Varonis Systems, Inc. revenue surged on 15.1% and EBITDA Margin increased on 4.6 pp from -23.9% to -19.3%
02/08/2021 • About Varonis Systems, Inc. (
$VRNS) • By InTwits
Varonis Systems, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Varonis Systems, Inc. is a fast growth stock: 2020 revenue growth was 15.1%, 5 year revenue CAGR was 18.1% at 2020 ROIC -28.4%
- The company operates at negative EBITDA Margin: -19.3%
- Varonis Systems, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 5.7% while average EBITDA Margin was -13.5% for the sames years
- Varonis Systems, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.4%. At the same time it's a lot of higher than industry average of 3.2%.
- CAPEX is quite volatile: $10m in 2020, $25m in 2019, $10m in 2018, $5m in 2017, $4m in 2016
- The company has unprofitable business model: ROIC is -28.4%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.3x while industry average is -1.0x
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 surged on 15.1%. Revenue growth showed acceleration in 20Q4 - it increased 31.2% YoY. During the last 5 years Revenue growth bottomed in 2019 at -6.0%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.1 pp from -6.2% to 0.91% in 2020.
Gross Margin decreased slightly on 1.3 pp from 86.2% to 84.9% in 2020. Gross Margin followed a declining trend at -1.5 pp per annum in the last 5 years. SG&A as a % of Revenue decreased on 6.6 pp from 84.3% to 77.7% in 2020.
Net Income margin decreased slightly on 1.1 pp from -31.0% to -32.1% in 2020. Net Income margin stuck to a declining trend at -7.2 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
In 2020 Varonis Systems, Inc. had CAPEX/Revenue of 3.5%. The company showed small growth in CAPEX/Revenue of 0.99 pp from 2.5% in 2017 to 3.5% in 2020. It's average level of CAPEX/Revenue for the last three years was 5.7%. During 2016-2020 CAPEX as a % of Revenue topped in 2019 at 10.0%.
Return on investment
The company operates at negative ROIC (-28.4%) and ROE (-100.2%). ROIC surged on 23.0 pp from -51.4% to -28.4% in 2020. ROE dropped on 28.3 pp from -72.0% to -100% in 2020. ROE declined at -22.4 pp per annum in 2016-2020.
Leverage (Debt)
Debt level is 2.3x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in 2020. Debt jumped on 331% while cash surged on 240%.
Varonis Systems, Inc. has no short term refinancing risk: cash is higher than short term debt (2,690.7%).
Management team
The company's CEO is Yakov Faitelson "Yaki". Yakov Faitelson "Yaki" has 17 years tenure with the company. Guy Melamed is a Varonis Systems, Inc.'s CFO. Guy Melamed has spent 3 years at the company.
Financial and operational results
FY ended 12/31/2020
Varonis Systems, Inc. ($VRNS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 165.9 | 215.4 | 270.3 | 254.2 | 292.7 | 15.1% |
| Gross Profit | 150.1 | 194.7 | 242.6 | 219.0 | 248.4 | 13.4% |
| SG&A | 125.5 | 160.7 | 201.8 | 214.3 | 227.5 | 6.2% |
| EBITDA | -9.8 | -10.1 | -25.0 | -60.8 | -56.4 | |
| EBIT | -12.0 | -13.4 | -29.1 | | | |
| Interest expence | 1.4 | 0.2 | 0.8 | | | |
| Tax | 1.3 | 2.8 | 0.4 | | | |
| Net Income | -14.2 | -13.8 | -28.6 | -78.8 | -94.0 | |
| Stock Based Compensation | 12.9 | 19.8 | 35.0 | | | |
Balance Sheet
|
|---|
| Cash | 48.3 | 56.7 | 48.7 | 68.9 | 234.1 | 239.6% |
| Accounts Receivable | 53.9 | 75.6 | 83.2 | | | |
| Accounts Payable | 1.3 | 0.6 | 2.6 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 8.3 | 8.7 | 5.2% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 57.0 | 273.0 | 378.6% |
Cash flow
|
|---|
| Capex | 3.8 | 5.3 | 9.6 | 25.4 | 10.1 | -60.2% |
Ratios
|
|---|
| Revenue growth | 30.4% | 29.9% | 25.5% | -6.0% | 15.1% | |
| EBITDA growth | -43.8% | 2.8% | 147.5% | 143.2% | -7.2% | |
|
|---|
| Gross Margin | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% | -1.3% |
| EBITDA Margin | -5.9% | -4.7% | -9.2% | -23.9% | -19.3% | 4.6% |
| EBIT Margin | -7.2% | -6.2% | -10.8% | | |
| SG&A, % of revenue | 75.6% | 74.6% | 74.6% | 84.3% | 77.7% | -6.6% |
| SBC, % of revenue | 7.8% | 9.2% | 12.9% | | |
| Net Income Margin | -8.6% | -6.4% | -10.6% | -31.0% | -32.1% | -1.1% |
| CAPEX, % of revenue | 2.3% | 2.5% | 3.5% | 10.0% | 3.5% | -6.5% |
|
|---|
| ROIC | -14.4% | -13.5% | -24.2% | -51.4% | -28.4% | 23.0% |
| ROE | -17.1% | -14.0% | -23.8% | -72.0% | -100.2% | -28.3% |
People
|
|---|
| Insider ownership | 3.7% | 3.7% | 3.7% | | | |
| Employees | 1,098 | 1,251 | 1,460 | | | |
| Revenue/Employee, th. $ | 151 | 172 | 185 | | | |
Varonis Systems, Inc. ($VRNS) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 54 | 67 | 77 | 95 | | -3.9% | 11.6% | 16.9% | 31.2% |
| EBITDA | -29 | -17 | -9 | -2 | | - | - | - | - |
| Net Income | -31 | -24 | -19 | -19 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 78 | 240 | 231 | 234 | | 20.3% | 247.0% | 336.8% | 239.6% |
| Short Term Debt | 8 | 8 | 9 | 9 | | 136.3% | 41.9% | 17.0% | 5.2% |
| Long Term Debt | 55 | 269 | 265 | 273 | | 3.6% | 349.0% | 352.0% | 378.6% |
Ratios
|
|---|
| Gross Margin | 81.2% | 84.5% | 85.3% | 86.9% | | -4.0% | -1.4% | -1.3% | 0.2% |
| EBITDA Margin | -52.7% | -25.5% | -11.4% | -2.2% | | -19.1% | 9.6% | 6.1% | 10.7% |
| Net Income Margin | -58.0% | -36.5% | -25.0% | -20.0% | | -17.8% | 4.5% | 0.8% | 0.2% |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| |
|---|
| Median (23 companies) | 12.9% | 14.0% | 19.0% | 19.4% | 12.9% |
|---|
| Varonis Systems, Inc. ($VRNS) | - | 29.9% | 25.5% | -6.0% | 15.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| CyberArk Software Ltd. ($CYBR) | 86.1% | 84.0% | 85.9% | 85.6% | 82.2% |
| |
|---|
| Median (23 companies) | 73.1% | 73.9% | 73.5% | 75.4% | 76.5% |
|---|
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| |
|---|
| Median (23 companies) | -9.8% | -4.3% | -3.9% | 0.2% | 3.0% |
|---|
| Varonis Systems, Inc. ($VRNS) | -5.9% | -4.7% | -9.2% | -23.9% | -19.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| |
|---|
| Median (23 companies) | 2.0% | 2.2% | 2.5% | 3.4% | 2.8% |
|---|
| Varonis Systems, Inc. ($VRNS) | 2.3% | 2.5% | 3.5% | 10.0% | 3.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
| |
|---|
| Median (23 companies) | 0.0% | -2.7% | -0.9% | -6.3% | -6.4% |
|---|
| Varonis Systems, Inc. ($VRNS) | -14.4% | -13.5% | -24.2% | -51.4% | -28.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| |
|---|
| Median (12 companies) | -1.2x | -0.6x | -0.4x | -0.3x | 0.4x |
|---|
