An Ark Full of Security

CyberArk Software Ltd. (NASDAQ:CYBR) of Israel has been on our acquisition list for 7 years. Like Noah's ark secured the human race, CyberArk wants to make us all safer. Our Seeking Alpha article about the identity security company appeared on S A on November 28, 2018; the share price was on the move up topping $68.35 each at the time of publication. The share price closed the second week of December ’23 near its 52-week high at $204.53 then slipped to $201.25 to close the second week of December '23.

In our opinion, current measures substantiate the stock’s Buy-rating status we, S A, and Wall Street analysts assign it at this time.

CyberArk stands out from its peers in several ways meaningful to investors. My associate, Dan Goldmeier, now VP of Sales & Marketing at start-up Hospice Tools in Chicago, worked with CyberArk in a former position at an Israeli software company. He rates CyberArk "a great company with some of the best tech for cybersecurity for governments and banks and enterprise companies. And the service to customers with boots on the ground is stellar."

In a survey by Gartner Peer Insights, CyberArk reviews rate it higher than Microsoft (MSFT) and 22 other well-known players in the field of Identity Security. CyberArk is "better at service and support, easier to integrate and deploy, and better evaluation and contracting."

A second reason for our gleam comes from the company's strategy of generating growing recurring revenue; that translates to good earnings and high margins. The quarterly gross profit margin over the last 3 quarters averages ~80% and 81.59% over all the years. That number is better than 85% of GPM of companies in the industry. CyberArk's operating and net margins rank lower than those of industry competitors but CyberArk is producing enough cash flow for the company liquidity ranking to place it mid-level among its peers.

Profile

According to Stockanalysis.com, CyberArk is the seventh largest, Israel-based, publicly traded, business on a U. S. exchange by market cap (~$8.39B) with annual revenue touching $700M.

A primary reason for the resiliency of Israel's stocks is that most of the above companies have R&D and marketing offices overseas and customers are worldwide. Overseas locations operationally support CyberArk's Israel and West Bank locations. Its operations, productivity, and output are minimally affected by the war.

CyberArk Software develops, markets, and sells software security programs and services. It is building subscription revenue, too.

Brand names include

• Privileged Access protects against attacks involving privileged access;
• Vendor Privileged Access combines PAM and Remote Access for third-party vendors;
• Endpoint Privilege Manager is a SaaS solution that secures privileges on the endpoint;
• Cloud Security is a SaaS solution that cuts risks arising from excessive privileges in cloud environments.
• Identity and Workforce Access covers workforce identity security by offering adaptive multi-factor authentication (MFA), single sign-on, secure Web sessions, workforce password management, application gateway, identity lifecycle management, directory services customer identity services, and more.
• Secrets Management manages the credentials used by third-party solutions and Secrets Manager Conjur secures cloud-native applications to develop AWS secrets.

Customers include financial services, manufacturing, insurance, healthcare, energy and utilities, transportation, retail, technology, and telecommunications industries. Private customers and government agencies are reached through CyberArk’s direct sales force, channel sales, security service providers, and advisory partners.

The company was founded in 1999 when Israel’s burgeoning tech industry engendered its tag name, the Start-Up Nation. Late this year, CyberArk was named an Overall Leader in the KuppingerCole Analysts AG 2023 “Leadership Compass: Access Management” report. “The company’s overall leadership position is based on the strength of its CyberArk Identity offering across the report’s product, innovation and market categories.”

CyberArk’s growth is partly attributable to its acquisition of 7 companies in software and IT at a cost of nearly $145M over the years. S A reports investment firm Wedbush Securities recently cited CyberArk among the global leaders likely to benefit from increased Washington spending next year on security and risk management; it projects total spending of $215B in ’24 or +14% Y/Y. Israel’s cybersecurity firms and government are projected to report revenue to grow in 2024 at an annual CAGR average of 11.66% hitting a market volume of $1.5B by FY ’28. This might be an underestimation considering how significantly cybersecurity firms are aiding in Israel’s anti-terror war effort.

More Good News

Q3 ’23 reported in November was one of the company’s best quarters. Demand for Identity Security is a global priority according to the CEO: “Total bookings growth accelerated and…significantly outpaced our guidance framework.” The engagement of customers on a subscription model resulted in “a break-out in terms of product ARR (annual recurring revenue) subscription growth, rising to a quarterly level," according to S A analyst Bert Hochfeld.

The shareholders were also told

"Subscription ARR reached $504 million growing 68% year-over-year. Total ARR reached $705 million growing 38%. We added a robust $52 million in net new ARR and we exceeded our guidance range across revenue, operating income and EPS with total revenue accelerating to 25% growth, reaching $191 million. Non-GAAP operating income came in at approximately $17 million, and we generated non-GAAP earnings per share of $0.42. Throughout the year, our team has personified excellence in execution, and we have navigated the macroeconomic landscape exceptionally well. While uncertainty persisted in the third quarter, we experienced a firming of the macro environment compared to the last few quarters. Our execution was even stronger in Q3, as seen in our meaningful top and bottom line outperformance… The velocity of our business is picking up as customers achieve faster time to value with our SaaS solutions."

We foresee significant revenue growth, and better and more consistent EPS upside over the next 2 years and into the future. Identity cybersecurity is an important part of risk management in public space security, as we discussed in a recent article about Evolv Technologies Holdings, Inc. (EVLV). We think the increase in demand for CyberArk’s products and services on a subscription basis is going to positively affect the consensus FY ‘24 EPS forecast loss to between -$1.73-to -$2.38 from the 2023 consensus between -$2.31-to -$2.40 per share. Wells Fargo (WFC) recently upgraded its average target price from $201 to $231.

We see an opportunity for an average target share price of +$250 over the next 3 to 6 months with no impediments to ending this rally anytime soon.

Finally, media coverage and sentiment about CyberArk was bullish most of the year and seems to remain so.

Risks

In our 2018 article, we wrote, “CyberArk is a solid investment for small investors interested in the cybersecurity industry. There is plenty of room for growth and opportunities for climbing to the target prices set by institutional investors.” Little has changed except, to note, that S A downgraded its Quant Rating assessment this year to Hold, as the share price soared $100 from the end of 2022 lowering its valuation. We consider this new status a risk flag and investors need to watch valuation.

Another concern is the conflict in Gaza; when Israel was invaded by Hamas in October, the average share price of Israel-based firms dived around 14% to 16%. Shares of CyberArk sold for $171 each in Sep ’23, slipped to ~$156 in late October, but are back-up, as we predicted the share prices would be once initial economic-impact revisions were evaluated.

Third, corporate insiders do not own many shares and that is never reassuring to retail value investors. Hedge funds consistently bought the stock in the first quarter of 2023 and in greater quantities beginning in May ’23. Since the rally, funds have tended to sell, decreasing their holdings by 102K shares last quarter. At its peak number in Q1 ’23, 33 hedge funds owned shares, 27 in Q2, and 30 at the end of Q3 ’23.

We do not see any downward trend evolving yet despite the greatest risk which is the high valuation. The company holds $571.6M in debt but last reported $906.2M in cash and equivalents; plus, its market cap tops $8B. CyberArk’s net cash flow from operations is slightly up but so are liabilities. It is liquid enough to cover outstanding financial obligations. Short interest moved up to +5% on the share price rise with days to cover 3-to-4 down from +7 last August.

CyberArk is in a labor-intensive business competing for trained innovative-thinking employees. In February ’23, the company hired another 150 employees to keep R&D apace. Officials also announced the CEO of 18 years is stepping down, but we expect any new moves to be delayed until after the war on terrorists is settled.

Valuation

Regarding S A’s valuation F grade, a peek at the metrics reveals the share price rally puts them out-of-sync with sector mean numbers. For example, P/E non-GAAP forward is 261.6 versus the sector mean of 23.8; PEG non-GAAP is 11.89 versus 2.03; and EV to Sales TTM and FWD is around 11 to the sector’s mean of 2.88 and 2.81, respectively. EV/EBITDA gets an F standing at 1.88 to 15.3. CyberArk’s price to various metrics all rate a D- or F. Concomitantly, its Enterprise Value has steadily risen:

In our opinion, considering EV growth, past and potential revenue and earnings growth, liquidity, potential for generating recurring income, and other metrics, we conclude the shares selling at around $210 each is a reasonable fair value but other valuation gauges suggest there is potential for the share price to move up higher.

Granted, the current share price is on the expensive side of fair value; we think fair value will rise when its price-to-sales ratio becomes more balanced as the company grows, cuts debt, enjoys the results of lower loan interest rates, and Identity Security software grows in sophistication and effectiveness pushing massive industry growth.

More value lies in the potential for this Israeli tech company garnering M&A attention from a suitor. These deals are at a 9 year low because of the war but identity tech companies have learned a lot from the war making CyberArk potentially more valuable.

Takeaway

We see from the valuation metrics a rising risk from sell-offs to take profits as we near the end of the year and start a new one. But predictions are, for the most part, 2024 will be a big up year for the stock market. The demand for identity security is only going to increase. We do not see any other significant downward pressures over the next 6 months on the stock. CyberArk is facing few risks, is carrying through on its subscription strategy, and has the potential for tremendous growth worldwide. It is why the company gets a better Factor Grade for Momentum from 6 and 3 months earlier and we see the stock as a Buy opportunity even at +$200 per share.

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A typical examination question in Mathematics will have several parts to it. Some parts (most usually at the beginning of the question) test your knowledge, by asking you to reproduce "bookwork", i.e. material presented in the lectures. Really, these parts test how well you've revised. Occasionally, especially in certain more advanced courses, there are entire questions that are bookwork. In some courses, some pieces of bookwork come up in the exam almost every year. In other courses, hardly any bookwork is set explicitly.

Tip: Figure out which pieces of bookwork come up most frequently, and make sure you can answer those questions easily and quickly.

You would be surprised how many poor attempts at routine bookwork questions we see every year. These are the parts of the questions that we expect students to be able to do.

Other parts of examination questions involve a "problem". In a "Methods" course, this will typically involve you applying a known technique from the course, and again this is something we expect you to be able to do. In a Pure Mathematics course, you might be asked to prove a result, or to apply a result in a particular setting.

Tip: Sometimes (but certainly not always!), the first part of the question is intended as a big hint as to how you should approach the second part.

Many exam questions, especially those that are otherwise very routine, have a last part (a "rider") which is more challenging than the rest of the question. This is quite deliberate, and the intention is to test whether you've really understood the material.

Tip: Do try all the riders (they're not always so hard after all!) but don't waste too much time on them in an exam if there are other things you can tackle instead.

Students sometimes seem to be annoyed that they have to do something clever to get 100% on a question. Don't forget, in many other subjects it's practically impossible to score 100% on a question!

Tip: Make sure you've answered all the parts of the question. Sometimes you're asked to do seven or eight things, and it's easy to overlook one.

In January 2023, we reported on the reasons why nursing exam pass rates fell in 2020 and 2021. In this report, we follow up on what has happened since.

During the first 2 years of the COVID-19 pandemic, the share of candidates who passed the national licensure exam to work as a registered nurse fell sharply, from 88.2% to 82.5%, for first-time U.S.-educated candidates, with a smaller decline -- from 72.8% to 68.9% -- for all candidates, including internationally educated and repeat test-takers.

In 2022, pass rates continued to drop, averaging 79.9% (8 percentage points lower than in 2019) for first-time U.S.-educated candidates, and 63.4% for all candidates, the lowest point in the last decade.

In 2023, to most experts' surprise, that spiral appears to be turning around.

Things Are Looking Up

The reason for this reversal depends on whom you ask. Test developers have argued that rates improved due to radical transparency and massive outreach to stakeholders, while some online critics have suggested the test simply got easier. Other nurse educators agreed that the increased transparency and outreach impacted rates, but worry those same measures exacerbated a culture of "teaching to the test."

Understanding trends in exam pass rates also requires context.

The National Council of State Boards of Nursing (NCSBN) produces the exam that aspiring nurses take to gain licensure: the National Council Licensure Examination (NCLEX). This exam uses computerized adaptive testing, which means each test-taker gets virtually a different exam, the difficulty of which changes based on the response given.

Every 3 years, the NCSBN assesses the pass rates for the exam and determines whether the current passing standard is appropriate. If the NCSBN's board of directors decides that the level of clinical judgment required of nurses in practice has increased, it can vote to raise the passing standard.

In December 2022, the NCSBN's board voted to keep the current passing standard on the NCLEX through March 31, 2026. Months later, on April 1, the NCSBN launched the Next Generation NCLEX (NGN), a new version of the NCLEX that aims to more effectively measure test-takers' clinical judgment.

Anytime a new exam is introduced, pass rates tend to dip by a few percentage points in the first two to three quarters, explained Philip Dickison, PhD, RN, CEO of the NCSBN. He said he was naturally a bit concerned about a new exam compounding the "drastic drop in the ability curve" seen during the pandemic, "but it was still the right thing to do."

Keith Rischer, PhD, RN, a nurse educator and owner of KeithRN, a nursing education company, recalled that the last major change to the NCLEX occurred when the passing standard was raised by 0.16 percentage points in 2012. Pass rates fell more than 7 percentage points -- from 90.34% for first-time candidates to 83.04% -- in a single year.

While the NCSBN kept the same passing standard in 2022, the stronger emphasis on clinical judgment and the "unique six-question case studies" in the NGN was predicted to increase the difficulty of the exam in some respects.

"There was an anticipation that this was going to be another precipitous decline in NCLEX pass rates," Rischer said.

Post-Pandemic Rebound

However, that wasn't what happened. Instead, preliminary data showed a jump in pass rates, from 79.9% in 2022 to 88.6% in 2023, for all first-time U.S.-educated candidates. Importantly, the 2023 data exclude the fourth quarter of the calendar year, which typically has the lowest pass rate, experts noted.

Still, Dickison said he was "pretty amazed" at the speed of the recovery. Some viewed the change as a "huge increase," but he stressed that rates were starting from a low baseline following a 3-year period when other variables, namely pandemic-related disruptions, impacted pass rates.

"What I think you're seeing ... is that we have rebounded to pre-pandemic ability levels in our measurements," he said.

Dickison credits the rebound to NCSBN's decision to let educators, regulators, and -- controversially -- preparatory groups "under the hood" of the new exam for several years before the NGN actually launched.

"The idea was to be as transparent as possible to all stakeholders," Dickison said. This meant leveraging opportunities at conferences and during webinars, and sharing what to expect of the new exam -- from case studies and measurement models -- in newsletters. Dickison also credited educators for the big role they played in helping prepare students.

Rayna Letourneau, PhD, RN, executive director of the Florida Center for Nursing, said that while some nurse educators have noted the exam has gotten "too easy," she suggested that perhaps the NGN is simply "a more logical way to measure what nursing students are being taught."

Similarly, she attributes the rise in pass rates to the focus on increased resources and preparation of candidates, including the implementation of "student success" coaching programs.

Teaching to the Test?

Rischer seemed to have a different view, pointing out that the NGN offers partial credit for certain "select-all-that-apply" multiple-choice questions. He said that he believes the real reason for improved pass rates is a shift in nursing education, though he added that his hypothesis is, at this point, "conjecture."

"What we have in the nursing literature for over almost 50 years ... is this widening gap between how nursing is taught in the university and college settings and how it's actually practiced at the bedside," he said. "We're not preparing our graduates for real-world practice realities."

Rischer said he grew even more concerned when he learned from online discussions that some professors were using NGN sample items to teach first-semester students.

"That's called teaching to the test," he argued. Instead of teaching students "alternative multiple-choice items, we need to be teaching our students the open-ended thinking of clinical practice."

For example, for a patient who had an appendectomy, Rischer said the appropriate steps are to take vital signs and conduct a head-to-toe assessment.

"There is not a 'select-all-that apply' multiple-choice item on your forehead that I could say, 'You know what? This is the correct answer,'" he added, noting that the NCSBN "is part of the problem." Currently, the primary mechanism that state nursing boards use to measure a program's performance is their first-time pass rate on the NCLEX, which only "reinforc[es] this unhealthy culture of teaching to the test."

The end result of that, as studies have shown, is that "currently less than 10% [of new nurses] have what practice partners would say is entry-level clinical judgment competency," Rischer said, citing a 2021 study. "Complications develop when a nurse doesn't notice or recognize what's most important until it's too late. So ... clinical judgment competency is a big deal. And teaching to the test ... isn't going to solve that."

He said one solution is to move away from first-time test-taker metrics and potentially allow students to take the exam twice and then average their score.

Another, more dramatic, change would be to include a skills test or what Rischer calls "demonstrable competencies" for essential skills involved in clinical decision making, which could be evaluated by an "objective observer."

"It will take more time. It will take more money, but this is something that we can and should be doing," he said.

'Not the Only Measurement'

For his part, Dickison noted that the NGN, like any exam, has limitations.

While it "measures your cognitive and your thinking ability, our exam does not measure the affective domain, doesn't measure character," he said. For example, the exam cannot assess a "less-than-acceptable social interaction" a student has with a professor, nor does the exam know which student is always late to class.

"If they don't show up to class on time every day, that might be a [sign] that they're not going to show up to a patient when they need to," Dickison explained. "That's why you have a regulatory system. That's why we have an education [system] ... these all have to work together. If you don't pass the NCLEX, you don't go to work, but it is not the only measurement that tells us we have a good nurse."

Purpose

To determine authenticity and authorship.

Method

The specifics of an investigation will depend on the nature of the document being studied (e.g., historical or personal) and the goals of the inquiry. Generally speaking, a document will be examined from three different aspects: historical, scientific, and stylistic.

Historical Analysis

It is virtually impossible to pinpoint the age of an undated document, but there may be clues to the era. If it is a printed piece - say a greeting card - the method of printing, address, and even the stamp may be important.

At the very least, materials and techniques must be consistent with place and time. Many forgeries are identified by the presence of materials that didn’t exist at the time alleged.

Scientific Analysis

A detailed paper analysis will detect every shred of physical evidence concealed in a document.

Stylistic Analysis

Comparisons of style are essential for authentication. Penmanship, cultural phrasing, and form of address can help to identify both the era and author. Handwriting comparisons can authenticate a signature or manuscript.

In some cases, all of it taken together can’t solve a historical puzzle. For example, there are five known manuscript copies of the Gettysburg Address. Testing has proved that all are authentic Lincoln documents. But it will never prove, definitively, which of the five Lincoln actually read from at Gettysburg.

General Final Exam Information⁠

GeneralFinal exams will be generated by the Registrar’s Office according to an exam matrix on or about the last day of the add/drop period for the term for any course that has 'Yes' indicated for a Final Exam in the catalog. The day and time of the first class meeting during the week determine the date and time for each exam. Courses that meet outside the normal university block scheduling will be scheduled within the time block that best fits the schedule without creating conflicts for students.

Exam times are as follows:

• 8 – 11 a.m.
• 11:30 a.m. – 2:30 p.m.
• 3 – 6 p.m.
• 6:30 - 9:30 p.m.

While exam blocks are three hours long, the actual length of the exam is determined by the instructor.

If examination days are postponed because of weather conditions, the first make-up day is documented on the academic calendar.

Faculty should review their exam schedule just after the last day of add/drop. If an exam was not generated or changes are needed, please email: scheduling@uml.edu. Requests for final exams, combined exams, etc. will not be accepted after the mid-semester evaluation date for the term in question. Please refer to the academic calendar for specific date information.

Common Exams

• Faculty should plan to administer a separate exam for each section of a course that they are teaching.
• Requests for common exams must be approved by the Dean AND the course must have, at minimum, three (3) class sections to be considered for common exam scheduling. 
• Requests should be submitted by email to: scheduling@uml.edu no later than the mid-semester evaluation date for said term, and all requests are subject to classroom availability.
• Common Finals will need to be applied to all sections of a course not to individual instructors.
• Common Exam Finals will be assigned to a common exam block. 
  • Students who are scheduled for two common exams at the same time should check with their instructors to see which exam has priority.

Note: Requests for combined exams will not be accepted after the mid-semester evaluation date for the term in question. Please refer to the academic calendar for specific date information.

Examination Conflicts

If a student has three (or more) finals scheduled on the same exam day, the student has the right to ask that a make up exam (or exams) be scheduled to reduce the number of exams in each day to two. Under these circumstances, required courses¹ take priority, so the student should make every effort to arrange the make-up exam for a non-required course with the respective instructor. Likewise, if a student has two finals scheduled in the same exam period, the required course takes priority; the student should schedule a make-up exam for the non-required conflicting course with the respective instructor. If for any reason a mutually agreeable solution between the student and the instructor cannot be achieved, the student should see his or her college dean immediately.

Students – If you have questions regarding any of your final exams, please contact your instructor directly. Instructors should reach out by email to: scheduling@uml.edu if an exam update is needed in SiS.

^1'Required courses' refers to whichever course is required toward that specific student’s degree pathway.

Final Exams for Hybrid and Virtual Class Sections

Exams (including final exams) for fully virtual classes should be administered virtually, as that is the modality which students selected. Exceptions to hold on-campus exams require deans' approval. An email (noting the approval) should be sent by email to: scheduling@uml.edu so that the exam location may be updated – exceptions are subject to room availability. If approved, faculty must indicate the alternate exam format in their course syllabus and accommodate students who are unable to attend in-person exams.

If a class section is hybrid (includes both an in-person meeting and either an online or virtual meeting pattern), then the final exam will be assigned as in-person, but the instructor may request the final exam to be virtual/online depending on the modes of instruction of the hybrid section. Hybrid courses also include courses that have more than one component with different modes of instruction (i.e., the lecture portion is virtual, but the recitation is in-person) and the instructor may decide whether or not the final exam is in-person in this scenario as well. Any requests for final exam updates should be sent by email to: scheduling@uml.edu.

Undergraduate and Graduate Final Exams (Day-school Sections)⁠

• Faculty are not required to administer cumulative final examinations and should assess their students as appropriate to their discipline and course content. If an exam is assigned and will not be taking place, please email: scheduling@uml.edu.
• Faculty who opts to administer final examinations must do so at the time and place specified by the Registrar's Office and listed in SiS. All day-school sections that are noted in the catalog with 'Yes' for final exam, will have a final exam block generated.
• Final take-home examinations or final papers must not be due earlier than the time that the Registrar's Office has scheduled the final examination for the course in question (although instructors may opt to allow such examinations or papers to be submitted early).
  • Note: If an academic program requires that students take final examinations for accreditation purposes, faculty are expected to adhere to the requirements of their accrediting organization.
• Graduate class sections may opt to administer their final exams on the last day of regular class meetings (week prior to the final exam period) but should contact scheduling if this is what they decide and need to remove a final exam block that was generated for their class section.
• For any course with a final exam during the exam period, no hour-examination (or major paper or project) shall be administered or due during the last five academic days of the semester unless the college dean has allowed an exemption.

Graduate, Online and Professional Studies Final Exams (GPS Sections)⁠

Graduate, Online and Professional Studies sections (section number typically begins with '0') take place on the final on-campus meeting day for that section (usually the week prior to the final exam period) – please see the on-campus course dates on Graduate, Online and Professional Studies website for the final meeting date (not to be confused with the course session dates).

If a GPS section is 'matched' (combined) with a day-school section (example ACCT 2010 201 and ACCT 2010 001), the final exam will follow day-school guidelines and an exam block will be assigned for both sections in SIS.

Classroom Reservations During the Final Exam Period⁠

Classroom reservations for ad hoc needs during the final exam period (review sessions, exam accommodations, makeup exams, etc.) will be accepted one week prior to the final exam period. Please email scheduling for these requests.

Makeup Examinations⁠

Individual makeup exams should be coordinated between the student and instructor as needed and should take place through the UMass Lowell Testing Centers or in a department location (please do not use academic classrooms for individual makeup exams without a confirmed reservation).

If an entire class needs to makeup an exam due to an unforeseen circumstance or emergency, the exam should be rescheduled by emailing: scheduling@uml.edu. Makeup exams for classes should take place during the regular examination period. 

The university final exam makeup dates listed on the university calendar are only to be used for inclement weather or other unanticipated university closure and should not be used as final exam dates for individual student or class makeup exams.

Disability Services Support & Resources⁠

Students who are registered with the Disability Services Office and have been approved for an extended time accommodation: if you have two exams scheduled on the same day, you may reschedule one of the exams if it has been confirmed that both exams are scheduled to use the entire 3-hour block. Please refer to the instructions under Examination Conflicts listed above to do so. For any other accommodation or disability-related question or concern, please contact by email: disability@uml.edu or visit Disability Services website for faculty and student resources.