Varonis(US:VRNS)2023-05-02 00:56Financial Data and Key Metrics Changes - In Q1 2023, the company reported revenues of $107.3 million, representing a 12% year-over-year increase [38] - Annual Recurring Revenue (ARR) grew 18% year-over-year to $478.1 million [10][35] - Free cash flow for the quarter was $35.7 million, up from $21 million in the same period last year [35][43] - The gross margin improved to 86.5% compared to 85.6% in Q1 2022 [40] - The net loss for Q1 2023 was $0.1 million, a significant improvement from a net loss of $10.2 million in Q1 2022 [42] Business Line Data and Key Metrics Changes - The SaaS mix for the quarter was 37%, significantly higher than the guidance of 15% [10][29] - Subscription revenues were $83 million, while maintenance and services revenues were $24.4 million, with renewal rates exceeding 90% [39] - The ARR contribution margin increased to 5.6%, up from 4.1% last year [41] Market Data and Key Metrics Changes - In North America, revenues grew 18% to $81.2 million, accounting for 76% of total revenues [39] - EMEA revenues declined 5% to $22.9 million, impacted by a 7% currency headwind [39][102] - Revenues from the Rest of the World grew 9% to $3.2 million [39] Company Strategy and Development Direction - The company is focused on transitioning to a SaaS model, which is expected to provide faster time to value and lower total cost of ownership for customers [11][34] - The management is optimistic about the ongoing SaaS journey and the positive reception from customers [9][25] - The company is raising its SaaS mix and ARR guidance based on strong initial adoption and pipeline expectations [26][45] Management's Comments on Operating Environment and Future Outlook - The management noted that the economic slowdown is impacting customer purchasing patterns, leading to longer sales cycles and increased deal scrutiny [36][49] - Despite the macro challenges, the company believes that data security remains a secular trend, and the SaaS offering is well-positioned to meet customer needs [61] - The management expressed confidence in the transition to SaaS and its potential to drive future growth [48] Other Important Information - The company ended Q1 2023 with $756.3 million in cash and equivalents [43] - The company repurchased 100,000 shares at an average price of $25.19, with $41 million remaining on its share repurchase authorization [44] Q&A Session Summary Question: What is the standard uplift seen when customers convert to SaaS? - The CEO indicated that a 25% to 30% uplift is typical when customers convert to SaaS, with expectations for customers to purchase more bundles [55] Question: Did the macro environment worsen in Q1 compared to Q4? - The CEO stated that the macro environment remained challenging but consistent with previous quarters, with customers focusing on ROI for data protection [58] Question: What is the early feedback regarding feature parity between SaaS and on-prem products? - The CEO mentioned that new customers find the SaaS offering superior, while existing customers are seeing rapid improvements to narrow any gaps [64] Question: What is the renewal rate and conversion outlook for Q2? - The CFO confirmed a renewal rate over 90% and noted increased renewal conversions in the pipeline for Q2, with over $1 million baked into the guidance [68] Question: How is the shift to SaaS impacting the sales pipeline? - The CEO noted that the SaaS model resonates better with customers, eliminating hardware concerns and reducing the need for extensive personnel [84][85] Question: What factors influenced customers' decisions to convert to SaaS? - The CEO explained that customers recognize the benefits of SaaS features, leading to voluntary conversions, while timing and feature availability remain considerations [80]