Slides
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Q4 2024 Varonis Overview
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Safe Harbor Statement This presentation has been prepared by Varonis Systems, Inc. (the “Company”) solely for informational purposes. It is not, and should not be assumed to be, complete. This presentation is not an offer to sell securities, nor is it a solicitation of an offer to buy securities. This presentation is not directed at, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. In considering any performance information contained herein, you should bear in mind that past or projected performance is not necessarily indicative of future results, and there can be no assurance that any entity referenced herein will achieve comparable results or that illustrative returns, if any, will be met. Statements in this presentation are made as of the date this presentation is made unless stated otherwise, and the delivery of this presentation at any time shall under no circumstances create an implication that the information contained herein is correct as of any time after such date. This presentation contains “forward-looking statements,” including statements concerning plans, objectives, goals, strategies, future events or performance, growth prospects, capital resources, expenditures and underlying assumptions and other statements, which are other than statements of historical facts. Actual outcomes and results could differ materially from those forecasts due to the impact of many factors beyond the control of the Company and its affiliates. The words “believe”, “expect”, “anticipate”, “intends”, “plan”, “estimate”, “aim”, “forecast”, “guidance”, “project”, “will”, “may”, “might”, “should”, “could” and similar expressions (or their negative) identify certain of these forward-looking statements. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements include the fact that the market for software that analyzes, secures, governs, manages and migrates enterprise data may not continue to grow or grow at the same pace; prolonged economic uncertainties or downturns; currency exchange rate fluctuations; increased competition; security breaches, cyberattacks or other cyber-risks and failure to comply with legal requirements, contractual obligations and industry standards regarding security, data protection and privacy; fluctuation in our quarterly results of operations due to variability in our revenues; our expansion into cloud-delivered services; our ability to predict renewal rates and manage growth effectively; our limited operating history at our current scale, which makes it difficult to evaluate and predict our future prospects; our history of losses; our ability to maintain strong relationships with our channel partners, including distributors and resellers, to whom we sell substantially all of our products and services; risks inherent in our international operations, including the effect of export and import controls and the risk of a violation or alleged violation of applicable anti-corruption or anti-bribery laws; collection and credit risks; our ability to maintain or enhance our brand recognition or reputation; our ability to retain, attract and recruit highly qualified personnel; our dependency on the continued services and performance of our co-founder, Chief Executive Officer and President; our ability to continually enhance and improve our technology; the fact that we derive substantially all of our revenues and cash flows from sales of licenses from a single platform of products; the fact that, if we experience interruptions or performance problems with our products, or if our software is not perceived as being secure, customers may reduce the use of or stop using our products; our ability to protect our proprietary technology and intellectual property rights; the fact that our tax rate may vary significantly depending on our stock price; our ability to fully utilize our net operating loss carryforwards; our indebtedness; and stock price volatility. These and other important risk factors are described more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company’s quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission and could cause actual results to vary from expectations. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. All information provided in this presentation is as of the date hereof, and the Company 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. This presentation also contains market statistics and industry data that are not necessarily comprehensive or reflective of market conditions. These have been derived from third party sources and have not been independently verified by the Company or its affiliates. This presentation also contains non-GAAP financial measures which are not prepared in accordance with Generally Accepted Accounting Principles and key performance metrics. A reconciliation of historical GAAP and non-GAAP financial measures is included in the Appendix, and definitions and reconciliations of historical GAAP and non-GAAP financial measures and definitions of key performance metrics are also provided on the Company’s fourth quarter 2024 press release issued on February 4, 2025 and can also be found at https://ir.varonis.com. A reconciliation for free cash flow referred to in our “Financial Guidance” can be found in our investor presentation, which can be found at https://ir.varonis.com. A reconciliation for non-GAAP operating income (loss) and non-GAAP net income (loss) referred to in our “Financial Guidance” is not provided because, as forward-looking statements, such reconciliation is not available without unreasonable effort due to the high variability, complexity, and difficulty of estimating certain items such as charges to stock-based compensation expense and currency fluctuations which could have an impact on our consolidated results. The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company.
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Company Overview
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Varonis at a Glance A leader in data security, fighting a different battle than conventional cybersecurity companies. FOUNDED IN 2004 IPO IN 2014 VRNS EMPLOYEES WORLDWIDE ANNUAL RECURRING REVENUES 18% Y/Y GROWTH ~2,400 $641.9MM ~53% 2024 OPERATING CASH FLOW $115.2MM 2024 FREE CASH FLOW $108.5MM SaaS ARR AS % OF TOTAL ARR
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Proven Technology SaaS Apps & Email Cloud Infrastructure & Databases On-prem & Cloud File Storage Permissions & Configurations Activity Sensitivity DATA DOMAINS VARONIS USES A DIFFERENT APPROACH TO PROTECT DATA Real-time visibility Automated remediation, labeling, & data subject access requests Proactive, data-centric detection
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Unified and Automated Data Security Platform REAL TIME CONNECTIVITY
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Proven Approach Find Fix Alert sensitive and stale data automatically, to remediate current exposure and prevent future exposures. overexposed sensitive data by analyzing data, account activity, and user behavior. on unusual data exposure and automatically respond to keep data safe.
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Secular Trends Data Growth AI & Cloud Adoption Cyber Threats 90% of organizations will adopt a hybrid cloud approach through 2027 and more than 80% of enterprises are expected to use Gen AI by 2026.2 The amount of data created in the world is expected to grow at a compound annual growth rate of 24% by 2028 with unstructured data accounting for more than 90% of total data generated.1 In 2024 the global average cost of a data breach was $4.9 million, which was the highest ever and 40% of breaches involved data stores across multiple environments.3 (1) IDC Research - International Data Corporation’s Global DataSphere Forecast (2) Gartner Research – Gartner Forecast for Worldwide Public Cloud Spend & Hype Cycle for Generative AI, 2023 (3) IBM – Cost of a Data Breach Report 2024
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Industry Changes Board Awareness Adoption & Standardization Regulation A data-centric approach to security is becoming the standard as the digital transformation increased reliance on data. Almost every breach involves data assets that are stored in growing, centralized repositories on-premises and in the cloud. Boards of Directors are now required to address cyber risks and demonstrate appropriate awareness and action. The confluence of notable attacks, media attention, and public outcry has led to data-centric regulations in the EU and North America like GDPR, CCPA, and the SEC disclosure rule around cyber events.
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Automated Posture Management Third-Party App Risk Data Classification for Email Athena AI Varonis for Azure Varonis for Azure Files 2006 2008 2010 2012 2014 2018 2021 2024 Varonis for Salesforce Varonis for Google Workspace Varonis for Box Varonis for GitHub Varonis for Jira Varonis for Zoom Varonis for Okta Varonis for AWS Varonis for Slack Pioneered data-first security Varonis for Windows & NAS Data Access Governance Varonis for GCP Varonis for Databricks Varonis for ServiceNow AI classification Varonis MDDR Varonis for Snowflake Varonis for M365 Copilot Universal Database Connector Data Classification Varonis for SharePoint Varonis for UNIX/Linux Data Detection & Response Varonis for Microsoft 365 Varonis for Active Directory Varonis for Exchange Secure Data Migration Varonis for Network Data Sensitivity Labeling Varonis for Entra ID 2005 2023 Varonis SaaS 2016 User & Entity Behavior Analytics (UEBA) More to come Our SaaS platform enables relentless innovation
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Expanding our TAM to protect data in more places + A leader in protecting large data stores in the cloud (e.g. M365) & on-prem + We have expanded into new areas, growing our TAM + Databases – in the cloud and on-prem + SaaS – e.g. Box, Google Drive & Salesforce + IaaS/PaaS – e.g. AWS, Azure, databases, Databricks, GCP , Snowflake On-Prem SaaS & Email On-Prem IaaS & PaaS SaaS & Email Databases BEFORE AFTER TAM
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Data Security Platform Use Cases
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First-Mover Advantage Data Volume Data volumes were much smaller Complexity Data was stored in fewer places Discipline Sales process drove tens of thousands of production installs High-Frequency Iterations 20 years of battle-testing, refinement, and innovation 2005
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Predictable Sales Motion Leads Risk Assessment Varonis Sales Closing Channel | Varonis SalesChannel | Marketing • Channel resellers provide introductions to the right buyers and help with closing • Salesforce performs in-person or virtual risk assessment and builds business case • Our software can be deployed in under an hour • Highly metrics-driven sales process • Usual Buyer: CISO/CIO/CTO NURTURE
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Proven Management Team Yaki Faitelson CEO, President, Co-Founder & Chairman Varonis since 2005 Jim O’Boyle Vice Chairman – Sales Varonis since 2006 Shai Cohen-Golan Chief of Staff Varonis since 2017 Guy Melamed CFO & COO Varonis since 2011 Dana Shahar Chief Human Resources Officer Varonis since 2013 Dov Gottlieb VP & General Counsel Varonis since 2021 David Bass Executive VP & CTO Varonis since 2005 Gilad Raz CIO & VP of Technical Services Varonis since 2006 David Gibson SVP of Strategic Programs Varonis since 2006 Rob Sobers CMO Varonis since 2011 Greg Pomeroy SVP of Worldwide Sales Varonis since 2008
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Financial Results: Q4 & FY 2024 Highlights
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Q4 & Full-year 2024 Highlights $465.1 $543.0 $641.9 Q4 2022 Q4 2023 Q4 2024 ANNUAL RECURRING REVENUES ($MM) ~53% SaaS ARR as % of Total ARR 16.6% Q4 ARR Contribution Margin $641.9MM ARR at the end of Q4 grew 18% YoY $108.5MM 2024 Free Cash Flow
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Annual Recurring Revenues $465.1 $478.1 $497.0 $517.5 $543.0 $560.3 $584.2 $610.0 $641.9 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 18% Q4 2024 GROWTH YoY
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SaaS is a headwind to reported revenue, but driving positive business momentum • In the fourth quarter, we had an ~18% headwind to our year-over-year revenue growth rate as a result of having increased SaaS sales in our bookings mix During the quarter as compared to the same quarter last year, we had approximately an 18% headwind to our year -over-year revenue growth rate as a result of having increased SaaS sales in our bookings mix, which are recognized ratably vs. the upfront recognition of our on-prem subscription products. The headwind reflects an assumption that on-prem subscription products and SaaS bookings mix as a percentage of total new bookings remained the same as the prior period (with the incremental SaaS booked as on -prem subscription products). The headwind also reflects an assumption that customers who purchased on-prem subscription renew as on-prem subscription and customers who purchased SaaS renew as SaaS. $23 $72 $106 $67 $25 $20 Q4 2023 Q4 2024 SaaS Term License Subscriptions Maintenance & Services SaaS Mix Headwind
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SaaS is a headwind to reported operating margin, but driving positive business momentum During the quarter as compared to the same quarter last year, we had approximately an 13% headwind to our operating margin as a result of having increased SaaS sales in our bookings mix, which are recognized ratably vs. the upfront recognition of our on-prem subscription products. The headwind reflects an assumption that on-prem subscription products and SaaS bookings mix as a percentage of total new bookings remained the same as the prior period (with the incremental SaaS booked as on -prem subscription products). The headwind also reflects an assumption that customers who purchased on-prem subscription renew as on-prem subscription and customers who purchased SaaS renew as SaaS. $27 $15 Q4 2023 Q4 2024 Non-GAAP Operating Income SaaS Mix Headwind $54 $109 Q4 2023 Q4 2024 YTD Free Cash Flow
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SaaS is a headwind to reported revenue, but driving positive business momentum • In 2024, we had a ~10% headwind to our year- over-year revenue growth rate as a result of having increased SaaS sales in our bookings mix During the fiscal year as compared to the previous year, we had approximately a 10% headwind to our year -over-year revenue growt h rate as a result of having increased SaaS sales in our bookings mix, which are recognized ratably vs. the upfront recognition of our on -prem subscription products. The headwind reflects an assumption that on-prem subscription products and SaaS bookings mix as a percentage of total new bookings remained the same as the prior period (with the incremental SaaS booked as on -prem subscription products). The headwind also reflects an assumption that customers who purchased on-prem subscription renew as on-prem subscription and customers who purchased SaaS renew as SaaS. $44 $209 $356 $254 $98 $88 FY 2023 FY 2024 SaaS Term License Subscriptions Maintenance & Services SaaS Mix Headwind
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SaaS is a headwind to reported operating margin, but driving positive business momentum During the fiscal year as compared to the previous year, we had approximately an 8% headwind to our operating margin as a result of having increased SaaS sales in our bookings mix, which are recognized ratably vs. the upfront recognition of our on-prem subscription products. The headwind reflects an assumption that on-prem subscription products and SaaS bookings mix as a percentage of total new bookings remained the same as the prior period (with the incremental SaaS booked as on -prem subscription products). The headwind also reflects an assumption that customers who purchased on-prem subscription renew as on-prem subscription and customers who purchased SaaS renew as SaaS. $29 $16 FY 2023 FY 2024 Non-GAAP Operating Income SaaS Mix Headwind $54 $109 FY 2023 FY 2024 YTD Free Cash Flow
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Q1 & FY 2025 Financial Guidance Guidance Q1 2025 FY 2025 Annual Recurring Revenues (“ARR”) $737.0MM – $745.0MM YoY growth 15% – 16% Free Cash Flow $120.0MM – $125.0MM Total Revenues $130.0MM – $135.0MM $610.0MM – $625.0MM YoY growth 14% – 18% 11% – 13% Non-GAAP Operating Income (Loss) ($14.0MM) – ($11.0MM) $0.5MM – $10.5MM Non-GAAP Operating Margin (10.8%) – (8.1%) 0.1% – 1.7% Basic and Diluted Shares Outstanding 113.6MM 137.5MM Non-GAAP Net Income (Loss) per Basic and Diluted Share ($0.06) – ($0.04) $0.13 – $0.17
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Our long-term goal is to build a billion-dollar business that grows meaningfully with expanding profit and cash flow.
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Thank you.
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Appendix: Revenue Recognition Example #1 TERM-BASED ON-PREM SUBSCRIPTION SAAS ~80% Upfront / ~20% Ratable ~85% of deal recognized in Q1 100% of deal recognized in fiscal year 100% Ratable ~25% of deal recognized in Q1 100% of deal recognized in fiscal year Both scenarios assume $100K ARR deal delivered on January 1 = ARR impact is the same Both are collected annually in advance = FCF impact is the same $5k $5k $5k $5k $80k Q1 Q2 Q3 Q4 $25k $25k $25k $25k Q1 Q2 Q3 Q4
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Appendix: Revenue Recognition Example #2 TERM-BASED ON-PREM SUBSCRIPTION SAAS ~80% Upfront / ~20% Ratable ~80% of deal recognized in Q2 ~90% of deal recognized in fiscal year 100% Ratable <1% of deal recognized in Q2 ~50% of deal recognized in fiscal year Both scenarios assume $100K ARR deal delivered on June 30 = ARR impact is the same Both are collected annually in advance = FCF impact is the same $80k $5k $5k Q1 Q2 Q3 Q4 $0k $25k $25k Q1 Q2 Q3 Q4
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Appendix: Revenue Recognition Example #3 TERM-BASED ON-PREM SUBSCRIPTION SAAS ~80% Upfront / ~20% Ratable ~80% of deal recognized in Q4 ~80% of deal recognized in fiscal year 100% Ratable <1% of deal recognized in Q4 <1% of deal recognized in fiscal year Both scenarios assume $100K ARR deal delivered on December 31 = ARR impact is the same Both are collected annually in advance = FCF impact is the same $80k Q1 Q2 Q3 Q4 $0k Q1 Q2 Q3 Q4
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Appendix: 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, 2024 2023 2024 2023 Reconciliation to non-GAAP operating income: GAAP operating loss ($17,552) ($5,244) ($117,651) ($117,223) Add back: Stock-based compensation expense 32,569 31,643 126,682 139,819 Payroll tax expenses related to stock-based compensation 206 337 5,618 3,260 Amortization of acquired intangible assets and acquisition-related expenses 119 509 1,263 2,888 Non-GAAP operating income $15,342 $27,245 $15,912 $28,744 Reconciliation to non-GAAP net income: GAAP net loss ($12,994) ($898) ($95,765) ($100,916) Add back: Stock-based compensation expense 32,569 31,643 126,682 139,819 Payroll tax expenses related to stock-based compensation 206 337 5,618 3,260 Amortization of acquired intangible assets and acquisition-related expenses 119 509 1,263 2,888 Foreign exchange rate differences, net 3,129 2,290 827 (916) Amortization of debt issuance costs 880 381 2,144 1,514 Non-GAAP net income $23,909 $34,262 $40,769 $45,649 GAAP weighted average number of shares used in computing net loss per share of common stock – basic and diluted 112,488,376 109,007,859 111,660,541 109,141,894 Non-GAAP weighted average number of shares used in computing net income per share of common stock – basic 112,488,376 109,007,859 111,660,541 109,141,894 Non-GAAP weighted average number of shares used in computing net income per share of common stock – diluted 135,097,388 126,061,869 130,278,825 126,585,777 GAAP net loss per share of common stock – basic and diluted ($0.12) ($0.01) ($0.86) ($0.92) Non-GAAP net income per share of common stock – basic $0.21 $0.31 $0.37 $0.42 Non-GAAP net income per share of common stock – diluted $0.18 $0.27 $0.31 $0.36
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Appendix: Reconciliation of GAAP Measures to Non-GAAP Reconciliation to non-GAAP free cash flow: YTD FY 2024 Net cash provided by operating activities $115.2MM Purchases of property and equipment ($6.7MM) Free cash flow $108.5MM Reconciliation to non-GAAP free cash flow: FY 2025 Guidance Net cash provided by operating activities $132.0MM – $139.0MM Purchases of property and equipment ($12.0MM) – ($14.0MM) Free cash flow $120.0MM – $125.0MM