How did Varonis Systems' revenue and expenses trend in Q4 2024?

Varonis Systems' revenue growth in Q4 2024 was robust, driven by strong software-as-a-service (SaaS) momentum and a 21% year-over-year increase in total revenue. However, the company faced challenges in federal business and experienced a decline in gross margin. Despite these headwinds, Varonis Systems remained optimistic about its growth prospects, with a forecasted revenue growth of 5% to 8% in Q4 and a projected non-GAAP operating income of $20.0 million to $22.0 million.

1. **Revenue Growth**: Varonis Systems reported a revenue of $148.1 million for Q3 2024, marking a 21% increase from the same quarter in the previous year. This growth was primarily fueled by strong SaaS adoption and an 18% increase in annual recurring revenue (ARR), with SaaS accounting for approximately 43% of total ARR. The company's revenue exceeded analyst estimates by 4.7%, and its earnings per share (EPS) surpassed expectations by 19%.
2. **Expense Management**: The company's operating expenses in Q3 2024 totaled $116.7 million, which included $6.7 million of acquired in-process R&D expenses. Despite these expenses, Varonis Systems reported an improvement in cash flow, with year-to-date free cash flow amounting to $88.6 million, up from $46 million in the previous year. This indicates effective expense management and a strong liquidity position, with $1.2 billion in cash, cash equivalents, short-term deposits, and marketable securities.
3. **Q4 Outlook**: Looking ahead, Varonis Systems forecasted revenues for Q4 2024 to range between $162.0 million and $167.0 million, reflecting a growth of 5% to 8% year-over-year. The company also anticipated a non-GAAP operating income of $20.0 million to $22.0 million and a non-GAAP net income per diluted share in the range of $0.13 to $0.14. These projections suggest a continued positive trajectory for the company, despite the challenges faced in previous quarters.

In conclusion, Varonis Systems demonstrated strong revenue growth and effective expense management in Q4 2024, positioning itself well for future financial success.