Data protection and security software company Varonis (NASDAQ:VRNS) fell short of analysts' expectations in Q3 FY2023, with revenue flat year on year at $122.3 million. Next quarter's outlook also missed expectations with revenue guided to $152 million at the midpoint, or 0.29% below analysts' estimates. Turning to EPS, Varonis made a GAAP loss of $0.21 per share, improving from its loss of $0.26 per share in the same quarter last year.
Is now the time to buy Varonis? Find out by reading the original article on StockStory.
Varonis (VRNS) Q3 FY2023 Highlights:
- Revenue: $122.3 million vs analyst estimates of $125.5 million (2.53% miss)
- EPS (non-GAAP): $0.08 vs analyst estimates of $0.03 ($0.05 beat)
- Revenue Guidance for Q4 2023 is $152 million at the midpoint, roughly in line with what analysts were expecting
- Free Cash Flow of $5.98 million, up 38.7% from the previous quarter
- Gross Margin (GAAP): 85.8%, in line with the same quarter last year
Founded by a duo of former Israeli Defense Forces cyber warfare engineers, Varonis (NASDAQ:VRNS) offers software-as-service that helps customers protect data from cyber threats and gain visibility into how enterprise data is being used.
Endpoint SecurityAlmost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. As the volume of internet enabled devices grows, every device that employees use to connect to business networks represents a potential risk. Endpoint security software enables businesses to protect devices (endpoints) that employees use for work purposes either on a network or in the cloud from cyber threats.
Sales GrowthAs you can see below, Varonis's revenue growth has been mediocre over the last two years, growing from $100.4 million in Q3 FY2021 to $122.3 million this quarter.
This quarter, Varonis's revenue was down 0.81% year on year, which might disappointment some shareholders.
Next quarter's guidance suggests that Varonis is expecting revenue to grow 6.58% year on year to $152 million, slowing down from the 12.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 9.7% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Varonis's free cash flow came in at $5.98 million in Q3, turning positive over the last year.
Varonis has generated $45.7 million in free cash flow over the last 12 months, a solid 10.4% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.
Key Takeaways from Varonis's Q3 Results Sporting a market capitalization of $3.46 billion, Varonis is among smaller companies, but its more than $448.9 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
Revenue missed, next quarter's revenue guidance was in line, but full year guidance was below expectations. However, billings in the quarter beat expectations. Adjusted operating profit guidance for next quarter and the full year were mixed like with revenue guidance, where the former was ahead but the latter was below. Overall, the results were mixed and could have been better. The company is down 4.1% on the results and currently trades at $30.18 per share.
The author has no position in any of the stocks mentioned in this report.
