Financial Data and Key Metrics Changes - In Q2 2025, the company reported an ARR growth of 19% to $693.2 million, with SaaS ARR now representing about 69% of total ARR [9][26] - Free cash flow for the year to date reached $82.7 million, up from $67.3 million in the same period last year [9][28] - Revenue for Q2 was $152.2 million, reflecting a 17% year-over-year increase, despite a 7% headwind due to increased SaaS sales recognized ratably [28] Business Line Data and Key Metrics Changes - SaaS revenues were $105.9 million, term license subscription revenues were $32.4 million, and maintenance and services revenues were $13.9 million, with renewal rates over 90% [28] - The second quarter ARR contribution margin improved to 16.5%, up from 14.9% year-over-year, indicating strong incremental margins while transitioning to SaaS [30] Market Data and Key Metrics Changes - The demand for the SaaS platform from both new and existing customers is strong, particularly for cloud environment protection [10][21] - The data security market is rapidly expanding due to factors such as AI usage and increasing compliance needs, creating more budgeted line items and opportunities [10] Company Strategy and Development Direction - The company is focused on completing its SaaS transition and capturing a growing market opportunity, with a strategic emphasis on automated data security solutions [9][25] - The partnership with Microsoft is being deepened to enhance security for AI tools and drive secure AI adoption [21][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook despite a challenging macro environment, citing strong underlying business drivers [26][58] - The company anticipates continued strong demand for its solutions, particularly as customers recognize the need for comprehensive data security [34][60] Other Important Information - The company achieved federal authorization to offer its entire SaaS platform to the federal sector, marking a significant milestone [9][76] - The company repurchased 1 million shares at an average price of $38.59 during the quarter, totaling $38.7 million [32] Q&A Session Summary Question: How does the company compete against Cyera? - Management noted that competitors like Cyera expand the total available market and raise awareness about the need for data protection, but they do not provide comprehensive outcomes like Varonis does [37][39] Question: Can you size the opportunity from the Microsoft partnership? - Management highlighted that AI security is fundamentally a data security issue, and the partnership is focused on addressing security challenges associated with AI tools [44][46] Question: What metrics instill confidence in achieving over 20% ARR growth? - Management indicated that strong new customer acquisition and healthy NRR trends support the confidence in achieving this growth target [50][52] Question: How is the macro environment trending compared to last quarter? - Management stated that the macro environment remains similar to the previous quarter, with ongoing deal scrutiny but strong demand for data security solutions [58][59] Question: How does the company view competition from backup vendors entering the DSPM market? - Management emphasized that traditional backup vendors rarely compete in POCs and that Varonis remains focused on deploying solutions at scale [62][64] Question: Can you elaborate on the trend of customers consolidating their data security budgets? - Management noted that customers are increasingly consolidating their budgets around Varonis due to the comprehensive nature of its solutions [67][70] Question: What is the significance of the FedRAMP authorization? - Management expressed excitement about the FedRAMP authorization, which allows the company to offer its SaaS platform to federal customers, representing a significant growth opportunity [76][78] Question: How many subscription services would a large healthcare customer utilize? - Management indicated that large customers often utilize multiple services, including databases and compliance tools, reflecting a comprehensive approach to data security [82][84] Question: What is the outlook for new logo acquisition? - Management reported an acceleration in new logo acquisition, with larger initial land sizes and a strong value proposition driving customer interest [85][87]

Financial Data and Key Metrics Changes - In Q1, Annual Recurring Revenue (ARR) grew 19% year-over-year to $664.3 million, with free cash flow increasing to $65.3 million from $56.4 million in the same period last year [9][22][24] - Total revenues for Q1 were $136.4 million, reflecting a 20% year-over-year increase, despite a 1% headwind due to the increased SaaS sales mix [23][24] - Gross profit was $109.4 million, resulting in a gross margin of 80.2%, down from 83.3% in Q1 2024 [24][25] - The company reported a net income of $700,000, compared to a net loss of $3.7 million in Q1 2024 [25] Business Line Data and Key Metrics Changes - SaaS revenues reached $88.6 million, while term license subscription revenues were $31.5 million, and maintenance and services revenues were $16.4 million, with renewal rates exceeding 90% [23][24] - Maintenance and services revenues declined by 32% year-over-year, primarily due to perpetual maintenance customers converting to the SaaS platform [24] Market Data and Key Metrics Changes - SaaS ARR now represents approximately 61% of total ARR, an increase from 53% in Q4 [21][22] - The company is experiencing strong demand for its SaaS solutions, particularly in securing data across cloud platforms [12][13] Company Strategy and Development Direction - The company is accelerating its SaaS transition, aiming to complete it by the end of the year, driven by strong demand for its SaaS solutions [9][10] - The acquisition of Firal enhances the company's data security platform, allowing for next-generation database activity monitoring and expanding its total addressable market [16][17] - The company is focusing on automating data security and integrating AI tools to enhance customer protection and satisfaction [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving over 20% ARR growth, citing strong customer demand and healthy new customer momentum [21][32] - The macroeconomic environment remains uncertain, but the company is focused on factors within its control and is optimistic about long-term opportunities [50][51] Other Important Information - The company repurchased 1,476,456 shares at an average price of $41.49, totaling $61.3 million [26] - The acquisition of Cyril is expected to add approximately $4 million in operating expenses in 2025, with no immediate impact on ARR or revenue [27][81] Q&A Session Summary Question: Confidence in ARR growth exceeding 20% - Management highlighted strong SaaS NRR trends and customer demand as key factors supporting confidence in achieving over 20% ARR growth [31][32] Question: MDDR adoption and competitive environment - Management noted that MDDR has been the fastest adopted platform, with strong customer interest in data-centric security solutions [36][40] Question: Operating margins and transition dynamics - Management indicated that the trough in operating margins is expected this year, with improvements anticipated as the transition progresses [43][44] Question: Macro impacts on performance - Despite macro uncertainty, management reported strong demand from both new and existing customers, contributing to ARR acceleration [48][51] Question: New logo momentum and customer adoption - Management observed that the MDDR offering and AI tools have simplified the value proposition for new customers, leading to increased adoption [84][85] Question: Gross margin outlook and operating income range - Management explained that gross margin volatility is expected during the transition, with a long-term target of around 80% by 2027 [90][91]

Financial Data and Key Metrics Changes - In Q4 2024, ARR grew 18% to $641.9 million, with SaaS ARR representing 53% of total company ARR for the first time [9][23][28] - Free cash flow reached $108.5 million, up from $54.3 million the previous year, marking a significant milestone for the company [10][28] - Total revenues for Q4 were $158.5 million, a 3% increase year-over-year, while full-year revenues grew to $551 million, reflecting a 10% increase compared to 2023 [29][32] Business Line Data and Key Metrics Changes - The company added over $200 million in SaaS ARR during 2024, ending the year with approximately $340 million in SaaS ARR [7][9] - New customer momentum was the primary driver of growth, with a 50% increase in ARR from new customers [20][28] - The dollar-based net retention rate for subscription customers was 105% at the end of 2024, indicating steady gross retention despite limited upsell activity [28] Market Data and Key Metrics Changes - The company is experiencing strong demand for its SaaS offerings, particularly in the context of increasing data security needs driven by AI initiatives [12][18] - The transition to SaaS is expected to enhance the company's ability to penetrate its total addressable market (TAM) and expand into new data stores [23][26] Company Strategy and Development Direction - The company plans to accelerate its transition to a fully SaaS model, now expecting to complete it by the end of 2025, which is a year earlier than previously anticipated [9][26] - The focus on automation and AI in data security is seen as a key differentiator, with the company positioning itself to capitalize on the growing need for data protection [11][12][14] - The introduction of MDDR (Managed Detection and Response) has been a significant driver of new business and existing customer conversions [16][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain growth post-transition, citing the simplicity and effectiveness of the SaaS platform [23][26] - The management highlighted the importance of data security in the current environment, emphasizing that organizations are increasingly aware of the risks associated with data breaches [12][13] - The company anticipates continued strong demand for its solutions, particularly as customers seek to deploy AI technologies securely [18][19] Other Important Information - The company ended 2024 with 5,600 subscription customers, a 13% year-over-year increase, and ARR per new customer grew approximately 20% year-over-year [28] - The gross margin for Q4 was 84.4%, down from 88.5% in the same quarter of the previous year, primarily due to the increased mix of SaaS sales [29][30] Q&A Session Summary Question: Can you discuss the potential upside to flat net new ARR growth? - Management indicated that customer demand for data security and the benefits of the SaaS platform are driving natural expansion, which could lead to upside in ARR growth [35][36] Question: Are you pulling forward renewal deals to facilitate conversions to SaaS? - Management clarified that they are starting renewal conversations earlier to streamline the conversion process, which is primarily a documentation challenge rather than a technological one [42][44] Question: How do you plan to sustain mid-teens growth post-transition? - Management believes that the growth will come from new customer momentum, improved net retention rates, and the introduction of new products like MDDR [43][51] Question: What is the current health of your pipeline and backlog? - Management reported a healthy pipeline with ongoing conversations about SaaS conversions, indicating confidence in both new customer acquisition and existing customer transitions [66][68] Question: Can you provide insights on traction with various data stores? - Management noted strong demand across multiple data repositories, emphasizing the acute need for data security solutions in the current landscape [71][75]