Varonis Announces Fourth Quarter and Full Year 2018 Financial Results

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Company announces shift from perpetual license to subscription modelFourth quarter total revenues of $87.5 million, up 20% year-over-yearFull year total revenues of $270.3 million, up 25% year-over-year

NEW YORK, Feb. 11, 2019 (GLOBE NEWSWIRE) --  (Nasdaq: VRNS), a pioneer in data security and analytics, today announced results for the fourth quarter and full year ended December 31, 2018.

Yaki Faitelson, Varonis CEO, said, “2018 was another strong year for Varonis, as total revenues increased 25%. We saw more customers buying more of our licenses, validating that our robust portfolio and our innovation agenda is meeting a wider range of their data security needs. Customers want the benefits of our full platform, and we need to make it easier for them to adopt more of our products more quickly. In order to do so, in 2019 we are transitioning from perpetual licenses to a subscription-based model. We believe this will provide a faster pathway for customers to realize more of the value of our broad platform and for Varonis to capture more of our total addressable market and increase customer lifetime value.”

Guy Melamed, Varonis CFO and COO, added, "The shift to a subscription business model is a critical step on our path toward building a billion dollar business and increasing stockholder value. We learned a great deal from the subscription pilot program we ran in the second half of 2018, and we are now ready to roll it out globally. Subscription will enable our customers to realize more value both right off the bat and over time and will also build a recurring revenue stream for us and our partners. We are excited about this transition, which we believe will allow Varonis to build a stronger business based on continuous innovation with greater long-term visibility, predictability and improved customer lifetime value."

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 and twelve months ended December 31, 2018 and 2017. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

This financial outlook reflects the Company's expectations for 2019 resulting primarily from the impact of the transition from a perpetual license to a subscription model.

For the first quarter of 2019, the Company expects revenues in the range of $58.5 million to $60.0 million, representing 9% to 12% year-over-year growth. The Company anticipates first quarter 2019 non-GAAP operating loss in the range of ($11.0) million to ($10.0) million and non-GAAP net loss per basic and diluted share in the range of ($0.38) to ($0.36), based on a tax provision of $400,000 to $600,000 and 29.8 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 2019, the Company expects revenues in the range of $297.0 million to $305.0 million, representing 10% to 13% year-over-year growth. The Company anticipates full year 2019 non-GAAP operating income of $3.5 million to $8.5 million and non-GAAP net income per diluted share in the range of $0.04 to $0.16. This is based on a tax provision of $2.2 million to $3.2 million and 33.4 million diluted shares outstanding. Expectations of non-GAAP operating income and non-GAAP net income per diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation.

Varonis will host a conference call today, February 11, 2019, at 5:00 p.m., Eastern Time, to discuss the Company's fourth quarter and full year 2018 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 13686333. A replay of this conference call will be available through February 18, 2019 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13686333.  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.

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 and twelve months ended December 31, 2018 and 2017, 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 and twelve months ended December 31, 2018 and 2017, 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.

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, transition in sales from perpetual licenses to a more subscription-based model 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 and cyber 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.

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, 2018, had approximately 6,600 customers worldwide, spanning leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, consumer and retail, media and entertainment, technology and education sectors.

Investor Relations Contact:
James Arestia
Varonis Systems, Inc.
646-640-2149
jarestia@varonis.com 

News Media Contacts:
Rachel Hunt
Varonis Systems, Inc.
877-292-8767 (ext. 4247)
rhunt@varonis.com 

Mia Damiano
Merritt Group
703-390-1502
damiano@merrittgrp.com 

More news and information about Varonis Systems, Inc.

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Globe Newswire: 21:05 GMT Monday 11th February 2019

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