UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): October 29, 2018  

Varonis Systems, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware001-3632457-1222280
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

1250 Broadway, 29th Floor, New York, NY 10001
(Address of Principal Executive Offices) (Zip Code)

(877) 292-8767
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [ ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On October 29, 2018, Varonis Systems, Inc. (“Varonis”) issued a press release announcing its financial results for the quarter ended September 30, 2018. A copy of the press release dated October 29, 2018, reporting Third Quarter 2018 Financial Results is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits 

Exhibit No. Description
   
99.1 Press Release dated October 29, 2018, reporting Third Quarter 2018 Financial Results


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 Varonis Systems, Inc.
   
  
Date: October 29, 2018By: /s/ Yakov Faitelson        
  Yakov Faitelson
  Chief Executive Officer and President
  


EXHIBIT INDEX

 

Exhibit No. Description
   
99.1 Press Release dated October 29, 2018, reporting Third Quarter 2018 Financial Results

EdgarFiling

EXHIBIT 99.1

Varonis Announces Third Quarter 2018 Financial Results

Total revenues of $67.1 million, up 26% year-over-year

License revenues of $35.8 million, up 23% year-over-year

NEW YORK, Oct. 29, 2018 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq: VRNS), a pioneer in data security and analytics, today announced results for the third quarter ended September 30, 2018.

Yaki Faitelson, Varonis CEO, said, “We delivered a strong third quarter. We saw solid contribution from both North America and Europe and strength across new and existing customers. Our sustained focus on targeting companies with more than 1,000 employees has led to larger initial commitments, greater upsell opportunities, and larger overall customer lifetime value. The strength of our product portfolio and innovations are enabling Varonis to become a more strategic part of our customers' security initiatives, allowing them to manage risk and protect data wherever it lives. We look forward to continuing this momentum as we close out 2018 and believe we are well positioned to continue to deliver strong growth and profitability.”

Financial Highlights for the Third Quarter Ended September 30, 2018

Revenues:

Operating Income (Loss):

Net Income (Loss):

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP income (loss) from operations and net income (loss) for the three and nine months ended September 30, 2018 and 2017. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Balance Sheet and Cash Flow:

Recent Business Highlights

Financial Outlook

For the fourth quarter of 2018, the Company expects revenues in the range of $86.5 million to $88.0 million, representing 18% to 21% year-over-year growth. The Company anticipates fourth quarter 2018 non-GAAP operating income in the range of $11.0 million to $12.0 million and non-GAAP net income per diluted share in the range of $0.32 to $0.34, based on a tax provision of $600,000 to $800,000 and 32.6 million diluted shares outstanding. Expectations of non-GAAP operating income and non-GAAP net income per diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

For the full year 2018, the Company now expects revenues in the range of $269.5 million to $271.0 million, representing 25% to 26% year-over-year growth. The Company now anticipates full year 2018 non-GAAP operating income of $5.5 million to $6.5 million and non-GAAP net income per diluted share in the range of $0.11 to $0.13. This is based on a tax provision of $2.3 million to $2.5 million and 32.4 million diluted shares outstanding. Expectations of non-GAAP operating income and non-GAAP net income per diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

Conference Call and Webcast

Varonis will host a conference call today, October 29, 2018, at 5:00 p.m., Eastern Time, to discuss the Company's third quarter 2018 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 13683777. A replay of this conference call will be available through November 5, 2018 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13683777.  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 and nine months ended September 30, 2018 and 2017, non-GAAP operating income (loss) is calculated as operating income (loss) excluding (i) stock-based compensation expense and (ii) payroll tax expense related to stock-based compensation.

For the three and nine months ended September 30, 2018 and 2017, non-GAAP net income (loss) is calculated as net income (loss) excluding (i) stock-based compensation expense and (ii) payroll tax expense related to stock-based compensation.

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.

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 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 September 30, 2018, had approximately 6,350 customers worldwide - comprised of industry leaders in many sectors including financial services, healthcare, public, industrial, insurance, energy and utilities, consumer and retail, education, media and entertainment and technology.


 
Varonis Systems, Inc.
Consolidated Statements of Operations
(in thousands, except for share and per share data)
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
    
 Unaudited & as adjusted
for 2017
 Unaudited & as adjusted
for 2017
Revenues:       
Licenses$35,804  $29,000  $94,338  $74,402 
Maintenance and services31,248  24,365  88,432  67,987 
Total revenues67,052  53,365  182,770  142,389 
        
Cost of revenues7,052  5,423  19,934  14,997 
        
Gross profit60,000  47,942  162,836  127,392 
        
Operating costs and expenses:       
Research and development17,267  11,903  50,526  33,810 
Sales and marketing40,792  32,458  122,113  95,952 
General and administrative8,774  6,708  23,832  18,796 
Total operating expenses66,833  51,069  196,471  148,558 
        
Operating loss(6,833) (3,127) (33,635) (21,166)
Financial income, net99  622  266  2,041 
        
Loss before income taxes(6,734) (2,505) (33,369) (19,125)
Income taxes(583) (759) (1,677) (1,539)
        
Net loss$(7,317) $(3,264) $(35,046) $(20,664)
        
Net loss per share of common stock, basic and diluted$(0.25) $(0.12) $(1.21) $(0.76)
        
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted29,281,701  27,595,461  28,859,156  27,292,216 
            

Stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 is included in the Consolidated Statements of Operations as follows (in thousands):

        
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
    
 Unaudited Unaudited
Cost of revenues$470  $283  $1,300  $783 
Research and development2,097  1,374  7,180  3,805 
Sales and marketing3,600  1,856  10,349  6,277 
General and administrative2,232  1,269  5,345  3,580 
 $8,399  $4,782  $24,174  $14,445 
                

Payroll tax expense related to stock-based compensation for the three and nine months ended September 30, 2018 and 2017 is included in the Consolidated Statements of Operations as follows (in thousands):

 
        
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
    
 Unaudited Unaudited
Cost of revenues$11  $25  $356  $70 
Research and development16  27  163  55 
Sales and marketing394  213  2,921  698 
General and administrative9  8  291  51 
 $430  $273  $3,731  $874 
                


 
Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
 September 30,
 2018
 December 31,
2017
 (unaudited) As adjusted
Assets   
Current assets:   
Cash and cash equivalents$67,868  $56,689 
Short-term investments90,214  79,868 
Trade receivables, net52,938  75,596 
Prepaid expenses and other current assets14,665  14,346 
Total current assets225,685  226,499 
    
Long-term assets:   
Other assets7,601  7,243 
Property and equipment, net12,593  11,896 
Total long-term assets20,194  19,139 
Total assets$245,879  $245,638 
    
Liabilities and stockholders’ equity   
Current liabilities:   
Trade payables$3,145  $635 
Accrued expenses and other short term liabilities46,104  42,453 
Deferred revenues72,544  73,493 
Total current liabilities121,793  116,581 
    
Long-term liabilities:   
Deferred revenues6,374  6,608 
Other liabilities7,651  7,807 
Total long-term liabilities14,025  14,415 
    
Stockholders’ equity:   
Share capital   
Common stock29  28 
Accumulated other comprehensive income (loss)(1,742) 136 
Additional paid-in capital256,210  223,868 
Accumulated deficit(144,436) (109,390)
Total stockholders’ equity110,061  114,642 
Total liabilities and stockholders’ equity$245,879  $245,638 
        


 
Varonis Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 Nine Months Ended
September 30,
 2018 2017
  
 Unaudited & as adjusted
for 2017
Cash flows from operating activities:   
Net loss$(35,046) $(20,664)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation2,480  1,970 
Stock-based compensation24,174  14,445 
Amortization of deferred commissions9,718  9,292 
Capital gain from disposal of fixed assets(27) (14)
    
Changes in assets and liabilities:   
Trade receivables22,658  9,181 
Prepaid expenses and other current assets(927) (838)
Deferred commissions(9,864) (9,511)
Other long term assets5   
Trade payables2,510  78 
Accrued expenses and other short term liabilities1,922  4,167 
Deferred revenues(1,183) 3,161 
Other long term liabilities(155) (421)
    
Net cash provided by operating activities16,265  10,846 
    
Cash flows from investing activities:   
Increase in short-term investments(10,333) (9,473)
Increase in long-term deposits(319) (209)
Proceeds from sale of property and equipment27  14 
Purchase of property and equipment(3,177) (3,572)
    
Net cash used in investing activities(13,802) (13,240)
    
Cash flows from financing activities:   
Proceeds from employee stock plans, net8,169  7,600 
Net cash provided by financing activities8,169  7,600 
Increase in cash, cash equivalents and restricted cash10,632  5,206 
Cash, cash equivalents and restricted cash at beginning of period57,236  48,803 
Cash, cash equivalents and restricted cash at end of period$67,868  $54,009 
        


 
Varonis Systems, Inc.
Reconciliation of GAAP Measures to non-GAAP
(in thousands, except share and per share data)
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
    
 Unaudited & as adjusted
for 2017
 Unaudited & as adjusted
for 2017
Reconciliation to non-GAAP operating income (loss):       
        
GAAP operating loss$(6,833) $(3,127) (33,635) (21,166)
        
Add back:       
Stock-based compensation expense8,399  4,782  24,174  14,445 
Payroll tax expenses related to stock-based compensation430  273  3,731  874 
        
Non-GAAP operating income (loss)$1,996  $1,928  $(5,730) $(5,847)
        
Reconciliation to non-GAAP net income (loss):       
        
GAAP net loss$(7,317) $(3,264) $(35,046) $(20,664)
        
Add back:       
Stock-based compensation expense8,399  4,782  24,174  14,445 
Payroll tax expenses related to stock-based compensation430  273  3,731  874 
        
Non-GAAP net income (loss)$1,512  $1,791  $(7,141) $(5,345)
        
        
Non-GAAP weighted average number shares used in computing net income (loss) per share of common stock - basic29,281,701  27,595,461  28,859,156  27,292,216 
Non-GAAP weighted average number shares used in computing net income (loss) per share of common stock - diluted32,525,060  30,812,151  28,859,156  27,292,216 
GAAP weighted average number shares used in computing net income (loss) per share of common stock - basic and diluted29,281,701  27,595,461  28,859,156  27,292,216 
        
Non-GAAP net income (loss) per share of common stock - basic$0.05  $0.06  $(0.25) $(0.20)
Non-GAAP net income (loss) per share of common stock - diluted$0.05  $0.06  $(0.25) $(0.20)
GAAP net loss per share of common stock - basic and diluted$(0.25) $(0.12) $(1.21) $(0.76)
                

Unaudited GAAP total revenues and expenses for the three and twelve months ended December 31, 2017 restated to reflect the adoption of ASC 606 for financial outlook comparative purposes (in thousands):

 
 Three Months Ended December 31, 2017
 (Unaudited)
 As Reported (605) Adjustments Restated for Adoption
of ASC 606
Total revenues73,209  (208) 73,001 
Total expenses67,186  (1,932) 65,254 
Operating income6,023  1,724  7,747 
      
      
 Twelve Months Ended December 31, 2017
 (Unaudited)
 As Reported (605) Adjustments Restated for Adoption
of ASC 606
Total revenues217,364  (1,974) 215,390 
Total expenses230,961  (2,152) 228,809 
Operating loss(13,597) 178  (13,419)
         

Investor Relations Contact:
James Arestia
Varonis Systems, Inc.
646-640-2149
Email: jarestia@varonis.com

News Media Contacts:
Rachel Hunt
Varonis Systems, Inc.
877-292-8767 (ext. 4247)
rhunt@varonis.com

Mia Damiano
Merritt Group
703-390-1502
damiano@merrittgrp.com