Varonis Systems, Inc.
Q4 2014 Earnings Call Transcript
Published:
- Operator:
- Good day and welcome to the Varonis Systems Incorporated Fourth Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Staci Mortenson, Investor Relations. Please go ahead.
- Staci Mortenson:
- Thank you. Good afternoon. Thank you for joining us today to review Varonis’ fourth quarter and full year 2014 financial results. With me on the call today are Yaki Faitelson, Chief Executive Officer; and Gili Iohan, Chief Financial Officer. After preliminary remarks, we will open up 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 first quarter and fiscal year ending December 31, 2015. Actual results may differ materially from those set forth in such statements. Important factors such as risks associated with anticipated growth in our addressable market; competitive factors including increased sales cycle time, changes in the competitive environment, pricing changes and increased competition; the risk that we may not able to attract or retain employees including engineers and sales personnel; our ability to build and expand our direct sales efforts and reseller distribution channels; general economic and industry conditions including expenditure trends for data governance and data security software; new product introductions and Varonis’ ability to develop and deliver innovative products; risks associated with international operations; Varonis’ ability to provide high quality service and support offerings; and macroeconomic conditions could cause actual results to differ materially from those contained in forward-looking statements. These factors are addressed 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 obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation for the most directly comparable GAAP financial measures is also available in our fourth quarter 2014 earnings press release, which can be found at www.varonis.com in the Investor Relations section. Also please note that a webcast of today’s call will be available on our website in the Investor Relations section. With that, I’d like to turn the call over to our Chief Executive Officer, Yaki Faitelson. Yaki?
- Yaki Faitelson:
- Thanks Stacy and good afternoon everyone. 2014 was a strong year for Varonis. We completed our successful IPO and celebrated 10 years of operation, those meaningful milestones in our development as a company. I’d like to thank all of our customers and provision partners for helping us to achieve our success. To quickly recap the results, Q4 revenues were $33.7 million, an increase of 31% year-over-year, for the full year revenues were $101.3 million, up 36%. Our results further validate a growing demand for organizations and by organizations to secure, manage and take advantage of the rapidly expanding human-generated data. On one hand, we are seeing an increasing number of high profile which is those that are not only target financial information, but also sensitive data and intellectual property to meaningfully the star business. On the other hand employees are straggling to find and access the same information, which is unacceptable that a tackles can more easily search out and extract intellectual property than trusted employees. It is becoming increasingly clear that organizations cannot reverse or even slow this trend, one that threatens their ability to conduct business without having Varonis as a co-component of their infrastructure. Gili will offer the financial details in a moment, but I wanted to provide you with additional business highlights that illustrate the success we are having in growing our business and building awareness of our product. Companies face the challenge of keeping critical business information secure without compromising the productivity of the employees. And this is only getting more difficult as the explosion of business data and our dependence on it complicates organization need to protect it, while still make it useable and accessible. We recently sponsored a study that was conducted by the Ponemon Institute; a leading research center dedicated to privacy, data protection and information security policy, a study included more than 2,000 employees in the U.S., UK, France and Germany across a variety of industries. The study revealed that organizations lack control over employees’ access and the use of company data, and that organization would overlook security risks before they would sacrifice productivity. The truth is they are not improving productivity, but overlooking security risks, they are slowing it down. With Varonis, the same control and practices that keep your data safe when used correctly also allow employees to utilize data more effectively. For example, 71% of employees say, they have access to data, they shouldn’t. Yet 43% of end-users take weeks, months or longer to be granted access to the data they need to do their job. At the same time 73% of end-users believe the growth of company data is very significantly or significantly a factor in their ability to find and access data and 68% of end-users say it is difficult or very difficult to share appropriate data or files with business partners such as customers or vendors. These findings represent a huge opportunity for Varonis and illustrates of what we have believed for many years that is no longer acceptable to be either productive or secure, organizations must be both. Our solutions not only dramatically reduce risk, but actually improve productivity and efficiency at the same time. Our huge market opportunity reinforces our commitment to extending our product offerings and opening up more use cases. We are pleased with the early touch and we are all getting around our version 6 Metadata platform, which became generally available in the quarter as well as our DatAnswers product. Enterprise search is a large opportunity and we believe our reports to attacking the problem positioned us well to capture market share. In addition, DatAnswers is expanding a risky sale into related areas such as e-discovery. E-discovery functionality expands many of our products, but search is definitely one of the key categories of our solution easily answers critical questions for business, legal and IT users such as which file exists that contains a reference to a model, what data did the person have access to at a certain time, and have any of the files been active by whom and when. When purchasing, we can easily activate this license key, leveraging the Metadata Framework already in place with our other product family. We are also excited to announce that the IDU Classification Framework for UNIX and Linux will be generally available by the end of Q1. Many of our customers store important files on UNIX and Linux serves and UNIX-accessible NAS devices and as the need to be able to find and classify those that are sensitive, regulated or otherwise interesting. In addition to the new offering, our Version 6 Metadata platform will include enhancements to both DataAdvantage and DataPrivilege. The entire DataAdvantage family will get more granted or statistical use and reports on employees, [indiscernible] to enhance security on key operations and business intelligence. DataPrivilege will get new automation to make secure collaboration easier. With data classifications for UNIX and Linux, we have increased our license count to 12, providing an excellent opportunity for existing customers and border offerings for new ones. We also announced future compatibility to our Metadata Framework with Microsoft Office 365 to well protect customers’ investment as they evolve their IT strategies to include cloud platforms, expected to be introduced later in the first half of the year as the cloud becomes more mainstream. We are extending our commitment to protect and mange human generated data regardless of where it presides. These are first of many exciting updates and several new licenses we plan to announce this year. We continue to see success of our ongoing efforts to increase our customer base adding 363 new customers in the fourth quarter and 950 in 2014, or 27% and 30% year-over-year growth respectively and ending the year with more than 3,300 customers. During the fourth quarter, we saw a high volume low ASP business model plays out, which provides us with a steady source of business for mostly on existing customers throughout the quarter and meaningfully reduces our dependence on big deals. We’d very good attach rate across our entire product line, which reinforces the expanding set of use cases to our product. It is important to remember that it takes approximately 18 months for our sales reps to be fully productive, therefore our 2014 results are primarily driven by our 2012 and 2013 investment. We plan to invest in sales in 2015 with the addition of the new reps, managers, channel enablement programs to drive growth. We also plan to invest in ongoing product development to further fuel engine. However, in 2015, you should expect us to see incremental leverage in the module as we gain efficiencies in the business. We continue to add and expand with great set of customers and let me spend a moment providing you with few examples. Ohio National Financial Services with DataAdvantage for Windows, IDU Classification Framework, and DatAlert is a proactive and preventive approach to protecting its customer and corporate data with Varonis in place Ohio National has a comprehensive view into how its 1,200 users use data and automated detective control that alerts on unusual activity. When the Boston Globe wanted to alert corporate risks and audit findings by identifying/locating corporate data that needed to be protected and ensuring rightful access. They also wanted monitoring controls that would ensure ongoing compliance and to reduce overall storage costs by identifying and eliminating stale data, after revaluating Varonis the globe purchase DataAdvantage for Windows, DatAlert and IDU Classification Framework to meet these objectives. And finally, I wanted to highlight Morpho purchase of DatAnswers. Morpho is a French multinational company, specialized in electronic security solution. They came to Varonis because they wanted to make sure the users could get value from their data and enhance end user experience with search, as well as to ensure that only the right data was accessible to the right people and organize correctly. With Varonis DatAnswers and DatAdvantage, end users access to relevant secure search result that is accessible to only those who should have access to it and all use is monitored. If we look to 2015, we see meaningful growth drivers for the business and we will continue to make investment in support of our product, comparative differentiation, and go-to-market initiative. As I’ve already touched on, you should expect us to continue enhance our overall product portfolio, thereby extending the value we provide to our customers in our market position. We also continue to make investment to grow sales organization, but also focusing on helping those we have added the last year ramp up in the reach productivity. We are excited about the opportunity in front of us, and believe we are building a world-class organization with the people and technology to go in-scale. With that I will turn the call over to Gil.
- Gili Iohan:
- Thank you, Yaki. Total revenues for the fourth quarter increased 31% to $33.7 million. Growth was very balanced, driven by new customer wins, the success we have seen with our land-and-expand strategy and consistently high maintenance renewal rates at over 90%. The movement in foreign currencies from when it provided guidance in November negatively impacted our revenues by approximately $300,000 during the quarter. License revenues were $21.7 million. This represents a 29% increase from the fourth quarter of 2013. Our maintenance and services revenues were $12 million increasing 36% compared to the fourth quarter of 2013. Looking at the business geographically, we saw broad-based growth. U.S. revenues increased 26% to $17.9 million or 53% of total revenue, EMEA increased 37% to $12.7 million or 38% of total revenues and rest of world increased 41% to $3.1 million or 9% of total revenues. For the fourth quarter existing customer license and first year maintenance revenue contribution was 36% versus 37% in the fourth quarter of 2013 and for the full year is at 36% versus 34% in 2013. Our land-and-expand model is delivering results and we will continue making investments to broaden our relationship with existing customers as well as increase new customer additions. As of December 31, 2014, 42% of customers had purchased more than one product family, up from 39% as of December 31, 2013, further validating our focus on innovation and expanding the use cases for our products. Our ASP for the full year 2014 was $58,000 compared to $61,000 in 2013. This reflects the strength in our high volume low ASP model during the year and our ability to grow 2014 total revenues 36% without meaningful contribution from larger deals. Before moving onto the profit and loss items, I would like to point out that I will be discussing non-GAAP results going forward unless otherwise stated, which for the fourth quarter of 2014 excludes the total of $1.8 million in stock-based compensation expense. Please note that the detailed GAAP to non-GAAP reconciliation can be found in the tables of our press release, which is available on our website. Gross profit for the fourth quarter was $31 million representing a gross margin of 91.9%, compared to 92.4% gross margin in the fourth quarter of 2013. This was in line with our expectations as we invested in infrastructure and personnel to support our increased revenues and high renewal rates. Sales and marketing expenses increased to $18.6 million or 55% of revenues for the fourth quarter of 2014, compared to $13 million or 51% of revenues in the fourth quarter of 2013. The increase was primarily due to increased sales force headcount and go-to-market expenses driving our growth. R&D dollars in the fourth quarter was $7.1 million compared to $5.7 million last year. This reflects our ongoing investments in innovation to enhance our existing product and launch new product to expand our value, total addressable market, and competitive position. G&A expenses were $3.2 million or 9% of revenue compared with $2.9 million or 11% of revenue in the fourth quarter of 2013, primarily related to the global expansion of our business. Operating expenses totaled $28.9 million in the fourth quarter, compared to $21.5 million last year. As a result, our operating income was $2.1 million for the fourth quarter, compared to an operating income of $2.2 million in the same period last year. During the quarter, we had financial expense of $806,000 primarily due to foreign exchange losses, compared to a gain of $116,000 due primarily to foreign exchange gains in the same period last year. As you know, foreign exchange gains and losses can fluctuate. Our guidance does not consider any additional potential impact to financial and other income and expense associated with foreign exchange gains or losses as we do not estimate movements in foreign currency rates. Our net income was $1.5 million for the fourth quarter of 2014 or $0.06 per diluted common share, compared to net income of $2.2 million or $0.10 per diluted common share for the fourth quarter of 2013. This is based on 27.2 million and 21.6 million diluted common shares outstanding for Q4 2014 and Q4 2013 respectively. We ended the quarter with 840 employees, a 47% increase from 573 at the end of the fourth quarter of 2013 and in addition of 51 people from the prior quarter. This reflects the increased investments in our business to support additional innovation, new products, and expanded sales capacity in order to drive significant and sustainable growth. I will now quickly recap this full year results. Total revenues were $101.3 million increased 36% over 2013. Non-GAAP operating loss was $12.6 million and non-GAAP loss per basic share was $0.60. If we look at the balance sheet, we ended the year with approximately $111.7 million in cash, cash equivalents, and short-term deposits. During the full year 2014, we used $7.1 million in cash for operations. Moving to guidance. For the first quarter of 2015, we expect total revenues of $22.9 million to $23.4 million. We expect our non-GAAP operating loss to range between $10.2 million and $9.7 million and non-GAAP loss per basic common share of $0.42 to $0.40. This assumes a tax provision of $100,000 to $300,000 and 24.7 million basic common shares outstanding. Our first quarter expenses include our annual sales kickoff, which is primarily to train our sales force in our exciting new offerings. For the full-year 2015, we expect total revenues in the range of $129.7 million to $132.8 million representing year-over-year growth of approximately 28% to 31%. We expect our non-GAAP operating loss to be in the range of $13 million to $12 million and non-GAAP loss per basic common share of $0.56 to $0.52. This assumes a tax provision of $650,000 to $850,000 and 24.7 million basic common shares outstanding. To summarize, we’re pleased with our fourth quarter and full year 2014 performance and we are very excited about the Company’s positioning for 2015 and beyond. With that, we would be happy to take questions you have. Operator?
- Operator:
- [Operator Instructions] We will take our first question from Raimo Lenschow with Barclays. RaimoLenschow Hi, thanks for taking my question. Yes, my first question is on the regional performance. Can you tell us a little bit about what you saw in the different regions [indiscernible] U.S. seems to be as [indiscernible] weakerthis quarter but then Europe and the rest of the world was performing better. Can you talk a little bit about what you’re seeing in the different regions? Thank you. YakiFaitelson Hi Raimo, so overall it was a solid quarter and we really benefited from the high volume, low ASP. Last in 2013 in the fourth quarter we have several large deals in the U.S. and that we didn’t have this year, but if you look at the U.S. sales performed well 35% growth and we are very pleased with the overall investment that we did. Results can fluctuate at least from quarter - from quarter-to-quarter, but we have well balanced business than this one market and not doing so well relatively to last year others are picking up, but we feel very comfortable about the U.S., we feel very comfortable about the investments in the U.S. and the positioning for 2015. RaimoLenschow I had one follow-up question if I may. Can you talk a little bit about the whole enterprise storage e-discovery space [indiscernible], et cetera for kind of rolled into bigger enterprises and it seems to be a big opportunity here now as you against that market with a really focused vision. What has been the customer interest so far on that one and how do we have to think about the revenue going into pipeline [indiscernible] as we go for 2015. Thank you. YakiFaitelson Thanks, so I need to remind you that we’re still in the early innings and usually it takes a year for us to see material revenues from a new product, but you know so far so good. We sold several in the fourth quarter when I think there are two parts of the market. One, we have 3,300 customers and most of them don’t have search surprisingly we discovered and want to do the price search but the current products in the marketplace are very expensive and they are not secure. And there is another segment of the market that already put an investment in place and most of the other players in the enterprise search are perpetual license – taking – the upfront license investment but then they also charging you for every object that they are indexing and it is across an arm and a leg and this is a market that is in my opinion time for destruction. So there is a big greenfield opportunity of people that’s know about it but the economics didn’t make sense for them and there is another step out of the market that people that invested in it and it just cost an arm and a leg and the annual – the annual expense of maintaining this product doesn’t make sense for them and we can take the budget. So it is interesting for us. We are entering a budgeted market and also enterprise search is driving of the other product. There are really two budgets there, one is enterprise search and the other one is e-discovery. And for e-discovery, the most, the core pro-component is search. So to refine the data I want to make sure that there are people tasted and no one changed it and we also want to find critical data and quarantine it so it really drive data advantage and the data transport engine and so far there very good times, it was a very strong strategic decision to go after this market because it cost a fraction and the performance are extremely high with us any and total cost [indiscernible] is low and the results are secure. RaimoLenschow Perfect. Thank you. Thanks for that.
- Operator:
- We will take our next question from John DiFucci with Jefferies. JohnDiFucci Thank you. Yaki, you mentioned the recent high profile security breaches [ph] which you also mentioned in press release the increased use cases for your products. Can you talk a little bit more about those increased use cases this was even if its in the areas like you’ve always been strong in security and archiving but are those other areas are they still more focused in those general areas? YakiFaitelson Hi, John, the reality is that it’s the balancing act between security and productivity just a huge challenge we need to use these assets and we also need to protect it and its very hard and but what we’re seeing is that if you have critical information someone needs it, so someone wants it and also other people need it which how we growing. So we definitely see search and file synchronization the ability to access the data security from anywhere, in any device and find the data that you need is a big use case. But also making sure that economics of maintaining the data and image file. So we see the Data Transport Engine plays out in two main use cases, one, is ready for compliance and regulation, I find critical data I want to move it to the right places and other one I just want to make sure that I can utilize my infrastructure in the right ways. So timing and data is a big productivity play there and a lot of automation and alerting to understand no touch value to make sure without touching anything that, if anything bad is happening that we have an alert and then also to move the right data in the right places for security regulation and compliance reason and also to make sure that you can utilize the infrastructure in the right ways and access data that itself. JohnDiFucci Okay, great. That’s helpful. So we used to be thinking along the lines of security but also along lines of efficiency and it sounds like there is probably it is being used in several different ways with those goals in mind so that – okay that’s helpful. If I may follow-up for Gili. Gili could you talk a little bit about foreign exchange and the impact on the bottom line with the impact on the other income line. But can you tell us what the impact on the top line was this quarter and perhaps what it will have what impact it might have on the top line for your guidance for maybe that the first quarter in the year? GiliIohan Yes. On constant currency basis the foreign currency movements from Q4 last year negatively impacted our revenues by approximately $600,000 and if you compared to the last guidance as I said it was $300,000 negative impact on the revenue and if we use that prior year exchange rates for 2015 guidance, it would have been approximately 3% higher than what we’ve just provided. JohnDiFucci Okay, great. That’s very helpful. Thank you very much, nice job. JohnDiFucci Thank you.
- Operator:
- We will go next to Matt Hedberg with RBC Capital Markets. MattHedberg Yes, thanks for taking my questions guys. You know large market opportunity I think [indiscernible] talked about continue to invest in sales and marketing. I’m curious what’s the right level to spend here and how should think about some of the productivity gains and some of the hiring that we did the last two years? YakiFaitelson Hi Matt, so it takes around 18 months for rep to be fully productive and just if I can walk you through the productivity curve, the right option of the first three months, was to just teach them about the overall product suit with a lot of used cases around security, productivity and cost efficiencies. After three months, they are trying to do their own meetings and starting to do evaluation. 90 days after the first evaluation closing the small deals six months and mid-size deals and yield a lot of deals. So they will start to contribute to a – start to contribute to revenues after three quarter and to be productive after a year and a half. So the people that with us more than year and a half are productive and more than profitable with the new people that we hired our gaining productivity and building strong pipeline. And this was a yield for lot of upfront investment, upfront investment in - first you need to put in management in place early on and managing a lot of people then you put reps that they are managing and you need to train them, but it’s a huge market opportunity. We feel very comfortable with how we get people’s program and make them more productive and we striving with to build a company that is in order of magnitude of bigger than it is now and we feel that we are investing in the right way. Having said that with time, we are going to a more mature? reps and the new reps, but we are going to keep investing. MattHedberg And then, may you’ve already said, I think, you mentioned that you’re starting to see some incremental leverage in the business. How should we think about cash flow this year where was it to your earnings guidance? And any updated thoughts on when you might expect to hit that casual breakeven for the year? GiliIohan And our guidance for 2015 operating loss called for few percent margin in leverage and we plan to keep the investing in our sales force and go to market in U.S. and middle management and?, but as we gain efficiency, we will see some leverage in our operating margins in the business. YakiFaitelson You know Matt, if you look at we didn’t burned a lot of cash we know how to be profitable in the key, it’s just a big market opportunities to balance very well between growth investing back to the business and profitability and in terms of overall leveraging the model you just would see us inching forward. We do it very, very gradually and make sure that we are striving for profitability of scale. So we see, if you look at the last year we see that all the building blocks of the model are working very well, we can do [indiscernible] population and understand how it’s working it scale. And we are striving to do it scale but you also, we can well inform me in form [ph] to expand that we are investing in a prudent way and are looking at every cent, we know what is needed on every and we have very output and what you can expect from us is to gradually inch forward towards more leverage into model. MattHedberg That’s great. Maybe I guess [indiscernible] one last one, your model is like you said in the prepared remarks not predicated on large deals. And I think ASPs were down little, but they’ve been more or less flat less over years. As you start just start to see some of the leverage in the sales force aligned and expand additional cross sell opportunities, might we expect ASPs to higher as we go or should you expect this trend to kind of 50,000 to 60,000 ASPs on initial deals are stay pretty consistent. GiliIohan The ASP was in the range of what we expect them to be and it’s basically driven by the high volume model. We completed the large number of deals, but we’ve really didn’t have a lot of large deals. And then we continue to see strong adoption across our customer both from new and existing customers, they often start with one product family and it is important to remember that the ASP is calculated based on the annual spend not and the customer lifetime value is much higher. Companies make a large commitment to us, they’re just doing it overtime, we have many customers at this spend with Varonis, more than $1 million of licensed revenue, they just do it overtime and we’re fine with that because this is how we are model based on high volume not depend on a large deals we plan to continue with that model. MattHedberg Got it, thanks guys. GiliIohan Thank you.
- Operator:
- We’ll take our next question from [indiscernible]. UnidentifiedAnalyst Thank you for taking my call, I’ll appreciate it. Yaki and Gili, I know you’ve been investing quite a bit in federal sectors. Can you comment on the traction there and what have you been hearing from our partners? YakiFaitelson No, we started the service during the - in the federal market but the fourth quarter is really the first quarter in the federal market. So there is regular seasonality but we believe that we have a big opportunity in the federal market and we’re investing there. UnidentifiedAnalyst Okay, I have one more question if I may. Can you talk about your large deal pipelines in the quadrant, have any of them slipped into fiscal 1Q? YakiFaitelson We are - the whole business modeling is in high volume low ASP sometimes we have large deals and this is what can skewed license goals a bit from quarter-to-quarter but most time in order to make sure that we have relatively short budget cycle we can show immediate value we’re going to large organization penetrating to solve problem on subset of the infrastructure own department level and we expand from there. So we have big pipeline with many large customers but many times they’re starting with $200,000, $300,000 deal and then expanding from there as Gili said. The customer lifetime value is over $1 million in license and this is how we’re doing it. And this also give us a lot of predictability and consistency in the business. UnidentifiedAnalyst All right. Thank you for taking my call. YakiFaitelson And regarding slip deals you always had slip deals but we have order moving from one quarter to the other. UnidentifiedAnalyst All right. Thank you guys, appreciate taking my call. YakiFaitelson Thank you.
- Operator:
- We will go next to Keith Weiss with Morgan Stanley. KeithWeiss Excellent, thank you guys for taking my question. As we head into 2015 you guys are heading into your sales kick off should we be expecting or are you guys expecting to do any significant changes in the go-to-market strategy whether it would be sort of what product you’re selling in some specialization or maybe referencing back to Fucci’s question any particular efforts to more specifically target on what we’re seeing as a big shift of spending into the security use cases? YakiFaitelson Thanks for the question, Keith. So in sales kick off we’ve the sales product which we believe is the big opportunity so there is one aspect on productivity and also security becoming C-level imperative and we look at security unstructured data is a strong incentive for these so we really making sure that our people know how to explain the value to C-level and also we’re going to support Office 365 and we believe that is a big opportunity from two reason. One is the organizations are like the economics of the cloud in some aspects, but are scared of cloud and they need a data protection and they also need to do migration and the other thing is we see that the unstructured data primarily is on premise and some of it is moving to the cloud, and if you remember how we price, it is by the user that can access the platform and we believe that the cloud is really increasing the overall total available market, because the data is distributed and it’s another platform for us. So we just want to make sure that our people know how to talk about the productivity use cases we know very well, because we always sell through evaluation, how to demonstrate them and because we are bring in many new innovations this year is very important to make sure that everybody are on the same page and we can execute the stepping and how to do this because we gained some experience with the new products in the newest considering the fourth quarter in order to make sure that to a men we know that everybody know how to teach them. KeithWeiss But no structural changes in sort of your go-to-market strategy and that, everyone’s still going to be selling across the portfolio? YakiFaitelson Yes, you know, we always have [indiscernible] that we are specialized in other products and we have a several organized sales people for DataAnywhere, but not any meaningful change. KeithWeiss Got it. And maybe if I could just follow-up on that, I mean, specifically on the security use case, it is definitely a high priority out there, do you think you can compete effectively enough when selling into the security focus customer by using that more generous approach or is there any potential sort of that you would have to get more of a domain focus sales person, like we’ve seen other vendors do to more specifically target the security dollars? YakiFaitelson No I think that’s - we can sell to with specific security, specific security campaigns, the hardest thing that we see is a lot of interest around us and a lot of security people want to talk to us, but I don’t think that it’s very important to understand that the security people many times are stepping up policies and the people that need to implement them are the infrastructure people, so we need to we really need to target both, but definitely in our marketing efforts and the Chief Security Officer is a target buyer, and we are addressing them in every sale campaign. Security is really in our DNA. KeithWeiss Excellent, thank you very much.
- Operator:
- We’ll take our next question from Scott Zeller with Needham & Company. ScottZeller Thanks, can you hear me Yaki?
- Operator:
- Your line is now open. Thank you. GiliIohan Yes. YakiFaitelson Yes. ScottZeller Yes, working half of the recent question about the - and Yaki you mentioned that Chief Security Officer is a buyer, do you review for us if you’ve noticed any changes in the target buyer within your IT organization and just review for us, which types of budgets you are pulling money from security systems management, compliance, et cetera? Can you just review of their any changes or shifts and where the budget dollars are coming from? YakiFaitelson Yes, of course. So, you need to remember that the bulk of our business coming from companies between 500 to 5,000 users and they usually the security officer is reporting to the CTO that also on the infrastructure. So primarily it’s the same budget and the CTO - the one of the infrastructure budget for a system management infrastructure itself and also security and many times is liaison to the business and they need to serve many business problems. So many times we are getting to him and showing the overall value. We understand that it can do many things with the platform and then define budget. But for sure, we saw that the recent security breaches are generating a lot of awareness and as they - a lot of business dollar that are allocating that organizations are allocating to make sure that they are protected because I think, what is happening lately is that organizations and you know Management’s and Board understand the severity of security breaches and no one wants to be there. ScottZeller Okay and then just a follow-up. I think, Keith had question earlier around go to market, any structural change is sales, I just wanted to ask specifically around your high volume modal ASP sales strategy, are you still committed to that practice? I just wanted to ask. YakiFaitelson Yes, it is the best way to scale, we have an enormous market opportunity our customers buying more and more and this is what makes the business predictable. You know and yes of course. This is how we can guide in the right way and how we can manage the business in the right way, and the large deals can be zero sum game. So we want to make sure with the high-value and low ASP [indiscernible] we can make sure that we can make salespeople productive and make sure that after a year and a half we can really contribute every quarter, quarter-over-quarter. ScottZeller Thank you.
- Operator:
- [Operator Instructions] And we’ll go next to Greg McDowell with JMP Securities. GregMcDowell Great, thank you very much. My first question is on dealing the business which we talk a little bit about already. But, I wanted to ask the type of sales rep you are investing in maybe in the last six months of 2014 and in 2015 whether you’re putting more focus on sort of inside how the sales reps, outside reps or sort of the channel or channel enabling the rep. Thanks. YakiFaitelson Its everything quota bearing reps is important components a SE are important component inside sales and channels. It’s all of them we’re putting a bit more focused on enterprises 500 users and above but its everything when you look at the sales engine all the building blocks needs to work and we are looking for salespeople that primarily sell software infrastructure, salespeople that can understand our model. Remember that our model is all about evaluation and we still we always lead on the value of the product and this is really how it works. But we investing we’re scaling the business and putting upfront investment in all the building blocks of the sales engine. GregMcDowell Great and one quick follow-up in terms of getting into those larger companies – companies with more than 500 employees. How important is this the UNIX and Linux operating system I mean why expand on those platforms why is in portfolio business, I would love to understand why you didn’t have those operating systems cover before and maybe if you could just touch on the type of market opportunity that being on UNIX and Linux what’s that now open up for you? Thank you. YakiFaitelson Thanks. So first we’re supporting UNIX and Linux for years with DataAdvantage. Now we’re supporting it with data classification framework and we just see that critical information also resides on UNIX and Linux. So the product and we just need to support we’re committed to support the data already. So our customers came to us and say they want to understand who can access my unified system who is touching the data, who is changing files but now also I want to understand critical information and we just saw big opportunity with UNIX and Linux based sales version also Mac devices that are gathering and we just another platform for us with critical information and we need to and we believe that will add a lot of value to our customers by finding critical information on this platform. GregMcDowell Great. Thank you very much.
- Operator:
- We will take our next question from Michael Kim with Imperial Capital. MichaelKim Hi, guys, you talked quite a bit about expanding your go-to-market investments just kind of curious yes, with the expansion in sales capacity how you feel about the sales leadership framework have you filled out a lot of country managers or regional managers and any color you can provide around providing a structure for this increase in sales capacity? YakiFaitelson Yes. We feel very good with the sales leadership in most places and when we increased sales capacity is only in the places that we are sure that management can grow scale. So we’re still added manager in several places and then we want to make sure that they know what they are doing and can do the right hiring decisions can build a channel, can represent the product well and educate new Reps, and then we are testing the order see how they are hiring, and after the proven we’re starting to scale up around this new manager. But overall senior sales management is with the company for many years, very strong they also know how to build the wining module under them and we feel that in 2014 we build a very strong management backbone that we can scale effectively for many years. MichaelKim And with the acceleration international growth, and I’m not sure if I miss this earlier but are there any particular geo’s that you see specific growth opportunity accelerated growth opportunities where you might put ahead your level of investment? YakiFaitelson We can sell in every market but I think that most of our dollars are going to go to at this point to U.S. and Europe. Obviously we’re going also to investing in Asia-Pac, but in 2015 at slower rate, most of the dollars will go to the U.S. and Europe. MichaelKim And out of these are you finding sort of the similar track where an initial product might be DataAdvantage or they more interested in some of the newer product in different use case? YakiFaitelson It’s now starting with DataAdvantage I will say the DatAnswers we still early innings, so I don’t know how it will play out we’re also testing to see if it makes sense to this product a time but we just need to make sure that it will go into the sales cycle and we will also learn what is the most effective way to sell it. But we see with DatAnswers that there is instant notification for the business user, we put the product in place and people know how to use Google the same they’re go and gain the finding the data that we need it just a big win and its part of the Metadata Framework so to install with the customer usually it takes less than an hour and a half. So we will see how this will play out and if we can legally make sense in some companies to live this product will do it but at this point is data advantage. MichaelKim Okay, fair enough. Great, thank you very much. YakiFaitelson Thank you.
- Operator:
- There are no further questions at this time. I’d like to return the conference back to Yaki Faitelson for any additional or closing remarks.
- Yaki Faitelson:
- Thank you. Before we end the call, I would like to thank all of our employees for their contribution to our success this year and all of our customers for their continuing support. Thank you for joining us today and look forward to speaking to you again soon. Thank you.
- Operator:
- This does conclude today’s conference. Thank you for your participation.
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