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Varonis Systems (VRNS)
NASDAQ:VRNS
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Varonis Systems
(NASDAQ:VRNS)
Rating:66Neutral
Price Target:
$49.00
▲( 4.79% Upside)
Positive Factors
Market Position
The company's current market cap and category-leading position are appealing to potential buyers in a rapidly consolidating security market.
Revenue and Growth
VRNS delivered a clean Q1 beat across ARR, revenue, and FCF, driving the stock higher.
SaaS Transition
The company's ongoing SaaS transition ahead of schedule as shown in recent quarters should drive accelerated growth and improved profitability.
Negative Factors
Acquisition Impact
Cyral acquisition is not expected to have any impact on ARR/revenue in FY25 and is expected to add $4M to OpEx.
Investment Concerns
The risk/reward at current levels feels increasingly skewed positive—investors are still pricing this like a business in transition risk.
Stock Performance
VRNS is down ~16.1% over the last six months, underperforming IGV by nearly 24 pts.
Varonis Systems (VRNS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.21B
Dividend YieldN/A
Average Volume (3M)1.39M
Price to Earnings (P/E)―
Beta (1Y)1.06
Revenue Growth13.34%
EPS Growth13.71%
CountryUS
Employees2,406
SectorTechnology
Sector Strength75
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)<0.01
Shares Outstanding111,924,960
10 Day Avg. Volume1,529,157
30 Day Avg. Volume1,393,395
Financial Highlights & Ratios
PEG Ratio2.16
Price to Book (P/B)11.18
Price to Sales (P/S)0.00
P/FCF Ratio46.73
Enterprise Value/Market Cap1.08
Enterprise Value/Revenue2.65
Enterprise Value/Gross Profit12.34
Enterprise Value/Ebitda-15.93
Forecast
1Y Price Target
$53.62Price Target Upside14.67% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering15
Varonis Systems Business Overview & Revenue Model
Company DescriptionVaronis Systems, Inc. provides software products and services that allow enterprises to manage, analyze, alert, and secure enterprise data in North America, Europe, the Middle East, Africa, and internationally. Its software enables enterprises to protect data stored on premises and in the cloud, including sensitive files and emails; confidential personal data belonging to customers, and patients and employees' data; financial records; strategic and product plans; and other intellectual property. The company offers DatAdvantage that captures, aggregates, normalizes, and analyzes every data access event for users on Windows and UNIX/Linux servers, storage devices, email systems, Intranet servers, cloud applications, and data stores; and DatAlert that profiles users, devices, and their behaviors related to systems and data, detects and alerts on deviations that indicate compromise, and provides a Web-based dashboard and investigative interface. It also provides Data Classification Engine that identifies and tags data based on criteria set in various metadata dimensions, as well as provides business and information technology (IT) personnel with actionable intelligence about data; and DataPrivilege, which offers a self-service Web portal that allows users to request access to data necessary for their business functions, and owners to grant access without IT intervention. In addition, the company provides Data Transport Engine, which provides an execution engine that unifies the manipulation of data and metadata, translating business decisions, and instructions into technical commands, such as data migration or archiving; and DatAnswers that offers search functionality for enterprise data. Varonis Systems, Inc. sells products and services through a network of distributors and resellers. The company serves IT, security, and business personnel. Varonis Systems, Inc. was incorporated in 2004 and is headquartered in New York, New York.
How the Company Makes MoneyVaronis Systems makes money primarily through the sale of its software solutions and related services. The company's revenue model is based on a subscription-based licensing model, where customers pay recurring fees for access to Varonis's software products and support services. Key revenue streams include software licenses, maintenance and support services, and professional services such as consulting and training. Varonis also leverages partnerships with value-added resellers, system integrators, and technology partners to expand its market reach and enhance its product offerings. These partnerships play a significant role in the company's ability to attract new customers and drive sales growth.
Varonis Systems Key Performance Indicators (KPIs)
Any
Annual Recurring Revenue
Measures the predictable revenue generated from ongoing subscriptions, indicating financial stability and customer retention strength.
Measures the predictable revenue generated from ongoing subscriptions, indicating financial stability and customer retention strength.
Data provided by:
Main Street Data
Main Street DataVaronis Systems Financial Statement Overview
Summary
Varonis Systems exhibits strong revenue growth and improving cash flow, which are positive indicators for future performance. However, the company faces challenges in achieving profitability and managing leverage, as evidenced by negative EBIT and high debt levels. Financial health is moderately stable but needs careful management to sustain growth and improve profitability.Income Statement
Varonis Systems has shown steady revenue growth over the years, with a revenue increase from $254.19 million in 2019 to $550.95 million in 2024. The gross profit margin is strong, consistently above 80%. However, the company has struggled with profitability at the net level, showing a net loss in most years except 2024. The EBIT and EBITDA margins are negative, indicating operational challenges.60
Neutral
Balance Sheet
The company's balance sheet shows a high debt-to-equity ratio, which increased significantly in 2024, indicating potential leverage risk. The equity ratio has been declining, suggesting reduced financial stability. However, the company has managed to maintain positive stockholders' equity over the years.55
Neutral
Cash Flow
The cash flow statement reveals a positive trend in operating cash flow, particularly in 2024. Free cash flow has improved significantly, displaying strong growth from 2023 to 2024. The operating cash flow to net income ratio is healthy, reflecting efficient cash management despite previous years of negative free cash flow.65
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 550.95M | 499.16M | 473.63M | 390.13M | 292.69M | Gross Profit |
| 457.10M | 427.41M | 403.80M | 330.74M | 248.43M | EBIT |
| -117.65M | -117.22M | -121.23M | -98.69M | -78.42M | EBITDA |
| -63.58M | -70.55M | -82.04M | -98.69M | -68.51M | Net Income Common Stockholders |
| -95.77M | -100.92M | -124.52M | -116.86M | -94.01M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 568.42M | 533.72M | 732.49M | 807.61M | 298.26M | Total Assets |
| 1.66B | 1.10B | 1.04B | 1.11B | 555.48M | Total Debt |
| 754.41M | 311.84M | 316.46M | 294.02M | 273.00M | Net Debt |
| 568.82M | 81.10M | -51.34M | -511.74M | 38.91M | Total Liabilities |
| 1.21B | 614.26M | 541.61M | 511.94M | 461.41M | Stockholders Equity |
| 455.66M | 489.65M | 502.13M | 596.59M | 94.07M |
| Cash Flow | Free Cash Flow | |||
| 108.51M | 54.32M | 475.00K | -3.31M | -15.96M | Operating Cash Flow |
| 115.20M | 59.42M | 11.87M | 7.18M | -5.84M | Investing Cash Flow |
| -532.25M | -143.08M | -374.25M | 54.38M | -54.75M | Financing Cash Flow |
| 371.90M | -53.40M | -75.58M | 510.11M | 225.75M |
Varonis Systems Technical Analysis
Positive
46.76
Price Trends
42.39
Positive
42.98
Positive
48.16
Negative
Market Momentum
1.29
Negative
73.30
Negative
82.43
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VRNS, the sentiment is Positive. The current price of 46.76 is above the 20-day moving average (MA) of 44.77, above the 50-day MA of 42.39, and below the 200-day MA of 48.16, indicating a neutral trend. The MACD of 1.29 indicates Negative momentum. The RSI at 73.30 is Negative, neither overbought nor oversold. The STOCH value of 82.43 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for VRNS.
Varonis Systems Risk Analysis
Varonis Systems disclosed 56 risk factors in its most recent earnings report. Varonis Systems reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Varonis Systems Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $5.02B | 27.76 | 40.23% | ― | 9.58% | 12.41% | |
73 Outperform | $4.53B | 23.27 | 189.40% | ― | 5.05% | 103.11% | |
66 Neutral | $5.21B | ― | -22.21% | ― | 13.34% | 13.71% | |
64 Neutral | $6.65B | ― | -17.68% | ― | 32.25% | 20.56% | |
61 Neutral | $1.50B | 57.39 | 164.75% | ― | 6.19% | ― | |
61 Neutral | $11.41B | 10.19 | -7.05% | 2.95% | 7.46% | -10.52% | |
60 Neutral | $3.99B | ― | -12.09% | ― | 11.79% | 35.35% |
* Technology Sector Average
Performance Comparison
VRNS
Varonis Systems
46.76
2.21
4.96%
QLYS
Qualys
136.43
-9.82
-6.71%
BOX
Box
31.26
5.38
20.79%
RPD
Rapid7
23.01
-14.97
-39.42%
TENB
Tenable Holdings
32.02
-11.11
-25.76%
S
SentinelOne
19.79
-1.93
-8.89%
Varonis Systems Earnings Call Summary
Earnings Call Date:May 06, 2025
(Q1-2025)
| % Change Since: 5.62%|
Next Earnings Date:Aug 04, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong quarter for Varonis with significant ARR growth and progress in their SaaS transition, alongside increased free cash flow and new customer acquisitions. However, challenges remain with a decline in gross margin and an operating loss, partly due to changes in revenue recognition from the SaaS transition.Q1-2025 Updates
Positive Updates
ARR Growth
Annual Recurring Revenue (ARR) grew 19% to $664.3 million in Q1, with SaaS ARR representing approximately 61% of total ARR, amounting to $403.9 million.
Free Cash Flow Increase
Generated $65.3 million of free cash flow in Q1, up from $56.4 million in the same period last year.
SaaS Transition Progress
SaaS transition is on track to complete by the end of the year, with SaaS ARR now representing 61% of total ARR, up 8 points from 53% in Q4.
New Customer Momentum
Strong contributions from new customers, including large healthcare systems and multinational consumer products companies, indicating healthy demand.
Innovation and Acquisitions
Launched Varonis for Agentforce and acquired Cyral to expand data security platform capabilities, enhancing the ability to monitor database activity.
Raised Full-Year Guidance
Full-year ARR guidance increased to $742 million to $750 million, and SaaS mix guidance raised to 80% by year-end.
Negative Updates
Gross Margin Decline
Gross margin decreased to 80.2% from 83.3% in the same period last year, due to increased SaaS sales in the booking mix.
Operating Loss
First quarter operating loss was $6.5 million, with an operating margin of negative 4.7%.
Revenue Recognition Impact
1% headwind to year-over-year revenue growth rate due to increased SaaS sales recognized ratably versus upfront recognition of on-prem subscription products.
Company Guidance
In the Varonis Systems, Inc. Q1 2025 earnings call, the company reported a 19% year-over-year growth in Annual Recurring Revenue (ARR) to $664.3 million, with SaaS ARR making up 61% of total ARR. The company also generated $65.3 million in free cash flow, an increase from $56.4 million in the previous year. For the full year, Varonis raised its ARR guidance to $742-$750 million, representing 16%-17% growth, and expects SaaS to constitute 80% of ARR by year-end. The company highlighted strong new customer momentum and successful existing customer conversions to SaaS, driven by demand for its SaaS platform and MDDR offering. Additionally, Varonis emphasized the strategic acquisition of Cyral to expand its data security platform and its plans to capitalize on growing customer interest in securing generative AI applications.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.