CYBR - Earnings call transcript Q2 2021

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Operator

Good day. Thank you for standing by. Welcome to the CyberArk Software Q2, 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. now today, hand Investor Erica would to conference Relations. I speaker your Smith, Instructions] like the to over [Operator Vice President, Please go ahead.

Erica Smith

session. to to Executive on prepared open the morning. joining today Officer. are Quarter Good After you Chairman call, a Josh Financial review and up Siegel, Mokady, today Financial Chief XXXX me D. will Second and CyberArk the remarks, With Thanks, Results. Question-and-Answer we Udi call 's Officer, Thank us for Chief

begin, remind maybe of made forward-looking Quarter Third best me we to on of expectations the available XXXX. statements full-year management's the and statements Before that certain specifically our currently and let you reflect I for on call considered judgment results beliefs operations the refer discussion projected information. regarding today based which our

expressly updates actively any of any on our publicly statements made model, a business to the duration and disclaims application differ adjust in related the release the to posted ability herein. statements. or forward-looking Risk Our Securities referenced 's press revisions to and those from actual state is I COVID-XX scope our to Factors regarding release Annual in to filed website, today's CyberArk global Exchange CyberArk results the Commission any to the ability the company's contained pandemic. XX-F its Report transition attention as direct may in pandemic, risks those and undertaking COVID-XX subscription Form well with impact the or that projected these economies, as on forward-looking in and materially your U.S. to on response

over this directly press GAAP presentation that measures to are available found financial comparable to the our section. our Mokady. discussion Udi today's Reconciliations today's call call, outlines as Executive Chief I'd turn financial to With call. will the like investor conference that, Additionally, be in and updated website a also financial the be well measures also Relations Officer, can discussed in the as and Udi. on an release, on non-GAAP in webcast Investor Chairman most

Udi Mokady

Erica, second in We hope Thanks amazing of are call thanks, you the quarter, an all the and company's families We one joining well. history. had best for and your the today. everyone,

than rate by the bookings guidance. in bookings over-achievement level with paired the mix our revenue Our subsequent transition our headwind gates demonstrates subscription higher that that Second This million. the created of achieved in Quarter we of XX%. the out the mix, anticipated of Despite reaching $XXX mix total considerably with were revenue

plan quarter, the XXXX. the ARR June accelerated Identity and the is I QX to XXX% mix, discussion growth, progress compared quarter seeing fact, than ARR, underlying frame revenue by bookings driven business incredible momentum and an the revenue In subscription recurring million XX. Subscription pillars Security importantly, $XXX million, demand. demand we the profitability. for to centered faster the subscription increase more of in Even as ARR SaaS of and to grew our grew strong Recurring to reached Due our bookings, significantly second $XX subscription XX% year-over-year. by robust record XX% and on business, the the subscription are trends our on of which transition, transition, Platform, in our innovation, around demonstrate PAM. in

certain to be and in privileged users, privileged the is the acceleration most growth. everywhere, applications, center at With strategy in expand every the three the hacker digital on move is transformation, contributing cybersecurity. trusts, and can the business. and important transformation and conditions. land and of and are digital Firstly, secular and security Positive human intertwined innovation, identity under cloud, access our of of Identity execution tailwinds zero our trends across the to bots

are They are about no organizations assumed verifies about think implementing programs taking breach trust, mindset budgets, you world and shrugs the around that everything. just allocating nothing zero and If frameworks. longer an strategizing

like access [Indiscernible] ransomware targeting landmark chains and exploiting denominator. IT and CIO are landscape, our the Microsoft attacks SolarWinds, Weaponized threat abuse changing of Exchange, landscape privilege security severity of priority. are of sophisticated techs and supply the common compromise, to and are and Colonial Our the Cisco software of top very are reaches examples and Pipeline, the pushing the identity the

This market deliver to creates Our business power unique backdrop. value provide in-demand time security a industrial-strength and and fast ability and is growth strong agility a and to combination.

of customers' ability growing approach partner needs teams value more aligned drive and are tailwinds with a our They and that the network, full taking on with sales. delivery, solutions learned of executing our go-to-market industry-leading to SaaS focused leverage land-and-expand the and focused selling come to advantage on these Our quickly the subscription the growth. and have subscription robust process

pillars those of sales vision. the expanding sales of bots, our securities and identity our we focus In our DevSecOps. Access One to include important areas security team across was go-to-market PAM our and motion two-speed organized identity January,

a by all activity and across PAM evidenced than business added size. portfolio, and customers cross-sale considerably. increased and Cloud, our the robust heart particularly QX, verticals, and biggest new As in with improved driver geographies, specialized of more customer regions, our levels our The Privileged in in has our of We is our land logos are acceleration growth. resources the PAM, the majority XXX Productivity the have increased was and of business, PAM focus working. At

keys the the infrastructure companies in manufacturing, clear A cloud. kingdom, services, In are landed large and XXX customers our XXXX enterprise that the in Global demonstration protecting fact, Cloud professional and cloud, in Privileged Fortune second leveraging quarter. critical the to increasingly

look success solutions. In -- identity of customers increasingly the in maturity on deal experience real-world today's cyber security because have across strategic of trust. programs, at of in meaningful everywhere made as work part solutions. including the close also across are all we CyberArk new environment, portfolio look to set as strong CyberArk but initiatives, a of partners increase This implementing purchasing our we broader across who of threat security challenges. customers and portfolio rates solutions, critical want with areas relying a extended flight our to with PAM as Customers solving sizes decisions comprehensive the our is fact, longer-term In

their by secure the secure CyberArk has types XXX% of now multiple While there privilege been more highlight blocking including existing I million demand to implementing second our An displacing as time modernize high more manager effective environment improved is manager, endpoint customer business servers and is increase DevOps be been highlight ACV. the who with our customer motion. well XXXX financial to endpoints CyberArk security strategy. down X-figure since accelerating a their a counting. footprint privilege in as Cloud. Conjur further had attacks with examples Privilege for identity demonstrates I lab Pipeline by ransomware and legacy the endpoint ransomware access. increased our vendor in with from our had in quarter, which vendor privilege The access in Colonial proven went locking of the QX, quickly of solutions, than that pipeline who been to -- X want are demonstrates our expanding examples They access from in quarter services hospital the expansion one to locking with power few A will velocity expanded to are who deep first in QX company

secure broad key and SailPoint of cases, use to as ServiceNow, well contributors a as integrations ability expansion [Indiscernible] our such set Our this due cloud as great to (ph). were

who secure company will would provide were highly DevOps logo. the identity this X-figure and PAM manual and targeting traditional competitive quickly of an trusting and business, a wanted Manager strong fixed deliver platform new unions and every DevSecOps. Endpoint is CyberArk, examples and not partner our a to our breadth applications the identity In applications that in our Secrets transportation highly situation. Privilege, XXX puncture the for Manager. quarter. incident across And win to are Fortune competitive leading increasingly value We're which our there a benefit SSO are the an one but to in AWS of peace SaaS This have non-unions secure. across QX, ease-of-use this against the of services and front purchased professional trusted strong protecting quickly. Manager key hit CyberArk, mission-critical to view, With had is in business solutions Privilege and the Secrets our European all of Access, momentum modern and scalability from number Conjur solution, their all empowered nearly The its truly its after security recognized running a mind applications identities, the a well-recognized company, winning was MFA, second a of up controls, of of through of embraced One from of identity customer just security portfolio. ransomware access Conjur and pipeline. financial a across and services increased been call secure ability post-breach identity hours, logo contributing business situation. existing agility its In a and In new was portfolio identities only security are in getting Attackers by criticality solutions Europe modernizing also a CI/CD developers, operational. company Cloud knowing Privilege customers matter and from stack the that typically running and response They the buying

secret technology scale further partner partners, Our driving firms, and our of and extending is in ecosystem sparse, reach go-to-market. advisory our

industry. automation partners practices Our customers and path, field as in on market training solutions well the of Hat, with our differentiate IT maximize their to resources, in the and CQ demand of advisory dedicated our investing some and like partners our and DevOps, Red strong firm as demonstration are in base in trends AWS investments. collaborate we who the cloud UI allow another

We strategic to of our the second transition. subscription pillar, our on ahead perform is which expectations. Moving

transition, we In faster and the partners, strategy customers, transition much January, of quarter subscription active new since selling anticipated. motion XX% a employees in set then, was the booking strategy. Our embraced we just second reached than mix our have in and

across continues we our in and with particular SaaS SaaS to were strength reach thrilled a products, Our one to Privilege of Cloud SaaS-heavy, transition Manager. for and Privilege be record new Endpoint bookings every

SaaS every regions. across increase us geography every and confidence the product quarter pricing the of be will fact, compared XXXX giving first In adopted to on the subscription and verticals in is subscription that mix

new, year. relatively than is subscription While with already XX% from transition in customers June of we an [Indiscernible], increase the their of have $XXX,XXX XXX over active more last

are continue customer we success towards see in to value great our way our program, to also We and well on customers. our progress transformative delivering

to X progression of exit the we and our with transition of complete quarter we of another confident Said past And to We XX XX% of are our analyzing quarters. reach the the from subscription transition. by will thrilled way, transition subscriptions in XXXX. instead we goal an are the forward. expect bookings transition, the now after X of end

further to types business session Privileged Moving from row. web Access the multi-cloud on in the leadership Gartner named sessions, which enterprise of extended June. in Dynamic be Dynamic secure and including our and of in Privileged and customers authentication speedboat sessions vision This security of both. game-changer require web are in pillar, solution recording ability positioned Access, we deliver Every Magic and solution and to apps Privilege in described customers our the of our environment power security positive. pleased all demonstrated session differentiation July and data for overwhelmingly Access were our to foundation Secure by execute our and entire Management, our from as the We standing The who the protection, at time market. event response June. event. has attended capabilities workloads. hybrid our to Web has which highest been a Dynamic a our both for for strategy our a councils. identity secures that cloud Impact and applications, of to Privileged is XXXX are for IT customers Access and leader continuous part introduced third existing just completeness Access innovation was The a by the Quadrant in strategy both strengthens position

vendor essential to the this only pillar. offering required will comments are the wrap up X with We achieve trusts. capability some I on profitability

on firing innovation our is extending is leadership engine and position. go-to-market machine cylinders, our Our all

in to As rates go-to-market, decision investments improved acceleration in half of looked fundamentals, productivity, growth particularly business, made the second and strong and the our in we market of beyond. we and our the drive close XXXX increase into to XXXX,

quarter, to a had our And the We transition profitability to our as have before company's recap, a transformation, strong identity around accelerated, delivering each pushed investments. PAM not the result, one and of tailwinds; period. digital zero SaaS reached we looking forward critically long-term value. strategy security before subscription business trusts, and changed second solutions major becoming innovation, deliver an we underlying record ensure incredible bookings, To philosophy return are hacker We the ahead, were and of investments history. we expect and evaluate by results. best entered in The DevSecOps transition across levels we industry return on a to our the our we that is Access requirement, security

outperformance in and environment the the our us half our first strong gives Our in supports the confidence year demand ability execute, of to growth. incredible

Josh and discuss our we will assumptions in result, booking raising a QX, As which our guidance above underlying detail. are in the more full-year beyond beat

tremendous solutions into our customers, and will way. and will unlock durable now year. third results cloud leading Josh? a the discuss I and call turn our are for Josh, way who partners. our our company We our on well the business transforming the outlook will quarter with full fast-growing, to value Which company, the over our for shareholders, subscription our towards

Josh Siegel

Thanks, Udi.

that be helpful wanted before the results. to slides remind you we walk website So will quarter, the discuss to we as details the through we that posted of we our

XX% of guidance subscription headlight we well terms had we of of came our mentioned, a already underlying business, delivered and particularly with Udi PAM That's in with As revenue acceleration mix our XX% a an $XXX the in quarter all total great expected. a than million for mix. the better framework of of we P&L, metrics transition ahead subscription of second bookings. in

That's bookings Udi revenue the reached we above midpoint with revenue the represented and subscription of last $XX.X XX% an quarter. As higher of for a year. revenue in what of XX% revenue total also and XXX% the the mentioned, total million bookings Subscription total only revenue quarter, was for in million second of quarter from $XX.X guided than mix above because subscription increase in anticipated second in stronger the May.

portion the faster and success mix. transition, XX, than our On the ARR revenue XX, was XXXX. license year. million really business. ARR portion, XXXX, on consideration, from million, have have growing of and the history. June. subscription see represented the million second $XX quarter of first created we Economically, SaaS XX% million the perpetual at representing the the in XX.X bookings it our monitor nearly from $XX.X million combined first total organic Our the Sequentially, which the $XXX in growth bookings On reached we or headwind into maintenance last recurring growth The really of revenue SaaS, strongest million quarter quarter subscription with subscription services increase grew year $XX.X ARR rate coming growing On-Prem million, as revenue organic XX% when the second was Taking acceleration year The company's total of XX% approximately only we of revenue. and June through pace the was and of of We're second $XXX and the see on in the as compare added services we an an quarter closely of the XXX% the planned the the our million XXXX. over to which this you license year-on-year $XX Normalizing growth and revenue recurring the second would second in the XX% mix mix on ARR year. moving quarter, professional Total our the supports transition. was $XX.X XX% $X.X grown revenue, over XX% year. ARR new of grown subscription year. by last by year compared mix would in percentage we to of basis, our quarter in can the million and for June in approximately second in the in sequential demonstrates XX% $XXX and million total bookings subscription, in the XX% mix this of from end total a maintenance in quarter subscription were shift, business, to maintenance quarter, headwind like-for-like

SaaS momentum with terms Americas about the new last The detail, a healthy logos XX% added million has bookings generated increase quarter. were $XX generated again million Americas compared $XX.X and business mix total see $XX be XX% increasing basis. on business thrilled well-diversified. the more new GAAP subscription the XX% second a bit of of than That's to will subscriptions. the business of in new revenue release. now the we're of total, the strongest logos of non-GAAP the businesses to be subscription. had of Please in -- The items an total number our in or about P&L XX% of in All Geographically, with of the the revenue. in So of million year. revenue and in A line revenue, new to representing deal EMEA quarter continues revenue more the of press discussed XX% of percentage or our in tables XXX sizes. during reconciliation APJ a full non-GAAP

million $XX.X second the was XX% profit quarter margin last or gross to gross second-quarter year. margin XX% in compared an gross Our

of to operating main continued X the income. the a disciplined $XX.X year-on-year make $X million, our in We income was business, and that quarter. investments in growth, million in items expenses XX% resulting operating impacted operating

margin $XX by about nine First, points. our operating million percentage the headwinds lowered

the second Over headwind, about income even quarter to And versus exchange We third, basis, expenses full share FX, employee the for with better the second in a year. and quarter foreign our count, aggressive $XXX,XXX X,XXX invest was the cash Marketing. to this diluted Sales second ending business $X.X neutralizing year to strong plan in flow against XXXX, per and from or cash Income a rates adaptive, XX% expenses of expected sheet, investments. free now margin. would higher in was the our cash Net And of a million, XX% total our employees margin we free balance are have XXX adapted than flow were XX% Second, billion headcount. in our last expenses ended flow operating our approximately quarter. half quarter executed of employees of X%. worldwide. the lowered we like-for-like and are In operating first This by XXXX. with been the contributed or of $XX.X operating On quarter hiring cash and our related $X.XX

also deferred on revenue increased XX. year We year by million to June XX% on $XXX

XXX% Our $XX.X SaaS only by that to million, June to million compared XXXX. on deferred revenue and grew XX, $XX

to Now, guidance. turning our

of For third $XXX million XXXX, $XXX to quarter million. of total the revenue we expect

a We operating of for about expect X loss operating million of million third to non-GAAP a the non-GAAP quarter. $X income

to from share. XXXX. net for approximately EPS and basic XX% a of profitability of headwind non-GAAP $XX of guidance of third per bookings a the our of We subscription $X.XX revenue and loss expect $X.XX million quarter range This loss about to assumes

the and the normalized our growth quarter, taking And revenue isolated XX% for subscription, the quarter calculated if year of third range. over growth third perpetual, of the the SaaS, total be to the normalized On-Prem Our calculates licensed rate year. XX% on for midpoint lines account, at headwind into is you

basic, diluted million and average, also guidance assumes Our shares. XX.X weighted

industry XXXX full year reflects close the strong and of tailwinds Our the robust guidance for rates.

to is and $XX XX% $XX is million, $XXX of total the significant assumption million. and for prior our year from full and guidance, subscription This assumed the year underlying million approximately now headwind revenue subscription the revenue represents increase headwind. million our the full for from bookings a mix from which bookings, range of in mix a $XXX our a XX% expect guidance We

provide a I account, license rate, wanted isolate to full we transition, our color range increase significant few growth want revenue lines the of subscription, the bookings in at approximate more which year. on growth the normalized into booking XX% headwind revenue. guidance for would total the calculated our perpetual, XX% midpoint taking SaaS And Given higher that of our of to and over a the and for headwind would combination represents the the underlying full-year. the rate assumptions emphasize mix be for the

we be P&L, million operating a moving between down $XX non-GAAP to Now, to income the million. expect $X

full share in We $X.XX expect for and about XX.X to average year, non-GAAP net taxes. weighted be diluted expect of shares range we diluted $X.XX. million in $XX million our per to income the And the

capitalize We leadership to opportunity, are second increasing our ensure growth investments business. strength as the position, half of the in on our can year fundamental the we that and a our

transition want for also a on free provide few flow full cash the guardrails of and the the updates to year. timing We

from the now As quarter already timing XX% we we subscription Udi subscription the of mentioned on expect threshold to crossover in by quarters. eight our transition XXXX. Meaning, the of transition, complete of should the targeted fourth bookings

flow. cash on Lastly,

to we that flow flow While the we for with XX% through X% expect we cash because halfway and want seasonality. not provide to free of typical intend of to cash margin already third-quarter free we're flow, of given guide between our non-GAAP more the do XXXX Currently, did granularity, second quarter be year. full cash for than the income lower net year, the

our Second-quarter and subscription Growth was is great. transition is underway. well accelerating,

and Operator turn the innovation With are to drive the now and that over that, beyond. will investments I'll for our call We Operator? in confident growth XXXX Q&A.

Operator

Thank you, sir.

a reminder, ask to [Operator a question, As Instructions].

line question of Kalia comes from the Barclays. Saket Your first of

Saket Kalia

upside Okay. Great. to the the what revenue start guide despite unchanged the guys, to higher questions here. really was revenue mix my the and to think quarter, maybe Udi, the commentary but year taking in Hey on better see for great subscription overall all It's just of I sort thanks interesting bookings. see you. the for was with

as maybe, is last that better we just quarter because well. think I that into could underlying backdrop, you what if you bookings double-click driving like feel wondering was I So heard

do activity? to better the deeper you we've just this level whether the is in feel you maybe that what coming competitive activity seen? is one a that is change environment related bookings or this breach Curious some driving could like into from So go whether of

Udi Mokady

in past say And Saket. talked record I talk are here we this to the pipeline. building about We've a good to today. pipeline. would lot it's a record you against Absolutely, executing

of combination market really execute see transition how the and a around the really and execution embraced subscription upmarket, executing strong organize and leadership increased mentioned we demand Privilege to strongly them. on as favorable really speedboats our demand Cloud gives competitive pleased we opportunity the team happening and core and like manager environment, to and it's to the it. quick examples SaaS So environment, also The the also which in time move I've I are sales working it we're great. the for to business PAM us the up adopting the complementing Privilege value very see given where enterprises large for Cloud is

So and kind driven I threat trust. add zero the of this by getting the that against considered in is solutions ransomware, also I'd all probably of specifically of demand above; environment but the I the EPM growing of are execution and that will environment, strong a demand critical the strong would pillar say rest say

Saket Kalia

Got super for helpful. it. Got you. follow-up my Josh, it. That's maybe for

because for unchanged maybe a to guide think mix guide. unexpected understand just be level bit revised deeper that maybe one to a the was do investments profitability. me, you're the income future like that revised operating go guide will years. all growth, feels -- revenue that has with Is will, maybe or revised anything I if changing just given income really in continued deeper going investing Can operating the the into in you for go-to-market. It little I we little think there into into those you

can. So just deeper maybe one if you level

Josh Siegel

Yes. certainly Thanks. I that. And into will go

first very tight hires a we internal in on So HX strong a starting perspective to with be overachieved to competitive stepping there that continue were -- out bookings. into net and go that the really I hires market part in into would position dive the to second we XXX half. of even we for coming to from And QX. from able going is part gas hiring would and hiring will considering overachieved it's because half. on the targets the the we into we we're and -- and the all, in go QX our second in into did market it's We And the doing additions, were that I job over other extra be other dive as that

that original And guidance, Our as pointed our into you out HX. believe internal pointed we're as morning, times we bookings amounts well, we that's and forecasts HX. our to up on up going well as this really variable beating several for out as drive

QX operating So the targets to that for expecting hires the that's our more actually a do we change when the under expenses. expenses and second when are in fact to we in half we the and hood in booking our some we're second our into consider more consider business the are the half, seeing on that are to rise. into position And what's contributing for related going to going second we go-to-market hires the where half increased

Udi Mokady

in adoption exiting And to just there QX the the we enterprise I business, by investment -- But momentum really efficient, growth increased that of in in competitive today. and will approach a fundamentals, justify -- and been landscape faster Company, and changed and market to add across about profitable and run SaaS business build as favorable subscription support that mentioned, scaling our nothing a talking that go-to-market of believe the the that that highly such the acceleration transition we've with Josh of the they'll

Saket Kalia

in get queue. Very I'll back helpful, it. guys. Got Thanks.

Udi Mokady

Thank you.

Operator

Auty line of question Morgan. Sterling of JP Your the from comes next

Sterling Auty

guys. thanks. Yeah, Hi,

ask profile that the new is on, me." says, not customers not So "You subscription? way. I about know the to mix expected, is just Company this want the coming choosing Especially question of subscription subscription is than when transition Obviously originally you who the much you what, for better what's talk the

Josh Siegel

across the verticals it. across XXXX surprised very as and board global and across Yes. companies pleasantly in prepared of and large would my And adopting Sterling, and mentioned it's even I regions we and geographies. by say happening primarily infrastructure were adoption I'll start. XXXX that across critical lot I have remarks, the

Josh adopting later As new And adopting government we to probably on SaaS them so in you were again, be I point really where but vertical can some logos, the verticals highly within government, we regions, APJ more off regulated under to laggards still the verticals, And slower global kick it's of happening. were is expect the subscription. If put want mentioned, in well the the adoption them also adoption, expect it's The but XX% to be. the be is that subscription, it's and SaaS a happening. in to perpetual. it,

Sterling Auty

down a an perpetual value how just And then, it what you. But view that? than on been do about I a if if you in just would under I number, bigger subscription. didn't maintenance, kind you're to think imagine cash us Josh, of but think about about great have would sense. one you Even it, exact X much the if I have first you portion the you've the you Makes revenue half you free framework a transition. do million. what collect for year-to-date, you given us don't of But flow? give of missed can said follow-up

Josh Siegel

breakeven three get getting more portion a to money The annual. And for a is size. subscription model. perpetual the perpetual remember there's It's annual payments typical piece than as the contracts perpetual Yes. right could be -- license classic the that years you to the model, SaaS, usually two maintenance before also compared I to much in let's contract. mean, you're annual the more on perpetual

and but obviously, there probably piece, impact been correlated it, I talking the think would -- about Operating you seeing -- flow we've to Margin. we but XX% subscription. necessarily So around mix some about cash framework, what Net know we're but on the give is cash is on a same relative can't I still flow X% other when over and success I to to the always above Margin Operating being Net Operating -- lower the Margin, Net percentage a

correlate would I where the that's difference. So

Sterling Auty

Yeah. Thank much. makes That you sense. so

Operator

line of Ho from question Jonathan the next Our comes (ph).

Jonathan Ho

Hi, good morning.

either to deals buy additional over make Can congratulations you're more or time? give for or easier my little as a me And sort of does Let SaaS echo platform multi-product on color upfront add-on customers bit to products the it you well. purchases? that us seeing

Udi Mokady

Yes, absolutely, Jonathan.

with the it think faster. that with security And the broad of call. the seen gave Privilege going examples customers EPM on on the solutions. examples we A customer Cloud I adds some advanced we've starts

third-party everyone, can we a depending we can and see also. on access, [Indiscernible] bite expand. good from they land on combined there every the value and They with get with customer MFA So and packages, the offering then show land how

power it's taking of security the place. the So platform definitely advanced

Jonathan Ho

solutions bit more for a seeing or are strategic Privilege pent-up review their Thank maybe any now of Got And either the they're these a add-ons from COVID-XX you Cloud solutions it. your SaaS of evidence and companies of of little demand on are looking or portfolio of you. some that taking potentially SaaS the side?

Udi Mokady

in bite where take and in in looking can larger to faster more logos very seeing in in it's Magic we're being [Indiscernible] SolarWinds and position. to latter. and the is regards they're a patch reactionary. it really companies say adopting new we first because customers be third be do the kind to the secure future also that to increased What how are a they're was results as see have time strategic definitely solve we the leader it's even Gartner the they in more the And I programmatic see across deal and row being year and Quadrant -- the and going their do sizes the for top Cloud. would across board of our more in of the -- that having strategic. Absolutely normal kind. events They're new and with them But can for

equity in I there. seen traditional seeing on we're same vendors we've and the private time, switching disruption the PAM think

control customer not And fact counter And security alluded SolarWinds wanted and on more and have applications. extension be developer we're of push would differentiate security, the we ourselves chosen types the the to offering our the that the the all that broad our with to where platform. they realm, the a PAM no suite and front ability ahead one increased need then in that having the trust especially ability the environment so that can shifting is threat management they after securing identity with the with and obviously and on what pushing full PAM we players -- to players, exactly waiting and on would to secure customers a the I longer PAM. management in we and say, security-first conduit identity to our the into DevOps Access win at if secrets and to to security-first but at the I they, The And the And the market center, example here for customer we [Indiscernible] DevOps back but have mindset win be be with the mindset with needed agnostic us to DevOps.

their Hat, and all to of into integrate with partnership the Red Our PAM. ability that

PAM the And what to throughout having us was this and win being wins all of applications platform on types this to front. able secure many and so led

Jonathan Ho

purchased maybe ask announced, quick the so helpful, about you I Privilege hit follow-up. going is think through the purchased I down-market, And Okay. That's you of Privilege you you guess channel? and significant purchase does being lot to that through I you a announced AWS. How Is was transaction after or AWS Do visibility AWS cash lead just follow-ons? to that and Centrify, then have or Cloud to Cloud of increase that. Thanks. a that as deal is Privilege The more Cloud how channel? a

Udi Mokady

our are a AWS and because partners, I existing have new especially AWS inclusive that where it our for is a compliments channel excited know. through and marketplace. the say about of it's actually channel but customers will That's able other don't very it that I relationships we're us, buy channel on works to great top question --

in for we the have AWS in able example be we complement Cloud in out recover great Privilege but AWS replicate the put the into our integrations a was going to accelerated we to from them whole down moving with there more buy this to that our existing with the invest channels. through really to CyberArk them go-to-market And up ability demand where we're partnership So we're cycle. Again, to customer and them ransomware helped was multiple those and for the wins.

Jonathan Ho

Thank very you. That's helpful.

Operator

line of of Ruykhaver the from Baird. Jonathan comes question next Your

Jonathan Ruykhaver

on Hey guys, the strong congrats performance.

adaptive, how just, with is seems But just give doing. us Cloud Udi, year So just hear acquisition. it's especially since you've can on feel Privilege a about positioning it's how security you to the messaging? the curious there, It there. you I'm first well great some traction about I'm -- like But if early been the curious really color had some

Josh Siegel

how opportunities excited I quarter -- say add-on customer in the of breakout they're And very it's speedboat landing really logos think performing. is this a the both our we're within and would new for also them about I creating a base. and muscle

on impact our but PAM, I ability say We our web in a to the what users. PAM newer the to life things and that excited leveraging way well ability give our types very business, are the events solutions for at to markets. speedboat with our lot of And access, other our secure strong with vendor the it's about invested connectivity controls we all part the customers the of them brought and customers from sessions for to we've So success to would progress table. announced and with a the its see is really integrating

the half as a an this to that Identity good on we us so and strategy. of give second the in competitive why be And a expect advantage adopt Security available will increased year and why

Jonathan Ruykhaver

be just new look on back XQ? that hear, I of any impacts in the dynamics Udi. and of these the or to layers, in -- at or we're you that great net dynamics peeling quarter that's you the quarter, some seasonal should looking era but No, maintenance Yeah. as we earlier, aware touched And when think at

Udi Mokady

to. side to subscription. nothing earlier the plan in question the though, just to exceeded we think actually, of SaaS according to terms on I of seasonal Everything I there's around maintenance behaves opportunity coming and want this ARR. point Jonathan, plan take from Okay. that business and I the one the would percentage

of was component For EPM that it we about the XX% I It's ARR about XX%. said have. subscription

So clarify I just Thanks. wanted that. to

Jonathan Ruykhaver

guys. Thanks,

Operator

line Your comes next Boyd of from UBS. the Roger of question

Roger Boyd

Hey, thank you.

about standpoint is go or and [Indiscernible] are perpetual is the customer back-half a just for to Can anything growth. Just changing from organically and expectations if strongback demand year you the to going online coming market it first that kickbacks strive, half question and talk doubles just quick way? there's a the incentive your from on XX% of half second in more an arrow relative to

Udi Mokady

QX with with coming And again, add-on mix. business So I more expecting think XX% we're in about, QX, a talked we mix then expecting, in a growing we're perpetual.

kicked January. running -- the of all SaaS terms train off incented to they're we In and and are teams, all that. in subscription, sell regions all They're that pushing

into one, to existing only business add-on positive is from in a which which that So nuance, mix. QX, the in be customers will an is expect we increase perpetual

Roger Boyd

of So would be conversion business, add-on that revenue? any not sort of maintenance

Josh Siegel

rolling combination, new from will business. be It pipeline half remember old but some the the even be but will it still going add-on. be mostly into because some a let's with pipeline is still year, mostly historical a of back the will There new this out business add that probably

Roger Boyd

Got it.

very much. Thank you Okay

Operator

Mizuho. Gregg question of Moskowitz line next the Your of from comes

Gregg Moskowitz

right. subscription hear for far. the to I introduced I that's more would you packages know love some tracking about how taking beginning you All new Guys, so Thank the of questions. year and the at some

Udi Mokady

pipeline. There for both I the deals new also first what our and vendor new the containing in were that restrict and into multi-factor adopt that and will get-go in closed often package is pipeline -- customer get combine a deals a seeing pipeline the an all is is the higher say and the value authentication, that to they cycle that the within packages mix. on from course Yeah, within of analytics, new basically access of closed newly-created to what we're

Gregg Moskowitz

That's right. very And Udi. Josh. helpful. All for Thanks, then

other primarily half, sales be as of capacity So aspects that channel is et investments ramping in well? be enablement, as the might greater you significantly such second go-to-market this acceleration the go-to-market cetera, will there or of marketing,

Josh Siegel

of the channel the around Yeah. Well, go-to-market. really about really in go-to-market related carriers, also across functions likes, it's to definitely and incremental when engine. it's think piece, the quota It's we but overlays heads managers the but and and all

Gregg Moskowitz

much. very Thanks Perfect. right. All

Operator

line of Trebnick the of from Catharine Colliers. comes question next Your

Catharine Trebnick

on thanks. my alliance good just within pull really your you some Thank help you revenue the for or me quarter. drive cross-sell, CX And maybe you five Could for your top taking players apart question. accounts, of up-sell that

Udi Mokady

of few. great collaboration there put for well, a SailPoint, probably in with I add Red them, field have There the go also the and deals the want as on And And where that, we Forescout. lines all of if devices this over are I up a Hat like that, the CQ their in and partners CQ well with variety. mentioned Proofpoint's support they power try as and really -- to integration will -- because [Indiscernible] integration. customers cloud-based, strong I of if IoT top I'll have really there's X. I top Sure. and is

right? ServiceNow, earlier the so so example variety And should partners also it's the in gave mentioned focus there AWS call thought definitely. a multiple I Because power as I'm of on on there and also we like beyond the are add the top. And I with five, partnering. the And the

Catharine Trebnick

Thank very you much.

Operator

Your Henderson next question of Needham. of from comes Alex the line

Alex Henderson

Thank you.

already Analysts down but in guidance about Obviously process very And decline margins give moderate operating around could of If 'XX. street quarter, from would to Thanks. expectations the 'XX. think a for a year-over-year steep us given I your Is end or Day in helpful. margins in little you're margins transition, more the margin increase to operating EPS alternatively, your on that that based to model the the be X%. in a process? your deck into fourth from out resulted give significant decline a in for don't 'XX, here 'XX XX% about achieving your because reduction has that directionality you continues from the operating that 'XX in showed I yet slide know into will order has already XX% you've year, further pretty So pace you still achieved, transition by bit 'XX accelerated a for some the

Josh Siegel

model get as So, in transition economics that continues that that and behind takes the a changed margin bookings of Alex. point. has model terms XX% way get the to from operating it of through until of transition side the to hit to other and Nothing the thanks fundamental XX% you coming context transition you the in the

by we that being of what excited quarter that that move fourth the is point XXXX. we're talked certainty, So to to we're to able more up today about

rebound So margin that of we anticipate is operating model typically last up, table terms though the will you do potentially come transition to now post transition we'll be transition transition of go to and quarter. liked down in the going moving follow the transition faster we the our of through the into operating through What XXXX. to then out see margin the up

quarters to the still to of we able -- of end XX model 'XX, that. later. return on after then on get to then other couple way the when I transitions fundamentally be our being transition earlier targets that And than of side So to rather to achieve on the the coming profitability the works to of and is these and would sound rebound go a transition, able would out rule the again, we're add, return

sooner. to moving profitability is going is X moving to out where basically we're up quarters come so And moving basically back to it --

Alex Henderson

I to though, pressure adds hiring right? think accelerated the in that And Super. also 'XX

Josh Siegel

go to we operating growth part being going XX it's going headwind in with into on this a able but fundamentally, hit talking coming we're Company the following revenue into is all Rule transition and margin, -- to still Yeah, if of obviously our to even still and the the about focused afterward to for guide year be about, year. of guidance this into a then if rebound hire is able year we the economically, whatever next but year think XX% you consider XX%

Alex Henderson

Great transition. Thanks.

Josh Siegel

Thank you.

Operator

Q&A the remarks. concludes closing for This will now over call Mokady back CEO Udi to I turn session. the

Udi Mokady

deeper customers a employees as thanks and will and execute I for want to quarter confident even strong our to everyone. that we thank our our and partners. customers, build Company. second I'm our with fast strategy, supporting partners, our contributing we subscription relationships transition Again, to

Operator

for call. conference today's you concludes Thank participating. This

may now disconnect. You

CyberArk Software (CYBR) 12 Aug 212021 Q2 Earnings call transcript