Nov 2, 2017

Varonis Announces Third Quarter 2017 Financial Results

Total revenues of $53.6 million, up 31% year-over-year
License revenues of $29.4 million, up 30% year-over-year

NEW YORK, Nov. 02, 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 third quarter ended September 30, 2017.

Yaki Faitelson, Varonis CEO, said, "We delivered a strong third quarter with both license and total revenues increasing 30% or greater. With recent high-profile data breaches and increasing regulatory scrutiny, organizations are adopting a more data-centric approach in their security initiatives. Varonis technology analyzes data content, access controls and usage across on-premises and cloud systems to prioritize and reduce risk and to detect abnormal behaviors that indicate a potential data breach."

Financial Highlights for the Third Quarter Ended September 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 income (loss) from operations and net income (loss) for the three and nine months ended September 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 fourth quarter of 2017, Varonis expects revenues in the range of $65.5 million to $67.0 million, representing 20% to 23% year-over-year growth. The Company anticipates fourth quarter 2017 non-GAAP operating income in the range of $9.3 million to $9.8 million and non-GAAP net income per diluted share in the range of $0.28 to $0.29, based on a tax provision of $500,000 to $700,000 and 31.0 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 2017, Varonis now expects revenues in the range of $209.5 million to $211.0 million, representing 27% to 28% year-over-year growth. The Company now anticipates full year 2017 non-GAAP operating income of $5.0 million to $5.5 million and non-GAAP net income per diluted share in the range of $0.16 to $0.17, based on a tax provision of $2.1 million to $2.4 million and 30.7 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, November 2, 2017, at 5:00 p.m., Eastern Time, to discuss the Company's third 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 13671904. A replay of this conference call will be available through November 9, 2017 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13671904.  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 nine months ended September 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 nine months ended September 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 5,950 customers as of September 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.

Investor Relations Contact:
Yun Kim
Varonis Systems, Inc.
646-640-2149
Email: kimy@varonis.com

Media Contacts:
Rachel Hunt
877-292-8767 (ext. 4247)
rhunt@varonis.com

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

 

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,  
      2017         2016           2017         2016      
                                             
    Unaudited     Unaudited  
Revenues:                    
Licenses    $    29,409        $    22,591          $    76,984        $    58,177      
Maintenance and services       24,192           18,346             67,171           51,870      
Total revenues       53,601           40,937             144,155           110,047      
Cost of revenues       5,436           4,116             14,986           11,333      
                     
Gross profit       48,165           36,821             129,169           98,714      
                     
Operating costs and expenses:                    
Research and development       11,903           9,290             33,810           27,033      
Sales and marketing       32,802           26,410             96,173           77,607      
General and administrative       6,711           5,051             18,806           14,379      
Total operating expenses       51,416           40,751             148,789           119,019      
Operating loss       (3,251 )         (3,930 )           (19,620 )         (20,305 )    
Financial income (expenses), net        622           (187 )           2,041           (146 )    
Loss before income taxes       (2,629 )         (4,117 )           (17,579 )         (20,451 )    
Income taxes       (685 )         (272 )           (1,649 )         (781 )    
Net loss    $    (3,314 )      $    (4,389 )        $    (19,228 )      $    (21,232 )    
                     
Net loss per share of common stock, basic and diluted   $   (0.12 )     $   (0.17 )       $   (0.70 )     $   (0.81 )    
                                     
Weighted average number of shares used in computing net
loss per share of common stock, basic and diluted
    27,595,461         26,492,313           27,292,216         26,294,936      
                                     

 

Stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 is included in the Consolidated Statements of Operations
as follows (in thousands):
 
 
    Three Months Ended September 30,     Nine Months Ended September 30,  
      2017       2016         2017       2016    
                                     
    Unaudited     Unaudited  
                     
Cost of revenues    $    283     $   186        $    783      $    504    
Research and development       1,374         805           3,805         2,263    
Sales and marketing       1,856         1,613           6,277         4,416    
General and administrative       1,269         854           3,580         2,272    
     $    4,782     $   3,458        $    14,445      $    9,455    
                                     

 

Payroll tax expense related to stock-based compensation for the three and nine months ended September 30, 2017 and 2016 is included in the Consolidated
Statements of Operations as follows (in thousands):
 
 
    Three Months Ended September 30,     Nine Months Ended September 30,  
      2017       2016         2017       2016    
                                     
    Unaudited     Unaudited  
                     
Cost of revenues    $    25     $   2        $    70      $    24    
Research and development       27         9           55         19    
Sales and marketing       213         40           698         163    
General and administrative       8         3           51         25    
     $    273     $   54        $    874      $    231    
                                     

 

Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
           
    September 30,   December 31,
      2017         2016    
    Unaudited    
Assets          
Current assets:          
Cash and cash equivalents    $    53,478        $    48,315    
Short-term investments       74,963           65,493    
Trade receivables, net        44,680           53,861    
Prepaid expenses and other current assets       5,500           3,650    
Total current assets       178,621           171,319    
                 
Long-term assets:            
Other assets       861           609    
Property and equipment, net       11,512           9,910    
Total long-term assets       12,373           10,519    
                 
Total assets    $    190,994        $    181,838    
Liabilities and stockholders' equity            
Current liabilities:            
Trade payables    $    1,366        $    1,288    
Accrued expenses and other short term liabilities       32,166           28,479    
Deferred revenues       58,383           58,478    
Total current liabilities       91,915           88,245    
             
Long-term liabilities:            
Deferred revenues       5,047           3,562    
Severance pay       1,705           1,664    
Other liabilities       5,283           5,628    
Total long-term liabilities       12,035           10,854    
             
Stockholders' equity:            
Common stock       28           27    
Accumulated other comprehensive income (loss)       1,009           (479 )  
Additional paid-in capital       213,995           189,335    
Accumulated deficit       (127,988 )         (106,144 )  
Total stockholders' equity       87,044           82,739    
Total liabilities and stockholders' equity    $    190,994        $    181,838    

 

Varonis Systems, Inc.  
Consolidated Statements of Cash Flows  
(in thousands)  
                 
    Nine Months Ended September 30,  
      2017         2016      
    Unaudited   Unaudited  
Cash flows from operating activities:          
Net loss    $   (19,228 )      $   (21,232 )    
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation        1,970           1,610      
Stock-based compensation        14,445           9,455      
Capital gain from disposal of fixed assets       (14 )         (2 )    
Changes in assets and liabilities:                  
Trade receivables       9,181           17,311      
Prepaid expenses and other current assets       (838 )         (930 )    
Trade payables       78           (1,668 )    
Accrued expenses and other short term liabilities       4,167           (502 )    
Severance pay       41           28      
Deferred revenues       1,390           402      
Other long term liabilities       (346 )         64      
Net cash provided by operating activities       10,846           4,536      
                   
Cash flows from investing activities:                  
Increase in short-term investments       (9,473 )        (13,250 )    
Increase in long-term deposits       (209 )         (27 )    
Increase in restricted cash       (43 )         (41 )    
Proceeds from sale of property and equipment       14           2      
Purchase of property and equipment       (3,572 )         (2,576 )    
Net cash used in investing activities      (13,283 )        (15,892 )    
           
Cash flows from financing activities:          
Proceeds from employee stock plans, net       7,600           3,803      
Net cash provided by financing activities       7,600           3,803      
                   
Increase (decrease) in cash and cash equivalents       5,163           (7,553 )    
Cash and cash equivalents at beginning of period       48,315           49,241      
Cash and cash equivalents at end of period    $    53,478        $    41,688      
                   
        -               
                   

 

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,  
      2017         2016           2017         2016      
    Unaudited     Unaudited  
Reconciliation to non-GAAP income (loss) from operations:                    
                     
GAAP operating loss    $    (3,251 )      $    (3,930 )        $    (19,620 )      $    (20,305 )    
                                     
Add back:                                    
Stock-based compensation expense       4,782           3,458             14,445           9,455      
Payroll tax expenses related to stock-based compensation       273           54             874           231      
                                     
Non-GAAP operating income (loss)    $    1,804        $    (418 )        $    (4,301 )      $    (10,619 )    
Reconciliation to non-GAAP net income (loss):                    
                     
GAAP net loss    $    (3,314 )      $    (4,389 )        $    (19,228 )      $    (21,232 )    
                                     
Add back:                                    
Stock-based compensation expense       4,782           3,458             14,445           9,455      
Payroll tax expenses related to stock-based compensation       273           54             874           231      
                                     
Non-GAAP net income (loss)    $    1,741        $    (877 )        $    (3,909 )      $    (11,546 )    
                                     
                                     
Non-GAAP net income (loss) per common share - basic    $    0.06        $    (0.03 )        $    (0.14 )      $    (0.44 )    
Non-GAAP net income (loss) per common share - diluted    $    0.06        $    (0.03 )        $    (0.14 )      $    (0.44 )    
GAAP net loss per common share - basic and diluted    $    (0.12 )      $    (0.17 )        $    (0.70 )      $    (0.81 )    
                                     
Non-GAAP weighted average number of common shares outstanding - basic      27,595,461           26,492,313             27,292,216           26,294,936      
Non-GAAP weighted average number of common shares outstanding - diluted      30,812,151           26,492,313             27,292,216           26,294,936      
GAAP weighted average number of common shares outstanding - basic and diluted      27,595,461           26,492,313             27,292,216           26,294,936