Q1 2024 CyberArk Software Ltd Earnings Call
Cath: Thank you for standing by. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2024 CyberArk Software earnings conference call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is Cathy and I will be your conference operator today at this time I would like to welcome everyone to the first quarter 'twenty 'twenty four is hyper arc software earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Cath: 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Erica Smith, Senior Vice President of Finance and Investor Relations. Please go ahead.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Erica Smith Senior Vice President of Finance and Investor Relations. Please go ahead.
Erica E. Smith: Thank you Kat good morning, Thank you for joining us today to review <unk> strong first quarter 'twenty 'twenty four financial results with me on the call today are Matt Cohen, our Chief Executive Officer, and Josh Siegel Chief Financial Officer. After prepared remarks, we will open up the call to a question and answer session before we begin let me.
Erica E. Smith: Thank you, Cat. Good morning. Thank you for joining us today to review CyberArk's strong first quarter 2024 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 up the call to a question and answer session. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management's best judgment based on currently available information.
Erica E. Smith: To remind you that certain statements made on the call today may be considered forward looking statements, which reflect managements best judgment based on currently available information I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the second quarter full year 'twenty 'twenty four.
Erica E. Smith: I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the second quarter, full year 2024, and beyond. However, our actual results might differ materially from those projected in these forward-looking statements. 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 Cyberark's website.
Erica E. Smith: And beyond our actual results may differ materially from those projected in these forward looking statements.
Erica E. Smith: Direct your attention to the risk factors contained in the Companys 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 <unk> website.
Erica E. Smith: We expressly disclaim any application or undertaking to release publicly any statements or revisions to any forward-looking statements made today. Additionally, non-GAAP financial measures will be discussed on today's 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 in today's call. A webcast of today's call is also available on our website in the investor relations section. With that, I'd like to turn the call over to our CEO, Matt Cohen. Thank you.
Erica E. Smith: We expressly disclaim any application or undertaking to release publicly any statements or revisions to any forward looking statements made today. Additionally, non-GAAP financial measures will be discussed on today's call.
Erica E. Smith: 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 website in the Investor Relations section with that I'd like to turn the call over to our CEO Matt.
Matthew Cohen: Cowen Matt.
Matthew Cohen: Thanks, Erica and thanks, everyone for joining the call today.
Matthew Cohen: And thank you everyone for joining the call today. I want to start by acknowledging CyberArk's 25th anniversary, which we celebrated just a few weeks ago. Udi Makati, CyberArk's founder and executive chairperson, is a visionary who, along with the founding team, identified a market need and set out to secure the most valuable information within the world's most complex global organizations. Along the way, Cyberark pioneered the privilege access management market, a segment of identity that has become a critical security layer and consistently moved up the CISO's priority.
Matthew Cohen: I wanted to start by acknowledging <unk>, 25th anniversary, which we celebrated just a few weeks ago.
Matthew Cohen: Rudy Mecate sidewalks founder and executive Chair is a visionary who along with the founding team identified a market need and set out to secure the most valuable information within the world's most complex global organizations.
Matthew Cohen: Along the way <unk> pioneered the privilege access management market a segment of identity that has become a critical security layer and consistently moved up the <unk> priority list.
Matthew Cohen: Since its founding, Cyberark has grown and evolved in many ways. Our success has been driven by an unwavering commitment to our mission of securing the world against cyber threats, so together we can move fearlessly forward. To execute our mission, we consistently deliver cutting-edge innovation and transformative value to all our customers. Perhaps most importantly, in a world of constantly escalating threats, we have been relentlessly focused on a security-first mindset in every decision we make since day one of our founding.
Matthew Cohen: Since its founding <unk> has grown and evolved in many ways.
Matthew Cohen: Our success was driven by an unwavering commitment to our mission of securing the world against cyber threats. So together, we can move seamlessly forward.
Matthew Cohen: To execute our mission, we consistently delivered a cutting edge innovation and transformative value to all our customers.
Matthew Cohen: Perhaps most importantly in a world of constantly escalating threats, we had been relentlessly focused on the securities first mindset and every decision we make.
Matthew Cohen: Since day, one of our founding.
Matthew Cohen: As a result of our strong execution and the trust that our security-first mindset has created with customers and partners, 25 years later, we are broadly recognized as the leader in identity security. Today, our unique value proposition to secure all identities with the right level of privilege controls on our identity security platform is resonating with customers. I am confident that we are only scratching the surface of this large and rapidly growing market opportunity.
Matthew Cohen: As a result of our strong execution and the trust that our security first mindset has created with customers and partners 25 years. Later, we are broadly recognized as the leader in identity security.
Matthew Cohen: Today, our unique value proposition to secure all identities with the right level of privilege controls on our identity security platform is resonating with customers I am confident that we are only scratching the surface of this large and rapidly growing market opportunity.
Matthew Cohen: Our strong first quarter results demonstrate that we built on the momentum we experienced throughout 2023. The durability of demand for our solutions and our execution is highlighted by a subscription ARR of 621 million, growing 54% year over year. Total AR of $811 million, growing 34% year-over-year. And Q1 results significantly exceeded guidance across revenue, operating income, and EPS. Total revenue growth accelerated to 37%, reaching approximately $222 million. Non-GAAP operating income came in at $33 million, a big improvement from a loss of $12.6 million in the first quarter of 2023, highlighting the operating leverage in our business model. Non-GAAP earnings per share were $0.75, up significantly from a loss of $0.17 in the year-ago period.
Matthew Cohen: Our strong first quarter results demonstrate that we built on the momentum we experienced throughout 2023, the durability of demand for our solutions and our execution is highlighted by subscription.
Matthew Cohen: $621 million growing 54% year over year.
Matthew Cohen: Total <unk>.
Matthew Cohen: At 811 million growing 34% year over year, and Q1 results significantly exceeded guidance across revenue operating income and EPS total revenue growth accelerated to 37%, reaching approximately $222 million.
Matthew Cohen: non-GAAP operating income came in at $33 million, a big improvement from a loss of $12 6 million in the first quarter of 2023, highlighting the operating life beverage and our business model.
Matthew Cohen: non-GAAP earnings per share was <unk> 75 up significantly from a loss of 17 and the year ago period.
Matthew Cohen: We are thrilled to report $67 million in free cash flow for the quarter, significantly up from $4 million in Q1 of last year and a proof point of our commitment to profitable growth. The strength of our results and business momentum gives us the confidence to raise our guidance for the full year 2024 on all metrics, which Josh will talk about later. Our ongoing success is fueled by a number of secular tailwinds, including the pace of attacker innovation, digital transformation, ongoing migration to the cloud, and exponential increases in human and machine identities.
Matthew Cohen: We are thrilled to report $67 million in free cash flow for the quarter significantly up from $4 million in Q1 of last year and a proof point of our commitment to profitable growth.
Matthew Cohen: The strength of our results and business momentum gives us the confidence to raise our guidance for the full year 2024 on all metrics, which Josh will talk about later.
Matthew Cohen: Our ongoing success is fueled by a number of secular tailwind, including the pace of attacker innovation digital transformation ongoing migration to the cloud and exponential increases in human and machine identities.
Matthew Cohen: Identity is the common denominator in every major cybersecurity breach. Our research has shown that over 90% of organizations have suffered from an identity-related cyber attack, a significant increase from about 60% in the prior year. Last quarter, we discussed the extensive security challenges faced by CIOs and CISOs in safeguarding the entire spectrum of identities across IT, developers, workforce, and machines. In today's severe threat landscape, customers recognize that merely managing identities without privileged security controls is a risk they cannot afford.
Matthew Cohen: Entity is the common denominator in every major cyber security breach our research has shown that over 90% of organizations have suffered from an identity related cyber attack a significant increase from about 60% in the prior year.
Matthew Cohen: Last quarter, we discussed the extensive security challenges faced by Cio's, and Dsos and safeguarding the entire spectrum of identities across developers.
Matthew Cohen: Developers workforce and machines.
Matthew Cohen: In today's severe threat landscape customers recognize that merely managing identities without privilege security controls is a risk they cannot afford.
Matthew Cohen: The security risks are further exasperated by the rise of AI, the proliferation of machine identities, and the increased elevation of access for human identities. As a result, organizations need to undergo a paradigm shift in identity security. They can no longer rely on yesterday's solutions and approaches to address today's problems.
Matthew Cohen: The security risks are further exasperated by the rise of AI proliferation of machine identities and increased elevation of access for human identities. As a result organizations need to undergo a paradigm shift and identity security. They can no longer rely on yesterday's solutions and approaches to it.
Matthew Cohen: Dress today's problems.
Matthew Cohen: We had side work are helping customers secure all identities human and machine as they access all environments, including hybrid and multi cloud environments. Our differentiation comes from our deep domain expertise and privilege access and retailer privilege controls for each identity group to mitigate risk effectively.
Matthew Cohen: We at CyberArk are helping customers secure all identities, human and machine, as they access all environments, including hybrid and multi-cloud environments. Our differentiation comes from our deep domain expertise in privilege access, and we tailor privilege controls for each identity group to mitigate risk effectively. We discover, secure, and manage across the entire life cycle of each identity group. We are the vendor best positioned to apply comprehensive, intelligent privilege controls across standing access, just-in-time access, and a zero-standing privilege approach, all from a unified identity security platform. Our land and expand motion, and the subscription flywheel continues to gain momentum.
Matthew Cohen: We discover secure and manage across the entire lifecycle of each identity group.
Matthew Cohen: We are the vendor best positioned to apply comprehensive intelligent privileged controls across standing access just in time access and a zero standing privilege approach all from a unified identity security platform.
Matthew Cohen: Our land and expand motion and the subscription flywheel continues to gain momentum. It all begins with new logos and we signed nearly 200 customers in the first quarter, while the majority of customers land with Pam approximately half of these new logos bought two or more solutions with many choosing to secure multiple identity groups.
Matthew Cohen: It all begins with new logos, and we signed nearly 200 customers in the first quarter. While the majority of customers land with PAM, approximately half of these new logos bought two or more solutions, with many choosing to secure multiple identity groups from day one. This speaks volumes about the power of our platform and the importance of identity security. A few exciting new logo examples from the quarter included a deal that perfectly showcases our platform selling motion and new routes to market, which was a financial services company that landed with PAM, EPM for workstations and servers, Conjure Cloud, and Identity Flows in a large seven-figure ACP deal that closed on the Azure marketplace.
Matthew Cohen: From day, one this speaks volumes about the power of our platform and the importance of identity security.
Matthew Cohen: A few exciting new logo examples from the quarter included a deal that perfectly showcases our platform selling motion and new routes to market, which was a financial services company that landed with Pam E. P. M for workstations and servers conjured cloud and identity flows and a large seven figure.
Matthew Cohen: <unk> ACP deal that closed to the Azure marketplace.
Matthew Cohen: The PAM market has evolved well beyond securing only high-risk IT personnel. Today, modern PAM programs protect a much broader group of privileged users, including developers, shadow IT, and database and cloud administrators. As an example, we have great customers in the government and healthcare verticals, and this quarter, we are excited about our new relationship with NHS Resolution, a body of the UK Department of Health and Social Care.
Matthew Cohen: The Pam market has evolved well beyond secure on only high risk personnel today modern Pam programs protect a much broader group of privileged users, including developers shadow It and database and cloud administrators. As an example, we have a great customer in the.
Matthew Cohen: Have great customers and the government and health care verticals and this quarter. We are excited about our new relationship with NHS resolution a body of the UK department of health and social care.
Matthew Cohen: They kicked off their relationship with Cyberark with Privileged Cloud and Secure Cloud Access and are planning to grow their footprint in the future. Each workforce identity is more powerful today than ever, and traditional MFA and SSO solutions are easily circumvented. We reimagined workforce identity by wrapping MFA and SSO with more controls through our secure web sessions, workforce password manager, EPM, and our new secure browser. This quarter, a large logistics company picked Cyberark for PAM and Workforce Identity after a head-to-head competition with a leading IDAS vendor.
Matthew Cohen: They kicked off their relationship with cyber Ark with privilege cloud and secure cloud access and are planning to grow their footprint in the future.
Matthew Cohen: Each workforce identity is more powerful today than ever and traditional MFA and SSO SSO solutions are easily circumvented.
Matthew Cohen: We re imagined workforce identity by wrapping MFA and SSO with more controls to our secure web sessions workforce password manager E. P M and our new secure browser.
Matthew Cohen: This quarter, a large logistics company pick cyber Ark for Pam and workforce identity. After a head to head competition with a leading I'd ask vendor are best in class security and breath of our platform were the deciding factors in winning this amazing new logo.
Matthew Cohen: Our best-in-class security and breadth of our platform were the deciding factors in winning this amazing new logo. Our customer base is also an important growth vector for CyberArk, and our platform selling motion is accelerating expansion deals. Overall, we had a strong quarter of expansion within our base across all our solutions, with particular strength in our secrets management business. The world of securing machine identities is changing rapidly. Organizations are grappling with a larger variety and an ever-growing number of machines.
Matthew Cohen: Our customer base is also an important growth vector for cyber Ark and our platform selling motion is accelerating expansion deals overall, we had a strong quarter of expansion within our base across all our solutions with particular strength in our secrets management business.
Matthew Cohen: The world of securing machine identities is changing rapidly organizations are grappling with a larger variety and an ever growing number of machines from applications to bots to workloads to Iot devices. Each one of these machines needs to be secured and managed across the lifecycle of.
Matthew Cohen: From applications to bots to workloads to IoT devices, each one of these machines needs to be secured and managed across the life cycle of multiple identity components, from secrets to digital keys to certificates. The proliferation of AI is further accelerating the growth and complexity of machine identities, and this is becoming a top security challenge. Traditionally, managing machines often sits outside the security team's remit of control. However, this practice exponentially increases risk and is unsustainable in today's threat landscape.
Matthew Cohen: Identity components from secrets to digital keys to certificates.
Matthew Cohen: The proliferation of AI is further accelerating the growth and complexity of machine identities. This is becoming a top security challenge traditionally managing machines often sits outside the security teams remit of control.
Matthew Cohen: However, this practice exponentially increases risk and is unsustainable and today's threat landscape.
Matthew Cohen: Customers increasingly realize they need to scale their machine identity security programs beyond local vaults, loosely enforced policies, and open source tools. They need an enterprise-ready machine identity security approach that can scale and is tied to their human identity security program through a single platform. One great win that exemplifies all I am describing was with a Cyberark customer who has been with us since 2018. We expanded our long-standing relationship with the Department for Works and Pensions in the UK with an expanded program while kick-starting a robust secrets management program.
Matthew Cohen: Customers increasingly realize they need to scale their machine identity security programs beyond local vaults loosely enforced policies and open source tools.
Matthew Cohen: They need an enterprise ready machine identity security approach that can scale and is tied into their human identity security program through a single platform.
Matthew Cohen: One great win that exhibited all I am describing was with a <unk> customer who has been with us since 2018.
Matthew Cohen: We expanded our long standing relationship with the department for work and pensions in the U K with an expanded program, while kicking off a robust secrets management program with cyber Ark is a key strategic partner. They are focused on aligning their Denny security roadmap for human and machine identities supporting the U.
Matthew Cohen: With Cyberark as a key strategic partner, they are focused on aligning their identity security roadmap for human and machine identities, supporting the UK government's focus on a stronger cybersecurity posture. We talked earlier about how we are protecting the workforce using a reimagined approach that goes beyond SSO and MFA, and for this approach, it needs to extend to the endpoint, the most common entry point for attacks. By removing local administration rights and enforcing least privilege and detecting identity-based threats targeting workstations and servers, organizations can reduce the endpoint attack surface.
Matthew Cohen: K government's focus on a stronger cyber security posture.
Matthew Cohen: We talked earlier about how we are protecting the workforce using a re imagined approach that goes beyond SSO and MFA and for this approach it needs to extend also to the endpoints. The most common entry point for attackers.
Matthew Cohen: By removing local administration rights and enforcing least privilege and detecting indemnity based threats targeting the worst at workstations and servers organizations can reduce the endpoint attack surface. This.
Matthew Cohen: This strategy also protects organizations from attackers who turn off EDR agents and proceed quietly without being detected, which is one of the main reasons a multinational food company in LATAM signed a high six-figure ACV EPM deal in the first quarter.
Matthew Cohen: This strategy also protect organizations from attackers, who turn off Edr agents and proceed quietly without being detected which is one of the main reasons a multinational food company in Latam signed a high six figure ACB E. P. M deal in the first quarter. This customer is looking to deploy sidewalk everywhere as.
Matthew Cohen: This customer is looking to deploy Cyberark everywhere as part of its broader identity strategy. During the past few years, EPM has experienced strong growth and recently surpassed $100 million in ARR. This achievement is testament to the solution's ability to extend identity security and zero trust to workstations and servers. We are excited about the potential for further growth in our EPM business, both with new and existing customers. We also talked about the exploding population of developers and the need to start securing them as privileged identities without interfering with their speed of innovation.
Matthew Cohen: Part of its broader identity strategy.
Matthew Cohen: During the past few years <unk> experienced strong growth and recently surpassed 100 million a day or this achievement is a testament to the solutions ability to extend identity security and zero trust to workstations and servers.
Matthew Cohen: We are excited about the potential for further growth in our APM business, both with new and existing customers.
Matthew Cohen: We also talk though about the exploding population of developers and the need to start securing them as privileged identities without interfering with their speed of innovation.
Matthew Cohen: Our Secure Cloud Access Solution, or SCA, provides best-in-class privilege controls for hybrid and multi-cloud environments. It applies the principle of least privilege access by granting just enough permissions with zero standing privileges, while still allowing developers, data scientists, and cloud engineers to work natively and efficiently without having to change their preferred workflows.
Matthew Cohen: Our secure cloud access solution. Our SCA provides best in class privilege controls to hybrid and multi cloud environments. It applies the principle of least privilege access by granting just enough permissions with zero standing privileges, while still allowing developers data scientists and cloud engineers to work natively and efficiently.
Matthew Cohen: With without having to change their preferred workflows.
Matthew Cohen: We are incredibly excited about this solution, and in the first quarter, we continue to see excellent traction with the offering. In a deal with a major retailer, the customer broadly deployed Cyberark SaaS solutions in a continued move to the cloud, but they cited secure cloud access as the most important differentiator and signed a high six-figure ACB deal that also included privileged cloud, secrets, and workforce identity. Q1 was an exciting quarter for our focus on innovation and new releases.
Matthew Cohen: We are incredibly excited about this solution and in the first quarter, we continued to see excellent traction with the offering.
Matthew Cohen: And a deal with a major retailer the customer broadly deployed sidewalks SaaS solutions and a continued move to the cloud, but they cited secure cloud access is the most important differentiator and signed a high six figure ACB deals that also include privilege cloud secrets and workforce identity.
Matthew Cohen: Q1 was an exciting quarter for our focused on innovation and new releases.
Matthew Cohen: Last year, we discussed our plans to expand our routes to market and increase our market reach through MSPs. According to Gartner, 40% of security customers are expected to consume solutions through a managed service by 2026. To accelerate this channel, we recently launched the CyberArk MSP Console. By providing MSPs with a single command center, this console is a key step in helping our MSP partners build managed services that secure their customers' human and non-human identities.
Matthew Cohen: Last year, we discussed our plans to expand our routes to market and increase our market reach through msp's. According to Gartner, 40% of security customers are expected to consume solutions to a managed service by 2026 to accelerate this channel. We recently launched a cyber Ark MSP console by providing MSP with a single command center. This.
Matthew Cohen: Console is a key step in helping our MSP partners build managed services that secure their customers human and nonhuman identities.
Matthew Cohen: We are also very excited about the general availability of CyberArk Secure Browser, the industry's first identity-centric secure browser. It is purpose-built for a cloud-first world and protects our customers against emerging threats while enabling productivity and ease of use across all CyberArk solutions. It is designed to help protect customers from fast-growing attack methods like cookie harvesting and browser-based attacks, both at and beyond login.
Matthew Cohen: We are also very excited about the general availability of <unk> secure browser the industry's first identity centric secure browser. It is purpose built for a cloud first world and protects our customers against emerging threats, while enabling productivity and ease of use across all <unk> solutions.
Matthew Cohen: Secure browser is designed to help protect customers from fast growing attack methods like cookie harvesting and browser based attacks, both app and beyond margin. It is natively integrated with our workforce solutions, providing a seamless unified user experience and serves also as a direct access portal to our entire platform.
Matthew Cohen: It is natively integrated with our workforce solutions, providing a seamless unified user experience and serves also as a direct access portal to our entire platform. We believe Secure Browser will not only enhance security for our customers but also drive adoption of our solutions. Lastly, Cyberark has recently received FedRAMP High authorization for two of its SaaS solutions, Endpoint Privilege Manager and Workforce Identity.
Matthew Cohen: We believe secure browser will not only enhance security for our customers, but also drive adoption of our solutions.
Matthew Cohen: Lastly, <unk> has recently received that ramp high authorization for two of SaaS solutions endpoint privilege manager and workforce identity, our investment and fed ramped high highlight <unk> commitment to help the public sector implement strategies that adhere to zero trust principles and move to a more secure.
Matthew Cohen: Our investment in FedRAMP High highlights Cyberark's commitment to help the public sector implement strategies that adhere to zero-trust principles and move to a more secure and efficient future. As excited as I am to talk about all these great developments, I'm even more excited by what we have in store for our customers and all of you at Impact in Nashville in just a few weeks. We have a tremendous lineup of truly innovative developments to talk about, so please tune in, and we look forward to seeing many of you there.
Matthew Cohen: Sure and efficient future.
Speaker Change: As excited as I am to talk about all of these great developments I'm, even more excited by what we have in store for our customers and all of you at impact in Nashville, and just a few weeks, we have a tremendous lineup of truly innovative developments to talk about so please tune in and we look forward to seeing many of you there.
Matthew Cohen: Josh will go deeper into the P&L in just a moment, but I wanted to emphasize that although most of my comments this morning focused on the potential for tremendous growth, we remain equally committed to delivering profitability and cash flow. This was evident in our Q1 results, and we remain well on track to deliver on the long-term targets we introduced last year. In summary, our momentum from 2023 continued in the first quarter, and we kicked off the year with a strong first quarter.
Speaker Change: Josh will go deeper into the P&L in just a moment, but I wanted to emphasize that although most of my comments. This morning focused on the potential for tremendous growth, we remain equally committed to delivering profitability and cash flow. This was evident in our Q1 results and we remain well on track to deliver on the long term target.
Speaker Change: We introduced last year.
Speaker Change: In summary, our momentum from 2023 continued in the first quarter and we kicked off the year with a strong first quarter I'll leave you with four main takeaways first demand for our solutions remains strong and identity security is at the top of <unk> priority list.
Matthew Cohen: I will leave you with four main takeaways. First, demand for our solutions remains strong, and identity security is at the top of CISO's priority list. Second, our unified identity security platform is meeting a clear customer requirement to apply the right level of privilege controls to every identity, human, and machine. Third, our security-first approach is a clear differentiator for Cyberark in the market, helping us win deals. And fourth, we have a long runway for growth and are making disciplined investments to capture a bigger share of the large and growing market opportunity. Josh, I'll turn the call over to you.
Speaker Change: Our unified identity security platform is meeting a clear customer requirement to apply the right level of privilege controls to every identity human and machine.
Speaker Change: Third our security first approach is a clear differentiator for <unk> in the market, helping us win deals and fourth we have a long runway for growth and are making disciplined investments to capture a bigger share of the large and growing market opportunity, Josh I'll turn the call over to you.
Joshua Siegel: Thanks, Matt. Q1 was another strong quarter for CyberArk. We exceeded expectations across all of our guided metrics. We reported strong ARR and revenue growth, drove significant operating margin expansion, and generated healthy free cash flow. Our strong results highlight the durability of demand for our solutions, the ongoing adoption of our broader identity security platform, and the power of our business model as we scale. Moving into the results, total revenue growth accelerated to 37% year-on-year, reaching $221.6 million and significantly exceeding the top end of our guidance. Demonstrating the continued momentum in our business, ARR reached $811 million. That's growing 34% year-on-year.
Joshua Siegel: Thanks, Matt.
Joshua Siegel: Q1, another strong quarter for Ciber, we exceeded expectations across all of our guided metrics, we reported strong <unk> and revenue growth drove significant operating margin expansion and generated healthy free cash flow are strong results highlight the durability of demand for our solutions.
Joshua Siegel: The ongoing adoption of our broader identity.
Speaker Change: Security platform and the power of our business model as we scale moving into the results total revenue growth accelerated to 37% year on year, reaching $221 $6 million and significantly exceeding the top end of our guidance demonstrating the continued momentum in our business.
Speaker Change: A R reached $811 million, that's growing 34% year on year, we added $37 million of net new <unk> and.
Joshua Siegel: We added $37 million in net new ARR, and that's compared to $34 million in the first quarter of last year. Subscription ARR grew 54% and reached $621 million, and is now 77% of total annual recurring revenue. Maintenance ARR was $190 million, and like-for-like conversion activity still represents about a single digit of our year-on-year growth.
Speaker Change: And that's compared to the $34 million in the first quarter of last year subscription a R. R grew 54% and reached $621 million and is now 77% of total annual recurring revenue.
Speaker Change: Maintenance was $190 million and like for like conversion activity still represents about a single digit of our year on year growth.
Joshua Siegel: Our strategy of upselling and cross-selling new solutions has been a significant factor in our strong growth. This is demonstrated by the fact that at the end of the first quarter, the cohort of customers with an ARR of more than $100,000 grew to over 1,780 customers, and for the cohort of, Now, moving into the details of the revenue lines, for the first quarter, recurring revenue reached $205.8 million, growing 41% year-on-year and accounting for 93% of total revenue. That's compared to 90% in the first quarter last year.
Speaker Change: Our strategy of Upselling and cross selling new solutions has been a significant factor in our strong growth. This is demonstrated by the fact that at the end of the first quarter that cohort of customers with an a or a more than $100000 grew to over 1780 customers and for the cohort of more than $500000.
Speaker Change: They grew to over 300 customers.
Speaker Change: Now moving into the details of the revenue lines for the first quarter recurring revenue reached $205 $8 million growing 41% year on year and accounted for 93% of total revenue as compared to 90% in the first quarter last year.
Speaker Change: Subscription revenue was $156 2 million growing 69% year on year, and representing 71% of total revenue while the primary driver of our outperformance was bookings we did experience an increase in average contract duration and our self hosted subscription deals relative to our guidance maintenance and serve.
Joshua Siegel: Subscription revenue was $156.2 million, growing 69% year-on-year, and representing 71% of total revenue. While the primary driver of our outperformance was bookings, we did experience an increase in average contract duration on our self-hosted subscription deals relative to our guidance. Maintenance and services revenue was $62.4 million. Of that, recurring maintenance revenue was $49.6 million. Our maintenance renewal rates remain strong and in line with historic levels. Professional services revenue was $12.8 million. From a geographic perspective, all regions showed healthy growth.
Speaker Change: <unk> revenue was $62 $4 million of that recurring maintenance revenue was $49 $6 million, our maintenance renewal rates remained strong and in line with historic levels professional services revenue was $12 $8 million.
Speaker Change: From a geographic perspective, all regions showed health healthy growth Americas revenue was $124 $5 million growing 27% year on year EMEA revenue was $74 million up 59% year on year, partly benefiting from our bookings.
Joshua Siegel: America's revenue was $124.5 million, growing 27% year-on-year. EMEA revenue was $74 million, up 59% year-on-year, partly benefiting from our bookings and the longer duration that I spoke about earlier. APJ revenue was $23 million, growing 37% year-on-year. Moving to the P&L, all line items will be discussed on a non-GAAP basis.
Speaker Change: And the longer duration that I spoke about earlier a P. J revenue was $23 million growing 37% year on year.
Speaker Change: Moving to the P&L all line items will be discussed on a non-GAAP basis. Please see the full GAAP to non-GAAP reconciliation in the tables of our press release.
Joshua Siegel: Please see the full GAAP to non-GAAP reconciliation in the tables of our press release. First quarter gross profit was $185.7 million, or 83.8% gross margin compared to 81.3% in the first quarter last year. The expansion of our gross margin was primarily driven by revenue outperformance. In the first quarter, our operating income was $33 million. The operating income outperformance was driven by three main factors.
Speaker Change: First quarter gross profit was $185 7 million or <unk> 83, 8% gross margin compared to 81, 3% in the first quarter last year. The expansion of our gross margin primarily driven by revenue outperformance in.
Speaker Change: In the first quarter, our operating income was $33 million. The operating income outperformance was driven by three main factors the revenue outperformance the timing of certain marketing related expenses that we now expect to incur in the second quarter and three we did experience a slower hiring pace, particularly in R&D.
Joshua Siegel: The revenue outperformance, the timing of certain marketing-related expenses that we now expect to incur in the second quarter, and three. We did experience a slower hiring pace, particularly in R&D. Net income came in at $35 million, or $0.75 per diluted share, also significantly outperforming our guidance. We ended March with 3,070 employees worldwide, including approximately 1,300 in sales and marketing.
Speaker Change: Net income came in at $35 million or <unk> 75 cents per diluted share also significantly outperforming our guidance. We ended March with 3070 employees worldwide, including approximately 1300 in sales and marketing we continue to see healthy growth in our quota carrying sales reps, particularly are fully ramped ones.
Joshua Siegel: We continue to see healthy growth in our quota-carrying sales reps, particularly our fully ramped ones. We were thrilled to deliver strong cash flow of free cash flow, $66.8 million, in the quarter. While we do not guide to cash flow quarterly, I would remind investors that cash flow is seasonally stronger for us in the first quarter. And, particularly this year, the strong cash flow is partly a function of strong bookings and renewals in the fourth quarter of 2023. For the remainder of the year, we expect cash flow to follow typical seasonal patterns, that is, lower in the second and third quarters and an uptick from the third quarter to the fourth quarter.
Speaker Change: We were thrilled to deliver strong cash flow of 66% of free cash flow $66 $8 million in the quarter, while we do not guide to cash flow quarterly I would remind investors that cash flow is seasonally stronger for us in the first quarter and particularly this year. The strong cash flow is partly a function of strong bookings.
Speaker Change: And renewals in the fourth quarter of 2023 for the remainder of the year, we expect cash flow to follow typical seasonal patterns, that's lower in the second and third quarters and an uptick from the third quarter to the fourth quarter.
Speaker Change: Turning now to our guidance for the second quarter of 'twenty 'twenty four we expect total revenue of $215 million to $221 million, which represents 24% year on year growth at the midpoint, we do expect SaaS to make up a bigger portion of our overall subscription mix in the second quarter impacting recognized revenue in period.
Joshua Siegel: Turning now to our guidance. For the second quarter of 2024, we expect total revenue of $215 to $221 million, which represents 24% year-on-year growth at the midpoint. We do expect SAS to make up a bigger portion of our overall subscription mix in the second quarter, impacting recognized revenue and periods. We expect non-GAAP operating income in the range of $12 million to $17 million for the second quarter. As a reminder, we will hold our Impact customer events in a couple of weeks, and our Impact World Tour will also begin in June, increasing our planned marketing expenses for the quarter.
Speaker Change: We expect non-GAAP operating income in the range of $12 million to $17 million for the second quarter. As a reminder, we will hold our impact customer events. A couple of weeks at our impact World Tour will also begin in June increasing our planned marketing expenses for the quarter. We are also seeing a stronger hiring pace, which is reflected in our guidance.
Joshua Siegel: We are also seeing a stronger hiring pace, which is reflected in our guidance. We expect our non-GAAP EPS to be in the range of $0.34 to $0.44 per diluted share. Our guidance also assumes 48.1 million weighted average diluted shares and about $10.2 million in taxes.
Speaker Change: <unk>.
Speaker Change: We expect our non-GAAP EPS to be in the range of 34 to <unk> 44 cents per diluted share. Our guidance also assumes $48 1 million weighted average diluted shares at about $10 $2 million in taxes for the full year 2024, we are increasing guidance across all our metrics. We now expect total revenue in the <unk>.
Joshua Siegel: For the full year 2024, we are increasing guidance across all our metrics. We now expect total revenue in the range of $928 to $938 million, representing 24% year-on-year growth at the midpoint. And as we look at our pipeline for the remainder of the year, SAS continues to lead the way. Reflecting our continued commitment to driving operating leverage, we are increasing our full-year operating income to a range of $90.5 million to $99.5 million.
Speaker Change: <unk> of $928 million to $938 million representing.
Speaker Change: Representing 24% year on year growth at the midpoint and as we look at our pipeline for the remainder of the year SaaS continues to lead the way.
Speaker Change: Reflecting our continued commitment to driving operating leverage we are increasing our full year operating income to a range of $95 million to $99.5 million, we expect our non-GAAP EPS to be between $1 88.
Speaker Change: Two $2.07 per diluted share, we expect about $48 1 million weighted average diluted shares and about $51 million in taxes for the full year of 2024.
Joshua Siegel: We expect our non-gap EPS to be in the range of $1.88 to $2.07 per diluted share. We expect about 48.1 million weighted average diluted shares and about $51 million in taxes for the full year of 2024. We are also raising our annual recurring revenue, now to be in the range of $975,990,000,000 at December 31, or about 27% year-on-year growth at the mid-point. We are also significantly increasing our free cash flow guidance for the full year 2024 to now be in the range of $115 million to $125 million.
Speaker Change: We are also raising our annual recurring revenue now to be in the range of $975 million and $990 million at December 31, or about 27% year on year growth at the midpoint.
Speaker Change: We are significantly also increasing our free cash flow guidance for the full year 2024 to now being in the range of $115 million to $125 million.
Joshua Siegel: To sum up, we are thrilled to kick off 2024 with another strong quarter of results. Demand for our solution is robust, our platform delivers tremendous value, and identity security remains a business imperative. We believe we are well-positioned to execute on our targets. I will now turn the call over to the operator for Q&A.
Speaker Change: To sum up we are thrilled to kick off 'twenty 'twenty four with another strong quarter of results demand for our solution is robust our platform delivers tremendous value and identity security remains a business imperative.
Speaker Change: We believe we are well positioned to execute on our targets I will now turn the call over to the operator for Q&A.
Speaker Change: Brighter.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not in mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Saket Kalia with Barclays. Your line is open.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask a question in there listening via loud speaker on Euro device. Please pickup your handset.
Barclays: And as far as that your phone is not on mute when asking your question again press star one to join the queue and your first question comes from the line of socket <unk> with Barclays. Your line is open.
Socket: Okay, Great Hey, good morning, guys. Thanks, Thanks for taking my questions here and congrats on 25 years.
Saket Kalia: Okay, great. Hey, good morning, guys. Thanks for taking my questions here, and congrats on 25 years.
Matthew Cohen: Thanks, Saket. I really appreciate it.
Socket: Socket really appreciate it.
Speaker Change: Sure.
Matthew Cohen: Matt, maybe just to start with you, particularly in the wake of some M&A out there, right, particularly IBM and Hashi, I was wondering if you could just talk a little bit about the backdrop here competitively, and since there were so many multi-product kind of examples on the call, maybe you could touch on that in terms of PAM and also broader identity. I know you spend a lot of time with customers, so I'm just kind of curious what you're seeing competitively.
Socket: Matt maybe just to start with you.
Speaker Change: Particularly in the wake of of some M&A out there right, particularly IBM and hashing.
Speaker Change: Brian if I could just talk a little bit about the backdrop here competitively.
Speaker Change: And there were.
Speaker Change: So many multi product kind of examples on the call maybe you could touch on that.
Speaker Change: In terms of Pam and also broader identity.
Brian: I know you spent a lot of time with customers. So just kind of curious what you're seeing competitively.
Matthew Cohen: Yeah, it's a great question, Saket, and I think what we see is the continued evolution in the competitive environment where our platform begins to put us, you know, heads and shoulders above everybody else that's out there. We are consistently able to tell the story of the spectrum of identity groups and our ability to bring more than one identity, more than just IT, onto our platform. That begins to differentiate us from the traditional PAM competitors that are out there that aren't really able to deliver on that message.
Matt: Yes, it's great question socket and I think what we see a continued evolution in the competitive environment, where our platform begin to puts us leap kind of heads and shoulders above everybody else. That's out there. We are consistently able to tell the story of the spectrum of identity groups in our ability to bring.
Brian: More than one identity more than just <unk>.
Matthew Cohen: Onto our platform that begins to differentiate us from the traditional Pam competitors that are out there that arent really able to deliver on that message. So so that starts to differentiate us in the Pam space and allows us to be able to continue to take share then when you start to look at our broader our broader identity story it brings us into spaces like we.
Matthew Cohen: So, that starts to differentiate us in the PAM space and allows us to be able to continue to take share. Then, when you start to look at our broader identity story, it brings us into spaces like access, and you hear me emphasize that a lot, which is that in the world of commoditized MFASSO, there isn't that much difference between vendors that are out there, but the ability to be able to wrap privilege controls on top of an MFASSO solution, ours or somebody else's, allows us to be able And we see that, you know, strongly in some of the examples that I shared.
Matthew Cohen: Talk about access and and you hear me emphasize that a lot which is in the in the world of Commoditized MFA SSO there isn't that much difference between vendors that are out there, but the ability to be able to wrap privilege controls on top of an MFA SSO solution ours or somebody else's allows us to be able to start.
Matthew Cohen: Talking about how do we bring workforce identities back into our overall identity security platform and we see that.
Matthew Cohen: Strongly in some of the examples that I shared the final piece, which you kind of hit on.
Joshua Siegel: The final piece, which you kind of hit on, is that we were putting together our talk track for this earnings on our secret story well before the Hashi acquisition, the IBM acquisition of Hashi. We had a really strong secret quarter, and we've been talking about the momentum building, not only in the products that we've had out for a while, but especially in our Conjure Cloud and Secrets Hub and SaaS-first solutions. And it really is this pivot where security is getting involved and wants to have an enterprise. And what we've seen in the prior quarters, and especially in this quarter, is that those deals are starting to pick up and actually also increase in size as customers want to put in place the enterprise backbone.
Joshua Siegel: We were putting together our talk track for this earnings on our secret story, well before the the Husky acquisition by by the IBM acquisition of <unk>, We had a really strong secrets quarter and we've been talking about the momentum building not only in the in the products that we've had out for a while but especially.
Joshua Siegel: In our conduit cloud and secrets hub in SaaS versus solutions and it really is this pivot where security is getting involved and wants to have an enterprise scalable approach to how you secure machine identities.
Joshua Siegel: And what we've seen in the prior quarters and especially in this quarter is that those deals are starting to pick up and actually also increased in size as customers want to put in place the enterprise backbone. So back to the point of hand, we've been feeling good about our competitive posture against <unk> as it's become more of an ENT.
Joshua Siegel: So back to the point at hand, we've been feeling good about our competitive posture against Hashi as it's become more of an enterprise-scale sale and a security sale. The disruption of IBM buying them, and how IBM is viewed in the market, I think it will just lean in to our ability to be able to capture that market around secrets and machine identity security.
Joshua Siegel: Surprise scale.
Joshua Siegel: <unk> and a security sale the the disruption of IBM buying them. How IBM is viewed in the market I think it will just lean in to our ability to be able to capture that market around secrets and machine identity security.
Speaker Change: Got it got it that makes a ton of sense, Josh if I can if I can ask one follow up for you I think the part I mean, great to see all the guidance metrics go up but the one that really stood out to me was was the increase in the free cash flow guide.
Joshua Siegel: Josh, if I can ask one follow-up question for you, I think the part of, I mean, great to see all the guidance metrics go up, but the one that really stood out to me was the increase in the free cash flow guide. As I think back historically, I think we've talked about sort of a bigger subscription renewal pipeline that maybe would renew it at higher incremental margins. Is that sort of the biggest driver for raising at this point in the year, or is it something else? And maybe at that point, where are we in that renewal flywheel for subscriptions? Sorry, there is a lot there, but does that make sense?
Joshua Siegel: So as I think back historically, I think we've talked about sort of a bigger subscription renewal pipeline.
Joshua Siegel: Maybe would renew it at higher at higher incremental margins.
Joshua Siegel: Sort of the biggest driver for raising at this point of the year or or is it something else and then maybe on that point, we're sort of in that renewal.
Joshua Siegel: <unk> wheel for subscription or sorry, a lot there, but does that makes sense.
Joshua Siegel: Yeah, yes, Saket, and thanks for asking. I mean, you know, first of all, you know, obviously we had a great first quarter on cash flow, you know, it was based off of coming off of a really strong year, and particularly Q4, and a strong Q4, not just in new business, but as you started to point out, it also included a really nice renewal base from Q4, which is kind of what you're sort of alluding to, which is kind of the beginning of the first glimpse of the power of this model after the transition.
Josh: Yes, yes, socket and thanks, Whit and thanks for asking I mean first of all you know obviously, we had a great first quarter on cash flow it was.
Joshua Siegel: Based off of coming off of a really strong year, and particularly Q4 and a strong Q4, not just a new business, but as you started to point out. It also included a really nice renewal base from Q4, which is kind of what your what you're sort of alluding to which is kind of at the beginning of the first glimpse of the power of <unk>.
Joshua Siegel: This model after the transition and now really started to see kind of the last piece of the flat. The last part of the flywheel come into effect, which is around cash flow and of course, we were able to boost from the first quarter by having excellent collections.
Joshua Siegel: And now we're really starting to see kind of the last piece of the plot, the last part of the flywheel come into effect, which is around cash flow. And of course, we are able to boost it from the first quarter by having excellent collections, as well. And early Q1 bookings, which also, which also supports the cash, and we are still continuing to control our expenses, which you know, we like to do. So overall, you know, it reports stellar cash flow execution for the first quarter.
Joshua Siegel: As well.
Joshua Siegel: And early Q1 bookings, which also which also supports the cash.
Joshua Siegel: And still continuing to control our expenses, which you know we like to do so overall.
Joshua Siegel: Reports, a stellar cash flow execution for the first quarter and that really gives us the confidence says one kind of the first part that I mentioned that actually the renewal and the recurring revenue to it does create that flywheel for billings and collections, assuming that we continue to collect it.
Joshua Siegel: And that really gives us the confidence as one, kind of the first part that I mentioned that actually the renewal and the recurring revenue does create that flywheel for billings and collections, assuming that we continue to collect at the well-executed rate that we are, and that we expect to do. And then, of course, our overall bullishness on the business for the rest of the year, as we also raise all of our metrics, not just cash flow.
Joshua Siegel: Well at the well executed right that we are that we expect to do.
Joshua Siegel: And then of course, our overall bullishness in the business.
Joshua Siegel: For for the.
Joshua Siegel: The rest of the year as we also raise all of our metrics not just the cash flow and so I think it's a complete story around cash flow.
Joshua Siegel: And so I think it's a complete story around cash flow. Your next question comes from the line of Gregg Moskowitz with Ms. Okay, thank you very much for taking the questions. And a nice job on Q1. Matt, I'd like to ask about EPM because it's an important solution and yet.
Gregg Steven Moskowitz: Your next question comes from the line of Gregg Moskowitz with Mizuho.
Joshua Siegel: Your next question comes from the line of Gregg Moskowitz with Mizuho.
Gregg Steven Moskowitz: Okay. Thank you very much for taking the questions.
Gregg Steven Moskowitz: And a nice job on the on the Q1, Matt I'd like to ask about <unk>, because it's an important solution and yet penetration rates remain very low across the industry and quite honestly, even within your own installed base and I think much of this might be due to a lack of awareness of <unk> P. M. In some cases and other cases, just the belief that you.
Gregg Steven Moskowitz: Having an edr solution might be announced.
Gregg Steven Moskowitz: But is there anything that fiber or can do without you think Ken perhaps further accelerate the adoption curve going forward.
Matthew Cohen: Yeah, Greg. So, you know how we feel about EPM. And I think you've heard us talk about the idea that it is the core security control that really can protect the endpoint against breach. And our feeling is, you know, even stronger in this threat landscape in this threat environment that you need an EPM agent installed on the endpoint, you need it on your servers, you need it to protect your EDR investment.
Gregg Steven Moskowitz: Yeah, Greg So you know, how we feel about APM and I think you've heard us talk about the idea that it is the core security control that really can protect the endpoint against bridge and our feeling is even stronger in the threat landscape and the threat environment that you need in APM.
Matthew Cohen: Agent installed at the at the endpoint you needed on your servers you needed to protect your Edr investment in.
Matthew Cohen: And ultimately you needed to secure the endpoint now I think what we have really come to the conclusion on is you're right. It's a little bit of education is still required in the market to explain that that <unk> isn't just about removing local admin rights, it's about implementing a least privilege workflow it's about application.
Matthew Cohen: And ultimately, you need it to secure the endpoint. Now, I think what we have really come to the conclusion on is you're right, there is a little bit of education still required in the market to explain that EPM isn't just about removing local admin rights. It's about implementing a least privilege workflow, it's about application control, and it's really about protecting ransomware.
Matthew Cohen: Troll and it's really about protecting ransomware and so I think what we're what we're what we're trying to understand and do as a company is start to embed the P. M value prop into each one of those human identity groups that I've been describing building deeper and tighter into the workflow of.
Matthew Cohen: And so, you know, I think what we're what we're trying to understand and do as a company is start to embed the EPM value proposition into each one of those human identity groups that I've been describing, build it deeper and tighter into the workflow of SSO and MFA, again, ours or anybody else's, make sure that developers' workstations start with an EPM control installed. And then, obviously, in our bread and butter within securing IT, make sure that everyone understands that EDR is really not enough.
Matthew Cohen: SSO and MFA again, ours or anybody else's make sure that developers workstation start with an E. P. M control installed and then obviously in our bread and butter within securing it make sure that everyone understands that edr has really not enough where you saw initial <unk>.
Matthew Cohen: Real success and APM was in highly attacked in highly regulated industries and those big enterprises been buying <unk> for years, and I think we need to take it beyond those industries and make sure that everybody can understand the value prop that I. Just described so final point here is we're continuing to invest not only in the.
Matthew Cohen: Where you saw initial real success in EPM was in high-attack and highly regulated industries, and those big enterprises have been buying EPM for years. And I think we need to take it beyond those industries and make sure that everybody can understand the value proposition that I just described. So my final point here is that we're continuing to invest not only in the integration and the solutions but, frankly, also in the go-to-market talent to be able to complement our sellers out there to tell the story a little bit richer and deeper, as I started to describe on the call.
Matthew Cohen: Integration solutions, but frankly also in the in the go to market talent to be able to complement our sellers out there to tell the story, a little bit richer and deeper as I started to describe on the call.
Brian Lee Essex: Your next question comes from the line of Brian Essex with J.P. Morgan.
Matthew Cohen: Your next question comes from the line of Brian Essex with J P. Morgan.
Brian Lee Essex: Yeah, thank you. Good morning.
Brian Lee Essex: Yes. Thank you and good morning. Thank you for taking the question I wanted to follow up on a question from Greg on <unk> I think.
Matthew Cohen: Thank you for taking the question. I want to follow up on a question from Greg on EPM. I think Obviously 100 million ARR is a great milestone and it's a substantial adjacent PAM for you guys, but I guess any any plans to, maybe evaluate go-to-market and do you see any impact on customer adoption for next-gen EDR or to customers and this is layer on top of you know legacy or best-of-breed EDR solutions and you know would love to understand maybe the profile as as as you see customers adopt EPM what does the profile of customer tend to look like maybe the size of the customer geo you know sophistication are they more identity focused or do you see that endpoint demand also driving a demand for EPM
Brian Lee Essex: Obviously, a $100 million IRR is a great milestone and had some substantial adjacent pan for you guys.
Matthew Cohen: I guess any any plans to.
Matthew Cohen: Maybe evaluate go to market and do you see any impact on customer adoption for next Gen Edr of your customers.
Matthew Cohen: This is layer on top of.
Matthew Cohen: Legacy our best of breed Edr solutions.
Matthew Cohen: And.
Matthew Cohen: Would love to understand maybe the profile.
Matthew Cohen: As you see customers adopt etfs.
Matthew Cohen: Or does the profile of customers tend to look like.
Matthew Cohen: Maybe the size of the customer.
Matthew Cohen: Sophistication or are they more identity focused or do you see that endpoint demand also driving demand for APM.
Matthew Cohen: Thanks, Brian. So, first and foremost, as I was hitting on with Greg, I think we believe that it's a necessary component to actually double down in our marketing organization and in our go-to-market organizations to increase our ability to be able to tell the story in the market, especially outside of the larger enterprises, which is an answer to one of your questions about which one was adopted fastest. You know, I think people in organizations with a security-first mindset that understand the threat landscape got started on EPM a little bit earlier, and they understood from day one that an EDR tool doesn't do the same thing. And, in fact, they're very complementary.
Speaker Change: Thanks, Brian So so I think first and foremost as I as it was hitting on with Greg I think we believe that it's.
Matthew Cohen: A necessary component to actually double down in our marketing organization and in our go to market organizations to increase our ability to be able to tell the story in the market, especially outside of the larger enterprises, which is an answer to one of your questions, which adopted the fastest I think people with our organizations with a security first mindset that under.
Matthew Cohen: Stood the threat landscape. They got started on <unk>, a little bit earlier and they understood from day, one that an edr tool doesn't do the same thing and in fact, they're very complementary I think as we've started to expand further and penetrate as we built that $100 million business. We started to see industries like healthcare and manufacturing start to take off.
Matthew Cohen: I think as we've started to expand further and penetrate, as we built that $100 million business, we started to see industries like healthcare and manufacturing start to take off, because those, again, are areas that are constantly under attack. You can almost map them to the threat environment and the ransomware threat, particularly, and those industries and those verticals are really the ones that have really started to accelerate and help us with building the momentum around the product. I think when we talk about the opportunity ahead, it's really about making it more seamlessly integrated into our overall portfolio and then enabling and investing in the overlay and marketing capacity to make the story clearer.
Matthew Cohen: Because those again are areas that are constantly under attack you can almost map to the threat environment and the ransomware threat, particularly in those industries and those verticals are really the ones that have really started to accelerate and help us with building the momentum around the product I think when we talk about the opportunity ahead.
Matthew Cohen: It's really about one making it more seamlessly integrated into our overall portfolio and then enabling and investing in the overlay and marketing capacity to make the story clearer and then finally it is about this idea of how do we make sure that we take the lessons.
Matthew Cohen: <unk> from the Big industries, and bring it down market to other to other customers to help them understand why this is the I am not using a the security control that they should get started with.
Matthew Cohen: And then finally, it is about this idea of how we take the lessons learned from the big industries and bring them down to the market to other customers to help them understand why this is the, I'm not using A, the security control that they should get started with. You know, it's an interesting thing, in some of the less mature markets, let's flip over to places like the state and local governments, we see EPM as being the landing spot, it's actually areas where they get started because they understand they can put in place a core security control very fast, it's a SaaS-based product, easy to adopt, and they can lock down a privileged pathway at the endpoint.
Matthew Cohen: It's an interesting thing and some of them less mature markets, let's let's flip over to places like the state and local governments, we see <unk> as being the landing spot, it's actually areas, where they get started because they understand they can put in place a core security control very fast, it's a SaaS based product easy to adopt and they can lock down a privilege.
Matthew Cohen: Pathway at the endpoint, so I think again we're.
Matthew Cohen: We're learning the the approach we are driving significant upside in the business through E. P M and I expect that business to continue to build and grow for us.
Matthew Cohen: In the quarters ahead.
Robbie David Owens: Your next question comes from the line of Rob Owens with Piper Seller. Your line is open. Great, thank you guys for...
Matthew Cohen: Your next question comes from the line of Rob Owens with Piper Sandler Your line is open.
Matthew Cohen: So I think, again, we're learning the approach, we're driving significant upside in the business through EPM, and I expect that business to continue to build and grow for us in the quarters ahead. Your next question comes from the line of Rob Owens with Piper Sandler. Great, thank you guys for taking my question.
Robbie David Owens: Great. Thank you guys for taking my question.
Robbie David Owens: Wanted to ask on net new subscription <unk>, which was flat from a year over year perspective wanted to ask a question I guess from the perspective of just security spending environment overall and within that if you could parse maybe what youre seeing geographically or enterprise versus SMB that'd be helpful. Thanks, guys.
Robbie David Owens: Yeah. Thanks, Rob. So overall, we had a strong quarter our ability to be able to continue to drive momentum in the market. You've heard me talk for quarters about the difference in conversation with the C. So with the CIO with the C suite.
Matthew Cohen: Thanks, Rob. So overall, we've had a strong quarter, and our ability to be able to continue to drive momentum in the market. You know, you've heard me talk for quarters about the difference in conversations with the CISO, with the CIO, with the C-suite, and elevating the conversation up to this identity security story and really talking about how do we help them with their overall security posture and help enable them as they talk to their boards, to their auditors, and at the top of the list is identity security.
Matthew Cohen: Elevating the conversation up disadvantaged security story, and really talking about how do we help them with their overall security posture and helped enable them as they talk to their boards to their auditors and at the top of the list is a denim security. So we continue to see that building, we continue to see that strong and Q1.
Matthew Cohen: So we continue to see that building, and we continue to see that strong. And, you know, Q1 was just a continuation of what we've been able to see over the last couple quarters. As it relates to the Q1 performance itself, you know, we were very happy with where we ended up and the overall performance. There was one element that actually occurred in the quarter where we had about 2 million or so renewals that basically weren't able to come in due to the holidays and other stuff and have closed since.
Matthew Cohen: Just a continuation of of what we've been able to see over the last couple of quarters as it relates to the Q1 performance itself. We were very happy with where we where we ended up in the overall performance. There was one element that that actually occurred in the quarter, where we had about $2 million or so of renewals that.
Matthew Cohen: Basically wasn't able to come in due to due to the holidays and other stuff and it closed and.
Matthew Cohen: And that would have made the net new AR, you know, look a little bit better. It has then demonstrated our ability to be able to raise full year revenue at a high level. So overall, I would tell you that Q1 was a strong quarter for us, and there's been no change in the environment that we've seen out there.
Matthew Cohen: And that would have made the net new a R look a little bit better.
Matthew Cohen: And then as demonstrated in our ability to be able to raise full year.
Matthew Cohen: At a high level.
Matthew Cohen: So overall I would tell you that Q1 was a strong quarter for us and Theres been no change in the in the environment that we've seen out there.
Speaker Change: Great. Thank you.
Fatima Aslam Boolani: Your next question comes from the line of Fatima Boolani with Citigroup.
Matthew Cohen: Your next question comes from the line of Seth <unk> with Citigroup.
Matthew Cohen: Good morning. Thank you for taking the time to answer my questions. Matt, in your prepared remarks, you shared a lot of anecdotes about customers who are increasingly lending with a higher incidence of products across the portfolio. So when I internalize this as, you know, manifestation and maybe increased wallet share, can you talk to us a little bit about the expansion rates and the dollar-based retention rates that you're realizing in the portfolio? And, you know, specifically in contrast to maybe some of the newer logo activity that, relative to more recent quarters, was a little bit slower. So just that contrast between the momentum and the size and scope of the momentum within the install base versus the new logo activity in the quarter. Thank you. Yeah
Fatima Aslam Boolani: Hi, Good morning. Thank you for taking my question, Matt in your prepared remarks, you shared a lot of anecdotes about customers who are.
Matthew Cohen: Kris Memorial Randall with higher intent products across the portfolio.
Matthew Cohen: Internalized the Gulf.
Matthew Cohen: Manifesting in maybe.
Matthew Cohen: <unk> wallet share.
Matthew Cohen: Can you talk just a little bit about the expansion rates.
Matthew Cohen: Dollar retention rates that you are realizing in the portfolio.
Matthew Cohen: Specifically in contrast to maybe some of the more logo activity that relative to more recent quarters first a little bit slower suggest that compare contrast between the momentum on the <unk>.
Matthew Cohen: And scope of the momentum within the install base versus.
Speaker Change: During the quarter. Thank you.
Matthew Cohen: Yeah, absolutely. So, first and foremost, I mean, we have a great set of costs. You know, we have more than 8,800 customers worldwide. These customers trust us from a security perspective. And so our ability to go back into that base to upsell them more PAM seats and then expand them into EPM, into workforce, into secrets, into our secure cloud access is an incredibly strong position that we find ourselves in. And our sales team does an excellent job of really monetizing that base and expanding our footprint.
Matt: Yeah, absolutely. So so first and foremost I mean, we have a great set of customers.
Matthew Cohen: We have more than 8080 to 100 worldwide. These customers Trust us from a security perspective, and so our ability to go back into that base just to up sell them more Pam seats, and then expand them into APM into workforce into secret into our secure cloud access and.
Matthew Cohen: Incredibly strong position that we find ourselves in and our sales team does an excellent job of really monetizing that base and expanding our footprint and so I think you heard that in our talk track as we as we talked about that healthy expansion ability.
Matthew Cohen: And so I think you heard that in our talk track as we talked about that healthy expansion ability that we have. And I think it comes back to an earlier question, which is our clear differentiation is this spectrum of identities, and customers are buying into the idea that it's not enough to just secure the most privileged IT users with PAM. They need to apply privilege controls across the entire spectrum of identity.
Matthew Cohen: The ability that we have and I think it comes back to an earlier question, which is our clear differentiation is the spectrum of identities and customers are buying into the idea that it's not enough to just secure the most privileged users with Pam they need to apply privilege controls across.
Matthew Cohen: The entire spectrum of identities. So I think on the on the existing business and our ability to upsell and expand it just continues to be strong it's been strong.
Matthew Cohen: So I think the existing business and our ability to upsell and expand just continues to be strong. It's been strong, and we're excited to see where we take that for quarters to come. From a new business perspective, we look at it and kind of say, anytime we can get 200 new logos in the door in a non-Q4 quarter, we're pretty happy with that. That allows us to be able to start the process of turning them into these longer-term customers to expand across the multiple identity groups.
Matthew Cohen: And we're excited to see where we take that for quarters to come from a new business perspective, we look at it and kind of say anytime we can get 200, new logos in the door.
Matthew Cohen: Q4 quarter.
Matthew Cohen: Pretty happy with that that allows us to be able to start the process of turning them into these longer term customer stage expand across the multiple identity groups and so we look at Q1 and we've always said that in this macro in this environment Q, new logo deals or take a little bit longer they take a little bit more work, we've gotten better and better.
Matthew Cohen: And so we look at Q1, and we've always said that in this macro, in this environment, new logo deals take a little bit longer, they take a little bit more work. But we've gotten better and better at doing that. And we're really happy with our ability to be able to land those logos. And frankly, we're really happy about the pipeline for those new logos, the ones we just landed, and when they are anticipated to come back for an expansion deal. Because then the flywheel is really kicking in, and it brings us back to the beginning of my answer. Your next question comes from the line of Joseph Gallo with Jeff.
Matthew Cohen: At doing that.
Matthew Cohen: And we are really happy with our ability to be able to land those those logos and frankly, we're really happy about the pipeline on those new logos. The ones. We just landed and when they are anticipated to come back for an expansion deal. Because then the flywheel is really kicking in and it brings us back to the beginning of my answer.
Joseph Anthony Gallo: Your next question comes from the line of Joseph Gallo with Jeffries. Your line is open. Mr. Joseph Gellil, your line is open.
Joseph Anthony Gallo: Your next question comes from the line of Joseph <unk> with Jefferies. Your line is open.
Joseph Anthony Gallo: Okay.
Joseph Anthony Gallo: Mr. Joseph Gallo your line is open.
Joseph Anthony Gallo: Can you hear me sorry, it somehow my my headset was not working.
Joseph Anthony Gallo: Awesome, sorry about that thanks for the question awesome to see the cash flow machine turn on it was impressive operating margin performance this quarter and the guidance, although the full year raise was modestly less than the beat can you just walk us through the dynamics for this year is that primarily Rev mix shift I think you mentioned head count growth, but moderating.
Joseph Anthony Gallo: So just any other investments we should think through given you the 34% IRR growth is highly indicative of a large opportunity. Thanks.
Joshua Siegel: Yeah, I'll start here. I mean, basically, you know, we're excited that we'll be able to raise the metrics across all boards from cash flow through the operating through the revenue through the operating. In terms of, you know, color on that, we do expect SAS to be a bigger player on the revenue side as we go into q2 and into the second half. With regard to the investments, you know, we're catching up on some hiring on the slower hiring from q1.
Joseph Anthony Gallo: Yeah I'll start here I mean, basically you know we're excited that we'll be able to.
Joshua Siegel: Raising the metrics across all boards from cash flow through the operating through the revenue through the operating and.
Joshua Siegel: In terms of.
Joshua Siegel: Color on that we do expect.
Joshua Siegel: SaaS to be a bigger player.
Joshua Siegel: On the revenue side as we go into Q2 and into the second half.
Joshua Siegel: With regard to the.
Joshua Siegel: The investments.
Joshua Siegel: We're catching up on some hiring on the slower hiring from Q1, and we anticipate to continue hiring into into the second half as well.
Joshua Siegel: And we anticipate continuing hiring into the second half as well. And, you know, so that's where we'll see some of the investment side in R&D. And also, of course, in the go-to-market engine, as we always like to pre-hire when we look at multiple years of growth. You know, I think, from another perspective, in terms of the mix, we see the mix continuing on other than the fact that we see it kind of inching up towards some more SaaS business, and maybe just
Joshua Siegel: So that's where we'll see some of the investment side in R&D and also of course in the go to market engine as we always like to pre hire when we when we look at multiple years of growth.
Joshua Siegel: I think.
Joshua Siegel: From a.
Joshua Siegel: From another perspective.
Joshua Siegel: In terms of the mix, we see the mix continuing on other than the fact that we see it kind of inching up towards some more SaaS business and maybe just one add for me is when we look back on Q1, and we talked as Josh said about a little bit of a slower hiring profile, we've seen that kind of kick in solidly.
Matthew Cohen: And maybe just one add for me is, you know, when we look back on Q1 and we talked, as Josh just said, about a little bit of a slower hiring profile, we've seen that kind of kick in solidly here in April. And so that actually brings up the anticipation of expense, and that's built into our guidance going forward. One of the nice things for me, despite the lower hiring in Q1, is when I actually look at the quota carriers, which is what we really are investing in to make sure that we capture the opportunity, we had a nice quarter around ramping up quota carriers, especially fully ramped quota carriers, and that sets us up to be able to capture the opportunity here throughout the year.
Matthew Cohen: In April and so that actually brings up the anticipation of expense and that's built into our guidance going forward one of the nice things for me. Despite the lower hiring in Q1 is when I actually look at the quota carriers, which is what we really are investing in to make sure that we capture the opportunity we.
Matthew Cohen: We had a we had a nice quarter around ramping up our quota carriers, especially fully ramped quota carriers and that sets us up to be able to go capture the opportunity here throughout the year as the year goes on we'll look for more opportunity to be able to capture on this exciting exciting growth opportunity ahead of us.
Matthew Cohen: You know, as the year goes on, we'll look for more opportunities to be able to capture this exciting growth opportunity ahead of us. Your next question comes from the line of Hamza Fodderwala with Morgan Stanley. Great. Thanks for taking my question. Josh, actually, I have a question for you on the guidance. Um, I actually thought, um, the,
Hamza Fodderwala: Your next question comes from the line of Hamzah <unk> with Morgan Stanley.
Hamza Fodderwala: Your next question comes from the line of Hamza Fudarwala with Morgan Stanley.
Hamza Fodderwala: Great. Thanks for taking my question.
Hamza Fodderwala: So I was actually a question for you on the guidance.
Hamza Fodderwala: I actually thought.
Hamza Fodderwala: The guidance raise was with better than expected in light of what we're seeing I think in software.
Hamza Fodderwala: More broadly I'm curious you know it's Q1.
Hamza Fodderwala: Tends to be the seasonally slowest quarter of the year and it's early in the year. So.
Hamza Fodderwala: What's giving you confidence to.
Hamza Fodderwala: Raise that are our guide by.
Hamza Fodderwala: By the magnitude that you did.
Hamza Fodderwala: Given what's still somewhat uncertain macro environment. Thank you.
Joshua Siegel: Yeah, thanks Hamza. I think it really starts with the demand environment that Matt talked a lot about already in the earlier questions and in his prepared remarks, and that's kind of generating, you know, the pipeline coverage and the demand generation that we're seeing, you know, for the course of the rest of the year. And I think the other point is we're well positioned as a go-to-market team and engine across those metrics.
Hamza Fodderwala: Yeah. Thanks, Hamzah I think I think it really starts with the demand environment that.
Joshua Siegel: Matt talked a lot about already in the earlier questions and in his prepared remarks, and that's kind of generating the pipeline coverage and.
Joshua Siegel: And the demand generation that we're seeing for.
Joshua Siegel: Over the course of the rest of the year and I think the other point is we're well positioned from a from a.
Joshua Siegel: Our go to market team in engine.
Joshua Siegel: Matt just alluded to the fact that.
Joshua Siegel: About where we are on.
Joshua Siegel: On a quota reps and quota carriers and just pretty much everything that we see coming out of Q1 coming first of all coming out of Q4, and then what we saw in Q1 and what we're seeing in the pipeline going forward and the overall.
Joshua Siegel: Demand environment that we're getting from the customer base, where we're confident on.
Joshua Siegel: Able to raise the guidance across those metrics.
Speaker Change: Thank you.
Adam Charles Borg: Your next question comes from the line Adam Borg with Stifel.
Operator: Thank you. Your next question comes from the line of Adam Borge with, "Awesome. Thanks so much for taking the question.
Joshua Siegel: Your next question comes from the line of Adam Borg with Stifel.
Adam Charles Borg: Awesome. Thanks, so much for taking the question maybe.
Adam Charles Borg: Maybe just on the cloud it's great to see the continued traction with secure cloud access and.
Adam Charles Borg: As we think about kind of the cloud opportunity more broadly, we often hear about either Ken or ITD R. I was hoping you could talk more about how you think about these adjacent cloud identity security markets as opportunities for Thai Brock over time, thanks, so much.
Matthew Cohen: Yeah, thanks, Adam. So we are, and you've all heard me talk about this opportunity of how we secure access to the cloud. And just to start with, that goes across two of the identity groups that I was describing. Traditional IT users are increasingly having to access not only on-premise targets but also cloud assets and cloud environments. And we need what would be considered a traditional PAM tool that's able to actually manage those hybrid environments effectively or secure those hybrid environments effectively.
Adam Charles Borg: Yeah. Thanks, Adam So we are and you've all heard me talk about this opportunity of of how we secure access to the cloud and just to start with that goes across two of the other identity groups that I was describing the traditional users are increasingly having to access not only on prem.
Matthew Cohen: Targets, but also cloud assets in cloud environments, and we need a what would be considered a traditional pam tool that's able to actually manage those hybrid environments effectively our secure those hybrid environments effectively in and so our ability to be able to take SCA and blended in within our identity security platform is a key.
Matthew Cohen: And, and so our ability to be able to take SEA and blend it in with our identity security platform is a key component part of actually how we're staying ahead in securing IT use. Then there is this new population of developers out there, and these developers are being hired at an exponential rate. And generally speaking, they're hired to innovate. And once they start innovating, they're scaling up cloud environments; they have unfettered entitlements and access. And that is just not sustainable.
Matthew Cohen: And part of actually how we're staying ahead in securing users. Then there is this new population of developers out there and these developers are hired at an exponential rate and generally speaking they're hired to go innovate.
Matthew Cohen: And organizations are understanding that they need to put in place controls in the cloud. So our SCA solution, which allows for zero standing privilege, which is a unique approach; no privileges are assigned until the point of access, allows us to be able to go in and talk to customers about securing that developer population, allowing them to use native tools, and applying security controls at the point of access. So that's a way of building up then to your question, which is, all right, well, what is the differentiation here, and how do these other markets play in?
Matthew Cohen: And once they start innovating, they're scaling up cloud environments. They have unfettered entitlements and access and that is just not sustainable and organizations are understanding that they need to put in place controls in the cloud so our SCA solution, which allows for zero standing.
Matthew Cohen: <unk>, which is a unique approach no privileges or assigned until the point of access.
Matthew Cohen: Laos us to be able to go in and talk to customers about securing that developer population, allowing them to use native tools and applying security controls at the point of access. So that's a way of building up then to your question, which is what is the differentiation here and how do these other markets play in when you start to think about CIM when.
Matthew Cohen: When you start to think about CIM, when you start to think even about ITDR, it's about really understanding or discovering what's going on. It's even, in some cases, about mapping, entitlements versus targets. And we have a place to play in those areas, but the major role we play at Cyberark is in enforcement and in controls. And ultimately, once you discover, once you understand, you have to control. And our SCA solution is a light touch, easy to deploy, security-first tool we can apply for controlling privilege access and access specifically as people try to access the cloud.
Matthew Cohen: You start to think even about ITD are it's about really understanding or discovering what's going on it's even in some cases about mapping entitlements versus targets and we have a place to play in those areas, but the major place. We play at cyber Ark is an enforcement and any controls and ultimately once you discover once you.
Matthew Cohen: Understand you have to control and are the SCA solution is a light touch easy to deploy security first tool, we can apply for controlling privilege access and privilege access specifically as people try to access the cloud so that is a little bit more background on it I think it's an opportunity for us.
Matthew Cohen: So that's just a little bit more background on it. I think it's an opportunity for us to be able to differentiate this cloud access market from some of the other areas that you were describing. And of course, our ability to be able to bring that into the overall platform is what sets us apart. Your next question comes from Roger Boyd with UBS Security. Great. Good morning. Thanks for taking the time to answer the question.
Roger Foley Boyd: To to be able to differentiate this cloud access market from some of the other areas that you were describing and of course, our ability to be able to bring that into the overall platform is what sets us apart.
Roger Foley Boyd: Your next question comes from the line of Roger Boyd with UBS Securities.
Matthew Cohen: Your next question comes from the line of Roger Boyd with UBS Securities.
Roger Foley Boyd: I wanted to go back to Joe's house.
Roger Foley Boyd: Great. Good morning, and thanks for taking the question I just want to go back to Joe's question, just on the guide, but regarding the duration tailwind that you've seen in term license over the past few quarters any color on what's driving that higher and Josh can you just clarify what you're expecting from a duration perspective throughout the rest of the year and how that might be impacting the <unk>.
Roger Foley Boyd: Arent updates to the revenue and <unk> guidance.
Joshua Siegel: Yeah, you know, I don't think that there was any one particular trend of it driving higher. I think we saw, though, in the first quarter, it go up by a few months, and it contributed about just about three and a half million dollars in tailwind on the revenue side for the quarter. And I think, you know, when we look at it kind of over time and kind of as we look into the pipeline, we kind of see it, you know, dropping down again by a couple of months, but it's gonna move around between the 20 and the 23 month range.
Roger Foley Boyd: Yes, I don't think that there was any one.
Joshua Siegel: Is it a trend of it driving higher I think we saw though in the first quarter. It go up by a few months and it contributed about.
Joshua Siegel: Just about three and a one.
Joshua Siegel: And tailwind on the revenue side for.
Joshua Siegel: For the quarter and I think when we look at it kind of over time and kind of as we look into the pipeline, we kind of see it.
Joshua Siegel: Dropping down again by a couple of months, but its going to move around between the 'twenty and into 'twenty three months range I think the bigger point on the on the look forward really is this idea that Josh hit on earlier around what do we see in the in the mix. When we look into Q2, Q3, and Q4 and when I analyze the <unk>.
Matthew Cohen: I think the bigger point on the look forward really is this idea that Josh hit on earlier around what we see in the mix when we look into Q2, Q3, and Q4. And when I analyze the pipeline, which unfortunately I still do, Eduard and I have great sessions around that, we try to understand what it is shaping up to be. And with all of our new products coming into play, which are SaaS only, and then where the market is moving, we see the mix of SaaS really stepping up in the quarters and in the out-quarters for the year.
Matthew Cohen: <unk>, which which unfortunately I still do not have great sessions around that we.
Matthew Cohen: We try to understand what is it what is it shaping up in with all of our new products coming into play which are SaaS only and then where the market is moving we see the mix of SaaS really stepping up in the quarters and in the out quarters for the year now we've taken that into account in our guide and even with that we've been able to raise.
Matthew Cohen: Now we've taken that into account in our guide, and even with that, we've been able to raise our revenue outlook for the year. But it is a pretty substantial shift in our pipeline towards that. Your next question comes from the line of Andrew Nowinski with Wells Fargo. Good, thank you for the question. I want to talk about
Andrew James Nowinski: Our revenue outlook for the year, but it is a pretty substantial shift in our pipe towards SaaS.
Matthew Cohen: Your next question comes from the line of Andrew Nowinski with Wells Fargo.
Andrew James Nowinski: Your next question comes from the line of Andrew Nowinski with Wells Fargo.
Andrew James Nowinski: Great. Thank you for the question I wanted to talk about.
Andrew James Nowinski: The U S. Federal market you mentioned, you have fed ramp high status for <unk> and Pam now.
Andrew James Nowinski: I guess first how is demand in the quarter and then second has that fed ramp high status opened up a larger pipeline with new agencies that you can now sell to you.
Andrew James Nowinski: Or are they also purchasing SaaS or more on prem. Thanks.
Matthew Cohen: Yeah, thanks. So when we think about our FedRAMP, let me first clarify that what we announced was FedRAMP high for EPM and for our identity products. And why did we start there, by the way, versus starting with PAM? It was because we only had SaaS versions of those products. So in order to even be able to sell to the federal government with identity and with EPM, we needed to be FedRAMped. We believed in the market opportunity. That's why we went and did the heavy lifting process, not just to get through FedRAMP, but to get to FedRAMP high.
Andrew James Nowinski: Yes.
Andrew James Nowinski: So so I think when we think about our fed ramp let me first clarify what we announced with fed ramp high for <unk> and for our identity products and why did we start there by the way versus starting with Pan. It was because we only have SaaS versions of those products. So in order to even be able to sell into the federal government with identity and.
Matthew Cohen: With APM, we needed to be fed ramped.
Matthew Cohen: We believe that the market opportunity. That's why we went and did the heavy lift process not just to get through fed ramp up to get to fed ramp pipe that opens up not just the civilian side of deferred federal market, but also the Dod side and frankly also helps us at the state level with the state side of the of the government organizations, we are <unk>.
Matthew Cohen: That opens up not just the civilian side of the federal market but also the DOD side and, frankly, also helps us at the state level with the state side of government organizations. We are very bullish and optimistic about our ability to bring EPM and identity into those markets. Now, we have an existing book of business with PAM on-prem that we've had for many years. We have invested in the on-prem certifications. We are now investing as well in PAM FedRAMP certification, and we'll get to that in the time ahead.
Matthew Cohen: Very bullish and optimistic of our ability to bring <unk> in identity into those markets now we have an existing book of business with Pam on Prem that we've had for many years, we have invested in the on Prem certifications, we now are investing as well and Pam.
Matthew Cohen: Fed ramp certification and we will get to that in the in the time ahead, but in the meantime, we believe that one of the biggest in.
Matthew Cohen: But in the meantime, we believe that one of the biggest industries or verticals that are being attacked is the government. It's being attacked at the federal level. It's being attacked at the state level. And our ability to be able to institute core security controls, like I'm describing, lock down the endpoints, and have a bigger story of identity beyond MFASSO allows us to be able to capture a bigger piece of the market in the federal space, which we've done successfully so far in our history, but we think it's an opportunity for investment and growth in the quarters and years ahead.
Matthew Cohen: Industries or verticals that are being attacked is the government, it's being attacked at the federal level, it's being attacked at the state level and our ability to be able to institute core security controls like I'm, describing locked down the endpoints have a bigger version of or bigger story of identity beyond MFA SSO allows us to be.
Matthew Cohen: Able to capture a bigger a bigger piece of the market in the federal space, which we've done well successfully so.
Matthew Cohen: So far in our history, but we think it's an opportunity for investment in growth in the in the quarters and years ahead.
Ittai Kidron: Your next question comes from the line of Ittai Kidron with Oppenheimer.
Matthew Cohen: Your next question comes from the line of <unk> Kidron with Oppenheimer.
Ittai Kidron: Thanks. I have two questions. Maybe I'll show them all at once.
Ittai Kidron: Thanks, I have two questions, maybe I'll throw them all at once.
Ittai Kidron: First for you Josh on the bookings upside.
Ittai Kidron: First for you, Josh, on the bookings upside. Can you give us a little bit more color there on how much of that is duration, new customers, expansion activity stronger than you expected, the mix of products there? Any color would be great. And Matt, going back to the point you mentioned, to the question of EPM being complementary to EDR, it is complementary today, but clearly, more and more of your portfolio right now is on the edge.
Ittai Kidron: Could you could you just give us a little bit more color there on how much does that duration new customers expansion activity stronger than you expected. The mix of products is there any color would be great and Matt on going back to the point you mentioned.
Ittai Kidron: The question now.
Ittai Kidron: Complementary.
Ittai Kidron: ECM being complementary to Edr it is complementary today, but clearly.
Speaker Change: And Mark.
Ittai Kidron: Your portfolio right now is at the edge I would think the browser would think I would think about that as a niche product as well.
Ittai Kidron: I would think of the browser as an edge product as well. And so, as you're moving closer and closer to the edge, can your EPM product evolve into an EDR-like product and be competitive within EDR?
Ittai Kidron: And so yes, you're moving closer and closer to the edge can your APM product evolve.
Ittai Kidron: Two and edr like product and be competitive with any Dr solution.
Matthew Cohen: Sure, and I may take both just in the interest of time to move us along, but there are questions. So on the first front, when we look at the bookings performance in the quarter, remember bookings have nothing to do with duration. So the duration, we just wanted to be transparent, was a bump up in the quarter, it's about three and a half million dollars in contribution around revenue, but it's not a contributing factor to the strength of our overall business.
Josh: Sure and I may take both just in interest of time to move this along but the questions. So on the first front when we when we look at the bookings performance in the quarter remember bookings has nothing to do with durations. So the duration. We just wanted to be transparent was a bump up in the quarter, it's about $3 5 million of contribution around revenue.
Matthew Cohen: But but it's not a contributing factor to the strength of our overall business. The strength of our overall business is based upon continued growth across the entire portfolio. We continue to see a or just grow really strongly for each piece of the platform now I highlighted in the call kind of particular strength in the <unk>.
Matthew Cohen: The strength of our overall business is based upon continued growth across the entire portfolio. We continue to see AAR just grow really strongly for each piece of the platform. Now, I highlighted in the call some kind of particular strength in the secrets management business. And I'm very excited by that, because that again is showing our ability to compete effectively as a security sales in the machine identity space. So I would highlight that.
Matthew Cohen: Grits management business and I'm I am very excited by that because that again is showing our ability to compete effectively as a security sale in the machine identity space. So I would highlight that I would also highlight as we talked about earlier, our ability to be able to go back into the base and expand customers beyond Pam or sick.
Matthew Cohen: I would also highlight, as we talked about earlier, our ability to be able to go back into the base and expand customers beyond PAM or securing IT into new areas like securing developers, or our ability to be able to compete effectively in the quarter around workforce and our differentiated workforce solution. So across the board, I can point to the entire portfolio, talk about strong bookings, and that kind of comes from that overall approach. Remind me again of the second question.
Matthew Cohen: Carrying it into new areas like securing developers or our ability to be able to go compete effectively in the quarter around workforce and our differentiated workforce solution. So across the board I can point to the entire portfolio talk about strong bookings and that in that kind of comes from that overall approach.
Speaker Change: Remind me again the second question.
Matthew Cohen: EPM into EDR.
Matthew Cohen: EPS into Edr.
Matthew Cohen: Thank you. So on the EPM side, I think we are very comfortable with our definition of identity security, our definition of these four different identity groups, our ability to be able to be the control point, and our ability to be able to apply privilege controls across those. And just like I think that EPM is a complement to EDR, I'm very respectful of the EDR businesses that are out there. I go to customers, and I tell them all the time, yes, they ask me, should I spend money on next-gen EDR?
Matthew Cohen: Thank you so on the Ami and the APM side.
Matthew Cohen: I think we are very comfortable with our definition of identity security our definition for these four.
Matthew Cohen: Four different identity groups, our ability to be able to be the control point in our ability to be able to apply privileged controls across those and just like.
Matthew Cohen: I think that.
Matthew Cohen: <unk> is a complement to edr.
Matthew Cohen: Very respectful of the Edr businesses that are out there I go to customers and I tell them. All the time, yes. They asked me should I spend money on next Gen Edr and I would say, yes, it's a good security control to have in place and a lot of them have the right security first mindset and how they approach it but I think there's plenty of space for us to carve out with the least.
Matthew Cohen: And I say, yes, it's a good security control to have in place, and a lot of them have the right security first mindset in how they approach it. But I think there's plenty of space for us to carve out with the least privilege and privilege control side of the endpoint. And by the way, when you talk about our browser, you're talking about the same thing, the idea of an identity-centric security control focused browser that can integrate into our identity security platform. And I think there's plenty of growth ahead of us without having to go into the larger EDR market.
Matthew Cohen: Privilege and privilege control side of the endpoint and by the way when you talk about our browser you are talking about the same thing the idea of an identity centric security control focused browser that can integrate into our data security platform and I think there's plenty of growth ahead of us without having to go into the larger edr market.
Speaker Change: I appreciate it thank you.
Operator: Your next question comes from the line of Shraddhi Kothari with Beard. Your line is open.
Matthew Cohen: Your next question comes from the line of.
Shrenik Kothari: Sure Eddie <unk> with Baird. Your line is open.
Shrenik Kothari: Hey, guys. Thanks for taking my question Mike.
Shrenik Kothari: A follow up on the.
Operator: Browser.
Shrenik Kothari: Looks very timely, as you said, addresses the growing demand for the enterprise market and is designed to go beyond just lock-in, harvesting, and browser-based attacks. One recent comment you made was that you believe the browser will not only enhance security but also drive adoption of all the other solutions. I know it's still early days, but the market seems to be moving quite fast. So just curious, are you already kind of seeing signs where the browser is seen differentiated, becoming a landing point, and driving demand for other solutions? And then just a quick follow-up on Azure.
Shrenik Kothari: And it looks very timely.
Shrenik Kothari: Congrats on.
Shrenik Kothari: The growing demand for Brandon.
Shrenik Kothari: Okay and designed to go beyond just law.
Shrenik Kothari: The harvesting and possibly correct.
Shrenik Kothari: One comment you made was you believe the browser will not only because they don't have to talk about also drive adoption of all the other solutions I know, it's still early days, but the market seems to be moving quite fast. So just curious are you already kind of seeing signs that the browser is seen differentiator, but coming up.
Shrenik Kothari: Landing point and driving demand for other solutions and then just a quick follow up on Azure.
Speaker Change: Sure. So I think just to ground everybody in the release. So when you when you go into the <unk> secure browser you are able to obviously from a security control perspective, browse freely with a cookie less browsing with password replacement with other security controls built right in and it's designed for.
Matthew Cohen: Sure. So I think just to ground everybody in the release. So when you go into the CyberArk secure browser, you are able to, obviously from a security control perspective, browse freely with cookie list browsing, with password replacement, with other security controls built right in. And it's designed for privileged users to be able to get to other targets within the enterprise much, much more securely. And it kind of locks down and stops one of the most important or most difficult attacks to be able to protect against, which is post-session authentication hijacking. So we look at it, and we pitch it from that perspective, and it is a really nice security story.
Matthew Cohen: For the privileged users to be able to get to other targets within the enterprise much much more securely and it kind of locked down and stops one of the most important or most.
Matthew Cohen: Difficult attacks to be able to protect against which is post session authentication hijacking. So we look at it and we pitch it from that perspective, and it is a really nice security story.
Matthew Cohen: But underneath that, it is really a gateway and easy navigation into our identity security platform. When you go into the browser, you're presented with a co-pilot that allows you to access your single sign-on tiles. It allows you to be able to access your infrastructure targets, traditional targets for PAM users. You can go, and right from the browser, right from the main screen, you can get into your cloud service provider's portals, into the backend microservices.
Matthew Cohen: But underneath that is really a gateway and an easy navigation into our identity security platform. When you go into the browser you're presented with a co pilot that allows you to be able to access your single sign on titles that allows you to be able to access your infrastructure targets traditional targets for Pam users you can go.
Matthew Cohen: And right from the browser right from the main <unk> main screen you can get into your cloud service providers portals into the backend micro services and you can actually do things right and the browsers that you would normally have to go into the back end platform to go do so that creates a much easier path for users and administrators to be able to.
Matthew Cohen: And you can actually do things right in the browser that you would normally have to go into the backend platform to do. So that creates a much easier path for users and administrators to be able to leverage and use the platform effectively. So when we look at customers and talk with all the customers that have been using the product when it was in limited release, they start to see this improved pathway of usage, removing the friction of user access in the PAM space and allowing for total integration into our workforce tools.
Matthew Cohen: Our leverage and use the platform effectively so when we look and we talk with customers and all the customers that have been using the product when it was in limited release they start to see this.
Matthew Cohen: Improved pathway of usage, removing the friction of user access in the Pam space and allowing for total integration into our workforce tools.
Matthew Cohen: Got it. Super, super helpful, Matt. And just quickly on the Azure Marketplace, you mentioned a seven-figure deal that you guys kind of won, aligned it with BAM-EPM, and kind of flowed through this new route to market. Can you talk a bit about the go-to-market process and kind of any sense about the relative size or mix or incremental trends around this marketplace motion? Sure.
Speaker Change: Got it that's super helpful. Martin just quickly on Azure.
Matthew Cohen: Through our marketplace.
Matthew Cohen: You mentioned about a seven figure deal that you guys kind of one a lot of it by maybe am and kind of flowed through this.
Matthew Cohen: This new route to market and we'll talk a bit about our go to market motion.
Matthew Cohen: Any sense about the relative size of it makes our incubator trends around this marketplace motion.
Matthew Cohen: Sure, and I think you've heard us talk in previous quarters about the idea of; we believe that one of the upside opportunities for us is to continue to exploit new routes to market. You've heard us talk about that in the context of the MSP program, the launch of our MSP console, our ability to be able to actually leverage new channel partners, go downmarket with distributors, and continue to push on our SI partnership and our SI relationship.
Speaker Change: Sure and I think you've heard us talk on the prior quarters about the idea of.
Matthew Cohen: We believe that one of the upside opportunities for US is to continue to exploit new routes to market you've heard us talk about that in the context of the MSP program. The launch of our MSP console, our ability to be able to actually leverage new channel partners go down market with distributors continue to push on our ESI partnership and our Si relationships. So <unk>.
Matthew Cohen: So you see, overall, we're investing in enabling and building stronger partnerships. One of those new routes to market is our marketplace, and you've heard us talk about the AWS relationship that we've built and continue to drive on to allow for frictionless buying, to leverage the AWS sales force, and then to be able to be part of the dollars that sit out there for marketplace purchases. And it's been a great lubricant in the sales cycle.
Matthew Cohen: Overall, we're investing in enabling and building stronger partnerships one of those new routes to market is our marketplace and you've heard us talk about the AWS relationship that we've built and continue to drive on to allow for frictionless buying to leverage the.
Matthew Cohen: The AWS sales force and then to be able to be part of the dollars that sit out there for marketplace purchases and it it's been a great lubrication in the sales cycle and this quarter. We highlighted the deal you mentioned, which went through the Azure marketplace. We're earlier days from that perspective for sure, but it speaks to the overall marketplace opportunity.
Matthew Cohen: In this quarter, we highlighted the deal that you mentioned, which went through the Azure marketplace. We're early days from that perspective, for sure, but it speaks to the overall marketplace opportunity as a buying vehicle and as a co-sell motion that can help drive our business forward.
Matthew Cohen: As a buying vehicle and as a co sell motion that can help drive our business forward.
Matthew Cohen: That concludes our Q&A session. I will now turn the conference back over to Matt Cohen for closing remarks.
Matthew Cohen: That concludes our Q&A session I will now turn the conference back over to Matt Cohen for closing remarks.
Matthew Cohen: Thank you.
Matthew Cohen: And I want to go back, as we celebrate our 25th anniversary, to think about the fact that CyberArc is laser focused on driving innovation and delivering value to our customers, an achievement we owe to the hard work and dedication of over 3,000 CyberArkers today, as well as our partners around the world. We are in an amazing position as the leading identity security company that is built to last and thrive for at least another 25 years. We look forward to welcoming many of you at our Impact customer event in just over two weeks. Thanks for joining us on the call today.
Matthew Cohen: And I want to go back as we celebrate our 20 <unk> anniversary to think about the fact that cyber Ark is laser focused on driving innovation and delivering value to our customers and achievement, we owe to the hard work and dedication of over 3000 cyber workers today as well as our partners around the world.
Matthew Cohen: We are in an amazing position as the leading identity security company that is built to last and thrive for at least another 25 years.
Matthew Cohen: We look forward to welcoming many you at our impact customer event and just over two weeks. Thanks for joining the call today.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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