4 Things CyberArk Management Wants You to Know

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Cybersecurity company CyberArk (NASDAQ: CYBR) released its second-quarter earnings in early August. A decline in sales in the Europe, Middle East, and Africa region (EMEA) helped keep overall revenue growth at just 14% over the previous year, which was below the previous quarter's growth of 26%, and the full-year 2016 growth of 35%. With the stock price down almost 20% in the past 12 months, as of this writing, investors are wondering whether the company will sink or swim going forward.

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In the earnings call, management talked frankly about what the company is doing about its lagging sales, and the overall opportunity for the company.

Using what works

... we want to replicate and extend the disciplined and programmatic approach that we had to ... help the sales processes in the Americas to EMEA, meaning better account control and pipeline management on the execution side.
-- Udi Mokady, CEO

The poor sales performance in EMEA was the elephant in the room on CyberArk's conference call, and management addressed it head-on. EMEA had grown 34% for full year 2016, stalled to 11% growth in Q1, and dropped to negative 5% in Q2. At $13.8 million, the region accounts for 24% or revenue.

Management emphasized that the market opportunity was not the issue, but it was its own execution that drove the weakness. It was good to see  management owning the issue and taking a hard look at how to correct it.

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A new chief revenue officer

We have promoted Ron Zoran, to Chief Revenue Officer, and he will be responsible for executing our worldwide sales strategy across sales, sales engineering and channels to drive revenue growth in all geographies. ... He will be working with our VP of EMEA sales to drive strategic operational enhancements that we believe will strengthen our risk-based sales methodology, enhance our channel strategy and deliver more account control.
-- Udi Mokady, CEO

Zoran's promotion was an internal move from vice president of sales for the Americas to this newly created position. Mokady spent some time on the call talking about Zoran's impressive credentials and how he led the Americas organization to "a compound annual rate of nearly 60% over the last 3 years." It's clear that the organization wants the success of Zoran's approach to be replicated across the globe. Zoran's previous position in the Americas won't be filled for now, and with solid 39% growth in the Asia-Pacific-Japan (APJ) region, it's likely that Zoran's focus will be 100% on getting growth back in the EMEA region.

Beefing up the system

We'll continue with our channel model and we have really strong channels there [in EMEA]. But we can do better in working with them, while retaining account control. So in these engagements to be side-by-side with the channel with higher touch to ensure that we have the right visibility and also are guiding the customers to make the right security decisions.
-- Udi Mokady, CEO

I'm not surprised that Mokady came out in favor for keeping the channel partner model for selling. As the company's founder, Mokady spent time working personally with channel partners in the early days of the company. Channel partners enable a small, growing company like CyberArk to reach more clients than by using a direct sales force alone. But once a channel partner has identified an opportunity, this is where the CEO thinks his team can do a better job working with the partner and ultimately help land the end customer for CyberArk.

News on cybersecurity threats helps

Ransomware like WannaCry and NonPetya are a high-profile reminder that every organization is vulnerable. And in the wake of these attacks, we have seen an increase in our pipeline of activity for Endpoint Privilege Manager.
-- Udi Mokady, CEO

Endpoint Privilege Manager (EPM) is the company's software that protects the endpoin,t which is the user's computer or mobile device that is used to access the network. Pipeline refers to the list of potential clients that are interested in CyberArk's products. News about cybersecurity breaches helps raise awareness of malware susceptibility and raises the desirability of products from Cyberark and other cybersecurity companies.

It was good to see management addressing the EMEA situation and making an organizational change that should correct the problem over time. Investors should watch if the company can follow up its actions with positive results in this important region.

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Brian Withers has no position in any of the stocks mentioned. The Motley Fool recommends CyberArk Software. The Motley Fool has a disclosure policy.