CYBR CyberArk Software Ltd

Record total revenue of $84.7 million increases by 31% year-over-year

GAAP operating income of $8.8 million and record non-GAAP operating income of $21.0 million

Net cash provided by operating activities for the nine months of $89.2 million

Deferred revenue of $136.0 million increases by 59% year-over-year

CyberArk (NASDAQ: CYBR), the global leader in privileged access security, today announced record total revenue and strong financial results for the third quarter ended September 30, 2018.

“We exceeded our financial outlook across all guided metrics, while generating record revenue and non-GAAP operating income in the third quarter,” said Udi Mokady, CyberArk Chairman and CEO. “Our strong results reflect our success executing our growth strategy across sales and marketing as well as delivering innovative solutions that help strengthen customers’ overall security posture on premises, in the cloud and across the DevOps pipeline. Given our strong leadership position in the privileged access security market and our performance year to date, we are pleased to raise our full year guidance for 2018.”

Financial Highlights for the Third Quarter Ended September 30, 2018

Revenue:

• Total revenue was $84.7 million, a 31% increase from $64.8 million in the third quarter of 2017.
• License revenue was $46.1 million, a 29% increase compared to $35.8 million in the third quarter of 2017.
• Maintenance and Professional Services revenue was $38.5 million, a 33% increase from $29.0 million in the third quarter of 2017.

Operating Income:

• GAAP operating income was $8.8 million for the quarter, compared to $1.7 million in the third quarter of 2017.
• Non-GAAP operating income was $21.0 million for the quarter, compared to $10.7 million in the third quarter of 2017.

Net Income:

• GAAP net income was $8.1 million, or $0.22 per diluted share, compared to GAAP net income of $1.7 million, or $0.05 per diluted share, in the third quarter of 2017.
• Non-GAAP net income was $17.8 million, or $0.48 per diluted share, compared to $8.9 million, or $0.25 per diluted share, in the third quarter of 2017.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP gross profit, operating income and net income for the three months and nine months ended September 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 September 30, 2018, CyberArk had $410.0 million in cash, cash equivalents, marketable securities and short-term deposits. This compares to $330.3 million as of December 31, 2017 and $296.8 million at September 30, 2017.
• As of September 30, 2018, total deferred revenue was $136.0 million, a 29% increase from $105.2 million at December 31, 2017 and a 59% increase from $85.6 million at September 30, 2017.
• During the first nine months of 2018, CyberArk generated $89.2 million in net cash provided by operating activities, an increase of 100% from $44.6 million in the first nine months of 2017.

Business Outlook

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

Fourth Quarter 2018:

• Total revenue is expected to be in the range of $94.75 million to $96.25 million which represents 18% to 20% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $27.3 million to $28.5 million, or an operating margin of 29% to 30%.
• Non-GAAP net income per share is expected to be in the range of $0.58 to $0.60 per diluted share. This assumes 37.9 million weighted average diluted shares.

Full Year 2018:

• Total revenue is expected to be in the range of $328.9 million to $330.4 million, which represents 26% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $78.0 million to $79.2 million, or an operating margin of 24%.
• Non-GAAP net income per share is expected to be in the range of $1.75 to $1.77 per diluted share. This assumes 37.2 million weighted average diluted shares.

Conference Call Information

CyberArk will host a conference call on today, Wednesday, November 7, 2018 at 4:30 p.m. Eastern Time (ET) to discuss the company’s third quarter financial results and its business outlook. To access this call, dial +1 844-237-3590 (U.S.) or +1 484-747-6582 (international). The conference ID is 2673547. 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 +1 855-859-2056 (U.S.) or +1 404-537-3406 (international). The replay pass code is 2673547. 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, facility exit and transitions 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 transitions costs, amortization of intangible assets related to acquisitions, intra-entity IP transfer tax effect and the tax effect of the other 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, facility exit and transitions 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 transitions cost 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 transitions 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; 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

Nine Months Ended September 30, September 30, 2017 2018 2017 2018   Revenues: License $ 35,818 $ 46,130 $ 99,088 $ 125,745 Maintenance and professional services 29,000 38,523 82,245 108,404         Total revenues 64,818 84,653 181,333 234,149   Cost of revenues: License 2,161 2,614 5,652 7,521 Maintenance and professional services 8,801 9,530 24,577 27,619         Total cost of revenues 10,962 12,144 30,229 35,140         Gross profit 53,856 72,509 151,104 199,009         Operating expenses: Research and development 11,369 14,980 30,144 41,772 Sales and marketing 32,877 37,880 90,055 107,983 General and administrative 7,927 10,870 22,214 29,483         Total operating expenses 52,173 63,730 142,413 179,238         Operating income 1,683 8,779 8,691 19,771   Financial income, net   816     1,407     2,491   3,473     Income before taxes on income 2,499 10,186 11,182 23,244   Tax benefit (taxes on income)   (818 )   (2,092 )   1,281   (352 )   Net income $ 1,681   $ 8,094   $ 12,463 $ 22,892       Basic net income per ordinary share $ 0.05   $ 0.22   $ 0.36 $ 0.64   Diluted net income per ordinary share $ 0.05   $ 0.22   $ 0.34 $ 0.62     Shares used in computing net income per ordinary shares, basic   34,979,389     36,485,724     34,703,328   35,981,177   Shares used in computing net income per ordinary shares, diluted   36,184,151     37,475,729     36,153,515   36,894,457           Share-based Compensation Expense:   Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018     Cost of revenues $ 701 $ 957 $ 1,658 $ 2,370 Research and development 1,775 2,237 4,607 5,748 Sales and marketing 2,459 3,770 6,148 9,061 General and administrative   2,267     3,371     6,230   8,492     Total share-based compensation expense $ 7,202   $ 10,335   $ 18,643 $ 25,671             CYBERARK SOFTWARE LTD. Consolidated Balance Sheets U.S. dollars in thousands (Unaudited) December 31, September 30, 2017 2018     ASSETS   CURRENT ASSETS: Cash and cash equivalents $ 161,261 $ 205,247 Short-term bank deposits 107,647 127,695 Marketable securities 34,025 53,532 Trade receivables 45,315 29,707 Prepaid expenses and other current assets   7,407   8,413     Total current assets   355,655   424,594     LONG-TERM ASSETS: Property and equipment, net 9,230 13,596 Intangible assets, net 15,664 16,374 Goodwill 69,217 83,156 Marketable securities 27,407 23,544 Severance pay fund 3,692 3,669 Other long-term assets 2,368 21,379 Deferred tax asset   19,343   23,076     Total long-term assets   146,921   184,794     TOTAL ASSETS $ 502,576 $ 609,388     LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES: Trade payables $ 1,960 $ 2,841 Employees and payroll accruals 25,253 25,861 Accrued expenses and other current liabilities 10,209 7,623 Deferred revenues   66,986   84,176     Total current liabilities   104,408   120,501     LONG-TERM LIABILITIES: Deferred revenues 38,249 51,838 Other long-term liabilities 242 1,218 Accrued severance pay   5,712   5,692     Total long-term liabilities   44,203   58,748     TOTAL LIABILITIES   148,611   179,249     SHAREHOLDERS' EQUITY: Ordinary shares of NIS 0.01 par value 91 95 Additional paid-in capital 249,874 291,087 Accumulated other comprehensive income (loss) 107 (577 ) Retained earnings   103,893   139,534     Total shareholders' equity   353,965   430,139     TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 502,576 $ 609,388               CYBERARK SOFTWARE LTD. Consolidated Statements of Cash Flows U.S. dollars in thousands (Unaudited)   Nine Months Ended September 30, 2017 2018   Cash flows from operating activities: Net income $ 12,463 $ 22,892 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,731 7,327 Amortization of premium on marketable securities 286 270 Share-based compensation expenses 18,643 25,671 Deferred income taxes, net (3,387 ) (6,669 ) Decrease (increase) in trade receivables (222 ) 15,608 Increase in prepaid expenses and other current and long-term assets (578 ) (5,669 ) Increase (decrease) in trade payables (913 ) 771 Increase in short term and long term deferred revenues 12,074 34,298 Increase (decrease) in employees and payroll accruals 384 (2,315 ) Decrease in accrued expenses and other current and long-term liabilities (279 ) (3,031 ) Increase in accrued severance pay, net   382     3     Net cash provided by operating activities   44,584     89,156     Cash flows from investing activities: Investment in short and long term deposits (14,132 ) (19,768 ) Investment in marketable securities (28,303 ) (47,316 ) Proceeds from maturities of marketable securities 13,217 31,198 Purchase of property and equipment (3,840 ) (7,130 ) Payments for business acquisitions, net of cash acquired   (41,329 )   (18,450 )   Net cash used in investing activities   (74,387 )   (61,466 )   Cash flows from financing activities: Proceeds from withholding tax related to employee stock plans - 2,220 Proceeds from exercise of stock options   2,080     14,038     Net cash provided by financing activities   2,080     16,258     Increase (decrease) in cash, cash equivalents and restricted cash (27,723 ) 43,948   Cash, cash equivalents and restricted cash at the beginning of the period   174,156     162,518     Cash, cash equivalents and restricted cash at the end of the period $ 146,433   $ 206,466                   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, 2017 2018 2017 2018   Gross profit $ 53,856 $ 72,509 $ 151,104 $ 199,009 Plus: Share-based compensation - Maintenance & professional services 701 957 1,658 2,370 Amortization of intangible assets - License   1,195     1,444     3,030     4,118     Non-GAAP gross profit $ 55,752   $ 74,910   $ 155,792   $ 205,497             Reconciliation of Operating Income to Non-GAAP Operating Income:   Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018     Operating income $ 1,683 $ 8,779 $ 8,691 $ 19,771 Plus: Share-based compensation 7,202 10,335 18,643 25,671 Amortization of intangible assets - Cost of revenues 1,195 1,444 3,030 4,118 Amortization of intangible assets - Sales and marketing 249 198 784 595 Acquisition related expenses - - 686 268 Facility exit and transitions costs   342     253     342     253     Non-GAAP operating income $ 10,671   $ 21,009   $ 32,176   $ 50,676       Reconciliation of Net Income to Non-GAAP Net Income:   Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018     Net income $ 1,681 $ 8,094 $ 12,463 $ 22,892 Plus: Share-based compensation 7,202 10,335 18,643 25,671 Amortization of intangible assets - Cost of revenues 1,195 1,444 3,030 4,118 Amortization of intangible assets - Sales and marketing 249 198 784 595 Acquisition related expenses - - 686 268 Facility exit and transitions costs 342 253 342 253 Taxes on income related to non-GAAP adjustments (1,757 ) (4,764 ) (9,046 ) (12,957 ) Intra-entity IP transfer tax effect, net   -     2,243     -     2,243     Non-GAAP net income $ 8,912   $ 17,803   $ 26,902   $ 43,083     Non-GAAP net income per share Basic $ 0.25   $ 0.49   $ 0.78   $ 1.20   Diluted $ 0.25   $ 0.48   $ 0.74   $ 1.17     Weighted average number of shares Basic   34,979,389     36,485,724     34,703,328     35,981,177   Diluted   36,184,151     37,475,729     36,153,515     36,894,457  

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CyberArkInvestor Contact:Erica Smith, +1-617-558-2132ir@cyberark.comorMedia Contact:Liz Campbell, +1-617-558-2191press@cyberark.com