CyberArk Announces Strong Third Quarter 2019 Results

CyberArk, (NASDAQ: CYBR), the global leader in privileged access management, today announced strong financial results for the third quarter ended September 30, 2019.

“Q3 was another strong quarter for CyberArk,” said Udi Mokady, CyberArk Chairman and CEO. “We delivered revenue growth of 28%, a non-GAAP operating margin of 27% and signed 200 new customers. Our results demonstrate our strong execution, leadership position in the market and the robust demand environment for our solutions. Organizations around the world recognize that Privileged Access Management is critical to a successful security program and are leveraging CyberArk to secure access across on-premises, cloud, and hybrid environments as well as the DevOps pipeline.”

Financial Highlights for the Third Quarter Ended September 30, 2019

Revenue:

  • Total revenue was $108.1 million, up 28% compared with the third quarter of 2018.
  • License revenue was $57.9 million, up 25% compared with the third quarter of 2018.
  • Maintenance and professional services revenue was $50.2 million, up 30% compared with the third quarter of 2018.

Operating Income:

  • GAAP operating income was $12.7 million, an increase from $8.8 million in the third quarter of 2018. Non-GAAP operating income was $29.4 million, an increase from $21.0 million in the third quarter of 2018.

Net Income:

  • GAAP net income was $15.2 million, or $0.39 per diluted share, an increase from GAAP net income of $8.1 million, or $0.22 per diluted share, in the third quarter of 2018. Non-GAAP net income was $25.6 million, or $0.65 per diluted share, an increase from $17.8 million, or $0.48 per diluted share, in the third quarter of 2018.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP gross margin, operating income and net income for the three months and nine months ended September 30, 2019 and 2018. 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, 2019, CyberArk had $555.1 million in cash, cash equivalents, marketable securities and short-term deposits. This compares to $451.2 million as of December 31, 2018 and $410.0 million at September 30, 2018.
  • As of September 30, 2019, total deferred revenue was $177.3 million, a 30% increase from $136.0 million at September 30, 2018.
  • During the nine months ended September 30, 2019, the Company generated $88.6 million in cash flow from operations, compared with $89.2 million in the first nine months of 2018.

Business Outlook
Based on information available as of November 6, 2019, CyberArk is issuing guidance for the fourth quarter and increasing its guidance for the full year 2019 as indicated below.

Fourth Quarter 2019:

  • Total revenue between $125.0 million and $127.0 million, representing 15% to 16% year-over-year growth.
  • Non-GAAP operating income between $38.5 million and $40.0 million.
  • Non-GAAP net income per share between $0.78 and $0.82 per diluted share.
    • Assumes 39.2 million weighted average diluted shares.

Full Year 2019:

  • Total revenue between $429.2 million and $431.2 million, representing 25% to 26% year-over-year growth.
  • Non-GAAP operating income between $119.75 million and $121.25 million.
  • Non-GAAP net income per share between $2.58 and $2.61 per diluted share.
    • Assumes 39.1 million weighted average diluted shares.

Conference Call Information
CyberArk will host a conference call today, November 6, 2019 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 +1 877-823-7693 (U.S.) or +1 647-689-4543 (international). The conference ID is 2039434. 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 +1 416-621-4642 (international). The replay pass code is 2039434. 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 the enterprise, in the cloud 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 © 2019 CyberArk Software. All Rights Reserved. All other brand names, product names, or trademarks belong to their respective holders.

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 or net income or any other performance measures derived in accordance with GAAP.

  • Non-GAAP gross profit is calculated as gross profit excluding share-based compensation expense and amortization of intangible assets related to acquisitions.
  • Non-GAAP operating income is calculated as operating income 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 net income excluding share-based compensation expense, acquisition related expenses, facility exit and transition costs, amortization of intangible assets related to acquisitions, intra-entity IP transfer tax effect and the tax effect of other 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, intra-entity IP transfer tax effect 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 and amortization of intangible assets related to acquisitions, facility exit and transition costs and intra-entity IP transfer tax effect 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, facility exit and transition costs, amortization of intangible assets related to acquisitions, intra-entity IP transfer tax effect and the tax effect of the other 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: changes in the rapidly evolving cyber threat landscape; failure to effectively manage growth; potential near-term declines in our operating and net profit margins and our revenue growth rate; real or perceived shortcomings, defects or vulnerabilities in the Company’s solutions or internal network system, or the failure of the Company’s customers, channel partners, managed security service providers, or contractors to correctly implement, manage and maintain to correctly implement the Company’s solutions; fluctuations in quarterly results of operations; the inability to acquire new customers or sell additional products and services to existing customers; competition from a wide variety of IT security vendors; the Company’s ability to successfully integrate recent and or future acquisitions; 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 EndedNine Months Ended
September 30,September 30,

2018

2019

2018

2019

 
Revenues:
License

$

46,130

$

57,868

$

125,745

$

161,353

Maintenance and professional services

38,523

50,247

108,404

142,878

 
Total revenues

84,653

108,115

234,149

304,231

 
Cost of revenues:
License

2,614

2,274

7,521

7,768

Maintenance and professional services

9,530

14,714

27,619

37,998

 
Total cost of revenues

12,144

16,988

35,140

45,766

 
Gross profit

72,509

91,127

199,009

258,465

 
Operating expenses:
Research and development

14,980

18,264

41,772

51,590

Sales and marketing

37,880

46,151

107,983

131,229

General and administrative

10,870

13,972

29,483

36,303

 
Total operating expenses

63,730

78,387

179,238

219,122

 
Operating income

8,779

12,740

19,771

39,343

 
Financial income, net

1,407

1,500

3,473

5,406

 
Income before taxes on income

10,186

14,240

23,244

44,749

 
Tax benefit (taxes on income)

(2,092)

1,008

(352)

(2,421)

 
Net income

$

8,094

$

15,248

$

22,892

$

42,328

 
 
Basic net income per ordinary share

$

0.22

$

0.40

$

0.64

$

1.13

Diluted net income per ordinary share

$

0.22

$

0.39

$

0.62

$

1.09

 
Shares used in computing net income
per ordinary shares, basic

36,485,724

37,805,442

35,981,177

37,460,829

Shares used in computing net income
per ordinary shares, diluted

37,475,729

39,057,545

36,894,457

38,831,275

 
 
 
 
Share-based Compensation Expense:
 
Three Months EndedNine Months Ended
September 30,September 30,

2018

2019

2018

2019

 
 
Cost of revenues

$

957

$

1,680

$

2,370

$

3,888

Research and development

2,237

2,912

5,748

7,613

Sales and marketing

3,770

5,949

9,061

14,512

General and administrative

3,371

4,797

8,492

11,473

 
Total share-based compensation expense

$

10,335

$

15,338

$

25,671

$

37,486

CYBERARK SOFTWARE LTD.

Consolidated Balance Sheets

U.S. dollars in thousands

(Unaudited)

December 31,September 30,

2018

2019

 
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents

$

260,636

$

346,092

Short-term bank deposits

106,399

107,926

Marketable securities

59,948

52,573

Trade receivables

48,431

55,506

Prepaid expenses and other current assets

6,349

9,777

 
Total current assets

481,763

571,874

 
LONG-TERM ASSETS:
Property and equipment, net

15,120

16,874

Intangible assets, net

14,732

10,239

Goodwill

82,400

82,400

Marketable securities

24,261

48,536

Other long-term assets

31,863

69,865

Deferred tax asset

23,481

28,128

 
Total long-term assets

191,857

256,042

 
TOTAL ASSETS

$

673,620

$

827,916

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Trade payables

$

4,924

$

3,967

Employees and payroll accruals

32,853

29,339

Accrued expenses and other current liabilities

13,271

22,325

Deferred revenues

92,375

109,677

 
Total current liabilities

143,423

165,308

 
LONG-TERM LIABILITIES:
Deferred revenues

57,159

67,598

Other long-term liabilities

6,268

26,696

 
Total long-term liabilities

63,427

94,294

 
TOTAL LIABILITIES

206,850

259,602

 
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.01 par value

95

98

Additional paid-in capital

303,900

361,180

Accumulated other comprehensive income (loss)

(939)

994

Retained earnings

163,714

206,042

 
Total shareholders' equity

466,770

568,314

 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

673,620

$

827,916

CYBERARK SOFTWARE LTD.

Consolidated Statements of Cash Flows

U.S. dollars in thousands

(Unaudited)

 
Nine Months Ended
September 30,

2018

2019

 
Cash flows from operating activities:
Net income

$

22,892

$

42,328

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization

7,327

8,122

Amortization of premium and accretion of discount on marketable securities, net

270

(39

)

Share-based compensation

25,671

37,486

Deferred income taxes, net

(6,669

)

(4,989

)

Decrease (increase) in trade receivables

15,608

(7,075

)

Increase in prepaid expenses and other current and long-term assets

(5,646

)

(12,629

)

Increase (decrease) in trade payables

771

(501

)

Increase in short-term and long-term deferred revenues

34,298

27,741

Decrease in employees and payroll accruals

(2,315

)

(4,318

)

Increase (decrease) in accrued expenses and other
current and long-term liabilities

(3,051

)

2,471

 
Net cash provided by operating activities

89,156

88,597

 
Cash flows from investing activities:
Investment in short and long term deposits

(19,768

)

(1,821

)

Investment in marketable securities

(47,316

)

(66,883

)

Proceeds from maturities of marketable securities

31,198

50,639

Purchase of property and equipment

(7,130

)

(5,389

)

Payments for business acquisitions, net of cash acquired

(18,450

)

-

 
Net cash used in investing activities

(61,466

)

(23,454

)

 
Cash flows from financing activities:
Proceeds from withholding tax related to employee stock plans

2,220

547

Proceeds from exercise of stock options

14,038

19,510

 
Net cash provided by financing activities

16,258

20,057

 
Increase in cash, cash equivalents and restricted cash

43,948

85,200

 
Cash, cash equivalents and restricted cash at the beginning of the period

162,521

261,883

 
Cash, cash equivalents and restricted cash at the end of the period

$

206,469

$

347,083

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 EndedNine Months Ended
September 30,September 30,

2018

2019

2018

2019

 
Gross profit

$

72,509

$

91,127

$

199,009

$

258,465

Plus:
Share-based compensation - Maintenance & professional services

957

1,680

2,370

3,888

Amortization of intangible assets - License

1,444

1,173

4,118

4,061

 
Non-GAAP gross profit

$

74,910

$

93,980

$

205,497

$

266,414

 
 
 
 
 
Reconciliation of Operating Income to Non-GAAP Operating Income:
 
Three Months EndedNine Months Ended
September 30,September 30,

2018

2019

2018

2019

 
 
Operating income

$

8,779

$

12,740

$

19,771

$

39,343

Plus:
Share-based compensation

10,335

15,338

25,671

37,486

Amortization of intangible assets - Cost of revenues

1,444

1,173

4,118

4,061

Amortization of intangible assets - Sales and marketing

198

144

595

432

Acquisition related expenses

-

-

268

-

Facility exit and transitions costs

253

-

253

-

 
Non-GAAP operating income

$

21,009

$

29,395

$

50,676

$

81,322

 
 
Reconciliation of Net Income to Non-GAAP Net Income:
 
Three Months EndedNine Months Ended
September 30,September 30,

2018

2019

2018

2019

 
 
Net income

$

8,094

$

15,248

$

22,892

$

42,328

Plus:
Share-based compensation

10,335

15,338

25,671

37,486

Amortization of intangible assets - Cost of revenues

1,444

1,173

4,118

4,061

Amortization of intangible assets - Sales and marketing

198

144

595

432

Acquisition related expenses

-

-

268

-

Facility exit and transitions costs

253

-

253

-

Taxes on income related to non-GAAP adjustments

(4,764

)

(6,345

)

(12,957

)

(14,237

)

Intra-entity IP transfer tax effect, net

2,243

-

2,243

-

 
Non-GAAP net income

$

17,803

$

25,558

$

43,083

$

70,070

 
Non-GAAP net income per share
Basic

$

0.49

$

0.68

$

1.20

$

1.87

Diluted

$

0.48

$

0.65

$

1.17

$

1.80

 
Weighted average number of shares
Basic

36,485,724

37,805,442

35,981,177

37,460,829

Diluted

37,475,729

39,057,545

36,894,457

38,831,275

Contacts:

Investor Contact:
Erica Smith
CyberArk
Phone: +1- 617-558-2132
ir@cyberark.com

Media Contact:
Liz Campbell
CyberArk
Phone: +1-617-558-2191
press@cyberark.com

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