VRNS - Earnings call transcript Q1 2020

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Operator

Greetings, and welcome to the Varonis Systems, Inc.

First Quarter 2020 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, James Arestia, Director of Investor Relations. you. Thank

begin. now may You

James Arestia

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

press release statements ending we under will under forth Forward-Looking and reports may make section statements to be During results more today in projections Statements, considered materially that and future a that our captioned forward-looking XXXX. statements. may securities the this the our results in we Commission. set call, from described and filed actual factors are to are of such federal our with related of risk earnings including Securities other June set laws, fully for important business these factors factors, Due issued those differ the number These forth in operating Exchange second XX, quarter

investors as all date. expressly reflect be forward-looking of release to disclaims or to upon made filings. application updates not revisions These our and read views subsequent any only statements encourage We as our our today representing as undertaking or relied of should to any views SEC statements any Varonis publicly any herein.

conference for at release, Investor measures call. press first Additionally, most in reconciliation be XXXX our discussed also comparable this section. can found A measures quarter non-GAAP financial which is GAAP in Relations the available will on be directly the www.varonis.com financial earnings

as call section. available call over that website the Faitelson. on are of the Officer, Relations to like note webcast Yaki as Yaki? an the well Also, Investor Executive turn Chief our updated I'd our in investor that, to With presentation please today's

Yakov Faitelson

quarter results good more happy you environment operating and and I'm first in afternoon, to you our for detail. everyone. today Thanks, discuss Jamie, with speak our current and Thank joining us.

are impact, safe to crisis earning are and First that and from any affected. economic foremost, been have this COVID-XX being evolved call hope with has different I healthy. global human held is and their loved under who encountered a and Obviously, clear our thoughts we has ones everyone with rapidly everyone circumstances before. and a

and I'm term. the which long very committed team, proud the of our Varonis running has adaptable leadership, resilient both which been to and for global business is the

months. taken I of Before we past the to outline X discuss the over environment, operating quarter current want we measures first and have some the

welfare is Our safety and top priority our of the employees.

taking since this particularly like good All and closed are customers, as a instances, the been interaction can so existing colleagues change are have employees offices Our working with mid-March, customers way, meetings same already our of virtually. this many operated been has is prospects. as A this adjustment with and the In our smooth It number for be. is place new. nothing remotely.

findings done convey as remotely. as we to the Our threats about XX-minute prefer just comparing face-to-face our what would able power the And are today's of will meeting, software certainly virtually. environment are reveal well be include can easily risk when assessment while of in our as we installation the

like. the we life expect to manage new Lastly, don't steps business. adapting prudent how in may taking can safe look we keeping to quickly we normal return what to everyone, the exactly to people new or addition know and are and when our to conditions, normal thoughtful the for working Like

actively we the seek always said, face, to tie with expenses revenues our management employee investment salaries have we and of beginning we the largest of across with a This greater compensated And senior level seeing the April, managing are highest exception In includes positions. the the sales implementing giving the of reduced key employees we higher with we reduction. that business. achieved. the organization, the decrease uncertainty As we across

it Board believe Directors The of be reduced. that is also appropriate the retainers cash

In and and easy savings collective were by the cost decisions. taking taken reflects colleagues, projects the examine I'm which culture strength the But of activities company. we commitment measures the from These actions. all to are have addition, inspired and not further our our to response team's

license recurring Difficulty] end a that announce pleased Despite compared our subscription than these before formally XX% to company more of transition. the continue to the challenges, XXXX of XX% business quarter is than less started And today, first were to transition XX% one the at our revenues from year, our [Technical are I'm revenues after in complete. subscriptions. and of we

the and the we to February first led start difficult, in mid-March, or in we pronounced, the and throughout momentum however, of trend across the customer continuation the more saw closing versus which impact January to strong the shortfall certain quarter, provided of board. specific pandemic with was Specific deals it size, This And we showed as became XXXX. more a not was our became in a In February. vertical had geographies. revenues guidance

market the is discuss we positioned operating our capitalize see. most remain I and current we much opportunity day-to-day, world to environment how to changing why I well relevant Given is think the on believe it substantial

current Let's environment. the start with

create than data. to and of when hackers that they founded protect we critical you home employees wants customers today, ever. As infrastructure vulnerable. to know for condition is Varonis advantage are we more protect And against help cybercrimes. companies sensitive who crises optimal data take We their And most and this know,

computers, the and infrastructure well as network world majority sometimes In on-prem employees from their even addition and as unsecured like companies stores Teams. stores XXX data from accessing threats the through Office working now home around home critical vulnerable potential VPN to these cloud and of the mid have actors,

our in alerting environment, associated in unparalleled is capabilities. and and is customers believe which new around interest unique we platform data infrastructure. many so must strong with and Simply protection, Our put, prospects have protecting investigation risk capabilities working threat employees providing and elevated driving understand our a remotely, detection data this

one even are or are most of encouraged a Security our technology the mitigate dispensable of of and shutdown the is pipeline. we the of help the stack, what by we areas a important our in security see most and total that breach spend of solution part threat one

conducted number reps sales risk of and have few our an assessment remote the unprecedented First, over evaluation weeks. last

to as are our into have traffic the time, organizations organic platform And and also well as as and as eager have our a same which primarily number significant increase forensics improve by system website, activities. protect As uptick data worker visibility we in been infrastructure use other a in to and access, engineers seen customers. the search potential remote tremendous data never At to we their a of and had well lastly, record of our our participants alerts in busier. existing has response and our teams, by incident driven webinars customers their threats investigate online help

Our have ability address ever challenges work, remote and been. with prospects organization attentive as than to help they customers more

is remained the optimistic our predict of disruption, when given demand increased be it as to and we that are timing monetized solution will for this ever. as pipeline strong cautiously believe the While the hard near term

enormous over of it our easier protected. opportunity Before has consume better how further about by been subscription want customers and Guy, more talk to the accelerated I the I for to it and call made the platform us front we has of position be turn have in to that

is to upsell X by further of licenses driving compared number see better X play. in initial We of under perpetual existing increasing number Varonis value X continue the buy or to the to of an in is important, continue outcome customers deal over a this much in license of licenses the our customers more and licenses, new average Equally the to the consuming customers. XXXX as adoption of the And X between the model. QX our for of greater course platform number evidence growth as

rates, with significantly underpenetrated meaningful remain Even which base, opportunity increase forward adoption customer for significantly company. within our represents in a the go this we

closely assessment model frictionless It completed common Given our both licenses, virtually is our ever be license of subscription from and are path and because see base. done transition, for code who have than of have customers our a get now we risk increase can we number to for the and exposure under we all that of the each purchase our materially all a usage platform. protection optimal to analyze license they risk for them license our customers,

for beyond reminder employees our weeks employees, together. for by customers to We started have largest dedication few go problems Varonis of and their unprecedented our everyone we some time. this intensified only know challenging of help above their willingness that particularly customers all to that past We And programs. in months, and of the has solve both customers our this the for a Empowered our in are life data made these COVID-XX. this pandemic this and protection

the fully confident the we can ever. our I'm customers trust that place to than us, continue this we value emerge stronger With from provide and in they

With call me to Guy. Guy? turn that, over let the

Guy Melamed

want Good plan I of I joining Thanks, majority time. guidance for discussing for that, first the our I'll we during and open today Q&A. financial Yaki's and to afternoon, Yaki. to safe this and our that before comments the thank turbulent recap the quarter how quarter everyone I hope business for After are opening today results you everyone. remarks managing echo the discuss well. we all is spend prepared second

expectations spoke world XXXX. you with weeks different for and we It's our clearly a XX from outlined when ago

about Our The the are company. to that the growth simply now, couple profitability was to a have expect reiterated those as want put last in in more any a bit provide earnings think at and the important And how for things and February, although to view on equally business. balance we to strategic of changed was which was we years, ultimately pillars color X of made of that we decision for forefront return philosophy, the I call us.

year perpetual that the side, with addition drive Two, components recurring revenues, X One, includes customers. three, On existing And start customers. expanding on this Let's in renewals revenue. new to which with licenses. lending maintenance subscription business:

the it new QX, and that to is while we in the end in near healthy, reflected monetize, point, of expect become challenging more the our term, saw customers from QX is pipeline continue to at which first the guidance. On we

X earlier, throughout As mentioned adopt we licenses on X average continue did see customers to as we XXXX. to new

customers is level expanding the the On seen side, unprecedented. our over from existing engagement past of we month the have

know, a you model. we opportunity the few sense a installed with and base, here of data expand As our to give you And land a have points. are

than and employees March or result on of XX% numbers the purchased of our XX% year customers. a licenses this that our XXX us to ago licenses with allows more product base, confirms much family which focusing of our X remaining purchased the addition we XX, to compared than our year revenue to has we to different had of our move portion to have have X through XX% in of platform compared from in position As licenses the Please licenses how number currently of regularly. customers a XX XX% growth out or increased instead, offer And more of significantly keep in completion or the strong The finally, mind year are uncertainty stronger transition within a these a demonstrating the of we ago. ago. we is as recurring even metrics potential time subscription the the And unleashing a opportunity base. the individual reported more of this

our that customers of and year continue same QX same additional XXX% denominator ARR customers from this looking net prior our end end the on numerator more to than licenses renewal of still as based which healthy. when the the higher dollar-based set grew current and And remain rates at XX%, retention to customers. at of subscription of subset XX% provide as is the calculated color important of of perpetual maintenance of be and the period of is quarter, a all rate, subscription above ARR and using of the period enterprise of

hopes, this QX more quarters these Taken say transition when even a together, aggressive we XX% our is our exceeded XXXX, XXXX. in that understatement. recurring to revenues huge last X the doubled initiated than have results To over more than in most

change efficiently greater acted regarding and strategically quickly expectations lower thoughtfully reaccelerate near-term when continue the to the bottom with on comes. will we Given while a in positioning top the line us line. quickly to in our operate the growth Doing growth, last at expense to focus have weeks, allow us levels, so time several

given we measures the and the include teams current our of some of possible discussed reduction reduction constraints. Yaki operating and part as hiring, implemented across opportunistic which as be board, challenging as have salary to expense effective our innovate

requires environment mix in a dynamic XX% successfully subscription business of and that navigating that this to X X% believe We critical quarters. skills decisiveness were adaptability, a in just the from same taking

Total revenues to now turn QX our were $XX.X I'll results. for million.

subscription Maintenance million, quarter in revenues revenues or with included at $XX.X revenues First million. and XX% were license of were services our a million which $XX.X $XX.X line expectations subscription mix.

Looking revenues XX% of revenues Rest at X% revenues. or the were million $X.X of total of representing were total $XX.X business geographically, million, EMEA, were North of world $XX.X revenues. total revenues revenues. In XX% or million America

subscriptions representing to the quarter back quarter reflects statement, the point Turning of the revenue. for be out XX.X% going margin discussing as gross XX.X% well was income XXXX. to non-GAAP coronavirus of as to a like forward. the profit higher of impact $XX that results first I'd million, I'll first from compared Gross the in mix This

$XX.X quarter first the in expenses million. Operating totaled

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

also despite the due above. operations, just quarter we out I'd operating environment result is point of below COVID-XX in first and to lean shortfall This proactive and a expenses the generally new in to our our like low to that discussed revenues, approach lower of guidance. this operating came our end that moderately disciplined in loss our

During the $XXX,XXX, financial approximately due quarter, we income of to primarily income. interest had

XX.X or for diluted of of for for was basic a or quarter and outstanding to on loss outstanding loss XXXX million quarter for $X.XX the net of basic is the of net diluted loss compared XX.X of shares diluted QX and Our XXXX. based share $XX.X per million basic first million XXXX first and loss XXXX. per million diluted basic $XX.X This QX shares a $X.XX and and share a

in despite balance transition securities quarter We current ended which The short cash, term of our year, the marketable and levels. of meaningful strength provides $XXX.X the impact million in support with are healthy equivalents, cash deposits, the last the at environment. business sheet

we to compared the Through million operations the generating from million same $X.X operations year. last generated period cash from cash $XX.X quarter, in of of

to cash As are continue value and therefore, collecting under we a on see contract subscription, on short-term amounts we reminder, flows. a annual impact

more However, to begin from once lower a we operations. cash which cost, ramp, we generate have contract renewal see a subscription to significantly expect

X,XXX with XXXX. XX% increase We from first the of ended the quarter an employees, quarter

approximately decrease term. we mentioned, already near slightly constant in to As expect the headcount remain or to

our guidance to quarter. for the Moving second

total expect million. $XX million revenues We of $XX to

in recommended the QX shares remain our to currently $XXX,XXX $XX net and We diluted operating non-GAAP expect quarter. to our non-GAAP loss and $X.XX basic to the a and The XX.X range of million the orders negative per shelter-in-place revenue basic million $XXX,XXX assumes outstanding. $X.XX. assumes This range of and provision end the of diluted in government-mandated or tax low for place effect negative million that in will of to loss between share $XX range remainder

to points additional some consider. are Here

aspects while to more also model. is compared our current recognition to rebound a should of allow the ratable First, business revenue us front-loaded headwind, revenue it rapidly recognition

that higher Second, a anticipate mix mix subscription please revenue. headwind keep the in will QX was result subscription the mind in we XX% this year XXXX and to

the of measures we expect in what above. range we as the XXXX in CapEx call last the in $XX part lower be Third, provided to that million million of will than $X slightly we discussed earnings

XXXX into is we most hedging locked, already contracts. And for locked rate rates. took advantage And of our foreign lastly, favorable hedging currency we by fully in and handle volatility XXXX at exchange the more entering of while

time responding and the us thoughtfully, to The decisively weather allow to time growth the is away which from In reaccelerate volatility, the us near but in only company different. will not no prepare actively to comes. shied the we summary, and past, will term this storm, is challenges have not when also

Thanks and for and you ones today, remain us we your loved joining and safe healthy. hope

we that, will questions. take Operator? to With be happy

Operator

[Operator Instructions].

Brent from Thill comes question Jefferies. line of the first Our with

Brent Thill

And if big I the just you cycle of secondarily, things as is just if view in happening then just renewal year in last what you April? stabilize your curious are entered of us new at give from comment March? the you you a renewals was the from model. on first end And demand could could seeing

Yakov Faitelson

question. Thanks the for

solid had we purchasing saw March. and in very So completely patterns we a different we April, saw than

remotely, to that the -- and it with March, the what VPNs adding So working what buy the have VPN stationary set they trying of up environment. of had getting capacity software. After the network, just compromised They I that machines, unsecured saw of these they amount configure usage weeks risk. said, cloud is customers way acute pipeline, from that this the and to us of and the capacity of lot different pipeline. massive environment were in -- for call of accessing just configure amount of a sometimes People in workloads, happened tremendous access but they slow this we this heaven to And amount And more they but needed a rush cloud our risk. VPN were application -- is saw last work tremendous X we uptick applications can The great with XXX Azure, a patterns. because is massive to of We in cybercrime. but and software. a cloud these as completely introduced the

record just the as after but we bought these healthy pipeline April, April. keep customers renewal we very and solid a and And X progressed. and overall, And to in we saw months more we very our more So started enter rates. as a had seeing weeks, said, started this buy to I strong

Guy Melamed

we're which, see on our customers Yaki We pipeline to a the And enterprise a companies, data shelter-in-place, Because was March was loaded. work-from-home, couldn't the said. material didn't to the worse want as typical caused the was back-end some signing other a disruptions. significantly think And the Yaki that, a I for at business similar XX, said, but end of that, there then the kind of really was POS. same us. time, up just because March points as result, deals, When you started the color subscription transition. it you So at time just month, it quarter have at to to we patterns switched started give huge disconnect add And what everyone came, increasing. software around headwind look from purchasing which of slip despite on for some closed and when April and

So we're is encouraged a of part the by we're overall, the remember, still April month. But optimistic. quarter. small But

of expansion the renewal for base. we within been to we've this the terms a a of of And a kind quarter And the theme kind sense rates, NRR. provided is time of we first discussing long wanted this In provide time. for our

as business to much wanted we is while operating kind of we we're pleased the than information So NRR was that sample, what mentioned give with given we're the possible, small this as greater environment. about And seeing. And a XXX%.

Operator

the Capital RBC comes with Markets. question next Our line Hedberg of Matt from

Matthew Hedberg

work-from-home, a the you the little I Can the your support product. time, of a be these right you product Teams, right how like days. that Given imagine right demand relevant is driver the guess that levels I might at seems right for like in in bit higher supportive particular, product the of it about super particular, guys? it's collaboration products Microsoft talk

Yakov Faitelson

Matt, yes, us. for massive Teams is

it But client pushes walks like collaboration. a online. that and essentially, on SharePoint So OneDrive of it's a top a product

to hard very permissions. it's So manage

-- in overexposed, of But critical are lot data. everything XXX. there are not a only so You

other and for data So OneDrive really to critical related very But thing that's up are well left. and everything it's SharePoint right Teams is and that Azure. works huge opening Online, Exchange, us, the Teams

open that's workloads, from is So And what there world. from and of the a going domain. you attacks there many are the you this lot for to of machines you lot these on-premises. RDP to see the connected And see and the on-prem to are the a cloud that on-prem have

drivers for with data. ever, that going and more very our are than is the XXX, cloud We've driver and that's feel Azure on-Prem everything we also strong So than just just huge the demand cloud seen for we demand in Varonis. even support more Teams are a relevant workloads in

Matthew Hedberg

particular. looking then terrible to maybe imagine, I great. but along And et taking out line back, imagine members, but situation, have step of from cetera, -- have seems Have lot importance kind data just have to -- of but had in obviously, virtual That's well new question, board all high and like it overall a a is like folks this, for level, a like your this new a have CIOs governance, of that same COVID I the executives, on call, seen is even environment? of record maybe net But thought you never meetings. just you've you it's product inbound seen you seems suited it would

Yakov Faitelson

product is search. in cases massive increase three is use extremely these The And just that the from website, see what working primarily well. overall we to traffic organic in

So people something that understand. is this

at overall what are to in that kind we at thinking, think shouldn't environment, Clicking they're what for click. to have and and configurations technologies on There are Because people protected. very it, ransomware nervous online. there doing processes that protection, they in This really lot be things, fast. looking security happening if I is order are attacks. is need the of of look heaven every very they do are time cybercrime. record amount and and Everybody this are of in data a you people

and this relevant adapt extremely technologies are we they to New need that environment. in

advanced that in So security, that protected. something sharp benefit This is then from. the to everything we sophisticated analytics on-prem cybercrime be very cloud, a teeth and for them order bypass traditional regulation is really easy this very and you need of we it's lot see that data and very in to with very

record short monetize it it of will in So and we know also, see with clearly of take term, how customers we pipeline thing product. lot will and the be licenses and of usability to the really long us to it hard we just the it. get in lot see pipeline, we of many a see is will And this see that a the benefits uptick automation a realizing they're but that other tremendous

in short -- every we positive it. it's of don't had has will to deal lot take so term, also see how And the long But -- you us, for we that a a know the it but very So monetize -- it's of far, the we champions customer that to scrutiny, process, are with lot and the and how even people that it it they Varonis, using through they when take many scrutiny, know justify times, see approval a is online. April.

Operator

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

Saket Kalia

Yaki, for you. maybe first

was a of you're talked bit percentage so little bit you You pipeline the time here, actually risk on about ultimately shed just And particular more little with business? products the what a a result done, many driving in assessment in? broad maybe light how building assessments does maybe interest particularly seeing risk brushes, just what could

Yakov Faitelson

Thankfully, assessment. Okay. our Most important products pipeline through XXX the Saket, coming Varonis, always are these a so but definitely to deals related first, Edge. in to we we it's risk risk as and big see in uptick of is everything assessment POCs. count very what all that understand through working,

to and teams the critical infection, everything on assessments. you this remotely, Edge very everything veteran monetize from how which in else but related kill it doing. the accessing and working are short terms doing. we this it. looking this can threat compliance and protecting use that to record the crisis, in They going these automation, teams, attacks. DNS, small our of are lot of high customers it, are they that and proxy in of closing not are a the is using only data of the they using data and have is product -- said, is we a -- also that data visibility. I and reconnaissance, related extensively, lot over privacy -- Edge doing it the they experienced tell of X detection So for is a is just supporting lot that it and access testing And term, the don't remotely amount I POCs appetite is all everything risk expand. there don't Varonis of percentage is understand There you we as that and just lot in in just configuration quality how lot term. how just this But And a a data and know data cases Everybody and chain you I exfiltration to But And from the something that and protection, they extremely XXX response, streams, place. COVID in of are a and they to see and are short are VPN, of is depends of and

Saket Kalia

the forward? that Listen, not? future Got business Guy, range ebb perpetual the returns going flow XX% number for perhaps you. you and maybe it. Or maybe follow-up in could is, do this for stay or of great mix I to in That makes as sort sense. my the was to see. guess perhaps this question expect the

about well, forward? going you're also about getting was what Guy, metric how sneak And Can the it could I just in as If a talk thinking that quarter? housekeeping just count from you this some customer investors. because question disclosing I'm

Guy Melamed

Saket. Sure,

I'll account. from second question So start on your customer the

no enterprises. We of more it's judging quarter, strategy attrition large have disclosing of not now the longer last not customers kind than is against we customer And while new our at did as the progress the simply because an engaging in adds, we're issue, of helpful XXXX. we mentioned end

relation to in that's So that.

plus that XX% for We a year from of the XX quarter-to-quarter. mix, in subscription for percent. said the us. the QX won't change at of guidance of great at terms the was In number the of coming year in kind We the beginning beginning guided at we

plan insignificant and as we're see, to that us, the for plus kind leaving that's perpetual for is XX license it we really percent. But becoming So how you at continue. of can

Operator

Our comes with of the from line next Franchi question Melissa Gorham Morgan Stanley.

Melissa Franchi

deals threat Good emergency activity from maybe to that everyone. that weren't of looking were did spending and pipe as shore for that there remote you budgeted to detection secure was did for? sort this enterprises some deals, a and pretty said the the were just were up their solid projects month, of Yaki, say April kind already was slipped really March. in that to April see healthy capabilities hear slipped you Or workers? deals you just in any from But

Yakov Faitelson

add First, it they capabilities, -- that is remember to to some lot small were Edge. XXX It April to but budgeted, both. still they but of both, a it's sample, projects dls was a decided that important or was added the

that capacity working risks workload in sure with all make applications from XXX and of that come just increased and a VPN the are the Azure, they from definitely, lot in to home they this want So traffic with protected.

-- everything. it's it's So just

Guy Melamed

And kind to subscription Melissa, to sales. thing still in April mix in April, When look is XX% even XXXX, a XXXX XXX% you at on with higher just significantly to remember year-over-year subscription April close that. growth really license of from one mix, that to add I in want approximately going we saw

small Yaki small still particularly environment. a the number in this quarter, but It's said, sample. just So we're for still pleased, like a very it's

Melissa Franchi

Guy. Okay. Great. And then a follow-up for you,

would potentially place. I'm on going end of to return we that freeze the requirements lifted? and the at be freeze to You a that shouldn't just potentially, happening contingent half that was wondering if is mentioned that if be year, year, the is in second normal hiring there shelter-in-place of the just hiring

Guy Melamed

of to we've we're and be ready talked quota-carrying our prepared kind expect to tried opportunistically because the achieve. is hiring, the of always to thinking in when growth to we level reaccelerate to of we And the we right. time hiring of revenue reps level want tie So that expenses about remarks,

the very we're So the but -- to the also line, reaccelerate we when time is on focusing but ready on top of focused bottom we're line, kind right.

Operator

question Company. line with & comes Our next Alex of from the Henderson Needham

Roger Boyd

This your about is bit Roger risk I upsell the made little Boyd remote very comments your new customers. talk implement activity you and existing to platform remotely? nice on on for and business assessment and to wondering, ability was a Can you of Alex. close some shelter-in-place

Yakov Faitelson

Yes.

assessment of most the is us, done For risk remotely. being

is this new. So nothing

for usual this in -- the on-prems terms now to Azure, a is -- or us AWS. install as So in is it's cloud, that in business this

it we is doesn't anything. our this change really how risk run and assessment, So

also many And also remote so effective. far, that find so times but far, to customers meet are face-to-face, we the prefer meetings very we

us, for as by and So business usual. large, it's

Roger Boyd

I'm of that at EMEA. were worth kind wondering if wondering current effects of COVID of geography. more in in It seemed to subscription. in show or that anything like what calling the I'm effects then the headwind just continue out great. or environment quickly, And Okay, Europe? macro looking adoption just they were of that's their delayed

Yakov Faitelson

and it's said, we As close Guy in happening subscription, also XXX% to EMEA. are

now are This are we teams subscription adopting the We business. how and sell it. is a EMEA

And so good far, in April, we also in saw results very EMEA.

Operator

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

Gur Talpaz

in of environment? could the hoping upsell bit on remarks. initial in frictionless not in mean, mentioned in upsell you deployment Okay, a expand actually you you Yaki, that. your great. ability, I deploy to notion but the this are seeing was I to prepared just terms what failure of

Yakov Faitelson

that one that are see that see doing, have we -- we want just customers -- on we so everything. No, the to everything

just with about alerts. we the our giving are So enrichment think that

if a data to the understand and what to payload. and critical you they they VPN, from after is You are to coming want if they're want surfing download how want understand Internet

see coming protection to compliance. on-prem, to we from on-prem same So with cloud, the attacks cloud the the and data from

but content your OneDrive and and You have and the same is SharePoint files NAS on Online inbox. your on devices, in file shares

you in we So that see to just one make want order have to standard. that sure

compliance, be and to protected detections to to be the be to need and platforms. So all very you good on have in

sell much that with to with have going we the tremendous over So us are time, lifetime platform, that the it's value. for customer see just overall believe -- we to easier results and think we the we subscription,

say we just and spend more are a our that also and platform play to strategic, we have they makes value. how we much very what clear can sense ability more. solution to to buy and have is time just more evidence much with all So the this becoming customers, that customers going they have more demonstrate attentive. the call are are automated buying, It conversation. and we the more full-blown now, They The good path

and lot initiatives a key for without a effort, value protection customers. lot of data bring cybersecurity to our of So

Gur Talpaz

pathway migration or of what you legacy given that where business for to and quarters you few And about a the That's migrate license over helpful. at contemplated today, might Guy, we're have look and the mix thought subscriptions have like customers next to years?

Guy Melamed

talking the kind their existing offer customers simply subscription. our of more and to the license numbers if licenses, So go of And additional the and do and continue quarter or licenses, buy. and existing buying we just transition. try we them or nicely the about more legacy have and above,that to as year. customers back introduced part really What convert number don't increased have you're of users of they they're last X additional already KPIs is the XXX that is that customers, doing over the We and X licenses to this subscription one licenses

are nice how more, XXXX customers increase can licenses, the within the utilizing On XX%. this platform, quarter on and we licenses to the unleashing X also shows XX% to that XX% in really X And but our went really it showing more base. of from it plus the it's and X much QX or existing plus licenses, customer that's XX% how went a sell from potential

Operator

the from comes line Shaul of with question Eyal next Oppenheimer. Our

Shaul Eyal

I any hope Yaki, Or note? discounting as fine. steady worthy everybody go? solid, trends, is unusual of we ASP

Yakov Faitelson

times, point, and win. customers value. organization many No. but that no. we At realizing up are for of feel this they're when scrutiny we a within win, We lot we deals, And the the see getting

the the on we to feel COVID, need special is there you day-to-day, report. obviously, but So nothing that

Guy Melamed

beginning but having sell quarter discount the company. a higher. they could they introduced note. get at of that's the if towards And the concept to perspective thing penalized if definitely for better we in commission for both more a from the retirement helping the one at where is and the just them make the thing, XXXX, right discounts, reps do Shaul, significantly And reps

give So just that to color.

Shaul Eyal

Fair foreign enough. it. exchange. And on while, maybe Guy, Got it. Got

versus some the of quarter, third shekel. gain headwind, recent you to or a the swings some in actually week those did dollar were down you this the of you think half a lock probably specifically I a given weak -- the little bit rate for the So second seen, we some able have really second, -- And U.S. a of that have year? little for the of of March, bit of

Guy Melamed

So the taking XXXX. answer is actually there. yes. to But spikes those locked were We that take of in able locked, and that of was was remarks, currency part volatility we and of place the prepared the advantage some we

kind already closed year, and our the in it our XXXX we of exchange, the Our foreign entered place. of was when hedging already guidance part was first

the favorable volatility us rates some helped So in for XXXX.

Operator

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

Chad Bennett

both back a going So it. of just on Guy, make percentage, to NRR we're sure that's basis? a and dollar The on recurring subscription to just combination clear XXX%, the maintenance

Guy Melamed

So of of but customers period. by me that denominator a end of the same current first of same The of definition of the subscription the customers all we definition. year let from the as period ARR the all, set that of as it's start higher is XXX%, than use numerator and prior subscription

this So number of include maintenance perpetual. doesn't

metric our a base expansion that tries of selling purely kind is the this of to show So within subscription.

Chad Bennett

today. attach of over penetration rate would highlighted obviously, when heck last that lot product metric and introduced, of a I the I just the be have than we've percentage year, guess thought and another you higher families, different a I'm curious, So would XXX%.

Guy Melamed

was small which with in and right number, you includes that it's the really only seeing. quarter second small sample. of XXXX part rolling one as pilot globally, a that we need is So is part the we're what while the one this Chad, of is of pleased now, did a NRR XXXX. very we're QX remember, full sample, It to thing it And

Chad Bennett

Follow-up.

couple of in weeks Just the terms in of March. saw the of last weakness you

what of a I there of or in you you new whether it think deals. spend are equation? mentioned and other pulling guess, piece was general net also? it that was hurt combination I just the that Were existing back slip was customers, that

Guy Melamed

a coming end I of QX the for the really do wasn't typical last This I X with that with problem at the weeks kind of the -- us. before, March, really Like had of had to we quarter customers think was worst shelter-in-place saw of we time said the end the of purchasing kind for pattern growing a started some the come was close. pipeline that discussed -- saw in slip started But and deals before, really it us, back purchasing patterns. things signing, the was as and we we that disconnect seeing there was between and April, we

Yakov Faitelson

amount projects It to into up as make remotely. as these customers just work up because we time, buy they scrambling sure deeper be that by and April, was at April, they some deeper just we out And of to into this tremendous -- keep risk. set customer of The of all needed got more And the this came -- brought they set same some that to to kinds rushed purchasing was protected. were pattern. to are

Operator

Jason the Blair. line next comes with William from of Our Ader question

Jason Ader

of creates strategic Guys, a could view even it long-term priority see organizations in more we think with they clearly you the some compliance these in a the list do holes. down of unit, mood, priority? short-term lot in work-from-home But companies the crisis push if is compliance

Yakov Faitelson

tell to doing protection. are hard now, is cybersecurity around and the but we what of data It's a lot

the compliance you many are highlight -- so does, in just sometimes have is happening mitigate. need it compliance What's it So there and environment you to this is cybercrimes. what that risk that

hackers, you a have lot You APTs of have malware. and

the another data. that many think data fire, uptick going in are and you that sometimes you I shouldn't People doing are organization's doesn't And so that they are and sense that tremendous see can the that they afraid they accessing rogue things is that make employees. will see with ransomware. thing get

to business. a in And employees, to your data demand. So still, your in to customers, belongs your business to it to have if you order driving that be everything is protect partners, you need

-- more will be the think our reason are customers time. don't demand will we compliance regulation any soften that the So than it, with evident because that is any it postponing doing other behind merit

Jason Ader

forecast just this little at the cycles you pipeline. you how obviously, contemplate great. And Okay, longer guidance, because Guy, good quarter this on sales sales you do with point, came a up you a did the have maybe bit a background as more cycle? you assume -- Or

Guy Melamed

consideration So But some QX. anything We every there QX. with to the yes, didn't we -- building did the obviously, deal, into and that sales scrutiny when moved cycle. of higher we that that's place we see were taken in consideration took slower and guidance, deals into the take

monitoring closely that our guide. take QX and So we're we it, in into consideration did

Operator

comes question next Our from of the JMP Erik with Suppiger Securities. line

Erik Suppiger

much a of How difference affected with to work Has made it there? partners? ability COVID-XX your has channel

Yakov Faitelson

No.

remotely. doing I think our -- of the We're installations most we meetings the that doing remotely, work can partners remotely.

So there change no there. is

Operator

of Our line Schappel Mark Benchmark. next question comes from with the

Mark Schappel

my questions have been answered. of Most

far the this year Just one, Yaki, releasing? front product development what as expect new as on we do

Yakov Faitelson

talking but more streams customers make is classify thematically, We with are platforms that the the call, we to of innovating. expand within about do that of to to we ability all and provide automation, are the value capacity the customers. friction sure very value to now reporting. is just of spend reducing interesting -- constantly coverage have to of with all just cloud, This with them ability coverage almost and there to direct that time us more And the us bringing the the the we're that not for to to bring compliance environment their more more data we want see more the and we buy correlation and and we with new our

more sure regarding that. is that make they can we just to value doing are So what with realize

Operator

question Daniel next Ives line Wedbush the comes from Securities. with of Our

Daniel Ives

Yes.

logos? base. environment, maybe challenging just And Can new so terms going raw versus after talk -- I this in tactically? mean that disburtions from X to about in just logos, obviously, just I So license X X, about of more a mean, just to in new talk much the you existing from X customers. perspective,

Yakov Faitelson

next several years. Then the we there are in Both are changed more are One, X doing things happened. subscription. years that became we us two Yes. relevant priority last in X, but everything the a for the significantly

more path a more consume give significantly we So really significantly our customers to to -- licenses.

map where also a realize can practices all strong call stakeholders. it value to sure make every We deep we and PBRs the success months X is, we customers that to understand provide sure all organization, that to very value, the to customer built value the customer make

means install cloud, them have is we underpenetrated, protecting are that big protect and we will So this that APTs need it make to that cybercrime. that sure and the from in it's we we everything, but base

of them terms a us but to So important also new X, XX, time, to we make But want take lot time it's very of us the with to and with sense and bring to XX spend for employees licenses. lot a at spend it's above sense base same the the it to in value, with good customers, customers. for right be customer the time structures them. that Thousand overall make of lifetime

to value. So these well for lifetime working customer both it are be -- high very us, strategies are very the customer, for needs but we aiming right and are

Daniel Ives

follow-up. just And a quick Okay.

roll especially from maybe day-to-day, about when meetings? talk you line, of goal just this this over perspective day-to-day, So terms of accelerating. the comes June sort do just in as you can't your to is do just untrusted Like from I the calls it the a find a sleeves, through mean in in team walking environment. environment, just in person you up customers can when management like customers like getting

Yakov Faitelson

I all value it's Yes, to customers. delivering our come think that to

then And buy value what Our they to first all priority understand team and do. about to is very them it, to then sure safe, giving make the successful. it's everybody customers the they is sure but make and making we once

what is are we So this doing.

very remotely, far, we're working so doing it's and well. it And

Guy Melamed

got where years a said trying they've to as help very closely IT, been from helping. they've so and XX can. walking as that we seen nice customers the time, supplier And and in Dan, much shelter-in-place customers we never crisis, during And during some we're really notes the

Operator

line next D.A. Our comes of question Rishi from Davidson. with Jaluria the

Rishi Jaluria

ones quick Two here.

why of well back you're touch There's to decision, ahead. that help wanted given you hiring you're big freeze. us a on can maybe making I understand Maybe investments First, dialing capitalized. the opportunity and the better

things back bit bounce be and is once of normal, return kind to you to think open thinking able general offices to should start start to I little quickly.

very the in So why not R&D keep at the product a side? the foot accelerator on on least

a as you're payment from any just looking follow-up. if seeing for customers, or be contracts? restructuring behavior quick And changes our it in extending terms then Wondering

Yakov Faitelson

we management said, want terms what's always it's see revenues. is need this company. case-by-case are business the on basis, capacity of hiring, and to -- unknowns going are that you we just partisan, make In your some just philosophy, we Guy as tied a here, But hire, within have expenses to sure your on. the And good there a we to --

going and see are we it's gains And or in just to gains. products. going are how going the we that market have harm to anything, we what's believe the want we have share investment work and to clarity, to productivity just -- that want develop in not products is new we expand. how play to really we But understand understand top do line out. to we our it, this the the not we on, going to ability that more going take the right short-term Once So going situation productivity is and or COVID to that

just unknown. feel that I think to that feel very good we going going the hire. that the prudent. capacity that just And need lot we of company. very within right decision. this we to And places strong are is be hire, there is we and We're In we a to have

Guy Melamed

forefront at with us. balance your need for of the question, also But second a our to the is terms with the partnership In customers there's running business. really really,

trying customers the work think the a we're right to business without needed I good way. and with the when partnership of doing keeping So impacting job

Operator

call queue. remarks. in Arestia closing for like further back the are questions to James There to I'd no hand the

James Arestia

safe So you hope thank you we speaking and forward look stays to all We for with your everyone a Have today. interest good night. well, soon. and

Operator

this teleconference. your Thank you gentlemen, and today's conclude for participation. does Ladies

your have disconnect a lines may time, wonderful day. at You and this

Varonis Systems (VRNS) 4 May 202020 Q1 Earnings call transcript