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Varonis Systems (VRNS)
NASDAQ:VRNS
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Varonis Systems
(NASDAQ:VRNS)56Neutral
Positive Factors
Customer Acquisition
Strong new customer acquisition is highlighted by a significant year-over-year increase in ARR from new customers, positioning the company for future upsell opportunities.
SaaS Transition
Management now expects the SaaS transition to be complete in 2025, two years ahead of the original schedule, with guidance implying SaaS reaches 78% of ARR.
Negative Factors
Sales Cycle
The sales cycle of conversions can and may continue to take longer than the acquisition of new customers.
Varonis Systems (VRNS) vs. S&P 500 (SPY)
Market Cap
$4.63B
Dividend YieldN/A
Average Volume (3M)1.94M
Price to Earnings (P/E)―
Beta (1Y)1.26
Revenue Growth10.38%
EPS Growth6.88%
CountryUS
Employees2,406
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)-0.86
Shares Outstanding112,550,156
10 Day Avg. Volume1,332,413
30 Day Avg. Volume1,940,511
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)8.32
Price to Cash Flow (P/CF)47.20
P/FCF Ratio40.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$55.79Price Target Upside36.94% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering16
Varonis Systems Business Overview & Revenue Model
Company DescriptionVaronis Systems, Inc. is a cybersecurity company that specializes in data security and analytics. The company focuses on protecting enterprise data against insider threats, data breaches, and cyberattacks by providing a data-centric security platform. Varonis' core products and services include solutions for data protection, threat detection and response, and compliance, enabling organizations to manage and secure their unstructured data across file systems, email systems, and other data repositories.
How the Company Makes MoneyVaronis Systems generates revenue primarily through the sale of software licenses and subscriptions for its data security and analytics platform. The company's revenue model is based on a combination of perpetual and term licenses, as well as subscription-based offerings. Key revenue streams include the sale of licenses for their data protection and threat detection solutions, as well as professional services and customer support. Varonis also earns money through renewals and upselling additional features or expanded coverage to existing customers. Strategic partnerships with technology vendors and system integrators can also play a role in expanding their market reach and customer base, contributing to revenue growth.
Varonis Systems Financial Statement Overview
Summary
Varonis Systems exhibits a robust revenue growth trajectory and improving cash flow metrics, which are positive indicators for future performance. However, the company faces challenges in achieving profitability and managing leverage, as evidenced by negative EBIT and high debt levels. The financial health is moderately stable but requires careful management to sustain growth and improve profitability.Income Statement
Varonis Systems has shown steady revenue growth over the years, with a revenue increase from $254.19 million in 2019 to $550.95 million in 2024. The gross profit margin is strong, consistently above 80%. However, the company has struggled with profitability at the net level, showing a net loss in most years except 2024. The EBIT and EBITDA margins are negative, indicating operational challenges.60
Neutral
Balance Sheet
The company's balance sheet shows a high debt-to-equity ratio, which increased significantly in 2024, indicating potential leverage risk. The equity ratio has been declining, suggesting reduced financial stability. However, the company has managed to maintain positive stockholders' equity over the years.55
Neutral
Cash Flow
The cash flow statement reveals a positive trend in operating cash flow, particularly in 2024. Free cash flow has improved significantly, displaying strong growth from 2023 to 2024. The operating cash flow to net income ratio is healthy, reflecting efficient cash management despite previous years of negative free cash flow.65
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 550.95M | 499.16M | 473.63M | 390.13M | 292.69M | Gross Profit |
| 457.10M | 427.41M | 403.80M | 330.74M | 248.43M | EBIT |
| -117.65M | -117.22M | -121.23M | -98.69M | -78.42M | EBITDA |
| -65.17M | -70.55M | -82.04M | -98.69M | -68.51M | Net Income Common Stockholders |
| 34.64M | -100.92M | -124.52M | -116.86M | -94.01M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 568.42M | 533.72M | 732.49M | 807.61M | 298.26M | Total Assets |
| 1.66B | 1.10B | 1.04B | 1.11B | 555.48M | Total Debt |
| 743.56M | 311.84M | 316.46M | 294.02M | 273.00M | Net Debt |
| 568.82M | 81.10M | -51.34M | -511.74M | 38.91M | Total Liabilities |
| 1.21B | 614.26M | 541.61M | 511.94M | 461.41M | Stockholders Equity |
| 455.66M | 489.65M | 502.13M | 596.59M | 94.07M |
| Cash Flow | Free Cash Flow | |||
| 108.51M | 54.32M | 475.00K | -3.31M | -15.96M | Operating Cash Flow |
| 115.20M | 59.42M | 11.87M | 7.18M | -5.84M | Investing Cash Flow |
| -532.25M | -143.08M | -374.25M | 54.38M | -54.75M | Financing Cash Flow |
| 371.90M | -53.40M | -75.58M | 510.11M | 225.75M |
Varonis Systems Technical Analysis
Negative
40.74
Price Trends
43.89
Negative
48.01
Negative
49.20
Negative
Market Momentum
-0.83
Positive
35.28
Neutral
21.43
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VRNS, the sentiment is Negative. The current price of 40.74 is below the 20-day moving average (MA) of 42.61, below the 50-day MA of 43.89, and below the 200-day MA of 49.20, indicating a bearish trend. The MACD of -0.83 indicates Positive momentum. The RSI at 35.28 is Neutral, neither overbought nor oversold. The STOCH value of 21.43 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VRNS.
Varonis Systems Risk Analysis
Varonis Systems disclosed 56 risk factors in its most recent earnings report. Varonis Systems reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Varonis Systems Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $16.53B | 1,777.39 | -5.91% | ― | 33.10% | -20.31% | |
73 Outperform | $4.73B | 27.36 | 41.09% | ― | 10.40% | 14.78% | |
73 Outperform | $32.03B | ― | -1.21% | ― | 30.77% | 79.05% | |
69 Neutral | $19.52B | 1,918.77 | 0.46% | ― | 15.33% | ― | |
63 Neutral | $4.49B | ― | -9.73% | ― | 12.68% | 54.80% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% | |
56 Neutral | $4.63B | ― | -20.26% | ― | 10.38% | 6.88% |
* Technology Sector Average
Performance Comparison
VRNS
Varonis Systems
40.74
-8.90
-17.93%
QLYS
Qualys
127.34
-45.17
-26.18%
CYBR
CyberArk Software
335.45
72.31
27.48%
OKTA
Okta
112.44
4.13
3.81%
ZS
Zscaler
208.76
8.02
4.00%
TENB
Tenable Holdings
36.50
-10.96
-23.09%
Varonis Systems Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: -13.02% | Next Earnings Date: May 5, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong progress in Varonis' SaaS transition and new customer growth, alongside significant milestones in free cash flow and ARR contribution margin improvements. However, these positive developments were tempered by headwinds in revenue growth and operating margins due to the SaaS transition, as well as pressures on the net retention rate.Highlights
Significant SaaS Transition Progress
In 2024, Varonis added over $200 million of SaaS ARR, ending the year with approximately $340 million of SaaS ARR or 53% of total company ARR. This progress is ahead of schedule, with the transition expected to complete by the end of 2025, a year earlier than previously anticipated.
Strong New Customer Growth
ARR per new customer grew approximately 20% year-over-year, and new business ACV grew by 50%. This growth was driven by the simplicity of the SaaS platform, MDDR, and demand for GenAI-related solutions.
Free Cash Flow Milestone
Varonis generated $108.5 million of free cash flow in 2024, doubling from $54.3 million in the previous year, crossing a significant $100 million milestone.
Record-Breaking ARR Contribution Margin
ARR contribution margin improved to 16.6% in 2024, up from 13.4% last year, indicating significant leverage improvement.
Lowlights
Revenue Growth Headwind
Total revenues for Q4 2024 were $158.5 million, up only 3% year-over-year, with approximately an 18% headwind due to the increased SaaS sales in the bookings mix.
Operating Margin Decline
Q4 2024 operating margin decreased to 9.7% compared to 17.7% in the same period last year, due to a 13% headwind from the SaaS transition.
Net Retention Rate Pressure
Dollar-based net retention rate for subscription customers was 105% at the end of 2024, reflecting limited upsell and cross-sell activity due to the focus on converting self-hosted customers to SaaS.
Company Guidance
During the Varonis Systems, Inc. fourth-quarter 2024 earnings call, the company provided guidance indicating a strong focus on accelerating their transition to a SaaS model. The CEO, Yaki Faitelson, highlighted the substantial progress made in 2024, with SaaS ARR growing by over $200 million and reaching approximately $340 million, representing 53% of total ARR. The company plans to complete this transition by the end of 2025, a year ahead of their previous outlook, expecting SaaS ARR to reach about $580 million, which would be approximately 78% of total ARR. For 2025, Varonis projected ARR growth of 15% to 16%, targeting $737 million to $745 million. Total revenues for the year are expected to grow by 11% to 13%, reaching $610 million to $625 million, with free cash flow anticipated to increase to $120 million to $125 million. The company emphasized the benefits of this transition in driving better retention rates, sales productivity, and upsell opportunities, aiming for a long-term ARR growth target of over 20%.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.