Aug 3, 2017

Varonis Announces Second Quarter 2017 Financial Results

Total revenues of $50.2 million, up 30% year-over-year
License revenues of $28.4 million, up 31% year-over-year

NEW YORK, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq:VRNS), a leading provider of software solutions that protect data from insider threats and cyberattacks, today announced results for the second quarter ended June 30, 2017.

Yaki Faitelson, Varonis CEO, said, "This was another strong quarter for Varonis with both license and total revenues increasing 30% or greater.  We continue to experience strong demand drivers for our business and are executing well on our key goals of increasing awareness and adoption for our solutions, more effectively targeting companies with 1,000 or more employees with larger customer lifetime values, and innovating to expand the value we deliver to our customers. With the Varonis Data Security Platform, we are delivering a strategic approach to not only protect enterprise data from cyberattacks, but also from insider threats and data breaches." 

Financial Highlights for the Second Quarter Ended June 30, 2017

Revenues:

Operating Income (Loss):

Net Income (Loss):

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP net income (loss) from operations and net income (loss) for the three and six months ended June 30, 2017 and 2016. 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 third quarter of 2017, Varonis expects revenues in the range of $50.0 million to $50.8 million, representing 22% to 24% year-over-year growth. The Company anticipates third quarter 2017 non-GAAP operating income in the range of $100,000 to $500,000 and non-GAAP net loss per basic and diluted share in the range of ($0.01) to $0.00, based on a tax provision of $450,000 to $650,000 and 27.5 million basic and diluted shares outstanding. Expectations of non-GAAP operating income and non-GAAP net loss per basic and diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

For the full year 2017, Varonis now expects revenues in the range of $205.0 million to $207.0 million, representing 25% to 26% year-over-year growth. The Company now anticipates full year 2017 non-GAAP operating income of $2.7 million to $3.7 million and non-GAAP net income per diluted share in the range of $0.07 to $0.09, based on a tax provision of $1.9 million to $2.3 million and 30.5 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, August 3, 2017, at 5:00 p.m., Eastern Time, to discuss the Company's second quarter 2017 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 13665665. A replay of this conference call will be available through August 10, 2017 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13665665.  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

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 six months ended June 30, 2017 and 2016, non-GAAP operating income (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 and six months ended June 30, 2017 and 2016, non-GAAP net income (loss) is calculated as net 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 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 leading provider of software solutions that protect data from insider threats and cyberattacks. Through its innovative Data Security Platform, Varonis allows organizations to analyze, secure, manage, and migrate their volumes of unstructured data. Varonis specializes in file and email systems that store valuable spreadsheets, word processing documents, presentations, audio and video files, emails, and text. This rapidly growing data often contains an enterprise's financial information, product plans, strategic initiatives, intellectual property, and confidential employee, customer or patient records. IT and business personnel deploy Varonis software for a variety of use cases, including data security, governance and compliance, user behavior analytics, archiving, search, and file synchronization and sharing. With offices and partners worldwide, Varonis had approximately 5,750 customers as of June 30, 2017, spanning leading firms in financial services, healthcare, public, industrial, insurance, energy and utilities, media and entertainment, consumer and retail, technology and education sectors.

 

  
Varonis Systems, Inc. 
Consolidated Statements of Operations 
(in thousands, except for share and per share data) 
  
  Three Months Ended June 30,  Six Months Ended June 30, 
   2017    2016     2017    2016   
                       
  Unaudited  Unaudited 
Revenues:          
Licenses  $   28,420    $   21,742     $   47,575    $   35,586   
Maintenance and services    21,754      16,899       42,979      33,525   
Total revenues    50,174      38,641       90,554      69,111   
           
Cost of revenues    4,878      3,721       9,550      7,217   
           
Gross profit    45,296      34,920       81,004      61,894   
           
Operating costs and expenses:          
Research and development    11,498      8,905       21,907      17,742   
Sales and marketing    32,560      26,840       63,371      51,204   
General and administrative    6,582      4,760       12,095      9,322   
Total operating expenses    50,640      40,505       97,373      78,268   
           
Operating loss    (5,344)     (5,585)      (16,369)     (16,374)  
           
Financial income (expenses), net     950      (605)      1,419      40   
           
Loss before income taxes    (4,394)     (6,190)      (14,950)     (16,334)  
           
Income taxes    (641)     (303)      (964)     (509)  
           
Net loss  $   (5,035)   $   (6,493)    $   (15,914)   $   (16,843)  
           
           
Net loss per share of common stock, basic and diluted $  (0.18)  $  (0.25)   $  (0.59)  $  (0.64)  
                   
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted  27,321,837    26,273,380     27,137,930    26,195,269   
                       

 

Stock-based compensation expense for the three and six months ended June 30, 2017 and 2016  is included in the Consolidated Statements of Operations as follows (in thousands):
  Three Months Ended June 30,  Six Months Ended June 30, 
   2017   2016    2017   2016  
                   
  Unaudited  Unaudited 
           
Cost of revenues  $   273  $  172    $   500   $   318  
Research and development    1,301     793      2,431     1,458  
Sales and marketing    2,362     1,628      4,421     2,803  
General and administrative    1,323     780      2,311     1,418  
   $   5,259  $  3,373    $   9,663   $   5,997  
                   

 

Payroll tax expense related to stock-based compensation for the three and six months ended June 30, 2017 and 2016 is included in the Consolidated Statements of Operations as follows (in thousands):
  Three Months Ended June 30,  Six Months Ended June 30, 
   2017   2016    2017   2016  
                   
  Unaudited  Unaudited 
           
Cost of revenues  $   12  $  9    $   45   $   22  
Research and development    13     2      28     10  
Sales and marketing    166     60      485     123  
General and administrative    8     8      43     22  
   $   199  $  79    $   601   $   177  
                   

 

Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
      
  June 30, December 31,
   2017    2016  
  Unaudited  
Assets     
Current assets:     
Cash and cash equivalents  $   53,539    $   48,315  
Short-term investments    68,039      65,493  
Trade receivables, net     41,313      53,861  
Prepaid expenses and other current assets    7,571      3,650  
Total current assets    170,462      171,319  
         
Long-term assets:      
Other assets    818      609  
Property and equipment, net    11,160      9,910  
Total long-term assets    11,978      10,519  
         
Total assets  $   182,440    $   181,838  
       
Liabilities and stockholders' equity      
Current liabilities:      
Trade payables  $   1,348    $   1,288  
Accrued expenses and other short term liabilities    30,769      28,479  
Deferred revenues    57,457      58,478  
Total current liabilities    89,574      88,245  
       
Long-term liabilities:      
Deferred revenues    3,889      3,562  
Severance pay    1,472      1,664  
Other liabilities    5,273      5,628  
Total long-term liabilities    10,634      10,854  
       
Stockholders' equity:      
Common stock    27      27  
Accumulated other comprehensive income (loss)    2,128      (479) 
Additional paid-in capital    204,751      189,335  
Accumulated deficit    (124,674)     (106,144) 
Total stockholders' equity    82,232      82,739  
Total liabilities and stockholders' equity  $   182,440    $   181,838  
         

 

Varonis Systems, Inc. 
Consolidated Statements of Cash Flows 
(in thousands) 
         
  Six Months Ended June 30, 
   2017    2016   
  Unaudited Unaudited 
Cash flows from operating activities:     
Net loss  $  (15,914)   $  (16,843)  
Adjustments to reconcile net loss to net cash provided by operating activities:     
Depreciation     1,284      1,066   
Stock-based compensation     9,663      5,997   
Capital gain from disposal of fixed assets    (2)     -    
Changes in assets and liabilities:         
Trade receivables    12,548      13,943   
Prepaid expenses and other current assets    (1,783)     47   
Trade payables    60      (538)  
Accrued expenses and other short term liabilities    2,769      16   
Severance pay    (192)     21   
Deferred revenues    (694)     (1,144)  
Other long term liabilities    (355)     (224)  
Net cash provided by operating activities    7,384      2,341   
          
Cash flows from investing activities:         
Decrease (increase) in short-term investments    (2,556)     4,750   
Increase in long-term deposits    (160)     (27)  
Increase in restricted cash    (49)     (7)  
Proceeds from sale of property and equipment    2      -    
Purchase of property and equipment    (2,534)     (1,447)  
Net cash provided by (used in) investing activities    (5,297)     3,269   
      
Cash flows from financing activities:     
Proceeds from employee stock plans, net    3,137      1,251   
Net cash provided by financing activities    3,137      1,251   
          
Increase in cash and cash equivalents    5,224      6,861   
Cash and cash equivalents at beginning of period    48,315      49,241   
Cash and cash equivalents at end of period  $   53,539    $   56,102   
      

 

Varonis Systems, Inc. 
Reconciliation of GAAP Measures to non-GAAP  
(in thousands, except share and per share data) 
           
  Three Months Ended June 30,  Six Months Ended June 30, 
   2017    2016     2017    2016   
                       
  Unaudited  Unaudited 
Reconciliation to non-GAAP income (loss) from operations:          
           
GAAP operating loss  $   (5,344)   $   (5,585)    $   (16,369)   $   (16,374)  
                   
Add back:                  
Stock-based compensation expense    5,259      3,373       9,663      5,997   
Payroll tax expenses related to stock-based compensation    199      79       601      177   
                   
Non-GAAP operating income (loss)  $   114    $   (2,133)    $   (6,105)   $   (10,200)  
           
Reconciliation to non-GAAP net income (loss):          
           
GAAP net loss  $   (5,035)   $   (6,493)    $   (15,914)   $   (16,843)  
                   
Add back:                  
Stock-based compensation expense    5,259      3,373       9,663      5,997   
Payroll tax expenses related to stock-based compensation    199      79       601      177   
                   
Non-GAAP net income (loss)  $   423    $   (3,041)    $   (5,650)   $   (10,669)  
                   
                   
Non-GAAP net income (loss) per common share - basic  $   0.02    $   (0.12)    $   (0.21)   $   (0.41)  
Non-GAAP net income (loss) per common share - diluted  $   0.01    $   (0.12)    $   (0.21)   $   (0.41)  
GAAP net loss per common share - basic and diluted  $   (0.18)   $   (0.25)    $   (0.59)   $   (0.64)  
                   
Non-GAAP weighted average number of common shares outstanding - basic   27,321,837      26,273,380       27,137,930      26,195,269   
Non-GAAP weighted average number of common shares outstanding - diluted   30,545,216      26,273,380       27,137,930      26,195,269   
GAAP weighted average number of common shares outstanding - basic and diluted   27,321,837      26,273,380       27,137,930      26,195,269   
                   

 

Investor Relations Contact:
Staci Mortenson
ICR
646-706-7516
Email: investors@varonis.com

News Media Contact:
Mia Damiano
Merritt Group
703-390-1502
Email: damiano@merrittgrp.com