¨
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Name of each exchange on which registered
|
|
Ordinary shares, par value NIS 0.01 per share
|
NASDAQ Global Select Market
|
U.S. GAAP
x
|
|
International Financial Reporting Standards as issued
by the International Accounting Standards Board
¨
|
Other
¨
|
3
|
||
3
|
||
3
|
||
26
|
||
36
|
||
36
|
||
58
|
||
83
|
||
87
|
||
88
|
||
89
|
||
101
|
||
102
|
103
|
||
103
|
||
103
|
||
104
|
||
104
|
||
104
|
||
105
|
||
105
|
||
105
|
||
105
|
||
106
|
||
106
|
||
|
·
|
our expectations regarding revenues generated by our hybrid sales model;
|
|
·
|
our expectations regarding our operating and net profit margins;
|
|
·
|
our expectations regarding significant drivers of our future growth;
|
|
·
|
our plans to continue to invest in research and development to develop technology for both existing and new products;
|
|
·
|
our plans to invest in sales and marketing efforts and expand our channel partnerships;
|
|
·
|
our plans to hire additional new employees;
|
|
·
|
our plans to leverage our global footprint in existing and new industry verticals to further expand our market share;
|
|
·
|
our plans to pursue incremental sales by further expanding our customer success team;
|
|
·
|
our expectations regarding our tax classifications;
|
|
·
|
our ability to successfully integrate the operations, products and personnel of Cybertinel Ltd. and Viewfinity, Inc., which we recently acquired; and
|
|
·
|
our plans to pursue additional strategic acquisitions.
|
A.
|
Selected Financial Data
|
Year ended December 31,
|
||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
(in thousands except share and per share data)
|
||||||||||||||||||||
Consolidated Statements of Operations:
|
||||||||||||||||||||
Revenues:
|
||||||||||||||||||||
License
|
$ | 21,125 | $ | 27,029 | $ | 38,907 | $ | 61,320 | $ | 100,113 | ||||||||||
Maintenance and professional services
|
15,240 | 20,179 | 27,250 | 41,679 | 60,699 | |||||||||||||||
Total revenues
|
36,365 | 47,208 | 66,157 | 102,999 | 160,812 | |||||||||||||||
Cost of revenues:
|
||||||||||||||||||||
License
|
899 | 1,002 | 1,216 | 2,654 | 5,088 | |||||||||||||||
Maintenance and professional services
|
4,517 | 5,922 | 7,860 | 12,053 | 17,572 | |||||||||||||||
Total cost of revenues(1)
|
5,416 | 6,924 | 9,076 | 14,707 | 22,660 | |||||||||||||||
Gross profit
|
30,949 | 40,284 | 57,081 | 88,292 | 138,152 | |||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development(1)
|
6,272 | 7,273 | 10,404 | 14,400 | 21,734 | |||||||||||||||
Sales and marketing(1)
|
15,929 | 22,081 | 32,840 | 44,943 | 66,206 | |||||||||||||||
General and administrative(1)
|
3,077 | 3,297 | 4,758 | 8,495 | 16,990 | |||||||||||||||
Total operating expenses
|
25,278 | 32,651 | 48,002 | 67,838 | 104,930 | |||||||||||||||
Operating income
|
5,671 | 7,633 | 9,079 | 20,454 | 33,222 | |||||||||||||||
Financial income (expenses), net
|
(190 | ) | 4 | (1,124 | ) | (5,988 | ) | (1,479 | ) | |||||||||||
Income before taxes on income
|
5,481 | 7,637 | 7,955 | 14,466 | 31,743 | |||||||||||||||
Tax benefit (taxes on income)
|
392 | 225 | (1,320 | ) | (4,512 | ) | (5,949 | ) | ||||||||||||
Net income
|
$ | 5,873 | $ | 7,862 | $ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||||||
Basic net income per ordinary share(2)
|
$ | 0.43 | $ | 0.51 | $ | 0.25 | $ | 0.46 | $ | 0.80 | ||||||||||
Diluted net income per ordinary share(2)
|
$ | 0.26 | $ | 0.31 | $ | 0.14 | $ | 0.34 | $ | 0.73 | ||||||||||
Weighted average number of ordinary shares used in computing basic net income per ordinary share(2)
|
4,969,489 | 6,592,997 | 6,900,433 | 13,335,059 | 32,124,772 | |||||||||||||||
Weighted average number of ordinary shares used in computing diluted net income per ordinary share(2)
|
22,791,354 | 25,245,790 | 10,765,914 | 29,704,730 | 35,322,716 |
As of December 31,
|
||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Consolidated Balance Sheet Data:
|
||||||||||||||||||||
Cash, cash equivalents and short-term bank deposits
|
$ | 33,353 | $ | 45,995 | $ | 65,368 | $ | 177,181 | $ | 238,252 | ||||||||||
Deferred revenue, current and long term
|
9,302 | 15,068 | 24,478 | 32,160 | 54,389 | |||||||||||||||
Working capital(3)
|
28,234 | 38,908 | 48,900 | 156,829 | 197,095 | |||||||||||||||
Total assets
|
47,654 | 64,379 | 89,632 | 210,552 | 334,424 | |||||||||||||||
Preferred share warrant liability
|
512 | 688 | 2,134 | — | — | |||||||||||||||
Total shareholders’ equity
|
30,290 | 38,494 | 45,846 | 155,008 | 246,670 |
(1)
|
Includes share-based compensation expense as follows:
|
Year ended December 31, | ||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Cost of revenues
|
$ | 70 | $ | 32 | $ | 39 | $ | 137 | $ | 499 | ||||||||||
Research and development
|
481 | 58 | 73 | 172 | 1,507 | |||||||||||||||
Sales and marketing
|
432 | 81 | 126 | 347 | 2,214 | |||||||||||||||
General and administrative
|
693 | 113 | 165 | 917 | 2,829 | |||||||||||||||
Total share-based compensation expenses
|
$ | 1,676 | $ | 284 | $ | 403 | $ | 1,573 | $ | 7,049 |
(2)
|
Basic and diluted net income per ordinary share is computed based on the weighted average number of ordinary shares outstanding during each period. For additional information, see note 11 to our consolidated financial statements included elsewhere in this annual report.
|
(3)
|
We define working capital as total current assets minus total current liabilities. In November 2015, the Financial Accounting Standards Board or the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. We early adopted this standard retrospectively and reclassified all of our current deferred tax assets to noncurrent deferred tax assets which has resulted in a change to previously published working capital amounts for the years ended December 31, 2011, 2012, 2013 and 2014.
|
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
Reconciliation of Operating Income to Non-GAAP Operating Income:
|
||||||||||||||||||||
Operating income
|
$ | 5,671 | $ | 7,633 | $ | 9,079 | $ | 20,454 | $ | 33,222 | ||||||||||
Share-based compensation
|
1,676 | 284 | 403 | 1,573 | 7,049 | |||||||||||||||
Public offering related expenses
|
– | – | – | – | 1,568 | |||||||||||||||
Acquisition related expenses
|
– | – | – | – | 677 | |||||||||||||||
Amortization of intangible assets – Cost of revenues
|
– | – | – | – | 359 | |||||||||||||||
Amortization of intangible assets – Research and development
|
– | – | – | – | 749 | |||||||||||||||
Amortization of intangible assets – Sales and marketing
|
– | – | – | – | 17 | |||||||||||||||
Non-GAAP operating income
|
$ | 7,347 | $ | 7,917 | $ | 9,482 | $ | 22,027 | $ | 43,641 |
Year ended December 31, | ||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reconciliation of Net Income to Non-GAAP Net Income:
|
||||||||||||||||||||
Net income
|
$ | 5,873 | $ | 7,862 | $ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||||||
Share-based compensation
|
1,676 | 284 | 403 | 1,573 | 7,049 | |||||||||||||||
Warrant adjustment
|
179 | 176 | 1,446 | 4,309 | – | |||||||||||||||
Public offering related expenses
|
– | – | – | – | 1,568 | |||||||||||||||
Acquisition related expenses
|
– | – | – | – | 677 | |||||||||||||||
Amortization of intangible assets – Cost of revenues
|
– | – | – | – | 359 | |||||||||||||||
Amortization of intangible assets – Research and development
|
– | – | – | – | 749 | |||||||||||||||
Amortization of intangible assets – Sales and marketing
|
– | – | – | – | 17 | |||||||||||||||
Taxes on income related to non-GAAP adjustments
|
– | – | – | – | (951 | ) | ||||||||||||||
Non-GAAP net income
|
$ | 7,728 | $ | 8,322 | $ | 8,484 | $ | 15,836 | $ | 35,262 |
B.
|
Capitalization and Indebtedness
|
C.
|
Reasons for the Offer and Use of Proceeds
|
D.
|
Risk Factors
|
|
·
|
our ability to attract and retain new customers;
|
|
·
|
our ability to sell additional products to current customers;
|
|
·
|
the ability of our service operation to keep pace with license sales to new and existing customers;
|
|
·
|
changes in customer or channel partner requirements or market needs;
|
|
·
|
changes in the growth rate of the information security market;
|
|
·
|
the timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of the information security market, including consolidation among our customers or competitors;
|
|
·
|
a disruption in, or termination of, our relationship with channel partners;
|
|
·
|
our ability to successfully expand our business globally;
|
|
·
|
reductions in maintenance renewal rates;
|
|
·
|
changes in our pricing policies or those of our competitors;
|
|
·
|
general economic conditions in our markets;
|
|
·
|
future accounting pronouncements or changes in our accounting policies or practices;
|
|
·
|
the amount and timing of our operating costs;
|
|
·
|
a change in our mix of products and services; and
|
|
·
|
increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates.
|
|
·
|
greater name recognition, a longer operating history and a larger customer base, notwithstanding the increased visibility of our brand following our initial public offering;
|
|
·
|
larger sales and marketing budgets and resources;
|
|
·
|
broader distribution and established relationships with channel and distribution partners and customers;
|
|
·
|
increased effectiveness in protecting, detecting and responding to cyber attacks.
|
|
·
|
greater customer support resources;
|
|
·
|
greater speed at which a solution can be deployed;
|
|
·
|
greater resources to make acquisitions;
|
|
·
|
larger intellectual property portfolios; and
|
|
·
|
greater financial, technical and other resources
|
|
·
|
delays in releasing product enhancements or new products;
|
|
·
|
failure to accurately predict market demand and to supply products that meet this demand in a timely fashion;
|
|
·
|
inability to interoperate effectively with the existing or newly introduced technologies, systems or applications of our existing and prospective customers;
|
|
·
|
inability to protect against new types of attacks or techniques used by cyber attackers or other data thieves;
|
|
·
|
defects in our products, errors or failures of our solutions to secure privileged accounts;
|
|
·
|
negative publicity about the performance or effectiveness of our products;
|
|
·
|
introduction or anticipated introduction of competing products by our competitors;
|
|
·
|
installation, configuration or usage errors by our customers;
|
|
·
|
easing or changing of regulatory requirements related to security; and
|
|
·
|
reluctance of customers to purchase products incorporating open source software.
|
|
·
|
greater difficulty in enforcing contracts and managing collections, as well as longer collection periods;
|
|
·
|
higher costs of doing business globally, including costs incurred in maintaining office space, securing adequate staffing and localizing our contracts;
|
|
·
|
fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business (See “—We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations”);
|
|
·
|
management communication and integration problems resulting from cultural and geographic dispersion;
|
|
·
|
risks associated with trade restrictions and foreign legal requirements, including any importation, certification, and localization of our platform that may be required in foreign countries;
|
|
·
|
greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;
|
|
·
|
compliance with anti-bribery laws, including, without limitation, compliance with the U.S. Foreign Corrupt Practices Act and the UK Anti-Bribery Act;
|
|
·
|
heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
|
|
·
|
reduced or uncertain protection of intellectual property rights in some countries;
|
|
·
|
social, economic and political instability, terrorist attacks and security concerns in general; and
|
|
·
|
potentially adverse tax consequences.
|
|
·
|
actual or anticipated fluctuations in our results of operations and the results of other similar companies;
|
|
·
|
variance in our financial performance from the expectations of market analysts;
|
|
·
|
announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans;
|
|
·
|
changes in the prices of our products and services;
|
|
·
|
our involvement in litigation;
|
|
·
|
our sale of ordinary shares or other securities in the future;
|
|
·
|
market conditions in our industry;
|
|
·
|
changes in key personnel;
|
|
·
|
speculation in the press or the investment community;
|
|
·
|
the trading volume of our ordinary shares;
|
|
·
|
changes in the estimation of the future size and growth rate of our markets;
|
|
·
|
any merger and acquisition activities; and
|
|
·
|
general economic and market conditions.
|
INFORMATION ON
TH
E COMPANY
|
A.
|
History and Development of the Company
|
B.
|
Business Overview
|
|
·
|
the breadth and completeness of a security solution;
|
|
·
|
reliability and effectiveness in protecting, detecting and responding to cyber attacks;
|
|
·
|
analytics and accountability at an individual user level;
|
|
·
|
ability of customers to achieve and maintain compliance with compliance standards and audit requirements;
|
|
·
|
strength of sale and marketing efforts, including distribution and channel relationships;
|
|
·
|
global reach and customer base;
|
|
·
|
scalability and ease of integration with an organization’s existing IT infrastructure and security investments;
|
|
·
|
brand awareness and reputation;
|
|
·
|
innovation and thought leadership;
|
|
·
|
quality of customer support;
|
|
·
|
speed at which a solution can be deployed; and
|
|
·
|
price of a solution and cost of maintenance and professional services.
|
C.
|
Organizational Structure
|
D.
|
Property, Plants an
d
Equipment
|
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
Year ended December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
(in thousands)
|
||||||||||||
Revenues
|
$ | 66,157 | $ | 102,999 | $ | 160,812 | ||||||
Non-GAAP operating income(1)
|
9,482 | 22,027 | 43,641 | |||||||||
Non-GAAP net income(1)
|
8,484 | 15,836 | 35,262 | |||||||||
Net cash provided by operating activities
|
20,159 | 23,195 | 59,160 | |||||||||
Total deferred revenues (as of period-end)
|
24,478 | 32,160 | 54,389 |
(1)
|
For a reconciliation of non-GAAP operating income to operating income and of non-GAAP net income to net income, the nearest comparable GAAP measures, see “Item 3.A. Selected Financial Data.”
|
A.
|
Operating Results
|
|
·
|
License Revenues.
License revenues are generated from sales of perpetual licenses for our cybersecurity software: Privileged Account Security Solution and Sensitive Information Management Solution.
|
|
o
|
Privileged Account Security Solution—The substantial majority of our license revenues has been from sales of our Privileged Account Security Solution. Customers can purchase Enterprise Password Vault, SSH Key Manager, Privileged Session Manager, Privileged Threat Analytics, Application Identity Manager, Viewfinity and On-Demand Privileges Manager. We license our Enterprise Password Vault to our customers based on the number of privileged account users. We offer customers the choice of licensing our Privileged Session Manager based on the number of devices secured or the number of concurrent sessions it monitors. We license our SSH Key Manager, Application Identity Manager and On-Demand Privileges Manager to our customers based on the number of servers that each such product protects. We license our Privileged Threat Analytics to customers based on the number of protected endpoints, such as servers, desktops, databases or mobile devices.
We license our Viewfinity to our customers based on the number of protected endpoints such as servers and desktops.
|
|
o
|
Sensitive Information Management Solution—We generate additional license revenues through sales of our Sensitive Information Management Solution, our first product to market. Customers license the Sensitive Information Management Solution based on the permitted number of users of the software.
|
|
·
|
Maintenance and Professional Services Revenues
. Maintenance revenues are generated from maintenance and service contracts purchased by our customers 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. We also offer professional services focused on both deployment and training our customers to fully leverage the use of our products.
|
Year ended December 31,
|
||||||||||||||||||||||||
2013
|
2014
|
2015
|
||||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
United States
|
$ | 32,041 | 48.4 | % | $ | 60,761 | 59.0 | % | $ | 92,034 | 57.2 | % | ||||||||||||
EMEA
|
25,796 | 39.0 | % | 33,198 | 32.2 | % | 50,644 | 31.5 | % | |||||||||||||||
Rest of World
|
8,320 | 12.6 | % | 9,040 | 8.8 | % | 18,134 | 11.3 | % | |||||||||||||||
Total revenues
|
$ | 66,157 | 100.0 | % | $ | 102,999 | 100.0 | % | $ | 160,812 | 100.0 | % |
·
|
Cost of License Revenues.
Cost of license revenues consists primarily of shipping costs associated with delivery of our software and license payments to third-party software vendors. We expect the absolute cost of license revenues to increase as our license revenues increase.
|
·
|
Cost of Maintenance and Professional Services Revenues.
Cost of maintenance and professional services revenues is primarily comprised of personnel costs for our global customer support organization. Personnel costs associated with customer support consist of salaries, benefits, bonuses and share-based compensation. We expect the absolute cost of maintenance and professional services revenues to increase as our customer base grows and as we hire additional professional services and technical support personnel.
|
Year ended December 31,
|
||||||||||||||||||||||||
2013
|
2014
|
2015
|
||||||||||||||||||||||
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
|||||||||||||||||||
(in thousands, except for %)
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
License
|
$ | 38,907 | 58.8 | % | $ | 61,320 | 59.5 | % | $ | 100,113 | 62.3 | % | ||||||||||||
Maintenance and professional services
|
27,250 | 41.2 | 41,679 | 40.5 | 60,699 | 37.7 | ||||||||||||||||||
Total revenues
|
66,157 | 100.0 | 102,999 | 100.0 | 160,812 | 100.0 | ||||||||||||||||||
Cost of revenues:
|
||||||||||||||||||||||||
License
|
1,216 | 1.8 | 2,654 | 2.6 | 5,088 | 3.2 | ||||||||||||||||||
Maintenance and professional services
|
7,860 | 11.9 | 12,053 | 11.7 | 17,572 | 10.9 | ||||||||||||||||||
Total cost of revenues
|
9,076 | 13.7 | 14,707 | 14.3 | 22,660 | 14.1 | ||||||||||||||||||
Gross profit
|
57,081 | 86.3 | 88,292 | 85.7 | 138,152 | 85.9 | ||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Research and development
|
10,404 | 15.7 | 14,400 | 14.0 | 21,734 | 13.5 | ||||||||||||||||||
Sales and marketing
|
32,840 | 49.7 | 44,943 | 43.6 | 66,206 | 41.2 | ||||||||||||||||||
General and administrative
|
4,758 | 7.2 | 8,495 | 8.2 | 16,990 | 10.6 | ||||||||||||||||||
Total operating expenses
|
48,002 | 72.6 | 67,838 | 65.8 | 104,930 | 65.3 | ||||||||||||||||||
Operating income
|
9,079 | 13.7 | 20,454 | 19.9 | 33,222 | 20.6 | ||||||||||||||||||
Financial expenses, net
|
(1,124 | ) | (1.7 | ) | (5,988 | ) | (5.8 | ) | (1,479 | ) | (0.9 | ) | ||||||||||||
Income before taxes on income
|
7,955 | 12.0 | 14,466 | 14.1 | 31,743 | 19.7 | ||||||||||||||||||
Taxes on income
|
(1,320 | ) | (2.0 | ) | (4,512 | ) | (4.4 | ) | (5,949 | ) | (3.7 | ) | ||||||||||||
Net income
|
$ | 6,635 | 10.0 | % | $ | 9,954 | 9.7 | % | $ | 25,794 | 16.0 | % |
Year ended December 31,
|
||||||||||||||||||||||||
2014
|
2015
|
Change
|
||||||||||||||||||||||
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
Amount
|
%
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
License
|
$ | 61,320 | 59.5 | % | $ | 100,113 | 62.3 | % | $ | 38,793 | 63.3 | % | ||||||||||||
Maintenance and professional services
|
41,679 | 40.5 | 60,699 | 37.7 | 19,020 | 45.6 | ||||||||||||||||||
Total revenues
|
$ | 102,999 | 100.0 | % | $ | 160,812 | 100.0 | % | $ | 57,813 | 56.1 | % | ||||||||||||
Year ended December 31,
|
||||||||||||||||||||||||
2014
|
2015
|
Change
|
||||||||||||||||||||||
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
Amount
|
%
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Cost of revenues:
|
||||||||||||||||||||||||
License
|
$ | 2,654 | 2.6 | % | $ | 5,088 | 3.2 | % | $ | 2,434 | 91.7 | % | ||||||||||||
Maintenance and professional services
|
12,053 | 11.7 | 17,572 | 10.9 | 5,519 | 45.8 | ||||||||||||||||||
Total cost of revenues
|
$ | 14,707 | 14.3 | % | $ | 22,660 | 14.1 | % | $ | 7,953 | 54.1 | % | ||||||||||||
Gross profit
|
$ | 88,292 | 85.7 | % | $ | 138,152 | 85.9 | % | $ | 49,860 | 56.5 | % |
Year ended December 31,
|
||||||||||||||||||||||||
2014
|
2015
|
Change
|
||||||||||||||||||||||
Amount
|
% of
Revenues
|
Amount
|
% of
Revenues
|
Amount
|
%
|
|||||||||||||||||||
($ in thousands)
|
||||||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Research and development
|
$ | 14,400 | 14.0 | % | $ | 21,734 | 13.5 | % | $ | 7,334 | 50.9 | % | ||||||||||||
Sales and marketing
|
44,943 | 43.6 | 66,206 | 41.2 | 21,263 | 47.3 | ||||||||||||||||||
General and administrative
|
8,495 | 8.2 | 16,990 | 10.6 | 8,495 | 100.0 | ||||||||||||||||||
Total operating expenses
|
$ | 67,838 | 65.8 | % | $ | 104,930 | 65.3 | % | $ | 37,092 | 54.7 | % | ||||||||||||
|
Year ended December 31,
|
|||||||||||||||||||||||
|
2013
|
2014
|
Change
|
|||||||||||||||||||||
|
Amount
|
|
% of
Revenues
|
Amount
|
|
% of
Revenues
|
Amount
|
|
%
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||
Revenues:
|
|
|
|
|
||||||||||||||||||||
License
|
|
$
|
38,907
|
|
|
58.8
|
%
|
$
|
61,320
|
|
|
59.5
|
%
|
$
|
22,413
|
|
|
57.6
|
%
|
|||||
Maintenance and professional services
|
|
27,250
|
|
|
41.2
|
|
41,679
|
|
|
40.5
|
|
14,429
|
|
|
53.0
|
|
||||||||
|
|
|
|
|||||||||||||||||||||
Total revenues
|
$
|
66,157
|
|
100.0
|
%
|
$
|
102,999
|
|
100.0
|
%
|
$
|
36,842
|
|
55.7
|
%
|
|||||||||
|
|
|
|
|
Year ended December 31,
|
|||||||||||||||||||||||
|
2013
|
2014
|
Change
|
|||||||||||||||||||||
|
Amount
|
|
% of
Revenues
|
Amount
|
|
% of
Revenues
|
Amount
|
|
%
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||
Cost of revenues:
|
|
|
|
|
||||||||||||||||||||
License
|
|
$
|
1,216
|
|
|
1.8
|
%
|
$
|
2,654
|
|
|
2.6
|
%
|
$
|
1,438
|
|
|
118.3
|
%
|
|||||
Maintenance and professional services
|
|
7,860
|
|
|
11.9
|
|
12,053
|
|
|
11.7
|
|
4,193
|
|
|
53.3
|
|
||||||||
|
|
|
|
|||||||||||||||||||||
Total cost of revenues
|
$
|
9,076
|
|
13.7
|
%
|
$
|
14,707
|
|
14.3
|
%
|
$
|
5,631
|
|
62.0
|
%
|
|||||||||
|
|
|
|
|||||||||||||||||||||
Gross profit
|
$
|
57,081
|
|
86.3
|
%
|
$
|
88,292
|
|
85.7
|
%
|
$
|
31,211
|
|
54.7
|
%
|
|||||||||
|
|
|
|
|
Year ended December 31,
|
|||||||||||||||||||||||
|
2013
|
2014
|
Change
|
|||||||||||||||||||||
|
Amount
|
|
% of
Revenues
|
Amount
|
|
% of
Revenues
|
Amount
|
|
%
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
||||||||||||||||||||
Research and development
|
|
$
|
10,404
|
|
|
15.7
|
%
|
$
|
14,400
|
|
|
14.0
|
%
|
$
|
3,996
|
|
|
38.4
|
%
|
|||||
Sales and marketing
|
|
32,840
|
|
|
49.7
|
|
44,943
|
|
|
43.6
|
|
12,103
|
|
|
36.9
|
|
||||||||
General and administrative
|
|
4,758
|
|
|
7.2
|
|
8,495
|
|
|
8.2
|
|
3,737
|
|
|
78.5
|
|
||||||||
|
|
|
|
|||||||||||||||||||||
Total operating expenses
|
$
|
48,002
|
|
72.6
|
%
|
$
|
67,838
|
|
65.8
|
%
|
$
|
19,836
|
|
41.3
|
%
|
|||||||||
|
|
|
|
|
·
|
Fair Value of our Ordinary Shares.
Because our shares were not publicly traded before September 24, 2014, we estimated the fair value of ordinary shares based on a number of objective and subjective factors consistent with the methodologies outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Companies Equity Securities Issued as Compensation, and based on independent third-party valuations that we obtained on a periodic basis. Following our initial public offering on September 24, 2014, our ordinary shares are publicly traded, and therefore we currently base the value of our ordinary shares on their market price.
|
|
·
|
Expected Term
. The expected term of options granted represents the period of time that options granted are expected to be outstanding, and is determined based on the simplified method in accordance with ASC No. 718-10-S99-1, (SAB No. 110), as adequate historical experience is not available to provide a reasonable estimate.
|
|
·
|
Volatility.
The expected share price volatility was based on the historical equity volatility of the ordinary shares of comparable companies that are publicly traded.
|
|
·
|
Risk-free Rate.
The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with a term equivalent to the contractual life of the options.
|
|
·
|
Dividend Yield.
We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.
|
Year ended
December 31,
|
||||
2013
|
||||
Expected volatility
|
45 | % | ||
Expected dividends
|
0 | |||
Expected term (in years)
|
2 | |||
Risk free rate
|
0.31 | % |
|
·
|
the expenditures are approved by the relevant Israeli government ministry, determined by the field of research;
|
|
·
|
the research and development is for the promotion or development of the company; and
|
|
·
|
the research and development is carried out by or on behalf of the company seeking the deduction.
|
|
·
|
deduction of the cost of purchased know-how, patents and rights to use a patent and know-how which are used for the development or promotion of the Industrial Enterprise, over an eight-year period commencing on the year in which such rights were first exercised;
|
|
·
|
under limited conditions, an election to file consolidated tax returns together with Israeli Industrial Companies controlled by it; and
|
|
·
|
expenses related to a public offering are deductible in equal amounts over three years commencing on the year of offering.
|
B.
|
Liquidity and Capital Resources
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
|
2014
|
|
2015
|
|||||||
|
(in thousands)
|
|||||||||||
Net cash provided by operating activities
|
|
$
|
20,159
|
|
|
$
|
23,195
|
|
|
$
|
59,160
|
|
Net cash used in investing activities
|
|
(826)
|
|
(51,445)
|
|
(7,012)
|
||||||
Net cash provided by financing activities
|
|
159
|
|
90,055
|
|
|
58,207
|
|
C.
|
Research and Development, Patents and Licenses, etc.
|
D.
|
Trend Information
|
E.
|
Off-Ba
la
nce Sheet Arrangements
|
F.
|
Contractual Obligations
|
Payments Due by Period
|
||||||||||||||||||||||||||||
Total
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021 and thereafter
|
||||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||||||
Operating lease obligations(1)
|
$ | 14,845 | $ | 3,190 | $ | 2,591 | $ | 2,749 | $ | 2,722 | $ | 2,733 | $ | 860 | ||||||||||||||
Uncertain tax obligations(2)
|
362 | — | — | — | — | — | — | |||||||||||||||||||||
Severance pay(3)
|
4,667 | — | — | — | — | — | — | |||||||||||||||||||||
Total
|
$ | 19,874 | $ | 3,190 | $ | 2,591 | $ | 2,749 | $ | 2,722 | $ | 2,733 | $ | 860 |
(1)
|
Operating lease obligations consist of our contractual rental expenses under operating leases of facilities and certain motor vehicles.
|
(2)
|
Consists of accruals for certain income tax positions under ASC 740 that are paid upon settlement, and for which we are unable to reasonably estimate the ultimate amount and timing of settlement. See Note 9(j) to our consolidated financial statements included elsewhere in this annual report for further information regarding our liability under ASC 740. Payment of these obligations would result from settlements with tax authorities. Due to the difficulty in determining the timing of resolution of audits, these obligations are only presented in their total amount.
|
(3)
|
Severance pay relates to accrued severance obligations to our Israeli employees as required under Israeli labor laws. These obligations are payable only upon the termination, retirement or death of the respective employee and may be reduced if the employee’s termination is voluntary. These obligations are partially funded through accounts maintained with financial institutions and recognized as an asset on our balance sheet. Of this amount, $1.4 million is unfunded. See Note 2(k) to our consolidated financial statement included elsewhere in this report for further information.
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A.
|
Directors and Senior Management
|
Name
|
|
Age
|
|
Position
|
Executive Officers
|
|
|
||
Ehud (Udi) Mokady
|
|
47
|
|
Chief Executive Officer, President, Founder and Director
|
Chen Bitan
|
|
46
|
|
General Manager, EMEA, Asia Pacific and Japan
|
Joshua Siegel
|
|
52
|
|
Chief Financial Officer
|
Ronen (Ron) Zoran
|
|
41
|
|
Vice President, Americas Sales
|
Nick Baglin
|
|
41
|
|
Vice President, EMEA Sales
|
Vincent Goh
|
44
|
Vice President, Asia Pacific and Japan Sales
|
||
Roy Adar
|
|
44
|
|
Senior Vice President, Product Management
|
John Worrall
|
|
57
|
|
Chief Marketing Officer
|
Directors
|
|
|
||
Gadi Tirosh(3)(4)
|
|
49
|
|
Chairman of the Board
|
David Campbell(1)(3)(4)
|
|
53
|
|
Director
|
Ron Gutler(1)(2)(3)(4)(5)
|
|
58
|
|
Director
|
Raphael (Raffi) Kesten(4)
|
|
62
|
|
Director
|
Kim Perdikou(1)(2)(4)(5)
|
|
58
|
|
Director
|
David Schaeffer(4)
|
|
59
|
|
Director
|
Amnon Shoshani(2)(4)
|
|
52
|
|
Director
|
(1)
|
Member of our compensation committee.
|
(2)
|
Member of our audit committee.
|
(3)
|
Member of our nominating and governance committee.
|
(4)
|
Independent director under the rules of the NASDAQ Stock Market.
|
(5)
|
External director under the Companies Law.
|
B.
|
Compensation
|
Information Regarding the Covered Executive
(1)
|
||||||||||||||||||||
Name and Principal Position
(2)
|
|
Base
Salary
|
|
Benefits and
Perquisites
(3)
|
|
Variable
Compensation
(4)
|
|
Equity-Based
Compensation
(5)
|
|
Total
|
||||||||||
Ehud (Udi) Mokady, President & CEO
|
|
$
|
350,000
|
|
|
$
|
169,326
|
|
|
$
|
700,000
|
|
|
$ |
1,483,799
|
|
|
$
|
2,703,125
|
|
Joshua Siegel, Chief Financial Officer
|
|
225,415
|
|
112,566
|
|
|
298,874
|
|
|
531,757
|
|
|
1,168,612
|
|
||||||
Ronen (Ron) Zoran, Vice President Sales, Americas
|
|
210,000
|
|
52,489
|
|
|
345,599
|
|
206,276
|
|
|
814,364
|
||||||||
Chen Bitan, General Manager, EMEA, Asia Pacific and Japan
|
|
184,659
|
|
|
134,841
|
|
219,081
|
|
|
216,224
|
|
|
754,805
|
|
||||||
John Worrall, Chief Marketing Officer
|
|
230,000
|
|
46,501
|
|
220,000
|
|
214,746
|
|
711,247
|
(1)
|
All amounts reported in the table are in terms of cost to our company, as recorded in our financial statements.
|
(2)
|
All current executive officers listed in the table are full-time employees. Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion rate for the year ended December 31, 2015.
|
(3)
|
Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to each executive, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurances (such as life, disability and accident insurances), convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent with our guidelines.
|
(4)
|
Amounts reported in this column refer to Variable Compensation such as commission, incentive and bonus payments as recorded in our financial statements for the year ended December 31, 2015.
|
(5)
|
Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2015 with respect to equity-based compensation. Assumptions and key variables used in the calculation of such amounts are described in paragraph d of Note 8 to our audited consolidated financial statements, which are included in this annual report.
|
C.
|
Board Practices
|
|
·
|
such majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and who lack a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or
|
|
·
|
the total number of shares voted by non-controlling, disinterested shareholders (as described in the previous bullet point) against the election of the external director does not exceed 2% of the aggregate voting rights in the company.
|
|
·
|
his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, provided that the external director recommended for reelection is not (i) the recommending shareholder himself or herself or (ii) a significant (5%) shareholder (a) that is himself, herself or itself, (b) that is its controlling shareholder or (c) that is under common control with an entity, that either carries out business with the company or is in competition with the company; or
|
|
·
|
his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above).
|
|
·
|
an employment relationship;
|
|
·
|
a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);
|
|
·
|
control; and
|
|
·
|
service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.
|
|
·
|
he or she meets the qualifications for being appointed as an external director, except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel) and (ii) the requirement for accounting and financial expertise or professional qualifications; and
|
|
·
|
he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in the service shall not be deemed to interrupt the continuation of the service.
|
|
·
|
oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law;
|
|
·
|
recommending the engagement or termination of the person filling the office of our internal auditor; and
|
|
·
|
recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors.
|
|
·
|
determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;
|
|
·
|
determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is material or extraordinary under the Companies Law) (see “—Approval of Related Party Transactions under Israeli Law”);
|
|
·
|
determining standards and policies for determining whether a transaction with a controlling shareholder or a transaction in which a controlling shareholder has a personal interest is deemed extraordinary and the approval requirements for transactions that are not extraordinary but also not insignificant (including, potentially, the approval of the audit committee);
|
|
·
|
where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to the board of directors and proposing amendments thereto;
|
|
·
|
examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;
|
|
·
|
examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor; and
|
|
·
|
establishing procedures for the handling of employees’ complaints as to the deficiencies in the management of our business and the protection to be provided to such employees.
|
|
·
|
recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than five years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur within five years of the date of a company’s initial public offering, and every three years thereafter);
|
|
·
|
recommending to the board of directors periodic updates to the compensation policy;
|
|
·
|
assessing implementation of the compensation policy;
|
|
·
|
determining whether the compensation terms of the chief executive officer of the company need not be brought to the shareholders for approval;
|
|
·
|
approving compensation terms of executive officers, directors and employees affiliated with controlling shareholders (as such term is specifically defined in the relevant section of the Companies Law, as described in below under “—Approval of Related Party Transactions under Israeli Law”); and
|
|
·
|
exempting certain compensation arrangements from the requirement to obtain shareholder approval under the Companies Law.
|
|
·
|
the responsibilities set forth in the compensation policy;
|
|
·
|
reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors; and
|
|
·
|
reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.
|
|
·
|
overseeing and assisting our board in reviewing and recommending nominees for election as directors;
|
|
·
|
assessing the performance of the members of our board; and
|
|
·
|
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and recommending to our board a set of corporate governance guidelines applicable to our company.
|
|
·
|
a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;
|
|
·
|
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;
|
|
·
|
an office holder (including a director) of the company (or a relative thereof); or
|
|
·
|
a member of the company’s independent accounting firm, or anyone on his or her behalf.
|
|
·
|
information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
|
|
·
|
all other important information pertaining to any such action.
|
|
·
|
refrain from any conflict of interest between the performance of his or her duties to the company and his or her duties or personal affairs;
|
|
·
|
refrain from exploiting any business opportunity of the company in order to receive a personal gain for himself or herself or others; and
|
|
·
|
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.
|
|
·
|
a transaction other than in the ordinary course of business;
|
|
·
|
a transaction that is not on market terms; or
|
|
·
|
a transaction that may have a material impact on a company’s profitability, assets or liabilities.
|
|
·
|
at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting at the meeting approves the transaction, excluding abstentions; or
|
|
·
|
the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the meeting do not exceed 2% of the voting rights in the company.
|
|
·
|
an amendment to the company’s articles of association;
|
|
·
|
an increase of the company’s authorized share capital;
|
|
·
|
a merger; or
|
|
·
|
the approval of related party transactions and acts of office holders that require shareholder approval.
|
|
·
|
financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
|
|
·
|
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; and
|
|
·
|
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
|
|
·
|
a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
|
|
·
|
a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and
|
|
·
|
a financial liability imposed on the office holder in favor of a third party.
|
|
·
|
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
|
·
|
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
|
|
·
|
an act or omission committed with intent to derive illegal personal benefit; or
|
|
·
|
a civil or criminal fine or forfeit levied against the office holder.
|
D.
|
Emplo
ye
es
|
As of December 31,
|
||||||||||||
Department
|
2013
|
2014
|
2015
|
|||||||||
Sales and marketing
|
135 | 202 | 294 | |||||||||
Research and development
|
95 | 119 | 176 | |||||||||
Services and support
|
60 | 76 | 118 | |||||||||
General and administrative
|
27 | 33 | 56 | |||||||||
Total
|
317 | 430 | 644 |
E.
|
Share Ownership
|
A.
|
Major Shareholders
|
|
·
|
each person or entity known by us to own beneficially 5% or more of our outstanding shares;
|
|
·
|
each of our directors and executive officers individually; and
|
|
·
|
all of our executive officers and directors as a group.
|
Shares Beneficially Owned
|
|||||||||
Name of Beneficial Owner
|
Number
|
%
|
|||||||
Principal Shareholders (1)
|
|
||||||||
Entities affiliated with Jerusalem Venture Partners(2)
|
3,852,587 | 11.6 | % | ||||||
Entities affiliated with Wells Fargo & Company(3)
|
3,013,336 | 9.0 | % | ||||||
FMR LLC(4)
|
2,848,650 | 8.6 | % | ||||||
Executive Officers and Directors
|
|||||||||
Ehud (Udi) Mokady(5)
|
1,008,363 | 2.9 | % | ||||||
Chen Bitan
|
* | * | |||||||
Joshua Siegel
|
* | * | |||||||
Ronen (Ron) Zoran
|
* | * | |||||||
Nick Baglin
|
* | * | |||||||
Vincent Goh
|
* | * | |||||||
Roy Adar
|
* | * | |||||||
John Worrall
|
* | * | |||||||
Gadi Tirosh(6)
|
3,868,587 | 11.6 | % | ||||||
David Campbell
|
* | * | |||||||
Ron Gutler
|
* | * | |||||||
Raphael (Raffi) Kesten(7)
|
3,868,587 | 11.6 | % | ||||||
Kim Perdikou
|
* | * | |||||||
David Schaeffer
|
* | * | |||||||
Amnon Shoshani(8)
|
1,069,618 | 3.2 | % | ||||||
All executive officers and directors as a group (15 persons)
|
6,576,037 | 18.9 | % |
*
|
Less than 1%.
|
(1)
|
Certain shareholders that reported greater than 5% beneficial ownership on a Schedule 13G filed with respect to their share ownership as of December 31, 2015 have not been included in the table as their percentage ownership is less than 5% based on the number of shares outstanding as of February 1, 2016.
|
(2)
|
Based on a Schedule 13G/A filed with the SEC on February 9, 2016, as of December 31, 2015, shares beneficially by venture capital funds associated with Jerusalem Venture Partners, a firm founded by Erel Margalit, consist of 1,961,475 shares held by Jerusalem Venture Partners IV, L.P., 1,453,361 shares held by JVP Opportunity VI, L.P., 283,397 shares held by JVP Opportunity VI-A, L.P., 47,190 shares held by Jerusalem Venture Partners IV (Israel), L.P.,72,917 shares held by JVP Opportunity VI Entrepreneur Fund, L.P., 17,566 shares held by Jerusalem Venture Partners Entrepreneurs Fund IV, L.P., and 16,681 shares held by Jerusalem Venture Partners IV-A, L.P. Jerusalem Partners IV, L.P., the general partner of Jerusalem Venture Partners IV, L.P., Jerusalem Venture Partners IV-A, L.P. and Jerusalem Venture Partners Entrepreneurs Fund IV, L.P. (collectively, the “JVP IV Funds”), and JVP Corp IV, the general partner of Jerusalem Partners IV, L.P. may be deemed to beneficially own the shares held directly by the JVP IV Funds. Jerusalem Partners-Venture Capital, L.P., the general partner of Jerusalem Venture Partners IV (Israel), L.P., and JVP Corp IV, the general partner of Jerusalem Partners IV -Venture Capital, L.P., may be deemed to beneficially own the shares held by Jerusalem Venture Partners IV (Israel), L.P. JP Opportunity VI, L.P., the general partner of JVP Opportunity VI, L.P., JVP Opportunity VI Entrepreneur Fund, L.P. and JVP Opportunity VI-A, L.P., or, collectively, the JVP VI Funds, and JVP Corp IV, the general partner of JP Opportunity VI, L.P., may be deemed to beneficially own the shares held by the JVP VI Funds. Control over voting and disposition of the shares held by the JVP IV and JVP VI Funds is shared among a group of individuals appointed by the trust of Erel Margalit consisting of Gadi Tirosh, Kobi Rozengarten, Raffi Kesten and Haim Kopans. The address of the foregoing entities and individuals is c/o Jerusalem Venture Partners, 41 Madison Avenue, 31st Floor, New York, NY 10010.
|
|
(3)
|
Based on a Schedule 13G filed by Wells Fargo & Company (“Wells”) with the SEC on January 25, 2016 on behalf of Wells’s subsidiaries Wells Capital Management Incorporated (“Wells Management”), Wells Fargo Bank, National Association, Wells Fargo Advisors Financial Network, LLC, Wells Fargo Funds Management, LLC (“Wells Funds”) and Wells Fargo Advisors, LLC, as of December 31, 2015, shares beneficially owned consist of 3,013,336 shares beneficially owned by Wells, 2,841,218 shares beneficially owned by Wells Management, an investment adviser, and 1,717,971 shares beneficially owned by Wells Funds, an investment adviser. The address of Wells is 420 Montgomery Street, San Francisco, CA 94104. The address of Wells Management is 525 Market St., 10
th
Floor, San Francisco, CA 94105. The address of Wells Funds is 525 Market Street, San Francisco, CA 94105.
|
|
(4)
|
Based on a Schedule 13G filed by FMR LLC (“FMR”), as of December 31, 2015, shares beneficially owned consist of 2,848,650 shares beneficially owned by FMR LLC, certain of its affiliates and subsidiaries. FMR LLC has sole voting power over 418,450 shares and sole dispositive power over 2,848,650 shares. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds' Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The address of FMR LLC is 245 Summer Street, Boston, MA 02210.
|
|
(5)
|
Mr. Mokady’s shares include 45,000 shares held in trust for family members over which Mr. Mokady is the beneficial owner.
|
|
(6)
|
Shares beneficially owned consists of 3,852,587 shares beneficially owned by entities affiliated with Jerusalem Venture Partners over which Mr. Tirosh may be deemed to share voting and investment power, as well as vested options to purchase 16,000 ordinary shares that are held directly by Mr. Tirosh. See footnote (1).
|
|
(7)
|
Shares beneficially owned consists of 3,852,587 shares beneficially owned by entities affiliated with Jerusalem Venture Partners over which Mr. Kesten may be deemed to share voting and investment power as well as vested options to purchase 16,000 ordinary shares that are held directly by Mr. Kesten. See footnote (1).
|
|
(8)
|
Shares beneficially owned consists of 1,053,618 shares beneficially owned by Cabaret Security Ltd. over which Mr. Shoshani holds voting and investment power, as well as vested options to purchase 16,000 ordinary shares that are held directly by Mr. Shoshani. The address of Cabaret Security Ltd. is 7 Chalamish Street, PO Box 3557, Caesarea 30889, Israel.
|
B.
|
Related Party Transactions
|
C.
|
Interests of Experts and Counsel
|
A.
|
Consolidated Statements and Other Financial Information
|
B.
|
Sign
if
icant Changes
|
A.
|
Offer and Listing Details
|
|
Low
|
|
High
|
|||||
Annual:
|
|
|
||||||
2015
|
$
|
33.00
|
$
|
76.35
|
||||
2014 (beginning September 24, 2014)
|
|
22.12
|
|
|
47.01
|
|
||
Quarterly:
|
||||||||
First Quarter 2016 (through March 1, 2016)
|
$
|
31.50
|
$
|
49.27
|
||||
Fourth Quarter 2015
|
37.51
|
54.74
|
||||||
Third Quarter 2015
|
40.63
|
65.50
|
||||||
Second Quarter 2015
|
51.16
|
76.35
|
||||||
First Quarter 2015
|
|
33.00
|
|
|
70.48
|
|
||
Fourth Quarter 2014
|
26.66
|
47.01
|
||||||
Third Quarter 2014 (beginning September 24, 2014)
|
|
22.12
|
|
|
37.20
|
|
||
Most Recent Six Months:
|
||||||||
March 2016 (through March 1, 2016)
|
|
$
|
37.47
|
|
$
|
38.35
|
||
February 2016
|
31.50
|
45.16
|
||||||
January 2016
|
36.33
|
49.56
|
||||||
December 2015
|
38.00
|
46.86
|
||||||
November 2015
|
37.51
|
51.95
|
||||||
October 2015
|
45.03
|
54.74
|
||||||
September 2015
|
44.70
|
54.74
|
B.
|
Plan of Distribution
|
C.
|
Markets
|
D.
|
Selling Shareholders
|
E.
|
Dilution
|
F.
|
Expen
se
s of the Issue
|
A.
|
Share Capital
|
B.
|
Memorandum and Articles of Association
|
|
·
|
amendments to our articles of association;
|
|
·
|
appointment or termination of our auditors;
|
|
·
|
appointment of external directors;
|
|
·
|
approval of certain related party transactions;
|
|
·
|
increases or reductions of our authorized share capital;
|
|
·
|
certain merger transactions; and
|
|
·
|
the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.
|
C.
|
Material Contracts
|
D.
|
Exchange Controls
|
E.
|
Taxation
|
|
·
|
banks, financial institutions or insurance companies;
|
|
·
|
real estate investment trusts, regulated investment companies or grantor trusts;
|
|
·
|
brokers, dealers or traders in securities, commodities or currencies;
|
|
·
|
tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the Code, respectively;
|
|
·
|
certain former citizens or long-term residents of the United States;
|
|
·
|
persons that receive our shares as compensation for the performance of services;
|
|
·
|
persons that hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for United States federal income tax purposes;
|
|
·
|
partnerships (including entities classified as partnerships for United States federal income tax purposes) or other pass-through entities, or indirect holders that hold our shares through such an entity;
|
|
·
|
S corporations;
|
|
·
|
holders that acquire ordinary shares as a result of holding or owning our preferred shares;
|
|
·
|
holders whose “functional currency” is not the U.S. Dollar; or
|
|
·
|
holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.
|
|
·
|
a citizen or individual resident of the United States;
|
|
·
|
a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia;
|
|
·
|
an estate the income of which is subject to United States federal income taxation regardless of its source; or
|
|
·
|
a trust if such trust has validly elected to be treated as a United States person for United States federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.
|
|
·
|
at least 75% of its gross income is “passive income”; or
|
|
·
|
at least 50% of the average quarterly value of its total gross assets (which may be measured in part by the market value of our ordinary shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production of passive income.
|
F.
|
Dividends and Paying Agents
|
G.
|
Statement by Experts
|
H.
|
Documents on Display
|
I.
|
Subsidiary Inform
at
ion
|
Period
|
|
Change in Average Exchange
Rate of the NIS
Against the U.S. dollar (%)
|
||
2015
|
|
8.6
|
||
2014
|
|
(0.9
|
)
|
|
2013
|
|
(6.4
|
)
|
ITE
M
13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
|
·
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
PRINCIPAL ACCOU
NT
ANT FEES AND SERVICES
|
|
2014
|
|
2015
|
|||||
|
(in thousands)
|
|||||||
Audit Fees
|
|
$
|
985
|
|
|
$
|
886
|
|
Audit-Related Fees
|
|
55
|
|
|
75
|
|||
Tax Fees
|
|
77
|
|
|
171
|
|||
All Other Fees
|
|
—
|
|
|
95
|
|
||
|
|
|||||||
Total
|
$
|
1,117
|
|
$
|
1,227
|
CORPORATE GOVER
NA
NCE
|
Page
|
|
F-2- F-3
|
|
F-4 – F-5
|
|
F-6
|
|
F-7 - F-8
|
|
F-9 - F- 10
|
|
F-11– F-40
|
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5
622555
ey.com
|
/s/ K ost Forer Gabbay & Kasierer | |
Tel-Aviv, Israel
|
KOST FORER GABBAY & KASIERER
|
March 10, 2016
|
A Member of Ernst & Young Global
|
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
|
Tel: +972-3-6232525
Fax: +972-3-
5622555
ey.com
|
/s/ K ost Forer Gabbay & Kasierer |
Tel-Aviv, Israel
|
KOST FORER GABBAY & KASIERER
|
March 10, 2016
|
A Member of Ernst & Young Global
|
December 31,
|
||||||||
2014
|
2015
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 124,184 | $ | 234,539 | ||||
Short-term bank deposits
|
52,997 | 3,713 | ||||||
Trade receivables
|
19,263 | 20,410 | ||||||
Prepaid expenses and other current assets
|
2,078 | 3,293 | ||||||
Total
current assets
|
198,522 | 261,955 | ||||||
LONG-TERM ASSETS:
|
||||||||
Property and equipment, net
|
2,148 | 3,584 | ||||||
Intangible assets, net
|
- | 18,558 | ||||||
Goodwill
|
- | 35,145 | ||||||
Severance pay fund
|
3,060 | 3,230 | ||||||
Prepaid expenses and other long-term assets
|
1,021 | 1,954 | ||||||
Deferred tax asset
|
5,801 | 9,998 | ||||||
Total
long-term assets
|
12,030 | 72,469 | ||||||
TOTAL ASSETS
|
$ | 210,552 | $ | 334,424 |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Revenues:
|
||||||||||||
License
|
$ | 38,907 | $ | 61,320 | $ | 100,113 | ||||||
Maintenance and professional services
|
27,250 | 41,679 | 60,699 | |||||||||
66,157 | 102,999 | 160,812 | ||||||||||
Cost of revenues:
|
||||||||||||
License
|
1,216 | 2,654 | 5,088 | |||||||||
Maintenance and professional services
|
7,860 | 12,053 | 17,572 | |||||||||
9,076 | 14,707 | 22,660 | ||||||||||
Gross profit
|
57,081 | 88,292 | 138,152 | |||||||||
Operating expenses:
|
||||||||||||
Research and development
|
10,404 | 14,400 | 21,734 | |||||||||
Sales and marketing
|
32,840 | 44,943 | 66,206 | |||||||||
General and administrative
|
4,758 | 8,495 | 16,990 | |||||||||
Total
operating expenses
|
48,002 | 67,838 | 104,930 | |||||||||
Operating income
|
9,079 | 20,454 | 33,222 | |||||||||
Financial expenses, net
|
(1,124 | ) | (5,988 | ) | (1,479 | ) | ||||||
Income before taxes on income
|
7,955 | 14,466 | 31,743 | |||||||||
Taxes on income
|
(1,320 | ) | (4,512 | ) | (5,949 | ) | ||||||
Net income
|
$ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||
Basic net income per ordinary share
|
$ | 0.25 | $ | 0.46 | $ | 0.80 | ||||||
Diluted net income per ordinary share
|
$ | 0.14 | $ | 0.34 | $ | 0.73 | ||||||
Other comprehensive income (loss)
|
||||||||||||
Unrealized gain (loss) on foreign currency cash flow hedges
|
155 | (488 | ) | 240 | ||||||||
Other comprehensive income (loss) for the period
|
155 | (488 | ) | 240 | ||||||||
Total comprehensive income
|
$ | 6,790 | $ | 9,466 | $ | 26,034 |
Accumulated other
|
||||||||||||||||||||||||||||||||
Preferred shares
|
Ordinary shares
|
Additional paid-in
|
comprehensive
income
|
Retained
|
Total
shareholders'
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
(loss) |
earnings
|
equity
|
|||||||||||||||||||||||||
Balance as of January 1, 2013
|
15,958,290 | $ | 41 | 6,707,680 | $ | 16 | $ | 34,250 | $ | - | $ | 4,187 | $ | 38,494 | ||||||||||||||||||
Exercise of options granted to employees
|
- | - | 311,672 | 1 | 158 | - | - | 159 | ||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | 155 | - | 155 | ||||||||||||||||||||||||
Share-based compensation expenses
related to options granted
to employees and non-employees
|
- | - | - | - | 403 | - | - | 403 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 6,635 | 6,635 | ||||||||||||||||||||||||
Balance as of December 31, 2013
|
15,958,290 | 41 | 7,019,352 | 17 | 34,811 | 155 | 10,822 | 45,846 | ||||||||||||||||||||||||
Exercise of options granted to employees
|
- | - | 255,562 | 1 | 189 | - | - | 190 | ||||||||||||||||||||||||
Other comprehensive loss
|
- | - | - | - | - | (488 | ) | - | (488 | ) | ||||||||||||||||||||||
Share-based compensation expenses
related to options
granted to employees
|
- | - | - | - | 1,573 | - | - | 1,573 | ||||||||||||||||||||||||
Exercise of warrants for preferred shares
|
493,360 | 1 | - | - | 7,194 | - | - | 7,195 | ||||||||||||||||||||||||
Conversion of preferred shares
|
(16,451,650 | ) | (42 | ) | 17,062,438 | 44 | (2 | ) | - | - | - | |||||||||||||||||||||
Issuance of ordinary shares upon initial public
offering, net
|
- | - | 6,164,000 | 17 | 88,451 | - | - | 88,468 | ||||||||||||||||||||||||
Tax benefit related to share-based compensation and issuance expenses
|
- | - | - | - | 2,270 | - | - | 2,270 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 9,954 | 9,954 | ||||||||||||||||||||||||
Balance as of December 31, 2014
|
- | $ | - | 30,501,352 | $ | 79 | $ | 134,486 | $ | (333 | ) | $ | 20,776 | $ | 155,008 |
Accumulated
|
||||||||||||||||||||||||||||||||
Preferred shares
|
Ordinary shares
|
Additional paid-in
|
other
comprehensive
|
Retained
|
Total
shareholders'
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
income (loss)
|
earnings
|
equity
|
|||||||||||||||||||||||||
Balance as of December 31, 2014
|
- | $ | - | 30,501,352 | $ | 79 | $ | 134,486 | $ | (333 | ) | $ | 20,776 | $ | 155,008 | |||||||||||||||||
Exercise of options and vested RSU’s granted to employees
|
- | - | 1,888,487 | 5 | 1,819 | - | - | 1,824 | ||||||||||||||||||||||||
Other comprehensive income
|
- | - | - | - | - | 240 | - | 240 | ||||||||||||||||||||||||
Share-based compensation expenses related to options and RSU’s granted to employees
|
- | - | - | - | 7,049 | - | - | 7,049 | ||||||||||||||||||||||||
Issuance of ordinary shares upon public
offering, net
|
- | - | 900,000 | 2 | 52,573 | - | - | 52,575 | ||||||||||||||||||||||||
Tax benefit related to share-based compensation and issuance expenses
|
- | - | - | - | 4,180 | - | - | 4,180 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | - | - | 25,794 | 25,794 | ||||||||||||||||||||||||
Balance as of December 31, 2015
|
- | $ | - | 33,289,839 | $ | 86 | $ | 200,107 | $ | (93 | ) | $ | 46,570 | $ | 246,670 |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
475 | 746 | 2,254 | |||||||||
Share-based compensation expenses
|
403 | 1,573 | 7,049 | |||||||||
Tax benefit related to share-based compensation
|
- | (645 | ) | (3,808 | ) | |||||||
Deferred income taxes, net
|
(769 | ) | 45 | (4,093 | ) | |||||||
Increase in trade receivables
|
(3,257 | ) | (6,535 | ) | (187 | ) | ||||||
Increase in prepaid expenses and other current and long-term assets
|
(920 | ) | (159 | ) | (1,183 | ) | ||||||
Increase (decrease) in trade payables
|
651 | (145 | ) | 322 | ||||||||
Changes in fair value of warrants to purchase preferred shares
|
1,446 | 4,309 | - | |||||||||
Increase in short term and long term deferred revenues
|
9,410 | 7,682 | 21,254 | |||||||||
Increase in employees and payroll accruals
|
2,651 | 3,501 | 5,011 | |||||||||
Increase in accrued expenses and other current and long-term liabilities
|
3,191 | 2,827 | 6,353 | |||||||||
Increase in accrued severance pay, net
|
243 | 42 | 394 | |||||||||
Net cash provided by operating activities
|
20,159 | 23,195 | 59,160 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Proceeds from short and long term deposits
|
8,735 | 2,533 | 49,329 | |||||||||
Investment in short and long term deposits
|
(8,809 | ) | (52,570 | ) | (619 | ) | ||||||
Purchase of property and equipment
|
(752 | ) | (1,408 | ) | (2,066 | ) | ||||||
Payments for business acquisitions, net of cash acquired (Schedule A)
|
- | - | (53,656 | ) | ||||||||
Net cash used in investing activities
|
(826 | ) | (51,445 | ) | (7,012 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Issuance of shares, net
|
- | 88,468 | 52,575 | |||||||||
Tax benefit related to share-based compensation
|
- | 645 | 3,808 | |||||||||
Proceeds from exercise of options and warrants
|
159 | 942 | 1,824 | |||||||||
Net cash provided by financing activities
|
159 | 90,055 | 58,207 | |||||||||
Increase in cash and cash equivalents
|
19,492 | 61,805 | 110,355 | |||||||||
Cash and cash equivalents at the beginning of the period
|
42,887 | 62,379 | 124,184 | |||||||||
Cash and cash equivalents at the end of the period
|
$ | 62,379 | $ | 124,184 | $ | 234,539 | ||||||
Non-cash activities
:
|
||||||||||||
Purchase of property and equipment in credit
|
$ | 90 | $ | 304 | $ | 338 | ||||||
Supplemental disclosure of cash flow activities:
|
||||||||||||
Cash paid during the year for taxes
|
$ | 287 | $ | 981 | $ | 4,760 |
Year ended
December 31,
|
||||
2015
|
||||
Working capital, net (excluding cash and cash equivalents)
|
$ | 497 | ||
Property and equipment, net
|
124 | |||
Other long-term assets
|
62 | |||
Goodwill
|
20,765 | |||
Other intangible assets
|
9,990 | |||
Deferred revenues
|
(931 | ) | ||
$ | 30,507 |
Year ended
December 31,
|
||||
2015
|
||||
Working capital, net (excluding cash and cash equivalents)
|
$ | (245 | ) | |
Property and equipment, net
|
340 | |||
Other long-term assets
|
34 | |||
Goodwill
|
13,201 | |||
Other intangible assets
|
7,760 | |||
Deferred tax
|
(1,009 | ) | ||
Deferred revenues
|
(44 | ) | ||
$ | 20,037 |
Year ended
December 31,
|
||||
2015
|
||||
Goodwill
|
$ | 1,179 | ||
Other intangible assets
|
1,933 | |||
$ | 3,112 |
NOTE 1:
|
GENERAL
|
|
a.
|
CyberArk Software Ltd. (together with its subsidiaries, the “Company”) is an Israeli company that develops, markets and sells software-based security solutions. The Company's solutions enable organizations to safeguard and monitor their privileged accounts, which are those accounts within an organization that have access to the organization's high value assets and are located across its IT infrastructure. The Company's software provides customers with the ability to protect, detect, monitor and control access to privileged accounts in order to break the lifecycle of a targeted cyber attack before it can cause damage to an organization.
|
|
b.
|
In September 2014, the Company completed its initial public offering ("IPO") in which the Company issued and sold 6,164,000 ordinary shares at a public offering price of $16.00 per share (including pursuant to the underwriters option to purchase additional ordinary shares). The net proceeds received from the IPO were $88,468 after deducting underwriting discounts of $6,904 and other offering expenses of $3,846. Refer also to note 8.b.
|
|
c.
|
In March 2015, the Company completed a public offering in which certain shareholders sold 4,600,000 ordinary shares (including pursuant to the underwriters option to purchase additional ordinary shares) at a public offering price of $51.00 per share. The Company did not receive any proceeds from the sale of ordinary shares by the selling shareholders and the related offering expenses were recorded in the statements of comprehensive income.
|
|
d.
|
In June 2015, the Company completed an additional public offering in which the Company issued and sold 900,000 ordinary shares at a public offering price of $61.00 per share. The total net proceeds received were $52,575 after deducting underwriting discounts of $2,196 and other offering expenses of $129. Another 4,000,000 shares were sold by certain selling shareholders. The Company did not receive any of the proceeds from the sales of shares by the selling shareholders and the related offering expenses were recorded in the statements of comprehensive income. Refer also to note 8.b.
|
|
e.
|
In August 2015, the Company acquired all of the share capital of Cybertinel Ltd. (“Cybertinel”) for total consideration of $20,515. Cybertinel, an Israeli company, specializes in cyber threat detection technology. In October 2015, the Company acquired all of the share capital of Viewfinity, Inc. ("Viewfinity") for total consideration of $30,500. Viewfinity is a provider of Windows least privilege management and application control. In September 2015, the Company acquired certain assets of Agata Ltd (“Agata”) for total consideration of $3,112. The Company accounted for the acquisition of Agata as a purchase of a business. The Company expensed the related acquisitions costs of $677 in general and administrative expenses.
|
NOTE 1:
|
GENERAL (Cont.)
|
|
f.
|
Unaudited pro forma result of operating
The following table presents our unaudited pro forma revenue, net income and basic and diluted net income (loss) for periods presented assuming the acquisitions of Cybertinel, Viewfinity and Agata occurred on January 1, 2014. The pro forma information is not necessarily indicative of the results of operations, which actually would have occurred has the acquisitions been consummated on those dates, nor does it purport to represent the results of operations for future periods:
|
December 31,
|
||||||||
2014
|
2015
|
|||||||
Pro forma revenue
|
$ | 108,517 | $ | 165,924 | ||||
Pro forma net income
|
$ | 76 | $ | 18,725 | ||||
Basic net income (loss) per ordinary share
|
$ | (0.28 | ) | $ | 0.58 | |||
Diluted net income (loss) per ordinary share
|
$ | (0.28 | ) | $ | 0.53 |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
a.
|
Use of estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, income taxes, deferred taxes and liabilities, share-based compensation cost, value of intangible assets and goodwill as well as in estimates used in applying the revenue recognition policy. 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 consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates
.
|
|
b.
|
Principles of consolidation:
The consolidated financial statements include the accounts of CyberArk Software Ltd. and its wholly-owned subsidiaries. Intercompany transactions and balances, have been eliminated upon consolidation.
|
|
c.
|
Financial statements in U.S. dollars:
A majority of the Company's revenues are generated in U.S. dollars. In addition, the equity investments were in U.S. dollars and substantial portion of the Company costs are incurred in U.S. dollars and New Israeli Shekels (“NIS”). The Company's management believes that the U.S. dollar is the currency of the primary economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.
Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with Statement of the Accounting Standard Codification ("ACS") No. 830 "Foreign Currency Matters" ("ASC No. 830"). All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the statement of comprehensive income as financial income or expenses, as appropriate.
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar as these subsidiaries' revenues, intercompany transactions, budgets and financing are denominated in U.S. dollars.
|
|
d.
|
Cash and cash equivalents:
Cash equivalents are short-term highly liquid deposits that are readily convertible to cash with original maturities of three months or less, at the date acquired.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
e.
|
Short-term bank deposits:
Short-term bank deposits are deposits with maturities of up to one year. As of December 31, 2014 and 2015 the Company's bank deposits were denominated in U.S. dollars, Euros and NIS and bore interest at weighted average deposits rates of 0.6%, and 0.4%, respectively. Short-term bank deposits are presented at their cost, including accrued interest. A portion of these deposits is used as security for the rental of premises and as a security for the Company's hedging activities.
|
|
f.
|
Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
|
%
|
|
Computers and related equipment
|
25 - 33
|
Office furniture and equipment
|
7 - 20
|
Leasehold improvements
|
Over the shorter of the related
lease period or the life of the asset
|
|
g.
|
Long-lived assets:
The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, "Property, Plant and Equipment" ("ASC No. 360"), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years ended December 31, 2013, 2014 and 2015, no impairment losses have been identified.
|
|
h.
|
Business Combination:
The Company accounts for its business acquisitions in accordance with Accounting Standards Codification (ASC) No. 805, Business Combinations. The Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the business combination date. The total purchase price allocated to the tangible assets acquired is assigned based on the fair values as of the date of the acquisition.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
i.
|
Goodwill and other intangible assets:
Goodwill and certain other purchased intangible assets have been recorded in the Company's financial statements as a result of acquisitions. Goodwill represents excess of the costs over the net tangible and intangible assets acquired of businesses acquired Under ASC topic 350, "Intangible—Goodwill and other", ("ASC 350") according to which goodwill is not amortized. In addition, the costs of intangible assets that were purchased from others for use in research and development activities were recorded as assets to the extent that they have alternative future use.
ASC 350 requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The Company operates as one reporting unit. Therefore, goodwill is tested for impairment by comparing the fair value of the reporting unit with its carrying value. The Company elects to perform an annual impairment test of goodwill as of October 1 of each year, or more frequently if impairment indicators are present.
Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets which range from one to 13. Acquired customer relationship and backlog are amortized over their estimated useful lives in proportion to the economic benefits realized. Other intangible assets consist primarily of technology are amortized over their estimated useful lives on a straight-line basis.
During the year ended December 31, 2015, no impairment losses were recognized.
|
|
j.
|
Derivative instruments:
ASC No. 815, "Derivative and Hedging", requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value.
For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
To hedge against the risk of overall changes in cash flows resulting from foreign currency salary payments during the year, the Company has instituted a foreign currency cash flow hedging program. The Company hedges portions of its forecasted expenses denominated in NIS. These forward and option contracts are designated as cash flow hedges, as defined by ASC 815, and are all effective, as their critical terms match underlying transactions being hedged.
As of December 31, 2014 and 2015, the amount recorded in accumulated other comprehensive loss from the Company's currency forward and option transactions was $333 (net of tax in the amount of $63) and $93 (net of tax in the amount of $18), respectively. At December 31, 2015, the notional amounts of foreign exchange forward and options contracts into which the Company entered were $13,432. The foreign exchange forward and options contracts will expire by the end of December 2016. The fair value of derivative instruments assets balance as of December 31, 2015 totaled $16. The fair value of derivative instruments liabilities balance as of December 31, 2014 and 2015, totaled $399 and $130, respectively.
In addition to the derivatives that are designated as hedges as discussed above, the Company enters into certain foreign exchange forward transactions to economically hedge certain account receivables in Euros.
Gains and losses related to such derivative instruments are recorded in financial expenses, net. As of December 31, 2015, the notional amounts of foreign exchange forward contracts into which the Company entered were $4,903. The foreign exchange forward contracts will expire by the end of October 2016. The fair value of derivative instruments assets balance as of December 31, 2015 totaled $139. The fair value of derivative instruments liabilities balance as of December 31, 2014 and 2015 totaled $20 and $13, respectively.
In the years ended December 31, 2013, 2014 and 2015, the Company recorded net financial income (loss), net from hedging transactions in the amount of $(1), $35 and $260, respectively.
|
|
k.
|
Severance pay:
The Israeli Severance Pay Law, 1963 ("Severance Pay Law"), specifies that employees are entitled to severance payment, following the termination of their employment. Under the Severance Pay Law, the severance payment is calculated as one month salary for each year of employment, or a portion thereof.
Part of the Company's liability for severance pay is covered by the provisions of Section 14 of the Severance Pay Law ("Section 14"). Under Section 14 employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, continued on their behalf to their insurance funds. Payments in accordance with Section 14 release the Company from any future severance payments in respect of those employees. As a result, the Company does not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company's balance sheet.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
For the Company's employees in Israel who are not subject to Section 14, the Company calculated the liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these employees multiplied by the number of years of employment as of the balance sheet date. The Company's liability for these employees is fully provided for via monthly deposits with severance pay funds, insurance policies and an accrual. The value of these deposits is recorded as an asset on the Company's balance sheet.
Severance expense for the years ended December 31, 2013, 2014 and 2015, amounted to $1,057, $1,187 and $1,794, respectively.
|
|
l.
|
U.S. employees defined contribution plan:
The U.S. subsidiary has a 401(K) defined contribution plan covering certain full time employees in the U.S. All eligible employees may elect to contribute up to an annual maximum, of lesser of 60% of their annual compensation to the plan through salary deferrals, subject to Internal Revenue Service limits but not greater than $18 per year (for certain employees over 50 years of age the maximum contribution is $24 per year).
The U.S. subsidiary matches amount equal to 100% of the first 3% of the employees Compensation that they contribute to the Plan and 50% of the next 2% of their Compensation that they contribute to the Plan with a limit of $9.8 a year. During the years ended December 31, 2013, 2014 and 2015 the U.S. subsidiary recorded expenses for matching contributions in amounts of $372, $544 and $907, respectively.
|
|
m.
|
Revenue recognition:
The Company generates revenues from licensing the rights to use its software products and from maintenance and professional services. The Company sells its products through its direct sales force and indirectly through resellers.
The Company accounts for its software licensing sales in accordance with ASC 985-605, "Software Revenue Recognition". ASC 985-605 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the elements when Vendor Specific Objective Evidence ("VSOE") of fair value exists for all elements and to be allocated to the different elements in the arrangement under the "residual method" when VSOE of fair value exists for all undelivered elements and no VSOE exists for the delivered elements.
Maintenance and professional services are sold separately and therefore the selling price (VSOE) is based on stand-alone transactions.
Under the residual method, at the outset of the arrangement with the customer, the Company defers revenue for the fair value of its undelivered elements and recognizes revenue for the remainder of the arrangement fee attributable to the elements initially delivered in the arrangement (software element) when all other criteria in ASC 985-605 have been met. Any discount in the arrangement is allocated to the delivered element.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
Software license revenues are recognized when persuasive evidence of an arrangement exists, the software license has been delivered, there are no uncertainties surrounding product acceptance, there are no significant future performance obligations, the license fees are fixed or determinable and collection of the license fee is considered probable. Fees for arrangements with payment terms extending beyond customary payment terms are considered not to be fixed or determinable, in which case revenue is deferred and recognized when payments become due from the customer provided that all other revenue recognition criteria have been met.
Revenues from maintenance and support contracts are recognized ratably, on a straight-line basis over the term of the related contract and revenues from professional services consist mostly of time and material services and accordingly, are recognized as the services are performed.
Professional service is not considered to be essential to the functionality of the software.
The Company generally does not grant a right of return to its customers.
The Company's software license, maintenance and professional services sold through distributors are non-exchangeable, non-refundable, non-returnable and without any rights of price protection. Accordingly, the Company considers distributors as end-users.
In transactions where a customer's contractual terms include a provision for customer acceptance, revenues are recognized when such acceptance has been obtained or when the acceptance provision has lapsed.
Deferred revenue includes unearned amounts received under maintenance and support contracts, professional services and amounts received from customers for licenses but not recognized as revenues due to the fact that these transactions did not meet the revenue recognition criteria, as of the balance sheet date.
|
|
n.
|
Research and development costs:
Research and development costs are charged to the statements of comprehensive income as incurred. ASC 985-20, "Software - Costs of Software to Be Sold, Leased, or Marketed", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.
Based on the Company's product development process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between completion of the working models and the point at which the products are ready for general release, have been insignificant. Therefore, all research and development costs are expensed as incurred.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
Marketing expenses:
Marketing expenses consist primarily of marketing campaigns and tradeshows. Marketing expenses are charged to the statement of comprehensive income, as incurred. Marketing expenses for the years ended December 31, 2013, 2014 and 2015, amounted to $5,155, $5,896 and $7,498, respectively.
|
|
p.
|
Share-based compensation:
The Company accounts for share-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" ("ASC No. 718"). ASC No. 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of comprehensive income.
The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC No. 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company has selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its option awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected share price, volatility and the expected option term.
The fair value of ordinary share underlying the options has historically been determined by management and approved by the Company's board of directors. Because there has been no public market for the Company's ordinary shares, management has determined fair value of an ordinary share at the time of grant of the option by considering a number of objective and subjective factors including financing investment rounds, operating and financial performance, the lack of liquidity of share capital and general and industry specific economic outlook, amongst other factors. The Company's management determined the fair value of ordinary shares based on valuations performed using the Option Pricing Method ("OPM") for the year ended December 31, 2013 and for the period from January 1, 2014 and up to September 24, 2014. Since September 24, 2014, the ordinary shares have been publicly traded.
|
|
q.
|
Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, "Income Taxes". This codification prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and for carry-forward tax losses. Deferred taxes are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The updated standard is effective beginning on January 1, 2017, with early application permitted as of the beginning of any interim or annual reporting period. The Company early adopted this standard retrospectively, and reclassified $3,788 of current deferred tax assets to noncurrent deferred tax assets as of December 31, 2014.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, "Income Taxes". Accounting guidance addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements, under which a company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accordingly, the Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense.
|
|
r.
|
Basic and diluted net income per share:
The Company applies the two class method as required by ASC No. 260-10, "Earnings Per Share" ("ASC No. 260-10"). ASC 260-10 requires the income per share for each class of shares (ordinary and preferred shares) to be calculated assuming 100% of the Company's earnings are distributed as dividends to each class of shares based on their contractual rights. No dividends were declared or paid during the reported periods.
|
|
|
Basic and diluted net income per share is computed based on the weighted-average number of shares of ordinary shares outstanding during each year. Diluted income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus dilutive potential shares considered outstanding during the period, in accordance with ASC 260-10. The total weighted average number of shares related to outstanding options, RSU’s, warrants and preferred shares that have been excluded from the calculations of diluted net earnings per share was 17,062,890, 437,176 and 484,726 for the years ended December 31, 2013, 2014 and 2015, respectively.
|
|
s.
|
Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with Accounting Standards Codification No. 220, "Comprehensive Income" ("ASC No. 220"). This statement establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of general purpose financial statements. Comprehensive income (loss) generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to shareholders.
|
|
t.
|
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 and trade receivables.
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 may be in excess of insured limits and are not insured in other jurisdictions. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.
The trade receivables of the Company are mainly derived from sales to 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.
|
|
u.
|
Fair value of financial instruments:
The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair values. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
The following methods and assumptions were used by the Company in estimating the fair value of their financial instruments:
The carrying values of cash and cash equivalents, short-term bank deposits, trade receivables, prepaid expenses and other current assets, trade payables, employees and payroll accruals and accrued expenses and other current liabilities approximate fair values due to the short-term maturities of these instruments.
The Company applies ASC No. 820, "Fair Value Measurements and Disclosures" ("ASC No. 820"), with respect to fair value measurements of all financial assets and liabilities.
The fair value of foreign currency contracts (used for hedging purposes) is estimated by obtaining current quotes from banks and third party valuations.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
|
|
Level 1 -
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2 -
|
Include other inputs that are directly or indirectly observable in the marketplace.
|
|
Level 3 -
|
Unobservable inputs which are supported by little or no market activity.
|
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In accordance with ASC 820, the Company measures its foreign currency derivative contracts, at fair value using the market approach valuation technique. Foreign currency derivative contracts as detailed in note 2.j are classified within Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments. Warrants to purchase preferred shares as detailed in note 2.v are classified within Level 3 value hierarchy, which is determined using a valuation model completed by a third party valuation firm.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
v.
|
Warrants to purchase preferred shares:
The Company accounted for freestanding warrants to purchase shares of its preferred shares as a liability on its consolidated balance sheet at fair value. The warrants to purchase preferred shares were recorded as a liability as the underlying preferred shares were contingently redeemable (upon a deemed liquidation event) and, therefore, could have obligated the Company to transfer assets in the future. The warrants were subject to re-measurement to fair value at each balance sheet date and any change in fair value was recognized as a component of financial expense, net, on the consolidated statements of comprehensive income. During the years ended December 31, 2013 and 2014, the Company recorded financial expenses from change in the warrants’ fair value in the amount of $1,446, $4,309, respectively.
Upon the IPO, the warrants were exercised for Series B3 preferred shares which were later converted into ordinary shares. See also note 8.c.2. The Company re-measured the warrants as of the conversion date using the intrinsic value based on the IPO price.
The following assumptions were used to estimate the value of the Series B3 preferred shares warrants as of December 31, 2013:
|
Year ended
December 31,
|
||||
2013
|
||||
Expected volatility
|
45 | % | ||
Expected dividends
|
0 | |||
Expected term (in years)
|
2 | |||
Risk free rate
|
0.31 | % |
|
w.
|
The impact of recently issued accounting standards still not effective for the Company as of December 31, 2015 is as follows:
In February 2016, the FASB issued an Accounting Standards Update (“ASU”) 2016-02. ASU 2016-02 changes the current lease accounting standard by requiring the recognition of lease assets and lease liabilities for all leases, including those currently classified as operating leases. This new guidance is to be applied under a modified retrospective application to the earliest reporting period presented for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the potential impact of this new guidance on its financial statements.
In September 2015, the FASB issued an ASU on simplifying the accounting for measurement-period adjustments related to business combination. The ASU eliminates the requirement to restate prior period financial statements for measurement-period adjustments and requires that the cumulative impact of a measurement-period adjustment be recognized in the reporting period in which the adjustment is identified. This ASU will be effective for the Company with respect to measurement-period adjustments that occur after October 1, 2017.
In May 2014, the FASB issued an accounting standard update on revenue from contracts with customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. On April 1, 2015 the FASB proposed deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting for annual reporting periods.
|
NOTE 3:
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
December 31,
|
||||||||
2014
|
2015
|
|||||||
Government authorities
|
$ | 18 | $ | 694 | ||||
Hedging transaction assets
|
- | 155 | ||||||
Prepaid expenses
|
1,793 | 2,154 | ||||||
Other current assets
|
267 | 290 | ||||||
$ | 2,078 | $ | 3,293 |
December 31,
|
||||||||
2014
|
2015
|
|||||||
Cost:
|
||||||||
Computers and related equipment
|
$ | 2,293 | $ | 3,712 | ||||
Leasehold improvements
|
557 | 1,092 | ||||||
Office furniture and equipment
|
687 | 1,095 | ||||||
3,537 | 5,899 | |||||||
Less accumulated depreciation
|
1,389 | 2,315 | ||||||
Depreciated cost
|
$ | 2,148 | $ | 3,584 |
December 31,
|
||||
2015
|
||||
Original amount:
|
||||
Technology
|
$ | 14,073 | ||
Customer relationship
|
5,120 | |||
Other
|
490 | |||
19,683 | ||||
Accumulated amortization:
|
||||
Technology
|
1,053 | |||
Customer relationship
|
2 | |||
Other
|
70 | |||
1,125 | ||||
Intangible assets, net
|
$ | 18,558 |
2016
|
$ | 4,586 | ||
2017
|
4,320 | |||
2018
|
4,047 | |||
2019
|
3,077 | |||
2020
|
1,404 | |||
Thereafter
|
1,124 | |||
$ | 18,558 |
December 31,
|
||||||||
2014
|
2015
|
|||||||
Government authorities
|
$ | 5,015 | $ | 7,131 | ||||
Accrued expenses
|
1,186 | 1,730 | ||||||
Uncertain tax position
|
322 | 362 | ||||||
Hedging transaction liabilities
|
419 | 143 | ||||||
$ | 6,942 | $ | 9,366 |
NOTE 7:
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
a.
|
Lease commitments:
The Company rent its facilities under various operating lease agreements, which expire through 2022. In addition, the Company leases certain motor vehicles under certain car operating lease agreement which expire through 2018. The minimum rental payments under operating leases as of December 31, 2015 are as follows:
|
Rental of premises
|
Lease of
motor vehicles
|
|||||||
2016
|
$ | 2,856 | $ | 334 | ||||
2017
|
2,431 | 160 | ||||||
2018
|
2,724 | 25 | ||||||
2019
|
2,722 | - | ||||||
2020
|
2,733 | - | ||||||
Thereafter
|
860 | - | ||||||
$ | 14,326 | $ | 519 |
|
Total rent expenses for the years ended December 31, 2013, 2014 and 2015 were approximately $1,303, $2,309 and $2,653, respectively.
Total motor vehicle lease expenses for the years ended December 31, 2013, 2014 and 2015 were approximately $386, $369 and $435, respectively.
|
|
b.
|
Pledges and Bank guarantees:
The Company pledged a bank deposit in the amount of $1,571 mainly in respect of an office lease agreement and hedging transactions, this amount is presented as part of short-term bank deposits and other long-term assets.
The Company obtained a bank guarantee in the amount of $916, in connection with an office lease agreement.
|
NOTE 7:
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
c.
|
Legal contingencies:
The Company is not currently a party, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate are expected by the Company to have a material effect on its consolidated financial statements. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter
.
|
NOTE 8:
|
SHAREHOLDERS' EQUITY
|
|
a.
|
Composition of shares capital of the Company:
|
December 31, 2014
|
December 31, 2015
|
||||||||||||||||
Authorized
|
Issued and outstanding
|
Authorized
|
Issued and outstanding
|
||||||||||||||
Number of shares
|
|||||||||||||||||
Ordinary shares of NIS 0.01 par value each
|
250,000,000 | 30,501,352 | 250,000,000 | 33,289,839 |
|
b.
|
Public Offering:
In September 2014, the Company completed an IPO in which the Company issued and sold 5,360,000 ordinary shares at a public offering price of $16.00 per share.
As part of the IPO, the underwriters received an option to purchase 804,000 ordinary shares of the Company at the price of $16.00 for a period of one month following the IPO date. The total value of the underwriters options based on the Black-Scholes-Merton option pricing model amounted to $592 which was included in the additional paid-in capital balance and as IPO offering expenses.
During September 2014, the underwriters fully exercised their option.
The total net proceeds received from the IPO were $88,468 after deducting underwriting discounts of $6,904 and other offering expenses of $3,846.
In June 2015, the Company completed an additional public offering in which the Company issued and sold 900,000 ordinary shares at a public offering price of $61.00 per share. The total net proceeds received were $52,575 after deducting underwriting discounts of $2,196 and other offering expenses of $129.
|
NOTE 8:
|
SHAREHOLDERS' EQUITY (Cont.)
|
|
c.
|
1.
|
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 after all the preferred shares received their preference amount in full as detailed below.
|
|
2.
|
Preferred shares:
Following the Company's IPO, as described in note 8.b, all of the Company’s preferred shares were automatically converted into ordinary shares based on the conversion ratios set forth in the Company's Articles of Association, which are as follows
:
|
Conversion Ratio
|
||||
Series A preferred Shares
|
1.094 | |||
Series A1 preferred Shares
|
1.485 | |||
Series B preferred Shares
|
1 | |||
Series B1 preferred Shares
(*)
|
1 | |||
Series B2 preferred Shares
|
1 | |||
Series B3 preferred Shares
|
1 |
|
(*)
|
with respect only to the Series B1 preferred shares, serial numbers 226,503 to 257,565 (inclusive), the Conversion Price was 1.543, which results in a Conversion Ratio of 1.001451717.
|
|
d.
|
Share-based compensation:
Under the Company's 2001 equity incentive plan, as amended March 5, 2003, and its 2011 and 2014 equity incentive plans (collectively, the "Plans"), options and restricted share units ("RSUs") may be granted to employees, officers, non-employees consultants and directors of the Company.
Under the Plans, as of December 31, 2015, an aggregate of 367,055 shares were still available for future grant. Each option granted under the Plans expires no later than 10 years from the date of grant. The vesting period of the options is generally four years, unless the Board of Directors or the Board's Compensation Committee determines otherwise. Any option which is forfeited or cancelled before expiration becomes available for future grants.
|
NOTE 8:
|
SHAREHOLDERS' EQUITY (Cont.)
|
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Cost of revenues
|
$ | 39 | $ | 137 | $ | 499 | ||||||
Research and development
|
73 | 172 | 1 ,507 | |||||||||
Sales and marketing
|
126 | 347 | 2,214 | |||||||||
General and administrative
|
165 | 917 | 2,829 | |||||||||
Total share-based compensation expense
|
$ | 403 | $ | 1,573 | $ | 7,049 |
NOTE 8:
|
SHAREHOLDERS' EQUITY (Cont.)
|
|
e.
|
Options granted to employees:
A summary of the activity in options granted to employees for the year ended December 31, 2015 is as follows:
|
Amount
of
options
|
Weighted
average
exercise
price
|
Weighted
average
remaining contractual term
(in years)
|
Aggregate
intrinsic value
|
|||||||||||||
Balance as of December 31, 2014
|
4,564,764 | $ | 2.57 | 5.96 | $ | 169,410 | ||||||||||
Granted
|
702,566 | $ | 55.73 | |||||||||||||
Exercised
|
(1,855,773 | ) | $ | 0.98 | ||||||||||||
Forfeited
|
(52,682 | ) | $ | 21.82 | ||||||||||||
Balance as of December 31, 2015
|
3,358,875 | $ | 14.27 | 6.54 | $ | 111,093 | ||||||||||
Exercisable as of December 31, 2015
|
2,156,965 | $ | 3.12 | 5.28 | $ | 91,108 | ||||||||||
Vested and expected to vest as of December 31, 2015
|
3,324,648 | $ | 14.05 | 6.52 | $ | 110,492 |
|
The computation of expected volatility is based on actual historical share price volatility of comparable companies. The expected option term represents the period of time that options granted are expected to be outstanding. For stock-option awards which were at the money when granted (plain vanilla stock-options), it is determined based on the simplified method in accordance with SAB No. 110, as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term. For stock-option awards which were in the money when granted, a binomial model was used to determine the expected term as an input to the Black-Scholes-Merton option pricing model. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.
|
NOTE 8:
|
SHAREHOLDERS' EQUITY (Cont.)
|
|
The following table set forth the parameters used in computation of the options compensation to employees for the years ended December 31, 2013, 2014 and 2015:
|
Year ended
December 31,
|
||||||
2013
|
2014
|
2015
|
||||
Expected volatility
|
45%
|
45%
|
45%
|
|||
Expected dividends
|
0
|
0
|
0
|
|||
Expected term (in years)
|
6.11
|
5.81-6.11
|
5.78-6.12
|
|||
Risk free rate
|
1.15%-2.64%
|
1.55%-2.02%
|
1.37%-1.68%
|
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Weighted-average grant date fair value of options granted
|
$ | 2.03 | $ | 6.95 | $ | 24.56 | ||||||
Total intrinsic value of the options exercised
|
$ | 1,858 | $ | 9,943 | $ | 110,191 | ||||||
Total fair value of options vested
|
$ | 340 | $ | 925 | $ | 2,054 |
NOTE 8:
|
SHAREHOLDERS' EQUITY (Cont.)
|
Exercise price
|
Options outstanding as of
December 31, 2015
|
Weighted average remaining
contractual term
|
Options exercisable as of December 31,
2015
|
Weighted average remaining
contractual term
|
||||||||||||||
(years)
|
(years)
|
|||||||||||||||||
$ | 0.20 | 108,555 | 5.53 | 108,555 | 5.53 | |||||||||||||
$ | 0.41 | 683,146 | 2.12 | 683,146 | 2.12 | |||||||||||||
$ | 1.06 | 179,776 | 5.55 | 179,776 | 5.55 | |||||||||||||
$ | 1.46 | 782,832 | 6.39 | 714,733 | 6.39 | |||||||||||||
$ | 1.78 | 161,818 | 7.04 | 94,017 | 7.06 | |||||||||||||
$ | 2.21 | 70,890 | 7.42 | 33,577 | 7.42 | |||||||||||||
$ | 6.47 | 323,916 | 7.97 | 154,076 | 7.97 | |||||||||||||
$ | 8.84 | 50,000 | 8.09 | 37,500 | 8.09 | |||||||||||||
$ | 9.93 | 59,063 | 8.32 | 22,077 | 8.32 | |||||||||||||
$ | 14.00 | 224,000 | 8.70 | 93,338 | 8.70 | |||||||||||||
$ | 42.33 | 22,100 | 9.95 | - | - | |||||||||||||
$ | 44.37 | 26,913 | 8.88 | 9,680 | 8.88 | |||||||||||||
$ | 47.40 | 186,400 | 9.70 | - | - | |||||||||||||
$ | 49.42 | 12,331 | 9.80 | - | - | |||||||||||||
$ | 55.30 | 28,022 | 9.70 | - | - | |||||||||||||
$ | 58.55 | 229,255 | 9.53 | - | - | |||||||||||||
$ | 58.86 | 22,000 | 9.14 | 3,000 | 9.14 | |||||||||||||
$ | 59.14 | 45,188 | 9.62 | - | - | |||||||||||||
$ | 63.37 | 125,270 | 9.45 | 23,490 | 9.45 | |||||||||||||
$ | 64.93 | 17,400 | 9.33 | - | - | |||||||||||||
3,358,875 | 6.54 | 2,156,965 | 5.28 |
|
f.
|
A summary of RSU activity for the year ended December 31, 2015, is as follows:
|
Amount
of
RSU’s
|
Weighted
average
grant date fair value
|
|||||||
Unvested as of December 31, 2014
|
27,960 | $ | 44.37 | |||||
Granted
|
399,006 | $ | 54.14 | |||||
Vested
|
(18,426 | ) | $ | 56.14 | ||||
Forfeited
|
(11,630 | ) | $ | 51.65 | ||||
Unvested as of December 31, 2015
|
396,910 | $ | 53.44 |
|
CyberArk Software Ltd. subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.
|
|
a.
|
Corporate tax in Israel:
In July 2009, the Israeli Parliament, known as the Knesset, passed the Law for Economic Efficiency (Amended Legislation for Implementing the Economic Plan for 2009 and 2010), 2009, which prescribed, among others, a gradual reduction in the rates of the Israeli corporate tax and real capital gains tax starting 2011. The tax rate in effect for 2011 was 24%.
The Law for Change in the Tax Burden (Legislative Amendments) (Taxes), 5772-2011, (the "Tax Burden Law 2011"), was published by the Government of Israel. The Tax Burden Law 2011 cancelled the scheduled progressive reduction of the corporate tax rate that was approved in 2009 and instead set the corporate tax rate at 25% from 2012 and thereafter.
On July 30, 2013, the Knesset approved the second and third readings of the Economic Plan for 2013-2014 ("Amended Budget Law") which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes.
These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas), taxing revaluation gains and increasing the tax rates on dividends within the scope of the Law for the Encouragement of Capital Investments to 20% effective from January 1, 2014.
Commencing January 1, 2016, the Israeli regular tax rate was reduced from 26.5% to 25%.
|
|
b.
|
Income before taxes on income is comprised as follows:
|
Year ended December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Domestic
|
$ | 6,304 | $ | 13,194 | $ | 28,285 | ||||||
Foreign
|
1,651 | 1,272 | 3,458 | |||||||||
$ | 7,955 | $ | 14,466 | $ | 31,743 |
|
c.
|
Deferred income taxes:
Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recorded for tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
|
Year ended
December 31,
|
||||||||
2014
|
2015
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carry-forwards
|
$ | 50 | $ | 5,584 | ||||
Capital losses carry-forwards
|
52 | 52 | ||||||
Research and development expenses
|
2,116 | 2,945 | ||||||
Deferred revenues
|
1,824 | 3,760 | ||||||
Issuance expenses
|
1,083 | 790 | ||||||
Share-based compensation
|
97 | 549 | ||||||
Other
|
807 | 1,590 | ||||||
Deferred tax assets before valuation allowance
|
6,029 | 15,270 | ||||||
Valuation allowance
|
52 | 52 | ||||||
Deferred tax asset
|
$ | 5,977 | $ | 15,218 | ||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
$ | - | $ | 5,761 | ||||
Property and equipment depreciation and other
|
176 | 213 | ||||||
Deferred tax liabilities
|
$ | 176 | $ | 5,974 |
|
d.
|
Income taxes are comprised as follows:
|
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Current
|
$ | 2,089 | $ | 4,467 | $ | 10,042 | ||||||
Deferred
|
(769 | ) | 45 | (4,093 | ) | |||||||
$ | 1,320 | $ | 4,512 | $ | 5,949 |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Domestic
|
$ | 1,096 | $ | 2,485 | $ | 5,208 | ||||||
Foreign
|
224 | 2,027 | 741 | |||||||||
$ | 1,320 | $ | 4,512 | $ | 5,949 |
|
e.
|
A reconciliation of the Company's theoretical income tax expense to actual income tax expense as follows:
|
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Income before income taxes
|
$ | 7,955 | $ | 14,466 | $ | 31,743 | ||||||
Statutory tax rate
|
25 | % | 26.5 | % | 26.5 | % | ||||||
Theoretical income tax expense
|
1,989 | 3,833 | 8,412 | |||||||||
Utilization of tax losses and deferred taxes for which valuation allowance was provided, net
|
4 | (143 | ) | (771 | ) | |||||||
Deferred taxes on losses for which valuation allowance was provided, net
|
(91 | ) | 834 | (1,713 | ) | |||||||
Non-deductible expenses
|
251 | 1,165 | 2,295 | |||||||||
Increase in other uncertain tax positions—net
|
175 | 19 | 8 | |||||||||
Tax adjustment in respect of different tax rate
|
(979 | ) | (838 | ) | (2,303 | ) | ||||||
Other
|
(29 | ) | (358 | ) | 21 | |||||||
Income tax expense
|
$ | 1,320 | $ | 4,512 | $ | 5,949 |
|
f.
|
Net operating loss carry-forwards
As of December 31, 2015, the Company had net operating and capital tax losses totaling approximately $15,250 and $197, respectively, out of which approximately $3,142 and $197 of losses, respectively, were attributed to Israel and can be carried forward indefinitely and $12,108 were attributed to the U.S. subsidiary and can be carried forward for up to 20 years. Utilization of some of U.S. net operating losses are subject to annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization. In addition the U.S. subsidiary had tax benefit related to share-based compensation in the amount of $15,814 that can be carried forward and offset against taxable income. Excess tax benefit will be credited to additional paid-in capital when realized.
|
|
g.
|
Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
The Company has been granted "Approved Enterprise" Status, under the above Law. The Company has elected the alternative benefits program, waiver of grants in return for tax exemptions. Pursuant thereto, the income of the Company derived from the "Approved Enterprise" program is tax-exempt for two years and will enjoy a reduced tax rate of 10%-25% for up to a total of eight years (subject to an adjustment based upon the foreign investors' ownership of the Company).
The period of tax benefits detailed above is subject to limits of 12 years from the year of commencement of production, or 14 years from granting of approval, whichever is earlier.
The tax-exempt income attributable to the "Approved Enterprise" can be distributed to shareholders, without subjecting the Company to taxes, only upon the complete liquidation of the Company. If these retained tax-exempt profits are distributed, they would be taxed at the corporate tax rate applicable to such profits as if the Company had not elected the alternative tax benefits program (currently between 10% to 25% for an "Approved Enterprise").
Entitlement to the above benefits is conditional upon the Company fulfilling the conditions stipulated by the above law, regulations published thereunder and the letters of approval for the specific investments in "approved enterprises". In the event of failure to comply with these conditions, the benefits may be canceled and the Company may be required to refund the amount of the benefits, in whole or in part, including interest and CPI linkage.
Income not eligible for "approved enterprise" benefits mentioned above is taxed at the regular rate.
|
|
On April 1, 2005, an amendment to the Investment Law came into effect ("the Amendment") and has significantly changed the provisions of the Investment Law. The Amendment limits the scope of enterprises which may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise, such as provisions generally requiring that at least 25% of the Approved Enterprise's income will be derived from export. Additionally, the Amendment enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits.
However, the Investment Law provides that terms and benefits included in any letter of approval already granted will remain subject to the provisions of the law as they were on the date of such approval. Therefore, the Company's existing Approved Enterprise will generally not be subject to the provisions of the Amendment.
Such an enterprise is a "Beneficiary Enterprise", rather than the previous terminology of Approved Enterprise. The period of tax benefits for a new Beneficiary Enterprise commences in the "Year of Commencement". This year is the later of: (1) the year in which taxable income is first generated by the company, or (2) the Year of Election.
The Company has elected the status of a Beneficiary Enterprise for the year ended in 2006 and 2008.
As of December 31, 2015, approximately $13,034 was derived from tax exempt profits earned by the Company's "Approved Enterprises" and "Beneficiary Enterprise". The Company and its Board of Directors have determined that such tax-exempt income will not be distributed as dividends and intends to reinvest the amount of its tax exempt income earned by the Company. Accordingly, no provision for deferred income taxes has been provided on income attributable to the Company's "Approved Enterprises" and "Beneficiary Enterprise" as such income is essentially permanently reinvested.
If the Company's retained tax-exempt income is distributed, the income would be taxed at the applicable corporate tax rate as if it had not elected the alternative tax benefits under the Investment Law and an income tax liability of up to $3,200 would have been incurred as of December 31, 2015.
On December 29, 2010, the Knesset approved an additional amendment to the Law for the Encouragement of Capital Investments, 1959. According to the amendment, a reduced uniform corporate tax rate for exporting industrial enterprises (over 25%) was established. The reduced tax rate will not be program dependent and will apply to the industrial enterprise's entire income. The tax rates for industrial enterprises have been reduced gradually over a period of five years as follows: - In 2011-2012, the reduced tax rate for development area A will be 10% and for the rest of the country - 15%. In 2013 - 2014, the reduced tax rate for development area A will be 7% and for the rest of the country - 12.5%. Starting 2015 and thereafter, the reduced tax rate for development area A will be 6% and for the rest of the country - 12%. See also note 9.a to additional amendment to the Law related to tax rate.
On March 2013, the Company notified the Israeli Tax Authorities that it had transferred from Beneficiary Enterprise status to Preferred Enterprise status.
|
|
h.
|
Tax benefits under the Law for the Encouragement of Industry (Taxation), 1969:
Management believes that the Company currently qualifies as an "industrial company" under the above law and as such, is entitled to certain tax benefits including accelerated depreciation, deduction of public offering expenses in three equal annual installments and amortization of other intangible property rights for tax purposes.
|
|
i.
|
Tax assessments:
CyberArk Software Ltd. tax years until December 31, 2011 are subject to statutes of limitation as of December 31, 2015 (The tax year ended in December 31, 2011 is subject to the Tax Authorities to extend for another year). In addition, the Company is currently under examination by the Israeli Tax Authorities for up to and including the 2014 tax year. The U.K. subsidiary’s tax years until December 31, 2011 are subject to statutes of limitation as of December 31, 2015. The U.S. subsidiary’s tax years ended December 31, 2002, 2004, 2005, 2006, 2008, 2009 and 2011 through 2015 are still open, as the statutes of limitation have not yet expired. Viewfinity’s tax years since inception are still open, as the statutes of limitation have not yet expired.
|
|
j.
|
Uncertain tax positions:
A reconciliation of the opening and closing amounts of total unrecognized tax benefits is as follows:
|
Year ended
December 31,
|
||||||||
2014
|
2015
|
|||||||
Opening balance
|
$ | 272 | $ | 322 | ||||
Increase (decrease) related to prior year tax positions
|
(5 | ) | 4 | |||||
Increase related to current year tax positions
|
55 | 36 | ||||||
Closing balance
|
$ | 322 | $ | 362 |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Bank charges
|
$ | (62 | ) | $ | (63 | ) | $ | (86 | ) | |||
Changes in fair value of warrants to purchase preferred shares
|
(1,446 | ) | (4,309 | ) | - | |||||||
Exchange rate gain (loss), net
|
307 | (1,817 | ) | (1,723 | ) | |||||||
Total expenses
|
(1,201 | ) | (6,189 | ) | (1,809 | ) | ||||||
Interest income
|
77 | 201 | 330 | |||||||||
Total financial expenses, net
|
$ | (1,124 | ) | $ | (5,988 | ) | $ | (1,479 | ) |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Numerator:
|
||||||||||||
Net income
|
$ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||
Dividends accumulated for the period
|
(4,879 | ) | (3,815 | ) | - | |||||||
Net income available to shareholders of ordinary shares
|
$ | 1,756 | $ | 6,139 | $ | 25,794 | ||||||
Denominator:
|
||||||||||||
Shares used in computing net income per ordinary shares, basic
|
6,900,433 | 13,335,059 | 32,124,772 |
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Numerator:
|
||||||||||||
Net income
|
$ | 6,635 | $ | 9,954 | $ | 25,794 | ||||||
Dividends accumulated for the period
|
(4,879 | ) | - | - | ||||||||
Net income available to shareholders of ordinary shares
|
$ | 1,756 | $ | 9,954 | $ | 25,794 | ||||||
Denominator:
|
||||||||||||
Shares used in computing net income per ordinary shares, diluted
|
10,765,914 | 29,704,730 | 35,322,716 |
|
a.
|
The Company applies ASC topic 280, "Segment Reporting" ("ASC No. 280"). The Company operates in one reportable segment. Total revenues are attributed to geographic areas based on the location of the end customer.
|
|
b.
|
The following tables present total revenues for the years ended December 31, 2013, 2014 and 2015 and long-lived assets as of December 31, 2014 and 2015:
Revenues:
|
Year ended
December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
United States
|
$ | 32,041 | $ | 60,761 | $ | 92,034 | ||||||
Israel
|
3,383 | 4,234 | 5,203 | |||||||||
United Kingdom
|
6,862 | 12,220 | 16,746 | |||||||||
EMEA (*)
|
15,551 | 16,744 | 28,695 | |||||||||
Other
|
8,320 | 9,040 | 18,134 | |||||||||
$ | 66,157 | $ | 102,999 | $ | 160,812 |
|
long-lived assets:
|
December 31,
|
||||||||
2014
|
2015
|
|||||||
United States
|
$ | 606 | $ | 929 | ||||
Israel
|
1,336 | 2,418 | ||||||
United Kingdom
|
143 | 155 | ||||||
EMEA (*)
|
15 | 22 | ||||||
Other
|
48 | 60 | ||||||
$ | 2,148 | $ | 3,584 |
CyberArk Software Ltd.
|
|||
Date: March 10, 2016
|
By:
|
/s/ Ehud Mokady | |
Ehud Mokady | |||
Chief Executive Officer, President, Founder and Director
|
Exhibit No.
|
|
Description
|
1.1
|
|
Articles of Association of the Registrant (incorporated by reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
2.1
|
|
Specimen share certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
2.2
|
|
Fourth Amended Investor Rights Agreement, dated July 10, 2014, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.1
|
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.2
|
|
Office Lease Agreement and amendments thereto, dated September 5, 2004, between the Registrant and Azorei Melal Industries Ltd., as amended.
¥
|
4.3
|
|
Office Lease Agreement, dated October 28, 2013, between Cyber-Ark Software, Inc. and Wells 60 Realty LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.4
|
|
First Amendment of Lease, dated October 23, 2014, between Cyber-Ark Software, Inc. and Wells 60 Realty LLC (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-202329))
|
4.5
|
Office Lease Agreement, dated February 26, 2015, between the Registrant and Azorei Melal Industries Ltd. (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-202329 ))
¥
|
|
4.6
|
|
2001 Stock Option Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.7
|
|
Section 102 2001 Stock Option Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.8
|
|
First Amendment to Section 102 2001 Stock Option Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.9
|
|
2011 Share Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form F-1, as amended (Registration No. 333-196991))
|
4.10
|
|
CyberArk Software Ltd. 2014 Share Incentive Plan, as amended
|
4.11
|
|
CyberArk Executive Compensation Policy (incorporated by reference to Appendix A of Exhibit 99.1 to the Registrant’s Report of Foreign Private Issuer on Form 6-K filed with the SEC on November 20, 2014)
|
8.1
|
List of subsidiaries of the Registrant
|
12.1
|
|
Certification of Principal Executive Officer required by Rule 13a-14(a) and Rule 15d-14(a) (Section 302 Certifications)
|
12.2
|
|
Certification of Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) (Section 302 Certifications)
|
13.1
|
|
Certification of Principal Executive Officer required by Rule 13a-14(b) and Rule 15d-14(b) (Section 906 Certifications)
|
13.2
|
|
Certification of Principal Financial Officer required by Rule 13a-14(b) and Rule 15d-14(b) (Section 906 Certifications)
|
15.1
|
|
Consent of Kost Forer Gabbay & Kasierer (a member of Ernst & Young Global)
|
101.INS
|
|
XBRL Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
¥
|
English summary of original Hebrew document
|
•
|
Subject Matter of the Lease Agreement
: Unprotected Lease of Office Space and Parking Spaces for the purpose of conducting business in the Hi-Tech field. Premises are located in Petach-Tikva, Israel.
|
•
|
Term of Original Lease
:
|
•
|
The term of the Original Lease was thirty-six (36) months commencing on July 1, 2004, with the Company’s right for early termination (which was not exercised by the Company). Under the Original Lease, the Company was given two options to extend the term of the lease, each by a twelve (12)-month period (subject to certain prior notices to the Landlord).
|
•
|
The term of the lease was extended several times over the years. Currently, the lease is set to expire on the later of June 30, 2017 and the date on which the Company receives control of the new premises it is leasing from the Landlord (with no right for early termination by the Company).
|
•
|
The term of the lease of all parking spaces leased by the Company from time to time is linked to the lease term of the main premises.
|
•
|
Premises Covered by the Lease Agreement
:
|
•
|
Property
– Under the Original Lease, the Company leased 843 square meters (gross) (approximately 9,074 square feet). Since then the Company has leased additional premises as follows: 550 square meters (gross) (approximately 5,920 square feet) under the May 3, 2007 Addendum, 630 square meters (gross) (approximately 6,781 square feet) under the February 16, 2012 Addendum, 867 square meters (gross) (approximately 9,332 square feet) under the January 29, 2013 Addendum, 670 square meters (gross) (approximately 7,212 square feet) under the December 12, 2013 Addendum, 250 square meters (gross) (approximately 2,691 square feet) under the November 15, 2015 Addendum and 579 square meters (gross) (approximately 6,232 square feet) under the January 7, 2016 Addendum. In total, the Company currently leases 4,389 square meters (gross) (approximately 47,243 square feet).
|
•
|
Parking
– The Company originally leased ten (10) parking spaces, and currently leases one hundred thirty-six (136) parking spaces.
|
•
|
Rental Fees
:
|
•
|
Property
– Under the Original Lease, during the original lease term the Company was to pay monthly rental fees of US $10 per square meter (gross). Such rental fees were to increase to US $10.75 for the two option periods under the Original Lease. All rental fees under the Original Lease were based on a fixed 4.587 NIS/Dollar exchange rate, exclusive of VAT and index-linked to the Consumer Price Index published by the Central Bureau of Statistics (the “
Index
”);
provided
that the rental fees shall not be less than the nominal values listed above.
|
•
|
Parking
– The monthly rental fee for the parking spaces currently leased by the Company ranges from NIS 360 to NIS 434 per parking space, in each case plus VAT and Index-linked.
|
•
|
Management Fees
– The management fees currently being paid by the Company with respect of an aggregate of 2,023 square meters (gross) (approximately, 21,775 square feet) equal to NIS 15.5 per square meter (gross) and with respect of the remaining 2,366 square meters (gross) (approximately, 25,467 square feet) paid on a cost plus 15% basis (approximately NIS 20 per square meter), in each case plus VAT and Index-linked.
|
•
|
Guarantees
–
|
•
|
An autonomous un-conditioned bank guarantee, for three (3) months’ rental fee plus VAT, to be extended from time to time by the Company to remain in effect for the duration of the term of lease and for thirty (30) days thereafter.
|
•
|
Dispute Resolution
–
|
•
|
The Lease Agreement shall be governed by an agreed-upon arbitrator, the identity of which shall be determined between the parties (and with respect to legal disputes – by the parties’ legal counsels). In the lack of such agreement, the identity of the arbitrator shall be decided by the Chairman of the Israeli Bar Association or the Chairman of the Engineers and Architects’ Association, as applicable.
|
•
|
Other Terms under the Lease Agreement
:
|
•
|
The Company has a right to sub-lease the premises (or any portion thereof), subject to the Landlord’s prior written consent (not to be unreasonably withheld). The Company may also transfer its rights to the premises to an affiliate, subject to the Landlord’s prior written consent (not to be unreasonably withheld).
|
•
|
Similar to other lease agreements, the Company agreed to assume responsibility for all fees, municipal or local taxes, utility payments, etc.;
provided
that the Landlord shall bear any and all taxes and fees, which by their nature are levied on property owners.
|
•
|
Similar to other lease agreements, each party has agreed to assume responsibility for any damage, injury or loss (bodily or otherwise) resulting from any act, omission or negligence on its part, and with respect of the Company – relating to its use of the property being leased.
|
•
|
The Lease Agreement further includes terms concerning the following non-material matters:
|
•
|
Renovations
–
Generally, the Company may not perform any major renovations on the premises without prior written authorization from the Landlord.
Subject to such advance approval by the Landlord, the Company may invest certain amounts on renovations for which the Landlord has agreed to reimburse the Company for a certain percentage of the costs.
|
•
|
Late Rental Fees
– In the event the Company fails to pay any of its rental fees on time, the amount overdue accrues interest based on Bank Hapoalim Ltd.’s standard rate for unauthorized overdrafts starting from the tenth day following the payment due date until the actual date of payment. If the amount due is for rental, management or electricity fees, the Landlord is entitled to stop any of these services other than disconnecting water and power, provided it shall notify the Company in writing seven days in advance.
|
•
|
Utilities
– The Company is responsible for paying for water, power and telephone utility bills, in addition to any taxes or fees, tolls, levies, property taxes and any other payments owed to governmental or local authorities relating to the property during the term of the Lease Agreement, unless such fees are specifically designated for the property owner.
|
•
|
No Right of set-off
–
The parties have agreed that any amounts owed shall not be subject to a set-off right.
|
•
|
Termination of the lease, vacating of premises and fixtures
–
Upon the termination of the Lease Agreement, the Company shall vacate the premises from any person or object which is not owned by the Landlord and return it to the Landlord in an undamaged, usable state. The Company has sole discretion to remove any fixtures, provided such removal does not damage the premises and provided that the Landlord will have no duty to compensate the Company for fixtures which it decides to leave.
|
•
|
Early termination rights and taxes with respect to parking spaces
–
The Company is entitled to park its vehicles on the premises during the term of the Lease Agreement, although the Landlord may terminate such right at any time upon 60 days advance notice. The Company has agreed to allow the Landlord to use the extra parking spaces at the premises on an as available basis.
The fees that the Company pays for parking spaces under the Lease Agreement include maintenance and management fees but do not include property tax or any other fees imposed by local authorities and for which the Company shall be liable immediately upon demand.
|
•
|
Payment Method
–
The rental fees shall be paid three months in advance by no later than the fifth day of the month during which a payment is made. The Company has agreed to sign a direct debit with respect to the rental and management fees. In the event the Company is over-charged, that extra amount shall be remitted to the Company within five business days.
|
1
|
||
2
|
||
6
|
||
9
|
||
9
|
||
10
|
||
15
|
||
15
|
||
17
|
||
20
|
||
21
|
||
22
|
||
23
|
||
23
|
||
27
|
||
27
|
||
29
|
||
30
|
||
32
|
||
33
|
||
33
|
||
33
|
||
34
|
||
34
|
||
34
|
||
36
|
||
36
|
||
36
|
2.
|
Term
|
Section
|
102 Awards
|
1.2(i)
|
102 Capital Gains Track Awards
|
9.1
|
102 Non-Trustee Awards
|
9.2
|
102 Ordinary Income Track Awards
|
9.1
|
102 Trustee Awards
|
9.1
|
3(9) Awards
|
1.2(ii)
|
Award Agreement
|
6
|
Cause
|
6.6.4.4
|
Company
|
1.1
|
Effective Date
|
24.1
|
Election
|
9.2
|
Eligible 102 Grantees
|
9.3.1
|
Incentive Stock Options
|
1.2(iii)
|
ISO Share Issuance Limit
|
5
|
ITA
|
1.1
(i)
|
Market Stand-Off
|
17.1
|
Market Stand-Off Period
|
17.1
|
Nonqualified Stock Options
|
1.2
(iv)
|
Plan
|
1.1
|
Recapitalization
|
14.1
|
Required Holding Period
|
9.5
|
Restricted Period
|
11.2
|
Restricted Share Agreement
|
11
|
Restricted Share Unit Agreement
|
12
|
Restricted Shares
|
1.1
|
RSUs
|
1.1
|
Rules
|
1.1(i)
|
Securities
|
17.1
|
Successor Corporation
|
14.2.1
|
Withholding Obligations
|
18.4
|
3.
|
4.
|
5.
|
7.
|
NONQUALIFIED
STOCK OPTIONS
.
|
9.
|
10.
|
17.
|
24.
|
28.
|
1.
|
I have reviewed this Annual Report on Form 20-F of CyberArk Software Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5.
|
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
|
/s/ Ehud Mokady
|
Ehud Mokady
|
Chief Executive Officer, President, Founder and Director
|
Date: March 10, 2016
|
1.
|
I have reviewed this Annual Report on Form 20-F of CyberArk Software Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
|
4.
|
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5.
|
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
|
/s/ Joshua Siegel
|
||
Joshua Siegel
|
||
Chief Financial Officer
|
||
Date: March 10, 2016
|
/s/ Ehud Mokady
|
Ehud Mokady
|
Chief Executive Officer, President, Founder and Director
|
Date: March 10, 2016
|
/s/ Kost Forer Gabbay & Kasierer
|
KOST, FORER, GABBAY & KASIERER
|
A Member of Ernst & Young Global
|
Tel-Aviv, Israel
|
March 10, 2016
|