Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the Varonis Systems First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tim Perz, Director of Investor Relations. sir. you, Thank

begin. You may

Tim Perz

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

considered second our During statements this future make forth may securities a that factors, results such including under December forward-looking call, full number be laws, statements related federal set actual to in statements. ending may business operating would to XXXX. results quarter we projections materially year differ Due those of XX, of for and our from

set are earnings these in Statements, more Forward-Looking to that factors press section under all filings. encourage factors forth and our read today Exchange filed These the the our investors risk release described the SEC important in Securities issued we and with Commission. captioned We reports fully and other are

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

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

Investor on a is that webcast call note available Lastly, our the website in section. today's Relations please of

Officer, Yaki? the like to call I'd our Chief to Yaki Executive over With turn Faitelson. that,

Yaki Faitelson

initial happy journey. about afternoon, and Tim, the share us you transition, to adoption XXXX ongoing everyone. the I'm performance. to SaaS we discuss our Thanks, excited feel joining on by progress optimistic our SaaS SaaS saw first quarter our good for and Thank

our us quarter expectations, of transition the with provided SaaS exceed that first start continues additional working. SaaS to results. our to reception with points Varonis So let's quarter our to proof this is The and strategy

mix in of our XX% $XXX.X of time, revenues cash $XX.X below the million. XX% $XXX.X our ahead Our to near-term as same year-over-year million. remains guidance term. result, million at came impact economic the XX%, reported We flow to quarter customers. grew ARR and long of At first SaaS where and continues can it slowdown we a free for our believe over the growth well be And

has in but seeing and still required of all cost deals scrutiny being environment just and of where to is faster an value, infrastructure America, operate. total are additional drastically headcount to related Varonis time North reduced at a Europe the overall on with SaaS Varonis because time the offer spending customers scrutinized. We SaaS lower come ownership right highly out in expenses

QX results pleased SaaS with the are updated backdrop. will ARR detail. review the And more and mix we difficult are in we our only and guidance. in our We are quarter raising year, despite a though into the our team's Guy performance outlook macro

at its we its bad more talk the At to a down. visualize from safely to who of the lock for exists has remote while growth SaaS sensitive cloud that of company the we people. get collaborate is our time, companies asset I most remind the and of and you And to customers, This important the about securing next locate prime I value Before a helps data target because usage automatically the companies importance, only hearing same why control. The are progress has rollout from same managing and is and it most what device want problem more it has challenging. actors. out made and access the data Data time, data to their Varonis of Varonis risks. is allows data, data, solve.

Recent to become from data events they it's of sensitive that insighted how but obvious case, In can outside insiders, either and compromise our attackers solution, it system data ask made without protect a less hard risk can when obvious the be contractors it they person. employees for than of always should.

some who to that feedback SaaS. are hearing customers of turn begun the from let's using recently we Varonis have Now

spoke Investor SaaS Day As our three last get and quarter our a reminder, I benefits key about in our from at March, plan. customers

incident to with proactive costs. customers First, is our and effort third, response.Second, an easier are And significantly much less remediation is maintain has SaaS infrastructure with easier automated deploy much and upgrade. SaaS to protected better lower

I Day, expect larger three to over At shorter two sales realize: three, we margin that one, about spoke benefits Investor our and lend; benefits time. cycle;

chemical visualize early. a alone beginning is So already they manufacturer employees that suspected data benefits. X,XXX customers them. evidence are risks, with to data. to SaaS, who to these it and overexposed configuration is it had our installing had access remediate still specialty to found But One example We as with issues company that difficult prior let of a see Varonis and

company Within first day that were anyone was and to on even to that to the see Internet. open installation, sensitive the of expose them open sensitive enabled Varonis information the entire files

been ends. it enough. link as team, nonstarter stopping security was scale not Manual visibility wouldn't does a and remediation this have For alone its never

and Varonis, other packages meet ransomware remediate that Before to their they their leveraging part use multiple Varonis the this classify to Windows on-prem XXX deployments. SaaS in power successfully point XXX.In lack purchased in did SaaS end, of the importantly, Microsoft to automation has most to Varonis and allowed protect installing tried the around not links automation, of has solutions due needs overexposed Microsoft team them with alert PII,

access scale. the analysis that does data was and XXX largest company links architecture its remediate shared see without gap no collaboration. not understand convenience had a no on country's They breaking Microsoft to also with who environment way Another the in could example was in links it's anyone and one days, security operators. XX and store is older to old can than their and locate of sensitive Internet way at performing data on This realize fair there to

at bringing manually were to overexposed but Prior they but is and these real proved ultimately these response unsuccessful. this, proactive organization trying intense time incident be functionality using us they address only Varonis, building to in, gained our visibility team problems Microsoft's into to ransomware this links. encrypted Not locked Once installed found network. attack and files bad identified immediately that that the and data and a of a had bypassed look the out, live perimeter networks the were actor incident. their A customer we number on but the we because being on stopping we're technologies stopped

Varonis simplify What a much this infrastructure spend maintenance deployment. for the and streamline started project more. process customer allow the Windows This of into and which to expanded XXX, Microsoft procurement benefits of response, realize classification the data purchased the them Varonis as proactive with quickly incident ongoing

convert SaaS In addition, quarter. this new customer existing wins, to we several Varonis also this customers had

conversions was XXX XXXX. became Fortune at a of insurance first, and company a One these customer in

and licenses Windows, Online XXX, SaaS subscription as on-prem for data Varonis into package the and prepared leverage a Exchange Director and Microsoft purchase Active discussions, SX. for center after SaaS. multiyear wanted for power on-premises to migrate its the Prior well XX plan DA We of had mentioned cloud renewal, renewal, to the as AWS they to they the Varonis renewal customer our Cloud

this upsell, increase gives of recognize our of a us model. an As and than additional greater in result conversion XX%, ARR we in confidence which pricing

have geographies well are they expanding environments JIRA to in Europe protect as our in into as We discussions additional Salesforce.com and Asia. and

of protection optimistic my is the customers. and In with which SaaS about conversation me resonating, in is clear it customers, automated leaves Varonis outlook spite the of impacting that is our slowdown that our simplicity economic feeling

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

Guy Melamed

Thanks, Yaki. Good afternoon, everyone.

providing plan today XXXX our year and color how to our quarter first more our addition customers affect business. and in time transition our performance the to our In economy SaaS I to focus full turn, outlook, on continues on and updated my

the year. about the means We QX encouraged what are of during team and with how are the this performed for rest pleased

in of do, pipeline we seeing, work our our reception guidance. mix full the to we raise and ARR Although year it and of the early, confidence allows SaaS a ARR our force, uplift both is our from are our SaaS the and to have us customers with sales together and lot

fully and As length at value revenue in ratable increases. subscription contribution recognized business SaaS our I initial margin flow Investor for the licenses indicators headwinds with revenue discussed on-prem shift as ARR XX% are will of the a leading where SaaS transition. the cash from the cause Day on approximately The model to March, ARR, this reported upfront mix deal free in during is

our are overall a However, function these of of trajectory indicative not the of simply and our of transition headwinds treatment or are accounting business.

progressing greater the which are, accounting-related we the throughout headwinds transition, it fact, positive. we view means obviously as In our faster these are

our quarter we adjusting the Given going and also outlook, momentum and which lower forward, we means pipeline mix ARR first are revenue raising saw our SaaS our are and we in outlook. the expectations

is is our customers which Our better-than-expected SaaS, sales driven resonating by our with Varonis force. start and being

are SaaS of that and just net our the guidance this evidence XX% and XX% represents upsell examples of quarter discussed new first mix Our business Yaki ARR, is new this of reception.

deals the the did sizes to that further and us provided. decide quarter, of SaaS and front conversation. our an of on-prem have To to seen into we go in uplift put we the feedback deal the previously so was where reps quote the in during gives customer pricing end, Early introduced average the already product back confidence far that subscription some

it While year other work sales some the into We is think this elongated part guidance. of for deals, itself convert, those some disruption did second these already factored our near-term in out created of this cycles. and and will

renewal existing conversations, SaaS platform licenses. during happy customers We SaaS and convert that saw entire buy even to additional their the to some were

was Although wasn't renewal projection. of our ahead the impact material quarter, of it ARR these this conversions

free conversions a As ahead margin. terms and to contribution we're our ARR dollar our modeling of assuming conversions projections, same significant metrics, the versus Star which operating the revenue material continue if North conversions this benefit change of the or which would cause should value not margin, it and the progression these ARR positive as reported a our At are a this headwind in But time, transition. in relates note, view these updated a flow to of you trend as cash will of to QX. guidance, further

at has mind keep look QX models. as I through it you which As think increased your of you renewal QX, pipeline significantly our versus should in conversions,

our to force. Turning sales

rep see initial than force with their of our did of to SaaS the of up while are and we transition both XXXX reduce expected, sales providing some As our success and majority learnings is from turnover, right tracking better pleased company. setting ability Further, our the but driven the our friction selling around vast by some to this incentives we expectations. the is being programs the transition to for engagement

As to our Yaki right as will it's with have and value SaaS since the the customers we feel still time the And achieve faster the mentioned, both solution we a benefits achieve as about a we for to the while SaaS transition. in year, lower believe significantly costs. result early infrastructure market good we Varonis allows customers of

cash assuming from quarter, the ARR growth mix grew last to and up same revenue to guidance. have of ahead which guided SaaS the same improving we first free as year-over-year reflecting line cash was $XX.X generated year, our top million In the XX% We we while generation. commitment million been period would of in well $XXX.X for, flow our $XX flow, million

I to the regarding like what earlier on environment. macro I'd elaborate said

cycles the QX, patterns. scrutiny layers weigh Across largest an of multiple to level we involving particular, slowing in purchasing impact. see and to seeing of economic climate continue elevated on the deal customers' saw approval, sales continue we with board, Europe, extended During the

into longer deal this of our budgetary takes cycles updated and as We a more guidance continue consideration. ongoing expect scrutiny, already result to and

now to more results detail. quarter first in our Turning

this Before income beginning. traditional shift are from from than numbers, what SaaS indicators of let get the our they the ARR our said margin I remind of the into for Remember transition. ARR, and business will we've you a in leading business indicative licenses to been metrics of model contribution of free the me the less flow past. statement health true the our term make have cash

included various transition We in slides investor the metrics. presentation again illustrate the of the have several on impact that

QX numbers. were revenues $XXX.X up year-over-year. the to on XX% million, Now total

products. growth SaaS are to the increased to quarter, had of the year, last year-over-year a sales approximately our compared which versus revenue X% upfront the as a subscription we in same result recognized headwind of During on-prem as ratably quarter recognition bookings our rate our mix, having

$XX.X XX% or were of In X% as and revenues X% In XX% million Subscription in $XX.X were America, renewal $XX or revenues declined revenues XX% million services a total XX%. total $XX.X to again, revenues. headwind to Currency million revenues X% the grew million of total Rest were over to maintenance million the revenues revenues. our rates, or EMEA, World revenue. X% of $X.X region. of in was grew North

reported remind SaaS you, all rates by were a to revenue Just impacted throughout higher mix. regions growth

discussing I'll a was first gross profit totaled first quarter Moving non-GAAP XXXX. XX.X% results forward. $XX.X million, down quarter quarter first for the in statement. the the representing Gross of be margin in compared to XX.X% million. the income $XX.X Operating expenses of going

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

same X% increased year, the the operating result as of on-prem products. our in our of sales upfront SaaS last to to recognition are margin versus compared recognized which fully quarter approximately as quarter, headwind had the our bookings mix having a ratable we a During subscription

while contribution ARR quarter was First and our SAP. ARR transitioning X.X%, incremental drive margins last growing year, from ability reflecting X.X% up to strong to margin

and million, had quarter, financial our on income interest deposits by of driven the approximately income primarily investments. $X.X During cash we short-term

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

$XXX.X securities As we had XXXX, of equivalents, and March cash cash, XX, million in deposits. marketable short-term

year. generated XXXX, operations of cash For $X.X million $X.X in to period year, last to compared same million the million was $XX.X three we from million CapEx March XX, and last months the ended $XX.X generated compared

our quarter, quarter. an We $XX million quarter authorization. have with During XXX,XXX ended employees, the purchase remaining flat shares share repurchased we last the price roughly of at on first we and versus average $XX.XX, X,XXX approximately repurchase

guidance our in to detail. Turning more

this to second quarter previously. notes now SaaS new of Our a up few back year. upsell and modeling business half assumes on year metric additional A from mix the XX% and as ARR, look full the guidance XX% of we

Federal's a we First, QX. to third our is expect yet and we Fed-run SaaS certified, quarter, quarter this to because be in largest the are headwind not mix

quarter, QX expect still the building in And the first, despite than quarter as is a dollar value the Second, larger line the year. close momentum half such, we smallest saw we deals which historical taking this trends. approach the are is we in the of prudent in in second to as our with is of much outlook

subscription we're significant on-prem third, dollar conversions these material from not assuming to the And or of SaaS of versus value conversions renewals change QX. in a

on SaaS ability We This leverage the faster reflects accounting Varonis raising margin, to our guidance are accounting on-prem adjustments of which contribution drives ARR revenue upfront SaaS in greater focus ARR ratable to income mix the because which SaaS. of our our customers during operating versus to reflects also guidance, the corresponding adoption from the of transition. and The operating subscription. treatment treatment higher results

Stars the contribution we a our during North and our clear in view that ARR the update margin direction Ultimately, flow to transition. cash as view free transition a sign and ARR, positive as is continue guidance to progressing this

headwinds From transition reminder, the of ongoing from longer economic budgetary and half as macro to standpoint, as as cycles sales turnover, perspective, and longer increased lower an to our other flight Lastly, convert year, unemployment ramp guidance on-prem well in up we a sales factor scrutiny, includes a SaaS an continues SaaS. increase may cycles in in sales assumes conditions. in which subscription deals which productivity a the still are sales first as of force period factoring in worsening

Now our turning to guidance.

$X.X shares operating to million second million income the range growth $X.X $X.XX non-GAAP of million in $XXX per net X%. revenues XXX.X $XXX X% $X.XX. of quarter outstanding. of This to diluted total share income representing diluted XXXX, Non-GAAP expect For assumes of we the to to million, of and million

ARR $XX XXXX, revenues includes XX%. of provision. capitalization year million, of $XXX related TCJA million $X a million Total full of of we now $XX $XXX cash Free flow XX%. to to growth headwind of $X which the to growth $XXX million XX% to million, representing to $XXX For expect to of X% million to the representing R&D million million,

Non-GAAP diluted to This per range million operating the in income $XX $XX $X.XX of and income non-GAAP net million of shares XXX.X assumes million $X.XX. to outstanding. diluted share

adoption by off showing confidence SaaS the margins. macro the give continued is driving while us SaaS, reflected of In incremental in year Varonis results year the the solid summary, first full mix despite outlook in positive ARR with of a our our challenges quarter These to XX%. contribution start environment, strong to our raise pipeline momentum

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

Operator

Our conducting Please we be time, question. question-and-answer this with Markets. will proceed Capital your [Operator At session. first with comes from Hedberg a RBC Matt question Instructions]

Matt Hedberg

for certainly Thanks there. really And adoption. execution. be my a the congrats environment out of you not was was on obviously, easy And give Yaki, question. on taking enjoyed lot customer. the a SaaS focus to guys. The Great, large I insurance the the on call example seem does

you XX% just converts? the base they of uplift goes to converted customer to ACV I'm SaaS you're what is a if of typically on-prem kind that they ARR XX% more seeing differently, saw to initially, sort said straight when maybe said contract? an seeing curious, SaaS. when a you're standard I Or is think uplift spending versus it ARR, that across a

Yaki Faitelson

to it's of very ownership. XX%, wash the we just discussed will also significantly Hi, in to bundles. easy XX% SaaS, we a Matt, -- early the believe when lot Matt. but It's stages, that customers convert in we cost a of [ph], of the easy relatively terms more buy to justify before, We total as

coverage the working. what is You for automated and that is really very exciting is outcome know us

far, aspect the to value conversion and SaaS proposition. so And from surprising every is primarily the us really overall

terms when believe should more -- this cost we be it's in significantly it's total ownership, of but customers of licenses. consume overall apple-to-apples, So also think that will that the increase, the we

Operator

Morgan Hamza with proceed question your from Stanley. with question. Our next Fodderwala comes Please

Hamza Fodderwala

for here. Hey, guys. Hamza Thank my question. taking you

Or in So got I earlier. you made that just the it versus QX to QX? the Yaki, fair worse to it point want say relatively clarify, Is environment consistent? was

Yaki Faitelson

I environment, It's but the it see tell will is data. worked do direction this will always and the macro can in I that what this same. and day, a for Overall, historically, attacks was say At they're something us. of the hard and relatively come device, but going any anywhere Yeah. that you we is from one end the

But one call is security blast have machine of have perimeter to When -- you the we if protect that protected, you data is environment, your that is insider protected us data you right. a the and And incident, job analyzing have Pentagon one really else, failed data with ROI. going this happen everything exposed, if if in you protecting data, biggest then is with you people you're is did the hard what you damage. you the have them XX% radius, compromised what and lasting is not need much data give when so user are the you or if what and and to we the saw

It's we the everything we're and of see a value of of have and reducing doing, SaaS, order a coverage is in value. of is friction. in we need magnitude incident what what And the the attentive. the pretty little of more just Cloud to the we with Day XX% its customers very we lot is And really very that DA with orders do discussed with effort, So Analyst amazing. to They and see really working get that response. lot are are

if well. the we I think keep do doing is So day, can secular automation, the relative can doing very that -- what we terms in hard macro, and data are at that very, trend. of coverage but I think a end And we of basis security

Operator

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

Saket Kalia

Maybe the feedback gap, and Hey, great. SaaS narrowing maybe for to that tell the Does transition parity extent of What's between you gap, you. there's could Thanks how than good the Barclays. products on-prem? just I product Saket there's taking terms right, that It's from still Yaki, to shift about afternoon, feature customers from a sort Okay, SaaS faster question of us here. early expected. guys. time? the Clearly, a the of make whether and for think you'll been in is do that question. you my a sort sense? over going And

Yaki Faitelson

Yeah.

thanks the So for question.

and have SaaS. So completely are all a the for remediation, so no-brainer just new coming just a customers, proactive because in more the capability advanced XXX much with in it's incident it's we -- mainly benefits in that response

So this non-issue. -- it's is a

be SaaS With have narrow we customers of quarters, frictionless we'll we are believe don't have still everything some also, to able we that moving the that in platform, do several we are features the going the and narrow And migration. to gap. to in very fast

have of are fast. platform, on-prem we we we have XX% on very, the moving Now but very what

As SaaS indicators. I the in far, before, transition, every said -- just aspect it's very good of have so we just it's

Operator

Securities. Joel proceed with your with Our next Fishbein from question. question Truist Please comes

Joel Fishbein

you. And in business assumptions Guy, your were good what And go of about questions. to year. my renewal taking that something then said throughout I percent rates, for conversion like the you decent I'd you the would renew? that for execution but Thank through be plan. cadence going against think Can you. you your the QX, a around helpful. understand Thank just of to

Guy Melamed

terms couple It of increased look at ahead, in pipeline. you're QX, question. talking seen in we've good think all, the significant. So the conversions when XX%, hundred very the But was first about we that's that's look as dollars. thousand the conversions QX, over consistently renewal in is weren't a continuing. And renewal we QX in a our and I of of conversion, renewal rate, if But rate

our the talking SaaS to when coming customers when about are they up. are renewals Now talk existing reps more

us do our the own, to because And because just a providing happening isn't any this for additional clear, QX over of that be uplift. a because which are commission million especially It's will number, product, guidance, doing their we really to again significant, we're baked we SaaS. an it's it us, be and sake is into significant Now but pipeline, They're being for of on development for to modeling getting reps conversions revenue a highlight on up incentives renewal better But larger want $X even ARR. larger not on that do benefits but if this. in this much headwind do more it to customers have the end and operating more the see margin. positive

Operator

Our from with Please next your Boolani question question. Citi. comes proceed with Fatima

Fatima Boolani

through you in the Hi, turnover, risks us us which some around articulated were the alignment about with was your Thank good your Guy, for elevated question. pretty talking transition. to of talked you afternoon. the you and much in taking when what script sales expectations you

some for of these ASP I'm given the capacity you. curious see elevated is up how rehire for make maybe backfill? that the should thinking conversations supposedly conversations some the higher you're the year turnover? existing dynamics just sales about should Thank and of Or you we So turnover. the and remainder on any with uplift or of customers, sales you're capacity around of going to with ACD some having commentary how

Guy Melamed

the and to the sales pleased much than was talked much initial tracking force guidance. expected, our of did but I see some remarks, better transition and our ability majority in vast we're very to as we the as you very SaaS, with as engagement mentioned, prepared that's selling and their turnover, of So it and

the pleased benefits. that. have received from has continue very in our want product overall, as hiring in the with customers We'll strategic We're a in of the way, SaaS locations. getting reps We're it the force and and done positions the invest. We prudent past. the reception way sales great on to we feedback But and our and to do we're

Operator

with from Please Roger Boyd UBS. Our your next comes proceed with question question.

Roger Boyd

Hey, And thanks question. execution. on taking the congrats the for

guess, the the guide Just in additional XQ the you that I'm to absent model of in wondering, did be revenue had think SaaS further have deteriorate you I about mix, assuming saw and what from I to full talked the XX% macro guidance? would outperformance year and XQ. revenue you the or growth, likely clear, been add would considerations any you Thanks. environment prior you XX% reiterating

Guy Melamed

great question. a That's

by entirely which Our revenue, related revenue headwind revenue mix is of and There's reduced up from the coming the obviously accounting million the our number, from to why increased that increase XX%. $X for reduction and down we of ARR year. $X to number revenue the XX% that's treatment, SaaS coming moved by million

to of baked is reduction uncertainty. in macroeconomic didn't uplift. We the did beginning We and that definitely We related at year. anything SaaS the change that the the entire of revenue related to

Roger Boyd

you. Thank clear. Very

Operator

question. your Brian next with Please JPMorgan. with question Our Essex with proceed is

Brian Essex

great. And little if guess for for one you, thanks question. of good could you of give either my Maybe bit color. a taking Thanks, afternoon. Hi, I us

a convert I think little like to customers had factors them some were more some got you us the over customers gating and remarks what hurdle there you the on-prem. that you then And and the in were the with of kind on-prem why? which stuck prepared pipeline? around then during of to that to to And what ones mentioned color give that decided Could say conversely, decided convert? maybe SaaS

Yaki Faitelson

Yeah.

them. vast customers feature us do they they them much and pushing that forced made conversion. question who with more of just XXX [ph]. want SaaS, see not currently just and much for sense to for have understood -- them Proactive conversion. the more almost it's a to sense that no-brainer majority just to for are vast, do time, of it. some of the move don't It just we we It's IR features and a Over to the timing We It's

Guy Melamed

a mentioned, customers to continue. to on I And and existing them. customers the new many types. is from There some that subscription of quarter, that SaaS the QuarterX had but and on-prem the reason we Yaki add. number two to in within we pricing see called that of commentary of subscription deals received kind There's wasn't quotes that expect that on-prem the conversion But Brian, in convert just their basically to color QuarterX, those gave with is as increased on pipeline We gave SaaS did renewals the material see on that. we

Operator

Our with Sandler. Piper from your question with Please Owens proceed next comes Rob question.

Rob Owens

for Thanks. give Anything funnel. impacting top thanks the taking can the the Curious afternoon. that standpoint. us pipeline is Good And question. top how shift from you or to the my of quantification SaaS a of

Yaki Faitelson

anything more can else what the customer. than say much that better is Overall, with I resonating

So every you the and if data. only say want people in to world you will right can go the organization the right access that do

You is can question sure critical completely in it can with do with yes. and alert will say SaaS. is what doing something abnormal The behavior, a that automatically. And is make and frictionless -- this you to how and manner lead any we know are that reliably everybody you stop would

much, just it's can from receive So the -- and they better. deploy reception in value, value the in way the it overall much terms platform get that way the is of they that

Guy Melamed

And SaaS much about. hardware pretty want more customer sold the the one, we significant, cost objection It's objections ownership is of people. talked to we we that subscription on-prem which that Yaki are and is when lower two a when that got deal total is, which the the second And of enough basically with eliminating and the automation generates have we basically benefits don't gets hurdles of for two that with those eliminated from have we don't the biggest customers offering.

Operator

your Our Tilton Wolfe next with with comes Josh Research. Please question. question from proceed

Josh Tilton

to question. XXXX think with million Hey, I guys. Cloud. just But everything previous numbers. have ended here. just I commentary from you DA on make on sure Thanks one a want the have ARR I quick the a handle the taking in for $X.X I

also million business, You had SaaS which the of trying Or is ARR with the a and mix, year is Thank understand, that Cloud? of XX% I'm DA SaaS $X.X you DA on top from And $X.X million Cloud? new the is you. that that in is finished XX% part just that mix. in to upsell

Guy Melamed

some been And QX metric confusion way in related is defined. the XXXX. is mix there's SaaS XX% think to that I

So of second SaaS let percentage growth The is mix by it. just clarifying new me a the ACV. spend

a that to new a ACV calculation of in do But to it not than from ARR. last out new you denominator relation larger year. net sales, your relates on it's to if related So much QX based question,

Operator

with comes next with Hallum Chad Our proceed Please from Bennett Group. Capital Craig question your question.

Chad Bennett

for question. taking my Thanks Great.

related mid-XXs seeing ARR, is shift in So, of a yeah, kudos from SaaS ARR deals and considering just, And on from negativity. this really And commentary. Guy, ARR expectations like sounds perspective which think your the has the the SaaS you're based kind right, year good. 'XX in you're related your or the to macro price to shift those accelerated on I flight not more SaaS. held, to for on improvement pretty the ACV to But in to percentage basis shift, it an dramatic business, baking deals

the a million is guide. magnitude $X puts would XX% there have have there it? of benefit more to I are I'm there? to thinking takes there SaaS Am is more about the in than coming -- going thought from XX% just Or and I not -- would not from bookings of

Guy Melamed

you walk can through I we're how thinking Well, this. about

First our one take into we quarter And there, of the into the the of it's the this before, guidance. mentioned Street I seriously. year, we out macro is bake all, continue a still there's lot uncertainty the of to commitment which smallest as very year. and And first the to

we've XX% so definitely XX% pricing realized, been as transition So we far extremely confidence with feedback you've that getting. feel in the us SaaS uplift. about the asked, encouraged to the that we've the gives And

So very in of the quarter confident year. today this in but we year, early where feel X after the stand we I is think

Operator

your Andrew with Please Our Fargo. proceed with Wells from question. comes Nowinski next question

Andrew Nowinski

Okay, you. thank

company So mentioned to insurance renewed, in Fortune existing an upsold think which I customer, DA saw. XX% you part to ARR you XXX that increase in and that you that contributed Cloud

a of DA Cloud customer of much what seeing when SaaS the increase XX% DA So how of attributable platform? was kind And to then buys that are attach Cloud? you rate

Guy Melamed

talk talked avoid of mix about Investor that in going and confusion one the So takes. to puts the things as we're one we SaaS the the Day because want Varonis we and the that about is to

that and Varonis the pleased for we everything we're SaaS for adoption the -- of in kind you So and the products, combines gave the tell I of with the that guidance the XX% can of DA SaaS. XX% year SaaS under the QX Cloud. mix both

very number mix that XX% definitely we're the the quarter. benefits, raising I think and SaaS from customers after one the see excited to to XX%

Yaki Faitelson

-- one in terms each SaaS of Cloud, have and everything that you platforms, terms we and at And we every of believe sell Cloud that look these But the our attach we just the our paper, proposition we the think several of have on we them, with in DA all DA is ready. customers in support. to massive can of platform believe is we And this everything customers just we Cloud overall platform, platforms DA on and otentiall. when SaaS that the the of the that rates, just XXX, we everything platforms, platform related becoming had has and to protection on-prem the market and and that more value bring and to

Operator

Shrenik comes Please W. question. Our your with with Kothari next from Robert question Baird. proceed

Shrenik Kothari

Hey, my question. for thanks taking

transition So ramp-up turnover of the first increased from of factoring and SaaS cycles. period you you're the longer assumes year, which still the mentioned in productivity kind standpoint, half

that ramp especially the spoke, appreciated. be increased additional that cetera, can transition So some renewal incentives would any that you granularity on provide visibility conversions implications turnover, pipeline the mentioned the you also you faster more the and productivity, et around greatly given larger the and without

Guy Melamed

the can was So were They six I from turnover, friction. understand when is tell numbers, year, sales of ahead the sales obviously, the the with adoption majority guidance. we see our kind company. friction well we benefits of that XX% -- And the the very you beginning much SaaS our the first the months, to of talked is two gave the the see we the of we expect first basically the quarters expectation coming places. guidance higher for two at when where One about which the pleased it's and mix And of force. you, for customers both

we But customers and we to were of conversation. friction that to expect conversation, which to deals the fact as to talked negotiation force sales with introduced that customers the in some try SaaS, the our about part subscription thing those in and the will and flight the back second move on-prem add pricing that them was go were

to called and go we that the kind should talked And in deals, six of first lot majority we those majority and in the the happens And second through vast pipeline out, we a Investor through the of that of for year first expect the call part on about the that. in deals that But months, had. clean of we the in of last part the year. that that friction the in larger the Day

that can And expectation. customers part in of we most But still for part conversations QuarterX. those the through holds, think the clear still with that's I

Operator

Our Securities. your proceed question. next question Please is with with Shebly FBN Seyrafi

Shebly Seyrafi

thanks Yeah, much. very

So deals But or before. scrutiny growth the versus you X% noted Europe currency by year That constant your that you're and actually in additional X% North on EMEA currency. was declined like constant seeing America. grew European business business in XX% -- by

America North decel So XX points. decel a would year-to-year. XX-point only

EMEA that's to on slowing than results case you're Can and basis. why like So a you actions more on constant elaborate the currency in it is EMEA? looks what taking improve America North down

Guy Melamed

at numbers, revenue number. saw first confusion a the that about bit We So to I there. the think look headwinds was you all, EMEA of related on EMEA of when FX there's a X%

still X% in Russia us of year, impact last business impacted headwind. still -- also the another QX that We had and recognized that was we

that, top related also to But the SaaS the of seeing headwind on transition. you're

transition, in we our all SaaS very with similar the related you good. on had this an accounting part the where SaaS the transition headwind. time our was has way were that teams selling that to So generate transition on-prem at comparison. remember subscription, And the the European have for in of the Not to will treatment with perpetual that. adoption sure also you to European and of I'm very well, SaaS Europe But that from adopted our teams transition, that of impact conversations

for will a cycles because mentioned. most Europe. seeing in So the the of numbers look should ARR. I and say we're confusion we're revenue I year-over-year forward, on the themselves and of year-over-year, and don't the part, basis North bit will be numbers to about probably not way why seeing also sales and it a in the America. items a definitely be deal But that's it's that at scrutiny, -- right looked seeing We're I that that's longer that talked think we going

Operator

to question-and-answer closing like over floor Tim end the We Perz now to have reached the of would comments. our turn I session. back for

Tim Perz

Varonis. us. We interest joining in Thanks, for your everyone, appreciate

Operator

your participation. This for concludes today's conference. you Thank

disconnect this may You time. lines your at

Varonis Systems (VRNS) 1 May 232023 Q1 Earnings call transcript