Q3 2024 Varonis Systems Inc Earnings Call Transcript
Key Points
- ARR grew 18% to $610 million, with SaaS now representing approximately 43% of total ARR, reflecting strong momentum in SaaS platform and MDDR offering.
- Year-to-date, Varonis Systems Inc (VRNS) generated $88.6 million of free cash flow, up from $46 million last year, indicating improved cash flow generation.
- The SaaS transition is gaining momentum, offering benefits such as shorter sales cycles, larger initial lands, and margin benefits over time.
- MDDR is becoming a key driver of new business wins in SaaS conversions, with customers seeing immediate and impactful benefits.
- The company has a strong liquidity position with $1.2 billion in cash, cash equivalents, short-term deposits, and marketable securities, bolstered by $394.1 million from convertible notes issuance.
- The federal business underperformed expectations by several million dollars, prompting changes in the management team.
- Gross margin decreased to 85% from 87.3% in the third quarter of 2023, due to a higher mix of SaaS sales and increased hosting costs.
- Operating expenses in the third quarter totaled $116.7 million, including $6.7 million of acquired in-process R&D expenses, impacting operating income.
- The macro environment remains stable, but the transition to SaaS creates headwinds to traditional income statement metrics.
- Despite early contributions from Gen AI, the company remains cautious about its material impact on financial results, not baking in significant Gen AI contributions into guidance.
Greetings, and welcome to the Varonis Systems, Inc. Third Quarter 2024 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Perz, Investor Relations.
Thank you. You may begin.
Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' third quarter financial results. With me on the call today are Yaki Faitelson, Chief Executive Officer; and Guy Melamed, Chief Financial Officer and Chief Operating Officer of Varonis. After preliminary remarks, we will open the call to a question-and-answer session.
During this call, we may make statements related to our business that would be considered forward-looking statements under federal securities laws, including projections of future operating results for our fourth quarter and full year ending December 31, 2024. Due to a number of factors, actual results may differ materially from those set forth in such statements.
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