Varonis Systems, Inc.

telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Pertz, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon. Thank you for joining us today to review Varonis' third quarter financial results. With me on the call today are Yaki Fidelson, 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 fourth quarter and full year ending December 31st, 2024. 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 third quarter 2024 earnings press release and our investor presentation, which can be found at www.veronis.com in the investor relations section. Lastly, please note that a webcast of today's call is 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?

YAKI FEIDELSON Thanks, Tim, and good afternoon, everyone. Thank you for joining us today to review our third quarter results. Today, I would like to discuss our SaaS transition progress and the key drivers of our business. as I often do on these calls, I would like to remind you why Voronis exists and the problem we solve. Next to its people, data is the most valuable asset of any business, so it is the primary target for bad actors and cyber attacks. Most organizations focus on securing endpoints and perimeters but leave many gaps for cyber attacks on their data. With the expansion of the cloud and the emergence of generative AI, productivity and collaboration have improved, but the risk of overexposing sensitive data has greatly increased. Since the inception of our company, we have taken a data-first approach to security. which allows our customers to locate their sensitive data, visualize who has access to it, lock it down, and detect and respond to threats on it. Now, with the automation of our SaaS platform, our customers can spend less time and effort protecting their data. Our managed data detection and response offering, which we call MDDR, saves them even more time and makes them much more protected. Simply put, Varonis allows organizations to use AI and collaborate in a much safer way. Turning to our third quarter results, ARR grew 18% to $610 million, and SaaS ARR now represents approximately 43% of total ARR, or approximately $260 million, which reflects the growing momentum of our SaaS platforms and our MDDR offering, as well as a small contribution from GenAI. Year-to-date, we generated $18.6 million of free cash flow versus $46 million last year, while our federal business underperformed our expectations Our strong performance this quarter was led by our enterprise business with healthy contribution from new logos growth and conversion activity from both on-prem subscription and perpetual maintenance customers. Guy will review our results and our updated guidance in more detail shortly. Our SaaS transition continues to gain momentum because of the many benefits our customers realize. As a reminder, they are. Customers achieve automated outcomes, which means they ensure data is protected with very little effort. SaaS is quicker to deploy and operationalize. We significantly lower infrastructure and personnel investments, and SaaS is easier to maintain and upgrade. Additionally, the three key benefits we continue to realize are shorter sales cycles, larger initial length, and margin benefits over time. This quarter, we continue to see more proof of these benefits in our SAS transitions and MDDR offering, as well as very early contribution from generative AI solutions. At the beginning of the year, we introduced MDDR, the first managed service for monitoring and protecting critical data built on top of our SAS platforms, and therefore, only available to our SAS customers. It protects data in a more automated way This offering is so important for an organization because the threat environment grows more dangerous by the day, and when a breach happens, every second counts. Security teams are stretching and struggle to see and respond to threats as quickly as they must with today's threat actors. With MBDR, we address the problem for them. leveraging our unique telemetry, user behavior analysis, and use of experience, building highly accurate threat models to detect and stop potential data breaches. While we have been selling MDDR for only two full quarters, customers are seeing immediate and impactful benefits, and MDDR is becoming a key driver of new business wins and SaaS conversions. As we previously said, we believe that MDDR is a game changer and that we are just scratching the surface of this opportunity. Another term that we have discussed is the impact of generative AI in large language models. These topics remain top of mind and a key theme in our discussion with prospects and customers. The productivity benefits of Gen AI are well understood and companies are rapidly starting to understand the related risks. As a reminder, the usage of AI makes it easier to create and access data which benefits employees but makes the job of an insider threat or outside attacker much easier. Generative AI tools utilize native access controls to determine which data is available to the identity and that is using the prompt. These controls must be optimized or generative AI tools will create immense risk for organizations, increasing the risk of cyber attacks. Voronis help organizations mitigate these risks. by ensuring that only the right people have access to the information that they need to do their job, and monitoring what they do access, either directly or through AI. Once the bad actor bypasses perimeter control, Voronis can automatically lock out the compromised user or machine, preventing damage from happening. In the third quarter, Gen-AI has a small positive impact to our reported metrics. It is very early, so we are taking a measured approach with regard to our expectations around Gen-AI contribution to our results, but the behavior we are seeing from customers give us additional confidence that we should see momentum grow as its adoption increases. With that, I would like to briefly discuss a couple key customer wins from Q3. A large medical company became a Voronis customer this quarter. This organization is subject to many state privacy and data regulation and wanted to better protect its data after it suffered multiple ransomware attacks. They were focused on visualizing the risk automatically locking their data down and being able to monitor it as they continue to grow through M&A. They also wanted to ensure their data was protected when deploying Microsoft Co-Pilot prior to bringing in Varonis. The team unsuccessfully tried to lock down their data using a DLP solution. Our risk assessment revealed over 40% of their sensitive data was open to every employee, including 60,000 files shared with anyone on the internet. Ultimately, they purchased the Voronis SaaS hybrid package with MVDR, Voronis for Co-Pilot, GitHub, Salesforce, and databases. This will allow this customer to safely adapt Microsoft Co-Pilot automatically reduce overexposures at scale and meet its regulatory requirements. We also saw continued strong demand with existing customers looking to convert the Voronis SaaS with mDDR protection. One example of this was a large insurance company that has been a perpetual licensed customer since 2015. Using Varonis to audit user access activity for its on-prem Windows environment, this organization was looking to change their data classification window while locking down their overexposed data in their unmonitored Microsoft 365 environment. A risk assessment in Microsoft 365 identified 40,000 files with social security numbers that were open to all employees. It also uncovered 10 terabytes of unlabeled files in OneDrive after failing to protect their data with their existing DLP and SIM vendors that ultimately purchased the Voronis SaaS hybrid package with mDDR and Voronis for databases. In addition, to automatically locking down their data at scale, Varonis MDDR will proactively monitor their hybrid environments. In summary, the sustained momentum that we saw from our SaaS platforms and MDDR this quarter leaves us excited as we head into the fourth quarter. We are confident in our ability to capitalize on the tailwind of MDDR, GenAI, and increasing data-centric compliance regulation to capture our significant market opportunity. With that, let me turn the call over to Guy. Guy.