Greetings, welcome to the Varonis second quarter 2018 conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Staci Mortenson , Investor Relations for Varonis. Please go ahead.
Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' second quarter 2018 financial results. With me on the call today are Yaki Faitelson, Chief Executive Officer, and Guy Melamed, Chief Financial Officer and Chief Operating 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 the federal securities laws, including projections of future operating results for our third quarter and fiscal year ending December 31st, 2018. 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 be able to attract or retain employees, including sales personnel and engineers, general economic and industry conditions, including expenditure trends for data and cyber security solutions, risks associated with the closing of large transactions, including our ability to close large transactions consistently on a quarterly basis, our ability to build and expand our direct sales efforts and reseller distribution channels, new product introductions and our ability to develop and deliver innovative products, risks associated with international operations, and our ability to provide high-quality service and support offerings, 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. 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 application 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 second quarter 2018 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?
Thanks, Stacy, and good afternoon, everyone. Total revenues for the second quarter were $62.2 million, an increase of 26% year-over-year. During the quarter, EMEA revenues increased 60%, and North America revenues increased 12%. Our growth in North America was impacted by underperformed moments in the West Coast region. We have moved top sales leadership into the region to help ensure we more effectively capture the demand in the region, as we are doing across the business. We feel confident that these changes will result in improvements in the second half of the year, and we remain on track to deliver our goals for 2018. We added a meaningful number of new customers and sold more to our existing ones, with the percentage of clients who purchased both two and three or more products increasing again this quarter.
We are also having success with customers who have started to more increase in greater lifetime value. This speaks directly to the increasing need for companies to track and protect their data wherever it is, wherever it's stored, reducing risk, preventing breaches, and meeting compliance requirements. Our platform approach, driven by our ongoing focus on innovation, is making Varonis a partner of choice in driving our land and expand strategy. During the second quarter, we continued to make investments to increase awareness and demand. We hosted 27 Varonis Connect events worldwide, attended key conferences such as RSA, Dell World, and Gartner Security & Risk Management Summit, and we met with an increasing number of prospects and customers. These events reinforce that the demand for our solution is strong and that our platform addresses critical challenges.
For both new and existing customers, risk assessment continued to be the most effective way to show senior-level executives that they have to take ownership and control of their data. Too many organizations have overexposed and unprotected files and emails on corporate networks worldwide. In addition to using risk assessment in the new business opportunities, regular risk assessments or progress reviews, we are proven to be a very successful tool for upsell. When we review with existing customers how they made progress using our solution, we get a chance to talk about how we can take them further. We discuss all the innovations we have been working on that will help address their remaining security or compliance needs, which is helping to drive upsell and cross-sell. Customers who purchase two or more products increased from 67% a year ago to 71% this quarter.
38% of customers have purchased three or more products, up from 32% in the year-ago period. For example, one of the largest credit unions in the U.S. relied on DatAdvantage and Data Classification Engine that they needed to help fixing security issues. External threats and CryptoLocker were a big concern, and global group access and stale data that they amassed over years were vulnerable to outsider attackers, malware, and insiders. Varonis Data Risk Assessment showed them Adding the Automation Engine to find and secure overexposed files could help them accelerate a cleanup project from two years to one week. In Q2, the customer added Automation Engine and DatAlert. With Varonis, they are driving real measurable value with unified security approach, working smarter to protect their sensitive data.
This example also shows why we made it strong for the Automation Engine and how we believe it is a key differentiator for us. The Automation Engine was built to fix exposure and inconsistencies automatically, meaningfully reducing the amount of time it takes to lock down access to huge amount of data. With our solutions, customers significantly decrease the likelihood of a breach and reduce the scope of potential damage. During the quarter, we added 227 new customers across a broad set of industries and company sizes. As data continue to grow on-premises and in the cloud, companies realize they must implement a strategy to manage and protect this data, looking to partners that can solve evolving needs.
While we still have customers that came to us and started with just one product in one division, increasingly, customers are seeing the value in our platform and taking a more thoughtful approach to data security. For example, in the second quarter, Varonis' Data Risk Assessment for a large regional law firm revealed that more than 90% of their files were open to everyone within the firm, raising ethical issues as well as security concerns. Like many companies, the firm tried to manage permissions using native Microsoft tools but could not keep up. In Q2, they decided on a better approach with the Varonis Data Security Platform. DatAdvantage will monitor their file activity and user behavior. Data Classification Engine will give them visibility into sensitive files. Automation Engine will find and fix overexposed files.
Data Transport Engine will automatically migrate, archive, or delete files. DatAlert will notify them of suspicious behavior that could indicate internal or external threats. Additionally, we'll handle privileged permission management for sensitive folders without burdening their IT staff. With Varonis, the law firm discovered how vulnerable they were and took action to reduce risk and secure their critical data. Another great new customer example is a large real estate firm based in Germany who contacted Varonis for a Data Risk Assessment in advance of GDPR. The Data Risk Assessment revealed more than 100,000 folders open to everyone in the company, and that 86% of these folders contained stale data. Now, DatAdvantage for Windows and Exchange are helping them clean up and maintain permissions. Data Classification Engine and GDPR patterns help them locate sensitive data.
DatAnswers make it easy for them to search for regulated data and fulfill Right to be forgotten requests. DatAlert notify them of unusual activity. With Varonis, the company gains visibility into its data, and the CISO can demonstrate to the leadership team how the company's sensitive and regulated information is kept safe. As I have mentioned before, GDPR helps with awareness and present opportunity that we believe we are well positioned to capture. We don't lean on compliance alone. We focus on the broader value that comes with adopting our comprehensive Varonis Data Security Platform. Another driver for our business is the adoption of our Office 365 solution, which again, saw acceleration. A large U.S. transportation company had been relying on Varonis for two years to protect their on-premises data stored with DatAdvantage, Data Classification Engine, and DatAlert.
They recently migrated to Office 365 and looked once again to Varonis to secure their sensitive documents and emails in the cloud. A Varonis risk assessment in their live SharePoint Online and Exchange environment revealed critical vulnerabilities, including mailboxes from top company executives opening to everyone within the organization. In Q2, they extended their Varonis investment and purchased DatAdvantage for SharePoint Online, OneDrive, and Exchange Online, and Data Classification Engine for OneDrive and SharePoint Online. With Varonis, they are reducing risk profile in the cloud, getting valuable context to realize greater value from their existing investment, and meeting rigorous compliance and data governance demands. We believe that we remain very well positioned to capture what we think is a large and growing opportunity.
More and more of our new and existing customers are embracing our Varonis Data Security Platform, which is driving our land and expand strategy and growing our customer lifetime value. This is all underpinned by our innovation that helps us solve more and more of our customer data security needs. I remain confident that we have the strategy and team to build a billion-dollar revenue business. With that, let me turn the call over to Guy.
Thank you, Yaki. Before I begin, I would like to remind you that our Q2 results are in accordance with the new 606 accounting standard, which we adopt according to the full retrospective method. Total revenues for the second quarter were $62.2 million, an increase of 26% year-over-year. License revenues were $33.5 million. This represents a 23% increase from the second quarter of 2017. Our maintenance and services revenues were $28.7 million, increasing 30% compared to the second quarter of 2017. For the three months ended June 30th, 2018, our maintenance renewal rate was once again over 90%.
Over the last several quarters, we have seen our maintenance renewal rate increase, which is a great validation of our products, support, and renewal teams. Looking at the business geographically, North America revenues increased 12% to $38.4 million, or 52% of total revenues. EMEA revenues came in at 35% of total revenues, or $21.5 million, an increase of 60%. Rest of the world revenues represent 4% of total revenues, or $2.3 million, an increase of 42%. For the second quarter, new customer license and first maintenance revenue contribution was 58%, up from 56% in the second quarter of 2017. During the quarter, we added 227 new customers, compared to 242 in Q2 2017.
Validating our strategy to focus on larger customers, we see our new customers continuing to make larger initial commitments to us as we continue to focus on attracting companies with 1,000 or more employees, while at the same time increasing revenues from our existing customer base. We ended the second quarter with approximately 6,200 customers. As of June 30th, 2018, 71% of our customers had purchased two or more product families, up from 67% as of June 30th, 2017. 38% of our customers had purchased three or more product families, compared with 32% in Q2 of 2017. These trends validate our investments in R&D and our platform approach, which helps our customers track and protect their data wherever it's stored, driving our land and expand strategy.
Before moving on to the profit and loss items, I would like to point out that I'll be discussing non-GAAP results going forward, unless otherwise stated, which for the second quarter of 2018 excludes a total of $8.8 million in stock-based compensation expense and $1.4 million of payroll tax expense related to stock-based compensation. We report non-GAAP results in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP. Please note that a detailed GAAP and non-GAAP reconciliation can be found in the tables of our press release, which is available on our website. Gross profit for the second quarter was $56.3 million, representing a gross margin of 90.5%, in line with our gross margin in the second quarter of 2017. Turning to operating expenses.
In line with our strategy, we increased our investments in our go-to-market initiatives to drive global growth as well as in R&D to continually improve our products and expand the number of use cases we deliver to our customers. As you remember, when we initially provided our 2018 yearly guidance, we emphasized our desire to continue to grow revenues while improving our non-GAAP operating margin, excluding the 300 basis points headwind related to FX. We continue to execute against our plan. Operating expenses totaled $57.3 million in the second quarter, compared to $45.5 million in the second quarter of 2017. As a result, our operating loss was $1 million, or an operating margin of -1.6% for the second quarter, compared to an operating loss of $650,000, or an operating margin of -1.3% in the same period last year.
During the quarter, we had financial expense of $811,000, primarily due to foreign exchange losses, compared to financial income of $950,000 in the second quarter of 2017, primarily due to foreign exchange gains. As you know, foreign exchange gains and losses can fluctuate. Our guidance does not consider any additional potential impact to financial and other income expense associated with foreign exchange gains or losses, as we do not estimate movement in foreign currency rates. Our net loss was $2.4 million for the second quarter of 2018, or a loss of $0.08 per basic and diluted share, compared to a net loss of $300,000, or $0.01 per basic and diluted share for the second quarter of 2017. This is based on 28.9 million and 27.3 million basic and diluted shares outstanding for Q2 2018 and Q2 2017 respectively.
If we look at the balance sheet, we ended the quarter with approximately $158.7 million in cash equivalents, and short-term investments. During the first six months of 2018, we generated positive operating cash flow of $20.4 million, compared to cash flow provided by operations of $7.4 million in the first six months of 2017. This year-over-year improvement is in keeping with our strategy to scale our business, delivering increasing levels of cash flow from operations. We ended the quarter with 1,364 employees, a 16% increase from 1,171 at the end of the second quarter of 2017. From the previous quarter, this is an addition of 46 people. We continue to increase our headcount to grow the business and realize productivity improvements as we scale. Moving to guidance.
For the third quarter of 2018, we expect total revenues of $64 million to $65 million, representing year-over-year growth of approximately 20%-22%. We expect our non-GAAP operating profit to range between breakeven and $1 million, and non-GAAP loss per basic and diluted share of $0.02 to non-GAAP income per diluted share of $0.01. This assumes a tax provision of $500,000 to $700,000 and 29.3 million basic and 32.6 million diluted shares outstanding. For the full year 2018, we now expect total revenues in the range of $265 million to $268.5 million, representing year-over-year growth of approximately 23%-25%. We now expect our non-GAAP operating income to be in the range of $2.5 million to $4.5 million and non-GAAP income per diluted share of $0.00 to $0.05. This assumes a tax provision of $2.7 million to $3.2 million, and 32.4 million diluted shares outstanding.
In closing, the demand for our solutions is strong, and we made good progress towards our 2018 goal of delivering solid profits and improving cash flow from operations. We continue to see benefits of our investments in R&D and the customer journey as we increase the estates across our customer base, driving lifetime value. With that, we would be happy to take questions you have. Operator?
Thank you. We will go to your question and answer session. We ask you please ask one question and one follow-up, and return to the queue. If you would like to be placed in the question queue, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove a question from the queue. For participants using speaker equipment, it is necessary to pick up your handset before pressing the star keys. Once again, ladies and gentlemen, it is *1 to ask a question today. We ask that you please ask one question and one follow-up, then return to the queue. Our first question today is coming from Matthew Hedberg from RBC Capital Markets. Your line is now live.
Hi, guys. Thanks for the questions. Yaki, thanks for the color on the West Coast. I am wondering if you could give us a little bit more there, what happened there, and then maybe a little bit more specifics on the changes on the West Coast. Did you lose any deals? Maybe how the pipeline feels. I guess maybe from a high level, can you help us quantify perhaps the impact on the quarter for the West Coast?
Yes, of course. This quarter, the West Coast really did not meet the overall Varonis standards. As you well know, we have a very methodical way that we are going to market, and it is very proven. We injected a very successful Varonis sales leader to help us just fix the overall region. In terms of demand in North America is very strong. The overall demand is very strong. This is why we always stress that you need to take a multi-quarter view on the business. This is not a company that you can assess on a quarter by quarter basis. We believe market, we are well positioned to execute very well in North America in the second half of the year.
That is great. Then maybe a quick one for Guy. Since your last guide, can you help us with the FX impact on both revenue and OpEx? I am curious if you can help us both on the quarter, but also your outlook would be helpful.
Sure. Hi, Matt. FX wasn't material for this quarter and isn't material in terms of the H2 portion. As you know, in terms of the guidance, we exclude the FX portion, it didn't have a material impact. It was a headwind of approximately 1% for H2 on the revenue side, nothing really too material for us.
Anything on the OpEx line?
On the OpEx line, as you remember, when we provided the full-year guidance, we closed the hedging for the Israeli shekel versus the US dollar. We basically said at the beginning of the year that we will have 300 basis points headwind in each of the quarters because of that.
Got it. Thanks.
Thank you.
Thank you. Our next question is coming from John DiFucci from Jefferies. Your line is now live.
Thank you. I guess, I just know I'm going to get You guys are too. You have this update tomorrow, but on the West Coast. Otherwise, I mean, the numbers look pretty good, guys. Just like a little bit of weakness out of one region is fine. Yaki, I'm going to ask Matt's question again. I'm sorry to be repetitive, but if you can give us any more detail on that, just because, we know you do have a very methodical go-to-market strategy, but I mean, the people on the West Coast, they're not all new, and they know the strategy. If there's something, what else Can you give us a little more on that? Sorry to ask the same question, but I would really appreciate a little more.
It's okay. Regarding just the overall West Coast, you need to be very disciplined. You know how it works. You're doing a POC, then you need to bring C-level people and present. If you're doing enough POCs and just present the business case in the right way, We have very high conversion rates. We just need leadership to know how to do it at scale, This is something that we are fixing. It is not something structural. We have very good teams. We just need to make sure that we have the right discipline and resource allocation, People doing everything at the right time. Having said that, on a trailing 12 months basis, including this quarter, North America is 23% growth. We bought this quarter more than 200 customers, and we did hundreds of transactions.
Had we closed several more mid-size deals than West Coast is we're delivering, we are not having this conversation. It's a licensed business. This is why we always tell you to take a multi-quarter view on the business. History, as a public company, we never miss the quarter. We have very good visibility into the pipeline. We know how things will play out several quarters ahead because the way that it's working, we have these POCs. We barely have any competition. Once we are doing the right things and there are so many budgets, nothing is distracting us in the sales process. The cloud is big, the Automation Engine is working, everything that we are doing in security analytics is working very well. That will happen from time to time.
We are addressing it, we are addressing it with a lot of visibility and a lot of control.
That's great. Thank you. That's helpful. If I could, a follow-up that sort of dovetails into this, and you touched a little bit on your prepared remarks on the risk assessment your team goes in and does, and I wonder if you could perhaps just give us a little more information. I know we've been hearing about it for a little while, and it makes a ton of sense, especially for something that a lot of companies don't have, to sort of open their eyes. Maybe give us a little more about when this approach started in earnest. What's the conversions with sale once you're able to do that? Because I can imagine that becomes very high once you get in to do it. Maybe even what's the trend in customers engaging at that level saying, "Yeah, sure, go ahead and do a risk assessment.
This came from Ken Spinner, our head of field engineering, that he came to me and said, "You know, Yaki, this is not a POC, but it's so valuable for the customer to see what's going on, what critical data they have, how it's exposed. With the security analytics, we can bring a red team, penetration testing, and show you how we are catching these APTs," which is something that is very valuable for the customers. Once you're doing a risk assessment, and you can bring the C-level people, it's something that you can really present to the board. These days, it's just high priority across the business. We are doing the risk assessment, and we are doing the reporting in a format that the business can understand easily where are the risks against what processes, what data, and how to remediate them.
If the teams are following this methodology of convincing the customer to do a risk assessment and then delivering the value, we are converting a lot of them. It's becoming just a very predictable sales campaign.
Okay. Has that become the norm, just going to market that way with every customer?
It's the only way.
Okay, great. Thank you.
Thank you. Our next question is coming from Saket Kalia from Barclays. Your line is now live.
Hi, guys. Thanks for taking my questions here. One question for you, Guy, and then a follow-up for you, Yaki. Maybe for you, Guy. Can you just talk about the mix of overall business from new customers versus existing? I know that we have the 58% of first-year license, kind of from existing versus new. I guess the question is, was there anything significant in your results versus your expectation in either of those categories, new versus existing?
Saket, thank you for the question. First of all, you've heard us in the last couple of quarters talk about how new customers are making larger initial commitments to us. I think this quarter was a great indication of those new customers making those initial commitments, and it's aligned with our strategy, and we were very happy with that. With that said, over time and on the long term, we definitely see our existing customers buying more and more licenses. We have more than 20 licenses to sell, and we see more and more of our existing customers want more and more licenses. Over time, a license and first-year maintenance coming from existing customers should continue to go up. In this specific quarter, and it can fluctuate from one quarter to the other, we saw those larger initial commitments made by the new customers.
Got it. Is it fair to say that maybe the existing piece, it seems like you did a little bit better on new, perhaps, than you were expecting. The existing, maybe was pushed out a bit. Is that the right way to think about it? I don't want to put words in your mouth, but I just want to clarify.
I think over the long term, you will continue to see the trend where the existing customers are increasing their percentage over time out of total revenue. That's part of our ability to grow and bring down profitability levels to the bottom line. In this specific quarters, we were very happy with the initial commitments made by those new customers.
It's very hard, in Varonis case, to draw a trend in a 90-day window.
No, that's totally fair. Actually, that's maybe just, I think you hinted at this earlier, Yaki, this is a follow-up for you. Just to make sure the question is asked, can you just talk about the competitive landscape a bit? I know that you touched on it before, but has anything changed in terms of win rates or anything else that you track internally when evaluating your relatively limited competition?
Not at this point. We are competing against ourselves. The competitive situation was stronger than ever. We are hitting scale. We are measuring everything, every POC and every meeting, and we know if we see any competition, and at this point, we are the dominant force in our market.
Very helpful. Thanks, guys.
Thank you.
Thank you. Our next question is coming from Alex Henderson from Needham & Company. Your line is now live.
Great. I realize the West Coast is going to get beat up on here a little bit, but if you were to look at the rest of the North American operations, excluding that region, would it have been a much higher growth rate in the 20s, excluding the West Coast region from it? Within the West Coast, is it a matter of the volume of POCs? Is it the volume of C-level meetings? Is it the volume of deal closures? Is it win rates versus competition? What is it specifically that you are going to change, and how do you get comfort that you're going to change it within a very short period, as you're indicating into the back half of the year? Or is this something that could take multiple quarters to fix?
First, when we are looking at the business, remember, everything in Varonis is POCs. We know what customers are looking to do, upsells, and we just have the right people on the ground and the right leadership. We know with these leaders, these are proven leaders, veterans in the company. Relatively, what are the close rates to make sure that we have enough senior leadership coverage to get into the deal. We also see the overall North American business, you need to understand that also, we see our business, we see the pipeline, but it's expanding and contracting. In 90 days, sometimes how to predict it like that. Overall business, we can see that this is something that is hard.
Remember that last year at this time, if I remember correctly, EMEA was around 17%, everybody asked me the same questions, instead, we see very good pipeline, we see maturity in the business. This is something that we're definitely see in North America. It's just a very good business. We didn't scratch the surface in terms of our penetration in the market. We can move from one quarter to the other, we had ICAP in the West, it looks like a typical growth for Varonis. When we are talking about visibility, we're talking about pipeline and coverage. We know the upsell, we know what are the use cases, we know by individual who are the individuals within Varonis that are holding this pipeline, how we are going to translate it into revenue.
We have very good visibility and just very good control.
That's all great information, it doesn't answer the question that was asked, which is, what specifically was it in the West Coast region that caused you to be off the Varonis way? Whether it was the number of POCs, the volume of C-level meetings, the volume of deal closures, something within the mix didn't do the Varonis. What was it?
Yeah. It depend on the individual, but it was everything. It's just the way the people was running the meetings, the follow-up, the C-level presentation. We have a methodology. This is what we saw. We saw that we have a playbook, part of the playbook we didn't execute, but these are very good teams. We know what we are doing. It's big market with strong demand. We can fix it fast.
All right. It seems to be the last question of how you get confidence that you can fix this in a short amount of period of time, if you've got "misses on all of the above" within that sales region.
It's only that not with every sales team individual. We know exactly what are the problems. We have the very good pipeline profile. The right people are involved in the deals. We were doing this for a very long time. In terms of the pipeline profile, the people, the use cases, the profile of the customer, the customer base, all the right metrics, all the right indicators are in the right direction. We have more than a decade of history, how this is playing out, and we believe that it will play out the same way this time.
I'll cede the floor. Thanks.
Thank you. Our next question is coming from Melissa Franchi from Morgan Stanley. Please proceed with your question.
Okay. Thanks for taking my question. I guess one question for Guy to start. When we're thinking about your revenue guidance for the second half of the year, are you assuming that the challenges you're seeing in the West Coast improve, or are you assuming that what you saw in Q2 sort of sustains through the year?
We definitely see the West Coast improving for the second half of the year. Part of the reason for our guidance for Q3 has to do with the fact that Q3 is a large deal for federal. We've made a lot of investments in the federal market and with the federal team, we still don't have enough history to predict and see how that closing takes place. That's part of the reason for Q3 guidance. We do feel very good about the pipeline for the second half of the year, and that the West will be improving.
Okay, just to clarify, so embedded in the guidance is an assumption that the West Coast improves.
Correct.
Overall, we have very good pipeline across all the North American region. As Guy said, this is a big quarter for Federal. We invested a lot, and we have very strong team, very strong pipeline, but it's still new for us, and it'll be just a bit stressful.
Mm-hmm. Okay. That makes sense. Then on the new customer adds down year-over-year, I know you had helpful color on the concentration on maybe larger customers and initial deal sizes are going up. At some point, does that metric start to stabilize and you'll start to see growth in new customer adds, or do we expect this trend to sort of continue?
We have growth in new customers adds in the 1,000-plus in the market that we want to play in. We feel very comfortable with the way we are penetrating the market and the customer sizes. We are doing business with the customers that we want to do business, with very strong lifetime value, and customers that provide both volume but also very good productivity for our sales force. Also this is the right customer count that the sellers can focus for upsells. Overall, in terms of the way that we penetrate and our new customers, we are very happy.
Makes sense. Thank you very much.
Thank you.
Thank you. Our next question is coming from Jared Terzis from Stifel. Your line is now live.
Great. Thanks for taking my question. Yaki, if you look at the history, when you've had geo-specific weakness, and you just talked about this, but I think it's an important point, you've been able to bounce back pretty quickly, whether it was EMEA in Q4 of 2016 or Russia some years ago. I guess the question is, are you going to run the same playbook you ran when you saw weakness in those regions, and do you feel confident just sort of the same bounce back that you saw? I know you keep saying, don't focus on one quarter, focus on multi-quarter, but I think it's an important point because you guys have been able to react and respond pretty quickly when you do face geo-specific adversity.
Yes. Without a doubt. One thing that is very important to remember that this is not a structural change like we had in the U.K., and when you look at the region overall North America, we just have a lot of underlying strength within North America. In terms of the scale of the problem, this is significantly less than what we had in EMEA. This is not even close. This is something that is much easier for us to attack.
That makes sense. Then, you just talked about the U.S. Fed opportunity and maybe being optimistic, also being cautiously optimistic. We saw some interesting deals this quarter. Can you talk about some of the things you've put into place over there to drive that opportunity? What perhaps gives you some confidence around the North American Fed opportunity? Are there specific programs you feel you can play against, whether it's CDM or something else of the sort, and why you perhaps feel cautiously optimistic here about the opportunity as you push into Q3?
We just see the discussions we have with customers. We see what is going for budget approvals, also just a tremendous need in this market. We invested a lot. We have very good teams, we believe that it can be just a massive business for us. Just think about the problems that we are solving for them, we did everything right. We invested in the right team, we invested in the right program, in the certification, just big investment from Varonis. Now it's the time to get it done.
Thank you.
Thank you. Our next question is coming from Greg McDowell from JMP Securities. Your line is now live.
Thank you. I want to go halfway around the world and talk about Europe a little bit. Obviously, one of the best-performing regions, 60% growth two quarters in a row, with GDPR coming into effect May 25th. I just was hoping you could highlight a little bit why it's going so well in Europe and how much of the growth in Europe is due to GDPR versus other things going on in Europe. Thanks very much.
It's everything. GDPR definitely, as I said before, just presented a very clear framework how to think about data protection, how to think about cyber security and about reporting. Once you go through this exercise, you always land on Varonis. It's just very easy to justify Varonis purchase, not to be in compliance with GDPR, to really solve the problem. It's something that is helping us. We just see good demand across the board.
Guy, one for you. I noticed you talked about the renewal rate for several quarters. The maintenance renewal rates have been increasing. I was just wondering if you could touch on what changes or tweaks have been made to start to increase that maintenance renewal rate and how you're doing it. Thanks.
Thanks for the question. I think it's a great indication of our product. Our product that customers are using and seeing value, and also a great indication of our support team and the renewals team that are working on those renewals and direct with the customers. We've seen the increase in the renewal rate over the last couple of quarters. We're very happy with that, and it's a great indication of our different departments at Varonis.
Thanks.
Thank you. Our next question is coming from Chad Bennett from Craig-Hallum. Your line is now live.
Great. Thanks for taking the questions. I guess just kind of high level, you guys talk about not looking at Varonis on a 90-day time period or short-term kind of outlook. I guess if we look at the license revenue growth, going from mid-to-high 30s, three quarters ago to what, based on your guide could be now high teens in the current quarter. I guess, since we should take a multi-quarter view, I'm wondering from an investment standpoint in the business, are you investing in the business like it's a high 20s, 30% license growth business or a high teens, 20% license growth business?
We always guide in a responsible way. We want to set forth goals that we can execute well against. We just definitely see a clear opportunity to be a billion-dollar business in revenue. This is a different company. We invented this market, we go to market. This is something that we created, and when we are investing in the business, we want to make sure that we are hiring people in a way that we can enable them, we can support them. We are balancing everything between growth, profitability, investing back in the business, the ability to invest in the people that we hire. In terms of the overall guidance, you can look at our history and see that we're always trying to guide in a very responsible way.
Then real quick follow-up for me, just not to belabor the West Coast stuff, was there any change in the North America, Salesforce or go-to-market entering the new fiscal year, whether it's around cross-sell, up-sell or new ads or focused on higher-end 1,000-plus employee businesses, kind of were any of those changes disruptive, I guess, in your opinion, to the quarter?
I think that what we are doing in terms of any changes that we did with the 1,000-plus new products, it's always gradual. It's just everything is a gradual process. We are not doing any revolution here in that sense. As I said before, we brought 227 customers. We did several hundred transactions. If we close several mid-sized deals, we wouldn't have this conversation. This is why we're always pressing to have a multi-quarter view, because sometimes things like that can happen. It happened to us in the time that we are public in North America, and it happened to us in Europe, and we always came back to doable, consistent goals. On a quarter by quarter basis to try and analyze this asset, it just doesn't make any sense.
Understood. Thanks for taking my question.
Thank you.
Thank you. Our next question is coming from Rishi Jaluria from D.A. Davidson. Your line is now live.
Hey, guys. Thanks for taking my questions. First, Yaki, let me start again on the West Coast issues. It sounds to me like you're talking about leadership changes as kind of being the fix. Are there any other changes that need to happen, in terms of either personnel or investments to fix this issue? Or is it purely leadership? I have a follow-up for Guy.
It's mainly leadership.
Okay, got it. Thanks. Guy, you talked about getting larger initial land as part of the land and expand strategy. Is that driven by greater initial seats in the adoption phase or by more products initially purchased by customers? Can you help us kind of understand what's driving that?
I think it's a little bit of both. We're definitely seeing customers wanting to buy more licenses. As you remember, about two and a half years ago, we started focusing on larger customers. I think it's a combination where we're targeting the enterprises where we can generate customer lifetime value and extract more licenses off those customers over time. Also those customers going through that risk assessment, seeing in their eyes how vulnerable they are and how exposed they are and how much sensitive data is open to everyone in the company. When they see that, we have over 20 licenses to help, and those customers just want to buy more.
Okay, got it. Thanks, guys.
Thank you.
Thank you. Our next question is coming from Mark Schappel from Benchmark Company. Your line is now live.
Hi, thank you for taking my question. Most of my questions have actually been answered, but just one here, Yaki, for you. In the past, you've noted or talked about how you're beginning to have some conversations with customers around Enterprise License Agreement or ELAs, and I was wondering if, granted you haven't signed any yet, I understand that, but I was wondering if those decisions and thought processes with customers are still ongoing.
They are ongoing, but it's still not just a common practice in Varonis, and we are not closing the ELAs.
Great. Thank you.
Thank you.
Thank you. We've reached the end of our question and answer session. I'll now turn the call over to management for any further or closing comments.
Before we end the call, I would like to thank all of our employees for their hard work and contribution to our success in this past quarter. We'd also like to thank to all our customers and partners of the continued support. Thank you for joining us today. We are looking forward to talk to you soon.
Thank you. That does conclude today's teleconference. You may disconnect your lines at this time. Have a wonderful day. We thank you for your participation today.