Fighting a different battle than conventional cybersecurity companies. Varonis Overview. April, 2018 VARONIS SYSTEMS. PROPRIETARY.

Transcription

1 Fighting a different battle than conventional cybersecurity companies. Varonis Overview April, 2018

2 Safe Harbor Statement 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 achievement of the anticipated levels of profitability, growth, the timely development of new projects, the impact of competitive pricing, and the impact of general business and global economic conditions. 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. 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 Financial figures and related business metrics for FY16, FY17 and Q1FY18 in this presentation are based on ASC 606 standards. Financial figures and related business metrics for FY15 and prior years are based on ASC 605. As of February 1, 2018, in order to focus its resources on its data security portfolio, the Company no longer sells DatAnywhere to new customers, and it does not expect renewals or sales of the product to its existing customers. The customer count and product family attach rates in this presentation reflect these changes. 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. 2

3 Yaki Faitelson CEO, President, Co-Founder and Chairman

4 Varonis Facts (Nasdaq: VRNS) Total Revenues FYE December ($MM) % GROWTH % GROWTH Q Q Started operations in 2005 Fighting a different battle than conventional cybersecurity companies Approximately 6,000 Customers, from SMB to Fortune 50 35% of revenues outside of North America in 2017 $215 MM 2017 Revenues Headquartered in New York City with 1,318 employees worldwide Licenses Revenues Maintenance and Services Revenues 4

5 Proven Technology ENTERPRISE DATA STORES USE CASES Unix/Linux Metadata Collection Data Access Governance Activity Monitoring Windows Office 365 Directory Services Security Analytics Reporting/User Interface/Alerting Workflow Data Classification Sharepoint Exchange Perimeter Devices Automation: Remediation/Commit Engine Migration/Disposition Data Management User Behavior Analytics NAS 5

6 Proven Approach 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. 6

7 Secular Trends DATA GROWTH HYBRID CLOUD CYBER THREATS The amount of data created in the world will grow to 163 Zettabytes (or 151 trillion gigabytes) in 2025, representing a nearly tenfold increase from the amount created in (1) Through 2020, more than 85% of enterprises adopting a cloud-first strategy will continue to host businesscritical 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) 7 (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

8 Industry Changes BOARD AWARENESS Board of Directors are now required to address cyber risks and demonstrate appropriate awareness and action. ADOPTION AND STANDARDIZATION A data-centric approach to security is becoming a standard. Almost every breach involves data assets in the form of files, s and video that are stored in growing onpremises and cloud file systems. REGULATION The confluence of notable attacks, media attention, and public outcry has led to new data-centric regulations. 8

9 $23.6BN Security Software $23.3BN IT Operations Management Addressing $15BN Opportunity Across IT & Security $15.2BN Storage Management $4.5BN Data Integration $15BN TAM (1) Varonis Systems estimates that our total addressable market is approximately 20% of these combined markets. (1) $10.0BN Infrastructure Software Source: Market size estimates from Gartner Research (as of April 2017) 9

10 Large Untapped Market ~50,000 COMPANIES IN NORTH AMERICA & EUROPE WITH MORE THAN 1,000 EMPLOYEES (1) ~120,000 `COMPANIES WORLDWIDE WITH MORE THAN 1,000 EMPLOYEES (1) ~740,000 COMPANIES IN EUROPE WITH MORE THAN 20 EMPLOYEES (2) ~635,000 COMPANIES IN THE UNITED STATES WITH MORE THAN 20 EMPLOYEES (3) 10 (1) D&B Hoovers (2) EU: Eurostat (3) U.S. Census Data

11 6 Product Families and Over 20 Licenses (common code base) Data Audit & Protection Monitor file activity and user behavior, prevent data breaches, and make permissions management and auditing a breeze Alerting & User Behavioral Analytics Detect suspicious activity and prevent data breaches across disparate platforms, visualize risk and prioritize Investigation Data Classification Discover where sensitive information is vulnerable and safely lock it down without interrupting business NEW in Q Least Privilege on Autopilot Automatically repair and maintain file systems so that you re less vulnerable to attacks, more compliant, and consistently enforcing a least privilege model Extends Data Security to Edge Devices Spot signs of attack at the perimeter with telemetry from perimeter devices like VPN concentrators, DNS and web proxies Data Classification Automatically identify GDPR eligible data to discover, manage, and protect GDPR data Data Retention & Migration Automatically find, move, archive, or delete data based on content type, age, access activity, and more Data Access Governance Give business users the power to review and manage permissions without IT assistance and automatically enforce business rules Enterprise Search & ediscovery Deliver relevant search results to the right people without exposing sensitive information 11

12 Example: DatAdvantage Product Family Has Many Licenses ON-PREMISES DATA STORES CLOUD DATA STORES AUTOMATION Note: Starting Q1 2018, DatAlert, along with Varonis Edge, has been reclassified as a new product family. 12

13 History of Innovation

14 Significant Cross-Sell Opportunity $8.8 DataPrivilege Data Transport Engine Edge $5.9 Automation Engine Automation Engine Data Classification Engine Data Classification Engine DatAlert DatAlert DatAdvantage for Directory Services $2.4 Data Classification Engine DatAdvantage for Exchange Online DatAdvantage for SharePoint Online DatAdvantage for Exchange Online DatAdvantage for SharePoint Online $1.0 DatAlert DatAdvantage for OneDrive DatAdvantage for OneDrive DatAdvantage for Windows DatAdvantage for Windows DatAdvantage for Windows DatAdvantage for Windows 1 license Initial Security Driven Deployment 3 licenses total Hybrid On-Premises and Cloud Deployment 7 licenses total Enterprise Deployment 11 licenses total 14 Note: Price ratios are based on list prices assuming DatAdvantage is 1X.

15 First-Mover Advantage 2005 DATA VOLUME COMPLEXITY DISCIPLINE HIGH-FREQUENCY ITERATIONS Data volumes were much smaller Data was stored in fewer places Sales process drove tens of thousands of production installs Over 10 years of battle-testing, refinement, and innovation 15

16 Predictable Sales Motion LEADS Channel resellers provide introductions to the right buyers and help with closing Channel Marketing Sales force performs risk assessment and builds business case RISK ASSESSMENT Installation takes up to 90 minutes (off-the-shelf product), risk assessment process takes 2-3 weeks Varonis Sales Nurturing Highly metrics driven Usual Buyer: CLOSING CIO/CTO/CISO Channel Varonis Sales 16

17 Varonis Risk Assessment 17 Where does my sensitive data live? How much of it is over exposed? What kind of sensitive data do I have? (GDPR, PCI, SOX, HIPAA, etc.) 21% OF FOLDERS OPEN TO EVERYONE (1) varonis-data-risk-report/ (2) 41% HAD AT LEAST 1,000 SENSITIVE FILES OPEN TO EVERY EMPLOYEE 76% OF FOLDERS CONTAIN STALE DATA 55M FOLDERS WITH UNIQUE PERMISSIONS 88% OF ORGANIZATIONS WITH OVER 1 MILLION FOLDERS HAVE AT LEAST 100,000 FOLDERS OPEN TO EVERYONE (1) The Varonis Data Risk Assessment helped us identify our at risk sensitive and classified data and build a plan of attack to reduce the likelihood of a data breach. (2) 95% OF OUR CUSTOMERS AGREED WITH THE FOLLOWING STATEMENT

18 Trusted by Customers Worldwide Across Key Verticals FINANCE PUBLIC SECTOR MEDIA & ENTERTAINMENT RETAIL & ENTERPRISE HEALTHCARE EDUCATION 18

19 Proven Management Team Yaki Faitelson CEO, President, Co-Founder & Chairman Varonis since 2005 Guy Melamed CFO & COO Varonis since 2011 David Bass Executive VP & CTO Varonis since 2005 Jim O Boyle Sr. VP of Worldwide Sales Varonis since 2006 Ken Spinner VP of Global Field Engineering Varonis since 2006 Gilad Raz CIO & VP of Technical Services Varonis since 2006 David Gibson CMO Varonis since

20 Guy Melamed Chief Financial Officer Chief Operating Officer

21 Financial Highlights SUCCESSFUL LAND & EXPAND MODEL Perpetual license - High Volume low ASP High predictability for renewals and license revenues from existing customers STRONG REVENUES GROWTH Targeting larger customers with high long-term value ASP of ~$59K in 2015, ~$65K in 2016, ~$83K in 2017 Consistent growth in % of license and 1st year maintenance from existing customers HIGH CUSTOMER SATISFACTION Consistently high renewal rate >90% As of March 31, 2018, 70% of customers purchased 2 or more product families, and 37% purchased 3 or more product families 21

22 Strong Revenue Growth Total Revenues FYE December ($MM) Maintenance and Services Revenues Licenses Revenues 30% GROWTH % GROWTH Q Q

23 Quarter-Over-Quarter Growth Is Strong Quarterly Revenues FYE December ($MM) Q1 Q2 Q3 Q4 Maintenance and Services Revenues 73 License Revenues

24 Strong Customer Growth Targeting customers with 1,000 or more employees with larger potential Customer Lifetime Value 6,000 5,850 5,000 5,150 5,350 5,550 4,050 4,250 4,500 4,650 3,150 3,300 3,550 3,700 2,350 2,500 2,650 2, ,000 1,100 1,200 1,300 1,400 1,500 1,700 1,800 1,950 2,050 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q

25 R&D Investments Are Paying Off Data Audit & Protection Monitor file activity and user behavior, prevent data breaches, and make permissions management and auditing a breeze Alerting & User Behavioral Analytics Detect suspicious activity and prevent data breaches across disparate platforms, visualize risk and prioritize Investigation Data Classification Discover where sensitive information is vulnerable and safely lock it down without interrupting business NEW in Q Least Privilege on Autopilot Automatically repair and maintain file systems so that you re less vulnerable to attacks, more compliant, and consistently enforcing a least privilege model Extends Data Security to Edge Devices Spot signs of attack at the perimeter with telemetry from perimeter devices like VPN concentrators, DNS and web proxies Data Classification Automatically identify GDPR eligible data to discover, manage, and protect GDPR data Data Retention & Migration Automatically find, move, archive, or delete data based on content type, age, access activity, and more Data Access Governance Give business users the power to review and manage permissions without IT assistance and automatically enforce business rules Enterprise Search & ediscovery Deliver relevant search results to the right people without exposing sensitive information 25

26 Significant Upsells and Cross-sells Customers Who Have Purchased 2 or More and 3 or More Product Families % of Total Customers 3+ Product Families 2+ Product Families 65% 69% 66% 70% 57% 36% 37% 29% 31% 21% Q Q

27 Existing Customers Spend More License and Associated First Year Maintenance Revenues from Existing Customers (%) 46% 46% 49% 42% 34% 36% 37% 26% 20% Q Q

28 Investments Show Strong Returns Operating Cash Flow ($MM) Positive Operating Cash Flow 0.1M - 1.7M Q Q (2.7) -7 (7.1) 28

29 Annual Operating Margin Is Improving COGS R&D 120% 9% S&M G&A 100% Operating Margin 80% 9% 23% 9% 20% 9% 3.5% 20% 4% 0.7% 60% -2% 40% 66% 60% 58% -7% 20% 0% -8.6% 11% 10% 10% % * Percentages are presented on a non-gaap basis. 29

30 Quarterly Operating Margin Is Improving COGS R&D S&M G&A 120% 100% Operating Margin 11% 27% 11% 23% 11% -12.5% 25% -7.0% -12.0% 80% -18.0% -17.0% 60% 40% 78% 72% 66% -22.0% 20% -28.6% -27.0% 0% 13% 11% 11% Q Q Q % * Percentages are presented on a non-gaap basis 30

31 Solid Balance Sheet (USD in Thousands) As of Mar 31, 2018 As of Dec 31, 2017 Cash, Cash Equivalents & Short-Term Investments $153,670 $136,557 Working Capital 99, ,918 Total Assets 224, ,638 Deferred Revenues, Current and Long-Term 74,728 80,101 Total Stockholders Equity 105, ,642 31

32 We plan to achieve our goal of building a billion dollar business that grows revenues meaningfully with expanding profit and cash flow.

33 Thank You