CyberArk Announces Strong Second Quarter 2018 Results

Second quarter total revenue of $77.7 million increases 35% year-over-year

GAAP operating income of $7.0 million and non-GAAP operating income of $17.0 million

Cash flow from operations of $56.2 million increases 90% year-over-year

Deferred revenue of $129.6 increases 56% year-over-year

NEWTON, Mass. & PETACH TIKVA, Israel--(BUSINESS WIRE)--CyberArk, (NASDAQ: CYBR), the global leader in privileged access security, today announced financial results for the second quarter ended June 30, 2018.

“CyberArk had a great second quarter,” said Udi Mokady, CyberArk Chairman and CEO. “We exceeded our guidance across all metrics. We posted strong revenue growth, profitability and operating cash flow. Our growth was driven by strong execution and robust demand from both new and existing customers across all geographies. We were thrilled to sign nearly 200 new logos in the second quarter bringing our total number of customers to more than 4,000, which demonstrates that we are still in the early innings of our market opportunity. In addition, the significant value our solution provides coupled with our unwavering commitment to customer satisfaction drove our add on business during the quarter. Given our strong execution in the first half of the year and our tremendous market opportunity, we are positioned well for the remainder of 2018.”

Financial Highlights for the Second Quarter Ended June 30, 2018

Revenue:

• Total revenue was $77.7 million, up 35% compared with the second quarter of 2017.
• License revenue was $41.1 million, up 36% compared with the second quarter of 2017.
• Maintenance and professional services revenue was $36.6 million, up 35% compared with the second quarter of 2017.

Operating Income:

• GAAP operating income was $7.0 million, an increase from $1.0 million in the second quarter of 2017. Non-GAAP operating income was $17.0 million, an increase from $8.8 million in the second quarter of 2017.

Net Income:

• GAAP net income was $8.4 million, or $0.23 per diluted share, an increase from GAAP net income of $3.2 million, or $0.09 per diluted share, in the second quarter of 2017. Non-GAAP net income was $13.5 million, or $0.36 per diluted share, an increase from $7.7 million, or $0.21 per diluted share, in the second quarter of 2017.

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 six months ended June 30, 2018 and 2017. 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, 2018, CyberArk had $377.5 million in cash, cash equivalents, marketable securities and short-term deposits. This compares to $330.3 million as of December 31, 2017 and $283.2 million at June 30, 2017.
• As of June 30, 2018, total deferred revenue was $129.6 million, a 23% increase from $105.2 million at December 31, 2017 and a 56% increase from $82.8 million at June 30, 2017.
• During the six months ended June 30, 2018, the Company generated $56.2 million in cash flow from operations, a 90% increase from $29.7 million in the first six months of 2017.

Business Outlook

Based on information available as of August 7, 2018, CyberArk is issuing guidance for the third quarter and increasing its guidance for the full year 2018 as indicated below.

Third Quarter 2018:

• Total revenue is expected to be in the range of $77.75 million to $79.25 million, which represents 20% to 22% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $11.4 million to $12.6 million.
• Non-GAAP net income per share is expected to be in the range of $0.25 to $0.28 per diluted share. This assumes 37.5 million weighted average diluted shares.

Full Year 2018:

• Total revenue is expected to be in the range of $320.0 million to $324.0 million, which represents 22% to 24% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $64.0 million to $67.0 million.
• Non-GAAP net income per share is expected to be in the range of $1.43 to $1.50 per diluted share. This assumes 37.0 million weighted average diluted shares.

Conference Call Information

CyberArk will host a conference call today, August 7, 2018 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 2687958. 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. Following the conference call, a replay will be available for one week at [phone] (U.S.) or [phone] (international). The replay pass code is 2687958. 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 (NASDAQ: CYBR) is the global leader in privileged access security, 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 100, 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 © 2018 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 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, 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, amortization of intangible assets related to acquisitions and the tax effect of the non-GAAP adjustments.

The Company believes that providing non-GAAP financial measures that exclude share-based compensation, acquisition related expenses, amortization of intangible assets related to acquisitions 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 the 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 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				Six Months Ended
	June 30,				June 30,
	2017		2018		2017		2018
Revenues:
License	$	30,318	$	41,121	$	63,270	$	79,615
Maintenance and professional services		27,162		36,592		53,245		69,881
Total revenues		57,480		77,713		116,515		149,496
Cost of revenues:
License		1,907		2,510		3,491		4,907
Maintenance and professional services		8,093		9,198		15,776		18,089
Total cost of revenues		10,000		11,708		19,267		22,996
Gross profit		47,480		66,005		97,248		126,500
Operating expenses:
Research and development		9,561		13,808		18,775		26,792
Sales and marketing		29,500		35,521		57,178		70,103
General and administrative		7,409		9,714		14,287		18,613
Total operating expenses		46,470		59,043		90,240		115,508
Operating income		1,010		6,962		7,008		10,992
Financial income, net		1,127		225		1,675		2,066
Income before taxes on income		2,137		7,187		8,683		13,058
Tax benefit		1,109		1,190		2,099		1,740
Net income	$	3,246	$	8,377	$	10,782	$	14,798
Basic net income per ordinary share	$	0.09	$	0.23	$	0.31	$	0.41
Diluted net income per ordinary share	$	0.09	$	0.23	$	0.30	$	0.40
Shares used in computing net income
per ordinary shares, basic		34,729,119		36,001,580		34,563,040		35,724,717
Shares used in computing net income
per ordinary shares, diluted		36,194,471		36,923,520		36,147,712		36,680,585
Share-based Compensation Expense:
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2018		2017		2018
Cost of revenues	$	504	$	758	$	957	$	1,413
Research and development		1,523		2,007		2,832		3,511
Sales and marketing		2,018		2,874		3,689		5,291
General and administrative		2,197		2,774		3,963		5,121
Total share-based compensation expense	$	6,242	$	8,413	$	11,441	$	15,336

CYBERARK SOFTWARE LTD. Consolidated Balance Sheets U.S. dollars in thousands (Unaudited)
	December 31,		June 30,
	2017		2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	161,261	$	205,193
Short-term bank deposits		107,647		100,818
Marketable securities		34,025		51,025
Trade receivables		45,315		32,959
Prepaid expenses and other current assets		7,407		10,344
Total current assets		355,655		400,339
LONG-TERM ASSETS:
Property and equipment, net		9,230		11,858
Intangible assets, net		15,664		18,017
Goodwill		69,217		83,157
Marketable securities		27,407		20,477
Severance pay fund		3,692		3,558
Other long-term assets		2,368		18,451
Deferred tax asset		19,343		21,383
Total long-term assets		146,921		176,901
TOTAL ASSETS	$	502,576	$	577,240
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$	1,960	$	4,359
Employees and payroll accruals		25,253		26,298
Accrued expenses and other current liabilities		10,209		6,474
Deferred revenues		66,986		81,660
Total current liabilities		104,408		118,791
LONG-TERM LIABILITIES:
Deferred revenues		38,249		47,901
Other long-term liabilities		242		1,400
Accrued severance pay		5,712		5,445
Total long-term liabilities		44,203		54,746
TOTAL LIABILITIES		148,611		173,537
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.01 par value		91		94
Additional paid-in capital		249,874		273,323
Accumulated other comprehensive income (loss)		107		(1,154	)
Retained earnings		103,893		131,440
Total shareholders' equity		353,965		403,703
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	502,576	$	577,240

CYBERARK SOFTWARE LTD. Consolidated Statements of Cash Flows U.S. dollars in thousands (Unaudited)
	Six Months Ended
	June 30,
	2017			2018
Cash flows from operating activities:
Net income	$	10,782		$	14,798
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		3,509			4,676
Amortization of premium on marketable securities		190			208
Share-based compensation expenses		11,441			15,336
Deferred income taxes, net		(3,642	)		(4,710	)
Decrease in trade receivables		3,412			12,357
Increase in prepaid expenses and other current and long-term assets		(1,257	)		(6,272	)
Increase (decrease) in trade payables		(869	)		2,003
Increase in short term and long term deferred revenues		9,339			27,845
Decrease in employees and payroll accruals		(1,953	)		(5,168	)
Decrease in accrued expenses and other
current and long-term liabilities		(1,391	)		(4,716	)
Increase (decrease) in accrued severance pay, net		91			(133	)
Net cash provided by operating activities		29,652			56,224
Cash flows from investing activities:
Proceeds from short and long term deposit		-			7,775
Investment in short and long term deposits		(9,646	)		-
Investment in marketable securities		(17,760	)		(30,563	)
Proceeds from maturities of marketable securities		9,106			20,114
Purchase of property and equipment		(2,038	)		(4,098	)
Payments for business acquisitions, net of cash acquired		(41,448	)		(18,450	)
Net cash used in investing activities		(61,786	)		(25,222	)
Cash flows from financing activities:
Proceeds from withholding tax related to employee stock plans		-			5,509
Proceeds from exercise of stock options		1,926			8,090
Net cash provided by financing activities		1,926			13,599
Increase (decrease) in cash, cash equivalents and restricted cash		(30,208	)		44,601
Cash, cash equivalents and restricted cash at the beginning of the period		174,156			162,520
Cash, cash equivalents and restricted cash at the end of the period	$	143,948		$	207,121

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						Six Months Ended
	June 30,						June 30,
	2017			2018			2017			2018
Gross profit	$	47,480		$	66,005		$	97,248		$	126,500
Plus:
Share-based compensation - Maintenance & professional services		504			758			957			1,413
Amortization of intangible assets - License		992			1,444			1,835			2,674
Non-GAAP gross profit	$	48,976		$	68,207		$	100,040		$	130,587
Reconciliation of Operating Income to Non-GAAP Operating Income:
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2018			2017			2018
Operating income	$	1,010		$	6,962		$	7,008		$	10,992
Plus:
Share-based compensation		6,242			8,413			11,441			15,336
Amortization of intangible assets - Cost of revenues		992			1,444			1,835			2,674
Amortization of intangible assets - Sales and marketing		289			199			535			397
Acquisition related expenses		248			-			686			268
Non-GAAP operating income	$	8,781		$	17,018		$	21,505		$	29,667
Reconciliation of Net Income to Non-GAAP Net Income:
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2018			2017			2018
Net income	$	3,246		$	8,377		$	10,782		$	14,798
Plus:
Share-based compensation		6,242			8,413			11,441			15,336
Amortization of intangible assets - Cost of revenues		992			1,444			1,835			2,674
Amortization of intangible assets - Sales and marketing		289			199			535			397
Acquisition related expenses		248			-			686			268
Taxes on income related to non-GAAP adjustments		(3,274	)		(4,964	)		(7,289	)		(8,193	)
Non-GAAP net income	$	7,743		$	13,469		$	17,990		$	25,280
Non-GAAP net income per share
Basic	$	0.22		$	0.37		$	0.52		$	0.71
Diluted	$	0.21		$	0.36		$	0.50		$	0.69
Weighted average number of shares
Basic		34,729,119			36,001,580			34,563,040			35,724,717
Diluted		36,194,471			36,923,520			36,147,712			36,680,585