The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Meta Marshall - Morgan Stanley & Co Ltd - Analyst
: Great, thanks. Maybe a question for me is just in terms of kind of you guys had just received FedRAMP high authorization for the SaaS platform.
And so I guess just what went into some of the decision to terminate some of the people on the federal team, and just how do you pursue that
opportunity going forward? Thanks.
Question: Matthew Hedberg - RBC Capital Markets Inc - Analyst
: Great, guys. Thanks for taking my question. Yaki, was there anything you heard that was consistent for why the on-prem deals didn't renew? I mean,
I guess was there anything competitively? And then, Guy, you noted SaaS NRR trends were made at healthy levels. I wonder if you could put a finer
point on what level that might imply. Thanks, guys.
Question: Fatima Boolani - Citigroup Inc - Analyst
: Good afternoon. Thank you so much for taking my question. Guy and Yaki, you've sort of identified that this non-renewal or rather churn on an
enterprise customer, presumably, was maybe more of an isolated event. But you are being prudent, and you are, frankly, taking a hatchet to your
ARR guidance for the year.
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OCTOBER 28, 2025 / 8:30PM, VRNS.OQ - Q3 2025 Varonis Systems Inc Earnings Call
So I'm wondering, in the 24% of the ARR base that is not SaaS, What are some of the granular assumptions or thought processes you're reflecting
to give us a better sense that, hey, we've kind of hit the floor on something like this happening again and frankly, for most of next year, ahead of
which maybe customers are going to have an air pocket in terms of their decision making. So can you help us through some of that in terms of
how you're putting parameters on the risk to the 24% of ARR that is not SaaS? Thank you.
Question: Joseph Gallo - Jefferies LLC - Analyst
: Hey, guys, thanks for the question. Should we expect you to ease on that 25% to 30% ASP uplift for conversions, or is there anything you can do
to further incentivize the on-premise customers remaining to move to SaaS? And then just in your conversations with customers, is there any sense
of the number or percentage of business that maybe would never be willing to or can't move to SaaS? Thanks.
Question: Brian Essex - JPMorgan Chase & Co - Analyst
: Great. Thank you very much. Thank you for taking the question. It's Brian from JPMorgan. I guess maybe, Yaki, for you, or maybe Guy, if you want
to pick this one up, on the SaaS business, it sounds like that business is still very healthy and kind of as expected.
Can you give us a sense of where you think ARR could shake out for the end of the year? I think if we use like your previous 82% guide that puts us
in a neighborhood of, I don't know, $615 million at the midpoint, somewhere in that neighborhood, but just a sense of the -- what to expect on
the south side. And then as a follow-up contribution from SlashNext, and Cyral, what you expect that could contribute for the rest of the year.
Thank you.
Question: Rudy Kessinger - DA Davidson & Co - Analyst
: Hey, guys, thanks for taking my question. It's kind of been asked, but I'm just curious, the end-of-life for self-hosted by the end of next year. You
just had lower renewal rates than you were expecting in Q3. I mean, do you feel at all that this push to migrate to SaaS is in any way alienating a
certain portion of your customers who are just never going to move to SaaS? And if so, I guess, why do that? I imagine some of those customers
might be very large strategic customers who have very high lifetime values. Why not let them have a longer timeframe to migrate to SaaS or remain
on term license if they want to? Thank you.
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OCTOBER 28, 2025 / 8:30PM, VRNS.OQ - Q3 2025 Varonis Systems Inc Earnings Call
Question: Roger Boyd - UBS Securities LLC - Analyst
: Great. Thanks for taking the questions. Just to go back to Josh's question for a minute, to just be clear, was there any change to how you're
approaching renewals on maintenance and term license in the quarter, relative to the second quarter or last year, and whether that maybe led to
some of this unpredictability?
I guess the context is we had heard some anecdotes that you were maybe more heavily encouraging on-prem customers to move to the SaaS; or
in some cases, limiting the ability for customers to renew on maintenance. And just wondering if that at all was informed by this planned end-of-life
on-prem business. Thanks.
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OCTOBER 28, 2025 / 8:30PM, VRNS.OQ - Q3 2025 Varonis Systems Inc Earnings Call
Question: Erik Suppiger - B. Riley Securities Holdings Inc - Analyst
: Yes, thanks for taking the question. Just -- can you remind us what your contribution from Fed was, and maybe what the contribution from the
on-premise Fed business, because I think all the Fed is probably on-premise. And then you've specifically identified both your Fed on-prem and
the non-Fed on-prem. Was there a difference in terms of the decline in renewal rates between those two categories, or were they both down
similarly?
Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst
: Yes, thanks for taking my question. So now that the conversion phase is largely complete, right, for your initial target for the mix and with the
end-of-life; and in light of your prior confidence in sustaining 20% top-line growth, if we can really help kind of triangulate what the underlying
growth cadence looks like going forward in your view, now with the conversion out of the picture?
Just from that $545 million SaaS ARR core, how much of that is considered sort of early stage with significant room for up-sell, cross-sell next year
and after via, of course, usage and module attach? And versus how much is already a little more mature with product adoption such as MDDR and
stuff like that? I just wanted to understand how to think about underlying growth cadence into next year and ahead. Thanks.
Question: Junaid Siddiqui - Truist Securities Inc - Analyst
: Great, thank you. As you expand your platform to cover adjacent use cases like SaaS and cloud infrastructure, I'm just curious. Where is the source
of that incremental budget that you are taking coming from? Are you seeing like a budget reallocation from existing security categories, or is this
tapping into net new spend from customers?
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