fighting a different battle than conventional cybersecurity ......source: market size estimates from...

VARONIS SYSTEMS. PROPRIETARY.

Fighting a different battle than

conventional cybersecurity companies


Varonis Overview

Q3 2020

VARONIS SYSTEMS. PROPRIETARY.2

This presentation has been prepared by Varonis Systems, Inc. (the “Company”) solely for informational purposes. It is not, and should not be assumed to be, complete. This presentation is not an offer to sell securities, nor is it a

solicitation of an offer to buy securities. This presentation is not directed at, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where

such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons into whose possession this presentation comes should inform

themselves about, and observe, any such restrictions.

In considering any performance information contained herein, you should bear in mind that past or projected performance is not necessarily indicative of future results, and there can be no assurance that any entity referenced

herein will achieve comparable results or that illustrative returns, if any, will be met. Statements in this presentation are made as of the date this presentation is made unless stated otherwise, and the delivery of this presentation at

any time shall under no circumstances create an implication that the information contained herein is correct as of any time after such date.

This presentation contains statements that, to the extent they are not recitations of historical fact, constitute “forward-looking statements.” Actual outcomes and results could differ materially from those forecasts due to the impact

of many factors beyond the control of the Company and its affiliates.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The words “believe”, “expect”, “anticipate”, “intends”, “plan”, “estimate”, “aim”, “forecast”, “project”, “will”, “may”, “might”, “should”, “could” and similar expressions (or their negative) identify certain of these forward-looking

statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures; growth in demand

for products and services; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of competitors.

The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating

trends, data contained in the Company’s records and other data available from third parties. These assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and

are beyond its control and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that, in the view of the Company, could cause actual results to differ materially from those

discussed in the forward-looking statements include the impact of the COVID-19 virus on the budgets of the Company’s clients and on economic conditions generally; the achievement of the anticipated levels of profitability,

growth, the timely development of new projects in the Company’s addressable market; competitive factors, including increased sales cycle time, changes in the competitive environment, pricing changes and increased

competition; risks associated with the acquisition of Polyrize Security Ltd. including, without limitation, integration of the acquisition may not occur as anticipated and the acquisition may not achieve the outcomes anticipated,

undisclosed liabilities may be discovered and attempts to retain key personnel may not succeed; and the impact of general business and global economic conditions. These and other important risk factors are described more fully

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission and could cause actual

results to vary from expectations. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. All information

provided in this presentation is as of the date hereof, and the Company undertakes no duty to update or revise this information, whether as a result of new information, new developments or otherwise, except as required by law.

This presentation also contains market statistics and industry data that are not necessarily comprehensive or reflective of market conditions. These have been derived from third party sources and have not been independently

verified by the Company or its affiliates.

This presentation also contains non-GAAP financial measures which are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of historical GAAP and non-GAAP financial measures can be

found at http://ir.varonis.com.

The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company.

Safe Harbor Statement

VARONIS SYSTEMS. PROPRIETARY.VARONIS SYSTEMS. PROPRIETARY.

Company Overview

VARONIS SYSTEMS. PROPRIETARY & CONFIDENTIAL.4

Varonis at a Glance

$261.1MM

ARR2

99+%

Subscription Mix3

98+%

RecurringRevenues3

Founded in 2005, IPO in 2014 (Nasdaq: VRNS)

Headquartered in New York City with ~1,630 employees worldwide(1)

Fighting a different battle than conventional cybersecurity companies

Completed transition to subscription-based business model in just over one year

(1) Includes employees and independent contractors.(2) As of September 30, 2020; ARR is annualized value of active term-based subscription license contracts and maintenance contracts related to perpetual licenses in effect at the end of that period.(3) Percentages are for the third quarter 2020. Recurring revenues include subscription revenues and maintenance revenues from perpetual licenses and exclude perpetual license revenues and professional services.


DATA PROTECTION

COMPLIANCE

THREAT DETECTION & RESPONSE

Proven Technology

ENTERPRISE DATA STORES

AND INFRASTRUCTUREUSE CASESANALYTICS & AUTOMATION

PermissionsUsers & Groups

PerimeterTelemetry

Access Activity

ADTelemetry

ContentClassification

Windows Exchange

SharePoint

Office 365

NASUnix/Linux

Directory

Services

Edge

Services

Box


DETECT PREVENT SUSTAIN

insider threats by analyzing data,

account activity and user behavior.

disaster by locking down sensitive and

stale data, reducing broad access and

simplifying permissions.

a secure state by automating

authorizations, migrations and disposition.

Proven Approach


Secular Trends

DATA GROWTH HYBRID CLOUD CYBER THREATS

The amount of data created in the

world will grow to 175 Zettabytes (or

175 trillion gigabytes) in 2025,

representing an approximately 27%

compound annual growth rate from

the amount created in 2018. (1)

Through 2020, more than 85% of

enterprises adopting a cloud-first

strategy are expected to continue to

host business-critical applications in

traditional data center environments. (2)

By 2025, almost 90% of all data will

require a meaningful level of security,

but less than half will be secured. (1)

(1) IDC Research - Data Age 2025: The Evolution of Data to Life-Critical(2) Gartner Research - Deliver Data Center Modernizing Using Three-Cloud Complementary Approaches


Industry Changes

BOARD

AWARENESS

ADOPTION AND

STANDARDIZATION

REGULATION

Board of Directors are now required

to address cyber risks and

demonstrate appropriate awareness

and action.

A data-centric approach to security

is becoming the standard. Almost

every breach involves data assets in

the form of files, emails and video

that are stored in growing on-

premises and cloud file systems.

The confluence of notable attacks,

media attention, and public outcry

has led to new data-centric

regulations in the EU and North

America like GDPR and CCPA.


$14.5 BNStorage Management

$36.3 BNSecurity Software

$16.1 BNInfrastructure Software

$5.3 BNData Integration

$28.3 BNIT Operations Management

$20BN+ TAM

Source: Market size estimates from Gartner Research (as of Dec 2019)

(1)

(1) Varonis Systems estimates that our total addressable market is approximately 20% of these combined markets, with the largest opportunity coming from the Security Software market.

Addressing $20BN+

Opportunity Across

IT & Security


6 Product Families and 26 Licenses (common code base)

Data ClassificationAutomatically identify eligible data to discover,

manage, and protect GDPR and CCPA data

Data ClassificationDiscover where sensitive information is

vulnerable and safely lock it down without

interrupting business

Data Audit & ProtectionMonitor file activity and user behavior, prevent

data breaches, and make permissions

management and auditing a breeze

Alerting & User Behavioral AnalyticsDetect suspicious activity and prevent data

breaches across disparate platforms, visualize

risk and prioritize Investigation

Data Retention & MigrationAutomatically find, move, archive, or delete

data based on content type, age, access

activity, and more

Least Privilege on AutopilotAutomatically repair and maintain file systems

so that you’re less vulnerable to attacks, more

compliant, and consistently enforcing a least

privilege model

Enterprise Search & eDiscoveryDeliver relevant search results to the right

people without exposing sensitive

information

Extends Data Security to Edge DevicesSpot signs of attack at the perimeter with

telemetry from perimeter devices like VPN

concentrators, DNS and web proxies

Data Access GovernanceGive business users the power to review and

manage permissions without IT assistance

and automatically enforce business rules

*

* in Q3 of 2019, DCE: GDPR Patterns was renamed to DCE: Policy Pack to reflect additional functionality


Example: DatAdvantage Product Family Has More Than 10 Licenses

ON-PREMISES DATA STORES CLOUD DATA STORES REMEDIATION


2005

2006

2008

2009

2010

2011

2012

2013

2014

2015 2017

2016 2018

2019

History of Innovation

* in Q3 of 2019, DCE: GDPR Patterns was renamed to DCE: Policy Pack to reflect additional functionality


Polyrize Acquisition

Polyrize platform maps and analyzes relationships between users and data across a

number of cloud applications and services

By integrating these capabilities into our

platform, the acquisition is expected to:

Expand and strengthen the Varonis Data

Security Platform to cover additional cloud

applications, services and infrastructure

Allow for the introduction of new licenses and

grow our addressable market

Offer a more complete view into enterprise data

stores

Acquisition expected to close in Q4 2020*

Cloud Applications Mapped and Analyzed

* Subject to the satisfaction of customary closing conditions, the acquisition is expected to close during the fourth quarter of 2020, although there can be no assurance that the acquisition will close within this time frame or at all.


First-Mover Advantage

HIGH-FREQUENCY ITERATIONS

15 years of battle-testing, refinement, and innovation

DISCIPLINE

Sales process drove tens of thousands of production installs

COMPLEXITY

Data was stored in fewer places

DATA VOLUME

Data volumes were much smaller

2005


Channel resellers provide introductions to the right

buyers and help with closing

Sales force performs in-person or virtual risk

assessment and builds business case

Installation takes up to 90 minutes (off-the-shelf

product) and can be done virtually, risk

assessment process takes 2-3 weeks

Highly metrics driven sales process

Usual Buyer: CISO/CIO/CTO

Predictable Sales Motion

Channel Marketing

LEADS

RISK ASSESSMENT

CLOSING

NurturingVaronis Sales

Varonis SalesChannel


Varonis Risk Assessment

Where does my sensitive data live?

How much of it is overexposed?

What kind of sensitive data do I have?

(GDPR, PCI, SOX, HIPAA, etc.)

USING THE

VARONIS DATA

SECURITY PLATFORM

REDUCES EXPOSURE TO

POTENTIAL THREATS BY

75%.(2)

(1)

17MILLION

AVERAGE NUMBER

OF FILES EXPOSED

TO EVERY EMPLOYEE

22%OF FOLDERS OPEN

TO EVERYONE

87%FOUND OVER 1,000

STALE, SENSITIVE FILES

53%HAD AT LEAST 1,000

SENSITIVE FILES OPEN

TO EVERY EMPLOYEE

58%HAD OVER 1,000

STALE USER

ACCOUNTS

(1) https://www.varonis.com/drr(2) https://info.varonis.com/resource/t1/research-report/forrester-tei-study-2020

https://www.varonis.com/drr

https://info.varonis.com/resource/t1/research-report/forrester-tei-study-2020


Proven Management Team

Yaki Faitelson

CEO, President, Co-Founder

& Chairman

Varonis since 2005

Jim O’Boyle

Sr. VP of Worldwide Sales

Varonis since 2006

Dana Shahar

Chief Human Resources

Officer

Varonis since 2013

Guy Melamed

CFO & COO

Varonis since 2011

Gilad RazCIO & VP of Technical

Services

Varonis since 2006

David Bass

Executive VP & CTO

Varonis since 2005

David Gibson

CMO

Varonis since 2006

Yuval Meidar

General Counsel

Varonis since 2020


Financial Results

Q3 2020 Highlights


Q3 2020 Highlights

Total revenue growth of 17% included a

99% subscription mix, compared to 74% in

Q3 2019

Annual recurring revenues at the end of

Q3 were $261.1 million and grew 46% YoY

98% of Q3 total revenues were recurring*

Acquisition of Polyrize will expand our

platform to cover additional cloud

applications and infrastructure

($MM)

* Recurring revenues include subscription revenues and maintenance revenues from perpetual licenses and exclude perpetual license revenues and professional services.

$117.9

$178.9

$261.1

Q3 2018 Q3 2019 Q3 2020

Annual Recurring Revenues (ARR)


Completed transition to subscription-based business model in just over one year

39%

61%

Q4 2018

98%

2%

Q3 2020

Non-Recurring Recurring*

High-Quality Revenue Base

* Recurring revenues include subscription revenues and maintenance revenues from perpetual licenses and exclude perpetual license revenues and professional services.


Annual Recurring Revenues (ARR)

($MM)

ARR is the annualized value of active term-based subscription license contracts and maintenance contracts related to perpetual l icenses in effect at the end of each period,

$117.9

$130.3$138.7

$155.2

$178.9

$210.5$220.5

$235.7

$261.1

Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020


11%

17%

26%

Q3 2018 Q3 2019 Q3 2020

6 or more Licenses

Subscription Model Driving Greater Individual License Adoption

Percentages reflect customers with 500 employees or more.

40%

50%

60%

Q3 2018 Q3 2019 Q3 2020

4 or more Licenses

Pre

transition

Pre

transition


Significant Opportunity to Expand within Existing Customer Base

ATTACH RATES

PRODUCT FAMILY Q3 2019 Q3 2020 CHANGE

DatAdvantage 100% 100% -

DatAlert 53.1% 56.5% + 3.4%

Data Classification Engine 52.4% 56.0% + 3.6%

DataPrivilege 15.5% 15.6% + 0.1%

Data Transport Engine 8.5% 9.8% + 1.3%

DatAnswers 2.2% 2.8% + 0.6%

Percentage of customers who have purchased at least one license from each product family out of the total number of customers.


Product Family Adoption

Percentages reflect total number of customers.

39%

43%

48%

72%75%

77%

Q3 2018 Q3 2019 Q3 2020

3 or more product families 2 or more product families


Q4 2020 Guidance

GUIDANCE Q4 2020

Total Revenues $82.0m – $85.0m

Non-GAAP Operating Income $5.0m – $6.0m

Tax Provision $500k – $700k

Interest Expense* ~$850k

Diluted Shares Outstanding 35.4m

Non-GAAP Net Income per Diluted Share $0.10 – $0.13

* Associated with the Company’s Senior Convertible Notes.


Our long-term goal is to build a

billion dollar business that grows

revenues meaningfully with

expanding profit and cash flow.


Thank You


fighting a different battle than conventional cybersecurity ......source: market size estimates from...

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