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MIAMI - Varonis Systems, Inc. (NASDAQ:VRNS), a data security provider, saw its shares tumble 31.8% after reporting third-quarter revenue that fell short of analyst expectations and issuing disappointing guidance, signaling challenges in its on-premises subscription business.
The company reported third-quarter revenue of $161.6 million, missing the analyst consensus of $166.44 million, while adjusted earnings per share of $0.06 met expectations. Revenue grew 9.1% compared to $148.1 million in the same quarter last year. The significant stock decline reflects investor concerns about the company’s growth trajectory and renewal rates.
Varonis CEO Yaki Faitelson explained the shortfall: "In the final weeks of the quarter, we experienced lower renewals in the Federal vertical and in our non-Federal on-prem subscription business, which led to a shortfall relative to our expectations."
The company’s SaaS revenue showed strong growth, reaching $125.8 million compared to $57.8 million in the third quarter of 2024. SaaS now represents approximately 76% of total annual recurring revenue (ARR), which grew 18% YoY to $718.6 million.
For the fourth quarter, Varonis provided guidance below analyst expectations, projecting revenue between $165 million and $171 million versus the consensus of $171 million, and adjusted EPS of $0.02 to $0.04 compared to analyst estimates of $0.04.
The company also reduced its full-year ARR guidance, now expecting $730 million to $738 million, representing 14% to 15% YoY growth. Varonis cited "the underperformance of our on-prem subscription business" and its decision to "end of life our self-hosted solution" as reasons for the reduced outlook.
Despite the revenue challenges, Varonis generated $122.7 million in cash from operations year-to-date, up from $90.9 million in the prior year period. The company announced a $150 million share repurchase authorization expected to be completed over the next 12 months.
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