Varonis Systems, Inc. revenue surged on 25.5% while EBITDA Margin decreased on 4.6 pp from -4.7% to -9.2%
02/11/2019 • About Varonis Systems, Inc. (
$VRNS) • By InTwits
Varonis Systems, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Varonis Systems, Inc. is a fast growth stock: 2018 revenue growth was 25.5%, 5 year revenue CAGR was 29.4% at 2018 ROIC -24.2%
- The company operates at negative EBITDA Margin: -9.2%
- Varonis Systems, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 9.1%. Average EBITDA Margin for the same period was -8.9%. In 2018 SBC/Revenue was even higher: 12.9%
- Varonis Systems, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $10m in 2018, $5m in 2017, $4m in 2016, $5m in 2015, $2m in 2014
- The company has unprofitable business model: ROIC is -24.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Varonis Systems, Inc.'s Revenue jumped on 25.5%. Revenue growth showed slowdown in 18Q4 - it was 19.9% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 4.6 pp from -4.7% to -9.2% in 2018. During the last 5 years EBITDA Margin topped in 2017 at -4.7%.
Gross Margin decreased slightly on 0.63 pp from 90.4% to 89.8% in 2018. During the last 5 years Gross Margin topped in 2015 at 90.6% and was declining since that time. SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue followed a declining trend at -1.6 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue increased on 3.7 pp from 9.2% to 12.9% in 2018. SBC as a % of Revenue grew at 2.0 pp per annum in 2014-2018.
Net Income margin decreased on 4.1 pp from -6.4% to -10.6% in 2018. During the last 5 years Net Income margin topped in 2017 at -6.4%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.5% in 2018. Varonis Systems, Inc.'s CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 2.8%.
Accounts receivable as a % of Revenue decreased on 4.3 pp from 35.1% to 30.8% in 2018. Accounts payable as a % of Revenue increased on 6.4 pp from 3.1% to 9.5% in 2018.
Return on investment
The company operates at negative ROIC (-24.2%) and ROE (-23.8%). ROIC dropped on 10.6 pp from -13.5% to -24.2% in 2018. ROE decreased on 9.8 pp from -14.0% to -23.8% in 2018. During 2014-2018 ROIC topped in 2017 at -13.5%.
Leverage (Debt)
The company has no debt. Cash dropped on 14.1%.
Management team
The company's CEO Yakov Faitelson "Yaki" is a founder and has spent 15 years with the company. CEO total compensation was
$8,770,972 in 2018 which included
$560,000 salary. The company's CFO Guy Melamed has spent 1 year with the company.
At the end of financial year the company had 3.7% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,460 employees. The number of employees jumped on 16.7%. Average revenue per employee in 2018 was
$185,129 and it increased on 7.5%.
Financial and operational results
FY ended 12/31/2018
Varonis Systems, Inc. ($VRNS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 101.3 | 127.2 | 165.9 | 215.4 | 270.3 | 25.5% |
| Gross Profit | 91.4 | 115.2 | 150.1 | 194.7 | 242.6 | 24.6% |
| SG&A | 80.7 | 102.5 | 125.5 | 160.7 | 201.8 | 25.5% |
| EBITDA | -16.0 | -17.5 | -9.8 | -10.1 | -25.0 | |
| EBIT | -17.3 | -19.1 | -12.0 | -13.4 | -29.1 | |
| Interest expence | | | 1.4 | 0.2 | 0.8 | 316.8% |
| Tax | 0.4 | 0.7 | 1.3 | 2.8 | 0.4 | -85.2% |
| Net Income | -19.4 | -21.3 | -14.2 | -13.8 | -28.6 | |
| Stock Based Compensation | 4.7 | 7.8 | 12.9 | 19.8 | 35.0 | 76.3% |
Balance Sheet
|
|---|
| Cash | 76.6 | 49.2 | 48.3 | 56.7 | 48.7 | -14.1% |
| Accounts Receivable | 37.9 | 47.4 | 53.9 | 75.6 | 83.2 | 10.1% |
| Accounts Payable | 2.7 | 2.6 | 1.3 | 0.6 | 2.6 | 312.6% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 2.3 | 4.5 | 3.8 | 5.3 | 9.6 | 80.3% |
Ratios
|
|---|
| Revenue growth | 35.8% | 25.5% | 30.4% | 29.9% | 25.5% | |
| EBITDA growth | 230.4% | 9.0% | -43.8% | 2.8% | 147.5% | |
|
|---|
| Gross Margin | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% | -0.6% |
| EBITDA Margin | -15.8% | -13.7% | -5.9% | -4.7% | -9.2% | -4.6% |
| EBIT Margin | -17.1% | -15.0% | -7.2% | -6.2% | -10.8% | -4.5% |
| SG&A, % of revenue | 79.6% | 80.6% | 75.6% | 74.6% | 74.6% | 0.0% |
| SBC, % of revenue | 4.6% | 6.1% | 7.8% | 9.2% | 12.9% | 3.7% |
| Net Income Margin | -19.1% | -16.7% | -8.6% | -6.4% | -10.6% | -4.1% |
| CAPEX, % of revenue | 2.3% | 3.6% | 2.3% | 2.5% | 3.5% | 1.1% |
|
|---|
| ROIC | -36.0% | -21.3% | -14.4% | -13.5% | -24.2% | -10.6% |
| ROE | | -23.8% | -17.1% | -14.0% | -23.8% | -9.8% |
People
|
|---|
| Insider ownership | 3.7% | 3.7% | 3.7% | 3.7% | 3.7% | 0.0% |
| Employees | 840 | 947 | 1,098 | 1,251 | 1,460 | 16.7% |
| Revenue/Employee, th. $ | 121 | 134 | 151 | 172 | 185 | 7.5% |
Varonis Systems, Inc. ($VRNS) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 54 | 62 | 67 | 88 | | 35.2% | 25.8% | 25.1% | 19.9% |
| EBITDA | -15 | -10 | -6 | 6 | | | | | -32.2% |
| Net Income | -15 | -13 | -7 | 6 | | | | | -5.2% |
Balance Sheet
|
|---|
| Cash | 71 | 74 | 68 | 49 | | 38.6% | 37.5% | 26.9% | -14.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 88.0% | 89.6% | 89.5% | 91.1% | | -0.2% | -0.5% | -0.4% | -1.0% |
| EBITDA Margin | -27.5% | -16.8% | -8.9% | 7.1% | | 1.1% | -5.8% | -4.1% | -5.4% |
| Net Income Margin | -28.1% | -20.4% | -10.9% | 7.4% | | 1.3% | -8.8% | -4.7% | -2.0% |
Peers in Systems Software
Below we provide Varonis Systems, Inc. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 18.2% | 14.6% | 14.0% | 19.0% |
|---|
| Varonis Systems, Inc. ($VRNS) | | 25.5% | 30.4% | 29.9% | 25.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| Dell Technologies Inc. ($DVMT) | | | | 87.6% | 87.5% |
| |
|---|
| Median (53 companies) | 76.1% | 74.5% | 73.1% | 73.9% | 73.5% |
|---|
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -5.0% | -9.8% | -4.3% | -3.9% |
|---|
| Varonis Systems, Inc. ($VRNS) | -15.8% | -13.7% | -5.9% | -4.7% | -9.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.9% | 2.1% | 2.0% | 2.2% | 2.5% |
|---|
| Varonis Systems, Inc. ($VRNS) | 2.3% | 3.6% | 2.3% | 2.5% | 3.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -2.7% | -0.9% |
|---|
| Varonis Systems, Inc. ($VRNS) | -36.0% | -21.3% | -14.4% | -13.5% | -24.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (23 companies) | -2.4x | -1.4x | -1.2x | -0.6x | -0.4x |
|---|
