Feb 11, 2016

Varonis Announces Fourth Quarter and Full Year 2015 Financial Results

Fourth quarter total revenues of $43.8 million, up 30% year-over-year

Full year total revenues of $127.2 million, up 26% year-over-year

NEW YORK, Feb. 11, 2016 (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 fourth quarter and full year ended December 31, 2015.

Yaki Faitelson, Varonis CEO, said, "We are pleased with our strong finish to 2015. It has become clear that companies across the globe can no longer tolerate the risks of not protecting data from the inside out. As a result, we are increasingly gaining the attention of decision makers higher up in organizations, and our programs are critical components of well thought out, well-funded security spending initiatives.  As we look to 2016, the demand environment is positive, and we are well positioned to capitalize on the opportunity."  

Financial Highlights for the Fourth Quarter Ended December 31, 2015

Revenues:

Operating Income:

Net Income (Loss):

Financial Highlights for the Full Year Ended December 31, 2015

Revenues:

Operating Loss:

Net 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 months and year ended December 31, 2015 and 2014. 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 2016, Varonis expects revenues in the range of $28.3 million to $28.8 million, representing 23% to 25% year-over-year growth. The Company anticipates first quarter 2016 non-GAAP operating loss in the range of ($10.0) million to ($9.6) million and non-GAAP earnings per basic share in the range of ($0.39) to ($0.38), based on a tax provision of $100 thousand to $300 thousand and 26.1 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

For the full year 2016, Varonis expects revenues in the range of $153.5 million to $156.5 million, representing 21% to 23% year-over-year growth. The Company anticipates full year 2016 non-GAAP operating loss of ($12.0) million to ($10.0) million, and non-GAAP loss per basic share in the range of ($0.49) to ($0.42), based on a tax provision of $800 thousand to $1.1 million and 26.2 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic 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, February 11, 2016, at 5:00 p.m., Eastern time, to discuss the Company's fourth quarter and full year 2015 financial results, current financial guidance and other corporate developments.  To access this call, dial 888-468-2440 (domestic) or 719-325-2281 (international).  The passcode is 9284291. A replay of this conference call will be available through February 18, 2016 at 877-870-5176 (domestic) or 858-384-5517 (international).  The replay passcode is 9284291.  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 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 months and year ended December 31, 2015 and 2014, non-GAAP operating income (loss) is calculated as operating income excluding (i) stock-based compensation expense and (ii) payroll tax expense related to stock-based compensation. 

For the three months and year ended December 31, 2015 and 2014, 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 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; 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 an innovative software 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 4,350 customers as of December 31, 2015, 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 December 31,  Year Ended December 31,  
    2015     2014       2015     2014    
  Unaudited  Unaudited     
Revenues:          
Licenses $ 28,242   $ 21,706    $ 71,273   $ 58,420   
Maintenance and services   15,595     12,008      55,937      42,928   
Total revenues   43,837     33,714       127,210     101,348   
           
Cost of revenues   3,279     2,788      12,019     9,911   
           
Gross profit   40,558     30,926      115,191     91,437   
           
Operating costs and expenses:          
Research and development   8,175     7,499      31,792     28,086   
Sales and marketing    24,295     19,619      86,367     68,787   
General and administrative   4,530     3,512      16,106      11,872   
Total operating expenses   37,000     30,630      134,265     108,745   
           
Operating income (loss)   3,558     296       (19,074)    (17,308)  
           
Financial expenses, net   (780)    (806)     (1,523)    (1,714)  
           
Income (loss) before income taxes   2,778     (510)     (20,597)    (19,022)  
           
Benefit (provision) for income taxes   (144)    179      (686)    (376)  
           
Net income (loss) $  2,634   $ (331)   $ (21,283)  $ (19,398)  
           
Net income (loss) per share of common stock          
Basic $ 0.10   $ (0.01)   $ (0.84)  $ (0.91)  
Diluted $ 0.09   $ (0.01)   $ (0.84)  $ (0.91)  
                   
                   
Weighted average number of shares used in computing net income (loss) per share of common stock                  
Basic   25,791,889     24,618,432       25,198,546     21,242,313   
Diluted   27,765,847     24,618,432      25,198,546     21,242,313   

 

Stock-based compensation expense for the three months and the year ended December 31, 2015 and 2014 is included in the Consolidated Statements of Operations as follows (in thousands):  
      
  Three Months Ended December 31,  Year Ended December 31,
   2015   2014    2015   2014 
  Unaudited Unaudited  Unaudited   
          
Cost of revenues $119  $72   $419  $192 
Research and development  419   407    1,954   1,198 
Sales and marketing  846   1,004    3,041   2,478 
General and administrative  706   343    2,380   796 
  $2,090  $1,826   $7,794  $4,664 

 

Varonis Systems, Inc.      
Consolidated Balance Sheets     
(in thousands)     
      
  December 31, December 31,
     2015     2014  
  Unaudited  
Assets     
Current assets:     
Cash and cash equivalents $ 49,241   $ 76,593  
Short-term deposits   57,103     35,102  
Trade receivables, net   47,436     37,869  
Prepaid expenses and other current assets   2,622     2,962  
Total current assets   156,402     152,526  
         
Long-term assets:      
Other assets   477     332  
Property and equipment, net   8,265     3,989  
Total long-term assets   8,742     4,321  
          
Total assets $ 165,144   $ 156,847  
       
Liabilities and stockholders' equity      
Current liabilities:       
Trade payables $ 2,612    $ 2,703  
Accrued expenses and other liabilities   23,029     16,754  
Deferred revenues   45,675     33,753  
Total current liabilities   71,316     53,210  
       
Long-term liabilities:      
Deferred revenues    3,096     3,464  
Severance pay   1,528     1,449  
Other liabilities   5,617     3,698  
Total long-term liabilities   10,241     8,611  
       
Stockholders' equity:      
Common stock   26     25  
Accumulated other comprehensive loss   (331)     (326) 
Additional paid-in capital   172,326     162,478  
Accumulated deficit   (88,434)    (67,151) 
Total stockholders' equity   83,587     95,026  
Total liabilities and stockholders' equity $ 165,144   $ 156,847  

 

Varonis Systems, Inc.        
Consolidated Statements of Cash Flows        
(in thousands)        
         
  Year Ended December 31, 
    2015     2014   
  Unaudited   
Cash flows from operating activities:     
Net loss $ (21,283)  $ (19,398)  
Adjustments to reconcile net loss to net cash used in operating activities:     
Depreciation    1,615     1,285   
Stock-based compensation   7,794     4,664   
Amortization of deferred charges related to loan   -     187   
Capital gain from disposal of fixed assets   (4)    (10)  
Changes in assets and liabilities:         
Trade receivables   (9,567)    (9,601)  
Prepaid expenses and other current assets   796     19   
Trade payables   (91)    540   
Accrued expenses and other liabilities   6,270     5,541   
Severance pay, net   79     348   
Deferred revenues   11,554     8,517   
Other long term liabilities   108     798   
Net cash used in operating activities   (2,729)    (7,110)  
          
Cash flows from investing activities:         
Increase in short-term deposits   (22,001)    (30,758)  
Decrease in long-term deposits    11     39    
Decrease (Increase) in restricted cash   (156)    230   
Proceeds from sale of property and equipment   4     -   
Purchase of property and equipment   (4,536)    (2,333)  
Net cash used in investing activities   (26,678)    (32,822)  
      
Cash flows from financing activities:     
Exercise of employee stock options   2,055     382   
Payment of deferred equity offering costs   -     (1,937 )  
Net proceeds from initial public offering   -     108,447   
Net cash provided by financing activities   2,055     106,892   
          
Increase (decrease) in cash and cash equivalents   (27,352)    66,960   
Cash and cash equivalents at beginning of period   76,593     9,633   
Cash and cash equivalents at end of period $ 49,241   $ 76,593   

 

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, 
    2015    2014      2015     2014   
  Unaudited  Unaudited 
Reconciliation to non-GAAP income (loss) from operations:           
           
GAAP operating income (loss) $3,558  $ 296    $ (19,074)  $ (17,308)  
                   
Add back:                  
Stock-based compensation expense  2,090    1,826      7,794     4,664   
Payroll tax expenses related to stock-based compensation  -    -       320     -   
                    
Non-GAAP operating income (loss) $5,648   $ 2,122    $ (10,960)  $ (12,644)  
           
Reconciliation to non-GAAP net income (loss):          
            
GAAP net income (loss) $2,634  $ (331)   $ (21,283)  $ (19,398)  
                   
Add back:                   
Stock-based compensation expense  2,090    1,826       7,794     4,664   
Payroll tax expenses related to stock-based compensation  -    -      320     -   
                   
Non-GAAP net income (loss) $4,724  $ 1,495    $ (13,169)  $ (14,734)  
                   
                   
                   
Non-GAAP net income (loss) per common share - basic $0.18  $ 0.06    $ (0.52)  $ (0.60)  
Non-GAAP net income (loss) per common share - diluted $0.17  $ 0.06    $ (0.52)  $ (0.60)  
GAAP net income (loss) per common share - basic $0.10  $ (0.01)   $ (0.84)  $ (0.91)  
GAAP net income (loss) per common share - diluted $0.09  $ (0.01)   $ (0.84)  $ (0.91)   
                   
Non-GAAP weighted average number of common shares outstanding - basic  25,791,889    24,618,432      25,198,546     24,490,086   
Non-GAAP weighted average number of common shares outstanding - diluted  27,765,847    27,178,143      25,198,546     24,490,086   
GAAP weighted average number of common shares outstanding - basic  25,791,889    24,618,432      25,198,546     21,242,313   
GAAP weighted average number of common shares outstanding - diluted  27,765,847    24,618,432       25,198,546     21,242,313   

 

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

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