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Bear of the Day: CyberArk Software (CYBR)

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CyberArk CYBR is a $6 billion provider of IT security solutions to more than 5,000 global businesses, which include over 50% of the Fortune 500 and more than 35% of the Global 2000 companies.

It turns out, there are not really one-provider-fits-all security needs, with many specializing in different aspects, from firewalls and identity to endpoint and data governance. That explains how CYBR can have so many big customers and still be struggling with profitability.

CYBR reported mixed Q2 results on August 12, wherein the top line surpassed the Zacks Consensus Estimate but the bottom line lagged the same. The leading Identity Security solution provider reported non-GAAP earnings of a penny, missing the Zacks Consensus Estimate of 3 cents per share. The figure declined 97.6% from the year-ago quarter’s earnings of 42 cents per share.

CYBR reported revenues of $117.2 million, beating the consensus mark of $116.3 million. The top line witnessed a year-over-year advance of 10%. Markedly, 68.8% of quarterly revenues were recurring in nature, which jumped 32.6% year over year to $80.6 million.

Annual Recurring Revenues (ARR) increased 35% to $315 million. The maintenance portion, representing 65% of total ARR, increased 10.9% year over year to $205.7 million. Subscription portion, which accounted for 35% of the total ARR, soared 128% year over year to $109.5 million. This upside was mainly driven by a record number of SaaS solutions bookings and strong demand for on-premises subscription offerings.

Segment-wise, subscription revenues (23.1% of total) were $27.1 million, up by 101% percent from the year-ago quarter.

Maintenance and professional services revenues (53.6% of total) climbed 10% at $62.9 million from the year-ago quarter.

Perpetual license revenues (23.3% of total) slumped 23.5% to $27.3 million at the close of this quarter.

CyberArk’s subscription transition is witnessing strong momentum, with a rapidly growing base of recurring revenues.

SaaS and subscription bookings created additional headwinds of about $13 million for the second quarter. However, strong demand for the company’s solutions more than offset this and drove top-line growth, as they gained 185 new customers.

Why CYBR is a Zacks #5 Rank

Based on guidance about the transition, Wall Street analysts lowered their EPS estimates significantly.

CyberArk said they now expect adjusted earnings of $0.01 to $0.26 per share, versus the prior guidance of $0.39 to $0.64. It continues to expect revenue of $484 million to $496 million.

Following this reveal, the Zacks full-year EPS consensus dropped 65% from 55-cents to 17-cents, representing a 92% decline from last year. And next year was slashed by over 50% among 10 covering analysts submitting estimate revisions.

CyberArk's transition may continue to attract new customers, but until the profit picture turns around it may be best to take profits after the recent run-up toward the old highs at $165.

The Zacks Rank will let you know.

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