CYBR CyberArk Software Ltd

Third quarter total revenue of $64.8 million, 18 percent year-over-year increase

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 third quarter ended September 30, 2017.

“We were pleased that CyberArk exceeded its guidance in the third quarter,” said Udi Mokady, CyberArk Chairman and CEO. “Our results were driven by both new and add-on business. We are making early progress executing our strategy to globalize the sales organization, which we believe will position us to capitalize on the long term opportunity for Privileged Account Security.”

Financial Highlights for the Third Quarter Ended September 30, 2017

Revenue:

• Total revenue was $64.8 million, an increase from $55.0 million in the third quarter of 2016.
• License revenue was $35.8 million, compared to $33.3 million in the third quarter of 2016.
• Maintenance and Professional Services revenue was $29.0 million, an increase from $21.7 million in the third quarter of 2016.

Operating Income:

• GAAP operating income was $1.7 million for the quarter, compared to $8.1 million in the third quarter of 2016.
• Non-GAAP operating income was $10.7 million for the quarter, compared to $14.3 million in the third quarter of 2016.

Net Income:

• GAAP net income was $1.7 million, or $0.05 per diluted share, compared to GAAP net income of $7.1 million, or $0.20 per diluted share, in the third quarter of 2016.
• Non-GAAP net income was $8.9 million, or $0.25 per diluted share, compared to $11.8 million, or $0.33 per diluted share, in the third quarter of 2016.

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, 2017 and 2016. 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, 2017, CyberArk had $296.8 million in cash, cash equivalents, marketable securities and short-term deposits. This compares to $295.5 million as of December 31, 2016.
• During the first nine months of 2017, CyberArk generated $44.6 million in cash flow from operations, compared to $36.2 million in the first nine months of 2016.

Business Outlook

Based on information available as of November 2, 2017, CyberArk is issuing guidance for the fourth quarter and full year 2017 as indicated below.

Fourth Quarter 2017:

• Total revenue is expected to be in the range of $75.0 million to $76.0 million which represents 17% to 18% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $16.8 million to $17.6 million.
• Non-GAAP net income per share is expected to be in the range of $0.35 to $0.36 per diluted share. This assumes 36.4 million weighted average diluted shares.

Full Year 2017:

• Total revenue is expected to be in the range of $256.3 million to $257.3 million, which represents 18% to 19% year-over-year growth.
• Non-GAAP operating income is expected to be in the range of $48.9 million to $49.7 million.
• Non-GAAP net income per share is expected to be in the range of $1.09 to $1.10 per diluted share. This assumes 36.3 million weighted average diluted shares.

Conference Call Information

CyberArk will host a conference call on today, Thursday, November 2, 2017 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 +1 844-237-3590 (U.S.) or +1 484-747-6582 (international). The conference ID is 75374407. 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 75374407. 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 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 more than 50 percent of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. 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 blog, or follow on Twitter via @CyberArk, LinkedIn or Facebook.

Copyright © 2017 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 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 costs, amortization of intangible assets related to acquisitions and the tax effect of 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, acquisition related expenses, facility exit costs 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 acquisitions, facility exit costs 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,” “guide,” “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, 2016 2017 2016 2017   Revenues: License $ 33,257 $ 35,818 $ 90,736 $ 99,088 Maintenance and professional services 21,707 29,000 61,519 82,245         Total revenues 54,964 64,818 152,255 181,333   Cost of revenues: License 1,084 2,161 3,641 5,652 Maintenance and professional services 6,962 8,801 17,750 24,577         Total cost of revenues 8,046 10,962 21,391 30,229         Gross profit 46,918 53,856 130,864 151,104         Operating expenses: Research and development 9,192 11,369 25,290 30,144 Sales and marketing 23,800 32,877 67,300 90,055 General and administrative 5,841 7,927 15,527 22,214         Total operating expenses 38,833 52,173 108,117 142,413         Operating income 8,085 1,683 22,747 8,691   Financial income, net 368 816 341 2,491   Income before taxes on income 8,453 2,499 23,088 11,182   Tax benefit (taxes on income) (1,341) (818) (5,203) 1,281   Net income $ 7,112 $ 1,681 $ 17,885 $ 12,463     Basic net income per ordinary share $ 0.21 $ 0.05 $ 0.53 $ 0.36 Diluted net income per ordinary share $ 0.20 $ 0.05 $ 0.50 $ 0.34   Shares used in computing net income per ordinary shares, basic 33,886,461 34,979,389 33,601,280 34,703,328 Shares used in computing net income per ordinary shares, diluted 35,983,790 36,184,151 35,798,352 36,153,515         Share-based Compensation Expense:   Three Months Ended Nine Months Ended September 30, September 30, 2016 2017 2016 2017     Cost of revenues $ 423 $ 701 $ 949 $ 1,658 Research and development 1,403 1,775 3,341 4,607 Sales and marketing 1,544 2,459 4,140 6,148 General and administrative 1,721 2,267 4,013 6,230   Total share-based compensation expense $ 5,091 $ 7,202 $ 12,443 $ 18,643         CYBERARK SOFTWARE LTD. Consolidated Balance Sheets U.S. dollars in thousands (Unaudited) December 31, September 30,   2016   2017     ASSETS   CURRENT ASSETS: Cash and cash equivalents $ 172,957 $ 145,365 Short-term bank deposits 86,829 100,968 Marketable securities 15,246 27,968 Trade receivables 33,330 33,906 Prepaid expenses and other current assets   4,804   5,847   Total current assets   313,166   314,054   LONG-TERM ASSETS: Property and equipment, net 4,760 8,076 Intangible assets, net 14,035 17,108 Goodwill 35,145 69,355 Marketable securities 20,443 22,503 Severance pay fund 3,332 3,741 Prepaid expenses and other long-term assets 1,761 1,621 Deferred tax asset   10,389   27,957   Total long-term assets   89,865   150,361   TOTAL ASSETS $ 403,031 $ 464,415   LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES: Trade payables $ 2,699 $ 3,464 Employees and payroll accruals 18,470 19,308 Accrued expenses and other current liabilities 6,876 6,725 Deferred revenues   50,111   57,726   Total current liabilities   78,156   87,223   LONG-TERM LIABILITIES: Deferred revenues 23,395 27,854 Other long-term liabilities 229 249 Accrued severance pay   5,035   5,826   Total long-term liabilities   28,659   33,929   TOTAL LIABILITIES   106,815   121,152   SHAREHOLDERS' EQUITY: Ordinary shares of NIS 0.01 par value 88 90 Additional paid-in capital 221,609 242,704 Accumulated other comprehensive income (loss) (175) 128 Retained earnings   74,694   100,341   Total shareholders' equity   296,216   343,263   TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 403,031 $ 464,415           CYBERARK SOFTWARE LTD. Consolidated Statements of Cash Flows U.S. dollars in thousands (Unaudited)   Nine Months Ended September 30, 2016 2017   Cash flows from operating activities: Net income $ 17,885 $ 12,463 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization 4,744 5,731 Amortization of premium on marketable securities 165 286 Share-based compensation expenses 12,443 18,643 Tax benefit related to share-based compensation (889) - Deferred income taxes, net (1,616) (3,387) Increase in trade receivables (6,321) (222) Increase in prepaid expenses and other current and long-term assets (606) (578) Decrease in trade payables (174) (913) Increase in short term and long term deferred revenues 12,406 12,074 Increase in employees and payroll accruals 76 384 Decrease in accrued expenses and other current and long-term liabilities (2,109) (279) Increase in accrued severance pay, net 240 382   Net cash provided by operating activities 36,244 44,584   Cash flows from investing activities: Proceeds from short and long term deposits - 131 Investment in short and long term deposits (88,361) (14,132) Investment in marketable securities (37,351) (28,303) Proceeds from maturities of marketable securities - 13,217 Purchase of property and equipment (2,446) (3,840) Payments for business acquisitions, net of cash acquired - (41,329)   Net cash used in investing activities (128,158) (74,256)   Cash flows from financing activities: Tax benefit related to share-based compensation 889 - Proceeds from exercise of stock options 1,678 2,080   Net cash provided by financing activities 2,567 2,080   Decrease in cash and cash equivalents (89,347) (27,592)   Cash and cash equivalents at the beginning of the period 234,539 172,957   Cash and cash equivalents at the end of the period $ 145,192 $ 145,365         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, 2016 2017 2016 2017   Gross profit $ 46,918 $ 53,856 $ 130,864 $ 151,104 Plus: Share-based compensation - Maintenance & professional services 423 701 949 1,658 Amortization of intangible assets - License 355 1,195 1,065 3,030   Non-GAAP gross profit $ 47,696 $ 55,752 $ 132,878 $ 155,792           Reconciliation of Operating Income to Non-GAAP Operating Income:   Three Months Ended Nine Months Ended September 30, September 30, 2016 2017 2016 2017     Operating income $ 8,085 $ 1,683 $ 22,747 $ 8,691 Plus: Share-based compensation 5,091 7,202 12,443 18,643 Amortization of intangible assets - Cost of revenues 355 1,195 1,065 3,030 Amortization of intangible assets - Research and development 478 - 1,434 - Amortization of intangible assets - Sales and marketing 301 249 903 784 Acquisition related expenses - - - 686 Facility exit costs - 342 - 342   Non-GAAP operating income $ 14,310 $ 10,671 $ 38,592 $ 32,176     Reconciliation of Net Income to Non-GAAP Net Income:   Three Months Ended Nine Months Ended September 30, September 30, 2016 2017 2016 2017     Net income $ 7,112 $ 1,681 $ 17,885 $ 12,463 Plus: Share-based compensation 5,091 7,202 12,443 18,643 Amortization of intangible assets - Cost of revenues 355 1,195 1,065 3,030 Amortization of intangible assets - Research and development 478 - 1,434 - Amortization of intangible assets - Sales and marketing 301 249 903 784 Acquisition related expenses - - - 686 Facility exit costs - 342 - 342 Taxes on income related to non-GAAP adjustments (1,576) (1,757) (3,155) (9,046)   Non-GAAP net income $ 11,761 $ 8,912 $ 30,575 $ 26,902   Non-GAAP net income per share Basic $ 0.35 $ 0.25 $ 0.91 $ 0.78 Diluted $ 0.33 $ 0.25 $ 0.85 $ 0.74   Weighted average number of shares Basic 33,886,461 34,979,389 33,601,280 34,703,328 Diluted 35,983,790 36,184,151 35,798,352 36,153,515

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