CyberArk Announces Strong Second Quarter 2016 Results

Second quarter total revenue of $50.4 million increases 39% year-over-year

NEWTON, Mass. & PETACH TIKVAH, Israel--(BUSINESS WIRE)--CyberArk (NASDAQ: CYBR), the company that protects organizations from cyber attacks that have made their way inside the network perimeter, today announced financial results for the second quarter ended June 30, 2016.

“The second quarter was another strong quarter for CyberArk,” said Udi Mokady, CyberArk Chairman and CEO. “Our top line growth demonstrates the increasing demand for our privileged account security platform while our bottom line outperformance shows the power of our business model. As we move into the second half of the year, we plan to continue making thoughtful investments including enhancing our technology platform and expanding market presence.”

Financial Highlights for the Second Quarter Ended June 30, 2016

Revenue:

• Total revenue was $50.4 million, up 39% year-over-year compared with the second quarter of 2015.
• License revenue was $30.0 million, up 35% compared with the second quarter of 2015.
• Maintenance and Professional Services revenue was $20.4 million, up 45% from the second quarter of 2015.

Operating Income:

• GAAP operating income was $8.5 million for the quarter, up from $6.5 million in the second quarter of 2015.
• Non-GAAP operating income was $13.6 million for the quarter, up from $8.2 million in the second quarter of 2015.

Net Income:

• GAAP net income was $6.4 million, or $0.18 per diluted share, compared to GAAP net income of $4.9 million, or $0.14 per diluted share, in the second quarter of 2015.
• Non-GAAP net income was $10.5 million, or $0.29 per diluted share, compared to $6.5 million, or $0.19 per diluted share, in the second quarter of 2015.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP operating income and net income for the three months and six months ended June 30, 2016 and 2015. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Balance Sheet and Cash Flow:

• As of June 30, 2016, CyberArk had $259.0 million in cash, cash equivalents, marketable securities and short-term deposits, compared to $238.3 million as of December 31, 2015.
• During the first six months of 2016, the Company generated $21.4 million in cash flow from operations, compared to $35.1 million in the first six months of 2015.

Business Outlook

Based on information available as of August 9, 2016, CyberArk is issuing guidance for the third quarter and full year 2016 as indicated below.

Third Quarter 2016:

• Total revenue is expected to be in the range of $51.5 million to $52.5 million, which represents 29% to 31% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $10.1 million to $11.0 million.
• Non-GAAP net income per share is expected to be in the range of $0.21 to $0.23 per diluted share. This assumes 36.0 million weighted average diluted shares.

Full Year 2016:

• Total revenue is expected to be in the range of $210.5 million to $212.5 million, which represents 31% to 32% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $48.4 million to $50.0 million.
• Non-GAAP net income per share is expected to be in the range of $1.03 to $1.07 per diluted share. This assumes 35.9 million weighted average diluted shares.

Conference Call Information

CyberArk will host a conference call on Tuesday, August 9, 2016 at 5:00 p.m. Eastern Time (ET) to discuss the company’s second quarter financial results and its business outlook. To access this call, dial [phone] (U.S.) or [phone] (international). The conference ID is 47864998. Additionally, a live webcast of the conference call will be available via the “Investor Relations” section of the company’s web site at www.cyberark.com. A replay will be available for one week at [phone] (U.S.) or [phone] (international). The replay pass code is 47864998. An archived webcast of the conference call will also be available in the “Investor Relations” section of the company’s web site at www.cyberark.com.

About CyberArk

CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including 45 percent of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. A global company, CyberArk is headquartered in Petach Tikvah, Israel, with U.S. headquarters located in Newton, Mass. The company also has offices throughout EMEA and Asia Pacific and Japan. To learn more about CyberArk, visit www.cyberark.com, read the company blog, http://www.cyberark.com/blog/, follow on Twitter @CyberArk or Facebook at https://www.facebook.com/CyberArk.

Copyright © 2016 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 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 operating income or net income or any other performance measures derived in accordance with GAAP.

• For the three and six months ended June 30, 2016, non-GAAP operating income is calculated as operating income excluding share-based compensation expense and amortization of intangible assets related to acquisitions. For the three and six months ended June 30, 2015, non-GAAP operating income is calculated as operating income excluding public offering and acquisition related expenses as well as share-based compensation expense.
• For the three and six months ended June 30, 2016, non-GAAP net income is calculated as net income excluding share-based compensation expense, amortization of intangible assets related to acquisitions and the tax effects related to the non-GAAP adjustments. For the three and six months ended June 30, 2015, non-GAAP net income is calculated as net income excluding public offering and acquisition related expenses as well as share-based compensation expense and the tax effects related to the non-GAAP adjustments.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash expense, the Company believes that providing non-GAAP financial measures that exclude share-based compensation, public offering and acquisition related expenses and amortization of intangible assets related to acquisitions 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. The Company believes that expenses related to its public offerings, acquisitions and amortization of intangible assets related to acquisitions 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 measures to evaluate its business.

Cautionary Language Concerning Forward-Looking Statements

This release may contain 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; 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 or channel partners 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 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 Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
Revenues:
License	$	22,278		$	29,965		$	42,256		$	57,479
Maintenance and professional services		14,097			20,415			27,034			39,812
Total revenues		36,375			50,380			69,290			97,291
Cost of revenues:
License		1,831			1,283			2,381			2,557
Maintenance and professional services		4,243			5,628			7,950			10,788
Total cost of revenues		6,074			6,911			10,331			13,345
Gross profit		30,301			43,469			58,959			83,946
Operating expenses:
Research and development		4,263			8,165			8,380			16,098
Sales and marketing		15,449			21,837			28,909			43,500
General and administrative		4,058			5,016			7,636			9,686
Total operating expenses		23,770			35,018			44,925			69,284
Operating income		6,531			8,451			14,034			14,662
Financial income (expenses), net		327			(94	)		(1,304	)		(27	)
Income before taxes on income		6,858			8,357			12,730			14,635
Taxes on income		(1,936	)		(1,908	)		(3,642	)		(3,862	)
Net income	$	4,922		$	6,449		$	9,088		$	10,773
Basic net income per ordinary share	$	0.16		$	0.19		$	0.29		$	0.32
Diluted net income per ordinary share	$	0.14		$	0.18		$	0.26		$	0.30
Shares used in computing net income
per ordinary shares, basic		31,530,242			33,547,975			31,049,379			33,457,149
Shares used in computing net income
per ordinary shares, diluted		35,001,262			35,787,574			34,896,092			35,740,107
Share-based Compensation Expense:
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
Cost of revenues	$	84		$	285		$	147		$	526
Research and development		85			998			167			1,938
Sales and marketing		177			1,371			316			2,596
General and administrative		797			1,325			978			2,292
Total share-based compensation expense	$	1,143		$	3,979		$	1,608		$	7,352

CYBERARK SOFTWARE LTD. Consolidated Balance Sheets U.S. dollars in thousands (Unaudited)
	December 31, 2015			June 30, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	234,539		$	178,420
Short-term bank deposits		3,713			45,850
Marketable securities		-			12,386
Trade receivables		20,410			20,804
Prepaid expenses and other current assets		3,293			5,196
Total current assets		261,955			262,656
LONG-TERM ASSETS:
Property and equipment, net		3,584			4,366
Intangible assets, net		18,558			16,290
Goodwill		35,145			35,145
Marketable securities		-			22,390
Severance pay fund		3,230			3,187
Prepaid expenses and other long-term assets		1,954			2,005
Deferred tax asset		9,998			10,030
Total long-term assets		72,469			93,413
TOTAL ASSETS	$	334,424		$	356,069
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	2,530		$	2,215
Employees and payroll accruals		15,860			13,699
Deferred revenues		37,104			42,812
Accrued expenses and other current liabilities		9,366			5,851
Total current liabilities		64,860			64,577
LONG-TERM LIABILITIES:
Deferred revenues		17,285			20,004
Other long-term liabilities		188			236
Accrued severance pay		4,667			4,601
Deferred tax liabilities		754			595
Total long-term liabilities		22,894			25,436
TOTAL LIABILITIES		87,754			90,013
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.01 par value		86			86
Additional paid-in capital		200,107			208,507
Accumulated other comprehensive income (loss)		(93	)		120
Retained earnings		46,570			57,343
Total shareholders' equity		246,670			266,056
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	334,424		$	356,069

CYBERARK SOFTWARE LTD. Consolidated Statements of Cash Flows U.S. dollars in thousands (Unaudited)
	Six Months Ended June 30,
	2015			2016
Cash flows from operating activities:
Net income	$	9,088		$	10,773
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization		459			3,126
Share-based compensation expenses		1,608			7,352
Tax benefit related to share-based compensation		(1,176	)		(411	)
Deferred income taxes, net		(731	)		(189	)
Decrease (increase) in trade receivables		4,965			(394	)
Increase in prepaid expenses and other
current and long-term assets		(1,175	)		(1,672	)
Increase (decrease) in trade payables		263			(179	)
Increase in short term and long term deferred revenues		21,106			8,427
Decrease in employees and payroll accruals		(1,153	)		(2,161	)
Increase (decrease) in accrued expenses and other
current and long-term liabilities		1,586			(3,240	)
Increase (decrease) in accrued severance pay, net		280			(23	)
Net cash provided by operating activities		35,120			21,409
Cash flows from investing activities:
Proceeds from short and long term deposits		39,289			-
Investment in short and long term deposits		-			(42,149	)
Investment in marketable securities		-			(34,650	)
Purchase of property and equipment		(1,060	)		(1,777	)
Net cash provided by (used in) investing activities		38,229			(78,576	)
Cash flows from financing activities:
Issuance of shares, net		52,685			-
Withholding proceeds related to exercise of options		17,201			-
Tax benefit related to share-based compensation		1,176			411
Proceeds from exercise of options		1,524			637
Net cash provided by financing activities		72,586			1,048
Increase (decrease) in cash and cash equivalents		145,935			(56,119	)
Cash and cash equivalents at the beginning of the period		124,184			234,539
Cash and cash equivalents at the end of the period	$	270,119		$	178,420

CYBERARK SOFTWARE LTD. Reconciliation of GAAP Measures to Non-GAAP Measures U.S. dollars in thousands (except per share data) (Unaudited)
Reconciliation of Operating Income to Non-GAAP Operating Income:
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
Operating income	$	6,531		$	8,451		$	14,034		$	14,662
Public offering related expenses		487			-			1,568			-
Share-based compensation		1,143			3,979			1,608			7,352
Amortization of intangible assets - Cost of revenues		-			355			-			710
Amortization of intangible assets - Research and development		-			478			-			956
Amortization of intangible assets - Sales and marketing		-			301			-			602
Acquisition related expenses		88			-			88			-
Non-GAAP operating income	$	8,249		$	13,564		$	17,298		$	24,282
Reconciliation of Net Income to Non-GAAP Net Income:
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
Net income	$	4,922		$	6,449		$	9,088		$	10,773
Public offering related expenses		487			-			1,568			-
Share-based compensation		1,143			3,979			1,608			7,352
Amortization of intangible assets - Cost of revenues		-			355			-			710
Amortization of intangible assets - Research and development		-			478			-			956
Amortization of intangible assets - Sales and marketing		-			301			-			602
Acquisition related expenses		88			-			88			-
Taxes on income related to non-GAAP adjustments		(114	)		(1,066	)		(114	)		(1,579	)
Non-GAAP net income	$	6,526		$	10,496		$	12,238		$	18,814
Non-GAAP net income per share
Basic	$	0.21		$	0.31		$	0.39		$	0.56
Diluted	$	0.19		$	0.29		$	0.35		$	0.53
Weighted average number of shares
Basic		31,530,242			33,547,975			31,049,379			33,457,149
Diluted		35,001,262			35,787,574			34,896,092			35,740,107