July 15, 2014
VIA EDGAR & HAND DELIVERY
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E. Washington, D.C. 20549
Attn: Gabriel Eckstein, Esq.
| Re: | Cyber-Ark Software Ltd. |
| Registration Statement on Form F-1 |
| Reg. No. 333-196991 |
Dear Mr. Eckstein:
On behalf of our client, Cyber-Ark Software Ltd. (the “Company”), we are submitting this letter to provide certain information supplementally to assist the Staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) in its review of the Company’s above-referenced registration statement on Form F-1 (the “Registration Statement”).
Attached asExhibit A for review by the Staff is the disclosure that the Company proposes to include in the second amendment to its Registration Statement in order to provide investors with preliminary information regarding its estimated results of operations for the quarter ended June 30, 2014. The Company previously submitted a framework for such disclosure to the Staff on July 9, 2014.
The Company expects to file a second amendment to its Registration Statement with the Commission at 6:00 am ET on July 17, 2014 immediately prior to the launch of the Company’s roadshow on that day. We appreciate anything you can do to finalize the Staff’s review of the Company’s proposed disclosure so that it can meet this proposed timeline.
July 15, 2014
Please direct any questions or comments concerning this letter to Colin Diamond at (212) 819-8754 or Taryn Zucker at (212) 819-2670 of White & Case LLP.
Sincerely,
/s/ White & Case LLP
White & Case LLP
CJD
| cc: | Joshua Siegel, Chief Financial Officer, Cyber-Ark Software Ltd. |
July 15, 2014
Exhibit A
Recent Developments
Our consolidated financial statements for the three months ended June 30, 2014 are not yet available. Accordingly, the information presented below reflects our preliminary results subject to the completion of our financial closing procedures and any adjustments that may result from the completion of the quarterly review of our consolidated financial statements. As a result, these preliminary results may differ from the actual results that will be reflected in our consolidated financial statements for the quarter when they are completed and publicly disclosed. These preliminary results may change and those changes may be material.
Our expectations with respect to our unaudited results for the period discussed below are based upon management estimates and are the responsibility of management. Our independent registered public accounting firm has not audited, reviewed or performed any procedures with respect to these preliminary results and, accordingly, does not express an opinion or any other form of assurance about them.
Because we have not completed our closing processes, we are unable to estimate the amount of taxes on income and, accordingly, are unable to estimate our net income. We have provided below our income before taxes on income. Although we are not able to estimate the amount of taxes on income, we have not identified any unusual or unique events or trends with respect to that line item that occurred during the three months ended June 30, 2014 and that might materially affect our net income for that quarter. We believe that the following information about our income before taxes on income, even when unaccompanied by information regarding our net income, is still helpful to an investor’s understanding of our operating performance.
| Three months ended June 30, | ||||||||
| 2013 | 2014 | |||||||
| (in thousands) | ||||||||
Consolidated Financial Information: | ||||||||
Revenues: | ||||||||
License | $ | 9,717 | $ | 11,000 – 11,200 | ||||
Maintenance and professional services | 6,767 | 10,000 – 10,100 | ||||||
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Total revenues | 16,484 | 21,000 – 21,300 | ||||||
Gross profit | 14,240 | 17,400 – 17,700 | ||||||
Operating income | 2,877 | 2,850 – 3,150 | ||||||
Income before taxes on income(1) | 2,835 | 1,750 – 2,000 | ||||||
Supplemental Financial Data: | ||||||||
Non-GAAP operating income(2) | $ | 2,972 | $ | 3,050 – 3,350 | ||||
July 15, 2014
Non-GAAP income before taxes on income(2) | 3,082 | 2,940 – 3,260 | ||||||
Cash, cash equivalents and short-term bank deposits (as of period end) | 52,567 | 76,407 | ||||||
Total deferred revenues (as of period end) | 19,649 | 31,900 – 32,000 |
| (1) | Includes share-based compensation expense financial expenses resulting from the revaluation of warrants to purchase preferred shares in the amounts set forth in footnote (2) below. |
| (2) | Non-GAAP operating income and non-GAAP income before taxes on income are non-GAAP financial measures. For a discussion of our presentation of non-GAAP financial measures, see footnote (6) to “Summary Consolidated Financial Data” beginning on page 10 of this prospectus. We encourage you to review our financial information in its entirety and not rely on a single financial measure. The following tables present a reconciliation of our operating income and income before taxes on income, the most directly comparable U.S. GAAP measures, to Non-GAAP operating income and Non-GAAP income before taxes on income. |
Reconciliation of Operating Income to Non-GAAP Operating Income: | ||||||||
Operating income | $ | 2,877 | $ | 2,850 – 3,150 | ||||
Share-based compensation expense | 95 | 180 – 200 | ||||||
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Non-GAAP operating income | $ | 2,972 | $ | 3,030 – 3,350 | ||||
Reconciliation of Income Before Taxes on Income to Non-GAAP Income Before Taxes on Income: | ||||||||
Income before taxes on income | $ | 2,835 | $ | 1,750 – 2,000 | ||||
Share-based compensation expense | 95 | 180 – 200 | ||||||
Warrant revaluation expense | 152 | 1,010 – 1,060 | ||||||
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Non-GAAP income before taxes on income | $ | 3,082 | $ | 2,940 – 3,260 |
Revenues
We estimate total revenues will range from $21.0 million to $21.3 million for the three months ended June 30, 2014 compared to $16.5 million for the three months ended June 30, 2013. This increase was due to increased sales volume of our solution. We increased our number of customers from approximately 1,300 as of June 30, 2013 to approximately 1,550 as of June 30, 2014.
We estimate our license revenues will range from $11.0 million to $11.2 million for the three months ended June 30, 2014. In the three months ended June 30, 2014, approximately 45% of license revenues were generated from sales to customers from whom we had generated revenues before the six months ended June 30, 2014.
We estimate our maintenance and professional services revenues will range from $10.0 million to $10.1 million for the three months ended June 30, 2014.
July 15, 2014
Gross Profit
Gross profit increased by between $3.2 million and $3.5 million, or approximately 22% to 24%, from $14.2 million in the three months ended June 30, 2013 to between $17.4 million and $17.7 million in the same period in 2014. Gross margins decreased from 86.4% to approximately 83% during the same period. This decrease was due to the increase in costs associated with sales of licenses and maintenance and services.
Operating Income
Operating income fluctuated by between a decrease of $30,000 to an increase of $0.3 million, representing a decrease ranging from approximately 1% to an increase of approximately 9.5%, from $2.9 million in the three months ended June 30, 2013 to between $2.9 million and $3.2 million in the same period in 2014. Operating expenses increased during this period compared to the prior period mainly due to increased headcount and included approximately $200,000 of share-based compensation expense. Our global headcount grew from 294 as of June 30, 2013 to 387 as of June 30, 2014.
Income Before Taxes on Income
Income before taxes on income decreased by between $0.8 million and $1.0 million, or approximately 30% to 38%, from $2.8 million in three months ended June 30, 2013 to between $1.8 million and $2.0 million in the same period in 2014. The primary reason for the decrease was an increase of approximately $0.9 million in financial expenses increased during this period compared to the prior period related to the revaluation of warrants to purchase preferred shares.