Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16

OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2024

Commission file number: 001-36625

 

CyberArk Software Ltd.

(Translation of registrant’s name into English)

9 Hapsagot St.

Park Ofer 2, P.O. Box 3143

Petach-Tikva 4951041, Israel

Tel: [phone]

(Address of principal executive offices)

_____________________

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒       Form 40-F ☐

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EXPLANATORY NOTE

The following documents are attached hereto:

 

•

Exhibit 99.1. Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024.

 

•

Exhibit 99.2. Operating and Financial Review and Prospects in connection with the Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024.

 

The Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024 attached as Exhibit 99.1 and the Operating and Financial Review and Prospects in connection with the Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024 attached as Exhibit 99.2 to this Report on Form 6-K are hereby incorporated by reference into the Company’s Registration Statements on Form S-8 (File Nos. 333-200367, 333-202850, 333-216755, 333-223729, 333-230269, 333-236909, 333-254152, 333-254154, 333-263436, 333-270222, 333-270223, 333-277932 and 333-280349) and on Form F-3 (File No. 333-282772) .

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CyberArk Software Ltd.
	By:	/s/ Joshua Siegel
		Name: Joshua Siegel
		Title: Chief Financial Officer

Date: December 5, 2024

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EXHIBIT INDEX

 

Exhibit No.		Document Description
99.1		Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024.
99.2		Operating and Financial Review and Prospects in connection with the Unaudited Condensed Consolidated Financial Statements of the Company as of and for the nine months ended September 30, 2024.

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Exhibit 99.1

CYBERARK SOFTWARE LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2024

INDEX

	Page
Condensed Consolidated Balance Sheets (Unaudited)	F-2 - F-3
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	F-4
Condensed Consolidated Statements of Shareholders' Equity (Unaudited)	F-5
Condensed Consolidated Statements of Cash Flows (Unaudited)	F-6
Notes to Condensed Consolidated Financial Statements (Unaudited)	F-7  F-23

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CYBERARK SOFTWARE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

		December 31, 2023				September 30, 2024
						Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	355,933			$	1,238,472
Short-term bank deposits			354,472				199,128
Marketable securities			283,016				37,707
Trade receivables (net of allowance for credit losses of $6 and $0 at December 31, 2023 and September 30, 2024, respectively)			186,472				166,157
Prepaid expenses and other current assets			31,550				300,766
Total current assets			1,211,443				1,942,230
LONG-TERM ASSETS:
Marketable securities			324,548				19,311
Property and equipment, net			16,494				17,470
Intangible assets, net			20,202				14,974
Goodwill			153,241				153,241
Other long-term assets			214,816				232,207
Deferred tax assets			81,464				82,382
Total long-term assets			810,765				519,585
TOTAL ASSETS		$	2,022,208			$	2,461,815

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 2

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CYBERARK SOFTWARE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Cont.)

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U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

		December 31, 2023				September 30, 2024
						Unaudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables		$	10,971			$	5,346
Employees and payroll accruals			95,538				86,779
Accrued expenses and other current liabilities			36,562				47,524
Convertible senior notes, net			572,340				535,378
Deferred revenues			409,219				447,757
Total current liabilities			1,124,630				1,122,784
LONG-TERM LIABILITIES:
Deferred revenues			71,413				78,052
Other long-term liabilities			33,839				30,452
Total long-term liabilities			105,252				108,504
TOTAL LIABILITIES			1,229,882				1,231,288
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.01 par value – Authorized: 250,000,000 shares at September 30, 2024 and December 31, 2023; Issued and outstanding: 43,573,526 shares at September 30, 2024 and 42,255,336 shares at December 31, 2023, respectively			111				114
Additional paid-in capital			827,260				1,259,840
Accumulated other comprehensive income (loss)			(1,849	)			112
Accumulated deficit			(33,196	)			(29,539	)
Total shareholders' equity			792,326				1,230,527
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	2,022,208			$	2,461,815

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 3

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CYBERARK SOFTWARE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

		Nine Months Ended September 30,
		Unaudited
		2023				2024
Revenues:
Subscription		$	321,766			$	490,230
Perpetual license			13,028				9,484
Maintenance and professional services			193,990				186,644
Total revenues			528,784				686,358
Cost of revenues:
Subscription			54,859				68,132
Perpetual license			1,173				1,248
Maintenance and professional services			60,446				65,231
Total cost of revenues			116,478				134,611
Gross profit			412,306				551,747
Operating expenses:
Research and development			157,653				169,776
Sales and marketing			299,376				333,993
General and administrative			67,038				89,422
Total operating expenses			524,067				593,191
Operating loss			(111,761	)			(41,444	)
Financial income, net			33,912				50,841
Income (loss) before taxes on income			(77,849	)			9,397
Tax benefit (taxes on income)			2,434				(5,740	)
Net income (loss)		$	(75,415	)		$	3,657
Basic net income (loss) per ordinary share		$	(1.82	)		$	0.09
Diluted net income (loss) per ordinary share		$	(1.82	)		$	0.08
Other comprehensive income
Change in net unrealized gains on marketable securities:
Net unrealized gains arising during the period			2,327				3,104
Net (gains) losses reclassified into net income (loss)			(16	)			556
			2,311				3,660
Change in unrealized net gain (loss) on cash flow hedges:
Net unrealized losses arising during the period			(6,653	)			(378	)
Net (gains) losses reclassified into net income (loss)			7,466				(1,321	)
			813				(1,699	)
Other comprehensive income, net of taxes of $426 and $267 for the nine months ended September 30, 2023, and 2024, respectively			3,124				1,961
Total comprehensive income (loss)		$	(72,291	)		$	5,618

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 4

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CYBERARK SOFTWARE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

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U.S. dollars in thousands (except share data and unless otherwise indicated)

		Ordinary shares
		Shares				Amount				Additional paid-in Capital				Accumulated other comprehensive income (loss)				Retained earnings (accumulated deficit)				Total shareholders' equity
Balance as of January 1, 2023			41,028,571			$	107			$	660,289			$	(15,560	)		$	33,308			$	678,144

Exercise of options and vested RSUs granted to employees			893,774				2				4,282				-				-				4,284
Other comprehensive income, net of tax			-				-				-				3,124				-				3,124
Share-based compensation			-				-				102,809				-				-				102,809
Issuance of ordinary shares under employee stock purchase plan			57,032				1				7,502				-				-				7,503
Net loss			-				-				-				-				(75,415	)			(75,415	)
Balance as of September 30, 2023 (Unaudited)			41,979,377			$	110			$	774,882			$	(12,436	)		$	(42,107	)		$	720,449

Exercise of options and vested RSUs granted to employees			214,095				1				6,780				-				-				6,781
Other comprehensive income, net of tax			-				-				-				10,587				-				10,587
Share-based compensation			-				-				37,595				-				-				37,595
Issuance of ordinary shares under employee stock purchase plan			61,864				*				8,003				-				-				8,003
Net income			-				-				-				-				8,911				8,911
Balance as of December 31, 2023			42,255,336			$	111			$	827,260			$	(1,849	)		$	(33,196	)		$	792,326

Exercise of options and vested RSUs granted to employees			1,013,139				3				5,242				-				-				5,245
Other comprehensive income, net of tax			-				-				-				1,961				-				1,961
Share-based compensation			-				-				121,806				-				-				121,806
Issuance of ordinary shares under employee stock purchase plan			55,926				*				9,573				-				-				9,573
Conversion of Convertible Senior Notes			249,125				*				39,218				-				-				39,218
Reclassification of Capped Call Transactions			-				-				256,741				-				-				256,741
Net income			-				-				-				-				3,657				3,657

Balance as of September 30, 2024 (Unaudited)

43,573,526

$

114

$

1,259,840

$

112

$

(29,539

)

$

1,230,527

*          Represents an amount lower than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 5

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CYBERARK SOFTWARE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

		Nine Months Ended September 30,
		Unaudited
		2023				2024
Cash flows from operating activities:
Net income (loss)		$	(75,415	)		$	3,657
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			15,097				11,983
Share-based compensation			102,566				121,421
Amortization of premium and accretion of discount on marketable securities, net and other			(2,724	)			(3,591	)
Deferred income taxes, net			(10,763	)			2,764
Amortization of debt discount and issuance costs			2,245				2,257
Change in fair value of derivative assets			-				(2,591	)
Decrease in trade receivables			1,834				20,315
Increase in prepaid expenses, other current and long-term assets and others			(22,565	)			(31,778	)
Changes in operating lease right-of-use assets			5,495				5,947
Decrease in trade payables			(980	)			(6,078	)
Increase in short-term and long-term deferred revenue			14,613				45,177
Decrease in employees and payroll accruals			(13,579	)			(6,195	)
Increase in accrued expenses and other current and long-term liabilities			669				10,216
Changes in operating lease liabilities			(7,187	)			(6,353	)
Net cash provided by operating activities			9,306				167,151
Cash flows from investing activities:
Investment in short-term and long-term deposits			(204,461	)			(221,898	)
Proceeds from short-term and long-term deposits			243,630				374,707
Investment in marketable securities and other			(322,049	)			(129,481	)
Proceeds from sales of marketable securities and other			1,169				483,296
Proceeds from maturities of marketable securities			284,276				204,764
Purchase of property and equipment			(4,253	)			(7,090	)
Net cash provided by (used in) investing activities			(1,688	)			704,298
Cash flows from financing activities:
Proceeds from (payments of) withholding tax related to employee stock plans			3,210				(7,661	)
Proceeds from exercise of stock options			4,209				5,245
Proceeds in connection with employee stock purchase plan			11,776				14,867
Net cash provided by financing activities			19,195				12,451
Increase in cash and cash equivalents			26,813				883,900
Effect of exchange rate differences on cash and cash equivalents			(1,955	)			(1,361	)
Cash and cash equivalents at the beginning of the period			347,338				355,933
Cash and cash equivalents at the end of the period		$	372,196			$	1,238,472

Non-cash activities:
Lease liabilities arising from obtaining right-of-use-assets		$	1,356			$	3,503
Non-cash purchase of property and equipment		$	731			$	1,054
Issuance of ordinary shares for conversions of convertible senior notes		$	-			$	39,218
Supplemental disclosure of cash flow activities:
Cash paid for income taxes		$	7,979			$	12,522

The accompanying notes are an integral part of the condensed consolidated financial statements.

F - 6

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 1:-

OVERVIEW, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

a.

CyberArk Software Ltd. (together with its subsidiaries, the “Company”) is an Israeli company that develops, markets and sells software-based identity security solutions and services. The Company's solutions and services secure access for any identity – human or machine – to help organizations secure critical business assets, protect their distributed workforce and customers, and accelerate business in the cloud. With CyberArk’s identity security platform, organizations can enable Zero Trust and least privilege with broad visibility, ensuring that every identity can securely access any approved resource, located anywhere, from everywhere – with a single Identity Security Platform. CyberArk has extended intelligent privilege controls across the entire identity lifecycle, for all types of identities. The CyberArk Identity Security Platform enables organizations to secure all identities – including workforce, IT, developers and machines – against cyber threats with intelligent privilege controls.

b.

Basis of presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023, included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023 filed with the SEC on March 13, 2024.

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2024, the Company’s condensed consolidated statements of comprehensive income (loss) and shareholders’ equity for the nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024 and 2023. The results for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or any other future interim or annual period.

F - 7

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 1:-

OVERVIEW, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)

c.

Use of estimates:

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such management estimates and assumptions are related, but not limited to contingent liabilities, income tax uncertainties, deferred taxes, share-based compensation, fair value of the convertible senior notes liability, as well as the determination of standalone selling prices in revenue transactions with multiple performance obligations and the estimated period of benefit for deferred contract costs. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

d.

Concentration of credit risks:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term bank deposits, marketable securities, trade receivables, severance pay funds, derivative instruments and capped call transactions.

The majority of the Company’s cash and cash equivalents and short-term bank deposits are invested with major banks in Israel and the United States. Such investments in the United States are in excess of insured limits and are not insured in other jurisdictions. Generally, these investments may be redeemed upon demand, and the Company believes that the financial institutions that hold the Company’s cash deposits are financially sound and, accordingly, bear minimal risk.

The Company’s marketable securities consist of investments, which are highly rated by credit agencies, in government, corporate and government sponsored enterprises debentures. The Company’s investment policy limits the amount that the Company may invest in any one type of investment or issuer, in order to reduce credit risk concentrations.

The trade receivables of the Company are mainly derived from sales to a diverse set of customers located primarily in the United States, Europe and Asia. The Company performs ongoing credit evaluations of its customers and, to date, has not experienced any significant losses.

The Company has entered into forward contracts with major banks in Israel to protect against the risk of changes in exchange rates. The derivative instruments hedge a portion of the Company’s non-dollar currency exposure.

F - 8

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 1:-

OVERVIEW, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The capped call transactions are subject to credit risk to the extent that the counterparties may be unable to meet their obligations under the contracts. The Company monitors the credit quality of the counterparties but does not currently anticipate any nonperformance.

e.

Significant Accounting Policies:

There have been no material changes in the significant accounting policies from those that were disclosed in the audited consolidated financial

statements for the fiscal year ended December 31, 2023 included in the Annual Report on Form 20-F other than those noted below.

f.

Recently issued accounting standards:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. The guidance will be effective for the Company for annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. The guidance will be effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 2020): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure in the notes to the financial statements of prescribed categories of expenses within relevant income statement captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.

g.

Reclassification:

Certain comparative figures have been reclassified to conform to the current period presentation.

F - 9

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 2:-  REVENUE RECOGNITION

The following table presents the Company’s revenue by category:

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
SaaS		$	209,299			$	330,652
Self-hosted subscription*			112,467				159,578
Perpetual license			13,028				9,484
Maintenance and support			156,323				147,809
Professional services			37,667				38,835
		$	528,784			$	686,358

* Self-hosted subscription also includes maintenance associated with self-hosted subscriptions. For additional information regarding disaggregated revenues, please refer to Note 11 below.

Unbilled Receivable:

The Company records unbilled receivables from contracts when the revenue recognized exceeds the amount billed to the customer. As of December 31, 2023 and September 30, 2024, $20,194 and $26,853 short-term unbilled receivables are included in trade receivables, respectively, and $1,000 and $5,031 long-term unbilled receivables are included in other long-term assets, respectively.

Contract Liabilities:

Contract liabilities consist of deferred revenue and include unearned amounts received under maintenance and support contracts and professional services that do not meet the revenue recognition criteria as of the balance sheet date. Contract liabilities also include unearned, invoiced amounts in respect of SaaS and self-hosted subscription contracts whereby there is an unconditional right for consideration. Deferred revenues are recognized as (or when) the Company performs under the contract. During the nine months ended September 30, 2024, the Company recognized $355,313 that were included in the deferred revenues balance as of December 31, 2023.

Remaining Performance Obligations:

Transaction price allocated to remaining performance obligations represents non-cancelable contracts that have not yet been recognized, which include deferred revenues and amounts not yet received that will be recognized as revenue in future periods.

The aggregate amount of the transaction price allocated to remaining performance obligations was $1,061 million as of September 30, 2024, out of which the Company expects to recognize approximately 60% during the next 12 months and the remainder thereafter.

F - 10

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 2:-  REVENUE RECOGNITION (Cont.)

Deferred Contract Costs:

Sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions are capitalized and amortized over an expected period of benefit.

For the nine months ended September 30, 2023 and 2024, the amortization of deferred contract costs included mainly in sales and marketing expenses was $39,800 and $46,462, respectively.

As of December 31, 2023 and September 30, 2024, the Company presented deferred contract costs from contracts which are for periods of less than 12 months of $696 and $452 in prepaid expenses and other current assets, respectively, and deferred contract costs in respect of contracts which are greater than 12 months of $166,733 and $181,751 in other long-term assets, respectively.

F - 11

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 3:- DERIVATIVE INSTRUMENTS

The company instituted a foreign currency cash flow hedging program to hedge against the risk of changes in cash flows mainly resulting from foreign currency salary payments during the year. The Company hedges portions of its forecasted expenses denominated in NIS. These forward and swap contracts are designated as cash flow hedges, as defined by ASC No. 815, and are all effective, as their critical terms match underlying transactions being hedged.

As of December 31, 2023 and September 30, 2024, the amount recorded in accumulated other comprehensive income (loss) from the Company’s currency forward and swap transactions was $2,670, net of tax of $364, and $971, net of tax of $132, respectively.

As of September 30, 2024, the notional amounts of foreign exchange forward and swap contracts  into which the Company entered were $116,769. The foreign exchange contracts will expire by December 2025. The fair value of derivative instruments assets balances as of December 31, 2023 and September 30, 2024, totaled $3,074 and $1,355, respectively. The fair value of derivative instruments liabilities balances as of December 31, 2023 and September 30, 2024, totaled $40 and $252, respectively.

The following table presents gains (losses) reclassified from accumulated other comprehensive income (loss) to the statements of comprehensive income (loss) per line item:

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
Cost of revenues		$	507			$	(85	)
Research and development			5,563				(990	)
Sales and marketing			942				(167	)
General and administrative			1,472				(259	)
Total gains (losses), before tax benefit (taxes on income)			8,484				(1,501	)
Tax benefit (taxes on income)			(1,018	)			180
Total gains (losses), net of tax benefit (taxes on income)		$	7,466			$	(1,321	)

F - 12

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 3:- DERIVATIVE INSTRUMENTS (Cont.)

In addition to the derivatives that are designated as hedges as discussed above, the Company enters into certain foreign exchange forward and swap transactions and holds foreign exchange deposits to economically hedge certain net asset balances in Euros, British Pounds Sterling, and NIS. Gains and losses related to such derivative instruments are recorded in financial income, net. As of September 30, 2024, with respect to these transactions, the notional amounts of foreign exchange forward contracts into which the Company entered were $68,440. The foreign exchange forward contracts will expire by January 2029.

The fair value of derivative instruments assets balances as of December 31, 2023 and September 30, 2024, totaled $6 and $78, respectively. The fair value of derivative instruments liabilities balances as of December 31, 2023 and September 30, 2024, totaled $996 and $1,458, respectively. For the nine months ended September 30, 2023 and 2024, the Company recorded financial income, net from hedging transactions of $306 and $(644), respectively.

As further described in Note 7, convertible senior notes, net, as of September 30, 2024, the Company recognized a derivative asset of $259.3 million related to the settlement of the capped call transactions.

NOTE 4:-

MARKETABLE SECURITIES

The following tables summarize the amortized cost, unrealized gains and losses, and fair value of available-for-sale marketable securities as of December 31, 2023 and September 30, 2024:

		December 31, 2023
		Amortized cost				Gross unrealized losses				Gross unrealized gains				Fair value
Corporate debentures		$	324,485			$	(4,998	)		$	357			$	319,844
Government debentures			288,214				(828	)			334				287,720
Total		$	612,699			$	(5,826	)		$	691			$	607,564

		September 30, 2024 (Unaudited)
		Amortized cost				Gross unrealized losses				Gross unrealized gains				Fair value
Corporate debentures		$	57,692			$	(983	)		$	11			$	56,720
Government debentures			301				(3	)			-				298
Total		$	57,993			$	(986	)		$	11			$	57,018

F - 13

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 4:-

MARKETABLE SECURITIES (Cont.)

The following table summarizes the continuous unrealized loss position and fair value of available-for-sale marketable securities as of December 31, 2023 and September 30, 2024, by duration of continuous unrealized loss:

		December 31, 2023								September 30, 2024 (Unaudited)
		Gross unrealized losses				Fair value				Gross unrealized losses				Fair value
Continuous unrealized loss position for less than 12 months		$	(590	)		$	186,910			$	-			$	-
Continuous unrealized loss position for more than 12 months			(5,236	)			190,560				(986	)			54,080
		$	(5,826	)		$	377,470			$	(986	)		$	54,080

The following table summarizes the amortized cost and fair value of available-for-sale marketable securities as of December 31, 2023 and September 30, 2024, by contractual years-to maturity:

		December 31, 2023								September 30, 2024 (Unaudited)
		Amortized cost				Fair value				Amortized cost				Fair value
Due within one year		$	285,012			$	283,016			$	38,136			$	37,707
Due between one and four years			327,687				324,548				19,857				19,311
		$	612,699			$	607,564			$	57,993			$	57,018

F - 14

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 5:- FAIR VALUE MEASUREMENTS

The carrying values of cash and cash equivalents, short-term bank deposits, trade receivables, prepaid expenses and other long-term and current assets, trade payables, employees and payroll accruals and accrued expenses and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

The following tables present the fair value of money market funds and marketable securities as of December 31, 2023 and September 30, 2024:

		December 31, 2023												September 30, 2024 (Unaudited)
		Level 1				Level 2				Total				Level 1				Level 2				Level 3				Total
Cash equivalents:
Money market funds		$	315,784			$	-			$	315,784			$	1,199,491			$	-			$	-			$	1,199,491
Corporate debentures and commercial paper			-				1,001				1,001				-				-				-				-
Government debentures			-				1,194				1,194				-				-				-				-
Marketable securities:
Corporate debentures and commercial paper			-				319,844				319,844				-				56,720				-				56,720
Government debentures			-				287,720				287,720				-				298				-				298
Derivative assets:
Capped call transactions			-				-				-				-				-				259,331				259,331
Total money market funds, marketable securities derivative assets measured at fair value		$	315,784			$	609,759			$	925,543			$	1,199,491			$	57,018			$	259,331			$	1,515,840

As of September 30, 2024, the estimated fair value of the Company's convertible senior notes was $993.2 million. The fair value was determined based on the closing quoted price of the convertible senior notes as of the last day of trading for the period and is considered Level 2 measurement. The fair value of the convertible senior notes is primarily affected by the trading price of the Company’s ordinary shares and market interest rates.

The Capped Call Transactions (as defined in Note 7) are considered Level 3 measurement as the Company applies the Black-Scholes option pricing model and uses historical volatility to determine expected share price volatility which is an unobservable input that is significant to the valuation.

NOTE 6:-

NON-CANCELABLE MATERIAL PURCHASE OBLIGATIONS

The Company entered into non-cancelable material agreements for the receipt of cloud infrastructure services and subscription-based cloud services. Future payments under non-cancelable material purchase obligations as of September 30, 2024 (Unaudited) are as follows:

2024 (remaining three months)			15,883
2025			54,681
2026			60,326
2027			48,750
		$	179,640

F - 15

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 7:-

CONVERTIBLE SENIOR NOTES, NET

a.

Convertible senior notes, net:

The net carrying amount of the liability of the convertible senior notes issued by the company in 2019 (“Convertible Notes”) as of December 31, 2023 and September 30, 2024 is as follows:

		December 31, 2023				September 30, 2024
						(Unaudited)
Liability component:
Remaining principal amount		$	575,000			$	535,781
Unamortized issuance costs			(2,660	)			(403	)
Net carrying amount		$	572,340			$	535,378

Interest expense related to the Convertible Notes was as follows:

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
Amortization of debt issuance costs		$	2,245			$	2,257
Total interest expense recognized		$	2,245			$	2,257

During the nine months ended September 30, 2024, the conditions allowing holders of the Convertible Notes to convert were met. The Company has received conversion notices from the holders and converted $39.2 million in aggregate principal amount of the Convertible Notes. As of December 31, 2023 and September 30, 2024, the Convertible Notes are classified as a current liability.

Subsequent to September 30, 2024, $535.3 million in aggregate principal amount of the Convertible Notes were converted for physical settlement, and $0.5 million were repaid in cash at par at maturity.

F - 16

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 7:-

CONVERTIBLE SENIOR NOTES, NET (Cont.)

b.

Capped Call Transactions:

In connection with the pricing of the Convertible Notes and the exercise by the initial purchasers of the over-allotment option, the Company entered into privately negotiated capped call transactions (“Capped Call Transactions”) with certain financial institutions (“Option Counterparties”). The Capped Call Transactions covered, collectively, the number of the Company's ordinary shares underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.

The Capped Call Transactions had an initial strike price of $157.53 per share, subject to certain adjustments, which corresponded to the approximate initial conversion price of the Convertible Notes.

The cap price of the Capped Call Transactions was initially $229.14 per share and was subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions were separate transactions, in each case, entered into by the Company with the Option Counterparties, and were not part of the terms of the Convertible Notes and would not change the holders' rights under the Convertible Notes.

On September 17, 2024, the Company reclassified the Capped Calls transactions from equity at fair value. The Capped Calls Transactions were previously recorded as part of equity since the Company could have elected the settlement method and equity classification was not precluded under ASC 815. The Company determined that as of September 17, 2024, it could no longer change the settlement method, and the Capped Call Transactions were required to be reclassified and measured at fair value through earnings since cash settlement became mandatory.

As such, $256.7 million was reclassified from additional paid-in capital to derivative assets which is a component of prepaid expenses and other current assets on the condensed consolidated balance sheets. The change in fair value of the derivative asset from the reclassification date to September 30, 2024, was $2.6 million and was recorded to financial income, net on the condensed consolidated statements of comprehensive income (loss).

On November 15, 2024, the Company received $261.4 million in cash from the settlement of the Capped Call Transactions.

F - 17

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 8:- REVOLVING CREDIT FACILITY

On June 25, 2024, the Company entered into a revolving credit facility agreement (“Credit Facility”) with Bank Leumi le-Israel B.M. (“Lender”). The Credit Facility enables the Company to borrow up to $250 million and matures on June 24, 2026.

The borrowings under the Credit Facility bear interest at a base rate plus a spread of 0.8% to 1.8%, or a three month Secured Overnight Financing Rate (“SOFR”) plus a spread of 2.45% to 4%. The ongoing fee on undrawn amounts is 0.7%.

The Credit Facility requires the Company to maintain at all times a minimum amount of $150 million unrestricted Cash and Cash equivalents, of which a minimum amount of $60 million is in the loan account. In addition, the Company is required to maintain a maximum quarterly net debt to adjusted EBITDA ratio of 4.5, stepping down to 2.5 over time. Non-compliance with a financial covenant may be cured by the next consecutive quarter. In addition, the Credit Facility limits the Company’s ability and the ability of its subsidiaries to, among other things, undergo a change in control, merge or consolidate, make acquisitions and incur pledges.

As of September 30, 2024, the Company has no outstanding amounts under the Credit Facility and was in compliance with all financial covenants.

NOTE 9:- SHAREHOLDERS' EQUITY

a.

Ordinary shares:

The ordinary shares of the Company confer upon the holders the right to receive notices of and to participate and vote in general meetings of the Company, rights to receive dividends and rights to participate in distribution of assets upon liquidation.

b.

Share-based compensation:

The 2024 Share Incentive Plan (the “2024 Plan”) was adopted by our board of directors and became effective on June 1, 2024. 1,787,022 ordinary shares reserved for issuance were transferred from the 2014 Share Incentive Plan to the 2024 Plan.

The maximum aggregate number of shares that may be issued pursuant to awards under this 2024 Plan is the sum of (a) 1,786,992 ordinary shares, plus (b) on January 1 of each calendar year commencing in 2025, a number of ordinary shares equal to the lesser of: (i) an amount determined by the Board, if so determined prior to the January 1 of the calendar year in which the increase will occur, (ii) 4% of the total number of ordinary shares of the Company outstanding on December 31 of the immediately preceding calendar year, and (iii) 4,000,000 ordinary shares.

On January 1, 2021, the Company’s Employee Share Purchase Plan (“ESPP”) became effective. The ESPP enables eligible employees of the Company and its designated subsidiaries to elect to have payroll deductions made during a six-month offering period in an amount not exceeding 15% of the gross base compensation which the employees receive. The applicable purchase price will be no less than 85% of the lesser of the fair market value of the Company’s ordinary shares on the first day or the last day of the purchase period. The total number of ordinary shares initially reserved under the ESPP as of January 1, 2021 was 125,000 shares (the “ESPP Share Pool”). On January 1 of each year between 2022 and 2026, the ESPP Share Pool will be increased by a number of ordinary shares equal to the lower of (i) 1,000,000 ordinary shares, (ii) 1% of the Company’s outstanding ordinary shares on December 31 of the immediately preceding calendar year, and (iii) a lesser number of ordinary shares determined by the Company’s board of directors.

F - 18

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 9:- SHAREHOLDERS' EQUITY (Cont.)

Under the 2024 Plan, options, restricted stock units (“RSUs”), performance share units (“PSUs”) and other share-based awards may be granted to employees, officers, non-employee consultants and directors of the Company.

Under the 2024 Plan and ESPP, as of September 30, 2024, an aggregate number of 1,961,984 ordinary shares were reserved for future grant. Any share under the 2024 Plan underlying an award that is cancelled, terminated or forfeited for any reason without having been exercised will automatically be available for grant under the 2024 Plan.

The total share-based compensation expense related to all of the Company's equity-based awards, recognized for the nine months ended September 30, 2023 and 2024 is comprised as follows:

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
Cost of revenues		$	13,112			$	15,857
Research and development			21,797				24,258
Sales and marketing			43,990				49,277
General and administrative			23,667				32,029
Total share-based compensation expense		$	102,566			$	121,421

The total unrecognized compensation cost amounted to $336,493 as of September 30, 2024 and is expected to be recognized over a weighted average period of 2.69 years.

F - 19

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 9:-

SHAREHOLDERS' EQUITY (Cont.)

c.

Options granted to employees:

There were no options granted during the nine months ended September 30, 2024.

A summary of the activity in options to employees for the nine months ended September 30, 2024 is as follows:

		Amount of options				Weighted average exercise price				Weighted average remaining contractual term (in years)				Aggregate intrinsic value (in thousands)
Balance as of December 31, 2023			244,787			$	78.85				4.24			$	34,320
Exercised			77,569			$	67.61							$	14,921
Forfeited and expired			1,046			$	127.64							$	170
Balance as of September 30, 2024			166,172			$	83.79				3.75			$	34,535
Exercisable as of September 30, 2024			158,055			$	80.22				3.57			$	33,412

The expected volatility of the Company’s ordinary shares is based on the Company’s historical volatility. The expected option term represents the period of time that options granted are expected to be outstanding, based upon historical experience.

d.

A summary of RSUs and PSUs activity for the nine months ended September 30, 2024 is as follows:

		Amount of RSUs and PSUs				Weighted average grant date fair value
Unvested as of December 31, 2023			2,639,337			$	136.15
Granted			832,673				236.8
Vested			935,570				129.42
Forfeited			91,805				145.84
Unvested as of September 30, 2024			2,444,635			$	172.64

The total fair value of RSUs and PSUs vested (based on fair value of the Company’s ordinary shares at vesting date) during the nine months ended September 30, 2024 was $234,122.

The amount of unvested PSU as of September 30, 2024 is 326,390.

F - 20

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 9:-

SHAREHOLDERS' EQUITY (Cont.)

e.

The following table summarizes the assumptions used in the Black-Scholes option pricing model to determine the fair value of the Company’s ordinary shares to be issued under the ESPP started on June 1, 2024:

		Nine Months Ended September 30,
		2024
ESPP
Expected volatility			28.23	%
Expected dividends			0	%
Expected term (in years)			0.5
Risk free rate			5.39	%

NOTE 10:-  BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
Net Income (loss) available to shareholders of ordinary shares		$	(75,415	)		$	3,657
Weighted-average shares used in computing basic net income (loss) per ordinary shares			41,539,052				42,879,017
Weighted-average effect of potentially dilutive securities:
Employee equity incentive plans			-				1,411,407
Weighted-average shares used in computing diluted net income (loss) per ordinary shares			41,539,052				44,290,424
Net income (loss) per share, basic		$	(1.82	)		$	0.09
Net income (loss) per share, diluted		$	(1.82	)		$	0.08

The total weighted average number of shares related to outstanding options, RSUs and PSUs that have been excluded from the computation of diluted net income (loss) per ordinary share due to their antidilutive effect was 3,031,519 and 18,986 for the nine months ended September 30, 2023 and 2024, respectively.

Additionally, approximately 3.6 million shares underlying the Convertible Notes are not considered in the calculation of diluted net income (loss) per share for the nine months ended September 30,2023 and 2024, respectively, as the effect would be anti-dilutive.

F - 21

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 11: - SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION

a.

The Company identifies operating segments in accordance with ASC Topic 280, "Segment Reporting". Operating segments are defined as components of an entity for which separate financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and evaluating financial performance. The Company determined it operates in one reportable segment as the Company’s chief operating decision maker is the Chief Executive Officer who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

b.

The total revenues are attributed to geographic areas based on the location of the Company’s channel partners which are considered as end customers, as well as direct customers of the Company.

The following table presents total revenues for the nine months ended September 30, 2023 and 2024:

Revenues:

		Nine Months Ended September 30,
		2023				2024
		(Unaudited)
United States		$	282,645			$	340,662
Israel			4,858				6,223
United Kingdom			33,099				40,184
Europe, the Middle East and Africa *			119,075				170,668
Other			89,107				128,621
		$	528,784			$	686,358

For the nine months ended September 30, 2023 and 2024, no single customer contributed more than 10% to the Company’s total revenues.

*          Excluding United Kingdom and Israel

F - 22

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CYBERARK SOFTWARE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---

U.S. dollars in thousands (except per share data and unless otherwise indicated)

NOTE 12: - SUBSEQUENT EVENTS

On October 1, 2024, the Company completed the acquisition of Venafi Holdings, Inc., a leader in machine identity management, and its subsidiaries (collectively, “Venafi”). This acquisition will combine Venafi’s machine identity management capabilities with the Company’s leading identity security capabilities to establish a unified platform for end-to-end machine identity security at enterprise scale.

The Company will account for the acquisition as a business combination in accordance with ASC No. 805, “Business Combinations”. The purchase consideration transferred to Venafi amounted to $1.66 billion in a combination of $1.02 billion in cash and $0.64 billion by the issuance of 2,285,076 Company ordinary shares.

F - 23

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Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2023 and 2024 and related notes appearing elsewhere in the Form 6-K of which this exhibit forms a part (the “Form 6-K”), our audited consolidated financial statements and other financial information as of and for the year ended December 31, 2023, appearing in our Annual Report on Form 20-F for the year ended December 31, 2023 (the “Annual Report”) and Item 5—“Operating and Financial Review and Prospects” of the Annual Report. Except where the context otherwise requires or where otherwise indicated in this discussion, the terms “CyberArk,” the “Company,” “we,” “us,” “our,” and “our business” refer to CyberArk Software Ltd. and its subsidiaries. Our financial statements have been prepared in accordance with U.S. GAAP.

Company Overview

CyberArk is a global leader in Identity Security, centered on intelligent privilege controls, with a focus on protecting organizations against identity-based cyberattacks. CyberArk applies intelligent privilege controls to all identities – human and machine – with continuous threat detection and prevention across the entire identity lifecycle. With CyberArk, organizations can enable Zero Trust and least privilege with complete visibility, ensuring that every identity can securely access any approved resource, located anywhere, from everywhere – with a single Identity Security Platform.  

 

We secure access to human and machine identities to help organizations secure critical business assets, protect their distributed workforce and customers, and accelerate business. CyberArk’s vision is to deliver an Identity Security Platform that contextually authenticates each identity, dynamically authorizes the least amount of privilege required, secures credentials, and thoroughly audits the entire cycle – giving organizations peace of mind to drive their businesses fearlessly forward. 

 

As the category-defining leader in Privileged Access Management, we are uniquely positioned to deliver on Identity Security because our core competency is securing the “keys to the kingdom.” These “keys to the kingdom” enable our customers to control access to sensitive infrastructure and applications, keeping them out of the hands of malicious or careless insiders or external attackers and preventing disruption to the business. 

 

Securing these human and machine identities is now more important than ever. With the rapid rise in mobile workers, hybrid and multi-cloud adoption, AI and, in particular, generative AI, and digitalization of the enterprise, physical and network security barriers are less relevant at securing data and assets than ever before. Compromised identities and their associated privileges represent an attack path to an organization’s most valuable assets. We believe that identity has become the new security perimeter and is at the foundation of Zero Trust security models. Our approach is unique since CyberArk recognizes that every identity can become privileged under certain conditions, and we offer the broadest range of security controls to reduce risk while delivering a high-quality experience to the end user. This includes securing workforce, IT, developer, and machine identities by replacing complex, patchworked, and siloed legacy access management solutions to improve security and operational efficiencies. 

We believe an Identity Security Platform must do far more than manage one group of identities; it must provide solutions to secure all identities, across all environments. Our goal is to reinvent and modernize capabilities across the established silos of Access Management (AM), Privileged Access Management (PAM), Identity Governance and Administration (IGA), and Machine Identity Management (MIM), while inventing new ways to secure modern identities of all types.

 

On October 1, 2024, we completed the acquisition of Venafi Holdings, Inc. and its subsidiaries (“Venafi”), a leader in machine identity management. This acquisition enables CyberArk to further deliver on its vision to secure every identity – human and machine – with the right level of privilege controls. All machine identities, including workloads, code, applications, IoT devices and containers, must be discovered, managed, secured and automated to keep their connections and communications safe. We believe that combining Venafi’s certificate lifecycle management, enterprise Public Key Infrastructure (PKI), workload identity management, secure code signing, and SSH security with CyberArk’s secrets management capabilities will empower organizations to protect against misuse and compromise of machine identities at enterprise scale. Together, CyberArk and Venafi will build end-to-end machine identity security solutions that help organizations improve security and stop costly outages – ultimately reducing risk and enhancing operational efficiency.

 

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Prior to 2020, we primarily derived our revenues by licensing our cybersecurity software, selling maintenance and support contracts, and providing professional services. We began executing our transition to a subscription business model in early 2021, and, in 2023, we reached our transition goals of selling primarily through subscriptions, including both SaaS and self-hosted subscriptions. In early 2024, we began selling solutions centered around solving critical customer security challenges for every type of identity: workforce, IT, developers and machines. We have taken our platform capabilities and designed solutions delivered through the CyberArk Identity Security Platform, which includes capabilities around privileged access management, access management, secrets management, endpoint privilege security, secure cloud access and identity governance and administration. The solutions are offered through a simplified packaging and pricing model, facilitating a more efficient buying process and enhancing our ability to secure a broader range of identities within our customers’ employee base. The solutions will also make it easier for our customers to buy the capabilities they need to secure every identity across the organization.  

During the nine months ended September 30, 2024, we increased our annual recurring revenue (“ARR”) by 31% to $926 million as of September 30, 2024. The growth in ARR was driven by an increase in bookings from SaaS and Self-hosted subscriptions. Our subscription revenues increased by 52% to $490.2 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, and recurring revenues increased by 33% to $638 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

 

For the nine months ended September 30, 2024 and 2023, our revenues were $686.4 million and $528.8 million, respectively, representing year-over-year growth of 30%. For the nine months ended September 30, 2024 and 2023, our net income (loss) was $3.7 million and $(75.4) million, respectively.

Total number of employees increased from 2,999 as of September 30, 2023 to 3,296 as of September 30, 2024.

We intend to continue to execute our strategy of growing our business to meet the needs of our customers and to pursue opportunities in new and existing verticals, geographies, and products. As part of our strategic growth initiatives, we plan to continue to invest in our sales and marketing teams, with a particular focus on expanding our channel partnerships including managed service providers, targeting new customers, expanding our relationships with existing customers, creating technology partnerships and further building out our customer success operations. We have made, and will continue to make, investments in research and development to broaden our platform capabilities, strengthen our existing solutions, enhance user experience and develop additional automation and AI technologies.

Key Performance Indicators and Recent Business Developments

We are focusing on the following metrics to evaluate the health of our business:

		Nine Months Ended September 30,
		2023				2024
		(in millions)
Total ARR (as of period-end)		$	705			$	926
Subscription Portion of ARR (as of period-end)			504				735
Deferred revenue (as of period-end)			423				526
Remaining Performance Obligations (as of period-end)			831				1,061
Recurring revenues			478				638
Net cash provided by operating activities		$	9			$	167

2

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ARR. ARR is a performance indicator that provides more visibility into the growth of our recurring business. ARR is defined as the annualized value of active SaaS, self-hosted subscriptions and their associated maintenance and support services, and maintenance contracts related to the perpetual licenses in effect at the end of the reported period. ARR should be viewed independently of revenues and total deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those measures. ARR is not a forecast of future revenues and can be impacted by contract start and end dates and renewal rates. The visibility offered by ARR allows us to make informed decisions about our capital allocation and level of investment.

Subscription Portion of Annual Recurring Revenue. The subscription portion of ARR is a performance indicator that provides visibility into the area of the business that will drive the long-term growth of our recurring business. The subscription portion of ARR is defined as the annualized value of active SaaS and self-hosted subscription contracts in effect at the end of the reported period. The subscription portion of ARR excludes maintenance contracts related to perpetual licenses. The subscription portion of ARR should be viewed independently of revenues and total deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those measures. The visibility offered by subscription portion of ARR allows management to make informed decisions about our capital allocation and level of investment.

 

Recurring Revenue. Recurring revenue is defined as revenue derived from SaaS and self-hosted subscription contracts, and maintenance contracts related to perpetual licenses during the reported period. Management monitors the growth of our recurring revenue to evaluate the health of our business.

 

Total Deferred Revenue. Our total deferred revenue consists of maintenance and support and professional services that have been invoiced and collected but that have not yet been recognized as revenues because they do not meet the applicable criteria, and of self-hosted and SaaS subscription contracts, where there are unconditional rights for a consideration, that have been invoiced but have not yet been recognized. As of September 30, 2024, SaaS deferred revenue grew 47% year-over-year, and represented 63% of total deferred revenue compared to 53% as of September 30, 2023.

Remaining Performance Obligations. Remaining performance obligations (“RPOs”) represent non-cancelable contracts that have not yet been recognized, which include deferred revenues and amounts not yet received that will be recognized as revenue in future periods. Management monitors the value of RPOs to provide visibility into near-term and multi-year revenue streams. This visibility allows us to make informed decisions about our capital allocations and level of investment.

Net Cash Provided by Operating Activities. We monitor Net cash provided by operating activities as a measure of the amount of cash generated by the business and our overall business performance. Our cash provided by operating activities is driven in part by up-front payments for subscription, maintenance and professional services offerings. Monitoring cash provided by operating activities enables us to assess our financial performance, excluding non-cash effects of certain items such as share-based compensation costs or depreciation and amortization, which allows us to better understand and manage the cash needs of our business.

A.

Operating Results

Components of Statements of Operations

Revenues

Our revenues consist of the following:

o Subscription Revenues. Subscription revenues include SaaS and self-hosted subscription revenues, as well as maintenance and support services associated with self-hosted subscriptions. Historically, our subscription revenues have been generated primarily from sales of our Privileged Access Manager (Privilege Cloud and self-hosted), Endpoint Privilege Manager, Secrets Manager, Vendor Privileged Access Manager, Workforce and Customer Access, Secure Cloud Access and Identity Management. In 2024, we shifted to selling solutions and began generating revenue from solutions to secure IT identities, workforce identity, Developer identities and Machine identities. An increasing percentage of our business is coming from our SaaS offerings, which have ratable revenue recognition, increasing our total deferred revenue that will be recognized over time. Our SaaS and self-hosted subscriptions represented 71% of our total revenues during the nine months ended September 30, 2024, and we expect our subscription revenues to continue to grow in the near and long term. Sale of our IT, Workforce and Developer solutions are licensed per user through standard and enterprise packages. Endpoint Privilege Manager is licensed by target system (workstations and servers). For Machine identities, we have packages, one aimed at being a starting point with a minimum number of workload identities, and the second one with add-on of any additional workload identities. Secrets Manager has two different licensing approaches based on the types of applications being secured. The first is licensed by agent for mission-critical and static applications, and the second is licensed by site/region and number of clusters for more dynamic cloud native applications and DevOps pipelines.

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o Perpetual License Revenues. Perpetual license revenues are generated primarily from sales of our Privileged Access Manager. We are seeing a single digit percentage of our business coming from perpetual licenses, which have upfront revenue recognition. We expect revenues from perpetual licenses to continue to decrease as a percentage of total revenue as we continue to operate as a subscription company.

o Maintenance and Professional Services Revenues. Maintenance revenues are generated from maintenance and support contracts purchased by our customers who bought perpetual licenses in order to gain access to the latest software enhancements and updates on an if-and-when available basis and to telephone and email technical support. With the continued decline of new perpetual licenses and related new maintenance contracts, we are expecting our total maintenance revenues to decline in the near and long term in absolute dollars. We also offer advanced services, including professional services and technical account management, for consulting, deployment and training of our customers to fully leverage the use of our products. We increasingly leverage partners to provide services around implementation and ongoing management of our solutions and we are shifting our service delivery team toward higher value services that are often recurring in nature, like technical account management.

Geographic Breakdown of Revenues

The United States is our biggest market, with the balance of our revenues generated from the EMEA region and the rest of the world, which includes Canada, Central and South America, and the Asia Pacific and Japan region. The following table sets forth the geographic breakdown of our revenues by region for the periods indicated:

		Nine Months Ended September 30,
		2023								2024
		Amount				% of Revenues				Amount				% of Revenues
		(dollars in thousands)
United States		$	282,645				54	%		$	340,662				50	%
EMEA			157,032				29	%			217,075				31	%
Rest of World			89,107				17	%			128,621				19	%
Total Revenues		$	528,784				100	%		$	686,358				100	%

Cost of Revenues

Our total cost of revenues consists of the following:

o Cost of Subscription Revenues. The cost of subscription revenues consists primarily of personnel costs related to our customer support and cloud operations. Personnel costs consist primarily of salaries, benefits, bonuses and share-based compensation. The cost of subscription revenues also includes cloud infrastructure costs, amortization of intangible assets and depreciation of internal use software capitalization. As our business grows, including the expansion of our SaaS offerings, we expect the absolute cost of subscription revenues to increase.

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o Cost of Perpetual License Revenues. The cost of perpetual license revenues consists primarily of appliance expenses and allocated personnel costs to support delivery and operations related to perpetual licenses. Personnel costs consist primarily of salaries, benefits, bonuses and share-based compensation. With perpetual licenses now making up a smaller part of our overall revenues, we expect the absolute cost of perpetual license revenues and the cost of perpetual license revenues as a percentage of total revenues to decrease.

o Cost of Maintenance and Professional Services Revenues. The cost of maintenance related to perpetual license contracts and professional services revenues primarily consists of allocated personnel costs for our global customer support, customer success and professional services organization. Personnel costs consist primarily of salaries, benefits, bonuses, share-based compensation and subcontractors’ fees. We anticipate the absolute dollars associated with generating professional services revenues to increase due to our expanding customer base and ongoing investment in our services teams, aimed at delivering exceptional customer experiences.

Gross Profit and Gross Margin

Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Our gross margin has historically fluctuated from period to period as a result of changes in the mix of revenues between SaaS, self-hosted Subscriptions and Perpetual Licenses, as well as maintenance and professional services revenues, cloud infrastructure costs and personnel costs. We expect our gross margin to be relatively consistent in the near term. As our subscription revenue mix continues to increase, we continue to streamline our cloud cost management; however, we continue to see an increase in our overall cloud related expenses.  At the same time we are making ongoing investments in our services team, which focuses on our customer experience.

Operating Expenses

Our operating expenses are classified into three categories: research and development, sales and marketing and general and administrative. For each category, the largest component is personnel costs, which consist primarily of salaries, employee benefits (including commissions and bonuses) and share-based compensation expenses. Operating expenses also include allocated overhead costs for IT, facilities and office expenses, as well as depreciation and amortization. Allocated costs for facilities and office expenses primarily consist of rent, office maintenance, utilities and office supplies. We expect personnel and all allocated costs to continue to increase in absolute dollars as we integrate Venafi personnel, hire new employees and add facilities to continue to grow our business.

Research and Development. Research and development expenses consist primarily of personnel costs attributable to our research and development personnel, consultants and contractors, cloud infrastructure and software expenses, and allocated overhead costs. We expect that our research and development expenses will continue to increase in absolute dollars as we continue to grow our research and development headcount to further strengthen our technology platform and invest in the development of both existing and new solutions, products and services. This includes expanding capabilities in machine identity management through the integration of Venafi team members. At the same time, we expect our research and development expenses as a percentage of revenue to decline over time as we recognize the benefits of being a recurring revenue company and as we scale the organization.

Sales and Marketing. Sales and marketing expenses are the largest component of our operating expenses and consist primarily of personnel costs, including commissions, as well as marketing programs and general sales costs, software and related expenses, travel expenses and allocated overhead costs. We continue to invest to extend the reach of our sales organization, which means we continue to invest in both direct and indirect sales channels and related marketing expenses. We expect that sales and marketing expenses will continue to increase in absolute dollars, as we plan to expand our go to market (“GTM”) efforts globally. At the same time, we expect our sales and marketing expenses as a percentage of revenue to decline, as we recognize the benefits of being a recurring revenue company and as we scale the organization. We continue to expect sales and marketing expenses will remain our largest category of operating expenses.

General and Administrative. General and administrative expenses consist primarily of personnel costs for our executive, finance, human resources, legal and administrative personnel. General and administrative expenses also include external legal, audit, accounting and other professional service fees, software and related expenses and insurance premiums. We continue to expect that general and administrative expenses will increase in absolute dollars as we grow and expand our operations.

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Financial Income, Net

Financial income, net consists of mainly interest income, change in fair value of derivative assets, amortization of debt discount and issuance costs, foreign currency exchange gains or losses and foreign exchange forward transactions expenses. Interest income consists of interest earned on our cash, cash equivalents, short- and long-term bank deposits, marketable securities and money market funds. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period. Foreign currency exchange changes reflect gains or losses related to transactions denominated in currencies other than the U.S. dollar.

Tax benefit (Taxes on Income)

Tax benefit (taxes on income) consists of taxes related to our activity in Israel, the United States, and numerous other foreign jurisdictions in which we conduct business.

The ordinary corporate tax rate in Israel is 23.0%. We have been entitled to various tax benefits under Israel’s Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”). As a result, our tax rate to be paid with respect to our eligible Israeli taxable income under these benefits programs is generally 12.0%.

Under the Investment Law and other Israeli legislation, we are entitled to certain additional tax benefits, including accelerated deduction of research and development expenses, accelerated depreciation and amortization rates for tax purposes on certain intangible assets and deduction of public offering expenses in three equal annual installments.

Our non-Israeli subsidiaries are taxed according to the tax laws in their respective jurisdictions of tax residency. Due to our multi-jurisdictional operations, we apply significant judgment to determine our consolidated income tax position.

Comparison of Period to Period Results of Operations

The following table sets forth our results of operations in dollars and as a percentage of total revenues for the periods indicated:

		Nine Months Ended September 30,
		2023								2024
		Amount				% of Revenues				Amount				% of Revenues
		(dollars in thousands)
Revenues:
Subscription		$	321,766				60.9	%		$	490,230				71.4	%
Perpetual license			13,028				2.4	%			9,484				1.4	%
Maintenance and professional services			193,990				36.7	%			186,644				27.2	%
Total revenues		$	528,784				100	%		$	686,358				100	%
Cost of revenues:
Subscription			54,859				10.4	%			68,132				9.9	%
Perpetual license			1,173				0.2	%			1,248				0.2	%
Maintenance and professional services			60,446				11.4	%			65,231				9.5	%
Total cost of revenues			116,478				22	%			134,611				19.6	%
Gross profit			412,306				78.0	%			551,747				80.4	%
Operating expenses:
Research and development			157,653				29.8	%			169,776				24.7	%
Sales and marketing			299,376				56.6	%			333,993				48.7	%
General and administrative			67,038				12.7	%			89,422				13.0	%
Total operating expenses			524,067				99.1	%			593,191				86.4	%
Operating loss			(111,761	)			(21.1	)%			(41,444	)			(6	)%
Financial income, net			33,912				6.4	%			50,841				7.4	%
Income (loss) before taxes on income			(77,849	)			(14.7	)%			9,397				1.4	%
Tax benefit (taxes on income)			2,434				0.5	%			(5,740	)			(0.8	)%
Net income (loss)		$	(75,415	)			(14.2	)%		$	3,657				0.6	%

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Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2024

 

Revenues

		Nine Months Ended September 30,
		2023								2024								Change
		Amount				% of Revenues				Amount				% of Revenues				Amount				%
		(dollars in thousands)
Revenues:
Subscription		$	321,766				60.9	%		$	490,230				71.4	%		$	168,464				52.4	%
Perpetual license			13,028				2.4	%			9,484				1.4	%			(3,544	)			(27.2	)%
Maintenance and professional services			193,990				36.7	%			186,644				27.2	%			(7,346	)			(3.8	)%
Total revenues		$	528,784				100	%		$	686,358				100	%		$	157,574				29.8	%

 

Revenues increased by $157.6 million, or 29.8%, from $528.8 million for the nine months ended September 30, 2023 to $686.4 million for the nine months ended September 30, 2024. This increase was primarily due to the growth of SaaS sales as well as the increase in self-hosted subscription sales, partially offset by the decline in perpetual license sales due to the Company’s transition away from the perpetual model to a subscription model. In addition, our strong SaaS and self-hosted subscription renewals further contributed to these results and allowed CyberArk to maintain its base of recurring business and build a foundation for growth. The largest increase in revenue occurred in the United States, where revenues increased by $58.0 million, while the increase in EMEA and the rest of the world was $60.0 million and $39.5 million, respectively.

Subscription revenues increased by $168.5 million, or 52.4%, from $321.8 million in the nine months ended September 30, 2023 to $490.2 million in the nine months ended September 30, 2024, as we increased the mix of our subscription sales and experienced an increase in demand for our SaaS and self-hosted subscription solutions.

Perpetual license revenues declined by $3.5 million, or 27.2%, from $13.0 million in the nine months ended September 30, 2023 to $9.5 million in the nine months ended September 30, 2024. The decline in perpetual license revenue is consistent with our transition from selling perpetual licenses to selling SaaS and self-hosted subscription solutions.

Maintenance and professional services revenues declined by $7.3 million, or 3.8%, from $194.0 million in the nine months ended September 30, 2023 to $186.6 million in the nine months ended September 30, 2024. Maintenance revenues declined by $8.5 million from $156.3 million in the nine months ended September 30, 2023 to $147.8 million in the nine months ended September 30, 2024. Despite our strong renewal rates, as anticipated, the new perpetual license sales did not add enough maintenance business to offset the churn and the transition of customers  from maintenance to SaaS and self-hosted subscription contracts.

Professional services revenues increased by $1.1 million from $37.7 million in the nine months ended September 30, 2023 to $38.8 million in the nine months ended September 30, 2024. The increase in professional services was also driven by the expansion of our professional services packages, which often include recurring services.

 

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Cost of Revenues and Gross Profit

		Nine Months Ended September 30,
		2023								2024								Change
		Amount				% of Revenues				Amount				% of Revenues				Amount				%
		(dollars in thousands)
Cost of revenues:
Subscription		$	54,859				10.4	%		$	68,132				9.9	%		$	13,273				24.2	%
Perpetual license			1,173				0.2	%			1,248				0.2	%			75				6.4	%
Maintenance and professional services			60,446				11.4	%			65,231				9.5	%			4,785				7.9	%
Total cost of revenues		$	116,478				22.0	%		$	134,611				19.6	%		$	18,133				15.6	%
Gross profit		$	412,306				78.0	%		$	551,747				80.4	%		$	139,441				33.8	%

 

Cost of subscription revenues increased by $13.2 million, or 24.2%, from $54.9 million in the nine months ended September 30, 2023 to $68.1 million in the nine months ended September 30, 2024. The increase in cost of subscription revenues was primarily driven by a $9.9 million increase in personnel costs and related expenses, a $3.4 million increase in cloud infrastructure costs to support the growth in our SaaS revenues, and a $1.4 million increase in the use of third-party consultants for services rendered, partially offset by a $2.1 million decrease in impairment of capitalized software development costs.

 

Cost of maintenance and professional services revenues increased by $4.8 million, or 7.9%, from $60.4 million in the nine months ended September 30, 2023 to $65.2 million in the nine months ended September 30, 2024. The increase in cost of maintenance and professional services revenues was driven primarily by a $6.3 million increase in personnel costs and related expenses, partially offset by a decrease of $1.9 million in the use of third-party consultants for services rendered.

 

Our headcount related to cost of revenues grew from 533 as of September 30, 2023 to 605 as of September 30, 2024.

 

Gross profit increased by $139.4 million, or 33.8%, from $412.3 million in the nine months ended September 30, 2023 to $551.7 million in the nine months ended September 30, 2024. Gross margins increased from 78.0% in the nine months ended September 30, 2023 to 80.4% in the nine months ended September 30, 2024. This was driven primarily by management of our cloud costs and a relatively higher mix of more mature SaaS products, which benefited gross margin.

 

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Operating Expenses

 

		Nine Months Ended September 30,
		2023								2024								Change
		Amount				% of Revenues				Amount				% of Revenues				Amount				%
		(dollars in thousands)
Operating expenses:
Research and development		$	157,653				29.8	%		$	169,776				24.7	%		$	12,123				7.7	%
Sales and marketing			299,376				56.6	%			333,993				48.7	%			34,617				11.6	%
General and administrative			67,038				12.7	%			89,422				13.0	%			22,384				33.4	%
Total operating expenses		$	524,067				99.1	%		$	593,191				86.4	%		$	69,124				13.2	%

 

Research and Development. Research and development expenses increased by $12.1 million, or 7.7%, from $157.7 million in the nine months ended September 30, 2023 to $169.8 million in the nine months ended September 30, 2024. This increase was primarily attributable to a $9.2 million increase in personnel costs and related expenses and a $3.4 million increase in cloud and software costs, partially offset by a decrease of $0.7 million in expenses related to consultants and contractors.

 

Our research and development team headcount grew from 909 as of September 30, 2023 to 1,017 as of September 30, 2024.

 

Sales and Marketing. Sales and marketing expenses increased by $34.6 million, or 11.6%, from $299.4 million in the nine months ended September 30, 2023 to $334.0 million in the nine months ended September 30, 2024. This increase was primarily attributable to a $25.6 million increase in personnel costs and related expenses due to increased headcount in all regions to expand our go-to-market organization. The increase was also attributable to a $2.9 million increase in expenses related to consultants and contractors, a $2.8 million increase in marketing expenses and sales events, a $2.2 million increase in cloud and software costs, and a $1.2 million increase in travel expenses.

 

Our sales and marketing headcount grew from 1,321 as of September 30, 2023 to 1,404 as of September 30, 2024.

 

General and Administrative. General and administrative expenses increased by $22.4 million, or 33.4%, from $67.0 million in the nine months ended September 30, 2023 to $89.4 million in the nine months ended September 30, 2024. This increase was primarily attributable to an increase of $14.1 million in personnel costs and related expenses due to increased headcount, a $5.1 million increase in services fees for external legal counsel, accounting advisors and patent administration and a $2.7 million increase in expenses related to consultants. The increase in external legal counsel and consultants expenses is mainly attributable to expenses related to the acquisition of Venafi.

 

Our general and administrative headcount grew from 236 as of September 30, 2023 to 270 as of September 30, 2024.

 

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Financial Income, Net. Financial income, net increased by $16.9 million, or 49.9%, from $33.9 million in the nine months ended September 30, 2023 to $50.8 million in the nine months ended September 30, 2024. This increase resulted primarily from an increase of $14.1 million in interest income from investments in marketable securities, short-term and long-term bank deposits and money market funds, Change in fair value of derivative assets of $2.6 million and $0.6 million of exchange rate gains, partially offset by $0.6 million of bank charges.

 

Tax Benefit (Taxes on Income). Tax benefit (taxes on income) changed from tax benefit of $2.4 million for the nine months ended September 30, 2023 to taxes on income of $5.7 million for the nine months ended September 30, 2024. This change was mainly attributed to an increase in our income before taxes on income.

 

B.

Liquidity and Capital Resources

 

We fund our operations with cash generated from operating activities. We have also raised capital through issuing convertible senior notes, the sale of equity securities in public offerings and, to a lesser extent, through exercised options. Our primary uses of our cash are for ongoing operating expenses and capital expenditures.  In addition, we have leveraged our strong balance sheet to complete mergers and acquisitions.

 

As of September 30, 2024 and December 31, 2023, our principal sources of liquidity were cash, cash equivalents, bank deposits and marketable securities of $1.5 billion and $1.3 billion, respectively.

 

On October 1, 2024, we completed the acquisition of Venafi for acquisition consideration of a combination of $1.02 billion in cash and $0.64 billion in CyberArk ordinary shares. To fund the cash consideration, we liquidated a portion of our marketable securities and deposits that were not intended for working capital needs. Additionally, we have secured a $250 million committed revolving credit line facility, which is fully available for utilization, as needed. Furthermore, in connection with the pricing of the 2019 convertible senior notes, we entered into a capped call transaction which was settled in cash for $261.4 million on November 15, 2024 in conjunction with the maturity of the convertible senior notes.

 

We believe that our cash generated from operating activities, along with existing cash, cash equivalents, marketable securities and bank deposits will be sufficient to fund our working capital and capital expenditures for at least the next 12 months and for the foreseeable future. Our future capital requirements will depend on many factors, including our revenue growth rate, renewal rates and timing of renewals, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts and expansion into new geographic locations, the timing of introductions of new products and enhancements to existing products and the continuing market acceptance of our offerings.

 

The following table presents the major components of net cash flows for the periods presented:

 

		Nine Months Ended September 30,
		2023				2024
		($ in thousands)
Net cash provided by operating activities		$	9,306			$	167,151
Net cash provided by (used in) investing activities			(1,688	)			704,298
Net cash provided by financing activities			19,195				12,451

 

A substantial source of our net cash provided by operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability. Our deferred revenue consists of maintenance and support and professional services that have been invoiced and collected but that have not yet been recognized as revenues and of self-hosted subscriptions and SaaS contracts that have been invoiced but not yet recognized. We assess our liquidity, in part, through an analysis of our short-term and long-term deferred revenue that has not yet been recognized as revenues together with our other sources of liquidity. Revenues from SaaS contracts and maintenance and support contracts are recognized ratably on a straight-line basis over the term of the related contract which is typically one year or three years, and revenues from professional services are recognized as services are performed. Thus, upfront payments add to the liquidity of our operations since we frequently recognize self-hosted subscription, SaaS, maintenance and support and professional services revenues and expenses in subsequent periods to when the payments may be received. The duration of our contracts also impacts our deferred revenue.

 

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Net Cash Provided by Operating Activities

 

Our cash flow reflects our net income (loss) coupled with changes in our non-cash working capital.

 

During the nine months ended September 30, 2024, operating activities provided $167.2 million in cash as a result of $3.7 million of net income, adjusted by $121.4 million of non-cash charges related to share-based compensation expense, $12.0 million related to depreciation and amortization expenses, $2.8 million decrease in deferred tax assets, $2.3 million in non-cash interest expense related to the amortization of debt discount and issuance costs and a net change of $42.0 million in non-cash working capital, partially offset by a $14.4 million net change from other long-term assets and liabilities and a $2.6 million of non-cash change in fair value of derivative assets.

 

The change of $42.0 million in non-cash working capital was due to a $38.5 million increase in short-term deferred revenue, a decrease of $20.3 million in trade receivables and an increase of $10.8 million in other current liabilities, partially offset by a $15.3 million net change from other current assets, a decrease of $6.2 million in employees and payroll accruals, and a decrease of $6.1 million in trade payables.

 

During the nine months ended September 30, 2023, operating activities provided $9.3 million in cash as a result of $75.4 million of net loss, adjusted by $102.6 million of non-cash charges related to share-based compensation expense, $15.1 million related to depreciation and amortization expenses, $2.2 million in non-cash interest expense related to the amortization of debt discount and issuance costs and a net change of $8.2 million in non-cash working capital, partially offset by a $32.6 million net change from other long-term assets and liabilities and a $10.8 million increase in deferred tax assets.

 

The change of $8.2 million in non-cash working capital was due to a $29.4 million increase in short-term deferred revenue, a decrease of $1.8 million in trade receivables and an increase of $0.4 million in other current liabilities, partially offset by a decrease of $13.6 million in employees and payroll accruals, an $8.8 million net change from other current assets and a decrease of $1.0 million in trade payables .

 

During the nine months ended September 30, 2023 and 2024, our days’ sales outstanding (“DSO”) was 62 days and 67 days, respectively.

Net Cash Provided by (Used in) Investing Activities

 

Investing activities have consisted of investment in, and proceeds from, short-term and long-term deposits, investment in, and proceeds from sales and maturities of marketable securities, and purchases of property and equipment.

 

Net cash provided by (used in) investing activities was $(1.7) million and $704.3 million for the nine months ended September 30, 2023 and 2024, respectively.

 

The increase of $706.0 million in net cash provided by investing activities in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due to a net increase of $708.8 million in proceeds from short- and long-term deposits, marketable securities and others, partially offset by an increase of $2.8 million in capital expenditures.

 

Net Cash Provided by Financing Activities

 

Our financing activities have consisted of proceeds from shares issued in connection with our ESPP, proceeds from the exercise of share options and proceeds from (payments of) withholding tax related to employee share plans.

 

Net cash provided by financing activities was $19.2 million and $12.5 million for the nine months ended September 30, 2023 and 2024, respectively.

 

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The decrease of $6.7 million in net cash provided by financing activities in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due to a decrease of $10.9 million in proceeds from (payment of) withholding tax related to employee stock plans, partially offset by an increase of $3.1 million in proceeds from shares issued in connection with employee stock purchase plan and an increase of $1.0 million in proceeds from the exercise of stock options.

 

C.

Research and Development, Patents and Licenses, etc.

 

We conduct our research and development activities primarily in Israel as well as other locations such as India, the United States and, following the Venafi acquisition, Bulgaria. As of September 30, 2024, our research and development department included 1,017 employees. In the nine months ended September 30, 2024, research and development costs accounted for 24.7% of our total revenues.

 

For a discussion of our research and development policies, see “—Research and Development” and “—Intellectual Property”, respectively, in Item 4.B. of our Annual Report.

 

D.

Trend Information

 

Other than as disclosed elsewhere in this Form 6-K, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2023, that are reasonably likely to have a material adverse effect on our revenue, net income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

 

E.

Critical Accounting Estimates

 

We have prepared our condensed consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. These estimates are prepared using our best judgment, after considering past and current events and economic conditions. While management believes the factors evaluated provide a meaningful basis for establishing and applying sound accounting policies, management cannot guarantee that the estimates will always be consistent with actual results. In addition, certain information relied upon by us in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third parties. Actual results could differ from these estimates and could have a material adverse effect on our reported results. We believe the critical accounting estimates discussed under Item 5, “Operating and Financial Review and Prospects” in our Annual Report reflect our more significant estimates, assumptions, and judgments that have the most significant impact on our condensed consolidated financial statements. There have been no significant changes to our critical accounting estimates as discussed in the Annual Report.

 

Recently Issued and Adopted Accounting Pronouncements

 

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 1 to our condensed consolidated financial statements included in this Form 6-K.

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