CyberArk (CYBR) Up 10.5% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for CyberArk Software Ltd. (NASDAQ:CYBR) . Shares have added about 10.5% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CYBR 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 drivers.

CyberArk's Q1 Earnings & Revenues Beat, '18 View Up

CyberArk reported splendid results for first-quarter 2018, wherein it exceeded its guidance at every point and surpassed the respective Zacks Consensus Estimate as well.

Revenues

CyberArk’s revenues were up 22% year over year to $71.8 million and came ahead of management’s guided range of $68.25-$69.75 million (mid-point $69 million), as well as the Zacks Consensus Estimate of $69 million. The company’s top line mainly benefited from better sales execution, customer acquisitions and add-on business from existing clients.

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. The company added more than 150 customers and ended the quarter with more than 3,800 clients.

Segment wise, License revenues which accounted for 54% of total revenues, increased 17% year over year to $38.5 million. Maintenance and Professional Services revenues, contributing 46% to total revenues, jumped 28% year over year to $33.3 million.

Geographically, the company witnessed revenue growth across every region. On a year-over-year basis, revenues from the Americas increased 18% and contributed 62% of total revenues. Revenues in the Asia Pacific and Japan were up 28% year over year, representing 8% of total revenues. EMEA recorded a 29% jump and accounted for 30% of total revenues.

Operating Results

CyberArk’s non-GAAP gross profit came in at $62.4 million, representing year-over-year growth of 22.2%. Gross margin expanded 40 basis points (bps) year over year to 86.9% in the first quarter.

The company reported non-GAAP operating income of $12.6 million, down marginally from $12.7 million reported in the year-ago quarter. However, operating income came in higher than the company’s guided range of $9.2-$10.4 million.

Non-GAAP operating margin dipped to 17.6% from 21.6%, primarily due to elevated operating expenses as a percentage of revenues. Escalated operating expenses mainly resulted from increased investment toward research & development and expanding sales capabilities.

The company reported non-GAAP net income of approximately $11.8 million, slightly up from $10.2 million reported in the year-ago quarter. However, net income margin contracted 90 bps to 16.5%.

On per-share basis, the company reported non-GAAP earnings of 32 cents, up 14.3% from the year-ago quarter. Benefits from higher revenues were partially offset by elevated operating expenses.

However, quarterly earnings came ahead of management’s guided range of 19-22 cents, and surpassed the Zacks Consensus Estimate of 21 cents as well.

Balance Sheet & Cash Flow

CyberArk exited the first quarter with cash, cash equivalents, short-term deposits and marketable securities of approximately $325.4 million, up from $302.9 million at the end of fourth-quarter 2017. Receivables were $38.4 million at the end of the reported 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.

Guidance

Buoyed by splendid first-quarter results, the company issued an encouraging outlook for the second quarter and raised the full-year guidance.

For the current year, CyberArk now anticipates revenues in the band of $315–$319 million (mid-point $317 million), representing 20-22% year-over-year growth, up from $312-$316 million (mid-point $314 million) predicted earlier.

Non-GAAP operating income is now projected to lie between $57.5 million and $60.5 million, up from the previous projection of $54.5–$57.5 million. Non-GAAP earnings per share for 2018 are now expected to lie in the $1.31–$1.37 band, against the previous estimate of $1.18–$1.24.

For the second quarter, CyberArk estimates revenues in the range of $72-$73.5 million (mid-point $72.75 million), representing 25-28% year-over-year growth. Non-GAAP operating income is predicted to lie in the band of $10.2-$11.4 million. The company projects non-GAAP earnings for the second quarter in the 23-25 cents range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.

VGM Scores

At this time, CYBR has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, CYBR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.