CyberArk Software Ltd.

Good morning. My name is Aaron and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q4 and full year 2024 CyberArk 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. And if you would like to ask a question during this time, you can simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Simply press star followed by the number one again. We do ask that you limit yourself to a single question per time when you are given the opportunity to speak. Thank you. And with that, I'd like to turn the call over to Sri Anantha, Vice President, Investor Relations. Sri, you may begin. Thank you.

Thank you, Operator. Good morning. Thank you for joining us today to review CyberArts' strong fourth quarter and full year 2024 financial results. With me on the call today are Matt Cohen, our Chief Executive Officer, and Erica Smith, our Chief Financial Officer. After prepared remarks, we will open up the call 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 our projected results of operations for the first quarter of full year 2025 and beyond. I also refer to our expectations and beliefs regarding the integration of NFI and Zillow security into our operations. Our actual results might differ materially from these projected in these forward-looking statements. with the U.S. Securities and Exchange Commission and those referenced in today's press release that are posted to CyberArk's website. CyberArk expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. 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 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 would like to turn the call over to our CEO, Matt Cohen.

Thanks, Sri, and thanks, everyone, for joining the call today. We are incredibly excited about the strong results we delivered in the quarter and for the full year 2024. Before I dive into specifics, I'd like to reflect on 2024 as a whole. This has been a truly momentous year of continued transformation and growth for CyberArk. By all metrics, it was an exceptional year filled with major milestones to celebrate. In 2024, we blew past the 1 billion ARR mark, a milestone we are very proud of. And as you will see in a moment, we hit that milestone even without the successful contribution from Benify. We also exceeded the benchmark of $1 billion in revenue for the first time. In 2024, we also demonstrated the inherent leverage in our business model, increasing our operating margin to 15%, and we fired up the cash flow engine with $221 million in free cash flow in 2024. Putting these numbers together, we return to being a Rule of 40 company, a place we know well, a year ahead of the playbook and the long-term targets we outlined at our 2023 Investor Day. The numbers, as proud of them as I am, just begin to tell the story of 2024. This was also the year where our industry-leading platform and differentiated persona-based solutions began to truly drive the conversation among security teams and in the C-suite. We are speaking their language and solving their biggest problems. Our solutions approach facilitates deeper relationships, bigger wallet share, and the ability to design more strategic identity security roadmaps. In a world of escalating fear brought on by increasingly sophisticated and relentless attacks, we are trusted because we, along with our partners, are always in it together with our customers. providing proven solutions and delivering demonstrable customer outcomes that they can trust to make them more secure. As I reflect on the year, my excitement about the milestones we are celebrating is exceeded by my excitement for what I see ahead and the sheer potential in the market. What is clear is that identity security has reached a defining moment and Cyborg has established its right to win. Bad actors are placing identity at the center of their attacks, and identity programs of the past are falling short of answering the call. The new identity security imperative is being driven by four security realities. We will discuss these four areas at our investor day in a little over a week, but I did want to preview them here as they help frame the opportunity ahead for CyberArk. First, privilege access is now everywhere. The entire spectrum of identities can become privileged depending on task, target, and even situation. This changes the game of how identity security solutions must respond. Second, the number of machine identities and the associated risks are exploding. Cloud computing, increased regulations and changing standards, and the very role machines play in our rapidly evolving world means machine identities of all types need to be discovered, secured, and automatically managed throughout their lifecycle to avoid leaving organizations completely exposed. Third, CISOs are overwhelmed by the sheer number of security tools and the integral nature of problems across Access, PAM, and IGA. As a result, they're looking to consolidate in order to decrease complexity, to lower spend, and most importantly, to strategically scale and grow with a vendor they can trust. And fourth, securing against AI and the securing of AI are soon to be among the biggest challenges we will all face. AI makes attackers more efficient, more pervasive, and ultimately more successful. Their targets, the identities we secure, require more protection than ever. At the same time, AI is introducing brand new identities, in the form of the agentic workforce that will quickly outnumber humans and just like every other identity, will need CyberArk to be secure. When you think about these four market realities combined with CyberArk's leadership position, our trusted security first reputation, and our strong ability to execute, which continues to make me so proud. As much as I enjoy 2024, you can understand why we are so eager to get started on the year ahead. We have the leading identity security platform in the market, but we are not done yet and remain focused on continuing to innovate and invest in our platform to meet the growing needs of the market. Earlier today, we announced the exciting acquisition of Zillow Security. This acquisition is a game changer for the identity governance landscape, addressing longstanding challenges that have hindered traditional IGA solutions. Legacy IGA are often slow to deploy, difficult to integrate, have limited integration with modern systems, and are reliant on manual processes. This leads to inefficiencies and heightened security and compliance risks. In a modern world where identities are no longer static, but instead are dynamic and need access on the fly, the only way to efficiently and securely provision all these identities is with an automated lifecycle management solution. In stark contrast to legacy IGA systems, Zilla's modern IGA SaaS platform was built from scratch to address today's digital environments, characterized by an explosion of SaaS applications, decentralized management, and identity-based security threats. Leveraging AI-driven role management, Zilla automates the processes of identity compliance and provisioning, making governance easy, intuitive, and all-inclusive for the modern enterprise. It offers the most complete set of integrations for both commonly used and custom SaaS applications. Compared to legacy IGA, Zillow can be deployed five times faster, complete access reviews with 80% less effort, and enable faster provisioning with 60% fewer service tickets. For customers, this acquisition means faster time to value with a modern approach to governance that reduces operational complexity. By integrating Zillow's best-in-class modern IGA capabilities with the CyberArk Identity Security Platform, we will redefine what's possible in IGA. Together, we will make the future of identity security smarter, faster, and more effective than ever before. We are thrilled to welcome the talented Zillow team to CyberArk. Erica will talk about the transaction details and the financial impact later in her remarks. As mentioned, Q4, saw the business continue to accelerate. Customers are navigating the risks of the threat landscape daily, and they understand that the traditional network perimeter has long been a thing of the past. In December, we were once again reminded of the severity of the threat landscape when a nation-state attacker leveraged a critical vendor vulnerability to compromise the US Department of Treasury. The attack came down to exploiting a vulnerability in software and ultimately stealing an API key. a type of machine identity to get into the support system, access applications and workstations, and eventually exfiltrate data. Not having best-in-class security controls across all identities is a risk that organizations cannot afford to take. Other vendors provide siloed solutions that are stitched together, which is both inefficient and ineffective. We provide a unified platform that empowers customers with complete visibility, automation, and control to secure every identity, human and machine. Customers are increasingly deploying on and expanding across the entire platform, securing multiple identity groups and consolidating spend with CyberArk. All of our top deals in the fourth quarter had multiple solutions. And I want to share a specific example that illustrates how we are selling the entire platform. In our top deal from the quarter, a leading global professional services company went all in on CyberArk and decided to replace a competing legacy PAM vendor. But they did not stop there. They'll also secure machines with secrets management in the workforce across the entire solution, including endpoints, secure browser, MFA, and SSO. The real decision maker for them was our SaaS platform scalability, fast-awaited array of integrations, And most of all, our session management capabilities for modern PAM workflows in the cloud. This deal represents the strength of the platform on full display. And our powerful platform is the enabler that allows us to offer comprehensive persona-based solutions that align to the major identity groups organizations have today, the workforce, IT, developers, and machines. These solutions are resulting in new customers landing with bigger deals and also accelerating our expand motion. Let's take a very quick tour through each major identity group and how our solutions are winning us new customers and helping us expand our base. The modern workforce user requires seamless access anytime, anywhere from any device. The same user can become privileged based on their activity or system they are accessing. Core controls like MFA and SSO alone are not enough. Our protection of the workforce extends to the endpoint, the browser, passwords, secure web sessions, and SaaS applications. Putting all this together, we have reimagined how to secure the workforce. Sulventum, a leading US healthcare company, had been a longtime PAM customer. Last quarter, they recognized the need for a modern workforce suite with our secure web sessions and workforce password manager capabilities, setting us apart from the traditional access management competition. Seeing the outcomes that delivered, they quickly returned this quarter again to substantially expand their workforce footprint to all of their employees while also adding solutions to protect IT developers and machines. Today, identity security programs for securing IT users need a modernized zero standing privilege approach to PAM that extends beyond IT administrators and standing access. We must secure access for cloud administrators as well as shadow IT and vendors. These programs become a core part of our expand motion A Fortune 500 pharmaceutical company, who has been a long-term customer, needed a scalable, modern platform to secure and streamline multiple identity groups in its cloud environment. In a mid-six-figure ACV deal, they are protecting IT and cloud admins by implementing modern privilege controls. Zero standing access to modern cloud infrastructure and cloud environments is also mission critical to securing the most privileged human identity group in the enterprise, the developers. If left unintended, with always-on access, developer identities dramatically increase risk and expand the attack surface. Our solution for securing developers offers the best of PAM without interfering with workflows and the pace of innovation. This is demonstrated in another amazing deal from the quarter with Builder.ai. As a born-in-the-cloud AI software and application development company, they understand the power of a unified platform to scale and innovate in a cloud-first world. With a focus on developers first, they chose the CyberArk Secure Cloud Access in a new logo deal that also covered IT and their workforce. Our momentum in securing machine identities continued in the fourth quarter, and we had our best quarter ever for secrets management. For the full year, secrets was our fastest growing solution on a year-over-year basis, followed closely by workforce. In Q4, we saw not only an acceleration in secrets management growth, but also a heavy double-digit increase in average deal sizes when compared to last Q4. We believe the success in secrets management is also an indicator of the market readiness for Ventify. Our performance on Ventify in the quarter speaks to this massive rights-based opportunity in the machine identity security market. With new customers, as well as the large opportunity we have to cross-sell into our base. We are thrilled to see strong early traction, and I want to talk about two deals in particular that illustrate our early success with Venify. The first new logo is a European government agency managing more than 40,000 certificates across operations. They needed a modern, scalable, automated machine identity solution in Venify's largest ever deal in EMEA. Next, I want to talk about a large European bank who has been a longtime CyberArk customer. This quarter, they enhanced the protection of IT users with our enterprise solution and also added Conjure Cloud and Secrets Hub. But they also added Venify in a six-figure ACV deal. As you can see, we also had great customer response in regions where there was previously little or no Venify go-to-market presence, resulting in a record quarter for Venify and EMEA. This early traction gives us confidence we can tap into the regional expansion opportunity as one driver for the revenue synergies we expect to realize with a combined machine identity go-to-market motion. Our innovation in the machine identity market will not stop there. As I mentioned earlier, another topic customers are asking us about as it relates to machine identities is AI, and in particular, agentic AI, and how this impacts their security posture. Historically, functionality like RPA, for example, required humans to write code for automations that mimic human behavior. When artificial intelligence evolves from generative AI and co-pilots to agents with the autonomy to complete tasks on a user's behalf, they can create their own automations entirely. In other words, they receive and grant privilege. And in turn, the attack surface expands. Like humans, AI agents will need the right level of privilege controls, and just like any other identity group, they will need CyberArk. We look forward to talking more about the agentic AI opportunity and the detailed plans we have in this area at the upcoming Investor Day. To sum up, I want to leave you with these three key takeaways today. First, the escalating threat environment and changing attack landscape places identity security at the top of the CISO priority list. with a growing focus on securing all identities, and there is strong enlightenment in what CyberArk offers to what the market needs. Second, our unified identity security platform is uniquely differentiated. Our solutions are designed to drive meaningful security outcomes, and with the addition of Ventify and now Zillow, we are expanding our leadership position in identity security. And third, to go after this opportunity and win, We have put all the right pieces in place to continue to outperform with best in class execution. We are solving real urgent problems for nearly 10,000 customers globally. And as their trusted partner, they did continue to get more strategic with CyberArk. We are proud to reach the milestone of 1 billion in AR and return to the rule of 40 with our expanded profitability and cash flow. The best part, we're just getting started. We look forward to seeing you at our 2025 Investor Day on February 24th and encourage you to also tune into the live stream as we share more about our amazing position to deliver another standout year in 2025 and beyond. With that, I'll turn it over to Erica.