Can you quantify the acceleration in new logos and expansion, and provide insight into how Atlas is contributing?

Guy stated a 'pretty significant' acceleration in total new customers. Atlas, though recently closed, showed 'nice contribution' and encouraging early signs, which is not yet baked into guidance. Yaki reiterated the critical need for automated security due to AI agents accessing data at robotic speeds. “we saw a pretty significant from our end. And what we also think and believe is when we look at the contribution from some of the new products, even though Atlas only closed in February, we saw some nice contribution there, nothing too material, but definitely something that gives us the confidence that we can continue to sell that at an accelerated pace throughout the year, and that's not baked in the guidance.”

Why did free cash flow guidance not increase despite Q1 conversions, given prior assumptions of churn?

Guy clarified that the full-year FCF guidance already assumed a base case of $50M-$75M conversions, not zero. Q1 conversions were on track with this assumption. The previously communicated headwind was from the end-of-life announcement, not a lack of conversions. “When we gave guidance on the full year numbers, we assumed the bear case scenario and a bull case scenario on the conversions, which was $50 million to $75 million. We are on track to achieve those numbers, and that's part of our free cash flow guide.”

What gives management confidence in the 20%-21% sustainable growth rate for SaaS ARR excluding conversions?

Guy highlighted the Q1 trends, acceleration with new customers, and existing SaaS customers' receptiveness to additional licenses as key drivers of confidence. He reiterated the long-held belief in achieving 20%+ growth with their platform and ability to upsell existing SaaS customers. “When you look at the environment out there, being able to accelerate with new customers is definitely something that we feel very good about and gives us the confidence. And when we see how our existing SaaS customers are receptive to additional licenses and the platform offering that we have, we definitely believe that there's a lot for us from a customer value perspective, customer lifetime value perspective to go back.”

VRNS

Varonis (VRNS) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· Apr 28, 2026

Source: earnings call transcript

Executive summary

Varonis Q1 FY26 — Strong SaaS ARR Growth Driven by AI Security Demand

Varonis delivered a strong Q1 FY26, driven by robust SaaS ARR growth and accelerated new customer acquisition, fueled by increasing demand for AI and data security solutions. The company is successfully navigating its transition to a fully SaaS model, with management expressing confidence in sustaining over 20% growth post-conversion. While free cash flow was impacted by acquisition costs, the underlying business momentum and strategic focus on AI security position Varonis for continued expansion.

Highlights

SaaS ARR, excluding conversions, increased 29% year-over-year to $522.6 million.
Total revenues were $173.1 million, up 27% year-over-year.
Generated $49 million of free cash flow, or $61.6 million adjusted for $12.6 million acquisition-related costs.
Non-GAAP net income was $7.5 million or $0.06 per diluted share, up from $0.7 million in Q1 2025.
Accelerated new customer wins and expansion within the installed base.

Concerns

Free cash flow of $49 million was down from $65.3 million in Q1 2025, impacted by acquisition-related costs and on-prem end-of-life.
Non-GAAP gross margin was 77.9%, down from 80.2% in Q1 2025.
ARR contribution margin was 14.1%, down from 16.7% last year, impacted by the end-of-life for the self-hosted platform.

Guidance & targets

Category	Target	Timeline	Confidence
SaaS ARR growth, excluding conversions	24% to 25% high materiality	Q2 · FY26	High
Total revenues	$175 million to $178 million medium materiality	Q2 · FY26	High
Non-GAAP operating loss	negative $1 million to breakeven medium materiality	Q2 · FY26	High
Non-GAAP net income per diluted share	$0.00 to $0.01 medium materiality	Q2 · FY26	High
Total SaaS ARR	$814 million to $845 million high materiality	FY26	High
SaaS ARR growth, excluding conversions	20% to 21% high materiality	FY26	High
Free cash flow	$100 million to $105 million high materiality	FY26	High
Total revenues	$731 million to $737 million medium materiality	FY26	High
Non-GAAP operating income	$7 million to $9 million medium materiality	FY26	High
Non-GAAP net income per diluted share	$0.11 to $0.12 medium materiality	FY26	High
On-prem to SaaS conversions	$50 million to $75 million medium materiality	FY26	High

VRNS operating KPIs by quarter

VRNS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Annual recurring revenue (ARR) SaaS excluding conversions	$522.6M In Q1, SaaS ARR, excluding conversions, increased 29% year-over-year to $522.6 million and total SaaS ARR, including conversions was $683.2 million. Source: earnings call transcript	$598.1M In Q2, SaaS ARR, excluding conversions, increased 25% year-over-year to $598.1 million and total SaaS ARR, including conversion was $726 million. Source: earnings call transcript	+14.4%
Annual recurring revenue (ARR) SaaS	$683.2M In Q1, SaaS ARR, excluding conversions, increased 29% year-over-year to $522.6 million and total SaaS ARR, including conversions was $683.2 million. Source: earnings call transcript	$726M In Q2, SaaS ARR, excluding conversions, increased 25% year-over-year to $598.1 million and total SaaS ARR, including conversion was $726 million. Source: earnings call transcript	+6.3%
Annual recurring revenue (ARR) Non-SaaS	~$83.7M In Q1, we had $11.3 million of conversion ARR, and we finished the quarter with approximately $83.7 million of non-SaaS ARR remaining. Source: earnings call transcript	~$59.3M In Q2, we had $11.4 million of conversion ARR, and we finished the quarter with approximately $59.3 million of non-SaaS ARR remaining. Source: earnings call transcript	—
Renewal rate SaaS	90%+ Our SaaS renewal rate was over 90%. Source: earnings call transcript	90%+ Our SaaS renewal rate was over 90%. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

SaaS ARR, excluding conversions $522.6 million Q1 FY26

up 29% year-over-year

Reflects ability to add new SaaS customers and expand with existing ones.

Total SaaS ARR, including conversions $683.2 million Q1 FY26

Deals & partnerships

AllTrue.ai Acquisition of a company providing an AI life cycle control plan (Atlas product).

Early feedback on the Atlas offering is positive, reinforcing its fit within the Varonis platform and potential to drive ARR growth over time. The acquisition provides the 'ultimate control plan for agents, models and pipeline'.

Risks & headwinds

Free cash flow impact from on-prem platform end-of-life Q1 FY26, expected to impact throughout 2026, particularly Q3 for churn.

FCF down from $65.3 million in Q1 2025 to $49 million in Q1 2026. ARR contribution margin down from 16.7% to 14.1%.

Mitigation:Focus on SaaS ARR growth and new customer acquisition to offset impacts.

Acquisition-related costs Q1 FY26, primarily from AllTrue acquisition.

Approximately $12.6 million in Q1 FY26.

Mitigation:Management highlighted this for visibility and expects to remain on track for full-year FCF guidance.

AI-powered adversaries and sophisticated attacks Ongoing.

Examples include cloud code breach, lone attacker scaling across 600+ firewalls in 55 countries.

Mitigation:Varonis' automated find, fix, and alert approach; securing data and AI systems; continuous investment in supply chain security capabilities (Interceptor, phishing sandbox).

Overexposed data and unsecured AI systems Immediate and ongoing with AI adoption.

AI pushes existing access controls to their limits, with systems and agents inheriting overly broad user access. Agents can move fast, behave unpredictably, and maximize privileges by design.

Mitigation:Varonis' platform for automated remediation, abnormal behavior detection, and access posture management, ensuring foundational controls operate at the speed and scale of AI.

What to watch in Q2 FY26

SaaS ARR growth, excluding conversions

Q2 FY26

Current 29% YoY in Q1 FY26

Target 24% to 25% YoY in Q2 FY26

Why it matters

This is the primary growth driver for the business post-transition, and management is confident in sustaining 20%+ growth.

For the second quarter of 2026, we expect SaaS ARR growth of 24% to 25%, excluding conversions

Find out whether VRNS delivers this. Inve re-checks your case every morning.

Q&A highlights

How is the sales team's shift to new business (away from conversions) impacting performance, and where is new business success concentrated?

Guy confirmed sales teams are now focused on upselling SaaS customers and selling to new customers, leading to accelerated new customer contribution. Yaki emphasized AI security driving demand, especially MDDR and automated remediation of excessive permissions, as AI agents necessitate foundational, automated security.

“Our sales force is able to go and with the simplicity of the SaaS offering, sell to customers that we wouldn't be able to sell before, and that's worked really well in Q1, and we expect that to continue in the year ahead.”

asked by Saket Kalia · answered by Guy Melamed

2 min read 6 chapters

Detailed narrative

AI Security as a Core Driver

Varonis is experiencing strong demand due to the critical need for data and AI security, addressing three main barriers to broader AI adoption: securing the data itself, securing AI systems, and fighting AI-powered adversaries. The company's platform provides automated solutions for finding, fixing, and alerting on data access issues, which is crucial as AI agents can access vast amounts of data rapidly and unpredictably, pushing existing access controls to their limits.

New Product Traction and Acquisitions

Early feedback on newer products like database activity monitoring, Interceptor, and Atlas (acquired) is positive, reinforcing their fit within the platform and potential to drive ARR growth. The Atlas acquisition, in particular, is highlighted as providing the 'ultimate control plan for agents, models, and pipelines,' with encouraging early signs of contribution and pipeline development, though not yet materially impacting Q1 ARR.

Successful SaaS Transition and New Customer Acquisition

The company reported a 'pretty significant' acceleration in new logo acquisition in Q1, attributing it to sales teams focusing on new business rather than conversions. The simplicity of the SaaS offering allows Varonis to reach new customer segments, and this focus on new customer acquisition is expected to continue driving growth throughout the year.

Customer Wins and Expansion

Varonis secured a global technology company with over 50,000 employees as a new customer, purchasing solutions for AWS, Salesforce, GCP, Google Drive, and Varonis SaaS for hybrid environments, including MDDR and Copilot protection. Existing customers like ServiceNow also expanded their investments to cover internal AI systems and email security, demonstrating the platform's breadth and ability to consolidate point tools.

Financial Performance and Guidance Raise

The strong Q1 performance led to a raise in full-year guidance for total SaaS ARR growth to 27% to 32% and SaaS ARR growth excluding conversions to 20% to 21%. Management expressed confidence in sustaining this growth rate as a fully SaaS company, citing healthy demand and momentum from both new customer wins and expansion within the installed base.

Free Cash Flow and Conversion Dynamics

Q1 free cash flow was $49 million, impacted by $12.6 million in acquisition-related costs, primarily from the AllTrue acquisition. The company reiterated its full-year free cash flow guidance of $100 million to $105 million, which assumes a base case of $50 million to $75 million in on-prem to SaaS conversions for the year, with Q1 conversions being on track with expectations.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.