Feb 17, 2015

Varonis Announces Fourth Quarter and Full Year 2014 Financial Results

Fourth Quarter Total Revenues of $33.7 Million, Up 31% Year-Over-Year

Full Year Total Revenues of $101.3 Million, Up 36% Year-Over-Year

NEW YORK, Feb. 17, 2015 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq:VRNS), the leading provider of software solutions for unstructured, human-generated enterprise data, today announced results for the fourth quarter and full year ended December 31, 2014.

Yaki Faitelson, Varonis CEO, said, "Our fourth quarter results capped off a strong year for Varonis as we further expanded our product offering, increased our use cases and drove meaningful levels of growth. Companies today must contend with the challenge of keeping critical business information secure without compromising the efficiency of their employees. This is increasing the demand for our solutions because they dramatically reduce risk and simultaneously improve employee productivity. As we enter 2015, we see multiple growth drivers for our business, and we will continue to make investments in support of our products, competitive differentiation and go-to-market initiatives in order to capture the significant market opportunity in front of us."

Financial Highlights for the Fourth Quarter Ended December 31, 2014

   Revenues:

   Operating Income:

   Net Income (Loss):

Financial Highlights for the Full Year Ended December 31, 2014

   Revenues:

   Operating Loss:

   Net Loss:

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP (loss)/income from operations and net (loss)/income for the three months and year ended December 31, 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 first quarter of 2015, Varonis expects revenues in the range of $22.9 million to $23.4 million, representing 31% to 34% year-over-year growth. The Company anticipates first quarter 2015 non-GAAP operating loss in the range of ($10.2) million to ($9.7) million and non-GAAP earnings per basic share in the range of ($0.42) to ($0.40), based on a tax provision of $100 thousand to $300 thousand and 24.7 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic share exclude stock-based compensation expense.

For the full year 2015, Varonis expects revenues in the range of $129.7 million to $132.8 million, representing 28% to 31% year-over-year growth. The Company anticipates full year 2015 non-GAAP operating loss of ($13.0) million to ($12.0) million, and non-GAAP loss per basic share in the range of ($0.56) to ($0.52), based on a tax provision of $650 thousand to $850 thousand and 24.7 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, February 17, 2015, at 5:00 p.m., Eastern time, to discuss the Company's fourth quarter and full year 2014 financial results, current financial guidance and other corporate developments. To access this call, dial 888-576-4398 (domestic) or 719-457-1035 (international). The passcode is 6258283. A replay of this conference call will be available through February 24, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 6258283. 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 months and year ended December 31, 2014 and 2013, non-GAAP operating loss is calculated as operating loss excluding stock-based compensation expense. 

For the three months and year ended December 31, 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 December 31, 2014, Varonis had more than 3,300 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 December 31,Year Ended December 31,
 2014201320142013
 UnauditedUnaudited
Revenues:        
Licenses  $ 21,706  $ 16,855  $ 58,420  $ 43,488
Maintenance and services  12,008  8,834  42,928  31,128
Total revenues  33,714  25,689  101,348  74,616
         
Cost of revenues  2,788  1,968  9,911  6,476
         
Gross profit  30,926  23,721  91,437  68,140
         
Operating costs and expenses:        
Research and development  7,499  5,867  28,086  20,973
Sales and marketing  19,619  13,308  68,787  44,131
General and administrative  3,512  2,964  11,872  8,881
Total operating expenses  30,630  22,139  108,745  73,985
         
Operating income (loss)  296  1,582  (17,308)  (5,845)
         
Financial income (expenses) and other, net   (806)  116  (1,714)  (1,274)
         
Income (loss) before income taxes  (510)  1,698  (19,022)  (7,119)
         
Income taxes  179  (182)  (376)  (356)
         
Net income (loss)  $ (331)  $ 1,516  $ (19,398)  $ (7,475)
         
Net income (loss) per share of common stock        
Basic  $ (0.01)  $ 0.39  $ (0.91)  $ (1.93)
Diluted  $ (0.01)  $ 0.23  $ (0.91)  $ (1.93)
         
Weighted average number of shares used in computing net income (loss) per share of common stock        
Basic 24,618,432 3,903,312 21,242,313 3,880,761
Diluted 24,618,432 6,497,644 21,242,313 3,880,761
 
 
Stock-based compensation expense for the three months and the year ended December 31, 2014 and 2013 is included in the Consolidated Statements of Operations as follows (in thousands):
         
 Three Months Ended December 31,Year Ended December 31,
 2014201320142013
 UnauditedUnaudited
         
Cost of revenues  $ 72  $ 19  $ 192  $ 39
Research and development  407  215  1,198  551
Sales and marketing  1,004  325  2,478  841
General and administrative  343  103  796  357
   $ 1,826  $ 662  $ 4,664  $ 1,788
 
 
Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
     
 December 31,
2014
December 31,
2013
 Unaudited 
Assets    
Current assets:    
Cash and cash equivalents  $ 76,593  $ 9,633
Short-term deposits  35,102  4,344
Restricted cash  --   171
Trade receivables, net   37,869  28,268
Prepaid expenses and other current assets  2,962  1,357
Total current assets  152,526  43,773
     
Long-term assets:    
Other assets  332  1,625
Property and equipment, net  3,989  1,856
Total long-term assets  4,321  3,481
     
Total assets  $ 156,847  $ 47,254
     
Liabilities, convertible preferred stock and stockholders' equity (deficiency)    
Current liabilities:    
Trade payables  $ 2,703  $ 2,163
Accrued expenses and other short term liabilities  16,754  11,643
Deferred revenues  33,753  26,591
Total current liabilities  53,210  40,397
     
Long-term liabilities:    
Deferred revenues  3,464  2,109
Warrants to purchase convertible preferred stock  --   2,866
Severance pay  1,449  1,101
Other liabilities  3,698  14
Total long-term liabilities  8,611  6,090
     
Convertible preferred stock  --   43,775
     
Stockholders' equity (deficiency):    
Common stock  25  4
Accumulated other comprehensive loss  (326)  -- 
Additional paid-in capital  162,478  4,741
Accumulated deficit  (67,151)  (47,753)
Total stockholders' equity (deficiency)  95,026  (43,008)
Total liabilities, convertible preferred stock and stockholders' equity (deficiency)  $ 156,847  $ 47,254
 
 
Varonis Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
     
 Year Ended December 31,
 20142013
 Unaudited 
Cash flows from operating activities:    
Net loss  $ (19,398)  $ (7,475)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:    
Depreciation   1,285  796
Stock-based compensation   4,664  1,788
Capital loss from disposal of fixed assets  (10)  (5)
Amortization of deferred charges related to loan  187  200
Revaluation of fair value of warrants to convertible preferred stock  --   1,508
Changes in assets and liabilities:    
Trade receivables  (9,601)  (8,233)
Prepaid expenses and other current assets  19  19
Trade payables  540  267
Accrued expenses and other short term liabilities  5,541  3,460
Increase in severance pay, net  348  377
Deferred revenues  8,517  7,427
Other long term liabilities  798  (75)
Net cash provided by (used in) operating activities  (7,110)  54
     
Cash flows from investing activities:    
Increase in short-term deposits  (30,758)  (4,001)
Decrease (increase) in long-term deposits  39  (28)
Decrease (Increase) in restricted cash  230  (338)
Purchase of property and equipment  (2,333)  (1,349)
Net cash used in investing activities  (32,822)  (5,716)
     
Cash flows from financing activities:    
Exercise of employee stock options  382  127
Payment of deferred equity offering costs  (1,937)  (439)
Exercise of warrants to purchase Series D convertible preferred stock  --   1,137
Net proceeds from initial public offering  108,447  -- 
Net cash provided by financing activities  106,892  825
     
Increase (decrease) in cash and cash equivalents  66,960  (4,837)
Cash and cash equivalents at beginning of period  9,633  14,470
Cash and cash equivalents at end of period  $ 76,593  $ 9,633
 
 
Varonis Systems, Inc.
Reconciliation of GAAP Measures to non-GAAP 
(in thousands, except share and per share data)
         
 Three Months Ended December 31,Year Ended December 31,
 2014201320142013
 UnauditedUnaudited
Reconciliation to non-GAAP income (loss) from operations:        
         
GAAP operating income (loss)  $ 296  $ 1,582  $ (17,308)  $ (5,845)
         
Add back:        
Stock-based compensation expense  1,826  662  4,664  1,788
         
Non-GAAP operating income (loss)  $ 2,122  $ 2,244  $ (12,644)  $ (4,057)
         
Reconciliation to non-GAAP net income (loss):        
         
GAAP net income (loss)  $ (331)  $ 1,516  $ (19,398)  $ (7,475)
         
Add back:        
Stock-based compensation expense  1,826  662  4,664  1,788
Financial expenses resulting from the revaluation of warrants to purchase convertible preferred stock   --   --   --   1,508
         
Non-GAAP net income (loss)  $ 1,495  $ 2,178  $ (14,734)  $ (4,179)
         
         
         
Non-GAAP net income (loss) per common share - basic  $ 0.06  $ 0.11  $ (0.60)  $ (0.22)
Non-GAAP net income (loss) per common share - diluted  $ 0.06  $ 0.10  $ (0.60)  $ (0.22)
GAAP net income (loss) per common share - basic  $ (0.01)  $ 0.39  $ (0.91)  $ (1.93)
GAAP net income (loss) per common share - diluted  $ (0.01)  $ 0.23  $ (0.91)  $ (1.93)
         
Non-GAAP weighted average number of common shares outstanding - basic  24,618,432  18,985,453  24,490,086  18,962,902
Non-GAAP weighted average number of common shares outstanding - diluted  27,178,143  21,579,785  24,490,086  18,962,902
GAAP weighted average number of common shares outstanding - basic  24,618,432  3,903,312  21,242,313  3,880,761
GAAP weighted average number of common shares outstanding - diluted  24,618,432  6,497,644  21,242,313  3,880,761
CONTACT: Investor Relations Contact:

         Staci Mortenson

         ICR

         646-706-7516

         investors@varonis.com

         

         News Media Contacts:

         Mark Fredrickson

         CTP

         617-412-4000 x274

         or 978-314-6739

         mfredrickson@ctpboston.com