fighting a different battle than conventional cybersecurity … · 2020. 8. 3. · 4 varonis...

VARONIS SYSTEMS. PROPRIETARY.

Fighting a different battle than

conventional cybersecurity companies


Varonis Overview

Q2 2020

VARONIS SYSTEMS. PROPRIETARY.2

This presentation has been prepared by Varonis Systems, Inc. (the “Company”) solely for informational purposes. It is not, and should not be assumed to be, complete. This presentation is not an offer to sell

securities, nor is it a solicitation of an offer to buy securities. This presentation is not directed at, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality,

state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons

into whose possession this presentation comes should inform themselves about, and observe, any such restrictions.

In considering any performance information contained herein, you should bear in mind that past or projected performance is not necessarily indicative of future results, and there can be no assurance that any

entity referenced herein will achieve comparable results or that illustrative returns, if any, will be met. Statements in this presentation are made as of the date this presentation is made unless stated otherwise, and

the delivery of this presentation at any time shall under no circumstances create an implication that the information contained herein is correct as of any time after such date.

This presentation contains statements that, to the extent they are not recitations of historical fact, constitute “forward-looking statements.” Actual outcomes and results could differ materially from those forecasts

due to the impact of many factors beyond the control of the Company and its affiliates.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements

of historical facts. The words “believe”, “expect”, “anticipate”, “intends”, “plan”, “estimate”, “aim”, “forecast”, “project”, “will”, “may”, “might”, “should”, “could” and similar expressions (or their negative) identify

certain of these forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital

resources and capital expenditures; growth in demand for products and services; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of

competitors.

The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of

historical operating trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant uncertainties and contingencies which are

difficult or impossible to predict and are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in the view of the Company, could

cause actual results to differ materially from those discussed in the forward-looking statements include the impact of the COVID-19 virus on the budgets of the Company’s clients and on economic conditions

generally; the achievement of the anticipated levels of profitability, growth, the timely development of new projects in the Company’s addressable market; competitive factors, including the impact of

competitive pricing and transition in sales from perpetual licenses to a more subscription-based model; and the impact of general business and global economic conditions. These and other important risk factors

are described more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s quarterly reports on Form 10-Q and our other filings with the Securities and

Exchange Commission and could cause actual results to vary from expectations. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express

or implied, is made regarding future performance. All information provided in this presentation is as of the date hereof, and the Company undertakes no duty to update or revise this information, whether as a

result of new information, new developments or otherwise, except as required by law.

This presentation also contains market statistics and industry data that are not necessarily comprehensive or reflective of market conditions. These have been derived from third party sources and have not been

independently verified by the Company or its affiliates.

This presentation also contains non-GAAP financial measures which are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of historical GAAP and non-GAAP financial

measures can be found at http://ir.varonis.com.

The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the

Company.

Safe Harbor Statement

VARONIS SYSTEMS. PROPRIETARY.VARONIS SYSTEMS. PROPRIETARY.

Company Overview

VARONIS SYSTEMS. PROPRIETARY & CONFIDENTIAL.4

Varonis at a Glance

$235.7MM

ARR2

99%

Subscription Mix3

98%

RecurringRevenues3

>120%

NRR3

Founded in 2005, IPO in 2014 (Nasdaq: VRNS)

Headquartered in New York City with ~1,570 employees worldwide(1)

Fighting a different battle than conventional cybersecurity companies

Completed transition to subscription-based business model in just over one year

(1) Includes employees and independent contractors.(2) As of June 30, 2020; ARR is annualized value of active term-based subscription license contracts and maintenance contracts related to perpetual licenses in effect at the end of that period.(3) Percentages are for the second quarter 2020. Recurring revenues include subscription revenues and maintenance revenues from perpetual licenses, and exclude perpetual license revenues and professional services. Q2 2020 dollar-based net retention rate (NRR) is the year-over-year growth in the ARR of active customers at the end of Q2 2019.


DATA PROTECTION

COMPLIANCE

THREAT DETECTION & RESPONSE

Proven Technology

ENTERPRISE DATA STORES

AND INFRASTRUCTUREUSE CASESANALYTICS & AUTOMATION

PermissionsUsers & Groups

PerimeterTelemetry

Access Activity

ADTelemetry

ContentClassification

Windows Exchange

SharePoint

Office 365

NASUnix/Linux

Directory

Services

Edge

Services

Box


DETECT PREVENT SUSTAIN

insider threats by analyzing data,

account activity and user behavior.

disaster by locking down sensitive and

stale data, reducing broad access and

simplifying permissions.

a secure state by automating

authorizations, migrations and disposition.

Proven Approach


Secular Trends

DATA GROWTH HYBRID CLOUD CYBER THREATS

The amount of data created in the

world will grow to 175 Zettabytes (or

175 trillion gigabytes) in 2025,

representing an approximately 27%

compound annual growth rate from

the amount created in 2018. (1)

Through 2020, more than 85% of

enterprises adopting a cloud-first

strategy are expected to continue to

host business-critical applications in

traditional data center environments. (2)

By 2025, almost 90% of all data will

require a meaningful level of security,

but less than half will be secured. (1)

(1) IDC Research - Data Age 2025: The Evolution of Data to Life-Critical(2) Gartner Research - Deliver Data Center Modernizing Using Three-Cloud Complementary Approaches


Industry Changes

BOARD

AWARENESS

ADOPTION AND

STANDARDIZATION

REGULATION

Board of Directors are now required

to address cyber risks and

demonstrate appropriate awareness

and action.

A data-centric approach to security

is becoming a standard. Almost

every breach involves data assets in

the form of files, emails and video

that are stored in growing on-

premises and cloud file systems.

The confluence of notable attacks,

media attention, and public outcry

has led to new data-centric

regulations in the EU and North

America like GDPR and CCPA.


$14.5 BNStorage Management

$36.3 BNSecurity Software

$16.1 BNInfrastructure Software

$5.3 BNData Integration

$28.3 BNIT Operations Management

$20BN+ TAM

Source: Market size estimates from Gartner Research (as of Dec 2019)

(1)

(1) Varonis Systems estimates that our total addressable market is approximately 20% of these combined markets, with the largest opportunity coming from the Security Software market.

Addressing $20BN+

Opportunity Across

IT & Security


6 Product Families and 26 Licenses (common code base)

Data ClassificationAutomatically identify eligible data to discover,

manage, and protect GDPR and CCPA data

Data ClassificationDiscover where sensitive information is

vulnerable and safely lock it down without

interrupting business

Data Audit & ProtectionMonitor file activity and user behavior, prevent

data breaches, and make permissions

management and auditing a breeze

Alerting & User Behavioral AnalyticsDetect suspicious activity and prevent data

breaches across disparate platforms, visualize

risk and prioritize Investigation

Data Retention & MigrationAutomatically find, move, archive, or delete

data based on content type, age, access

activity, and more

Least Privilege on AutopilotAutomatically repair and maintain file systems

so that you’re less vulnerable to attacks, more

compliant, and consistently enforcing a least

privilege model

Enterprise Search & eDiscoveryDeliver relevant search results to the right

people without exposing sensitive

information

Extends Data Security to Edge DevicesSpot signs of attack at the perimeter with

telemetry from perimeter devices like VPN

concentrators, DNS and web proxies

Data Access GovernanceGive business users the power to review and

manage permissions without IT assistance

and automatically enforce business rules

*

* in Q3 of 2019, DCE: GDPR Patterns was renamed to DCE: Policy Pack to reflect additional functionality


Example: DatAdvantage Product Family Has More Than 10 Licenses

ON-PREMISES DATA STORES CLOUD DATA STORES REMEDIATION


2005

2006

2008

2009

2010

2011

2012

2013

2014

2015 2017

2016 2018

2019

History of Innovation

* in Q3 of 2019, DCE: GDPR Patterns was renamed to DCE: Policy Pack to reflect additional functionality


First-Mover Advantage

HIGH-FREQUENCY ITERATIONS

15 years of battle-testing, refinement, and innovation

DISCIPLINE

Sales process drove tens of thousands of production installs

COMPLEXITY

Data was stored in fewer places

DATA VOLUME

Data volumes were much smaller

2005


Channel resellers provide introductions to the right

buyers and help with closing

Sales force performs in-person or virtual risk

assessment and builds business case

Installation takes up to 90 minutes (off-the-shelf

product) and can be done virtually, risk

assessment process takes 2-3 weeks

Highly metrics driven sales process

Usual Buyer: CISO/CIO/CTO

Predictable Sales Motion

Channel Marketing

LEADS

RISK ASSESSMENT

CLOSING

NurturingVaronis Sales

Varonis SalesChannel


Varonis Risk Assessment

Where does my sensitive data live?

How much of it is overexposed?

What kind of sensitive data do I have?

(GDPR, PCI, SOX, HIPAA, etc.)

USING THE

VARONIS DATA

SECURITY PLATFORM

REDUCES EXPOSURE TO

POTENTIAL THREATS BY

75%.(2)

(1)

17MILLIONAVERAGE NUMBER

OF FILES EXPOSED

TO EVERY EMPLOYEE

22%OF FOLDERS OPEN

TO EVERYONE

87%FOUND OVER 1,000

STALE, SENSITIVE FILES

53%HAD AT LEAST 1,000

SENSITIVE FILES OPEN

TO EVERY EMPLOYEE

58%HAD OVER 1,000

STALE USER

ACCOUNTS

(1) https://www.varonis.com/drr(2) https://info.varonis.com/resource/t1/research-report/forrester-tei-study-2020

https://www.varonis.com/drrhttps://info.varonis.com/resource/t1/research-report/forrester-tei-study-2020


Proven Management Team

Yaki Faitelson

CEO, President, Co-Founder

& Chairman

Varonis since 2005

Jim O’Boyle

Sr. VP of Worldwide Sales

Varonis since 2006

David Gibson

CMO

Varonis since 2006

Dana Shahar

Chief Human Resources

Officer

Varonis since 2013

Guy Melamed

CFO & COO

Varonis since 2011

Gilad RazCIO & VP of Technical

Services

Varonis since 2006

David Bass

Executive VP & CTO

Varonis since 2005


Financial Results

Q2 2020 Highlights


Q2 2020 Highlights

Annual recurring revenues at the end of

Q2 were $235.7 million and grew 52% YoY

Dollar-based Net Retention Rate was

greater than 120% for Q2*

98% of Q2 revenues were recurring**

Q2 2020 subscription revenues were 99%

of license revenues, compared to 56% in

the prior year

($MM)

* Q2 2020 dollar-based net retention rate is the year-over-year growth in the ARR of active customers at the end of Q2 2019.

** Recurring revenues include subscription revenues and maintenance revenues from perpetual licenses, and exclude perpetual l icense revenues and professional services.

$111.9

$155.2

$235.7

Q2 2018 Q2 2019 Q2 2020

Annual Recurring Revenues (ARR)


Annual Recurring Revenues (ARR)

($MM)

ARR is the annualized value of active term-based subscription license contracts and maintenance contracts related to perpetual l icenses in effect at the end of each period,

$111.9$117.9

$130.3$138.7

$155.2

$178.9

$210.5

$220.5

$235.7

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020


Subscription Model Driving Greater Individual License Adoption

Percentages reflect customers with 500 employees or more.

48%

58%

Q2 2019 Q2 2020

4 or more Licenses4 or more Licenses

16%

24%

Q2 2019 Q2 2020

6 or more Licenses6 or more Licenses


Significant Opportunity to Expand within Existing Customer Base

ATTACH RATES

PRODUCT FAMILY Q2 2019 Q2 2020 CHANGE

DatAdvantage 100% 100% -

DatAlert 52.3% 55.7% + 3.4%

Data Classification Engine 51.2% 55.2% + 4.0%

DataPrivilege 15.5% 15.6% + 0.1%

Data Transport Engine 8.2% 9.4% + 1.2%

DatAnswers 2.0% 2.7% + 0.7%

Percentage of customers who have purchased at least one license from each product family out of the total number of customers.


Product Family Adoption

Percentages reflect total number of customers.

38%

42%

47%

71%74%

77%

Q2 2018 Q2 2019 Q2 2020

3 or more product families 2 or more product families


Q3 2020 Guidance

GUIDANCE Q3 2020

Total Revenues $68.0m – $71.0m

Non-GAAP Operating Loss ($3.0m) – ($2.0m)

Tax Provision $500k – $700k

Interest Expense* ~$800k

Basic and Diluted Shares Outstanding 31.6m

Non-GAAP Net Loss per Basic and Diluted Share ($0.14) – ($0.11)

* Associated with the Company’s Senior Convertible Notes.


Subscription – Revenue Recognition (example)(1)

1. Assume a $120K annual subscription contract for three years signed January 1, 2020

2. Contract years 2 and 3 have auto renewal component and invoiced separately

3. Total Contract Value (TCV) = $360K

Total recognized revenues appear in Income Statement in “Subscriptions” line

Only current year unrecognized Subscription maintenance revenues appear on balance sheet

Revenue model is upfront-loaded and not fully ratable

2020 Subscription Revenues: $120K 2021 Subscription Revenues: $120K 2022 Subscription Revenues: $120K

(1) This is an illustrative example and there can be no assurance that such expectations regarding revenue recognition will prove to be correct.


We plan to achieve our long-term

goal of building a billion dollar

business that grows revenues

meaningfully with expanding profit

and cash flow.


Thank You


fighting a different battle than conventional cybersecurity … · 2020. 8. 3. · 4 varonis...

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