CyberArk Software Ltd.

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the CyberArk Software fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Erica Smith, Senior Vice President, Finance and Investor Relations. Please go ahead.

Thank you, Dennis. Good morning. Thank you for joining us today to review CyberArk Strong fourth quarter and full year 2023 financial results. With me on the call today are Matt Cohen, our Chief Executive Officer, and Josh Spiegel, our Chief Financial Officer. After prepared remarks, we will open the call up to a question and answer session. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management's best judgment based on currently available information. I refer specifically to the discussion of our expectations and beliefs regarding our projected results of operations for the first quarter, for year 2024, and beyond. Our actual results might differ materially from those projected in these forward-looking statements. I direct your attention to the risk factors contained in the company's annual report on Form 20F filed with the U.S. Securities and Exchange Commission and those referenced in today's press release that are posted to our website. CyberArk expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward-looking statements made today. Additionally, non-GAAP financial measures will be discussed on this conference call. Reconciliations to the most directly comparable GAAP financial measures are also available in today's press release as well as in an updated investor presentation that outlines the financial discussion in today's call. A webcast of today's call is also available on our website in the IR section. With that, I'd like to turn the call over to our CEO, Matt Cohen. Matt?

Thanks, Erica. And thanks, everyone, for joining the call today. We had an amazing fourth quarter to round out a momentous year for CyberArk. Early in the year, We were nimble and adjusted our selling motion in light of the macroeconomic backdrop. And in the fourth quarter, it continued to pay off, resulting in another great growth quarter. We entered 2024 a fully recurring revenue company with over 95% of our bookings coming from subscription. Demand for our identity security platform accelerated in 2023, and we end the year having solidified our leadership position in the market. We delivered a record-breaking fourth quarter, beating our guidance across all metrics. Subscription ARR reached 582 million, growing 60% year over year. Total ARR reached 774 million, growing 36% year over year. We were thrilled to add record sequential net new subscription and total ARR, and we exceeded our guidance range across revenue, operating income, and EPS. Total revenue growth accelerated to 32 percent, reaching $223 million. Non-GAAP operating income came in at approximately $35 million, and we generated non-GAAP earnings per share of 81 cents. We also consistently outperformed throughout the year and delivered total revenue of $752 million with growth accelerating to 27 percent Non-GAAP operating income of approximately $33 million, or a 4% operating margin, well above the break-even we guided for at the beginning of 2023. Non-GAAP earnings per share of $1.12, and while we did not guide for cash flow, we were thrilled to generate $51 million in free cash flow, or a 7% margin for the full year 2023. Our performance speaks volumes about our execution. We fine-tuned our go-to-market motion, including platform selling, channel strategy, and customer success. We improved the alignment between sales and marketing, generating record, high-quality pipeline across all our solutions. And lastly, R&D delivered against our mission to secure all identities with the right level of privilege controls through our groundbreaking identity security platform. In addition to strong execution, we're benefiting from durable demand trends driven by the proliferation of new identities, new environments, and new attack methods. Throughout 2023, organizations were reminded yet again that there is one constant in cyber attacks. All roads lead to identity. In the context of these urgent trends, the mission-critical nature of our platform becomes apparent. CyberArk is the only vendor with a platform that can effectively and securely address the new world security requirements which center on controls. Given our groundbreaking innovation and the changes in our business over the last few years, I'm going to break from our typical quarterly call cadence to outline how our identity security solutions are helping customers solve these challenges, which also speaks to the massive growth for CyberArk. Every organization today has a spectrum of identities, from core IT to developers to machines and across the entire workforce. And the number of identities is increasing at an exponential rate. Access for each of these identities has its own unique level of risk and complexity, requiring different levels of controls. Let me take you through this spectrum of identities and what we are seeing from customers and how that has expanded our addressable market. A CyberR customer typically starts with core privilege access management, and it's focused on securing standing access for IT users who have high levels of privileges, like a database or application administrator or maybe a cloud operations team. As they deploy, they follow a roadmap that brings a growing number of users within central IT but also third-party vendors and even shadow IT organizations under PAM security controls. As a result, there's a continuous expansion of the number of users leveraging PAM. Adoption begins to accelerate when PAM is delivered as a service, giving an easier adoption path and lower cost of ownership. It accelerates even further when we help customers tackle new use cases through revolutionary new access methods like just-in-time or dynamic access. Just-in-time access cuts the adoption curve down even further by allowing federated access to databases, cloud workloads, and other modern targets, while also increasing the security controls by assigning entitlements dynamically at the time of access. The modern PAM program has evolved dramatically in the last few years and has opened up a significant expansion opportunity for CyberArk, even within the extended IT organization. You see this in our healthy PAM ARR growth rates that have continued to persist. But moving beyond IT for a second, one of the fastest growing areas for human identities is the expanding developer community. Our secure cloud access solution brings privileged controls to the cloud and has meaningfully expanded our TAM to include developers as well as engineering teams and data scientists. We provide native access for developers with a zero-standing privilege approach. This innovative solution greatly and measurably reduces risk, and organizations can quickly go from dabbling in discovery to actual control of developers as they access their cloud environments. Always-on entitlements to cloud environments are a security nightmare, yet innovation speed is the true promise of modern cloud programs. Secure cloud access, or SEA, ensures that our customers never have to choose between security and innovation speed. While SDA is one of our newest offerings, we had a strong quarter in Q4, and pipeline continues to build. This is one of the areas we are most excited about as we enter 2024. But as these developers work in the cloud, they are focused on creating or extending applications, workloads, and APIs that need access to critical data infrastructure and other cloud workloads. This results in the rise of machine identities. Machine identities represent one of the riskiest and most complex components of the modern enterprise. To protect these machines and the secrets that they use, customers turn to our secrets management solution. Our secrets management solution securely and centrally manages secrets at enterprise scale, all while avoiding vault sprawl. It satisfies the CISO's requirements while never impeding the developer's workflows. Machine identities are exploding, and our ability to bring together human and machine elevates the conversations with our customers. As we think about our fourth quarter results, Secrets Manager was included in six of our top 10 deals, and we are pleased with the early success of Conjure Cloud. We have covered IT, we've covered developers and machines, but now I want to move on to the part of the enterprise that is in need of an entirely new approach to identity security, securing workforce identities. Legacy approaches of MFA and SSO are workforce requirements, but on their own, they provide limited security. evidence time and time again in major breaches. Any identity can become privileged, causing CISOs to reconsider the way they secure the workforce. Leveraging intelligent privilege controls, CyberArk has reinvented workforce identity by building on top of traditional MFA and SSO with market leading innovations like secure web sessions, workforce password manager, and CyberArk secure browser. When combined with MFA and SSO into one unified solution, we have created a more holistic and comprehensive approach to securing the workforce, where intelligent privilege controls once again are making the enterprise more secure. This approach is paying off, and we had a record fourth quarter for our workforce solutions. It's worth pausing for a moment to discuss our CyberArk secure browser. Our secure browser is built with native integrations to all of our workforce capabilities and will help customers protect against one of the fastest rising attack methods, which is cookie harvesting and browser-based attacks. It's also built to be the gateway to all our solutions, allowing easy access to all enterprise targets and providing a seamless user experience to our entire identity security platform. Our workforce solutions, however, do not stop there. The modern workforce logs into desktops, laptops, and servers every day as part of their regular workflow. These endpoints need their own form of intelligent privilege controls. Endpoint Privilege Manager, or EPM, is seamlessly integrated with our workforce solutions and our browser as well. We are doing this to implement least privilege and secure the endpoint. Least privilege access is a foundational security control. Every endpoint needs EPM to be truly secured. Despite the great growth over the last few years, we still have a tremendous opportunity within our install base to further cross-sell EPM. And we also see EPM as a strong landing spot for new logos. As we kick off 2024, I wanted to make sure our investors understood how we are setting the pace of innovation, how our solutions work together, and how our identity security platform delivers value by dynamically adjusting the level of controls based upon complexity and risk. We are delivering a game changer in the market. We are driving operational efficiency and at the same time focusing on privileged controls that help customers to stay safe from cyber threats and move their business forward. If we move back into the fourth quarter for a second, on the new business side, we signed about 340 new logos in the fourth quarter. As customers prioritize in-depth security controls in this severe threat landscape, new logos are increasingly landed with two or more solutions. In fact, in Q4, a number of our largest new customers landed with five or more solutions. contributing to the significant increase in new business deal sizes. A few of the new logo highlights in the quarter include, as the education sector continues to be targeted by bad actors, evolving practices to align with industry-leading security controls are top of mind. This quarter, the London School of Economics, a leading business school globally, was looking to significantly and measurably improve its security posture. In this new logo win, they went broad across the platform with PAM, EPM, and Secrets Management. In an example of the power of our ecosystem, a partner introduced a Fortune 100 financial services customer to CyberArk. This all-SAS, seven-figure ACV deal was closed through the AWS marketplace. We are thrilled to see this customer applying a CyberArk Everywhere approach out of the gate. securing privileged access, secrets, endpoint, third-party vendors, and workforce identities. Our focus on moving from land into expand motion is built into our platform strategy and is contributing to our outperformance. A few examples of expansion deals from the quarter include A government agency that landed with CyberArk last quarter returned this quarter for more users and more products across our platform, buying PAM, EPM, secrets, identity flows, identity compliance, secure web sessions, and a seven-figure ACV deal. A major Fortune 100 U.S. retailer chose CyberArk as their trusted strategic advisor in 2020. Looking for defense in depth, they are consolidating spend with CyberArk and in another seven-figure ACV deal, extended their protection with more privileged users, secrets management, workforce and customer identity, remote access, and secure cloud access. To summarize, all the land and expand deals demonstrate that every vertical, every business across all sizes have identity security challenges that our platform can help address. Touching briefly on profitability, Throughout the year, we demonstrated leverage in our business with each operating expense line improving as a percent of revenue. For the year, we grew revenue over 27 percent, while our non-GAAP operating expenses grew just over 15 percent. We are striking the right balance between investing in growth and innovation and driving profitability and cash flow. With our stellar performance in 2023 and the strong guidance you will hear from Josh in just a few minutes, I remain very confident in the long-term targets we have set. As we look ahead, our top priorities for 2024 are expanding our leadership position in driving identity security growth, delivering cutting-edge innovation and strengthening our industry-leading platform, leveraging data analytics to scale our business, including the use of artificial intelligence and machine learning, and delivering outstanding customer experience and value across the customer journey. I'm also very excited to welcome Eduardo Camacho as our Chief Operating Officer. I have worked closely with her for more than 20 years and have tremendous respect for her and her ability to drive customer outcomes and to lead our go-to-market strategy and field execution. I also want to thank Chris Kelly for his contribution to CyberArk. He'll stay with CyberArk through the end of March to ensure a seamless transition, and we wish him well for the future. We are in a position of strength as the leader in identity security, and our competitive position is incredibly strong. We are addressing a critical customer need with our platform, and the threat landscape is keeping identity security a top priority at our customers. As I reflect on our accomplishments in 2023, I am even more enthusiastic about CyberArk's future coming into 2024. I did want to pause here to talk about October 7th and how we responded. I am so very proud of our global team and how they came together after the October 7th Moss attack. As families, friends, colleagues, and entire communities continue to navigate through great tragedy, loss, and increased stress, our culture and team are what drive our success. I will now turn the call over to Josh, who will discuss our record financial results and provide you with our outlook for 2024 in more detail.