CyberArk (CYBR) Down 33.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for CyberArk (CYBR). Shares have lost about 33.5% 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 drivers.

CyberArk’s Q4 Earnings & Revenues Top Estimates

CyberArk Software Ltd. (CYBR) reported healthy fourth-quarter 2019 results, wherein both top and bottom lines beat estimates. Non-GAAP earnings per share of 97 cents surpassed the Zacks Consensus Estimate by 21.3%. The bottom line was also higher than the year-ago quarter’s 89 cents.

CyberArk’s revenues grew 19% year over year to $129.7 million and beat the consensus mark of $126 million.

Strong revenue growth across all geographical regions augmented 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, strong demand across all verticals, particularly government, healthcare, IT services, media and pharmaceuticals (each grew more than 40%), boosted revenues.

Quarter Details

Segment-wise, License revenues (59% of total revenues) increased 15% year over year to $76.5 million, primarily driven by new businesses in the Americas, and the Asia Pacific and Japan (APJ) region.

The company’s products, Application Access Manager and Endpoint Privilege Manager, represented nearly 11% and 7% of license revenues, respectively.

Maintenance and Professional Services (41%) revenues rose 26% to $53.1 million. Within the segment, professional services revenues came in at $9.3 million, representing 7% of total revenues.

The company witnessed top-line growth in every region. On a year-over-year basis, revenues of $71.1 million from the Americas increased 17%. Revenues of $12.6 million from the APJ jumped 94%. EMEA revenues of $45.9 million rose 10%.

CyberArk’s new SaaS solutions — CyberArk Privilege Cloud and Alero — are also witnessing significant growth.

CyberArk ended the quarter with more than 5,300 customers, adding around 300 new logos.

The company’s advisory, value-added reseller and technology partner ecosystem contributed more than 50% of revenues from the indirect channel.

The company continued hiring and ended the quarter with 1,380 employees worldwide.

Operating Results

CyberArk’s non-GAAP gross profit was $115.6 million, representing year-over-year growth of 17.7%. Gross margin contracted 90 basis points (bps) to 89.1%.

The company reported non-GAAP operating income of $42.1 million compared with $39.8 million in the year-ago quarter. Non-GAAP operating margin contracted 406 bps to 32.5%, partly due to continued investments in cloud infrastructure deployments.

Balance Sheet & Cash Flow

CyberArk exited the quarter with cash, cash equivalents, short-term deposits and marketable securities of approximately $1.1 billion, up from $555.1 million at the end of the previous quarter. The company’s balance sheet does not show any long-term debt.

The company’s cash flow generated from operations was approximately $141.7 million, as of Dec 31, 2019, up from $88.6 million sequentially.

2019 Highlights

For the full year, CyberArk reported revenues of $433.9 million, up 26% year over year.

License, and Maintenance and Professional Services revenues rose 24% and 30% year over year, respectively.

Non-GAAP earnings of $2.77 per share were higher than the year-ago quarter’s earnings of $2.06.

Guidance

For 2020, CyberArk anticipates revenues of $511-$519 million, up from $419-$423 million, indicating 19% year-over-year growth at midpoint ($515 million).

Expenses are expected to grow 30% during the year.

Non-GAAP earnings per share for 2020 are expected in the $2.26-$2.38 band.

For the first quarter of 2020, CyberArk estimates revenues of $125-$127 million, implying 15-16% year-over-year growth.

Non-GAAP operating income is expected in a band of $38.5-$40 million. The company projects non-GAAP earnings in the 78-82 cents range.

A difficult year-over-year comparison in the first quarter, particularly in the Americas and the APJ, is expected to be an overhang.

An impact of $3 million is expected on the company’s top line in the first quarter due to an unfavorable mix of perpetual and SaaS business.

CyberArk typically experiences a sequential revenue decline in the first quarter, moderate sequential growth in the second and third quarters, and highest revenues in the fourth quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -55.94% due to these changes.

VGM Scores

At this time, CyberArk has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 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 this revision indicates a downward shift. It's no surprise CyberArk has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.