Varonis Systems, Inc. (Nasdaq: VRNS), a pioneer in data
security and analytics, today announced financial results for the
first quarter ended March 31, 2021.
"Our first quarter performance was strong, continuing the
positive trajectory of 2020 and evidences the ongoing critical need
for companies around the globe to protect their sensitive data.
Secular trends which drive demand for our products have
accelerated, and with our subscription offering, we are able to
deliver on our customers' immediate requirements and longer-term
needs," said Yaki Faitelson, Varonis CEO.
"Our customer lifetime value has increased significantly,
driving revenue growth, margin expansion and cash flow generation,"
Mr. Faitelson continued. "Supported by a financial model which
provides greater visibility and predictability, we believe we are
well positioned to capitalize on these trends and are just
scratching the surface of a large and growing market
opportunity."
Financial Summary for the First Quarter Ended March 31,
2021
- Subscription revenues increased 120% to $44.8 million, compared
with $20.4 million in the first quarter of 2020.
- Maintenance and services revenues were $29.7 million, compared
with $33.4 million in the first quarter of 2020.
- Total revenues increased 38% to $74.8 million, compared with
$54.2 million in the first quarter of 2020.
- GAAP operating loss was ($34.1) million, compared to GAAP
operating loss of ($32.7) million in the first quarter of
2020.
- Non-GAAP operating loss was ($6.3) million, compared to
non-GAAP operating loss of ($17.4) million in the first quarter of
2020.
The tables at the end of this press release include a
reconciliation of GAAP loss to non-GAAP loss from operations and
net loss for the three months ended March 31, 2021 and 2020. An
explanation of these measures is included below under the heading
"Non-GAAP Financial Measures and Key Performance Indicators."
Key Performance Indicators and Recent Business
Highlights
- Annual recurring revenues, or ARR, were $306.9 million as of
the end of the first quarter, up 39% over the prior year
period.
- As of March 31, 2021, 66% of customers with 500 employees or
more purchased four or more licenses, up from 55% as of March 31,
2020, and 32% purchased six or more licenses, up from 21% as of
March 31, 2020.
- For the first quarter of 2021, total revenues in North America
increased 39% over the prior-year period to $52.8 million, total
revenues in EMEA increased 38% over the prior-year period to $20.2
million, and total revenues from Rest of World were $1.7
million.
- As of March 31, 2021, the Company had $824.0 million in cash
and cash equivalents, marketable securities and short-term
deposits.
- During the three months ended March 31, 2021, the Company
generated $20.4 million of cash from operations, compared to $3.9
million generated in the prior year period.
- Strengthened the balance sheet through the placement of a
$500.0 million follow-on offering.
- Awarded a Cyber CatalystSM designation by MarshSM provided by
leading cyber insurers to those they believe can have a meaningful
impact on cyber risk.
- Published the 2021 Healthcare Data Risk Report, which analyzed
over 3 billion files and found that the average healthcare
organization in the survey has 31,000 sensitive files open to
everyone.
An explanation of ARR is included below under the heading
"Non-GAAP Financial Measures and Key Performance Indicators."
Financial OutlookFor the second quarter of
2021, the Company expects:
- Revenues of $82.5 million to $84.0 million, or year-over-year
growth of 24% to 26%.
- Non-GAAP operating loss of ($2.5) million to ($1.5)
million.
- Non-GAAP net loss per basic and diluted share in the range of
($0.04) to ($0.03), based on 106.4 million basic and diluted shares
outstanding.
For full year 2021, the Company now expects:
- Revenues of $365.0 million to $370.0 million, or year-over-year
growth of 25% to 26%.
- Non-GAAP operating income of $4.5 million to $8.5 million.
- Non-GAAP net loss per basic and diluted share in the range of
($0.01) to non-GAAP net income per diluted share of $0.02, based on
105.3 million basic and diluted shares outstanding and 116.5
million diluted shares outstanding, respectively.
Actual results may differ materially from the Company’s
Financial Outlook as a result of, among other things, the factors
described below under “Forward-Looking Statements”.
Stock SplitAll common stock and per share data
in this earnings release have been retroactively adjusted for the
impact of the three-for-one split effective March 15, 2021.
Conference Call and WebcastVaronis will host a
conference call today, Monday, May 3, 2021, at 4:30 p.m. Eastern
Time, to discuss the Company's first quarter 2021 financial
results. To access this call, dial 877-425-9470 (domestic) or
201-389-0878 (international). The passcode is 13718049. A replay of
this conference call will be available through May 10, 2021 at
844-512-2921 (domestic) or 412-317-6671 (international). The
replay passcode is 13718049. A live webcast of this conference
call will be available on the "Investors" page of the Company's
website (www.varonis.com), and a replay will be archived on the
website as well.
Non-GAAP Financial Measures and Key Performance
IndicatorsVaronis believes that the use of non-GAAP
operating income (loss) and non-GAAP net income (loss) is helpful
to our investors. These measures, which the Company refers to as
our non-GAAP financial measures, are not prepared in accordance
with GAAP.
Non-GAAP operating income (loss) is calculated as operating
income (loss) excluding (i) stock-based compensation expense, (ii)
payroll tax expense related to stock-based compensation, and (iii)
amortization of acquired intangible assets and acquisition related
expenses.
Non-GAAP net income (loss) is calculated as net income (loss)
excluding (i) stock-based compensation expense, (ii) payroll tax
expense related to stock-based compensation, (iii) amortization of
acquired intangible assets and acquisition related expenses, (iv)
foreign exchange gains (losses) which includes exchange rate
differences on lease contracts as a result of the implementation of
ASC 842, and (v) amortization of debt discount and issuance
costs.
The Company believes that the exclusion of these expenses
provides a more meaningful comparison of our operational
performance from period to period and offers investors and
management greater visibility to the underlying performance of our
business. Specifically:
- Stock-based compensation expenses utilize varying available
valuation methodologies, subjective assumptions and a variety of
equity instruments that can impact a company's non-cash
expenses;
- Payroll taxes are tied to the exercise or vesting of underlying
equity awards and the price of our common stock at the time of
vesting or exercise, factors which may vary from period to
period;
- Acquired intangible assets are valued at the time of
acquisition and are amortized over an estimated useful life after
the acquisition, and acquisition-related expenses are unrelated to
current operations and neither are comparable to the prior period
nor predictive of future results;
- The Company incurs foreign exchange gains or losses from the
revaluation of its significant operating lease liabilities in
foreign currencies as well as other assets and liabilities
denominated in non-U.S. dollars, which may vary from period to
period; and
- Amortization of debt discount and debt issuance costs, which
relate to the Company’s convertible senior notes issued in 2020, is
a non-cash item.
Each of our non-GAAP financial measures is an important tool for
financial and operational decision making and for evaluating our
own operating results over different periods of time. The non-GAAP
financial measures do not represent our financial performance under
U.S. GAAP and should not be considered as alternatives to operating
income (loss) or net income (loss) or any other performance
measures derived in accordance with GAAP. Non-GAAP financial
measures may not provide information that is directly comparable to
that provided by other companies in our industry, as other
companies in our industry may calculate non-GAAP financial results
differently, particularly related to non-recurring, unusual items.
In addition, there are limitations in using non-GAAP financial
measures because the non-GAAP financial measures are not prepared
in accordance with GAAP, and exclude expenses that may have a
material impact on our reported financial results. Further,
stock-based compensation expense and payroll tax expense related to
stock-based compensation have been, and will continue to be for the
foreseeable future, significant recurring expenses in our business
and an important part of the compensation provided to our
employees. Also, the amortization of intangible assets are expected
recurring expenses over the estimated useful life of the underlying
intangible asset and acquisition-related expenses will be incurred
to the extent acquisitions are made in the future. Additionally,
foreign exchange rates may fluctuate from one period to another,
and the Company does not estimate movements in foreign currencies.
Finally, the amortization of debt discount and debt issuance costs
are expected recurring expenses until the maturity of the senior
notes in 2025.
The presentation of non-GAAP financial information is not meant
to be considered in isolation or as a substitute for the directly
comparable financial measures prepared in accordance with GAAP.
Varonis urges investors to review the reconciliation of our
non-GAAP financial measures to the comparable GAAP financial
measures included below, and not to rely on any single financial
measures to evaluate our business.
A reconciliation for non-GAAP operating income (loss) and
non-GAAP net income (loss) referred to in our “Financial Outlook”
is not provided because, as forward-looking statements, such
reconciliation is not available without unreasonable effort due to
the high variability, complexity, and difficulty of estimating
certain items such as charges to stock-based compensation expense
and currency fluctuations which could have an impact on our
consolidated results. The Company believes the information provided
is useful to investors because it can be considered in the context
of the Company’s historical disclosures of this measure.
ARR is a key performance indicator defined as the annualized
value of active term-based subscription license contracts and
maintenance contracts related to perpetual licenses in effect at
the end of that period. Subscription license contracts and
maintenance for perpetual license contracts are annualized by
dividing the total contract value by the number of days in the term
and multiplying the result by 365. The annualized value of
contracts is a legal and contractual determination made by
assessing the contractual terms with our customers. The annualized
value of maintenance contracts is not determined by reference to
historical revenues, deferred revenues or any other GAAP financial
measure over any period. ARR is not a forecast of future revenues,
which can be impacted by contract start and end dates and renewal
rates.
Forward-Looking Statements
This press release contains, and statements made during the
above referenced conference call will contain, "forward-looking"
statements, which are subject to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, including
regarding the Company's growth rate and its expectations regarding
future revenues, operating income or loss or earnings or loss per
share. These statements are not guarantees of future performance
but are based on management's expectations as of the date of this
press release and assumptions that are inherently subject to
uncertainties, risks and changes in circumstances that are
difficult to predict. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements to be materially
different from any future results, performance or achievements.
Important factors that could cause actual results to differ
materially from those expressed or implied by these forward-looking
statements include the following: the impact of the COVID-19 global
pandemic on the budgets of our clients and on economic conditions
generally; the impact of potential information technology,
cybersecurity or data security breaches; risks associated with
anticipated growth in Varonis’ addressable market; Varonis’ ability
to predict the timing and rate of subscription renewals and their
impact on the Company’s future revenues and operating results;
competitive factors, including increased sales cycle time, changes
in the competitive environment, pricing changes and increased
competition; the risk that Varonis may not be able to attract or
retain employees, including sales personnel and engineers; Varonis’
ability to build and expand its direct sales efforts and reseller
distribution channels; general economic and industry conditions,
such as foreign currency exchange rate fluctuations and expenditure
trends for data and cybersecurity solutions; risks associated with
the closing of large transactions, including Varonis’ ability to
close large transactions consistently on a quarterly basis; new
product introductions and Varonis’ ability to develop and deliver
innovative products; risks associated with international
operations; Varonis’ ability to provide high-quality service and
support offerings; risks associated with our convertible notes and
capped-call transaction; and risks associated with the acquisition
of Polyrize including, without limitations, integration of the
acquisition may not occur as anticipated and the acquisition may
not achieve the outcomes anticipated, undisclosed liabilities may
be discovered and attempts to retain key personnel may not succeed.
These and other important risk factors are described more fully in
Varonis’ reports and other documents filed with the Securities and
Exchange Commission and could cause actual results to vary from
expectations. All information provided in this press release and in
the conference call is as of the date hereof, and Varonis
undertakes no duty to update or revise this information, whether as
a result of new information, new developments or otherwise, except
as required by law.
About Varonis
Varonis is a pioneer in data security and analytics, fighting a
different battle than conventional cybersecurity companies. Varonis
focuses on protecting enterprise data: sensitive files and emails;
confidential customer, patient and employee data; financial
records; strategic and product plans; and other intellectual
property. The Varonis Data Security Platform detects cyberthreats
from both internal and external actors by analyzing data, account
activity and user behavior; prevents and limits disaster by locking
down sensitive and stale data; and efficiently sustains a secure
state with automation. Varonis products address additional
important use cases including data protection, data governance,
zero trust, compliance, data privacy, classification and threat
detection and response. Varonis started operations in 2005 and has
customers spanning leading firms in the financial services, public,
healthcare, industrial, insurance, energy and utilities,
technology, consumer and retail, media and entertainment and
education sectors.
To find out more about Varonis, visit www.varonis.com
|
Varonis Systems, Inc. |
Consolidated Statements of Operations |
(in thousands, except for share and per share
data) |
|
Three Months EndedMarch 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Revenues: |
|
|
|
Subscriptions |
$ |
44,828 |
|
|
$ |
20,365 |
|
Maintenance and services |
29,671 |
|
|
33,423 |
|
Perpetual licenses |
286 |
|
|
388 |
|
Total revenues |
74,785 |
|
|
54,176 |
|
|
|
|
|
Cost of revenues |
13,482 |
|
|
10,180 |
|
|
|
|
|
Gross profit |
61,303 |
|
|
43,996 |
|
|
|
|
|
Operating costs and
expenses: |
|
|
|
Research and development |
30,062 |
|
|
22,688 |
|
Sales and marketing |
51,493 |
|
|
42,580 |
|
General and administrative |
13,823 |
|
|
11,398 |
|
Total operating expenses |
95,378 |
|
|
76,666 |
|
|
|
|
|
Operating loss |
(34,075 |
) |
|
(32,670 |
) |
Financial income (expenses),
net |
(1,022 |
) |
|
1,453 |
|
|
|
|
|
Loss before income taxes |
(35,097 |
) |
|
(31,217 |
) |
Income taxes |
(559 |
) |
|
(213 |
) |
|
|
|
|
Net loss |
$ |
(35,656 |
) |
|
$ |
(31,430 |
) |
|
|
|
|
Net loss per share of common
stock, basic and diluted |
$ |
(0.36 |
) |
|
$ |
(0.34 |
) |
|
|
|
|
Weighted average number of
shares used in computing net loss per share of common stock, basic
and diluted |
100,246,972 |
|
|
92,679,000 |
|
|
|
|
|
|
|
|
Stock-based compensation expense for the three months ended
March 31, 2021 and 2020 is included in the Consolidated Statements
of Operations as follows (in thousands): |
|
|
|
|
|
Three Months EndedMarch 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Cost of revenues |
$ |
1,589 |
|
|
$ |
785 |
|
Research and development |
7,158 |
|
|
4,081 |
|
Sales and marketing |
7,742 |
|
|
4,729 |
|
General and
administrative |
4,890 |
|
|
3,288 |
|
|
$ |
21,379 |
|
|
$ |
12,883 |
|
|
|
|
|
|
|
|
|
|
Payroll
tax expense related to stock-based compensation for the three
months ended March 31, 2021 and 2020 is included in the
Consolidated Statements of Operations as follows (in
thousands): |
|
|
|
|
|
Three Months EndedMarch 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Cost of revenues |
$ |
565 |
|
|
$ |
267 |
|
Research and development |
160 |
|
|
100 |
|
Sales and marketing |
3,215 |
|
|
1,617 |
|
General and
administrative |
785 |
|
|
380 |
|
|
$ |
4,725 |
|
|
$ |
2,364 |
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangibles and
acquisition-related expenses for the three months ended March 31,
2021 and 2020 is included in the Consolidated Statements of
Operations as follows (in thousands): |
|
|
|
|
|
Three Months EndedMarch 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Cost of revenues |
$ |
381 |
|
|
$ |
— |
|
Research and development |
1,308 |
|
|
— |
|
Sales and marketing |
3 |
|
|
— |
|
General and
administrative |
— |
|
|
— |
|
|
$ |
1,692 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Varonis Systems, Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
March 31, 2021 |
|
December 31, 2020 |
|
Unaudited |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
753,606 |
|
|
$ |
234,092 |
|
Marketable securities |
28,080 |
|
|
34,117 |
|
Short-term deposits |
42,284 |
|
|
30,053 |
|
Trade receivables, net |
51,302 |
|
|
94,229 |
|
Prepaid expenses and other current assets |
24,564 |
|
|
27,357 |
|
Total current assets |
899,836 |
|
|
419,848 |
|
Long-term assets: |
|
|
|
Operating lease right-of-use asset |
54,000 |
|
|
47,924 |
|
Property and equipment, net |
35,930 |
|
|
37,163 |
|
Intangible assets, net |
5,462 |
|
|
5,846 |
|
Goodwill |
23,135 |
|
|
23,135 |
|
Other assets |
19,444 |
|
|
21,566 |
|
Total long-term assets |
137,971 |
|
|
135,634 |
|
Total assets |
$ |
1,037,807 |
|
|
$ |
555,482 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Trade payables |
$ |
637 |
|
|
$ |
850 |
|
Accrued expenses and other short-term liabilities |
87,026 |
|
|
83,198 |
|
Deferred revenues |
91,596 |
|
|
98,588 |
|
Total current liabilities |
179,259 |
|
|
182,636 |
|
Long-term liabilities: |
|
|
|
Convertible senior notes, net |
220,149 |
|
|
218,460 |
|
Operating lease liability |
54,383 |
|
|
54,540 |
|
Deferred revenues |
2,152 |
|
|
2,778 |
|
Other liabilities |
3,274 |
|
|
2,997 |
|
Total long-term
liabilities |
279,958 |
|
|
278,775 |
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Share capital |
|
|
|
Common stock |
106 |
|
|
95 |
|
Accumulated other comprehensive income |
4,191 |
|
|
9,371 |
|
Additional paid-in capital |
920,691 |
|
|
395,347 |
|
Accumulated deficit |
(346,398 |
) |
|
(310,742 |
) |
Total stockholders’
equity |
578,590 |
|
|
94,071 |
|
Total liabilities and
stockholders’ equity |
$ |
1,037,807 |
|
|
$ |
555,482 |
|
|
|
|
|
|
|
|
|
|
Varonis Systems, Inc. |
Consolidated Statements of Cash Flows |
(in thousands) |
|
Three Months EndedMarch 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(35,656 |
) |
|
$ |
(31,430 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation |
2,349 |
|
|
2,098 |
|
Stock-based compensation |
21,379 |
|
|
12,883 |
|
Amortization of deferred commissions |
4,157 |
|
|
3,249 |
|
Noncash operating lease costs |
2,242 |
|
|
1,960 |
|
Amortization of debt discount and issuance costs |
1,689 |
|
|
— |
|
|
|
|
|
Changes in assets and
liabilities: |
|
|
|
Trade receivables |
42,927 |
|
|
36,785 |
|
Prepaid expenses and other current assets |
(1,673 |
) |
|
342 |
|
Deferred commissions |
(3,873 |
) |
|
(2,236 |
) |
Other long-term assets |
900 |
|
|
(82 |
) |
Trade payables |
(213 |
) |
|
(174 |
) |
Accrued expenses and other short-term liabilities |
(5,029 |
) |
|
(6,922 |
) |
Deferred revenues |
(7,618 |
) |
|
(12,603 |
) |
Other long-term liabilities |
(1,198 |
) |
|
4 |
|
Net cash provided by operating
activities |
20,383 |
|
|
3,874 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Increase in short-term deposits |
(12,225 |
) |
|
(4,805 |
) |
Decrease in marketable securities |
6,036 |
|
|
7,794 |
|
Decrease in long-term deposits |
2,460 |
|
|
34 |
|
Purchases of property and equipment |
(1,116 |
) |
|
(2,609 |
) |
Net cash provided by (used in)
investing activities |
(4,845 |
) |
|
414 |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Proceeds from follow-on offering, net |
500,034 |
|
|
— |
|
Proceeds from employee stock plans, net |
3,942 |
|
|
4,316 |
|
Net cash provided by financing
activities |
503,976 |
|
|
4,316 |
|
Increase in cash and cash
equivalents |
519,514 |
|
|
8,604 |
|
Cash and cash equivalents at
beginning of period |
234,092 |
|
|
68,929 |
|
Cash and cash equivalents at
end of period |
$ |
753,606 |
|
|
$ |
77,533 |
|
|
|
|
|
|
|
|
|
|
Varonis Systems, Inc. |
Reconciliation of GAAP Measures to non-GAAP |
(in thousands, except share and per share
data) |
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
|
|
|
|
|
Unaudited |
Reconciliation to
non-GAAP operating loss: |
|
|
|
|
|
|
|
GAAP operating loss |
$ |
(34,075 |
) |
|
$ |
(32,670 |
) |
|
|
|
|
Add back: |
|
|
|
Stock-based compensation
expense |
21,379 |
|
|
12,883 |
|
Payroll tax expenses related
to stock-based compensation |
4,725 |
|
|
2,364 |
|
Amortization of acquired
intangible assets and acquisition-related expenses |
1,692 |
|
|
— |
|
|
|
|
|
Non-GAAP operating loss |
$ |
(6,279 |
) |
|
$ |
(17,423 |
) |
|
|
|
|
Reconciliation to
non-GAAP net loss: |
|
|
|
|
|
|
|
GAAP net loss |
$ |
(35,656 |
) |
|
$ |
(31,430 |
) |
|
|
|
|
Add back: |
|
|
|
Stock-based compensation
expense |
21,379 |
|
|
12,883 |
|
Payroll tax expenses related
to stock-based compensation |
4,725 |
|
|
2,364 |
|
Amortization of acquired
intangible assets and acquisition-related expenses |
1,692 |
|
|
— |
|
Foreign exchange rate
differences, net (*) |
(1,564 |
) |
|
(1,239 |
) |
Amortization of debt discount
and issuance costs |
1,689 |
|
|
— |
|
|
|
|
|
Non-GAAP net loss |
$ |
(7,735 |
) |
|
$ |
(17,422 |
) |
|
|
|
|
Non-GAAP weighted average
number of shares used in computing net loss per share of common
stock - basic and diluted |
100,246,972 |
|
|
92,679,000 |
|
GAAP weighted average number
of shares used in computing net loss per share of common stock -
basic and diluted |
100,246,972 |
|
|
92,679,000 |
|
|
|
|
|
Non-GAAP net loss per share of
common stock - basic and diluted |
$ |
(0.08 |
) |
|
$ |
(0.19 |
) |
GAAP net loss per share of
common stock - basic and diluted |
$ |
(0.36 |
) |
|
$ |
(0.34 |
) |
(*) Exchange rate differences for the three months ended March
31, 2021 and 2020 include exchange rate differences on lease
contracts of $1,523 and $875, respectively, as a result of the
implementation of ASC 842, as well as other assets and liabilities
denominated in non-U.S. dollars.
Investor Relations Contact:
James Arestia
Varonis Systems, Inc.
646-640-2149
investors@varonis.com
News Media Contact:
Rachel Hunt
Varonis Systems, Inc.
877-292-8767 (ext. 1598)
pr@varonis.com
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