Q4 2024 Earnings Summary
- Exceptional new logo wins with larger deal sizes: In the fourth quarter, CyberArk's top three deals were all new logos, securing the full platform and demonstrating increasing deal sizes. This indicates strong demand for CyberArk's integrated Identity Security solutions.
- Significant cross-selling opportunities from acquisitions: Early enthusiasm and strong initial traction with the Venafi acquisition show potential for revenue synergies, especially as CyberArk leverages its channel partners. The acquisition of Zilla Security positions CyberArk to redefine Identity Governance and Administration (IGA) with a modern approach, expanding their total addressable market.
- Channel partnerships and MSPs driving growth: CyberArk's channel strategy, including Managed Service Providers (MSPs), is contributing significantly to new customer acquisition and growth. MSPs have been a growth area, helping to bring in new logos and expand CyberArk's market reach.
- Potential delays in realizing revenue synergies from the Venafi acquisition, as it may take up to 6 to 9 months sales cycles and 1 to 2 quarters to train channel partners. This indicates that the full financial benefits from the acquisition might not materialize immediately.
- Uncertainty in federal government spending could impact CyberArk's revenues, as changes in administration views may affect federal budgets. While the federal government represents about 5% of ARR, any reduction could have a negative effect.
- The pace of maintenance ARR conversions may be leveling off, suggesting that the conversion opportunity might be diminishing. Although the company sees significant conversion opportunity in the $186 million of maintenance ARR, the activity didn't inflect and is expected to pick up as the year progresses.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | Q1 2025 | no prior guidance | $301 million to $307 million | no prior guidance |
Non-GAAP Operating Income | Q1 2025 | no prior guidance | $42.5 million to $47.5 million | no prior guidance |
Non-GAAP EPS | Q1 2025 | no prior guidance | $0.74 to $0.81 per diluted share | no prior guidance |
Weighted Average Diluted Shares | Q1 2025 | no prior guidance | 51.3 million | no prior guidance |
Financial Income | Q1 2025 | no prior guidance | $7 million | no prior guidance |
Tax Rate | Q1 2025 | no prior guidance | Approximately 23% | no prior guidance |
Total Revenue | FY 2025 | no prior guidance | $1.308 billion to $1.318 billion | no prior guidance |
Non-GAAP Operating Income | FY 2025 | no prior guidance | $215 million to $225 million | no prior guidance |
Non-GAAP EPS | FY 2025 | no prior guidance | $3.55 to $3.70 per diluted share | no prior guidance |
Weighted Average Diluted Shares | FY 2025 | no prior guidance | 51.5 million | no prior guidance |
Financial Income | FY 2025 | no prior guidance | $26 million | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | Approximately 24% | no prior guidance |
Annual Recurring Revenue (ARR) | FY 2025 | no prior guidance | $1.410 billion to $1.420 billion | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | no prior guidance | $300 million to $310 million | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | 1% to 1.5% of revenue | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong, recurring demand for identity security and subscription-based solutions | Q1 2024: Emphasized accelerating subscription ARR (54% YoY), 77% of total ARR. Q2 2024: Subscription ARR grew 50% YoY, 78% of total ARR. Q3 2024: Subscription ARR up 46% YoY, 79% of total ARR. | Q4 2024: ARR exceeded $1B, subscription ARR $977M (84% of total). | Consistent priority, robust YoY growth |
Ongoing integration of acquisitions (Venafi, Zilla) and cross-selling opportunities | Q1 2024: No mention. Q2 2024: Venafi deal pending; expected synergy with secrets management. Q3 2024: Confident in Venafi cross-sell; bundling machine identity with secrets. | Q4 2024: Strong Venafi integration adding ~$166M ARR; Zilla contributes ~$5M; cross-selling to large base. | Sustained focus; integrations driving new revenue |
Channel and MSP partnerships driving new logos and market expansion | Q1 2024: MSP console launch; ~200 new logos with channel help. Q2 2024: MSP adoption broadening portfolio; ~245 new logos. Q3 2024: No mention. | Q4 2024: Channel a key differentiator, MSP efforts fueling new logos. | Continued expansion via partners |
Subscription ARR growth and maintenance ARR conversions (concerns about leveling off) | Q1 2024: $621M subscription ARR (77% total), maintenance conversions at single-digit %. Q2 2024: $677M subscription ARR (78% total), same conversion pattern. Q3 2024: $735M subscription ARR (79% total), conversion still single-digit. | Q4 2024: $977M subscription ARR, 84% total, single-digit from maintenance conversions. | Robust subscription momentum persists |
Government spending uncertainties impacting federal revenues | Q1 2024: Optimistic on FedRAMP High, no spending concerns. Q2 2024: Government ~10% ARR, stable outlook. Q3 2024: No mention. | Q4 2024: Uncertainty noted but minimal impact, around 10% of ARR, broad agency base reduces risk. | Generally stable federal performance |
New logo wins with larger deal sizes showcasing demand for integrated Identity Security | Q1 2024: ~200 new logos, half buying 2+ solutions. Q2 2024: 245 new logos, half adopting multiple solutions. Q3 2024: ~230 new logos, 7-figure ACV deal with a bank. | Q4 2024: 346 new logos, 3 largest deals were 7-figure new logos, increased average deal size. | Steady growth, bigger deals reflect platform adoption |
Potential delays in realizing revenue synergies from Venafi acquisition | Q1 2024: No mention. Q2 2024: No mention. Q3 2024: No mention. | Q4 2024: Not framed as a delay; full channel impact expected in back half of 2025. | Timeline normal, no stated slowdown |
Departure of the long-serving CFO raising questions about leadership continuity | Q1 2024: No mention. Q2 2024: No mention. Q3 2024: CFO Joshua Siegel’s departure disclosed; confidence in successor Erica Smith. | Q4 2024: No mention. | Transition managed, only noted in Q3 |
Margin expansion, free cash flow growth, and operating leverage post-subscription transition | Q1 2024: Operating income rebounded; free cash flow rose to $66.8M. Q2 2024: Operating margin ~10.6%, FCF $41.7M. Q3 2024: Operating margin 15%, FCF margin 21%. | Q4 2024: 15% operating margin for FY24, record FCF $221M, subscription model drives leverage. | Ongoing improvement in profitability |
Workforce solutions surpassing $100 million ARR indicating strong cross-sell potential | Q1 2024: No mention. Q2 2024: No mention. Q3 2024: Surpassed $100M ARR, still low penetration (~1,000 of 9,000 customers). | Q4 2024: No mention. | Highlighted in Q3 only |
Lack of NRR (net retention rate) disclosure affecting transparency perceptions | Q1 2024: No mention. Q2 2024: NRR not disclosed; still early in subscription model. Q3 2024: No mention. | Q4 2024: No mention. | Briefly noted in Q2 |
IBM’s acquisition of HashiCorp and FedRAMP High authorization no longer prominently referenced | Q1 2024: Addressed IBM-HashiCorp deal; confident in competitive posture, FedRAMP High for EPM. Q2 2024: No mention. Q3 2024: No mention. | Q4 2024: No mention. | No subsequent references after Q1 |
Zilla Security acquisition emerging as a modern IGA solution | Q1 2024: No mention. Q2 2024: No mention. Q3 2024: No mention. | Q4 2024: Positioned as modern IGA SaaS, integrates AI-driven governance for faster deployments. | Newly spotlighted in Q4 |
Shifting sentiment toward slower-than-expected synergy realization and subscription momentum | Q1 2024: No mention. Q2 2024: No mention. Q3 2024: No mention. | Q4 2024: No mention. | No mentions so far |
Future impact from modern IGA expansion, Venafi synergy, and continued channel-driven growth | Q1 2024: No mention. Q2 2024: Focus on Venafi synergy and MSP strategy. Q3 2024: Emphasis on scaling Venafi and machine identity. | Q4 2024: IGA (Zilla) + Venafi + channel expected to spur growth. | Broadening scope, more strategic integrations |
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Guidance Philosophy and Potential Upside
Q: How should we think about guidance and upside given acquisitions?
A: Erica Smith explained that their guidance philosophy for 2025 remains similar to last year, not assuming major macro changes, and guiding to net new Annual Recurring Revenue (ARR) on an organic basis similar to the prior year. With the Venafi and Zilla acquisitions, they see significant opportunities but have maintained a consistent guidance approach. -
New Logo Wins and Platform Expansion
Q: How broadly are you landing with new customers across products?
A: Matthew Cohen highlighted an exceptional quarter for landing broadly with the full platform. Their top three deals were all new logos that included securing privileged access for IT, workforce, machines, and developers, leading to exponential increases in deal sizes. Customers are increasingly seeking to secure multiple areas simultaneously, driving larger initial deals. -
Venafi Go-to-Market Strategy
Q: How are you integrating Venafi into your sales and channel?
A: Matthew Cohen stated they are leveraging their traditional CyberArk account executives to lead conversations, with the Venafi team acting in an overlay role. They are targeting their 8,000 customers to sell Venafi solutions. The integration is proceeding well, with positive early results and strong channel reception, expecting channel impact to accelerate in the second half of the year. -
Securing AI Agents
Q: Why is CyberArk well-positioned to secure AI agents?
A: Matthew Cohen explained that AI agents act both as machines and humans, accessing data and infrastructure in nondeterministic ways. CyberArk's Identity Security platform, which secures dynamic privileged access for both humans and machines, is uniquely suited to secure AI agents as their privileges change in dynamic environments. -
Zilla Acquisition and Platform Alignment
Q: How does Zilla align with your broader platform strategy?
A: Matthew Cohen discussed that Zilla adds modern Identity Governance and Administration (IGA) capabilities, addressing the challenges of securing access to the growing number of SaaS applications and cloud consoles. Zilla's integration into their platform allows customers to manage entitlements, provisioning, and compliance in modern environments, enhancing their comprehensive Identity Security offering. -
Channel Strategy and MSP Opportunity
Q: Can you talk about your channel strategy and MSP plans?
A: Matthew Cohen emphasized that the channel is a key differentiator for CyberArk. They experienced strong momentum with Managed Service Providers (MSPs), contributing to new logo growth. Their relationships with systems integrators and resellers are deepening, and they continue to see the channel as a force multiplier, particularly with the addition of Venafi solutions. -
Impact of Federal Government Spending
Q: What are customers saying about federal spending uncertainties?
A: Matthew Cohen noted that while there is some uncertainty, CyberArk is in an enviable position. Global government represents about 10% of their ARR, with half of that from the U.S. federal government. Their offerings are mission-critical and can help the government save money through more efficient, modern solutions, leading to less scrutiny in this environment. They feel good about their federal business and did not see a meaningful impact on guidance. -
Machine Identity Management and Governance
Q: Does Zilla help develop governance for machine identities?
A: Matthew Cohen confirmed that managing machine identities is complex, involving various types and layers. CyberArk has developed a broad portfolio, and Zilla's capabilities can be applied to enhance their machine identity security solutions, particularly in automation and lifecycle management, solidifying their end-to-end offering in this space. -
Maintenance ARR and Conversion Opportunity
Q: Is the pace of maintenance conversions leveling off?
A: Erica Smith mentioned they saw some conversion activity in the fourth quarter and believe there is significant conversion opportunity in the maintenance ARR base of $186 million. They expect a healthy pace of conversions, potentially picking up as the year progresses.