Nov 6, 2014

Varonis Announces Third Quarter 2014 Financial Results

Total revenues of $25.6 million, up 38% year-over-year

License revenues of $14.2 million, up 39% year-over-year

NEW YORK, Nov. 6, 2014 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq:VRNS), the leading provider of software solutions for unstructured, human-generated enterprise data, today announced results for the third quarter ended September 30, 2014.

Yaki Faitelson, Varonis CEO, said, "This was a strong quarter for Varonis driven by excellent growth in both new customers and expansion within our existing customers. Companies are paying more attention to their growing volumes of valuable unstructured data. With all the well-publicized breaches, companies are also realizing that serious vulnerabilities exist internally. Varonis is the only company that can monitor, manage and protect human-generated data in critical file systems, email, intranets, and file shares, while at the same time increasing employee productivity and reducing costs, and we have proven that we can do it at scale. The use cases for our solutions keep expanding, and our overall opportunity is growing."  

Financial Highlights for the Third Quarter Ended September 30, 2014

Revenues:

Operating Loss:

Net Loss:

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 and nine months ended September 30, 2014 and 2013. 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 2014, Varonis expects revenues in the range of $33.2 million to $33.9 million. The Company anticipates fourth quarter 2014 non-GAAP operating income in the range of $1.0 million to $2.0 million and non-GAAP earnings per diluted share in the range of $0.02 to $0.06, based on a tax provision of $0.25 million to $0.45 million and 27.2 million diluted shares outstanding. Expectations of non-GAAP income from operations and non-GAAP income per diluted share exclude stock-based compensation expense.

For the full year 2014, Varonis now expects revenues in the range of $100.8 million to $101.5 million. The Company anticipates full year 2014 non-GAAP operating loss of ($13.8) million to ($12.8) million, and non-GAAP loss per basic share in the range of ($0.60) to ($0.56), based on a tax provision of $0.8 million to $1.0 million and 24.5 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic share exclude stock-based compensation expense.

Conference Call and Webcast

Varonis will host a conference call today, November 6, 2014, at 5:00 p.m., Eastern Time, to discuss the Company's third quarter 2014 financial results, current financial guidance and other corporate developments. To access this call, dial 888-337-8169 (domestic) or 719-325-2464 (international). The passcode is 3281860. A replay of this conference call will be available through November 13, 2014 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 3281860. A live webcast of this conference call will be available on the "Investor Relations" 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 loss and non-GAAP net 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, 2014 and 2013, non-GAAP operating loss is calculated as operating loss excluding stock-based compensation expense. 

For the three and nine months ended September 30, 2014 and 2013, non-GAAP net loss is calculated as net loss excluding (i) stock-based compensation expense and (ii) financial expenses resulting from the revaluation of warrants to purchase convertible preferred stock.

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 believes that excluding financial expenses with respect to revaluation of warrants to purchase convertible preferred stock allows for more meaningful comparison between our net loss from period to period, especially since upon the closing of the IPO, the warrants automatically converted into warrants to purchase our common stock, and as a result, are no longer evaluated at each balance sheet date. 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 loss or net 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 has been, and will continue to be for the foreseeable future, a significant recurring expense 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 engineers and sales personnel; Varonis' ability to build and expand its direct sales efforts and reseller distribution channels; general economic and industry conditions, including expenditure trends for data governance and data security software; 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; and macroeconomic conditions. 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 the leading provider of software solutions for unstructured, human-generated enterprise data. Varonis provides an innovative software platform that allows enterprises to map, analyze, manage and migrate their unstructured data. Varonis specializes in human-generated data, a type of unstructured data that includes an enterprise's spreadsheets, word processing documents, presentations, audio files, video files, emails, text messages and any other data created by employees. This data often contains an enterprise's financial information, product plans, strategic initiatives, intellectual property and numerous other forms of vital information. IT and business personnel deploy Varonis software for a variety of use cases, including data governance, data security, archiving, file synchronization, enhanced mobile data accessibility and information collaboration. As of September 30, 2014, Varonis had approximately 3,000 customers, spanning leading firms in the financial services, public, healthcare, industrial, energy & utilities, technology, consumer and retail, education and media & entertainment sectors.

         
         
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,
 2014201320142013
 UnauditedUnaudited
Revenues:        
Licenses  $ 14,239  $ 10,256  $ 36,714  $ 26,633
Maintenance and services  11,324  8,254  30,920  22,294
Total revenues  25,563  18,510  67,634  48,927
         
Cost of revenues  2,590  1,652  7,123  4,508
         
Gross profit  22,973  16,858  60,511  44,419
         
Operating costs and expenses:        
Research and development  7,316  5,712  20,587  15,106
Sales and marketing  17,741  11,115  49,168  30,823
General and administrative  3,030  2,158  8,360  5,917
Total operating expenses  28,087  18,985  78,115  51,846
         
Operating loss  (5,114)  (2,127)  (17,604)  (7,427)
         
Financial expenses, net   (944)  (387)  (908)  (1,390)
         
Loss before income taxes  (6,058)  (2,514)  (18,512)  (8,817)
         
Income taxes  (296)  (50)  (555)  (174)
         
Net loss  $ (6,354)  $ (2,564)  $ (19,067)  $ (8,991)
         
Net loss per share of common stock, basic and diluted  $ (0.26)  $ (0.66)  $ (0.95)  $ (2.32)
         
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted 24,516,417 3,897,203 20,100,388 3,875,204
         
         
Stock-based compensation expense for the three and nine months ended September 30, 2014 and 2013 is included in the Unaudited Consolidated Statements of Operations as follows (in thousands):
         
 Three Months Ended September 30,Nine Months Ended September 30,
 2014201320142013
 UnauditedUnauditedUnauditedUnaudited
         
Cost of revenues  $ 55  $ 9  $ 121  $ 20
Research and development  319  151  790  336
Sales and marketing  614  252  1,473  517
General and administrative  226  98  454  253
   $ 1,214  $ 510  $ 2,838  $ 1,126
     
     
Varonis Systems Inc.
Consolidated Balance Sheets
(in thousands)
     
 September 30,December 31,
 20142013
 UnauditedAudited
Assets    
Current Assets:    
Cash and cash equivalents  $ 115,237  $ 9,633
Short-term deposits  102  4,344
Restricted cash  --   171
Trade receivables, net   21,146  28,268
Prepaid expenses and other current assets  1,496  1,357
Total current assets  137,981  43,773
     
Long-term assets:    
Other assets  950  1,625
Property and equipment, net  2,737  1,856
Total long-term assets  3,687  3,481
     
Total assets  $ 141,668  $ 47,254
     
Liabilities, convertible preferred stock and stockholders' equity (deficiency)    
Current liabilities:    
Trade payables  $ 2,754  $ 2,163
Accrued expenses and other liabilities  14,881  11,643
Deferred revenues  25,914  26,591
Total current liabilities  43,549  40,397
     
Long-term liabilities:    
Deferred revenues  3,083  2,109
Warrants to purchase convertible preferred stock  --   2,866
Severance pay  1,445  1,101
Other liabilities  445  14
Total long-term liabilities  4,973  6,090
     
Convertible preferred stock  --   43,775
     
Stockholders' equity (deficiency):    
Common stock  24  4
Accumulated other comprehensive loss  (542)  -- 
Additional paid-in-capital  160,484  4,741
Accumulated deficit  (66,820)  (47,753)
Total stockholders' equity (deficiency)  93,146  (43,008)
Total liabilities, convertible preferred stock and stockholders' equity (deficiency)  $ 141,668  $ 47,254
     
     
Varonis Systems Inc.
Consolidated Statements of Cash Flows
(in thousands)
     
 Nine Months Ended September 30,
 20142013
 UnauditedUnaudited
Cash flows from operating activities:    
Net loss  $ (19,067)  $ (8,991)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation   858  566
Stock-based compensation   2,838  1,126
Capital loss from disposal of fixed assets  --   (5)
Amortization of deferred charges related to loan  93  162
Revaluation of fair value of warrants to purchase convertible preferred stock  --   1,508
Changes in assets and liabilities:    
Trade receivables  7,122  5,881
Prepaid expenses and other current assets  (232)  463
Other long term assets  (615)  -- 
Trade payables  591  (384)
Accrued expenses and other liabilities  2,696  263
Increase in severance pay, net  344  57
Deferred revenues  297  183
Other long term liabilities  431  (47)
Net cash provided by (used in) operating activities  (4,644)  782
     
Cash flows from investing activities:    
Decrease (increase) in short-term deposits  4,242  (1)
Decrease (increase) in long-term deposits  48  (30)
Decrease (Increase) in restricted cash  218  (332)
Purchase of property and equipment  (1,739)  (828)
Net cash provided by (used in) investing activities  2,769  (1,191)
     
Cash flows from financing activities:    
Exercise of employee stock options  213  56
Exercise of warrants to purchase Series D convertible preferred stock  --   1,137
Payment of deferred equity offering costs  (1,181)  -- 
Net proceeds from initial public offering  108,447  -- 
Net cash provided by financing activities  107,479  1,193
     
Increase in cash and cash equivalents  105,604  784
Cash and cash equivalents at beginning of period  9,633  14,470
Cash and cash equivalents at end of period  $ 115,237  $ 15,254
         
         
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,
 2014201320142013
 UnauditedUnaudited
Reconciliation to non-GAAP loss from operations:        
         
GAAP operating loss  $ (5,114)  $ (2,127)  $ (17,604)  $ (7,427)
         
Add back:        
Stock-based compensation expense  1,214  510  2,838  1,126
         
Non-GAAP operating loss  $ (3,900)  $ (1,617)  $ (14,766)  $ (6,301)
         
Reconciliation to non-GAAP net loss:        
         
GAAP net loss  $ (6,354)  $ (2,564)  $ (19,067)  $ (8,991)
         
Add back:        
Stock-based compensation expense  1,214  510  2,838  1,126
Financial expenses resulting from the revaluation of warrants to purchase convertible preferred stock   --   905  --   1,508
         
Non-GAAP net loss  $ (5,140)  $ (1,149)  $ (16,229)  $ (6,357)
         
GAAP Weighted average number of common shares outstanding - basic and diluted  24,516,417  3,897,203  20,100,388  3,875,204
Add:        
Additional weighted average shares giving effect to initial public offering and conversion of preferred stock at the beginning of the period  --   15,082,141  4,346,285  15,082,141
         
Non-GAAP weighted average number of common shares outstanding - basic and diluted  24,516,417  18,979,344  24,446,673  18,957,345
         
Non-GAAP net loss per common share - basic and diluted  $ (0.21)  $ (0.06)  $ (0.66)  $ (0.34)
GAAP net loss per common share - basic and diluted  $ (0.26)  $ (0.66)  $ (0.95)  $ (2.32)
CONTACT: Investor Relations Contact:

         Staci Mortenson

         ICR

         646-706-7516

         Email: investors@varonis.com

         

         News Media Contacts:

         Mark Fredrickson

         CTP

         617-412-4000 x274

         or 978-314-6739

         Email: mfredrickson@ctpboston.com