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- **SaaS Dominance**: 76% ARR from SaaS, with self-hosted solution ending in 2026. Q3 ARR $718.6M (18% YoY), but on-prem renewals underperformed, leading to 5% headcount cut.
- **Product Momentum**: Launches of Interceptor and DAM, plus Microsoft partnership, fuel growth. SaaS NRR healthy, with focus on upselling post-transition.
- **Financial Health**: $1.1B cash, $150M buyback. Full-year ARR guidance $730M-$738M, free cash flow $120M-$125M. Gross margin 79.4%, operating margin 0.1%.
- **Risks**: Federal and non-federal on-prem renewals volatile. 24% of ARR (non-SaaS) uncertain, but SaaS ARR expected to reach 83% by year-end.

**【CEO Summary Section】**
- **SaaS Transition Completion**: 76% of ARR now from SaaS, 2 years ahead of plan. Self-hosted solution to be phased out by December 2026.
- **ARR Growth**: Q3 ARR $718.6M (18% YoY), driven by SaaS. Federal and non-federal on-prem renewals underperformed, leading to 5% headcount reduction.
- **New Product Launches**: Varonis Interceptor (AI-native email security) and Next-Gen Database Activity Monitoring (DAM) via Cyral acquisition. Strategic Microsoft partnership to enhance Copilot security.
- **Customer Wins**: Fintech and financial services companies migrating to SaaS for cloud data protection and AI integration.

**【CFO Financial Commentary】**
- **Revenue**: Q3 total revenue $161.6M (9% YoY), SaaS $125.8M. Full-year ARR guidance $730M-$738M (14%-15% growth), free cash flow $120M-$125M.
- **Margins**: Gross margin 79.4%, ARR contribution margin 16.3%. Operating income $0.2M (0.1%), net income $8.4M ($0.06 EPS).
- **Liquidity**: $1.1B cash and marketable securities. $150M share buyback program announced.

**【Q&A Highlights】**
- **Federal Business Challenges**: Underperformance in renewals, team size reduction. FedRAMP high authorization pending, but focus on SaaS conversions.
- **SaaS NRR**: Healthy trends, excluding conversion uplift. Upsell focus for 2026 as SaaS transition completes.
- **End-of-Life Impact**: Additional conservatism baked into Q4 guidance. 24% of ARR (non-SaaS) faces uncertainty, but SaaS ARR expected to reach 83% by year-end.
- **Customer Migration**: Most non-renewing on-prem customers were single-use case; discussions ongoing to convert to SaaS. No term compression observed.
- **Strategic Acquisitions**: SlashNext (email security) and Cyral (DAM) driving adjacencies in data security and AI compliance.

Varonis Systems, Inc. (VRNS) Q3 2025 Earnings Call Transcript

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VRNS

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