Summary
Varonis reported first quarter revenue of $74.8 million, up 38% from $54.2 million in the prior year period. The subscription shift kept reshaping the mix. Subscriptions accounted for 59.9% of total revenue, up from 37.6% a year earlier, while maintenance and services fell to 39.7% of revenue from 61.7%. Subscription revenue grew 120% year over year, and annual recurring revenue reached $306.9 million as of March 31, 2021, a 39% increase over $220.5 million a year earlier. Management credited new customer acquisitions, existing customers expanding licenses and a high subscription renewal rate.
Profitability remains the weak spot. GAAP operating loss was $34.1 million for the quarter, wider than the $32.7 million loss in the prior year quarter, and GAAP net loss widened to $35.7 million from $31.4 million. Diluted loss per share was $0.36. On a non-GAAP basis the numbers look better: operating loss narrowed to $6.3 million from $17.4 million, and net loss per share improved to $0.08 from $0.19. Gross margin rose to 82.0% from 81.2%, up 0.8 percentage points, and operating margin rose to negative 45.6% from negative 60.3%, a 14.7 percentage point gain. Seasonality matters here. The first quarter usually carries the year's lowest gross margin because revenue is typically lowest then, and the fourth quarter usually carries the highest.
Cash generation improved sharply. Operating cash flow was $20.4 million for the quarter, up from $3.9 million a year earlier, driven largely by collections of accounts receivable. Capital expenditures were $1.1 million, down from $2.6 million. Days sales outstanding improved to 69 from 84. Current deferred revenue stood at $91.6 million at March 31, 2021, up 8.6% from $84.3 million a year earlier. The balance sheet carried $824.0 million in cash, cash equivalents, marketable securities and short-term deposits after a $500.0 million follow-on equity offering.
Guidance points to more growth and smaller losses. For the second quarter of 2021, Varonis expects revenue of $82.5 million to $84.0 million, or 24% to 26% year-over-year growth, and a non-GAAP operating loss of $2.5 million to $1.5 million. Non-GAAP net loss per basic and diluted share is guided to $0.04 to $0.03 on 106.4 million shares outstanding. For full year 2021, revenue is guided to $365.0 million to $370.0 million, or 25% to 26% growth, with non-GAAP operating income of $4.5 million to $8.5 million. Full year non-GAAP results are guided to a net loss per share of $0.01 at the low end and net income per diluted share of $0.02 at the high end, based on 105.3 million basic and diluted shares and 116.5 million diluted shares, respectively.
Adoption metrics show customers buying deeper into the platform. As of March 31, 2021, 66% of customers with 500 employees or more had purchased four or more licenses, up from 55% a year earlier, and 32% had purchased six or more, up from 21%. North America revenue grew 39% over the prior year period and EMEA revenue grew 38%. Maintenance renewal rates on perpetual licenses stayed above 90%. The company also rolled out a platform update aimed at insider and collaboration risks in Microsoft 365.
Risks are familiar but real. Management lists the pandemic's effect on customer budgets, the timing and rate of subscription renewals, competitive pressure and longer sales cycles, the difficulty of closing large transactions consistently each quarter, foreign exchange swings, the convertible notes and related capped call, and the Polyrize acquisition, which closed in the fourth quarter of 2020 and may not integrate as anticipated. Tax audits in Israel, including a current audit, and a full valuation allowance against U.S. deferred tax assets also sit in the background. For all the revenue momentum, the company still posted a $35.7 million quarterly net loss, and that gap between growth and profit is the central question for the rest of 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $74.8M | $95.2M | -21.4% | $54.2M | +38.0% |
| Gross profit | $61.3M | $82.7M | -25.9% | $44.0M | +39.3% |
| Gross margin | 82.0% | 86.9% | -4.9 pp | 81.2% | +0.8 pp |
| Research & development | $30.1M | $27.9M | +7.6% | $22.7M | +32.5% |
| Sales & marketing | $51.5M | $48.9M | +5.3% | $42.6M | +20.9% |
| General & administrative | $13.8M | $13.1M | +5.6% | $11.4M | +21.3% |
| Total operating expenses | $95.4M | $89.9M | +6.1% | $76.7M | +24.4% |
| Operating income (loss) | -$34.1M | -$7.2M | -373.3% | -$32.7M | -4.3% |
| Operating margin | -45.6% | -7.6% | -38.0 pp | -60.3% | +14.7 pp |
| Net income (loss) | -$35.7M | -$19.0M | -87.3% | -$31.4M | -13.4% |
| Net margin | -47.7% | -20.0% | -27.7 pp | -58.0% | +10.3 pp |
Risks
The COVID-19 pandemic and related economic uncertainty remain difficult to predict and could delay customer purchasing decisions, lengthen sales cycles, reduce IT spending, and increase bad debt or contract renegotiation risk.
Quarterly results fluctuate because most sales close in the last three weeks of each quarter, large transactions are less predictable, and COVID-19 has lengthened sales cycles. A small revenue shortfall could disproportionately affect quarterly results.
Substantially all sales are fulfilled through channel partners, agreements are generally non-exclusive and terminable on 30 days' notice, and loss of key partners could materially reduce revenues.
The market for enterprise data security software is new and unproven, and increased competition from established or emerging vendors could lead to price cuts, longer sales cycles, lower renewal rates, and loss of market share.
The company depends on hiring and retaining sales, marketing, and engineering personnel, especially in Israel; remote recruiting and training during COVID-19 may delay new sales force productivity, and equity declines could impair retention.
Although subscription revenues increased 120% to $44.8 million and ARR grew 39% to $306.9 million in Q1 2021, the completed subscription transition may not continue yielding expected benefits if renewal rates decline or customers delay renewals.
Failure to comply with evolving privacy and data protection laws such as GDPR and CCPA could result in fines, lawsuits, required changes to products or practices, and reduced demand for the platform.
The Israeli subsidiary's Beneficiary Enterprise tax benefit terminated as of December 31, 2020, and it expects to be subject to the standard corporate tax rate of 23% as of January 1, 2021, which may increase tax expenses and effective tax rates.
The $253.0 million 2025 Notes and $70.0 million revolving credit facility reduce business flexibility, increase borrowing costs, and could dilute existing stockholders upon conversion of the 2025 Notes.
SaaS KPIs
All quarters →Customers with 500+ employees purchasing 4+ licenses
Customers with 500+ employees purchasing 6+ licenses
Perpetual License Maintenance Renewal Rate
Summary, forecast, risks and KPIs are extracted from VARONIS SYSTEMS INC's SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.