Rob Owens: In the prepared remarks, you did talk about the record new logo additions that you had during the year and talked about optimized go-to-market extended channel partnerships. Maybe focus a little bit on the channel front with the new partners, what is their contribution to net new ARR at this point? And how do you expect that to ramp throughout ’23 and into the future?
Udi Mokady: Yes. I would say definitely strong contributors to the growth and in capturing the new logos. And especially as we expanded and have more and more channels trained on the new solutions also helping us land with Access and other fronts. I don’t have the metric handy of how much do we attribute. But again, the majority of our sales involve channels. And probably 70%, 80% of our business, we attribute through direct work with channels. So there are definitely strong contributors to this net ARR. And I think, like I mentioned in the remarks, it’s strategic for us to have them embracing our broad portfolio, and we see that through their certifications and training and through sales that they’re continuously expanding beyond PAM with us also to Access and Secretes Management.
Rob Owens: And quickly for Josh, as you contemplate the profitable growth and the return of margin moving forward, having gone through the transition, how should we think about free cash flow and any hints there in terms of modeling it?
Josh Siegel: Yes. Thanks, Rob. And as I talked about earlier in the remarks, we’re — I would look at over a 12-month period because we get a lot of seasonality and fluctuations from quarter-to-quarter. But on a 12-month period for 2023, we’re looking at free cash flow at non-GAAP net income margin level. And then I think if I would add to that, because you also talked about kind of post transition as we kind of continue on through the transition, we certainly would expect to see that as expansion of free cash flow in the out years as our — as we get to already back into ’24 and ’25, and we’re post now roundtripping our full ARR base.
Operator: Your next question is from the line of Fatima Boolani with Citi. Please go ahead.
Fatima Boolani: And Udi, sad to see you go, but I’m looking forward to getting Matt hard times from here. So maybe I’ll start with you. Just with respect to the model transition, as you essentially move it into Phase 2 of the transition with continued ARR growth, I’m curious what sort of changes if at all, that you’re thinking about making by way of go-to-market bundling pricing strategy? So any of those inputs potentially changing the way you scale the ARR base from here? And would love to hear Matt chime in too, if relevant. And a follow-up for Josh, please.
Udi Mokady: So it’s Udi, first of all, thanks, Fatima. I’m staying, but I’m looking forward to giving Matt a hard time. And let’s start with that. Maybe Matt, you take this.
Matt Cohen: Sure, Udi. Thanks. I think as we look at 2023, we kind of just see continued momentum in the go-to-market channels that we’ve already put into place. We’ve started to rely and kind of build a much stronger engine in the marketing organization to help us with the kind of demand generation, and we continue to put more focus and frankly, more resources on that ability to be able to drive pipe that way. Certainly, our bundles have been a piece of the success over the last couple of years where we have our core PAM-C come with a little bit of identity and a little bit of other areas that help to drive and see those products in. We’re certainly instituting a price increase in 2023 here, kind of matched to the inflationary environment that we’ve seen, and that will help us kind of get a little bit of uptick.
And then as we were just talking about, we push on the channel partner program and making sure that these — what we keep referring to is new routes to market, the focus with the MSP program, the distributors, even the marketplaces that are out there and leveraging them to help us drive demand. But I look at 2023 kind of as a continuation of what we’ve been doing because we’ve been seeing such success with that.
Operator: Your next question is from the line of Eric Heath with KeyBanc Capital Markets. Please go ahead.
Eric Heath: Matt, congratulations on the new appointment there. Udi, I guess both a question for you and Matt. Looking forward, I mean, I guess, how do you think of CyberArk success? How much is predicated on successful moving into Access Management beyond, call it, Broader Privilege Access? And how meaningful do you push into that market over the next few years, given it is a more competitive market, and there’s really a couple of large vendors that kind of already are large incumbents in the space. So how do you think about that initiative over the next couple of years? .
Udi Mokady: Yes, absolutely. I think the beauty of the CyberArk chart right now is that we have such a great opportunity in PAM itself as such a critical layer of security and then this growth engine in Access, in Access, our business almost doubled in ARR. We’re seeing a record pipeline or improving win rates. I mentioned that now with the Magic Quadrant, we’re also invited to more and more RFPs. So the way we look at it is great upside for us in expanding into access. We are and we will and that we’re doing it differentiated. You mentioned competition. We’re coming to it as from the makers of PAM, those who really pioneered the hardest layer of security in identity, the hardest part of identity coming into securing all types of identities, the human workforce users, the third-party supplier, the machine identities and coming to it from that position of strength and trust as the security vendor.
So we are going after it. And — but we’re going after it in a differentiated way. We have a great customer base to leverage. We have new lending — new ways to land and so it is an upside along with, of course, the other growth entrants like Secrets Management.
Matt Cohen: And I would just add here that I think increasingly, it’s an Identity Security story with our customers, and we’re able to talk to them about our platform, we’re able to talk to them about all the solutions working together to drive value and to protect their environments. And so when we think about our recent Global kickoff that we just had where we had all our sellers together, the main story that we were training on is how to position the full Identity Security story. And that brings us then obviously with the foundation in PAM, but outside into these other areas in our conversations with our customers.
Operator: Your next question is from the line of Shaul Eyal with Cowen & Company. Please go ahead.
Shaul Eyal: Congrats, Udi. Congrats, Matt. Best wishes to you looking forward to working with Matt. Udi, what a ride. I actually had a question about machine identity, I think you just mentioned that you and Matt. At a recent conference, you made some, I would even say, both statement about machine identity the opportunity and CyberArk taking pretty much a nice share longer term within this market. Can you talk to us about what you see within the machine identity now you guys are doing absolutely great on the human side. But what should we be expecting out of CyberArk going forward within the machine identity arena?
Udi Mokady: Yes, absolutely, Shaul. And again, thanks for the warm words. I think what we discovered in our surveys and also in the field is that with digital transformation and with cloud adoption, organizations are creating a multitude more machine identities than they have human identities even to the factor of 45 times more machines than you and that’s what I mentioned in the conference. And as Matt mentioned earlier, we’re going after this with a platform sale that covers both the human and machine under identity Security. And it’s becoming this gaming hall. By the way, in some of the recent breaches the point of no return is — was when the attacker achieved privileged access through credentials that were identities, and we’re able to get into systems that way.
And so our strategy is to do that with our platform and to make it easier and easier for the developers to adopt our solutions as we announced that at our last Big Impact event. And as we mentioned, we’re seeing our first customers adopted. We announced Secrets Hub, which make it very completely transparent to the developer to work natively in the cloud environment. The first announcement was with AWS Secret Store, where CyberArk is the backbone securing Secrets for all types of applications, both on-premise cloud environments and it’s transparent to the developers. So that’s going to be our strategy going forward. Make it easy for the developer, but provide the security professionals, the single pane of glass, the — and be the backbone to securing all types of credentials and identities.
Operator: Your next question is from the line of Brian Essex with JPMorgan. Please go ahead.
