Varonis Systems, Inc.

Greetings and welcome to the Verona Systems, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, James Arresia, Director of Investor Relations. Thank you.

Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' fourth quarter and full year 2020 financial results. With me on the call today are Yaki Fidelson, Chief Executive Officer, and Guy Melamed, Chief Financial Officer and Chief Operating Officer. After preliminary remarks, we will open the call to a question and answer session. During this call, we may make statements related to our business that would be considered forward-looking statements under federal securities laws. including projections of future operating results for our first quarter and full year ending December 31st, 2021. Due to a number of factors, actual results may differ materially from those set forth in such statements. These factors are set forth in the earnings press release that we issued today under the section captioned Forward-Looking Statements, and these and other important risk factors are described more fully in our reports filed with the Securities and Exchange Commission. We encourage all investors to read our SEC filings. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. Varonis expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call, which excludes stock-based compensation expense, payroll tax expense related to stock-based compensation, amortization of acquired intangible assets, acquisition-related expenses, foreign exchange gains and losses, amortization of debt discount and issuance costs related to our convertible notes issued in May 2020, and acquisition-related taxes. A reconciliation for the most directly comparable GAAP financial measures is also available in our fourth quarter and full year 2020 earnings press release, which can be found at www.veronis.com in the investor relations section. Also, please note that an updated investor presentation, as well as a webcast of today's call, are available on our website in the Investor Relations section. With that, I'd like to turn the call over to our Chief Executive Officer, Yaki Feidelson. Yaki?

Thanks, Jamie, and good afternoon, everyone. Thank you for joining us to discuss our first quarter 2020 results, which exceeded all expectations on both the top and bottom line. Our performance is a testament to the demand for the Voronis data security platform. The team's continued execution, especially during these challenging times, and the power of our subscription model we are well positioned to capitalize on the acceleration we are witnessing in global digital transformation. And we believe it will make for an exciting 2021. I want to begin today by recapping our 2020 performance and then discuss how the secular trends that organizations are experiencing today and that many are predicting to continue provide Voronis a long-term opportunity to fulfill its mission of protecting sensitive data for our customers. I will then turn the call to Guy to discuss our results and guidance in more detail. Let's start by looking back on our performance over the last 12 months. When I spoke to you a year ago, we were completing what we believe was one of the fastest transition to subscription in the history of software. But our momentum was interrupted in mid-March as COVID hit. Companies had to enable their employees to work from home almost overnight. However, once they had addressed employees' 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. These risks don't only relate to working from home, but also to the reality of greater digital collaboration, which is here to stay. As a result, we started to see a significant uptick in the use of our platform by customers and our pipeline became stronger. From that point on, business improved each quarter. Our Q2 results were solid, Q3 further improved, and our Q4 results were outstanding. With this upswing, we gained the momentum needed to exceed the high end of the full year 2020 revenue guidance we provided pre-COVID. I would like to now discuss how secular trends have accelerated, impacting our customers and creating strong demands to our product. And the engine that is fueling these trends is digital transformation. Let's start there. Employees in every organization have been collaborating across multiple platforms for years, leading to more complexity and more exposed data. This is a given and will only continue. Increasing data risks and potentially disrupting business globally, we have all seen the expansion accelerated on cloud applications like Microsoft 365 and Teams. The shift to the cloud highlights the need for a zero-trust approach, which Voronis has always subscribed to. Specifically, we believe that perimeter security by itself is insufficient, that users should only have access to the data they require, and that companies should continually monitor for abuse and violations. So digital transformation is the engine, and the trends coming from that are accelerating, bringing with them a significant escalation of risks. One trend is cybercrime and its collision with data protection Cryptocurrency has made stolen data easier to monetize, and those who want to steal it are more sophisticated than ever before. This year alone, companies around the world saw COVID-related phishing emails specifically targeting unstructured data, advanced persistent threats, or APTs, like Maze, Emotet, and Ryuk, vulnerabilities in perimeter devices, remote access servers, and in Active Directory itself, and continuous threat from rogue insiders that many times is the biggest risk of all. The target of these hacks is almost always critical data, which is our mission to protect. As a result, customers increasingly tell us our platform is a must-have. Another trend is regulation. Digital transformation and increased cyber attacks have made compliance with data-centric regulation like GDPR and CCPA a serious challenge. This creates substantial operational and reputational risks that companies can no longer ignore. And it's another reason why customers continue to tell us Varonis is a must-have platform. Which brings me to the overriding need and growing demand to streamline processes through automation. For every CISO, companies often have thousands of employees creating data-generating risks. The security team cannot keep pace to secure this data, mitigate cyber threats, and ensure compliance. Automation is the answer, and it's another must-have which has built in into our integrated platform. With our subscription model, our customers find it seamless and efficient to initially purchase more licenses and continue to consume more over time, realizing and benefiting from the power and flexibility of our offering. Let me provide a few examples from Q4. One example of a large initial commitment by a new customer in a US healthcare company that had data retention and PHI reporting issues. During a risk assessment, we found that 90% of their data was being shared externally, allowing attackers to easily sidestep their endpoint tools. We also demonstrated how automation engine could fix global access issues in days, where doing so manually would have taken several years. This new customer purchase data advantage and data classification licenses for multiple on-prem and cloud platform, as well as data alert and automation engine. In addition to the new wins like this, we remain significantly under-penetrated within our customer base, And in Q4, the team was again successful in closing expansion opportunities with a number of existing customers. A prime example is a local government agency in France with more than 3,000 employees, which has relied on Varonis for more than two years to protect their data on-prem. Like many Varonis customers, this agency was planning to move data to the cloud. During a risk assessment for the Microsoft Cloud data stores, we alerted them to ransomware attacks, which convinced them to add licenses for data advantage for Azure, Exchange Online, SharePoint Online, OneDrive, as well as Edge. In total, we now provide them with 12 subscription licenses. This example further demonstrates that our path to double-digit license with other customers has never been clearer. With our acquisition of Polarize, which closed in Q4, our capacity to provide more licenses will significantly increase. We'll be well positioned to address our customer needs as they move sensitive data to additional cloud application and infrastructure, delivering data protections through the necessary visibility, insight, and control. Today, Varonis is stronger than we have ever been. And as I said, going into 2021, we are more than ready to take advantage of the digital transformation and execute on the market opportunity we see. We remain focused on the long-term opportunity as we move closer to our $1 billion target and beyond. With that, let me turn the call over to Guy. Guy.