Greetings, and welcome to the Varonis Second Quarter 2018 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacy Mortensen, Investor Relations for Varonis.
Please go ahead.
Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' Q2 2018 financial results. With me on the call today are Yaki Staitelson, Chief Executive Officer and Brad 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 Q3 fiscal year ended December 31, 2018. Actual results may differ materially from those that were in such statements. Important factors such as risks associated with anticipated growth in our addressable market, competitive factors, including increased sales cycle time, changes to the competitive environment, pricing changes and increased competition, the risk that we cannot be able to attract or retain employees, including sales personnel and engineers, general economic and industry conditions, including expenditure trends for data and cybersecurity 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 in retailer distribution channels, new product introductions in our ability to develop and deliver innovative products risks associated with international operations and our ability to provide high quality service and support offerings the 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 the 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. Veronis expressly disclaims any application or undertaking to release publicly any updates or revisions to any forward looking statements we appear in.
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 Q2 2018 earnings press release, which can be found at www.coronis.com in the Investor Relations section. Also, please note that our 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 Paitos. Yaki?
Thanks, Stacy, and good afternoon, everyone. Total revenues for the Q2 were $62,200,000 increase of 26% year over year. During the quarter, EMEA revenues increased 50% and North America revenues increased 12%. Our growth in North America was impacted by underperformance 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 2 and 3 or more products increasing again this quarter. We are also having success with customers with thousands of more increase and greater lifetime value.
This speaks directly to the
increasing need for companies to track and protect their data wherever it is, 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 lender expense strategy. During the Q2, we continue to make investments to reduce awareness and demand. We also have 27 Varonis Connect events worldwide, attended key conferences such as RSA, Bell World and Security and 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 continues to be the most effective way to show senior level executive that they have to take ownership and control of the data. Too many of our transitions have overexposed and unprotected files in EMEA from corporate networks worldwide. In addition, using risk assessment in the new business opportunities, regular risk assessments or progress reviews, we are proven to be a very successful tool for access. 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 the remaining future compliance needs.
This is helping to drive upselling costs and process. And customers who purchased 3 or more products increased from 67% a year ago to 71% this quarter. 38% of customers have purchased 3 or more products, up from 32% in the year ago period. For example, 1 of the largest credit union in the U. S.
Relied on data advancing the data specification engine that they needed to help fixing security issues, external threats and crypto lockers were a big concern, and global group access and the sales data that they commenced over the years to more vulnerable to outside the hackers, malware and insiders. Varonis data risk assessment showed automation engine to find and secure over export files could help them accelerate the treatment project from 2 years to 1 week. In Q2, the customer added automation engine and data. With Varonis, they are driving real measurable value with unified security search, working smarter to protect those sensitive data. This example also speaks to why we made it strong for the automation engine and how we believe it is a key differentiator for us.
The automation engine will build to fix exposures and its consistencies automatically, meaningfully reducing the amount of time it takes to lock down access to huge amount of data. With our solutions, customers significantly decreased the likelihood of a breach and reduced the scope of potential damage. During the quarter, we added 227 more 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 their data and looking to partners that can serve 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 Q2, Varonis data risk assessment for a large regional law firm revealed that more than 90% of their files were opened to everyone within the firm, raising ethical issues as well as security concerns. As 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 Vonage data security platform. Their advantage will monitor their file activity and user behavior, and a classification engine will give them visibility into sensitive file Operation Engine will sign in 6 over 4 files with the transport engine will automatically migrate archives or delete files and data alerts will notify them of suspicious behavior that could indicate internal or external threats. Additionally, we have the privilege to handle permissions in 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 physical business. Another great new customer detail is a large real estate firm based in Germany who contracted Varonis for a data risk assessment in advance of GDPR. The data risk assessment revealed more than 100,000 folders opened to everyone in the company, About 86% of these folders contain fair data. Now data advantage for Windows and Exchange are helping them clean up and maintain permissions. Data classification engine and GDPR partners help them locate sensitive data.
Data answer makes it easy for them to search for regulated data and fulfill right to be forgotten requests and data alerts 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 presents 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 data security platform.
Another driver for our business is the adoption of our Office three sixty five solution, which again saw acceleration. Large U. S. Transportation company has been relying on Varonis for 2 years to protect the on premises data stored with data advantage, data classification engine and data alert. We recently migrated to Office 365 and looked once again to Varonis to secure sensitive documents and emails in the cloud.
Varonis' risk assessment in the live SharePoint, OneDrive and Exchange environment to be 3 vulnerabilities, including mailboxes from top company executives opening to everyone within the organization. In Q2, extending the overall investment and purchase data advantage for SharePoint Online, OneDrive and Exchange Online and data classification engine for OneDrive and SharePoint Online. With Varonis, we are reducing risk profile in the cloud, taking valuable context to realize greater value from the SIEM 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 their data security platform, which is driving the land and expand strategy and growing their customer lifetime value.
This is all underpinned by our innovation that helps us solve more and more customer data security needs. I remain confident that we have the strategy and team to build the $1,000,000,000 revenue business. And with that, let me turn the call over to Ben.
Thank you, Yaki. Before I begin, I would like to remind you that our Q2 results are in accordance with a new 606 accounting standard, which we adopt according to the full retrospective method. Total revenues for the Q2 were $62,200,000 an increase of 26% year over year. License revenues were $33,500,000 This represents a 23% increase from the Q2 of 2017. Our maintenance and services revenues were $28,700,000 increasing 30% compared to the Q2 of 2017.
For the 3 months ended June 30, 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 $38,400,000 or 52% of total revenues. EMEA revenues came in at 35% of total revenues or $21,500,000 an increase of 60%. Rest of the world revenues represent 4% of total revenues or $2,300,000 an increase of 42%.
For the Q2, new customer license and maintenance revenue contribution was 58%, up from 56% in the Q2 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 Q2 with approximately 6,200 customers. As of June 30, 2018, 71% of our customers had purchased 2 or more product families, up from 67% as of June 30, 2017.
38% of our customers had purchased 3 or more product families compared with 32% in Q2 of 2017. These trends validate our investments in R and 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 Q2 of 2018 excludes a total of $8,800,000 in stock based compensation expense and $1,400,000 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 the detailed GAAP to non GAAP reconciliations can be found in the tables of our press release, which is available on our website.
Gross profit for the Q2 was $56,300,000 representing a gross margin of 90.5 percent,
in line with
our gross margin in the Q2 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 R and 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 net FX. We continue to execute against our plan.
Operating expenses totaled $57,300,000 in the 2nd quarter compared to $45,500,000 in the Q2 of 2017. As a result, our operating loss was $1,000,000 or an operating margin of negative 1.6 percent for the 2nd quarter compared to an operating loss of $650,000 or an operating margin of negative 1.3 percent in the same period last year. During the quarter, we had financial expense of $811,000 primarily due to foreign exchange losses and the financial income of $950,000 in the Q2 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 $2,400,000 for the Q2 of 2018 or a loss of $0.08 per basic and diluted share compared to a net loss of $300,000 or 0 point 0 $1 per basic and diluted share for the Q2 of 2017. This is based on 28,900,000 27,300,000 basic and diluted shares outstanding for Q2 'eighteen and Q2 'seventeen, respectively. If we look at the balance sheet, we ended the quarter with approximately $158,700,000 in cash, cash equivalents and short term investments. During the 1st 6 months of 2018, we generated positive operating cash flow of $20,400,000 compared to cash flow provided by operations of $7,400,000 in the 1st 6 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 13.64 employees, a 16% increase from 11.71 at the end of the Q2 of 2017. From the previous quarter, this is an addition of 36 people. We continue to increase our headcount to grow the business and realize productivity improvements as we scale. Moving to guidance. For the Q3 of 2018, we expect total revenues of 64,000,000 dollars to $65,000,000 representing year over year growth of approximately 20% to 22%.
We expect our non GAAP operating profit to range between breakeven and $1,000,000,000 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 $700,000 $29,300,000 basic and 32,600,000 diluted shares outstanding. For the full year 2018, we now expect total revenues in the range of $265,000,000 to $268,500,000 representing year over year growth of approximately 23% to 25%. We now expect our non GAAP operating income to be in the range of $2,500,000 to $4,500,000 and non GAAP income per diluted share of 0 point 0 $0 to 0 point 0 $5 This assumes a tax provision of $2,700,000 to $3,200,000 32,400,000 diluted shares outstanding. In closing, the demand for our solutions is strong, and we made good progress towards our 2018 goal of delivering solid profit and improving cash flow through operations. We continue to see benefits of our investments in R and D and the customer journey as we increase the attach rates across our customer base, driving lifetime value.
With that, we will be
happy to take questions you have. Operator? Thank you.
We'll now be conducting a question and answer session. We ask you please ask one question and one follow-up and return to the Our first question today is coming from Matt Hedberg from RBC Capital Markets. Your line is now live.
Hey, guys. Thanks for the questions. Yossi, thanks for the color on the West Coast. I'm 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? And 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. So this quarter, the West Coast really didn't meet the overall Voron standards. As you well know, we have a very historical way that we are going to market, and it's just very proven. And we injected a very successful Voron sales leader to help us just fix the overall region. In terms of demand, 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 we can assess on a quarter by quarter basis. And we believe, Mark, that we are well positioned to execute very well in North America in second half of
the year. That's great. And then maybe a quick one for Guy. Since your last guide, can you help us with Jefferies' impact on both revenue and OpEx? I'm curious if you can help both on the quarter, but also your outlook would be helpful.
Sure. Hi, Matt. So, 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, but it didn't have a material impact. It was a headwind of approximately 1% for H2 on the revenue side, but nothing really too material for us.
And then 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 U. S. Dollar. And 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 asked this update tomorrow. But on the West Coast and otherwise, I mean, the numbers look pretty good, guys. It's just a little bit of weakness in the 1 region is fine.
And it's Yaki, I'm going to ask Matt's question again and sorry to hear it. But can you give us any more detail on that just because we know you do have a very methodical go to market strategy. But I mean, people on the West Coast, they're not all new and they know the strategy. So is there 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. So regarding just the overall West Coast, we have you need to be very disciplined. You know how it works. You're doing the POC, then you need to win fee level people and present to do enough POCs and just present the business case in the right way, and we have very high conversion rates. We just need leadership to know how to do it at scale, and this is something that we are fixing.
It is not something factual. We have very good teams. We just need to make sure that we have the high discipline and resource allocation and people doing everything in the right time. Having said that, on a trailing 12 months basis, including this quarter, North America, a 23% growth. We won this quarter more than 200 customers, and we did 100 of transactions.
And we closed several more midsized dealers, and West is we're delivering, we are not having this conversation. And it's a licensed business. This is why we always tell you to take a multi quarter view on the business. In our history, as a public company, we never missed a 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 are we have these POCs. We barely have any competition. So 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.
Really, everything that we are doing in security analytics is working very well. Things like that will happen from time to time. We are addressing it, and we are addressing it with a lot of visibility and a lot of control.
That's great. Thank you. That's helpful. And then, if I could, a follow-up. It sort of dovetails into this and you talked 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 like when this started in earnest? What's the conversions with Dell once you're able to do that? Because I can imagine that becomes very high once you get in to do it. And then maybe even what's the trend in customers engaging at that level saying, yes, we sure, go ahead and do a risk assessment?
This came from Ken Spino, our Head of Field Engineering, but he came to me and said, Yaki, this is not a POC. 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 A2Ts, which is something that is very valuable for the customers. And once you're doing the risk assessment and you can bring the C level people, it's something that you can really present to the board. And these days, it's just it's a high priority across the business.
And we are doing the risk assessment and we are doing the reporting format that the business can understand easily where are the risks against what processes, what data and how to remediate them. And if the things are following this methodology of convincing the customer to do a risk assessment and then delivering the value, we are converting just we are converting a lot of them. It's becoming just a very predictable sales campaign.
Okay. And then does 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.
One question for you, Guy, and then a call for you, Yaffi. 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 percent of 1st year license kind of from existing versus new. But I guess the question is, was there anything significant in your result versus your expectation in either of those categories, new versus existing?
Thanks for taking my 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.
So over time, the license and 1st year maintenance coming from existing customers should continue to go up. But 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. Got it. So I mean, 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 put maybe what was pushed out of that. 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.
So I think over the long term, you will continue to see the trend where the existing customers are increasing their percentage over time and out of total revenue. That's part of our ability to grow and bring down profitability levels to the bottom line. In this specific quarter, we were very happy with the initial commitments made by those new customers.
And you can't it's very hard in Varoni's case to draw a trend in a 90 day window.
No, that's totally fair. And actually, that's maybe just a I think you answered this earlier, Yaki, just one follow-up for you. Just to make sure the question is asked,
can you just talk about the competitive landscape?
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?
No. 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 just 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 and Company. Your line is now live.
Great. I realize the West Coast is going to get beat up on here a little bit.
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? And within the West Coast, is it a matter of the volume of POCs? Is it the volume of sea 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?
When we are looking at the first, when we are looking at the business, remember, everything in Varunty is CO2s. We know what customers are aiming to do upsells and just have the right people in the ground and the right leadership. And we know with these leaders, these are proven leaders that are running the company, relatively well at the close rate to make sure that we have enough senior leadership coverage to get into the deal. We also see the overall North American business. And you need to understand that also, in our business, we see the pipeline, but it's expanding and contracting within 90 days with how they sometimes how to predict it like that.
Overall, 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% and everybody asked me the same questions and instead, we see very good pipeline, we see immaturity in the business. This is something that we definitely see in North America. It's 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 and then we have Ichap in the West and this is it looks like atypical growth for Varonis. But when we are talking about visibility, we're talking about pipeline and coverage. We know the upsell and we know what are the use cases. And we know by individual, who are the individuals within Varonis that are holding this pipeline and how we are going to translate it into revenue. So we have very good visibility and just very good control.
That's all great information, but it doesn't answer the question that was asked, which is what specifically was in the West Coast region that caused you to be off the Veronis Way, whether it's the number of POCs, the volume of fee level meetings, the volume of deal closures, something within the mix didn't do the vertical half of
the quarter? Yes. It was it depends on the individual, but it was everything. It's just the people was running the meetings, the follow-up, the C level presentation, It just was we have a methodology, depends on the sales team, but 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 things.
There's no one we are doing in big market with strong demand, and we can fix it fast. All right. So to
answer the
last question of how you get confidence
that you can close and 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 all in the above, not with any sales team. We know exactly what are the problems. We have we're starting we have a very good pipeline profile. The right people are involved in the deals. And we are doing this for a very long time.
And 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. And 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 see 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. So 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 sustained throughout 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, and we've made a lot of investments in the federal market and with the federal team. But we still don't have enough history to predict and see how that closing takes place. So that's part of the reason for Q3 guidance And we do feel very good about the pipeline for the second half of the year and that the West will be improving.
Okay. So just to clarify, so embedded in the guidance is an assumption that the West Coast improves?
Correct. But overall, we have very good pipeline across all the North America all the North American region. We just this is a 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 we just a bit careful.
Okay. That makes sense. And then on the customer the new customer adds down year over year, I'm making some helpful color on the concentration on new customers and initial deal sizes are going up. But at some point, does that metric start to stabilize and you'll start to see growth in new customer
customers adds in the 1,000 plus in the market that we want to play in. So we feel very comfortable with the way we are penetrating the market and the customer sizes. We are doing business with the customers that want to do business with very strong lifetime value and customers that provide both volume but also very good productivity for our sales force. And also, this is the right customer count that the sellers can focus for upsell. So overall, in terms of the way that we penetrate our new customers, we are very happy.
Thank you.
Our next question is coming from Gerozo Lopez from Stifel. Your line is now live.
Great. Thanks for taking my question.
So 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 'sixteen or Russia some years ago. So I guess the question is, you going to run the same kind of what you ran when you saw weakness in those regions? And do you feel confident just sort of the same bounce back that you saw? And I know you keep saying don't focus on 1 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 geospecific adversity.
Yes, without a doubt. But 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, the overall North America, we just still have a lot of underlying strength within North America. So 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 adopt.
Makes sense. And then you just talked about the U. S. Fed opportunity and maybe being optimistic and 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 food opportunity? Are there specific programs you feel you can play against, whether it's CGM or something else of the sort? And why perhaps feel cautiously optimistic here about the opportunity as you push into Q3?
We see we just see the discussions we have with customers. We see what is going for budget approval. And also, there's just a tremendous need in this market. We invested a lot. We have very good team.
And we believe that it can be just an impressive business for us. And this is just think about the problems that we are solving for management. We did everything right. We invested in the right things, we invested in the right programs, in the certification, just big investment from Varonis. And now it's the time to get it done.
Thank you. Our next question is coming from Greg MacDowell 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, 2 quarters in a row with GDPR coming into effect May 25. 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. And once you go through this exercise, you always land on loans. It's just very easy to justify a loan purchase, not to be in compliance with GDPR to really solve the problem. So it's something that is helping us.
And so we just see good demand across the board.
And then 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 sort of 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 products that customers are using and seeing value and also a great indication of our support team and the renewal team that are working on those renewals and direct with the customers. And 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.
Okay. Thanks.
Thank you. Our next question is coming from Chad Bennett from Craig Hallum. Your line is now live.
Great. Thanks for taking my questions. So I guess just kind of high level, you guys talked about not looking at the 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 3 quarters ago to what, based on your guide, to 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're always guiding in a responsible way. We want to set growth goals that we can execute well against. We just definitely see a clear opportunity to be a $1,000,000,000 business in revenue. But this is a different company. We invented this market, 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. So we are balancing everything between growth, profitability, investing back in the business, the ability to invest in the people that we hire. So and 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.
And then real quick follow-up for me. Just to belabor the West Coast stuff, but was there any change in the North America sales force or boat market entering the new fiscal year, whether it's around cross sell, up sell or new adds or focused on higher end 1,000 plus employee businesses. Kind of were any of those changes disruptive, I guess, in your opinion, for the quarter? No.
I think that it's 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. And as I said before, we bought 227 customers with several 100 transactions. If we close several mid sized deals, we wouldn't have this conversation.
So this is why we always seem to have a multi quarter view because sometimes things like that can happen. And 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 a durable, consistent growth. On a quarter by quarter basis to try and analyze these asset, it just doesn't make any sense.
Understood. Thanks for taking my questions.
Thank you. Thank you. Our next question is coming from Ricky Gilera from D. A. Davidson.
Your line is now live.
Hey, guys. Thanks for taking my questions. First, Jack, let me start again on the West Coast issues. I mean, 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 the issue?
Or is it purely leadership? And then I have a follow-up for that.
It's mainly leadership.
Okay. Got it. And Guy, I mean, you talked about getting larger initial lands as part of the land and expand strategy. I mean is that driven by greater initial fees in the adoption phase or that 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. And as you remember, about 2, 2.5 years ago, we started focusing on larger customers. So 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, but also those customers seeing 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. And when they see that, we have over 20 licenses to help, and those customers just want to buy more.
Thank you. Our next question is coming from Mark Schackal from Benchmark Company. Your line is now live. Hi. Thank you for taking my question.
Most of the questions have actually been answered, but just one here, Yaki, for you. In the past, you've noted and talked about how you're beginning to have some conversations with customers around the enterprise license agreements or ELAs. And I was wondering if, granted you haven't signed any yet, I understand that. So I was wondering if these decisions and thought processes or customers are still ongoing.
They are ongoing, but it's still not just common practice in Varonis, and we are not closing GLA.
We've reached the end of our question. I just want to turn the floor back over to management for any further or closing comments.
Before we end the call, I would like to thank to all of our employees for their hard work and contribution to our success in this past quarter. We also like to thank to all our customers and partners for their continued support. Thank you for joining us today, and 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, and have a wonderful day. We thank you for your participation today.