EX-99.5 6 exhibit_99-5.htm EXHIBIT 99.5
Exhibit 99.5

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet as of June 30, 2024, the unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2023 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2024. The unaudited pro forma condensed combined financial information includes the historical results of CyberArk Software Ltd. (together with its subsidiaries, “CyberArk”) and Venafi Holdings, Inc. (together with its subsidiaries, “Venafi”) after giving pro forma effect to CyberArk’s acquisition of Venafi (the “Venafi Acquisition”) as described in the following paragraphs and accompanying notes.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or consolidated financial condition would have been had the Venafi Acquisition actually occurred on June 30, 2024 for the balance sheet, or January 1, 2023 for the statements of operations, nor does it purport to project the future consolidated results of operations or consolidated financial condition for any future period or as of any future date. Under accounting for business combinations, the assets and liabilities of Venafi are required to be recorded at their preliminary respective fair values as of the date of the Venafi Acquisition, October 1, 2024 (“Acquisition Date”). CyberArk has performed the fair valuation of Venafi’s assets and liabilities. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained. The unaudited pro forma adjustments are based upon available information and certain assumptions that CyberArk believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. All pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma condensed combined financial information.
 
The Venafi Acquisition

On May 19, 2024, CyberArk entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among CyberArk and Venafi, a leader in machine identity management. Pursuant to the terms and conditions in the Merger Agreement, the Venafi Acquisition combined Venafi’s machine identity management capabilities with CyberArk’s leading identity security capabilities to establish a unified platform for end-to-end machine identity security at enterprise scale.
 
CyberArk accounted for the Venafi Acquisition as a business combination in accordance with ASC No. 805, “Business Combinations”. The purchase consideration transferred to Venafi amounted to $1.66 billion, of which $1.02 billion was paid in cash and $0.64 billion was by the issuance of 2.3 million ordinary shares. CyberArk was determined to be the accounting acquirer after taking into account the relative share ownership, the composition of the governing body of the combined entity and the designation of certain senior management positions. The purchase price of the Venafi Acquisition has been allocated to the assets acquired and liabilities assumed based on their fair values at the Acquisition Date.
 
The unaudited pro forma condensed combined balance sheet as of June 30, 2024 gives effect to the merger as if it had occurred on June 30, 2024. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2024 and the year ended December 31, 2023 give effect to the Venafi Acquisition as if it had occurred on January 1, 2023, the beginning of the earliest period presented, and combines the historical results of CyberArk and Venafi. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2024 combines the unaudited condensed consolidated statement of operations of CyberArk for the six months ended June 30, 2024, and Venafi’s unaudited condensed consolidated statement of operations for the six months ended June 30, 2024. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 combines the audited consolidated statement of operations of CyberArk for the year ended December 31, 2023 with Venafi’s audited consolidated statement of operations for the year ended December 31, 2023. The unaudited pro forma condensed combined financial information has been prepared pursuant to Article 11 of Regulation S-X.


This unaudited pro forma condensed combined financial information should be read in conjunction with:
 
 
•
 
the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information;
       
 
•
  
the separate historical audited consolidated financial statements of CyberArk for the fiscal year ended December 31, 2023, included in CyberArk’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2024;
       
 
•
  
the separate historical unaudited condensed consolidated financial statements of CyberArk as of and for the six months ended June 30, 2024, included in Exhibit 99.1 of CyberArk’s Report on Form 6-K furnished to the SEC on October 22, 2024;

 
•
 
the separate historical audited condensed consolidated financial statements of Venafi as of and for the fiscal year ended December 31, 2023, included in Exhibit 99.4 of CyberArk’s Report on Form 6-K furnished to the SEC on October 22, 2024; and
       
 
•
  
the separate historical unaudited condensed consolidated financial statements of Venafi as of June 30, 2024, and December 31, 2023 and for the three and six months ended June 30, 2024, included in Exhibit 99.3 of CyberArk’s Report on Form 6-K furnished to the SEC on October 22, 2024.

2

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

   
Historical
                            
Pro Forma Combined
  
   
CyberArk
as of
June 30,
2024
    
Venafi
as of
June 30,
2024
    
Reclassification
Adjustments
    
Note
    
Transaction
Accounting
Adjustments
    
Note
    
as of
June 30,
2024
  
                                           
ASSETS
                                          
                                           
CURRENT ASSETS:
                                          
Cash and cash equivalents
  
$
641,014
    
$
113,298
    
$
-
          
$
(572,911
)
    
5(a
)
  
$
181,401
  
Short-term bank deposits
    
231,037
      
-
      
-
            
-
              
231,037
  
Contract acquisition costs, net
    
-
      
4,410
      
-
            
(4,410
)
    
5(b
)
    
-
  
Contract assets
    
-
      
13,872
      
-
            
-
              
13,872
  
Marketable securities
    
528,086
      
-
      
-
            
(527,147
)
    
5(a
)
    
939
  
Trade receivables, net
    
156,049
      
29,001
      
-
            
-
              
185,050
  
Prepaid expenses and other current assets
    
34,983
      
6,456
      
-
            
-
              
41,439
  
                                                       
Total current assets
    
1,591,169
      
167,037
      
-
            
(1,104,468
)
            
653,738
  
                                                       
LONG-TERM ASSETS:
                                                      
Marketable securities
    
30,871
      
-
      
-
            
-
              
30,871
  
Property and equipment, net
    
16,477
      
348
      
-
            
-
              
16,825
  
Contract acquisition costs, noncurrent, net
    
-
      
6,331
      
-
            
(6,331
)
    
5(b
)
    
-
  
Intangible assets, net
    
16,665
      
236,703
      
-
            
302,511
      
5(b
)
    
555,879
  
Goodwill
    
153,241
      
550,086
      
-
            
620,252
      
5(b
)
    
1,323,579
  
Right-of-use assets
    
-
      
4,176
      
(4,176
)
    
3
      
-
              
-
  
Other long-term assets
    
227,140
      
1,115
      
4,176
      
3
      
-
              
232,431
  
Deferred tax assets
    
85,021
      
-
      
(22,393
)
    
5(c
)
    
-
              
62,628
  
                                                         
Total long-term assets
    
529,415
      
798,759
      
(22,393
)
            
916,432
              
2,222,213
  
                                                         
TOTAL ASSETS
  
$
2,120,584
    
$
965,796
    
$
(22,393
)
          
$
(188,036
)
          
$
2,875,951
  

See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

3

UNAUDITED PRO FORMA BALANCE SHEETS
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

   
Historical
                            
Pro Forma Combined
  
   
CyberArk
as of
June 30,
2024
    
Venafi
as of
June 30,
2024
    
Reclassification
Adjustments
    
Note
    
Transaction
Accounting
Adjustments
    
Note
    
as of
June 30,
2024
  
                                           
LIABILITIES AND SHAREHOLDERS' EQUITY
                                          
                                           
CURRENT LIABILITIES:
                                          
Trade payables
  
$
6,189
    
$
-
    
$
784
      
3
    
$
-
          
$
6,973
  
Accounts payable and accrued liabilities
    
-
      
9,006
      
(9,006
)
    
3
      
-
            
-
  
Employees and payroll accruals
    
75,909
      
-
      
9,527
      
3
      
-
            
85,436
  
Accrued compensation
    
-
      
9,527
      
(9,527
)
    
3
      
-
            
-
  
Note payable, net of issuance costs
    
-
      
249,486
      
-
              
(249,486
)
    
5(d
)
    
-
  
Accrued expenses and other current liabilities
    
37,979
      
799
      
9,719
      
3
      
17,302
      
5(e), 5(f
)
    
65,799
  
Convertible senior notes, net
    
573,824
      
-
      
-
              
-
              
573,824
  
Lease liabilities
    
-
      
1,497
      
(1,497
)
    
3
      
-
              
-
  
Deferred revenues
    
442,223
      
51,398
      
-
              
-
              
493,621
  
                                                         
Total current liabilities
    
1,136,124
      
321,713
      
-
              
(232,184
)
            
1,225,653
  
                                                         
LONG-TERM LIABILITIES:
                                                        
Deferred revenues
    
75,887
      
9,837
      
-
              
-
              
85,724
  
Deferred tax liability, net
    
-
      
5,176
      
(22,393
)
    
5(c
)
    
51,742
      
5(b
)
    
34,525
  
Lease liabilities, net of current portion
    
-
      
2,896
      
(2,896
)
    
3
      
-
              
-
  
Other long-term liabilities
    
31,601
      
454
      
2,896
      
3
      
-
              
34,951
  
                                                         
Total long-term liabilities
    
107,488
      
18,363
      
(22,393
)
            
51,742
              
155,200
  
                                                         
TOTAL LIABILITIES
    
1,243,612
      
340,076
      
(22,393
)
            
(180,442
)
            
1,380,853
  
                                                         
COMMITMENTS AND CONTINGENCIES
                                                        
                                                         
SHAREHOLDERS' EQUITY:
                                                        
Ordinary shares of NIS 0.01 par value
    
113
      
-
      
-
              
6
      
5(g
)
    
119
  
Class B common shares of $0.001 par value
    
-
      
9
      
-
              
(9
)
    
5(g
)
    
-
  
Additional paid-in capital
    
918,948
      
925,465
      
-
              
(286,335
)
    
5(g
)
    
1,558,078
  
Accumulated other comprehensive loss
    
(1,440
)
    
(696
)
    
-
              
696
      
5(g
)
    
(1,440
)
Retained earnings (accumulated deficit)
    
(40,649
)
    
(299,058
)
    
-
              
278,048
      
5(h
)
    
(61,659
)
                                                         
Total shareholders' equity
    
876,972
      
625,720
      
-
              
(7,594
)
            
1,495,098
  
                                                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
2,120,584
    
$
965,796
    
$
(22,393
)
          
$
(188,036
)
          
$
2,875,951
  

4

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)
 
   
Historical
                            
Pro Forma
Combined
  
   
CyberArk
Year
Ended December 31, 2023
    
Venafi
Year
Ended December 31, 2023
    
Reclassification
Adjustments
    
Note
    
Transaction Accounting
Adjustments
    
Note
    
Year
Ended
December 31,
2023
  
Revenues:
                                          
Subscription
  
$
472,023
    
$
143,231
    
$
(13,635
)
    
3
    
$
-
          
$
601,619
  
Perpetual license
    
21,037
      
-
      
-
              
-
            
21,037
  
Maintenance and professional services
    
258,828
      
-
      
24,375
      
3
      
-
            
283,203
  
Professional services and other
    
-
      
10,740
      
(10,740
)
    
3
      
-
            
-
  
                                                       
     
751,888
      
153,971
      
-
              
-
            
905,859
  
                                                       
Cost of revenues:
                                                      
Subscription
    
74,623
      
13,937
      
(4,550
)
    
3
      
75,726
      
6(a), 6(b
)
    
159,736
  
Perpetual license
    
1,873
      
-
      
-
              
-
              
1,873
  
Maintenance and professional services
    
79,635
      
-
      
16,139
      
3
      
1,420
      
6(b
)
    
97,194
  
Professional services and other
    
-
      
11,589
      
(11,589
)
    
3
      
-
              
-
  
                                                         
     
156,131
      
25,526
      
-
              
77,146
              
258,803
  
                                                         
Gross profit
    
595,757
      
128,445
      
-
              
(77,146
)
            
647,056
  
                                                         
Operating expenses:
                                                        
                                                         
Research and development
    
211,445
      
37,437
      
-
              
6,471
      
6(b
)
    
255,353
  
Sales and marketing
    
405,983
      
48,592
      
-
              
22,317
      
6(a), 6(b), 6(c
)
    
476,892
  
General and administrative
    
94,801
      
102,951
      
905
      
3
      
(61,092
)
    
6(a), 6(b), 6(d
)
    
137,565
  
Restructuring
    
-
      
905
      
(905
)
    
3
      
-
              
-
  
                                                         
Total operating expenses
    
712,229
      
189,885
      
-
              
(32,304
)
            
869,810
  
                                                         
Operating loss
    
(116,472
)
    
(61,440
)
    
-
              
(44,842
)
            
(222,754
)
Financial income, net
    
53,214
      
-
      
(18,234
)
    
3
      
21,023
      
6(e
)
    
56,003
  
Interest expense, net
    
-
    
(17,369)
      
17,369
      
3
      
-
              
-
  
Foreign currency loss
    
-
      
(161
)
    
161
      
3
      
-
              
-
  
Other loss
    
-
      
(704
)
    
704
      
3
      
-
              
-
  
                                                         
Loss before taxes on income
    
(63,258
)
    
(79,674
)
    
-
              
(23,819
)
            
(166,751
)
Tax benefit (taxes on income)
    
(3,246
)
    
5,041
      
-
              
6,043
      
6(f
)
    
7,838
  
                                                         
Net loss
  
$
(66,504
)
  
$
(74,633
)
  
$
-
            
$
(17,776
)
          
$
(158,913
)
                                                         
                                                         
Basic net loss per ordinary share
  
$
(1.60
)
                                          
$
(3.62
)
Diluted net loss per ordinary share
  
$
(1.60
)
                                          
$
(3.62
)
Shares used in computing net loss per ordinary shares, basic
    
41,658,424
                              
2,285,076
      
6(g
)
    
43,943,500
  
Shares used in computing net loss per ordinary shares, diluted
    
41,658,424
                              
2,285,076
      
6(g
)
    
43,943,500
  

See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

5
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2024
U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

   
Historical
                            
Pro Forma
Combined
  
   
CyberArk
Six Months Ended June 30, 2024
    
Venafi
Six Months Ended June 30, 2024
    
Reclassification
Adjustments
    
Note
    
Transaction
Accounting
Adjustments
    
Note
    
Six Months Ended June 30, 2024
  
Revenues:
                                          
Subscription
  
$
314,653
    
$
74,785
    
$
(6,843
)
    
3
    
$
-
          
$
382,595
  
Perpetual license
    
6,588
      
-
      
-
              
-
            
6,588
  
Maintenance and professional services
    
125,015
      
-
      
11,630
      
3
       -
           
136,645
  
Professional services and other
    
-
      
4,787
      
(4,787
)
    
3
      
-
            
-
  
                                                       
     
446,256
      
79,572
      
-
              
-
            
525,828
  
                                                       
Cost of revenues:
                                                      
Subscription
    
43,563
      
8,325
      
(2,609
)
    
3
      
37,925
      
6(a), 6(b
)
    
87,204
  
Perpetual license
    
782
      
-
      
-
              
-
              
782
  
Maintenance and professional services
    
43,081
      
-
      
7,482
      
3
      
760
      
6(b
)
    
51,323
  
Professional services and other
    
-
      
4,873
      
(4,873
)
    
3
      
-
              
-
  
                                                         
     
87,426
      
13,198
      
-
              
38,685
              
139,309
  
                                                         
Gross profit
    
358,830
      
66,374
      
-
              
(38,685
)
            
386,519
  
                                                         
Operating expenses:
                                                        
                                                         
Research and development
    
110,470
      
17,679
      
-
              
3,425
      
6(b
)
    
131,574
  
Sales and marketing
    
220,303
      
24,377
      
-
              
7,929
      
6(a), 6(b), 6(c
)
    
252,609
  
General and administrative
    
58,411
      
59,095
      
-
              
(40,957
)
    
6(a), 6(b
)
    
76,549
  
                                                         
Total operating expenses
    
389,184
      
101,151
      
-
              
(29,603
)
            
460,732
  
                                                         
Operating loss
    
(30,354
)
    
(34,777
)
    
-
              
(9,082
)
            
(74,213
)
Financial income, net
    
27,399
      
-
      
(8,279
)
    
3
      
10,817
      
6(e
)
    
29,937
  
Interest expense, net
    
-
      
(8,049
)
    
8,049
      
3
      
-
              
-
  
Foreign currency loss
    
-
      
(188
)
    
188
      
3
      
-
              
-
  
Other loss
    
-
      
(42
)
    
42
      
3
      
-
              
-
  
                                                         
Loss before taxes on income
    
(2,955
)
    
(43,056
)
    
-
              
1,735
              
(44,276
)
Tax benefit (taxes on income)
    
(4,498
)
    
739
      
-
              
(440
)
    
6(f
)
    
(4,199
)
                                                         
Net loss
  
$
(7,453
)
  
$
(42,317
)
  
$
-
            
$
1,295
            
$
(48,475
)
                                                         
                                                         
Basic net loss per ordinary share
  
$
(0.17
)
                                          
$
(1.08
)
Diluted net loss per ordinary share
  
$
(0.17
)
                                          
$
(1.08
)
Shares used in computing net loss per ordinary shares, basic
    
42,689,375
                              
2,285,076
      
6(g
)
    
44,974,451
  
Shares used in computing net loss per ordinary shares, diluted
    
42,689,375
                              
2,285,076
      
6(g
)
    
44,974,451
  

See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

6

Note 1—Basis of Presentation

The accompanying unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X. The unaudited pro forma condensed combined balance sheet as of June 30, 2024 was prepared using the historical unaudited condensed consolidated balance sheet of CyberArk and historical unaudited condensed consolidated balance sheet of Venafi as of June 30, 2024, and presents the unaudited pro forma combined financial position of CyberArk and Venafi as if the Venafi Acquisition occurred on June 30, 2024.

The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2023 and for the six-month period ended June 30, 2024 gives effect to the Venafi Acquisition as if it had occurred on January 1, 2023. The unaudited pro forma condensed combined statement of operations combines the historical results of the fiscal periods of CyberArk and Venafi.
 
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting in accordance with the provisions of ASC 805, Business Combinations, with CyberArk determined to be the acquirer under this guidance. In the unaudited pro forma condensed combined balance sheet, CyberArk purchase consideration associated with the Venafi Acquisition has been allocated to the assets acquired and liabilities assumed, based upon their respective fair values as of the Acquisition Date.
 
Any excess of the purchase consideration over the fair value of identified tangible and intangible assets acquired and liabilities assumed is recognized as goodwill. Management believes the estimated fair values utilized for the assets acquired and liabilities assumed are based on reasonable estimates and assumptions. The fair values are subject to adjustment for up to one year after the Acquisition Date as additional information is obtained.
 
The determination of the fair values of the assets acquired and liabilities assumed (and the related determination of estimated useful lives of amortizable identifiable intangible assets) requires significant judgment and estimates. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows related to the business acquired. Although the Company believes the fair values assigned to the assets acquired and liabilities assumed from the acquisition are reasonable, new information may be obtained about facts and circumstances that existed as of the date of the acquisition during the twelve-month period following the acquisition which could cause actual results to differ materially from the unaudited pro forma condensed combined financial information.
 
The unaudited pro forma condensed combined financial information reflects transaction accounting adjustments management believes are necessary to present fairly CyberArk’s pro forma financial position and results of operations following the closing of the Venafi Acquisition as of and for the periods indicated. The unaudited pro forma condensed combined financial information does not give effect to the potential impact of any anticipated synergies, operating efficiencies or cost savings that may result from the Venafi Acquisition or of any integration costs of CyberArk and Venafi or the costs necessary to achieve any synergies, operating efficiencies or cost savings.
 
Supplemental Information
 
To provide additional insights into Venafi’s and CyberArk's financial information, the following table presents expenses for share-based compensation, amortization, acquisition related expenses, and impairment of capitalized software development costs for the respective periods.

   
Year Ended December 31, 2023
(USD in thousands)
  
   
CyberArk
    
Venafi
    
Transaction Accounting
Adjustments
    
Note
    

Pro Forma
Combined
  
Share-based compensation
  
$
140,101
    
$
8,706
    
$
6,514
      
6(b
)
  
$
155,321
  
Amortization of share-based compensation capitalized in software development costs
    
393
      
-
      
-
              
393
  
Amortization of intangible assets
    
7,364
      
79,641
      
22,173
      
6(a
)
    
109,178
  
Acquisition related expenses
    
-
      
-
      
21,010
      
6(d
)
    
21,010
  
Impairment of capitalized software development costs
  
$
2,067
    
$
-
    
$
-
            
$
2,067
  

7
   
Six Months Ended June 30, 2024
(USD in thousands)
  
   
CyberArk
    
Venafi
    
Transaction Accounting
Adjustments
    
Note
    
Pro Forma
Combined
  
Share-based compensation
  
$
78,030
    
$
3,779
    
$
4,078
      
6(b
)
  
$
85,887
  
Amortization of share-based compensation capitalized in software development costs
    
153
      
-
      
-
              
153
  
Amortization of intangible assets
    
3,659
      
39,821
      
7,572
      
6(a
)
    
51,052
  
Acquisition related expenses
  
$
5,281
    
$
7,204
    
$
-
            
$
12,485
  

Note 2 —Significant Accounting Policies

The accounting policies used in the preparation of this unaudited pro forma condensed combined financial information are those set out in CyberArk’s audited financial statements as of and for the year ended December 31, 2023. Management has completed the review of Venafi’s accounting policies and has determined that no significant adjustments are necessary to conform Venafi’s historical consolidated financial statements to the accounting policies used by CyberArk in the preparation of the unaudited pro forma condensed combined financial information. Certain reclassification adjustments have been reflected in the pro forma financial information to conform Venafi’s presentation to CyberArk’s presentation in the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations. These reclassifications have no effect on previously reported total assets, total liabilities, stockholders’ equity, or income from continuing operations of CyberArk or Venafi.

Following the completion of the Venafi Acquisition, CyberArk will perform a comprehensive review of Venafi’s accounting policies. As a result of the review, CyberArk may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma condensed combined financial information.

Note 3—Reclassifications

The following reclassification adjustments were made to conform the presentation of Venafi’s financial information to CyberArk’s presentation as indicated in the table below:

Balance Sheet as of June 30, 2024

Amount (USD in thousands)
  
Presentation in Venafi’s Historical
Financial Statements
  
Presentation in Unaudited Pro Forma Condensed
Combined Financial Information
$
4,176
  
Right-of-use assets
  
Other long-term assets
 
784
  
Accounts payable and accrued liabilities
  
Trade payables
 
8,222
  
Accounts payable and accrued liabilities
  
Accrued expenses and other current liabilities
 
9,527
  
Accrued compensation
  
Employees and payroll accruals
 
1,497
  
Lease liabilities
  
Accrued expenses and other current liabilities
$
2,896
  
Lease liabilities, net of current portion
  
Other long-term liabilities

Statement of Operations for the Fiscal Year Ended December 31, 2023

Amount (USD in thousands)
  
Presentation in Venafi’s Historical
Financial Statements
  
Presentation in Unaudited Pro Forma Condensed
Combined Financial Information
$
13,635
  
Subscription (Revenues)
  
Maintenance and professional services (Revenues)
 
10,740
  
Professional services and other (Revenues)
  
Maintenance and professional services (Revenues)
 
4,550
  
Subscription (Cost of revenues)
  
Maintenance and professional services (Cost of revenues)
 
11,589
  
Professional services and other (Cost of revenues)
  
Maintenance and professional services (Cost of revenues)
 
905
  
Restructuring
  
General and administrative
 
17,369
  
Interest expense, net
  
Financial income (expense), net
 
161
  
Foreign currency loss
  
Financial income (expense), net
$
704
  
Other loss
  
Financial income (expense), net

The reclassification adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report CyberArk’s financial condition and results of operations shortly after the completion of the Venafi Acquisition.

8

Statement of Operations for the Fiscal Six Months Period Ended June 30, 2024
 
Amount (USD in thousands)
  
Presentation in Venafi’s Historical
Financial  Statements
  
Presentation in Unaudited Pro Forma Condensed
Combined Financial Information
$
6,843
  
Subscription (Revenues)
  
Maintenance and professional services (Revenues)
 
4,787
  
Professional services and other (Revenues)
  
Maintenance and professional services (Revenues)
 
2,609
  
Subscription (Cost of revenues)
  
Maintenance and professional services (Cost of revenues)
 
4,873
  
Professional services and other (Cost of revenues)
  
Maintenance and professional services (Cost of revenues)
 
8,049
  
Interest expense, net
  
Financial income (expense), net
 
188
  
Foreign currency loss
  
Financial income (expense), net
$
42
  
Other loss
  
Financial income (expense), net

Note 4—Purchase Consideration and Allocation

Purchase Consideration
 
The purchase consideration amounted to $1.66 billion, based on the closing price of CyberArk ordinary shares on Nasdaq of $279.70 on October 1, 2024. The purchase consideration is as follows:
 
   
Amount
(USD in thousands)
  
Cash
  
$
1,020,608
  
CyberArk ordinary shares (2,285,076 shares at $279.70 per share)
    
639,136
  
Total purchase price
  
$
1,659,744
  

Purchase Price Allocation

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Venafi are recorded at their fair values as of the Acquisition Date and added to those of CyberArk. The purchase price allocation shown below is based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and has been prepared to illustrate the estimated effect of the Venafi Acquisition. CyberArk has performed the preliminary fair valuation of Venafi’s assets and liabilities. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained.

9
 
The following table sets forth the allocation of the total purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, based on Venafi’s balance sheet on June 30, 2024, with excess recorded as goodwill:

   
Amount
(USD in thousands)
  
Preliminary Aggregate Purchase Consideration Allocation
      
Cash and cash equivalents
  
$
33,848
  
Accounts receivables
    
29,001
  
Contract Assets
    
13,872
  
Prepaid expenses and other current assets
    
6,456
  
Property and equipment
    
348
  
Right-of-Use Assets
    
4,176
  
Acquisition-related intangible assets
    
539,067
  
Other Assets
    
1,262
  
Total assets
    
628,030
  
Accounts Payable and Accrued Liabilities
    
5,516
  
Accrued Compensation
    
9,527
  
Deferred revenues, current and non-current
    
61,235
  
Deferred Tax Liability, net
    
56,918
  
Lease Liabilities, current and non-current
    
4,176
  
Other Liabilities
    
1,252
  
Total Liabilities
    
138,624
  
Fair value of net assets acquired
    
489,406
  
Goodwill
    
1,170,338
  
Total
  
$
1,659,744
  

Goodwill represents the excess of acquisition consideration over the fair value of the underlying net assets acquired. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill is not amortized. Instead, it is tested for impairment at least once a year, unless there are indicators of impairment. Goodwill is attributable to the assembled workforce of Venafi, planned growth in new markets and synergies expected to be achieved from the combined operations of CyberArk and Venafi. Goodwill recorded in the Venafi Acquisition is not deductible for tax purposes.
 
The fair value adjustments are further described below in Notes 5 and 6.
 
Deferred Tax Liability, net
 
Deferred tax liabilities principally represent the deferred tax impact associated with the incremental differences in book and tax basis created from the purchase price allocation. Deferred taxes associated with estimated fair value adjustments are computed using a blended statutory U.S. federal and state tax rate. For balance sheet purposes, each jurisdiction’s enacted tax rates were based on the applicable tax laws. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-acquisition activities, cash needs, the geographical mix of income and changes in tax law.

10
 
Intangible Assets

Identifiable acquisition-related intangible assets in the unaudited pro forma condensed combined financial information consist of the following:
 
   
Fair Value
(USD in thousands)
    
Estimated Useful
Life
(In Years)
   
Amortization based upon preliminary fair values for the six months ended June 30, 2024
    
Amortization based upon preliminary fair values for the year ended December 31, 2023
  
Technology - On-Premise
  
$
181,911
      
5
    
$
18,191
    
$
36,382
  
Technology - SaaS
    
195,165
      
5
      
19,517
      
39,033
  
Customer Relationships – On Premise
    
150,005
      
8
      
9,375
      
18,751
  
Customer Relationships - SaaS
    
4,957
      
8
      
310
      
620
  
Trademark
    
7,029
      
1
      
-
      
7,029
  
Total
  
$
539,067
            
$
47,393
    
$
101,815
  

The fair value for all identifiable intangible assets is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use).
 
The amortization related to the identifiable intangible assets is reflected as a pro forma adjustment in the unaudited pro forma condensed combined statements of operations based on the estimated useful lives above.
 
Note 5—Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments
 
Adjustments included in the Transaction Accounting Adjustments column in the accompanying unaudited pro forma condensed combined balance sheet as of June 30, 2024:
 

 (a)
Reflects $1.02 billion in cash paid as consideration of the acquisition, of which $527 million was funded from the sale of marketable securities. Included as part of the entire purchase consideration is $170 million that was used to repay Venafi indebtedness. Additionally, reflects $79 million cash paid by Venafi to partially settle the indebtedness subsequent to June 30, 2024 and prior to the acquisition date of October 1, 2024.


(b)
Reflect the adjustments of fair value of assets acquired and liabilities assumed as a result of acquisition accounting. Refer to Note 4 for details.

Goodwill

   
USD in thousands
  
Elimination of Venafi’s historical goodwill
  
$
(550,086
)
Goodwill from Venafi Acquisition
    
1,170,338
  
Total adjustment to goodwill
  
$
620,252
  

    Acquisition-related Intangible Assets, net

   
USD in thousands
  
Elimination of Venafi’s historical acquisition-related intangible assets
  
$
(236,556
)
Acquisition-related intangible assets from the Venafi Acquisition
    
539,067
  
Total adjustment to acquisition-related intangible assets – see note 4
  
$
302,511
  

    Contract acquisition costs, net

   
USD in thousands
  
Elimination of Venafi’s historical current and long-term Contract acquisition costs, net
  
$
(10,741
)

11

   Deferred Tax Liability, net

   
USD in thousands
  
Deferred tax impact associated with the incremental differences in book and tax basis created from the purchase price allocation
  
$
(77,179
)
Elimination of Venafi’s historical deferred tax asset valuation allowance
    
25,437
  
Total adjustment to deferred tax liability, net
  
$
(51,742
)


(c)
Represents the reclassification adjustment of $22.4 million from deferred tax assets to deferred tax liability related to CyberArk Subsidiaries in certain jurisdictions.


(d)
To adjust the loan settlement on the transaction closing date due to a change of control event.


(e)
Represents the accrual of additional transaction costs of $21 million incurred by CyberArk subsequent to June 30, 2024, and elimination of transaction costs of $3.5 million accrued by Venafi on June 30, 2024, and paid as part of the consideration.


(f)
Reflects the fair value adjustment of $217 thousand to Venafi’s historical lease liabilities.
 

 (g)
Reflects the elimination of Venafi’s historical Class B Units, additional paid in capital and accumulated other comprehensive loss as well as adjustment to reflect the value of shares issued as consideration to Venafi’s stockholders.
 
Additional Paid-in Capital
 
   
USD in thousands
  
Elimination of Venafi’s historical additional paid in Capital
  
$
(925,465
)
Value of CyberArk ordinary shares issued as consideration to Venafi’s stockholders
    
639,130
  
Total adjustment to additional Paid-in Capital
  
$
(286,335
)


(h)
Reflect the adjustments to eliminate Venafi’s historical accumulated deficit after pro forma adjustments and record transaction costs.

   Retained earnings (accumulated deficit)

   
USD in thousands
  
Elimination of Venafi’s historical accumulated deficit
  
$
299,058
  
Adjustment for CyberArk’s transaction costs due at closing
    
(21,010
)
Total adjustment to accumulated deficit
  
$
278,048
  
 
12

Note 6—Unaudited Pro Forma Condensed Combined Statements of Operations Adjustments
 
Adjustments included in the Transaction Accounting Adjustments column in the accompanying unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2024 and for the year ended December 31, 2023:


 (a)
Represents the adjustments to record (i) the elimination of Venafi’s historical amortization expense and (ii) recognition of new amortization expense related to identifiable intangible assets acquired. The amortization of all finite-lived intangible assets is based on the periods over which the economic benefits of the intangible assets are expected to be realized, which are subject to further adjustment as additional information becomes available. The amortization finite-lived identifiable intangible assets is on a straight-line basis.


(i)
Elimination of Venafi’s historical intangible asset amortization (in thousands):

   
Pro Forma Six Months Ended June 30, 2024
    
Pro Forma Year Ended December 31, 2023
  
General and administrative
  
$
(39,821
)
  
$
(79,641
)
 
The elimination of Venafi’s historical intangible asset amortization does not include amortization for other intangible assets that are not related to the business combination.


 (ii)
Amortization of Acquisition-related intangible assets (in thousands):

   
Pro Forma Six Months Ended June 30, 2024
    
Pro Forma Year Ended December 31, 2023
  
Cost of revenues- subscription
  
$
37,708
    
$
75,415
  
Sales and marketing
  
$
9,685
    
$
26,399
  


(b)
The adjustment for share-based awards represents the difference between Venafi’s historical share-based compensation expenses and the estimated share-based compensation expense related to a new awards issued to continuing employees (in thousands):

   
Pro Forma Six Months Ended June 30, 2024
    
Pro Forma Year Ended December 31, 2023
  
Cost of revenue - subscription
  
$
217
    
$
311
  
Cost of revenue - professional services and other
    
760
      
1,420
  
Research and development
    
3,425
      
6,471
  
Sales and marketing
    
812
      
773
  
General and administrative
  
$
(1,136
)
  
$
(2,461
)


(c)
To eliminate amortization of contract acquisition costs (in thousands):

   
Pro Forma Six Months Ended June 30, 2024
    
Pro Forma Year Ended December 31, 2023
  
Sales and marketing
  
$
(2,568
)
  
$
(4,855
)


(d)
Represents the accrual of additional transaction costs of $21 million incurred by CyberArk subsequent to June 30, 2024.


(e)
To eliminate the historical interest expenses related to Venafi’s debt, settled at closing due to a change of control event.
 

 (f)
Reflects the income tax effect of unaudited pro forma adjustments. CyberArk assumed a tax rate of 25.4% for the pro forma adjustments for the year ended December 31, 2023 and for the six months ended June 30, 2024, representing the federal and state tax rate. CyberArk’s effective tax rate following the Venafi Acquisition may be affected by various factors, including tax planning, and therefore may differ materially.


(g)
Represent the pro forma weighted average shares outstanding that have been calculated using the historical weighted average ordinary shares of CyberArk outstanding and the additional ordinary shares of CyberArk issued in conjunction with the Venafi Acquisition, assuming those ordinary shares were outstanding for the fiscal year ended December 31, 2023 and for the six months ended June 30, 2024.
 
13

The following table sets forth the computation of pro forma basic and diluted earnings per share
 
   
Pro Forma Six Months Ended June 30, 2024
    
Pro Forma Year Ended December 31, 2023
  
Pro forma loss attribute to stockholders (in thousands)
  
$
(48,475
)
  
$
(158,913
)
                 
Historical CyberArk weighted average ordinary shares outstanding- Basic and diluted
    
42,689,375
      
41,658,424
  
CyberArk ordinary shares issued to Venafi stockholders pursuant to the Merger Agreement
    
2,285,076
      
2,285,076
  
Basic and diluted weighted average ordinary shares outstanding used in computing pro forma net earnings per share
    
44,974,451
      
43,943,500
  
                 
Pro forma loss per ordinary share, basic and diluted
  
$
(1.08
)
  
$
(3.62
)

14