Data protection and security software company Varonis (NASDAQ:VRNS) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 6.2% year on year to $114 million. On the other hand, the company expects next quarter's revenue to be around $124.5 million, slightly below analysts' estimates. It made a non-GAAP loss of $0.03 per share, down from its loss of $0 per share in the same quarter last year.
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Varonis (VRNS) Q1 CY2024 Highlights:
- Revenue: $114 million vs analyst estimates of $113.7 million (small beat)
- EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.09 ($0.06 beat)
- Revenue Guidance for Q2 CY2024 is $124.5 million at the midpoint, below analyst estimates of $125.6 million (operating loss also guided to worse than expectations)
- The company reconfirmed its revenue guidance for the full year of $541 million at the midpoint (slightly raised full year operating profit guidance)
- Gross Margin (GAAP): 81.3%, down from 83.6% in the same quarter last year
- Free Cash Flow of $56.4 million, up from $8.29 million in the previous quarter
- Annual Recurring Revenue: $560.3 million at quarter end, up 17.2% year on year
- Market Capitalization: $4.78 billion
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 three years, growing from $74.79 million in Q1 2021 to $114 million this quarter.
Varonis's quarterly revenue was only up 6.2% year on year, which might disappoint some shareholders. On top of that, the company's revenue actually decreased by $40.08 million in Q1 compared to the $31.79 million increase in Q4 CY2023. Regardless, we aren't too concerned because Varonis's sales seem to follow a seasonal pattern and management is guiding for revenue to rebound in the coming quarter.
Next quarter's guidance suggests that Varonis is expecting revenue to grow 7.9% year on year to $124.5 million, improving on the 3.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 10.1% 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 $56.4 million in Q1, up 57.9% year on year.
Varonis has generated $75 million in free cash flow over the last 12 months, a decent 14.8% of revenue. This FCF margin stems from its asset-lite business model and gives it a decent amount of cash to reinvest in its business.
Key Takeaways from Varonis's Q1 Results It was good to see Varonis beat analysts' ARR (annual recurring revenue) expectations this quarter. It was also comforting to see the company reiterate its full year revenue guidance and slightly raise its operating profit guidance. On the other hand, its revenue and operating profit guidance for next quarter missed Wall Street's estimates. Overall, this was a mixed quarter for Varonis. The stock is flat after reporting and currently trades at $44.58 per share.
