Varonis Systems, Inc.

Greetings. Welcome to a Varonis Systems Incorporated second quarter 2022 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. Please note this conference is being recorded and I will now turn the conference over to James Aresta, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon. Thank you for joining us today to review Varonis' second quarter 2022 financial results. With me on the call today are Yaki Feidelson, Chief Executive Officer, and Guy Malamed, Chief Financial Officer and Chief Operating Officer of Varonis. 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 third quarter and full year ending December 31st, 2022. 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. A reconciliation for the most directly comparable GAAP financial measures is also available in our second quarter 2022 earnings press release, which can be found at www.veronis.com in the investor relations section. Lastly, 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. Thanks for joining us today. Our Q2 results once again demonstrated the strength of our platform and the durability of our business model, highlighted by 30% year-over-year growth in ARR. We are especially pleased with the performance in North America, which contributed significantly to this quarter growth. And given the uncertainty of the times, companies around the world continue to recognize the growing urgency to secure their sensitive data. The needs of our customers have always driven our innovation and fuel our growth. And as the world moves to a more hybrid working environment, the Voronis data security platform has become even more critical in protecting sensitive data wherever it is stored. Today, I would like to discuss the trends we are seeing and how we are positioned to capitalize on them, so let's jump in. Looking back, we founded Voronis because we understood the capacity to create and share data far exceeded the capacity to protect it. Since then, the relentless growth and complexity of data has dramatically increased the attack surface for all companies, making it even harder to protect. Today, it covers all geographies, sectors, and sizes, requiring the coverage and automated protection that our offering provides. The pace of our innovation has matched this rapid growth, and today, we provide our customers a comprehensive solution for protecting sensitive data. While on-prem data continue to grow, nearly every company is creating more and more important data in the cloud. Most organizations that we speak with are deeply concerned that their data isn't fully protected and secured within the new complex cloud environments they utilize and depend on. Their concerns are quickly validated and rightly escalated during our initial risk assessment. It goes like this. Our sales reps start with two simple questions. Do you know when your sensitive data is stored? Do you know whether only the right people have access to it? Would you know if your sensitive data was being stolen or encrypted? What we find is that most organizations cannot answer yes to any of these questions at any time for any of their data, much less all of it. And this problem has only become worse as companies add more data to the cloud. Why is that? First, cloud applications were built to create and share sensitive data more easily, which inevitably pushed security down as a concern. This is true to Microsoft 365 and Azure, where we have seen tremendous customer engagement over the past few years, as well as additional cloud applications like Google Drive, AWS, and Salesforce, to name a few. Second, The many CISOs we speak with describe cloud applications as the black boxes. They typically report that because each application offers different security capabilities and permission models, some of which are extremely complex, each new application increases their risk surface in ways that are hard to see. Think about the data inside a CRM system like Salesforce. Not only does it contain sensitive information that must be protected in accordance with regulation like GDPR, CCPA, and others, but it also holds the key to the sales pipeline and customer records. This data is clearly mission critical to every organization. Losing it or having it stolen can damage your reputation, cost millions in fines, and pose existential risk to your business. This would be catastrophic. These CISOs can tell us that without Varonis, mapping access, finding sensitive data, and tracking suspicious activity would be impossible. With Data Advantage Cloud, organizations can visualize their biggest cloud risks, proactively reduce their blast radius, and conduct faster cross-cloud investigations. Data Advantage Cloud significantly expands our market opportunity and provides long-term potential. Data Advantage Cloud is in early innings, and we have always said that our new licenses take time to gain critical mass. Nevertheless, we are pleased with customers' conversations and the pace of selling, which improved sequentially in Q2. As we continue building pipeline for the second half of the year and beyond, And we are still on pace for the $5 million ARR expectations we guided for the beginning of the year. Before I turn the call to Guy, I would like to highlight a few customer wins from Q2. A technology company with more than 7,000 employees became a new Varonis customer in Q2. They needed to fix critical open access and data retention issues, but estimated that doing so manually will take them years. After a risk assessment demonstrated how Voronis would automatically shrink their blast radius in a fraction of the time and at much lower cost, they purchased our silver bundle, which contains seven licenses. And they intend to expand deployment of our platform in line with the growing data in Microsoft 365 and Salesforce. Turning to our existing customers, you have heard me say that it's the only small movement. When customers consume more licenses, they get higher level of automated value, which in turn leads to additional purchases, all moving towards the double-digit license target we have for every Voronis customer. A great example of this is one of the largest telecommunications providers in North America. It first became Voronis customers in 2013 when they were looking to protect their data on-prem. Over the years, they purchased additional subscriptions, including data classification to identify sensitive data and the automation engine to proactively reduce the blast rate. During the second quarter, this organization of over 100,000 employees purchased an on-prem enterprise licensing agreement, which gives them access to 26 Veronis licenses to better address ransomware threats and to protect data in Microsoft 365. And we are already discussing with them the next purchase of our Data Advantage Cloud SaaS offering that can help protect their data in AWS. To recap, through the expansion of the attack surface, we believe that the global customer's need for strategic data protection has never been more urgent. Our unmatched capability to address these needs coupled with our ongoing innovation continue to drive value for all Voronis stakeholders. We remain focused on two things, executing against the enormous market opportunity before us and closing in on our $1 billion ARR target. With that, let me turn the call over to Guy. Guy.