Fighting a different battle than conventional cybersecurity … · 2020. 8. 3. · 4 VARONIS...
Transcript of Fighting a different battle than conventional cybersecurity … · 2020. 8. 3. · 4 VARONIS...
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VARONIS SYSTEMS. PROPRIETARY.
Fighting a different battle than
conventional cybersecurity companies
VARONIS SYSTEMS. PROPRIETARY.
Varonis Overview
Q2 2020
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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
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VARONIS SYSTEMS. PROPRIETARY.VARONIS SYSTEMS. PROPRIETARY.
Company Overview
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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.
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VARONIS SYSTEMS. PROPRIETARY.5
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
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VARONIS SYSTEMS. PROPRIETARY.6
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
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VARONIS SYSTEMS. PROPRIETARY.7
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
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VARONIS SYSTEMS. PROPRIETARY.8
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.
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VARONIS SYSTEMS. PROPRIETARY.9
$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
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VARONIS SYSTEMS. PROPRIETARY.10
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
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VARONIS SYSTEMS. PROPRIETARY.11
Example: DatAdvantage Product Family Has More Than 10 Licenses
ON-PREMISES DATA STORES CLOUD DATA STORES REMEDIATION
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VARONIS SYSTEMS. PROPRIETARY.12
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
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VARONIS SYSTEMS. PROPRIETARY.13
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
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VARONIS SYSTEMS. PROPRIETARY.14
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
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VARONIS SYSTEMS. PROPRIETARY.15
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
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VARONIS SYSTEMS. PROPRIETARY.16
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
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VARONIS SYSTEMS. PROPRIETARY.VARONIS SYSTEMS. PROPRIETARY.
Financial Results
Q2 2020 Highlights
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VARONIS SYSTEMS. PROPRIETARY.18
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
$235.7
Q2 2018 Q2 2019 Q2 2020
Annual Recurring Revenues (ARR)
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VARONIS SYSTEMS. PROPRIETARY.19
Annual Recurring Revenues (ARR)
($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
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VARONIS SYSTEMS. PROPRIETARY.20
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
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VARONIS SYSTEMS. PROPRIETARY.21
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.
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VARONIS SYSTEMS. PROPRIETARY.22
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
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VARONIS SYSTEMS. PROPRIETARY.23
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.
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VARONIS SYSTEMS. PROPRIETARY.24
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.
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VARONIS SYSTEMS. PROPRIETARY.VARONIS SYSTEMS. PROPRIETARY.
We plan to achieve our long-term
goal of building a billion dollar
business that grows revenues
meaningfully with expanding profit
and cash flow.
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VARONIS SYSTEMS. PROPRIETARY.
Thank You
VARONIS SYSTEMS. PROPRIETARY.