Varonis Systems Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Congrats on the results. It's really great to see the SaaS transition continue to accelerate and finish by year-end. One of the key questions that I get from a lot of investors is: What gives you, guys, confidence that ARR can grow (inaudible) north of [20%] you, guys, illustrated. I think Guy mentioned the SaaS net NRR is significantly above total NRR. Is there any other things that you would give us a guide post around the confidence in that element?

Question: Joel Fishbein - Truist Securities, Inc. - Analyst : Thank you so much for the questions and great results. I'd love to get some more color around MDR adoption and how the competitive environment around that and then how that could potentially be an (inaudible) questions (inaudible) to be accelerated to ARR?

Question: Saket Kalia - Barclays Capital Inc. - Analyst : You said from the beginning that the [North Stars] on this trend in are going to be ARR, SaaS mix and free cash flow. But I wanted to ask about the income statement just for a second. And maybe the question is how far are we from the trough in operating margins as we think about this transition accelerating? And are there any other dynamics that you want us to think about as we kind of think about sort of the model going forward with respect to that?

Question: Joshua Tilton - Wolfe Research, LLC - Analyst : Hello guys, can you hear me?

Question: Joshua Tilton - Wolfe Research, LLC - Analyst : Awesome. Congrats on a great start to the year. I just wanted to double down, Guy, on one thing you said. I know you mentioned that you're monitoring the macro pretty closely. Could you maybe just double-click on what is it all impacts in the quarter you saw because of the current macro? how you're thinking about or how you incorporate macro expectations into the guidance for this year?

Question: Roger Boyd - UBS Securities LLC - Analyst : Thanks for taking my questions. And I'll echo comments on cash on a strong quarter. Guy, you mentioned good traction being logos in the quarter. I wonder if you could talk about, one, are we getting to the point where we can kind of quantify how often new logos are landing with some of the newer offerings Varonis for kind of the SaaS applications, cloud storages, and databases? And, then, similarly, on the strength in use cases around securing copilot and other AI tools. Are we getting to a point there where we can kind of quantify how big that traction is?

Question: Joseph Gallo - Jefferies Group LLC - Analyst : Last quarter, you mentioned elongation of conversion cycle times. Has that length of cycle time for conversions changed in any way? And then, how is the gross retention rates in ASP upside recognized in for those customers?

Question: Brian Essex - JPMorgan Chase & Co. - Analyst : Yaki, got a question for you. Great to see the innovation outside of Microsoft copilot into other Agentic applications like CRM. Could you maybe

Question: Shaul Eyal - TD Cowen - Analyst : Congrats on solid set results and guidance. Yaki I wanted to ask very two little quick questions. One was the headcount that you're adding with the small with the stocking acquisition? And a macro, Guy or Yaki, (inaudible) specifically, I'm not talking about tariffs, et cetera, but (inaudible) specifically, have you seen anything emerging in this quarter?

Question: Jason Ader - William Blair & Company - Analyst : I wanted to ask on the gross margin outlook. I know that the SaaS transition is impacting that. Can you just talk about what you expect for the remainder of 2025 and then the kind of more medium-term outlook? And then, just sort of related to that, why is a non-GAAP operating income range so wide? Can you just speak to that?

Question: Rudy Kessinger - D.A. Davidson & Co. - Analyst : Firstly, Guy, I want to make sure (inaudible), I think in response to Josh's question earlier, you said 80% SaaS mixed by year-end on ARR. I think that's versus 78% expected previously. I want to make sure I got that right. And then secondly, I guess my real question does it feel like we're getting any closer to an inflection point on the copilot and Gen AI stuff? Just what are you seeing from customer behavior? How has maybe the macro impact in the rollout of agent force copilot, et cetera? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 8:30PM, VRNS.OQ - Q1 2025 Varonis Systems Inc Earnings Call

Question: Shrenik Kothari - Robert W. Baird & Co. Inc. - Analyst : Just on a related note from the previous question. So historically, your spend has been an unstructured environment and, of course, with the several acquisitions and increased focus on (inaudible) , will be driving into infrastructure data. Just Yaki, how are customers responding to kind of more [UNFI] across structured, unstructured assets? Do you see as more of a green bar expansion? And are there like real gaps in automated congregation there? Are you seeing budgets kind of shift from potentially legacy asset (inaudible) into your platform? Just curious what you're seeing.