Q1 2022 Cyberark Software Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to cyber or first quarter 2000, and journey to earnings call. At this time, all that N D serine netease and only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that todays call is being recorded.
If you require any further assistance. Please press star zero. Thank you.
Now I would like to welcome Ms. Erica Smith Ma'am. Please go ahead.
Thank you. Good morning, Thank you for joining us today to review <unk> first quarter 2022, and financial results with me on the call today.
<unk>, Chairman and Chief Executive Officer, and Josh Siegel Chief Financial Officer. After prepared remarks, we will open the call up to a question and answer session. Before we begin let me remind you that certain statements made on the call today may be considered forward looking statements, which reflect managements best judgment based on currently available information.
I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the second quarter and our full year 2020 in Q or results may differ materially from those projected in these forward looking statements I would direct your attention to the risk factors contained in the company's annual report.
Four times form 20-F filed with the U S Securities and Exchange Commission and then was referenced in todays press release that are posted to <unk> website as well as the duration and scope of the COVID-19 pandemic related impact on global economies and our ability to adjust in response to the pandemic.
<unk> expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward looking looking statements made herein.
Additionally, non-GAAP financial measures will be discussed on this conference call reconciliations to the most directly comparable GAAP financial measures are also available in today's press release as well as an updated investor presentation that outlines the financial discussion in todays call.
We also want to remind you that we provide the calculated revenue headwind for additional color on the impact of our subscription bookings mix, but it should not be viewed as comparable to or a substitute for reported GAAP revenues. Our other GAAP metrics a webcast of today's call is also available on our website in the Investor Relations section.
With that I'd like to turn the call over to our chairman and Chief Executive Officer, Connie Lee, Thanks, Erica and thanks, everyone for joining the call. We had a fantastic start to 2022 the business once again accelerated momentum picked up additional speed with our bookings growth rate accelerating off the record fourth quarter, a testament to our.
Execution and the strong market fundamentals.
Iraq continues to be the best metric to evaluate the health of the business in Q1 subscription and <unk> reached $219 million and growth accelerated to 149% year over year.
Totally are reached $427 million and growth accelerated once again to 48% and we had the best sequential increase in subscription era and total there are outside of the fourth quarter outpacing our record setting third quarter 2021 performance.
Josh will talk about it later, but given our incredible results, we are raising our <unk> guidance for the full year.
We also achieved an important milestone with the subscription booking mix, reaching 86%, surpassing the transition target of 85%.
That achievement paired with our great bookings in the quarter demonstrate that our go to market organization has transformed into a subscription engine. We were thrilled to complete the transition in just five quarters well ahead of our initial plan for an eight to 10 quarter transition.
Our strong bookings in the first quarter exceeded our guidance framework, so even with our significantly higher subscription mix total revenue came in at $128 million, creating a revenue headwind of about $21 million in the first quarter normalizing the mix of bookings to the first quarter of last year. Our total revenue line would have grown by about 32.
2% in the first quarter with the license lines growing much faster.
Our results clearly demonstrate first and foremost identity security is more critical than ever, particularly given the significantly heightened threat landscape and geopolitical tensions second demand for identity security platform centered on privilege access continues to accelerate and third we are well positioned.
To execute against a multiyear durable growth opportunity.
I will frame to date around the pillars of growth subscription transition and innovation starting with growth second.
Secular tailwind of digital transformation, the adoption of zero Trust and the tanker innovation continued to push identity security to the center of every customer discussion geopolitical tensions in Russia invasion into Ukraine have further heightened incredibly severe threat landscape.
Ah recently, Danny security threat landscape survey identified that the race to digitize created an explosion of human and machine at Daddies, and then acute cyber security that.
Unmanaged and unprotected identities are exposing organizations to significant risks, which could have crippling effects less than half of our respondents have ideally security controls in place to protect their business critical applications.
Another key statistic over 70% of organizations surveyed experienced ransomware attacks in the past year to each on average.
Our survey results reinforce the durability of demand for identity security.
All of these factors came into play with customers and prospects in the first quarter privilege cloud endpoint privilege manager and axis, all SaaS solutions more than doubled again momentum continues to build for cyber Ark identity with even more pickup in new logos cross sell and add on deals in the first quarter.
And secrets management, we are increasingly securing across customers application of state from Dev ops commercial off the shelf cell posted as well as kubernetes and large scale container environments.
Geographically, we had strong contributions from all our regions with each exceeding our transition expectations.
New business doubled year over year. It was a great quarter, we signed nearly 250, new logos across customer sizes and verticals from airlines cruise ships schools and hospitals to born in the cloud software identity security is becoming a universal requirement.
There were many great new business wins, but I want to highlight a few.
And a seven figure ACB deal a major local government landed with privileged cloud and endpoint privilege manager as part of its digital transformation to secure its Azure counsels office 365, all network devices and much more scale.
Scalability and protecting against ransomware attacks were key in this deal.
A travel and leisure company still grappling from the impact from the global pandemic picked up cyber because of our multiple deployment options, including remote access for both self hosted pan and privilege cloud.
After trying to secure privilege with a homegrown solution a born in the cloud crypto currency company landed with <unk> to meet the increased compliance requirements and its industry superior security custom integrations and scalability were the deciding factors.
Cyber insurance continues to be a driver for our business and one highly competitive access deal a leading retail technology vendor fixed <unk> identity to meet stringent cyber insurance requirements and aggressive obviously SEC five migration timeline.
We saw concrete examples of the heightened threat landscape and geopolitical tensions increasing the sense of urgency with some customers, including a major state transportation Division that bought privileged cloud in response to the potential threat against critical infrastructure.
We're also seeing increased velocity in our adult business customers, adding more users and expanding to new solutions faster.
As examples.
A major health Company Health plan company is implementing a cyber Ark everywhere strategy to standardize on pan securing more privileged users and is also expanding into secrets manager for Dev ops.
A fortune 100 transportation company landed with Pam in 2018, the customer success team has built an amazing relationship with this customer and they will now leverage endpoint privilege manager to secure across more than 75000 endpoints, including 15000 employees and 60000 customer touch points.
A state government expanded for privilege from privileged cloud to secure web sessions in the quarter to provide more visibility and protection across applications and users.
Our land and expense strategy is at work and this customer is now evaluating a broad workforce identity rollout for our single sign on and MFA.
Vars Global system integrators advisories and managed security service providers are building <unk> identity security practices across Pam access and Dev ops enablement.
Enablement picked up significantly in the first quarter with both the number of <unk> certified partners and the average number of certifications trending up.
John will get into the specifics of the transition dynamics, but I wanted to reiterate that we were thrilled to exceed our 85% bookings target well ahead of our transition timeline and are now focused on operating and scaling as a subscription company. We are already seeing the flywheel effect in action, we now have more than 960 customers.
With over $100000 in annual recurring revenue up over 50% from Q1 2021, we're even more thrilled that our transition is based on a strong SaaS Foundation, where we continue to see SaaS first in almost all regions.
On innovation I want to highlight that while we have been transforming <unk> into a subscription company. We have also been building the industry's most comprehensive scalable identity security platform in the market.
Our platform is centered on path to provide customers with the highest levels of security, but it extends well beyond to secure all human and machine identities.
Along with increasing demand for privileged cloud our growth engines like endpoint privilege manager <unk> identity, and secrets manager are making meaningful contributions to the business. Most visible is the strength of our subscription E. R. R.
We recently announced that <unk> achieved four nines of availability, which enhances security and risk mitigation and drive productivity gains.
So Iraq Identi protects against the leading point of attack used in data breaches compromised credentials.
Our solution unifies SSO adaptive MFA user behavior analytics lifecycle management and directory services into one integrated solutions.
<unk> and endpoint privilege manager also reached in process status for fed Rep high authorization.
The government's most sensitive status for unclassified data and cloud environments, putting us in a great position to extend further into U S federal with new solutions.
In April we rolled out <unk> for Linux significantly expanding our opportunity and building on the incredible growth in EPS.
We are very excited to announce that we added <unk> a provider of advanced and modern no code application integration and workflow automation to Ciber, we acquired the company late in the first quarter and are looking forward to sharing more details about how we integrate their technology for access capabilities into our solution at impact life, our customer event in June .
Hi.
With our roots in cyber security and our identity security platform centered on privilege access management, we are in the best position of any vendor to help customers navigate the heightened threat landscape, we have an incredible opportunity to execute against this massive multiyear growth opportunity.
Before I hand over to Josh I want to welcome to <unk>. A strong addition to the team in Simon <unk>, who joins us as our Chief Marketing Officer, Simon brings 25 years of experience and driving strong growth transformational change and leadership in SaaS companies I'm excited to see how he and his team further improve our leadership.
<unk> and continued to increase demand for our identity security platform.
I will now turn the call over to Josh who will discuss our great financial results in more detail and provide you with our outlook for the second quarter and full year 2022, including raising our <unk> guidance for the year over to you Josh Thanks, Uzi and we'd like to remind you first that we posted slides to the website that walks through our.
<unk> results as Judy mentioned, we had a stellar first quarter to kick off the year momentum continues to build in our business fueled by amazing execution and a strong demand environment in terms of the headline P&L. We generated total revenue of $127 6 million in the first quarter with an 86%.
<unk> mix of subscription bookings.
We'll come back to the mix in a moment, but as a reminder, the combination of revenue in line with guidance at a mix higher than we anticipated demonstrates that total bookings again outperformed our guidance framework for the quarter.
Perhaps the best example of the momentum and the health of the business is the acceleration of our annual recurring revenue growth starting with the subscription portion, which reached $219 million and grew a 149% year on year.
The subscription portion now represents over 50% of total annual recurring revenue and just a year ago. The subscription portion was only $88 million or just 30% of total.
We were thrilled with the sequential increase in the subscription portion of $36 million off the strong seasonality in enterprise software, we saw in the fourth quarter.
Total annual recurring revenue was $427 million as of March 31, with growth accelerating to 48% year on year.
The acceleration in the business.
First quarter off an incredible fourth quarter 2021 results. When <unk> grew also 44% really underscores that the business is firing on all cylinders.
Moving to revenue subscription revenue generated from SaaS and self hosted subscription contracts reached $51 9 million and represented 41% of total revenue in the first quarter, that's increasing 110% year on year <unk>.
Consistent with the progression of our subscription transition perpetual license revenue declined to $10 $6 million, our maintenance and services professional services revenue was $65 $1 million with $54 $9 million from recurring maintenance and $10 $1 million and professional services revenue.
Recurring revenue defined as our total subscription plus our maintenance related to the perpetual license revenue reached $106 9 million or 84% of total revenue that's growing 40% year on year.
With the strength of our execution, we are quickly approaching our target of more than 90% of revenue from recurring.
Our subscription bookings mix increased to 86% in the first quarter. That's significantly ahead of our guidance of 79% bookings mix and now surpassing this subscription transition target of 85% we said.
We reached our mixed target in just five quarters as Judy mentioned well ahead of the eight to 10 quarters subscription transition Tam timeline that we outlined in the <unk>.
Early 2021 substantially now completing the transition from a sales perspective.
Economically the headwind created by the mix was approximately $21 million in the first quarter and when we compare like for like to the first quarter of 2021, when the mix was only 51%.
Normalizing our growth for the mix shift in the subscription transition the license portion of the of our business, our SaaS self hosted subscription and perpetual would've grown about 62%.
Taking the calculated revenue headwind into consideration total revenue growth would have accelerated to a strong 32% year on year.
Geographically the business is well diversified the Americas in particular had a standout quarter generating $75 million in revenue representing 59% of total revenue. The Americas again had the strongest percentage of SaaS bookings during the quarter.
EMEA had $39 million in revenue or 31% of total revenue with SaaS bookings more than tripling over last year.
P. J is also executing well with SaaS and subscription representing now nearly 75% of bookings a great accomplishment for that region.
If we look across the geographies adjusted for the calculated revenue headwind created by the mix. The Americas license revenue would have grown by over 100% EMEA by over 30% in <unk> by about 10%.
All line items of the P&L will be discussed on a non-GAAP basis. Please see the full GAAP to non-GAAP reconciliation in the tables of our press release.
Our first quarter gross profit was $104 1 million, an 82% gross margin thats compared with 85% gross margin in the first quarter last year, primarily the result of the increase in our SaaS business.
We continued to make investments to drive innovation and growth, resulting in operating expenses of $115 9 million or 29% increase year on year and generating an operating loss of $11 $8 million in the quarter.
Our operating results were lowered by $1 $5 million from foreign exchange rates.
And the approximately $21 million calculated revenue headwind we discussed.
Adjusting for the headwinds and FX operating margin would have been positive 6% in the first quarter.
Net loss was $11 9 million or <unk> 30 per diluted share for the first quarter.
We continue to attract and retain top talent, a testament to our culture and our success in the market and we ended March with over 2300 employees worldwide, that's including more than 1000 employees in sales and marketing.
For the first quarter free cash flow was $23 million or 18% free cash flow margin. The strong cash flow was the result of our seasonally strong fourth quarter bookings renewals as well as just great collections.
This cash flow contributed to our strong balance sheet and we ended the quarter with $1 2 billion in cash and investments.
Now turning to our guidance our guidance for the second quarter of 2022, and the full year reflects the robust industry tailwind execution and are growing our base.
For the second quarter of 2022, we expect total revenue of $135 million to $141 million, we expect non-GAAP operating loss of about 14, five to $9 $5 million for the second quarter.
We expect our earnings per share to range from non-GAAP net loss of 37 to <unk> 25 per basic and diluted share.
This guidance assumes about 87% of subscription bookings mix and a calculated revenue and profitability headwind of approximately $15 million for the second quarter.
Our guidance also assumes $40 6 million basic and diluted shares and about $2 million in taxes.
For the full year of 2022, we are raising the midpoint of our full year guidance and now expect total revenue in the range of 583 five to $598 $5 million. We are also increasing the mix assumption underlying our guidance to 88% from subscription bookings and a.
New headwind is also increasing now to approximately $61 million for the year.
So for the full year, we expect non-GAAP operating loss to be between 33, 5% and $25 million, we expect our non-GAAP net loss per basic and diluted share to be in the range of <unk> 92 to <unk> 60.
For the full year, we expect about $40 7 million basic and diluted shares in about $10 million in Texas.
Given that we surpassed our subscription transition bookings mix of 85%, we want to reiterate the impact on the business for 2022, as we talked about last quarter. The faster SAS heavy transition is having impact on the slope of revenue growth and profitability exiting the transition for the next few quarters, we will.
Continue to face a headwind to our revenue and profitability given last year's booking mix annual recurring revenue and the subscription portion of <unk> are the best metrics to evaluate the health of the business.
As you saw from our guidance revenue is rebounding already in 2022 with 18% growth at the midpoint of the guidance. We also want to reiterate that our approach to investment Hasnt changed the profitability of our operations is masked by the subscription transition and we expect to return to the rule of 40 once the <unk>.
<unk> dynamics play out.
Given the acceleration in our business, we are increasing our full year guidance for annual recurring revenue, which we now expect to be between $535 million and $541 million at December 31, 2022, that's a 37% growth year over year at the midpoint.
We continue to expect maintenance to decline, which impacts the total <unk> growth rate. When you think about our guidance. It is important to note.
First the combination of higher mix headwind in revenue mid point means we are increasing the booking assumptions underlying our guidance and second raising our full year.
Guidance after just the first quarter of the year demonstrates our confidence in the business and the strong demand we are seeing.
In terms of cash flow, while we had a seasonally very strong first quarter, we still anticipate that it'll be in line with our non-GAAP net income margin over a 12 month period.
The first quarter was a standout quarter to kick off what I am confident will be another stellar year for cyber Ark, our bookings mix target for the subscription transition is now behind US we are focused on capitalizing on the massive opportunity in front of US I will now turn the call over to the operator for Q&A.
Thank you Sir and as a reminder, if you wish to ask a question simply press Star then the number one on your telephone keypad.
Your first question is from the line off.
<unk> <unk> from Barclays. Your line is now open.
Okay, Great Hey, good morning, guys. Thanks for taking my questions here.
Absolutely.
Hey, maybe maybe for you great to see the results first of all maybe you could just zoom out a little bit and just talk to us a little bit about the competitive environment and to what extent you feel like the broader identity platform that <unk> has.
<unk> is helping you competitively.
Sure thing second and great to hear from you. So I would say that honestly. This is one of the best if not the best competitive positions, we've we've ever been with.
Yes.
On the <unk> front some of the traditional Pam vendors are I would say there are still working through changing hands from private equity and the disruption there is long lasting.
Particularly because they haven't been investing in R&D and that starts to show up in sales cycles and in renewal opportunities and in this environment and this threat landscape environment.
It's critical to make those investments and we're making sure that our identity security platform.
We're investing in it is secured and we keep up with the pace of change.
In enterprise 80, so that's on the <unk> for access we see the IDEXX vendors, so okta and Microsoft and in Dev Ops, we see hashi, but our approach is fundamentally different I think creating the speedboats or those business units. We created in 2021 really made a difference.
Were better at selling our platform to your question.
And in customers buy in on our security expertise with Pam, but they want to take the full journey for all identities human.
And machine with us across across the platform and based on that expertise.
In the center of Excellence, where we are.
Were selected and I think we're also seeing it in the in the analyst reports out there whether it's the Gartner magic quadrant for Pam and Forrester wafer for either so I would say bottom line the foundation in Pam.
Really puts us in the best position to go after the full identity security opportunity.
Got it got it very clear Josh maybe for you for my follow up great to see the full year go up, particularly the <unk> just to make sure. The question is asked was there anything to note just on timing of deals. It felt like the beat in the quarter was stronger than what most were expecting on IRR.
Feels like a portion of that is flowing through not the entire thing again understanding it's early in the year. So maybe that's the answer but again just wanted to make sure. The question was asked on on how you sort of feel about the full year guide going up versus the beat in the quarter.
Yes, hi, thanks, and thanks for the question.
The revenue in the quarter was impacted by really the great mix of outperforming on.
On bookings and the overall the overall business that we saw from the first quarter and in our ability to raise for the year.
It's because we outperformed in the first quarter and we're increasing our underlying booking assumptions for the year.
I think I think you also were alluding to it but the fact that we're able to increase our guidance now for the R. R.
This early in the year really really attests to our confidence in what we're seeing from the demand environment.
Okay got it I'll get back in queue. Thank you. Thank.
Thank you.
Your next question is from the line of Adam <unk> from Stifel. Your line is now open.
Great. Thanks, so much for taking the question. So just to be there for either video Josh just on EMEA. So it's great to see the traction there and you talked about bookings I believe SaaS bookings up triple digits, but just given the proximity to the war and your luxury EMEA footprint, maybe just talk a little bit more about the demand trends youre seeing and has anything changed either positively or negatively in the month of April .
Oh sure what are you hearing all I'll kick it off I would say, we're fresh fresh from actually meeting the EMEA leadership team.
In person and.
<unk>.
They are reporting strong demand.
And very strong pipeline and.
If we talk about the macro attention, it's only creating a tailwind of urgency.
And the need to take a serious look at cyber security. So I think some of the trends we saw in the in.
In the Americas in previous years of increased awareness.
<unk> are definitely reaching Europe .
And for US, it's a well performing region.
That's great and maybe just as a quick follow up so it was great to see the record new logos.
Thank you and you talked in the past about SaaS, improving velocity and helping to reduce friction in sales cycles. Just curious if youre starting to see a greater emphasis more down market from your traditional enterprise stronghold and kind of what other investments youre, making.
To better capitalize on that thanks again.
Yes, so again I would say on all fronts, both on the on the enterprise front.
As we look in the commercial market we're lending.
We're lending with SaaS and we have more lending we have more landing spots with both privilege cloud.
<unk> and <unk>.
Entity.
In the commercial sector as we call it which is again the high end of the mid market.
Certainly there are embracing our our SaaS solution and the fact that.
There is theres quick time to value and you can see that.
It's about two thirds of those 250, new logos in Q1 came from from that that segment of the market.
Excellent. Thanks again.
Your next question is from the line of Rob Owens from Piper Sandler Your line is now open.
Great I'd love to touch on the new logo growth as well just given.
I think what we've seen throughout the earnings season has been durability of spend but it really feels like your business is seeing inflection here. So can you maybe speak to you gave us some $2 50 number, but maybe speak a little bit to the the pipeline that youre seeing as you as you head into the June quarter here.
Alright, great.
We've been talking about the buildup of pipeline in the last several calls and I think the the.
The great new business and the doubling of new business sales is actually executing on that record pipeline. We've been we've been talking about the landing with more spots like I. Just mentioned, we are having more solutions is landing spot the channel of the channel strength is in the general pipeline.
And and also lending and larger deal sizes, which is often more more products and.
And more and more users and I would say the new business portion that you're asking about.
About about pipe.
The forward looking pipeline on new business as the percent of pipeline continues to grow so that trend continue.
<unk> continues and it is that strong execution of the team against that.
Against this demand environment.
Great. Thank you for the color.
Absolutely.
Your next question is from the line of Brian Essex from Goldman Sachs. Your line is now open.
Hi, good morning, and thank you for taking the question maybe to kind of pivot off of Rob's question.
Could you give us maybe maybe a little bit of perspective, I guess during the onset of the pandemic. When you saw a little pullback in deal sizes and how how.
The platform is being consumed given the mix that you have now with greater SaaS mix.
The greater awareness, how do you think about the durability of growth and if we were to head into more of a more challenging macro environment.
Where do you think you might see either benefit or risk to the durability of growth with regard to how enterprises consume the platform.
Oh, absolutely I would say, we're confident that we're looking at a durable <unk>.
Long term opportunity we've done so much in these past two years to create a wide wide platform and increase our leadership position.
Position expanding from compounding to identity security and having those initial somebody lending, but we look at the beginning we talked about above.
Our customers not being strategic.
And if we talk about two years ago are they thinking about this strategically they definitely are they see either.
Security and Pam at the center is the vector of attack in.
And we're seeing that trickle cross geography Cross cross vertical you see how.
Ill diverse we are from a from a vertical perspective, and thats only strengthening and then the adoption of the SaaS solutions as Josh mentioned, even in regions like a P J, where we thought it would take longer here.
In Europe for further prior for the prior question.
We just have I would say stronger demand environment a wider.
That form based solution set to execute on that in and you have a management team that has seen that has seen different times and.
And across those.
Areas with great success. So we're very realistic we look at the numbers were we in EMEA allude to the strength of the pipeline and the demand environment. We really believe it's it's durable and strong.
Great. That's very helpful. Maybe just a quick follow up so I wanted to congratulate you on the CMO higher.
I know, it's early days, but what do you anticipate you might see with regard to changes within the sales and marketing.
Management structure to comprehend and power our hiring trends.
I guess I expected to be impacted due to the change.
Yes, so we expect a smooth transition from underground.
An organizational perspective, because this was highly embraced bye bye.
But by the sales leadership team and.
We all believe that we are back to your prior question that were actually in the best setup right now to step on that pedal of both on the on the growth growth marketing.
Element elevating our identity security.
Our posture.
And getting getting it out there the leadership position that is reflected in the customer base and getting it out there and leveraging this flywheel effect that.
We're now seeing from from from that platform. So we love that Simon.
It comes from it comes from SaaS and in building great brands and so.
Basically hit the ground running so.
So our expectation is is upwards and outwards and like I mentioned, our next upcoming thing is.
Our first event, our first live event out of the pandemic in July .
And with with our customers and prospects.
Excellent. Thank you I appreciate the color.
Thank you.
Once again, if you wish to ask a question simply press Star then the number one on your telephone keypad and please be advised to have one question and one follow up question on your next question is from Fatima <unk> from <unk>. Your line is now open.
Good morning, Thank you for taking my questions.
Andy I wanted to go back to the script can you talk about Linux support for EPS I'm curious, if you can characterize and quantify for us.
And that actually opens up incremental opportunity around <unk>.
Privilege management that you previously weren't addressing and how that might change the.
Contended or cooperatives dynamic with Santana that traditionally defined endpoint security vendors and then I have a quick follow up for Josh. Please.
Great for the amount of first of all first of all great question.
I only had one sentence for it but I'm Super excited about APM for last because first of all <unk>.
It is one of our strong performance and.
And more than more than doubled for us along with the the other SaaS solutions I would say from a leadership position it just.
A great. We're in a great that we're in a great place, but we have been addressing so far windows.
Points and Windows server as an endpoint and Mac endpoints and this really takes us to Linux the Linux platforms.
Both both servers and they are.
Of course, the Linux endpoints as well and really taking us.
Into our.
Our customers cloud environments, and and and for those who are hybrid to the data centers and giving them a U.
That same easy to manage policies for lease provision for the Linux environment, which is so important to.
And preventing ransomware and privilege escalation and all the.
I'd say non repeatable points of attack, so I would say within the huge Tam that.
We're we're addressing but.
But we went after the windows environment.
First and in the team and our channels are very excited about this and we will make more of a splash.
At at our impact event from a competitive standpoint, I talked about standalone.
We have been.
Fully partnering with the Edr.
Lenders to date.
<unk> is not an edr solution than the security solution for.
And 14 lease privilege on the endpoint and we think that.
It applies just the same.
As we expand to.
The Linux environment, but from a standalone competitive standpoint, it gives us even additional advantage to what.
What we have today to be able to basically cover all platforms.
Again leverage that the multiple landing points, we had we have now also Linux.
I appreciate that and Josh very quickly appreciate the India demand environment and the feedback youre getting from the regional sales team has been pretty robust and strong.
But I was hoping you could more.
More discretely addressed any business activity in the conflict regions and if there is any financial impact to your business.
Any suspension of operations any write down of business any quantification on your credit exposure would be very helpful. Thank you.
Yes <unk>. Thanks.
No.
That area is not it's not impacting our results.
It's already reflected in our guidance, we're not doing.
Business there.
And in total anyway.
Whole area is less than 1% so.
On the on the flip side, it's kind of a tailwind when you think about the geopolitical volatility.
Especially as it elevates cyber cyber risk.
But.
We don't see it.
Being a material impact on us.
Thank you.
Your next question is from the line of Gregg Moskowitz from Mizuho. Your line is now open.
Okay. Thank you for taking the question very impressive acceleration in Ah congrats as well on reaching a subscription bookings transition. So far are the targets. So far ahead of schedule. So I had a question on <unk> as well can you maybe just expand on what has made <unk> in particular are so much more valuable to the point, where it's become a key driver of that.
Celebration that you've been showing.
Yes, I think it's.
The whole zero Trust free.
Framework doesn't really work.
<unk>.
If someone can take over that that end machine that that somebody has.
<unk> is establishing that.
Touch point or handshake with.
<unk> really allows organizations to know that okay that endpoint will run with minimal privileges will be in at least privilege mode and it is really foundational to the zero Trust and then there is the <unk>.
Additional added benefit discovered over the years I mean, it was at least at least there was really prevents.
Our malware from from from running in moving our laterally and it's become a an important enforced for.
For preventing ransomware from spreading and so we see those those two major drivers that solution to help us basic cyber hygiene of running at least privilege mode to support the zero Trust frameworks and it helps prevent.
Even the ransomware landed it helps prevent most ransomware from lending, but even if atlanta from from from.
Propagating and and of course.
The many years of investing and making it.
Super user friendly is that it applies to all.
All users in an organization and they don't feel it is very transparent transparent to the user.
Alright, that's great and then just as a follow up can you talk to how your global government business performed this quarter as well as what your expectations are for this vertical over the rest of the year. Thank you.
Yes, no absolutely.
As you as you can see probably in the slides.
Rented the global government as is nicely at 10%.
Part of the pie.
And really I would say, we're seeing steady adoption of <unk>.
<unk>.
<unk>.
It continues to be an important vertical that we're investing in I talked about the investment and the fed ramp.
Certifications to be to be able to begin to sell our SaaS solutions to the U S. Federal government, but we are seeing adoption around the world both for SaaS solutions.
Also for government that do want.
Self hosted we're giving that that optionality and that's that's very important for them.
And very often in our U S.
The vacations.
Are giving us credit elsewhere around <unk> around the world on our investments in the security and scalability of the platform.
Perfect. Thank you.
Thank you.
Your next question is from the line of Hamzah.
<unk> from Morgan Stanley . Your line is now open.
Hey, guys. Thanks for taking my question.
So really appreciate all the other great detail earlier.
Maybe just one for one for Josh.
I'm curious as you think about your your full year outlook.
How are you handicapping for all the <unk>.
Macro uncertainty out there I get that.
Security right now.
Fairly defensive given the geopolitical volatility, but in the past <unk> has had relatively longer sales cycles and then in relation to that how should we think about the seasonality in net new <unk> for the rest of the year.
Yeah. So thanks, Hamzah I mean with regard to your first question.
We're very confident.
What's going on this year, obviously, the economy will do with the economy is doing but I think you addressed it earlier on today that we have.
Strong resilient type of a business model that is basically, especially now with with us hitting our kind of our subscription mix that Pat of over 85%, where we're really now driving towards going through the to the other side of the transition towards growth and profitability.
And when we think about this year.
The demand environment.
It has not has not changed and if anything has strengthened.
In the course of time I mean, I think we saw news even this morning.
Pretty material events.
In Costa Rica.
And so we're we're continuing to invest however, I will point out that Werent experienced management team annuity talked about this before so we understand that.
We are constantly monitoring the situation, but at this point, we're very confident on where the where the businesses, where our pipeline is and and the demand environment around cyber so.
It's still ahead.
And on the second question remind me.
There was a second question new air our seasonality for the rest of the year, yes, So I think.
Clearly, we're as as we get further and further into the year where the.
The Delta.
The Delta on the mix gets smaller and smaller so we have much bigger compares when we get into into the second half of the year, So you're going to see a smaller growth.
And we started off with a very with a very strong growth of 48% in the first quarter. So I think that.
It will go kind of in tandem with the narrowing of the headwind Delta between the 80 to high Eighty's that we're doing in subscription business this year versus <unk>.
Versus the <unk> that we did last year and so Q3 and Q4 will we will have the narrowest.
Narrowest Joan.
Thank you.
Your next question is from the line of Joshua Tilton from Wolfe Research. Your line is now open.
Hey, guys. Thanks for taking my questions and congrats on the results I wanted to go back to the ALR raised one can you guys. Maybe just comment on how much of that as possible conservatism versus this dynamic of expanding subscription versus declining maintenance net new IRR that you guys have baked into the guidance.
Yes, I think I think.
We do anticipate some some decline in the maintenance, which actually makes our <unk>.
Expansion of the <unk> guide.
Even much more powerful because we have to make up make up for that for that maintenance reduction.
And we're really excited about the fact that we were able to come in at a 37% guide for the IRR.
And it's I would say that the increase is.
Really reflective of.
<unk> from the net new business.
We're doing so.
It's not.
It's around the new business that we're doing and the continued.
Renewals and up sells off the existing customers.
And when you guys.
Could you, possibly maybe just expand on what Youre seeing in regards to maybe deal sizes and Asps as you continue to be more successful with your bundling strategy and maybe how does that if at all benefit growth in the quarter.
Yes, we're actually seeing a uptick as we have for several quarters in a row on deal size and I think you alluded to it before particularly on new bids which.
Really really starting to surge this quarter. We saw we saw an uptick on the on the <unk> deal size. So.
Zinc.
Got a blending with lending with more products and more users because of how we created the <unk>.
Platform strength.
Thanks, guys much appreciated.
Yeah.
Your next question is from the line of Roger Boyd from UBS Securities. Your line is now open.
Hey, Thank you and congrats on a nice quarter wondering if you could talk about the.
The cloud marketplace AWS marketplace.
It isn't growth pipeline and just how you expect that opportunity to evolve as you push further with secrets management.
Things like E P M.
Thanks.
Yes.
I am personally very very bullish about.
The partnership will buzzing in AWS, and it's kind of a new thing that that evolved.
And started and started last year, if we look at.
And just in Q1, we had great examples of that synergy where it actually complements.
Our channels are doing and we can streamline opportunities through.
The mutual AWS.
Customers and.
I would say strong momentum.
Continuing into Q1, and there is a strong pipe built for.
The rest of the year and for next year. So we'll try to give more more specific numbers, but I can tell you I can I can definitely say that the strong pipeline build.
And youre right that the additional solution.
We are rolling out create even more opportunity.
On that on that collaboration.
There are some things in the works.
We will elaborate in in our customer.
At our customer event.
More streamlined ways.
Partner up with AWS.
Got it makes sense and one quick follow up can you just talk about operational security Ot the role <unk> plays in security infrastructure, and what Youre seeing in demand just given the emphasis on protecting critical infrastructure worldwide.
Yes, yes, we have seen.
Say, when we and I think we've been painted that when our last investor day that.
Organizations, usually leave that part to last because it's a separate type of network, but we have multiple customers securing their operational technology environment with sidewalk from electricity companies energy companies.
Sometimes even even even even remote locations in there.
Environment, and and and so it's become a stage of what we call the <unk> blueprint as customers rollout identity security and privilege access management.
They expand to there to there.
<unk> environment, sometimes we have built and integrations directly with the.
With the providers of.
I would say the endpoints on the operational side and sometimes we partner with gateway providers, where they bridge us.
To be able to manage and rotate and secure identities for those environments I agree with you. It's it's a growing concern for these for these infrastructure organizations and we're an important part of the solution.
Great. Thanks, a lot.
Thank you.
Your next question is from Daiichi drone from Oppenheimer. Your line is now open.
Thanks, a lot of questions have been asked but Josh I want to just from a financial standpoint.
It looks like perpetual.
Coming down so in your guide for next quarter can you help us kind of get our hands on.
What do you think perpetual revenue what is your assumption for perpetual revenue as part of the overall pie and then second question is around inflation.
Clearly everyone is carrying the higher expenses.
If inflation, we feel it everywhere.
How do you think about price increases.
Forward your products or perhaps on maintenance.
As well I mean, it's the first time that maintenance is down quarter.
Quarter over quarter IRR, So I'm, just kind of trying to understand how you're going to play that price increase card going forward.
Yes, hi, and thanks for the question I'll start with the second question, So I don't forget it.
But.
So we did we do have price increases, particularly as we particularly around the maintenance and things that are also very.
Personnel related.
So in terms of services in terms of maintenance in terms of renewals. We have built in ways for price increases I think you know also when we think about our.
On our.
Perpetual those prices have increased as well and we every year annually.
<unk>.
Look at price at price.
Increases as it relates to the current inflation, but we have incorporated that into into our model for this year.
And.
With regard to.
With regard to the perpetual revenue I mean, we gave the kind of the mix that.
Guiding for.
For Q2.
And the related headwind I think.
I think the best way to look at is probably similar to Q1.
Very good excellent. Thank you.
Yes.
Your next question is from the line of Keith <unk> from Keybanc Capital. Your line is now open.
Great. Thanks for taking my question and I'll Echo my congrats as well.
Just curious to hear your thoughts maybe on the impact of the security incident.
Quarter, what that might have had an impact on the on.
The market more broadly and maybe how it affected your business or your customer conversations in the quarter and more specifically just curious if you saw that provide a tailwind for your vendor access solutions.
Yes.
So I would say that.
Underscores that.
Every company has to be diligent on security and so it became one of those things.
One of those names that come up or an example of a place that comes up on the importance of investing.
Investing in security and also to your last point and ensuring the vendor access and third party controls.
We have a six to nine month cycle. So it didn't have.
Q1 <unk>.
In fact, but.
I think the important thing is as the momentum we're seeing for our access solution is really because customers are requiring a security first approach as it helps us emphasize you need a security first approach and this foundation of Hay from the makers of Pam were coming from from Pam We secured are most sensitive.
Users and third parties.
We're well positioned so.
The example.
It can also lead to that growing awareness of the importance to four.
Securing third party and vendor access.
And the most important thing is that we're proud of our security first approach to identity.
Great. That's helpful. And then just one quick follow up just on <unk>.
<unk> management.
An update of the timing of the launch of the cloud version and how you might see that change in your competitive positioning or maybe even accelerating adoption of secrets management within your customer base.
Yes.
Mike.
Well, we'll give more specific timing, it's going to be launched this year.
It will take away some of the.
Reduce the time to value for customers. So anytime we do that and we've done that across the.
But folio it helps in.
And adoption.
And gives that will give us a competitive edge in terms of timing.
The SaaS version.
It will be within this year and and stay tuned in the meantime.
Helping will helping our customer customers in their in their hybrid environments and.
Signing up some great marquee accounts and again, especially in their modern.
Kubernetes.
Dana environments like I mentioned.
Great. Thank you.
Hi, Ken.
Your next question is from the line of <unk> from GMP Securities. Your line is now open.
Great. Good morning, Thanks for taking my question, maybe just one quick one for you early.
I wanted to follow up on one of the points you made during your prepared remarks around wins, you mentioned that cryptocurrency company that had actually replaced a homegrown solution I just wanted to confirm.
Make sure I am clear was that a pam related homegrown solution or something more on the access space you could maybe give us some more detail there and then as a follow up to that is that a trend that you see this generally within the pan.
Part of the house customers can having homegrown.
Solutions and if you could maybe give some more color.
Around that trend as you see it.
So it's a great question and I actually would say that in the past it was in our in our earlier is when we saw that some of the highly regulated organizations, we're making an attempt to to create their own homegrown and we were rapidly replacing that in and Youre all familiar with our strength in the financial industry. I think this was an example, where.
Kind of a.
Type of a born on modern environment.
The company took a stab at it building it on its own and just saw that it doesn't scale.
And it doesn't provide the security that they need so it was a great win for us.
And just like we saw other great wins in the quarter in born in the cloud type.
Type organizations, where we can we can come in and be part of the solution and of course, the very similar to.
So our finance organization and our very.
And our highly highly targeted so it was a great win.
For us and.
And actually I'm, hoping that.
What are the dates we will be able to actually show a case study in and disclose the customer name with their consent because it's.
Definitely a great logo.
Okay, Thanks, again and thanks.
Good job on the quarter.
Thank you very much.
Your next question is from the line of Andrew <unk> from Wells Fargo. Your line is now open.
Hi, This is Justin Donati on for Andy.
Thanks for taking my question.
You've talked about the strong pipeline.
Just wondering if you could quantify anything around.
How your win where we win rates have been trending.
Just any color you could add there. Thank you.
Yes, I don't I don't have them.
Don't have numerical I would say I would say.
Back to my initial comment that I was just going fast because we're at the end of the call.
As I mentioned competitive.
<unk> position is probably one of the best we've seen it in.
On the <unk> front, so that's very strong and for US the world of access as an expansion. So we're very excited to see our win rates trend up and been very very differentiated.
Be very differentiated there.
Okay.
Okay, and if I could just ask one follow up question outside of Japan, what is <unk>.
<unk> the next add on for our customers.
So I would say that the lending sponsor.
Our privileged cloud <unk> and <unk>.
Our sovereign identity and often we see a combination of those in the land and whatever it was not part of that would be the runner up followed by by Secrets management as add on business.
Especially in our in our strategic account that follow are our blueprint and our expanding as two secrets management, but it rotates between privileged cloud lending with privileged call it <unk> <unk> or.
Cyber Ark identity in wood.
Expansion around there and very often we're.
We're coming in with a package that introduces them and give them a flavor of the other solution and hence that's why we talk about the velocity of add on because they had a taste that we are going to consume a quick.
Quick time to value and we can get that add on business faster.
There are no further question Mr. Mccarthy. Please go ahead.
Alright. Thank you very much we are thrilled to start 2022 with an incredible quarter with strong demand for our identity security platform and as always I want to thank our customers and partners for being the cornerstone of our success I also want to extend a special appreciation to the entire Ciber team, who came together and worked hard to exit.
<unk> subscription the subscription transformation strategy and shifting us in five quarters amazing. Thank you.
And with that this concludes today's conference call. Thank you for attending you may now disconnect.
Yes.
[music].
Sure.
Yes.
Roger.
[music].
Okay.
Thank you.