Varonis Systems, Inc. (VRNS) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 Annual Meeting of Stockholders for Varonis Systems, Inc. The time is now 10:02 Eastern time. Thank you for joining us today. I'm Yaki Faitelson, Chief Executive Officer, President and Chairman of the Board of Directors of Varonis. This is a virtual meeting conducted via live audio webcast. At this time, I call the meeting to order. With me today via telephone conference are members of the Board of Directors and [ Nom Committee ], a partner at Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global Limited, Varonis' independent registered public accounting firm. Also joining us is John Holewa, a representative of American Election Services, who will serve as our inspector of elections; Guy Melamed, our Chief Financial Officer and Chief Operating Officer; and Dov Gottlieb, our Vice President, General Counsel and Corporate Secretary. We will conduct the formal part of the meeting. And once the votes have been taken and the polls are closed, the tabulated votes will be reported. I will then provide an update on the business of Varonis, and we'll try to answer appropriate questions that are submitted from stockholders during the time alluded in accordance with the rules of the meeting. Our independent auditors will also be available to answer appropriate questions. [Operator Instructions] The [ polls on ] each matter upon which stockholders will vote at the meeting opened at 10 a.m. Eastern time and will remain open until announcement that the polls are closed. Any stockholders who has not yet voted or who would like to change a previously submitted vote may utilize the web portal and do so now. At this time, Dov Gottlieb will give a report regarding the presence of a quorum to conduct business at this meeting and briefly review the procedures that will follow during today's meeting.

Thank you, Yaki. The Board of Directors has designated March 31, 2021, as the record date for this meeting. As of the record date, there were 106,152,171 shares of common stock entitled to vote at this meeting. The Board of Directors has appointed John Holewa of American Election Services as inspector of elections to tabulate the votes at today's meeting, and he has sworn the inspector's oath. The oath will be filed within the records of the company. Mr. Holewa has provided a certified list of stockholders of record as of the record date, and it is available for inspection during and after this meeting. Formal notice of the annual meeting and proxy materials were made available on or about April 12, 2021, to each stakeholder of record as of the record date. The affidavit of mailing and a certified list of stockholders will be filed within the records of the company. I have received a preliminary report from the inspector of elections showing that at today's meeting, the holders of at least 93,066,102 shares, which is more than 87.6% of shares entitled to vote, are present in person or by proxy, and therefore, a quorum is present to conduct business. After presentation of all the agenda items, the Chairman will open the meeting for questions. Only validated stockholders will be able to ask questions in the dedicated field on the web portal. In order to ensure that the business of the meeting proceeds in an orderly fashion and that stockholders who wish to speak have a fair opportunity to do so, questions shall be limited to the agenda item being considered. Also, as a courtesy to all stockholders, we ask that you limit yourself to one question. The Chairman will read questions submitted from validated stockholders aloud before answering. If appropriate, the Chairman will refer questions to others for a response. The preliminary count indicates that a quorum is present, and the meeting is duly convened and open for business.

We have 3 items of business to address today. Information about each item, including the vote necessary to approve the items, is also contained in the proxy statement. The first item of business is the election of 3 Class 1 directors. The Board of Directors has nominated Gili Iohan, Rachel Prishkolnik and Ofer Segev for election to the Board of Directors, each of them expiring at the annual 2024 Annual Meeting and until their successors have been duly elected and qualified. No other nominations were received in accordance with the advance notice requirement in the company's bylaws. Accordingly, all nominations are closed. The Board of Directors has recommended a vote in favor of each of these nominees. The second item of business is an advisory vote to approve the company's executive compensation in 2020 as disclosed in the proxy statement. The Board of Directors has recommended a vote in favor of this proposal. The third item is the ratification of the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global Limited, as Varonis' independent registered public accounting firm for fiscal year ending December 31, 2021. The Board of Directors has recommended a vote in favor of this proposal. This concludes the introduction of all the proposals to be presented at the meeting. If you have not voted or if you want to change your vote, you may do so now online. [Voting]

The polls are now closed. It's 10:08 a.m. Eastern time. The inspector of elections has completed the tabulation of the preliminary voting results. Dov, will you please provide the preliminary results?

The report of the voting of the proposals presented at this meeting is as follows: each of the director nominees has been elected to the Board; the advisory vote on the company's executive compensation in 2020 has been approved; and the selection of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global Limited, as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021, has been ratified. Final vote results will be filed in a Form 8-K by no later than 4 business days from today.

I hereby declare, subject to final tabulation of the votes, that Gili Iohan, Rachel Prishkolnik and Ofer Segev have been elected as directors; the advisory vote of the company's executive compensation in 2020 as disclosed in the proxy statement has been approved; and the selection of Kost Forer Gabbay & Kasierer as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021, has been ratified. The list of stockholders, the notice of annual meeting and proxy statement and the final report of the inspector of elections will be filed with the records of the company. I will now provide a brief update on the business of our company. 2020 was a strong year for Varonis. A year ago, we had just completed what we believe was one of the fastest transitions to subscription in the history of software. But our momentum was interrupted in mid-March as the full force of COVID-19 hit Varonis and companies around the world, all of whom had to rapidly enable their employees to work from home almost overnight. However, once they have addressed employee safety and business continuity, companies quickly realized their remote workforce was more dependent than ever on access to sensitive data on prem and in the cloud, exposing them to heightened risks. From that point on, business improved each quarter. Our Q2 results were solid. Q3 further improved, and Q4 results were outstanding. With this upswing, we gained momentum needed to exceed the high end of the full year 2020 revenue guidance we provided pre-COVID. We are proud of our 2020 financial results, which include the following highlights. Revenues were $292.7 million, representing growth of 15%. ARR at the end of Q4 2020 was $287.3 million, representing year-over-year growth of 37%. Subscription revenues grew 110% year-over-year. As we sit here today, the digital transformation gains traction in almost all industries around the globe, changing the way we live and work and impacting how data is stored, managed and accessed. This transformation has fueled, and we expect will continue to fuel, this secular trend that drives demand for our products. We are excited to capitalize on the large opportunity ahead of us. We will now entertain questions that have been provided by stockholders via the web portal. We did not receive any questions by stockholders this year. Thank you for your interest in the company. At this time, I want to thank all of you for attending today's meeting and for your continued support. I now declare the meeting we adjourned.