Q2 2024 CyberArk Software Ltd Earnings Call

Unknown Executive: 2024 Financial Results. With me on the call today are Matt Cohen, our Chief Executive Officer, and Josh Siegel, our Chief Financial Officer.

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 statement.

Unknown Executive: 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. I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the third quarter of full year 2024 and beyond. I also refer to our expectations and beliefs regarding our proposed acquisition of Benefax.

Unknown Executive: 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. Cyberark expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call.

Speaker Change: <unk>, which reflect management's best judgment based on currently available information.

Refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the third quarter full year 2024 and beyond.

Speaker Change: <unk> also referred to our expectations and beliefs regarding our proposed acquisition of benefit.

Speaker Change: Our actual results might differ materially from those projected in these forward looking statements.

Speaker Change: 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 todays press release that are posted to <unk> website.

Speaker Change: <unk> expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call reconciliations to the most directly comparable GAAP financial measures, but.

Speaker Change: Also available in today's press release as well as an updated investor presentation that outlines the financial discussion in todays call.

Unknown Executive: 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 today's call. A webcast of today's call is also available on our website in the Investor Relations section. With that, I would like to turn the call over to our CEO, Matt Cohen.

Speaker Change: A webcast of today's call is also available on our website in the IR section with that I would like to turn the call over to our CEO, Matt Cole.

Matt Cohen: Thanks Sri and thanks everyone for joining the call today. We started the year with a clear vision and strategy to strengthen our position as the Ademi security company. In the second quarter, we executed against this strategy exceptionally, and the result exceeded expectations with momentum continuing to build across all aspects of our business. After a strong first half of the year, and with our proposed acquisition of Venify in the second half on track, we are well positioned to extend our leadership across all identity use cases with our industry-leading platform and solution. More on Venafi later, but first, a few highlights from our strong second quarter. Net new subscription ARR was 56 million. That's a record outside of our seasonally strong fourth quarter.

Matt Cole: Thanks, Lee and thanks to everyone for joining the call today.

Matt Cole: We started the year with a clear vision and strategy to strengthen our position as the identity Security company.

Speaker Change: In the second quarter, we executed against the strategy exceptionally and our results exceeded expectations with momentum continuing to build across all aspects of our business.

Matt Cole: After a strong first half of the year and with our proposed acquisition of identified in the second half on track, we are well positioned to extend our leadership across all identity use cases, with our industry, leading platform and solutions.

Matt Cole: More on benefit later, but first a few highlights from our strong second quarter.

Matt Cole: Net new subscription <unk> was $56 million, that's a record outside of our seasonally strong fourth quarter subscription a or a $677 million grew 50% year over year total E. R of $868 million grew 33% year.

Matt Cohen: Subscription AR of $677 million grew 50% year over year. Total AR of $868 million grew 33% year-over-year, and our Q2 results significantly exceeded guidance across revenue, operating income, and EPS. We delivered record total revenue of $224.7 million, growing 28% year-over-year. Non-GAAP operating income came in at $23.7 million, highlighting the operating leverage in our business model. Non-GAAP Earnings Per Share was $0.54.

Matt Cole: Over a year and our Q2 results significantly exceeded guidance across revenue operating income and EPS.

Matt Cole: We delivered record total revenue of $224 7 million growing 28% year over year non-GAAP operating income came in at $23 7 million highlighting the operating leverage in our business model.

Matt Cole: non-GAAP earnings per share was 54 cents and.

Matt Cohen: And we are pleased to report $41.7 million in free cash flow, or a 19% free cash flow margin for the quarter, another proof point of the subscription flywheel effect and the power of our business model. We are incredibly proud to be among an elite class of software companies that delivered faster than 30% ARR growth, increased net new ARR year over year, and drove meaningful upside in profitability and free cash flow. That's a testament to our relentless focus on driving profitable growth, our expanded position as the leader in identity security, and the unique value proposition of our unified identity security platform, solving clear and present needs for CISOs around the world. 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 discuss later today.

Matt Cole: And we are pleased to report $41 7 million in free cash flow or a 19% free cash flow margin for the quarter. Another proof point of the subscription flywheel effect and the power of our business model.

Matt Cole: We are incredibly proud to be among an elite class of software companies that delivered faster than 30% AOR growth increased net new a our year over year and drove meaningful upside in profitability and free cash flow.

Matt Cole: That's a testament to our relentless focus on driving profitable growth our expanded position as the leader in identity security and the unique value proposition of our unified identity security platform solving clear and present needs for the <unk> around the world.

Matt Cole: 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 discuss later.

Matt Cole: Today, she shows recognize that traditional methods of securing identity no longer work.

Matt Cohen: CISOs recognize that traditional methods of securing identity no longer work. Three forces, new identities, new environments, and new attack methods, are fundamentally redefining the market. The modern enterprise has to secure four different types of identities or personas, with each one having unique challenges and levels of complexity. The four groups are the workforce, IT, developers, and machines.

Speaker Change: Three forces new identities, new environments, and new attack methods are fundamentally redefining the market. The modern enterprise has to secure for different types of identities of personas with each one having unique challenges and levels of complexity.

Matt Cole: The four groups our workforce developers.

Speaker Change: Developers and machines. These identity groups are increasingly accessing heterogeneous targets located on prem and in hybrid and multi cloud environments, meaning security has moved from parameter based to identity centric.

Matt Cohen: These identity groups are increasingly accessing heterogeneous targets located on-premises and in hybrid and multi-cloud environments, meaning security has moved from perimeter-based to identity-centric. Given this complexity, it's no surprise that in today's threat landscape, all roads lead back to identity. Last year, 93% of organizations were victims of an identity-related cyberattack, and nearly all of them more than once.

Speaker Change: Given this complexity, it's no surprise that in today's threat landscape all roads lead back to identity last year, 93% of organizations were victims of an identity related cyber attack and nearly all of them more than once as I talk with customers and experts around the world it's evident that in.

Matt Cohen: As I talk with customers and experts around the world, it's evident that a new paradigm for securing identity is required. This new paradigm centers around our fundamental vision that every identity, human and machine, needs to be secured with the right level of privilege controls. Cyberark's unified end-to-end platform is the only one to deliver on this vision. Increasingly, this is resonating with customers, and it's driving tremendous business momentum and fueling our growth.

Speaker Change: New paradigm for securing identity is required this new paradigm centers around our fundamental vision that every identity human and machine needs to be secured with the right level of privilege controls.

Speaker Change: <unk> unified end to end platform is the only one to deliver on this vision increasingly this is resonating with customers and it's driving tremendous business momentum and fueling our growth.

Matt Cohen: In Q2, the strength of our platform and land and expand execution resulted in strong close rates and robust pipeline build. Customers are allocating significant portions of their budgets to identity security, consolidating spend, and most importantly, consolidating trust with Cyberark. As an example of all these factors coming together, we can look at a strategic customer partnership.

Speaker Change: In Q2, the strength of our platform and land and expand execution resulted in strong close rates and robust pipeline build customers are allocating significant portions of their budget to identity security consolidating spend and most importantly, consolidating trust with sidewalk.

Matt Cole: As an example of all these factors coming together, we can look at our strategic customer protest.

Matt Cohen: Less than a year ago, the International Government Agency landed as a new logo with a seven-figure deal that secured IT users with PAM, workforce identities with Identity and EPM, and machines with sequence management. Since then, they have grown with Cyberark, and this quarter, they further expanded their workforce protection with another seven-figure ACB deal. The deep relationship we have formed with ProDESP and the speed of expansion after initial deployment shows the power of our identity security platform and how it is well aligned with what great organizations like ProDESP need to do to be secure.

Speaker Change: Less than a year ago, the international government agency landed as a new logo with a seven figure deal that secured users with Pam workforce identities with identity and a P M and machines with secrets management.

Speaker Change: Since then they have grown with cyber Ark and this quarter. They further expanded their workforce protection with another seven figure ACB deal.

Speaker Change: The deep relationship we have formed with protests and the speed of expansion. After initial land shows the power of our identity security platform and how it is well aligned with what great organizations like protests need to do to be secure.

Matt Cohen: As the scope of PAM programs continues to expand to include shadow IT, database, and cloud administrators, as well as high-risk workforce users, we are continuing to help our customers modernize their identity security programs with broader, more agile, privileged controls across these personas. And in a rip-and-replace new logo win, a leading biotechnology company signed a six-figure deal to replace a competing PAM vendor.

Speaker Change: As the scope of Pam programs continues to expand to include Shadow I T database and cloud administrators as well as high risk workforce users. We are continuing to help our customers modernize their Danny security programs with broader more agile privilege controls across these personas and a <unk>.

Speaker Change: Rip and replace new logo win a leading biotechnology company signed a six figure deal to replace a competing Pam vendor.

Matt Cohen: Cyberark's comprehensive identity security platform was a key differentiating factor as the customer wanted to modernize not just the protection of the IT user with Privileged Cloud but also enhance security for their workforce with Workforce Password Manager and protect machine identities with Secrets Management. Every organization today has a substantial and rapidly growing developer population. In the pursuit of speed and efficiency, developers are often afforded always-on privileges with only light, if any, security in place.

Speaker Change: <unk> comprehensive identity security platform was a key differentiating factor is the customer wanted to modernize not just the protection of the user with privilege cloud, but also enhanced security for their workforce with workforce password manager and protect machine identities with secrets management.

Speaker Change: Every organization today has a substantial and rapidly growing developer population in the pursuit of speed and efficiency developers are often afforded always on privileges with only light if any security in place.

Matt Cohen: Here too, we have to shift the paradigm to one of security first without interfering with the developer's pace of innovation. At the foundation of our developer solution is our Secure Cloud Access, or SEA, functionality. SEA applies the principle of least privilege access to developers, data scientists, and cloud engineers while allowing them to work natively and efficiently without having to change their preferred workflow. In the second quarter, we continue to see strong traction with this offering.

Speaker Change: Here too we have to shift the paradigm time to one of security first without interfering with the developers pace of innovation.

Speaker Change: At the foundation of our developer solution is our secure cloud access or FCA functionality.

Speaker Change: CA applies the principal at least privilege access to developers data scientists and cloud engineers, while allowing them to work natively and efficiently without having to change their preferred workflow.

Speaker Change: In the second quarter, we continued to see strong traction with this offering.

Matt Cohen: In a deal that included SEA and Privilege Cloud, leading enterprise software company SAP saw standing access, just-in-time access, and zero-standing privilege from a unified solution as the key differentiator for choosing Cyberark. With SEA, they can now seamlessly enable a zero-standing privilege approach while fully securing their modern cloud environment. On the spectrum of identities, the need to do things differently is especially top of mind for securing workforce users. Each workforce identity is more powerful today than ever before and can become privileged throughout the workday. Traditional SSO and MFA functionality on their own don't provide the security needed, as evidenced by many high-profile breaches.

Speaker Change: And a deal that included S. P a and privilege cloud leading enterprise software company S. P saw standing access just in time access and zero standing privilege from a unified solution as the key differentiator for choosing ciber.

Speaker Change: With FCA.

Speaker Change: They can now seamlessly enable a zero standing privilege approach, while fully securing their modern cloud environments.

Speaker Change: On the spectrum of identities the need to do things differently is especially top of mind for securing work force users each workforce identity is more powerful today than ever before and can become privilege privileged throughout the work that.

Speaker Change: Traditional SSO and MFA functionality on their own don't provide the security needed as evidenced in many high profile breaches.

Matt Cohen: In the second quarter, our workforce solution was once again one of the strongest performers because we are solving this critical customer problem. We reimagined workforce identity by wrapping MFA and SSO with more controls that secure web sessions, the browser, and manage passwords. In addition, workforce protection extends to the endpoint with Endpoint Privilege Manager. The following two deals showcase the power of bringing privilege controls to the workforce. A U.S. financial services company that is a longtime CyberArk PAM customer had a need to keep its workforce more secure by managing passwords. With WPM, they can now do exactly that.

Speaker Change: In the second quarter, our workforce solution was once again one of the strongest performers because we are solving this critical customer problem.

Speaker Change: We've re imagined workforce identity by wrapping MFA and SSO with more controls that secure web sessions, the browser and manage passwords. In addition, workforce protection extends to the endpoint with endpoint privilege manager.

Speaker Change: Following two deal showcase the power of bringing privilege controls to the workforce.

Speaker Change: A U S financial services company, Who's a longtime side, where our cam customer had a need to keep its workforce more secure by managing passwords with W. P. M. They can now do exactly that the ability to add secure browser and secure web sessions on top of their existing vendors SSO and MFA means they can also benefit.

Matt Cohen: The ability to add secure browser and secure web sessions on top of their existing vendors, SSO, and MFA, means they can also benefit from the additional security layer of CyberArk's broader access suite that's integrated within our platform. In a different example of the importance of least privilege at the endpoint when securing the workforce, a major aviation company chose to protect their workforce workstations by implementing our EPM solution. Choosing to deploy EPM with our FedRAMP High certification, they landed a high six-figure deal that closed through the AWS Marketplace.

Speaker Change: <unk> from the additional security layer of sidewalks broader access suite, that's integrated within our platform.

Speaker Change: And a different example of the importance of lease privileged at the endpoint when securing the work force a major aviation company chose to protect their workforce workstations by implementing our APM solution.

Speaker Change: Choosing to deploy E. P M with our fed ramp certification they landed with a high six figure deal that closed through the AWS marketplace.

Matt Cohen: In machine identity, we had an outstanding quarter, and our momentum continues to build, underpinning our current machine identity solution, our Conjure Cloud and Secrets Hub, which when combined empower the developer with agility and security within their native workflow. In one outstanding deal from the quarter, a major airline, who is a long-standing Cyberark customer, recognized the need to move its secrets management strategy within the security team's remit. We quickly demonstrated the value of Cyberark Secrets Hub, resulting in a mid-six-figure ACV deal.

Speaker Change: In machine identity, we had an outstanding quarter and our momentum continues to build underpinning our current machine identity solution or conjure cloud and secret sauce, which when combined empower the developer with agility and security within their native workflow.

Speaker Change: And one outstanding deal from the quarter, a major airline who has a long standing side, where our customer recognize the need to move its secrets management strategy within the security teams remit, we quickly demonstrated the value of cyber Ark secrets up resulting in a mid six figure ACB deal.

Matt Cohen: We believe that the market for protecting machine identities is inflating, and we have increasingly heard from customers that there is an urgent need to protect all machine identities. Machine identities themselves are growing exponentially due to the increase in cloud computing and the rise of AI. The machine identity landscape is also becoming more complex with increasing regulatory scrutiny and emerging standards like Google's guidance to rotate certificates every 90 days. All of this is happening as machine identities are increasingly targeted by adversaries as a weak point in organizational security controls.

Speaker Change: We believe that the market for protecting machine identities as inflected and we have increasingly heard from customers that there is an urgent need to protect all machine identities machine of days themselves are growing exponentially due to the increase in cloud computing and the rise of AI. The machine identity landscape is also be.

Speaker Change: Coming more complex with increasing regulatory scrutiny and emerging standards like Google's guidance to rotate certificates every 90 days all of this is happening as machine identities are increasingly targeted by adversaries as a weak point in organizational security controls.

Matt Cohen: We are very excited to be building out and expanding our leadership position in machine identities with the pending acquisition of Enify, which is undergoing regulatory review. All machine identities need to be discovered, secured, managed, and automated to keep their connections and communication safe. Benefi's machine identity management solutions are complementary to CyberArk with no technology overlap. We believe that by combining our secrets management with Venafi's Modern Machine Identity Management, Certificate Lifecycle Management, and SSH Key Management, we will set a new standard for end-to-end machine identity security.

Speaker Change: We are very excited to be building out and expanding our leadership position and machine identities with the pending acquisition of <unk>, which is undergoing regulatory review.

Speaker Change: All machine identities needs to be discovered secured managed and automated to keep their connections and communication safe verifies machine identity management solutions are complementary to cyber Ark with no technology overlap. We believes that can I, combining our secrets management with Vantiv is modern Ms.

Speaker Change: <unk> identity management Certificate lifecycle management, and SSH key management, we will set a new standard for end to end machine identity security.

Matt Cohen: As you can see from these deal examples, our platform provides the ability to land on multiple spots and with multiple products. In the second quarter, we signed 245 new logos, and approximately half of these new logos landed with two or more solutions.

Speaker Change: As you can see from these deal examples our platform provides the ability to land in multiple spots in with multiple products in the second quarter, We signed 245, new logos and approximately half of these new logos landed with two or more solutions in other words customers are protecting multiple types of identities with XI.

Matt Cohen: In other words, customers are protecting multiple types of identities with Cyberark from day one. In addition, we had a strong quarter of expansion within our base across all our solutions, but machine identities with secrets management and workforce identities with our access offerings were particularly strong. At IMPACT, our marquee customer event held in May, attendance was up more than 25% compared to last year.

Speaker Change: From day one.

Speaker Change: In addition, we had a strong quarter of expansion within our base across all our solutions, but machine identities with secrets management and workforce identities with our access offerings were particularly strong.

Speaker Change: At impact our marquee customer event held in May attendance was up more than 25% compared to last year. We showcase that we are the front runner in innovation and are expanding the capabilities of our identity security platform, all serving our fundamental vision of securing every identity human or machine with the right.

Matt Cohen: We showcased that we are the frontrunner in innovation and are expanding the capabilities of our identity security platform, all serving our fundamental vision of securing every identity, human or machine, with the right level of privilege controls. We announced exciting product innovations across the whole portfolio, but I want to highlight two of them here, Core AI and ITDR. CyberArk's Cora AI provides identity security-focused artificial intelligence embedded within our identity security platform. Our unique data set on the behavior of all identities enables Cora AI to do more, and ultimately, to effectively analyze sessions, detect threats, and recommend actions.

Speaker Change: Level of privilege controls.

Speaker Change: We announced exciting product innovations across the whole portfolio, but I want to highlight two of them here core AI and ITD or <unk>.

Speaker Change: <unk> core AI provides a dent in the security focused artificial intelligence embedded within our identity security platform.

Speaker Change: Unique dataset on the behavior of all identities enables core AI to do more and ultimately effectively analyze sessions detect threats and recommend action.

Matt Cohen: In addition, user and admin lives are made easier, and adoption is faster, with an addendum security assistant that understands natural language. This will fundamentally transform how users interact with our platform, significantly reducing the time it takes to deliver critical information and analysis. Identity Threat Detection and Response, or ITDR, is sometimes discussed as a separate market or product. However, we at CyberArk believe ITDR capabilities need to be part of a broader platform. They should not just be about monitoring the vendor's infrastructure or limited to Active Directory; they need to look across all identities to detect identity risk, and then be able to take automated response before damage is done. Our ITDR capabilities powered by Core AI will detect and identify risky behavior. Anomalous Use of Secrets, and much more.

Speaker Change: In addition, user and admin lives are made easier and adoption is faster within identity security assistant that understands natural language. This will fundamentally transform how users interact with our platform. So it did significantly reducing the time it takes to deliver critical information and analysis.

Speaker Change: Denny threat detection and response or ITD R is sometimes discussed as a separate market or product. We at <unk> believe ITD, our capabilities need to be part of a broader platform. They should not just be about monitoring the vendors infrastructure are limited to active directory they need to look across all identities.

Speaker Change: To detect identity risk and then be able to take automated response before damage is done.

Speaker Change: Our I T D. Our capabilities powered by core AI will detect and identify risky behavior.

Speaker Change: This use of secrets and much more.

Matt Cohen: The powerful combination of Core AI and ITDR enhances security, improves resiliency, drives increased productivity, and enhances engagement with our platform. In summary, I want to leave you with the following takeaways from today's presentation. First, momentum continues to accelerate in our business. Identity security is a top priority for CISOs, and customers are consolidating spend with Cyberark. Second, our solution selling is increasing our momentum in the market. Applying the right level of privilege controls to every identity is a security imperative that is recognized by boards, the C-suite, security teams, and increasingly by operations and developers.

Speaker Change: The powerful combination of core AI, and ITD or enhance it security improves resiliency drives increased productivity and enhances engagement with our platform.

Ray Mcdonough: 2024 Financial Results, with me on the call today are Matt Cohen, our Chief Executive Officer, and George 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. I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the third quarter, full year 2024 and beyond.

Matt Cohen: Third, we are leading the charge when it comes to thought leadership and execution in the identity security space. Our ongoing innovation and pending acquisition of Ventify will further extend our leadership position and competitive moat and help further solidify our position as the identity security company.

Speaker Change: In summary.

Speaker Change: I want to leave you with the following takeaways from today's.

Speaker Change: First momentum continues to accelerate in our business are Daniel security is a top priority for <unk> and customers are consolidating spend with cyber Ark.

Ray Mcdonough: I also refer to our expectations and beliefs regarding our proposed acquisition of benefit. 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 20F filed with the U.S. Securities and Exchange Commission and those referenced in today's press release that are posted to Cyberark's website. Cyberark expressly disclines any application or undertaking to release publicly any updates or revisions to any forward-looking statements made herein.

Speaker Change: Second our solution selling is increasing our momentum in the market applying the right level of privilege controls to every identity is this security imperative that is recognized by boards by the C suite security teams and increasingly by operations and developers.

Speaker Change: Third we are leading the charge when it comes to thought leadership and execution in the identity security space are ongoing innovation and pending acquisition of <unk> will further extend our leadership position and competitive moat and help further solidify our position as the Denny Security company.

Speaker Change: And lastly.

Matt Cohen: We are executing. Deals are progressing at a faster pace, and our close rates remain strong. This is a clear testament to the fact that customers are allocating budgets to Adani security. Momentum continues to build across our entire business, and the strength of our platform is driving our outstanding results. With our 28% revenue growth and our 19% free cashflow margin, we were a solid Rule of 40 company in Q2. I will now turn the call over to Josh, who will talk about our strong financial results and the increase in our yearly guidance.

Speaker Change: We are executing deals are progressing at a faster pace and our close rates remains strong a clear Testament to the fact that customers are allocating budgets to have Danny security.

Speaker Change: Momentum continues to build across our entire business and the strength of our platform is driving our outstanding results with our 28% revenue growth and our 19% free cash flow margin. We were a solid rule of 40 company in Q2.

Ray Mcdonough: Additionally, non-GAP financial measures will be discussed on this conference call. Reconciliation 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 IR section.

Speaker Change: I'll now turn the call over to Josh who will talk about our strong financial results and the increase in our yearly guidance.

Matthew Cohen: With that, I would like to turn the call over to our CEO, Matt Cohen. Thanks, Ray, and thanks everyone for joining the call today. We started a year with a clear vision and strategy to strengthen our position as the Ademi Security Company. In the second quarter, we executed against this strategy exceptionally and a result succeeded expectations with momentum continuing to build across all aspects of our business. After a strong first half of the year and with our proposed acquisition of benefit in the second half on track, we are well positioned to extend our leadership across all identity use cases with our industry-leading platform and solutions.

Josh Siegel: Thanks Matt. Q2 was another strong quarter for Cyberark. Once again, we exceeded our guidance across all metrics, highlighting our strong execution and durable demand for our identity security platform. We delivered strong, net new ARR growth, 245 new logos, solid top line growth, and our subscription flywheel is helping us drive robust operating leverage and healthy free cash flow. Now, moving into the results.

Josh: Thanks, Matt Q2 was another strong quarter for cyber hug once again, we exceeded our guidance across all metrics, highlighting Australia execution and durable demand for identity security platform. We delivered strong net new <unk> growth 245, new logos solid topline.

Speaker Change: Growth in our subscription flywheel is helping us drive robust operating leverage and healthy free cash flow.

Speaker Change: Moving into the results total revenue grew 28% year on year, reaching $224.7 million and exceeded the top end of our guidance range.

Josh Siegel: Total revenue grew 28% year on year, reaching $224.7 million and exceeding the top end of our guidance range. Annual recurring revenue reached $868 million, that's growing 33% year-on-year, with $57 million in total net new ARR. As expected, SAS made up a larger share of our bookings in the second quarter compared to the year-ago period last year.

Speaker Change: Annual recurring revenue reached $868 million, that's growing 33% year on year with $57 million in total net new a R. As expected SaaS made up a larger share of our bookings in the second quarter compared to the year ago period from.

Matthew Cohen: More on benefit later, but first, a few highlights from our strong second quarter. Net news subscription ARR was 56 million. That's a record outside of our seasonally strong fourth quarter. Subscription ARR of 677 million grew 50 percent year over year. Total ARR of 868 million grew 33 percent year over year. And our Q2 results significantly exceeded guidance across revenue, operating income and EPS. We delivered record total revenue of 224.7 million growing 28 percent year over year.

Josh Siegel: Subscription ARR grew 50% and reached $677 million, and is now 78% of total ARR. We added $56 million in net new subscription ARR, that's an increase from the $49 million in the second quarter last year and a record for any non-Q4 quarter. Maintenance ARR was $191 million. Like for like, conversion activity still represents a single digit percent of our year-on-year ARR growth.

Speaker Change: From last year subscription.

Speaker Change: Grew 50% and reached $677 million and is now 78% of total a are we added $56 million and net new subscription <unk>. That's an increase from the $49 million in the second quarter last year and a record for any Q4 quarter.

Speaker Change: Maintenance was $191 million like for like conversion activity still represents a single digit percent of a year on year AOR growth.

Matthew Cohen: Non-GAP operating income came in at 23.7 million highlighting the operating leverage in our business model. Non-GAP earnings per share was 54 cents. And we are pleased to report 41.7 million in free cash flow or a 19 percent free cash flow margin for the quarter. We are incredibly proud to be among an elite class of software companies that delivered faster than 30% ARR growth, increased net new ARR year over year, and drove meaningful upside in profitability and free cash flow.

Josh Siegel: Our business continues to benefit from the momentum we are seeing in upselling and cross-selling new solutions across our platform, which is a significant factor in our strong growth. In the second quarter, the cohort of customers with more than $100,000 in ARR grew to nearly 1,900, and the cohort with ARR of more than $500,000 is now over 340 customers that grew 38% year-on-year. Moving into the details of the revenue lines for the second quarter, recurring revenue reached $208 million, growing 32% year-on-year and accounting for 93% of total revenue, continuing to go up from 90% in the second quarter last year.

Speaker Change: Our business continues to benefit from the momentum we are seeing in Upselling and cross selling new solutions across our platform, which is a significant factor in our strong growth.

Speaker Change: In the second quarter that cohort of customers with more than $100000 in Ara grew to nearly 1900.

Speaker Change: And the cohort with a more than $500000 is now over 340 customers that grew 38% year on year.

Speaker Change: Moving into the details of the revenue lines for the second quarter recurring revenue reached $208 billion growing 32% year on year and accounted for 93% of total revenue continue to go up from the 90% in the second quarter last year. So.

Matthew Cohen: That's a testament to our relentless focus on driving profitable growth, our expanded position as the leader in identity security, and the unique value proposition of our Unified Identity Security platform, solving clear and present needs for the CSOs around the world. The strength of our results in business momentum gives us the confidence to raise our guidance for the full year 2024 on all metrics, which Josh will discuss later. Today, CSOs recognize that traditional methods of secure identity no longer work.

Josh Siegel: Subscription revenue was $158.4 million, growing 49% year-on-year and representing 70% of total revenue. Maintenance and professional services revenue was $62.7 million. Of that, recurring maintenance revenue was $49.6 million compared to $51.6 million in the year-ago period. And our maintenance renewal rates remain strong. And in line with historic levels, professional services revenue was $13.1 million. From a geographic perspective, all regions showed healthy growth.

Speaker Change: Subscription revenue was $158 $4 million growing 49% year on year, and representing 70% of total revenue.

Speaker Change: Maintenance and professional services revenue was $62 $7 million of that recurring maintenance revenue was $49 $6 million compared to 51, six in the year ago period, and our maintenance renewal rates remain strong.

Matthew Cohen: Three forces, new identities, new environments, and new attack methods are fundamentally redefining the market. The modern enterprise has to secure four different types of identities or personas, with each one having unique challenges and levels of complexity. The four groups are workforce, IT, developers, and machines. These identity groups are increasingly accessing heterogeneous targets located on-prem and in hybrid and multi-cloud environments, meaning security has moved from perimeter-based to identity centric. Given this complexity, it's no surprise that in today's threat landscape, all roads lead back to identity.

Speaker Change: And in line with historic levels professional services revenue was $13 $1 million.

Speaker Change: From a geographic perspective, all regions showed healthy growth Americas was $129 2 million growing 21% year on year EMEA revenue was $69 9 million up 39% year on year and a P. J revenue was $25 $6 million growing 40%.

Josh Siegel: Americas revenue was $129.2 million, growing 21% year-on-year. EMEA revenue was $69.9 million, up 39% year-on-year. And APJ revenue was $25.6 million, growing 40% year-on-year. All P&L items will now be discussed on a non-GAAP basis.

Speaker Change: Year on year.

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

Josh Siegel: Please see the full GAAP to a non-GAAP reconciliation in the tables of our press room. Second quarter gross margin and gross profit were $186.9 million, or 83.2% gross margin. That's up from 81.5% in the second quarter last year.

Matthew Cohen: Last year, 93% of organizations were victims of an identity-related cyber attack, and nearly all of them, more than once. As I talk with customers and experts around the world, it's evident that a new paradigm for securing identity is required. This new paradigm centers around our fundamental vision that every identity, human and machine needs to be secured with the right level of privileged controls. Cyberarch unified end-to-end platform is the only one to deliver on this vision.

Speaker Change: Second quarter gross margin gross profit was $186 $9 million or <unk> 83 to 83, 2% gross margin that's up from 81, 5% in the second quarter last year.

Josh Siegel: In the second quarter, our operating income was $23.7 million, or 10.6% operating margin, also up compared to the operating loss of $5.6 million in the second quarter of last year. The significant improvement from the year-ago period highlights the inherent operating leverage of our business model. Net income came in at $26.1 million or $0.54 per diluted share, also significantly outperforming our guidance and up from earnings per share of $0.03 in the year-ago period. We ended June with 3,200 employees worldwide, including about 1,370 in sales and marketing.

Speaker Change: In the second quarter, our operating income was $23 $7 million or 10, 6% operating margin also up compared to the operating loss of $5 $6 million in the second quarter of last year, a significant improvement from the year ago period highlights the inherent operating leverage of our business model.

Matthew Cohen: Increasingly, this is resonating with customers and it's driving tremendous business momentum and fueling our growth. In Q2, the strength of our platform and land and expand execution resulted in strong close rates and robust pipeline build. Customers are allocating significant portions of their budget to identity security, consolidating spend, and most importantly, consolidating trust with cyberarch. As an example of all these factors coming together, we can look at a strategic customer protest. Less than a year ago, the international government agency landed as a new logo with a seven-figure deal that secured IT users with PAM, workforce identities with identity and EPM, and machines with sequence management.

Speaker Change: Net income came in at $26 1 million or 54 cents per diluted share also significantly outperforming our guidance and up from earnings per share of three says in the year ago period. We ended June with 3200 employees worldwide, including about 1370 in sales and marketing.

Josh Siegel: We are pleased to deliver another strong quarter of free cash flow, which was $41.7 million in the second quarter, as compared to a negative $12.6 million in the second quarter of last year. That means we have delivered $108 million in free cash flow in the first six months of the year, which is well ahead of our expectations. We believe this is a clear demonstration of the inherent cash flow potential of our recurring revenue model.

Speaker Change: We are pleased to deliver another strong quarter of free cash flow, which was 41 $7 million in the second quarter as compared to a negative $12 6 million in the second quarter of last year.

Speaker Change: That means we have delivered $108 million and free cash flow in the first six months of the year. That's well ahead of our expectations. We believe this is a clear demonstration of the inherent cash flow potential in a recurring revenue model.

Matthew Cohen: Since then, they have grown with cyberarch and this quarter, they further expanded their workforce protection with another seven-figure ACV deal. The deep relationship we have formed with protests and the speed of expansion after initial land shows the power of our identity security platform and how it is well aligned with what great organizations like protests need to do to be secure. As the scope of PAM programs continues to expand to include shadow IT, database and cloud administrators, as well as high-risk workforce users, we are continuing to help our customers modernize their identity security programs with broader, more agile, privileged controls across these personas.

Josh Siegel: Before going into guidance, I want to briefly touch on our proposed VENFI acquisition, which is still expected to close in the second half of 2024. As we noted previously, Venafi had approximately $150 million in ARR with more than 550 customers.

Speaker Change: Before going into guidance I want to briefly touch on our proposed <unk> acquisition, which is still expected to close in the second half of 2024.

Speaker Change: As we noted previously <unk> had approximately $150 million in <unk> with more than 550 customers like cyber Ark about 95% of <unk> revenue is recurring added to our durable subscription revenue model.

Josh Siegel: Like Cyberark, about 95% of Venafi's revenue is recurring, adding to our durable subscription revenue model. Importantly, we expect Venafi to be immediately attritive to non-GAAP margins. It's rare to find an acquisition opportunity that meets both strategic and financial objectives. We're confident with Venafi. We did exactly that.

Speaker Change: Shortly we expect <unk> to be immediately accretive to non-GAAP margins.

Speaker Change: It's rare to find an acquisition opportunity that meets both strategic.

Matthew Cohen: Thomas. In a rip-and-replaced new logo win, a leading biotechnology company signed a six-figure deal to replace a competing Pam Vender. Cyberark's comprehensive identity security platform was a key differentiating factor that the customer wanted to modernize not just the protection of the IT user with Privilege Cloud, but also enhance security for their workforce with workforce-pass-for-manager and protect machine identities with secrets management. Every organization today has a substantial and rapidly growing developer population.

Speaker Change: And financial objectives.

Speaker Change: We're confident with verify we did exactly that.

Josh Siegel: Now, let's turn to our guidance. For the third quarter of 2024, we expect total revenue of $230 to $236 million, which represents 22% year-on-year growth at the midpoint. We expect non-GAAP operating income in the range of $20.5 million to $25.5 million for the third quarter. We expect our non-GAAP EPS to be in the range of $0.38 to $0.49 per diluted share. Our guidance also assumes 48.2 million weighted average diluted shares and about $12 million in taxes.

Speaker Change: Now, let's turn to our guidance for the third quarter of 2024, we expect total revenue of $230 million to $236 million, which represents 22% year on year growth at the midpoint, we expect non-GAAP operating income in the range of $25 million to $25 $5 million for the third quarter.

Speaker Change: We expect our non-GAAP EPS to be in the range of 38 to 49 cents per diluted share. Our guidance also assumes $48 2 million weighted average diluted shares at about $12 million in taxes.

Matthew Cohen: In the pursuit of speed and efficiency, developers are often afforded always-on privileges with only light if any security in place. Here too, we have to shift the paradigm to one of security first, without interfering with the developer's pace of innovation. At the foundation of our developer's solution is our secure cloud access or SCA functionality. SCA applies the principle of least-privilege access to developers, data scientists, and cloud engineers while allowing them to work natively and efficiently without having to change the preferred workflow.

Josh Siegel: For the full year 2024, we are increasing our guidance across all our metrics. We now expect total revenue in a range of $932 to $942 million, representing 25% year-on-year growth at the midpoint of the range. As we look at our pipeline for the remainder of the year, SAS continues to be expected to lead the way.

Speaker Change: For the full year 2024, we are increasing our guidance across all our metrics. We now expect total revenue in a range of $932 million to $942 million, representing 25% year on year growth at the midpoint of the range.

Speaker Change: As we look at our pipeline for the remainder of the year SaaS continues.

Speaker Change: To be expected to lead the way.

Josh Siegel: Reflecting the power of our subscription model and our continued commitment to driving operating leverage, we are increasing our full-year operating income to a range of $107.5 million to $116.5 million. We expect our non-GAAP earnings per share to be between $2.17 and $2.36 per diluted share. We expect about 48.2 million weighted average diluted shares and about $53 million in taxes for the full year 2024. We are also raising our annual recurring revenue to a range of $985 million to $995 million at December 31, 2024, or about 28% year-on-year growth in the mid-fifties.

Speaker Change: Reflecting the power of our subscription model and our continued commitment to driving operating leverage we are increasing our full year operating income to a range of 175 $107.5 million to $116 $5 million, we expect our non-GAAP earnings per share to be between $2.17 and too.

Matthew Cohen: In the second quarter, we continue to see strong traction with this offer. In a deal that included SCA and Privilege cloud, leading enterprise software company SAP saw a standing access just in time access and zero standing privilege from a unified solution as the key differentiator for choosing cyber. With SCA, they can now seamlessly enable a zero standing privilege approach while fully securing their modern cloud environments. On the spectrum of identities, the need to do things differently is especially top of the line for securing workforce users.

Speaker Change: Dollars 36 cents per diluted share, we expect about $48 2 million weighted average diluted shares at about $53 million in taxes for the full year 2024.

Speaker Change: We are also raising our annual recurring revenue to a range of $985 million to $995 million at December 31, 2024, or about 28% year on year growth at the midpoint.

Matthew Cohen: Each workforce identity is more powerful today than ever before, and can become privileged and privileged throughout the workday. Traditional SSO and MFA functionality on their own don't provide the security needed, as evidenced in many high-profile breaches. In the second quarter, our workforce solution was once again one of the strongest performers because we are solving this critical customer problem. We reimagined workforce identity by wrapping MFA and SSO with more controls that secure web sessions, the browser, and manage passwords.

Josh Siegel: We are significantly increasing our free cash flow guidance for the full year to a range of $145 to $155 million. That will represent a 16% free cash flow margin in the mid-term. I want to note that our guidance for the third quarter and full year 2024 does not include contribution from the proposed acquisition of Venafi. We will update our guidance for the Venafi acquisition in the first quarterly earnings call after we close the transaction.

Speaker Change: We are significantly increasing our free cash flow guidance for the full year to a range of $145 million to $155 million that will represent 16% free cash flow margin at the midpoint.

Speaker Change: I want to note that our guidance for the third quarter and full year 2024 does not include contribution from the proposed acquisition of <unk>, We will update our guidance for the identify acquisition in the first quarterly earnings call. After we close the transaction.

Josh Siegel: To sum up, we are thrilled to report another strong quarter to finish out a strong first half of the year and confidently raise our guidance. We are pleased with the progress we have made towards closing the Venafi acquisition and look forward to the industry leader joining Cyberark later this year. With reporting now the 33% ARR growth, 11% operating margin, and 19% free cash flow margin, we are firing on all cylinders. Identity security is a top priority for CISOs, and our platform is a clear industry leader delivering tremendous value for our customers. And I will now turn the call over to the operator for Q&A. Operator?

Speaker Change: To sum up we are thrilled to report another strong quarter to finish out a strong first half of the year and confidently raised our guidance. We are pleased with the progress we have made towards closing the <unk> acquisition acquisition and look forward to the industry leader joining.

Matthew Cohen: In addition, workforce protection extends to the endpoint with endpoint privilege manager. The following two deals showcase the power of bringing privilege controls to the workforce. A U.S, financial services company whose a long time cyber arc Pam customer had a need to keep its workforce more secure by managing passwords. With WPM, they can now do exactly that. The ability to add secure browser and secure web sessions on top of their existing vendors SSO and MFA means they can also benefit from the additional security layer of cyber arcs, broader access suite that's integrated within our platform.

Speaker Change: Cyber are later this year.

Speaker Change: With reporting now the 33% AOR growth, 11% operating margin, 19% free cash flow margin. We are firing on all cylinders identity security is a top priority for <unk> and our platform is a clear industry leader delivering tremendous value for our.

Matthew Cohen: In a different example, the importance of least privilege at the endpoint when securing the workforce, a major aviation company chose to protect their workforce workstations by implementing our EPM solution. Choosing to deploy EPM with our Fed-Ramp High Certification, they landed with a high six-figure deal that closed through the AWS Marketplace. In machine identity, we had an outstanding quarter, and our momentum continues to build, underpinning our current machine identity solution, our conjure cloud and secret time, which when combined empowered the developer with agility and security within their native workflow.

Speaker Change: Customers.

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

Speaker Change: Operator.

Speaker Change: Thank you.

Operator: At this time, I would like to remind everyone in order to ask a question, press star then the number 1 on your telephone keypad. Your first question comes from the line of Saket Kalia with Barclays. Please go ahead.

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

Speaker Change: Your first question comes from the line of Sarkis <unk> with Barclays. Please go ahead.

Saket Kalia: Okay, great. Hey, good morning, guys. Thanks for taking my questions here and congrats on the strong execution. Thanks, Saket; we appreciate it. Absolutely. Matt, maybe just to start with you. I think we all understand Cyberark's sort of undeniable leadership in the PAM market. But I was wondering if you could just talk about how you feel like you're differentiating in areas like workforce identity and secrets management, because during your prepared remarks, it just sounds like there's a lot more functionality that you could offer in at least those two areas versus competitors. But I just wanted to hear how you think about that.

Sarkis <unk>: Okay, Great Hey, good morning, guys. Thanks for taking my questions here and congrats on the strong execution.

Speaker Change: Socket, we appreciate it.

Speaker Change: Absolutely, Matt maybe just to start with you.

Matthew Cohen: In one outstanding deal from the quarter, a major airline, who is a long-standing cyber arc customer, recognized the need to move its secrets management strategy within the security team's remit. We quickly demonstrated the value of cyber arc secrets hub, resulting in a mid-six-figure ACV deal. We believe that the market for protecting machine identities is inflecting, and we have increasingly heard from customers that there's an urgent need to protect all machine identities.

Speaker Change: I think we all understand cyber arcs.

Speaker Change: Sort of undeniable leadership, right and in the Pam market.

Speaker Change: But I was wondering if you could just talk about how you feel like you're differentiating in areas like workforce identity and secrets management.

Speaker Change: During your prepared remarks, it just sounds like there's a lot more functionality that you could offer and at least those two areas versus competitors, but just wanted to hear how you think about that.

Matt Cohen: Thanks, Saket. I actually love that question. I might spend a little bit more time answering it because I think it's core to kind of our growth strategy here is our ability to differentiate on those two pillars versus market competitors. So if we start with securing the workforce, and you've heard me say this before, but we really have taken a stance that we need to reimagine how we secure workforce identities.

Speaker Change: Yeah. Thanks socket.

Matthew Cohen: Machine identities themselves are growing exponentially through the increasing cloud computing and the rise of AI. The machine identity landscape is also becoming more complex with increasing regulatory scrutiny and emerging standards like Google's Guidance to rotate certificates every 90 days. All of this is happening as machine identities are increasingly targeted by adversaries as a weak point in organizational security controls. We are very excited to be building out and expanding our leadership position and machine identities with the pending acquisition of Vennify, which is undergoing regulatory review.

Speaker Change: She loved that question I might spend a little bit more time on answering it because I think it's it's core to kind of our growth strategy here is our ability to be able to differentiate on those two pillars versus the market competitors. So if we start with securing the work force and you've heard me say this before but we really have taken a stance that we need to re imagine.

Matt Cohen: And for a long time now, we've been securing the workforce, the general workforce, with single sign-on and multi-factor authentication. And those are really important core security controls, and we offer them, and our competitors offer them. But the reality is, in this breach environment, we need to go beyond those basic security controls. We need to do things like extra security when a high-risk user is accessing an increasing number of SaaS applications. That's our secure web session.

Speaker Change: How we secure workforce identities and for a long time now we've been securing the workforce the general workforce with single sign on and Multifactor authentication and those are really important core security controls and we offer it and the competitors offer it but the reality is in this breach environment, we need to go beyond those.

Matthew Cohen: All machine identities need to be discovered, secured, managed, and automated to keep their connections and communication safe. Vennify machine identity management solutions are complementary to cyber arc with no technology overlap. We believe that combining our secrets management with Vennify's modern machine identity management, certificate lifecycle management, and SSH key management, we will set a new standard for end-to-end machine identity security. As you can see from these deal examples, our platform provides the ability to land in multiple spots and with multiple products.

Speaker Change: Basic security controls, we need to do things like extra security when a high risk user is accessing the increasing number of SaaS applications that are secure web sessions and the idea. There is a normal user who's going through their daily work. They can they can it looks like a regular user when they're accessing certain application.

Matt Cohen: And the idea there is that a normal user who's going through their daily work, they can look like a regular user when they're accessing certain applications. But if you're the admin in HR accessing the workday system, you're actually a high-risk, privileged user every time you go into that SaaS tool. And so we need to be able to wrap extra security controls for those use cases. We add, in our secure browser, the idea of really enterprise-grade security browsing for these users so that we can tie in things like cookie-less browsing.

Brad: But if youre the admin in HR accessing the workday system Youre actually a high risk privileged user every time you go into that fast tool and so we need to be able to wrap extra security controls for those use cases, we add in our secure browser the idea of really enterprise grade security Brad.

Matthew Cohen: In the second quarter, we signed 245 new logos and approximately half of these new logos landed with two or more solutions. In other words, customers are protecting multiple types of identities with cyber arc from day one. In addition, we had a strong quarter of expansion within our base across all our solutions, but machine identities with secrets management and workforce identities with our access offerings were particularly strong.

Speaker Change: <unk> for these users so that we can tie in things like cookie less browsing, we can have the ability to be able to monitor sessions.

Matt Cohen: We can have the ability to be able to monitor sessions. The idea of a workforce password manager, which we heard a talk about in the release. So these ideas together into one integrated solution puts our package, our solution, versus the competitors, and customers are increasingly saying, "wait, I can get that? Why wouldn't I go with that?"

Speaker Change: The idea of workforce password manager, which you heard us talk about in the release. So these ideas together into one integrated solution puts our package our solution versus the competitors and the customers are increasingly saying wait I can get that why wouldn't I go with that because we need to think about how we substantially.

Matt Cohen: Because we need to think about how we substantiate a better security posture for the workforce. So we are having a higher win rate. We are seeing strong growth on the workforce side, and you hear the excitement as I'm describing it. It's a similar story over on the machine side. I'd say it's a story that's even going to get better after the Eventify acquisition.

Matthew Cohen: At impact, our marquee customer event held in May, attendance was up more than 25% compared to last year. We showcased that we are the front runner in innovation and are expanding the capabilities of our identity security platform, all serving our fundamental vision of securing every identity human or machine with the right level of privilege controls. We announced exciting product innovations across the whole portfolio, but I want to highlight two of them here, Core AI and ITDR.

Speaker Change: Eight a better security posture for the workforce.

Speaker Change: We are having a higher win rate we are seeing strong growth on the workforce side and you hear the excitement as I'm describing it it's a similar story over on the on the machine side I'd say, it's a story, that's even going to get better post identify acquisition, but here, we're talking about the idea of how do we get control across the broad.

Matthew Cohen: Cyber arcs Core AI provided identity security focused artificial intelligence embedded within our identity security platform. Our unique data set on the behavior of all identities enables Core AI to do more and ultimately effectively analyze sessions, detect threats, and recommend actions. In addition, user and admin lives are made easier and adoption is faster with an identity security assistant that understands natural language. This will fundamentally transform how users interact with our platform, significantly reducing the time it takes to deliver critical information and analysis.

Matt Cohen: But here we're talking about the idea of how do we get control across the broad spectrum of machine identities that sit out there? And we can be talking about legacy applications that are still sitting in the data center. We can be talking about modern container-based applications coming out of the developer group. We can even be talking about the idea of microservices or the workloads that sit underneath all these modern applications.

Speaker Change: Vectren machine identities that sit out there and we can be talking about legacy applications that are still sitting in the data center, we can be talking about modern container based applications coming out into the developer group, we can even be talking about the idea of the micro services of the workloads that sit underneath all these modern applications.

Speaker Change: All have identities and we need to be able to make sure that we can discover them. We can secure them and we can manage them, but we have to do it in a way that's native to the workflow of the people who are actually building. These applications and our combination of conjure cloud and secrets hub allows us to.

Matt Cohen: They all have unique identities. And we need to be able to make sure that we can discover them, we can secure them, and we can manage them. But we have to do it in a way that's native to the workflow of the people who are actually building these applications. And our combination of Conjure Cloud and Secrets Hub allows us to differentiate both the ability to offer a full-scale solution like Conjure Cloud but also to be able to add or layer on top of the secret stores that sit within the hyperscalers, AWS, Microsoft, and Google, so that developers can actually choose what tools they want to use, but security can layer the right controls on top.

Speaker Change: Both the ability to offer a full scale solution like like hundred cloud, but also to be able to to add or layer on top of the secret stores that sit within the hyperscale or as AWS, Microsoft Google. So the developers can actually choose what tools they want to use but security can layer the right controls on.

Matthew Cohen: A Dendi threat detection and response, or ITDR, is sometimes discussed as a separate market or product. We at Cyberark believe, ITDR capabilities need to be part of a broader platform. They should not just be about monitoring the vendor's infrastructure or limited to active directory. They need to look across all identities to detect identity risk and then be able to take automated response before damage is done. Our ITDR capabilities powered by Core AI will detect and identify risky behavior, anomalous use of secrets, and much more. The powerful combination of Core AI and ITDR enhances security, improves resiliency, drives increased productivity, and enhances engagement with our platform.

Matt Cohen: And you heard that in the example I used in the script of the airline, who basically made a decision that machine identity security was going to be under the control of the security team. And the minute that decision was made, Cyberark became the only choice. So I think this is what we're seeing out there in the market. And, you know, as we think about Venify and the expanding opportunity to actually go after certificates and other forms of machine identity, we just see a long runway of growth ahead of us.

Speaker Change: Top and you heard that in the example, I used in the script of the airline who basically made a decision that machine identity security was going to be under the control of the security team and the minute that decision was made <unk> became the only choice. So I think this is what we're seeing out there in the mall.

Speaker Change: Market and as we think about verifying the expanding opportunity to actually go after certificates and other forms of machine identity. We just see a long runway of growth ahead of us.

Matthew Cohen: In summary, I want to leave you with the following takeaways from today's. First, momentum continues to accelerate in our business. A Dendi security is a top priority for CISOs and customers are consolidating spend with Cyberark. Second, our solution selling is increasing our momentum in the market. Applying the right level of privilege controls to every identity is a security imperative that is recognized by boards, by the C-suite, security teams, and increasingly by operations and developers.

Josh Siegel: Josh, maybe for my follow-up for you, the inflection in free cash flow is just great to see. You know, I know that billings isn't a metric that we've really focused on much in the past, but I'm just wondering, as that sort of flywheel with subscription renewals grows, how do you sort of think about when that metric becomes more meaningful?

Speaker Change: That makes a ton of sense.

Speaker Change: Josh maybe maybe for my follow up for you.

Matthew Cohen: Third, we are leading the charge when it comes to thought leadership and execution in the identity security space. Our ongoing innovation and pending acquisition of Vennify will further extend our leadership position and competitive mode and help further solidify our position as the identity security company. Lastly, we are executing deals are progressing at a faster pace and our close rates remain strong, a clear testament to the fact that customers are allocating budgets to a Dendi security.

Speaker Change: The inflection in free cash flow is just great to see.

Josh: I know that billings is a metric that we've really focused on much in the past.

Josh: Just wondering is that sort of flywheel with subscription renewals grows how do you sort of think about when that metric becomes more meaningful.

Josh Siegel: Yeah, hi Saket, thanks. First of all, you're right, we're really excited with the free cash flow that we generated, not only in Q2, but really for the whole first half of the year, and also excited that we're able to continue to raise the guidance significantly for the full year, and it's really based off of, you know, the factors around, you know, just really strong renewal rates, strong bookings as well, and I think, you know, when we think about billings, one of the things that, you know, it's the reason why we've always kind of shied away is the noise that comes from the maintenance piece of the component within the deferred revenue that goes into the billings calculation, so I think to the extent that when ARR for the maintenance, you know, goes down dramatically, and we've become where everything around the ARR growth and the deferred revenue is focused around the subscription SaaS, I think that's where that's where billings becomes a lot, you know, more of a clear predictor or indicator of the growth in the business, and that's why we're still really focused today on our ARR growth, which is really the strongest indicator because it kind of helps to wash out, you know, any impact from the tail of our transition out of the perpetual business model.

Speaker Change: Yeah, Hi, Thanks first of all you're right, where we're really excited with the free cash flow that we generated in not only in Q2, but really for the whole first half of the year and also excited that we're able to continue to raise the guidance significantly for the full year and it's really based off of.

Speaker Change: The factors around.

Speaker Change: Just really strong renewal rates strong bookings.

Speaker Change: As well and I think I think you know what.

Speaker Change: We think about billings one of the things that is the reason why we've always kind of shied away. The noise that comes from the maintenance piece of the component within the within the deferred Rev.

Speaker Change: Revenue for that.

Speaker Change: That goes into the billings calculation, so I think to the extent that one four for the maintenance goes down dramatically and we become where everything around the growth in the deferred revenue as both destroy the subscription SaaS I think that's where that's what billings becomes a lot.

Matthew Cohen: Momentum continues to build across our entire business and the strength of our platform is driving our outstanding results. With our 28% revenue growth and our 19% free cash flow margin, we were a solid rule of 40 company in Q2.

Speaker Change: More of a player predictor.

Speaker Change: Predictor or or or.

Joshua Siegel: I will now turn the call over to Josh who will talk about our strong financial results and the increase in our yearly guidance. Thanks Matt. Q2 was another strong quarter for cyber arc. Once again, we exceeded our guidance across all metrics, highlighting our strong execution and durable demand for our identity security platform. We delivered strong net new ARR growth, 245 new logos, solid top line growth, and our subscription flywheel is helping us drive robust operating leverage and healthy free cash flow.

Speaker Change: Indicator.

Speaker Change: The growth in the business and that's why we're still really focused today.

Speaker Change: At our <unk> growth.

Speaker Change: Which is really the strongest indicator because it kind of helps to wash out any impact from the from the tail of our transition out of the out of the perpetual business model.

Saket Kalia: It makes a ton of sense. Thanks, guys. Your next question comes from the line between Jonathan Ho and William Blake.

Speaker Change: It makes a ton of sense. Thanks, guys.

Jonathan Ho: Your next question comes from the line of Jonathan Ho with William Blair. Please go ahead. Hi, good morning. Matt, can you maybe give us a little bit of additional commentary on how your platform vision is

Speaker Change: Your next question comes from the line of Jonathan Ho with William Blair. Please go ahead.

Joshua Siegel: Moving to the results, total revenue grew 28% year on year, reaching 224.7 million dollars and exceeded the top end of our guidance range. Hange, Annual Recurring Revenue reached $868 million, that's growing 33% year-on-year with $57 million in total net new ARR, as expected, SaaS made up a larger share of our bookings in the second quarter compared to the year-ago period from last year. Subscription ARR grew 50% and reached $677 million, and is now 78% of total ARR.

Jonathan Ho: Hi, good morning.

Jonathan Ho: Matt can you maybe give us a little bit of additional commentary on how your platform vision is resonating with customers and are you, perhaps seeing channel partners start to bring you more into these types of deals as well.

Matt Cohen: Yeah, hi Jonathan. So absolutely, I mean, I think the platform is the very foundation of our ability to do solution selling. And it's the combination of both that is actually differentiating us in the market. So, you know, we come to the customers, and we're talking about these four personas, these four identity groups: workforce, IT, developers, and machines. And then we're talking about this vision, which is the idea of being able to secure every identity with the right level of privilege controls.

Matt Cole: Yeah, Hi, Jonathan So absolutely I mean, I think the platform is the very foundation of our ability to do solution selling and it's the combination of both that is actually differentiating us in the market. So we come to the to the customers and we're talking about these for persona disease for identity groups workforce.

Jonathan Ho: Developers and machines and then we're talking about this vision, which is the idea to be able to secure every identity with the right level of privileged controls the only way that that's possible is with an integrated platform with the ability to be able to understand the behaviors of each identity group and.

Joshua Siegel: We added $56 million in net new subscription ARR, that's an increase from the $49 million in the second quarter last year, and a record for any non-Q4 quarter. Maintenance ARR was $191 million like for like conversion activity still represents a single digit percent of our year-on-year ARR growth. Our business continues to benefit from the momentum we are seeing in upselling and cross-selling new solutions across our platform, which is a significant factor in our strong growth.

Matt Cohen: The only way that that's possible is with an integrated platform with the ability to understand the behaviors of each identity group and apply the right level of controls; we call that intelligent privilege controls, based upon what behaviors we're seeing, what the users are trying to do, and what the targets they're trying to access. And so we're not even into the discussion yet around the particular technologies that we offer.

Jonathan Ho: Apply the right level of controls we call that intelligent privilege controls based upon what behaviors, we're seeing what the users trying to do what the target theyre trying to access and so we're not even into the discussion yet around that particular technologies that we offer I'm talking about a high level vision with customers about this ability.

Matt Cohen: I'm talking about a high-level vision with customers about this ability to be able to expand across all their identity groups. That introduces the notion of how, well, how do we do that? Well, we do that with one integrated platform, one user experience, one ability to be able to run unified audit and unified reporting. And absolutely, that is not only responding to customers, but I think it's the backbone of the relationship.

Joshua Siegel: In the second quarter, the cohort of customers with more than $100,000 in ARR grew to nearly 1900, and the cohort with ARR are more than $500,000 is now over 340 customers that grew 38% year-on-year. Moving into the details of the revenue lines for the second quarter, recurring revenue reached $208 million growing 32% year-on-year and accounting for 93% of total revenue continuing to go up from the 90% in the second quarter last year.

Jonathan Ho: To be able to expand across all their identity groups that introduces the notion of the how well how do we do that well, we do that with one integrated platform one user experience one ability to be able to run unified audit and unified reporting and absolutely that is not only resonating with customers, but I think it's the backbone of the relate.

Chip: And chip because even if a customer decide you know what your the Pam leader I wanted to get started with securing it.

Chip: They feel a future proof they feel safe in the relationship because they know they can expand off of one platform into those other identity groups. When the time comes now of course, as we mentioned about half of our new logos land with more than one solution more than one identity group because customers actually from the from the get go.

Matt Cohen: Because even if a customer decides, you know what, you're the PAM leader, I want to get started with securing IT, they feel future-proof, they feel safe in the relationship because they know they can expand off of one platform into those other identity groups when the time comes. Now, of course, as we mentioned, about half of our new logos land with more than one solution, more than one identity group, because customers, actually, from the get go, want to get started with leveraging more and more of the platform.

Joshua Siegel: Subscription revenue was $158.4 million growing 49% year-on-year and representing 70% of total revenue. Maintenance and professional services revenue was $62.7 million of that recurring maintenance revenue was $49.6 million compared to $51.6 in the year ago period and our maintenance renewal rates remained strong and in line with historic levels. Professional services revenue was $13.1 million. From a geographic perspective, all regions showed healthy growth. America's was $129.2 million growing 21% year-on-year. Emea revenue was $69.9 million up 39% year-on-year and APJ revenue was $25.6 million growing 40% year-on-year.

Jonathan Ho: To get started with leveraging more and more of the platform. So I do think it's fundamental to our strategy and it is.

Matt Cohen: So I do think it's fundamental to our strategy, and it's fundamental actually to the elevation of our relationships with our customers as we map out their long-term identity security strategy. Got it, got it. And then just in terms of a quick

Speaker Change: <unk> actually to the elevation of our relationships with our customers as we map out their long term identity security strategy.

Speaker Change: Okay.

Speaker Change: Got it got it and then just in terms of a quick follow up when we look at the strength in the free cash flow margins. This quarter I mean, it's sort of a new normal level or should we expect there to be an additional leverage just given the strength in your performance. Thank you.

Josh Siegel: Yeah, thanks, Jonathan. So, you know, I think we guided and increased our income for the full year. So, you know, that's the expectation going into the back half of the year. But I do think that the cash flow from the second quarter and also from the first quarter indicated that yes, we do have a lot of leverage in our model to be able to continuously increase our cash flow margin, our free cash flow margin against revenue going forward. And we anticipate doing that this year.

Speaker Change: Yeah. Thanks, Jonathan So I think we guided an increased our guide for the full year, so that that's the expectation.

Joshua Siegel: All P&L items now will be discussed on a non-gap basis. Please see the full gap to a non-gap reconciliation in the tables of our press release. Second quarter gross margin gross profit was $186.9 million or 83.83.2% gross margin that's up from 81.5% in the second quarter last year. In the second quarter, our operating income was $23.7 million or 10.6% operating margin also up compared to the operating loss of $5.6 million in the second quarter of last year.

Speaker Change: Going to the back half of the year, but I do think that what.

Speaker Change: What what the cash flow from the second quarter and also from the first quarter indicators that yes, we do have a lot of leverage in our model to be able to continuously increase increase our cash flow large enough free cash flow margin against revenue going forward and we anticipate doing that in the years to come.

Speaker Change: Thank you.

Madeline Brooks: Your next question comes from the line of Madeline Brooks with Bank of America. Please go ahead. Great. Thanks for taking my questions.

Madeline Group: Your next question comes from the line of Madeline Group.

Joshua Siegel: The significant improvement from the year ago period highlights the inherent operating leverage of our business model. That income came in at $26.1 million or 54 cents per day due to chair also significantly outperforming our guidance and up from earnings per share of three cents in the year ago period. We ended June with 3,200 employees worldwide including about 1,370 in sales and markets. We are pleased to deliver another strong quarter of free cash flow, which was $41.7 million in the second quarter, as compared to a negative $12.6 million in the second quarter of last year.

Madeline Group: Bank of America. Please go ahead.

Madeline Brooks: Great, thanks for taking my questions and a nice performance this quarter. Just two quick ones from me.

Madeline Group: Great. Thanks for taking my question and.

Madeline Group: Nice performance acquired two quick ones for me first of all we're not in your prepared remarks, you called out some nice wins and I just want to tell a quick on those I'm trying to understand that.

Matt Cohen: First of all, Matt, in your prepared remarks, you called out some nice wins, and I just wanted to double, double click on those and try and understand that, or I guess confirm with you that the second quarter was really driven by a host of different deals versus one or two really, you know, oversized, large ones. And then the second question for me, both for Matt as well as for Josh, is just getting an update on some of those other business metrics.

Speaker Change: Alright, guys confirm with you that second quarter was really driven by a host of different deal versus the one or two really oversized bars line and then second question for me both answer Matt Pauls for Jonathan just getting an update on some of those.

Matt Pauls: Other business metrics, and you mentioned that over 50% of our landing with more solution for <unk>.

Matt Cohen: And you mentioned that over 50 percent are landing with two or more solutions. So, how should we think about growth in just core PAM versus the other areas in your portfolio? And additionally, too, if you could just touch on any type of NRR metric. I know last time you spoke, I think it was still trending above 125. So, if we could just kind of get an indication of where it is now, that would be helpful. Thanks so much.

Speaker Change: Should we think about growth in just core Pam first as the other areas in your product in your portfolio and Additionally.

Speaker Change: Just touch on any type of that type of a metric or no last time on the stock I think it's still trending about 125.

Speaker Change: Just kind of get an indication of where it is now that would be helpful. Thanks. So much.

Joshua Siegel: Before going into guidance, I want to briefly touch on our proposed benefit acquisition, which is still expected to close in the second half of 2024. As we noted previously, benefit had approximately $150 million in ARR with more than 550 customers. Like Cyberark, about 95% of benefit revenue is recurring, adding to our durable subscription revenue model. Importantly, we expect benefit to be immediately attreative to non-gap margins. It's rare to find an acquisition opportunity that meets both strategic and financial objectives. We're confident with benefit, we did exactly that.

Speaker Change: Percent makeup from the top 10 deals as a percent of our overall bookings.

Speaker Change: And we continue to see a really strong.

Speaker Change: Breath of business across all our markets actually driving our results. So it's a it's a great indication actually of the strength of the business. When we look under the covers from that perspective.

Speaker Change: I think when you think about the the metrics that we're seeing out there I think we're continuing to feel moved.

Speaker Change: And we feel good about about all of them.

Matt Cohen: I think when we think about our new logo lands, we were really happy with that. So yes, multiple solution lands, but just in general, you know, getting to 245 new logos in this economy feels like a strong landing spot for us. And we continue to plant seeds across the board. And I think that's the other kind of underlying message. We've talked about this mix or this pie for a while.

Speaker Change: I think when we think about our new logo lands, we were really happy with that so yes, multiple multiple solution lands, but just in general getting to 245, new logos in this economy. It feels like a strong landing spot for us.

Joshua Siegel: Now let's turn to our guidance. For the third quarter of 2024, we expect total revenue of $230 to $236 million, which represents 22% year on year growth at the midpoint. We expect non-gap operating income in the range of $20.5 million to $25.5 million for the third quarter. We expect our non-gap EPS to be in the range of $0.38 to $0.49 per W to share. Our guidance also assumes 48.2 million weighted average diluted shares, and about $12 million in taxes.

Speaker Change: And we continue to plant seeds across the board and.

Speaker Change: And we plant seeds across the board across all of the of the product lines and I think that's the other kind of underlying message. We've talked about this mix or this pie for a while and the pie continues to maintain and the and then.

Josh Siegel: And the pie continues to maintain in the consistent kind of slices, as we've seen in prior quarters. And the reason for that is that PAM continues to grow. So our newer areas obviously are growing faster, and they're performing well. But the core PAM business itself, from an AR perspective, continues to grow. And so the overall shifting of the underlying pie doesn't change all that much, which is where you want to be, right?

Speaker Change: Consistent kind of slices as we've seen in prior quarters and the reason for that is that Pam continues to grow so are our newer areas, obviously are growing faster and they're performing well, but the core Pam business itself from an AR perspective continues to grow and so the overall shifting of the underlying pie doesn't change all that much.

Joshua Siegel: For the full year 2024, we are increasing our guidance across all our metrics. We now expect total revenue in a range of $932 to $942 million, representing 25% year on year growth at the midpoint of the range. As we look at our pipeline for the remainder of the year, SaaS continues to be expected to lead the way. Reflecting the power of our subscription model and our continued commitment to driving, operating, leverage.

Speaker Change: Which is where do you want to be right you want your core business to continue to perform and you want your emerging businesses to perform even better but not catch up so much because you have any weakness in your core and so this is what we're seeing.

Josh Siegel: You want your core business to continue to perform, and you want your emerging businesses to perform even better, but not catch up so much because you have any weakness in your core. And so this is what we're seeing. You know, I think we're still too early to really talk about NRR as a number out there. We want to get through some more cycles. So it's actually not a number that we've disclosed out there. I think we feel very strong in our ability to be able to harvest deals within our base, and we see really strong expansion within that base.

Speaker Change: We're still too early to really talk about NR as a as a number out there we want to get through some more of cycles. So it's actually not a number that we've disclosed out there, but I think we feel very strong and our ability to be able to harvest a deals within our base and we see really strong expansion within that base.

Joshua Siegel: We are increasing our full year operating income to a range of $107.5 million to $116.5 million. We expect our non-gap earnings per share to be between $2.17 and $2.36 per diluted share. We expect about 48.2 million weighted average diluted shares, and about $53 million in taxes for the full year 2024. We are also raising our annual recurring revenue to a range of $985 million to $995 million at December 31, 2024, or about 28% year on year growth at the midpoint. We are significantly increasing our free cash flow guidance for the full year to a range of $145 to $155 million that will represent 16% free cash flow margin at the midpoint.

Speaker Change: Yes.

Speaker Change: Thanks, so much.

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

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

Rob Orange: Thanks for taking my question this morning. Matt, you're coming in at the tail end of earnings, and your call sounds quite different than mine, pretty much what we've heard out there. And so I want to drill down a little bit into that relative to, is there a sense of urgency you're finding from companies or customers? Excuse me, I mean, your new logo counts up. Few companies have had the net new ARR growth in the first half that you guys have. So is it just all coming together at this point? Or is there not? Is there some sense of urgency? Because you know, the economy has been relatively uneven or flat at best for most.

Rob Owens: Yes. Thanks for thanks for taking my question this morning and Matt.

Speaker Change: Sure you are coming in at the tail end of earnings in your call sounds quite different than pretty.

Rob Owens: Pretty much what we've heard out there and so I wanted to drill down a little bit into that relative to <unk>.

Speaker Change: Is there a sense of urgency or finding from companies or customers excuse me I mean, your new logo counts up few companies have had the net.

Speaker Change: AOR growth in the first half that you guys have so is.

Joshua Siegel: I want to note that our guidance for the third quarter and full year 2024 does not include contribution from the proposed acquisition of benefit. We will update our guidance for the benefit acquisition in the first quarterly earnings call after we close the transaction.

Speaker Change: Is it just all coming together at this point or is there is there some sense of urgency because the economy has been relatively uneven or flat at best for most.

Unknown Executive: Action.

Matt Cohen: Yeah, Rob, it's a good question, and I think it is indicative of what we're seeing out there. So let's break it down again and see what the landscape looks like.

Speaker Change: Yes, Rob it's a good question and it's and I think it is indicative of what we're seeing out there. So let's let's breakdown again, what the landscape looks like at the moment in time the threat vectors. The adversaries out there it continues to elevate right and so the breach environment.

Matthew Cohen: To sum up, we are thrilled to report another strong quarter to finish out a strong first half of the year and confidently raise our guidance. We are pleased with the progress we have made towards closing the benefit acquisition and look forward to the industry leader joining Cyberark later this year. With reporting now, the 33% ARR growth, 11 percent operating margin, 19% pre-cashable margin, we are firing on all cylinders. Identity security is a top priority for CSOs and our platform is a clear industry leader delivering tremendous value for our customers.

Matt Cohen: At the moment in time, the threat vectors, the adversaries out there, it continues to escalate, right? And so the breach environment, the risk environment increases, and CISOs and security teams are under a tremendous amount of pressure. And within that construct, they're asked by their boards, by their C-suite to focus in on what's most important, what's most likely to reduce risk, and that's the ability to actually secure environments. And then, frankly, also what's most likely to help them be resilient if risk materializes.

Speaker Change: Ironman.

Speaker Change: The risk environment increases and <unk> and security teams are under a tremendous amount of pressure and within that construct there asked by their boards by their C suite to focus in on what's most important what's most likely to reduced risk and that's the ability.

Speaker Change: To actually secure environments, and then frankly also what's most likely to help them be resilient if risk materializes.

Matt Cohen: And we, within the identity security space as a whole and as a leader in identity security, are just at the forefront of those conversations. Because ultimately, CISOs prioritize identity security at the top of the list.

Operator: And I will now turn the call over to the operator for Q&A. Operator, thank you. At this time I would like to remind everyone in order to ask a question, press start in the number one on your telephone keypad.

Speaker Change: And we within the identity security space as a whole and as the leader in identity security are just at the forefront of those conversations because ultimately the <unk> prioritize identity security at the top of the list. So the answer of what they can do to reduce risk is.

Matt Cohen: So the answer to what they can do to reduce risk is implement core controls, implement privilege controls, understand how to protect the workforce more securely than just MFASSO, go and attack the machine identity environment that has been neglected for years, expand out or modernize how we secure IT to make sure that we're not just doing, you know, the basics, but we're moving beyond that to actually, for example, secure access to VMs and to the cloud. And so all of that then becomes a conversation between us and the customer about, all right, how do we move? And how fast can we move?

Speaker Change: Implement.

Saket Kalia: Your first question comes from the line of Saket Kalia with Bart Lease. Please go ahead. Okay, great. Hey, good morning guys. Thanks for taking my questions here and congrats on the strong execution. Thank you, Saket. We appreciate it. Absolutely. Matt, maybe just to start with you. You know, I think we all understand Cyberark's sort of undeniable leadership, right, in the PAM market. But I was wondering if you just talk about how you feel like you're differentiating in areas like workforce identity and secrets management.

Speaker Change: Core controls implement privilege controls understand how to protect the workforce more securely than just MFA SSO go and attack the machine identity environment that had been neglected for years expand out or modernize how we secure.

Saket Kalia: Because during your prepared remarks, it just sounds like there's a lot more functionality that you could offer in at least those two areas versus competitors. But just wanted to hear how you think about that. Thanks, Saket. I actually love that question.

Speaker Change: To make sure that we're not just doing the basics, but we're moving beyond that to actually for example, secure access to the EMS into cloud and so all of that then becomes a conversation with us and the customer about all right. How do we move and how fast can we move our partners get it so theyre pushing it harder so we become a top priority.

Matt Cohen: Our partners get it, so they're pushing it harder. And so we have become a top priority for our partner ecosystem. And ultimately, it materializes in the results that we see. I think, you know, independent of macros and independent of other factors out there and uncertainty, ultimately, security teams have a mission. And it's the same mission of ours, which is to secure their environments, protect their organization, and their digital transformations. And I think we're just top of mind for that. And then we're able to go deliver, and we see that in the results. And we see it in the outlook of what we see in the pipe moving forward.

Speaker Change: 44, our partner ecosystem, and ultimately materializes and the results that we see.

Speaker Change: Independent of macros in independent of of other factors out there and uncertainty ultimately securities teams have a mission and it's the same mission of ours, which is to secure their environments to protect their organization and their digital transformations and I think we're just top of mind for that and then we're able to go delay.

Matthew Cohen: I might spend a little bit more time on answering it because I think it's core to kind of our growth strategy here is our ability to be able to differentiate on those two pillars versus the market competitors. So if we start with securing the workforce, and you've heard me say this before, but we really have taken a stance that we need to reimagine how we secure workforce identities. And you know, for a long time now, we've been securing the workforce, the general workforce with single sign-on and multifactor authentication.

Speaker Change: Ever and we see that in the results and we see it and even the outlooks of what we see in the pipe moving forward.

Josh Siegel: Thanks for your commentary there. Josh, just a quick one on free cash flow margin. If I look on a 12-month basis, you're closer to about 20%. Historically, the shape of free cash flow in any given year is a little more second half weighted, if not even throughout the year. Is there something unique in this year relative to that second half?

Speaker Change: Thanks for your commentary there Josh just a quick one on free cash flow margin.

Speaker Change: Look on a trailing 12 month basis youre closer to about 20% historically the shape of free cash flow in any given year is a little more second half weighted if not even throughout the year. So is there something unique in this year relative to that second half because I think you are.

Matthew Cohen: And those are really important core security controls. And we offer it and the competitors offer it. But the reality is in this breach environment, we need to go beyond those basic security controls. We need to do things like extra security when a high-risk user is accessing the increasing number of SaaS applications. That's our secure web sessions. And the idea there is a normal user who's going through their daily work. They can look like a regular user when they're accessing certain applications.

Josh Siegel: Because I think you're guiding to roughly 16.5% of the cash flow margin at the high end of the range, which is actually below your TTM numbers. Thanks. Yeah, thanks, Rob.

Speaker Change: You're guiding to roughly 16, 5% cash flow margin at the high end of the range, which is actually below your TTM numbers. Thanks.

Matthew Cohen: But if you're the admin in HR accessing the workday system, you're actually a high-risk privilege user every time you go into that SaaS tool. And so we need to be able to wrap extra security controls for those use cases. We add in our secure browser. You know, the idea of really enterprise-grade security browsing for these users so that we can tie in things like cookie list browsing. We can have the ability to be able to monitor sessions.

Josh Siegel: Yeah, thanks, Rob. You know, when we look at the guidance for the full year that we raised, I think, by $30 million, but we're still handicapping, so to speak, for the impact of the Venafi transaction or the investment that we're doing today around it and related costs. We're also taking into consideration potential rate cuts in the second half that could be significant on interest income. And third, I would say that there are considerations of tax obligations in the second half.

Rob Owens: Thanks, Rob.

Speaker Change: So when we look at the when we look at the guidance for the full year that we that we raised I think by $30 million, but we're still handicapping so to speak for the impact of.

Rob Owens: The <unk> transaction of the investment that we're doing.

Rob Owens: Today around it and related costs were also taking into consider consideration potential rate cuts in the second half that could be significant on the on the interest income and third I would say that.

Rob Owens: There's there's consideration of tax obligations in the second half so when we kind of think about that and we obviously, we're much more bullish on our free cash flow this year.

Josh Siegel: So, when we kind of think about that, and we are, you know, obviously, much more bullish on our free cash flow this year than we were starting out in February, and we were glad that we were able to still increase the guidance for the full year, but we did consider some of these other factors to the extent that we increased our guidance.

Matthew Cohen: The idea of workforce password manager, which we heard us talk about in the release. So these ideas together into one integrated solution puts our package, our solution versus the competitors. And the customers are increasingly saying, wait, I can get that? Why wouldn't I go with that? Because we need to think about how we substantiate a better security posture for the workforce. So we are having a higher win rate. We are seeing strong growth on the workforce side and you hear the excitement as I'm describing it.

Rob Owens: Then we have started out in February.

Speaker Change: And.

Speaker Change: And we are glad that we were able to still increase the guidance for this for the full year, but we did consider some of these other factors about to the extent that we increased our guidance.

Speaker Change: Thank you.

Shaul Eyal: Your next question comes from the line of Shaul Eyal with TD Cohen. Please go ahead. Thank you. Good morning. Good afternoon.

Shaul Eyal: Thank you. Your next question comes from the line of Shaul Eyal with TD Cohen. Please go ahead. Thank you.

Speaker Change: Your next question comes from the line of Sean.

Matthew Cohen: It's a similar story over on the machine side. I'd say it's a story that's even going to get better post-eventify acquisition. But here we're talking about the idea of how do we get control across the broad spectrum of machine identities that sit out there. And we can be talking about legacy applications that are still sitting in the data center. We can be talking about modern container-based applications coming out as developer group.

Colin: Colin Please go ahead.

Sean Colin: Thank you good morning, good afternoon Guy.

Grant: Grant on the ongoing consistent execution.

Sean: Any any views on how the public.

Speaker Change: Any views on how the public vertical.

Speaker Change: Performed this quarter, maybe just a word about linearity trends during the quarter and maybe how it's been performing during the month of July. Thank you.

Matthew Cohen: We can even be talking about the idea of the microservices of the workloads that sit underneath all these modern applications. They all have identities. And we need to be able to make sure that we can discover them. We can secure them and we can manage them. But we have to do it in a way that's native to the workflow of the people who are actually building these applications. In our combination of Conjure Cloud and Secrets Hub allows us to differentiate both the ability to offer a full-scale solution like Conjure Cloud, but also to be able to add or layer on top of the secret stores that sit within the hyperscalers, AWS, Microsoft, Google, so that the developers can actually choose what tools they want to use but security can layer the right controls on top.

Matt Cohen: Sure, I'll take that. So, I think we've talked about this before, but as the nature of our solutions has become more mission critical, we've seen a kind of more even distribution in our federal government space, kind of across the board. And so, you know, we don't generally see a huge tick up; we are actually seeing just good, solid behavior across government, global government, across SLED, and state and local, which is a growth area for us.

Speaker Change: Sure I'll take that.

Speaker Change: I think we've talked about this before but as the at the nature of our of our solutions have become more mission critical we've seen kind of more even distribution in our and our federal government space.

Speaker Change: Kind of across the board and so we don't we don't generally see a huge kick up we actually are seeing just good good solid behavior across government global government across sled.

Speaker Change: State and local which is a which is a growth area for us.

Matt Cohen: And so, you know, I think we're happy with our performance overall, and we expect it to continue, but I wouldn't say there were any outsized differences in the quarter. And frankly, I don't think there'll be any outsized differences in the quarters to come. I think we're just going to continue to see strong growth. I think our global government vertical represents about 10% of our overall ARR, and, you know, I think we will continue to see that perform well. Any views about linearity trends?

Colin: And so I think we're happy with our performance overall, we expect it to continue but I wouldn't say there was any outsized are differences in the quarter and frankly, I don't think there'll be any outsides differences in the in the quarter to come I think we're just going to continue to see strong growth I think our global government vertical.

Matthew Cohen: And you heard that in the example I used in the script of the airline who basically made a decision that machine identity security was going to be under the control of the security team. And the minute that decision was made, cyber ARC became the only choice. So I think this is what we're seeing out there in the market. And as we think about benefiting the expanding opportunity to actually go after certificates and other forms of machine identity, we just see a long runway of growth ahead of us.

Colin: Rents about 10% of our of our overall.

Colin: And.

Colin: I think we continue to see that perform well.

Colin: Okay.

Colin: And it uses about linearity trends.

Matt Cohen: Across the entire business, you know, we continue to see our normal hockey stick. So we are always back end loaded in a quarter. We saw Q2 perform kind of consistent with normal Q2s. I would say we've had a strong start to Q3. Here. So we're feeling, we're feeling pretty good. But I haven't quite solved the quarterly hockey stick. It's one thing yet to be solved here at Cyberark.

Colin: Across the entire business.

Colin: We continue to see.

Colin: We see our normal hockey sticks. So we are always are backend loaded in a quarter.

Joshua Siegel: That makes a ton of sense. Josh maybe, maybe for my follow-up for you, the inflection in free cash flow is just great to see. You know, I know that Billings isn't a metric that we've really focused on much in the past, but I'm just wondering if that sort of flywheel with subscription renewals grows, how do you sort of think about when that metric becomes more meaningful? Yeah, hi, Saket, thanks. First of all, you're right, we're really excited with the free cash flow that we generated, not only in YouTube, but really for the whole first half of the year, and also excited that we're able to continue to raise the guidance significantly for the full year, and it's really based off of, you know, the factors around, you know, just really strong, renewal rates, strong bookings as well.

Colin: We saw Q2 performed kind of consistent with normal Q2s I would say we've had a strong start to Q3 here. So we're feeling we're feeling pretty good.

Speaker Change: But I haven't quite solve the AR.

Colin: The quarterly hockey stick its one one thing yet to be solved here at <unk>.

Speaker Change: Thank you so much.

John DiFucci: Your next question comes from the line of John DiFucci with Guggenheim. Please go ahead.

John <unk>: Your next question comes from the line of John <unk>.

John <unk>: Golden time. Please go ahead.

John DiFucci: Thank you. I'd like to follow up to Rob's question because the results here, as everyone is saying here, are impressive.

John <unk>: Thank you.

John <unk>: I'd like to follow up to Rob's question.

Speaker Change: The results here as everyone is saying here is impressive.

John DiFucci: But it's not only, Matt, the CISOs that have said, hey, identity is a priority here, but also cyber insurance companies. I know you and I have talked about this a lot in the past, but I'm just curious, are you seeing sort of any uptick in at least conversations around cyber insurance or demand? Because to Rob's point, having new logos grow year over year for the first time in a year and a half in this quarter, in this IT spending environment, is not only impressive, but it's also very unique.

Speaker Change: But it is not only Matt.

Speaker Change: T cells that identify that have said hey identity. Some priority here, but it's also cyber insurance companies I noticed you and Ive talked about this a lot in the past, but I'm. Just curious are you seeing sort of any uptick in at least conversations around cyber insurance or demand because to rob's point.

Joshua Siegel: And I think, I think, you know, when we think about Billings, one of the things that, you know, it's the reason why we've always kind of shied away the noise that comes from the maintenance piece of the component within the deferred revenue that goes into the Billings calculation. So I think to the extent that when ARR for the maintenance, you know, goes down dramatically and we become where everything around the ARR growth and the deferred revenue is focused on the subscription staff.

Speaker Change: Having new logos grow year over year for the first time in a year and a half and this quarter in this spending environment.

Speaker Change: Is not only impressed impressive it's also very unique.

Matt Cohen: You spoke about the origin and the strength of the CISOs. They've recognized they really need to protect identities in a more robust way. But what's the tactical catalyst to that happening, other than some of the, I guess, breaches we've heard about out there? Is cyber insurance – because to get cyber insurance at a decent price, you have to have PAM. And is that part of what's driving this sort of uniqueness?

Speaker Change: You spoke about the origin of the shrink.

Joshua Siegel: I think that's where Billings becomes a lot, you know, more of a clear predictor or indicator of the growth in the business, and that's why we're still really focused today on our ARR growth, which is really the strongest indicator because it kind of helps to wash out, you know, any impact from the tail of our transition out of the out of the perpetual business model. Makes a ton of sense.

Speaker Change: <unk> <unk>.

Speaker Change: They recognize they really need to protect the identities in a more robust way.

Speaker Change: But what's the tactical catalyst to that happening other than some of them.

Speaker Change: Breaches, we've heard about out there is our U is cyber insurance BSI averaged to get cyber insurance at a decent price you have to have Pam.

Speaker Change: And is that part of what's driving this sort of uniqueness.

Saket Kalia: Thanks, guys.

Matt Cohen: Yeah, listen, I think we've talked about it before. Cyber insurance is a nice tailwind for us. And absolutely, you know, the cyber insurers, as they've, as they've kind of perfected their models, look at core security controls that need to be in place. And, you know, PAM is there, by the way; EPM is increasingly there. You see them starting to move over and look at the machine identity space, given the threat vector there. For sure, MFASSO has always been there.

Speaker Change: Yes, listen I think we've talked about cyber insurance is a nice tailwind for us and absolutely.

Jonathan Ho: Your next question comes from the line of Jonathan Ho, with William Blair. Please go ahead.

Speaker Change: Cyber insurers as they as they kind of have perfected their models look at core security controls that need to be in place and.

Jonathan Ho: Hi, good morning. Can you maybe give us a little bit of additional commentary on how your platform vision is resonating with customers, and are you perhaps seeing channel partners start to bring you more into these types of deals as well? Yeah, hi, Jonathan. So absolutely. I mean, I think the platform is the very foundation of our ability to do solution selling, and it's the combination of both that is actually differentiating us in the market.

Pam: Pam as they are by the way E. P. M is increasingly there.

Speaker Change: You see them starting to move over and look at the machine identity space given the threat vector there for sure MFA SSO has always been there. So I think cyber insurance isn't is a nice tailwind and you kind of started to hit on on other factors and what I would tell you is there's a lot of tailwind and so you know the regulatory environment as a tailwind.

Matt Cohen: So I think cyber insurance is a nice tailwind. And you kind of started to hit on other factors, you know, and what I would tell you is, there are a lot of tailwinds. You know, the regulatory environment is a tailwind for us. We're talking about DORA, you know, regulations, Europe or SEC regulations here in the US, they create a awareness of what is most important to go do. Cyber insurers, as you just talked about, create a awareness of what's most important to do.

Speaker Change: For us we do talking about Dora regulations in Europe, our SEC regulations here in the U S. They create a awareness of what is most important to go do cyber insurers as you just talked about creating awareness of what's most important to go do you mentioned the breach environment and increasingly we are seeing both customers and <unk>.

Jonathan Ho: So, you know, we come to the to the customers and we're talking about these four personas, these four identity groups, workforce, IT, developers, and machines, and then we're talking about this vision, which is the idea to be able to secure every identity with the right level of privilege controls. The only way that that's possible is with an integrated platform, with the ability to be able to understand the behaviors of each identity group and apply the right level of controls.

Matt Cohen: You mentioned the breach environment, and increasingly, we're seeing both customers and even IR firms making sure that the first thing they do or recommend is come talk to us. And we see, you know, kind of post-breach deals picking up and coming our way from a cyber arc perspective. So I think, I think across the board, the tailwinds that support the fundamental thesis that I gave Rob, which is that we're top of mind and we're a priority, they all kind of reinforce that point and ultimately lead to stronger results. Okay, so it sounds like...

Speaker Change: The IR firms, making sure that the first thing. They go do a recommend is come talk to us and we see kind of post breach deals are picking up coming our way from a cyber Ark perspective, So I think I think across the board the tailwind that support the fundamental thesis that I.

Jonathan Ho: We call that intelligent privilege controls based upon what behaviors we're seeing, what the users trying to do, what the target they're trying to access. And so, we're not even into the discussion yet around the particular technologies that we offer, I'm talking about a high level vision with customers about this ability to be able to expand across all their identity groups. That introduces the notion of the how. Well, how do we do that?

Jonathan Ho: Well, we do that with one integrated platform, one user experience, one ability to be able to run unified audit and unified reporting, and absolutely, that is not only resonating with customers, but I think it's the backbone of the relationship, because even if a customer decides, you know what, you're the Pam leader, I want to get started with securing IT, they feel future proof, they feel safe in the relationship because they know they can expand off of one platform into those other identity groups when the time comes. Now, of course, as we mentioned, about half of our new logos land with more than one solution, more than one identity group, because customers actually from the get go want to get started with leveraging more and more of the platform. So, I do think it's fundamental to our strategy, and it's fundamental actually to the elevation of our relationships with our customers as we map out their long-term identity security strategy.

Speaker Change: Gave Rob which is we're top of mind and where our priority. They all kind of reinforce that point and ultimately lead to stronger results.

John DiFucci: Okay, so it sounds like a lot of things are happening out there. Okay, well, nice job you guys. Thank you. Thank you.

Speaker Change: Okay. So it sounds like a lot of things are happening out there okay.

Speaker Change: Nice job guys. Thank you.

Joshua Tilton: Your next question comes from the line of Joshua Tilton with Wolf Research. Please go ahead.

Speaker Change: Your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead.

Joshua Tilton: Hey guys, thanks for taking my question. Just one for me.

Joshua Tilton: Hey, guys. Thanks for taking my question just one from me.

Speaker Change: Matt I think you mentioned that when rates were improving on the workhorse side I know you guys talk a lot about how your workforce product portfolio of differentiated because you.

Speaker Change: You have some adjacent offerings.

Speaker Change: Episode on MFA feel more secure but can you talk to some of the strategic pricing initiatives. You are taking that help make customers not only feel like the product portfolio of differentiated but we're just getting much more value from it as well and how thats, maybe help driving those improving win rates.

Matt Cohen: Matt, I think you mentioned that win rates were improving on the workforce side. I know you guys talk a lot about how your workforce product portfolio is differentiated because, you know, you have some adjacent offerings that just make SSO and MFA feel more secure. But can you talk about some of the strategic pricing initiatives you're taking that help customers not only feel like the product portfolio is differentiated, but they're just getting much more value from it as well, and how that may be helping to drive those improving win rates?

Matt Cohen: Sure, Josh, so thank you. I think we talked about this a little bit at our Investor Day, but we've moved on to this solution motion. And it's a really simple concept, right? Which is that we're pricing per the persona group, or we're launching solutions per the persona group. So there's the workforce, again, IT, developers, and machines. For each one of those personas, you've got a kind of standard and an enterprise package. And our goal is to make sure that even the standard package is better than anything you can get from any competitor out there. And obviously, the enterprise takes it one step further.

Speaker Change: Yeah, sure Hey, Josh So thank you I think.

Speaker Change: We talked about this a little bit at our Investor day, but we've moved to this solution motion and it's a really simple concept right, which is where we're pricing per per their persona group over launching solutions for the persona group. So there's work for us again it developers.

Joshua Siegel: God it, God it, and then just in terms of a quick follow up, when we look at the strength in the free cash flow margins this quarter, I mean it's just sort of the new normal level or should we expect there to be additional leverage just given the strength in your performance. Thank you. Yeah thanks, Jonathan. So you know I think we guided and increased our guide for the full year so that you know that's the expectation, you know, going to the back half of the year but I do think that what the cash flow from the second quarter and also from the first quarter indicated that yes we do have a lot of leverage in our model to be able to continuously increase our cash flow margin of free cash flow margin against revenue going forward and we anticipate doing that in the years to come. Thank you.

Speaker Change: Developers and machines for each one of those personas, we've got a kind of standard and an enterprise package and our.

Speaker Change: Our goal is to make sure that even the standard package is better than anything you can get from any competitor out there and obviously the enterprise takes it one step further and so when.

Matt Cohen: And so, you know, when we think about the workforce side for a second, and you think about our standard workforce solution, certainly our enterprise one, you're getting a slice of not just MFA SSO, but you're getting the first two layers of security of secure web sessions and standard and the second two layers in enterprise, you're getting a level of identity management around lifecycle management and workflow engine, you're getting the browser, you're And so, as you kind of pointed out, you know, in spaces where we're competing from the, let's say, challenger position, you know, especially in the workforce, we're not the biggest, biggest shark out there; we compete on value and security.

Speaker Change: When we think about the workforce side for a second when you think about our standard our workforce solution certainly our enterprise one you're getting a slice of not just MFA SSO, but youre getting the first two layers of security of secure web sessions and standard in the second two layers in enterprise, you're getting a level of identity management.

Speaker Change: Lifecycle management and.

Speaker Change: In workflow engine Youre getting the browser.

Speaker Change: Youre getting an element of workforce password manager and so.

Madeline Brooks: Your next question comes from the line of Madeline Brooks with Bank of America, please go ahead. Three things for teaching my questions and nice performance with quarter just two quick ones from me. First of all, you're not in your prepared remarks you called out some nice wins and I just wanted to double click on those and trying to understand that or I guess confirm with you that second quarter was really driven by a host of different deals versus one or two really, you know, oversized large ones.

Speaker Change: As you kind of pointed out in spaces, where we're competing from the let's say challenger position, especially in workforce. We're not the biggest biggest shock out. There then we're competing on value and security and we're going in with our new solutions and we're saying wait.

Matt Cohen: And we go in with our new solutions, and we say, wait, do you really want what they offer for SSO MFA versus what we offer as a total solution to secure your workforce? And I think that's responding. And by the way, it responds even if the customer doesn't want to swap out their IDP, their SSO MFA provider. And I shared that example in the script because this is an important one, which is to say, listen, if you've made a choice about Microsoft or even Okta recently, and you don't want to swap that out, that's fine.

Speaker Change: You really want what they offer of our SSO MFA versus what we offer as a total solution to secure your workforce and I think thats resonating and by the way resonates, even if the customer doesn't want to swap out their I D. P. Their SSO MFA provider I shared that example in the script because it's an important one which is to say listen.

Madeline Brooks: And then second question for me, both, you know, for Matt as well as for Josh is just getting an update on some of those other business metrics and you mentioned that over 50% are landing with two and more solutions. So how should we think about growth in just core pan versus the other areas in your portfolio and additionally to the good to just touch on any type of a NRR type of a metric.

Speaker Change: If you've made a choice on Microsoft or even okta.

Matt Cohen: We can start to wrap our security controls on top of that, and then over time, we can see what happens. And I think that's what the sales team is feeling energized about. And they're out there competing not only more effectively, but I think with a lot more confidence.

Speaker Change: Recently, and you don't want to swap that out that's fine we can start to wrap our security controls on top of that we can bring you into our platform and then over time, we can see what happens and I think thats.

Madeline Brooks: I know last time you spoke, I think it was still turning above 125. So we could just kind of get an indication of where it is now that the helpful. Thanks so much. Percent make up from the top 10 deals as a percent of our overall bookings and we continue to see a really strong breath of business across all our markets actually driving our results. So it's a great indication actually of the strength of the business when we look under the covers from that perspective.

Speaker Change: What the sales team is feeling energized by and they're out there competing not only more effectively but I think with a lot more confidence.

Joshua Tilton: That makes a lot of sense. And then maybe a quick follow-up, you know, you I think also in the prepared remarks called out how, you know, the lifetime of certificates is kind of shrinking to 90 days when it used to be, I think, you know, multiple years. There seems to be a lot of little incremental news headlines and just, you know, companies out there losing faith in their incumbent certificate management providers.

Speaker Change: That makes a lot of sense and then just maybe a quick follow up.

Speaker Change: I think also in the prepared remarks, you called out how the lifetime of certificates kind of shrinking to 90 days when it used to be I think multiple years, there seems to be a lot of little incremental news headlines suggest.

Speaker Change: Companies out there, losing faith in their incumbent Certificate management providers are you seeing a rate of change in the demand with which people are realizing that benefit is a modern solution that can handle these new requirements that the market is impressing upon these companies.

Joshua Tilton: Are you seeing a rate of change in the demand with which people are realizing that Benefi, you know, is a modern solution that can handle these new requirements that the market is impressing upon it? Yeah, listen. I

Madeline Brooks: I think when you think about, you know, the metrics that we're seeing out there, you know, I think we're continuing to feel good about all of them. You know, I think when we think about our new logo lands, we were we were really happy with that. So yes, multiple multiple solution lands, but just in general, you know, getting to 245 new logos in this economy, it feels like a strong landing spot for us.

Matt Cohen: Yeah, listen. I think we remain incredibly enthused by the Venafi acquisition. We need to finish it out, close it, and get them on board.

Speaker Change: Yeah listen I think we remain.

Speaker Change: Incredibly enthused by the verify acquisition, we need to go finish it out close it and get them on board.

Matt Cohen: But I'm out there talking to customers, our customers, really every day. And, of course, as you might imagine, I'm discussing machine identities. And we're talking about this kind of broad end-to-end machine identity landscape. And I just want everybody to try to understand this for a second.

Speaker Change: But I'm out there talking to customers our customers are really every day and of course as you might imagine.

Madeline Brooks: And we continue to plant seeds across the board and we plant seeds across the board across all of the of the product lines. And I think that's the other kind of underlying message is we've talked about this mix or this pie for a while. And the pie continues to maintain in the consistent kind of slices as we've seen in prior quarters. And the reason for that is that Pam continues to grow.

Speaker Change: Discussing machine identities and we're talking about this kind of broad end to end machine identity landscape and and I just want everybody to try to understand this for a second for each machine identity, let's take an application.

Matt Cohen: For each machine identity, let's take an application. It can be an application, it can be a bot, it can be an AI-driven bot, it can be an IoT device, but let's take an application. That application has multiple identities. So that application can have an identity that looks a lot like a username and password. We call that a secret.

Matt Cohen: It can also have an identity with its core identifying features. Think like the equivalent of a human with their passport or their driver's license. That's a certificate. And without the ability to be able to identify themselves through a certificate, they can't, for example, get listed on websites; it can't get listed in Google.

Speaker Change: It can be an application that can be a bot. It can be an AI driven bought it can be an iot device, but lets take an application that application has multiple identities. So that application can have an identity that looks a lot like a user name and password we call that a secret.

Madeline Brooks: So our newer areas obviously are growing faster and they're performing well. But the core Pam business itself from an AR perspective continues to grow. And so the overall shifting of the underlying pie doesn't change all that much, which is where you want to be, right? You want your core business to continue to perform and you want your emerging businesses to perform even better, but not catch up so much because you have any weakness in your core. And so this is what we're seeing.

Speaker Change: It can also have an identity with its with its core.

Speaker Change: Identifying features think like the equivalent of a human with their passport or their driver's license, that's a certificate and without the ability to be able to identify themselves through a certificate. They can't for example, the application can't get listed on website, who can't get listed in Google. So the idea here is our end to end machine identity goes across all.

Matthew Cohen: You know, I think we're still too early to really talk about NRR as a number out there. You know, we want to get through some more cycles. So it's actually not a number that we've disclosed out there. But you know, I think we feel very strong in our ability to be able to harvest deals within our base. And we see, you know, really strong expansion within that base. Thank you so much.

Matt Cohen: So the idea here is our end-to-end machine identity goes across all machines. And then within each machine, it can manage whether it's the secrets, the credentials, it can manage the certificates, these identifying features, it can manage their keys, modern keys. And our combination of Venify plus Cyberark allows us to be able to be really the only provider that can do that end-to-end. Now, diving into your question, actually, that was all a long preamble, is that when we think about the certificate space, there have been organizations out there that aren't on the upper tier of the enterprise or aren't highly regulated that thought they could do this themselves.

Speaker Change: Machines, and then within each machine can manage whether its the secrets. The credentials that can manage the certificates. These identifying features that can manage their key U S. H keys modern keys, and our combination of <unk> plus cyber Ark allows us to be able to be really the only provider that can do that and to.

Rob Owens: Your next question comes from the line of Rob Owens to Piper Sandler. Please go ahead. Yeah thanks for, thanks for taking my question this morning and that, you know, you're, you're coming into tail end of earnings and your call sounds quite different than pretty much what we've heard out there and so I want to drill down a little bit into that relative to, is there a sense of urgency you're finding from company?

Speaker Change: And now the diving into your question actually that was that was all along preamble is when we think about the certificate space. There has been organizations out there that are on the upper tier of the enterprise or arent highly regulated that been able that thought they could do this themselves I can create a spreadsheet and track all my <unk>.

Matt Cohen: You know, I can create a spreadsheet and track all my certificates, which can be in the thousands or even more. And I can figure out when I need to rotate or issue a new certificate when it expires through an automated script. That's impractical today. If you are managing more than 5,000 certificates, the idea of doing it manually or through an automated fashion is just not possible.

Speaker Change: If it gets which in being in the thousands or even more and I can figure out when I need to rotate or issue a new certificate when it expires through an automated script that impractical. Today. If you are managing more than 5000 certificates the idea of doing it manually or through an automated fashion.

Rob Owens: So customers, excuse me, I mean, your new logo counts up, few companies have had the net new ARR growth in the first half that you guys have. So is it just all coming together at this point or is there, is there some sense of urgency? Because, you know, the economy has been relatively uneven or flat at best for most. Yeah Rob, it's a good question and I think it is indicative of what we're seeing out there.

Speaker Change: Just not possible and so that then triggers real interest in a enterprise grade certificate lifecycle management tool and a modern SaaS environment, which is really what verify offers and so I really think we're at this inflection point, where the do it myself or do it with some.

Matt Cohen: And so that then triggers real interest in an enterprise-grade certificate lifecycle management tool in a modern SaaS environment, which is really what Venafi offers. And so I really think we're at this inflection point where the do-it-myself or do-it-with-some-smart-people-on-IT approach is no longer applicable. So you add that to the total end-to-end story, and that's why, as you can tell because I'm going on about it, that's why you can see this idea of, wow, what can we do at Cyberark as the leader in machine identity?

Rob Owens: So let's break down again what the landscape looks like. At the moment in time, the threat vectors, the adversaries out there, it continues to elevate. Right and so the breach environment, the risk environment increases and CSOs and and security teams are under a tremendous amount of pressure. And within that construct, they're asked by their boards, by their C-suite to focus in on what's most important, what's most likely to reduce risk and that's the ability to actually secure environments.

Rob Owens: And then frankly, also what's most likely to help them be resilient, if risk materializes and we within the identity security space as a whole and as the leader and identity security are just at the forefront of those conversations because ultimately the CSOs prioritize identity security at the top of the list. So the answer of what they can do to reduce risk is implement core controls, implement privilege controls, understand how to protect the workforce more securely than just MFA SSO, go and attack the machine identity environment that has been neglected for years, expand out or modernize how we secure IT to make sure that we're not just doing, you know, the basics, but we're moving beyond that to actually, for example, secure access to VMs into cloud.

Speaker Change: Smart people on it.

Speaker Change: Is no longer applicable so you add that with the total end to end story and that's why as you can tell because I'm going on about it. That's that's why you can see this idea of Wow, what can we do a cyber Ark as the leader in machine identity and when we when we close this acquisition and we come back we'll talk a little bit more about what that offering looks like.

Rob Owens: And so all of that then becomes a conversation with us and the customer about all right, how do we move and how fast can we move our partners get it so they're pushing it harder, so we become a top priority for our partner ecosystem and ultimately materializes in the results that we see. I think independent of macros and independent of other factors out there and uncertainty, ultimately security teams have a mission and it's the same mission of ours, which is to secure their environments to protect their organization and their digital transformations.

Matt Cohen: And when we close this acquisition and we come back, we'll talk a little bit more about what that offering looks like and the momentum we'll see. Your next question comes from the line of Fatima Boolani with Citi. Please go ahead. Oh, good morning. Thank you for taking my question. Just one for me.

Speaker Change: And the momentum will save.

Fatima Boolani: Your next question comes from the line of Fatima Boolani with Citi. Please go ahead. Oh, good morning. Thank you for taking my question.

Speaker Change: Your next question comes from the line of.

Speaker Change: Bonnie.

Bonnie: Please go ahead.

Bonnie: Hi, Good morning. Thank you for taking my question just one from me Josh alluded to maybe bringing down the free cash flow directly in response to some of the things that you might be doing that and been advised on wondering if you could give us a little bit more detail or maybe a taste of what.

Speaker Change: Maybe for maybe anticipatory investment.

Speaker Change: Our plans are at furniture initiatives might be around <unk>.

Speaker Change: That hasn't closed yet, but again anything anticipatory that youre doing if you could give us a great. Thank you.

Josh Siegel: Yeah, I'll start, and Matt, if you have anything to add. But, you know, first of all, I think it's, you know, from my angle, when we're trying to forecast cash flow, free cash flow for the second half of the year, it's really more around what we are doing now around, you know, a PMI for the transaction, the additional investments around making sure that it's successful, the full integration, as well as, of course, related transactions.

Speaker Change: Yes, yes I'll start.

Speaker Change: If you have anything to add but.

Speaker Change: First of all I think it's from my angle on we're trying to forecast cash flow free cash flow for the second half of the year.

Speaker Change: It's really more around what are we doing now round.

Speaker Change: PMI for the transaction the additional investments.

Bonnie: Around making sure that it's successful.

Speaker Change: The full integration.

Bonnie: As well as of course related transactional costs that are going to be going into it whether the dry ones of legal and various advisory advisory costs as well and I also would not.

Josh Siegel: Related transactional costs that are going to be going into it, whether, you know, the dry ones of legal and various advisory costs as well. And I also would not, I would want to repeat, we took into consideration where interest rates are going in the second half of the year, which also has an impact on the free cash flow. But it's really the things around related to what we know we're doing today in terms of direct and indirect costs related to the integration with Venera. Your next question.

Bonnie: I would want to repeat Theres also.

Bonnie: Look actually.

Joshua Siegel: And I think we're just top of mind for that and then we're able to go deliver and we see that in the results and we see it even in the outlooks of what we see in the pipe moving forward. Thanks for your commentary there. Just just a quick one on free cash flow margin. If I look on a 12 month basis, you're closer to about 20%. Historically, the shape of free cash flow in any given year is a little more second half way to do not even throughout the year.

Bonnie: Consideration of where interest rates are going in the second half of the year, which is also has as an impact on the free cash flow, but it's really those things around related to what we know we're doing today around direct and indirect costs related to the integration with benefit.

Junaid Siddiqui: Your next question comes from the line of Junaid Siddiqui with Tourist Securities. Please go ahead. Great, thank you for taking

Bonnie: Your next question comes from the line of July Siddiqui curious Securities. Please go ahead.

Joshua Siegel: So is there something unique in this year relative to that second half because I think you're you're guiding to roughly 16.5% of the cash flow margin at the height of the range, which is actually below your TTM numbers. Thanks, Rob. You know, so when we look at the guidance for the full year that we raised, I think by $30 million, but we're still handicapping, sort of speak for the impact of the benefit transaction of the investment that we're doing today around it and related costs, we're also taking into consideration potential rate cuts in the second half that could be significant on the interest income, and third, I would say that there's consideration of tax obligations in the second half.

July Siddiqui: Great. Thank you for taking my question.

Bonnie: Matt you've talked about the importance of the MSP channel.

July Siddiqui: And have really leaned into it could you talk about the traction that youre seeing in the MSP console that you recently launched and maybe any other initiatives that are contributing to growth in new logos.

Matt Cohen: Yeah, sure. No, I think MSPs are an important component of today and an even more important component of the future. You know, I think more and more organizations, not just down market but actually enterprise organizations are choosing to outsource their security stack to the MSP providers throughout there. And so we see that as a big piece of our partner program. We talk about it actually regularly.

Matt: Yeah sure no I think MSP as our.

Speaker Change: Important component up today in an even more important component of the future I think more and more organizations not just dipped down market, but actually enterprise organizations are choosing to outsource their security stack to the MSP providers for out there and so we see that as a as a big piece of our partner program, we talked about it actually regularly.

Bonnie: We did launch the MSP console earlier in the year and it has gotten rave reviews. Its made the life of the MSP significantly easier.

Matt Cohen: We did launch the MSP console earlier in the year, and it's gotten rave reviews; it's made the life of the MSP significantly easier, and it allows them to be able to focus on going out and helping find customers. And once they have it, keeping those customers happy and satisfied. And the console itself really helps with some kind of tenant management. It helps with the ability to understand usage and, again, just makes their life easier.

Joshua Siegel: So when we kind of think about that and we, you know, obviously we're much more bullish on our free cash flow this year than we had started out in February and and and we were glad that we were still increased the guidance for this for the full year, but we did consider some of these other factors about for to the extent that we increased our guidance.

Bonnie: And it allows them to be able to focus on going out and helping find us customers. Once they have it keeping those customers happy and satisfied in the console itself really helps with the kind of tenant management. It helps with the ability to understand usage.

Speaker Change: Again, just makes their life easier. So I think msp's are a big piece of the future of cyber Ark.

Unknown Executive: Thank you.

Speaker Change: You see more and more of the kind of non traditional you kind of size get into MSP resellers become msp's and I think it is a big piece of how we see ourselves going forward. It also allows us by the way to talk about a broader portfolio stack.

Shaul Eyal: Your next question comes from the line of Shaul Eyal with TV Cohen. Please go ahead. Thank you. Good morning. Good afternoon, guys. Congrats on your ongoing consistent execution.

Matt Cohen: So I think MSPs are a big piece of the future of CyberArk. You see more and more of the, you know, kind of non-traditional, you know, kind of SIs get into MSPs, resellers, because they become MSPs. And I think it's a big piece of how we see ourselves going forward. It also allows us, by the way, to talk about a broader portfolio. You know, if you had talked to us maybe a year or two ago about the MSPs we did have, they were really focused on PAM.

Speaker Change: If you could talk to us.

Matthew Cohen: Guys, any any views on how the public any views on how the public vertical have performed this quarter, maybe just toward about cleanly already trends during the quarter and maybe how it's been performing during the month of July. Thank you. Sure, I'll take that so I think we've talked about this before, but as the as the nature of our of our solutions have become more mission critical, we've seen kind of more even distribution in our in our federal government space.

Bonnie: A year or two ago with the MSP is we did have they were really focused in on Pam and now we see the MSP is really embracing the full portfolio strategy the platform itself actually moving into machines moving into the access side.

Speaker Change: The areas that all of our partners not just the Msp's are most excited about is actually this idea of cloud access and how do we secure developers whether their cloud architect sitting in it or developer sitting in the developer organization and what we've seen here and it was evident in the.

Matt Cohen: And now we see the MSPs really embracing the full portfolio strategy, the platform itself, you know, actually moving into machines, moving into the access side. You know, one of the areas that all of our partners, not just the MSPs, are most excited about is actually this idea of cloud access and how do we secure developers, whether they're cloud architects sitting in IT or developers sitting in the developer organization. And what we've seen here, and it was evident in the SAP example, we have released a press release, and I mentioned them in the script. They really wanted to think about how they could expand the notion of PAM to a modern stack that actually secures the cloud environment.

Matthew Cohen: Kind of across the board, and so you know, we don't we don't generally see a huge kick up. We actually are seeing just good, good solid behavior across government global government across sled and state local, which is a which is a growth area for us. And so, you know, I think we're we're happy with our performance overall. We expect it to continue, but I wouldn't say there was any outsized differences in the quarter and frankly, I don't think there'll be any outsides different.

Speaker Change: As example, we have released a press release and I mentioned them in the script. They really wanted to think about how they expand the notion of Pam to a modern stack that actually secures the cloud environment and they adopted our secure cloud access as the fundamental component platform of how developers will.

Matt Cohen: And they adopted our Secure Cloud Access as the fundamental component platform of how developers will access the cloud environment. It's a really exciting win for us. And, you know, those types of new use cases come to play with the MSPs as well, because they realize that they can cover all of the personas of their organizations if they effectively adopt the CyberArk platform.

Speaker Change: Access to cloud environment, it's a really exciting win for us and those types of new use cases come to play with the MSP as well and they realize that they can they can cover all of the personas of their organizations if they effectively adopt the <unk> platform.

Matthew Cohen: In the in the quarter to come, I think we're just going to continue to see strong growth. I think our global government vertical is represents about 10% of our of our overall AR and, you know, I think we continue to see that perform well.

Bonnie: Okay.

Bonnie: Yeah.

Matt Cohen: That concludes our question and answer session at this time. I will now turn the call over to Mr. Matt Cohen for closing remarks. Please go ahead.

Bonnie: That concludes our question and answer session. At this time I will now turn the call over to Mr. Matt Cohen for closing remarks. Please go ahead.

Matthew Cohen: Any views about the new already trends across the entire business, you know, we continue to see. We see our normal hockey stick. So we are we are always back and loaded in a quarter. We saw Q2 perform kind of consistent with normal Q2s. I would say we've had a strong start to Q3 here. So we're feeling we're feeling pretty good. But I haven't quite solved the the quarterly hockey stick. It's one one thing yet to be solved here at cyber. Thank you so much.

Matt Cohen: Thank you. And as you can tell, we're just thrilled to deliver another strong quarter. We're delivering innovation, and we're continuing to build our vision around this idea of delivering the right level of privilege controls to every identity. We couldn't be more excited about the Venafi acquisition, which remains on track to close in the second half of 2024. And we're in an amazing position overall to continue expanding our leadership position in identity security.

Matt Cohen: Thank you and as you can tell we're just thrilled to deliver another strong quarter, we're delivering innovation and we're continuing to build our vision.

Matt Cohen: I want to end by thanking the more than 3,000 employees at CyberArk all around the world for their hard work and their diligent effort in making CyberArk what it is today. Thank you, and we'll talk soon.

Speaker Change: Around this idea of delivering the right level of povich controls to every identity, we couldnt be more excited about the <unk> acquisition, which remains on track to close in the second half of 2024, and we are an amazing position overall to continue expanding our leadership position and identity security I want to end by by thanking the more than 3000.

Bonnie: Employees at cyber Ark, all around the world for their hard work and their diligent effort in making <unk>. What it is today. Thank you and we'll talk soon.

John DiFucci: You're next question comes from the line of John DiFucci with Guggenheim. Please go ahead. Thank you. I'd like to follow up to Rob's question, because you know the results here as everyone is saying here is their impressive. But it's not only Matt the CISOs that identified that have said, hey, identities are priority here, but it's also cyber insurance companies. I know you and I've talked about this a lot in the past, but I'm just curious, are you seeing sort of any uptick in at least conversations around cyber insurance or demand?

Operator: This concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: This concludes today's call. Thank you all for joining you may now disconnect.

John DiFucci: Because to Rob's point, having new logos grow year-to-year for the first time in a year and a half in this quarter, in this IT spending environment is not only impressive, it's also very unique. You spoke about the origin and the strength of the CISOs that they've recognized, they really need to protect identities in a more robust way. But what's the tactical catalyst to that happening other than some of the, I guess, breaches we've heard about out there?

Speaker Change: Please wait the conference will begin shortly.

Bonnie: [music].

Bonnie: Yes.

Bonnie: [music].

John DiFucci: Are you, is cyber insurance, because cyber insurance to get cyber charts at a decent price, you have to have PAM. And is that part of what's driving this sort of uniqueness? Yeah, listen, I think we've talked about it. Cyber insurance is a nice tailwind for us and absolutely, you know, the cyber insurers as they kind of perfected their models, look at core security controls that need to be in place. And, you know, PAM is there.

John DiFucci: By the you see them starting to move over and look at the machine identity space, given the threat vector there, for sure, MFA SSO has always been there. So, I think cyber insurance is a nice tailwind. And you kind of started to hit on other factors, you know, and what I would tell you is, there's a lot of tailwinds, you know, the regulatory environment is a tailwind for us. We're talking about Dora, you know, regulations Europe or SEC regulations here in the US, they create a awareness of, you know, what is most important to go do.

John DiFucci: Cyber insurers as you just talked about, create an awareness of what's most important to go do. You mentioned the breach environment and increasingly we're seeing both customers and even the IR firms making sure that the first thing they go do are recommend is come talk to us. And we see, you know, kind of post breach deals picking up, coming our way from a cyber arc perspective. So, I think across the board, the tailwinds that support the fundamental thesis that I gave Rob, which is, we're top of mind and we're a priority, they all kind of reinforce that point and ultimately lead to stronger results.

John DiFucci: Okay, so it sounds like a lot of things are happening out there. Okay, a little nice job, you guys. Thank you.

Joshua Tilton: Your next question comes from the line of Joshua Tillton with Wolf Research, please go ahead. Hey guys, thanks for taking my question. Just one for me, Matt, I think you mentioned that wind rates were improving on the workforce side. I know you guys talk a lot about how your workforce product portfolio is differentiated because, you know, you have some adjacent offerings that just make, at the so and MFA feel more secure.

Joshua Tilton: But can you talk to some of the strategic pricing initiatives you're taking that help make customers not only feel like the product portfolio is differentiated, but they're just getting much more value from it as well and how that may be helped driving those improving. William Lynn Wright. Sure, Josh. So, thank you.

Matthew Cohen: I think we talked about this a little bit at our investor day, but we've moved to this solution motion. And it's a really simple concept, right, which is we're pricing per the persona group, we're launching solutions per the persona group. So there's workforce, again, IT, developers and machines. For each one of those personas, we've got a kind of standard and an enterprise package. And our goal is to make sure that even the standard package is better than anything you can get from any competitor out there.

Matthew Cohen: And obviously the enterprise takes it one step further. And so, you know, when we think about the workforce side for a second, and you think about our standard workforce solution, certainly our enterprise one, you're getting a slice of not just MFA SSO, but you're getting the first two layers of security of secure web sessions and standard, and the second two layers in enterprise. You're getting a level of identity management around life cycle management and workflow engine.

Matthew Cohen: You're getting the browser. You're getting an element of workforce password manager. And so, as you kind of pointed out, you know, in spaces where we're competing from the, let's say, challenger position, you know, especially in workforce. We're not the biggest, biggest shark out there. Then we're competing on value in security. And we're going in with our new solutions. And we're saying, wait, you really want what they offer for SSO MFA versus what we offer as a total solution to secure your workforce.

Matthew Cohen: And I think that's resonating. And by the way, it resonates even if the customer doesn't want to swap out their IDP, their SSO MFA provider. And I shared that example in the script because it's an important one, which is to say, listen, if you've made a choice on Microsoft or even Octa recently and you don't want to swap that out, that's fine. We can start to wrap our security controls on top of that.

Matthew Cohen: We can bring you into our platform. And then over time, we can see what happens. And I think that's what the sales team is feeling energized by. And they're out there competing not only more effectively, but I think with a lot more confidence. That makes a lot of sense.

Matthew Cohen: And then just maybe a quick follow-up. I think also in the prepared remarks, you called out how the lifetime of certificate is kind of shrinking to 90 days when it used to be, I think, multiple years. There seems to be a lot of little incremental news headlines that just companies out there are losing faith in their incumbent certificate management providers. Are you seeing a rate of change in the demand with which people are realizing that benefit is a modern solution that can handle these new requirements that the market is impressing upon these companies?

Matthew Cohen: Yeah, listen, I think we remain incredibly enthused by the benefit acquisition. We need to go finish it out, close it and get them on board. But I'm out there talking to customers, our customers, really every day. And of course, as you might imagine, I'm discussing machine identities. And we're talking about this kind of broad end-to-end machine identity landscape. And I just want everybody to try to understand this for a second. They're for each machine identity.

Matthew Cohen: Let's take an application. It can be an application. It can be a bot. It can be an AI driven bot. It can be an IoT device. But let's take an application. That application has multiple identities. So that application can have an identity that looks a lot like a username and password. We call that a secret. It can also have an identity with its core identifying features. Think like the equivalent of a human with their passport or their driver's license.

Matthew Cohen: That's a certificate. And without the ability to be able to identify themselves through a certificate, they can't, for example, the application can't get listed on websites. It can't get listed in Google. So the idea here is our end-to-end machine identity goes across all machines. And then within each machine, it can manage whether it's the secrets, the credentials, it can manage the certificates, these identifying features. It can manage their keys, their HK's, modern keys. And our combination of benefit plus cyber art allows us to be able to be really the only provider that can do that end-to-end.

Matthew Cohen: Now, diving into your question actually, that was all a long preamble. When we think about the certificate space, there has been organizations out there that aren't on the upper tier of the enterprise or aren't highly regulated, that they thought they could do this themselves. I can create a spreadsheet and track all my certificates, which shouldn't be in the thousands or even more. And I can figure out when I need to rotate or issue a new certificate when it expires through an automated script.

Matthew Cohen: That's impractical today. If you are managing more than 5,000 certificates, the idea of doing it manually or through an automated fashion is just not possible. And so that then triggers real interest in an enterprise grade certificate lifecycle management tool in a modern SaaS environment, which is really what Vennify offers. And so I really think we're at this inflection point where the do-it-myself or do it with some smart people on IT is no longer applicable.

Matthew Cohen: So you add that with the total end-to-end story, and that's why, as you can tell because I'm going on about it, that's why you can see this idea of, wow, what can we do as cyber arc as the leader in machine identity?

Matthew Cohen: And when we close this acquisition and we come back, we'll talk a little bit more about what that offering looks like, and the momentum will say.

Fatima Boolani: Your next question comes from the line of Fatima Boolani. We've seen the, please go ahead.

Joshua Siegel: Good morning. Thank you for taking my question. Just one from me. Joshua alluded to maybe bringing down the free cash flow directly in response to some of the things that you might be doing random benefits. I'm wondering if you could give us a little bit more detail or maybe a taste of what maybe some of these intents or participatory investments or plans or efforts or initiatives might be around benefit provided that it hasn't closed yet. But again, anything anticipatory that you're doing that you could give us a flavor on.

Joshua Siegel: Thank you. Yeah, y'all start that if you have anything to add, but you know, first of all, I think it's, you know, from my angle when we're trying to forecast cash flow free cash flow for the second half of the year, it's really more around what are we doing now around, you know, PMI for the transaction, the additional investments around making sure that it's successful. The full integration as well as, of course, related transactional costs that are going to be going into it whether, you know, the dry ones of legal and various advisory advisory costs as well.

Joshua Siegel: And I also would not, I would want to repeat. There's also, you know, we took actually consideration of where interest rates are going in the second half of the year, which is also as an impact on the free cash flow. But it's really that things around related to what we know we're doing today around direct and indirect costs related to the integration with benefit.

Junior City: Your next question comes from the line of junior city, key with tourist security, please go ahead.

Matthew Cohen: Great. Thank you for taking my question. Matt, you've talked about the importance of the MSP channel and have really leaned into it.

Matthew Cohen: Could you talk about the traction that you're seeing in the MSP console that you recently launched and maybe any other initiatives that are contributing to growth in new logos? Yes, sure. No, I think MSPs are, you know, important component of today and an even more important component of the future. You know, I think more and more organizations, not just down market, but actually enterprise organizations are choosing to outsource their security stack to the MSP providers throughout there.

Matthew Cohen: And so we see that as a big piece of our partner program. We talked about it actually regularly. We did launch the MSP console earlier in the year and it's gotten rave reviews. It's made the life of the MSP significantly easier. And it allows them to be able to focus on going out and helping find us customers. And once they have it, keeping those customers happy and satisfied and the console itself really helps with kind of tenant management.

Matthew Cohen: It helps with the ability to understand usage and again, just makes their life easier. So I think MSPs are a big piece of the future of cyber ARG. You see more and more of the, you know, kind of non-traditional kind of SI's get into MSPs, resellers become MSPs. And I think it's a big piece of how we see ourselves going forward. It also allows us, by the way, to talk about a broader portfolio stack.

Matthew Cohen: You know, if you had talked to us maybe a year or two ago with the MSPs we did have, they were really focused in on Pam. And now we see the MSPs really embracing the full portfolio strategy, the platform itself, you know, actually moving into machines, moving into the access side. You know, one of the areas that all of our partners, not just the MSPs, are most excited about, is actually this idea of cloud access.

Matthew Cohen: And how do we secure developers, whether they're cloud architect sitting in IT, or developer sitting in the developer organization. And what we've seen here, and it was evident in the SAP example, we have released a press release, and I mentioned them in the script, they really wanted to think about how they expand the notion of Pam to a modern stack that actually secures the cloud environment. And they adopted our secure cloud access, as the fundamental component platform of how developers will access the cloud environment.

Matthew Cohen: It's a really exciting win for us. And, you know, those types of new use cases come to play with the MSPs as well, and they realize that they can cover all of the personas of their organizations if they effectively adopt the cyber art platform.

Operator: That concludes our question and answer session at this time.

Matthew Cohen: I will now turn the call over to Mr. Matt Cohen for closing remarks. Please go ahead. Thank you. And as you can tell, we're just thrilled to deliver another strong quarter. We're delivering innovation and we're continuing to build our vision around this idea of delivering the right level of privilege controls to every identity. We couldn't be more excited about the benefit acquisition, which remains on track to close in the second half of 2024. And we're an amazing position overall to continue expanding our leadership position in identity security.

Matthew Cohen: I want to end by thanking the more than 3,000 employees at Cyberark all around the world for their hard work and their diligent effort to make in Cyberark what it is today. Thank you and we'll talk soon.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect.

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