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CyberArk's (CYBR) Q1 Earnings & Revenues Beat, '18 View Up

Shares of CyberArk Software Ltd. CYBR gained nearly 3% during yesterday’s after-hour trading session on splendid first-quarter 2018 results. The reported figures exceeded the guidance and surpassed the Zacks Consensus Estimate as well. Encouraging revenue guidance for the ongoing quarter and the full year also contributed to the upswing.

Now let’s discuss quarterly results in detail.

Revenues

CyberArk’s revenues were up 22% year over year to $71.8 million and came ahead of management’s guided range of $68.25-$69.75 million (mid-point $69 million), as well as the Zacks Consensus Estimate of $69 million. The company’s top line mainly benefited from better sales execution, customer acquisitions and add-on business from existing clients.

During the reported quarter, the company closed a number of deals, including a significant number of seven-figure new clients. Also, CyberArk witnessed a remarkable number of federal deals in the quarter. The company added more than 150 customers and ended the quarter with more than 3,800 clients.

Segment wise, License revenues which accounted for 54% of total revenues, increased 17% year over year to $38.5 million. Maintenance and Professional Services revenues, contributing 46% to total revenues, jumped 28% year over year to $33.3 million.

Geographically, the company witnessed revenue growth across every region. On a year-over-year basis, revenues from the Americas increased 18% and contributed 62% of total revenues. Revenues in the Asia Pacific and Japan were up 28% year over year, representing 8% of total revenues. EMEA recorded a 29% jump and accounted for 30% of total revenues.

CyberArk Software Ltd. Price and EPS Surprise

CyberArk Software Ltd. Price and EPS Surprise | CyberArk Software Ltd. Quote

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Operating Results

CyberArk’s non-GAAP gross profit came in at $62.4 million, representing year-over-year growth of 22.2%. Gross margin expanded 40 basis points (bps) year over year to 86.9% in the first quarter.

The company reported non-GAAP operating income of $12.6 million, down marginally from $12.7 million reported in the year-ago quarter. However, operating income came in higher than the company’s guided range of $9.2-$10.4 million.

Non-GAAP operating margin dipped to 17.6% from 21.6%, primarily due to elevated operating expenses as a percentage of revenues. Escalated operating expenses mainly resulted from increased investment toward research & development and expanding sales capabilities.

The company reported non-GAAP net income of approximately $11.8 million, slightly up from $10.2 million reported in the year-ago quarter. However, net income margin contracted 90 bps to 16.5%.

On per-share basis, the company reported non-GAAP earnings of 32 cents, up 14.3% from the year-ago quarter. Benefits from higher revenues were partially offset by elevated operating expenses.

However, quarterly earnings came ahead of management’s guided range of 19-22 cents, and surpassed the Zacks Consensus Estimate of 21 cents as well.

Balance Sheet & Cash Flow

CyberArk exited the first quarter with cash, cash equivalents, short-term deposits and marketable securities of approximately $325.4 million, up from $302.9 million at the end of fourth-quarter 2017. Receivables were $38.4 million at the end of the reported quarter.

CyberArk’s balance sheet does not have any long-term debt. The company generated cash flow from operations of approximately $33.1 million in the first quarter.

Guidance

Buoyed by splendid first-quarter results, the company issued an encouraging outlook for the second quarter and raised the full-year guidance.

For the current year, CyberArk now anticipates revenues in the band of $315–$319 million (mid-point $317 million), representing 20-22% year-over-year growth, up from $312-$316 million (mid-point $314 million) predicted earlier. The guided range is higher than the Zacks Consensus Estimate of $314.4 million.

Non-GAAP operating income is now projected to lie between $57.5 million and $60.5 million, up from the previous projection of $54.5–$57.5 million. Non-GAAP earnings per share for 2018 are now expected to lie in the $1.31–$1.37 band, against the previous estimate of $1.18–$1.24. The earnings projection is also higher than the Zacks Consensus Estimate of $1.22.

For the second quarter, CyberArk estimates revenues in the range of $72-$73.5 million (mid-point $72.75 million), representing 25-28% year-over-year growth. The mid-point of the guided range is higher than the Zacks Consensus Estimate of $72.03 million. Non-GAAP operating income is predicted to lie in the band of $10.2-$11.4 million. The company projects non-GAAP earnings for the second quarter in the 23-25 cents range. The Zacks Consensus Estimate is currently pegged at 22 cents.

Our Take

The company’s outstanding first-quarter results, along with an encouraging outlook, indicate that its ongoing investment in sales and marketing strategies are paying off.

CyberArk’s expansion strategy through acquisitions is encouraging for the near term.  Per the company, last year’s acquisition of Conjur business has received strong customer response. Conjur specializes in offering DevOps security software. Therefore, the acquisition is anticipated to boost CyberArk’s capabilities in empowering companies to accelerate software deployment in their organizations with more security.

Moreover, CyberArk’s strategy of enhancing relationship with channel partners is bringing in new customers. The company noted that channel partners make a key component to its go-to-market sales strategy and generated roughly 60% of the business in the first quarter.

Apart from this, the company’s C3 technology alliance program is also influencing deals, in turn, bolstering its revenues. CyberArk has nearly 70 partners, now, under this program, which includes companies like Proofpoint PFPT, Qualys QLYS and ServiceNow NOW    .

We believe the company’s continued focus on the aforementioned initiatives will continue to drive its top-line performance.

Currently, CyberArk has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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