In less than two months Udi Mokady will step down as CEO of cybersecurity company CyberArk (Nasdaq: CYBR), which he founded. After serving as CEO since 2005, he will be succeeded by COO Matt Cohen but he will remain as an active chairman.
Mokady told "Globes," "We have been working on this for a good many months. I have quietly spoken to colleagues who have made the transition to an active chairman. I have already been CEO for 18 years, eight years as a public company. The founder does not need to be CEO forever. From my point of view the dream was ultimately to be an active chairman and to reach a situation in which it was possible to appoint another CEO and see continuity.
"When the skies are blue and the company is in a strong position, this is the time. We have made two very big changes at CyberArk that we have completed successfully - the transition to a subscriber-based business model and expanding privilege protection in the organization to all identity security. This is a good point for change, and there is someone strong and good that we nurtured as COO for three-and-a-half years."
Mokady continues, "An entrepreneur can stay and maintain the corporate culture and the CEO can still flourish."
The division of duties between them will be such that Cohen will manage the day-to-day and operational activities, while Mokady will handle, he says, "Anything that multiplies power and leverages continuity - relationships with clients and partners, maintaining relationships, and also being the face of the company I am identified with. I have already been signed up to present at several conferences. It is important for me also to maintain the corporate culture. People like to know that the entrepreneur remains, and is active."
Will it be easy for you to let go?
Mokady laughs, "In everything we discuss at the company, I always look at what is the right decision for CyberArk, from tactical to strategic matters. I'm a terrible ego neutralizer. Here too, I look at what is best for the company, and if the shift is made, then it should be done professionally and in a way that the new CEO will succeed. My job is that he will succeed, and I will let go the day-to-day running."
Will Matt Cohen pursue a new strategy or continue with the current one?
He will continue with the strategy that he helped form, to operate and present performance in the huge market we have expanded into. Now is the time to put our foot on the pedal in a smart way."
The macroeconomic situation has "minimal impact"
CyberArk was founded in 1999 and over the years its specific cybersecurity market has heated up - solutions for the security and management of privileged accounts in enterprise computer systems, for example accounts of IT personnel who have extensive privileges. In 2020, it entered a new market for the first time, identity management, by acquiring a US company for $70 million that is engaged in the field.
At the same time, like many companies in this sector, it began changing its business model - shifting from selling permanent licenses to customers to a model of selling subscriptions, which produces recurring revenue. As expected, the transition period weighed heavily on the company's results, but the process has been completed. In 2023, CyberArk expects revenue growth of 22%-24% to $724-736 million, and non-GAAP earnings per share of $0.07-0.28 per share ($3.2-12.9 million). The annual recurring revenue (ARR) is forecast to grow by 28%-30% by the end of the year to $730-740 million dollars.
The company is traded on Nasdaq with a market cap of $6.1 billion, up over 15% since the start of 2023 but down 25% from its peak in November 2021. Nevertheless, whoever bought shares in 2014 has seen returns of over 800% on their investment.
Most of the analysts covering the share have issued positive recommendations and see a smooth managerial transition. Oppenheimer even mentioned that the macroeconomic situation has had "minimal impact" on CyberArk due to the company's broad portfolio.
The macroeconomic situation doesn't affect you?
"We never put up billboards on the Ayalon highway and we never hired more employees than we needed. We never jumped ahead of time and so we continued to hire even in the last quarter - another 150 employees. We've been through economic crises in the past and we continued to grow wisely. The combination of a company with a healthy size, a good market and responsible business model have put us in a good place."
CyberArk currently has 2,800 employees, of which 870 are in Israel in Petah Tikva and Beersheva.
For sure it must be easier to hire today with layoffs at other companies
"We still find that in some positions there is a shortage, especially in professional positions, and this is a good problem for the Israeli economy. We saw that multinational companies laid off workers, so there is more supply today. Again, we were not part of the hype of billboards on the Ayalon (designed to attract employees to tech companies), but we have always managed to attract people with a vision of going beyond the search for an exit. More importantly - we also manage to retain employees. This is acute because an employee who stays 7-8 years or more allows you to build corporate culture, and it also doubles the power of all the accumulated knowledge. I think this is part of our secret."
Venture capital investments in four Israeli companies
CyberArk currently has over $1.2 billion in cash and long-term debt of $520 million. Some tech companies are moving money abroad because of the risk they identify with the government's judicial reform.
Are you also considering moving money?
"In this case, in the life of a public company everything is managed very responsibly. It is not political but very structured. Regarding financial management, there is a risk management committee of the board of directors that examines the risks. Regardless of personal opinions, and I personally am very worried about a judicial revolution - on a business level, we did not see fit to make a change at the moment. I think we manage the risk well. We have a large operation in Israel and it is important to conduct ourselves responsibly."
Last year you set up a $30 million corporate venture capital fund and you have since announced investments in three Israel companies. What has been happening since?
"We have added an investment in another company, which has not yet been announced because we are waiting for them to issue their announcement, and they currently wisely prefer to operate in stealth. This is also an Israeli company. I think that although we don't need thousands of startups in the field, there is always room for innovation that focuses on a new problem. The fund is continuing, and in terms of the three companies we have already invested in (Dig Security, Enso Security and Zero Networks), we assist them a lot. At a recent conference we presented them to our customers, and for them this is good support from a company with customers."
"Identity security has become the most effective protection"
Today the valuations are easier for investing in cybersecurity?
"They are beginning to calm down. Usually the private market lags behind the public market. We recently had a conference in Israel, and an analyst from the sector came and presented about the decline in public companies, and said that in the private market the decline will come later. I looked especially at the faces of the startups in the audience. For investors, this is an opportunity to invest at sane prices."
What are the prominent trends today in cybersecurity?
"In the world of data security, you want to be a proactive layer that really provides protection. Just this week we saw an attack in Israel (on the Technion). The attacker will probably succeed in penetrating, but in such a decentralized world, identity security has become the most effective protection that can be provided. Today, organizations understand that it is important to invest in data security and want to invest not in what is nice to have, but in the important categories, which we are also in."
Published by Globes, Israel business news - en.globes.co.il - on February 15, 2023.
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