Expect Beat & Flow-Thru on SaaS ARR Ex-Conversions; We Like Setup as FY27 ARR Could Accelerate

研报英文原文证据摘录

Expect Beat & Flow-Thru on SaaS ARR Ex-Conversions; We Like Setup as FY27 ARR Could Accelerate

Barclays | Varonis Systems, Inc.

in conversion ARR last quarter so we wouldn't be surprised to see a similar level if not slightly

more conversions in 2Q as we move through the year. More importantly, our estimate

assumes SaaS NNARR ex-conversions is flat y/y at ~$29M, which is likely conservative since

SaaS NNARR ex-conversions grew ~30% y/y in 1Q on healthy demand in data security, a

broader platform to sell this year, and more incentives for sales reps to focus on new logos

and cross-sell/upsell (versus conversions in years prior), all of which we expect to drive

healthy growth in SaaS NNARR again in 2Q. Our checks sounded healthy as data security is

becoming more of a priority and VRNS now has a larger platform to sell with the recent Cyral,

SlashNext, and AllTrue acquisitions.

•• We expect the FY26 guide for SaaS ARR ex-conversions to flow through the 2Q beat and

FY26 conversion ARR to remain unchanged, similar to last quarter. Looking out to the rest

of the year, we expect VRNS to take a similar approach to last quarter when it comes to the

FY26 SaaS ARR guide by flowing through the 2Q beat on SaaS NNARR excluding conversions

while reiterating the FY26 conversion ARR guide. Zooming in, we expect VRNS to reiterate the

$50-75M in conversion ARR expected for FY26 since it's still early in the year and we expect 4Q

to be the biggest conversion quarter since more of the renewals are up in 4Q, and 3Q will

likely be impacted by higher churn in the US federal and state government vertical. That said,

we think it could flow through the 2Q beat on SaaS NNARR ex-conversions to the FY26 guide,

which would take up the guide for FY26 SaaS ARR excluding conversions (which recall