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Varonis Announces First Quarter 2015 Financial Results

NEW YORK, May 6, 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 first quarter ended March 31, 2015.

Yaki Faitelson, Varonis CEO, said, "Our first quarter results were driven by strength in the US and our high volume, low ASP business model as customers look to Varonis for solutions to help them manage their human generated data and to improve productivity while managing security risks. However, our business in EMEA was weaker than expected, and we believe this weakness could continue over the next few quarters. Therefore, we are adjusting our full year guidance. We now expect to grow revenues at approximately 22-25% for the full year 2015. We are also making some adjustments to our spending, primarily in sales and marketing, to better align the business overall as we remain extremely focused on capturing the massive opportunity in front of us."

Financial Highlights for the First Quarter Ended March 31, 2015

Revenues:

  • Total revenues were $23.0 million, up 32% compared with the first quarter of 2014.
  • License revenues were $10.2 million, up 26% compared with the first quarter of 2014.
  • Maintenance and services revenues were $12.8 million, up 36% compared with the year-ago period.

Operating Loss:

  • GAAP operating loss was ($11.6) million for the quarter, compared to ($7.9) million in the first quarter of 2014.
  • Non-GAAP operating loss was ($9.9) million for the quarter, compared to ($7.3) million in the first quarter of 2014.

Net Loss:

  • GAAP net loss was ($12.7) million, compared to GAAP net loss of ($8.1) million in the first quarter of 2014.
  • GAAP net loss per basic share was ($0.51), compared to GAAP net loss per basic share of ($0.73) in the first quarter of 2014, based on 24.7 million and 11.1 million basic common shares outstanding, respectively.
  • Non-GAAP net loss was ($11.0) million, compared to ($7.4) million in the first quarter of 2014.
  • Non-GAAP net loss per basic share was ($0.44), compared to ($0.30) in the first quarter of 2014, based on 24.7 million and 24.4 million basic common shares outstanding, respectively.
  • The GAAP and Non-GAAP net loss for the quarter included financial expense of ($1.0) million primarily due to foreign exchange losses compared to ($38,000) in the first quarter of 2014.

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 months ended March 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:

  • As of March 31, 2015, the Company had $113.0 million in cash and cash equivalents and short-term deposits compared with $111.7 million as of December 31, 2014.
  • During the three months ended March 31, 2015, the Company generated $1.2 million in cash from operations compared with $4.3 million in the prior-year period.

Recent Business Highlights

  • For the first quarter of 2015, total revenues in the United States increased 44% over the prior-year period to $13.1 million, total revenues from EMEA increased 15% over the prior-year period to $8.0 million, and total revenues from Rest of World increased 31% over the prior-year period to $1.9 million.
  • Generated 64% of license and first year maintenance revenues from new customers and 36% from existing customers in the first quarter of 2015, compared to 67% and 33%, respectively, in the prior-year period.
  • Added 189 new customers during the first quarter of 2015 compared with 158 in the prior-year period.
  • Announced that its Metadata Framework has been voted "Software Product of the Year" in the 2015 Network Computing awards. Network Computing is the UK's longest established magazine dedicated to network management. In its ninth year, the winners of its award program are determined by online voting open to the public - such recognition is a prestigious mark of achievement for IT security products and vendors.

Financial Outlook

For the second quarter of 2015, Varonis expects revenues in the range of $28.5 million to $29.3 million, representing 16% to 19% year-over-year growth. The Company anticipates second quarter 2015 non-GAAP operating loss in the range of ($7.5) million to ($6.7) million and non-GAAP loss per basic share in the range of ($0.31) to ($0.28), based on a tax provision of $100,000 to $300,000 and 24.8 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 $123.6 million to $126.7 million, representing 22% to 25% year-over-year growth. The Company anticipates full year 2015 non-GAAP operating loss of ($17.5) million to ($16.0) million, and non-GAAP loss per basic share in the range of ($0.73) to ($0.68), based on a tax provision of $650,000 to $850,000 and 24.8 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, May 6, 2015, at 5:00 p.m., Eastern Time, to discuss the Company's first quarter 2015 financial results, current financial guidance and other corporate developments. To access this call, dial 888-428-9490 (domestic) or 719-457-2689 (international). The passcode is 9877918. A replay of this conference call will be available through May 13, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 9877918. 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 ended March 31, 2015 and 2014, non-GAAP operating loss is calculated as operating loss excluding stock-based compensation expense.

For the three months ended March 31, 2015 and 2014, non-GAAP net loss is calculated as net loss excluding stock-based compensation expense.

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. 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; 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; Varonis' ability to build and expand its direct sales efforts and reseller distribution channels; 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 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 March 31, 2015, Varonis had approximately 3,500 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 March 31,
2015 2014
Unaudited
Revenues:
Licenses $ 10,158 $ 8,053
Maintenance and services 12,828 9,402
Total revenues 22,986 17,455
Cost of revenues 2,833 2,042
Gross profit 20,153 15,413
Operating costs and expenses:
Research and development 7,733 6,439
Sales and marketing 20,191 14,241
General and administrative 3,780 2,665
Total operating expenses 31,704 23,345
Operating loss (11,551) (7,932)
Financial expenses and other, net (1,041) (38)
Loss before income taxes (12,592) (7,970)
Income taxes (78) (104)
Net loss $ (12,670) $ (8,074)
Net loss per share of common stock, basic and diluted $ (0.51) $ (0.73)
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted 24,741,306 11,082,770
Stock-based compensation expense for the three months ended March 31, 2015 and 2014 is included in the Consolidated Statements of Operations as follows (in thousands):
Three Months Ended March 31,
2015 2014
Unaudited
Cost of revenues $ 91 $ 20
Research and development 467 199
Sales and marketing 737 340
General and administrative 390 87
$ 1,685 $ 646
Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2015 2014
Unaudited
Assets
Current assets:
Cash and cash equivalents $ 77,919 $ 76,593
Short-term deposits 35,102 35,102
Trade receivables, net 20,643 37,869
Prepaid expenses and other current assets 2,354 2,962
Total current assets 136,018 152,526
Long-term assets:
Other assets 326 332
Property and equipment, net 5,474 3,989
Total long-term assets 5,800 4,321
Total assets $ 141,818 $ 156,847
Liabilities and stockholders' equity
Current liabilities:
Trade payables $ 2,122 $ 2,703
Accrued expenses and other liabilities 14,480 16,754
Deferred revenues 31,891 33,753
Total current liabilities 48,493 53,210
Long-term liabilities:
Deferred revenues 3,225 3,464
Severance pay 1,449 1,449
Other liabilities 4,182 3,698
Total long-term liabilities 8,856 8,611
Stockholders' equity:
Common stock 25 25
Accumulated other comprehensive loss (446) (326)
Additional paid-in capital 164,711 162,478
Accumulated deficit (79,821) (67,151)
Total stockholders' equity 84,469 95,026
Total liabilities and stockholders' equity $ 141,818 $ 156,847
Varonis Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
2015 2014
Unaudited
Cash flows from operating activities:
Net loss $ (12,670) $ (8,074)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 344 254
Stock-based compensation 1,685 646
Amortization of deferred charges related to loan -- 31
Capital loss from disposal of fixed assets (1) --
Changes in assets and liabilities:
Trade receivables 17,226 14,014
Prepaid expenses and other current assets 1,064 (284)
Trade payables (581) (74)
Accrued expenses and other liabilities (2,394) (1,069)
Increase in severance pay, net -- 314
Deferred revenues (2,101) (1,424)
Other long term liabilities (1,327) 3
Net cash provided by operating activities 1,245 4,337
Cash flows from investing activities:
Decrease in short-term deposits -- 3,987
Decrease in long-term deposits -- 37
Decrease (Increase) in restricted cash 6 (15)
Purchase of property and equipment (473) (608)
Net cash provided by (used in) investing activities (467) 3,401
Cash flows from financing activities:
Exercise of employee stock options 548 13
Payment of deferred equity offering costs -- (335)
Net proceeds from initial public offering -- 108,447
Net cash provided by financing activities 548 108,125
Increase in cash and cash equivalents 1,326 115,863
Cash and cash equivalents at beginning of period 76,593 9,633
Cash and cash equivalents at end of period $ 77,919 $ 125,496
Varonis Systems, Inc.
Reconciliation of GAAP Measures to non-GAAP
(in thousands, except share and per share data)
Three Months Ended March 31,
2015 2014
Unaudited
Reconciliation to non-GAAP loss from operations:
GAAP operating loss $ (11,551) $ (7,932)
Add back:
Stock-based compensation expense 1,685 646
Non-GAAP operating loss $ (9,866) $ (7,286)
Reconciliation to non-GAAP net loss:
GAAP net loss $ (12,670) $ (8,074)
Add back:
Stock-based compensation expense 1,685 646
Non-GAAP net loss $ (10,985) $ (7,428)
GAAP Weighted average number of common shares outstanding - basic and diluted 24,741,306 11,082,770
Add:
Additional weighted average shares giving effect to initial public offering and conversion of preferred stock at the beginning of the period -- 13,283,027
Non-GAAP weighted average number of common shares outstanding - basic and diluted 24,741,306 24,365,797
Non-GAAP net loss per common share - basic and diluted $ (0.44) $ (0.30)
GAAP net loss per common share - basic and diluted $ (0.51) $ (0.73)

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

Source:Varonis Systems, Inc.