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Varonis Up 7% As Earnings Confirm ‘Strong Fundamental Opportunity’

support@smarteranalyst.com (Ben Mahaney)

Shares in security software platform Varonis (VRNS) are spiking 7% in Tuesday’s pre-market trading after the company delivered a solid earnings beat for the second quarter.

Specifically, Q2 Non-GAAP EPS of -$0.15 beat Street estimates by $0.20; although GAAP EPS of -$0.77 fell marginally short by $0.07. However, revenue of $66.6M surged 12% year-over-year, topping Street estimates by $9.71M.

Encouragingly, Q2 Subscription revenues also rose 130% to $34.1M, vs $14.8M in Q219 while ARR (annual recurring revenues) increased 52% year-over-year to $235.7M. Plus subscription revenues mix came in at 99%, compared to 56% year-ago.

At the end of the quarter, Varonis revealed that it had $326.1M in cash and cash equivalents, marketable securities and short-term deposits.

And looking forward, the company is now guiding for Q3 Non-GAAP EPS of $(0.14)-$(0.11) (vs. a consensus of $(0.17)) and Revenue of $68-$71M- significantly higher than the Street’s expected guidance of $65.2M. It did not provide guidance for the full year.

“Varonis had a strong second quarter, with annual recurring revenue growth of 52% year-over-year,” said Yaki Faitelson, Varonis CEO. “The new world of highly distributed workforces has exposed the elevated risks of the work-from-home environment, and Varonis is in a unique position to address them.”

Meanwhile Guy Melamed, Varonis CFO and COO, said that the strong second quarter results mean the company can now resume investments in the business for 2020, while planning for margin improvements and greater cash flow generation in the future.

Shares in Varonis have soared 36% year-to-date, and analysts have a bullish Strong Buy consensus on the stock’s outlook. That’s with an average analyst price target of $108 (2% upside potential).

Following the earnings report, Baird analyst Jonathan Ruykhaver reiterated his hold rating on the stock while raising his price target from $110 to $120 (13% upside potential).

“Commentary was positive around adoption of Varonis’ solutions for cloud environments as well as multi-license adoption, both of which should help support continued growth for the company” he commented, adding “Overall, we continue to see a strong fundamental opportunity for Varonis.” (See VRNS stock analysis on TipRanks)

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