CyberArk Software (CYBR) 4 Nov 212021 Q3 Earnings call transcript

Hello, and welcome to the Q3 2021 CyberArk Software Limited Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Ms. Smith. Erica ma'am. ahead, go Please

Chairman you, we Lisa. today results. for us for session. Officer. Udi Thank me Josh question-and-answer Officer; Siegel, a Chief open Good review CyberArk's the morning. Financial Mokady, are to today financial prepared the you Chief third Executive on and remarks, joining After call Thank and will quarter With up XXXX call

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

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

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

we other the or or our GAAP Chief substitute viewed our Udi of Mokady. metrics. Officer, should call GAAP like calculated impact today's for comparable website also Chairman that webcast to shift the section. We calculation in call bookings color that, IR additional the A the a subscription as I'd you is it not our to provide Executive headwind be of on turn for revenues to mix With remind over also and available want on Udi? but reported to

company, Thanks, acceleration, and for in QX and X thanks, was I the could the amazing our the quarter, call. and If metrics are everyone, and the acceleration of another thrilled demand Erica, the we word the bookings joining in of environment, this the would underlying specifically to results. be that only demonstrate it use characterize quarter business. with growth health

quarter ARR XXX. accelerated the subscription to million. to to accelerated during examples, $XXX and to million. XX%, new $XXX revenue million logos growth XXX%, ARR added As Total Recurring reaching growth $XX reaching XX%, accelerated reaching over growth accelerated

guidance. of the of and revenue evidenced subscription higher considerably model Customers the Even the we again quarter, business from performance about anticipated think in growth way is guidance XX% for framework. year-over-year, were This our calculated which new an $XXX bookings, our than this Our of mix, coming line is SaaS quarter. to in XX% indicative our second faster than of generated represent that overall headwind. isolate One would a bookings, bookings embracing QX, of demonstrating Management. for SaaS Security on bookings Access the growth. standout quarter Simply demand license stellar it our of total the our our above midpoint, again Privileged to license subscription record million, license our growth put, the subscription was total adjusted incredible revenue the as and in robust was headwind following transformation centered third from of record driven are ahead platform Identity the revenue by by execution with

strong As demonstrates our revenue subscription the the backdrop discussion. and talked progress transition, in innovation a and throughout the The SaaS subscription we the solutions recurring today's transition provide year, our and ARR for pillars growth, subscription demand great profitability have mix, X for particular. of about in

love Let me the in Excellence has starting here our contributed attacker our of start stronger. and because with strong trajectory in cloud been migration secular and tailwinds business. our growth. innovation never acceleration I growth execution transformation, the to digital

and across in the supply With an assumed and to pipeline. enterprises now is Instead, contend take is recognize It under It easy automation ransomware, interest posture. and and breach assume bots to prospect a and as applications deeper and dig human They high. with our can innovation, customers identity an the chains tax the customer longer to attacker our mindset. acceleration DevOps operator-driven why certain solutions malware see all-time at conditions. have have identity and users, privileged on no enough that is service every in be

across revenue total the adjust major more. calculated When license our the about geographies, with you growing every across obviously by at XX% faster had game perfect EMEA even which and region APJ, talk headwind, Looking territories. will for over we revenue our Americas, grew revenue another Josh

much to New more firms agencies. We than and across enterprise. from security meets customers organization regardless and retailers, land or the every to identity the both that we Cloud marquee mentioned, mid-market build XXX large added demonstrating our the and customers, law with PAM platform. I size for Privileged to software accelerated, oil and typically want large deeper to companies, momentum business in We as in vertical of spectrum, gas government continues

examples Privilege resonating a like also annual the effects logos great record company are levels with wins seeing access win off identity with demand. And cross-sell our school emerging and adoption company in markets. Privilege alive commercial taking improved a solution off, activity another increased broader is a or will X drive strong units that services footprints, few the Privilege born access be Conjur new Cloud retailer, crippling it base, pipelines customer from more tightly expanding QX customer proving company. all new third to financial and customers talk had local name SaaS to spot we every secure be regions be and and expansion had identity the was The will highlight in secure of users company benefits for competitive secrets. more with particularly With security are on in EPM, platform becomes a to our signed Productivity customers. growth is landing in want demonstrates system facto resources of another I adding exciting differentiating business increased that subscription base an more large from recognizes fact, opportunity as our customer they a the in deal, minutes, to using continue will largest few considerably. contract but securing customers best pay a customer our de large Endpoint innovations with only are self-hosted both ransomware speedboat in CyberArk great a as base. our the enterprise both where organization or is QX a enterprise legacy our I within Fortune with Not both continued to our just In and about replacing EPM This to existing and new an critical is model highly wins. specialized that and software increased Cloud and wins Privilege with has but customer customer products more for quarter this access Access is and software Access set applications. DevSecOps focus services quarter. nonhuman a of quarter. Identity. the security of third our few a large PAM a a in financial set faster. a human to CyberArk XX In for Cloud in A the ever, quarter, cloud and the food Manager, our quarter

program win Secrets went In QX, with Privilege the strong with Cloud and center deep lasting Cloud, buying they Identity demonstrates access, the of we XXXX, a building relationships at criticality Workforce step. their competitive Access secure shows and our insurance X and ability our program our just high-profile comprehensive relationships expanded ourselves Manager, This remote us bought brought anywhere endpoint, We every platform, solutions. the on implementing nice way. do. their the DevSecOps They along a the company giving began A Cloud. first expanding committed in and to of securing our space, identity of it Privilege identity pride importantly, journey Our our power in CyberArk CyberArk enterprise culture, PAM portfolio, is putting But Manager. the large with company and with security more customers. of embracing pharmaceutical everything Intolerance applications Privilege edge is to a is customer the

is ecosystem our extending further scale in reach driving our Our and partner go-to-market.

acquiring the up on testament to more into more going to CDW security comprehensive of XXXX. strategic as even in focus Our our companies, certified are partners and to space. in training our Group This through partners professionals certification close to opportunity deeper programs partners we and been and programs and The making is growth have we full more we commitment year leveraging than growth. in XX% drive QX, Year-to-date, the did invest our stepping channel expect. identity acquisitions a number significant including Herjavec our A

our subscription the expectations made strong the like third would quarter. and to I transition. in Next, progress outperformed on We focus

Our for strong driven another and and by privilege with transition record to demand Privileged for strength we Cloud, SaaS SaaS solutions, reached bookings, new manager. continues in be our particular endpoint

of X/X faster than year-over-year. now completed of We XX% $XXX,XXX customers XXX in have active over subscription is number and transition than with the our ARR growing more

which the time. of expected value prioritizing value subscription type we As will we lifetime and faster are result began over customers in our journey, getting platform, when higher

subscription are progress success with confident our we exit of XXXX. are will transition with the the of quarter the transition. We third And we year-to-date, thrilled our by

announced us our the foundation the our and merges and of the more identity leadership Web to general week the between and Our availability innovation this of worlds Web pillar Secure Secure strengthens We strategy, put further Sessions, Sessions competition solution. distance and position. access continues PAM. of customer workforce earlier in is

now the all that of in and web market from protection, apps can consoles. recording to including for only authentication types session with vendor the customers are session We empower business cloud applications continuous

will PAM profitability Visionary comments pillar. Magic were in leveraging KuppingerCole. the Wave yesterday, by named to just we recognized pleased an the management we leader leader for Access were our in we my expertise believe innovation We the this are experts. Quadrant leader Forrester some named into up the are are Identity-as-a-Service extend announced We a I access overall access. on industry undisputed that privileged and position enterprise our to discussion for wrap the Only in And and XXXX We Management. see by with

already you've from headwind off. subscription As our The obscuring the P&L. are paying our in on acceleration investments seen is from the profitability the business, transition

track Given To gives quickly. the of scale strong profitable our well strength are profitability up more we our which us delivering growth, of record positioned levels. to bookings, return to QX and sum

on business is into SaaS the enterprise back large growth. and Cloud bookings quarter. reached EPM the quarter mainstream security into way the pushing Our new of discussion. is record this moved the record year-over-year accelerating Privileged and a is leading has

Our subscription is transition progress. strong making

to Our industry-leading I our XXXX. results Josh, never for the across and more our outlook to provide and relevant. over discuss turn DevSecOps will the year been PAM, Access fourth platform full idea financial has who Josh, quarter you call security will detail more in you. over and now

Udi. Thanks,

Before posted through we slides helpful that quarter, remind to will of would you discuss we be results. website to we as walk that the our details like the we the

even strong a our in third As had quarter, meaningfully Udi comparison a QX great accelerated bookings license to we mentioned, XXXX. growth

transition also identity both our We strategy. significant progress made executing security subscription and our

guidance the of ahead of XX% million bookings headline mix. of mix a delivered terms total our a of we XX% framework $XXX.X In with subscription revenue P&L, of

in Subscription you As our subscription revenue a the revenue XX% on-premise quarter, of from and midpoint $XX.X total in includes represented in and beat and remember our last total expectations above only the reached and of quarter. which revenue, bookings our may higher total for bookings million last our increasing SaaS third year. million XX% XXX% mix quarter, the revenue from guidance third $XX.X the that quarter revenue subscription demonstrates of

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

XX% on XX% is rate strong or subscription bookings, business. a XX% in quarter the the renewal of subscription mix our growth when mix the ahead $XX.X continue is $XX it the revenue last a the subscription of which and and maintenance headwind growth SaaS, of million in into $XX.X our third subscription year-on-year. accelerated to XXXX. revenue, growth to of from quarter by clear of third accelerated third illustrated calculated the quarter have Taking related revenue in year-on-year Recurring revenue total includes the like-for-like schedule. Normalizing renewal and for We the portion revenue revenue, approximately total created transition year. quarter perpetual business. maintenance of underlying again is XX% consideration, million we total reached mix over With the our on Economically, in was third compare headwind to license the license on growing on-premise the and business, shift, our XX% to perpetual the XX% million the in mix

$XXX $XX reaching million experienced million, largest over We the ever Moving in recurring XX% subscription quarter about the portion, of the representing third increase sequential on the and adding total. in to our annual revenue.

terms was second quarter another business September from last in of about XX. the both of more XX% an XXXX. maintenance business great million, quarter than million total them compared year. signed customers new was new with ARR year-on-year, XXX of XX% subscription in the XX% The logos $XXX for Our to acceleration trends. We growing quarter, opting of portion $XXX that's We at new third had and

$XX.X a business $XX.X revenue New in $XX.X of XX% or SaaS well to geographies, line XX% diversified. revenue, continues we than license total the also look the by quarter. total of faster XX% Americas, in over region of approximately growing percentage for the with our see again now the the grown third strongest to created by be The again, calculated an Please generated will and XX% press would release. business quarter. total of APJ increased adjusted generated each APJ revenue discussed the our EMEA. revenue. non-GAAP had the have across items Geographically, sizes headwind had Americas be million The Online representing total. in XX% and Americas revenue million revenue, tables of with GAAP and subscription the or million the full bookings in in in of mix even mix, increasing revenue subscription. the reconciliation on XX% P&L in during the on If basis. EMEA deal non-GAAP of

XX% year. last XX% gross in Our gross margin third with quarter quarter million gross the $XXX.X consistent profit third or was margin of the

neutralizing the $X.X calculated approximately related FX like-for-like in million and would XX% are been That's expenses growth, about We $XXX,XXX $XX continue to a from to and make headwind of expenses important our foreign have of Over rates headwind. exchange, than and XX% lowered operating to resulting income better income investments guidance. of the to of was drive a of in increase is year-on-year in remember million is operating operating XX% our by innovation million. $XXX.X midpoint basis, operating It the third and approximately that was operating the headcount. quarter, XXXX. quarter our which On margin revenue our

the CyberArk ending sales contributed XXX we Of quarter with in In about loss the third free per months worldwide. flow Net third third cash first $XX.X the million XXXX, count, employee cash billion flow and are our total shares. cash and with quarter we cash of X,XXX balance the So This ended flow X,XXX in basic diluted $X.XX and strong margin. $X.X quarter sheet marketing. in or million our the XX% or to investments. $X.X free surpassed was employees, X and was quarter, for

Turning to our guidance.

strong industry tailwinds, reflects quarter the for record and fourth productivity. booking, execution year-to-date the our improved guidance Our robust

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

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

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

rate be perpetual, SaaS, is total into headwind So are the for the the the about Similarly, subscription revenue if on-premise the headwind lines isolate at of the the calculated into range, account. about license taking the and growth midpoint we growth year-on-year. our would XX% normalized of revenue, account XX% for you quarter taking

guidance shares. also Our assumes diluted million XX.X

be full assumed and headwinds range. emphasize from year and $XX full want guidance of is a mix to subscription the we bookings account, full million XX% I beat total and quarter. now is XX% and year approximately our $XXX.X raise million. increase XX% hammer The is And $XX an if total revenue million. to increasing year, year Taking XX% growth normalized SaaS approximately headwind again third guidance, the our the the license that prior over the for full at full underlying our expect taking of calculated would in the the This mix into beyond This and lines, both which revenue bookings revenue rate assumptions indicates from are the headwind the for a million underlying assumption isolate XXXX, the $XXX.X the to the and that midpoint perpetual, you subscription of year. into the revenue growth for calculated the revenue. our For rate in our above bookings increasing range from is subscription of mix for guidance revenue our guidance our bookings we our account. represents

P&L. Now moving down the

$XX.X non-GAAP We operating million be $XX.X income to between million. expect to

$X.XX. be expect our in to non-GAAP income net range share We the of per $X.XX to diluted

growth. ARR million year, current in and taxes. the the to our on timing about wanted We weighted transition of and expect million XX.X the briefly $XX.X on mention thoughts we full about shares For average diluted

quarter earlier, expect quarter year-to-date, in complete XXXX Given to the our of fourth outlined we transition the XXXX in as the third now we versus exit we the success of expect transition and Also, growth acceleration given prior expect of call. our August about of framework bookings XX%. year-on-year. grow an this from That's increase record year, revenue recurring we the to to our our and annual our XX%

a execution third and was our quarter The transition in the strategy. identity and our great another of subscription quarter step important security

which in business our growth recurring is you see accelerating, Our results and revenue rates.

are As Operator? turn will the long-term for position we growth the I look over call deliver and a now ahead, Q&A. operator in to great to profitability. we

[Operator Instructions].

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

this broader with wondering team just doing. maybe talking about like doing about part recently. on business to versus how the but talk identity I extent do here just both the make customers more remarks, prepared part maybe Privilege the in the level have is was the start to with DevSecOps, think go the Udi, for parts just non-Privilege just touched deeper. is It to buy you you if you could just business been Access and of X Does you a you. of these feels lot portfolio? of And the non-Privilege I example? know and want of sense? what How that

Yes, absolutely. thing. Sure

the So SaaS the mentioned, our message that parts with say identity of is fact I business I performance and would Cloud the we're Privilege is security customers. and of as But way. excited by leading all the really resonating

we identity More of products, portfolio. customer If of and other appealing landing both of also And all that say at gave wide overlay pipeline or that to for security first that getting at our new our is build, and of Zero you the accounts DevSecOps the be ransomware. EPM point landing have it's are And every and again, power new record existing the buying speedboats, all, portfolio. resonating entire related when new and and more speedboat base to calling the what example non-Privilege, also the the quarter you're that of the our message, we into that is happening. a conversation drivers of upsell. is quarter to a that is and Access had look the they in this and then Trust a the into customer having look I really across would gets customers effort also I are them bought but have the spot with the elements, customers that proving

loyalty, think getting And and landing and for a again, piece on the Privileged to in some the new actually Access with of way taste I Management the those access, bundling, is they're the that elements spots. with opportunity of fire we have upsell early deals. customer example, I'm of the and excited leads get

from us you. we're Can going Josh, sounds maybe kind quarter anything exit? my keep you the had remind to means expected. of that modeling a just a It perspective earlier transition follow-up of given originally for sort anything a for from to mind earlier mix than exit from like what Or perspective, in that you what we just or just need mix? a

is we our coming Yes. fully out we're Thanks, of into subscription main I that threshold mean, about company, into put XX% we the thing Saket. we bookings kind that when a talk talking of from get of subscription. when past -- transitioning the and -- SaaS

threshold we call perpetual when in of the more you'll really able be of that that we QX, today, the beginning moving to and tale of -- going third that about third after that year. after percentage last continue the And of or set to it's of already. is a playbook in, there the And to talk that from happening quarter we're year, from means will really over quarter out. quarter the keep from the hitting coming talking be QX XX% So quarter. see glad to bookings coming course, remaining in subscription what that a playbook particularly But SaaS to we're kind end about improving then, decreasing kind the of at on out quarter next business and -- perpetual now

Borg with Adam Your line next Stifel. from comes the question of

Sessions you more I kind on would was or you curious, in be are particular interesting there demanded? where this that an product. about users seems And just start. the remarks. It Secure talked just like any verticals Maybe something to Web think of prepared like

the have privileged of the is is more business cases over control user worried it. very privilege more We're absolutely. that and you organization where having No, and session. no see actually We about the about a proliferation excited

is in So applications web using I whether and others. like success for would application factors sessions folks X others. business say a like functions they're a business user, Salesforce consoles like like and then major also part the a administrative functions a or IT But HR web or the using

that and elements across there it IT are elements are in like business see there are of verticals, actually all terms verticals, And So companies. applying of users. we

Of just of And course, the sign-on more even want management it those attach the and it beauty have can CyberArk, identity to regulated like gives doesn't us tend these put in -- the and companies to controls that opportunity will across it place. is to PAM controls all the that single to solution apply even solution to faster. run that have on sell any to the

a helpful. as slide the quarters, faster growing the talked becomes smaller mix just financials, as last quick stands interesting about follow-up. bookings a to deck, are and In maybe vertical. That's it other part several by and of the just that manufacturing And It's banking over really you areas see the out.

So about more to your traditional what I'd in to seeing you're of I’ll call less some what's leading the verticals. love success hear

No, absolutely.

CyberArk I see verticals. across the more the trend Access Privileged couple identity jumping is saw all and security the you years last And earlier of into over practice regulated best and consider a Management catch-up. think historically, the fray verticals

saw quarter, more than energy government, doubled. manufacturing vertical, the global This we energy

mode. have sector, of customer are verticals. strong in we continue. will There all And continuing faster so be that say and a very catch-up a course, in verticals to some base are I the applicable And that financial would we're to

Morgan from comes question next Stanley. Your line of Hamza Fodderwala the with

a you're in just of the Udi, first comment you. about there? open particular, of wondering tools. and source sort rise if bit growth identity, can opportunity machine-to-machine in the for question was seeing I Any given little comment you

secrets Yes. Access place can going And a awareness secret, the or And I earlier stole access get pipeline where that my opportunity wanted I after after. a the very to secret answer the type about we proliferation you machine-to-machine are as if our deeper. mentioned, even the management stole world, talked similar the as a of that's like definitely in growing you much and thought add attackers strong there's SolarWinds if or lot on DevOps you before, in human you

attach And secrets so and customers to and more that fact they that see management companies, we're We it's the self-hosted applicable definitely we'll Cloud want And lot secrets model. the to. solution seeing are grow. and more also of expanding customers our of to and can a all now leverage course, leverage buy to this Privilege management, consume in solution as to subscription a the

out side, we're a had machines. And So secrets going special after it. there's probably even on we of growing faster the where and application the if applications a are human there the and you're but -- right, side it's across proliferation credentials proliferation see, these we big trend a of control and glasses, of side, would on an yes, development and on

helpful. That's

Josh. for for follow-up quick a Just

Just transition. should a obviously, with subscription think maintenance? then we puts And ARR, is the maintenance of going versus given the and just bit a drag be about on how the takes to

that quarters? over we should how the think modeling So about kind next of few

flat perpetual transition the to to kind of start the will piece of we We kind the sequentially. a saw of to continue it maintenance ARR seeing. We're to absolutely. the we'll minus potentially very could on in point see at grow subscription trend go even quarter, third of get go been we've some that XXX% as and quarter, growth to Yes, high going still the

year. of business already around the and crossing So over the already XX% of the the And ARR the of mix year, half subscription on to will the really on next first consider in way ARR of next it's XX% negative, more in it first growing I the total to of are exact kind go at than the maintenance terms half when start depends can timing and piece Today, of the we look it is think in we later it it's XX% the next of of year. rate. in

question Essex Goldman with line of Sachs. next the from Your comes Brian

license perpetual XQ Hamza's if up I follow quarter. been wondering could historically I question on actually. heavy relatively has was a

what towards out how to the do you the with regard if the you SaaS. what a the bit transitioning quarter? skew to incentive seen kind SaaS, or have -- base previous can more changes typically typically perpetual you then installed of maybe you around in we the impact anything your any progress volatility in see little about on to think fourth compensations with So regard give to in on could do what pipeline? potential the call And efforts What side color perpetual us see the with maybe side? And is regard with

So second piece. Brian, I'll start with your

way I think -- always right this we follow approach we trend. customer was transition the way the and the the by do approach

think I customers alluded they of to push even their self-hosted map. see that existing having to surprised and them, part like without road were we the embracing us I as are

look ways see privileged you cold and they the timing, adopt that solution. So also right in consider for to our

that and want controls Some for self-hosted in gave where to and are Privilege large and were these I M&A, examples, or quickly. the some that up put they units script, business customers like CyberArk for very faster new our running bought Cloud

they at their our SaaS And -- start And will excited allow EPM here are we're them. we has but others and the solutions look those so and the every out new they'll for of it downsize and to or to seeing center, right adopted. as Cloud in time SaaS, other do solution Privilege course, them data been solution as like identity adopt to

of always incentive, team at year the the the of subscription and customer. sell of program to put terms the do incentivizing we, SaaS that course, beginning the out the by right with In

expecting existing for customers that. that on definitely business QX, have up And so lined had we're

Yes.

and said, sales of happening to think our look it out, out addition, new from a us. I through when full-blown third definitely but new included really the move -- XX% just subscription, and new we And incentivizing pointed just SaaS we're a SaaS focused year, on pipeline set for quarter package and them it's And new transitioning to how to selling we SaaS also as out where playbook we what and Udi indicative -- quote and has So of we teams, out in subscription. add, for also which the pipeline to Udi I'll been as the do to included at see this to subscription. and coming the create of logos perpetual for from subscription-based logos. education we on to selling the our going asset We've majority set incentives clear Brian,

Specifically seeing and to we to anticipate incentive do just sell the largest around is plans, our that not compensation perpetual or QX, to QX. -- really it's enterprises. It's related quarter, also business more in QX we our

fourth the to and budget licenses are and those is going on deals likely quarter, will deals typically a closing be in most perpetual existing be there's be So customers add-on in installed with flush and which that installed to adding current and base, more opening their base. more

But a expect hence SaaS more tick our we to subscription, target of the subscription So in and quarter see quarter into because our has we go and most XX%. over we'll third up created move that this in and of fourth year ability to next in the see getting then been the to to in pipeline new SaaS in do as and more perpetual. again, start year,

helpful. it. Got follow-up. just And a real That's for maybe quick

think when to spending, expectation how in Given profitability given how -- transition, the operating costs. the in historical to Sales of see in let forward? thoughts But relative you think do on of kind pull see and platform. is better the about elevated and shift elevated growth we innovation spend rates. an inflection your time to on double-digit start great to also We profitability line the might back margins marketing the forward I you R&D mean, for completion about

Yes.

work be the next I to it's quarter, transition start of I we through all and transition increasing going way And the some the after through year the to X transition. you is basically the then slow usually X the X and the a trough margins. mechanics is think quarters the way mean -- shift. operating the following

get But that So going back X the control quarters still in take the there. to to gradual rise going several we the post single before to from over transition. be a to to it quarter, X going there. is going not we afterwards can't we quarter. get can is transition, rising quarters the through that The start -- end the to then early bring faster see transition of It's we the fact that in faster, we be

William line Blair. of next Ho comes with Jonathan from Your question the

success thinking guess, any that. for there, your there large just you're a a how I wanted EPM EPM, the with is around to, product Just to get to start given that seeing as change be could Just sense area? want

of removing of it X EPM privilege the them. all that has the -- about of excited and X effective children, areas is it's we're against best it's Jonathan, least our they're -- also is But practice but of all very reducing we're so again, risk those a where ransomware.

on point think the the gas where is And there a for leverage growth we to great. is step awareness us So this the got engine. and to we further opportunity finally

but in and channels the mid-market how it team into us, things in the place refine place, it mainstream going out both So we is said, as but down We've are there put I'm taking to also of I also CDW opportunity, and wider going Management put this awareness like landing the bring that type -- to works Privileged spot we're bring program, mid-market. sales strong saw can a there not as -- with us the expanding also even that important and in maturing put channels a to becoming both Access because we not a for to this that but TAM part like a and that of stand-alone. numbers our more control of

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

trends what can in you're large customer base adoption those witnessing detail Privilege you're if to you with congrats strong expansion success see a more Udi, installed I'm Cloud. little the across and about commercial bit it's acquisition in enterprise? wondering seeing And new versus of you're terms of versus on the talk great trends terms performance. adoption the seeing

acceleration the before would surface this excited solutions is attack converting. I very past in logos. of relevant that see say the are months built XX that new that over more the pipeline is, to the the part Yes. And we're we're we've record expanding and

I more subject those And Access And we're before, in experts channel and the then spots PAM. matter programs, provides more seeing paying and opportunity. for investing speedboat with landings. -- and take mentioned landing with the been with really the in we the of as have a to think logos course, off I with the channel and structure EPM are those

include and also those but So include they CDW, doing more others. with the AWS

going mid-market, I has our and sweet these been exciting. channels able further spot, enterprise were the Now really it's with with to commercial, less go market expanded moving both highly if versus is regulated which enterprise to to from the part regards it's after but of understood down regulated the

you your And maybe enablement that you to partners? in Is as are Where driver amongst talk that as XXXX? driving more that bookings push becomes in something this of look a the commercial. into could we about terms channel material

and because the without after on efforts again it's of commercial want is team incremental we enterprise we excel think saw that it's going the the our space. I CyberArk, for the be But a that holy distracting commercial we're we in focus and types want the base. both double strongest channels to down that have grail -- coming is customer Enterprise focus to where we from,

of appreciating you'll is the in ASP course, But larger identity put yes, be embracing place. the growth. part see the so to of it security the is the continue messaging larger from and of really enterprise source a major and coming deals And we the innovation which business,

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

could identity I the and in what PAM recognition seeing their security the a centered you out adaptive more just customer base talk a general upsell privileged access of was little you're of terms about strategy to of and your these of willingness if wondering customers strategy.

Yes, absolutely.

on the Management. our DevSecOps motion customers biggest upselling and the I Secrets PAM and Access think is

like So PAM majority and relationships management. the to customers happy introduce customers suppliers, and motion important last customers, the the of PAM and to explore Idaptive additional those their side. we happy of of over the secrets But from acquisition, course, motion growing the workforce I the to -- they're last bigger into to privilege formed year our then the our was elements proliferation the covering of into they're that with deep portfolio. across pure The and the X,XXX into the that's is said, over where sure users on elements make also them -- the piece most expanding third-party

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

to the success transition. if wondering I'm customers to from existing know respect also a have to I with that seeing SaaS? of and Udi, you're loyalty subscription overall incentive more So to move seeing that with SaaS all on-premise you're migrations the

Yes. Yes. Okay.

more years. which to customer the our allow base. really even the from strategy their the adopt to follow on-premise subscription course, and if an among more migrating customer are the examples the So move in #X Fortune the on like on-prem of and that an gradual more while to value I we is -- SaaS see -- to also X XX they're Cloud. the at coming look new and in obviously, move gave with Privilege enterprise -- We'll subscription, is thing our taking more giving strength ourselves they incentivize, of to surprised salespeople, enterprises business some we over find into customer see but packages, get of the the in customers the really is add-on execute that's pleasantly The that CyberArk -- year security incentivizing it the the as on a identity to to to consume And bundled customers portfolio. how for optionality pathway of them But packages. coming

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

Privilege Or more given you the driving this democratization applicability your talked is adoption broader SaaS fact users So that SaaS by that now, remarks, faster. and of Is driving the attack Udi, prepared and more users about comments? there's a especially SaaS in surface?

and value. of type success customer through does go I and taking the seeing where think install care of we're deliver A process packages. we quicker of the classic SaaS, there's infrastructure, the have to not benefits of

users of and lot so path faster. more of the portfolio. they our to upsell to They they faster security that it Cloud the -- the at running. but have alleviated also of then on Privileged They a up it's ability business get elements manage see working. gave their see infrastructure And or you of a them both other And

but of organization faster and sale. it's all add-on an in about overall path I center CyberArk. to to So would creating time We very -- and innovation the the faster benefit real customer an value. entire is time the the we say value, put in quicker all But to customer

comes question the next from Your Ittai line Oppenheimer. Kidron with of

time are customers the Great who is I to have going a now and it to that getting transition that hard model? terminate meaning late about prices stop by what to the stuck into big you of quarter. core perpetual? you're question the the close are last the or of odds of which raise order with the year, line push are offering going next subscription And and still that is perpetual what midpoint you're your actually you're bastion what is guess will end to that do going on on maintenance in customers to you you

Yes.

puts constitution first. our have We the customer I -- think

for worked -- So loyalty and really customer that has us.

taste the more the a be portfolio And the the subscription to subscription pick in So going that packages. maintenance it, to other are as they subscription I to renewal know, stick to it's elements of side you they're want on. expand they carrot a to course, CyberArk the and that's packages. well. think open them gradually And that see to lead is for if maintenance them journey definitely transition. question, revenue the in I recurring especially value the to out packages, -- even for greater to we're bring and Josh, on And as great on us on with are add subscription remember of are much to as see And more of the versus to where a going with on take seeing let's they elements up anything overall, is the and to the SaaS the prior don't and of journey. that's opportunity value SaaS the there open

and based. be them to a really the going Yes. to subscription sales great more they add-on tech sales, an think more as current form to our they're get want subscription to the upgrade that and for base of installed tech kind for incented to points upgrade main if add because they covered their No, their And perpetual. on be and installed now is on packages of base of it's that reverse same move you I also issue a

So pretty as will it we happening it's a but happening there today. naturally, be tail for it we see once but naturally -- see

next Securities. Your line Trebnick with question Colliers Catherine of comes from the

architectures? quantify much organizations to could new try really the how or Udi, really you business, to the is that driven Trust undertake by Zero acceleration being

business. least Trust. privilege even it's And Yes. achieve I Catherine. the say strong and executive Sure, Zero couldn't of a drivers give are for our to tenant but out business number, Zero elements, that strong PAM against clear I and other protection in that business basic there, ransomware drivers Trust would order our is very a the and all also the putting controls really

definitely Zero customer at PAM center, connection how So of is on every the approach full part but to at the conversation, the in executing Trust They CyberArk say Trust the Zero and with I CSO them framework. CIO like of so it's identity would security or also a level. getting

the layer, of top I remote they really I connect their them connect touch side to security that but both allow the a suppliers, proactive can great get transformation enablement on is to driver their proactive workforce, all their allowing the modernize. beauty also provide going we of IT portfolio a we and of a protection course, this transform and it's are digital enablement to with to because and, So want I -- get solution. the -- great was our think we're

the are tailwinds Trust so Zero for it's part there. of right frameworks but And all us, supporting out

comes Research. Your Tilton from the Wolf with of line Joshua next question

to the one, even does demand a think year Access about identity compare the versus of contrast you demand space, specifically and maybe For and the X broader my environment, Privileged just hoping Management for kind first when access months I how or was we can this management, compare ago? demand the for on comment but

Yes.

motion going I have customer base. ago, of say So combined didn't year this we a existing would after the

to layer looking is Management, us. market Access to benefit X go Privileged of critical right customer worlds from the CyberArk where put a I we for that now think the in leader,

it's reach go a demand capture new I centered the customer we Access that of -- the doing need Privileged market really have on to market, base we're but for us strongest and Access the We trust opportunity recall PAM. enable the much it can very to and motion that for it us can is strong is And and is Management. the the write a and growing to on our -- huge because way digital transformation.

of both have the is that they're And their So to strategy. would a the X PAM a the I cybersecurity Board. most to pillar basic is need would I layer in the resonates even present with they strong definitely that CISO say, demand. say and must

driven. is PAM cybersecurity of So more

Our the PAM to expansion Access with here the customers gets is rest portfolio, the which and of driver us of enablement, digital trust and to the transformation also stay.

Your Securities. next Koujalgi question line comes Taz from the Guggenheim of with

comment your vertical? that you any this in products Can show on And that in performance quarter? Fed strength

Absolutely.

do look segment, major, full led we where mentioned also say, the QX. grew in education quarter. much XXX% share if would of of need the not touches Privilege vertical can very for budget the the performed at I Management. grower And and in order levels and than many with attribute Access it Privileged Access in around the that budget, say I in mentioned well still agencies that a really I We was vertical, government a governments local for bucket is more to the and Trust Management to executive lot agencies, Federal privilege partners administration engagement awareness vertical, see say that new the market. mostly our us, So years. in flush I elements I with -- ever. I but than of and like by us many in would state and it's the as various SLED Zero global previous we the the same stronger basics and that the Federal the least would this did

of & Mike Needham Your next line with Company. question comes from Cikos the

the motion. cross-sell wanted they or subscription track once incentivized down to sales. about to you customers with CyberArk's to portfolio? talking cross-sell where that continue are we're their do they just guys are come I at Curious, congregating have for to on customers next? touch the to add-on Obviously, question, SaaS enough within to data where sense a are this -- us that motion give typically going point First What's

So a program. stage PAM, typically would a a the I next pure customer it would the of -- the varies of EPM PAM really say expand PAM on as that kind

You've privilege. secured servers, but exposed and you left endpoints your with over

with mention So the it's also the in cross-sell. kind actually of step it. I we're next XDR make EDR companies And the earlier, partnering to the but and did

the list securing and nicely from to there's partners of that our applications a on or And on it's with expansion and the to then, side of because they're that management their program, front, front. So an if then other PAM the together access. executing then EPM secrets and course, identity privilege

In for a PAM customer. best course we're can security would both land a I and the new the of products if multiple as a that land generalize, identity the again, to would with account, we PAM be of elements that with And more. so actually in say what's bundled awareness I can had we that practice seeing

Mokady turn to like would the I Mr. time, this back call remarks. to closing Udi At over for

and Thank supporting even build will that you, for thank we with subscription Thanks, our our partners to as our everyone. modern transition our deeper Lisa. I'm and and to relationships company. I third Thanks, customers, a to we our customers contributing strong quarter execute employees strategy, want confident everyone. partners.

This concludes conference. today's

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