Greetings. Welcome to the SailPoint Technologies Holdings Inc., Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to our host, Josh Harding, Senior Vice President of Finance and Investor Relations. Thank you. You may begin.

Good afternoon and thank you for joining us today to discuss SailPoint's third quarter 2021 financial results. Joining me today are SailPoint's CEO and Co-Founder, Mark McClain; and our Interim Chief Financial Officer, Cam McMartin. 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. Since this call will include references to non-GAAP results, which excludes special items, please reference this afternoon's press release in the Investors section of sailpoint.com for further information regarding forward-looking statements and reconciliations of GAAP to non-GAAP results. And now, I'd like to turn the call over to Mark McClain.

Thanks Josh, and thanks to each of you for joining the call today. I’m very pleased to share our strong third quarter fiscal year 2021 results with you. We exceeded the high-end of both our ARR and revenue guidance driven by very strong growth from our SaaS and subscription-based offerings. We ended the quarter with approximately $324 million of ARR up 44% year-over-year and a subscription revenue of approximately $71 million up 39% year-over-year. Our outperformance this quarter can be attributed to two main factors. First, the demand environment for identity security continues to be very strong. An increasing number of enterprises have realized that their current security stack is not sufficient to address today's threat landscape. Recognizing that identity is core to their overall security strategy. Enterprises continue to select identity security as a top investment priority. This is evidenced by the strategic conversations we're having with customers and the quality and depth of our sales pipeline. We believe this sets us up for many years of exciting growth. Second, our transition to a subscription-based business model, which we outlined at our analyst day earlier this year, has happened well ahead of our initial expectations. In Q3 87% of the total new bookings came from our subscription-based offerings up from 82% last quarter, and 72% in Q1. This accelerated timeline has been driven by two key factors. Incredibly strong growth in demand for our SaaS platform, and customers desire to procure our other products on a subscription basis. As Cam will discuss later in the call, our transition to a subscription model is in our view largely complete. While our Sass platform has been successful in the broader enterprise market, one of the key drivers behind the accelerated growth we're experiencing with SaaS is the traction we're now seeing…

Thank you, Mark, and thanks to everyone for joining us on the call today. Before we're viewing our outperformance for the quarter, I'd like to note that we posted a few slides to the Investor Relations section of SailPoint’s website. I'll reference them throughout this call. These supplemental materials include additional disclosure that we believe further highlights the businesses continued strong performance and the success we've had shifting the business to what is now almost entirely comprised of subscription revenue streams, which I'll discuss further as part of my prepared remarks. As Mark noted earlier, we had a great quarter and significantly beat our prior guidance across every metric, driven by strong new bookings results, a faster than expected mix shift to our subscription-based offerings and retention that was better than plan. Total ARR grew by more than $32 million sequentially this past quarter, ending the period at approximately $324 million. This represents a 44% year-over-year growth rate and a result, that is $6.8 million above the high end of the guidance range we provided on our last call. As you will see in the slides I referenced earlier, we provided a further breakout of total ARR, not only for this quarter, but for each quarter since the first quarter of 2020. We ended the third quarter with $179 million of ARR from our subscription-based offerings, which represents an 81% year-over-year increase. Our subscription ARR consists of $132 million from SaaS and approximately $47 million from recurring term licenses. Further, we ended the quarter with approximately $145 million coming from our recurring perpetual maintenance base. As you can see, in the supplemental materials, perpetual maintenance ARR grew by $3.6 million sequentially, despite only 13% of total new bookings coming from our perpetual licenses this past quarter. We believe this highlights…

Thank you. At this time, we will be conducting a question-and-answer session. Our first question from Rob Owens of Piper Sandler.

I want to hone in a little bit given you gave us the breakout this quarter run perpetual maintenance and support and it's still grew at 15%, I think year-over-year. So help us understand when that's going to flatten out maybe roll over number one. And number two, is there any incentive for those customers who bought the traditional perpetual and are on maintenance and support to start to move to term at this point, or will you offer incentives to shift them to longer term? Thanks.

Hey, Rob. Cam McMartin here. Good to hear your voice.

Likewise, Cam.

Look, I think a couple of questions here, let me see if I can take them in turn. I think you did see a healthy growth rate in terms of the maintenance progression in the quarter. We're pleased with the overall contribution that IIQ family continues to provide. It's largely as you appreciate a business that on IIQ family side is now shifted to term license business and that's our focus for selling term. But we are seeing good progression quarter-on-quarter in terms of expansion selling into the IIQ install base, and the occasional as we saw in Q3 the occasional contribution from perpetual license transactions. And I expect that will continue going forward into 2022. That's our expectation is that we'll see a moderating contribution from perpetual licenses, but a continued contribution from term licenses. As it relates to incentives, we don't really at this point, have any incentives in what we're doing in our installed base, our customers continue to expand their implementations of IIQ, both those that have bought on a perpetual basis, and those that are bought on a term basis and we will continue to work with those customers to fill out, if you will, the depth and breadth of their identity security deployment in their enterprise. As has been the case all along, we typically see a good follow on if you will land and then expand selling opportunity. And that's continued and is represented in the results you saw in this quarter.

Great. And then if I may, around the expansion, I think Mark made the comment about simplifying selling into the install base. And is this seen through reduced sales cycles? Is this seen through larger contracts? And then I guess when things normalize here, I would assume an acceleration in business trends in general, just given that a lot of your revenue in any given quarter is coming from that install base.

Yes, Rob. Good question. Yes, we debated that term, simplify for words. I think what we're saying is, we see good momentum, is that too much information, sorry. I think we're seeing good momentum with a number of things, with the modules we've developed and introduced to the market, with some of the acquisitions we did. And just that general sense of quite often, customers, as we like to say, by less than everything on the truck. So we have a nice motion to continue to add to your time. So it wasn't a brand new shift from things before we'd seen plenty of upsell, cross sell in our base and both IQ and IDN. But now I think we're seeing that as we shift to a more recurring revenue, either term or SaaS model. I think customers themselves are more in a mindset of buying more over time. It's sort of the discipline I think they've gotten more used to. Yes, I think it's just simplifying the motion.

And Rob, I just add a bit to that, I think, think of it as a richer expansion opportunity in that we continue not to fill out every identity need of the enterprise in terms of the quantum of identities we're selling. But now with some of the additional products that Mark referenced AI, cloud access management arm, others, we've got the opportunity to come back and have a more fulsome, if you will coverage of their identity security needs. And so in that sense, it's a richer follow-on expansion opportunity than you might have seen historically with SailPoint.

Our next question is from Matt Hedberg of RBC Capital Markets.

Hey, it’s Sternberg for Hedberg. Thanks for taking our questions. ARR growth, really impressive in the quarter 44% accelerated from last quarter off a tougher comp guidance points to about a similar level for the fourth quarter. Could you drill down a little more into what's driving the strength here? I think the supplemental slides help to visualize this, but what's enabling you to maintain and even accelerate that growth right here?

Yes, Cam McMartin, here. Again, good to talk to you. Look, I think it's multifaceted as you as you look at the supplemental materials we provided you today, the prior question, I think points to one element, we continue with the strength of the IIQ family to be able to expand the perpetual maintenance ARR, both in terms of the expansion selling and again, that occasional follow on or occasional, new perpetual license transaction. So that maintenance ARR was growing nicely. I think the motion in the enterprise for term licenses continues to be healthy as well. There are organizations that do prefer IIQ, but the principal motion and the one that's really accelerated very nicely over the last, six, eight quarters and you see that in the supplemental materials SaaS. The resonance in the enterprise for a cloud identity security solution has picked up, we think in a very healthy way. One that we're pleased with, it's across the spectrum of enterprise size. It's across the geographics, if you will, regions that we cover and so it is a depth and breadth story that we like in that we're seeing, multiple subscription revenue lines growing nicely. The selling of those is also expanding and accelerating. You saw that in some of the comments we made in the prepared marks around increasing bookings, objectives for Q4. So we're seeing I think, overall, the full spectrum of the business contributing to that ARR expansion and the continued growth of the business.

Great, thanks. And then you mentioned workflows in the prepared remarks. Could you just expand upon the concept of moving identity closer to the workflow of a business?

Sure, this is Mark, I'll take that one. What we're seeing there is, historically, we had some workflow capabilities in our on-prem identity, product IdentityIQ. And that kind of led to the mindset, I guess, I'll call it that, in that environment, people expected to be able to extend the product through some level of tying into their business processes. And when we first introduced SaaS, in the kind of market, we're focused on initially kind of mid-market, they were more kind of prone to say, I'll just kind of take what you've given me from a process management standpoint, as we move more into the mid to large and then very large scale enterprises. Typically, we're right in situations where the customers either have more unique environments, they want to connect to, more unique applications, more complex business processes, where their ability to kind of quickly adapt to their business processes and policies was a little tougher, frankly, in the product initially with our SaaS product. So with workflows, we're making it even simpler and more accessible for business people to kind of tie in various identity processes to their regular business flow. And that can take the form of everything from, not just the traditional kind of joiner mover lever processes we talk about that other flavors of either compliance or provisioning processes where they want to get the business people more into that policy flow. And I think we're finding that both our partners and our customers are really excited about the ability to use that capability to make it simpler to integrate the identity security processes into their traditional business process.

Our next question is from Hamza Fodderwala of Morgan Stanley.

Mark, first question for you. You talked a little bit about how you're seeing more traction in the upper end of the enterprise market. I'm curious if you could expand on that a little bit? And what inning of the sort of legacy replacement cycle do you think that we're in? And obviously, there's still a lot of legacy Oracle or IBM solutions being used out there for identity governance? So are you seeing more of a willingness for customers to look at some of these newer offerings such as yourself? And how much alike, do you think that still have?

Yes, Hamza, good question. On the first part of your question, I think in kind of, why are we seeing increased traction in those large-scale enterprises, it really is kind of both a push pull. What I mean is, I think we continue to put a lot of engineering and development effort into broadening and deepening the capabilities of the SaaS offerings to effectively make a kind of use case equivalent to the on-prem offering. So I think when I tie in enterprise class customer looks for the things they expect to see in a product of this nature, they see those things now, in our IdentityNow product. And so I think that's probably kind of open their mind to it. And then, the pull, if you will, that's the push from us, in my metaphor here to pull from them, it's just -- I think it just increased openness over time to accept this particular kind of technology from the cloud. I think, one things we always remind people of is, we're a very market driven company, when we talked to the market 15 years ago, when get this company started. Again, 10 to 12 years ago, I mean, sorry, eight to 10 years ago, it was just very clear that those high-end customers were not really interested in getting this product delivered as a SaaS offerings, that has shifted. I think their preference has shifted to a kind of a SaaS first expectation, their confidence in the kind of bulletproof nature of the security environments of the cloud providers like Amazon and Azure and Google is just very high. And so I think they trust and believe this is in fact, a very secure way to manage it and they get that SaaS is just a really, really smart way to do this to continue to allow them and as to extend the product quickly and easily over time. So I think it's a push pull there. To your second point, on the legacy environment. I used to play some baseball, I guess I'll give you about a second or third inning on this deal. And I think we're certainly in the first third of the game, how's that? I don't think we're into the middle innings yet, I think we're in the first third of the game in terms of the amount of legacy particularly legacy implementations in these larger enterprises that is still yet to be turned over. And so we're pretty bullish on the number of places, we think we can still take the solution in the Fortune Global 5000 around the world, I think there's a lot of installed identity products out there still from the legacy players.

Maybe just a quick follow up. You talked a lot about the attach rate of the AI-enabled services, any color you can give us how penetrated those services are within your install base?

Still pretty low penetration, yes. Not heavily penetrated in the install base, we've had good motion in both what we call attach meaning, putting it into the initial transaction with a lot of customers. And we've had a pretty good level of activity in the install base, what we would call in that case a cross sell of new functionality. But both are still far from dominant in either our new selling motion or our installed base penetration. So again, lots of headroom there to add value over the coming years.

Our next question is from Brent Thill of Jefferies.

Hey, guys. This is Joe on Brent. Really appreciate the question. Seems like everything is firing on all cylinders. And I know you guys made a lot of good market changes early this year, building out inside sales team moving to more solutions oriented sales for transaction, can you give an update there and how hiring has trended throughout the year?

Yes, I think in general, good on both fronts, Joe, meaning we're pleased with the momentum of the hiring. I'll start with the second half, I guess first. We all know there's a pretty challenging talent environment out there right now probably even more so in the technical deep skills, talent environment. But even in the technical selling and traditional sales roles, ISR roles, it's a pretty, pretty frothy market, pretty competitive. We've been really pleased at the rate that we've been able to bring on really capable, experienced talented people and in some cases, more early stage career folks in their lifetimes or inside selling or, in general, I think we're running ahead of plan on where we wanted to be at this point of the year on quota carrying folks and so kind of feel good about the preparedness for hitting '22 at a good momentum. So very, very good on that front on the hiring. On the selling motion, there was a pretty significant focus on a new methodology that was more consultative kind of designed to focus on more business value than just technical sales, prowess, if you will. And I think Matt Mills would tell you, he feels really good about the momentum shift there as well, in terms of how we're approaching the selling process. I think it has to do with the value we're getting from customers as they appreciate the value we're delivering in the environment. So overall, pretty pleased with both the momentum of capacity building as well as the motion to sell at a greater value and higher up in the organization generally.

Great to hear. And it's obviously evident in the SaaS and ARR numbers. I guess as a follow up, can you guys provide some guardrails? Or maybe put some take on how to think about cash flow into '22 and '23? When should we see meaningful leverage? I know there's a term license overhang versus perpetual, but just any help there would be helpful.

Yes, Joe, this was Cam. I think we've not provided any guidance yet on '22. What you saw say in the prepared remarks is that the transition to a scription based model that principally or largely subscription-based model we see is now complete. And we will continue to invest aggressively in this business as we see top-line perform. Mark has commented about the success we're having and expanding the capacity of the field sales force, in the '21 timeframe to benefit '22. That's on track. We're pleased with where we are. And we continue to make investments in the R&D organization, because we believe the innovation that we're driving is yielding benefit in the selling motion and across the board. We'll continue to think about and be aggressive investing. So I think as you look at it, you'll see us continue to be thoughtful about how we invest. But with the subscription transition, I think what I'll tell you is that will give you more color, about that transition to cash flow, breakeven and the timing of that when we get out into the February timeframe.

Our next question is from Brian Essex of Goldman Sachs.

Thank you as well for the additional disclosure. That's very helpful. I was wondering, if I could start with a little bit of commentary into the backlog. I think he noted that you're building healthy backlog into the fourth quarter. How does that maybe -- I would like to know how that maybe differs from prior periods. Is it a similar mix? Are there I think in 4Q or the back half of the year tend to be -- might tend to be a little bit more seasonally heavy on the perpetual side? Do you still have, maybe some larger perpetual deals floating outdoor? Do you think it's going to be mostly geared towards SaaS with a higher degree of visibility allowing you today a little bit narrower kind of guide rails around guidance?

Sure. Thanks, Brian. This is Cam. Good to meet you. A few comments as it relates to the fourth quarter pipeline. We did highlight that it's healthy. As a reminder, the second half of the year is generally our “seasonally” strongest period of the year, fourth quarter being with the enterprise orientations of business, the most seasonally healthy period of the year. And that's true this year. I think as we look across all the business, across the globe, we're seeing, real build a pipeline, as we came into Q4, and it looks healthier across all the product lines and across all the geographies as well. It's a mature pipeline, we like to see that in Q4. So we're pleased with the composition of the pipeline in the quarter. In terms of mix, it historically has been a somewhat higher perpetual bit mix in the quarter. But with the progression we've made in the selling of both SaaS in term licenses, I would say that the mix that we saw in Q3 and the way we commented on it being 10%, from a perpetual standpoint, or loss for the quarter, I think, will continue to manifest itself in the coming quarters, fourth quarter included now. Anyone deal and anyone quarter can move the percentages around a little bit. But I think you can take away from the comments that we made in the prepared remarks that the profile of the business going forward is going to be essentially or effectively a subscription profile. And that's the way you should think about it as you go forward.

Got it. That's super helpful. And maybe Cam, have you -- good to meet you as well. If could you provide a little bit of color on some of the puts and takes on the gross margin side? It looks like they moved around a little bit just as we kind of fine tune our models over the next, couple of years, how should we expect those margins to trend or was there anything anomalous in the quarter that caused them to shift a little bit?

I would say there was nothing anomalous when we start with the second half of your question, Brian. First, there was nothing anomalous in the quarterly profile, as you would expect, there's a bit of mix effect, depending on the relative contribution of perpend term versus SaaS in the sense, you understand what those margin profiles typically look like. So that effect is true. I was, coming back into the business, and studying what the gross margin trends have been over recent quarters, I'm quite pleased with the way in which the team has been managing the overall margin progression in terms of SaaS, particularly with the scale progression that we've seen in the business. I'm pleased with what I see there, we've had a bit of pressure from a margin standpoint on the services side and that really is getting the scale of that team and the processes right to service that accelerating SaaS contribution is just the sheer SaaS volume of the business. So I feel good about the overall position of the company on the gross margin basis and the aggregates. I think, as you go forward, I think you've been -- expect us to continue to manage it within the lines from a mix standpoint, to see progression and help. But in terms of the overall trend again, I will basically point you out to February and let us get through the planning process and think about '22 to give you an any more look than that. Okay.

Our next question is from Andrew Nowinski of Wells Fargo.

Thanks. Congrats on a quarter. I just want to step back at a high level. I'm wondering if you could just explain how that current threat landscape has influenced customers to deploy an IGA solution and why it's a higher priority now than maybe it was even a year ago?

Look, I think no sudden inflection, no shift there. But just a continued higher level of focus and awareness is the way I would describe the progression. I mean, yes, there's definitely sensitivity to significant threat events. But I'd say in general, this is more like a sea change of people just recognizing that identity is a vector they weren't as focused on managing wealth in their enterprises, that only got exposed and highlighted a bit through the early stages of the pandemic COVID environment as everybody went home or out of the office. And as we've come back partially to offices, partially not all that did was just kind of leave that awareness in place and cause people to, I think, be more and more focused on closing that gap, if you will, of how little they really do understand their identity landscape and mostly large enterprises today. So I think it's more that than any particularly pointed inflections of growth related to threats. It's just a level of awareness that so many of the bad things that happen are related to some level of compromised identity. And that's just driving a lot of focus in this area.

Okay, got it. And then, as a follow up, Cam, it's good to chat with you again. But I'm wondering if you could just give us an update on the current CFO search?

Yes, happy to. Andy, it's good, first of all, good to talk to you again. The answer is, is that we're pleased with the progress obviously, with the transition, wanted me jumping back end lend a hand, in this transition period. We immediately began a search as you would expect, we would have that search is underway. It will be ongoing for a bit of time, but we're pleased with the candidate flow. We're pleased with the interest that we're seeing from candidates in the company and the opportunity and would expect in a reasonable period of time, we'll get that role filled. And I'll call get to jump back in, what I was doing previously. So I think you'll see a good answer here in the coming weeks and months.

Our next question is from Mike Walkley of Canaccord Genuity.

It's Denzel on for Mike. Thanks for taking my questions. So I was just wondering, just given the solid ARR beat this quarter, as well as the strong 43% ARR growth expectations for Q4? Do you just provide us with some color on maybe some of the level of conservatism you're baking into the total revenue guide? I think this was actually in line with street at the higher end. Are you anticipating license revenue falling off a little bit faster than you had previously anticipated?

Yes, Denzel, this was Cam. Couple of comments, one, you obviously did see the acceleration in the guide for both the fourth quarter and the full year. As you will note in the prepared remarks. the full year guide now at 415.5 and 417.5 would have been about 7 million higher had bookings mix in Q4, than the same as bookings mix was in the August period. And so in that regard, the revenue reflects that continuing, if you will, shifting mix more towards SaaS, in totality, and even within the license line more towards terms. So we're seeing the kind of progression we want to see in the overall subscription lines from a revenue and bookings perspective, it's contributing in the right way. So we're pleased with the way total revenue has come out from a guide perspective, again, given that if the mix had been the same, as we saw back in August, we've been about 7 million higher.

Okay, great. Thanks for the details. And in the prepared remarks, you noted only a small number of your existing perpetual license customers have made the transition over to a SaaS. So clearly, there's obviously some room to expand here. Could you give us some details on sort of how these conversations have trended as they come up for renewal and you expect these customers to omit the transition over time?

Yes. So as you recall, we have a very large installed base of IdentityIQ customers. We're, obviously with the level of ARR maintenance, you see there about $145 million at the end of the period. It's a big contributor overall to the business. And as I highlighted in my prepared remarks, we're retaining those customers are greater than 95%. And we view that as an indication of how satisfied those customers are with their IdentityIQ installations today. We have begun to have not surprising a small number of initial conversations with customers around the possibility of making transitions from IdentityIQ to IdentityNow, from a platform to a platform perspective going into the cloud with IdentityNow. So we're working with those customers, identifying how we would transition them across what timeline. Our expectations, in terms of the way to think about this motion will begin to contribute to the business in 2022 but will be a multi-year contributor. That is, it won't be, you won't see a large scale move across platforms in any particular year. I think what you'll see is a steady and a healthy progression of migration across a multi-year period. And that is based both, I think on our belief that many of our customers will remain IQ customers for a number of years to come. And quite frankly, the fact that we continue to make investments in the IdentityIQ product portfolio, to enrich and extend the value prop there. So in both ways, that this will be a multi-year transition process, we included it in the comments, this quarter, only to point out that we're beginning to have those conversations and we expect there to be, if you will, a beginning of that motion to contribute to the business for 2022. It does, obviously over time represent a growth lever to total ARR growth. And we'll begin to comment on that as we get into 2022 as the year progresses there, but at this point, we're just trying to -- if you will give you that heads up that this is a motion that will begin.

Just a tiny little bit of color to add to that, right. And if you think about it, we have customers that bought IdentityIQ, let's say between eight and 14 years ago, when we didn't have a SaaS offering. And some of those customers were probably at the size and scale and complexity, that IdentityNow weren't available would have been the right answer, and because they've had the product for that long, they're fully depreciated, they've got good value from and they are open to it, right. So kind of think smaller and/or older customers of IdentityIQ, we are seeing some level of interest coming from those customers. And we expect that will pick up as they get more confident that IdentityNow is in fact a great transition option for them. But again, we really do want to reinforce we're not pressing people to make this move, where we're going to increasingly think we'll hear more about their interest in it from some subset of our base. But as Cam said, there is pressure on those customers to migrate, but we do anticipate seeing a little more uptick over -- starting more next year and probably increasing frankly in the next few years, but still with a large IQ base probably for quite a long time in front of us.

Our next question is from Alex Henderson of Needham & Co. Please proceed with your question.

Thanks. Just a couple of quick clarifications before I ask a question. I think you said to one of the prior comments that the $7 million was based off of the level of subscriptions that were in the period of August as opposed to earlier, I thought you said that versus your expectations for the year-end fourth quarter percent subscription. Can you just clarify which of those statements is true?

Sure, Alex, this is Cam. So the answer is that what I was basically saying is that the contribution in Q4 bookings from SaaS has increased versus our previous expectations. So as we look at the revenue guide and compared the current revenue guide to the fourth quarter -- to the August revenue guide, excuse me, what we're seeing is, is that there is a, if you will, $7 million downward effect on what revenue otherwise would have been had the mix of bookings remain the same in our current forecast as was the case in August.

Right. So you didn't say that it was relative to the rate of subscription in the prior period, you're saying versus your expectations for fourth quarter, that's the clarification I want to --

No, that's right, versus the expectations. Yes.

All right. The second thing is you talked about very strong hiring, can you talk about any attrition rates, are you seeing any turnover in your sales force, what's going on with your wage rates as a result of obviously the great resignation period that we're in impacting people's decision to stay or move?

Yes, Alex, Cam here. I would say that our overall attrition rate is relative to what I'm seeing other places in the marketplace quite good. We are -- it's definitely the case that the attrition rate has come up some, in 2021 over what it was in 2020, not surprising given the realities of people's behavior between those two years. So we have seen an increase in attrition. But in general, I would say the leadership team of the company believes that, that attrition rate is better than we might have otherwise expected and better than what we're quite frankly reading and hearing from others in the marketplace, so we're pleased. As it relates to, I think you asked about the sales force, the sales rate -- sales turnover rate, excuse me, is quite healthy. We're very pleased there. I think the overall, given the tightness of talent in the marketplace, we -- Matt's been able -- Matt Mills was able to do a great job of both attracting new talent as Mark talked about in terms of growth of the size of the team, but also retaining the talent within the team. So the balance there is really quite healthy and we're pleased with where we're ending the year.

If I could do a follow-up since the first one was just a clarification. You mentioned earlier in the call that you were seeing more interest in upsell and better upsell of additional subscriptions and features. Can you provide any data to help us demonstrate that point to our clients as we're writing our notes? So it would be very helpful if you have any supporting information other than just simply the claim?

Alex, I think to be clear, I think what we said was, we're seeing it as a simplified process more than we said we've seen an actual uptick. I think we still see a fairly consistent level percentage wise of the amount of business we do into kind of new logos versus kind of up-sell, cross-sell into our installed base, that actually has been a fairly consistent percentage of, let's just round it to roughly two-thirds, one-third over time. I think our point was that as people are moving a more subscription revenue model, whether that's term or SaaS, I think that model tends to lend itself to kind of a, get more as you go kind of a mindset for the customer as much as our sales team. So I think that's going to make it -- by the way, just to be clear, Alex, in contrast to the traditional perpetual license sale, BigBuy waited some number of years and do an upgrade, right. I think there is a more iterative consistent motion to both sell and buy, I think in a recurring repetitive selling motion there around these kinds of term and SaaS offerings. So that was the main point. I don't know that we'll be breaking out exactly kind of data on that anytime too soon. I think it is a -- it is an indicator that with all the things we've done to add to the portfolio, new developed, organically developed modules, some of the products we've acquired, all those we see is creating great opportunity for additional upsell in the future. So --

Great. Well, thank you very much for the questions and thank you for the great print and guide.

Our next question is from Joshua Tilton of Wolfe Research. Please proceed with your question.

Hey guys, thanks for sneaking me in real quick. I just have a quick housekeeping question. The bookings mix slide of perpetual versus term that you gave in the supplemental information, do those bookings include maintenance, and if it does, could you just remind me what percentage of perpetual and the term booking is maintenance?

Yes. So this is Cam, Joshua. Yes, the bookings mix for perpetual does include maintenance one-year, in terms of the way we price and package the transaction for perpetual, we've always included as part of the overall offering one-year of maintenance and then after that it goes into renewal cycle. And that's my reference to that 95% retention of renewal rate in that installed base. The answer is plus or minus. I mean the maintenance rate in terms of simple math or is roughly 20% of any perpetual transaction will be that first year maintenance value that gets ascribed to that service that PCs that, that PCS that will be consumed across that first year.

And in terms of the term booking, does that include maintenance as -- the -- does that include the allocation that goes to maintenance as well?

It does as well. Yes, yes, absolutely.

And that's 40% of the bookings, is that correct?

Plus or minus, that's a good number to use, yes.

Thank you very much.

And it's generally speaking, importantly, the second question would be what's the duration there that's assume we on average sell a three-year term license transaction.

Our next question is from Rudy Kessinger of D.A. Davidson. Please proceed with your question.

Hey, thanks for taking my questions, guys. Most of them have been answered. I guess, I'm just curious, going back to some of the perpetual customers that you've seen migrate to SaaS at this point. What's kind of the dollar for dollar uplift that you've seen so far?

Joshua, it's Cam here. The answer is, it's very early days. I wouldn't want to draw any conclusions at this juncture from the transaction history we have. It's a very, very small number, handful of transactions, the way to think about it. And so I wouldn't want to give you an indication or draw a conclusion at this juncture about what we're doing. We aren't getting an uplift as you would expect in the sense of moving from a maintenance stream to a SaaS revenue stream. The platforms as Mark commented earlier are getting to be quite equivalent in terms of their total functional value delivered, that didn't when I was in the business a couple of years ago, that wasn't the case. We were a bit different, if you will, in terms of trailing someone in SaaS. From a functionality standpoint, the team has done a magnificent job in innovating and bringing forward the depth and breadth of capability in the SaaS platform. So they're very nicely complementary today in terms of how I think about it. So we are getting that uplift, it's early. Importantly, as you, I think can discern from the prepared remarks and some of the answers of the question, the vast majority, essentially all of the SaaS growth that we're getting today is from new customer acquisition. We're -- that's the motion, it's the principal motion of the sales force today is to lead with SaaS and we're doing that, and it's having great success and that's demonstrated by the numbers you saw in the release today.

Got it. And then I guess, as we try to -- again, as I try to get on the model going forward, as we think about Q4 and going forward as perpetual licenses are largely wound down at this point. I mean, is it your expectation that term licenses will continue to grow for the next couple of years or how should we think about that line?

I think if you look at it on a dollar basis, yes, we will continue to see expansion in the dollar level of term license contribution from an ARR expansion standpoint or revenue standpoint. As Mark highlighted a minute ago, one asked a question about where we are with the replacement cycle in the marketplace, as Mark said early innings, second or third, if you think about it, those very large customers today that our replacement opportunities for us are going to be a mix of term and SaaS going forward. And so we're going to see dollar growth. On a mix basis, I think it will continue to be the case, as you've seen in the trend-line that SaaS will be a greater and greater percentage of the totality of our business in the coming periods.

Our next question is from Yun Kim of Loop Capital. Please proceed with your question.

Thank you. Mark and Cam, congrats on a continued success. On the traction that you're seeing with the enterprise market with the SaaS platform, can you give us some color around how fast large enterprises in Europe is adopting SaaS solution versus their U.S. counterparts? And any update on the -- on your go-to-market and sales approach different in Europe versus the U.S., if that mix between SaaS and on-prem is different between those two regions? Thanks.

Yes, thanks, Yun. Generally you know, what I'll tell you is, there are pockets where that's a little more differentiated certain geographies by the way, true in Asia and in Europe, where there is a little more hesitancy to move towards SaaS, I'd say in some of the larger enterprises. But in general, I'd say you're seeing most of the major economies in Europe look pretty similar to the U.S. in terms of their openness, willingness to move SaaS. And our sales motion to your second part of that is pretty much the same in both regions that we're leading with SaaS as the option, we think is going to be the most relevant option for the great majority of the enterprises we talked to. But again for various reasons, some customers are still interested in procuring new versions of IQ, and we are very happy that -- that's the answer that works for them and we will continue to support that need in the market. But it is clearly becoming less prevalent that there are customers for whom that is the right answer. I think increasingly be kind of the highest end of the enterprise market where some of those customers really want that flexibility and are happy to take you say hosted offering versus a true multi-tenant SaaS offering. But in general, no major pattern differential in Europe and for that matter, Asia from the U.S.

Okay, great. And then quick question for Cam, for those large enterprise SaaS deals you mentioned in the prepared remarks, can you talk about any difference in contract length or billings frequency versus other typical SaaS deals you guys have done?

Yes, the profile of those transactions really looks very similar to what we have been doing for a number of years, that is, but the vast majority of them are three-year bill is annually transactions that has been our motion really since the beginning of the SaaS product coming into the market and we continue to focus in that direction. We have had the periodic transaction that will go beyond three years for whatever particular reason. But if you think about our business profile, that business profile is the vast majority of transactions for those three-year duration annual billing transactions.

We have reached the end of the question-and-answer session. I will now turn the call back over to Mark McClain for closing remarks.

Thank you. Just appreciation again for folks who took the time to join us on the call today. Obviously, we're pleased with the results, we thought we are making great progress on some of the things we talked about at the beginning of the year in our Analyst Day. And we're looking forward to talking to you in a few months about how the year wrapped up, but we wish you all a good holiday season, and thanks for joining us today.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.