Financial Data and Key Metrics Changes - In Q4 2025, total ARR increased 16% year-over-year to $745.4 million, with SaaS ARR at $638.5 million, representing 86% of total ARR and a 32% year-over-year increase excluding conversions [6][21] - Free cash flow for 2025 was $131.9 million, up from $108.5 million in the previous year [22] - Q4 total revenues were $173.4 million, a 9% increase year-over-year, with SaaS revenues at $142.3 million [22] Business Line Data and Key Metrics Changes - The SaaS business is highlighted as the future of the company, with a record number of conversions from the self-hosted platform contributing approximately $65 million in Q4 [5][20] - The decision to end-of-life the self-hosted platform has led to increased conversions and a focus on maximizing customer retention [8][9] Market Data and Key Metrics Changes - The company is experiencing strong demand from both new and existing customers, particularly in cloud environments, driven by automation and the need for comprehensive data security solutions [10][15] - The SaaS dollar-based net retention rate was 110% at the end of 2025, indicating strong organic growth within the existing customer base [21] Company Strategy and Development Direction - The company aims to transition to a 100% SaaS model by the end of 2026, which is expected to unlock further growth opportunities and improve financial health [6][17] - The acquisition of Altru is intended to enhance the company's ability to secure AI systems and data, reinforcing its data-first strategy [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by AI-driven cyber threats and emphasizes the importance of data security in the context of AI adoption [12][72] - The company is optimistic about achieving its 2027 financial targets, despite anticipated headwinds in 2026 due to the end-of-life announcement for the self-hosted platform [24][67] Other Important Information - The company plans to provide more detailed disclosures regarding SaaS ARR growth excluding conversions to help investors understand business drivers [19][28] - The gross margin for Q4 was 80%, down from 84.4% in the previous year, reflecting the impact of the transition strategy [22][23] Q&A Session Summary Question: Clarification on SaaS ARR growth guidance - Analysts expressed confusion regarding the growth rate assumptions, particularly the 18%-20% SaaS ARR growth guidance excluding conversions compared to the exit rate for 2026 [32] - Management emphasized that the focus should be on SaaS ARR growth excluding conversions as the primary growth driver [34] Question: Contribution from new versus existing customers - Analysts inquired about the expected contribution to growth from new customers versus existing ones, and management confirmed a focus on increasing sales to both segments [40][41] Question: Net dollar retention comparison - Questions were raised about the 110% net dollar retention rate and its comparison to prior periods, with management indicating that it reflects strong growth potential within the SaaS customer base [43][44] Question: Headwinds to contribution margin and free cash flow - Analysts sought clarification on the anticipated $30 million-$50 million headwind to contribution margin and free cash flow in 2026, with management explaining it relates to lower expected renewal rates from the non-SaaS business [64][66] Question: AI's impact on security - Analysts asked about the implications of AI on security, with management asserting that AI presents both opportunities and risks, emphasizing the need for robust data security measures [69][72]

Financial Data and Key Metrics Changes - In Q4 2025, total ARR was $745.4 million, reflecting a 16% year-over-year increase [21] - SaaS ARR reached $638.5 million, accounting for 86% of total ARR, with a 32% year-over-year increase when excluding conversions [5][19] - Free cash flow for 2025 was $131.9 million, up from $108.5 million in the previous year [22] - Q4 total revenues were $173.4 million, a 9% increase year-over-year, with SaaS revenues at $142.3 million [22] - Net income for Q4 2025 was $11.1 million, or $0.08 per diluted share, down from $23.9 million, or $0.18 per diluted share in Q4 2024 [24] Business Line Data and Key Metrics Changes - The SaaS business is highlighted as the future of the company, with a record number of conversions from the self-hosted platform [4][5] - Approximately $65 million of non-SaaS ARR was converted in Q4, with expectations of an additional $50 million to $75 million converting by the end of 2026 [8][19] - The company is focusing on upselling existing SaaS customers and acquiring new customers, with a dollar-based net retention rate of 110% for SaaS customers [20][41] Market Data and Key Metrics Changes - The company is experiencing strong demand from both new and existing customers, particularly in cloud environments [9][15] - The acquisition of Altru is expected to enhance the company's ability to secure AI systems and data, addressing emerging risks in the market [12][74] Company Strategy and Development Direction - The company is transitioning to a 100% SaaS model by the end of 2026, which is expected to unlock further growth opportunities [5][17] - The focus is on automation and providing higher customer satisfaction through the SaaS platform, which is seen as a significant competitive advantage [6][10] - The company aims to leverage AI to enhance data security and compliance, positioning itself as a leader in the evolving cybersecurity landscape [10][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2027 financial targets despite anticipated headwinds in 2026 due to the end-of-life announcement for the self-hosted platform [24][66] - The company believes that the transition to SaaS will lead to a healthier financial profile starting in 2027 [24][66] - Management highlighted the importance of understanding AI's impact on data security and the need for robust guardrails around AI tools [11][72] Other Important Information - The company plans to provide more detailed disclosures regarding SaaS ARR growth excluding conversions on a quarterly basis in 2026 [18][27] - The company expects a lower ARR contribution margin and free cash flow in 2026 due to the end-of-life announcement, estimating a $30 million to $50 million headwind [24][66] Q&A Session Summary Question: Clarification on SaaS growth rate assumptions - Management emphasized that the SaaS ARR growth excluding conversions is the key metric to focus on, guiding for 18%-20% growth in 2026 [33][34] Question: Contribution from new versus existing customers - Management indicated that the focus will shift back to acquiring new customers and upselling existing ones, with expectations for improved net retention rates [40][41] Question: Impact of AI on demand - Management noted that AI is a significant driver of demand, with products like Varonis Copilot contributing to growth [46][47] Question: Changes in sales capacity and strategy - Management confirmed ongoing efforts to enhance sales capacity and productivity, particularly in the federal sector [50][53] Question: Understanding the $30 million-$50 million headwind - Management explained that the headwind is due to lower expected renewal rates from the non-SaaS business, but they remain confident in achieving better margins and cash flow in the future [64][66]

Sid Charbonnet President, Seemann Composites Karman Space & Defense Expands into High-Priority Maritime Defense Market with Agreement to Acquire Seemann Composites and Materials Sciences January 21, 2026 Tony Koblinski Chief Executive Officer Mike Willis Chief Financial Officer Chief Operating Officer Steven Gitlin Vice President Investor Relations Jonathan Beaudoin 21 JAN, 2026 Forward-Looking Statements This presentation may contain "forward-looking statements" within the meaning of Section 27A of the Sec ...