A month has gone by since the last earnings report for CyberArk (CYBR Quick QuoteCYBR - Free Report) . Shares have added about 5.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CyberArk due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

CyberArk Q3 Earnings Beat Estimates, Revenues Fall Y/Y

CyberArk Software reported third-quarter 2020 non-GAAP earnings of 31 cents per share that exceeded the Zacks Consensus Estimate by 6.9%. The bottom line, however, declined 52.3% year over year.

CyberArk’s revenues fell 1.4% year over year to $106.6 million and missed the consensus mark by 5.7%. Markedly, 59% of quarterly revenues were recurring in nature, which grew 40% year over year to $63 million.

Annual Recurring Revenues increased 40% year over year to $250 million.

Quarter Details

Segment-wise, License revenues (42.9% of total revenues) decreased 20.9% year over year to $45.8 million. On a combined basis, SaaS and subscription revenues increased roughly 200% year over year and accounted for 28% of total license revenues.

Maintenance and Professional Services (57.1%) revenues increased 21% year over year to $60.8 million. Within the segment, professional services revenues came in at $9.9 million, representing 9% of total revenues.

The company witnessed strong year-over-year growth in financials, healthcare, telecom, pharma and the IT services software vertical.

CyberArk’s non-GAAP gross profit was $89.5 million, marking year-over-year decline of 4.8%. Moreover, gross margin contracted 300 basis points (bps) to 83.9% on unfavorable revenue mix (higher SaaS revenues) and increased cloud infrastructure cost related to SaaS business.

Operating expenses increased 20.8% year over year to $94.7 million. As a percentage of revenues, operating expenses were 88.8% compared with 72.5% reported in the year-ago quarter.

The company reported non-GAAP operating income of $13.1 million, down 55.4% year over year. Non-GAAP operating margin declined from 27.2% reported in the year-ago quarter to 12.3% in the reported quarter.

Balance Sheet

As of Sep 30, 2020, CyberArk had $1.1 billion in cash, cash equivalents, marketable securities and short-term deposits.

Total deferred revenues were $227.6 million, up 28% year over year.

Key Developments

During the reported quarter, the company introduced CyberArk Cloud Entitlements Manager, an AI-powered service, to remove excessive cloud permissions.

Moreover, the company’s solutions are now available on Microsoft’s cloud platform Azure. Further, CyberArk achieved AWS Digital Workplace Competency Status and AWS Outposts Ready designation.

Guidance

For the fourth quarter of 2020, CyberArk estimates revenues of $125-$135 million.

Non-GAAP operating income is expected in the band of $25-$33 million. The company projects non-GAAP earnings in the 52-67 cents per share range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, CyberArk has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. 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.

Outlook

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.