Varonis Systems, Inc. Q1 FY2026 earnings call

CEO Yaki Fidelson noted Q1 results reflect strong performance executing on data security and AI enablement needs. Strong demand from accelerating new logos and existing customers. Continued adoption of MDDR and AI-related products, and traction in securing cloud environments. Key customer wins like a global tech company and ServiceNow expanding investments. Emphasized platform's role in safely enabling AI with automation

SAS ARR excluding convergence increased 29% year-over-year to $522.6 million in Q1. Total SaaS ARR including conversion was $683.2 million. Total revenues were $173.1 million, up 27% year over year. SAS revenues were $161.1 million. Term license subscription revenues were $6.9 million, and maintenance and services revenues were $5.2 million. Gross profit for the first quarter was $134.9 million, representing a gross margin of 77.9%. Operating expenses in the first quarter totaled $136.3 million. As a result, first quarter operating loss was $1.4 million

Second quarter 2026 expects SAS ARR growth of 24% to 25% excluding conversions, total revenues of $175 million to $178 million. Full year 2026 expects total SAS ARR of $814 million to $845 million (27% to 32% growth), SAS ARR excluding conversions 20% to 21% growth, free cash flow of 100 million to $105 million

Factors causing actual results to differ from forward-looking statements as per federal securities laws, and acquisition-related costs impacting cash flow

Q: And our first question comes from Saget Kalia with Barclays. Maybe a question for both of you. I think one of the thoughts this year has been that Varonis sales teams could spend more time now on new business rather than on both new business and conversions as they did last year. Guy, maybe for you, can you expand on how that's looking the first quarter into that new model? And Yaki, for you, Where are you having that success in driving new business?

A: You're right. We talked a lot about the fact that the conversions from on-prem subscription to SaaS were cannibalizing the time of the reps. And that in 2026, the way we've structured the commission plan and the way we've focused our reps is to go back and focus on upselling SaaS customers with additional products and going into new TAMs and selling new products and selling our SaaS offering to new customers. And we saw an acceleration in the new customer contribution, which we're extremely happy with, and it very much fits with what we were trying to achieve and the strength of the platform. So our sales force is able to go and with the simplicity of the SaaS offering, sell to customers that we wouldn't be able to sell before. And that's worked really well in Q1, and we expect that to continue in the year ahead. In terms of what's in the market, the reality that for organizations to realize the value from AI, from others and agents, they need to connect their organization and information into it. They are as good as the data. And this is the biggest problem that we see for organization. We call it the 3% paradox. It's very hard for them to securely connect the data. So the MBDR becoming this AI detection and response, automated remediation of excessive permissions is the holy grail. If not, these agents will create and read massive amount of information that they should never touch, and you also see just a lot of attacks that are AI-based, and this is hitting on all cylinders with the value proposition of the platform. You know, you need just foundational security that is automated, but it needs to be security. It can't be just partial discovery. It's scale, and, you know, AI just eats every data type, structure, unstructured application in the cloud and on-prem. This works. very well for us, and we see that it's driving the business.