IPO Report: Varonis (VRNS)

Francis Gaskins |

Varonis (VRNS) provides specialized enterprise software that allows enterprises to map, analyze, manage and migrate their unstructured data.

 

One other company is scheduled for the week of February 24, 2014. The full IPO calendar is available at IPOpremium.

 

VRNS’s manager and joint mangers are Morgan Stanley, Barclays, Jefferies and RBC Capital Markets. The co-manager is Needham & Co.

 

VRNS scheduled a $86.4 million IPO with a market capitalization of $429 million at a price range midpoint of $18 for February, Friday 28, 2014 on the Nasdaq.  Update:  the price range mid-point was raised to $20.  The rating is the same.

 

Overview

 

VRNS provides specialized enterprise software, 42% of revenue is recurring from maintenance and services.

 

2013 revenue grew 40% to $75 million from $53 million, gross margin remained constant at 91%, and losses increased 54% to -$7.5 million from -$4.8 million. 

 

Valuation

Glossary

 

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

 

Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

Varonis Systems (VRNS)

$428

5.7

-57.1

5.2

5.2

20%

 

 

 

 

 

 

 

Conclusion
There is considerable demand for tech companies with 40% and higher revenue growth if they have 91% gross margins. VRNS fits that profile and in that profile losses are not as important as top line revenue increases and gross profit margins.

 

VRNS is the first tech company of the year and if it does well, then we can expect the tech category to take over for the biopharma category, which recently ran out of steam.

 

The recommendation is buy on the IPO

 

SEC Filings

 

Business

VRNS provides an innovative software platform that allows enterprises to map, analyze, manage and migrate their unstructured data.

 

VRNS specializes in human-generated data, a type of unstructured data that includes an enterprise’s word processing documents, spreadsheets, presentations, audio files, video files, emails, text messages and any other data created by employees.

 

This data contains an enterprise’s financial information, product plans, strategic initiatives, intellectual property and other forms of vital information. VRNS’ proprietary Metadata Framework technology enables enterprises to gain actionable insights from their human-generated data by intelligently extracting critical metadata, or data about data, from an organization’s IT infrastructure and constructing a map of functional relationships among employees, data objects, content and usage through this contextual information.

 

VRNS has been a pioneer in developing a software platform that allows enterprises to realize the value of their human-generated data in ways that are not resource-intensive and are easy to implement.

 

The revolution in internet search occurred when search engines began to mine internet metadata, such as the links between pages, in addition to page content, thereby making the internet’s content more usable and subsequently valuable.

 

Similarly, VRNS’ Metadata Framework creates advanced searchable data structures and provides real-time intelligence about an enterprise’s massive volumes of human-generated content, making human-generated data more valuable to the organization.

 

IT and business personnel deploy VRNS’ software for a variety of use cases, including data governance, data security, archiving, file synchronization, enhanced mobile data accessibility and information collaboration.

 

History

VRNS started operations in 2005 with a vision to make enterprise human-generated data more accessible, manageable, secure and actionable.

 

VRNS began offering its flagship product, DatAdvantage, which provides centralized visibility for all of an enterprise’s human-generated data, in 2006.

 

Since then VRNS has continued to invest in innovation and has consistently introduced new products to its customers, including DataPrivilege, which was introduced in 2006, as its self-service web portal for business users.

 

In 2009, VRNS introduced the IDU Classification Framework for sensitive data classification. VRNS further enhanced its DatAdvantage offering by releasing DatAdvantage for Exchange governance in 2010 which enabled its customers to exercise control over the information being transferred through corporate e-mails.

 

In 2011, VRNS  introduced DatAdvantage for Directory Services for increased visibility into Active Directory.

 

More recently in 2012, VRNS released the Data Transport Engine for intelligent data migration and archiving and DatAnywhere for secure hybrid cloud collaboration.

 

Growth Plan

Growing VRNS’ salesforce will be essential to achieving its customer base expansion goals.

 

The salesforce and its approach to introducing products to the market has been key to VRNS’ successful growth in the past and will be central to its growth plan in the future.

 

VRNS’ model focuses on targeting customers of all sizes, industries, and geographies. The ability of VRNS’ sales teams to support its channel partners to efficiently identify leads, generate evaluations, and convert them to satisfied customers will continue to impact its ability to grow. VRNS intends to expand its sales capacity by adding headcount throughout its sales and marketing department.

 

Intellectual Property
As of January 31, 2014, VRNS had 10 issued patents in the United States and 45 pending U.S. patent applications. VRNS also had two patents issued and 49 applications pending for examination in non-U.S. jurisdictions, and 42 pending Patent Cooperation Treaty, or PCT, patent applications, all of which are counterparts of the U.S. patent applications.

 

Dividend Policy

No dividends planned

 

Competition

While there are some companies which offer certain features similar to those embedded in VRNS’ solutions, as well as others with which it competes in certain use cases, VRNS believes that it does not compete with a company that offers the same breadth of functionalities that it offers in a single integrated solution.

 

Nevertheless, VRNS does compete against a select group of software vendors, such as Symantec Corporation and Dell Software (formerly Quest), that provide standalone solutions, similar to those found in VRNS’ comprehensive software suite, in the specific markets in which VRNS operates.

 

VRNS also faces direct competition with respect to certain of its products, specifically DatAnywhere, Data Transport Engine and DatAdvantage for Directory Services.

 

5% stockholders

Accel Europe Funds                                          25.6%                                      

Evergreen IV, LP                                              23.1%

Pitango Venture Capital Funds                             17.7%

J.P. Morgan Affiliated Funds(                                 9.1%

EMCCorporation                                                    6.4%

Yakov Faitelson                                                      9.2%

Ohad Korkus                                                           9.4%

 

             

Use of proceeds

VRNS expects to net $77.9 million from its IPO. Proceeds are allocated as follows:

 

general corporate purposes, including headcount expansion, working capital, sales and marketing activities, research and product development, general and administrative matters, and capital expenditures.

 

VRNS may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement its business, although it has no present commitments to complete any such transactions at this time.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
VRNS Varonis Systems Inc. 27.25 -0.10 -0.37 301,358
PFDB Patriot Fed Bk (Ny) 6.64 -0.12 -1.82 184

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