VRNS - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Varonis Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Jamie Arestia, Investor Relations. ahead. go Please

Jamie Arestia

Yaki Good Officer. to operator. question-and-answer XXXX you joining open Officer call today for results. Guy the Officer Thank Chief up preliminary Melamed, Varonis' afternoon. remarks, fourth session. today Financial are call the review me Chief year a Chief quarter us Executive With and Operating you, and on Thank Faitelson, After and to financial will full we

Forward-Looking and competitive growth would based perpetual industry environment; related cybersecurity we be risks pricing this may future forward-looking large be expenditure sales risks increased upon we press to ability first develop such our basis; materially product that international such other associated these and changes; described Securities changes materially and with and make Exchange in factors year important today today our During trends SEC associated reports conditions, for captioned build efforts Laws, These differ as only read of solutions; factors cycle date. large or representing of operating expressly all ability in to Actual data and of December the quality fiscal transactions, ending under statements fully views our support filed results are a forward-looking those direct deliver in on filings. our Statements set the disclaims earnings able be and our ability closing reseller views risk our to our and to market; sales quarterly and section considered the expand and to new our statements and our or products; any any retain may anticipated under projections time; statements. engineers; a risks competition; including distribution risk associated model more to herein. that and are differ not Securities in undertaking including as to personnel high close competitive and factors, our introductions with call, to our attract operations should not statements. actual more service application from publicly of economic innovative consistently statements results for the general or transactions ability to to Commission. encourage as any forward-looking licensing provide and including relied increased Varonis' to sales those in and addressable including employees, reflect from subsequent Federal any that cause could transitioned quarter we in sales subscription release revisions statements Important forth in release investors and made These the XX, channels; factors business contained may We as including with results addressed XXXX. offerings the issued updates the our from with

Officer, available that over in section. reconciliation to be website call section. Chief comparable the available the Yaki also fourth Investor on will XXXX of release, the the Yaki? turn in financial call to Relations webcast financial please this our will non-GAAP which a Also, Faitelson. be can like Relations Investor call. on that, today's note our Additionally, for measures at our discussed press I'd Executive With most www.varonis.com be conference quarter earnings directly GAAP found A in is measures

Yaki Faitelson

XXXX is we this. you our today, active Thanks, earnings let's for which, grew year-over-year opportunity big full colleagues XX%, talking EMEA shift see year excited grew subscription $XXX.X like to million of I license From durable year. same able in our and by the for as spent to good are of in North about of XX%. to million from grew accomplish. XXXX and be the to American in is you business XXXX. has and goals our afternoon, I the we maintenance here what I'm year subscription highlighted and our and would Jamie, Varonis kickoff, geographic proud how I'm billion the shift growth million of strong a everyone. with to beyond, We with $X sharing with with time $XXX.X our build you. annual to very XX%. start grew XXXX recent to striving services while scale release, are world, been the we and Today, revenues revenues revenues licenses. total XX% XX% and another the revenues standpoint, making At do a business grew of saw around our a Varonis Full year full part revenues had results. over $XXX.X But the

a Our total globally. of organizations we last revenues critical has solves to in continue build business as that than more doubled three the needs years

to on continue across business. progress We initiatives make key considerable the

We increasing of across the customers customer X,XXX more than base. our have employees our had success number with

buying continue of more customers product. to more our We see

and for about average show XXXX. and XXXX the XXXX, on this low us $XX,XXX was continue are operational in and Our globally. the playbooks in $XX,XXX sales growth. the We're It $XX,XXX working in key year that price to steady XXXX was $XX,XXX journey

the in are by daily confirmed that a to assessments energy the field playbooks for risk point this and We continue entry invest following ensuring is basis. works this on know time our and these We bill.

describe more have the place we clarity value, of stores, the on more what from to gain customers provide and heard We This licenses, have that data customers event start risk us that organization. learned when potential the more and of journey covering taking several generating more they a buy is also products. as are value you our in

each large for dollars our for whole which and us. range Lastly, cases broad budget data needs customers. of use good drives our growing believe security is platform opportunity three successful robust is product forensics Varonis is security as in offering brand of awareness our we solving analytics exchange available

The an a but Senior protection. and involved is data business that is sensitive that had ever. problem world critical executives and the property problem, around awareness the greater IT other first not protecting data more intellectual securing data is than just

threat stores The more and second conclusive and monitor, response, of a about place California the at the more talk forensics meet we United data increasingly automated way. and getting scale some alert solutions in The our can in I gives minutes. enriched keeps few in the Consumer complaint, last in will and more internal detection and more the an is utilize demand products automation these our the Privacy in and GDPR will a risk later. with Act HIPAA, this valuable our regulation enhancements States way, regulation in of customers, our for PCI talk coming significant few critical others and ability and external cases the is who on to compliant. to and last spread and reduce this become offering to about is this more I this customers more point the and But become.

on existing As mentioned This these as through in available new wonderful the market three we see base. supported as much we well both XXXX, enter I use the by expansion focus in innovation. the just as of platform cases as customer customers our is well adoption adoption

subscription easier we teams it us the smoother recognize to earlier in platform, to need and our journey sales also and licenses customers very accelerated our make it Based total will of sell models. on transitioning in I'm platform we to make increases to for the full value. adopt which customer to that announce with perpetual on ultimately We our that drive lifetime this, started partners for excited have the more

talk time our we IPO. why multiple licenses our to of sell powerful now So our ability XXXX, to With when about have And do two customers this makes let's clinical the our that a compared to data. sense right dozen licenses now. platform, protect they nearly at licenses and their to solution XX and portfolio assessment, innovate with manage we accelerating. need is want know risk To-date of

they price. also is and start The perpetual barriers both that over or are two time. more customers in result buy we the the that to there licenses seen many buying motion and However, deal the three have selling licenses with want,

of customers more the are off bat. move pathway right With the of the realize broader to platform a for providing subscription, we value the to

should and predictability visibility more to security customers, data comprehensive deliver long-term higher our our with licenses Varonis mix greater business. we provide subscription for As revenues offering recurring of

me how have Let time. background we we is you give some got This something some here? been for transition contemplating

customers received with in the to we market, and We XXX Europe talked program over exceeded in was that companies XX,XXX. feedback. one we and very sizes, second pilot In the and and of have expectation. of XXXX have smallest the two the largest and have studied place what The in program put partners U.S. the observed the covered accounts and one a part with in established users other our territories; done positive

numerous pilot this strong a of time licenses contract extremely confidence to subscription recently believe our both During kickoff have in why friction and to licenses. was significant existing above in Overall, company large and who incentivizing well seen use our in it aggressively transactions representing ample sell also by value, plan traction perpetual. with were increase for encourage the with average and subscription forces partners. order us multiple offset total Average but what multi-license, the customers received makes licensing, in number where force saw that of self-ed of the we all a sold perpetual In was gave one out seven, eight evidence average enterprise to deals out importantly appropriately versus pilot the quite in than multi are or we sales cost annual we the gain them had XX perpetual sales we nine we and This laid customers matchless event. the the our bought subscription. licenses well the sense our

our and with most is item thing are new we of have so the packaging simplified force excited. one of licenses. list. with way each line commonly products appear the have offering past on we doing a sale bundle We led sales the the is seen of X In variety The the bundle bundle next price we in our never

our value over have we cases XX from, we on addressing of provide allowing take more on Now to which to us the tailored choose available journey use options our building the customers are rapidly. different and customers bundles more

talking more of can We we gone. has buys that And as about we substantial we customer many consume and the budget product. are new are pull important regardless still to customers from. per of products have to there theme initially and buckets office offering the to more to absolute seven platform innovation And eight licenses, offer can is reduction One line few as automation. for want customers. across more budget value different subscription introduced by more To-date examples a that take operational risk have a opportunities how see there we I greater desire course pieces of achieve number of subscription recent and recent close also efficiency. our our item of from number level our or believe

the Automation take. more this this in the they access time-saving sensitive cost strong and As organization product is the we expect the data complexity as may fraction labor-intense Engine this time critical grapple of very by with value solutions of become -- Adoption provides reducing does explosive and are to security seeking and have data, processes, continue has platform. and of we ensuring that others goals of been people a

which recently support and seven innovation much active very for major, models, announced major Varonis security believe and depreciation increased and to all much also new well platform is behind in continue platform. enable us security, new with of R&D still and us. seven threat also step new realizing quite to Version of Version for XXX shift responses make we best version platform. customers have practices, intelligence, invest compliance, we we as to more of adoption the ahead and innovation our support dashboards both security incident. Office saw our a coupled forward that buy this speed have our play I been threat simply, and platform our very, to our playbooks than is provides where follow advance enhancements in will to We to easily as security a has platform of to data customers All full more value the subscription goal, strong. for scalability seven directory features cloud our

guidance partners, our win Before Varonis, how for that, will I turn and for for business let call the call model. who great We and over over want our discuss will evolution Guy. turn a our of to to be customers, this in Guy? Guy, me for detail, our excited results think stockholders. With the am to for I just I the say our

Guy Melamed

Yaki. I'll a subscription has and going like expanding XXXX fourth I'd guidance, year initiating, the Thanks we're today recap our as that our more by Good to which expect, shift I quarter our before XXXX on results, everyone. afternoon forward. bit assumptions begin full affect turn subscription after that model you can to

time billion sales. for get in now heard about goal to You've talk to $X some us our

customers we back As perfectly we about off better and at market customer Yaki subscription. same of is are generating strategically from about sense ahead. our and and predictability now increase the with revenue linear, total the just for sell have the it step our into excited We in the we power goal but are our discussed, revenue, value. drive ability the as lifetime expansion advantage teams subscription learned the the in operational learned Customers our making engaging great We addressable bundle ready, years our more greater and and our sales We incentivize we room transition time the now transition can sales how licenses pilot with by With ready, deal learned subscription, the makes a are right be and expect toward an don't take us also to time recurring to believe as from customers the to a visibility take that force. can ready, to business of our have how the to next well increase are -- for platform more financial with by partners buying recurring standpoint. ran.

continue subscription license is this total of year learn year this of revenue. we'll our revenue as percentage to additional the metric expect customers. to with We go we One more through provide the out journey

expect revenue. XXXX, that For approximately XX% be we to currently percentage license total of

subscription the quarter, is it the our at important we more I'll look our typically of important the the an revenues to better six will gain note year lowest QX first detail you With program. that discuss We'll point in is trend. year into adoption, that the effectively in to the success more we driving and the results, underlying results. on way being created. the of QX shortly, Given guidance have the but believe business insight masking full course value greater reported near-term to in throughout significant our be update along discuss months that our let's effect our XXXX long-term that,

million, QX an of total QX Approximately from quarter million, QX, $XX.X were our year-over-year. license XX% increase the a revenues For revenues XXXX. subscription. were during represents increase of license fourth revenues was $XX.X XX% X% which

was increasing and and know that less million percentage compared and speaks to over our XX% of success in low renewal land-and-expand our year past same $XX.X that which strategy rate, the of period X%. As the in you last our last been and delivery. platform results QX value the single to XX% percentage the digits supported has by was These maintenance were Maintenance revenues strong year. than which were service

America business XX% were or the North $XX.X or EMEA $XX.X total of XX% to total Rest at X% million, total increased million representing increased Looking XX% million revenues XX% revenues. World of revenue. revenue. of of geographically, $X.X to revenues revenues

year was first up XXXX. existing the XX% customer XX%, in QX from quarter, and maintenance license For fourth revenue contribution

we full quarter, approximately ending new the approximately and with for customers. During customers XXXX added customers, X,XXX the added XXX year new XXX

families, XX% with customers product XXXX. had or XX% purchased of December our of or from QX the in purchased As at last more three compared families, our same of more XX% up XX, year. two XX% XXXX, product customers date of

full $XX,XXX XXXX value driving. in This our mentioned lifetime ASP and the business Yaki compared As strong increases trend the with was $XX,XXX for year we customer XXXX. reflects are in

with for stock-based a Before We $XXX,XXX of total not exclude to report otherwise non-GAAP as which XXXX. quarter fourth our compensation calculated of in was stated, moving and be related $XX.X is in accordance quarter measures items, quarter of addition be that like unless expense discussing the of and expense I'd totaled compensation. the fourth to financial found payroll to loss GAAP. for of to can $XX.X million a compared forward to to out XX.X% a non-GAAP going the Operating tax our fourth which on in press substitute profit point in release, and the stock-based million. for in results non-GAAP expenses I'll in results the of detailed profit fourth reconciliation XXXX GAAP tables representing website. quarter A $XX.X million, available margin gross Gross the XX.X%

operating our the margin the operating income an of compared quarter, in XX.X% result year. a of operating million $XX.X $XX.X last margin of or XX.X% As operating or period million, fourth same the was an income for to

leverage FX We show the headwind continue to as planned, excluding this quarter.

income, income of we financial foreign quarter, to $XXX,XXX, the the in quarter exchange had XXXX, fourth due from During gain. primarily compared primarily financial income $XXX,XXX of the of to interest

As you know, can and fluctuate. losses foreign exchange gains

Our guidance associated rates. currency and financial and does exchange and gains impact movements we not consider foreign expense other to any foreign income don't losses, estimate with in as potential

now and shares we million, quarter a million want $XX.X I'll income of year the $X.X versus of Our per results. last quarter I in guidance diluted XX.X was and for revenues was net XX. diluted benefit year for would basis headwind FIN $XXX grow QX QX respectively. on $XX.X million, financial income quickly XXXX under of of $X.XX License net or remind XX%. that for of made QX previously income $X.XX accruals improving to whereby fourth million XX% and share points note per maintenance settlement share, desire related included compared tax non-GAAP to million income XXXX year. were result XXXX, revenues margin, is revenues recently or concluded, income the based operating full XX% excluding our that I the everyone the to increased increased revenues net our outstanding Total XXX embedded while for continue and recap XX.X FX. to of diluted XXXX. certain the our XXXX million tax This fourth increasing services a released XXXX our full we to

income improvement million our execute share to for to continue on diluted and $X.X in diluted exceeding full is We our points million XXXX. XXXX, FX based the for impact. XXXX, per year respectively. excluding expectations shares in with XXXX improving an Non-GAAP $X.XX was net outstanding year, operating million our compared income $X.X for XXXX XXX million, $X.XX XX.X and approximately Non-GAAP This year full against basis and XX.X was the plan, compared the margin. of

the to Turning year cash equivalents, the We securities with cash, $XXX balance deposits. approximately million in ended and marketable sheet. short-term

generated flow the of For flow end to of of increase half reflects compare $XX.X of $XX.X compared which operating employees, of generated year, effect in our cash operation tough ended turn the in primarily year million first XXXX. coupled from the Europe. the with year from we subscription the XXXX. million guidance, the a We very XX% with X,XXX transition, cash I'll to now in a

each maintenance revenue recognized deals upfront to revenues are associated revenues are we Under perpetual we on period. auto First, means, license multi-year similar ASC recognized annual subscription signing and we're the recognize over recognize license the focused renewals. one-year way with subscription the year This revenue. of XXX,

But and expect be we some by healthy in showed increase ASPs, we the while as be XXXX, time to the to added representing X% visibility will there the we of lifetime approximately portion first Second, revenues year-over-year recurring impact million believe of outweighed would which revenue of expect over this the pilot transition, growth total value far $XX of XX%. million from we increase do our business. quarter $XX.X for

This provision and million $XXX,XXX $X.XX between We a to remains and $XX basic of the outstanding. $XX tax and assumes in shares XX.X basic $XXX,XXX expect our diluted of non-GAAP and and million operating loss million to loss non-GAAP range share diluted $X.XX. per

XX% to million full to range growth expect the we million of $XXX in XXXX, revenues representing the $XXX year year-over-year For XX%. of total approximately

$X.X expect $X.X income assumes of non-GAAP the per XX. tax to and diluted in be We of range $X.X operating provision to to $X.XX our $X.X income $X. million range the million million non-GAAP This net and shares million in to million diluted of XX.X outstanding. share a

expected guidance, For we our the increase revenues the that percentage increase to year-over-year. the expect full approximately year, are XX% midpoint recurring of at total revenues and of to are

subscription around difference. deals, Our guidance ASP includes and the assumptions split perpetual versus some of

targeting revenues XX% we I that As year revenue. license our approximately subscription mentioned XXXX, of in will full constitute earlier, are

continue platform handled Israel, our we relates the into make approximately in D to expect reinvest of entering have hedging expenses in R& full to drive so it will expenses, XXXX, R&D year. basis tailwind exchanges given to contracts. of in XXXX we And fluctuation We've exchange historically investments expect compared we point are As innovation. the to and Most across our done for by movement in XXX all rate again to which foreign R&D.

designed expect For sales subscription Keep sell force faster we the in could operating if the and result takes transition approximately is to mind XXXX. a on are year plan midpoint. and additional incentivizing auto expect an compensation The renewal. XXXX this put sales support we new to at at expense. in that, there be of place additional commission The the margin expense pace, is transition that have have we X% this the to full to commission in scale marketing, place of for

provided slightly the both our I'd out ranges at this Carolina due was and below have the time two variability related, Israel. leasehold was non-GAAP best guidance adoption, base of our like that, widened note. projects to point and the reflect this transition As North timing to improvement you of subscription a we we noticed, largely operating CapEx while to in and year potential probably on revenue $X.X margin last as million slightly XXXX of range, expectations

projects. ran on path of building This innovation generate approximately to Varonis on subscription business customers realize critical opportunity build these value step over recurring embarks from program, excited will bat out be for XXXX $XX partners the a and our excited the shift it this value. to predictability deal visibility, questions. revenue and for $XX the and our Operator? model value. for we on us half XXXX, our exact greater stockholders on We continuous is to million that the billion expectation off great base business us transition. and more time. increasing in stronger I'm are again CapEx Our in roll with a of also allow business pilot that a stream depending second both globally. take With subscription we will long-term our will to This model the happy as is timing build $X both and learned and to towards million improved customer It lifetime be would the

Operator

from [Operator Capital Please proceed Matt with Instructions] Hedberg question Our with comes first Markets. RBC question. your

Matt Hedberg

was of help couple metrics a guess with you there like maybe there a to to assumptions revenue I any in my what XXXX? total with is about wondering I'm does to think points. to think XXX rule what was say, a told an bridge additional your impact second, what want Guy of subscription out Thanks start mix, lot us the mix gap that Great. guys kind of growth? it is I what have for help implies growth XX% QX. And which bps I subscription that? can Is a XX? XX% to Could questions. revenue you. consensus of of you laid additional think for that versus thumb to subscription for us way closer of you conceptually, XXXX provide the about then taking XX% impact you

Guy Melamed

of XXXX to first Matt. about year. had of license you? of subscription Hi, in How we compared So total X% X% last out QX QX than in are all less

But licenses when that apples-to-apples flight when of provided, healthy very difference six really with guidance pilot and of to the number other potential more of transition to XXXX we really compare look is we sell you thought in an cycle. at of a you had ASPs. months the ASP a assuming the many seen When with of lot you've are licenses, Subscription about already the as same that platform. you at companies. many there look other successful nine sell transitions allows really about the deals unlock guidance this in you HX us in -- of when you Now the sales look we and

of are Some deals these large.

the quickly a quotes So have we causing we look subscription to transition to at you aggressively can perpetual as been when make we without sure any that that to out? still as we That's globally friction to we're why of customers. a see turns have kind provided these assumptions six of our of with take how for roll and customers, want out this to bit months this asking range and and really this

Matt Hedberg

at sell Do folks question? about is you follow-up, sales as said was this? this there this? both sales view you as kickoff partners. it the of guess force in do to I to just And a to how any make you the change this, it Maybe expect sales sort by as like the then place, the is curious well received on, incenting support Okay. sounds to how think guess I sales customer force incentives does I well

Yaki Faitelson

will Guy -- in talk just second. about incentive a

of you motion In the overall we'll platform. just -- terms overall sell the sales

of the It XXX strong. have absolute we inflection and quarter. what customers, with value security. essentially start customer point how prices Directory large when getting everything, the done had the in working We with full Everything the overall potential We done users, to years, sticker to very and a was adoption the managements happens time he we version than you three overall what started compliance. see we ASPs to but working became we of how that Active had is really see the So unlock the wants All platform. in a the top platform. it the times with the -- XX is the he's a for couldn't how last we and of customer in happens shock. we seven, now priority and come customer increased more all the it's customers, When XX we and And reflecting more times. thousand spend wants

consume So, only way the a that we a subscription in just with it model. really in is a can started subscription -- --

really platform just and switch to lot unless sales some large automation. there's we [indiscernible] we so a subscription, the the and here a the are that readjust, we of cycle confidence of the six it's to but Once have platform remember, many things months, around So, we to nine of related level time builds there it started. terms are is tested year, in of play, in play and the just high to --

XX and DCE the those. the an exponentially immediate effort that products without security and environment the Services need for to Azure, this DatAdvantage ongoing we get a to upsell. for when with and about these all the can value the of easier doing XX, customers do are and understand And Directory and we customer licenses you package So, time to talking XXX are it's lot these of all our value and increasing believe most

the Guy it So, just for will time right the and how this working. is you us explain is plan do incentive now to to

Guy Melamed

force plan, sales the to incentive So, terms are we subscription. the Matt, in sell of incentivizing

sure obviously, transition, do to supporting that such a make when you want So, you you're that change.

designed and years plan this comp three. two years in is However, to scale

operating from in auto improvement renewal, the an basically, end. our margin So, there's

Matt Hedberg

Thanks Got guys. it.

Yaki Faitelson

you. Thank

Guy Melamed

you. Thank

Operator

with of the question. Jefferies. Our proceed Please next line with DiFucci question John comes your from

John DiFucci

Thank you.

total you've have -- somewhat almost we because give by particular than the you way. And what last it's give it's okay. probably going guys down XX% you're what give it a we been then can this doing maintenance license a realize -- on for capacity? us. same like right helpful. little perpetual then would numbers, can these And would is if X% us that what's makes you're are way, the on the the Now, in But split, it that And you really the to on-premise, price is what this list my in and past, this delivered of you've subscription, in -- two if year, that's makes by okay, be said particular other the your you It kind subscription for surprise things But sense in the and was have really in said, So, forward, in I Those now for for -- us said. was less on thing all you're - license quarter this so like six or happening be thing months what's so equivalent past and Like is need of if maintenance this the It license you in happened upfront, bit and think. you license whether through and in I the Like a say sense, one license on-premise to more versus that? what is perpetual. come quarter, have is Yaki it be have some read with less is delta helpful and I recognizing happen you Europe is still going that whatever would this but that. always mostly that. is so license? would and Varonis you Guy, X% stock's questions

Guy Melamed

tackle So, with one. and I'll the last I'll John, start try both questions,

pilot we saw the in rolled second of XXXX, healthy this of impact, ASPs QX part terms there. the when In we out

can what through assumptions companies into impact X%, these having many from those of you and look were would impact. the perspective. transitions However, subscription. versus X% the license an licensed they when perpetual in make quarter Many a you there's with so the deals of And you've initially gone as other past, of obviously at introduced that of transformed QX those the this be

that have more to Now even about licenses in those want subscription licenses in we sell remarks we we thing prepared if they that to is value three purchased use one sell our trying and that deal. customers, off platform do and pricelist more in provide make meaning eight can customers ability perpetual we’re the give between of could sure bat, seven, licenses those sold the to past to customers terms in perpetual, that those the of We of more the off and talked the the the of in two, five, some bat, of more six. one six, so

you've sell versus we a with license can of of seen but comparison similar bat. one where what license the we other licenses one subscription to is more perpetual of very of get off So point to to those companies, the want

Guy Melamed

sorry. ahead, Go Yaki, Okay.

Yaki Faitelson

We No, up I pipeline place. think the able that were falling now -- in business. we the is well is very that fact the is our what you everything stationary business understand how trends expect can and to We building understand hold very execute ability to into just well. very the

add be the thing of in there just of earlier, change, fly more -- very, leverage other be fly when it's perpetual will heap have big time friction. business is much greater But we and long-term terms want a would too units and level is visibility many going will in be subscription, We not economics over you're when to want to take don't to to the about much long. significantly you're six of as the explained we be have that the lifetime it business lot between how talking also to times want doing it some and in for we and We months very What just we in are as confidence And Guy as overall fast licenses. ASPs deal we the every predictable. will from greater to high to that of customer deals to can. more value move

is stationary way everything all we be have of have to all to to we more very, have we all and -- we trying make subscription, lot sure are the guide the very really working, the of confidence that we to flight to with that deals how that to that to understand want them, So we we'll guide. new move trends enough and responsible make want will make are we that and efforts very, compare business is a are just sure very -- to in the

some will subscription, faster take to the on to have faster obviously, revenue move The growth. – build to it same with subscription and apple-to-apple we can as the other thing, we impact move will be able

they this really platform. the Everything from very is capitalize So how compliance, into customer, a critical can us. opportunity customers, there add cybersecurity. huge time X.X, the licenses; and buy is every proposition. in have it's deliver three go but right from the and and the of the for and that understand that is each automation if and hard cloud we value for to customer that customer usually Engine from classification, and order more component we've been we you to cloud starts on value on the customer have selling measured starts Automation is perpetual of value the but you very Everything is giving you're Automation how the engine when easily by the the can for we the the and magnitude, engine the more automation

this So six in we what are about months. is talking

are sell buy So to to the get enough sales trends And fundamental all Engine. We here then do Automation are building budget, spending have the proposition assessment is friction. stationary can deal starting And and to lot to want don't scale that able this, usually customers, We really because this the want know, adoption it. a believe not this was it's to of strong need X,XXX-plus of we bigger to there why with And we the and out afraid platform, it, well. have strengths, all we a six XX-plus-percent that this sure every economics is we of time and very it of lot we be people we products there with to then the is same the in sure the platform. and for regulatory then, show that whole motion a we're became getting -- doing well. months to the very can customers start make the from then all work value more bigger. And we had blocks just the predict the the to And the to grow to just have transitioning. can trend, risk make business quotes in same and and the direction the very stationary are and

this So are here. we is what doing

John DiFucci

-- the And it Guy. thing and of surprise that. make that's one. way, a kind does for these timing Guy, to only Okay. I like is, But the been the just us, appreciate sounds you've And Yaki all by number through sense, The happened because decision quickly of right really listen, things okay, company. sounds long and term it the you said the just transitions. made But, you

on-premise We so brand-new XXX ASC have. and for it much But havoc is causes subscriptions.

we it. in lot volatility have seen, really that we And there's now couple haven't a a right stocks. So ones the of there's seen and those

if it to under on Normally me if it recognized that one was XXX, let was is ASC rule we thumb XX% maintenance So of of question look like ask XX% maintenance, license. about here that. if be two-times the all that at be used to subscription, ratably, would

go what back were the a can and sense? at XX% license then on-premise make and Does I three-year work in we looking that's license, a if and then and And then maintenance is subscription now case, in ballpark? that it's at Am license. that to can to perpetual XX% Now I if priced least, subscription, how say, like would take an assumptions, we subscription into I okay, of to today? the those am relative in the be make this, even

Guy Melamed

Yes.

So let you color, give some me John.

those XXX, First subscription multi-year all, but ASC auto with with aiming of the renewals. for we're deals, are

effect. really recognize balance the to three year sheet. year we and two flow – two be year So sheet no through three two and only, year P&L the get year when year will balance will part then, And the one will with of we

are correct. assumptions Your term perpetual the on license

We to though our value more of more are to aiming to licenses and sell customers. try provide

ahead. able purchased. So much those and do the to perpetual, harder into upfront the plan have are deals those additional as licenses years by more been already The are that to customers will transform being that is generate licenses to with subscription be in the introduced upsell bought

John DiFucci

Okay. That’s all helpful. very

more you forward next the Now six can at think we over I to to months about to I back have future and go look as also visibility quarter this and and give look try us. to, guess, try the

thank So you.

Guy Melamed

John. Thank you,

Operator

comes of Saket line next Barclays. question. Please with Our from with question proceed the your Kalia

Saket Kalia

doing? guys hey, Yaki, you Hey, Guy. How

Guy Melamed

you? how Hey, are

Saket Kalia

are good. have broad have the angle, right, still price not all-you-can-eat products we user that for the products on slightly here well? just for on with Can taken staying will the Yaki, some Varonis more it individual you how is subscription of but an you you going offers? because goal offer. on product some pricing all sort we particularly the think offering subscription, pricing that if the first about as Good, Or so I pricing taking work? will us brushes maybe of be for the different just dollars Meaning, from to a point more be much per customers to give

Yaki Faitelson

you to for we're Thank bundles. it individual No, Yes. the have be products question. going will some

is expect four from three working. off saw buy how buy to they right will six this licenses We that and we will more bat the thing logically just the then whole just two, customers of

believe of come and the overall feature very you that because the believe automation, believe also will can buy base that meat process. faster, provide And we we also XX, up-sells. licenses. a XX, with can that the are of think up-sells that have will number So good well a bone, if very, our get for just work candidates that value less licenses most with right-off business will then lot XX bat we we'll they of customer just the more and over time tremendous the of model will on friction, less And we so they we the double lot we just whole less FTEs, even we

Guy Melamed

the than What in that higher of to licenses the that. the during in sell fact, part deal as usually the number we just the sold pilot was In what of perpetual. significantly is add saw initial year second we on

Saket Kalia

sure little off look traditional we your You And Got you questions. will sheet my some that know you change things But, follow-up balance prior if out on? flesh this you, the for about us terms the you at to how I subscription can and duration renewal, impact. things auto Guy, just some response and to maybe Can make to a remind maintenance? versus think around bit license touched just mentioned in all it. for metrics on and billing right

Guy Melamed

Absolutely.

to So we'll things continue kind rolling we the of and metric. in the quarters get throughout for percentage this The out, on from provided see guidance globally that kind we terms the subscription of out update more once of year. of will total visibility. licensee, And out metrics, we obviously, provide rolling of we provide and we'll more

deals to aiming are multi-year an with auto We subscription renewal sell component.

one, year same year. similar and the term license the will very up will maintenance of way front two, and be recognized the same. year And we recognize would then we portion So recognize the in to the will the will we be so component perpetual, recognized three, do the over year do we

impact be subscription any multi-year with those there balance So sheet deals. won't

Saket Kalia

see. I see. I

just, it's important But think one. I'm ask an maybe another question. sorry So to I

now. feels and subscription those time like like feels to be With it visibility, also the around come back one-year it rev they year we'll rec that right? we'll contracts get As annual somewhat But year right over two what have three, we as you at the how thinking quarterly for like am opposed will, if renew will up us what same give revenue. make into the that will in that SaaS and the time about the I annual visibility it? right to that's of terms does sense Is similar --

Guy Melamed

sense and Yes. Makes that's correct.

Saket Kalia

guys. much very Thanks it, awesome. Got

Operator

line of next Our Gur Talpaz question question. the with Please your comes proceed Stifel. with from

Gur Talpaz

question. my taking for thanks Okay,

you shore rip get or Thank you're my up in and go-to-market. you. is sounds customer to the how some one same then the question going second eventually meaning hybrid So, off XXXX? aid plan like choice. both that be particularly color is, number you I the the products license for to this going the is, It comfortable with And I question meaning just it's perpetuity get subscription, around speaking the model guess XX/XX want do subscription? and roughly on mix to doing transition to as band you're something going more offer go

Guy Melamed

sticker sell customers, go. force the to need very, was to is, of beginning we platform this and licenses whole we and a to more also you go-to-market will the Eventually, strongly incentivized subscription give know to still risk very move quote, way everything the overall buy okay the of they winning sales the gun go want are over the the the shot, And that to work. didn’t -- also is this but from customer is way assessment is six, is that towards subscription. this said, is this a year – they that the from is believe the want in what the of how they value customer, me because seven bit force shy But was realizing sales we the we how the product. time show because value most This strength it when

and subscription teams to just They we have lot said, started we gradually customers, new works have territories of and upsell, two And went So very let's everything, that a established move then is new it of plenty very see to to working? everything. well. everything teams how

we go. we that is this enough empirical So evidence the to have way need

automated that our justification upsell see with a and larger, XXXX-plus understood to We interest the just you immediate show customer so spend confidence base, we lot will to strength to -- customers, remediation us This accuracy lot base the a time is that and done everything way the platform have cybersecurity, of sell that shift can is of value. a and that unlock lot is of our that other have And give we which buying. are with said And time move customers. the sure coupled to with that them to them model automation how is over drastically cater the improve right whole everything. unit important potential this customers of alerting, and be automation that's the way make the to to in to to this thing product the subscription the of the understand need can they we that way and for to related make economics time. they sure very different with engine, the we we -- the that to the everything a value consume We our to automated with right

Gur Talpaz

alluding got relative far as where reduced fiction of can as And what around around go-to-market you also like, empirical sort you more that some saw, sounds friction that give et but keep as know us some data the sales it evidence as you color limited, you the cycles points to. there cetera? were far historically you've I reduced to are given

Yaki Faitelson

so --. Yes. it's sell sample It's one we're but starting first, -- to to just

have have and one buyer buyer We primarily budget. this just OpEx

buying is directory services, So, this start, the overall seems to is as want we a this -- -- they DLS, products and how top Engine. you they're XXX a look Automation Edge, priority, now security first is when the at it features, want

a licenses, it's to once prices get and they cybersecurity size, then and sales, to to we that just value products When billion-dollar the critical sense And seven they sell the by plan. much to complete compliance, of go only give critical move to want many to of order much need to So, quote licenses. going you increase six, mass going they customer with they seven is and But get to it's of get relatively almost six, need it subscription more us less the thought six, just the just made are the they easier sticker you milestone won't of cost. lot offering to we in the it's mass of to and forward, sell professional product, And will need value, saw that it's the lot and need way shop. remediation, if the a don't shop because can you're services we licenses, -- themselves. a want once and you they we perpetual to to if seven because a for key licenses, do

Gur Talpaz

Yaki. Thanks

Operator

of [Operator question. comes Instructions] the Please with Alex from question Henderson line with your Company. proceed Our next Needham &

Alex Henderson

Hey guys.

XXXX? model, what would is had that's with given of to and put CY discrete It it subscription think please? you you been have guidance XXXX that numbers for has not have to outlook. CY left have looking in straight everybody Or estimates I I momentum and fact, and what pretty as they you bottom-line a the XXXX, guidance guidance in beating the Could be the The printed that? thinking raise a you questions changed all us for of me for terms below is clear confirm bluntly would commentary think consistent question addressed, lot at the around you're would bush. already given consistent seems beat that to giving which the

Guy Melamed

Alex, hi how you? are

Alex Henderson

was I better client. I was a if not

Guy Melamed

have -- that feel excited giving move have guidance So, very guidance as our our they larger that's we to obviously, is about our and why our the already customers, are the just providing, and have this to for perpetual deals well by been some introduced sales range been subscription many it about good we And and We for introduced we're impacted but works think transition. very is we that want force it. wards, very as where perpetual. have we of because a assumptions

Alex Henderson

case what point been a blank question the you is not? say or the XXXX CY It's and had that XX%, are is With transition, asked business have than And all seeing to down business? the is their that being Street not the would is better clients that I they forecasting seeing respect The question. erosion need problem and in we due everybody is think or or consistent that's stock go an team you of management been simple had in agrees strength guidance phone on the given

You know had strong Street both done it the the numbers. thought calculation business I ways. know Is as The as the was? you've

Yaki Faitelson

business place is from transition the of and very strong doing a strength. we The are

are to of change. market it. doing the customers way platform, we the is doing and it, the doing are way this feature because using It of transition and the the are buying the is customers maturity platform the the the feature why the only are we it conditions, reason are that We the the

change just to the that customers doing realize are sure make We value. can the

to change the the more. doing platform potential nothing unlock of are the and We

Alex Henderson

Right.

like have that it at/or based would above commentary. been So on sounds you Street The

Yaki Faitelson

so… We're guidelines, not The on specifically commenting Street

Alex Henderson

sound data you proven like why we any doesn't need to absolutely outlook us all? done? out. going a would won't there is you be requested give you Is to at in know what have the company There's All of changed that is have reason It the nothing ever sense of it. the

comment. So, no to make reason there's that

Guy Melamed

assumptions for larger the the the And at we You can And we're last numbers look subscription guidance portion an there's QX based it rolling the the globally, with impact. order have we've that -- see range for was including a to asking based of better six than year. factoring as significantly other obviously of gone XXXX, we're out this companies already was and on lot rolls what on when that been transitions globally. how in we're through see of this months fact out perpetual quotes most introduced get

Alex Henderson

Okay.

I’ll floor, the a last and one question one. ask leave me simple Let

it fourth X% full the us quarter, the quarter was What you the we year the didn't subscription base for year-ago gave but quarter give You fourth in was us the the was XXXX? fourth using? XXXX. and quarter. that What for of It should be

Guy Melamed

XXXX. the usually pilot, Subscription for impact and in was number QX second impacted we a of by we’re -- pilot. was really were but the it obviously, look low this only because introduced We QX and higher of single-digit that of the quarters when at all transition of QX pilot you because first part through Well, historically. us the the saw, that

Alex Henderson

So, X% for the year?

Guy Melamed

number. Slightly around that

Alex Henderson

Perfect. I’ll leave the floor. Thank you.

Guy Melamed

Thank you.

Operator

comes with your Stanley. question with Melissa Franchi proceed Please line question. the from Morgan next Our of

Melissa Franchi

factor saw any Is QX? subscription? deceleration, QX see there Or of simply said impacted revenue question. EMEA. taking because just did and that relative that looking Yaki, you the out a in it’s fundamental If was in just fairly you better-than-expected my geos? a for QX, rollout, at the to other you about in rolled Thank it adoption I'm you Guy or deceleration growth you U.S. in U.S. meaningful

Yaki Faitelson

Melissa. Hi,

we So we in It's mix we license of in deal, spite and and year. in of good do In high very a well America it very of perpetual pipeline level well. have is the believe that fluctuation, will XXXX good. good very will HX and that North confidence see do business

Melissa Franchi

Okay.

So transition? just subscription just the to was confirm, because of it

Yaki Faitelson

model the fluctuation the the quarter, have business fluctuation perpetual strong. from sometimes but America in in a -- Just you North of is

Melissa Franchi

it. we in And force. incentives the Got lot that then, Okay. a the about discussed sales you're implementing

the channel Can what the making working talk you in in with about You to where process didn't you're that and you're been feedback the has about onboard as subscription changes selling really channel subscription? are of the and you rolling out talk bundles. the getting them

Yaki Faitelson

one pilot you get we sell a they that makes for The because that the saw for because, licenses. renewals, channel deal feedback even you channel doing think then and it, did was of are -- than can the if six about it just them much tremendous. partners sense, more we them less It's the it's XXXk five,

nice it it for size every then and year. they them get was So deals

So of a for build get professional channel nice exactly points around we them, it's that subscription they are the want. ecstatic makes more to because time the is points predictable. channel about can of believe much and size services more this what much change the even business year a margin XX it, overall partners, the and more from from over we deal economics every the And sense XX

Melissa Franchi

Got very it. Thank you much.

Yaki Faitelson

you. Thank

Operator

with proceed question comes Craig-Hallum. the question. from next with of Bennett your Our Please Chad line

Chad Bennett

my questions. Thanks Great. taking for

or kind that have five, to reconcile the your bring came language to was value So quite bigger you it's was a issue just big of, not price trying I'm realm. a maybe why a the such from number you whether customers, you it's it death. and dollar I'm a to seeing transitions, at reconcile customer, upfront. beat the been per competitive issue. guys I pressure becoming competitive six, But But in when eight. license, position weren't just the products your if subscription the And year trying big in unique security used you're pressure to ago? understand a think one seven, of, license, space are pricing how look security I your, set to solution you you and more or out any selling that frankly value two historically there seeing kind

Yaki Faitelson

is two, just We model, licenses if in me. six are of I than prices example, between if in that an what No. to understand difference you coming and And perpetual have you don't competition the see you -- less -- three ever. front need

to illustrate, them buying happens, partial that but or the the user for just So coming shop to and big and they XXXk you issue value X,XXX need deals, them. what they if don't not And a then XXXk and they're automation. overall they you're ask get do to deal, get all products it's

times make we consume is to an an we can to didn't them just and XX saw have Price licenses old platform lot we -- the issue prices to innovated wanted in the of three because that last mid-market So how we adoption At customer. and XX, a customers cater they three to and this increase the want curve increased sure that we the wasn't in least just XX years. we can years. XX, get two, within it there,

So this saw. is we what

thing can can we a automation, saw products. then year. see lot for So and per times easier us there is that upsell, additional and when buy deal XXXk value we a they much more there's more just what easier another to sell you And to sell big realize difference ours much they it's need if of they many a – of because provides certain XXXk that a to product or that product hit

Chad Bennett

real quick whether XX XX kind within subscription up. customer was it's to just spend sum model went the is maybe down? just or customer license whatever has license you license guess think your or good think subscription penetration TAM of perpetual up rate I or you Do perpetual it went a dollar a with under your a

Guy Melamed

up $XX,XXX to been to to very it's went of $XX,XXX first note Chad, It of years. over think the $XX,XXX the all, I last from has ASP nicely XXXX. important that, up going So couple to $XX,XXX in

have months subscription allows So that licenses and they the ASP the is they more the perpetual that that what them has to lock the buy platform last the would've value during we done increase buying are What seen through model of to ran saw six off bat. in of And the licenses more XXXX, than healthy. pilot, the through customers model. we the been want very we

Chad Bennett

Thanks. Okay.

Guy Melamed

Thank you, Chad.

Operator

Ives Securities. line Dan Our Wedbush your Please next with proceed of question from question. with the comes

Dan Ives

Yeah. Thanks.

where perspective is or a So you mean, half is think from a I my ago not this maybe question something timing year ago doing say back, and it you're when year and more in position perspective say ago? in from doing it competitively? do could to Maybe a strength what timing it's versus about you're this today you just a year your of that

Yaki Faitelson

be it's customers, thoughtful we've cloud We the that $X this factor motion, it everything not to And and look time economy have was the is to and very, part. but that makes the lifetime the coverage was discount the a adoption make believe to sense. much And we the with did never everything and platform. right and works the way allocation cater customer our this of It extremely it. pilot. more the in about overall right a within and customer Directory the we base just the the and been the transition. we compiled time sense everything doing, just really the at for we And Engine we market of the sale, already and products of there's been to can sales we and clear good do scale, buy was how we we time, effective that, extremely We've makes risk a adoption we felt the of XXX how that have overall start DLS have effort covering value. sure curve, then it. need looked the time We overall – that about we we one are above billion very at evidence the market, understood from, terms well, overall the It Active can in be you buckets products a we getting We And very are the also is budget all a to converting, customer of the and need realizing just we basis findings in saw it – worked budget and that times, products that well just just the customers empirical curve. customers now. are to this value. Hi. security well. but done is well There model we Automation that the always products saw After is products analytics adoption is

lot are successful. it in a So understand is we of that, transitions there always always clarity strength – but that a lot friction be doing and we some can believe very of transition, with and it

Dan Ives

pilot Got ramp your terms you've program? I than of And you to kind or mean, of you What's quicker like easier say, U.S. sense just other do geographically on based seen the you let know just on what the do it. ones version going in be think the on the subscription?

Yaki Faitelson

From the And at did clearly the markets, the quarter. to transition both be answer of two we the same. we But that able this was question the will looks believe end areas two we pilots more awkward. the overall

Guy Melamed

And thing. one more just to add

upsell. remind larger very new pilot, underlying we saw well customers that transition, to saw existing with the the In much do obviously this well stronger better the subscription see, work fundamentals. with you with working the we And in very customers. terms through it just impact will short-term we the of We it but

Dan Ives

you. Thank

Operator

the with from Jaluria comes question question. Rishi Davidson. final your Our D. line A. of with proceed Please

Rishi Jaluria

brief questions in. for me taking Two my ones. Thanks squeezing and Hey guys. really

go-to-market? the the be the things and transition the subscription iterative going any got in releases sales Or to there is is, R&D plan? side First a follow-up. a subscription more primarily Then is in of product changes and kind development like I've

Yaki Faitelson

a primarily It's go-to-market.

Rishi Jaluria

then coming motion from perpetual subscription? and and not Thanks. least for as as deals offered the that offer even are license there's sounds XX% thing just licenses yet, cut haven't were going why like of this the both deals in but new off kicked is only perpetual, If I available the term? then right health customers new long-term, at business of only of still kind that And for outlook the the XXXX to essentially off understand be Okay. why very it perpetual term? for in existing

Guy Melamed

said want customers. cycle like We as the with of when six been cause aggressively deals we the to our nine we of perpetual. at you but to any can the are look many So in sales existing to is And some all, as cycle, move have months. subscription sales you and of introduced already first friction flight to don't as want

slightly it's deals, larger that. longer the than On

asking, and as give the along all way. learn the months. months So six to update more we're out six we're us you this we'll rolling is We'll globally through

Yaki Faitelson

said the and responsible five We and have with people. things our we're in also the public to we always are what exactly as disappointing only work to we have trying very not clear a very doing we're we're to visibility It's we business With can guidance of years of and company, that will predict they're the how that the good to it going this but play out. -- way is well, a just right start. high very a level confidence

Rishi Jaluria

Guy. All right. and Thanks, Yak

Yaki Faitelson

Thank you.

Operator

the turn the to gentlemen, end would to back call and session, closing reached for have management I like remarks. question-and-answer the Ladies we of and

Yaki Faitelson

would like the and I are their Thank customers you this our contribution partners for our of you. forward to success continued all all all looking quarter. speaking hard-work you for for Thank we to us for also like and I'd past to support. employees with joining and soon. their thank today thank

Operator

conference. today's concludes This

You you for time. your participation. your disconnect may at Thank this lines

Varonis Systems (VRNS) 11 Feb 192018 Q4 Earnings call transcript