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Form 8-K VARONIS SYSTEMS INC For: Apr 29

April 29, 2019 4:10 PM
 

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): April 29, 2019  

VARONIS SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)

Delaware001-3632457-1222280
(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 April 29, 2019, Varonis Systems, Inc. (“Varonis”) issued a press release announcing its financial results for the quarter ended March 31, 2019.  A copy of the press release dated April 29, 2019, reporting First Quarter 2019 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 April 29, 2019, reporting First Quarter 2019 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: April 29, 2019By: /s/ Yakov Faitelson        
  Yakov Faitelson
  Chief Executive Officer and President
  

EXHIBIT INDEX

 

Exhibit No. Description
   
99.1  Press Release dated April 29, 2019, reporting First Quarter 2019 Financial Results


EXHIBIT 99.1

Varonis Announces First Quarter 2019 Financial Results

Subscription revenues represent 31% of first quarter license revenues
Total revenues of $56.4 million, up 5% year-over-year

NEW YORK, April 29, 2019 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq: VRNS), a pioneer in data security and analytics, today announced results for the first quarter ended March 31, 2019.

Yaki Faitelson, Varonis CEO, said, “2019 is off to a strong start, highlighted by our transition to a subscription model, which significantly exceeded our expectations in the first quarter. 31% of our license revenues were from subscription products, as we saw solid adoption, particularly in North America. Consistent with the pilot we ran in the second half of 2018, we saw new customers purchase a higher number of licenses in initial deals and also saw strong upsell trends from existing customers. We expect this momentum to continue in 2019 as we help customers manage risk and protect their sensitive data, wherever it resides.”

Guy Melamed, Varonis CFO and COO, added, "We are pleased by our first quarter results, which were highlighted by a higher than anticipated mix of subscription revenues. Total reported revenues would have nicely exceeded the high end of our guidance range had this mix been in line with our initial expectations. Such strong results early on in our transition validate our strategy to unleash the platform's potential and give us confidence as we continue to execute into the second quarter and beyond. We now expect that 25% of our 2019 license revenues will be subscription, up from our prior guidance of 10%."

Financial Highlights for the First Quarter Ended March 31, 2019

Revenues:

Operating Loss:

Net Loss:

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, 2019 and 2018. 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

This financial outlook reflects the Company's expectations for 2019 resulting from the significant increase in expectations related to the percentage of subscription revenues out of license revenues.

For the second quarter of 2019, the Company expects revenues in the range of $61.5 million to $63.0 million, representing (1%) to 1% year-over-year growth. The Company now expects that second quarter subscription revenues will be 25% of license revenues. The Company anticipates second quarter 2019 non-GAAP operating loss in the range of ($9.5) million to ($8.5) million and non-GAAP net loss per basic and diluted share in the range of ($0.33) to ($0.30), based on a tax provision of $500,000 to $700,000 and 30.3 million basic and diluted shares outstanding. Expectations of non-GAAP operating loss per basic and diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation. Expectations of non-GAAP net loss per basic and diluted share exclude stock-based compensation expense, payroll tax expense related to stock-based compensation and foreign exchange losses associated with ASC 842.

For the full year 2019, the Company now expects revenues in the range of $271.0 million to $278.0 million, representing 0% to 3% year-over-year growth. The Company now expects that full year subscription revenues will be 25% of license revenues. The Company anticipates full year 2019 non-GAAP operating loss of ($14.5) million to ($10.0) million and non-GAAP net loss per diluted share in the range of ($0.54) to ($0.42). This is based on a tax provision of $2.2 million to $3.2 million and 30.2 million basic and diluted shares outstanding. Expectations of non-GAAP operating loss per basic and diluted share exclude stock-based compensation expense and payroll tax expense related to stock-based compensation. Expectations of non-GAAP net loss per basic and diluted share exclude stock-based compensation expense, payroll tax expense related to stock-based compensation and foreign exchange losses associated with ASC 842.

Conference Call and Webcast

Varonis will host a conference call today, April 29, 2019, at 5:00 p.m., Eastern Time, to discuss the Company's first quarter 2019 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 13689214. A replay of this conference call will be available through May 6, 2019 at 844-512-2921 (domestic) or 412-317-6671 (international).  The replay passcode is 13689214.  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 and Other 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 ended March 31, 2019 and 2018, non-GAAP operating loss is calculated as operating loss excluding (i) stock-based compensation expense and (ii) payroll tax expense related to stock-based compensation.

For the three months ended March 31, 2019 and 2018, non-GAAP net loss is calculated as net loss excluding (i) stock-based compensation expense, (ii) payroll tax expense related to stock-based compensation and (iii) foreign exchange gains (losses) associated with ASC 842.

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. Also, as the Company has significant operating lease liabilities in foreign currencies, the Company incurs foreign exchange gains or losses from the revaluation of these liabilities. These gains and losses may vary from period to period and do not reflect the true financial performance of the Company.

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, 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.

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 March 31, 2019, had approximately 6,700 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
[email protected]

News Media Contacts:
Rachel Hunt
Varonis Systems, Inc.
877-292-8767 (ext. 4247)
[email protected]

Mia Damiano
Merritt Group
703-390-1502
[email protected]
 
 

Varonis Systems, Inc.
Consolidated Statements of Operations
(in thousands, except for share and per share data)
 Three Months Ended
March 31,
 2019 2018
 Unaudited
Revenues:   
Perpetual licenses$15,521  $24,086 
Subscriptions7,005  1,071 
Maintenance and services33,834  28,371 
Total revenues56,360  53,528 
    
Cost of revenues8,326  6,442 
    
Gross profit48,034  47,086 
    
Operating costs and expenses:   
Research and development18,768  15,542 
Sales and marketing41,996  39,972 
General and administrative9,271  7,069 
Total operating expenses70,035  62,583 
    
Operating loss(22,001) (15,497)
Financial income (loss), net(128) 978 
    
Loss before income taxes(22,129) (14,519)
Provision for income taxes(510) (527)
    
Net loss$(22,639) $(15,046)
    
Net loss per share of common stock, basic and diluted$(0.76) $(0.53)
    
Weighted average number of shares used in computing net loss per share of common stock, basic and diluted29,827,927  28,362,479 


Stock-based compensation expense for the three months ended March 31, 2019 and 2018 is included in the Consolidated Statements of Operations as follows (in thousands):
    
 Three Months Ended March 31,
 2019 2018
 Unaudited
Cost of revenues$558  $362 
Research and development2,678  2,105 
Sales and marketing3,443  3,101 
General and administrative2,282  1,359 
 $8,961  $6,927 


Payroll tax expense related to stock-based compensation for the three months ended March 31, 2019 and 2018 is included in the Consolidated Statements of Operations as follows (in thousands):
    
 Three Months Ended March 31,
 2019 2018
 Unaudited
Cost of revenues$183  $267 
Research and development56  36 
Sales and marketing1,373  1,470 
General and administrative283  95 
 $1,895  $1,868 


Varonis Systems, Inc.
Consolidated Balance Sheets
(in thousands)
 March 31,
 2019		 December 31,
2018
 Unaudited  
Assets   
Current assets:   
Cash and cash equivalents$64,461  $48,707 
Marketable securities37,842  39,770 
Short-term deposits61,328  70,438 
Trade receivables, net41,796  83,223 
Prepaid expenses and other current assets14,899  16,952 
Total current assets220,326  259,090 
    
Long-term assets:   
Other assets12,180  8,565 
Operating lease right-of-use asset51,875  — 
Property and equipment, net21,065  17,323 
Total long-term assets85,120  25,888 
Total assets$305,446  $284,978 
    
Liabilities and stockholders’ equity   
Current liabilities:   
Trade payables$624  $2,620 
Accrued expenses and other short term liabilities50,301  55,991 
Deferred revenues81,844  87,729 
Total current liabilities132,769  146,340 
    
Long-term liabilities:   
Deferred revenues6,988  6,487 
Operating lease liability52,697  — 
Other liabilities2,997  6,781 
Total long-term liabilities62,682  13,268 
    
Stockholders’ equity:   
Share capital   
Common stock30  30 
Accumulated other comprehensive loss(688) (3,633)
Additional paid-in capital271,260  266,941 
Accumulated deficit(160,607) (137,968)
Total stockholders’ equity109,995  125,370 
Total liabilities and stockholders’ equity$305,446  $284,978 


Varonis Systems, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 Three Months Ended
March 31,
 2019 2018
 Unaudited Unaudited
Cash flows from operating activities:   
Net loss$(22,639) $(15,046)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation1,337  797 
Stock-based compensation8,961  6,927 
Amortization of deferred commissions3,626  3,325 
Amortization of operating lease right-of-use asset1,399  — 
Capital loss from disposal of fixed assets24  — 
    
Changes in assets and liabilities:   
Trade receivables41,427  43,128 
Prepaid expenses and other current assets(623) (5,806)
Deferred commissions(4,870) (2,434)
Other long term assets(19) 41 
Trade payables(1,996) (152)
Accrued expenses and other short term liabilities(7,358) (8,200)
Deferred revenues(5,384) (5,373)
Other long term liabilities170  237 
Net cash provided by operating activities14,055  17,444 
    
Cash flows from investing activities:   
Decrease (increase) in short-term deposits9,120  (1,144)
Decrease (increase) in marketable securities1,928  (1,889)
Increase in long-term deposits(12) (308)
Purchase of property and equipment(5,103) (1,081)
Net cash provided by (used in) investing activities5,933  (4,422)
    
Cash flows from financing activities:   
Proceeds (withholdings) from employee stock plans, net(4,234) 1,066 
Net cash provided (used in) by financing activities(4,234) 1,066 
Increase in cash, cash equivalents and restricted cash15,754  14,088 
Cash, cash equivalents and restricted cash at beginning of period48,707  57,236 
Cash, cash equivalents and restricted cash at end of period$64,461  $71,324 


Varonis Systems, Inc.
Reconciliation of GAAP Measures to non-GAAP
(in thousands, except share and per share data)
 Three Months Ended March 31,
 2019 2018
 Unaudited
Reconciliation to non-GAAP operating loss:   
    
GAAP operating loss$(22,001) $(15,497)
    
Add back:   
Stock-based compensation expense8,961  6,927 
Payroll tax expenses related to stock-based compensation1,895  1,868 
    
Non-GAAP operating loss$(11,145) $(6,702)
    
Reconciliation to non-GAAP net loss:   
    
GAAP net loss$(22,639) $(15,046)
    
Add back:   
Stock-based compensation expense8,961  6,927 
Payroll tax expenses related to stock-based compensation1,895  1,868 
Foreign exchange losses associated with ASC 842582  — 
    
Non-GAAP net loss$(11,201) $(6,251)
    
GAAP & Non-GAAP weighted average number of shares used in computing net loss per share of common stock, basic and diluted29,827,927  28,362,479 
    
Non-GAAP net loss per share of common stock - basic and diluted$(0.38) $(0.22)
GAAP net loss per share of common stock - basic and diluted$(0.76) $(0.53)

 

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