It has been about a month since the last earnings report for CyberArk (CYBR - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CyberArk due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
CyberArk’s Q2 Earnings & Revenues Beat Estimates
CyberArk reported better-than-expected second-quarter 2020 results. Non-GAAP earnings per share of 42 cents exceeded the Zacks Consensus Estimate by 61.5%. The bottom line, however, is lower than the year-ago quarter’s 59 cents.
CyberArk’s revenues grew 6.3% year over year to $106.5 million and beat the consensus mark of $101 million. Solid revenue growth across all geographical regions aided the top line. Moreover, an expanding customer base was a tailwind.
Increasing demand for privileged access security on the back of digital transformation and cloud migration strategies was a key growth driver. Moreover, growing pipelines across verticals such as banking, insurance, healthcare, global government, pharmaceuticals and utilities, which have been less affected by the coronavirus pandemic, boosted revenues.
Segment wise, License revenues (45% of total revenues) decreased 8.2% year over year to $47.9 million. Add-on business contributed 75% of license revenues in the second quarter.
The company’s products, Application Access Manager and Endpoint Privilege Manager, represented nearly 15 and 9% of license revenues, respectively.
Maintenance and Professional Services (55%) revenues were up 22% to $58.6 million. Within the segment, professional services revenues came in at $9.9 million, representing 9% of total revenues.
The company witnessed top-line growth in every region. On a year-over-year basis, revenues of $64.5 million from the Americas increased 4.4%. Revenues of $11.6 million from the APJ jumped 20%. EMEA revenues of $30.4 million rose 5.9%.
CyberArk’s non-GAAP gross profit was $90.7 million, marking year-over-year growth of 3.5%. However, gross margin contracted 300 basis points (bps) to 85% on lower license revenues.
The company reported non-GAAP operating income of $16.9 million compared with the year-ago quarter’s $26.5 million. Non-GAAP operating margin shrunk 10.5 percentage points to 15.9% on higher operating expenses.
Balance Sheet & Cash Flow
CyberArk exited the second quarter with cash, cash equivalents, short-term deposits and marketable securities of $1.1 billion, down from the $1.2 billion witnessed at the end of the previous quarter. The company’s balance sheet does not show any long-term debt.
During the first six months of 2020, the company generated operating cash flow of $53.3 million.
For the third quarter of 2020, CyberArk estimates revenues of $107-$115 million.
Non-GAAP operating income is expected in the band of $8-$15 million. The company projects non-GAAP earnings in the 19-33 cents range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -354.17% due to these changes.
At this time, CyberArk has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CyberArk has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.