Subscription revenues represent 31% of first
quarter license revenuesTotal revenues of $56.4 million, up 5%
year-over-year
Varonis Systems, Inc. (Nasdaq: VRNS), a pioneer in data security
and analytics, today announced results for the first quarter ended
March 31, 2019.
Yaki Faitelson, Varonis CEO, said, “2019 is off to a strong
start, highlighted by our transition to a subscription model, which
significantly exceeded our expectations in the first quarter. 31%
of our license revenues were from subscription products, as we saw
solid adoption, particularly in North America. Consistent with the
pilot we ran in the second half of 2018, we saw new customers
purchase a higher number of licenses in initial deals and also saw
strong upsell trends from existing customers. We expect this
momentum to continue in 2019 as we help customers manage risk and
protect their sensitive data, wherever it resides.”
Guy Melamed, Varonis CFO and COO, added, "We are pleased by our
first quarter results, which were highlighted by a higher than
anticipated mix of subscription revenues. Total reported revenues
would have nicely exceeded the high end of our guidance range had
this mix been in line with our initial expectations. Such strong
results early on in our transition validate our strategy to unleash
the platform's potential and give us confidence as we continue to
execute into the second quarter and beyond. We now expect that 25%
of our 2019 license revenues will be subscription, up from our
prior guidance of 10%."
Financial Highlights for the First Quarter Ended
March 31, 2019
Revenues:
- Total revenues were $56.4 million, up 5% compared with the
first quarter of 2018.
- Subscription revenues were $7.0 million and as a percentage of
license revenues were 31%, compared with $1.1 million or 4% in the
first quarter of 2018.
- Perpetual license and subscription revenues were $22.5 million,
down 10% compared with the first quarter of 2018 due to the impact
of the transition to a subscription-based model.
- Maintenance and services revenues were $33.8 million, up 19%
compared with the first quarter of 2018.
Operating Loss:
- GAAP operating loss was ($22.0) million for the quarter,
compared to ($15.5) million in the first quarter of 2018.
- Non-GAAP operating loss was ($11.1) million for the quarter,
compared to ($6.7) million in the first quarter of 2018.
Net Loss:
- GAAP net loss was ($22.6) million, compared to ($15.0) million
in the first quarter of 2018.
- GAAP net loss per basic and diluted share was ($0.76), compared
to ($0.53) in the first quarter of 2018, based on 29.8 million and
28.4 million basic and diluted shares outstanding,
respectively.
- Non-GAAP net loss was ($11.2) million, compared to ($6.3)
million in the first quarter of 2018.
- Non-GAAP net loss per basic and diluted share was ($0.38),
compared to ($0.22) in the first quarter of 2018, based on 29.8
million and 28.4 million basic and diluted shares outstanding,
respectively.
The tables at the end of this press release include a
reconciliation of GAAP to non-GAAP loss from operations and net
loss for the three months ended March 31, 2019 and 2018. An
explanation of these measures is also included below under the
heading "Non-GAAP Financial Measures."
Balance Sheet and Cash Flow:
- As of March 31, 2019, the Company had $163.6 million in
cash and cash equivalents, marketable securities and short-term
deposits, compared with $158.9 million as of December 31,
2018.
- During the three months ended March 31, 2019, the Company
generated $14.1 million of cash from operations, compared to $17.4
million in the prior-year period.
Recent Business Highlights
- Annualized recurring revenues at the end of the first quarter
were $138.7 million, up 35% over the prior year period.
- For the first quarter of 2019, total revenues in North America
increased 20% over the prior-year period to $37.8 million, total
revenues from EMEA decreased 19% over the prior-year period to
$16.4 million, and total revenues from Rest of World increased 35%
over the prior-year period to $2.1 million.
- Generated 56% of license and first year maintenance revenues
from existing customers and 44% from new customers in the first
quarter of 2019, compared to 49% and 51%, respectively, in the
prior-year period.
- Added 133 new customers during the first quarter of 2019
compared with 183 in the prior-year period. While the number of new
customers grew in North America, the relatively lower total number
of new customers this quarter was a consequence of slower adoption
of the subscription-based model transition in EMEA.
- As of March 31, 2019, 73% of customers had purchased two
or more product families, and 41% had purchased three or more
product families, up from 70% and 37%, respectively, as of
March 31, 2018.
- Announced that Varonis Version 7.0 became generally available:
showcasing incident response playbooks, Active Directory risk
dashboards, enhanced cloud coverage, threat intelligence, and
accelerated investigations with fast query response.
- Participated in a panel session discussing the GDPR and the new
California Consumer Privacy Act at the 2019 RSA Conference, which
also included a session on detecting and stopping advanced
cyberattacks with data-centric security, as well as Version 7.0
demos for customers.
- Discovered a new variant of Qbot, a strain of malware that
enables financial fraud.
- Released our 2019 Global Data Risk Report, which examined the
Data Risk Assessments of nearly 800 organizations and revealed that
companies continue to expose sensitive data to insider threats,
ransomware and data breaches. On average, each employee had access
to approximately 17 million files.
Financial Outlook
This financial outlook reflects the Company's expectations for
2019 resulting from the significant increase in expectations
related to the percentage of subscription revenues out of license
revenues.
For the second quarter of 2019, the Company expects revenues in
the range of $61.5 million to $63.0 million, representing (1%) to
1% year-over-year growth. The Company now expects that second
quarter subscription revenues will be 25% of license revenues. The
Company anticipates second quarter 2019 non-GAAP operating loss in
the range of ($9.5) million to ($8.5) million and non-GAAP net loss
per basic and diluted share in the range of ($0.33) to ($0.30),
based on a tax provision of $500,000 to $700,000 and 30.3 million
basic and diluted shares outstanding. Expectations of non-GAAP
operating loss per basic and diluted share exclude stock-based
compensation expense and payroll tax expense related to stock-based
compensation. Expectations of non-GAAP net loss per basic and
diluted share exclude stock-based compensation expense, payroll tax
expense related to stock-based compensation and foreign exchange
losses associated with ASC 842.
For the full year 2019, the Company now expects revenues in the
range of $271.0 million to $278.0 million, representing 0% to 3%
year-over-year growth. The Company now expects that full year
subscription revenues will be 25% of license revenues. The Company
anticipates full year 2019 non-GAAP operating loss of ($14.5)
million to ($10.0) million and non-GAAP net loss per diluted share
in the range of ($0.54) to ($0.42). This is based on a tax
provision of $2.2 million to $3.2 million and 30.2 million basic
and diluted shares outstanding. Expectations of non-GAAP operating
loss per basic and diluted share exclude stock-based compensation
expense and payroll tax expense related to stock-based
compensation. Expectations of non-GAAP net loss per basic and
diluted share exclude stock-based compensation expense, payroll tax
expense related to stock-based compensation and foreign exchange
losses associated with ASC 842.
Conference Call and Webcast
Varonis will host a conference call today, April 29, 2019, at
5:00 p.m., Eastern Time, to discuss the Company's first quarter
2019 financial results, current financial guidance and other
corporate developments. To access this call, dial
877-425-9470 (domestic) or 201-389-0878 (international). The
passcode is 13689214. A replay of this conference call will be
available through May 6, 2019 at 844-512-2921 (domestic) or
412-317-6671 (international). The replay passcode is
13689214. 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 and Other Financial Measures
Varonis 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.
For the three months ended March 31, 2019 and 2018,
non-GAAP operating loss is calculated as operating loss excluding
(i) stock-based compensation expense and (ii) payroll tax expense
related to stock-based compensation.
For the three months ended March 31, 2019 and 2018,
non-GAAP net loss is calculated as net loss excluding (i)
stock-based compensation expense, (ii) payroll tax expense related
to stock-based compensation and (iii) foreign exchange gains
(losses) associated with ASC 842.
Because of varying available valuation methodologies, subjective
assumptions and the variety of equity instruments that can impact a
company's non-cash expense, the Company believes that providing
non-GAAP financial measures that exclude stock-based compensation
expense allow for more meaningful comparisons between our operating
results from period to period. In addition, the Company excludes
payroll tax expense related to stock-based compensation expense
because, without excluding these tax expenses, investors would not
see the full effect that excluding stock-based compensation expense
had on our operating results. These expenses 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, which factors
may vary from period to period independent of the operating
performance of our business. Similar to stock-based compensation
expense, the Company believes that excluding this payroll tax
expense provides investors and management with greater visibility
to the underlying performance of our business operations and
facilitates comparison with other periods as well as the results of
other companies. Also, as the Company has significant operating
lease liabilities in foreign currencies, the Company incurs foreign
exchange gains or losses from the revaluation of these liabilities.
These gains and losses may vary from period to period and do not
reflect the true financial performance of the Company.
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 data are not measures of 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, may be different from non-GAAP financial
measures used by other companies 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. 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.
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: risks associated with anticipated
growth in Varonis' addressable market; competitive factors,
including increased sales cycle time, changes in the competitive
environment, pricing changes, transition in sales from perpetual
licenses to a more subscription-based model 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,
including expenditure trends for data and cyber security 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; and Varonis' ability to provide
high-quality service and support offerings. 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.
To find out more about Varonis, visit www.varonis.com
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
insider threats and cyberattacks 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. With a focus on data security, Varonis
serves a variety of use cases, including governance, compliance,
classification and threat analytics. Varonis started operations in
2005 and, as of March 31, 2019, had approximately 6,700
customers worldwide, spanning leading firms in the financial
services, public, healthcare, industrial, insurance, energy and
utilities, consumer and retail, media and entertainment, technology
and education sectors.
Investor Relations Contact:James ArestiaVaronis
Systems, Inc.646-640-2149jarestia@varonis.com
News Media Contacts:Rachel HuntVaronis Systems,
Inc.877-292-8767 (ext. 4247)rhunt@varonis.com
Mia DamianoMerritt Group703-390-1502damiano@merrittgrp.com
Varonis Systems, Inc. |
Consolidated Statements of
Operations |
(in thousands, except for share and per share
data) |
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Unaudited |
Revenues: |
|
|
|
Perpetual licenses |
$ |
15,521 |
|
|
$ |
24,086 |
|
Subscriptions |
7,005 |
|
|
1,071 |
|
Maintenance and services |
33,834 |
|
|
28,371 |
|
Total revenues |
56,360 |
|
|
53,528 |
|
|
|
|
|
Cost of revenues |
8,326 |
|
|
6,442 |
|
|
|
|
|
Gross profit |
48,034 |
|
|
47,086 |
|
|
|
|
|
Operating costs and
expenses: |
|
|
|
Research
and development |
18,768 |
|
|
15,542 |
|
Sales and
marketing |
41,996 |
|
|
39,972 |
|
General
and administrative |
9,271 |
|
|
7,069 |
|
Total operating
expenses |
70,035 |
|
|
62,583 |
|
|
|
|
|
Operating loss |
(22,001 |
) |
|
(15,497 |
) |
Financial income
(loss), net |
(128 |
) |
|
978 |
|
|
|
|
|
Loss before income
taxes |
(22,129 |
) |
|
(14,519 |
) |
Provision for income
taxes |
(510 |
) |
|
(527 |
) |
|
|
|
|
Net loss |
$ |
(22,639 |
) |
|
$ |
(15,046 |
) |
|
|
|
|
Net loss per share of
common stock, basic and diluted |
$ |
(0.76 |
) |
|
$ |
(0.53 |
) |
|
|
|
|
Weighted average number
of shares used in computing net loss per share of common stock,
basic and diluted |
29,827,927 |
|
|
28,362,479 |
|
Stock-based compensation expense for the three months ended
March 31, 2019 and 2018 is included in the Consolidated Statements
of Operations as follows (in thousands): |
|
|
|
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Unaudited |
Cost of revenues |
$ |
558 |
|
|
$ |
362 |
|
Research and
development |
2,678 |
|
|
2,105 |
|
Sales and
marketing |
3,443 |
|
|
3,101 |
|
General and
administrative |
2,282 |
|
|
1,359 |
|
|
$ |
8,961 |
|
|
$ |
6,927 |
|
Payroll tax expense related to stock-based compensation for
the three months ended March 31, 2019 and 2018 is included in the
Consolidated Statements of Operations as follows (in
thousands): |
|
|
|
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Unaudited |
Cost of revenues |
$ |
183 |
|
|
$ |
267 |
|
Research and
development |
56 |
|
|
36 |
|
Sales and
marketing |
1,373 |
|
|
1,470 |
|
General and
administrative |
283 |
|
|
95 |
|
|
$ |
1,895 |
|
|
$ |
1,868 |
|
Varonis Systems, Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
March 31, 2019 |
|
December 31, 2018 |
|
Unaudited |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
64,461 |
|
|
$ |
48,707 |
|
Marketable securities |
37,842 |
|
|
39,770 |
|
Short-term deposits |
61,328 |
|
|
70,438 |
|
Trade
receivables, net |
41,796 |
|
|
83,223 |
|
Prepaid
expenses and other current assets |
14,899 |
|
|
16,952 |
|
Total current
assets |
220,326 |
|
|
259,090 |
|
|
|
|
|
Long-term assets: |
|
|
|
Other
assets |
12,180 |
|
|
8,565 |
|
Operating
lease right-of-use asset |
51,875 |
|
|
— |
|
Property
and equipment, net |
21,065 |
|
|
17,323 |
|
Total long-term
assets |
85,120 |
|
|
25,888 |
|
Total assets |
$ |
305,446 |
|
|
$ |
284,978 |
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Trade
payables |
$ |
624 |
|
|
$ |
2,620 |
|
Accrued
expenses and other short term liabilities |
50,301 |
|
|
55,991 |
|
Deferred
revenues |
81,844 |
|
|
87,729 |
|
Total current
liabilities |
132,769 |
|
|
146,340 |
|
|
|
|
|
Long-term
liabilities: |
|
|
|
Deferred
revenues |
6,988 |
|
|
6,487 |
|
Operating
lease liability |
52,697 |
|
|
— |
|
Other
liabilities |
2,997 |
|
|
6,781 |
|
Total long-term
liabilities |
62,682 |
|
|
13,268 |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Share
capital |
|
|
|
Common
stock |
30 |
|
|
30 |
|
Accumulated other comprehensive loss |
(688 |
) |
|
(3,633 |
) |
Additional paid-in capital |
271,260 |
|
|
266,941 |
|
Accumulated deficit |
(160,607 |
) |
|
(137,968 |
) |
Total stockholders’
equity |
109,995 |
|
|
125,370 |
|
Total liabilities and
stockholders’ equity |
$ |
305,446 |
|
|
$ |
284,978 |
|
Varonis Systems, Inc. |
Consolidated Statements of Cash
Flows |
(in thousands) |
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Unaudited |
|
Unaudited |
Cash flows from
operating activities: |
|
|
|
Net loss |
$ |
(22,639 |
) |
|
$ |
(15,046 |
) |
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation |
1,337 |
|
|
797 |
|
Stock-based compensation |
8,961 |
|
|
6,927 |
|
Amortization of deferred commissions |
3,626 |
|
|
3,325 |
|
Amortization of operating lease right-of-use asset |
1,399 |
|
|
— |
|
Capital
loss from disposal of fixed assets |
24 |
|
|
— |
|
|
|
|
|
Changes in assets and
liabilities: |
|
|
|
Trade
receivables |
41,427 |
|
|
43,128 |
|
Prepaid
expenses and other current assets |
(623 |
) |
|
(5,806 |
) |
Deferred
commissions |
(4,870 |
) |
|
(2,434 |
) |
Other
long term assets |
(19 |
) |
|
41 |
|
Trade
payables |
(1,996 |
) |
|
(152 |
) |
Accrued
expenses and other short term liabilities |
(7,358 |
) |
|
(8,200 |
) |
Deferred
revenues |
(5,384 |
) |
|
(5,373 |
) |
Other
long term liabilities |
170 |
|
|
237 |
|
Net cash provided by
operating activities |
14,055 |
|
|
17,444 |
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
Decrease
(increase) in short-term deposits |
9,120 |
|
|
(1,144 |
) |
Decrease
(increase) in marketable securities |
1,928 |
|
|
(1,889 |
) |
Increase
in long-term deposits |
(12 |
) |
|
(308 |
) |
Purchase
of property and equipment |
(5,103 |
) |
|
(1,081 |
) |
Net cash provided by
(used in) investing activities |
5,933 |
|
|
(4,422 |
) |
|
|
|
|
Cash flows from
financing activities: |
|
|
|
Proceeds
(withholdings) from employee stock plans, net |
(4,234 |
) |
|
1,066 |
|
Net cash provided (used
in) by financing activities |
(4,234 |
) |
|
1,066 |
|
Increase in cash, cash
equivalents and restricted cash |
15,754 |
|
|
14,088 |
|
Cash, cash equivalents
and restricted cash at beginning of period |
48,707 |
|
|
57,236 |
|
Cash, cash equivalents
and restricted cash at end of period |
$ |
64,461 |
|
|
$ |
71,324 |
|
Varonis Systems, Inc. |
Reconciliation of GAAP Measures to
non-GAAP |
(in thousands, except share and per share
data) |
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
|
Unaudited |
Reconciliation
to non-GAAP operating loss: |
|
|
|
|
|
|
|
GAAP operating loss |
$ |
(22,001 |
) |
|
$ |
(15,497 |
) |
|
|
|
|
Add back: |
|
|
|
Stock-based
compensation expense |
8,961 |
|
|
6,927 |
|
Payroll tax expenses
related to stock-based compensation |
1,895 |
|
|
1,868 |
|
|
|
|
|
Non-GAAP operating
loss |
$ |
(11,145 |
) |
|
$ |
(6,702 |
) |
|
|
|
|
Reconciliation
to non-GAAP net loss: |
|
|
|
|
|
|
|
GAAP net loss |
$ |
(22,639 |
) |
|
$ |
(15,046 |
) |
|
|
|
|
Add back: |
|
|
|
Stock-based
compensation expense |
8,961 |
|
|
6,927 |
|
Payroll tax expenses
related to stock-based compensation |
1,895 |
|
|
1,868 |
|
Foreign exchange losses
associated with ASC 842 |
582 |
|
|
— |
|
|
|
|
|
Non-GAAP net loss |
$ |
(11,201 |
) |
|
$ |
(6,251 |
) |
|
|
|
|
GAAP & Non-GAAP
weighted average number of shares used in computing net loss per
share of common stock, basic and diluted |
29,827,927 |
|
|
28,362,479 |
|
|
|
|
|
Non-GAAP net loss per
share of common stock - basic and diluted |
$ |
(0.38 |
) |
|
$ |
(0.22 |
) |
GAAP net loss per share
of common stock - basic and diluted |
$ |
(0.76 |
) |
|
$ |
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Varonis Systems (NASDAQ:VRNS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Varonis Systems (NASDAQ:VRNS)
Historical Stock Chart
From Apr 2023 to Apr 2024