SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Exact name of Registrant as specified in its charter)
Telephone: +972 (3) 918-0000
CyberArk Software Ltd.
9 Hapsagot St.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary shares, par value NIS 0.01 per share | CYBR | The Nasdaq Stock Market LLC |
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ |
Emerging growth company ☐ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
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PART I | ||
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PART II | ||
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PART III | ||
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101 |
• | changes to the drivers of our growth and our ability to adapt our solutions to the information security market changes and demands; |
• | our ability to acquire new customers and maintain and expand our revenues from existing customers; |
• | intense competition within the information security market; |
• | real or perceived security vulnerabilities gaps, or cybersecurity breaches of our, or our customers’ or partners’ systems, solutions or services ; |
• | risks related to our compliance with privacy, data protection and artificial intelligence (AI) laws and regulations; |
• | fluctuation in our quarterly results of operations and our ability to successfully operate our business as a subscription company; |
• | our reliance on third-party cloud providers for our operations and software-as-a-service (“SaaS”) solutions; |
• | our ability to hire, train, retain and motivate qualified personnel; |
• | our ability to effectively execute our sales and marketing strategies; |
• | our ability to find, complete, fully integrate or achieve the expected benefits of additional strategic acquisitions; |
• | our ability to main successful relationships with channel partners, or if our channel partners fail to perform; |
• | risks related to sales made to government entities; |
• | prolonged economic uncertainties or downturns; |
• | our history of incurring net losses, our ability to generate sufficient revenue to achieve and sustain profitability and our ability to generate cash flow from operating activities; |
• | regulatory and geopolitical risks associated with our global sales and operations; |
• | risks related to intellectual property claims; |
• | fluctuations in currency exchange rates; |
• | the ability of our products to help customers achieve and maintain compliance with government regulations or industry standards; |
• | our ability to protect our proprietary technology and intellectual property rights; |
• | risks related to using third-party software, such as open-source software; |
• | risks related to stock price volatility or activist shareholders; |
• | any failure to retain our “foreign private issuer” status or the risk that we may be classified, for U.S. federal income tax purposes, as a “passive foreign investment company”; |
• | risks related to our Convertible Notes, including the potential dilution to existing shareholders and our ability to raise the funds necessary to repurchase our Convertible Notes; |
• | changes in tax laws; |
• | our expectation to not pay dividends on our ordinary shares for the foreseeable future; and |
• | risks related to our incorporation and location in Israel, including the ongoing war between Israel and Hamas and conflict in the region. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
• | PAM, including Endpoint Privilege Management, such as Delinea and BeyondTrust; |
• | IAM, such as Okta and Microsoft; and |
• | Secrets Management, such as Hashi Corporation. |
• | failure to fully comply with various global data privacy and data protection laws (see “—The dynamic regulatory environment around privacy, data protection, and AI may limit our offering or require modification of our products and services, which could limit our ability to attract new customers and support our current customers and increase our operational expenses. We could also be subject to investigations, litigation, or enforcement actions alleging that we fail to comply with regulatory requirements, which could harm our operating results and adversely affect our business.”); |
• | fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business (see “—We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.”); |
• | social, economic and political instability, war, civil disturbance or acts of terrorism, conflicts (including the ongoing conflicts between Israel and Hamas and Ukraine and Russia), security concerns, and any pandemics or epidemics; |
• | greater difficulty in enforcing contracts and managing collections, as well as longer collection periods; |
• | noncompliance with specific anti-bribery laws, without limitation, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010 and the heightened risk of unfair or corrupt business practices in certain geographies, which may include the improper or fraudulent sales arrangements by us, or by our channel partners or service providers that may impact financial results and result in restatements of, or irregularities in, financial statements; |
• | certain of our activities and products are subject to U.S., European Union, Israeli, and possibly other export and trade control and economic sanctions laws and regulations, which have and may additionally prohibit or restrict our ability to engage in business with certain countries and customers. If the applicable requirements related to export and trade controls change or expand, if we change the encryption functionality in our products, or if we develop other products, or export products from/to certain jurisdictions, we may fail to comply with such regulations or may need to satisfy additional requirements or obtain specific licenses to continue to export our products in the same global scope. Various countries also regulate the import or export of certain encryption products and other technologies and services and have enacted laws that could limit our ability to distribute or implement our products in those countries. In addition, applicable export control and sanctions laws and regulations may impact our ability to sell our products, directly or indirectly, to countries or territories that are the target of comprehensive sanctions or to prohibited parties; |
• | unexpected changes in regulatory practices and foreign legal requirements may adversely affect our business. The introduction of new cybersecurity laws and regulations and changes in existing ones or their enforcement, may impair our ability to sell our solutions in certain jurisdictions if we are not able to adapt our products and offerings to conform with such regulations. In addition, changes in tax regulations and uncertain tax obligations and effective tax rates, may result in recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, or changes in the valuation of our deferred tax assets and liabilities; |
• | new and developing laws and regulations, and compliance with, and the uncertainty of, laws and regulations that apply or may in future apply to our areas of business, including cybersecurity, corporate governance, anti-trust and competition, local and regional employment (including cross-border travel), employee and third-party complaints, supply chain regulation, limitation of liability, conflicts of interest, AI, securities regulations and other regulatory requirements affecting trade, local tariffs, product localization and investment; |
• | reduced or uncertain protection of intellectual property rights in some countries; and |
• | management communication and integration problems resulting from cultural and geographic dispersion. |
• | actual or anticipated fluctuations in our results of operations and the results of other similar companies; |
• | variance in our financial performance from the expectations of market analysts; |
• | announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans; |
• | changes in the prices of our products and services or in our pricing models; |
• | our involvement in litigation; |
• | our sale of ordinary shares or other securities in the future; |
• | market conditions in our industry; |
• | speculation in the press or the investment community; |
• | the trading volume of our ordinary shares; |
• | changes in the estimation of the future size and growth rate of our markets; |
• | any merger and acquisition activities; and |
• | general economic and market conditions. |
A. | History and Development of the Company |
B. | Business Overview |
• | Strengthening our Identity Security leadership position by delivering ongoing innovation. We intend to extend our leadership position by enhancing our solutions, including utilization of AI, introducing new functionality and developing new offerings to address additional use cases. Our strategy includes both internal development and an active mergers and acquisition program in which we acquire or invest in complementary businesses or technologies. |
• | Extending our global go-to-market reach. We market and sell our solutions through a high-touch hybrid model that includes direct and indirect sales. We leverage our sophisticated marketing capabilities, such as account-based and inbound marketing, GTM plays, and our CyberArk IMPACT and IMPACT World Tour conferences, to drive demand and generate pipeline. We plan to expand our sales reach by adding new direct sales capacity, expanding our indirect channels by deepening our relationships with existing partners and by adding new partners, including value-added resellers, system integrators, managed security service providers, distributors, and C3 Alliance partners. We are also expanding our routes to market to include cloud provider marketplaces. |
• | Growing our customer base. The global threat landscape, digitalization of the enterprise, cloud migration and the broad security skills shortage are contributing to the need for Identity Security solutions. We believe that every organization, regardless of size or vertical, needs Identity Security. We plan to pursue new customers in the enterprise and corporate segments of the market with our sales and partner teams, as well as through our brand awareness and lead generation campaigns. |
• | Expanding our relationships with existing customers. As of December 31, 2023, we had more than 8,800 customers. We have worked hard to develop strong relationships with our customers. Our Customer Success team will focus on expanding these relationships by growing the number of users who access our solutions and cross-selling additional products and services. |
• | Driving strong adoption of our solutions and retaining our customer base. An important part of our overall strategy, particularly for our SaaS and self-hosted subscription customers, is delivering fast time to value from our solutions. We will continue to deliver high levels of customer service and support and invest in our Customer Success team to help ensure that our customers are up and running quickly and derive benefit from our software, which we believe will result in higher customer retention rates. |
• | Attracting, developing and retaining a diverse and inclusive employee base. A key pillar of our growth strategy is attracting, developing and retaining our employees. Our people are one of our most valuable assets, and our culture is a key business differentiator for CyberArk. We value diversity and inclusion, which allows for the exchange of ideas, creates a strong community, and helps ensure our employees feel valued and respected. |
While traditional, perimeter-based security relies on a strategy of trying to separate legitimate users from threat actors and assumes that systems and traffic within the corporate networks and datacenters can be trusted, Zero Trust assumes that the threat actors have already established a network presence and have access to an organization’s applications and systems. In a Zero Trust security model, organizations aim to have every identity continuously authenticated and authorized before granting it access.
o | Privileged Access Manager. CyberArk Privileged Access Manager and CyberArk Privilege Cloud include risk-based credential security and session management to protect against attacks involving privileged access. CyberArk’s self-hosted Privileged Access Manager solution can be deployed in a self-hosted data center or in a hybrid cloud or a public cloud environment. CyberArk Privileged Cloud is a SaaS solution. |
o | Vendor Privileged Access Manager. CyberArk Vendor Privileged Access Manager combines Privileged Access Manager or Privilege Cloud and Remote Access, a SaaS solution, to provide fast, easy and secure privileged access to third-party vendors who need access to critical internal systems via CyberArk, without the need to use passwords. By not requiring VPNs or agents, Vendor Privileged Access Manager removes operational overhead for administrators, makes it easier and quicker to deploy and improves organizational security. |
o | Dynamic Privileged Access. CyberArk Dynamic Privileged Access is a SaaS solution that provisions just-in-time (JIT), privileged access to Linux Virtual Machines (VMs hosted in AWS and Azure and on-premises windows servers). The solution leverages attribute-based access control and full session isolation to drive measurable risk reduction. Dynamic Privileged Access allows organizations to unify controls for JIT and standing privileged access across public cloud and on-premises systems, enabling operational efficiencies while progressing towards Zero Standing Privileges and Zero Trust initiatives. |
o | Endpoint Privilege Manager. CyberArk Endpoint Privilege Manager is a SaaS solution that secures privileges on the endpoint (Windows servers, Windows desktops and Mac desktops) and helps contain attacks early in their lifecycle. It enables revocation of local administrator rights, while minimizing impact on user productivity, by seamlessly elevating privileges for authorized applications or tasks. Application control, with automatic policy creation, allows organizations to prevent malicious applications from executing, and runs unknown applications in a restricted mode. This, combined with credential theft protection, helps prevent malware such as ransomware from gaining a foothold and contains attacks on the endpoint. |
o | Secure Desktop. CyberArk Secure Desktop solution lets businesses protect access to endpoints and enforce the principle of least privilege without complicating IT operations or hindering user productivity. The unified endpoint multifactor authentication and privilege management solution helps organizations strengthen access security, optimize user experiences, and eliminate the manually intensive, error-prone administrative processes that can lead to over provisioning and privilege abuse. |
o | Adaptive Multi-factor Authentication (MFA). Adaptive MFA enables an enterprise to enforce risk-aware and strong identity assurance controls within the organization. |
o | Single Sign-On (SSO). SSO is the ability to use a single secure identity to access all applications and resources within an organization. CyberArk Identity enables SSO for all types of users (workforce, partners, and consumers) to all types of workstations, systems, VPNs, and applications both in the cloud and on-premises. |
o | Secure Web Sessions. Secure Web Sessions records, audits and protects end-user activity within designated web applications. The solution uses a browser extension on an end-user’s endpoint to monitor and segregate web apps that are accessed through SSO and deemed sensitive by business application owners, enterprise IT and security administrators. |
o | Workforce Password Management. CyberArk Workforce Password Management is an enterprise-focused password manager providing a user-friendly solution to store data from business applications -like website URLs, usernames, passwords and notes – in a centralized vault and securely share it with other users in the organization. |
o | Application Gateway. With the CyberArk Identity Application Gateway service, customers can enable secure remote access and expand SSO benefits to on-premises web apps — like SharePoint and SAP — without the complexity of installing and maintaining VPNs. |
o | Identity Lifecycle Management. This module enables CyberArk Identity customers to automate the joiner, mover, and leaver processes within the organization. This automation is critical to ensure that privileges don’t accumulate, and a user’s access is turned off as soon as the individual changes roles or leaves the organization. |
o | Directory Services. Allows customers to use identity where they control it. In other words, we do not force our customers to synchronize their on-premises Active Directory implementation with our cloud. Our cloud architecture can work seamlessly with any existing directory, such as Active Directory, LDAP-based directories, and other federated directories. CyberArk Identity also provides its own highly scalable and flexible directory for customers who choose to use it. |
o | Secrets Manager Credential Providers. Credential Providers can be used to provide and manage the credentials used by third-party solutions such as security tools, RPA, and IT management software, and also supports internally developed applications built on traditional monolithic application architectures. Credential Providers works with CyberArk’s on-premises and SaaS based solutions. |
o | Conjur Enterprise and Conjur Cloud. For cloud-native applications built using DevOps methodologies, Conjur Enterprise and Conjur Cloud provide a secrets management solution tailored specifically to the unique requirements of these environments delivered either on-premises or in the cloud. We also provide an open-source version to better meet the needs of the developer community. |
o | Secrets Hub. CyberArk Secrets Hub enables security teams to have centralized visibility and management across secrets in native vaults, such as AWS Secrets Manager and Azure Key Vault, without impacting developer workflows. |
o | Secure Cloud Access. Secure Cloud Access is a service provided from the Identity Security Platform, offering secure, native access to cloud consoles, native services and workloads with zero standing privileges. This service addresses the needs of developers, site reliability engineers and administrators accessing services in their cloud environments via the console or command line interface (CLI). Secure Cloud Access greatly reduces the risk of compromised access in the public cloud, while providing native user experiences for the Cloud Engineering and DevOps teams leading digital transformation. |
• | PAM, including Endpoint Privilege Management, such as Delinea and BeyondTrust; |
• | IAM, such as Okta and Microsoft; and |
• | Secrets Management, including broad DevOps solutions, such as Hashi Corporation. |
o | the breadth and completeness of a security solution; |
o | reliability and effectiveness in protecting, detecting and responding to cyberattacks; |
o | analytics and accountability at an individual user level; |
o | the ability of customers to achieve and maintain compliance with compliance standards and audit requirements; |
o | strength of sale and marketing efforts, including advisory firms and channel partner relationships; |
o | global reach and customer base; |
o | scalability and ease of integration with an organization’s existing IT infrastructure and security investments; |
o | brand awareness and reputation; |
o | innovation, including AI and generative AI capabilities, and thought leadership; |
o | quality of customer support and professional services; |
o | the speed at which a solution can be deployed and implemented; and |
o | the price of a solution, including bundled or free offerings, and cost of maintenance and professional services. |
C. | Organizational Structure |
Name of Subsidiary | Place of Incorporation |
CyberArk Software, Inc. | Delaware, United States |
Cyber-Ark Software (UK) Limited | United Kingdom |
CyberArk Software (Singapore) Pte. Ltd. | Singapore |
CyberArk Software (DACH) GmbH | Germany |
CyberArk Software Italy S.r.l. | Italy |
CyberArk Software (France) SARL | France |
CyberArk Software (Netherlands) B.V. | Netherlands |
CyberArk Software (Australia) Pty Ltd. CyberArk Software (Japan) K.K. CyberArk Software Canada Inc. CyberArk USA Engineering, GP, LLC | Australia Japan Canada Delaware, United States |
CyberArk Software (Spain), S.L. | Spain |
CyberArk Software (India) Private Limited C3M India Private Limited CyberArk Turkey Siber Güvenlik Yazılımı Anonim Şirketi | India India Turkey |
D. | Property, Plant and Equipment |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
($ in millions) | ||||||||||||
Total ARR (as of period-end) | $ | 393 | $ | 570 | $ | 774 | ||||||
Subscription Portion of ARR (as of period-end) | $ | 183 | $ | 364 | $ | 582 | ||||||
Recurring revenues | $ | 349 | $ | 498 | $ | 680 | ||||||
Deferred revenue (as of period-end) | $ | 317 | $ | 408 | $ | 481 | ||||||
RPO (as of period-end) | $ | 516 | $ | 713 | $ | 972 | ||||||
Net cash provided by operating activities | $ | 75 | $ | 50 | $ | 56 |
A. | Operating Results |
Year ended December 31, | ||||||||||||||||||||||||
2021 | 2022 | 2023 | ||||||||||||||||||||||
Amount | % of Revenues | Amount | % of Revenues | Amount | % of Revenues | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
United States | $ | 253,811 | 50.5 | % | $ | 312,816 | 52.9 | % | $ | 393,355 | 52.3 | % | ||||||||||||
EMEA | 163,328 | 32.5 | 178,344 | 30.1 | 225,738 | 30.0 | ||||||||||||||||||
Rest of World | 85,778 | 17.0 | 100,550 | 17.0 | 132,795 | 17.7 | ||||||||||||||||||
Total revenues | $ | 502,917 | 100.0 | % | $ | 591,710 | 100.0 | % | $ | 751,888 | 100.0 | % |
o | Cost of Subscription Revenues. The cost of subscription revenues consists primarily of personnel costs related to our customer support and cloud operations. Personnel costs consist primarily of salaries, benefits, bonuses and share-based compensation. The cost of subscription revenues also includes cloud infrastructure costs, amortization of intangible assets and depreciation of internal use software capitalization. As we shift more of our sales to SaaS and self-hosted subscription offerings, we expect the absolute cost of subscription revenues to increase. |
o | Cost of Maintenance and Professional Services Revenues. The cost of maintenance related to perpetual license contracts and professional services revenues primarily consists of allocated personnel costs for our global customer support and professional services organization. Such costs consist primarily of salaries, benefits, bonuses, share-based compensation and subcontractors’ fees. As new perpetual licenses and their associated maintenance contracts continue to decrease, we are expecting our total cost of maintenance revenues to decline. Concurrently, we anticipate cost of professional services revenues to increase due to our expanding customer base and ongoing investment in our services teams, aimed at delivering exceptional customer experiences. |
Year ended December 31, | ||||||||||||||||||||||||
2021 | 2022 | 2023 | ||||||||||||||||||||||
Amount | % of Revenues | Amount | % of Revenues | Amount | % of Revenues | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Subscription | $ | 134,628 | 26.8 | % | $ | 280,649 | 47.4 | % | $ | 472,023 | 62.8 | % | ||||||||||||
Perpetual license | 115,738 | 23.0 | 49,964 | 8.5 | 21,037 | 2.8 | ||||||||||||||||||
Maintenance and professional services | 252,551 | 50.2 | 261,097 | 44.1 | 258,828 | 34.4 | ||||||||||||||||||
Total revenues | 502,917 | 100.0 | 591,710 | 100.0 | 751,888 | 100.0 | ||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Subscription | 25,837 | 5.2 | 46,249 | 7.8 | 74,623 | 9.9 | ||||||||||||||||||
Perpetual license | 3,904 | 0.8 | 2,893 | 0.5 | 1,873 | 0.2 | ||||||||||||||||||
Maintenance and professional services | 63,566 | 12.6 | 76,904 | 13.0 | 79,635 | 10.6 | ||||||||||||||||||
Total cost of revenues | 93,307 | 18.6 | 126,046 | 21.3 | 156,131 | 20.7 | ||||||||||||||||||
Gross profit | 409,610 | 81.4 | 465,664 | 78.7 | 595,757 | 79.3 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | 142,121 | 28.2 | 190,321 | 32.2 | 211,445 | 28.1 | ||||||||||||||||||
Sales and marketing | 274,401 | 54.6 | 345,273 | 58.4 | 405,983 | 54.0 | ||||||||||||||||||
General and administrative | 71,425 | 14. 2 | 82,520 | 13.9 | 94,801 | 12.6 | ||||||||||||||||||
Total operating expenses | 487,947 | 97. 0 | 618,114 | 104.5 | 712,229 | 94.7 | ||||||||||||||||||
Operating loss | (78,337 | ) | (15.6 | ) | (152,450 | ) | (25.8 | ) | (116,472 | ) | (15.5 | ) | ||||||||||||
Financial income (expense), net | (12,992 | ) | (2.6 | ) | 15,432 | 2.6 | 53,214 | 7.1 | ||||||||||||||||
Loss before taxes on income | (91,329 | ) | (18.2 | ) | (137,018 | ) | (23.2 | ) | (63,258 | ) | (8.4 | ) | ||||||||||||
Tax benefit (taxes on income) | 7,383 | 1.5 | 6,650 | 1.1 | (3,246 | ) | (0.4 | ) | ||||||||||||||||
Net loss | $ | (83,946 | ) | (16.7 | )% | $ | (130,368 | ) | (22.0 | )% | $ | (66,504 | ) | (8.8 | )% |
Year ended December 31, | ||||||||||||||||||||||||
2022 | 2023 | Change | ||||||||||||||||||||||
Amount | % of Revenues | Amount | % of Revenues | Amount | % | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Subscription | $ | 280,649 | 47.4 | % | $ | 472,023 | 62.8 | % | $ | 191,374 | 68.2 | % | ||||||||||||
Perpetual license | 49,964 | 8.5 | 21,037 | 2.8 | (28,927 | ) | (57.9 | ) | ||||||||||||||||
Maintenance and professional services | 261,097 | 44.1 | 258,828 | 34.4 | (2,269 | ) | (0.9 | ) | ||||||||||||||||
Total revenues | $ | 591,710 | 100.0 | % | $ | 751,888 | 100.0 | % | $ | 160,178 | 27.1 | % |
Year ended December 31, | ||||||||||||||||||||||||
2022 | 2023 | Change | ||||||||||||||||||||||
Amount | % of Revenues | Amount | % of Revenues | Amount | % | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Subscription | $ | 46,249 | 7.8 | % | $ | 74,623 | 9.9 | % | $ | 28,374 | 61.4 | % | ||||||||||||
Perpetual license | 2,893 | 0.5 | 1,873 | 0.2 | (1,020 | ) | (35.3 | ) | ||||||||||||||||
Maintenance and professional services | 76,904 | 13.0 | 79,635 | 10.6 | 2,731 | 3.6 | ||||||||||||||||||
Total cost of revenues | $ | 126,046 | 21.3 | % | $ | 156,131 | 20.7 | % | $ | 30,085 | 23.9 | % | ||||||||||||
Gross profit | $ | 465,664 | 78.7 | % | $ | 595,757 | 79.3 | % | $ | 130,093 | 27.9 | % |
Year ended December 31, | ||||||||||||||||||||||||
2022 | 2023 | Change | ||||||||||||||||||||||
Amount | % of Revenues | Amount | % of Revenues | Amount | % | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | $ | 190,321 | 32.2 | % | $ | 211,445 | 28.1 | % | $ | 21,124 | 11.1 | % | ||||||||||||
Sales and marketing | 345,273 | 58.4 | 405,983 | 54.0 | 60,710 | 17.6 | ||||||||||||||||||
General and administrative | 82,520 | 13.9 | 94,801 | 12.6 | 12,281 | 14.9 | ||||||||||||||||||
Total operating expenses | $ | 618,114 | 104.5 | % | $ | 712,229 | 94.7 | % | $ | 94,115 | 15.2 | % |
B. | Liquidity and Capital Resources |
Year Ended December 31, | ||||||||
2022 | 2023 | |||||||
($ in thousands) | ||||||||
Net cash provided by operating activities | $ | 49,708 | $ | 56,204 | ||||
Net cash used in investing activities | (68,392 | ) | (85,828 | ) | ||||
Net cash provided by financing activities | 12,225 | 38,084 |
Total | Less than 1 year | 1 – 3 years | 3 – 5 years | More than 5 years | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Operating lease obligations(1) | $ | 32,546 | $ | 8,304 | $ | 12,798 | $ | 8,795 | $ | 2,649 | ||||||||||
Uncertain tax obligations(2) | 5,960 | — | — | — | — | |||||||||||||||
Severance pay(3) | 8,337 | — | — | — | — | |||||||||||||||
0.00% Convertible Senior Notes due 2024(4) | 575,000 | 575,000 | — | — | — | |||||||||||||||
Non-cancelable material purchase obligations(5) | 214,244 | 50,487 | 115,007 | 48,750 | — | |||||||||||||||
Total | $ | 836,087 | $ | 633,791 | $ | 127,805 | $ | 57,545 | $ | 2,649 |
C. | Research and Development, Patents and Licenses, etc. |
D. | Trend Information |
o | the expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
o | the research and development is for the promotion or development of the company; and |
o | the research and development is carried out by or on behalf of the company seeking the deduction. |
o | amortization of the cost of purchased know-how, patents and rights to use a patent and know-how which are used for the development or promotion of the Industrial Enterprise, over an eight-year period commencing on the year in which such rights were first exercised; |
o | under limited conditions, an election to file consolidated tax returns together with Israeli Industrial Companies controlled by it; and |
o | expenses related to a public offering of shares in a stock exchange are deductible in equal amounts over three years commencing on the year of offering. |
A. | Directors and Senior Management |
Name | Age | Position |
Senior Management | ||
Ehud (Udi) Mokady (4) | 55 | Executive Chairman of the Board and Founder |
Matthew Cohen | 48 | Chief Executive Officer and Director |
Joshua Siegel | 60 | Chief Financial Officer |
Eduarda Camacho | 52 | Chief Operating Officer |
Donna Rahav | 45 | Chief Legal Officer |
Omer Grossman | 44 | Chief Information Officer |
Peretz Regev | 45 | Chief Product Officer |
Directors | ||
Gadi Tirosh (1)(3)(4)(5) | 57 | Lead Independent Director |
Ron Gutler (1)(2)(4)(5) | 66 | Director |
Kim Perdikou (1)(2)(3)(4)(5) | 66 | Director |
Amnon Shoshani (3)(5) | 60 | Director |
François Auque (2)(5) | 67 | Director |
Avril England (4)(5) | 55 | Director |
Mary Yang (5) | 55 | Director |
(1) | Member of our compensation committee. |
(2) | Member of our audit committee. |
(3) | Member of our nominating, environmental, sustainability and governance committee. |
(4) | Member of our strategy committee. |
(5) | Independent director under the rules of Nasdaq. |
B. | Compensation |
Information Regarding the Covered Executive (1) | ||||||||||||||||
Name and Principal Position (2) | Base Salary | Benefits and Perquisites (3) | Variable Compensation (4) | Equity-Based Compensation (5) | ||||||||||||
Ehud (Udi) Mokady, Executive Chairman of the Board and Founder | $ | 311,500 | $ | 373,322 | $ | 271,005 | $ | 8,656,640 | ||||||||
Matthew Cohen, Chief Executive Officer | 445,000 | 127,702 | 387,150 | 6,954,122 | ||||||||||||
Joshua Siegel, Chief Financial Officer | 380,933 | 84,635 | 261,000 | 5,261,586 | ||||||||||||
Chen Bitan, Chief Cyber Transformation Officer and General Manager Israel | 333,086 | - | 121,800 | 2,406,501 | ||||||||||||
Clarence Hinton, Chief Strategy Officer | 355,000 | 71,416 | 165,300 | 2,106,166 |
(1) | In accordance with Israeli law, all amounts reported in the table are in terms of cost to our Company, as recorded in our financial statements for the year ended December 31, 2023. |
(2) | Other than our Executive Chairman of the Board, all current officers listed in the table are full-time employees. Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion rate for the year ended December 31, 2023. |
(3) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to each executive, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurances (such as life, disability and accident insurances), convalescence pay, payments for Medicare and social security, tax gross-up payments and other benefits and perquisites consistent with our guidelines, regardless of whether such amounts have actually been paid to the executive. |
(4) | Amounts reported in this column refer to Variable Compensation, such as incentives and earned or paid bonuses as recorded in our financial statements for the year ended December 31, 2023. |
(5) | Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2023 with respect to equity-based compensation, reflecting also equity awards made in previous years which have vested during the current year. Assumptions and key variables used in the calculation of such amounts are described in Note 12 to our audited consolidated financial statements, which are included in this annual report. |
RSUs | Business PSUs | Relative TSR PSUs | ||
2023 | Percentage | 50% | 30% | 20% |
Amount | 29,100 | 17,460 | 11,640 | |
2024 | Percentage | 50% | 30% | 20% |
Amount | 24,000 | 14,400 | 9,600 |
RSUs | Business PSUs | Relative TSR PSUs | |
Percentage | 50% | 30% | 20% |
Amount | 21,300 | 12,780 | 8,520 |
Year of Grant | Performance Targets | Performance Criteria Achievement Rate (Weighted Average) | Earning Rate |
2023 Business PSUs | • Annual recurring revenue • Operating Margin | 181.3% | 159% |
Year of Grant | Percentile Rate | Earning Rate |
2021 | 89.74% | 200.0% |
Number of PSUs Granted (on Target) | Number of PSUs Earned | ||
2023 Business PSUs | Executive Chairman | 12,780 | 20,370 |
CEO | 17,460 | 27,820 | |
2021 rTSR PSUs | Executive Chairman | 12,650 | 25,300 |
CEO | 2,540 | 5,080 |
C. | Board Practices |
• | providing leadership to the Board if circumstances arise in which the role of the Executive Chairman of the Board may be, or may be perceived to be, in conflict with the interests of the Company, and responding to any reported conflicts of interest, or potential conflicts of interest, arising for any director; |
• | presiding as chairman of meetings of the Board at which the Executive Chairman of the Board is not present, including executive sessions of the independent members of the Board; |
• | serving as a liaison between the CEO and the independent members of the Board; |
• | providing feedback on Board meeting agendas, information and ongoing training provided to the Board, and requiring changes to the same; |
• | approving meeting schedules to ensure there is sufficient time for discussion of all agenda items; |
• | having the authority to call meetings of the independent members of the Board; |
• | being available for consultation and direct communication with shareholders, as appropriate; |
• | recommending that the Board retain consultants or advisers that report directly to the Board; |
• | conferring with the Executive Chairman of the Board or CEO on important Board matters and key issues and tasks facing the Company, and ensuring the Board focuses on the same; |
• | presiding over the Board’s annual self-assessment process and the independent directors’ evaluation of the effectiveness of the Executive Chairman of the Board, CEO, and management; and |
• | performing such other duties as the Board may, from time to time, delegate to assist the Board in the fulfillment of its duties. |
o | overseeing our accounting and financial reporting process and the audits of our financial statements, the effectiveness of our internal control over financial reporting and making such reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act; |
o | retaining and terminating our independent registered public accounting firm subject to the approval of our board of directors and, in the case of retention, of our shareholders and recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors and related fees and terms; |
o | establishing systems of internal control over financial reporting, including communication and implementation thereof and the assessment of the internal controls in accordance with the Sarbanes-Oxley Act, and any attestation by the independent registered public accounting firm; |
o | determining whether there are deficiencies in the business management practices of our Company, including in consultation with our Head of Internal Audit or the independent registered public accounting firm, and making recommendations to the board of directors to improve such practices; |
o | determining whether to approve certain related party transactions (see “Item 6.C. Board Practices —Approval of Related Party Transactions under Israeli Law”); |
o | recommending to the board of directors the retention and termination of our Head of Internal Audit, and determining the Head of Internal Audit’s remuneration, in accordance with the Companies Law; |
o | approving the working plan proposed by the Head of Internal Audit and reviewing and discussing the work of the internal auditor on a quarterly basis; |
o | reviewing our cybersecurity risks and controls with senior management, keeping our board informed of key issues related to cybersecurity; |
o | establishing procedures for the handling of employees’ complaints as to the deficiencies in the management of our business and the protection to be provided to such employees; |
o | conduct or authorize investigations into any matters within the scope of its responsibilities as it deems appropriate; and |
o | performing such other duties consistent with the audit committee charter, our governing documents, stock exchange rules and applicable law that may be requested by the board of directors from time to time, including discussing with management policies and practices that govern the process by which the Company undertakes risk assessment and management in sensitive areas. |
o | recommending to the board of directors for its approval a compensation policy and subsequently reviewing it from time to time, assessing its implementation and recommending periodic updates, whether a new compensation policy should be adopted or an existing compensation policy should continue in effect; |
o | reviewing, evaluating, and making recommendations regarding the terms of office, compensation, and benefits for our office holders, including the non-employee directors, taking into account our compensation policy; |
o | exempting certain compensation arrangements from the requirement to obtain shareholder approval under the Companies Law (including with respect to the Chief Executive Officer); and |
o | reviewing and granting equity-based awards pursuant to our equity incentive plans to the extent such authority is delegated to the compensation committee by our board of directors and the reserving of additional shares for issuance thereunder. |
o | overseeing and assisting our board of directors in reviewing and recommending nominees for election as directors and as members of the committees of the board of directors; |
o | establishing procedures for, and administering the performance of the members of our board and its committees; |
o | evaluating and making recommendations to our board of directors regarding the termination of membership of directors; |
o | reviewing, evaluating, and making recommendations regarding management succession and development; |
o | reviewing and making recommendations to our board of directors regarding board member qualifications, composition and structure and the nature and duties of the committees and qualifications of committee members; |
o | establishing and maintaining effective corporate governance principles and practices, including, but not limited to, developing and recommending to our board of directors a set of corporate governance guidelines applicable to our Company; and |
o | providing oversight of the Company’s efforts with regard to ESG matters, disclosure and strategy, as well as coordinating, as necessary, with other committees of the board of directors and the Company’s ESG committee and steering committee, which are comprised of key Company employees and management. |
o | a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; |
o | a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
o | an office holder (including a director) of the company (or a relative thereof); or |
o | a member of the company’s independent accounting firm, or anyone on his or her behalf. |
o | information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and |
o | all other important information pertaining to any such action. |
o | refrain from any conflict of interest between the performance of his or her duties to the company and his or her duties or personal affairs; |
o | refrain from any action which competes with the company’s business; |
o | refrain from exploiting any business opportunity of the company in order to receive a personal gain for himself or herself or others; and |
o | disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder. |
o | a transaction other than in the ordinary course of business; |
o | a transaction that is not on market terms; or |
o | a transaction that may have a material impact on a company’s profitability, assets or liabilities. |
o | an amendment to the company’s articles of association; |
o | an increase of the company’s authorized share capital; |
o | a merger; or |
o | the approval of related party transactions and acts of office holders that require shareholder approval. |
o | a monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such undertaking must be limited to certain events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the foreseen events and described above amount or criteria; |
o | reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; or (2) in connection with a monetary sanction or liability imposed on him or her in favor of an injured party in certain administrative proceedings; |
o | expenses incurred by an office holder in connection with administrative proceedings instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by administrative proceedings, including reasonable litigation expenses and reasonable attorneys’ fees; and |
o | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent. |
o | a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; |
o | a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
o | a monetary liability imposed on the office holder in favor of a third party; |
o | a monetary liability imposed on the office holder in favor of an injured party in certain administrative proceedings; and |
o | expenses incurred by an office holder in connection with certain administrative proceedings, including reasonable litigation expenses and reasonable attorneys’ fees. |
o | a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
o | a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
o | an act or omission committed with intent to derive illegal personal benefit; or |
o | a civil or criminal fine, monetary sanction or forfeit levied against the office holder. |
D. | Employees |
As of December 31, | ||||||||||||
Department | 2021 | 2022 | 2023 | |||||||||
Sales and marketing | 941 | 1,157 | 1,321 | |||||||||
Research and development | 643 | 901 | 922 | |||||||||
Services and support | 381 | 493 | 533 | |||||||||
General and administrative | 175 | 217 | 242 | |||||||||
Total | 2,140 | 2,768 | 3,018 |
Shares Beneficially Owned | ||||||||
Name of Beneficial Owner | Number | % | ||||||
Senior Management and Directors | ||||||||
Ehud (Udi) Mokady (1) | * | * | ||||||
Matthew Cohen | * | * | ||||||
Joshua Siegel | * | * | ||||||
Eduarda Camacho | * | * | ||||||
Donna Rahav | * | * | ||||||
Peretz Regev | * | * | ||||||
Omer Grossman | * | * | ||||||
Gadi Tirosh | * | * | ||||||
Ron Gutler | * | * | ||||||
Kim Perdikou | * | * | ||||||
Amnon Shoshani | * | * | ||||||
François Auque | * | * | ||||||
Avril England | * | * | ||||||
Mary Yang | * | * | ||||||
All senior management and directors as a group (14 persons) | 417,826 | 1 | % |
(1) | Mr. Mokady’s shares include 12,600 shares held in trust for family members over which Mr. Mokady is the beneficial owner. |
• | each person or entity known by us to own beneficially 5% or more of our outstanding shares; |
• | each of our directors and senior management individually; and |
• | all of our senior management and directors as a group. |
A. | Offer and Listing Details |
• | banks, financial institutions or insurance companies; |
• | real estate investment trusts, regulated investment companies or grantor trusts; |
• | brokers, dealers or traders in securities, commodities or currencies; |
• | tax-exempt entities, accounts or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the Code, respectively; |
• | certain former citizens or long-term residents of the United States; |
• | persons that receive our ordinary shares as compensation for the performance of services; |
• | persons that hold our ordinary shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for United States federal income tax purposes; |
• | persons subject to special tax accounting rules as a result of any item of gross income with respect to the ordinary shares being taken into account in an applicable financial statement; |
• | partnerships (including entities or arrangements classified as partnerships for United States federal income tax purposes) or other pass-through entities or arrangements, or indirect holders that hold our ordinary shares through such an entity or arrangement; |
• | S corporations; |
• | holders whose “functional currency” is not the U.S. dollar; or |
• | holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares. |
• | a citizen or individual resident of the United States; |
• | a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia; |
• | an estate the income of which is subject to United States federal income taxation regardless of its source; or |
• | a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust. |
• | at least 75% of its gross income is “passive income”; or |
• | at least 50% of the average quarterly value of its total gross assets (which may be measured in part by the market value of our ordinary shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of passive income. |
Period | Change in Average Exchange Rate of the NIS Against the U.S. dollar (%) | |||
2023 | 9.7 | |||
2022 | 4.0 | |||
2021 | (6.2 | ) |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
2022 | 2023 | |||||||
($ in thousands) | ||||||||
Audit Fees | $ | 872 | $ | 1,010 | ||||
Audit-Related Fees | 33 | - | ||||||
Tax Fees | 749 | 262 | ||||||
All Other Fees | 57 | 45 | ||||||
Total | $ | 1,711 | $ | 1,317 |
• | risk assessments designed to help identify material cybersecurity risks to our critical systems and information; |
• | security teams principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; |
• | the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; |
• | cybersecurity and data privacy training and awareness for employees, contractors, incident response personnel, and senior management; |
• | a cybersecurity incident response plan and policy that includes procedures for responding to cybersecurity incidents and defines how security incidents are identified, classified, reported, remediated and mitigated; and |
• | a risk management process for key third-party providers based on our assessment of their respective risk profiles and function. |
Exhibit No. | Description | |
2.6 | ||
4.18 | ||
97.1 | ||
101.INS | iXBRL Document | |
101.SCH | iXBRL Taxonomy Extension Schema Document | |
101.CAL | iXBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | iXBRL Taxonomy Definition Linkbase Document | |
101.LAB | iXBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | iXBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline iXBRL document) |
CyberArk Software Ltd. | |||
Date: March 13, 2024 | By: | /s/ Matthew Cohen | |
Matthew Cohen | |||
Chief Executive Officer |
Page | |
Reports of Independent Registered Public Accounting Firm (PCAOB ID 1281) | F-2 – F-5 |
F-6 – F-7 | |
F-8 | |
F-9 | |
F-10 - F-11 | |
F-12 – F-49 |
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
Revenue recognition | ||
Description of the Matter | As explained in Note 2 to the consolidated financial statements, the Company generates revenues from providing the rights to access its SaaS solutions and licensing the rights to use its software products, maintenance and professional services. The Company enters into contracts with customers that include combinations of products and services, which are generally distinct and recorded as separate performance obligations. The transaction price is then allocated to the distinct performance obligations based on a relative standalone selling price basis and revenue is recognized when control of the distinct performance obligation is transferred to the customer. Auditing the Company's recognition of revenue involved a high degree of auditor judgment due to the effort to evaluate 1) the identification and determination of whether products and services, such as software licenses and related services, are considered distinct performance obligations and the timing of revenue recognition and 2) the determination of stand-alone selling prices for each distinct performance obligation. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls related to the identification and determination of distinct performance obligations and the timing of revenue recognition, and the determination of stand-alone selling prices for each distinct performance obligation. Our audit procedures also included, among others, selecting a sample of customer contracts and reading contract source documents for each selection, including the executed contract and purchase order and evaluating the appropriateness of management's application of significant accounting policies on the contracts. We tested management's identification of significant terms for completeness, including the identification and determination of distinct performance obligations and the timing of revenue recognition. We also evaluated the reasonableness of management's estimate of stand-alone selling prices for products and services and tested the mathematical accuracy of management's calculations of revenue. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements. |
December 31, | ||||||||
2022 | 2023 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 347,338 | $ | 355,933 | ||||
Short-term bank deposits | 305,843 | 354,472 | ||||||
Marketable securities | 301,101 | 283,016 | ||||||
Trade receivables (net of allowance for credit losses of $0 and $6 at December 31, 2022 and 2023, respectively) | 120,817 | 186,472 | ||||||
Prepaid expenses and other current assets | 22,482 | 31,550 | ||||||
Total current assets | 1,097,581 | 1,211,443 | ||||||
LONG-TERM ASSETS: | ||||||||
Marketable securities | 227,748 | 324,548 | ||||||
Property and equipment, net | 23,474 | 16,494 | ||||||
Intangible assets, net | 27,508 | 20,202 | ||||||
Goodwill | 153,241 | 153,241 | ||||||
Other long-term assets | 217,040 | 214,816 | ||||||
Deferred tax assets | 72,809 | 81,464 | ||||||
Total long-term assets | 721,820 | 810,765 | ||||||
TOTAL ASSETS | $ | 1,819,401 | $ | 2,022,208 |
F - 6
December 31, | ||||||||
2022 | 2023 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade payables | $ | 13,642 | $ | 10,971 | ||||
Employees and payroll accruals | 77,328 | 95,538 | ||||||
Accrued expenses and other current liabilities | 33,584 | 36,562 | ||||||
Convertible senior notes, net | - | 572,340 | ||||||
Deferred revenues | 327,918 | 409,219 | ||||||
Total current liabilities | 452,472 | 1,124,630 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Convertible senior notes, net | 569,344 | - | ||||||
Deferred revenues | 80,524 | 71,413 | ||||||
Other long-term liabilities | 38,917 | 33,839 | ||||||
Total long-term liabilities | 688,785 | 105,252 | ||||||
TOTAL LIABILITIES | 1,141,257 | 1,229,882 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Ordinary shares of NIS 0.01 par value – Authorized: 250,000,000 shares at December 31, 2022 and 2023; Issued and outstanding: 41,028,571 shares and 42,255,336 shares at December 31, 2022 and 2023, respectively | 107 | 111 | ||||||
Additional paid-in capital | 660,289 | 827,260 | ||||||
Accumulated other comprehensive loss | (15,560 | ) | (1,849 | ) | ||||
Retained earnings (accumulated deficit) | 33,308 | (33,196 | ) | |||||
Total shareholders' equity | 678,144 | 792,326 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,819,401 | $ | 2,022,208 |
F - 7
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Revenues: | ||||||||||||
Subscription | $ | 134,628 | $ | 280,649 | $ | 472,023 | ||||||
Perpetual license | 115,738 | 49,964 | 21,037 | |||||||||
Maintenance and professional services | 252,551 | 261,097 | 258,828 | |||||||||
502,917 | 591,710 | 751,888 | ||||||||||
Cost of revenues: | ||||||||||||
Subscription | 25,837 | 46,249 | 74,623 | |||||||||
Perpetual license | 3,904 | 2,893 | 1,873 | |||||||||
Maintenance and professional services | 63,566 | 76,904 | 79,635 | |||||||||
93,307 | 126,046 | 156,131 | ||||||||||
Gross profit | 409,610 | 465,664 | 595,757 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 142,121 | 190,321 | 211,445 | |||||||||
Sales and marketing | 274,401 | 345,273 | 405,983 | |||||||||
General and administrative | 71,425 | 82,520 | 94,801 | |||||||||
Total operating expenses | 487,947 | 618,114 | 712,229 | |||||||||
Operating loss | (78,337 | ) | (152,450 | ) | (116,472 | ) | ||||||
Financial income (expense), net | (12,992 | ) | 15,432 | 53,214 | ||||||||
Loss before taxes on income | (91,329 | ) | (137,018 | ) | (63,258 | ) | ||||||
Tax benefit (taxes on income) | 7,383 | 6,650 | (3,246 | ) | ||||||||
Net loss | $ | (83,946 | ) | $ | (130,368 | ) | $ | (66,504 | ) | |||
Basic net loss per ordinary share | $ | (2.12 | ) | $ | (3.21 | ) | $ | (1.60 | ) | |||
Diluted net loss per ordinary share | $ | (2.12 | ) | $ | (3.21 | ) | $ | (1.60 | ) | |||
Other comprehensive income (loss) | ||||||||||||
Change in net unrealized gains (losses) on marketable securities: | ||||||||||||
Net unrealized gains (losses) arising during the year | (3,405 | ) | (11,733 | ) | 7,903 | |||||||
(3,405 | ) | (11,733 | ) | 7,903 | ||||||||
Change in unrealized net gain (loss) on cash flow hedges: | ||||||||||||
Net unrealized gains (losses) arising during the year | 1,702 | (11,418 | ) | (2,898 | ) | |||||||
Net gains (losses) reclassified into net loss | (2,075 | ) | 7,194 | 8,706 | ||||||||
(373 | ) | (4,224 | ) | 5,808 | ||||||||
Other comprehensive income (loss), net of taxes of $(516), $(2,176) and $1,870 for 2021, 2022 and 2023, respectively | (3,778 | ) | (15,957 | ) | 13,711 | |||||||
Total comprehensive loss | $ | (87,724 | ) | $ | (146,325 | ) | $ | (52,793 | ) |
F - 8
Ordinary shares | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings (accumulated deficit) | Total shareholders' equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance as of January 1, 2021 | 39,034,759 | $ | 101 | $ | 481,992 | $ | 4,175 | $ | 221,020 | $ | 707,288 |
Exercise of options and vested RSUs granted to employees | 1,007,111 | 3 | 10,940 | - | - | 10,943 | ||||||||||||||||||
Other comprehensive loss, net of tax | - | - | - | (3,778 | ) | - | (3,778 | ) | ||||||||||||||||
Share-based compensation | - | - | 96,005 | - | - | 96,005 | ||||||||||||||||||
Net loss | - | - | - | - | (83,946 | ) | (83,946 | ) | ||||||||||||||||
Balance as of December 31, 2021 | 40,041,870 | $ | 104 | $ | 588,937 | $ | 397 | $ | 137,074 | $ | 726,512 |
Exercise of options and vested RSUs granted to employees | 868,599 | 3 | 1,838 | - | - | 1,841 | ||||||||||||||||||
Other comprehensive loss, net of tax | - | - | - | (15,957 | ) | - | (15,957 | ) | ||||||||||||||||
Share-based compensation | - | - | 121,579 | - | - | 121,579 | ||||||||||||||||||
Issuance of ordinary shares under employee stock purchase plan | 118,102 | * | 13,867 | - | - | 13,867 | ||||||||||||||||||
Adjustments from adoption of ASU 2020-06 | - | - | (65,932 | ) | - | 26,602 | (39,330 | ) | ||||||||||||||||
Net loss | - | - | - | - | (130,368 | ) | (130,368 | ) | ||||||||||||||||
Balance as of December 31, 2022 | 41,028,571 | $ | 107 | $ | 660,289 | $ | (15,560 | ) | $ | 33,308 | $ | 678,144 |
Exercise of options and vested RSUs granted to employees | 1,107,869 | 3 | 11,062 | - | - | 11,065 | ||||||||||||||||||
Other comprehensive income, net of tax | - | - | - | 13,711 | - | 13,711 | ||||||||||||||||||
Share-based compensation | - | - | 140,404 | - | - | 140,404 | ||||||||||||||||||
Issuance of ordinary shares under employee stock purchase plan | 118,896 | 1 | 15,505 | - | - | 15,506 | ||||||||||||||||||
Net loss | - | - | - | - | (66,504 | ) | (66,504 | ) | ||||||||||||||||
Balance as of December 31, 2023 | 42,255,336 | $ | 111 | $ | 827,260 | $ | (1,849 | ) | $ | (33,196 | ) | $ | 792,326 |
F - 9
CYBERARK SOFTWARE LTD.
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (83,946 | ) | $ | (130,368 | ) | $ | (66,504 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 14,228 | 16,203 | 19,250 | |||||||||
Share-based compensation | 95,436 | 120,821 | 140,101 | |||||||||
Amortization of premium and accretion of discount on marketable securities, net | 7,532 | 3,894 | (4,570 | ) | ||||||||
Deferred income taxes, net | (11,972 | ) | (15,630 | ) | (7,879 | ) | ||||||
Amortization of debt discount and issuance costs | 17,792 | 2,980 | 2,996 | |||||||||
Increase in trade receivables | (20,083 | ) | (7,606 | ) | (65,655 | ) | ||||||
Increase in prepaid expenses, other current and long-term assets and others | (44,423 | ) | (37,141 | ) | (45,016 | ) | ||||||
Changes in operating lease right-of-use assets | 6,204 | 4,558 | 6,566 | |||||||||
Increase (decrease) in trade payables | 1,499 | 4,053 | (2,669 | ) | ||||||||
Increase in short-term and long-term deferred revenue | 74,767 | 91,167 | 72,190 | |||||||||
Increase in employees and payroll accruals | 23,821 | 714 | 6,981 | |||||||||
Increase (decrease) in accrued expenses and other current and long-term liabilities | (101 | ) | 4,801 | 7,507 | ||||||||
Changes in operating lease liabilities | (6,014 | ) | (8,738 | ) | (7,094 | ) | ||||||
Net cash provided by operating activities | 74,740 | 49,708 | 56,204 | |||||||||
Cash flows from investing activities: | ||||||||||||
Investment in short-term and long-term deposits | (369,088 | ) | (496,894 | ) | (337,835 | ) | ||||||
Proceeds from short-term and long-term deposits | 264,019 | 532,563 | 319,542 | |||||||||
Investment in marketable securities and other | (357,210 | ) | (375,731 | ) | (406,633 | ) | ||||||
Proceeds from sales and maturities of marketable securities and other | 243,013 | 325,472 | 344,046 | |||||||||
Purchase of property and equipment | (8,928 | ) | (12,517 | ) | (4,948 | ) | ||||||
Business acquisitions, net of cash acquired (Schedule A) | - | (41,285 | ) | - | ||||||||
Net cash used in investing activities | (228,194 | ) | (68,392 | ) | (85,828 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from (payments of) withholding tax related to employee stock plans | (789 | ) | (184 | ) | 11,188 | |||||||
Proceeds from exercise of stock options | 11,738 | 1,968 | 11,065 | |||||||||
Proceeds in connection with employee stock purchase plan | - | 15,143 | 15,831 | |||||||||
Payments of contingent consideration related to acquisitions (Schedule A) | - | (4,702 | ) | - | ||||||||
Net cash provided by financing activities | 10,949 | 12,225 | 38,084 | |||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | (142,505 | ) | (6,459 | ) | 8,460 | |||||||
Effect of exchange rate differences on cash, cash equivalents and restricted cash | (689 | ) | (3,053 | ) | 135 | |||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 500,044 | 356,850 | 347,338 | |||||||||
Cash and cash equivalents at the end of the year | $ | 356,850 | $ | 347,338 | $ | 355,933 |
F - 10
CYBERARK SOFTWARE LTD.
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Non-cash activities: | ||||||||||||
Lease liabilities arising from obtaining right-of-use-assets | $ | - | $ | 28,256 | $ | 896 | ||||||
Non-cash purchase of property and equipment | $ | 2,165 | $ | 1,769 | $ | 1,022 | ||||||
Exercise of stock options | $ | 127 | $ | - | $ | - | ||||||
Supplemental disclosure of cash flow activities: | ||||||||||||
Cash paid during the year for taxes, net | $ | 8,404 | $ | 9,302 | $ | 11,435 |
Year ended December 31, | ||||
2022 | ||||
Working capital, net (excluding $19 of cash and cash equivalents acquired) | $ | (9 | ) | |
Goodwill | 11,809 | |||
Technology | 6,716 | |||
Deferred taxes, net | (827 | ) | ||
$ | 17,689 |
Year ended December 31, | ||||
2022 | ||||
Working capital, net (excluding $59 of cash and cash equivalents acquired) | $ | (293 | ) | |
Property and equipment | 30 | |||
Other long-term liabilities | (445 | ) | ||
Goodwill | 17,715 | |||
Technology | 9,581 | |||
Deferred taxes asset | 1,710 | |||
$ | 28,298 |
F - 11
CYBERARK SOFTWARE LTD.
NOTE 1:- | GENERAL |
a. | CyberArk Software Ltd. (together with its subsidiaries, the "Company") is an Israeli company that develops, markets and sells software-based Identity security solutions and services. The Company's solutions and services secure access for any identity - human or machine - to help organizations secure critical business assets, protect their distributed workforce and customers, and accelerate business in the cloud. The Company's software extends its leadership in Privileged Access Management, or PAM, to offer a comprehensive set of Identity Security capabilities. |
b. | In March 2022, the Company acquired all of the share capital of AAPI1, Inc., a Delaware corporation ("Aapi") for total gross consideration of $17,689. CyberArk acquired Aapi to bolster Identity Lifecycle Management capabilities and broaden Identity Automation and Orchestration capabilities across its Identity Security Platform. Aapi specializes in the field of automation of identity. With identity automation, embedded App functions, and micro access control, Aapi develops an identity, communications and incident response platform. The Company expensed the related acquisition costs of $252 in General and Administrative. The Company accounted for the acquisition as business combination in accordance with ASC No. 805, "Business Combinations". Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Aapi`s technology into the Company`s portfolio. Pro forma results of operations have not been presented because the acquisition was not material to the Company's results of operations. |
c. | In July 2022, the Company acquired all of the share capital of C3M, LLC ("C3M") for total gross consideration of $28,298. CyberArk acquired C3M to strengthen the Company platform by offering cloud privilege security offerings and further expand the Company capabilities. C3M specializes in multi-cloud security and compliance solutions. The Company expensed the related acquisition costs of $1,992. The Company accounted for the acquisition as business combination in accordance with ASC No. 805, "Business Combinations". Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating C3M`s technology into the Company`s portfolio. Pro forma results of operations have not been presented because the acquisition was not material to the Company's results of operations. |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
a. | Use of estimates: |
b. | Principles of consolidation: |
c. | Financial statements in U.S. dollars: |
d. | Cash and cash equivalents: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
e. | Short-term bank deposits: |
f. | Investments in marketable securities: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
g. | Property and equipment: |
% | ||
Computers, software and related equipment | 20 – 33 | |
Office furniture and equipment | 15 – 20 | |
Leasehold improvements | Over the shorter of the related lease period or the life of the asset |
h. | Long-lived assets: |
i. | Business combinations: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
j. | Goodwill and other intangible assets: |
% | ||
Technology | 20 | |
Customer relationships | 8 | |
Other | 33 |
k. | Derivative instruments: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Cost of revenues | $ | (144 | ) | $ | 509 | $ | 590 | |||||
Research and development | (1,552 | ) | 5,381 | 6,486 | ||||||||
Sales and marketing | (273 | ) | 927 | 1,104 | ||||||||
General and administrative | (389 | ) | 1,358 | 1,713 | ||||||||
Total gains (losses), before tax benefit (taxes on income) | (2,358 | ) | 8,175 | 9,893 | ||||||||
Tax benefit (taxes on income) | 283 | (981 | ) | (1,187 | ) | |||||||
Total gains (losses), net of tax benefit (taxes on income) | $ | (2,075 | ) | $ | 7,194 | $ | 8,706 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
l. | Severance pay: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
m. | U.S. defined contribution plan: |
n. | Convertible senior notes: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
o. | Revenue recognition: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
SaaS | $ | 69,303 | $ | 166,361 | $ | 298,331 | ||||||
Self-hosted subscription* | 65,325 | 114,288 | 173,692 | |||||||||
Perpetual license | 115,738 | 49,964 | 21,037 | |||||||||
Maintenance and support | 214,036 | 217,695 | 207,561 | |||||||||
Professional services | 38,515 | 43,402 | 51,267 | |||||||||
$ | 502,917 | $ | 591,710 | $ | 751,888 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
p. | Deferred contract costs: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
q. | Trade Receivables and Allowances: |
r. | Leases: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
s. | Research and development costs: |
t. | Internal use software and website development cost: |
u. | Advertising and marketing expenses: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
v. | Share-based compensation: |
w. | Income taxes: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
x. | Basic and diluted net loss per share: |
y. | Comprehensive income (loss): |
z. | Concentration of credit risks: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
aa. | Fair value of financial instruments: |
Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date. |
Level 2 - | Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. |
Level 3 - | Inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation. |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
ab. | Investments in privately held companies: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
ac. | Recently adopted accounting standards: |
ad. | Recently issued accounting standards: |
ae. | Reclassification: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 3:- | MARKETABLE SECURITIES |
December 31, 2022 | ||||||||||||||||
Amortized cost | Gross unrealized losses | Gross unrealized gains | Fair value | |||||||||||||
Corporate debentures | $ | 414,278 | $ | (12,223 | ) | $ | 111 | $ | 402,166 | |||||||
Government debentures | 128,686 | (2,006 | ) | 3 | 126,683 | |||||||||||
Total | $ | 542,964 | $ | (14,229 | ) | $ | 114 | $ | 528,849 |
December 31, 2023 | ||||||||||||||||
Amortized cost | Gross unrealized losses | Gross unrealized gains | Fair value | |||||||||||||
Corporate debentures | $ | 324,485 | $ | (4,998 | ) | $ | 357 | $ | 319,844 | |||||||
Government debentures | 288,214 | (828 | ) | 334 | 287,720 | |||||||||||
Total | $ | 612,699 | $ | (5,826 | ) | $ | 691 | $ | 607,564 |
December 31, | ||||||||||||||||
2022 | 2023 | |||||||||||||||
Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | |||||||||||||
Continuous unrealized loss position for less than 12 months | $ | (5,779 | ) | $ | 257,850 | $ | (590 | ) | $ | 186,910 | ||||||
Continuous unrealized loss position for more than 12 months | (8,450 | ) | 218,082 | (5,236 | ) | 190,560 | ||||||||||
$ | (14,229 | ) | $ | 475,932 | $ | (5,826 | ) | $ | 377,470 |
December 31, | ||||||||||||||||
2022 | 2023 | |||||||||||||||
Amortized cost | Fair value | Amortized cost | Fair value | |||||||||||||
Due within one year | $ | 304,597 | $ | 301,101 | $ | 285,012 | $ | 283,016 | ||||||||
Due between one and four years | 238,367 | 227,748 | 327,687 | 324,548 | ||||||||||||
$ | 542,964 | $ | 528,849 | $ | 612,699 | $ | 607,564 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 4:- | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
December 31, | ||||||||
2022 | 2023 | |||||||
Prepaid expenses | $ | 15,167 | $ | 19,133 | ||||
Hedging transaction assets | 121 | 3,080 | ||||||
Government authorities | 3,431 | 7,513 | ||||||
Deferred contract costs | 1,713 | 696 | ||||||
Other current assets | 2,050 | 1,128 | ||||||
$ | 22,482 | $ | 31,550 |
NOTE 5:- | PROPERTY AND EQUIPMENT, NET |
December 31, | ||||||||
2022 | 2023 | |||||||
Cost: | ||||||||
Computers, software and related equipment *) | $ | 43,300 | $ | 42,570 | ||||
Leasehold improvements | 10,087 | 10,600 | ||||||
Office furniture and equipment | 4,273 | 4,352 | ||||||
57,660 | 57,522 | |||||||
Less - accumulated depreciation | 34,186 | 41,028 | ||||||
Depreciated cost | $ | 23,474 | $ | 16,494 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 6:- | GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
December 31, | ||||||||
2022 | 2023 | |||||||
Balance as of beginning of the year | $ | 123,717 | $ | 153,241 | ||||
Goodwill acquired | 29,524 | - | ||||||
Closing balance | $ | 153,241 | $ | 153,241 |
December 31, | ||||||||
2022 | 2023 | |||||||
Original amount: | ||||||||
Technology | $ | 55,922 | $ | 55,922 | ||||
Customer relationships | 9,586 | 9,586 | ||||||
Other | 664 | 732 | ||||||
66,172 | 66,240 | |||||||
Less - accumulated amortization | 38,664 | 46,038 | ||||||
Intangible assets, net | $ | 27,508 | $ | 20,202 |
2024 | 7,340 | |||
2025 | 4,907 | |||
2026 | 3,490 | |||
2027 | 2,563 | |||
2028 and thereafter | 1,902 | |||
$ | 20,202 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 7:- | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | ||||||||
2022 | 2023 | |||||||
Government authorities | $ | 5,682 | $ | 8,464 | ||||
Accrued expenses | 12,236 | 12,879 | ||||||
Unrecognized tax benefits | 2,805 | 5,960 | ||||||
Lease liabilities, current | 7,857 | 8,240 | ||||||
Hedging transaction liabilities | 5,004 | 1,019 | ||||||
$ | 33,584 | $ | 36,562 |
NOTE 8:- | COMMITMENTS AND CONTINGENT LIABILITIES |
a. | Legal contingencies: |
b. | Bank guarantees: |
c. | Non-cancelable material purchase obligations: |
2024 | 50,487 | |||
2025 | 54,681 | |||
2026 | 60,326 | |||
2027 | 48,750 | |||
$ | 214,244 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 9:- | LEASES |
Year ended December 31, | ||||||||
2022 | 2023 | |||||||
Operating lease cost | $ | 7,522 | $ | 8,888 | ||||
Short-term lease cost | 1,326 | 1,858 | ||||||
Variable lease cost | 1,342 | 1,491 | ||||||
Total net lease costs | $ | 10,190 | $ | 12,237 |
December 31, | ||||||||
2022 | 2023 | |||||||
Operating lease ROU assets (under other long-term assets in the balance sheets) | $ | 37,857 | $ | 32,186 | ||||
Operating lease liabilities, current | $ | 7,857 | $ | 8,240 | ||||
Operating lease liabilities, long-term (under other long-term liabilities in the balance sheets) | $ | 28,874 | $ | 22,293 | ||||
Weighted average remaining lease term (in years) | 5.7 | 4.8 | ||||||
Weighted average discount rate | 2.8 | % | 2.9 | % |
December 31, 2023 | ||||
2024 | 8,304 | |||
2025 | 7,076 | |||
2026 | 5,722 | |||
2027 | 4,972 | |||
2028 | 3,823 | |||
Thereafter | 2,649 | |||
Total undiscounted lease payments | 32,546 | |||
Less: imputed interest | (2,013 | ) | ||
Present value of lease liabilities | $ | 30,533 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 10: | FAIR VALUE MEASUREMENTS |
December 31, | ||||||||||||||||||||||||
2022 | 2023 | |||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||
Money market funds | $ | 206,228 | $ | - | $ | 206,228 | $ | 315,784 | $ | - | $ | 315,784 | ||||||||||||
Corporate debentures and commercial paper | - | 2,998 | 2,998 | - | 1,001 | 1,001 | ||||||||||||||||||
Government debentures | - | - | - | - | 1,194 | 1,194 | ||||||||||||||||||
Marketable securities: | ||||||||||||||||||||||||
Corporate debentures and commercial paper | - | 402,166 | 402,166 | - | 319,844 | 319,844 | ||||||||||||||||||
Government debentures | - | 126,683 | 126,683 | - | 287,720 | 287,720 | ||||||||||||||||||
Total money market funds and marketable securities measured at fair value | $ | 206,228 | $ | 531,847 | $ | 738,075 | $ | 315,784 | $ | 609,759 | $ | 925,543 |
NOTE 11: | CONVERTIBLE SENIOR NOTES, NET |
a. | Convertible senior notes, net: |
(1) | During any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company's ordinary shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 11:- | CONVERTIBLE SENIOR NOTES, NET (Cont.) |
(2) | During the five business day period after any 10 consecutive trading day period ("measurement period") in which the trading price, determined pursuant to the terms of the Convertible Notes, per $1 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the ordinary shares and the conversion rate on each such trading day; |
(3) | If the Company calls such Convertible Notes for redemption in certain circumstances, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or |
(4) | Upon the occurrence of specified corporate events. |
b. | The Company may not redeem the notes prior to November 15, 2022, except in the event of certain tax law changes. The Company may, at any time and from time to time, redeem for cash all or any portion of the notes, at the Company's option, on or after November 15, 2022, if the last reported sale price of the Company`s ordinary shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which it delivers notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed. |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 11:- | CONVERTIBLE SENIOR NOTES, NET (Cont.) |
December 31, | ||||||||
2022 | 2023 | |||||||
Liability component: | ||||||||
Principal amount (outstanding and original) | $ | 575,000 | $ | 575,000 | ||||
Adjustment from Adoption of ASU 2020-06 | 46,270 | - | ||||||
Unamortized discount | (46,270 | ) | - | |||||
Unamortized issuance costs | (5,656 | ) | (2,660 | ) | ||||
Net carrying amount | $ | 569,344 | $ | 572,340 |
Year ended | ||||||||||||
December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Amortization of debt issuance costs | $ | 2,412 | $ | 2,980 | $ | 2,996 | ||||||
Amortization of debt discount | 15,380 | - | - | |||||||||
Total interest expense recognized | $ | 17,792 | $ | 2,980 | $ | 2,996 |
c. | Capped Call Transactions: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:- | SHAREHOLDERS' EQUITY |
a. | Composition of share capital of the Company: |
December 31, | ||||||||||||||||
2022 | 2023 | |||||||||||||||
Authorized | Issued and outstanding | Authorized | Issued and outstanding | |||||||||||||
Number of shares | ||||||||||||||||
Ordinary shares of NIS 0.01 par value each | 250,000,000 | 41,028,571 | 250,000,000 | 42,255,336 |
b. | Ordinary shares: |
The ordinary shares of the Company confer upon the holders the right to receive notices of and to participate and vote in general meetings of the Company, rights to receive dividends and rights to participate in distribution of assets upon liquidation.
c. | Share-based compensation: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
Under the 2014 Plan and ESPP, options, RSUs, PSUs and other share-based awards may be granted to employees, officers, non-employee consultants and directors of the Company.
The total share-based compensation expense related to all of the Company's equity-based awards, recognized for the years ended December 31, 2021, 2022 and 2023 is comprised as follows:
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Cost of revenues | $ | 11,158 | $ | 15,060 | $ | 17,612 | ||||||
Research and development | 20,498 | 27,102 | 29,458 | |||||||||
Sales and marketing | 38,546 | 51,099 | 58,790 | |||||||||
General and administrative | 25,234 | 27,560 | 34,241 | |||||||||
Total share-based compensation expense | $ | 95,436 | $ | 120,821 | $ | 140,101 |
d. | Options granted to employees: |
Amount of options | Weighted average exercise price | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Balance as of December 31, 2022 | 440,884 | $ | 72.31 | 4.59 | $ | 26,338 | ||||||||||
Granted | 4,500 | 132.60 | ||||||||||||||
Exercised | 186,529 | 59.32 | ||||||||||||||
Forfeited | 12,830 | 147.54 | ||||||||||||||
Expired | 1,238 | 175.88 | ||||||||||||||
Balance as of December 31, 2023 | 244,787 | $ | 78.85 | 4.24 | $ | 34,320 | ||||||||||
Exercisable as of December 31, 2023 | 229,924 | $ | 74.45 | 3.98 | $ | 33,246 |
The expected volatility of the Company's common stock is based on the Company's historical volatility. The expected option term represents the period of time that options granted are expected to be outstanding, based upon historical experience.
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.
The following tables sets forth the parameters used in computation of the options and ESPP compensation to employees for the years ended December 31, 2021, 2022 and 2023:
Year ended December 31, | ||||||
Options | 2021 | 2022 | 2023 | |||
Expected volatility | 44%-46% | 46%-50% | 51% | |||
Expected dividends | 0% | 0% | 0% | |||
Expected term (in years) | 3.65-3.88 | 3.73-3.76 | 3.77-3.78 | |||
Risk free rate | 0.49%-0.99% | 1.67%-4.40% | 3.58%-3.97% |
Year ended December 31, | ||||||
ESPP | 2021 | 2022 | 2023 | |||
Expected volatility | 33.63% | 55.67%-64.20% | 39.46%-44.12% | |||
Expected dividends | 0% | 0% | 0% | |||
Expected term (in years) | 0.5 | 0.5 | 0.5 | |||
Risk free rate | 0.1% | 2.15%-4.65% | 5.33%-5.44% |
A summary of options data for the years ended December 31, 2021, 2022 and 2023, is as follows:
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Weighted-average grant date fair value of options granted | $ | 55.50 | $ | 39.69 | $ | 62.25 | ||||||
Total intrinsic value of the options exercised | $ | 20,742 | $ | 30,031 | $ | 22,935 |
The aggregate intrinsic value is calculated as the difference between the per-share exercise price and the fair value of an ordinary share for each share subject to an option multiplied by the number of shares subject to options at the date of exercise.
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
e. | A summary of RSUs and PSUs activity for the year ended December 31, 2023 is as follows:
|
Amount of RSUs and PSUs | Weighted average grant date fair value | |||||||
Unvested as of December 31, 2022 | 2,484,808 | $ | 128.12 | |||||
Granted | 1,254,748 | 144.35 | ||||||
Vested | 921,340 | 126.18 | ||||||
Forfeited | 178,879 | 133.50 | ||||||
Unvested as of December 31, 2023 | 2,639,337 | $ | 136.15 |
NOTE 13:- | INCOME TAXES |
b. | Loss before taxes on Income is comprised as follows: |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Domestic loss | $ | (113,339 | ) | $ | (167,606 | ) | $ | (116,661 | ) | |||
Foreign income | 22,010 | 30,588 | 53,403 | |||||||||
$ | (91,329 | ) | $ | (137,018 | ) | $ | (63,258 | ) |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
c.Deferred income taxes:
Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recorded for tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
December 31, | ||||||||
2022 | 2023 | |||||||
Deferred tax assets: | ||||||||
Carry-forwards losses and credits | $ | 48,824 | $ | 59,911 | ||||
Capital losses carry-forwards | 89 | - | ||||||
Research and development expenses | 16,367 | 22,859 | ||||||
Deferred revenues | 12,343 | 12,841 | ||||||
Intangible assets | 9,063 | 8,267 | ||||||
Share-based compensation | 21,024 | 26,897 | ||||||
Operating lease liability | 5,691 | 4,737 | ||||||
Accruals and others | 12,224 | 4,276 | ||||||
Gross deferred tax assets before valuation allowance | 125,625 | 139,788 | ||||||
Less: Valuation allowance | 21,741 | 24,569 | ||||||
Total deferred tax assets | $ | 103,884 | $ | 115,219 | ||||
Deferred tax liabilities: | ||||||||
Intangible assets | $ | 2,892 | $ | 3,527 | ||||
Deferred commissions | 21,885 | 24,999 | ||||||
Operating lease ROU asset | 5,417 | 4,696 | ||||||
Property and equipment and other | 881 | 700 | ||||||
Gross deferred tax liabilities | $ | 31,075 | $ | 33,922 | ||||
Net deferred tax assets | $ | 72,809 | $ | 81,297 |
As of December 31, 2023, $108,915 of undistributed earnings held by the Company's foreign subsidiaries are designated as indefinitely reinvested. If these earnings were repatriated to Israel, it would be subject to Israeli income taxes and to foreign withholding taxes and an adjustment for foreign tax credits.
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
d.Income taxes are comprised as follows:
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Current | $ | 4,589 | $ | 8,980 | $ | 11,125 | ||||||
Deferred | (11,972 | ) | (15,630 | ) | (7,879 | ) | ||||||
$ | (7,383 | ) | $ | (6,650 | ) | $ | 3,246 |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Domestic | $ | (12,171 | ) | $ | (19,716 | ) | $ | (14,105 | ) | |||
Foreign | 4,788 | 13,066 | 17,351 | |||||||||
$ | (7,383 | ) | $ | (6,650 | ) | $ | 3,246 |
e.A reconciliation of the Company's theoretical income tax benefit to actual income tax expense (benefit) is as follows:
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Loss before income taxes | $ | (91,329 | ) | $ | (137,018 | ) | $ | (63,258 | ) | |||
Statutory tax rate | 23.0 | % | 23.0 | % | 23.0 | % | ||||||
Theoretical tax benefit | (21,006 | ) | (31,514 | ) | (14,549 | ) | ||||||
Excess tax benefits related to share-based compensation | (4,424 | ) | (1,817 | ) | (3,817 | ) | ||||||
Non-deductible expenses | 3,988 | 6,325 | 2,963 | |||||||||
Valuation allowance | 1,896 | 1,538 | 3,320 | |||||||||
Unrecognized tax benefits | (1,638 | ) | (1,914 | ) | 3,155 | |||||||
Foreign and preferred enterprise tax rates differential | 12,171 | 18,450 | 12,826 | |||||||||
Prior years and others | 1,630 | 2,282 | (652 | ) | ||||||||
Income tax expense (tax benefit) | $ | (7,383 | ) | $ | (6,650 | ) | $ | 3,246 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
f. | Net operating loss carry-forwards: |
g. | Tax benefits under the Law for the Encouragement of Capital Investments, 1959: |
- | Introduction of a benefit regime for "Preferred Technology Enterprises" ("PTE") granting a 12% tax rate in central Israel – on qualified income deriving from Benefited Intellectual Property, subject to a number of conditions being fulfilled, including a minimal amount or ratio of annual R&D expenditure and R&D employees, as well as having at least 25% of annual income derived from exports to large markets. |
- | A 12% capital gains tax rate on the sale of a preferred intangible asset to a foreign affiliated enterprise, provided that the asset was initially purchased from a foreign resident at an amount of NIS 200 million or more. |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
- | A withholding tax rate of 20% for dividends paid from PTE income (with an exemption from such withholding tax applying to dividends paid to an Israeli company). Such rate may be reduced to 4% on dividends paid to a foreign resident company, subject to certain conditions regarding percentage of foreign ownership of the distributing entity. |
i. | Tax assessments: |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
j.Unrecognized tax benefits:
A reconciliation of the opening and closing amounts of total unrecognized tax benefits is as follows:
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Opening balance | $ | 4,633 | $ | 3,870 | $ | 2,805 | ||||||
Decrease related to settlements with taxing authorities | (2,382 | ) | (2,353 | ) | - | |||||||
Increase related to prior year tax positions | 976 | 429 | 743 | |||||||||
Decrease related to expiration of statutes of limitations | - | - | - | |||||||||
Increase related to current year tax positions | 643 | 859 | 2,412 | |||||||||
Closing balance | $ | 3,870 | $ | 2,805 | $ | 5,960 |
NOTE 14: | FINANCIAL INCOME (EXPENSE), NET |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Bank charges and other | $ | (250 | ) | $ | (269 | ) | $ | (359 | ) | |||
Exchange rate income (loss), net | (509 | ) | 1,564 | 1,567 | ||||||||
Interest income and Gain from investment in privately held companies | 5,559 | 17,117 | 55,002 | |||||||||
Amortization of debt discount and issuance costs | (17,792 | ) | (2,980 | ) | (2,996 | ) | ||||||
Financial income (expense), net | $ | (12,992 | ) | $ | 15,432 | $ | 53,214 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 15:- | BASIC AND DILUTED NET LOSS PER SHARE |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
Numerator: | ||||||||||||
Net loss available to shareholders of ordinary shares | $ | (83,946 | ) | $ | (130,368 | ) | $ | (66,504 | ) | |||
Denominator: | ||||||||||||
Shares used in computing basic and diluted net loss per ordinary shares | 39,645,453 | 40,583,002 | 41,658,424 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 16:- | SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION |
a. | The Company identifies operating segments in accordance with ASC Topic 280, "Segment Reporting". Operating segments are defined as components of an entity for which separate financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and evaluating financial performance. The Company determined it operates in one reportable segment as the Company's chief operating decision maker is the Chief Executive Officer who makes operating decisions, assesses performance and allocates resources on a consolidated basis.. |
b. | The total revenues are attributed to geographic areas based on the location of the Company's channel partners which are considered as end customers, as well as direct customers of the Company. |
Year ended December 31, | ||||||||||||
2021 | 2022 | 2023 | ||||||||||
United States | $ | 253,811 | $ | 312,816 | $ | 393,355 | ||||||
Israel | 7,416 | 6,302 | 6,784 | |||||||||
United Kingdom | 35,530 | 41,297 | 45,751 | |||||||||
Europe, the Middle East and Africa *) | 120,382 | 130,745 | 173,203 | |||||||||
Other | 85,778 | 100,550 | 132,795 | |||||||||
$ | 502,917 | $ | 591,710 | $ | 751,888 |
December 31, | ||||||||
2022 | 2023 | |||||||
United States | $ | 5,353 | $ | 4,635 | ||||
Israel | 41,948 | 33,898 | ||||||
United Kingdom | 4,858 | 3,118 | ||||||
Europe, the Middle East and Africa *) | 525 | 747 | ||||||
Other | 8,647 | 6,282 | ||||||
$ | 61,331 | $ | 48,680 |