CyberArk Software Ltd. Q1 FY2025 earnings call

• Strong first quarter results with total ARR of $1.215 billion, revenue of $318 million, 18% operating margin, and $96 million free cash flow. - Identity security is critical as over 90% of organizations face identity-related breaches. - Unified identity security platform includes discovery, privilege controls, policy automation, life cycle automation, and governance/compliance. - Innovation with new solutions for human, machine, and AI identities, including Zilla provision and compliant modules, secure workload access solution, and Secure AI Agent solution. - Venafi integration progressing ahead of expectations, with pipeline building and cross-sell synergies.

Annual recurring revenue (ARR) reached $1.215 billion. Net new ARR was $46 million, up from $37 million in Q1 of last year. Subscription ARR grew to $1.028 billion, with subscription net new ARR of $51 million compared to $39 million in Q1 of last year. Maintenance ARR was $188 million. Total revenue in Q1 was $317.6 million, with recurring revenue at $298.2 million (94% of total revenue) and subscription revenue at $250.6 million (79% of total revenue).

• Second quarter 2025: Total revenue expected $312M - $318M, non-GAAP operating income $41.5M - $46.5M, non-GAAP EPS $0.74 - $0.81. - Full year 2025: Total revenue expected $1.313B - $1.323B (32% Y/Y growth), non-GAAP operating income $221M - $229M, non-GAAP EPS $3.73 - $3.85, ARR $1.410B - $1.420B (21% Y/Y growth), adjusted free cash flow $300M - $310M.

• Macro uncertainty and potential impact on business. - BEAT tax expense related to US-based erosion taxes, which is an ongoing expense.

Q: Talk about customers' willingness to buy multiple products and how to drive multiproduct sales?

A: Matt Cohen said customers want to tackle entire identity security problems, teams elevate to talk platform, go in with 3-year roadmaps, and even customers starting with one solution work on roadmap for future.

Q: Thoughts on maintenance business and conversion opportunity?

A: Erica Smith said customer base willing to move to SaaS/subscription, slight uptick in conversion activity in Q1, expectation of increased maintenance ARR conversion as year progresses.

Q: Macro headwinds and guidance changes?

A: Erica Smith said no macro headwinds seen, but took more conservative approach in guidance due to macro volatility.

Q: Trends in adoption of Zilla and Venafi across segments and customer size?

A: Matt Cohen said Venafi has universal interest across segments, Zilla is in early days with customers seeking help with modern environment governance.

Q: Pricing for non-human identities like machines and AI agents?

A: Matt Cohen said price per agent/application may come down with scale, but total deal size matters, and average deal size on machine side is larger than PAM.

Q: Competitive environment and net new ARR growth excluding Venafi and Zilla?

A: Matt Cohen said competitive environment hasn't changed significantly, net new ARR organic subscription is growing.

Q: Sales cycles and consolidation play?

A: Matt Cohen said sales cycles haven't changed, go-to-market team is good at guiding customers through buyer's journey, displacement opportunities take longer but expansion is common.

Q: Closing awareness gap for machine identities?

A: Matt Cohen said security teams are taking control, helping CISOs get central authority over machine identities.

Q: Pricing of machine identity vs human and certificate life cycle change?

A: Matt Cohen said deal size matters for machine identities, certificate life cycle change is a mandate from CA/Browser Forum.