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The call conveyed strong growth momentum in the transition to a SaaS-focused business: SaaS ARR ex-conversion grew 29% YoY, total revenue grew 27% YoY, management raised full-year ARR and revenue guidance, reported notable new-logo wins and product traction (AI-focused offerings and recent acquisitions), and maintained a strong balance sheet with active share repurchases. Offsetting items included modest margin pressure (gross margin and ARR contribution margin declines), lower reported free cash flow and cash from operations versus last year (partly due to acquisition-related cash costs), and ongoing visibility uncertainty related to the on-prem end-of-life and conversion timing. Overall, the positives (robust ARR growth, raised guidance, customer wins, product momentum and cash reserves) outweigh the transition-related headwinds and margin/cash-flow noise.
Varonis provided Q2 2026 guidance for SaaS ARR growth excluding conversions of 24%–25%, total revenues of $175–178M (up 15%–17% YoY), a non‑GAAP operating loss of $(1)M to breakeven and non‑GAAP diluted EPS of $0.00–0.01 (assuming 131.1M diluted shares). For full‑year 2026 it raised guidance to total SaaS ARR of $814–845M (+27%–32%), SaaS ARR growth excluding conversions of 20%–21%, free cash flow of $100–105M, total revenues of $731–737M (+17%–18%), non‑GAAP operating income of $7–9M and non‑GAAP diluted EPS of $0.11–0.12 (assuming 132.1M shares); management also reiterated conversion expectations of roughly $50–75M for the year and said the Q2 bridge to total SaaS ARR assumes zero conversions. This follows a strong Q1: SaaS ARR ex‑conversions $522.6M (+29% YoY), total SaaS ARR $683.2M (including $11.3M of conversions), Q1 total revenue $173.1M (+27%), Q1 FCF $49M ($61.6M adjusted for ~$12.6M acquisition‑related costs), $900M cash and equivalents, ~83.7M non‑SaaS ARR remaining, >90% SaaS renewal rate, gross margin 77.9%, operating loss (non‑GAAP) $(1.4)M, net income $7.5M ($0.06/diluted), and $132.1M of share repurchases (5,355,445 shares at $24.67).
SaaS ARR excluding conversions increased 29% year-over-year to $522.6M; total SaaS ARR including conversions was $683.2M. Company raised full-year total SaaS ARR guidance to $814M–$845M (growth 27%–32%) and SaaS ARR ex-conversions guidance to 20%–21%.
Total revenues for Q1 were $173.1M, up 27% year-over-year. Net income improved to $7.5M ($0.06 per diluted share) from $0.7M in Q1 2025.
Management raised full-year targets: total revenues $731M–$737M (growth 17%–18%), free cash flow $100M–$105M, non-GAAP operating income $7M–$9M, and non-GAAP EPS $0.11–$0.12.
Company reported acceleration in new-customer contribution and continued expansion within the installed base. Notable wins include a global technology customer (50,000+ employees) purchasing Varonis for multiple clouds and MDDR/forensics capabilities; ServiceNow expanded to cover internal AI systems and email security.
Management highlighted continued adoption of MDDR and AI-related offerings, early traction from acquisitions (Interceptor, Atlas, database activity monitoring) and initial encouraging POCs for AllTrue/Atlas though no material ARR contribution yet from AllTrue in Q1.
As of March 31, 2026, cash, cash equivalents, short-term deposits and marketable securities totaled $900M. The company repurchased 5,355,445 shares for $132.1M in Q1.
Operating loss narrowed to $1.4M (operating margin -0.8%) from an operating loss of $6.5M (-4.7%) in Q1 2025, reflecting improved operational performance despite ongoing investments.
Varonis discovered the 'Reprompt' vulnerability in Microsoft Copilot, demonstrating product/security expertise and visibility in AI system safeguards.
Greetings, and welcome to the Varonis Systems, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Tim Perz. Please go ahead.
Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' first quarter 2026 financial results. With me on the call today are Yaki Faitelson, Chief Executive Officer; and Guy Melamed, 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 second quarter and full year ending December 31, 2026. 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-GA...