Earnings call transcript Q1 2023

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the CyberArk First Quarter 2023 Earnings Conference Call. [Operator Instructions].

Erica Smith, SVP, Investor Relations and ESG.

conference. your begin may You

Erica Smith

our Thank we you, today Results. for us to session. Officer. Matt Thank me Siegel, question-and-answer and our a Chief open Good review CyberArk's up morning. Financial Cohen, are to today Financial prepared the you Executive First Officer; on Josh remarks, joining After call Rob. Chief will Quarter With call XXXX the

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

might projected statements. those results actual in from materially differ forward-looking these Our

release I and to any attention annual and on application Form in updates risk U.S. expressly made release disclaims referenced filed forward-looking today. to contained those or or Exchange statements CyberArk's in are report any undertaking publicly any factors Securities direct your to the press posted with on that XX-F website. Commission CyberArk revisions the company's the today's

financial conference Additionally, in in as comparable be will financial on Reconciliations discussion in an also discussed as directly that well non-GAAP the the to today's today's presentation most GAAP this outlines are measures measures release, financial call. available press investor updated call.

GAAP provide website of IR color reported also information want for to our be in additional or a subscription comparable we webcast also today's available bookings, you section. revenues should for or that GAAP A is but not as the We on other viewed to remind call mix regarding it metrics. substitute

over turn Cohen. I'd the CEO, to that, Matt With to our like Matt? call

Matt Cohen

of The from met support, at and world. Since to commitment partners ago, My with customers have privileged partners. the CyberArk's Thanks, have we reinforce identities the palpable. our security my base human are and Erica. controls my customers and earnings about that identity applying an impressive role weeks challenge thanks, unified tackling joining starting all I a to is around with CEO. we machine And and of six vendor our mission extensively new through everyone, call meetings platform. critical passion, security first the and amazing for And people, only team

We are requirement landscape. stop a from in adding mission-critical the controls that today's threat progressing, attacks

Total $XXX XX% of navigating we I our and proposition, how million and grew quarter, SaaS an Because all-time year-over-year. XX% is value at with am platform solutions environment. today's our being unique in the ARR accelerated bookings even macroeconomic are first and high, demand XX% revenue subscription the for prioritized $XXX.X Total mix year-over-year. reached reached our growth motion. grew CyberArk and million million selling pleased by for and our XX%, ARR reached $XXX current to driven in Subscription backdrop, and came

the Before environment I details macro the the talk about to getting into wanted of itself. quarter,

expect these confident the initial in forward moving as We expansion in did and are QX customers year. to see the scope and the QX already programs pipeline, are engagements, many of move because back but that we identity and we security the through those are in we of opportunities our are our subscription outperformed cycles that larger guidance. bookings reducing We embedded longer macro pleased downsized, continue select deals SaaS assumptions

of the demand of our ARR to guidance ability and strength revenue our our the subscription identity security durability speaks bookings ARR, full-year increase a material subscription guidance, platform. The prioritization mix to and maintain of our our despite in

the EPM, entire offering. Privilege momentum for portfolio business Deals pipeline our in are are Cloud progressing record we Access, strong our as as through the seeing pipeline, Secrets across and and well with growth

profitability. the tailwinds example of The discussion, to migration, powerful AI on quarter, of new transformation, the and a shape attacker technology innovation, digital frame will accelerating. are and will persistent is innovation always, secular only growth, that we Moving the as cloud landscape. around cyber

difficult, vulnerable weaponized organizations including, impossible if privilege not breach With attacks are protect ways even assumed to privilege these controls emerging posture, one to against that the AI, detect an become implementing more is and to lease best threats. of

professionals secure. our leverage customer level enormous vector, about we only of in an will us of weeks, at place. security in and identity a stated make X,XXX massive AI organizations. taking strategy between had CyberArk. At XX% and an only comprehensive mission-critical, cybersecurity maturity Recently how is but identity to Impact place protection attack And two event opportunity just a survey the of customers gap consider is can There also X% that hear as our the not but you under more they conducted AI for

our have tailwinds to target. these built $X engine is well We scale our architected our platform go-to-market capitalize to billion ARR on strategy secular and beyond CyberArk

flows, password compliance, management, Cloud, Secret secure quarter privileged all sessions, the workforce contributing excitement. are key management, in Our customer life recent to traction, Hub, innovations web are Conjur wins had and and gaining cycle

expand with logos, the and signed new we and quarter. over motion land first Our in begins XXX customers

customer QX include we're to increase major control strategy wanted and deeper by controls across a key insurance cloud-first wins its privileged struggling with a PAM company, identity. secure point and provider. security protection every few to A scale layering This and

flows, will Cloud. be sessions, web compliance, platform identity deployed course, globally, Our identity including of secure and security Privilege identity

customers, and sales a the For new that pipeline. to in the drivers leading buy this in including our results, verticals. workforce wins to the management broad our Cloud leverage contributed health-care password banking, secure insurance, and is cycle, to cyber first Privilege market as friction many reducing route DevOps as quarter, and to management compliance, the marketplace Regulation, in provider are health-care insurance AWS well secrets

the pipe. receiving QX, leading a the we Early in and already company in we're insurance with formalized program opportunities referral cyber

customers, SaaS In addition strong marquee for had we to signing subscriptions. quarter a expansion and

to with platform, over and most the more which reached $XXX,XXX metric revenue, end A identity expand is customers X,XXX than QX. of identity recurring the PAM the with in annual securing order also customers by password security land increase of software flows and passwords. employee motion peace examples mind but increase that across not at include workforce protection in an provide and automate few existing the its managing Our only in management is efficiency expanded to visible IT accelerating XX% purchased workflows company, to

Fortune who deal. QX of ability and weaponized A key a been PAM as of to and long-time half the our XXX protect threat second protecting against end-points transportation AI a expansion cited company in the has significant began XXXX, ransomware and motivators customer

and CyberArk Identity and reach feet partner also with in momentum extending is channel more in with certifications building our The market is Management. now the Secrets on street

market While reach still services business, helping customers managed APJ, EMEA, secure rely on MSPs contributor scale and who small relatively a to are move and their overall down Americas us to our environments. and across

validation KuppingerCole the setting applications. secure solutions. were innovation management, management quarter, a by in identity management Workforce security. we sensitive privileged are further password example that of On industry-first the our announced we create of In the of in we accessing innovation first leader pace the way an Workforce password as side, with access web of in used strength recognized is another where sessions conjunction

credential capability Today, Privilege risk escalation and discover, accelerating. Windows endpoint early theft security Cloud The MacOS of all and local endpoint. review, at onboard platform This improves automatically is to access and privileged and the are EPM lowers effect privilege enhanced leveraging customers and accounts.

year profitability this I a operating reiterate into our cover we we will invest discipline and to of will wanted few that each Josh just look lines expense to in moments, leverage with XXXX, as continue but and beyond.

make Importantly, with have ability we agile through as plans year. move our and be to our growth, the adjustments investment the we in

As with changing the February be level, with investors, as Udi, at strategy. changing asked highest the we're I've I've talked CEO, about we I done been about not will around what in as

can there have deliver We where to next the and improve profitability. areas the performance. said, drive That ingredients level execute our of and execution all remains growth we and

focus only area data, our deliver that to operational programmatic boost efficiency This in identity our engine will business next as success entire the platform. our security harnessing our key data marketing with quarters expansion enhance allowed opportunities, we sales the same productivity, us the drive and subscription customer empower excellence. take with through One company level, execution the productivity combined shift innovation and to increase the transition more that comes is drive rigorous model five to to and

all identity ecosystem to the ever, is more A are services, our second motion, we across of trusted set we our as in and environments. our growth. in identity laser-focused and one our are within how are is increasingly reach accelerating towards customers. and and of this on leader broadest trust our focus fully that and tremendous platform we partners robust With opportunity. than can identities our leverage realizing partner moving and that this Identity is underway critical our the platform selling secure role area security mind, organizations Consolidation new drive extend use for

Securing not And managing positioned best all of at capture based cybersecurity market. a our just access human requirement strategies. we the with are is customers' privileged our to on center controls, identities, approach the

lead for of we will our are a help disciplined in machine the We alignment market. choice customers ensure execution and commanding becoming identity platform deep across organization extend the creating driving the security while

made navigated results quarter, progress macro environment. strategy, a we we executing we and In challenging the great as strong delivered first our

the cash profitability We accelerate are for growth, executing improve and on year. strong pace to and generate flow

discuss will you financial turn full-year quarter, look I in increase call is bookings provide through our our and in our more headwind. to the guidance, for raise when who the results for a and Josh, what with essentially you the will the mix subscription guidance Josh? outlook XXXX full detail the second now over ARR

Josh Siegel

once and Matt. portion reaching the $XXX increasing subscription exceptional XX%, our million. In at growth revenue quarter, million That's delivered $XXX March XX%, we Annual representing again. of XX% XX, grew total first recurring ARR. reached Thanks, the ARR

year. We $XX higher ARR increase first quarter net QX $XX last sequential in of the which from XXXX, new million the the of subscription of than also added million is

of total Demand was maintenance a XX% SaaS ARR of quarter license activity subscription as up high last of drove due in for two of first transition. bookings, only of bookings XX. XX% in The Like-for-like our represented guidance an growth. a maintenance framework our of conversion XX%. mix The year. to year-on-year The to $XXX of million our at XX% our the to ARR portion was result years only above all-time our last perpetual decline over percent offerings single-digit compares still sales March subscription lower the

$XXX.X XX% year-on-year. million accelerating with to was revenue Total growth

resulted lowered would end in have of While recognized mix higher been our our guidance record revenue quarter. the for recognized our in revenue framework, in mix first growth, Normalizing bookings guidance assumed it high also range. than the our we strong subscription ARR total at the our

Like every company, environment. current we are also the macroeconomic navigating

quarter, select versus as the mentioned, deals which Matt performance. sales their for of were in bought persisted cycles would immediate large more downsized upside longer-term towards to contributed needs As longer approved planning, end the our customers have

deals, subscription the on in and pressure [indiscernible] our duration of putting at bound lower range, recognized For again long-term revenue. came deferred

signed corporate or quarter, our the environment we it customer acquisition, logos mid-market segment. for more new XXX in While challenging new was primarily in a

Looking and that priority. we growth across and are current forward the metrics, are our navigating strong identity we moving illustrate remain that environment, a customers pipeline programs, with the their ARR macro record security

$X.X revenue Moving Consistent license revenue did to of million. reached first decline business representing at into for perpetual our subscription quarter. the revenue coming in quarter. move of growing our with details the XX% in million, revenue year-on-year total $XX.X Subscription lines and first model, the XX% the

$XX.X Our maintenance services from services $XX.X million revenue maintenance was recurring million with and revenue. in $XX.X professional and million

reached be revenue $XX.X million, year. $XX.X and last to quarter grew growing $XXX.X year-on-year in well XX% XX% EMEA revenue. to by now million XX% XX% from revenue. total by business of to the XX% year-on-year, Americas That's million, reached in portion hitting revenue continues Geographically, grew $XXX.X $XX.X growing recurring million, the diversified. first The million year-on-year APJ

the first compared EMEA region nearly headwinds XX% bookings first a to some the and year, XX%, experience to quarter. quarter. subscription had increase FX XX meaningful last quarter recognized in in continued to and headwind a That's mix point revenue creating in the percentage The in

P&L see be a the reconciliation press GAAP full will release. line to tables the of items discussed our All Please in of non-GAAP non-GAAP basis. the on

margin. a of perpetual gross the Our quarter XX% XX% gross margin and as quarter compared in gross $XXX.X an year revenue with higher first profit was lower or SaaS business. result million first last That's

loss share, significantly by XX% diluted that resulted or mix operating and expenses $XXX.X increased while profitability was of be the operating million, shift an $X.XX million. Our overall Net impacted in loss recurring million by to to continues $X.X $XX.X revenue. to per

as improve we has to Our have begun margin planned. profile

nearly including over ended in with X,XXX worldwide, We March X,XXX sales employees and marketing.

free million For cash three margin. a months flow flow free $X X% first cash of the XXXX, was or

guidance. Turning to our

competitive year platform higher-than-expected balances the for the environment. for increased and durable the our and position, uncertainty guidance against second bookings Our macro demand the the in our strong the XXXX mix, headwind quarter subscription from created full our

For we expect revenue $XXX represents the the XX% $XXX second quarter which midpoint. of million, year-on-year total to XXXX, of growth million at

expect be are in first to the license revenue. the We in to and in the headwind quarter. subscription the The reported for assuming be mix perpetual mix saw revenue similar initial quarter higher is to the range mid-XX% our the to we levels we second guidance than February, increasing our

and to $X.X non-GAAP basic the loss quarter, expect million a EPS shares. $XX.X We loss we net of $X.XX range of a $X.XX operating of million for to to from diluted per about non-GAAP -- our expect of net second and loss

average Our diluted shares basic guidance XX.X weighted $X.X in million and and also about taxes. assumes million

the for year remain full the subscription subscription that the now this expectation mix the given bookings compared year, full-year increase the are XX%. for quarter assumption the bookings The first guidance to mix level to in and at expectation still our it the XXXX, total maintaining For range. about XX% range rest we our $XXX in in will in of prior of That's revenue the low $XXX million. our million is for

and Maintaining a meaningful our the at our for mix raise guidance bookings. ratable year our more revenue of full the revenue guidance is higher a revenue SaaS given of essentially subscription year

to million of in full increased results year quarter. operating million, the EPS to our $X we loss and maintaining range net of of range operating per income interest an be operating $X.XX of $X for our income are $X.XX of a and are to improving income the because We share first

taxes XX.X year We in average and million for weighted of $XX.X shares the XXXX. diluted full million expect about about

be bookings and and On the range. growth year-on-year million at in revenue growth December annual $XXX million or subscription quarter, back first midpoint between of for the we recurring about increased our the XX% raising at to guidance strong are ARR the of our XXXX, XX, $XXX a

Our cash came free in flow flow free X% cash margin. at

free full result for income performance first net non-GAAP upward revising above the As we income guardrails of cash the are the our range margin non-GAAP XXXX net margin quarter, a our margin. to year flow X%, of in the for to

quarter, flow. for cash and customer to seasonal have our in impact there and expenses example, between from expect the fluctuations We be our other event quarters will in expenses -- second the we affect that free cash

environment. Overall, with our demand in this our The platform of and revenue net pleased our we macro subscription accelerating of evidenced strong by strength growth, were prioritization ARR, are security execution, strong particularly flows. is we build leverage recurring, overall deliver and growth, business of revenue improving pipeline beginning to have XX% record more a now with ARR model that identity our growth, resilient cash operating and

over call now to turn the the Q&A. will for I Operator. operator

Operator

Kalia line Barclays. from [Operator the Instructions] Saket comes from first question Your of

open. is line Your

Saket Kalia

taking for six question. CEO. your as weeks Thanks guys. first my on morning, Good Matt, congrats

Matt Cohen

you. Good Saket. to hear Thanks, from

Saket Kalia

since we'll of time the start the spend with been least say there last have lot interesting I you a couple Matt, months know security. of to Yes. for maybe customers.

just progression? is, Curious And question from how saw can the in companies. such progressed quarter of seeing and just you maybe we conversations? other March on terms talk It's of terms the just anything more So comment quarter you're what security results if linearity just in mixed can been recently? you March about maybe that

Matt Cohen

when look quarter as mean really when back the sure. occurring, and into with are results what's they we the this pleased at analyze Yes, quarter the try talked conversations of conversations these of up we about, I to with we we're list show I we're the the we and continue see on have. top to think customers, we having where want phenomenon to

stack a and but prioritization organizations. for obviously, are when mission-critical within process, There's across tech solution a entire the cybersecurity these even we

we customers, conversations of and And our actually, they they implementing feel And we're of order understand on these is be with They awareness secure so, something having that partnership importance their the investments need and areas. this this customer landscape. overall, to this in the are while implementing mind of base. to just when everybody, in threat within understand the in fast macros level

mentioned take approval we longer. see As the do little here, we cycles remarks bit prepared in a

One time up cycle. approval the in the team of the addressing all is, out tell sales pop that's thing I sure we're selling might that something people since we're let's who actually make going the needed, and

are sponsors always not of -- going Even are aware of show some our to up. who's

And Make talk them actually in. to early, pre-brief conversation. we them go about with else talk they're So, teams in come let's who the aware. about might engage sure that

it actually throughout see it. And quarter. their approval the when sign to help of execution length us type we off that of to that gets and able level, So the they're behavior on

deal realize also We for buy I and hit is just for PAM. that a there they of expansion head-on. they can right What second a looks there's maybe there's now, like kind they the right a of more gets deals, -- identities And need now kind talked want because seats this of that when that there, about XXX-seat to downsizing are customer proliferating. of XXX that

And they the maybe XXX in there's need that summer. seats

buy the then to XXX they'll in the push and XXX they'll off the later now, so, summer. And

a for looking go back the exciting in. those you kind of the that our seats, deals Now compelling little now open have those we selling any you're sales that XXX they so fact us upside. can that it's needs for only summer a moments as little customer an is up and not but team, definitely always of other go limit to for team, readdress for a to a never up opens as want in what smaller But a actually actually to see and bit and event

the sense across kind tough place environment. board, what's that's going macro type It's company on. are, we in even of being nice be of a the this So, of to my security

Saket Kalia

into how and just not regional for absolutely, talk institutions? one about institutions Yes, the focus Matt, maybe of of security created exposure you. financial all we on is types Josh, mix how it about maybe Can just because, Can other this you could talk that vertical financial go versus equal. course, in specifically my services shows. level follow-up for that maybe much And banks if of deeper are financial you A lot Josh, of vertical performed? quarter. that

Josh Siegel

off year-on-year. Actually, Thanks, vertical start financial by saying I'll Yes. Saket. our was up

So we would that the say kind -- and level, bank overall, even I is what in the also of quarter. closed actually deals end in the regional of

is So, the important the from large from I think an small vertical perspective, for financials our us to enterprise.

business of much have entire are to portfolio. larger to They from coming enterprises the broader Clearly, a banks. going our footprint be the majority and larger our large is footprint a much from and across going mid-

it's larger So, when the at look financial be the size we enterprises. going our from of pipeline, coming to

I And financial I degradation any with off service we're financials think the the pipe that our I tapering not large look financial we're as field, the -- And into of with other customer of thing forward, think going pipeline. seeing and say financials in any would is well. seeing we as regional engagement the that not out

Operator

Roger comes question next UBS the line from your And Boyd from Securities. of

Your line open. is

Roger Boyd

what and you. as and of view any shift in And helpful this But opportunities curve? adoption where Thank would Secrets mean, we PAM of be to Matt. do greenfield, kind you're tons be Access the higher-level seeing Thanks. terms of have I question of kind well? in a Management. EPM on you environment in SaaS are Matt, Maybe think brownfield, curious, in you for I'd

Matt Cohen

Yes.

to so excited that I opportunity forget about in get about think newer areas talk the we the PAM. sometimes we

spot continually we about when out that in the not space. end opportunities, the enterprise think prospects there, market, new new even both are is the sweet in even but the of the the low just I excited of kind of

that was programs movement And the we base, our only a out, and then needed kind underpenetrated. that all there is brings. that of user the that And towards we're started within a that type privileged certain mature reason account. more see PAM we We feel actually for of when

you department, core were user license. to going if type were that so, the within you And of IT we sell a

Access user group. and privileged outside community, business notion as now start as see at it, the Management, the actually this of well we become functions need to as of development any any user Privileged needs of developer can time, a DevOps core the the And lot IT

understand start our You to how more room there customer much within little a themselves. base is about more run bit to

us And under the room both see the when we bring enterprise so PAM our starting really the combine mid-market, it that midsized and users of opportunity go PAM and adopt and out to to in PAM as the base, we approaches, to to in new can customer look ahead to umbrella, all modern on circle and the broaden run capitalize as the speaks down leader way and we ability market you really it. the that's of out both

Roger Boyd

Thanks. Great. on the guide. one a just Josh, And quick

from ago? ARR than a just the us little looks the seeing were guide, quarter you little conservative in macro XX% more we there? the And might I you raised Thanks. You your environment be in a through assumptions change modeling as a walk Can full-year that the any but XQ. versus think deceleration growth steeper

Josh Siegel

by the us able really points. and on guide. consistent with new before, with of despite But the keeping close being level same we're gave that so cycles subscription -- guide the the increasing in rates logos, couple what light of sure, the record and around our within time, and longer ARR harder at raise still keeping pipeline to out, at just approval being a that revenue by guide mix our you effectively, percentage to not be the pointed probably referring We're Matt still the generated was so trends the That's on confidence. to the Yes, that's persisting same on confidence gives but that macro seeing potentially the Roger. of we're SaaS us what

Operator

Adam Borg from the Stifel. line of And your comes next question from

Your line is open.

Adam Borg

but that talked love I for the a question. customer hear a taking for in Matt. then would couple about weeks. more at motion, anything my the and about you, bit that's progressing, more about you Thanks, hear little how platform in script, follow-up. have event a the I to And know this we'll Maybe

Matt Cohen

thanks to hear Sure, the Adam, for and from you. Good question.

So, because kind the think We or now a I I the do types is this represents need that motion to that to lot it there that excited after of get protected. nature maturity secured they're that about need platform into. of identities about the selling be environments of talk selling this of that idea market we're multiple and be multiple types going

about able plug the sure customers can't on start least of they all the to again as and or go when point identities solve multiple count up business waking so privilege and are those that integrated to at They complexity users make then move well you can want core about and and hybrid to after human And infrastructure, infrastructure, you those actually to be endpoint but premium secured. idea an end-point think approach the and users that of all of into general they not all cloud as you as this just over protecting are the and fact you machine and that now the to in workforce, identities PAM solutions on think identities problems.

integrated actually things it's do solutions is platform when entire because those with that that point in that together, context we our so, can one can't do talking the motion. sure market need, approach that to netted to customers the actually, And even make meeting

the So, know, making as they sales been ramping that. position can you sure we've on team that up and focused

there do opportunity go be Our to to messaging marketing I team out that. get of really ours And by that. just the able is excited

around And down use environment, and that take trend. us are market like well phrase positioned that we consolidate feel mean advantage themselves we customer that that can positioned we're remarks consolidation to looking the of this is in what trust prepared their trust. space identity well heard that to by partners this they within the of You to in vendors

Adam Borg

quick maybe And follow-up. as helpful. a Super just

about in over year-on-year. talk a new logos You little did quarter, adding bit XXX the down

You and talked macro about the record pipeline. tough

we back really about if an think efforts base? to are as the we this so, go-to-market more of upsell I as looking So, XXXX, are year? any And at reorienting Thanks.

Matt Cohen

sure. Yes, No problem.

we the a saw mid-market obviously, things when way, want our about by new is different to slip And down a here. market where there some new paint of One think space, is, absolute number. new couple around pressure in I logo’s deals So, there, we to just logo little acquisition. for started logos, the particularly, out sure, bit

actually to beyond right products multiple in to the to be strong it logos we there's new within our was that the able overall, size customer important to other closing think some sell in continues smaller. of actual new But the logos the direction. logos new logo trend net a And is deal ability getting quarter. not One really to those I business PAM, trends contribution, are understand. business, the ARR the contribution The from that are is bigger,

of the new business. the planting contribution the with logos, as want happy future, absolute from are although possible So, to be we although in actually the pretty number as the for many new we seats occurred always and that quarter,

And shift our so, need a to overall we actually go-to-market approach. see don't

and focus it go closes as if can base. new little building planting and a can upsell it cross-sell eventually. At and cross-sell logos, same -- on for even We will time, the bit we with the within pipeline us upsell come slower, to

The business logo strong. is be final continue our within win rates thing business, I'll within our customer really just our to new say

less little XXX, than would overall liked. the number have bit Overall, seeing. the really we're we happy again, maybe although, a So, with new we're actually at customer that business

Adam Borg

again. Thanks, Helpful.

Operator

Angie from from line comes the Stanley. And of Song Morgan next your question

Your is line open.

Angie Song

on speaking here as few Congratulations, weeks your Hamza CEO. I'm at Matt, on Morgan Fodderwala first Stanley. behalf of

Matt, the has for announced. question a just months couple since of been transition CEO So, I It's of a you. been guess,

CyberArk top priorities about fiscal as company So, could ARR in your scaled around for talk by that beyond you $X billion us to three just the like year 'XX?

Matt Cohen

spend and travel sure. the Israel world I've Yes, different around the been kind I and amazing last our CEO six meet to over that. and first really or day And R&D I was to go see talk locations. of weeks think in as it's able with love talent fun had opportunity always about I so. a there. No. in our headquarters employees my organization to

And back human traditional not about, around just it and what I our as more sets the platform workforce, customers, meet They're the the again, provider. of looking visit, first that talking point own for look in priority was to conversations the and our for that's environments, position expansion can but secure expansion, just at. continued same security. as nonhuman the sure someone their anchor a secure users actually cure each our priority. for that privileged one everything things is Increasingly, the looking more we identity else it go and to the And cloud to that I with I so identities. leadership for comes when that really they're those is can -- PAM, secure and Even

a way We to have several something marketing of that sales that years, that. a a fully the from core a from productivity of ramped to go-to-market is of from up, second focus, perspective, get doing and a contribution engine to process it's so modern that our which ramped of do able that but And working ability obviously be we continuation to I was can our go on take for market. advantage becomes us,

We it's we're of we're through our fundamental to sure couple these And to of then shareholders. level investor that important efficiently our it's to back want the us profit delivering right make because DNA that and scaling years. to the into make next is third sure community thing, the for

obviously leverage And into not that to cash we're subscription through, we're exit deliver flow so but just the into top to and best business is the the able way growing to the transition fully, we're shareholder our the do strong that a line, which get the base. back way ramping number

Operator

Your next from line Owens the question comes Piper Rob Sandler. from of

Your line is open.

Rob Owens

Great. Thanks taking for morning. question my this

opportunities. of Just want the contribution just bit AWS of little overall, maybe me. touch partner -- know I mentioned ecosystem, you are and see the CSPs? Marketplace, for seeing you guys a and through but one green Swift these channel indirect the expansion some some you I to around Thanks. shoots

Matt Cohen

of XXs, below Great. ecosystem. of strong question. generally market differentiators of those We we've component run our seen partner a Thanks. always We've indirect our our speaking, think as to And Great in increasing Rob. No, going Yes, ecosystem. run our I kind in kind sure. the even business business. XX% sometimes that's in had an upper partner shift are is of touching mentioned, partners to through market. how you the And one

following suit with and get Access actually embracing they're to PAM actually Management. One, able They're outside and of They're us. SaaS. Secrets with leading

those partners to found the did we purchased have one emerge. bringing marketplace, use. might to macroeconomic CyberArk is already market. call we actually kind of see partake and money they also full that mention story the of they're which And they this in great types credits newer a way AWS sales AWS of But environment the So, lubricate because can process

us more allows two of One, flavors. is But MSP program. I we remarks, MSSP as emergence also actually on see, in the I highlighted it go the their taking that the even or to more down market prepared the really And think that business organizations not in in do the enterprise see managing we solution want space and more effectively. to be But of stack. security organizations IT and

And SIs. program, MSPs. have their we the environment, one-off so, security they're service know, as telco and even built great bigger managed of the SIs, partnerships, to actually many with you the and telcos We've looking have we to up biggest

mature as and starts we can So market it. take advantage that of to accelerate,

exceptionally move as business Now it's we're a excited the forward. one moment, of about minimal it's we of part at overall but that the areas the

Operator

And of the Liani of your America. from Bank next Tal line question comes from

open. is line Your

Tal Liani

have we we cybersecurity, I'm extremely successful and at the is do wondering business. how Microsoft, market? all, Friday, questions. One against them? in and hosted more them in if how in Microsoft more you more I see two And see and markets on competition is, And

And the the second revenues, on are great stability, Josh. for is margins? success Great sustainability, still negative. outlook but and margins question What's for

Matt Cohen

first the take I'll Great. one, Josh.

their They've overall a said, in very formidable motion time. a lot up a for in approach. been, good a frankly, Microsoft, So, They're competition long us you of as they've with strong a of core a is partner within built organization, ways. kind software cybersecurity and

And up base. sometimes show see our we customer within them

between security do core PAM there only security, depth versus for that core is like to CyberArk. up Microsoft really that of CISOs, to security, right, they do conversation of provide. need they CyberArk understand What comes choice example, can kind though of the right, the that real a the we've The turns solution seen PAM, actually isn't type that minute

heard the the I And or sign-on, think there. versus we of And Access is us Access. you've MFA in matter, competing think when very for basic controls SSO areas even the you or differentiation, and before, also are our about into emerge in credible that see or Microsoft them fight MFA entered commoditized that them, as if we're again, will, out when other I took market single for they kind of talk Okta market. security of the privileged deeper we we a to the force applicability business

that MFA bring or comparability and sessions And sign sit become solution, between ours. single password can solutions means bodyguards solution what like security is secure their that we workforce web against or that there's the management a where

wanting enter of the begin in understand solution. kind endpoint customers for You it, to me the on they that's to Actually, aware the It's even they not solution. with or lately to need privilege buy and them EPM saw have market. we problem once of management if kind validate biggest getting our to thrilling honest, be be customers is because EPM the

think a conversation for a And capabilities, get publicity. into that and top. When our is come Microsoft on out actually entering deep we market solutions news features into I like functions and about wonderful

my confident think market to help feel they pretty And the on And of view them. Microsoft but so overall, head of that's when kind landscape. we I very the against we're I'm head them. Again, respectful

Josh Siegel

playbook, so we're year this our question, in we're that which second shift -- for already drove your to we're through kind now pleased back We're Tal, the transition for that year, year. to post our guidance. right, excited we're negative following that improvement And and breakeven first last getting transition, of the our our through margins

anticipate further that into we expand continue then 'XX. and to to And gross margin next year 'XX

earlier -- the out our And earlier benefit the of the line. top continuing following we as pointed post-transition, answers, revenue accelerated the in on of playbook, right the Matt on one then So for we're track getting we on year and of expansions are scaling about that that's guide and next that and forward. you're sure drive the this in efficiently think going those year making already focused to going the seeing then totally margins

Tal Liani

Got it. Thank you.

Operator

of from Your Markets. comes Heath from next question KeyBanc line Eric Capital the

Your open. line is

Eric Heath

a strong here. Congrats quarter on

any see your Our increased change the one, just conversation bigger given investments the just any But for A to and to on plans picture, is one. maintenance the I great shift on given side margins hiring of ratable the this Just the business. Curious, the things. your mix there of thoughts of number macro in of change it's to on mean margins. the year? the couple pace of some

kind just of I follow-up five that, previously net little line to a And where just of bit flow, guidance margin. you a of cash think think changed it should on margin, with income in net ahead it the be points your that free kind was I income

a like the change has some duration seems hidden of pressure the So given little -- there what that curious billings just bit?

Matt Cohen

think that we here, earnings we last macro take year, were it relates business. less account versus our I we taking the which the into we percentage versus bit calibrate leverage maybe to it see what to saw we in talked the need Eric. backdrop headcount And hiring opportunity. the investment Sure, And to drive the because about little call, at a plan. would also increase continue overall I'll back part and and was XXXX, this our is first and as the into both

investments And We round we continue out scaling license and throughout added I the in go the vision, there the QX, and to the where and for of to we ability look we able drive company our overall in rest And continue go-to-market feel security like to then the the example, identity year on be deliver will that capture. towards think XX% to play roughly see out. opportunity of operations. the of to make rest is platform support to, strategic

think headcount. measured our So, I in we're

we Our is, need any our direction that we talking is a were to. that forward, going we consistent about. And in belief headcount can pull with hiring what were lever this

we agile in our a So, operating back accelerate more? we'll we're we the and make the very Should cut that's the beauty of really approach, under. less? that model And quarter-by-quarter, we're decisions little should

Josh Siegel

and start to, guidance on in of cash with to already come cash Eric. now to margin ago, in it's the net margin quarter start pointed -- did to pleased more think well. visibility up And we're Yes, go second have -- months basis. all, flow, a on plus as really and three out, that to net And tracked and income QX the able -- X% flow first regard we're net plus you our margin non-GAAP we we to income income than I

better with three forward, QX months think our I And a that even feel success there, in we we it's expectations a where up. pipeline look comfortable as look at said we place and at we be reflection ago. renewals one and our going also, of we'll on But and our flow ended than guide the cash

Operator

comes from from question JPMorgan. next of Essex Brian line Your the

open. is line Your

Brian Essex

[indiscernible] the kind does morning, and I how your and we process and what you a saw up question. pause saw inside the like compare right saw when good realize guess, Could customer saw contract maybe shorter what the spend, things meaningful of pandemic, approval maybe guess differ recognition you of might -- critical PAM you and do then of that, to base, everyone of call the a few I we for ago? PAM pause in compared we now contrast you're coverage and seeing deals kind reacceleration. a you is the my for downsizing Matt, But and trued that facing thank trued helpful SolarWinds a durations. after of like we in the how and Hi, of deal and onset of taking be nature up value the years now had or seeing versus and you're what pretty

Matt Cohen

Yes.

our top as look to the able generate and to back at talking go QX see We able pipeline. priority progress a continuing ahead, and just that be the be don't of We been to out we've to the in we we at we As out see about. list ability the on business. our customers. see conversations We our of see the to record -- year ability be towards pause

is really that protecting the against pull position of to market, secure solutions do portfolio, tremendously in. where you of of the better. and identity different means terms attack place good think be It's our in nature our vector I The maturity is it's are the we I identities back vector recognition and of in the just it the we of it critical in the what to a in And of a solutions hit, and understanding sell. an importance which to attack the

now And macros a and to a I show platform up customer obviously, it being and with better broad think we conversations market lends backdrop despite mind. everybody's sell. solutions to a base itself of And on better

Brian Essex

in reductions this That their and comments impact we or your sense. maybe made Right. back and one base of how And impact footprint be the how they quarter could his customer that makes business? might might recently just circle labor expansion. Any thinking from to on headcount rationalizing about your

Matt Cohen

as of perspective, notion privilege accounts regardless. that I the privileged said, and proliferate We're identities No. lucky that from

between so, you a their headcount customers need correlation economic buy from be or may CyberArk. situations difficult in look on when may not and verticals certain don't they that to what or there's I in at And industries, decision think

of So much that's worry about. too we things that not the one

Operator

question from comes line Jonathan the Ruykhaver from Your Cantor next of Fitzgerald.

Your line is open.

Jonathan Ruykhaver

Good morning. you. Thank

motion past, adaptive the adoption. is emphasized in sales the largely So, the or company base has access for installed

think organizations those that of a question installed base, existing given portion is, solution. an your have if So, would not large IAM large portion, I the I some have enterprise

much the that might if two on green be that touch large and And that? just the strategy within given you could How then also, see you go-to-market also incumbents field? do how market successful already? So of

Matt Cohen

sure. Yes,

us of and organizations multiple more other solutions customer to the talk is when customers side. different we within base, on in either accelerate overall the solutions to nice on the it continues of a actually business kinds have often So, I divisions, that vendor more completely their piece or look think surprising are throughout about think within not, for through And that's many Access somewhat meaningful people as legacy I sprawl you our become a way acquisition, how access than happened through business.

within is order competitors is solutions. competitors and time, that replacement able be two for From our rip space win. solutions. do opportunity to and space, so, those Obviously in significant that in in this And like to to base replace replace replace and customer conversation sure. go those against to we the feel time rich a having a there about really to But but legacy it in those here in competing we're opportunity to rip not

want platform. in and more security how also to account, of on can talk of can to story, of and Microsoft to about your way take differentiate if sign-on they can or so our them and web and back emphasize we overall still I connect secure sessions advantage our and about an for any sit to overall doing secure the compete, example, there embedded even point the to security will [indiscernible] a it is them privilege and connect we still in portfolio, of back top notion we controls identity go how that can solutions talk identity to single that

platform security and differentiating. special SSO. It's with we're our And more and my that's that than MFA. talk and not is SSO, so more It's And SSO secure when becoming your that our their track. identity can more than of SSO again, sauce becomes better you keep MFA my strong

more forward comfortable that our drives increase and Access with formidable the more track you said, directly position two Again, very going growth what becoming the will be as to space. competitors continue in we is that that space. as talk and team Our in

Operator

Kothari question Shrenik of next the comes from Your line from Baird.

open. is Your line

Shrenik Kothari

from Kothari Baird. my on Shrenik the is Matt. This first Congrats quarter, taking Thanks question. for

to particular, one weaponized cyber AI in organizations are quick Josh. and mentioned more that's for landscape and difficult detect. So, you Matt, you one becoming to vulnerable attacks that the sharing AI follow-up about for

talk a see and about this a transportation quick quarter? what motivator a for more of key little then You the do XXX AI a Can you terms terms pipeline, example company deal. past gave the ahead? the in customer; Fortune one you the of an cited Josh. driver as And in was bit opportunity in expansion of the And follow-up threat

Matt Cohen

Yes.

attention, are in it's and any that perspective. much that that I captivated through market, need. to because the fear AI, market understanding solutions of sometimes And educate think I market gets from think market so a ready things helps the new with that there help more they

you is what to what at and we're a We're impact you it? and about this event idea weaponized it of our many sure, AI which talk can talk will join. attack path about hopefully For and about of does look the we do what going to like going

And is not it threats now, weaponized notion the up AI organizations. the organizations what single do important to to But because the the identities. But not is controlling or detecting notion we're only way reason most why cases for it does is able that right emphasizing is of in enough. is attack actually wakes the to securing it the that need by control We be to threat. some path

EDR talking an is to At about. here, endpoint, solved. what so, that was and is silly referring in to customer example have which would at this I'll an you give you're endpoint, the be not the the And

sort to put installing the going believe EDR environment, own clear. our it, some on IT a location. in an We if they're new was department Let's of be

that turn way get EDR detect. and be can off is EDR actually and But sitting if off you then to approach more end-point, credentials, local because get that and that no local if a at that EDR that controls relatively turn so that admin out figure can is you the to significantly, able can that useless. you get path longer weaponize privilege around AI controls itself or your there's attack EDR And in, can

it's and going solution, removes the really which because sure do there, that EDR to And does local on ensuring respond. to the local the ability server. in it's desktop, make to well, investment to is local what to available on it make the detect actually be changes you're endpoint, EPM that, on system your able Our by and you're now your doing

it they're says, concept going is, breach, AI but and up the time, what a this it concept wakes them at that more details assume in. more so, assume And is point of it organizations we'll through although some in shakes to get does talk

do that's control. CyberArk what we're you control? because Now all where and And to do security about in comes

Operator

next Andrew Wells Your the from Nowinski comes of Fargo. from question line

line Your open. is

Andrew Nowinski

it is the that better just discounting gross So, of to margin, I expected. to than of line finish go wanted have you trying slightly using think downsizing the back deals? some the of consider deals to increase would course get throughout tool summer? over was a the to And these you might some prevented Do an in of

Josh Siegel

gross our Andrew, I -- referring the you're think regard of don't to think kind in to that, that I pricing with margin?

Andrew Nowinski

full the could if more size? mean get aggressive the I I were better, any just on it Yes. help deal just I deals mean yes, if to -- downsized. I'm wondering you offered pricing

Josh Siegel

in that take second. Matt let I'll a

from gross I'll our perspective, have we think, let seen that on I talk margin, the tactic. would as Matt pricing. not the necessarily

Matt Cohen

think as with core we're vendor, a price their getting understanding when tough that a I a conscious Listen, we partner with a as make can within and the always Yes. sure value. and that we're in budget and we're operating board, we're environment, we're our across customers is while or concern, the our budget, customers fit working those macro to

see to we pricing on renewals see this pricing good continue within way, good By the our We environment. in this environment. even

give later, customers, don't a for seats. are to seats going months And take trying them get our feel their we or or buy ultimately, still we want and or two certain you're to just come to get If to month away to in, force confident to months certainly, them bite. those trying you're five that way first

confident that we work end pretty market want we're we're to the when be. we you of receiving approach when run, right the sure a creating value actually in the we perspective. for the the I'm a to at and level delivering make happens, pricing aggressive that of sell. how But But then And we're We're price. on we from the back with and you're need in flexible value or deals that long them overall, business day,

Operator

closing have session. Matt the back turn our I CEO, will we of Q&A Cohen, And call now over the remarks. for final reached end to some

Matt Cohen

Thanks.

their for their and and employees commitment our partners thank support. to want our customers I continued hard for So, and work

impact of been greatest of to it's able company. seeing a many to the a and now six and wonderful talk the customer be of to We're identity about greatest everybody update weeks from far. all our security As platform we're I at week event, over going the our on hopefully, said, so looking you, forward you latest of latest and where

So, until for care. then, the thanks today. Take call

Operator

This concludes today's conference you your for call. Thank participation.

You may disconnect. now

CyberArk Software (CYBR) 11 May 232023 Q1 Earnings call transcript