UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2021
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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CYBERARK SOFTWARE LTD.
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
9 Hapsagot St.
Park Ofer B, P.O. BOX 3143
Petach-Tikva 4951040, Israel
(Address of principal executive offices)
Donna Rahav
Chief Legal Officer
Telephone: +972 (3) 918-0000
CyberArk Software Ltd.
9 Hapsagot St.
Park Ofer B, P.O. BOX 3143
Petach-Tikva 4951040, Israel
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Ordinary shares, par value NIS 0.01 per share |
CYBR |
The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 2021, the registrant had outstanding 40,041,870 ordinary shares, par value NIS 0.01 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
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Accelerated filer ☐
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Non-accelerated filer ☐
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Emerging growth company ☐
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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒
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International Financial Reporting Standards as issued by the
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Other ☐
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International Accounting Standards Board ☐
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Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
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• |
changes to the drivers of our growth and our ability to adapt our solutions to IT security market demands; |
• |
the transition of our business to a subscription model that began in 2021 and our ability to complete our transition goals in the
time frame expected; |
• |
our sales cycles and multiple pricing and delivery models; |
• |
unanticipated product vulnerabilities or cybersecurity breaches of our, or our customers’ or partners’
systems; |
• |
an increase in competition within the Privileged Access Management and Identity Security markets; |
• |
our ability to hire, train, retain and motivate qualified personnel; |
• |
our ability to sell into existing and new customers and industry verticals; |
• |
risks related to our compliance with privacy and data protection laws and regulations; |
• |
our history of incurring net losses and our ability to achieve profitability in the future; |
• |
the duration and scope of the COVID-19 pandemic and its impact on global and regional economies and the resulting effect on the demand
for our solutions and on our expected revenue growth rates and costs; |
• |
our ability to find, complete, fully integrate or achieve the expected benefits of additional strategic acquisitions; |
• |
our reliance on third-party cloud providers for our operations and SaaS solutions; |
• |
our ability to expand our sales and marketing efforts and expand our channel partnerships across existing and new geographies;
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• |
risks related to sales made to government entities; |
• |
regulatory and geopolitical risks associated with our global sales and operations (including the current conflict between Russia
and Ukraine) and changes in regulatory requirements or fluctuations in currency exchange rates; |
• |
the ability of our products to help customers achieve and maintain compliance with government regulations or industry standards;
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• |
risks related to intellectual property claims or our ability to protect our proprietary technology and intellectual property rights;
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risks related to stock price volatility or activist shareholders; |
• |
any failure to retain our “foreign private issuer” status or the risk that we may be classified, for U.S. federal income
tax purposes, as a “passive foreign investment company”; |
• |
risks related to our Convertible Notes, including the potential dilution to existing shareholders and our ability to raise the funds
necessary to pay amounts due under our Convertible Notes; |
• |
our expectation to not pay dividends on our ordinary shares for the foreseeable future; and |
• |
risks related to our incorporation and location in Israel. |
ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. |
KEY INFORMATION |
o |
our revenues may fluctuate as a result of variations in our booking mix from the different licensing and delivery models and the
corresponding timing of revenue recognition – ratably for SaaS subscriptions and the maintenance portion of self-hosted subscriptions,
and upon delivery for perpetual licenses and the license portion of self-hosted subscriptions. For example, if our customers continue
to prefer to buy our solutions as a subscription at a greater rate than we anticipate, our recognized revenues may lag our expectations
and guidance; |
o |
since fiscal year 2020, we have incurred net losses with declining operating margins, and we expect our operating and net income
losses to continue to increase, and our cash flow from operations to decline (see “—We have incurred net losses, and may not
be able to generate sufficient revenue to achieve and sustain profitability.”); |
o |
the introduction of new product offerings and solutions may result in longer sales cycles, lost opportunities or less predictable
revenues if our new or existing customers, prospects and partners are less receptive of such advancements (including a transition to SaaS
in order to receive certain functionalities) or require a longer period to assess and select the solutions appropriate to them;
|
o |
the introduction of more SaaS offerings may lead to extended presale periods due to, among others, comprehensive product and security
reviews and requirements by customers, extensive contract negotiations and more stringent compliance and operational obligations (such
as those related to data protection); |
o |
our sales force may struggle with selling multiple pricing, licensing and delivery models to customers, prospects and partners, which
may extend sales cycles, reduce the likelihood of sales closing, or lead to increased turnover rates and lower headcount; |
o |
our research and development teams may find it difficult to deliver functionality and drive innovation across multiple code bases
on a timely basis; and |
o |
customer demand for migration from self-hosted solutions to SaaS may happen faster than we anticipate, in which case we might not
be able to meet this demand and associated scalability requirements. |
o |
our ability to attract new customers and to retain existing customers by and through renewals of maintenance services and subscriptions
(see “—If we are unable to acquire new customers or sell additional products and services to our existing customers, our future
revenues and operating results will be harmed.”); |
o |
the amount and timing of our operating costs and cash collection, which may vary also as a result of fluctuations in foreign currency
exchange rates or changes in taxes or other applicable regulations (see “—We are exposed to fluctuations in currency exchange
rates, which could negatively affect our financial condition and results of operations.”); |
o |
the rate at which our customers fully deploy their purchased solutions, and our ability to sell additional solutions and services
to current customers; |
o |
effects from the COVID-19 pandemic or other public health crises, and the global economic changes caused by it (see “—The
COVID-19 pandemic, measures taken in response to it and the resulting global economic environment have adversely affected, and may
adversely affect in the future, our business, financial condition, and results of operations.”); |
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the ability of our support and customer success operations to keep pace with sales to new and existing customers and the expansion
of our solution portfolio and to satisfy customer demands for consultancy and professional services; |
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our ability to successfully expand our business globally; |
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the release timing and success of new product and service introductions by us or our competitors or any other change in the competitive
landscape of the cybersecurity market, including consolidation among our competitors; |
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the introduction of new accounting pronouncements or changes in our accounting policies or practices; |
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changes in our pricing policies or those of our competitors; and |
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the size and discretionary nature of our prospective and existing customers’ IT budgets. |
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greater name recognition, a longer operating history and a larger customer base; |
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larger sales and marketing budgets and resources; |
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broader distribution and established relationships with channel partners, advisory firms and customers; |
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increased effectiveness in protecting, detecting and responding to cyberattacks; |
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greater or localized resources for customer support and provision of services; |
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greater speed at which a solution can be deployed and implemented; |
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greater resources to make acquisitions; |
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lower pricing and attractive packaging; |
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greater operational flexibility and less stringent accounting, auditing and legal standards, applicable to privately held companies;
|
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larger intellectual property portfolios; and |
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greater financial, technical and other resources. |
o |
failure to fully comply with various, global data privacy and data protection laws (see “—The dynamic regulatory environment
around privacy and data protection may limit our offering or require modification of our products and services, which could limit our
ability to attract new customers and support our current customers and increase our operational expenses. We could also be subject to
investigations, litigation, or enforcement actions alleging that we fail to comply with the regulatory requirements, which could harm
our operating results and adversely affect our business.”); |
o |
continuing uncertainty of the long term economic, financial, regulatory, trade, tax and legal implications of the withdrawal of the
U.K. from the European Union (“Brexit”). Our U.K. subsidiary is the main entity for sales into Europe. In 2021, the revenues
generated by our U.K. subsidiary from the European Union countries (excluding the U.K.) accounted for 23% of our total global revenue.
Our London office is also our European headquarters and third largest office globally; |
o |
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.”);
|
o |
social, economic and political instability, war, civil disturbance or acts of terrorism, conflicts (including the current conflict
between Russia and Ukraine) and security concerns in general, and any wide-spread viruses or epidemics, such as COVID-19; |
o |
greater difficulty in enforcing contracts and managing collections, as well as longer collection periods; |
o |
noncompliance with specific anti-bribery laws, without limitation, the U.S. Foreign Corrupt Practices Act and the U.K Bribery Act
of 2010 and the heightened risk of unfair or corrupt business practices in certain geographies, which may include the improper or fraudulent
sales arrangements by us or by our channel partners or service providers that may impact financial results and result in restatements
of, or irregularities in, financial statements; |
o |
Certain of our activities and products are subject to U.S., Israeli, and possibly other export and trade control and economic sanctions
laws and regulations, which have and may additionally prohibit or restrict our ability to engage in business with certain countries and
customers. If the applicable requirements related to export and trade controls change or expand (such as in response to the Russia and
Ukraine conflict), if we change the encryption functionality in our products, or if we develop other products or export products from
additional jurisdictions, we may need to satisfy additional requirements or obtain specific licenses in order to continue to export our
products in the same global scope. Various countries also regulate the import or export of certain encryption products and other technologies
and services and have enacted laws that could limit our ability to distribute or implement our products in those countries. In addition,
applicable export control and sanctions laws and regulations may impact our ability to sell our products, directly or indirectly, to countries
or territories that are the target of comprehensive sanctions, or to prohibited parties; |
o |
unexpected changes in regulatory practices and foreign legal requirements, including uncertain tax obligations and effective tax
rates, which may result in recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates
and higher than anticipated earnings in jurisdictions where we have higher statutory rates, or changes in the valuation of our deferred
tax assets and liabilities; |
o |
compliance with, and the uncertainty of, laws and regulations that apply to our areas of business, including corporate governance,
anti-trust and competition, local and regional employment (including cross-border travel), employee and third-party complaints, limitation
of liability, conflicts of interest, securities regulations and other regulatory requirements affecting trade, local tariffs, product
localization and investment; |
o |
reduced or uncertain protection of intellectual property rights in some countries; and |
o |
management communication and integration problems resulting from cultural and geographic dispersion. |
o |
actual or anticipated fluctuations in our results of operations and the results of other similar companies; |
o |
variance in our financial performance from the expectations of market analysts; |
o |
announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions
or expansion plans; |
o |
changes in the prices of our products and services or in our pricing models; |
o |
our involvement in litigation; |
o |
our sale of ordinary shares or other securities in the future; |
o |
market conditions in our industry; |
o |
changes in key personnel; |
o |
speculation in the press or the investment community; |
o |
the trading volume of our ordinary shares; |
o |
changes in the estimation of the future size and growth rate of our markets; |
o |
any merger and acquisition activities; and |
o |
general economic and market conditions. |
ITEM 4. | INFORMATION ON THE COMPANY |
A. |
History and Development of the Company |
B. |
Business Overview |
• |
Strengthening our Identity Security leadership position by delivering ongoing
innovation. We intend to extend our leadership
position by enhancing our existing products and services, introducing new functionality and developing new solutions to address new use
cases. Our strategy includes both internal development and an active mergers and acquisition program where we acquire or invest in complementary
businesses or technologies. |
• |
Extending our global go-to-market reach. We sell our solutions through
a high-touch hybrid model that includes direct and indirect sales. We plan to expand our sales reach by adding new direct sales capacity,
expanding our indirect channels by deepening our relationships with existing partners and by adding new value-added resellers, system
integrators, managed security service providers and C3
Alliance partners. We are also expanding our routes to market to include cloud provider marketplaces. |
• |
Growing our customer base. The
global threat landscape, digitalization of the enterprise, cloud migration and the broad security skills shortage are contributing to
the need for Identity Security solutions. We believe that every organization, regardless of
size or vertical, needs Identity Security and we plan to pursue business with new customers in the enterprise and mid-market, or commercial,
segments of the market. |
• |
Expanding our relationships with existing customers. As
of December 31, 2021, we had approximately 7,500 customers. We have worked hard to develop strong relationships with our customers, and
our strategy includes our Customer Success team expanding these relationships by growing the number of users who access our solutions
and cross-selling additional products and services. |
• |
Driving strong adoption of our solutions and retaining our customer base. An
important part of our overall strategy, particularly for our SaaS and self-hosted subscription customers, is delivering fast time to value
from our solutions. We plan to deliver high levels of customer service and support and continue to invest in our Customer Success team
to help ensure that our customers are up and running quickly and derive benefit from our software, which we believe will result in higher
customer retention rates. |
• |
Attracting, developing and retaining a diverse and inclusive employee base.
A key pillar of our growth strategy is attracting, developing and retaining our employees. Our people are one of our most valuable
assets, and our culture is a key business differentiator for CyberArk. We value diversity and inclusion which allows for the exchange
of ideas, creates a strong community and helps ensure our employees are valued and respected. |
• |
Privileged Access Manager. CyberArk Privileged Access Manager includes risk-based credential
security and session management to protect against attacks involving privileged access. CyberArk’s self-hosted Privileged Access
Manager solution (formerly known as Core PAS) can be deployed in a self-hosted data center or in a hybrid cloud or a public cloud environment,
either as a perpetual license or as a subscription. CyberArk’s Privileged Access Manager is also provided as a SaaS solution through
CyberArk Privilege Cloud. |
• |
Vendor Privileged Access Manager. CyberArk Vendor Privileged Access Manager combines Privileged
Access Manager and Remote Access (formerly known as Alero) to provide fast, easy and secure privileged access to third-party vendors who
need access to critical internal systems via CyberArk, without the need to use passwords. By not requiring VPNs or agents, Vendor Privileged
Access Manager removes operational overhead for administrators, makes it easier and quicker to deploy and improves organizational security.
|
• |
Endpoint Privilege Manager. CyberArk Endpoint Privilege Manager
is a SaaS solution that secures privileges on the endpoint (Windows servers, Windows desktops and Mac desktops) and helps contain attacks
early in their lifecycle. It enables revocation of local administrator rights, while minimizing impact on user productivity, by seamlessly
elevating privileges for authorized applications or tasks. Application control, with automatic policy creation, allows organizations to
prevent malicious applications from executing, and runs unknown applications in a restricted mode. This, combined with credential theft
protection, helps prevent malware such as ransomware from gaining a foothold and contains attacks on the endpoint. |
• |
Cloud Entitlements Manager. CyberArk Cloud Entitlements Manager
is a SaaS solution that reduces risks that arise from excessive privileges by implementing Least Privilege across cloud environments.
From a centralized dashboard, Cloud Entitlements Manager provides visibility and control of permissions across an organization’s
cloud landscape. Within this single display, Cloud Entitlements Manager offers automatically deployable remediations based on the principle
of Least Privilege, to help organizations strategically remove excessive permissions without disrupting cloud operations. |
• |
Adaptive Multi-factor Authentication (MFA). Adaptive MFA enables an enterprise to enforce
risk-aware and strong identity assurance controls within the organization. |
• |
Single Sign-On (SSO). SSO is the ability to use a single secure identity to access all applications
and resources within an organization. CyberArk Identity enables SSO for all types of users (workforce, partners, and consumers) to all
types of workstations, systems, VPNs, and applications both in the cloud and on-premises. |
• |
Secure Web Sessions. Secure Web Sessions records, audits and protects end-user activity within
designated web applications. The solution uses a browser extension on an end-user’s endpoint to monitor and segregate web apps that
are accessed through SSO and deemed sensitive by business application owners, enterprise IT and security administrators. |
• |
Application Gateway. With the CyberArk Identity Application Gateway service, customers can
enable secure remote access and expand SSO benefits to on-premises web apps — like SharePoint and SAP — without the complexity
of installing and maintaining VPNs. |
• |
Identity Lifecycle Management. This module enables CyberArk Identity customers to automate
the joiner, mover, and leaver processes within the organization. This automation is critical to ensure that privileges don’t accumulate,
and a user’s access is turned off as soon as the individual changes roles or leaves the organization. |
• |
Directory Services. Allows customers to use identity where they control it. In other words,
we do not force our customers to synchronize their on-premises Active Directory implementation with our cloud. Our cloud architecture
can work seamlessly with any existing directory, such as Active Directory, LDAP-based directories, and other federated directories. CyberArk
Identity also provides its own highly scalable and flexible directory for customers who choose to use it. |
• |
Secrets Manager Credential Providers. Credential Providers can be used to provide and manage
the credentials used by third-party solutions such as security tools, RPA, and IT management software, and also supports internally developed
applications built on traditional monolithic application architectures. Credential Providers works with CyberArk’s on-premises and
SaaS based solutions. |
• |
Secrets Manager Conjur. For cloud-native applications built using DevOps methodologies, Conjur
Enterprise provides a secrets management solution tailored specifically to the unique requirements of these environments. We also provide
an open-source version to better meet the needs of the developer community. |
o |
the breadth and completeness of a security solution; |
o |
reliability and effectiveness in protecting, detecting and responding to cyber-attacks; |
o |
analytics and accountability at an individual user level; |
o |
ability of customers to achieve and maintain compliance with compliance standards and audit requirements; |
o |
strength of sale and marketing efforts, including advisory firms and channel partner relationships; |
o |
global reach and customer base; |
o |
scalability and ease of integration with an organization’s existing IT infrastructure and security investments; |
o |
brand awareness and reputation; |
o |
innovation and thought leadership; |
o |
quality of customer support and professional services; |
o |
speed at which a solution can be deployed and implemented; and |
o |
price of a solution and cost of maintenance and professional services. |
C. |
Organizational Structure |
D. |
Property, Plant and Equipment |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
($ in millions) |
||||||||||||
Total ARR (as of period-end) |
$ |
192 |
$ |
274 |
$ |
393 |
||||||
Subscription Portion of Annual Recurring Revenue (as of period-end) |
$ |
19 |
$ |
74 |
$ |
183 |
||||||
Recurring revenues |
$ |
176 |
$ |
247 |
$ |
349 |
||||||
Deferred revenue (as of period-end) |
$ |
190 |
$ |
243 |
$ |
317 |
A. |
Operating Results |
Year ended December 31, |
||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||
Amount |
% of Revenues |
Amount |
% of Revenues |
Amount |
% of Revenues |
|||||||||||||||||||
($ in thousands) |
||||||||||||||||||||||||
United States |
$ |
233,945 |
53.9 |
% |
$ |
246,811 |
53.1 |
% |
$ |
253,811 |
50.5 |
% | ||||||||||||
EMEA |
129,730 |
29.9 |
|
141,866 |
30.6 |
|
163,328 |
32.5 |
| |||||||||||||||
Rest of World |
70,220 |
16.2 |
|
75,754 |
16.3 |
|
85,778 |
17.0 |
| |||||||||||||||
Total revenues |
$ |
433,895 |
100.0 |
% |
$ |
464,431 |
100.0 |
% |
$ |
502,917 |
100.0 |
% |
o |
Cost of Subscription Revenues. Cost of subscription revenues consists primarily of cloud
infrastructure costs, amortization of intangible assets, personnel costs for our global cloud organization that consist primarily of salaries,
benefits, bonuses and share-based compensation and depreciation of internal use software capitalization. As we shift more of our sales
to SaaS and self-hosted subscription offerings, we expect the absolute cost of subscription revenues and the cost of subscription revenues
as a percentage of revenues to increase. |
o |
Cost of Perpetual
License Revenues. Cost of perpetual license revenues consists primarily of allocated personnel costs to support delivery and operations
related to perpetual licenses, appliances expenses and costs incurred by amortization of intangible assets. Personnel costs consist primarily
of salaries, benefits, bonuses and share-based compensation. As we shift more of our sales to SaaS and self-hosted subscription contracts,
we expect the absolute cost of perpetual license revenues and the cost of perpetual license revenues as a percentage of revenues to decrease.
|
o |
Cost of Maintenance and Professional Services Revenues. Cost of maintenance related to perpetual
license contracts and professional services revenues primarily consists of allocated personnel costs for our global customer support and
professional services organization. Such costs consist primarily of salaries, benefits, bonuses, share-based compensation and subcontractors’
fees. 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, |
||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||
Amount |
% of Revenues |
Amount |
% of Revenues |
Amount |
% of Revenues |
|||||||||||||||||||
($ in thousands) |
||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Subscription
|
$ |
18,168 |
4.2 |
% |
$ |
56,425 |
12.1 |
% |
$ |
134,628 |
26.8 |
% | ||||||||||||
Perpetual license
|
221,955 |
51.1 |
176,061 |
37.9 |
115,738 |
23.0 |
||||||||||||||||||
Maintenance and professional services |
193,772 |
44.7 |
231,945 |
50.0 |
252,551 |
50.2 |
||||||||||||||||||
Total revenues
|
433,895 |
100.0 |
464,431 |
100.0 |
502,917 |
100.0 |
||||||||||||||||||
Cost of revenues: |
||||||||||||||||||||||||
Subscription
|
5,611 |
1.3 |
17,513 |
3.8 |
25,837 |
5.2 |
||||||||||||||||||
Perpetual license
|
7,900 |
1.8 |
4,925 |
1.1 |
3,904 |
0.8 |
||||||||||||||||||
Maintenance and professional services |
49,104 |
11.3 |
60,133 |
12.9 |
63,566 |
12.6 |
||||||||||||||||||
Total cost of revenues
|
62,615 |
14.4 |
82,571 |
17.8 |
93,307 |
18.6 |
||||||||||||||||||
Gross profit
|
371,280 |
85.6 |
381,860 |
82.2 |
409,610 |
81.4 |
||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Research and development
|
72,520 |
16.7 |
95,426 |
20.5 |
142,121 |
28.2 |
||||||||||||||||||
Sales and marketing
|
184,168 |
42.4 |
219,999 |
47.4 |
274,401 |
54.6 |
||||||||||||||||||
General and administrative
|
52,308 |
12.1 |
60,429 |
13.0 |
71,425 |
14. 2 |
||||||||||||||||||
Total operating expenses
|
308,996 |
71.2 |
375,854 |
80.9 |
487,947 |
97. 0 |
||||||||||||||||||
Operating income (loss)
|
62,284 |
14.4 |
6,006 |
1.3 |
(78,337 |
) |
(15.6 |
) | ||||||||||||||||
Financial income (expense), net
|
7,800 |
1.8 |
(6,395 |
) |
(1.4 |
) |
(12,992 |
) |
(2.6 |
) | ||||||||||||||
Income (loss) before taxes on income |
70,084 |
16.2 |
(389 |
) |
(0.1 |
) |
(91,329 |
) |
(18.2 |
) | ||||||||||||||
Tax benefit (taxes on income)
|
(7,020 |
) |
(1.6 |
) |
(5,369 |
) |
(1.2 |
) |
7,383 |
1.5 |
||||||||||||||
Net income (loss)
|
$ |
63,064 |
14.5 |
% |
$ |
(5,758 |
) |
(1.2 |
)% |
$ |
(83,946 |
) |
(16.7 |
)% |
Year ended December 31, |
||||||||||||||||||||||||
2020 |
2021 |
Change |
||||||||||||||||||||||
Amount |
% of Revenues |
Amount |
% of Revenues |
Amount |
% |
|||||||||||||||||||
($ in thousands) |
||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Subscription |
$ |
56,425 |
12.1 |
% |
$ |
134,628 |
26.8 |
% |
$ |
78,203 |
138.6 |
% | ||||||||||||
Perpetual license
|
176,061 |
37.9 |
115,738 |
23.0 |
(60,323 |
) |
(34.3 |
) | ||||||||||||||||
Maintenance and professional services |
231,945 |
50.0 |
252,551 |
50.2 |
20,606 |
8.9 |
||||||||||||||||||
Total revenues
|
$ |
464,431 |
100.0 |
% |
$ |
502,917 |
100.0 |
% |
$ |
38,486 |
8.3 |
% |
Year ended December 31, |
||||||||||||||||||||||||
2020 |
2021 |
Change |
||||||||||||||||||||||
Amount |
% of Revenues |
Amount |
% of Revenues |
Amount |
% |
|||||||||||||||||||
($ in thousands) |
||||||||||||||||||||||||
Cost of revenues: |
||||||||||||||||||||||||
Subscription
|
$ |
17,513 |
3.8 |
% |
$ |
25,837 |
5.2 |
% |
$ |
8,324 |
47.5 |
% | ||||||||||||
Perpetual license
|
4,925 |
1.1 |
3,904 |
0.8 |
(1,021 |
) |
(20.7 |
) | ||||||||||||||||
Maintenance and professional services |
60,133 |
12.9 |
63,566 |
12.6 |
3,433 |
5.7 |
| |||||||||||||||||
Total cost of revenues
|
$ |
82,571 |
17.8 |
% |
$ |
93,307 |
18.6 |
% |
$ |
10,736 |
13.0 |
% | ||||||||||||
Gross profit
|
$ |
381,860 |
82.2 |
% |
$ |
409,610 |
81.4 |
% |
$ |
27,750 |
7.3 |
% |
Year ended December 31, |
||||||||||||||||||||||||
2020 |
2021 |
Change |
||||||||||||||||||||||
Amount |
% of Revenues |
Amount |
% of Revenues |
Amount |
% |
|||||||||||||||||||
($ in thousands) |
||||||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Research and development
|
$ |
95,426 |
20.5 |
% |
$ |
142,121 |
28.2 |
% |
$ |
46,695 |
48.9 |
% | ||||||||||||
Sales and marketing
|
219,999 |
47.4 |
274,401 |
54.6 |
54,402 |
24.7 |
||||||||||||||||||
General and administrative
|
60,429 |
13.0 |
71,425 |
14.2 |
10,996 |
18.2 |
||||||||||||||||||
Total operating expenses
|
$ |
375,854 |
80.9 |
% |
$ |
487,947 |
97.0 |
% |
$ |
112,093 |
29.8 |
% |
B. |
Liquidity and Capital Resources |
Year Ended December 31, |
||||||||
2020 |
2021 |
|||||||
($ in thousands) |
||||||||
Net cash provided by operating activities
|
$ |
106,769 |
$ |
74,740 |
||||
Net cash used in investing activities
|
(412,387 |
) |
(228,194 |
) | ||||
Net cash provided by financing activities
|
13,249 |
10,949 |
($ in thousands) |
Total |
Less than 1
year |
1 – 3 years |
3 – 5 years |
||||||||||||
|
||||||||||||||||
Operating lease obligations(1) |
$ |
17,596 |
$ |
7,017 |
$ |
9,993 |
$ |
586 |
||||||||
Uncertain tax obligations(2) |
3,870 |
— |
— |
— |
||||||||||||
Severance pay(3) |
8,271 |
— |
— |
— |
||||||||||||
0.00% Convertible Senior Notes due 2024(4) |
575,000 |
— |
575,000 |
— |
||||||||||||
|
||||||||||||||||
Total |
$ |
604,737 |
$ |
7,017 |
$ |
584,993 |
$ |
586 |
C. |
Research and Development, Patents and Licenses, etc. |
D. |
Trend Information |
E. | Critical Accounting Estimates |
o |
the expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
o |
the research and development is for the promotion or development of the company; and |
o |
the research and development is carried out by or on behalf of the company seeking the deduction. |
o |
amortization 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;
|
o |
under limited conditions, an election to file consolidated tax returns together with Israeli Industrial Companies controlled by it;
and |
o |
expenses related to a public offering of shares in a stock exchange are deductible in equal amounts over three years commencing on
the year of offering. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. |
Directors and Senior Management |
Name |
Age |
Position | ||
Senior Management |
||||
Ehud (Udi) Mokady |
53 |
Chairman of the Board and Chief Executive Officer and Founder | ||
Joshua Siegel |
58 |
Chief Financial Officer | ||
Chen Bitan |
52 |
General Manager Israel, Chief Product Officer | ||
Matthew Cohen |
46 |
Chief Operating Officer | ||
Donna Rahav |
43
|
Chief Legal Officer | ||
Directors |
||||
Gadi Tirosh(1)(3)(4)(5) |
55 |
Lead Independent Director | ||
Ron Gutler(1)(2)(4)(5) |
64 |
Director | ||
Kim Perdikou(1)(2)(3)(4)(5) |
64 |
Director | ||
David Schaeffer(5) |
65 |
Director | ||
Amnon Shoshani(3)(5) |
58 |
Director | ||
François Auque(2)(5) |
65 |
Director | ||
Avril England(4)(5) |
53 |
Director |
(1) |
Member of our compensation committee. |
(2) |
Member of our audit committee. |
(3) |
Member of our nominating and corporate governance committee. |
(4) |
Member of our strategy committee. |
(5) |
Independent director under the rules of Nasdaq. |
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) |
||||||||||||
Ehud (Udi) Mokady, Chairman of the Board & CEO
|
$ |
415,000 |
$ |
325,324 |
$ |
695,320 |
$ |
10,970,738 |
||||||||
Joshua Siegel, Chief Financial Officer
|
422,231 |
127,886 |
393,740 |
4,306,569 |
||||||||||||
Matthew Cohen, Chief Operating Officer
|
412,000 |
88,662 |
690,432 |
3,674,682 |
||||||||||||
Chen Bitan, General Manager Israel, Chief Product Officer
|
366,493 |
206,051 |
323,690 |
2,227,113 |
||||||||||||
Clarence Hinton, Chief Strategy Officer
|
330,000 |
71,012 |
300,010 |
1,788,878 |
(1) |
In accordance with Israeli law, all amounts reported in the table are in terms of cost to our Company, as recorded in our financial
statements for the year ended December 31, 2021. |
(2) |
All current 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, 2021. |
(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 Medicare and social security, tax gross-up payments and other benefits and perquisites consistent with our guidelines,
regardless of whether such amounts have actually been paid to the executive. |
(4) |
Amounts reported in this column refer to Variable Compensation such as incentives and earned or paid bonuses as recorded in our financial
statements for the year ended December 31, 2021. |
(5) |
Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2021
with respect to equity-based compensation, reflecting also equity awards made in previous years which have vested during the current year.
Assumptions and key variables used in the calculation of such amounts are described in Note 12 to our audited consolidated financial statements,
which are included in this annual report. |
RSUs |
Business PSUs |
Relative TSR PSUs | ||
2020 |
Percentage |
50% |
30% |
20% |
Amount |
27,700 |
16,600 |
11,100 | |
2021 |
Percentage |
~40% |
~40% |
20% |
Amount |
25,300 |
25,290 |
12,650 | |
2022 |
Percentage |
40% |
40% |
20% |
Amount |
24,600 |
24,600 |
12,300 |
C. |
Board Practices |
o |
providing leadership to the board of directors if circumstances arise in which the role of the Chairman of the Board may be, or may
be perceived to be, in conflict, and responding to any reported conflicts of interest, or potential conflicts of interest, arising for
any director; |
o |
presiding as chairman of meetings of the board of directors at which the Chairman of the Board is not present, including executive
sessions of the independent members of the board of directors; |
o |
serving as liaison between the Chairman of the Board and the independent members of the Board; |
o |
approving meeting agendas for the board of directors; |
o |
approving information sent to the board of directors; |
o |
approving meeting schedules to assure that there is sufficient time for discussion of all agenda items; |
o |
having the authority to call meetings of the independent members of the board; |
o |
ensuring that he or she is available for consultation and direct communication with shareholders, as appropriate; |
o |
recommending that the board of directors retain consultants or advisers that report directly to the board; |
o |
conferring with the Chairman of the Board on important board of directors matters and ensuring the board of directors focuses on
key issues and tasks facing the Company; and |
o |
performing such other duties as the board of directors may from time to time delegate to assist the board of directors in the fulfillment
of its duties. |
o |
overseeing of our accounting and financial reporting process and the audits of our financial statements, the effectiveness of our
internal control over financial reporting and making such reports as may be required of an audit committee under the rules and regulations
promulgated under the Exchange Act; |
o |
retaining and terminating our independent registered public accounting firm subject to the approval of our board of directors and,
in the case of retention, of our shareholders 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 and related fees and terms; |
o |
establishing systems of internal control over financial reporting, including communication and implementation thereof and the assessment
of the internal controls in accordance with the Sarbanes-Oxley Act, and any attestation by the independent registered public accounting
firm; |
o |
determining whether there are deficiencies in the business management practices of our Company, including in consultation with our
internal auditor or the independent registered public accounting firm, and making recommendations to the board of directors to improve
such practices; |
o |
determining whether to approve certain related party transactions (see “Item 6.C. Board Practices —Approval of Related
Party Transactions under Israeli Law”); |
o |
recommending to the board of directors the retention and termination of our internal auditor, and determining the internal auditor's
fees and other terms of engagement, in accordance with the Companies Law; |
o |
approving the working plan proposed by the internal auditor and reviewing and discussing the work of the internal auditor on a quarterly
basis; |
o |
reviewing our cybersecurity risks and controls with senior management, keeping our board informed of key issues related to cybersecurity;
|
o |
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; and |
o |
performing such other duties consistent with the audit committee charter, our governing documents, stock exchange rules and applicable
law that may be requested by the board of directors from time to time, including discussing with management policies and practices that
govern the process by which the Company undertakes risk assessment and management in sensitive areas. |
o |
recommending to the board of directors for its approval a compensation policy and subsequently reviewing it from time to time, assessing
its implementation and recommending periodic updates, whether a new compensation policy should be adopted or an existing compensation
policy should continue in effect; |
o |
reviewing, evaluating and making recommendations regarding the terms of office, compensation and benefits for our office holders,
including the non-employee directors, taking into account our compensation policy; |
o |
exempting certain compensation arrangements from the requirement to obtain shareholder approval under the Companies Law (including
with respect to the Chief Executive Officer); and |
o |
reviewing and granting equity-based awards pursuant to our equity incentive plans to the extent such authority is delegated to the
compensation committee by our board of directors and the reserving of additional shares for issuance thereunder. |
o |
overseeing and assisting our board of directors in reviewing and recommending nominees for election as directors and as members of
the committees of the board of directors; |
o |
establishing procedures for, and administering the performance of the members of our board and its committees; |
o |
evaluating and making recommendations to our board of directors regarding the termination of membership of directors; |
o |
reviewing, evaluating and making recommendations regarding management succession and development; |
o |
reviewing and making recommendations to our board of directors regarding board member qualifications, composition and structure and
the nature and duties of the committees and qualifications of committee members; |
o |
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and
recommending to our board of directors a set of corporate governance guidelines applicable to our Company; and |
o |
provide oversight of the Company’s efforts with regard to environmental, social and governance (“ESG”) matters,
disclosure and strategy, as well as coordinate, as necessary, with other committees of the board of directors and the Company’s
ESG committee and steering committee, which are comprised of key Company employees and management. |
o |
a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; |
o |
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
o |
an office holder (including a director) of the company (or a relative thereof); or |
o |
a member of the company’s independent accounting firm, or anyone on his or her behalf. |
o |
information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position;
and |
o |
all other important information pertaining to any such action. |
o |
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; |
o |
refrain from any action which competes with the company’s business; |
o |
refrain from exploiting any business opportunity of the company in order to receive a personal gain for himself or herself or others;
and |
o |
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. |
o |
a transaction other than in the ordinary course of business; |
o |
a transaction that is not on market terms; or |
o |
a transaction that may have a material impact on a company’s profitability, assets or liabilities. |
o |
an amendment to the company’s articles of association; |
o |
an increase of the company’s authorized share capital; |
o |
a merger; or |
o |
the approval of related party transactions and acts of office holders that require shareholder approval. |
o |
a monetary liability incurred by or 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 undertaking must be limited to certain 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 foreseen events and
described above amount or criteria; |
o |
reasonable litigation expenses, including reasonable 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; or
(2) in connection with a monetary sanction or liability imposed on him or her in favor of an injured party in certain Administrative
proceedings; |
o |
expenses incurred by an office holder in connection with Administrative proceedings instituted against such office holder, or certain
compensation payments made to an injured party imposed on an office holder by Administrative proceedings, including reasonable litigation
expenses and reasonable attorneys’ fees; and |
o |
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. |
o |
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; |
o |
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; |
o |
a monetary liability imposed on the office holder in favor of a third party; |
o |
a monetary liability imposed on the office holder in favor of an injured party in certain Administrative proceedings; and |
o |
expenses incurred by an office holder in connection with certain Administrative proceedings, including reasonable litigation expenses
and reasonable attorneys’ fees. |
o |
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;
|
o |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office
holder; |
o |
an act or omission committed with intent to derive illegal personal benefit; or |
o |
a civil or criminal fine, monetary sanction or forfeit levied against the office holder. |
D. |
Employees |
As of December 31, |
||||||||||||
Department |
2019 |
2020 |
2021 |
|||||||||
Sales and marketing
|
656 |
772 |
941 |
|||||||||
Research and development
|
349 |
464 |
643 |
|||||||||
Services and support
|
253 |
309 |
381 |
|||||||||
General and administrative
|
122 |
144 |
175 |
|||||||||
Total
|
1,380 |
1,689 |
2,140 |
• |
each person or entity known by us to own beneficially 5% or more of our outstanding shares; |
• |
each of our directors and senior management individually; and |
• |
all of our senior management and directors as a group. |
Shares Beneficially Owned |
||||||||
Name of Beneficial Owner |
Number |
% |
||||||
Principal Shareholders |
||||||||
Wasatch Advisors, Inc. (1) |
3,691,565 |
9.2 |
% | |||||
Senior Management and
Directors |
||||||||
Ehud (Udi) Mokady(2) |
* |
* |
||||||
Joshua Siegel |
* |
* |
||||||
Chen Bitan |
* |
* |
||||||
Matthew Cohen |
* |
* |
||||||
Donna Rahav |
* |
* |
||||||
Gadi Tirosh |
* |
* |
||||||
Ron Gutler |
* |
* |
||||||
Kim Perdikou |
* |
* |
||||||
David Schaeffer |
* |
* |
||||||
Amnon Shoshani |
* |
* |
||||||
François Auque |
* |
* |
||||||
Avril England |
* |
* |
||||||
All senior management and directors as a group (12 persons) |
578,502 |
1.4 |
% |
(1) |
Based on a Schedule 13G/A filed on February 10, 2022, by Wasatch Advisors, Inc. (“Wastach”), shares beneficially owned
consist of 3,691,565 ordinary shares over which Wastach has sole voting and dispositive power. The address of Wasatch is 505 Wakara Way,
Salt Lake City, UT 84108. |
(2) |
Mr. Mokady’s shares include 12,600 shares held in trust for family members over which Mr. Mokady is the beneficial
owner. |
ITEM 8. | FINANCIAL INFORMATION |
ITEM 9. | THE OFFER AND LISTING |
ITEM 10. | ADDITIONAL INFORMATION |
• |
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, accounts 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 ordinary shares as compensation for the performance of services; |
• |
persons that hold our ordinary shares as part of a “hedging,” “integrated” or “conversion” transaction
or as a position in a “straddle” for United States federal income tax purposes; |
• |
persons subject to special tax accounting rules as a result of any item of gross income with respect to the ordinary shares being
taken into account in an applicable financial statement; |
• |
partnerships (including entities or arrangements classified as partnerships for United States federal income tax purposes) or other
pass-through entities or arrangements, or indirect holders that hold our ordinary shares through such an entity or arrangement;
|
• |
S corporations; |
• |
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. |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Period |
Change in Average Exchange Rate of the NIS Against the U.S. dollar (%) |
|||
2021 |
(6.2 |
) | ||
2020 |
(3.6 |
) | ||
2019 |
(0.9 |
) |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. | CONTROLS AND PROCEDURES |
• |
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. |
ITEM 16A. |
AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. |
CODE OF ETHICS |
ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
2020 |
2021 |
|||||||
($ in thousands) |
||||||||
Audit Fees |
$ |
633 |
$ |
746 |
||||
Audit-Related Fees |
275 |
155 |
||||||
Tax Fees |
312 |
367 |
||||||
All Other Fees |
11 |
48 |
||||||
Total |
$ |
1,231 |
$ |
1,316 |
ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F. |
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM 16G. |
CORPORATE GOVERNANCE |
ITEM 16H. |
MINE SAFETY DISCLOSURE |
ITEM 16I. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM 17. |
FINANCIAL STATEMENTS |
ITEM 18. |
FINANCIAL STATEMENTS |
ITEM 19. |
EXHIBITS |
Exhibit No. |
Description | |
101.INS |
iXBRL Document | |
101.SCH |
iXBRL Taxonomy Extension Schema Document | |
101.CAL |
iXBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF |
iXBRL Taxonomy Definition Linkbase Document | |
101.LAB |
iXBRL Taxonomy Extension Label Linkbase Document | |
101.PRE |
iXBRL Taxonomy Extension Presentation Linkbase Document | |
104 |
Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline iXBRL document)
|
|
CyberArk Software Ltd. |
| |
|
|
|
|
Date: March 10, 2022 |
By: |
/s/ Ehud Mokady |
|
|
|
Ehud Mokady |
|
|
|
Chairman of the Board & Chief Executive Officer |
Page
|
|
Reports of Independent Registered Public Accounting Firm (PCAOB ID 1281)
|
F-2 - F-5
|
F-6 - F-7
|
|
F-8
|
|
F-9
|
|
F-10 - F-11
|
|
F-12 - F-47
|
Revenue recognition
|
||
Description of the Matter
|
As explained in Note 2 to the consolidated financial statements, the Company substantially generates revenues from providing the rights to access its SaaS solutions and licensing the rights to use its software products, maintenance and professional services. The Company enters into contracts with customers that include combinations of products and services, which are generally distinct and recorded as separate performance obligations. The transaction price is then allocated to the distinct performance obligations based on a relative standalone selling price basis and revenue is recognized when control of the distinct performance obligation is transferred to the customer.
|
|
Auditing the Company's recognition of revenue involved a high degree of auditor judgment due to the effort to evaluate 1) the identification and determination of whether products and services, such as software licenses and related services, are considered distinct performance obligations that should be accounted for separately versus together and 2) the determination of stand-alone selling prices for each distinct performance obligation.
|
||
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls related to the identification of distinct performance obligations, and the determination of stand-alone selling prices for each distinct performance obligation.
|
|
Our audit procedures also included, among others, selecting a sample of customer contracts and reading contract source documents for each selection, including the executed contract and purchase order and evaluating the appropriateness of management's application of significant accounting policies on the contracts. We tested management's identification of significant terms for completeness, including the identification and determination of distinct performance obligations. We also evaluated the reasonableness of management's estimate of stand-alone selling prices for products and services and tested the mathematical accuracy of management's calculations of revenue.Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements.
|
December 31,
|
||||||||
2020
|
2021
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
499,992
|
$
|
356,850
|
||||
Short-term bank deposits
|
256,143
|
369,645
|
||||||
Marketable securities
|
196,856
|
199,933
|
||||||
Trade receivables (net of allowance for credit losses of $101 and $23 at December 31, 2020 and 2021, respectively)
|
93,128
|
113,211
|
||||||
Prepaid expenses and other current assets
|
15,312
|
22,225
|
||||||
Total current assets
|
1,061,431
|
1,061,864
|
||||||
LONG-TERM ASSETS:
|
||||||||
Marketable securities
|
202,190
|
300,662
|
||||||
Property and equipment, net
|
18,537
|
20,183
|
||||||
Intangible assets, net
|
23,676
|
17,866
|
||||||
Goodwill
|
123,717
|
123,717
|
||||||
Other long-term assets
|
99,992
|
121,743
|
||||||
Deferred tax assets
|
32,809
|
47,167
|
||||||
Total long-term assets
|
500,921
|
631,338
|
||||||
TOTAL ASSETS
|
$
|
1,562,352
|
$
|
1,693,202
|
Year ended
December 31,
|
||||||||||||
2019
|
2020
|
2021
|
||||||||||
Revenues:
|
||||||||||||
Subscription
|
$
|
18,168
|
$
|
56,425
|
$
|
134,628
|
||||||
Perpetual license
|
221,955
|
176,061
|
115,738
|
|||||||||
Maintenance and professional services
|
193,772
|
231,945
|
252,551
|
|||||||||
433,895
|
464,431
|
502,917
|
||||||||||
Cost of revenues:
|
||||||||||||
Subscription
|
5,611
|
17,513
|
25,837
|
|||||||||
Perpetual license
|
7,900
|
4,925
|
3,904
|
|||||||||
Maintenance and professional services
|
49,104
|
60,133
|
63,566
|
|||||||||
62,615
|
82,571
|
93,307
|
||||||||||
Gross profit
|
371,280
|
381,860
|
409,610
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development
|
72,520
|
95,426
|
142,121
|
|||||||||
Sales and marketing
|
184,168
|
219,999
|
274,401
|
|||||||||
General and administrative
|
52,308
|
60,429
|
71,425
|
|||||||||
Total operating expenses
|
308,996
|
375,854
|
487,947
|
|||||||||
Operating income (loss)
|
62,284
|
6,006
|
(78,337
|
)
|
||||||||
Financial income (expense), net
|
7,800
|
(6,395
|
)
|
(12,992
|
)
|
|||||||
Income (loss) before taxes on income
|
70,084
|
(389
|
)
|
(91,329
|
)
|
|||||||
Tax benefit (taxes on income)
|
(7,020
|
)
|
(5,369
|
)
|
7,383
|
|||||||
Net income (loss)
|
$
|
63,064
|
$
|
(5,758
|
)
|
$
|
(83,946
|
)
|
||||
Basic net income (loss) per ordinary share
|
$
|
1.68
|
$
|
(0.15
|
)
|
$
|
(2.12
|
)
|
||||
Diluted net income (loss) per ordinary share
|
$
|
1.62
|
$
|
(0.15
|
)
|
$
|
(2.12
|
)
|
||||
Other comprehensive income (loss)
|
||||||||||||
Change in net unrealized gains (losses) on marketable securities:
|
||||||||||||
Net unrealized gains (losses) arising during the year
|
777
|
2,152
|
(3,405
|
)
|
||||||||
777
|
2,152
|
(3,405
|
)
|
|||||||||
Change in unrealized net gain (loss) on cash flow hedges:
|
||||||||||||
Net unrealized gains arising during the year
|
1,538
|
2,676
|
1,702
|
|||||||||
Net gains reclassified into net income (loss)
|
(558
|
)
|
(1,471
|
)
|
(2,075
|
)
|
||||||
980
|
1,205
|
(373
|
)
|
|||||||||
Other comprehensive income (loss), net of taxes of $(240), $(458) and $(516) for 2019, 2020 and 2021, respectively
|
1,757
|
3,357
|
(3,778
|
)
|
||||||||
Total comprehensive income (loss)
|
$
|
64,821
|
$
|
(2,401
|
)
|
$
|
(87,724
|
)
|
|
|
Ordinary shares
|
|
|
Additional
paid-in
capital
|
|
|
Accumulated other comprehensive income
(loss) |
|
|
Retained
earnings
|
|
|
Total
shareholders'
equity
|
|
|||||||||
Shares
|
|
|
Amount
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
|
|
36,838,523
|
|
|
$
|
95
|
|
|
$
|
303,900
|
|
|
$
|
(939
|
)
|
|
$
|
163,714
|
|
|
$
|
466,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options and vested RSUs granted to employees
|
1,204,993
|
4 |
24,543
|
- | - |
24,547
|
||||||||||||||||||
Equity component of convertible senior notes, net of tax
|
- | - |
65,932
|
- | - |
65,932
|
||||||||||||||||||
Purchase of capped calls
|
- | - |
(53,648
|
) |
- | - |
(53,648
|
) | ||||||||||||||||
Other comprehensive income, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,757
|
|
|
|
-
|
|
|
|
1,757
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
55,710
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,710
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,064
|
|
|
|
63,064
|
|
Balance as of December 31, 2019
|
38,043,516
|
$
|
99 |
$
|
396,437
|
$
|
818
|
$
|
226,778
|
$
|
624,132
|
|||||||||||||
Exercise of options and vested RSUs granted to employees
|
|
|
991,243
|
|
|
|
2
|
|
|
|
13,094
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,096
|
|
Other comprehensive income, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,357
|
|
|
|
-
|
|
|
|
3,357
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
72,461
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,461
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,758
|
)
|
|
|
(5,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
|
39,034,759
|
|
|
$
|
101
|
|
|
$
|
481,992
|
|
|
$
|
4,175
|
|
|
$
|
221,020
|
|
|
$
|
707,288
|
|
Exercise of options and vested RSUs granted to employees
|
|
|
1,007,111
|
|
|
|
3
|
|
|
|
10,940
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,943
|
|
Other comprehensive loss, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,778
|
)
|
|
|
-
|
|
|
|
(3,778
|
)
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
96,005
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96,005
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(83,946
|
)
|
|
|
(83,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021
|
|
|
40,041,870
|
|
|
$
|
104
|
|
|
$
|
588,937
|
|
|
$
|
397
|
|
|
$
|
137,074
|
|
|
$
|
726,512
|
|
Year ended
December 31,
|
||||||||||||
2019
|
2020
|
2021
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income (loss)
|
$
|
63,064
|
$
|
(5,758
|
)
|
$
|
(83,946
|
)
|
||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
10,646
|
15,475
|
14,228
|
|||||||||
Share-based compensation
|
55,517
|
71,849
|
95,436
|
|||||||||
Amortization of premium and accretion of discount on marketable securities, net
|
(47
|
)
|
3,068
|
7,532
|
||||||||
Deferred income taxes, net
|
(6,974
|
)
|
(1,988
|
)
|
(11,972
|
)
|
||||||
Amortization of debt discount and issuance costs
|
1,966
|
17,183
|
17,792
|
|||||||||
Increase in trade receivables
|
(24,522
|
)
|
(17,315
|
)
|
(20,083
|
)
|
||||||
Increase in prepaid expenses, other current and long-term assets and others
|
(14,321
|
)
|
(20,487
|
)
|
(38,219
|
)
|
||||||
Increase in trade payables
|
1,571
|
558
|
1,499
|
|||||||||
Increase in short-term and long-term deferred revenue
|
40,821
|
45,397
|
74,767
|
|||||||||
Increase in employees and payroll accruals
|
7,337
|
7,846
|
23,821
|
|||||||||
Increase (decrease) in accrued expenses and other current and long-term liabilities
|
6,652
|
(9,059
|
)
|
(6,115
|
)
|
|||||||
Net cash provided by operating activities
|
141,710
|
106,769
|
74,740
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Investment in short-term and long-term deposits
|
(33,961
|
)
|
(123,054
|
)
|
(105,069
|
)
|
||||||
Investment in marketable securities
|
(165,714
|
)
|
(405,193
|
)
|
(357,210
|
)
|
||||||
Proceeds from sales and maturities of marketable securities
|
63,489
|
191,637
|
243,013
|
|||||||||
Purchase of property and equipment
|
(7,036
|
)
|
(7,174
|
)
|
(8,928
|
)
|
||||||
Business acquisitions, net of cash acquired (Schedule A)
|
-
|
(68,603
|
)
|
-
|
||||||||
Net cash used in investing activities
|
(143,222
|
)
|
(412,387
|
)
|
(228,194
|
)
|
||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from (payment of) withholding tax related to employee stock plans
|
1,155
|
1,069
|
(789
|
)
|
||||||||
Proceeds from exercise of stock options
|
24,428
|
12,180
|
11,738
|
|||||||||
Proceeds from the issuance of convertible senior notes, net of issuance costs
|
560,107
|
-
|
-
|
|||||||||
Purchase of capped calls
|
(53,648
|
)
|
-
|
-
|
||||||||
Net cash provided by financing activities
|
532,042
|
13,249
|
10,949
|
|||||||||
Increase (decrease) in cash, cash equivalents and restricted cash
|
530,530
|
(292,369
|
)
|
(142,505
|
)
|
|||||||
Effect of exchange rate differences on cash, cash equivalents and restricted cash
|
-
|
-
|
(689
|
)
|
||||||||
Cash, cash equivalents and restricted cash at the beginning of the year
|
261,883
|
792,413
|
500,044
|
|||||||||
Cash, cash equivalents and restricted cash at the end of the year |
$
|
792,413
|
$
|
500,044
|
$
|
356,850
|
||||||
Non-cash activities:
|
||||||||||||
Lease liabilities arising from obtaining right-of-use-assets
|
$
|
27,926
|
$
|
3,237
|
$
|
-
|
||||||
Non-cash purchase of property and equipment
|
$
|
960
|
$
|
1,639
|
$
|
2,165
|
||||||
Exercise of stock options
|
$
|
119
|
$
|
916
|
$
|
127
|
Year ended
December 31,
|
||||||||||||
2019
|
2020
|
2021
|
||||||||||
Supplemental disclosure of cash flow activities:
|
||||||||||||
Cash paid during the year for taxes, net
|
$
|
10,548
|
$
|
11,424
|
$
|
8,404
|
||||||
Reconciliation of cash, cash equivalents and restricted cash:
|
||||||||||||
Cash and cash equivalents
|
792,363
|
499,992
|
356,850
|
|||||||||
Restricted cash included in other long-term assets
|
50
|
52
|
-
|
|||||||||
Total cash, cash equivalents and restricted cash
|
$
|
792,413
|
$
|
500,044
|
$
|
356,850
|
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 and services. The Company's solutions and services secure access for any identity - human or machine - to help organizations secure critical business assets, protect their distributed workforce and customers, and accelerate business in the cloud. The Company's software extends its leadership in Privileged Access Management, or PAM, to offer a comprehensive set of Identity Security capabilities.
b In May 2020, the Company acquired all of the share capital of IDaptive Holdings, Inc. ("Idaptive") for total gross consideration of $68,603. Idaptive specializes in Identity and Access Management as a Service (IDaaS) which provides a comprehensive Artificial Intelligence (AI)-based and security-first approach to managing identities that is both adaptive and context-aware. The Company expensed the related acquisition costs of $2,932 substantially in general and administrative. Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Idaptive`s technology into the Company`s portfolio. Pro forma results of operations have not been presented because the acquisition was not material to the Company's results of operations.
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
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. Such management estimates and assumptions are related, but not limited to contingent liabilities, income tax uncertainties, deferred taxes, share-based compensation, fair value of assets acquired and liabilities assumed in business combinations, fair value of the liability component of the convertible senior notes, as well as the determination of standalone selling prices in revenue transactions with multiple performance obligations and the estimated period of benefit for deferred contract costs. The Company's management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
F - 12 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b.Principles of consolidation:
The consolidated financial statements include the financial statements of CyberArk Software Ltd. and its wholly owned subsidiaries. All 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 a substantial portion of the Company's costs are incurred in U.S. dollars. The Company's management believes that the U.S. dollar is the currency of the primary economic environment in which the Company and each of its subsidiaries 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 Accounting Standard Codification ("ASC") No. 830 "Foreign Currency Matters." All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the statement of comprehensive income (loss) as financial income or expenses, as appropriate.
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.
e.Short-term bank deposits:
Short-term bank deposits are deposits with maturities of up to one year. As of December 31, 2020 and 2021, the Company's bank deposits are denominated in U.S. dollars and New Israeli Shekels ("NIS") and bear yearly interest at weighted average rates of 0.86% and 0.72%, respectively. Short-term bank deposits are presented at their cost, including accrued interest.
F - 13 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f.Investments in marketable securities:
The Company accounts for investments in debt marketable securities in accordance with ASC No. 320, "Investments - Debt and Equity Securities". The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company classifies all of its marketable securities as available-for-sale as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders' equity.
Starting January 1, 2020, the Company periodically evaluates its available-for-sale debt securities for impairment in accordance with ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. If the amortized cost of an individual security exceeds its fair value, the Company considers its intent to sell the security or whether it is more likely than not that it will be required to sell the security before recovery of its amortized basis. If either of these criteria are met, the Company writes down the security to its fair value and records the impairment charge in the Consolidated Statements of Comprehensive Income (Loss). If neither of these criteria are met, the Company determines whether credit loss exists. Credit loss is estimated by considering changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, as well as other factors.
During the years ended December 31, 2020 and 2021, no credit loss impairments have been identified.
For the year ended December 31, 2019, the Company's securities were reviewed for impairment in accordance with ASC No. 320-10-35. According to this standard, if such assets were considered to be impaired, the impairment charge was recognized in earnings when a decline in the fair value of its investments below the cost basis was judged to be Other-Than-Temporary Impairment (OTTI). Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company's intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. Based on the above factors, the Company concluded that unrealized losses on its available-for-sale securities for the year ended December 31, 2019 were not OTTI.
g.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, software and related equipment |
|
20 – 33 |
Office furniture and equipment |
|
15 – 20 |
Leasehold improvements |
|
Over the shorter of the related lease period or the life of the asset |
h.Long-lived assets:
The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, "Property, Plant and Equipment", 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, 2019, 2020 and 2021, no impairment losses have been identified.
i.Business combination:
The Company accounts for its business acquisitions in accordance with ASC No. 805, "Business Combinations." While 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, these estimates and assumptions are subject to refinement. The total purchase price allocated to the tangible and intangible assets acquired is assigned based on the fair values as of the date of the acquisition. During the measurement period, which does not exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Goodwill generated from the business combinations is primarily attributable to synergies between the Company and acquired companies` respective products and services. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
j.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 purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject to an impairment test.
F - 15 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ASC No. 350, "Intangible-Goodwill and other" requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The accounting guidance gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that might indicate that a reporting unit's fair value is less than its carrying amount. If it is determined, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is performed. 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.
For the years ended December 31, 2019, 2020 and 2021, no impairment losses were identified.
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 to twelve years. Intangible assets, consisting primarily of technology and customer relationships, are amortized over their estimated useful lives on a straight-line basis or in proportion to their economic benefits realized.
k.Derivative instruments:
ASC No. 815, "Derivative and Hedging," requires companies to recognize all of their derivative instruments as either assets or liabilities on the balance sheet 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.
As a result of adopting ASU 2017-12, "Targeted Improvements to Accounting for Hedging Activities", beginning January 1, 2019, gains and losses on the derivatives instruments that are designated and qualify as a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified into earnings in the same accounting period in which the designated forecasted transaction or hedged item affects earnings.
To hedge against the risk of changes in cash flows resulting from foreign currency salary payments during the year, the Company 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 No. 815, and are all effective, as their critical terms match underlying transactions being hedged.
F - 16 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
As of December 31, 2020 and 2021, the amount recorded in accumulated other comprehensive income (loss) from the Company's currency forward and option transactions was $1,459, net of tax of $200 and $1,086, net of tax of $148, respectively.
As of December 31, 2021, the notional amounts of foreign exchange forward contracts into which the Company entered were $70,592. The foreign exchange forward contracts will expire by September 2022. The fair value of derivative instruments assets balances as of December 31, 2020 and 2021, totaled $1,654 and $1,318, respectively. The fair value of derivative instruments liabilities balances as of December 31, 2020 and 2021, totaled $0 and $86, respectively.
In addition to the derivatives that are designated as hedges as discussed above, the Company enters into certain foreign exchange forward transactions and holds foreign exchange deposits to economically hedge certain net asset balances in Euros, British Pounds Sterling, Canadian Dollars and NIS. Gains and losses related to such derivative instruments are recorded in financial income (expense), net. As of December 31, 2021, with respect to these transactions, the notional amounts of foreign exchange forward contracts into which the Company entered were $32,546. The foreign exchange forward contracts will expire by June 2022. The fair value of derivative instruments assets balances as of December 31, 2020 and 2021, totaled $0 and $751, respectively. The fair value of derivative instruments liabilities balances as of December 31, 2020 and 2021 totaled $1,561 and $36, respectively.
For the years ended December 31, 2019, 2020 and 2021 the Company recorded financial income (expense), net from hedging transactions of $515, $(1,317) and $2,099, respectively.
l.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.
The majority 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, made on behalf of the employee with insurance companies. 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.
F - 17 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
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 accruals. The value of these deposits recorded as an asset on the Company's balance sheet under other long-term assets as of December 31, 2020 and 2021 is $4,952 and $5,227, respectively. The amount of accrued severance payable recorded as a liability on the Company's balance sheet under long-term liabilities as of December 31, 2020 and 2021 is $7,963 and $8,271, respectively.
Severance expenses for the years ended December 31, 2019, 2020 and 2021, amounted to $4,035, $4,813 and $6,368, respectively.
m.U.S. defined contribution plan:
The U.S. subsidiaries has a 401(k) defined contribution plan covering certain full time and part time employees in the U.S. who meet certain eligibility requirements, excluding leased employees and contractors. All eligible employees may elect to contribute up to an annual maximum, of the lesser of 100% of their annual compensation to the plan through salary deferrals, subject to Internal Revenue Service limits, but not greater than $19.5 per year (for certain employees over 50 years of age the maximum contribution is $26 per year).
The U.S. subsidiaries matches amounts equal to 100% of the first 3% of the employee's compensation that they contribute to the defined contribution plan and 50% of the next 2% of their compensation that they contribute to the defined contribution plan with a limit of $11.4 per year per employee. For the years ended December 31, 2019, 2020 and 2021, the U.S. subsidiary recorded expenses for matching contributions of $2,697, $3,533 and $4,386, respectively.
n.Convertible senior notes:
The Company accounts for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options". The Company allocated the principal amount of the convertible senior notes between its liability and equity component. The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument of similar credit rating and maturity that does not have a conversion feature. The equity component is based on the excess of the principal amount of the convertible senior notes over the fair value of the liability component and is recorded in additional paid-in capital. The equity component, net of issuance costs and deferred tax effects is presented within additional paid-in-capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on the same proportions as the proceeds from the notes.
F - 18 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Relating to the convertible senior notes issued in 2019, issuance costs attributable to the liability and equity components were $12.9 million and $2.0 million, respectively. Issuance costs attributable to the liability are netted against the principal balance and are amortized to interest expense using the effective interest method over the contractual term of the notes. The effective interest rate of the liability component of the notes is 3.50%.
Issuance costs attributable to the equity component are netted with the equity component in additional paid-in capital.
o.Revenue recognition:
The Company substantially generates revenues from providing the right to access its SaaS solutions and licensing the rights to use its software products, maintenance and professional services. Subscription revenues include Software as a Service ("SaaS") offerings and on-premise subscription (“Self-hosted subscription”). The Company sells its products through its direct sales force and indirectly through resellers. Payment is typically due within 30 to 90 calendar days of the invoice date.
The Company recognizes revenues in accordance with ASC No. 606, "Revenue from Contracts with Customers" ("ASC No. 606"). As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation.
The Company enters into contracts that can include combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations and may include an option to provide products or services. The perpetual license and self-hosted subscription are distinct as the customer can derive the economic benefit of the software without any professional services, updates or technical support.
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. The Company does not grant a right of return to its customers.
In instances of contracts where revenue recognition differs from the timing of invoicing, the Company generally determined that those contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company's products and services, not to receive or provide financing. The Company uses the practical expedient and does not assess the existence of a significant financing component when the difference between payment and revenue recognition is a year or less.
F - 19 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company records unbilled receivables from contracts when the revenue recognized exceeds the amount billed to the customer. As of December 31, 2020 and 2021 $8,328 and $12,517 short-term unbilled receivables are included in trade receivables, and $15,530 and $1,873 long-term unbilled receivables are included in other long-term assets.
The Company allocates the transaction price to each performance obligation based on its relative standalone selling price. For maintenance, the Company determines the standalone selling price based on the price at which the Company separately sells a renewal contract. For professional services, the Company determines the standalone selling prices based on the prices at which the Company separately sells those services. For SaaS, self-hosted subscription and perpetual license products, the Company determines the standalone selling prices by taking into account available information such as historical selling prices, contract value, geographic location, and the Company's price list and discount policy.
Perpetual license and the license portion of self-hosted subscription are recognized at the point of time when the license is made available for download by the customer. Maintenance revenue related to perpetual license contracts and the maintenance component of the self-hosted subscription offering as well as SaaS revenues are recognized ratably, on a straight-line basis over the term of the related contract, which is generally one to three years.. Professional services revenues substantially are recognized as the services are performed.
The following table presents the Company's revenue by category:
|
December 31, | |||||||||||
|
2019 |
2020 |
2021 |
|||||||||
|
||||||||||||
SaaS |
$ |
7,286 |
$ |
24,305 |
$ |
69,303 | ||||||
Self-hosted subscription* |
10,882 | 32,120 | 65,325 | |||||||||
Perpetual license |
221,955 | 176,061 | 115,738 | |||||||||
Maintenance and support |
157,486 | 190,897 | 214,036 | |||||||||
Professional services |
36,286 | 41,048 | 38,515 | |||||||||
|
||||||||||||
|
$ | 433,895 | $ | 464,431 | $ | 502,917 |
* Self-hosted subscription also includes maintenance associated with self-hosted subscriptions.
For additional information regarding disaggregated revenues, please refer to Note 16 below.
Contract liabilities consist of deferred revenue and include unearned amounts received under maintenance and support contracts and professional services that do not meet the revenue recognition criteria as of the balance sheet date. Contract liabilities also include unearned, invoiced amounts in respect of SaaS and self-hosted subscription contracts whereby there is an unconditional right for the consideration. Deferred revenue are recognized as (or when) the Company performs under the contract. During the year ended December 31, 2021, the Company recognized $154,167 that were included in the deferred revenues balance as of December 31, 2020.
F - 20 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Remaining Performance Obligations:
Transaction price allocated to remaining performance obligations represents non-cancelable contracts that have not yet been recognized, which includes deferred revenues and amounts not yet received that will be recognized as revenue in future periods.
The aggregate amount of the transaction price allocated to remaining performance obligations was $516 million as of December 31, 2021, out of which, the Company expects to recognize approximately 59% in 2022 and the remainder thereafter.
p.Deferred contract costs:
The Company pays sales commissions primarily to sales and certain management personnel based on their attainment of certain predetermined sales goals. Sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid for initial contracts, which are not commensurate with sales commissions paid for renewal contracts, are capitalized and amortized over an expected period of benefit. Based on its technology, customer contracts and other factors, the Company has determined the expected period of benefit to be approximately five years. Sales commissions for initial contracts, which are commensurate with sales commissions paid for renewal contracts, are capitalized and amortized correspondingly to the recognized revenue of the related initial contracts. Sales commissions for renewal contracts are capitalized and amortized over the related contractual renewal period and aligned with the revenue recognized from these contracts. Amortization expense of these costs are substantially included in sales and marketing expenses.
For the year ended December 31, 2020 and 2021, the amortization of deferred contract costs was $39,592 and $43,236, respectively.
As of December 31, 2020 and 2021, the Company presented deferred contract costs from contracts which are for periods of less than 12 months of $3,079 and $801 in prepaid expenses and other current assets, respectively, and deferred contract costs in respect of contracts which are greater than 12 months of $48,716 and $96,619 in other long-term assets, respectively.
q.Trade Receivable and Allowances:
F - 21 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.Leases:
In accordance with ASU No. 2016-02, "Leases (Topic 842)", the Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use ("ROU") asset for leases with a term of twelve months or less. The Company also elected the practical expedient to not separate lease and non-lease components for its leases.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease payments arising from the lease. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured at lease commencement date based on the discounted present value of minimum lease payments over the lease term. The implicit rate within the operating leases is generally not determinable, therefore the Company uses its Incremental Borrowing Rate ("IBR") based on the information available at commencement date in determining the present value of lease payments. The Company's IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option.
Payments under the Company's lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease right-of-use assets and liabilities. Variable lease payments are primarily comprised of payments affected by common area maintenance and utility charges. The Company subleases certain office spaces to third-parties. Sublease income is recognized over the term of the agreement.
s.Research and development costs:
Research and development costs are charged to the statements of comprehensive income (loss) as incurred except to the extent that such costs are associated with internal-use software that qualifies for capitalization.
ASC No. 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 model and the point at which the product is ready for general release, have been insignificant.
F - 22 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
t.Internal use software and website development cost:
The Company capitalizes qualifying costs associated with the development of its website and incurred during the application development stage related to software developed for internal-use in accordance with ASC No. 350-40 "Internal-use Software" ("ASC No. 350-40"). These costs are capitalized based on qualifying criteria. Such costs are amortized over the software's estimated life of three to five years. Costs incurred to develop software applications consist of (a) certain external direct costs of materials and services incurred in developing or obtaining internal-use computer software, and (b) payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the development or implementation of the software. Capitalized internal-use software and website costs are included in property and equipment, net in the consolidated balance sheets.
The Company also capitalizes implementation costs incurred in a cloud computing arrangement that is a service contract, according to the internal-use software guidance in ASC No. 350-40. The capitalized implementation costs and their related amortization and cash flows are presented on the financial statements in consistent with the prepaid amounts and fees related to the associated cloud computing arrangement. Capitalized implementation costs are amortized over the term of the arrangement, beginning when the module or component of the cloud computing arrangement that is a service contract is ready for its intended use.
u. Advertising and marketing expenses:
Advertising and marketing expenses consist primarily of marketing campaigns and tradeshows. Advertising and marketing expenses are charged to the statement of comprehensive income (loss), as incurred. Advertising and marketing expenses for the years ended December 31, 2019, 2020 and 2021, amounted to $20,055, $22,082 and $27,504, respectively.
v.Share-based compensation:
The Company accounts for share-based compensation in accordance with ASC No. 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 award is recognized as an expense over the requisite service periods, which is generally the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. If vesting is subject to a performance condition, recognition is based on the implicit service period of the award. Expense for awards with performance conditions is estimated and adjusted on a quarterly basis based upon the assessment of the probability that the performance condition will be met and is recognized on a graded vesting basis.
F - 23 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company has selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its option awards and Employee Share Purchase Plan ("ESPP"). The fair value of Restricted Share Units ("RSUs") and Performance Share Units ("PSUs") without market conditions, is based on the closing market value of the underlying shares at the date of grant. For PSUs subject to market conditions, the Company uses a Monte Carlo simulation model, which utilizes multiple inputs to estimate payout level and the probability that market conditions will be achieved.
The Black-Scholes-Merton and Monte Carlo models require a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. The Company recognizes forfeitures of equity-based awards as they occur. For graded vesting awards subject to service conditions, the Company recognizes compensation cost using the straight-line attribution method.
w.Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740-10, "Income Taxes" ("ASC No. 740-10"). ASC No. 740-10 prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and 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 assets will not be realized.
The Company established reserves for uncertain tax positions based on the evaluation of whether or not the Company's uncertain tax position is "more likely than not" to be sustained upon examination based on its technical merits. The Company records interest and penalties pertaining to its uncertain tax positions in the financial statements as income tax expense.
x.Basic and diluted net income (loss) per share:
Basic net income (loss) per ordinary share is computed by dividing net income (loss) for each reporting period by the weighted-average number of ordinary shares outstanding during each year. Diluted net income (loss) per ordinary share is computed by dividing net income (loss) for each reporting period by the weighted average number of ordinary shares outstanding during the period, plus dilutive potential ordinary shares considered outstanding during the period, in accordance with ASC No. 260-10 "Earnings Per Share". The Company experienced a loss in the years ended December 31, 2020 and 2021; hence all potentially dilutive ordinary shares were excluded due to their anti-dilutive effect.
y.Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC No. 220, "Comprehensive Income." 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 changes resulting from investments by, or distributions to, shareholders.
F - 24 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
z.Concentration of credit risks:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term bank deposits, marketable securities, trade receivables, severance pay funds and derivative instruments.
The majority of the Company's cash and cash equivalents and short-term bank deposits are invested with major banks in Israel and the United States. Such investments in the United States are in excess of insured limits and are not insured in other jurisdictions. Generally, these investments may be redeemed upon demand and the Company believes that the financial institutions that hold the Company's cash deposits are financially sound and, accordingly, bear minimal risk.
The Company's marketable securities consist of investments, which are highly rated by credit agencies, in government, corporate and government sponsored enterprises debentures. The Company's investment policy limits the amount that the Company may invest in any one type of investment or issuer, in order to reduce credit risk concentrations.
The trade receivables of the Company are mainly derived from sales to a diverse set of customers located primarily in the United States, Europe and Asia. The Company performs ongoing credit evaluations of its customers and, to date, has not experienced any significant losses.
The Company has entered into forward contracts with major banks in Israel to protect against the risk of changes in exchange rates. The derivative instruments hedge a portion of the Company's non-dollar currency exposure.
aa.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.
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 their 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.
F - 25 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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 at the measurement date. 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 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3 -Inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
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 No. 820, the Company measures its foreign currency derivative instruments, at fair value using the market approach valuation technique. Foreign currency derivative contracts as detailed in note 2k are classified within Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.
As of December 31, 2021, the estimated fair value of the Company’s convertible senior notes, net as further described in Note 11, was determined based on the closing quoted price of the convertible senior note, net as of the last day of trading for the period, and is considered Level 2 measurement.
F - 26 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ab.Recently adopted accounting standards:
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): "Simplifying the Accounting for Income Taxes". The new standard simplifies the accounting for income taxes. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.
The Company adopted the standard beginning January 1, 2021. The standard did not have a material impact on the consolidated financial statements.
ac.Recently issued accounting standards:
In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40).” The new standard reduces the number of accounting models in ASC 470-20 that require separate accounting for embedded conversion features. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. The treasury stock method should no longer be used to calculate diluted net income per share for convertible instruments.
The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. Adoption of the new standard is expected to result in an increase of retained earnings in an amount of $26,602, a decrease of additional paid-in capital in an amount of $65,932, an increase of convertible senior notes, net, in an amount of $46,270 and a decrease of deferred tax liabilities, net, in an amount of $6,940. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.
F - 27 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In October 2021, the FASB issued ASU No. 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance .” The new standard improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company does not expect the adoption of the standard will have a material impact on its consolidated financial statements.
ad.Reclassification:
Certain comparative figures have been reclassified to conform to the current year presentation. Also, beginning in the first quarter of 2021, the Company revised the presentation of its lines of revenue and cost of revenue. The Company believes that the revised categories for revenue and cost of revenue as presented on the income statement align with how management evaluates the business and the shift toward recurring revenues. The new revenue lines consist of (a) Subscription revenue, which represents SaaS and self-hosted subscription revenue including the license portion of self-hosted subscription revenue and the ratable maintenance component of self-hosted subscription revenue, (b) Perpetual license revenue and (c) Maintenance and professional services revenue, which represents the maintenance component related to perpetual license sales and professional services revenue.
F - 28 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 3:-MARKETABLE SECURITIES
The following tables summarize the amortized cost, unrealized gains and losses, and fair value of available-for-sale marketable securities as of December 31, 2020 and 2021:
|
|
December 31, 2020 |
|
|||||||||||||
|
|
Amortized cost |
|
|
Gross unrealized losses |
|
|
Gross unrealized gains |
|
|
Fair value |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debentures |
|
$ |
354,775 |
|
|
$ |
(115 |
) |
|
$ |
3,004 |
|
|
$ |
357,664 |
|
Government debentures |
|
|
41,185 |
|
|
|
(17 |
) |
|
|
214 |
|
|
|
41,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
395,960 |
|
|
$ |
(132 |
) |
|
$ |
3,218 |
|
|
$ |
399,046 |
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized cost |
|
|
Gross unrealized losses*) |
|
|
Gross unrealized gains |
|
|
Fair value |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debentures |
|
$ |
453,927 |
|
|
$ |
(1,493 |
) |
|
$ |
881 |
|
|
$ |
453,315 |
|
Government debentures |
|
|
47,450 |
|
|
|
(254 |
) |
|
|
84 |
|
|
|
47,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
501,377 |
|
|
$ |
(1,747 |
) |
|
$ |
965 |
|
|
$ |
500,595 |
|
*) Out of the total unrealized losses, an amount of $16 has been in a continuous unrealized loss position for twelve months or longer.
The following table summarizes the amortized cost and fair value of available-for-sale marketable securities as of December 31, 2020 and 2021, by contractual years-to maturity:
|
|
December 31, |
|
|||||||||||||
|
|
2020 |
|
|
2021 |
|
||||||||||
|
|
Amortized cost |
|
|
Fair value |
|
|
Amortized cost |
|
|
Fair value |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due within one year |
|
$ |
196,587 |
|
|
$ |
196,856 |
|
|
$ |
199,883 |
|
|
$ |
199,933 |
|
Due between one and four years |
|
|
199,373 |
|
|
|
202,190 |
|
|
|
301,494 |
|
|
|
300,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
395,960 |
|
|
$ |
399,046 |
|
|
$ |
501,377 |
|
|
$ |
500,595 |
NOTE 4:-PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Prepaid expenses |
|
$ |
7,346 |
|
|
$ |
15,566 |
|
Hedging transaction assets |
|
|
1,654 |
|
|
|
2,069 |
|
Government authorities |
|
|
1,720 |
|
|
|
3,365 |
|
Deferred commissions |
|
|
3,079 |
|
|
|
801 |
|
Other current assets |
|
|
1,513 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,312 |
|
|
$ |
22,225 |
|
NOTE 5:-PROPERTY AND EQUIPMENT, NET
The composition of property and equipment, net is as follows:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Cost: |
|
|
|
|
|
|
||
Computers, software and related equipment *) |
|
$ |
25,828 |
|
|
$ |
35,290 |
|
Leasehold improvements |
|
|
7,490 |
|
|
|
7,739 |
|
Office furniture and equipment |
|
|
3,870 |
|
|
|
4,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
37,188 |
|
|
|
47,119 |
|
|
|
|
|
|
|
|
|
|
Less - accumulated depreciation |
|
|
18,651 |
|
|
|
26,936 |
|
|
|
|
|
|
|
|
|
|
Depreciated cost |
|
$ |
18,537 |
|
|
$ |
20,183 |
|
*) For the years ended December 31, 2020 and 2021, the Company capitalized $3,369 and $4,160 including $612 and $569 of share-based compensation costs, relating to its internal use software and website development, respectively.
Depreciation expense amounted to $5,057, $6,634 and $8,418 for the years ended December 31, 2019, 2020 and 2021, respectively.
F - 30 |
NOTE 6:-GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Changes in the carrying amount of goodwill:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Balance as of beginning of the year |
|
$ |
82,400 |
|
|
$ |
123,717 |
|
Goodwill acquired |
|
|
41,317 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
$ |
123,717 |
|
|
$ |
123,717 |
|
The composition of intangible assets is as follows:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Original amount: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Technology |
|
$ |
39,625 |
|
|
$ |
39,625 |
|
Customer relationships |
|
|
9,586 |
|
|
|
9,586 |
|
Other |
|
|
664 |
|
|
|
664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
49,875 |
|
|
|
49,875 |
|
|
|
|
|
|
|
|
|
|
Less - accumulated amortization |
|
|
26,199 |
|
|
|
32,009 |
|
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
$ |
23,676 |
|
|
$ |
17,866 |
|
Amortization expense amounted to $5,589, $8,841 and $5,810 for the years ended December 31, 2019, 2020, and 2021, respectively.
As of December 31, 2021, the weighted-average remaining useful lives (in years) of Technology and Customer relationships was 3.3 and 9.8, respectively.
The estimated future amortization expense of intangible assets as of December 31, 2021 is as follows:
2022 |
|
|
4,877 |
|
2023 |
|
|
4,329 |
|
2024 |
|
|
4,282 |
|
2025 |
|
|
1,849 |
|
2026 |
|
|
441 |
|
Thereafter |
|
|
2,088 |
|
|
|
|
|
|
|
|
$ |
17,866 |
|
NOTE 7:-ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Government authorities |
|
$ |
4,871 |
|
|
$ |
3,839 |
|
Accrued expenses |
|
|
6,825 |
|
|
|
8,771 |
|
Unrecognized tax benefits |
|
|
4,633 |
|
|
|
3,870 |
|
Lease liability, current |
|
|
7,025 |
|
|
|
6,974 |
|
Hedging transaction liabilities |
|
|
1,561 |
|
|
|
122 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,915 |
|
|
$ |
23,576 |
|
NOTE 8:-COMMITMENTS AND CONTINGENT LIABILITIES
a.Legal contingencies:
From time to time, the Company becomes involved in legal proceedings or is subject to claims arising in its ordinary course of business. Such matters are generally subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues for contingencies when the loss is probable and it can reasonably estimate the amount of any such loss. The Company is currently not a party to any material legal or administrative proceedings and is not aware of any material pending or threatened material legal or administrative proceedings against the Company.
b. Bank guarantees:
The Company obtained bank guarantees of $1,716 primarily in connection with an office lease agreement.
c. Non-cancelable material purchase obligations:
The Company entered into a non-cancelable material agreement for the receipt of cloud infrastructure services, effective as of April 2021 through March 2024. As of December 31, 2021, the Company’s outstanding contractual commitment is $38,125.
F - 32 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 9:-LEASES
The Company entered into operating leases primarily for offices. The leases have remaining lease terms of up to 4.5 years, some of which may include options to extend the leases for up to an additional 8 years.
The components of operating lease costs were as follows:
|
|
Year ended December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
$ |
6,495 |
|
|
$ |
7,224 |
|
Short-term lease cost |
|
|
1,709 |
|
|
|
1,188 |
|
Variable lease cost |
|
|
1,193 |
|
|
|
1,302 |
|
Sublease income |
|
|
(273 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
Total net lease costs |
|
$ |
9,124 |
|
|
$ |
9,519 |
|
Supplemental balance sheet information related to operating leases is as follows:
|
|
Year ended December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
|
|
Operating lease ROU assets (under other long-term assets in the balance sheets) |
|
$ |
20,363 |
|
|
$ |
14,159 |
|
Operating lease liabilities, current |
|
$ |
7,025 |
|
|
$ |
6,974 |
|
Operating lease liabilities, long-term (under other long-term liabilities in the balance sheets) |
|
$ |
16,202 |
|
|
$ |
10,239 |
|
Weighted average remaining lease term (in years) |
|
|
3.8 |
|
|
|
2.9 |
|
Weighted average discount rate |
|
|
1.7 |
% |
|
|
1.7 |
% |
Lease liability as of December 31, 2021, is as follows:
|
|
December 31, |
|
|
|
|
|
|
|
2022 |
|
$ |
7,017 |
|
2023 |
|
|
6,121 |
|
2024 |
|
|
3,872 |
|
2025 |
|
|
389 |
|
2026 |
|
|
197 |
|
|
|
|
|
|
Total undiscounted lease payments |
|
|
17,596 |
|
Less: imputed interest |
|
|
(383 |
) |
|
|
|
|
|
Present value of lease liabilities |
|
$ |
17,213 |
|
F - 33 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 10:-FAIR VALUE MEASUREMENTS
The following tables present the fair value of money market funds and marketable securities for the years ended December 31, 2020 and 2021:
|
|
December 31, |
|
|||||||||||||||||||||
|
|
2020 |
|
|
2021 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
260,940 |
|
|
$ |
- |
|
|
$ |
260,940 |
|
|
$ |
204,367 |
|
|
$ |
- |
|
|
$ |
204,367 |
|
Corporate debentures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,818 |
|
|
|
1,818 |
|
Commercial paper |
|
|
- |
|
|
|
13,555 |
|
|
|
13,555 |
|
|
|
- |
|
|
|
14,076 |
|
|
|
14,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debentures and commercial paper |
|
|
- |
|
|
|
357,664 |
|
|
|
357,664 |
|
|
|
- |
|
|
|
453,315 |
|
|
|
453,315 |
|
Government debentures |
|
|
- |
|
|
|
41,382 |
|
|
|
41,382 |
|
|
|
- |
|
|
|
47,280 |
|
|
|
47,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value |
|
$ |
260,940 |
|
|
$ |
412,601 |
|
|
$ |
673,541 |
|
|
$ |
204,367 |
|
|
$ |
516,489 |
|
|
$ |
720,856 |
|
As of December 31, 2021, the estimated fair value of the Company's convertible senior notes, as further described in Note 11, was $729.8 million. The fair value was determined based on the closing quoted price of the convertible senior notes as of the last day of trading for the period, and is considered Level 2 measurement. The fair value of the convertible senior notes is primarily affected by the trading price of the Company`s common stock and market interest rates.
NOTE 11:-CONVERTIBLE SENIOR NOTES, NET
a.Convertible senior notes, net:
In November 2019, the Company issued $500 million aggregate principal amount, 0% coupon rate, of convertible senior notes due and an additional $75 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment option of the initial purchasers (collectively, "Convertible Notes").
The Convertible Notes are convertible based upon an initial conversion rate of 6.3478 of the Company's ordinary shares, par value NIS 0.01 per share per $1 principal amount of Convertible Notes (equivalent to a conversion price of approximately $157.53 per ordinary share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events. The Convertible Notes are senior unsecured obligations of the Company.
The Convertible Notes will mature on November 15, 2024 (the "Maturity Date"), unless earlier repurchased, redeemed or converted. Prior to May 15, 2024, a holder may convert all or a portion of its Convertible Notes only under the following circumstances:
(1) |
During any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company's ordinary shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; |
F - 34 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 11:-CONVERTIBLE SENIOR NOTES, NET (Cont.)
(2) |
During the five business day period after any 10 consecutive trading day period ("measurement period") in which the trading price, determined pursuant to the terms of the Convertible Notes, per $1 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the ordinary shares and the conversion rate on each such trading day; |
(3) |
If the Company calls such Convertible Notes for redemption in certain circumstances, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or |
(4) |
Upon the occurrence of specified corporate events. |
On or after May 15, 2024 until the close of business on the third scheduled trading day immediately preceding the Maturity Date, a holder may convert its Convertible Notes at any time, regardless of the foregoing circumstances.
Upon conversion, the Company can pay or deliver cash, ordinary shares or a combination of cash and ordinary shares, at the Company's election.
b.The Company may not redeem the notes prior to November 15, 2022, except in the event of certain tax law changes. The Company may, at any time and from time to time, redeem for cash all or any portion of the notes, at the Company's option, on or after November 15, 2022, if the last reported sale price of the Company`s ordinary shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which it delivers notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed.
Upon the occurrence of a Fundamental Change as defined in the Indenture, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased (plus accrued and unpaid special interest payable under certain circumstances set forth in the terms of the Convertible Notes (if any) to, but excluding, the fundamental change repurchase date). In addition, in connection with a make-whole fundamental change (as defined in the Indenture), or following the Company's delivery of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or redemption, as the case may be.
F - 35 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 11:- CONVERTIBLE SENIOR NOTES, NET (Cont.)
During the year ended December 31, 2021, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible as of December 31, 2021 and are classified as long-term liability.
The net carrying amount of the liability and equity components of the Convertible Notes for the periods presented is as follows:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
Liability component: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount |
|
$ |
575,000 |
|
|
$ |
575,000 |
|
Unamortized discount |
|
|
(62,356 |
) |
|
|
(46,976 |
) |
Unamortized issuance costs |
|
|
(10,342 |
) |
|
|
(7,930 |
) |
|
|
|
|
|
|
|
|
|
Net carrying amount |
|
$ |
502,302 |
|
|
$ |
520,094 |
|
|
|
|
|
|
|
|
|
|
Equity component, net of issuance costs of $2,046 and deferred taxes of $11,022 |
|
$ |
65,932 |
|
|
$ |
65,932 |
|
Interest expense related to the Convertible Notes was as follows:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
Amortization of debt discount |
|
$ |
14,931 |
|
|
$ |
15,380 |
|
Amortization of debt issuance costs |
|
|
2,252 |
|
|
|
2,412 |
|
Total interest expense recognized |
|
$ |
17,183 |
|
|
$ |
17,792 |
|
c.Capped Call Transactions:
In connection with the pricing of the Convertible Notes and the exercise by the Initial Purchasers of the over-allotment option, the Company entered into privately negotiated capped call transactions ("Capped Call Transactions") with certain financial institutions ("Option Counterparties"). The Capped Call Transactions cover, collectively, the number of the Company's ordinary shares underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.
The Capped Call Transactions have an initial strike price of approximately $157.53 per share, subject to certain adjustments, which corresponds to the approximate initial conversion price of the Convertible Notes.
The cap price of the Capped Call Transactions is initially $229.14 per share and is subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions are separate transactions, in each case, entered into by the Company with the Option Counterparties, and are not part of the terms of the Convertible Notes and will not change the holders' rights under the Convertible Notes.
F - 36 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 11:- CONVERTIBLE SENIOR NOTES, NET (Cont.)
As the Capped Call Transactions are considered indexed to the Company's stock and are considered equity classified, they are recorded in shareholders' equity on the consolidated balance sheet and are not accounted for as derivatives. The cost of the Capped Call Transactions was approximately $53.6 million and was recorded as a reduction to additional paid-in capital.
NOTE 12:-SHAREHOLDERS' EQUITY
a.Composition of share capital of the Company:
|
|
December 31, |
|
|||||||||||||
|
|
2020 |
|
|
2021 |
|
||||||||||
|
|
Authorized |
|
|
Issued and outstanding |
|
|
Authorized |
|
|
Issued and outstanding |
|
||||
|
|
Number of shares |
|
|||||||||||||
Ordinary shares of NIS 0.01 par value each |
|
|
250,000,000 |
|
|
|
39,034,759 |
|
|
|
250,000,000 |
|
|
|
40,041,870 |
|
b.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.
c.Share-based compensation:
On January 1, 2021, the Company's ESPP became effective. The ESPP enables eligible employees and eligible employees of designated subsidiaries to elect to have payroll deductions made during a six-month offering period in an amount not exceeding 15% of the gross base compensation which the employees receive. The total number of ordinary shares initially reserved under the ESPP as of January 1, 2021 was 125,000 shares ("the ESPP Share Pool"). In connection with establishing the ESPP, the Company correspondingly reduced the number of shares available under the Company's 2014 share incentive plan (the "2014 Plan") by 125,000. On January 1 of each year between 2022 and 2026 the ESPP Share Pool will be increased by a number of ordinary shares equal to the lowest of (i) 1,000,000 shares, (ii) 1% of the Company's outstanding shares on December 31 of the immediately preceding calendar year, and (iii) a lesser number of shares determined by the Company's board of directors. The applicable purchase price will be no less than 85% of the lesser of the fair market value of the Company's ordinary shares on the first day or the last day of the purchase period.
F - 37 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
The total share-based compensation expense related to all of the Company's equity-based awards, recognized for the years ended December 31, 2019, 2020 and 2021 is comprised as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
$ |
5,690 |
|
|
$ |
8,734 |
|
|
$ |
11,158 |
|
Research and development |
|
|
10,960 |
|
|
|
14,691 |
|
|
|
20,498 |
|
Sales and marketing |
|
|
20,976 |
|
|
|
28,220 |
|
|
|
38,546 |
|
General and administrative |
|
|
17,891 |
|
|
|
20,204 |
|
|
|
25,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense |
|
$ |
55,517 |
|
|
$ |
71,849 |
|
|
$ |
95,436 |
|
The total unrecognized compensation cost amounted to $209,367 as of December 31, 2021 and is expected to be recognized over a weighted average period of 2.72 years.
d.Options granted to employees:
A summary of the activity in options granted to employees for the year ended December 31, 2021 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, 2020 |
|
|
648,773 |
|
|
$ |
62.09 |
|
|
|
5.94 |
|
|
$ |
64,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
22,600 |
|
|
|
162.24 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
197,667 |
|
|
|
55.35 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
12,854 |
|
|
|
101.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
|
460,852 |
|
|
|
68.78 |
|
|
|
5.44 |
|
|
|
48,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of December 31, 2021 |
|
|
390,954 |
|
|
$ |
60.05 |
|
|
|
4.95 |
|
|
$ |
44,269 |
|
The expected volatility of the Company's common stock is based on the Company's historical volatility. The expected option term represents the period of time that options granted are expected to be outstanding. Prior to January 1, 2020, it was determined based on the simplified method in accordance with SAB No. 110, as adequate historical experience was not available to provide a reasonable estimate. Starting January 1, 2020, the expected term is based upon historical experience.
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.
F - 38 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
The following tables set forth the parameters used in computation of the options and ESPP compensation to employees for the years ended December 31, 2019, 2020 and 2021:
|
|
Year ended December 31, |
|
|||||||||
Options |
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Expected volatility |
|
|
48 |
% |
|
|
40%-41 |
% |
|
|
44%-46 |
% |
Expected dividends |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Expected term (in years) |
|
|
5.90-6.10 |
|
|
|
4.02-4.20 |
|
|
|
3.65-3.88 |
|
Risk free rate |
|
|
1.49%-2.49 |
% |
|
|
0.22%-1.61 |
% |
|
|
0.49%-0.99 |
% |
|
|
Year ended December 31, |
|
|||||||||
ESPP |
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Expected volatility |
|
|
- |
|
|
|
- |
|
|
|
33.63 |
% |
Expected dividends |
|
|
- |
|
|
|
- |
|
|
|
0 |
% |
Expected term (in years) |
|
|
- |
|
|
|
- |
|
|
|
0.5 |
|
Risk free rate |
|
|
- |
|
|
|
- |
|
|
|
0.1 |
% |
A summary of options data for the years ended December 31, 2019, 2020 and 2021, is as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Weighted-average grant date fair value of options granted |
|
$ |
55.43 |
|
|
$ |
33.82 |
|
|
$ |
55.50 |
|
Total intrinsic value of the options exercised |
|
$ |
45,326 |
|
|
$ |
18,790 |
|
|
$ |
20,742 |
|
The aggregate intrinsic value is calculated as the difference between the per-share exercise price and the fair value of an ordinary share for each share subject to an option multiplied by the number of shares subject to options at the date of exercise.
F - 39 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 12:-SHAREHOLDERS' EQUITY (Cont.)
e.A summary of RSUs and PSUs activity for the year ended December 31, 2021 is as follows:
|
|
Amount of RSUs and PSUs |
|
|
Weighted average grant date fair value |
|
||
|
|
|
|
|
|
|
||
Unvested as of December 31, 2020 |
|
|
2,121,633 |
|
|
$ |
98.67 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,111,672 |
|
|
$ |
143.69 |
|
Vested |
|
|
809,444 |
|
|
$ |
90.16 |
|
Forfeited |
|
|
244,147 |
|
|
$ |
109.88 |
|
|
|
|
|
|
|
|
|
|
Unvested as of December 31, 2021 |
|
|
2,179,714 |
|
|
$ |
123.54 |
|
The total fair value of RSUs and PSUs vested (based on fair value of the Company's ordinary shares at vesting date) during the years ended December 31, 2019, 2020 and 2021 was $67,737, $76,027 and $113,918, respectively.
NOTE 13:-INCOME TAXES
CyberArk Software Ltd.'s subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.
a.Corporate tax in Israel:
Ordinary taxable income is subject to a corporate tax rate of 23% for the years 2019-2021.
b.Income (loss) before taxes on income is comprised as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Domestic income (loss) |
|
$ |
52,254 |
|
|
$ |
(12,643 |
) |
|
$ |
(113,339 |
) |
Foreign income |
|
|
17,830 |
|
|
|
12,254 |
|
|
|
22,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
70,084 |
|
|
$ |
(389 |
) |
|
$ |
(91,329 |
) |
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:
|
|
December 31, |
|
|||||
|
|
2020 |
|
|
2021 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Carry-forwards losses and credits |
|
$ |
36,314 |
|
|
$ |
42,202 |
|
Capital losses carry-forwards |
|
|
94 |
|
|
|
96 |
|
Research and development expenses |
|
|
2,521 |
|
|
|
11,848 |
|
Deferred revenues |
|
|
10,345 |
|
|
|
11,005 |
|
Intangible assets |
|
|
8,037 |
|
|
|
7,730 |
|
Share-based compensation |
|
|
11,547 |
|
|
|
15,046 |
|
Operating lease liability |
|
|
1,351 |
|
|
|
1,088 |
|
Accruals and other |
|
|
3,695 |
|
|
|
4,638 |
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets before valuation allowance |
|
|
73,904 |
|
|
|
93,653 |
|
|
|
|
|
|
|
|
|
|
Less: Valuation allowance |
|
|
19,591 |
|
|
|
20,614 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
$ |
54,313 |
|
|
$ |
73,039 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
$ |
1,606 |
|
|
$ |
2,189 |
|
Convertible senior notes |
|
|
8,724 |
|
|
|
6,946 |
|
Deferred commission |
|
|
8,251 |
|
|
|
14,969 |
|
Operating lease ROU asset |
|
|
1,254 |
|
|
|
827 |
|
Property and equipment and other |
|
|
1,669 |
|
|
|
941 |
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities |
|
$ |
21,504 |
|
|
$ |
25,872 |
|
Net deferred tax assets |
|
$ |
32,809 |
|
|
$ |
47,167 |
|
As of December 31, 2021, $55,505 of undistributed earnings held by the Company's foreign subsidiaries are designated as indefinitely reinvested. If these earnings were repatriated to Israel, it would be subject to Israeli income taxes and to foreign withholding taxes and an adjustment for foreign tax credits. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
F - 41 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
d.Income taxes are comprised as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Current |
|
$ |
13,994 |
|
|
$ |
7,357 |
|
|
$ |
4,589 |
|
Deferred |
|
|
(6,974 |
) |
|
|
(1,988 |
) |
|
|
(11,972 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,020 |
|
|
$ |
5,369 |
|
|
$ |
(7,383 |
) |
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
8,093 |
|
|
$ |
(1,431 |
) |
|
$ |
(12,171 |
) |
Foreign |
|
|
(1,073 |
) |
|
|
6,800 |
|
|
|
4,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,020 |
|
|
$ |
5,369 |
|
|
$ |
(7,383 |
) |
e.A reconciliation of the Company's theoretical income tax expense (benefit) to actual income tax expense (benefit) is as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Income (loss) before income taxes |
|
$ |
70,084 |
|
|
$ |
(389 |
) |
|
$ |
(91,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory tax rate |
|
|
23.0 |
% |
|
|
23.0 |
% |
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Theoretical income tax expense (benefit) |
|
|
16,119 |
|
|
|
(89 |
) |
|
|
(21,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefits related to share-based compensation |
|
|
(6,391 |
) |
|
|
(3,645 |
) |
|
|
(4,424 |
) |
Non-deductible expenses |
|
|
3,002 |
|
|
|
3,054 |
|
|
|
3,988 |
|
Intra-entity intellectual property transfer |
- | 5,036 | - | |||||||||
Valuation allowance | - | - | 1,896 | |||||||||
Unrecognized tax benefits |
|
|
1,343 |
|
|
|
(322 |
) |
|
|
(1,638 |
) |
Foreign and preferred enterprise tax rates differential |
|
|
(6,717 |
) |
|
|
1,714 |
|
|
|
12,171 |
|
Impact of CARES Act |
|
|
- |
|
|
|
(683 |
) |
|
|
- |
|
Prior years and others |
|
|
(336 |
) |
|
|
304 |
|
|
|
1,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (tax benefit) |
|
$ |
7,020 |
|
|
$ |
5,369 |
|
|
$ |
(7,383 |
) |
F - 42 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
f.Net operating loss carry-forwards:
As of December 31, 2021, the Company had net operating losses substantially derived from excess tax benefits from share-based payments and capital tax losses, totaling $148,689 and $258, respectively, out of which $141,209 and none of the losses, respectively, were federal net operating losses attributed to the U.S. subsidiary. The rest were attributed to Israel, can be carried forward indefinitely and resulted mainly from acquisitions made by the Company. Out of these federal net operating losses attributed to the U.S. subsidiary, $45,955 are subject to up to 20-year carryforward period. The remaining $95,254 can be carried forward indefinitely, but are subject to the 80% taxable income limitation upon utilization. Utilization of some of these U.S. net operating losses is subject to annual limitation due to the "change in ownership" provisions of the U.S. Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
g.Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
As of December 31, 2021, approximately $16,353 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 Enterprises" 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 Law for the Encouragement of Capital Investments ("Investment Law") and an income tax liability of up to $4,015 would be incurred as of December 31, 2021.
In December 2016, the Israeli Knesset passed Amendment 73 to the Investment Law which included a number of changes to the Investment Law regimes through regulations approved on May 1, 2017 and that have come into effect from January 1, 2017.
Applicable benefits under the new regime include:
-Introduction of a benefit regime for "Preferred Technology Enterprises" ("PTE") granting a 12% tax rate in central Israel – on qualified income deriving from Benefited Intellectual Property, subject to a number of conditions being fulfilled, including a minimal amount or ratio of annual R&D expenditure and R&D employees, as well as having at least 25% of annual income derived from exports to large markets.
-A 12% capital gains tax rate on the sale of a preferred intangible asset to a foreign affiliated enterprise, provided that the asset was initially purchased from a foreign resident at an amount of NIS 200 million or more.
F - 43 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:-INCOME TAXES (Cont.)
-A withholding tax rate of 20% for dividends paid from PTE income (with an exemption from such withholding tax applying to dividends paid to an Israeli company). Such rate may be reduced to 4% on dividends paid to a foreign resident company, subject to certain conditions regarding percentage of foreign ownership of the distributing entity.
The Company adopted the PTE since 2017 and believes it is generally eligible for its benefits.
In addition the company received a ruling from the Israeli tax authorities which approves the PTE's benefits.
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 Benefits for Research and Development:
Section 20A to the Israeli Income Tax Ordinance allows, under certain conditions, a tax deduction for research and development expenses, including capital expenses, for the year in which they are paid. Such expenses must relate to scientific research in industry, agriculture, transportation, or energy, and must be approved by the relevant Israeli government ministry, determined by the field of research. Furthermore, the research and development must be for the promotion of the company's business and carried out by or on behalf of the company seeking such tax deduction. However, the amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. As for expenses incurred in scientific research that is not approved by the relevant Israeli government ministry, they will be deductible over a three-year period starting from the tax year in which they are paid. The Company believes that it is eligible for the above mentioned benefit for the majority of its research and development expenses.
j.Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"):
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") to provide certain relief as a result of the COVID-19 outbreak. Some of the key income tax-related provisions of the CARES Act include modification in the usage of net operating losses, interest deductions and payroll benefits. During the year 2020, the Company recorded a tax benefit (see Note 13e).
F - 44 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 13:- INCOME TAXES (Cont.)
k.Tax assessments:
As of December 31, 2021, the Company has reached a corporate tax assessment agreement with the Israeli Tax Authorities in relation to tax years 2016 through 2018, as reflected below in the unrecognized tax benefits schedule. As of the date of the approval of the financial statements, the Company is under a corporate tax assessment by the Israeli Tax Authorities for the tax years 2019 and 2020.
As of that date, the U.K. subsidiary's tax years until December 31, 2019 are subject to statutes of limitation effective in the U.K.
For the U.S. subsidiary's tax years ended December 31, 2018 through 2021, statute of limitation have not yet expired. For companies acquired by the U.S. subsidiary, there are open loss years from 2018 through 2020.
l.Unrecognized tax benefits:
A reconciliation of the opening and closing amounts of total unrecognized tax benefits is as follows:
|
|
Year ended December 31, |
||||||||||
|
|
2019 |
|
|
2020 |
|
2021 | |||||
|
|
|
|
|
|
|
||||||
Opening balance |
|
$ |
1,993 |
|
|
$ |
3,728 |
|
$ |
4,633 | ||
Decrease related to settlements with taxing authorities |
|
|
- |
|
|
|
(796 |
) |
(2,382 | ) | ||
Increase related to prior year tax positions |
|
|
120 |
|
|
|
74 |
|
976 | |||
Decrease related to expiration of statutes of limitations |
|
|
(242 |
) |
|
|
(92 |
) |
- | |||
Increase related to current year tax positions |
|
|
1,857 |
|
|
|
1,719 |
|
643 | |||
|
|
|
|
|
|
|
|
|
||||
Closing balance |
|
$ |
3,728 |
|
|
$ |
4,633 |
|
$ |
3,870 |
During the years ended December 31, 2019, 2020 and 2021, the Company recorded $47, $21 and $(21), respectively, for interest expense (income) related to uncertain tax positions. As of December 31, 2020 and 2021, accrued interest was $133 and $112, respectively.
Although the Company believes that it has adequately provided for any reasonably foreseeable outcomes related to tax audits and settlement, there is no assurance that the final tax outcome of its tax audits will not be different from that which is reflected in the Company's income tax provisions. Such differences could have a material effect on the Company's income tax provision, cash flow from operating activities and net income in the period in which such determination is made.
F - 45 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 14:-FINANCIAL INCOME (EXPENSE), NET
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Bank charges |
|
$ |
(274 |
) |
|
$ |
(275 |
) |
|
$ |
(250 |
) |
Exchange rate income (loss), net |
|
|
(803 |
) |
|
|
683 |
|
|
|
(509 |
) |
Interest income |
|
|
10,843 |
|
|
|
10,380 |
|
|
|
5,559 |
|
Amortization of debt discount and issuance costs |
|
|
(1,966 |
) |
|
|
(17,183 |
) |
|
|
(17,792 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expense), net |
|
$ |
7,800 |
|
|
$ |
(6,395 |
) |
|
$ |
(12,992 |
) |
NOTE 15:-BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
Numerator: |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net income (loss) available to shareholders of ordinary shares |
|
$ |
63,064 |
|
|
$ |
(5,758 |
) |
|
$ |
(83,946 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic net income (loss) per ordinary shares |
|
|
37,586,387 |
|
|
|
38,628,770 |
|
|
|
39,645,453 |
|
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
Numerator: |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net income (loss) available to shareholders of ordinary shares |
|
$ |
63,064 |
|
|
$ |
(5,758 |
) |
|
$ |
(83,946 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income (loss) per ordinary shares |
|
|
38,890,108 |
|
|
|
38,628,770 |
|
|
|
39,645,453 |
|
The total weighted average number of shares related to outstanding options, RSUs and PSUs that have been excluded from the computation of diluted net income (loss) per ordinary share due to their antidilutive effect was 495,975, 2,823,985 and 2,734,308 for the years ended December 31, 2019, 2020 and 2021, respectively.
Additionally, 3.6 million shares underlying the conversion option of the Convertible Notes are not considered in the calculation of diluted net income (loss) per share as the effect would be anti-dilutive. The Company intends to settle the principal amount of Convertible Notes in cash and therefore will use the treasury stock method for calculating any potential dilutive effect on diluted net income per share, if applicable. The conversion will have a dilutive impact on diluted net income per share when the average market price of a common stock for a given period exceeds the conversion price of $157.53 per share.
F - 46 |
CYBERARK SOFTWARE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
NOTE 16:-SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION
a.The Company identifies operating segments in accordance with ASC Topic 280, "Segment Reporting". Operating segments are defined as components of an entity for which separate financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and evaluating financial performance. The Company determined it operates in one reportable segment as the Company's chief operating decision maker is the Chairman and Chief Executive Officer who makes operating decisions, assesses performance and allocates resources on a consolidated basis, accompanied by information about revenue by geographic region.
b.The total revenues are attributed to geographic areas based on the location of the Company's channel partners which are considered as end customers, as well as direct customers of the Company.
The following tables present total revenues for the years ended December 31, 2019, 2020 and 2021 and long-lived assets as of December 31, 2020 and 2021:
Revenues:
|
|
Year ended December 31, |
|
|||||||||
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
233,945 |
|
|
$ |
246,811 |
|
|
$ |
253,811 |
|
Israel |
|
|
7,827 |
|
|
|
7,312 |
|
|
|
7,416 |
|
United Kingdom |
|
|
36,146 |
|
|
|
33,101 |
|
|
|
35,530 |
|
Europe, the Middle East and Africa *) |
|
|
85,757 |
|
|
|
101,453 |
|
|
|
120,382 |
|
Other |
|
|
70,220 |
|
|
|
75,754 |
|
|
|
85,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
433,895 |
|
|
$ |
464,431 |
|
|
$ |
502,917 |
|
For the years ended December 31, 2019, 2020 and 2021, no single customer contributed more than 10% to the Company's total revenues.
Long-lived assets, including property and equipment, net and operating lease right-of-use assets:
- - - - - - - - -
F - 47
• |
Subject Matter of the Lease: Unprotected tenancy lease of office and parking spaces for the purpose of conducting the Company's business. Premises are located in
Petach-Tikva, Israel.
|
• |
Term of the Lease:
|
■ |
The original term of the Lease is sixty (60) months commencing on August 10, 2017 (“Original Term”).
|
■ |
The Lease was extended on January 30, 2022 for additional consecutive sixty-one (61) months (“Extended Term”). The Company is given an option to extend the term of the Lease
for twenty-four (24) consecutive months. Such option applies automatically unless the Company notifies the Landlord 180 days prior to the commencement of such option period that it does not wish to exercise the option.
|
■ |
The term of the Lease for 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:
|
■ |
Property – The Lease includes 10 floors, levels 1 to 10. The Company has a right of first refusal to lease the remaining 3 adjacent floors in the Landlord’s other
existing or future buildings that are located in the same office park.
|
■ |
Parking – The Company has the right to lease three hundred (300) parking lots.
|
• |
Rental Fees:
|
■ |
Property – The Company shall pay a monthly rental fee of 74 NIS (approximately US$23.1) during the Original Term and 75.5 NIS (approximately US$23.5) during the
Extended Term per square meter (gross). For the option period, the monthly rental fees shall be increased by 3% compared to the monthly rental fee of the preceding period. All rental fees are 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 is 433 NIS per parking space, in each case plus VAT and Index-linked.
|
■ |
Management Fees – The management fees shall be paid on a cost plus 15% basis plus VAT and Index-linked.
|
■ |
Payment Terms – The rental fees shall be paid three months in advance. 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.
|
• |
Guarantees:
|
■ |
An autonomous un-conditional bank guarantee, for an amount representing three (3) months' rental fee plus VAT, to be extended from time to time by the Company to remain in
force for the entire term of Lease and for ninety (90) days thereafter.
|
• |
Dispute Resolution:
|
■ |
Technical disputes raised regarding the Lease, shall be governed by an agreed-upon professional arbitrator (a civil engineer). Legal disputes raised regarding the Lease, shall
be governed by Israeli Court in Tel Aviv.
|
• |
Other Terms of the Lease:
|
■ |
The Company has a right to sub-lease the premises (or any portion thereof) and to sub-let to a substitute lessee, subject to the Landlord's prior written consent. The Company
may also transfer the Lease to an affiliate, subject to the Landlord's prior written consent.
|
■ |
Similar to other lease agreements, each party agrees 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 leased property.
|
• |
The Lease further includes terms concerning the following 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.
|
■ |
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, 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 or expiration of the Lease, 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.
|
|
|
Name of Subsidiary
|
Place of Incorporation
|
|
|
CyberArk Software, Inc.
|
Delaware, United States
|
Cyber-Ark Software (UK) Limited
|
United Kingdom
|
CyberArk Software (Singapore) PTE. LTD.
|
Singapore
|
CyberArk Software (DACH) GmbH
|
Germany
|
CyberArk Software Italy S.r.l.
|
Italy
|
CyberArk Software (France) SARL
|
France
|
CyberArk Software (Netherlands) B.V.
|
Netherlands
|
CyberArk Software (Australia) Pty Ltd.
CyberArk Software (Japan) K.K.
CyberArk Software Canada Inc.
CyberArk USA Engineering GP, LLC
|
Australia
Japan
Canada
Delaware, United States
|
CyberArk Software (Spain), S.L.
|
Spain
|
CyberArk Software (India) Private Limited
|
India
|
1. |
I have reviewed this Annual Report on Form 20-F of CyberArk Software Ltd. (the “company”);
|
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
|
|
Chairman of the Board & Chief Executive Officer
|
1. |
I have reviewed this Annual Report on Form 20-F of CyberArk Software Ltd. (the “company”);
|
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
|
|
|
|
|
/s/ Ehud Mokady
|
|
Ehud Mokady
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
Date: March 10, 2022
|
/s/ Joshua Siegel
|
|
Joshua Siegel
|
|
Chief Financial Officer
|
|
Date: March 10, 2022
|
Tel Aviv, Israel
|
/s/ KOST FORER GABBAY AND KASIERER
|
March 10, 2022
|
A member of Ernst & Young Global
|