It has been about a month since the last earnings report for CyberArk (CYBR - Free Report) . Shares have added about 8% 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 its most recent earnings report in order to get a better handle on the important catalysts.
CyberArk reported second-quarter 2018 non-GAAP earnings of 36 cents, which rose 71.4% from the year-ago quarter and surpassed the Zacks Consensus Estimate of 24 cents as well.
CyberArk’s revenues were up 35.2% year over year to $77.7 million and came ahead of the Zacks Consensus Estimate of $73 million. The top line mainly benefited from better sales execution, customer acquisitions and add-on business from existing clients.
Segment wise, License revenues, which accounted for 53% of total revenues, increased 35.6% year over year to $41.1 million. High level of customer satisfaction and growing adoption of its solutions are helping it win deals in new as well as add-on business. Notably, add-on business accounted for 55% of license revenues in the quarter.
The company is gaining momentum among advisory firms like Deloitte, PWC, KPMG and Accenture. Management mentions that new and add-on business impacted by advisory firms grew more than 50% from the year-ago quarter.
Maintenance and Professional Services revenues, contributing 47% to total revenues, jumped 34.7% year over year to $36.6 million. Professional services revenues were $6.8 million, contributing 9% of total revenues, driven by better efficiency from services group and improvement in services from EMEA.
Geographically, the company witnessed revenue growth across every region. On a year-over-year basis, revenues from the Americas increased 24% and contributed 62% of total revenues. Revenues in the Asia Pacific and Japan were up 54% year over year, representing 9% of total revenues. EMEA recorded a 62% jump and accounted for 29% of total revenues.
During the reported quarter, the company closed a number of deals, including a significant number of seven-figure new clients. Also, CyberArk witnessed a remarkable number of federal deals in the quarter. Global government vertical, which represents 15% of the company’s business, more than doubled from the year-ago quarter.
Management mentioned that banking, education, energy, insurance, IT services and software and telecommunications sectors grew by at least 50% this quarter.
CyberArk’s non-GAAP gross profit came in at $68.2 million, representing year-over-year growth of 39.3%. Gross margin expanded 260 basis points (bps) year over year to 87.8% driven by higher utilization of professional services team and fall in third-party subcontractor’s use.
The company reported non-GAAP operating income of $17 million, compared with $8.8 million reported in the year-ago quarter. Non-GAAP operating margin expanded to 21.9% from 15.3%.
Balance Sheet & Cash Flow
CyberArk exited the quarter with cash, cash equivalents, short-term deposits and marketable securities of approximately $377.5 million, up from $325.4 million at the end of previous quarter.
CyberArk’s balance sheet does not have any long-term debt. The company generated cash flow from operations of approximately $33.1 million in the first quarter.
Buoyed by splendid second-quarter results, the company issued an encouraging outlook for the third quarter and raised the full-year guidance.
For the current year, CyberArk now anticipates revenues in the band of $320–$324 million, representing 22-24% year-over-year growth, up from $315-$319 million predicted earlier.
Non-GAAP operating income is now projected to lie between $64 million and $67 million, up from the previous projection of $57.5–$60.5 million. Non-GAAP earnings per share for 2018 are now expected to lie in the $1.43–$1.50 band, against the previous estimate of $1.31–$1.37.
For the third quarter, CyberArk estimates revenues in the range of $77.75-$79.25 million, representing 20-22% year-over-year growth. Non-GAAP operating income is predicted to lie in the band of $11.4-$12.6 million. The company projects non-GAAP earnings for the third quarter in the 25-28 cents range.
The company expects operating expenses to increase in the quarter due to seasonal employee expenses, marketing programs, and the company’s new defense customer series.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -27.27% due to these changes.
Currently, CyberArk has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, CyberArk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.