Q4 2023 CyberArk Software Ltd Earnings Call

Operator: Good morning, my name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the CyberArk Software fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Dennis and I will be your conference operator today at this time I would like to welcome everyone to the Sabre arc software fourth quarter and full year 2023 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, vending number one on your telephone keypad. To withdraw your question, press star one again.

After the Speakers' remarks, there will be a question and answer session if.

Speaker Change: If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question Press Star one again.

Erica Smith: I would now like to turn the conference over to Erica Smith, Senior Vice President, Finance and Investor Relations. Please go ahead. Thank you, Dennis. Good morning. Thank you for joining us today to review CyberArk Strong's fourth quarter and full year 2023 financial results. With me on the call today are Matt Cohen, our Chief Executive Officer, and Josh Siegel, our Chief Financial Officer. After prepared remarks, we will open the call up to questions and answers. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management's best judgment based on currently available information.

Speaker Change: I would now like to turn the conference over to Erica Smith, Senior Vice President Finance and Investor Relations. Please go ahead.

Erica Smith: Thank you Dennis good morning, Thank you for joining us today to review side, our external fourth quarter and full year 2023 financial results with me on the call today.

Erica Smith: Our Chief Executive Officer, and Josh Siegel, Chief Financial Officer. After prepared remarks, we will open the call up to a question and answer session.

Erica Smith: Where 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 first quarter full year 2024.

Erica Smith: I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the first quarter, full year 2024, and beyond. Our actual results might differ materially from those projected in these four looking forward. I direct your attention to the risk factors contained in the company's annual report on Form 20-F, filed with the U.S. Securities and Exchange Commission, and those referenced in today's press release that are posted on our website. Cyberark expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made today. Additionally, non-GAAP financial measures will be discussed on this call. Reconciliations to the most directly comparable gap financial measures are also available in today's press release, as well as in an updated investor presentation that outlines the financial discussion on today's call. A webcast of today's call is also available on our website in the Investor Relations section. With that said, I'd like to turn the call over to our CEO, Matt Cohen. Matt?

Erica Smith: And our actual results may differ materially from those projected in these forward looking statements.

Erica Smith: Back to your attention to the risk factors contained in the company's annual report on form 20-F filed with the U S Securities and Exchange Commission and those referenced in todays press release that are posted to our website.

Erica Smith: <unk> expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward looking statements made today.

Erica Smith: 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 in an updated investor presentation that outlines the financial discussion in todays call and webcast of today's call is also available on our.

Erica Smith: Our website in the IR section with that I'd like to turn the call over to our CEO, Matt Cohen Matt.

Matthew Lessner Cohen: Thanks, Erika, and thanks, everyone, for joining the call today. We had an amazing fourth quarter to round out a momentous year for CyberArk. Early in the year, we were nimble and adjusted our selling motion in light of the macroeconomic backdrop. And in the fourth quarter, it continued to pay off, resulting in another great growth quarter. We enter 2024 as a fully recurring revenue company with over 95% of our bookings coming from subscriptions. Demand for our identity security platform accelerated in 2023. And we end the year having solidified our leadership position in the market. We delivered a record-breaking fourth quarter, beating our guidance across all metrics. Subscription AAR reached 582 million, growing 60% year over year. Total AAR reached 774 million, growing 36% year over year.

Matthew Lessner Cohen: Thanks Erica.

Matthew Lessner Cohen: Thanks to everyone for joining the call today.

Matthew Lessner Cohen: We had an amazing fourth quarter to round out a momentous year for <unk>.

Matthew Lessner Cohen: Early in the year, we were nimble and adjusted our selling motion in light of the macroeconomic backdrop.

Matthew Lessner Cohen: In the fourth quarter, we continued to pay off resulting in another great growth quarter.

Matthew Lessner Cohen: We entered 2024 fully recurring revenue company with over 95% of our bookings coming from subscription.

Matthew Lessner Cohen: Demand for our identity security platform accelerated in 2023.

Matthew Lessner Cohen: And we would end the year, having solidified our leadership position in the market.

Matthew Lessner Cohen: We delivered a record breaking fourth quarter, beating our guidance across all metrics subscription are reached 582 million growing 60% year over year.

Matthew Lessner Cohen: Total <unk> reached $774 million growing 36% year over year.

Matthew Lessner Cohen: We were thrilled to add record sequential net new subscriptions and total ARR, and we exceeded our guidance range across revenue, operating income, and EPS. Total revenue growth accelerated to 32%, reaching $223 million. Non-GAAP operating income came in at approximately $35 million, and we generated non-GAAP earnings per share of $0.81.

Matthew Lessner Cohen: We were thrilled to add record sequential net new subscription and total <unk>.

Matthew Lessner Cohen: And we exceeded our guidance range across revenue operating income and EPS.

Matthew Lessner Cohen: Total revenue growth accelerated to 32% reaching $223 million.

Matthew Lessner Cohen: non-GAAP operating income came in at approximately $35 million and we generated non-GAAP earnings per share of <unk> 81.

Matthew Lessner Cohen: We also consistently outperformed throughout the year and delivered total revenue of $752 million, with growth accelerating to 27%, non-GAAP operating income of approximately $33 million, or a 4% operating margin, well above the break-even we guided for at the beginning of 2023, and non-GAAP earnings per share of $1.12. And while we did not guide for cash flow, we were thrilled to generate $51 million in free cash flow, or a 7% margin, for the full year 2023. Our performance speaks volumes about our execution. We fine-tuned our go-to-market strategy, including platform selling, channel strategy, and customer success. We improved the alignment between sales and marketing, generating record-high-quality pipeline across all our solutions. And lastly, R&D delivered against our mission to secure all identities with the right level of privilege controls through our groundbreaking identity security platform. In addition to strong execution, we're benefiting from durable demand trends driven by the proliferation of new identities, new environments, and new attack methods. Throughout 2023, organizations were reminded yet again that there is one constant in cyber attacks. All roads lead to identity.

We also consistently outperformed throughout the year and.

Matthew Lessner Cohen: And delivered total revenue of $752 million with growth accelerating to 27% non-GAAP operating income of approximately $33 million or 4% operating margin well above the breakeven we guided for at the beginning of 2023.

Matthew Lessner Cohen: non-GAAP earnings per share of $1 12.

Matthew Lessner Cohen: And while we did not guide for cash flow, we were thrilled to generate $51 million in free cash flow or 7% margin for the full year 2023.

Matthew Lessner Cohen: Our performance speaks volumes about our execution, we fine tuned our tuned our go to market motion, including platform selling channel strategy and customer success, we improved the alignment between sales and marketing generating record high quality pipeline across all our solutions and lastly, R&D delivered against our mission to <unk>.

Matthew Lessner Cohen: You're all identities with the right level of privilege controls through our groundbreaking identity security platform.

Matthew Lessner Cohen: In addition to strong execution, we're benefiting from durable demand trends driven by the proliferation of new identities, new environments and new attack methods throughout 2023 organizations. We're reminded yet again that there is one constant in cyber attacks.

Matthew Lessner Cohen: All roads lead to identity.

Matthew Lessner Cohen: In the context of these urgent trends, the mission-critical nature of our platform becomes apparent. Cyberark is the only vendor with a platform that can effectively and securely address the new world security requirements, which center on controls. Given our groundbreaking innovation and the changes in our business over the last few years, I'm going to break from our typical quarterly call cadence to outline how our identity security solutions are helping customers solve these challenges, which also speaks to the massive growth for CyberArk. Every organization today has a spectrum of identities, from core IT to developers to machines and across the entire workforce, and the number of identities is increasing at an exponential rate. Access for each of these identities has its own unique level of risk and complexity, requiring different levels of control.

Matthew Lessner Cohen: In the context of these urgent trends the mission critical nature of our platform becomes apparent <unk> is the only vendor with a platform that can effectively and securely address the new world security requirements, which center on controls.

Matthew Lessner Cohen: Given our groundbreaking innovation and the changes in our business over the last few years I'm going to break from our typical quarterly call cadence to outline how our identity security solutions are helping customers solve these challenges, which also speaks the massive growth.

Matthew Lessner Cohen: For <unk>.

Matthew Lessner Cohen: Every organization today has a spectrum of identities from core it.

Matthew Lessner Cohen: To developers to machines and across the entire workforce.

Matthew Lessner Cohen: The number of identities is increasing at an exponential rate.

Matthew Lessner Cohen: Access for each of these identities has its own unique level of risk and complexity requiring different levels of controls.

Matthew Lessner Cohen: Let me take you through this spectrum of identities and what we are seeing from customers and how that has expanded our addressable market. A CyberArk customer typically starts with core privilege access management and is focused on securing standing access for IT users who have high levels of privileges like a database or application administrator or maybe a cloud operations team. As they deploy, they follow a roadmap that brings a growing number of users within central IT but also third-party vendors and even shadow IT organizations under PAM security controls. As a result, there's a continuous expansion of the number of users leveraging PAM. Adoption begins to accelerate when PAM is delivered as a service, giving an easier adoption path and lower cost of ownership. It accelerates even further when we help customers tackle new use cases through revolutionary new access methods like just-in-time or dynamic access. Just-in-time access cuts the adoption curve down even further by allowing federated access to databases, cloud workloads, and other modern targets, while also increasing security controls by assigning entitlements dynamically at the time of access.

Matthew Lessner Cohen: Let me take you through this spectrum of identities and what we are seeing from customers and how that has expanded our addressable market our.

Matthew Lessner Cohen: Our cyber customer typically starts with core privilege access management and its focused on securing standing access for users who have high levels of privileges like a database or application administrator or may be a cloud operations team.

Matthew Lessner Cohen: As they deploy they follow a roadmap that brings a growing number of users within central it.

Matthew Lessner Cohen: But also third party vendors and even shadow it organizations under Pam security controls.

Matthew Lessner Cohen: As a result, there is a continuous expansion of the number of users leveraging tan.

Matthew Lessner Cohen: Adoption begins to accelerate when Pam is delivered as a service given an easier adoption path and lower cost of ownership. It accelerates even further when we help customers tackle new new use cases through revolutionary new access methods like just in time or dynamic access.

Matthew Lessner Cohen: Just in time access cuts the adoption curve down even further by allowing Federated access to databases cloud workloads and other modern targets, while also increasing the security controls by and signing entitlements dynamically at the time of access.

Matthew Lessner Cohen: The modern PAM program has evolved dramatically in the last few years and has opened up a significant expansion opportunity for CyberArk, even within the extended IT organization. You can see this in our healthy PAM-AR growth rates that have continued to persist. But moving beyond IT for a second, one of the fastest growing areas for human identities is the expanding developer community. Our secure cloud access solution brings privileged controls to the cloud and has meaningfully expanded our TAM to include developers as well as engineering teams and data scientists. We provide native access for developers with a zero standing privilege approach.

Matthew Lessner Cohen: Modern Pam program has evolved dramatically in the last few years and it's opened up a significant expansion opportunity for <unk>, even within the extended IC organization.

Matthew Lessner Cohen: You see this in our healthy Pam are growth rates that have continued to persist.

Matthew Lessner Cohen: But moving beyond it for a second one of the fastest growing areas for human identities is the expanding developer community. Our secure cloud access solution brings privileged controls to the cloud and has meaningfully expanded our Tam to include developers as well as engineering teams and data scientists.

Matthew Lessner Cohen: We provide native access for developers with a zero standing privilege approach. This innovative solution greatly and measurably reduces risk and organizations can quickly go from dabbling in discovery.

Matthew Lessner Cohen: This innovative solution greatly and measurably reduces risk, and organizations can quickly go from dabbling in discovery to actual control of developers as they access their cloud environment. However, always-on entitlements to cloud environments are a security nightmare. Yet innovation speed is the true promise of modern cloud programs. Secure Cloud Access, or SCA, ensures that our customers never have to choose between security and innovation speed. While SDA is one of our newest offerings, we had a strong quarter in Q4, and pipeline continues to build. This is one of the areas we are most excited about as we enter 2024. But as these developers work in the cloud, they are focused on creating or extending applications, workloads, and APIs that need access to critical data infrastructure and other cloud workloads. This results in the rise of machine identity.

Matthew Lessner Cohen: Actual control of developers as they access their cloud environments.

Matthew Lessner Cohen: Always on entitlements to cloud environments are security Nightmare, yet innovation speed is the true promise of modern cloud programs secure cloud access or FCA ensures that our customers never have to choose between security and innovation speed.

Matthew Lessner Cohen: FCA is one of our newest offerings, we had a strong quarter in Q4 and pipeline continues to build this is one of the areas. We are most excited about as we enter 2024.

Matthew Lessner Cohen: But as these developers work in the cloud they are focused on creating or extending applications workloads and Apis that need access to critical data infrastructure and other cloud workloads. This results in the rise of machine identities.

Matthew Lessner Cohen: Machine identities represent one of the riskiest and most complex components of the modern enterprise. To protect these machines and the secrets that they use, customers turn to our secrets management solution. Our secrets Management solution securely and centrally manages secrets at enterprise scale, all while avoiding waltz problems. It satisfies the CISO's requirements while never impeding the developers' workflows.

Matthew Lessner Cohen: <unk> identities represent one of the riskiest and most complex components of the modern enterprise to protect these machines and the secrets that they use customers turn to our secrets management solution.

Matthew Lessner Cohen: Our secrets management solution securely and centrally managed as secrets at enterprise scale, all while avoiding balt sprawl.

Matthew Lessner Cohen: It satisfies the <unk> requirements, while never impeding the developers workflows machine identities are exploding and our ability to bring together human and machine.

Matthew Lessner Cohen: Machine identities are exploding, and our ability to bring together humans and machines elevates the conversations with our customers. As we think about our fourth-quarter results, Secrets Manager was included in six of our top 10 deals, and we are pleased with the early success of Conjure Cloud. We have covered IT, we've covered developers and machines, but now I want to move on to the part of the enterprise that is in need of an entirely new approach to identity security, securing workforce identity. Legacy approaches of MFA and SSO are workforce requirements, but on their own they provide limited security, as evidenced time and time again in major breaches.

Matthew Lessner Cohen: Elevates the conversations with our customers.

Matthew Lessner Cohen: As we think about our fourth quarter results Secrets manager was included in six of our top 10 deals and we are pleased with the early success of conjure cloud.

Matthew Lessner Cohen: We have covered it we've covered developers and machines, but now I want to move on to the part of the enterprise that is in need of an entirely new approach to identity security securing workforce identities.

Matthew Lessner Cohen: The legacy approaches of MFA and SSO, our workforce requirements.

Matthew Lessner Cohen: But on their own they provide limited security evidenced time and time again and major breaches.

Matthew Lessner Cohen: Any identity can become privileged, causing CISOs to reconsider the way they secure the workforce. Leveraging intelligent privilege controls, CyberArk has reinvented workforce identity by building on top of traditional MFA and SSO with market-leading innovations like secure web sessions, Workforce Password Manager, and CyberArk Secure Browser. When combined with MFA and SSO into one unified solution, we have created a more holistic and comprehensive approach to securing the workforce, where intelligent privilege controls once again are making the enterprise more secure. This approach is paying off, and we had a record fourth quarter for our workforce solution. It's worth pausing for a moment to discuss our CyberArk Secure Browser. The CyberArk Secure Browser is built with native integrations to all of our workforce capabilities and will help customers protect against one of the fastest rising attack methods, which is cookie harvesting and browser-based attacks.

Matthew Lessner Cohen: Any identity can become privileged, causing <unk> to reconsider the way they secure the workforce.

Matthew Lessner Cohen: Leveraging intelligent privileged controls cyber Ark has reinvented workforce identity by building on top of traditional MFA and SSO with market, leading innovations like secure web sessions workforce password manager and cyber Ark secure browser when combined with MFA and SSO into one unified solution we have.

Matthew Lessner Cohen: <unk> created a more holistic and comprehensive approach to securing the workforce. We're intelligent privilege controls once again are making the enterprise more secure this approach is paying off and we had a record fourth quarter for our workforce solutions.

Matthew Lessner Cohen: It's worth pausing for a moment to discuss our cyber Ark secure browser or secure browser has built with native integrations to all of our workforce capabilities and will help customers protect against one of the fastest rising attack methods, which is cookie harvesting and browser based attacks.

Matthew Lessner Cohen: It's also built to be the gateway to all our solutions, allowing easy access to all enterprise targets and providing a seamless user experience across our entire identity security platform. Our workforce solutions, however, do not stop there. The modern workforce logs into desktops, laptops, and servers every day as part of their regular workflow. These endpoints need their own form of intelligent privilege controls. Endpoint Privilege Manager, or EPM, is seamlessly integrated with our workforce solutions and our browser as well.

Matthew Lessner Cohen: <unk> also built to be the gateway to all our solutions, allowing easy access to all enterprise targets and providing a seamless user experience to our entire identity security platform.

Matthew Lessner Cohen: Our workforce solutions, however, do not stop there the modern workforce logs into desktops laptops and servers every day as part of their regular workflow. These endpoints need their own form of intelligent privilege controls endpoint privilege manager or <unk> is seamlessly integrated with our workflow.

Matthew Lessner Cohen: Our solutions and our browser as well.

Matthew Lessner Cohen: We are doing this to implement least privilege and secure the endpoint. Least Privilege Access is a foundational security control. Every endpoint needs EPM to be truly secured. Despite the great growth over the last few years, we still have a tremendous opportunity within our installed base to further cross-sell EPM, and we also see EPM as a strong landing spot for new logos. As we kick off 2024, I wanted to make sure our investors understood how we are setting the pace of innovation, how our solutions work together, and how our identity security platform delivers value by dynamically adjusting the level of controls based upon complexity and risk. We are delivering a game-changer in the market. We are driving operational efficiency and, at the same time, focusing on privilege controls that help customers to stay safe from cyber threats and move their business forward. If we move back into the fourth quarter for a second, on the new business side, we signed about 340 new logos in the fourth quarter.

Matthew Lessner Cohen: We are doing this to implement least privilege and secure the endpoint.

Matthew Lessner Cohen: Least privilege access is that foundational security control every endpoint needs to be truly secured despite the great growth over the last few years, we still have a tremendous opportunity within our install base to further cross sell APM and we also see <unk> has a strong landing spot for new logos.

Matthew Lessner Cohen: As we kick off 2024, I wanted to make sure our investors understood. How we are setting the pace of innovation, how our solutions work together and how our identity security platform delivers value by dynamically adjusting the level of controls based upon complexity and risk.

Matthew Lessner Cohen: We are delivering a game changer in the market, we are driving operational efficiency and at the same time focusing on privilege controls that help customers to say stay safe from cyber threats and move their business forward.

Matthew Lessner Cohen: If we move back into the fourth quarter for a second on the new business side, we signed about 340, new logos in the fourth quarter as customers prioritize in depth security controls in this severe threat landscape new logos are increasingly landed with two or more solutions in fact in Q4.

Matthew Lessner Cohen: As customers prioritize in-depth security controls in this severe threat landscape, new logos are increasingly landing with two or more solutions. In fact, in Q4, a number of our largest new customers landed with five or more solutions, contributing to the significant increase in new business deal sizes. A few of the new logo highlights in the quarter include: As the education sector continues to be targeted by bad actors, evolving practices to align with industry-leading security controls is top of mind. This quarter, the London School of Economics, a leading business school globally, was looking to significantly and measurably improve its security posture.

Matthew Lessner Cohen: Number of our largest new customers landed with five or more solutions contributing to the significant increase in new business deal sizes.

Matthew Lessner Cohen: A few of the new logo highlights from the quarter include at the education sector continues to be targeted by bad actors evolving practices to align with industry, leading security controls are top of mind. This quarter. The London School of economics, a leading business school globally was looking to significantly and measurably improve its security posture.

Matthew Lessner Cohen: In this new logo win, they went broad across the platform with PAM, EPM, and Secrets Management. In an example of the power of our ecosystem, a partner introduced a Fortune 100 Financial Services customer to CyberArk. This all-SaaS seven-figure ACV deal was closed through the AWS Marketplace.

Matthew Lessner Cohen: And this new logo win they went broad across the platform with Pam <unk> and secrets management.

Matthew Lessner Cohen: And an example of the power of our ecosystem a partner introduced a fortune 100 financial services customer to <unk>. This all SaaS seven figure ACB deal was closed through the AWS marketplace. We are thrilled to see this customer applying a <unk> everywhere approach out of the gate secure.

Matthew Lessner Cohen: We are thrilled to see this customer applying a CyberArk Everywhere approach out of the gate, securing privileged access, secrets, endpoint, third-party vendors, and workforce identity. Our focus on moving from land to expand motion is built into our platform strategy and is contributing to our outperformance. A few examples of expansion deals from the quarter include a government agency that landed with CyberArk last quarter returned this quarter for more users and more products across our platform, buying PAM, EPM, Secrets, Identity Flows, Identity Compliance, and Secure Web Sessions in a seven-figure ATV deal. Additionally, a major Fortune 100 U.S. retailer chose Cyberark as their trusted strategic advisor in 2020.

Matthew Lessner Cohen: Privileged access secrets endpoint third party vendors and workforce identities.

Matthew Lessner Cohen: Our focus on moving from land into expand motion is built into our platform strategy and is contributing to our outperformance.

Matthew Lessner Cohen: A few examples of expansion deals from the quarter include a government agency that landed with cyber Ark last quarter returned this quarter for more users and more products across our platform buying Pam <unk> secrets identity flows identity compliance secure web sessions and a seven figure 80 video.

Matthew Lessner Cohen: A major fortune 100 U S retailer chose <unk> as their trusted strategic advisor in 2020 looking for defense in depth. They are consolidating spend with cyber Ark and in another seven figure ACB deal extended their protection with more privileged users secrets management workforce.

Matthew Lessner Cohen: Looking for defense in depth, they are consolidating spend with Cyberark and, in another seven-figure ACV deal, extended their protection with more privileged users, secrets management, workforce and customer identity, remote access, and secure cloud access. To summarize, all the land and expand deals demonstrate that every vertical, every business across all sizes has identity security challenges that our platform can help address. Touching briefly on profitability, throughout the year, we demonstrated leverage in our business with each operating expense line improving as a percent of revenue. For the year, we grew revenue by over 27% while our non-GAAP operating expenses grew just over 15%.

Matthew Lessner Cohen: And customer identity remote access and secure cloud access to.

Matthew Lessner Cohen: To summarize all of the land and expand deals demonstrate that every vertical every business across all sizes have identity security challenges that our platform can help address.

Matthew Lessner Cohen: Touching briefly on profitability throughout the year, we demonstrated leverage in our business with each operating expense line improving as a percent of revenue for the year. We grew revenue over 727%, while our non-GAAP operating expenses grew just over 15%.

Matthew Lessner Cohen: We are striking the right balance between investing in growth and innovation and driving profitability and cash flow. With our stellar performance in 2023 and the strong guidance you will hear from Josh in just a few minutes, I remain very confident in the long-term targets we have set. As we look ahead, our top priorities for 2024 are expanding our leadership position in driving identity security growth, delivering cutting-edge innovation and strengthening our industry-leading platform, leveraging data analytics to scale our business, including the use of artificial intelligence and machine learning, and delivering outstanding customer experiences and value across the customer journey. I'm also very excited to welcome Eduardo Camacho as our Chief Operating Officer. I have worked closely with her for more than 20 years and have tremendous respect for her and her ability to drive customer outcomes and lead our go-to-market strategy and field execution. I also want to thank Chris Kelly for his contribution to CyberArk.

Matthew Lessner Cohen: We are striking the right balance between investing in growth and innovation and driving profitability and cash flow with our stellar performance in 2023, and the strong guidance you will hear from Josh in just a few minutes I remain very confident in the long term targets we have set.

Matthew Lessner Cohen: As we look ahead, our top priorities for 2024 are expanding our leadership position in driving identity security growth delivering cutting edge innovation and strengthening our industry, leading platform leveraging data and analytics to scale, our business, including the use of artificial intelligence and machine learning and delivering outstanding.

Matthew Lessner Cohen: Customer experience and value across the customer journey.

Matthew Lessner Cohen: I'm also very excited to welcome Eduardo Camacho as our Chief operating officer.

Matthew Lessner Cohen: I have worked closely with her for more than 20 years and have tremendous respect for her and her ability to drive customer outcomes and to lead our go to market strategy and field execution.

Matthew Lessner Cohen: I also want to thank Chris Kelly for his contribution to <unk>. He will stay with <unk> through the end of March to ensure a seamless transition and we wish him well for the future.

Matthew Lessner Cohen: He'll stay with CyberArk through the end of March to ensure a seamless transition, and we wish him well for the future. We are in a position of strength as the leader in identity security, and our competitive position is incredibly strong. We are addressing a critical customer need with our platform, and the threat landscape is keeping identity security a top priority for our customers. As I reflect on our accomplishments in 2023, I am even more enthusiastic about CyberArk's future in 2024. I did want to pause here to talk about October 7th and how we responded.

Matthew Lessner Cohen: We are in a position of strength as the leader in identity secure security and our competitive position is incredibly strong we are addressing a critical customer need with our platform.

Matthew Lessner Cohen: And the threat landscape is keeping identity security a top priority at our customers.

Matthew Lessner Cohen: As I reflect on our accomplishments in 2023.

Matthew Lessner Cohen: Im even more enthusiastic about <unk> future coming into 2024.

Matthew Lessner Cohen: I did want to pause here to talk about October 7th and how we've responded I am so very proud of our global team and how they came together after the October 7th months' attack as families friends colleagues and entire communities continue to navigate through great tragedy loss and increased stress or color.

Matthew Lessner Cohen: I am so very proud of our global team and how they came together after the October 7th mass attack as families, friends, colleagues, and entire communities continued to navigate through great tragedies, loss, and increased stress. Our culture and team are what drive our success. I will now turn the call over to Josh, who will discuss our record financial results and provide you with our outlook for 2024 in more detail. Thanks, Matt.

Matthew Lessner Cohen: Sure.

Matthew Lessner Cohen: And team are what drive our success.

Matthew Lessner Cohen: I will now turn the call over to Josh who will discuss our record financial results and provide you with our outlook for 2024 and more detail.

Josh Siegel: Thanks, Matt we posted outstanding results in the fourth quarter and beat our guidance across all metrics total revenue growth accelerated again this quarter to 32% coming in at a record $223 $1 million and significantly exceeding our guidance our identity security platform.

Josh Siegel: We posted outstanding results in the fourth quarter and beat our guidance across all metrics. Total revenue growth accelerated again this quarter to 32 percent, coming in at a record $223.1 million and significantly exceeding our guidance. Our identity security platform continues to drive momentum for upsell, cross-sell, and new logos. This has allowed us to meet the strategic financial objectives we set for ourselves at the beginning of the year—durable top-line growth, improved operating leverage, and strong free cash flow generation. Demonstrating the continued momentum in our business, ARR reached $774 million at year end, growing 36% year on year and coming in above the high end of our guidance range. The subscription portion increased 60% and reached $582 million, and is now 75% of total ARR.

Josh Siegel: Continues to drive momentum of upsell cross sell and new logos. This allowed us to meet the strategic financial objectives, we set for ourselves at the beginning of the year durable top line growth improved operating leverage and strong free cash flow generation.

Josh Siegel: Demonstrating the continued momentum in our business.

Josh Siegel: <unk> reached $774 million at year end growing 36% year on year and coming in above the high end of our guidance range. The subscription portion increased 60% and reached $582 million and is now 75% of total a R. R.

Josh Siegel: We added a record $78 million in net new subscription ARR as customers are consolidating on Cyberark and continue to land and expand with more of our platform. In addition, we had a record quarter for SAS bookings, both in absolute dollars and the mix of our bookings. Compared to year-end 2022, we added an impressive $218 million of net new subscription ARR, also a record. The maintenance portion of annual recurring revenue declined slightly to $192 million at December 31, which was in line with our expectations.

Josh Siegel: We added a record $78 million in net new subscription as.

Josh Siegel: As customers are consolidating on cyber and continue to land and expand with more of our platform. In addition, we had a record quarter for SaaS bookings both in absolute dollars and mix of our bookings compared to year end 2022, we added an impressive 218 million.

Josh Siegel: <unk>.

Josh Siegel: Net new subscription <unk> also a record.

Josh Siegel: The maintenance portion of annual recurring revenue.

Josh Siegel: Declined slightly to $192 million at December 31, which was in line with our expectations. We continued to see strong renewal rates and like for like conversion activity is still only represents a single digit percent of our year on year <unk> growth.

Josh Siegel: We continue to see strong renewal rates, and like-for-like conversion activity still only represents a single-digit percent of our year-on-year ARR growth. Our strong execution is also demonstrated by the 30% increase in customers with more than $100,000 in annual recurring revenue to over $1,700 at the end of the fourth quarter. The cohort of customers with more than $500,000 in ARR also grew over 45% to now be nearly 300 customers.

Josh Siegel: Australia execution is also demonstrated by the 30% increase in customers with more than $100000 in annual recurring revenue to over 700 at the end of the fourth quarter.

Josh Siegel: Cohort of customers with more than $500000 and they are also grew over 45% to now being nearly 300 customers. The biggest driver of this cohort is the upsell of additional users and cross sell of new solutions across the platform.

Josh Siegel: The biggest driver of this cohort is the upsell of additional users and cross-sell of new solutions across the platform. Matt touched upon our strong execution, and I wanted to briefly touch on the macro. Our solutions continue to be prioritized and budgets allocated, close rates remain strong, productivity improved, and deals progress nicely as we convert our pipeline, including several seven-figure ACV deals. We continue, as well, to build strong new pipelines to support our future growth. Moving into the details of the revenue lines for the fourth quarter, recurring revenue reached $201.5 million, again making up 90% of total revenue. That's compared to 84% in the fourth quarter of last year.

Josh Siegel: Matt touched upon our strong execution and I wanted to briefly touch on the macro our solutions continued to be prioritized and budgets allocated close rates remain strong productivity improved and deals progress nicely as we converted our pipeline, including several seven figure <unk> deals.

Josh Siegel: <unk>.

Josh Siegel: We continued as well to build strong new pipeline to support our future growth.

Josh Siegel: Moving into the details of the revenue lines for the fourth quarter recurring revenue reached $201 $5 million again, making up 90% of total revenue thats compared to 84% in the fourth quarter last year recurring revenue growth accelerated to 41% year on year showing the momentum.

Josh Siegel: Recurring revenue growth accelerated to 41% year-on-year, showing the momentum in our SaaS portfolio continues to gain steam. With a total subscription bookings mix of 95% for the full year and our recurring revenue reaching 90% of total in each of the quarters of 2023, it is safe to say we are now a fully recurring revenue company. Digging into the specifics, our subscription revenue line reached $150.3 million, with growth accelerating to 70% year-on-year and representing 67% of total revenue in the fourth quarter. Our maintenance and professional services revenue was $64.8 million.

Josh Siegel: In our SaaS portfolio continues to gain steam with total subscription bookings mix of 95% for the full year and our recurring revenue, reaching 90% of total in each of the quarters of 2023. It is safe to say we are now a fully recurring revenue company.

Josh Siegel: Digging into the specifics our subscription revenue line reached a $153 million with growth accelerating to 70% year on year and representing 67% of total revenue in the fourth quarter.

Josh Siegel: Our maintenance and professional services revenue was $64 8 million.

Josh Siegel: Of that, $51.2 million dollars came from recurring maintenance, and professional services revenue at $13.6 million dollars for the quarter. Geographically, each of our major territories grew revenue faster than 30% in the fourth quarter. The Americas' revenue was $130.3 million, that's growing 31% year on year, and the Americas had a record, with SAS reaching over 70% of bookings in the quarter. EMEA grew by 33% year-on-year to $68.7 million in revenue, and APJ grew by 35% to $24.1 million in revenue.

Josh Siegel: Of that $51 $2 million coming from recurring maintenance and with professional services revenue at $13 6 million for the quarter.

Josh Siegel: Geographically each of our major territories grew revenue faster than 30% in the fourth quarter. The Americas revenue was $133 million, that's growing 31% year on year and the Americas had a record with SaaS, reaching over 70% of bookings in the quarter.

Josh Siegel: EMEA grew by 33% year on year to $68 $7 million in revenue in <unk> grew by 35% to $24 $1 million in revenue.

Josh Siegel: Diversification has always been a foundation of our strategy, and it is great to see the strength across all of our geographies in the fourth quarter. We also see that universal strength reflected in the full year, with the Americas, EMEA, and APJ each growing 27% year on year. All line items of the P&L now will be discussed on a non-gap basis.

Josh Siegel: Diversification has always been a foundation of our strategy and it is great to see the strength across all of our geographies in the fourth quarter. We also see that universal strength reflected in the full year with the Americas, EMEA and AP J, each growing 27% year on year.

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

Josh Siegel: Please see the full GAAP to non-GAAP reconciliation in the tables in our press room. Our fourth quarter gross profit was $189.7 million. That's an 85% gross margin compared to 83% in the fourth quarter last year. The expansion of our gross margin is due to revenue outperformance and tight management of our cloud costs. Our operating income of $34.7 million significantly exceeded the top end of our guidance. Our operating leverage was driven by disciplined investments and revenue outperformance. Net income came in at $38.1 million, that's $0.81 per diluted share, also significantly outperforming our guidance.

Josh Siegel: Our fourth quarter gross profit was $189 7 million Thats, an 85% gross margin compared to the 83% in the fourth quarter last year. The expansion of our gross margin is due to revenue outperformance and tight management of our cloud costs, our operating income of $34 $7 million.

Josh Siegel: Significantly exceeded the top end of our guidance, our operating leverage was driven by disciplined investments and our revenue outperformance net.

Josh Siegel: Net income came in at $38 $1 million, that's 81 per diluted share also significantly outperforming our guidance.

Josh Siegel: Moving on to review the full year 2020, we began the year expecting 29% growth in ARR, 23% revenue growth, and hitting a break-even operating margin. We finished a great year. ARR grew 36%, revenue came in at $752 million, with growth accelerating now to 27%, and we returned to meaningful profitability, delivering non-GAAP operating income of $33.5 million, or about 4% operating margin for the full year. And we continue to march towards Rule of 40. Our EPS came in at $1.12 per diluted share.

Josh Siegel: Moving on to review the full year 2023, we've.

Josh Siegel: We began the year expecting 29% growth in a R 23% revenue growth.

Josh Siegel: Hitting breakeven operating margin, we finished a great year.

Josh Siegel: <unk> grew 36% revenue came in at $752 million with growth accelerates accelerating now that 27% and we returned to meaningful profitability delivering non-GAAP operating income of $33 $5 million or about 4% operating margin for the full year and we.

Josh Siegel: <unk> to March towards rule of 40, our EPS came in at $1 12 per diluted share.

Josh Siegel: We ended December with approximately 3,000 employees worldwide, including over 1,320 in sales and marketing. For the full year of 2023, we expect free cash flow to be $51.3 million, or a 7% free cash flow margin. As a reminder, we still consider free cash flow to be the last piece of our model to inflect after the subscription transition, and we are confident that we are just at the beginning of this expansion with our 2023 results. Turning to our guidance, For the first quarter and the full year 2024, our guidance reflects the momentum we're seeing in the business, combined with our confidence to meet the 2024 priorities that Matt outlined earlier. For the first quarter of 2024, we expect total revenue of $209 to $215 million, which represents 31% year-on-year growth at the midpoint, and we expect non-GAAP operating income in the range of $7.5 to $12.5 million for the first quarter. We expect our non-GAAP EPS to range from $0.21 to $0.31 per diluted share.

Josh Siegel: We ended December with approximately 3000 employees worldwide, including over 1320 in sales and marketing.

Josh Siegel: For the full year 2023 free cash flow was $51 $3 million or 7% free cash flow margin. As a reminder, we still consider free cash flow that would be the last piece of our model to inflect. After the subscription transition and we are confident that we are just at the beginning of this expansion with our 2023 results.

Josh Siegel: Turning to our guidance for the first quarter and the full year 2024, our guidance reflects the momentum we're seeing in the business combined with our confidence to meet the 'twenty 'twenty four priorities that Matt outlined earlier for.

Josh Siegel: For the first quarter of 2024, we expect total revenue of $290 million to $215 million, which represents 31% year on year growth at the midpoint and we expect non-GAAP operating income in the range of seven 5% to $12 $5 million for the first quarter, we expect our non-GAAP EPS to range from 21 to 31.

Josh Siegel: <unk> diluted share.

Josh Siegel: Our guidance assumes 47.8 million weighted average diluted shares and about $10.5 million in taxes. For the full year 2024, we expect total revenue in a range of $920 to $930 million, representing 23% growth year-on-year at the midpoint of the range. Reflecting our continued commitment to operating leverage, we expect our full-year operating income now to be in the range of $75.5 million to $84.5 million, and we expect our EPS to be between $1.63 to $1.81 per diluted share.

Josh Siegel: Our guidance assumes $47 8 million weighted average diluted shares at about $10 $5 million in taxes.

Josh Siegel: For the full year 2024, we expect total revenue in a range of $920 million to $930 million, representing 23% growth year on year at the midpoint of the range.

Josh Siegel: Reflecting our continued commitment to operating leverage we expect our full year operating income now to be in the range of $75 5 million to $84 5 million, we expect our EPS to be between $1 63.

Josh Siegel: To $1 81 per diluted share, we expect about 48 million weighted average diluted shares and about 46 and a half million dollars in taxes for the full year 2024.

Josh Siegel: We expect about 48 million weighted average diluted shares and about $46.5 million in taxes for the full year 2024. We expect annual recurring revenue to be between $968 million and $983 million at December 31, 2024, or about 26% year-on-year growth at mid- We are also issuing guidance for free cash flow for the first time and expect free cash flow to be in the range of $85 to $95 million for the full year 2024, and we remain confident about the long-term target that we outlined at InvestingWise. I also want to provide a few pointers to help you model our expenses for the year.

Josh Siegel: We expect annual recurring revenue to be between $968 million and $983 million at December 31, 2024, or about 26% year on year growth at the midpoint.

Josh Siegel: We are also issuing guidance for free cash flow for the first time and expect free cash flow to be in the range of $85 million to $95 million for the full year 2024, and we remain confident about the long term target that we outlined at Investor day.

Josh Siegel: I also wanted to provide a few pointers to help model our expenses for the year.

Josh Siegel: While we expect to continue to invest in our innovation engine and in sales and marketing in absolute dollars, we do expect to see an improvement in both line items as a percentage of revenue. We will once again hold our Impact customer event and our Impact World Tour in the second quarter of 2024. We will begin our Impact World Tour in the second quarter of 2024, increasing our marketing expenses for that. Our CapEx is expected to be 1.5% of total revenue. So to sum up, we are thrilled to deliver another stellar quarter and amazing full year results showing continued demand for our platform, the execution of our land and expand motion, and durable tailwinds that have made identity security a must have. As a recurring revenue company and the leader in identity security, Cyberark is well positioned to drive leverage in our model across all areas and deliver the expanded profitability and cash flow levels in 2024 that I just discussed. I will now turn the call over to the operator for Q&A. Operator.

Josh Siegel: While we expect to continue to invest in our innovation engine and in sales and marketing in absolute dollars. We do expect to see an improvement in both line items as a percentage of revenue we will once again hold our impact customer event.

Josh Siegel: And.

Josh Siegel: And our impact World tour in the second quarter in 2024 begin our impact World tour in the second quarter of 2024, increasing our marketing expenses for that quarter. Our capex is expected to be one 5% of total revenue.

Josh Siegel: So to sum up we are thrilled to deliver another stellar quarter and amazing full year results showing continued demand for our platform the execution of our land and expand motion and durable <unk> that have made identity security a must have.

Josh Siegel: As a recurring revenue company and a leader in identity security Cyber Ark is well positioned to drive leverage in our model across all areas and deliver the expanded profitability and cash flow levels in 2024, I just discussed.

Speaker Change: I'll now turn the call over to the operator for Q&A operator.

Operator: At this time, I would like to remind everyone that in order to ask a question, simply press star and then the number one on your telephone keypad. Your first question is from the line of Saqib Khalia with Barclays. Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.

Ankur Kalia: Your first question is from the line of <unk> Kalia with Barclays. Please go ahead.

Saqib Khalia: Okay, great. Hey guys, thanks for taking my questions here and nicely done. Thanks, Zach. It's great to hear from you. Same here.

Kalia: Okay, Great Hey, guys. Thanks for taking my questions here and nicely done.

Kalia: <unk> great to hear from you.

Matthew Lessner Cohen: Matt, maybe I'd love to dig into your prepared remarks on the workforce or single sign-on market. Very helpful, by the way, prepared remarks. The question is, given some of the noise in that market competitively, how do you think Cyberark is positioned, and what are you seeing in the pipeline there for just the broader identity platform? Does that make sense?

Kalia: Same here, Matt maybe maybe to start with you.

Kalia: I'd love to dig into your prepared remarks.

Ankush Kalia: On the workforce or or single sign on market very helpful by the way of prepared remarks.

Ankush Kalia: The question is given some of the noise in that market competitively how do you think <unk> is positioned.

Ankush Kalia: And what are you seeing in the pipeline there for just the broader identity platform.

Matthew Lessner Cohen: It does, and it's a great question, and I think the first thing I would say is, independent of the competitive environment and some of the things that are happening there, we feel really strongly, as I kind of outlined, that our approach to workforce security is differentiated, that it is actually unique in the market, and that while MFA and SSO, as I said in the prepared remarks, are important, you must have them, they're no longer sufficient for how you actually cover the workforce from an identity security perspective, and so our notion of a holistic or a unified solution that brings together MFA, SSO, but also brings in our workforce password management, our layers of security that sit within secure web sessions, and the browser as the access point, actually, for us, kind of reinvents that space and puts us in a place where we can take some of the, what we would consider kind of legacy approaches that are out there in the market, and put them on their heels in terms of our ability to have a conversation there. Then when you connect that back to the identity security platform and the idea that you can actually manage those users in the same way or at the same time as you do your highly privileged users, it takes the differentiation even further. So we feel like we're in kind of entering a sweet spot in terms of our ability to compete in that market. We see it building in our pipeline, and certainly, you know, the competitive atmosphere out there for us hasn't really ever been better than we're seeing right now as we go into 2024. Got it. Got it.

Speaker Change: Makes sense.

Speaker Change: Does and it's a great question.

Speaker Change: I think the first thing I would say.

Speaker Change: Independent of the competitive environment.

Speaker Change: And some of the things that are happening there, we feel really strongly as I as I kind of outlined that our approach to work towards security is differentiated that is actually unique in the market and that while MFA and SSO as I said in the prepared remarks are important.

Speaker Change: You must have them theyre no longer sufficient for how you actually cover the workforce from an and Danny security perspective, and so our notion of of a holistic or a unified solution that brings together MFA SSO, but also brings in our workforce password management, our layers of security that sit within <unk>.

Speaker Change: <unk> web sessions and the browser as the as the access point actually for us kind of reinvent that space and puts us in a place where we can take some of the what we would consider kind of legacy approaches that are out there in the market and put them on their heels in terms of our ability to have a conversation there than when you connect that back to the identity security.

Speaker Change: Platform and the idea that you can actually manage those users in the same way or at the same time as you do your highly privileged users. It takes a differentiation even further so we feel like we're in and kind of entering a sweet spot in terms of our ability to compete in that market, we see it building in our pipeline.

Speaker Change: And certainly you know the competitive atmosphere out there for us has hasnt really ever been better than we're seeing right now as we go into 2024.

Speaker Change: Got it got it very clear Josh maybe for my for my follow up for you.

Josh Siegel: Very clear. Josh, maybe for my follow-up for you, great to see the free cash flow inflect this year and appreciate the guide. And I know it's early to talk about that metric beyond 2024, but maybe anecdotally, what are some of the puts and takes for free cash flow beyond 2024, structurally, that you want us to think about with that metric. Yeah, thanks, Zach.

Speaker Change: Great to see the free cash flow influx this year and I appreciate the guide.

Josh Siegel: And I know, it's early to talk about that metric beyond 2024.

Speaker Change: Anecdotally what are some of the puts and takes for free cash flow beyond 2024 structurally.

Speaker Change: Do you want us to think about what that metric.

Speaker Change: Thanks.

Josh Siegel: You know, I think it's mostly around puts as we think about the next couple of years. And it's, it's really the expanding leverage that we're getting in the operating income that, you know, we're seeing at each of the years on our road to the age of 40. And, and then of course, it's the flywheel effect that we are going to increasingly get this year, then and then again in 2025, which is, you know, really reflecting the renewals, the full-blown renewals of having already gone through round tripping the SAS and subscription bookings that we, you know, built up in the last couple of years. And, and so that gives us strong confidence that we're on track to hitting our medium goals Your next question is from the line of Shao Yao with CD Cowan. Please go ahead. Thank you. Good morning. Good afternoon.

Speaker Change: I think it's mostly around puts as we think about the next couple of years and it's it's really the expanding leverage that we're getting in the operating income that we're seeing at each of the years.

Speaker Change: On a road to our rule of 40 in and then of course, it's the flywheel effect that we are going to increasingly get.

Speaker Change: This year, then and then again in 2025, which is really reflecting the renewals of full blown renewals of of having already gone through round tripping.

Speaker Change: The SaaS and subscription bookings that we are.

Speaker Change: Built up in the last couple of years and so that gives us strong confidence that we're on track to hitting our medium our goals there.

Shallow Yao: Your next question is from the line of a shallow Yao with TD Cowen. Please go ahead.

Shallow Yao: Thank you.

Shallow Yao: Good morning, good afternoon, congrats on a really loved some guidance, Matt Let me also echo my congrats on those kind of well prepared remarks.

Shao Yao: Congratulations on the results and guidance. Matt, let me also echo my congratulations on those kinds of well-prepared remarks, taking us through a customer journey as it pertains to Cyberark's expanding platform. Maybe building on that journey, you know, you've just put out a press release about Indiana University Hospital expanding relations with Cyberark. Maybe a good opportunity here to share with us what they're doing with Cyberark on top of their core PAM deployment, and where else can they expand with you guys in the coming years? And I have the follow-up.

Shallow Yao: Taking us through our customer journey.

Yao: As it pertains to <unk> expanding platform.

Speaker Change: Maybe building.

Speaker Change: On that journey.

Speaker Change: Just put out a press release from Indiana University Hospital, expanding relation with <unk> may be a good opportunity here to share with us what is it that they are doing with fiber.

Speaker Change: Top of the core Pam deployment, and where else can they expand with you guys lined the coming years.

Speaker Change: And I have a follow up.

Matthew Lessner Cohen: Yeah, thanks, Joel. And thanks for the comments on the remarks. And what I really do want to do is help everybody understand the full market opportunity that's before us. As we go after the spectrum of identities, and we move beyond where people have traditionally thought of us, which is in IT, it just opens up such a remarkable opportunity for us to expand as we cover the overall enterprise. When we think about that particular customer example, it's a good indicator of what we see across the board when a customer starts to use our SaaS platform. It kind of fits the bill, if you will, of the descriptions that I was walking everybody through.

Speaker Change: Yeah, Thanks, Joe and thanks for thanks for the comments on the on the remarks, and what I would I really do want to do is help everybody understand the full market opportunity. That's before US is as we go after the spectrum of identities and we kind of move beyond where people have traditionally thought of us which is in it.

Speaker Change: It just opens up such a remarkable opportunity for us to expand as we cover the overall enterprise.

Speaker Change: When we think about that particular customer example.

Speaker Change: It's a good indicator of what we see across the board when a when a customer starts to partake of our SaaS platform.

Speaker Change: It kind of fits the bill if you will of the descriptions that I was walking everybody through and the idea here is the more solutions people get started on the more identities. They can start to bring into the platform, but even when customers like that get started with multiple solutions theres such an expansion opportunity as we.

Matthew Lessner Cohen: And the idea here is the more solutions people get started on, the more identities they can start to bring into the platform. But even when customers like that get started on multiple solutions, there's such an expansion opportunity as we build out the longer-term roadmap for them as they bring on more identities. I think a good way to think about the market for us is every proliferation of identity, whether it be human or non-human or machine, equals another point for us here at Cyborg, another area that we can secure. And so if you take a customer like that that's also sitting in healthcare, that's definitely under attack day in and day out by ransomware and other really kind of terrible threats, they can expand for years to come as we start So it's a great example for us, and healthcare certainly is a vertical that we see exploding for us in the coming years. Got it, got it.

Speaker Change: Build out the longer term roadmap for them as they bring on more identities I think a good way to think about the market for US is every proliferation of identity, whether it be human or nonhuman or machine equals another another point for us here at <unk>. Another area that we can secure and so if you take a customer like that.

Speaker Change: So sitting in healthcare.

Speaker Change: Definitely under attack day in and day out by Ransomware and other other really.

Speaker Change: Kind of terrible threats. They can they can expand for for years to come as we start to help them bring all aspects of their enterprise all their identities into the platform. So it's a great example, actually for us in health care, certainly as a as a vertical that we see exploding for us in the coming years.

Speaker Change: Got it got it thank you for that.

Josh Siegel: Thank you for that. And, you know, for my next question, either you or Josh, a macro-driven one, I haven't heard you mention the term elongated sales cycle. I think maybe you're amongst a handful of companies implying a stabilizing or a better than feared stabilizing macro environment rather than alluding to an elongated sales cycle. Why is that? Are things actually becoming better, and you guys, unlike other companies, are not covering your behinds and, you know, as kind of adding that elongated sales cycle commentary? Yeah, I'll take that one.

Speaker Change: And from our next question, either you or Josh.

Speaker Change: Macro driven one.

Speaker Change: I haven't heard you mentioning the term elongated sales cycle I think maybe you are like amongst the handful of companies implying.

Speaker Change: Capitalizing or are better than feared stabilizing macro environment, rather than alluding to elongated sales cycle.

Speaker Change: Why is that alright, thank actually becoming better and you guys. Unlike other companies are not covering your behind them.

Speaker Change: Adding those elongated sales cycle commentary.

Speaker Change: Yeah, I'll take that one and it is something that were particularly both proud of and excited about and throughout the whole year, you've heard us talk about that which is.

Matthew Lessner Cohen: And it is something that we're, you know, particularly both proud of and excited about. And throughout the whole year, you've heard us kind of talk about that, which is, you know, listen, it is a tough macro. There's no question about it. When I talk with my colleagues and talk to the C-suite at our customers, they're living through, you know, tough budget cycles. That being said, everybody has money to spend on what's most important.

Speaker Change: It is a tough macro there is no question about it when I talk with my my colleagues and talk to the C suite at our customers their living through tough budget cycles that being said everybody has money to spend on what's most important and generally speaking cyber is more important than the rest of the.

Matthew Lessner Cohen: And generally speaking, cyber is more important than the rest of the tech stack. But within cyber, there are areas that are actually prioritized, and we've been lucky to be one of those areas throughout the year, where when customers are putting together their budgets, they don't have the luxury of really avoiding spending on identity security.

Speaker Change: Tech stack, but we've in cyber there are areas that actually are prioritized and we've been lucky to be one of those areas throughout the year, where when customers are putting together their budgets. They don't have the luxury of really avoiding spending on identity security and when theyre going to spend they're going to spend with us and so that opens the.

Matthew Lessner Cohen: And when they're going to spend, they're going to spend with us. And so that opens the door, if you will, to much more fertile ground for us to go harvesting within our customer base and even out into the broader market. Now, what we are also, as I said, proud about is that we actually adjusted our execution arm to make sure that we were checking the extra boxes. You know, we trained the team early on to bring the CFO into the discussion to make sure the Joshes of the world were actually part of the discussion early. Don't avoid them!

Speaker Change: Door, if you will for a much more fertile ground for us to go to go harvest and within our customer base and even out into the into the broader market now what we what we also are as I said proud about is that we actually adjusted our execution arm to make sure that we were checking the extra boxes, we reached.

Speaker Change: The team early on to bring the CFO into the discussion to make sure that <unk> of the world were actually part of the discussion early don't avoid them bring them in so they understand the value statement, we help them understand how to structure deals more appropriately for these macros and so between the mission critical nature of our solutions and the phenomenal execute.

Matthew Lessner Cohen: We bring them in so they understand the value statement. We help them understand how to structure deals more appropriately for these macros. And so between the mission-critical nature of our solutions and the phenomenal execution of our teams, we've been able to navigate a tough macro throughout the year but do it much more effectively. Now, I would say we start to see some signs of those macros as we get towards the back half of the year here, and we look forward.

Speaker Change: One of our teams, we've been able to navigate a tough macro throughout the year, but but do it much more effectively now I would say we start to see some shoring up of those macros as we as we get towards the back half of the year here and we look forward.

Matthew Lessner Cohen: So, you know, that's encouraging for us as we look ahead. But, generally speaking, I think it is a testament to the role of identity security and the security stack today. Your next question is from the line of Fatima Boolani with Citigroup. Please go ahead.

Speaker Change: So that's encouraging for us.

Speaker Change: As we look out but generally speaking I think it is a testament to the role of identity security and the security stack today.

Speaker Change: Your next question is from the line of Fatima <unk> with Citigroup. Please go ahead.

Fatima Boolani: Thank you for taking my questions. Matt, just to start with you, talked a lot about the momentum you're seeing with new customers coming into the CyberArk, install-based family and landing with multiple solutions. But what I wanted to pick your brain on is we're now essentially in an anniversary, the two-year mark of when you did the massive fast transition. So I'd love any high-level commentary from you on what this potential wave or renewal cycle tsunami could look like in terms of buying behavior and patterns. And then I have a quick follow-up question for Josh, please.

Fatima: Thank you for taking my questions not just to start with you.

Fatima: <unk> talked a lot about the momentum you're seeing new customers coming into the cyber Ark install base formally Randall with multiple solutions.

Fatima: I wanted to pick your brain on.

Speaker Change: We're now essentially going to anniversary the two year Mark is when the massive SaaS transition so.

Speaker Change: Any high level commentary.

Speaker Change: On what does the potential wave or renewal cycle tsunami could look like in terms of buying behavior and patterns.

Speaker Change: Follow up for Josh.

Matthew Lessner Cohen: Yeah, so great question. I think what we see, first of all, is that as we go out and we land these logos, the time to next purchase continues to compress. So we can land somebody in Q1, and we can get a follow-on deal in Q3 or Q4.

Speaker Change: Yes.

Josh Siegel: Great question I think what we see first of all is that.

Josh Siegel: As we go out and we are landing these logos that the time to next purchase continues to compress. So we can land somebody in a Q1 and we can get a follow on deal.

Josh Siegel: Q3.

Matthew Lessner Cohen: And so even before we get to the first anniversary of a renewal date, we're able to drive the land and expand. And to be honest, that's one of the things that gets us most excited because the flywheel of the sales process continues to accelerate. Now, that being said, as you mentioned, all of these contracts, as they start to come up for renewal, also create a compelling event for an expansion play.

Josh Siegel: Our Q4, and so even before we get to the first anniversary of our renewal date, we're able to drive to land and expand motion and to be honest. That's one of the things that gets us most excited because the flywheel of the sales process continues to accelerate now that being said as you mentioned all of these.

Josh Siegel: Contracts as they start to come up for renewal also creates a compelling event for an expansion play and we think of that as a prime opportunity to not only upsell on the existing suite, they have but to introduce the new solutions and to cross sell into the base and we see that kind of a sale.

Matthew Lessner Cohen: And we think of that as a prime opportunity to not only upsell on the existing suite they have but to introduce new solutions and cross-sell into the base. And we've seen that kind of sales methodology change kind of kick in more and more over the last couple of quarters, where we're actually enabling our sales team to have the conversation of, you know, it's a different conversation at the point of renewal, just understanding what they have consumed. Read the telemetry, get the upsell in there, because that's a basic motion you should always be able to do, and then understand, through adoption curves and roadmaps that we've seen with other customers, what's the next best solution to introduce and make sure it's part of the renewal cycle when the wallet's already open. And again, that's something that the sales team has really improved at and will continue to improve on as they become even more proficient in the staff selling process. I appreciate that.

Speaker Change: Sales.

Speaker Change: Methodology change kind of kick in more and more over the last couple of quarters, where we're actually enabling our sales team in the conversation of it's a different conversation at the point of renewal of just understanding what they consumed read the telemetry get the upsell in there because that's a that's a basic motion you should.

Speaker Change: Be able to do always and then understand through adoption curves and roadmaps that we've seen with other customers. What's the next best solution to introduce and make sure. It's part of the renewal cycle. When the wallet is already open and again, that's something that the sales team has really improved that and we will continue to improve that.

Speaker Change: As they become even more proficient in SaaS selling motion.

Speaker Change: I appreciate that and Joshua related matter.

Josh Siegel: Josh, on a related matter, as we, you know, work through the maturation, if you will, of the base as it relates to converting some of your customers on the predecessor, you know, perpetual form factors, and any prior customers sitting on perpetual maintenance. I'm curious if you can help characterize what proportion of ARR growth is going to be coming from simply converting prior perpetual maintenance customers and any impact that has had on growth this quarter. Thank you. Yeah, thanks, Fatima.

Speaker Change: As we.

Speaker Change: Works through that.

Speaker Change: Maturation, if you will of the data as it relates to converting some of your customers on the predecessor perpetual form factor I think any prior customer sitting on perpetual maintenance I'm curious if you can help characterize what proportion of <unk> growth is going to be coming from simply converting.

Speaker Change: Prior perpetual maintenance customer.

Speaker Change: Any impact that had in next quarter that growth. Thank you.

Josh Siegel: You know, I think as we look at conversions, and we go back already a whole bunch of quarters into 23, and even into 22, we're still seeing it really reflecting, you know, single digits, mid single digits of our ARR growth coming from conversions. I think as we look into 2024, we're not really changing that view; we think it should behave similarly to what we saw in 23 and already at the end. And I'll just add on top of that just one element from a strategy perspective, if you will, which is, you know, when you analyze this base of customers, and you try to understand, okay, what their buying patterns are, the first thing you're looking at is, while they Is there any last expansion that we're seeing in that base versus the rest of the base?

Speaker Change: Yes, thanks for team.

Speaker Change: As we look at conversions and we go back already a whole bunch of quarters into 'twenty, three and even into 'twenty. Two we're still seeing it really reflecting a single.

Speaker Change: Digits.

Speaker Change: Mid single digits of our era of growth coming from conversions I think as we look into 2024, we're not really changing that of that view, we think it should behave similarly to what we saw.

Speaker Change: 'twenty three in already at the end of 'twenty two.

Speaker Change: And I'll just add on top of that just one element from a from a strategy perspective, if you will which is when you analyze this base of customers and you try to understand okay. What theyre buying patterns. The first thing you're looking at is while there is still on maintenance are they buying other solutions is there any last expansion that we're seeing in that base versus the rest of the base and if the answer was yes.

Matthew Lessner Cohen: And if the answer was yes, then you're really wanting to push them as hard and fast as possible to get them to move because otherwise, you're gated yourself on your expansion in those accounts. When we actually analyze the maintenance paying base, their expansion sales, the rate at which they're buying the new solutions is not that much different than people who are sitting in a subscription model or on the SaaS platform. And so that gives us a little bit more leeway to be flexible with that customer base to keep them happy on that self-hosted or perpetual product and move when they're ready and, in fact, move them to SaaS when they're ready, not move them over to an on-premises subscription because when we move them to SaaS, the upsell is significantly higher.

Speaker Change: Then youre really wanting to push them as hard and fast as possible to get them to move because otherwise you're gated yourself on your expansion in those accounts when we actually analyze the maintenance paying base their expansion.

Speaker Change: Sales the rate at which they are buying the new solutions is not that much different than people, who are sitting in a subscription model or on the SaaS platform and so that gives us a little bit more leeway to be flexible with that customer base that to keep them happy on that on that.

Speaker Change: Self hosted or or perpetual product and and move when they are ready and in fact move them to SaaS when theyre ready not move them over to an on premise subscription because when we move them to SaaS. The upsell is significantly higher so strategically as Josh said I don't think youre going to see us be that aggressive in 2025 I think.

Matthew Lessner Cohen: So strategically, as Josh said, I don't think you're going to see us be that aggressive in 2025. I think you'll see customers start to migrate because their own plans call for SaaS, but we're really excited by our ability to be able to drive NRR out of any base that we have. Your next question comes from the line of Rob Owens with Piper Sandler.

Speaker Change: See customers start to migrate because their own plans call for SaaS, but what we're really excited by our ability to be able to drive NR or out of any base that we have.

Speaker Change: Your next question comes from the line of Rob Owens with Piper Sandler. Please go ahead.

Rob Owens: Please go ahead. Yeah, thanks for taking my question. Matt, when you speak to the full identity market opportunity, what are your thoughts around IGA? Is it an IGA light approach, or is it something that you're going to look to dive into?

Rob Owens: Yeah. Thanks for taking my question, Matt when you speak to the full identity market opportunity.

Rob Owens: What are your thoughts around the Iga is an Iga light approach or is that something that youre going to look to dive into more fully.

Matthew Lessner Cohen: Rob, great question. And I think we still see fundamentally that the siloed nature of PAM access and IGA is at the detriment of customers and their security posture. And that organizations that implement that kind of in that silo are not taking the most robust security posture that they can. So we are increasingly focusing on adding to our identity management stack and being able to manage the modern IGA workflows that sit out there in combination with our SEA solution, even in combination with our PAM customer base. And so I think you'll see us continue to invest in that. Now, again, if somebody needs to go and do a large-scale IGA deployment across all legacy assets that sit in the data center, we have a great partnership.

Matthew Lessner Cohen: Rob Rob Great question, and I think we still see fundamentally that the siloed nature of Pam access and Iga is at the detriment of customers and their security posture and that that organizations that implement kind of in that silo are not taken.

Matthew Lessner Cohen: The the most robust security posture that they can so we increasingly focusing in on adding to our identity management stack and.

Matthew Lessner Cohen: And being able to manage the modern Iga workflows that sit out there in combination with our <unk> solution, even in combination with our with our with our Pam customer base and so I think youll see us continue to invest in that now again, if somebody needs to go and do a large scale iga deployment across all legacy.

Matthew Lessner Cohen: That sit in the data center, we have a great partnership with Sailpoint and we're fine with Sailpoint, taking that bigger business, but as you move these workloads to the cloud as you move into a modern real estate, we increasingly believe that in order to win we need a hybrid approach in every solution that we bring to <unk>.

Matthew Lessner Cohen: We have a great partnership with SailPoint, and we're fine with SailPoint taking that bigger business. But as you move these workloads to the cloud, as you move into modern real estate, we increasingly believe that in order to win, we need a hybrid approach. And every solution that we bring to market from this point forward, and the team knows it; they hear it from me all the time, has to have components of governance, components of access, and components of privilege controls. That is what makes us unique.

Matthew Lessner Cohen: Market from this.

Matthew Lessner Cohen: This point forward and the team knows the hearing from me all the time has to have components of governance components of access and components of Hercules controls that is what makes US unique that's what makes our platform unique and I think youll hear us talking more about that in the in the days to come.

Jonathan Ho: That's what makes our platform unique, and I think you'll hear us talking more about that in the days to come. Your next question is from the line of Jonathan Ho with William Blair. Please go ahead.

Erica Smith: Your next question is from the line of Jonathan Ho with William Blair. Please go ahead.

Matthew Lessner Cohen: Hi, good morning, and congratulations on the strong results and guidance. Yeah, I just wanted to understand a little bit more about your secure cloud access product and whether you could give us some additional detail on how big of an opportunity you think this could become. Thank you.

Jonathan Ho: Hi, good morning, and congratulations on the strong results and guidance, Yes, just wanted to understand a little bit more about your secure cloud access product and whether you can give us some additional detail on how big of an opportunity you think this can become thank you.

Jonathan Ho: Thanks, Jonathan and thanks for asking about my my Little favorite area. Here. So you gave me a chance to to pontificate, a little bit about it but listen we believe fundamentally that the idea here in the cloud.

Matthew Lessner Cohen: And thanks for asking about my little favorite area here. You give me a chance to pontificate a little bit about it. But listen, we believe fundamentally in the idea here in the cloud, that customers have moved fast, and for good reason, into their cloud real estate. And as they moved, they granted unfettered access to all of these users out there in the developer community in order to facilitate speed. And that leads to a world of over-entitlement and, frankly, a lack of control.

Matthew Lessner Cohen: Customers have moved.

Matthew Lessner Cohen: Fast.

Matthew Lessner Cohen: And for good reason into their cloud real estate and as they moved they granted unfettered access to all of these users out there in the developer community in order to facilitate speed and that leads to a world of over entitlement and frankly lack of control now we have a lot of vendors out there that really.

Matthew Lessner Cohen: Now, we have a lot of vendors out there that really look at discovery and trying to understand what that cloud real estate looks like, even presenting ways of managing posture and managing the overall cloud environments. And we think that's important, by the way, and we partner with some of them to make sure that we can tap into the great data that they're able to harvest. But ultimately, like the on-prem world, security comes back to control. And so our SEA solution is built on the idea that you need to have the same levels, and the same concepts of control in your cloud estate as you did on-prem. You need to make sure that you're actually isolating sessions.

Matthew Lessner Cohen: <unk> look at discovery and trying to understand what that cloud real estate looks like even even presenting ways of managing posture.

Matthew Lessner Cohen: And managing the overall.

Matthew Lessner Cohen: Cloud environments, and we think thats important by the way when we partner with some of them to make sure that we can tap into the great data that theyre able to harvest, but ultimately like the on Prem World Security comes back to control and so our SCA solution is built on the idea that you need to have the same level.

Matthew Lessner Cohen: So seeing concepts of control in your cloud escaped estate as you did on Prem you need to make sure that you are actually isolating sessions you need to make sure that you understand and controlling entitlements you need to actually make sure that there is the ability to be able to record, especially an audited.

Matthew Lessner Cohen: You need to make sure that you understand and control entitlements. You need to actually make sure that there is the ability to be able to record, especially in audited industries. And so our SEA solution takes all the principles of PAM. But then what it does, it says, actually, in that environment, you don't need standing access.

Matthew Lessner Cohen: Industries, and so our SCA solution takes all the principles of Pam.

Matthew Lessner Cohen: But then what it does it says actually in that environment, you don't need standing access.

Matthew Lessner Cohen: You can actually have entitlements or privileges assigned at the point of access. So a cloud user, a developer, can use their federated access, their personal accounts. They can log into the cloud console.

Matthew Lessner Cohen: Can actually have entitlements or privileges assigned at the point of access so our cloud user or developer can use their federated access their personal accounts. They can log in to the cloud console. They can start to work in the cloud services and we can apply the right level of entire entitlements and privileges.

Matthew Lessner Cohen: They can start to work in the cloud services, and we can apply the right level of entitlements and privileges right at that time for a period of time. And the minute they log out, we can remove those entitlements so that when that account is sitting inactive, it is actually a zero-privilege account.

Matthew Lessner Cohen: Right at that time for a period of time and the minute. They log out we can remove those entitlements. So that when that account is sitting inactive it is actually a zero privilege account and we can drive.

Matthew Lessner Cohen: And we can drive a least-privilege approach. We believe, fundamentally, and as you can hear, I get excited when I talk about it, that moving into this control area of the cloud is an underrepresented piece of the market. It's not actually represented in the TAMs of all these other cloud security vendors that are out there, and we're uniquely positioned to actually capitalize on that. So while it's early days, and while we're a couple of quarters into the market, I would tell you that at our enterprise accounts, the numbers of conversations that are actually leading with. How we secure our cloud is remarkable to me.

Matthew Lessner Cohen: Least privilege approach, we believe fundamentally in as as you can hear I get excited when I talk about it that moving into this control area of the cloud is in is in underrepresented piece of the market. It's not actually represented in the terms of of all of these other cloud security vendors that are out there and that we're uniquely positioned to.

Matthew Lessner Cohen: Actually capitalize on that so while it's early days and while we're a couple of quarters into the market I would tell you that at our enterprise accounts the numbers of conversations that are actually leading with.

Matthew Lessner Cohen: How do we secure our cloud is remarkable to me and that then sets up a long term Tam for us in this area that I believe can can be a meaningful significantly meaningful contribution to our growth.

Ken Talanian: And that then sets up a long-term TAM for us in this area that I believe can be a meaningful, significantly meaningful contribution to our AR road. Your next question is from the line of Tal Liany with Bank of America. Please go ahead. Hi. The first one is...

Ken Talanian: Your next question is from the line of Tao Leone with Bank of America. Please go ahead.

Matthew Lessner Cohen: Thank you for watching. What happens when they want to... www.circlelineartschool.com, Any, any..., product, management, etc. Sure. You know what?

Ken Talanian: Hi.

Ken Talanian: A few questions.

Ken Talanian: The first one is.

Ken Talanian: Can you take us through a journey of a client spoke a lot about it the churn of a client from a point of view of synergy with existing customers.

Ken Talanian: With customers first land with Pam.

Ken Talanian: What happens when they want to go to a different product, whereas the synergy is there.

Ken Talanian: Is there any any.

Ken Talanian: Synergy in terms of products or sales motion or or management et cetera.

Ken Talanian: Sensitive for them to continue with you with your other products.

Matthew Lessner Cohen: Sure. So, when we think about that synergy or we think about that expanding motion, if you will, it really depends on the priorities of the organization. And I'll give you two different examples.

Matthew Lessner Cohen: Sure.

Ken Talanian: Thank you one by one.

Matthew Lessner Cohen: Sure. So I think when we think about that synergy or we think about that expand motion. If you will it really depends on the priorities of the organization and I'll give you two different examples.

Matthew Lessner Cohen: You know, you might be sitting in an organization where they have invested heavily in their non-human identities, in their machines, in their ability to build out a modern application environment. And in that case, you know, if that's the priority of the organization, it's the most likely next step from someone who secures IT and their PAM users to actually move over and secure the non-human identities. And, you know, the synergy is, hey, we can take a least privileged approach. We can help them understand how to create these controls that I'm talking about, but we can do it in a developer-friendly or a native way, especially with our Secrets Hub product and our easy-to-deploy Conjure Cloud product.

Matthew Lessner Cohen: You might be sitting in an organization, where they have invested heavily in their nonhuman identities and their machines in there and there and their ability to build out a modern application environment and in that case, if that's the priority of the organization. It's the most likely next step from someone who securities.

Matthew Lessner Cohen: And Theyre Pam users to actually move over and secure the nonhuman identities and.

Matthew Lessner Cohen: The synergy is hey, we can take a at least privilege approach. We can help them understand how to create these controls and I'm talking about but we can do it in a in a developer friendly or a native way, especially with our secrets hub product and are easy to deploy 100 cloud product and so you see some customers where that might be the first path. They go towards expansion.

Matthew Lessner Cohen: And so, you see some customers where that might be the first path they take towards expansion. An alternative is you might be sitting in an area of high attacks around ransomware, and it might be healthcare, it might be financial services. And in those areas, all right, they've locked down their core controls in IT. Now they need to secure their endpoints. They need to secure their servers.

Matthew Lessner Cohen: And the alternative is you might be sitting in an area of high attacks around ransomware and he might be health care it might be financial services and in those areas, okay, they've locked down their core controls in it now.

Matthew Lessner Cohen: Now they need to secure their endpoints they need to secure their servers and the natural extension is to move into EQM and then in that case that the next expand motion for that customer.

Matthew Lessner Cohen: And the natural extension is to move into EPM. And in that case, that's the next step in motion for that customer. And then there's a third type of customer, to be honest, that actually buys a little bit of everything.

Matthew Lessner Cohen: And then there's a third type of customer to be honest that actually buys a little bit of everything and they start to deploy in pockets in different work groups in different areas of the enterprise and then they look to upsell or expand over time within a broader set of three four or five solutions. So.

Matthew Lessner Cohen: And they start to deploy them in pockets, in different workgroups, in different areas of the enterprise. And then they look to upsell or expand over time within a broader set of three, four, or five solutions. So the other way to answer the question is that there is no one typical pattern.

Matthew Lessner Cohen: The other way to answer the question is there is no one typical pattern the underlying element, though that drives the success is a unified platform with single shared services, a unified audit and ability to be able to run identity across all of that the ability to run threat analytics across all of them.

Matthew Lessner Cohen: The underlying element, though, that drives the success is a unified platform with single shared services, a unified audit, an ability to be able to run identity across all of that, the ability to run threat analytics across all of that. And so the idea is that these customers, although they're not fully consolidating day one across the platform, they're future-proofed in terms of the consolidation aims they have for the longer term. I think there was another question. Yeah, I think again. It depends.

Matthew Lessner Cohen: And so the idea of being these customers, although they're not fully consolidating day, one out across the platform there for future proofed in terms of the consolidation aims they have for the longer term.

Speaker Change: I think there was another question.

Matthew Lessner Cohen: And in these cases.

Speaker Change: Thank you.

Matthew Lessner Cohen: To replace an existing vendor or is it kind of Greenfield where you break.

Matthew Lessner Cohen: The feature is still areas, where there is no such features I think you'd have to compete with it.

Matthew Lessner Cohen: Legacy vendor or an existing vendor that is already there.

Matthew Lessner Cohen: I think again.

Matthew Lessner Cohen: You know, when you move into access, in general, we're competing with something that's there. In a lot of cases, it's legacy. And it's things that are outdated and not ready for the modern stack. When you move into EPM, sometimes it's greenfield.

Speaker Change: It depends.

Matthew Lessner Cohen: When you move into access in general, we're competing with something that's there and a lot of cases, it's legacy.

Matthew Lessner Cohen: And there's things that are outdated and not ready for the modern stack when you move into APM, sometimes it's greenfield actually the concept of least privilege on the endpoint is a new concept for them and there they are sitting with their endpoints unprotected, maybe just having invested in edr xdr, but not understanding yet the power of the PM agent when.

Matthew Lessner Cohen: Actually, the concept of least privilege on the endpoint is a new concept for them. And they're sitting with their endpoints unprotected, maybe just having invested in EDR or XDR but not understanding yet the power of the EPM agent. When you move into the secret space, generally speaking, they're working at the workgroup level, maybe they're using some open source tools at the workgroup level, but now they're trying to make an enterprise buy. So you're replacing, or you're sitting on top of, that open source.

Matthew Lessner Cohen: When you move into two the secret space generally speaking theyre working at the work group level, maybe they are using some open source tools at.

Matthew Lessner Cohen: The work group level, but now they are trying to make an enterprise bi so youre, replacing or you're sitting on top of that open source or for example, you're sitting on top of the cloud services providers in the native secret stores.

Matthew Lessner Cohen: Or, for example, you're sitting on top of the cloud services providers and the native secret stores. In the cloud space, for sure, you're, you're, you're going greenfield, you know, this idea of control and the developer themselves, that's, that's something that's new. So I took you around really quickly there, to the real estate, but I think that represents the kind of the kind of things that we see out there in the market. Your next question is from the line of Joshua Tilton with Wolf Research. Please go ahead. Hey guys, thanks for taking my question. Matt, I thought it was very interesting.

Joshua Tilton: In the cloud space for sure Youre going in Greenfield this idea of control and the developer themselves that that's something that's new.

Joshua Tilton: Look you're around really quickly there the real estate, but I think that represents the kind of the kind of things that we see out there in the market.

Matthew Lessner Cohen: Your next question is from the line of Joshua Tilton with Wolfe Research. Please go ahead.

Joshua Tilton: Hey, guys. Thanks for taking my question.

Joshua Tilton: Matt I thought was very interesting you talked a lot about new identities in your prepared remarks.

Joshua Tilton: You talked a lot about new identities in your prepared remarks. How do you see the potential for co-pilot accounts to maybe act as a tailwind to either PAM or just the broader identity market as organizations kind of look to secure what feels like a pretty big wave of incremental credentials that's about to hit the market? Yeah, Josh, it's a really good question.

Joshua Tilton: How do you how do you see the potential for co pilot accounts, maybe act as a tailwind to.

Joshua Tilton: To either Pam or just the broader identity market as organizations pellets to secure what feels like a pretty big wave of incremental credentials, it's about to hit the market.

Speaker Change: Yes, Josh.

Matthew Lessner Cohen: And it speaks to the larger point, which is that any identity needs a level of identity security, right? And we believe that we can bring all of them into our platform. So if we take the Copilot example, it's almost like a hybrid of a human identity and a machine identity all in one, with, generally speaking, granted large swaths of privilege that mirror the human and machine that it's meant to augment or, in some cases, replace.

Josh Siegel: It's a really good question and it speaks to the larger point, which is any identity need the level of identity security right and we believe that we can bring all of them into our platform. So if we take the co. Pilot example, it's almost like a hybrid of a human identity and a machine identity. All in one with generally speaking granted large swaths of privilege that.

Matthew Lessner Cohen: Mirror the human <unk> machine that it's dead, it's meant to that it's meant to augment or in some cases replace and so AI technology kind of takes off.

Matthew Lessner Cohen: And so as AI technology kind of takes off, it creates a lot of vectors for growth. It creates vectors as we kind of compete or combat the attack vectors fueled by AI. It allows us to be able to build AI into our products to make them more effective, to make them better able to secure environments. And then it is also the tools themselves that need to be secured.

Matthew Lessner Cohen: It creates a lot of vectors for for grows it creates vectors as we kind of compete or a combat against the attack vectors fueled by AI and it allows us to be able to build AI into our products to make them more effective to make them.

Matthew Lessner Cohen: Better able to secure environment and then also is the tools themselves that need to be secured and copilot as a great example of that where we're going to end up with multiple new identities.

Matthew Lessner Cohen: And Copilot is a great example of that, where we're going to end up with multiple new identities, and we're going to need to secure them just as if it was a new developer coming on board or if it's a new member of the workforce coming on. And I think that speaks to the market we're in, where if you're in the identity security market, the number of identities is your market, and any increase is a good thing. Your next question is from the line of Hamza Fodderwala with Morgan Stanley. Please go ahead. Hamza, your line is open. Sorry about that.

Hamza Fodderwala: And we're going to need to secure it just as if it was a new developer coming on or if it's a new member of the workforce coming on and I think that speaks to the market. We're in where if you are in the identity security market. The number of identities is your is your market and any increase is a good thing.

Hamza Fodderwala: Your next question is from the line of Hamzah <unk> with Morgan Stanley. Please go ahead.

Hamza Fodderwala: Hamzah Your line is open.

Hamza Fodderwala: Sorry about that good morning. Good afternoon. Thank you for taking my question.

Hamza Fodderwala: Good morning. Good afternoon. Thank you for taking my question. I had one question around distribution for Matt. It seems like you're going after a really broad opportunity, and the prepared remarks were really helpful. I'm curious how you plan to continue to improve on the sales velocity to go from, you know, nine, 10, 20,000 customers over time, or do you feel like there's more opportunity still within the installed base and that's gonna be driving the majority of growth going forward? Thank you. Yeah, Hamza, thanks for the question.

Hamza Fodderwala: I had one question around distribution format.

Speaker Change: It seems like Youre going after really broad opportunity in the prepared remarks were really helpful. I'm curious how you plan to.

Speaker Change: Continuing to improve on the sales velocity to go from 910 20000 customers over time or do you feel like theres more opportunity still within the install base and that's going to be driving the majority of growth going forward. Thank you.

Speaker Change: Yeah Hamzah, thanks for the question and.

Matthew Lessner Cohen: And, you know, I wanted to highlight the opportunity within the base because I think it's important that everybody understands how the expansion happens. But you can get me equally excited about our ability to be able to go and grab new logos. And, you know, if you were talking with our wonderful CMO, he walks around with a new logo T-shirt on every day because that's what he's going off and trying to drive for us and build up that channel. Now, as you said, it's not just about what we do. It's about our channel partners in that space. We have the best channel partners in the world, whether it's the SIs. You heard an example of where one of them was able to bring us into a Fortune 100 account this quarter.

Speaker Change: I wanted to highlight the opportunity within the base because I think it's important that everybody understands how the expansion happens, but you can get me equally excited about our ability to be able to go and grab new logos and if you were talking with our wonderful CMO.

Matthew Lessner Cohen: He walks around with a new logo T shirt on everyday.

Matthew Lessner Cohen: Because that's what he is going off and trying to drive for us and buildup that channel now as you said, it's not just about what we do direct it's about our channel partners in that space.

Matthew Lessner Cohen: The best Channel partners in the World, whether it's the size you heard an example of where one of them was able to bring us into a fortune 100 accounts this quarter, whether it's the reselling partners that are out there that are increasingly turning their attention to driving new logos.

Matthew Lessner Cohen: Whether it's the reselling partners that are out there that are increasingly turning their attention to driving new logos, or if it's an area which I'm even more excited about, which is the MSP programs. And, you know, as you start to.

Matthew Lessner Cohen: Or if it's an area, which I'm, even more excited about which is the MSP programs and as you start to embed your entire platform into the MSP and you start to be able to have them represent you within their vast customer base, even in the enterprise and down market that becomes a flywheel of its own in.

Matthew Lessner Cohen: As you start to embed your entire platform into the MSPs, and you start to be able to have them represent you within their vast customer base, even in the enterprise and down market, that becomes a flywheel of its own in terms of the ability to be able to go after new logos and to be able to go after new logos with all of the products that So I do think you're hitting on a key point here, which is the channel, and the force multiplying effect of our channel is a critical ingredient in driving. The productivity growth that we want to see, and we continue to want to see more productivity and then also our ability to get outside of our base and really capture this opportunity in the broader market. Your next question is from the line of Ray McDonough with Guggenheim Securities. Please go ahead. Great, thanks for taking the questions. Maybe one for Matt and, if I could, a follow up for Josh afterward.

Ray Mcdonough: Terms of the ability to be able to go after new logos and to be able to go after new logos with all of the product set so I do think youre hitting on a key point here, which is the channel and the force multiplying effect of our channel is a critical ingredient of driving the productivity growth that we want to see and we continue to want to see more productivity.

Ray Mcdonough: And then also our ability to be able to get outside of our base and really capture this opportunity in the broader market.

Matthew Lessner Cohen: Your next question is from the line of Ray Mcdonough with Guggenheim Securities. Please go ahead.

Ray Mcdonough: Great. Thanks for taking the questions, maybe one for Matt and if I could a follow up for Josh after but Matt I wanted to follow up on your answer to answer the question around the almost the key opportunity.

Matthew Lessner Cohen: But Matt, I wanted to follow up on your answer to Hamza's question around the MSSP opportunity. What specifically are you doing to enable the channel from a product perspective to help them, you know, help you attack that market? And then, you know, how much of the demand and the need for cyber insurance plays into the roll-down market and what those MSSPs can help you achieve in terms of penetration? Yeah, great, great, great follow-up, by the way.

Matthew Lessner Cohen: What specifically are you doing to enable the channel from a product perspective to help them.

Matthew Lessner Cohen: You attack that market and then.

Matthew Lessner Cohen: How much how much of the demand and the need for cyber insurance plays into that.

Matthew Lessner Cohen: The roll down market and what those MSS cheese can help you achieve in terms of penetration.

Speaker Change: Yes, great great great follow up by the way and I think there is investments in the product to make it serve the MSP market better.

Matthew Lessner Cohen: And I think there are investments in the product to make it serve the MSP market better. We've got a whole wing of product management that's actually just thinking about the MSP market and what needs to happen. And some of that we've built, and some of it's still being built. The idea of easier reporting, the ability of an easier way to manage tenancy within the platform, the idea of even on the finance side, which isn't in the product but in the organization, to be able to bill more effectively and more flexibly.

Matthew Lessner Cohen: We've got we've got a whole wing of product management, that's actually just thinking about the MSP market and what needs to happen and some of that we've built and some of it is still being built the idea of easier reporting the ability of.

Matthew Lessner Cohen: Easier way to manage tenancy within the platform the.

Matthew Lessner Cohen: The idea of even on the finance side, which is in the in the product, but in the organization to be able to bill more effectively and more flexibly. All of these things are part of our MSP program Holistically, we think of it as a market for us and we've run it like that where we're tracking.

Matthew Lessner Cohen: All these things are part of our MSP program holistically. We think of it as a market for us, and we run it like that, where we're tracking the contribution and what do we need to do throughout the entire parts of Cyberark, including product, to serve that market. And so I think that's one of the big shifts we've made in the last 18 months is to think of it that way. It's not just a little bit of an offshoot of the channel partner program. It's its own thing.

Matthew Lessner Cohen: The contribution and what do we need to do throughout the entire parts of cyber are concluding product to serve that market and so I think that's one of the big shifts we've made in the last 18 months is to think of it that way, it's not just a little bit of an offshoot of the of the.

Matthew Lessner Cohen: Channel partner program its own thing I think to your point there is intersections all the time between the growth drivers of our business on one end you've got cyber insurance with absolutely in the lower end of the enterprise and in the mid market is a driver of people towards Pam towards identity secured.

Matthew Lessner Cohen: I think to your point, there are intersections all the time between the growth drivers of our business. On one end, you've got cyber insurance, which is absolutely a driver of people towards PAM, towards identity security. It's a factor in whether somebody can get cyber insurance, and by the way, it's a factor in what their premium would look like. Then those companies are looking for an easy way to procure it. They might be procuring it, by the way, not only through MSPs. They might be procuring it through their AWS marketplace and leveraging some of those lubricated routes to market.

Matthew Lessner Cohen: It's a it's a factor in whether somebody can get cyber insurance and by the way. It's a factor in what their premium would look like then those companies are looking for an easy way to procure it they might be procuring it by the way not even only through MSP as they might be procuring it through their AWS marketplace and leveraging some of those lubricated routes to market, but in <unk>.

Matthew Lessner Cohen: But in addition, then MSPs can manage the whole system for them, obscuring them from any of the complexity, and making sure that they're able to stand it up quickly and meet the cyber insurance requirements. And we could take any one of the tailwinds that we talk about and routes to market that we talk about, and there's always that juxtaposition. And the one you're picking on is a particularly good one for us as we move forward. This concludes the Q&A session. I will now turn the call back to the CEO, Matt Cohen, for any closing remarks. So, thank you to everybody. I want to finish up here by thanking our employees for their hard work and dedication. It's only because of them that we're able to talk about the success we had in 2023 and our optimism for the future.

Matthew Lessner Cohen: Additional msp's can manage the whole system for them.

Matthew Lessner Cohen: Obscuring them from any of the complexity and make sure that theyre able to stand it up quickly and meet the cyber insurance insurance requirements.

Matthew Lessner Cohen: We could take any one of the tailwind that we talk about and routes to market that we talk about and there is always that juxtaposition in the one year picking on us as a particularly nice one for us as we move forward.

Matthew Lessner Cohen: This concludes the Q&A session I will now turn the call back to you at the CEO, Matt Cohen for any closing remarks.

Matthew Lessner Cohen: So thank you to everybody I want to finish up here by by thanking our employees for their hard work and dedication it's only because of them that we're able to talk about the success, we had in 2023 and our optimism for the future I want to thank our customers and partners for their support.

Matthew Lessner Cohen: I want to thank our customers and partners for their support and partnership. And personally, I also want to thank Udi for his mentorship and support over the last year. I look forward to continuing to partner with him on the long-term strategy and in his role as executive chair. But personally, I have a big thank you to him to add to the talk track here. With that being said, we look forward to seeing you all and talking to you all real soon. Take care. This concludes the CyberArk Software fourth quarter and full year 2023 earnings conference call. Thank you for joining us. You may now disconnect. Please wait; the conference will begin shortly. Thank you for watching.

Matthew Lessner Cohen: Partnership.

Matthew Lessner Cohen: And personally I also want to thank <unk> for.

Matthew Lessner Cohen: For his mentorship and support over the last year.

Matthew Lessner Cohen: I look forward to continuing to partner with him on the long term strategy in his role as executive chair.

Matthew Lessner Cohen: But personally I have a big thank you to him to add into the to the talk track here with that being said, we look forward to seeing you all and talking to you all real soon take care.

Matthew Lessner Cohen: This concludes the cyber Ark software fourth quarter and full year 2023 earnings conference call. Thank you for joining you may now disconnect.

Matthew Lessner Cohen: Please wait the conference will begin shortly.

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Matthew Lessner Cohen: [music].