Varonis Systems
VARONIS SYSTEMS INC (Form: 8-K, Received: 02/12/2018 16:11:50)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): February 12, 2018  

Varonis Systems, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware 001-36324 57-1222280
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

1250 Broadway, 29th Floor, New York, NY 10001
(Address of Principal Executive Offices) (Zip Code)

(877) 292-8767
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  [ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On February 12, 2018, Varonis Systems, Inc. (“Varonis”) issued a press release announcing its financial results for the quarter and year ended December 31, 2017.  A copy of the press release dated February 12, 2018, reporting Fourth Quarter and Full Year 2017 Financial Results is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits


Exhibit No.   Description
     
99.1   Press Release dated February 12, 2018 , reporting Fourth Quarter and Full Year 2017 Financial Results  


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  Varonis Systems, Inc.
     
   
Date: February 12, 2018 By:  /s/ Yakov Faitelson        
    Yakov Faitelson
    Chief Executive Officer and President
   


EXHIBIT INDEX

 

Exhibit No.   Description
     
99.1   Press Release dated February 12, 2018 , reporting Fourth Quarter and Full Year 2017 Financial Results  

EXHIBIT 99.1

Varonis Announces Fourth Quarter and Full Year 2017 Financial Results

Fourth quarter total revenues of $73.2 million, up 35% year-over-year 
Full year total revenues of $217.4 million, up 32% year-over-year

NEW YORK, Feb. 12, 2018 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq:VRNS), a pioneer in data security and analytics, today announced results for the fourth quarter and full year ended December 31, 2017.

Yaki Faitelson, Varonis CEO, said, "2017 was a very strong year for Varonis.  Total revenues increased 32%, we achieved non-GAAP profitability and generated meaningful levels of cash flow from operations.  These results validate that our highly differentiated data security solutions are solving critical needs of organizations globally.  High profile data breaches and regulation are driving organizations to take a more data-centric approach to their security strategy. We are clearly benefiting from these secular trends, as organizations struggle to manage and secure their growing on-premises and cloud data in an increasingly complex hybrid environment that is no longer defined by a traditional perimeter. Our focus on innovation, our expanded set of product offerings and our ability to more effectively reach companies with 1,000 or more employees is driving our land and expand strategy.  We believe we are just scratching the surface on our larger market opportunity and are building a company to drive meaningful levels of growth while scaling operations to deliver increasing profit and cash flow from operations.”

Financial Highlights for the Fourth Quarter Ended December 31, 2017

Revenues:

Operating Income:

Net Income:

Financial Highlights for the Full Year Ended December 31, 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 months and year ended December 31, 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

The Company’s financial outlook reflects the adoption of ASC 606, effective January 1, 2018, using the full retrospective method. The Company expects the adoption will have no material impact on its revenues and operating profitability metrics.

Due to the appreciation of the New Israeli Shekel against the U.S. Dollar, the Company expects its operating expenses, mainly those related to research and development, to be negatively impacted by this foreign currency movement in 2018 compared to 2017. For both the first quarter and full year 2018, we expect this impact to be approximately 300 basis points to our non-GAAP operating margin.

For the first quarter of 2018, the Company expects revenues in the range of $49.2 million to $50.0 million, representing 24% to 26% year-over-year growth. The Company anticipates first quarter 2018 non-GAAP operating loss in the range of ($8.6) million to ($8.2) million and non-GAAP net loss per basic and diluted share in the range of ($0.32) to ($0.31), based on a tax provision of $400,000 to $600,000 and 28.3 million basic and diluted shares outstanding. Expectations of non-GAAP operating loss 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 2018, the Company expects revenues in the range of $260.0 million to $264.5 million, representing 21% to 23% year-over-year growth. The Company anticipates full year 2018 non-GAAP operating income of $1.5 million to $4.0 million and non-GAAP net loss per basic and diluted share in the range of ($0.04) to non-GAAP net income per diluted share of $0.02.  This is based on a tax provision of $2.7 million to $3.2 million and 28.6 million basic and diluted shares outstanding and 32.2 million diluted shares outstanding. Expectations of non-GAAP operating income and non-GAAP net income (loss) per basic and diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

The tables at the end of this press release include a reconciliation of ASC 605 to ASC 606 for the first quarter 2017 and full year 2017.

Conference Call and Webcast

Varonis will host a conference call today, February 12, 2018, at 5:00 p.m., Eastern Time, to discuss the Company's fourth 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 13675180. A replay of this conference call will be available through February 19, 2018 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13675180.  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 months and year ended December 31, 2017 and 2016, non-GAAP operating income (loss) is calculated as operating income (loss) 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, 2017 and 2016, non-GAAP net income (loss) is calculated as net income (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 pioneer in data security and analytics, fighting a different battle than conventional cybersecurity companies. Varonis focuses on protecting enterprise data: sensitive files and emails; confidential customer, patient and employee data; financial records; strategic and product plans; and other intellectual property. The Varonis Data Security Platform detects insider threats and cyberattacks by analyzing data, account activity and user behavior; prevents and limits disaster by locking down sensitive and stale data; and efficiently sustains a secure state with automation. With a focus on data security, Varonis serves a variety of use cases, including governance, compliance, classification and threat analytics. Varonis started operations in 2005 and, as of December 31, 2017, had approximately 6,250 customers worldwide - comprised of industry leaders in many sectors including financial services, healthcare, public, industrial, insurance, energy and utilities, consumer and retail, education, media and entertainment and technology.  

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

News Media Contact:
Rachel Hunt
Varonis Systems, Inc.
877-292-8767 (ext. 4247)
Email: 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 December 31,     Twelve Months Ended December 31,
    2017   2016     2017   2016
    Unaudited     Unaudited      
Revenues:                  
Licenses   $   46,626     $   34,696       $   123,610     $   92,873  
Maintenance and services       26,583         19,713           93,754         71,583  
Total revenues       73,209         54,409           217,364         164,456  
                   
Cost of revenues       5,887         4,510           20,873         15,843  
                   
Gross profit       67,322         49,899           196,491         148,613  
                   
Operating costs and expenses:                  
Research and development       13,559         9,627           47,369         36,660  
Sales and marketing       39,723         30,212           135,896         107,825  
General and administrative       8,017         5,449           26,823         19,822  
Total operating expenses       61,299         45,288           210,088         164,307  
                   
Operating income (loss)       6,023         4,611           (13,597 )       (15,694 )
                   
Financial income (expenses), net        321         (739 )         2,362         (885 )
                   
Income (loss) before income taxes       6,344         3,872           (11,235 )       (16,579 )
                   
Income taxes       (810 )       (350 )         (2,459 )       (1,131 )
                   
Net income (loss)   $   5,534     $   3,522       $   (13,694 )   $   (17,710 )
                   
Net income (loss) per share of common stock                   
Basic   $   0.20     $   0.13       $   (0.50 )   $   (0.67 )
Diluted   $   0.18     $   0.12       $   (0.50 )   $   (0.67 )
                           
Weighted average number of shares used in computing net income (loss) per share of common stock                          
Basic     27,987,216       26,737,557         27,467,440       26,406,312  
Diluted     31,121,806       29,319,879         27,467,440       26,406,312  
                           

 

Stock-based compensation expense for the three and twelve months ended December 31, 2017 and 2016   is included in the Consolidated Statements of Operations as follows (in thousands):  
 
    Three Months Ended December 31,     Twelve Months Ended December 31,  
    2017   2016     2017   2016  
    Unaudited     Unaudited          
                     
Cost of revenues    $    295     $   195        $    1,078      $    699    
Research and development       1,404         789           5,209         3,052    
Sales and marketing       2,265         1,688           8,542         6,104    
General and administrative       1,426         811           5,006         3,083    
     $    5,390     $   3,483        $    19,835      $    12,938    
                                     

 

Payroll tax expense related to stock-based compensation for the three and twelve months ended December 31, 2017 and 2016 is included in the Consolidated Statements of Operations as follows (in thousands):  
 
    Three Months Ended December 31,     Twelve Months Ended December 31,  
    2017   2016     2017   2016  
    Unaudited     Unaudited          
                     
Cost of revenues    $    21     $   2        $    91      $    26    
Research and development       12         9           67         28    
Sales and marketing       243         15           941         178    
General and administrative       8         2           59         27    
     $    284     $   28        $    1,158      $    259    
                                     

 

Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
         
    December 31,   December 31,
    2017   2016
    Unaudited    
Assets        
Current assets:        
Cash and cash equivalents    $    56,689      $    48,315  
Short-term investments       79,868         65,493  
Trade receivables, net        75,596         53,861  
Prepaid expenses and other current assets       7,130         3,650  
Total current assets       219,283         171,319  
             
Long-term assets:        
Other assets       973         609  
Property and equipment, net       11,896         9,910  
Total long-term assets       12,869         10,519  
             
Total assets    $    232,152      $    181,838  
         
Liabilities and stockholders' equity        
Current liabilities:        
Trade payables    $    635      $    1,288  
Accrued expenses and other short term liabilities       42,453         28,479  
Deferred revenues       73,891         58,478  
Total current liabilities       116,979         88,245  
         
Long-term liabilities:        
Deferred revenues       7,034         3,562  
Other liabilities       6,561         7,292  
Total long-term liabilities       13,595         10,854  
         
Stockholders' equity:        
Common stock       28         27  
Accumulated other comprehensive income (loss)       136         (479 )
Additional paid-in capital       223,868         189,335  
Accumulated deficit       (122,454 )       (106,144 )
Total stockholders' equity       101,578         82,739  
Total liabilities and stockholders' equity    $    232,152      $    181,838  
             

 

Varonis Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
           
    Twelve Months Ended December 31,
    2017   2016
    Unaudited    
Cash flows from operating activities:        
Net loss    $   (13,694 )    $   (17,710 )
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation        3,328         2,180  
Stock-based compensation        19,835         12,938  
Capital gain from disposal of fixed assets       (20 )       (2 )
Changes in assets and liabilities:            
Trade receivables      (21,735 )       (6,425 )
Prepaid expenses and other current assets       (3,317 )       (1,028 )
Trade payables       (653 )       (1,324 )
Accrued expenses and other short term liabilities       14,453         5,302  
Deferred revenues       18,885         13,269  
Other long term liabilities       (731 )       147  
Net cash provided by operating activities       16,351         7,347  
             
Cash flows from investing activities:            
Increase in short-term investments      (14,402 )       (8,390 )
Increase in long-term deposits       (305 )       (111 )
Proceeds from sale of property and equipment       20         2  
Purchase of property and equipment       (5,314 )       (3,825 )
Net cash used in investing activities      (20,001 )      (12,324 )
         
Cash flows from financing activities:        
Proceeds from employee stock plans, net       12,083         4,072  
Net cash provided by financing activities       12,083         4,072  
             
Increase (decrease) in cash, cash equivalents and restricted cash       8,433         (905 )
Cash, cash equivalents and restricted cash at beginning of period       48,803       49,708  
Cash, cash equivalents and restricted cash at end of period    $    57,236      $  48,803  
         

 

Varonis Systems, Inc.
Reconciliation of GAAP Measures to non-GAAP  
(in thousands, except share and per share data)
                   
    Three Months Ended December 31,     Twelve Months Ended December 31,
    2017   2016     2017   2016
    Unaudited     Unaudited
Reconciliation to non-GAAP income (loss) from operations:                  
                   
GAAP operating income (loss)    $    6,023      $    4,611        $    (13,597 )    $    (15,694 )
                               
Add back:                              
Stock-based compensation expense       5,390         3,483           19,835         12,938  
Payroll tax expenses related to stock-based compensation       284         28           1,158         259  
                               
Non-GAAP operating income (loss)    $    11,697      $    8,122        $    7,396      $    (2,497 )
                   
Reconciliation to non-GAAP net income (loss):                  
                   
GAAP net income (loss)    $    5,534      $    3,522        $    (13,694 )    $    (17,710 )
                               
Add back:                              
Stock-based compensation expense       5,390         3,483           19,835         12,938  
Payroll tax expenses related to stock-based compensation       284         28           1,158         259  
                               
Non-GAAP net income (loss)    $    11,208      $    7,033        $    7,299      $    (4,513 )
                               
                               
Non-GAAP net income (loss) per common share - basic    $    0.40      $    0.26        $    0.27      $    (0.17 )
Non-GAAP net income (loss) per common share - diluted    $    0.36      $    0.24        $    0.24      $    (0.17 )
GAAP net loss per common share - basic    $    0.20      $    0.13        $    (0.50 )    $    (0.67 )
GAAP net income (loss) per common share - diluted    $    0.18      $    0.12        $    (0.50 )    $    (0.67 )
                               
Non-GAAP weighted average number of common shares outstanding - basic      27,987,216         26,737,557           27,467,440         26,406,312  
Non-GAAP weighted average number of common shares outstanding - diluted      31,121,806         29,319,879           30,854,436         26,406,312  
GAAP weighted average number of common shares outstanding - basic      27,987,216         26,737,557           27,467,440         26,406,312  
GAAP weighted average number of common shares outstanding - diluted      31,121,806         29,319,879           27,467,440         26,406,312  
                               

 

Unaudited total revenues and expenses for the three months ended March 31, 2017 and twelve months ended December 31, 2017 restated to reflect the adoption of ASC 606 (in thousands):
                   
    Three Months Ended March 31, 2017
(Unaudited)
      As Reported (605)     Adjustments   Restated for Adoption of ASC 606
             
Total revenues    $    40,380      $    (787 )   $   39,593  
Total expenses       51,405         120         51,525  
Operating loss    $    (11,025 )    $    (907 )    $    (11,932 )
                   
                   
    Twelve Months Ended December 31, 2017
(Unaudited)
      As Reported (605)     Adjustments   Restated for Adoption of ASC 606
     
Total revenues    $    217,364      $    (1,974 )   $   215,390  
Total expenses       230,961         (2,152 )       228,809  
Operating loss    $    (13,597 )    $    178      $    (13,419 )