai remediation solution But visibility is just noise without context. That's why we also deliver the deep intelligence to understand the meaning behind that access, moving beyond who has access to answer what they can do, when, and at what risk level. This identity-context combination of visibility and deep intelligence is our most significant advantage. It's what enables our customers to move from simply asking who has access to confidently being able to answer whether that access is appropriate, safe, and being used correctly right now. Competitors may offer a fraction of one or the other. We deliver both with the granularity and depth that have always been the hallmark of SailPoint. This is such an exciting moment for the company. We believe we have the right strategy, the platform, and the team to continue defining the market through our leadership for years to come. Now, to walk you through the financial details of this outstanding year, I'll hand it over to Brian, our CFO.

Brian Carolin, CFO

Thanks, Mark. Good morning, everyone, and thank you for joining us today. We finished the year with a great fourth quarter, bringing our annual recurring revenue to $1.125 billion. This represents 28% year-over-year growth, a rate we have consistently maintained for the past three quarters, underscoring the strong and sustained demand for our identity security platform at scale. This growth rate is more than 500 basis points better than our initial FY26 ARR guidance. Our SaaS ARR continues to be a powerful growth engine, delivering ARR of $746 million, an increase of 38% year-over-year, and accounting for 90% of our net new ARR for fiscal Q4. This strong performance is a testament to our SaaS FIRST strategy and growth in our emerging products. In fact, net new ARR from our emerging products more than doubled quarter over quarter, accounting for approximately 17% of our net new ARR in fiscal Q4. And what's even more impressive is that the total ARR from existing customers who adopted our AI identity solutions, which includes AIS, MIS, and DAS, or DAS, expanded by more than 50% year over year. We believe this is an excellent leading indicator of our future growth, demonstrating that as customers prioritize a comprehensive identity security strategy, they are turning to SailPoint for innovation. As a result, we're seeing customers commit to larger deals to secure their environment. This past fiscal year, our average ARR per SaaS customer grew to over of $380,000. That's an increase of 19% from last year and more than double what it was four years ago. We closed the fiscal year with 215 customers exceeding $1 million in ARR. That's a 34% increase from the previous year and a clear indicator of our success in both landing large new enterprise customers and expanding our relationships with existing ones. Our customers are increasingly choosing to modernize by migrating from our on-premise Identity IQ solution to our Identity Security Cloud, or ISC. They are making the strategic move to leverage the continuous innovation we are building into our cloud platform. This trend is not only growing, but also broadening. Initially, it was primarily our perpetual licensed customers moving to SaaS. Now, we are engaging in more of these strategic conversations with our term-licensed customers as well. This expanded migration trend represents a significant opportunity for growth. Our existing perpetual and term-licensed customers combined represent approximately $350 million in ARR. With a typical 2 to 3x uplift upon migration, this translates into an opportunity approaching $1 billion. dollars. We view this as a durable growth tailwind and confirmation that the market is moving toward our strategic vision. It reinforces the incredible momentum we see in our SaaS business and the significant interest from customers ready to modernize their identity programs. Importantly, our gross retention has remained strong and steady at 97 percent this year. We believe this speaks volumes about the value our platform provides and the trust we've earned from our customers, in addition to representing an exciting path to ARR expansion. In the fourth quarter, our net revenue retention remains strong at 113%. Looking at our overall financial performance for the fiscal fourth quarter, we delivered revenue of $295 million, an increase of 23% year-over-year with SAS revenue growing 37%. Our adjusted operating margin in Q4 was 20.6%, an expansion of 160 basis points year over year. We also continued to generate strong cash flow with $64 million of cash from operating activities and $57 million of free cash flow, which represents a a 19.5% free cash flow margin. For our fiscal year, 2026, we delivered revenue of $1.071 billion, an increase of 24% year over year, with SAS revenue growing 35%. Our adjusted operating margin for the year was 18.1%, an increase of 270 basis points. Turning now to guidance. For simplicity, I will refer to the midpoint of our guidance ranges where applicable. Full details can be found in this morning's press release and supplemental earnings deck, where you can also find additional modeling notes. For the fiscal first quarter of 2027, we expect ARR to be $1.155 billion, up 25% year over year. We expect revenue to be $275 million, an increase of 19% year-over-year, with adjusted operating margin of 11.1%. We expect our diluted share count to be approximately 568 million shares and adjusted EPS to be 4 to 5 cents. For our fiscal year 2027, we expect ARR to be $1.361 billion, up 21% year-over-year. We expect revenue to be approximately $1.265 billion, an increase of 18% year-over-year, with adjusted operating margin of 18.5%. We expect our diluted share count to be approximately 580 million shares and adjusted EPS to be $0.32. We expect to generate approximately $200 million of free cash flow in fiscal year 2027. Our guidance assumes a continued shift towards our cloud platform with 90 to 95 percent of net new ARR coming from SaaS in FY27. If we assumed no change in SaaS mix relative to FY26, our guidance for revenue growth would be approximately 300 basis points higher and our adjusted operating margin would be approximately 200 basis points higher. We believe making a more conservative assumption with our term forecast is the right approach, given the increased interest in our SaaS solutions. In summary, we believe our strong results, consistent growth at scale, and innovative product roadmap position us well for continued success in the AI-powered future. We remain committed to driving durable, profitable growth, and we are optimistic about our ability to deliver long-term value to our shareholders. With that, let's invite Matt Mills, our president, to join us and open the call for questions. Operator?

Operator

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. We ask that you please limit yourself to one question to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sackett Kalia of Barclays.

Sackett Kalia, Analyst — Barclays

Sackett, your line is open. Well, hey, good morning, everyone, and thanks for taking my question here. Brian, maybe for you, I'd love to jump right into the ARR guide here for fiscal 27. You know, I think the moving parts in the revenue guide make a ton of sense just given the strength you're seeing in SAS. and what that means for REVREC on term. But from an ARR perspective, can you just talk about how you're thinking about the on-prem component next year in terms of churn versus conversion, and zooming out, whether the guidance philosophy on ARR is different going into fiscal 27 versus

Brian Carolin, CFO

fiscal 26? Okay. Good morning, Socket. Good to hear from you. Thanks for your question. First of all, we feel like this is the appropriate place to start the year for our initial guidance, start the year out. We obviously have strong momentum heading into the year. We've demonstrated 28% ARR growth for the past three quarters in a row. We're doing this in scale, well above a billion dollars at this point, with 38% SAS ARR growth. So I think we're demonstrating healthy demand. We have a strong pipeline. we've demonstrated strong and steady gross retention at 97% which is a great place to be and I think you know the innovation is really driving customers towards SAS both new customers and existing customers we do have a very strong migration pipeline as I mentioned on the script or call we have a 350 million dollar opportunity that's broken down between about 210 million of term with the remainder of $140 million coming from perpetual maintenance. I think we've said in the past, we typically see a 2 to 3x multiplier on that at the time of migration, and then it grows from there with emerging products and other add-ons and cross-sell opportunities. There's really no fundamental change in our business. There's no change in the competition or win rates. We feel like we're simply taking a prudent approach to start the year. We feel good about this. We feel it's the right place to start, and, you know, we'll take it from there.

Sackett Kalia, Analyst — Barclays

Very helpful.

Operator

Thank you. Our next question comes from the line of Matt Hedberg of RBC. Please go ahead, Matt.

Brian Carolin, CFO

Thanks for taking my question, guys. You know, you guys launched Navigators recently,

Matt Hedberg, Analyst — RBC

and it really does feel like that's going to help customers think through even longer-term usage such as SailPoint, whether it's humans or non-human identities. And so I guess I'm curious, kind of, you know, initial reaction to that. And, you know, when we think about AIS's impact to fiscal 27,

Scott Schmitz, Head of Investor Relations

how have you thought about the impact of that, I guess, Brian, from kind of that initial guide?

Brian Essex, Analyst — JP Morgan

You can take the pricing one or no one.

Matt Mills, Other

Look, I think like any of these new pricing models, it takes a bit to get them going. we really showed it showed up big in our fourth quarter I think we'll talk about this later but the migration it was a strong migration quarter and our flex monetization was pretty significant in driving a lot of that and and just to remind you what that is it's it's kind of taken the economics of having two sets of IPV and the SAS and the perpetual right and running it into a single economic stream so it makes it much much easier for these customers to get going. And quite frankly, you know, it's always year one, right? Year one, maybe year one and a half that they try to get through from an economic perspective. And this flex premier monetization has been instrumental in helping us really get through that in

Brian Carolin, CFO

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

Peter Marc Levine, Analyst — Evercore

Thanks, guys.

Operator

Thank you. Our next question comes from the line of Rob Owens of Piper Sandler. Your line is open, Rob.

Rob Owens, Analyst — Piper Sandler

Thanks for taking my question. I wanted to build on Socket's question a little bit. And Mark, I appreciate your commentary around this being the single greatest market expansion driver you've ever seen. But if we look at fiscal 26, we saw moderating ARR beats throughout the year. And then if we look at the initial guide for ARR, it's not really showing durable growth. so maybe help us understand just how this year played out relative to you know your expectations and then as you look forward in the in the coming fiscal year just what's in the guide for ai and agentic and that potential inflection or have you discounted all of that out of the guide

Brian Carolin, CFO

thank you hi rob it's brian here i'll start and i think mark might add some color commentary on this So I think we've been able to demonstrate very consistent growth throughout the year. So we feel good about doing this in a very balanced manner. So it's a balanced growth in terms of half of that came from new customers and half came from existing. So we view that as, you know, durability going out to the future. And certainly there's going to be an inflection point with a lot of the emerging identity types on the non-human identity side. When that inflection point happens, you know, we can't pinpoint precision with that. but we do know it's going to happen. We're factoring very little into the initial guide, but we do think it's going to build over time. So we feel like this is the right place to start the year. I think we've been able to demonstrate an outperformance as the year went along in FY26. Hopefully we can continue that. It's FY27, but we simply want to be prudent with the starting point

Mark McClain, CEO

and then build from there. Rob, thanks again for the question. Good to talk to you. Yeah, Yeah, look, you've done a strong time. We're not kind of prone to over-hyping things, and I think when we talk about this being a significant TAM expansion, it's because of the momentum we see building with these large strategic customers where we spend the great majority of our time. And obviously, as Brian says, we see some ramp coming from the customers as they get into the, quote, unquote, the year of deployment. We talked a lot about how last year was a lot of, I don't know if I'd call it experimentation, but a lot of flying out various parts of the agentic and AI world in these into large customers, and now people seem to be ready to move into more production. So they are talking to us very actively, very actively about how they need to secure this agentic environment, and so that's the kind of demand curve we see building, but again, it's just prudent in our minds not to kind of build that into an initial commitment to the street here, but we see it coming, and we don't think anybody actually in the market doubts that, honestly, Rob. I think what everybody's questioning is who's going to be the winners, and our contention continues to be to manage this well you have to have the things that are kind of unique to our traditional value which is a breadth of understanding all the identities in the landscape and a depth of the detailed entitlements and data those identities can access and that just gets more complex and much more real time in this emerging world of agentic and we just feel like we are very well positioned to capture that opportunity and our customers and prospects and matt probably pick this up later in the conversation maybe but that's that's what we're hearing from them and we're seeing that that interest and they're talking to lots of vendors obviously they seem to be very pleased with what we're describing as where we're headed here what we're already delivering without been out in the market for a few months in many cases where people are now just making announcements with great thank you thank you our next question comes from the

Brian Essex, Analyst — JP Morgan

line of brian essex of jp morgan your line is open brian hi good morning and uh thank you for taking the question um and maybe maybe a brian i know we're going to get a lot of questions on this today so i just wanted to you know put a finer point on on you know the ar guidance and you know maybe from the perspective of what you saw this year versus what you're contemplating for next year um i think you know if if i look at what you delivered this year um you know 248 million of net new ar growing 27 which was phenomenal um gross retention rates are best in class so we don't really seems as though you don't have to worry about filling a leaky bucket. But the top end of your guide implies maybe $241 million of net new IRR. So I just want to understand from what you were able to deliver this year from a sales productivity perspective, how should we think about the levers that you have in place and the assumptions with the guidance next year, just so you can get a sense of the level of conservatism and how much effort from sales productivity and investment in sales and marketing is required to kind of, like, you know, exceed

Brian Carolin, CFO

that expectation. Thank you. Sure. Thanks, Brian. So, I think we've demonstrated that durability in the growth profile, and I think that's what gives a lot of confidence going into this year. Again, we feel like this is the right starting point. We hope to build from there as the year goes along. So, but we still see a lot of opportunity, both in new logo acquisition, We still see a lot of opportunity in what we call our target account list. We're about 15% penetrated. That's a 15,000-named account list that we continue to go after. Lots of white space there. We are landing larger deals. We're up about 20% on average for ARR per customer for the past two years. Once we land them, we keep them. We have a 97% gross retention rate. and then we expand with them consistently in that 113 to 115 percent range throughout the year. And we still feel like it's early in terms of the emerging products and cross-sell opportunities that we're seeing. Not only the explosion of identity growth, especially non-human identities, and again, we started seeing contributions right away from the emerging modules, which contributed 17 percent of our net new ARR growth. And then let's not forget about the migration opportunity. So we have about a $350 million opportunity. That means only about 15% of our on-prem ARR has been penetrated. We still have $350 million to go. You start doing a 2 to 3x multiple on that at the time of migration, and then it grows from there over the next several years. I think we looked out into FY27 and beyond, and we have a lot of tailwinds in our favor, a lot of opportunity. again from new logos and also expansion within our existing customer base thank you thank you

Operator

our next question comes from the line of meta marshall of morgan stanley your line is open meta

Meta Marshall, Analyst — Morgan Stanley

great thanks um wanted to ask a question you know the 50 uplift in err from those adding the new modules stat was particularly interesting i guess i just wanted to get a sense is that kind of what we would expect as the normal uplift, or, you know, they might have just adopted one of the three products, and so that's not kind of a fair necessarily kind of total uplift potential calculation, if that makes sense. Thanks. Hi, Vita. It's Brian here.

Brian Carolin, CFO

I would say it's still early days. You know, we're very pleased with the early traction and early success that we're seeing, and hopefully that's a leading indicator of what's to come in FY27 and beyond. But I think it's resonating with customers. I mean, you know, these emerging products, many of which were just unveiled over the last, you know, six months, are starting to take hold. And more importantly, I think they're showing up in customer conversations and funnel

Operator

and pipeline opportunities. Thank you. Our next question comes from the line of Keith Bachman, of BMO. Your line is open, Keith.

Matt Hedberg, Analyst — RBC

Excuse me. Hi. Thank you very much. And sorry to go back to the guide for a second, but I wanted to, what is compressing? If I think about the formula, you've been growing ARs. You mentioned 28% and you're getting about half, 114 net retention rate. So if you think about the guide, 21% and all the attributes that go with it, is the assumption that the net retention rate will continue to compress and or new logos will slow? Because all the characterization that you've given about the on-premise migration potential new products, I'm just a little bit surprised about the implied rate of deceleration, even if we assume some conservatism. So is it a slowing of the retention rate or new logos or both? Any color you could give there would be

Brian Carolin, CFO

appreciated. Many thanks. Hi, Keith. It's up, Brian, and I'll take that. Again, we feel this is the right place to start. There is no fundamental change in the business. There's no change in competition or win rates. We're simply taking a conservative approach to start the year. We feel good about this. I would say that we are leaning more towards SaaS and term migrations. We probably would see a little less new term business in FY27 if we had to call one thing out, because I think customers are going right to SaaS. One example is in Europe. They doubled their SaaS business year over year in FY26. They have really leaned into it in terms of the customer base and our selling motion. And so that's going to be very strong, and we're counting on that to be very strong. So So, again, no fundamental change in the business. We understand that the starting point is, you know, probably a little bit lower, but we feel it's the right place to start. We feel good about it, and we hope to build from here.

Matt Hedberg, Analyst — RBC

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

Brian Carolin, CFO

I would not. I would not. Okay. We're very consistent in that range.

Matt Hedberg, Analyst — RBC

Okay.

Operator

Many thanks.

Keith Bachman, Analyst — BMO

Thank you. Thank you, Keith.

Operator

Thank you. Our next question comes from the line of Jonathan Ruckover of Cantor Fitzgerald. Jonathan, your line is open.

Jonathan Ruckover, Analyst — Cantor Fitzgerald

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

Mark McClain, CEO

Yeah, thank you, Jonathan. You're right on it there at the end of your comment sort of question there, I'd say, in that we are not focused at this point on the traditional PAM market, which is kind of a static privilege assignment, you know, the acronym unpacked to privileged account management, right? Like an account is sort of permanently privileged in that model. And it's obviously, as we all know, kind of the history of that was permanently privileged users like database administrators and systems administrators. And what we're all talking about, and I'd say this is coming from even the folks, you know, like Paolo who bought cyber and others in the market, that the world is shifting to a much more universal sense of managing privilege across all identities and a much more dynamic sense of privilege, not static. And so when we look at that evolution, and by the way, you know, Jonathan particularly now applied on that dynamic factor to agents, which will probably be so dynamic as to potentially be almost ephemeral. There might be agents that literally exist for seconds and do a job and go away again. Well, in that environment, obviously, we think it is going to be that breadth and depth capability that we possess. We think as strong as anyone in the market, if not stronger, and that is to see that range of identities, and we're doing tons of investment technology to see, to have visibility to all of that range of identities, and then to have the breadth, excuse me, the depth, to go deeply into the detailed entitlements or data access rights that allow a particular identity to get to particular data. And again, we've differentiated this since our IPO about a year ago, that the other two parts of the traditional identity market, you know, the access part, which is very wide, covers a lot of identities. They're certainly talking, those vendors, about covering the new agentic identity world, But they would struggle, I would argue, to go into the depth that's required to really control these things at a granular level. And on the other side, those coming from the privileged heritage, obviously very deep in their coverage of human identities, and I think they're going to certainly claim to be able to provide that to non-human. Their challenge is breadth. They just have typically covered, I think the quote from the leader at Palo Alto was that typical cyborg shop had covered 3% to 5% of the identities in that enterprise, and we've covered 100% of those identities in those enterprises. So it's just a very different starting point to go after this market, and we do believe that those fundamental characteristics and then the ways in which we're leaning into this dynamic need is going to put us in a very good position as these markets unfold and as customers go to volume, right? And we do think that's kind of a unique position we're starting from, and others are saying a lot of words and not necessarily we're sure how they're going to deliver on those words. So I think this game is going to be a proof game in our fiscal 27, this calendar 26. It's going to be a proof of who can deliver what the customers actually need and the technology they need to solve these problems. And we do kind of encourage you to keep watching how that unfolds this year. Like Brian said, for a lot of reasons, we think we're starting from the right place. With our financial guide, we're making sure you hear us clearly on our confidence and our technical abilities and where we're going. And so that's where I would say that's true. Hopefully that's helpful.

Jonathan Ruckover, Analyst — Cantor Fitzgerald

Yeah. Yeah, very much so. Thank you.

Operator

Thank you. Our next question comes from the line of Gabriela Borges of Goldman Sachs. Your line is open, Gabriela.

Gabriela Borges, Analyst — Goldman Sachs

Hi, good morning. Mark, I wanted to get your thoughts on what Entropic has announced on being able to accelerate COBOL migration. Through the lens of we know that IGA migrations are sort of painful for your enterprise customers to switch on to SailPoint and then for SailPoint to do the implementation as well. So my question for you is how does AI make those types of migrations easier? The potential opportunity seems to be around your classic market share gains in IGA. The risk would potentially be at the switching cost goes down. So yeah, we'd love to hear you chat about that a little bit.

Mark McClain, CEO

Yeah, I think if I understood it, Gabriel, part of this is a little choppy, but I think I got most of that question. I apologize if I didn't quite, please clarify. But, no, I think what we're seeing is, yes, the AI tools being released rapidly and evolving rapidly in the market certainly help us do a lot of things to be more efficient and effective at moving customers forward. We're leveraging those tools, right? We always talk about AI for us has three or four characteristics, right? It is potentially enabling bad actors and threat actors to be more effective. We have to protect against that. It's enabling us to be far more effective in what we do, and it's creating this demand curve that we talked about with Rob earlier about our customers are deploying it, and we think we can be there to help them manage it. So it's got a lot of characteristics. In the sense that what does it do to help us do what we do more effectively, which I believe is your question, and how do we therefore maybe potentially fend off kind of newer competitors who are coming, say, from a pure AI agentic world? I think a term we're all going to be talking about a lot this year, Gabrielle, not just in our space, but in a lot of spaces, is domain knowledge, right? You can't enter a space with zero domain knowledge and be that threatening to a partner who's already in that space and also leveraging AI, right? I think our secret sauce and many vendors, secret sauce, this is the whole software AI debate, will be as we leverage these amazing technologies and filter them through our very deep and rich understanding of what it takes to be successful in these enterprise environments, We think that puts us in a very good position. So, yes, we're actively looking at ways to use AI to discover agents and technologies, how to quickly leverage policies and put them into our product, how to quickly help customers define what's going to be needed to get ready. Our next question comes from the line of Patrick Coville of Scotiabank.

Operator

Your line is open, Patrick.

Keith Bachman, Analyst — BMO

Mark and Brian, thank you for having me on. I mean, lots of drivers that you guys have called out, you know, SailPoint's cloud transition, you know, the SKU upgrade motion, more identities, Argentic. I think there have been a lot of questions on the Fiscal Year 27 guide. So actually, I want to ask my question about 4Q specifically. 4Q ARR, the beat was a little bit skinnier than we might have hoped. So was there anything unusual for Q of like push or pull in ARR into different quarters? And then actually, similarly, when I look at operating margin, the outperformance there versus the guy provided three months ago was perhaps a little bit less than we've seen throughout fiscal 26. So, again, like with cost, was anything that kind of pushed or pulled in the quarter? Thank you.

Brian Carolin, CFO

Hi, Patrick. I'll go first. This is Brian here. So I think, you know, we look at this and we think the business is very healthy and, you know, we're pleased with the results. We're in line to slightly above all of our guided metrics. We grew net new ARR 34% year over year. That was the best quarter ever by at least $20 million, and that was driven by SAS, which that net new ARR was up 41% year over year. So, I think we demonstrated growth at scale. We had a steady gross retention rate and net revenue retention rate. New products are ramping. We're seeing momentum there. As I mentioned, 17% of our net new AR. Net new AR came from emerging customers. Margins improved 270 basis points over the course of the year. So, we're doing this at growth in a very responsible matter. And we also demonstrated significant free cash flow movement. You know, as I mentioned, a lot of customers now are starting with SaaS. So that's in accordance with our strategy. This is playing out as we expected with an intentional shift to SaaS with 90% of our net new ARR in Q4 coming from SaaS. I think I mentioned that, you know, more new customers are starting with SaaS, especially in geographies like Europe. You know, EMEA, SAS, NetNew, ARR doubled in FY26. You know, we possibly saw like a little bit of less on-prem expansion bookings through term business, but we're not reading into that. Actually, I think, you know, we're viewing this as a positive in terms of now customers embracing SAS, going right to it, and also migration opportunities are going to be a tailwind for us, as I mentioned, moving forward.

Matt Mills, Other

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

Peter Marc Levine, Analyst — Evercore

Very clear. Thank you.

Operator

Thank you. Our next question comes from the line of Joseph Gallo of Jefferies. Please go ahead, Joseph.

Anik Bamanan, Analyst — Jefferies

It's Anik Bamanan for Joe Gallo. Thanks for taking our question. Non-human identities seem to be making deals larger and more complex. Any changes to the sales cycles? And then can you talk about pricing? Previously, I think you talked about a 40% pricing for a non-human identity relative to human.

Matt Mills, Other

Hi. This is Matt. I'll just give it a shot, and then the other guys can add in if they want. Look, I do think sales cycles have elongated a little bit over the last six quarters, but I don't think there's anything that we've seen as of late that's changed that narrative. I think when you look at our approach to strategic pricing these agents, you know, we kind of start with the fundamental basis of the simple principle that agents need to be deployed securely and their life cycle will be intrinsically tied to the human identities, right? I think there's a lot of companies that are looking at it very similar to us, but you cannot secure one without governing the other. And, you know, our aim really is to meet our customers and prospects where they are. This is still relatively new to a lot of these folks, and, you know, they're looking for some approaches to be able to get into this that helps them integrate, in their mind, a potential risk of moving forward with Agentec AI. So our model and our approach to this is start with humans, and then we apply some level of a ratio to it. And, you know, if you remember the Jensen-Hong theory, right, that his company's going to have 2,000 agents to every one employee. Well, that's a little bit of an extreme example, but it gives you a point of reference on how we're thinking about that. And then the last part of this thing is, you know, how do you charge for this? And, you know, it's a bit of a consumption model because you want these customers to be able to deploy it without limits over the period of time of the contract. and the contracts we've done like this basically all start with a price point and then it's what does the renewal look like and so this gives us a pretty solid foundation to be able to say here's the cost point here's here's the ability to access and to deploy over the period and then here's how the follow-up of the renewal would come and those are the long pulls in the tent the last piece I'll add because it's very important is a fair use policy all of our all these proposals have a fair use policy uh versus sustainability to make sure that um if a customer is using it outside of our expectations right and the way you should think of it is anything over 95 of the broader uh customer base right there's some there's some uh components in there that actually protect us from runaway costs and so that's that's i don't know if that's helpful or not i hope it is um but it gives you a little bit of a view in terms of how we're looking at

Peter Marc Levine, Analyst — Evercore

pricing uh this non-human world thank you our next question comes from the line of peter

Operator

levine of evercore your line is open peter great thank you gentlemen and uh good morning

Brian Carolin, CFO

yeah maybe to uh you know matt your the last question maybe to a final point and maybe for you as well brian is how should we think about you know monetization you know in a more consumption flex driven model right or the directional metrics you can share with us if it's revenue per identity or per ai workflow just to kind of help frame the opportunity or for you know for us to kind of just see what the revenue build looks like again it's just i guess

Mark McClain, CEO

it's more so just quantify for us as you're securing more ai agents just how that translates into revenue higher attach rates increased assumption or again just metrics like revenue for identity? How should we best think about that? Thank you. So this is all about flexibility

Brian Carolin, CFO

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

Matt Mills, Other

Yeah, I would say it's not a metered model, Peter. We recognize it financially just like we would any other kind of deal.

Brian Carolin, CFO

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

Matt Mills, Other

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

Operator

Thank you. Thank you. Our next question comes from the line of Gray Powell of BTIG. Please go ahead, Gray.

Sackett Kalia, Analyst — Barclays

Okay, great. Thank you very much.

Brian Carolin, CFO

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

Matt Mills, Other

Yeah, hey, Greg, this is Matt. I'll give you a perspective. I mean, we've really seen, I'll just use our own migrations as a point of reference, right? Once we announced all the innovations here at Navigator last year, significant difference in these customers that are large customers that have probably made a lot of customizations, even with our own tools, feeling this overwhelming urge that they've got to move. I think these agents and agendas AI, I think they all realize this is not going to be a, do we want to do it or not, it is coming at you 100 miles an hour. And so I think it's cost not only the legacy ones that you're talking about, the oracles and maybe the CAs of the world, but anybody who's not on a platform that can actually handle the accelerated event they all are coming at them, they could have done the rumor.

Operator

That's really helpful. Thank you. Thank you. Our next question comes from the line of Shrenik Khathari of Baird. But please go ahead, Sharnik.

Shrenik Khathari, Analyst — Baird

Yeah, thanks for taking my question. So you closed 500-plus deals tied to new innovations and emerging products, contributing 17% net URR, which is clearly a very strong start and encouraging early signal. But just given your own commentary, many of these are still in early innings. On the go-to-market side, how do you view the current transition from selling a more core governance sales motion towards this more complex multi-product expansion playbook? Do you feel from training, enablement, field structure, how are you viewing you are already in place to sell this broader platform from day one?

Mark McClain, CEO

Yeah, I'll take a shot at that. Matt may jump on too. I think a couple things, right? We just had, as you all know, our Navigate conference in the fall, and then we just had our sales kickoffs just a little bit a few weeks ago. And big focus on a couple of different things. One is making sure people feel confident that as any customer wants to move forward with, we'll call it traditional IGA, they're very confident in what we're doing vis-à-vis our kind of current competitors and the legacy players we've seen. But I think particularly on that kind of continuing to add fuel to the fire, that 17%, you know, of our AR coming from these emerging products, A large portion of the enablement at ARCSCO this year was around making sure people are ready and equipped to go have those conversations. And then I'll point to one particular thing Matt and the team have done, and maybe Matt will give a little more color here. For the first time, we've put kind of a focused, targeted sales team around the agentic topic area. We've been bringing in new reps and SEs who come from that kind of a heritage, and that's really opening up a different sales motion to the chief AI officer or whatever the company calls their lead AI person, right? We're still obviously engaged with CISOs and identity leaders about that, but we're finding that some of the pull, the demand we've been talking about, is actually coming from that AI part of the organization. And shockingly, maybe not shockingly, sometimes they aren't as connected to the identity team as they probably should be, and sometimes we're the ones helping that bridge get built. Matt and Gary leads our whole field team and kind of put a focused effort on that. Matt, maybe you can expand a little bit on what we're doing there and what we hope to accomplish there.

Matt Mills, Other

Yeah, yeah. Think of them as product-oriented sellers, right? So they walk in the door with a set of skills to be able to talk about Agentec and not only, you know, the value prop, but also the challenges these companies have in deploying it. I think the other thing is that's really important is that, as Mark said, It feels to us that a lot of the budget now is locked up in this head of AI or chief AI officer, whatever they call it, and that going through that route, we're unlocking a lot more budget and a lot more opportunity than maybe just simply going up the traditional stovepipe, well, you know, identity up to the CISO. So that's become very interesting.

Shrenik Khathari, Analyst — Baird

Appreciate your answer.

Operator

Thank you. I would now like to turn the conference back over to Mark McLean for closing remarks.

Mark McClain, CEO

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

Operator

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