CyberArk Announces Third Quarter 2020 Results

Rhea-AI Summary

CyberArk (NASDAQ: CYBR) reported strong financial results for Q3 2020, with total revenue of $106.6 million, a 40% increase in Annual Recurring Revenue (ARR) to $250 million, and SaaS bookings setting records. Notably, SaaS and subscription revenue surged nearly 200% year-over-year, now representing 28% of total license revenue. Despite a GAAP operating loss of $(10.5) million and a GAAP net loss of $(15.9) million, the company is transitioning to a recurring revenue model. CyberArk maintains $1.1 billion in cash, reflecting solid financial health.

Positive

• 40% increase in Annual Recurring Revenue (ARR) to $250 million.
• Record SaaS bookings and strong demand for SaaS solutions.
• Total deferred revenue increased by 28% to $227.6 million.
• SaaS and subscription revenue grew nearly 200% year-over-year.

Negative

• GAAP operating loss of $(10.5) million.
• GAAP net loss of $(15.9) million.

NEWTON, Mass. & PETACH TIKVA, Israel--(BUSINESS WIRE)--CyberArk (NASDAQ: CYBR), the global leader in privileged access management, today announced financial results for the third quarter ended September 30, 2020.

“We are pleased with the momentum in the business including posting another quarter of record SaaS bookings,” said Udi Mokady, CyberArk Chairman and CEO. “Enterprise demand for our SaaS solutions continued to build in the third quarter, particularly for CyberArk Privilege Cloud and Endpoint Privilege Manager. Customers are increasingly turning to CyberArk as their trusted advisor to securely implement digital transformation, cloud migration, and identity and risk reduction programs. Our ongoing cloud innovation, including CyberArk Cloud Entitlements Manager, our recently introduced AI-powered solution that strengthens cloud security, further extends our leadership position in the market. The significant increase in new SaaS and subscription bookings grew our annual recurring revenue (ARR) by 40 percent to $250 million and our deferred revenue by 28 percent to $228 million. In addition, the combination of SaaS and subscription revenue increased nearly 200 percent year over year and represents about 28 percent of total license revenue compared to 7 percent of license revenue in the third quarter of 2019. While the bookings mix shift toward high-value recurring subscriptions created a headwind to our recognized revenue and profitability in the quarter, looking through the near-term effect on the reported P&L, our business performance was strong and the level of customer and prospect engagement was at an all-time high.”

Continued Mokady, “As we look ahead, we will begin actively transitioning our business to a recurring revenue model in 2021, by further accelerating our SaaS business and shifting the Company sales from perpetual licenses to recurring subscriptions. As a result of our robust SaaS and subscription bookings, our strong and growing mix of recurring revenue, our expanding SaaS portfolio, and our comprehensive review of enterprise buying patterns, we are confident that our strategy will create significant long-term value for CyberArk, our customers, partners, and shareholders.”

Financial Highlights for the Third Quarter Ended September 30, 2020

Revenue:

• Total revenue was $106.6 million.
• License revenue was $45.8 million.
• Maintenance and professional services revenue was $60.8 million.

Operating Income (Loss):

• GAAP operating loss was $(10.5) million and non-GAAP operating income was $13.1 million.

Net Income (Loss):

• GAAP net loss was $(15.9) million, or $(0.41) per basic and diluted share. Non-GAAP net income was $12.2 million, or $0.31 per diluted share.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP gross profit, operating income (loss) and net income (loss) for the three months and nine months ended September 30, 2020 and 2019. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Balance Sheet and Cash Flow:

• As of September 30, 2020, CyberArk had $1.1 billion in cash, cash equivalents, marketable securities and short-term deposits. This compares to $555.1 million at September 30, 2019.
• As of September 30, 2020, total deferred revenue was $227.6 million, a 28% increase from $177.3 million at September 30, 2019.
• During the nine months ended September 30, 2020, the Company generated $67.8 million in net cash provided by operating activities, compared to $88.6 million in the first nine months of 2019.

Annual Recurring Revenue (ARR):

• Annual Recurring Revenue (ARR) was $250 million, an increase of 40% from $178 million at September 30, 2019.

Recent Business Highlights

• CyberArk was named a Leader in the Gartner 2020 Magic Quadrant for Privileged Access Management*
• Introduced general availability of CyberArk Cloud Entitlements Manager, our latest SaaS solution, an AI-Powered service to remove excessive cloud permissions
• Strengthened ability to secure identities and privileged credentials in the cloud:
  • Availability on Microsoft Azure
  • Achieved AWS Digital Workplace Competency Status
  • Achieved AWS Outposts Ready designation

(*) Gartner, Magic Quadrant for Privileged Access Management, Felix Gaehtgens, Abhyuday Data, Michael Kelley, 4 August 2020

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Business Outlook

Based on information available as of November 10, 2020, CyberArk is issuing guidance for the fourth quarter as indicated below.

Fourth Quarter 2020:

• Total revenue between $125.0 million and $135.0 million.
• Non-GAAP operating income between $25.0 million and $33.0 million.
• Non-GAAP net income per share between $0.52 and $0.67 per diluted share.
  • Estimated tax rate of 23 percent.
  • Assumes 40.0 million weighted average diluted shares.

Conference Call Information

CyberArk will host a conference call today at 8:30 a.m. Eastern Time (ET) to discuss the company’s third quarter financial results and its business outlook. To access this call, dial +1 (833) 968-2251 (U.S.) or +1 (778) 560-2670 (international). The conference ID is 3387489. Additionally, a live webcast of the conference call will be available via the “Investor Relations” section of the company’s website at www.cyberark.com.

Following the conference call, a replay will be available for one week at +1 (800) 585-8367 (U.S.) or (416) 621-4642 (international). The replay pass code is 3387489. An archived webcast of the conference call will also be available in the “Investor Relations” section of the company’s website at www.cyberark.com.

About CyberArk

CyberArk (NASDAQ: CYBR) is the global leader in privileged access management, a critical layer of IT security to protect data, infrastructure and assets across cloud and hybrid environments, and throughout the DevOps pipeline. CyberArk delivers the industry’s most complete solution to reduce risk created by privileged credentials and secrets. The company is trusted by the world’s leading organizations, including more than 50 percent of the Fortune 500, to protect against external attackers and malicious insiders. A global company, CyberArk is headquartered in Petach Tikva, Israel, with U.S. headquarters located in Newton, Mass. The company also has offices throughout the Americas, EMEA, Asia Pacific and Japan. To learn more about CyberArk, visit www.cyberark.com, read the CyberArk blogs or follow on Twitter via @CyberArk, LinkedIn or Facebook.

Copyright © 2020 CyberArk Software. All Rights Reserved. All other brand names, product names, or trademarks belong to their respective holders.

Key Performance Indicators and Non-GAAP Financial Measures

Annual Recurring Revenue (ARR)

• Annual Recurring Revenue (ARR) is defined as the annualized value of active SaaS, subscription or term-based license and maintenance contracts related to perpetual licenses in effect at the end of the reported period.

Non-GAAP Financial Measures

CyberArk believes that the use of non-GAAP gross profit, non-GAAP operating income and non-GAAP net income is helpful to our investors. These financial measures are not measures of the Company’s financial performance under U.S. GAAP and should not be considered as alternatives to gross profit, operating income (loss) or net income (loss) or any other performance measures derived in accordance with GAAP.

• Non-GAAP gross profit is calculated as GAAP gross profit excluding share-based compensation expense, acquisition related expenses and amortization of intangible assets related to acquisitions.
• Non-GAAP operating income is calculated as GAAP operating income (loss) excluding share-based compensation expense, acquisition related expenses, facility exit and transition costs, and amortization of intangible assets related to acquisitions.
• Non-GAAP net income is calculated as GAAP net income (loss) excluding share-based compensation expense, acquisition related expenses, amortization of intangible assets related to acquisitions, facility exit and transition costs, amortization of debt discount and issuance costs, intra-entity IP transfer tax effect, net and the tax effect of non-GAAP adjustments.

The Company believes that providing non-GAAP financial measures that exclude, as applicable, share-based compensation expense, acquisition related expenses, amortization of intangible assets related to acquisitions, facility exit and transition costs, non-cash interest expense related to the amortization of debt discount and issuance costs, intra-entity IP transfer tax effect, net and the tax effect of the non-GAAP adjustments allows for more meaningful comparisons of its period to period operating results. Share-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company’s business and an important part of the compensation provided to its employees. Share based compensation expense has varying available valuation methodologies, subjective assumptions and a variety of equity instruments that can impact a company’s non-cash expense. The Company believes that expenses related to its acquisitions, amortization of intangible assets related to acquisitions, facility exit and transition costs, intra-entity IP transfer tax effect, net and non-cash interest expense related to the amortization of debt discount and issuance costs do not reflect the performance of its core business and impact period-to-period comparability.

Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies in the industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures as they exclude expenses that may have a material impact on the Company’s reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with U.S. GAAP. CyberArk urges investors to review the reconciliation of its non-GAAP financial measures to the comparable U.S. GAAP financial measures included below, and not to rely on any single financial measure to evaluate its business.

Guidance for non-GAAP financial measures excludes, as applicable, share-based compensation expense, acquisition related expenses, amortization of intangible assets related to acquisitions, facility exit and transition costs, non-cash interest expense related to the amortization of debt discount and issuance costs, intra-entity IP transfer tax effect, net and the tax effect of the non-GAAP adjustments. A reconciliation of the non-GAAP financial measures guidance to the corresponding GAAP measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability and significance of, the amounts of share-based compensation expense, amortization of intangible assets related to acquisitions, and the non-recurring expenses that are excluded from the guidance. Accordingly, a reconciliation of the non-GAAP financial measures guidance to the corresponding GAAP measures for future periods is not available without unreasonable effort.

Cautionary Language Concerning Forward-Looking Statements

This release contains forward-looking statements, which express the current beliefs and expectations of CyberArk’s (the “Company”) management. In some cases, forward-looking statements may be identified by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential” or the negative of these terms or other similar expressions. Such statements involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: the duration and scope of the COVID-19 pandemic and the impact of the pandemic and actions taken in response, on global and regional economies and economic activity and the resulting impact on the demand for the Company’s solutions and on its expected revenue growth rates and costs; the Company’s ability to adjust its operations in response to impacts from the COVID-19 pandemic; difficulties predicting future financial results, including due to impacts from the COVID-19 pandemic; the Company’s plan to begin actively transitioning its business to a recurring revenue model in 2021; changes to the drivers of the Company’s growth; the Company’s ability to sell into existing and new industry verticals; the Company’s sales cycles and multiple licensing models may cause results to fluctuate; the Company’s ability to sell into existing customers; potential changes in the Company’s operating and net profit margins and the Company’s revenue growth rate; the Company’s ability to successfully find, complete, fully integrate and achieve the expected benefits of future acquisitions, including the Company’s ability to integrate and achieve the expected benefits of Idaptive; real or perceived shortcomings, defects or vulnerabilities in the Company’s solutions or internal network systems; the Company’s ability to hire qualified personnel; the Company’s ability to expand its channel partnerships across existing and new geographies; the Company’s ability to further diversify its product deployments and licensing options; and other factors discussed under the heading “Risk Factors” in the Company’s most recent annual report on Form 20-F filed with the Securities and Exchange Commission. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

CYBERARK SOFTWARE LTD.
Consolidated Statements of Operations
U.S. dollars in thousands (except per share data)
(Unaudited)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2019		2020		2019		2020
	Revenues:
	License		$ 57,868		$ 45,772		$ 161,353		$ 145,292
	Maintenance and professional services		50,247		60,817		142,878		174,620
	Total revenues		108,115		106,589		304,231		319,912
	Cost of revenues:
	License		2,274		6,038		7,768		13,496
	Maintenance and professional services		14,714		16,350		37,998		46,367
	Total cost of revenues		16,988		22,388		45,766		59,863
	Gross profit		91,127		84,201		258,465		260,049
	Operating expenses:
	Research and development		18,264		24,609		51,590		68,767
	Sales and marketing		46,151		55,418		131,229		158,961
	General and administrative		13,972		14,649		36,303		45,104
	Total operating expenses		78,387		94,676		219,122		272,832
	Operating income (loss)		12,740		(10,475)		39,343		(12,783)
	Financial income (expenses), net		1,500		(1,453)		5,406		(3,662)
	Income (loss) before taxes on income		14,240		(11,928)		44,749		(16,445)
	Tax benefit (taxes on income)		1,008		(3,954)		(2,421)		(1,367)
	Net income (loss)		$ 15,248		$ (15,882)		$ 42,328		$ (17,812)
	Basic net income (loss) per ordinary share		$ 0.40		$ (0.41)		$ 1.13		$ (0.46)
	Diluted net income (loss) per ordinary share		$ 0.39		$ (0.41)		$ 1.09		$ (0.46)
	Shares used in computing net income (loss)
	per ordinary shares, basic		37,805,442		38,797,347		37,460,829		38,532,563
	Shares used in computing net income (loss)
	per ordinary shares, diluted		39,057,545		38,797,347		38,831,275		38,532,563
	Share-based Compensation Expense:
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2019		2020		2019		2020
	Cost of revenues		$ 1,680		$ 2,573		$ 3,888		$ 6,325
	Research and development		2,912		4,223		7,613		10,606
	Sales and marketing		5,949		8,071		14,512		21,224
	General and administrative		4,797		5,449		11,473		15,220
	Total share-based compensation expense		$ 15,338		$ 20,316		$ 37,486		$ 53,375

	CYBERARK SOFTWARE LTD.
	Consolidated Balance Sheets
	U.S. dollars in thousands
	(Unaudited)
				December 31,		September 30,
				2019		2020
	ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents			$ 792,363		$ 507,079
	Short-term bank deposits			140,067		224,929
	Marketable securities			132,412		152,188
	Trade receivables			72,953		63,334
	Prepaid expenses and other current assets			8,406		14,753
	Total current assets			1,146,201		962,283
	LONG-TERM ASSETS:
	Marketable securities			54,408		237,178
	Property and equipment, net			16,472		17,804
	Intangible assets, net			9,143		26,259
	Goodwill			82,400		123,717
	Other long-term assets			72,091		86,604
	Deferred tax asset			24,451		33,558
	Total long-term assets			258,965		525,120
	TOTAL ASSETS			$ 1,405,166		$ 1,487,403
	LIABILITIES AND SHAREHOLDERS' EQUITY
	CURRENT LIABILITIES:
	Trade payables			$ 5,675		$ 5,726
	Employees and payroll accruals			41,345		37,941
	Accrued expenses and other current liabilities			27,132		21,936
	Deferred revenues			118,519		149,732
	Total current liabilities			192,671		215,335
	LONG-TERM LIABILITIES:
	Convertible senior notes, net			485,119		497,950
	Deferred revenues			71,836		77,916
	Other long-term liabilities			31,408		25,972
	Total long-term liabilities			588,363		601,838
	TOTAL LIABILITIES			781,034		817,173
	SHAREHOLDERS' EQUITY:
	Ordinary shares of NIS 0.01 par value			99		101
	Additional paid-in capital			396,437		457,766
	Accumulated other comprehensive income			818		3,393
	Retained earnings			226,778		208,970
	Total shareholders' equity			624,132		670,230
	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$ 1,405,166		$ 1,487,403

	CYBERARK SOFTWARE LTD.
	Consolidated Statements of Cash Flows
	U.S. dollars in thousands
	(Unaudited)
			Nine Months Ended
			September 30,
			2019		2020
	Cash flows from operating activities:
	Net income (loss)		$ 42,328		$ (17,812)
	Adjustments to reconcile net income to net cash
	provided by operating activities:
	Depreciation and amortization		8,122		10,956
	Amortization of premium and accretion of discount on marketable securities, net		(39)		1,422
	Share-based compensation		37,486		53,375
	Deferred income taxes, net		(4,989)		(2,531)
	Decrease (increase) in trade receivables		(7,075)		12,479
	Amortization of debt discount and issuance costs		-		12,831
	Increase in prepaid expenses and other current and long-term assets		(12,629)		(14,974)
	Decrease in trade payables		(501)		(1,528)
	Increase in short-term and long-term deferred revenues		27,741		30,537
	Decrease in employees and payroll accruals		(4,318)		(5,130)
	Increase (decrease) in accrued expenses and other
	current and long-term liabilities		2,471		(11,804)
	Net cash provided by operating activities		88,597		67,821
	Cash flows from investing activities:
	Investment in short and long term deposits		(1,821)		(85,092)
	Investment in marketable securities		(66,883)		(347,842)
	Proceeds from maturities of marketable securities		50,639		146,208
	Purchase of property and equipment		(5,389)		(4,937)
	Payments for business acquisitions, net of cash acquired		-		(68,603)
	Net cash used in investing activities		(23,454)		(360,266)
	Cash flows from financing activities:
	Proceeds from (payment of) withholding tax related to employee stock plans		547		(439)
	Proceeds from exercise of stock options		19,510		7,604
	Net cash provided by financing activities		20,057		7,165
	Increase (decrease) in cash, cash equivalents and restricted cash		85,200		(285,280)
	Cash, cash equivalents and restricted cash at the beginning of the period		261,883		792,413
	Cash, cash equivalents and restricted cash at the end of the period		$ 347,083		$ 507,133

CYBERARK SOFTWARE LTD.
Reconciliation of GAAP Measures to Non-GAAP Measures
U.S. dollars in thousands (except per share data)
(Unaudited)
	Reconciliation of Gross Profit to Non-GAAP Gross Profit:
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2019		2020		2019		2020
	Gross profit		$ 91,127		$ 84,201		$ 258,465		$ 260,049
	Plus:
	Share-based compensation - License, Maintenance & professional services		1,680		2,573		3,888		6,325
	Amortization of intangible assets - License		1,173		2,654		4,061		5,829
	Acquisition related expenses		-		46		-		447
	Non-GAAP gross profit		$ 93,980		$ 89,474		$ 266,414		$ 272,650
	Reconciliation of Operating Income (Loss) to Non-GAAP Operating Income:
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2019		2020		2019		2020
	Operating income (loss)		$ 12,740		$ (10,475)		$ 39,343		$ (12,783)
	Plus:
	Share-based compensation		15,338		20,316		37,486		53,375
	Amortization of intangible assets - Cost of revenues		1,173		2,654		4,061		5,829
	Amortization of intangible assets - Sales and marketing		144		205		432		478
	Acquisition related expenses		-		270		-		4,526
	Facility exit and transitions costs		-		140		-		140
	Non-GAAP operating income		$ 29,395		$ 13,110		$ 81,322		$ 51,565
	Reconciliation of Net Income (Loss) to Non-GAAP Net Income:
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2019		2020		2019		2020
	Net income (loss)		$ 15,248		$ (15,882)		$ 42,328		$ (17,812)
	Plus:
	Share-based compensation		15,338		20,316		37,486		53,375
	Amortization of intangible assets - Cost of revenues		1,173		2,654		4,061		5,829
	Amortization of intangible assets - Sales and marketing		144		205		432		478
	Acquisition related expenses		-		270		-		4,526
	Facility exit and transitions costs		-		140		-		140
	Amortization of debt discount and issuance costs		-		4,314		-		12,831
	Taxes on income related to non-GAAP adjustments		(6,345)		(4,878)		(14,237)		(15,956)
	Intra-entity IP transfer tax effect, net		-		5,036		-		5,036
	Non-GAAP net income		$ 25,558		$ 12,175		$ 70,070		$ 48,447
	Non-GAAP net income per share
	Basic		$ 0.68		$ 0.31		$ 1.87		$ 1.26
	Diluted		$ 0.65		$ 0.31		$ 1.80		$ 1.23
	Weighted average number of shares
	Basic		37,805,442		38,797,347		37,460,829		38,532,563
	Diluted		39,057,545		39,634,165		38,831,275		39,424,949