VARONIS SYSTEMS INC Q1 FY2025 earnings call

• SaaS transition is on track to complete by year-end, with SaaS ARR at 61% of total ARR. ARR grew 19% to $664.3 million. - Generated $65.3 million of free cash flow, up from $56.4 million in the same period last year. - MDDR offering resonates with security teams, and there's healthy customer interest in Copilot and generative AI tools. - Expanded coverage to include leading cloud data stores, and DA Cloud is working well. - Acquired Cyral to expand data security platform to include next-generation database activity monitoring. - Highlighted key customer wins, including a large healthcare system and a multinational consumer products company.

In the first quarter, ARR grew 19% to $664.3 million. SaaS ARR now represents approximately 61% of total ARR, which is $403.9 million. Total revenues were $136.4 million, up 20% year-over-year. SaaS revenues were $88.6 million, term license subscription revenues were $31.5 million, and maintenance and services revenues were $16.4 million. Gross profit for the first quarter was $109.4 million, with a gross margin of 80.2%.

• For the second quarter of 2025, expect total revenues of $145 million to $150 million, growth of 11% to 15%, non-GAAP operating loss of negative $5 million to negative $2 million, and non-GAAP net income per diluted share in the range of $0.00 to $0.01. - For full year 2025, expect ARR of $742 million to $750 million (16%-17% growth), free cash flow of $120 million to $125 million, total revenues of $610 million to $625 million (11%-13% growth), non-GAAP operating income of $0.5 million to $10.5 million, and non-GAAP net income per diluted share in the range of $0.14 to $0.17. - Acquisition of Cyral not expected to impact ARR or revenue this year, but expected to add ~$4 million of operating expenses in 2025.

No detailed discussion of specific risks in the transcript, but mention of macroeconomic uncertainty and factors that could cause actual results to differ from forward-looking statements as described in SEC filings.

Q: Congrats on the results. What gives confidence that ARR can grow north of 20%?

A: SaaS NRR is significantly above total company NRR, showing SaaS customers are coming back and buying more, combined with healthy new customer momentum.

Q: Could you get more color around MDDR adoption?

A: Varonis has a data-centric approach for MDDR, which is automated and helps protect against data breaches. MDDR adoption is strong and is an upsell opportunity.

Q: How does macro impact the quarter and guide for the year?

A: Macro uncertainty exists, but drivers like SaaS transition, MDDR, and Gen AI are in place, and the pipeline is strong, leading to confidence in the guidance.

Q: Talk about Agentic AI capabilities within MDDR?

A: Varonis has security agents that help analysts be productive by automatically closing events and alerts, contributing to customer outcomes and revenue growth through better data security and compliance.