Good day and welcome to the Varonis Systems Incorporated third quarter 2014 conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Staci Mortenson, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' third quarter 2014 financial results. With me on the call today are Yaki Faitelson, Chief Executive officer and Gili Iohan, Chief Financial Officer. After preliminary remarks, we will open up the call to a question-and-answer session. During this call, we may make statements related to our business that would be considered forward-looking statements under federal securities laws including projections of future operating results for our fourth quarter and fiscal year ending December 31, 2014. Actual results may differ materially from those set forth in such statements. Important factors such risks associated with anticipated growth in our addressable market; competitive factors including increased sales cycle time, changes in the competitive environment, pricing changes and increased competition; the risk that we may not able to attract or retain employees including engineers and sales personnel; our ability to build and expand our direct sales efforts and reseller distribution channels; general economic and industry conditions including expenditure trends for data governance and data security software; new product introductions and Varonis' ability to develop and deliver innovative products; risks associated with international operations; Varonis' ability to provide high quality service and support offerings; and macroeconomic conditions could cause actual results to differ materially from those contained in forward-looking statements. These factors are addressed in the earnings press release that we issued today under the section captioned forward-looking statements and these and other important risks are described more fully in our reports filed with the Securities and Exchange Commission. We encourage all investors to read our SEC filings. These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date. Varonis expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made herein. Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation for the most directly comparable GAAP financial measures is also available in our third quarter 2014 earnings press release, which can be found at www.varonis.com in the Investor Relations section. Also please note that a webcast of today's call will be available on our website in the Investor Relations section. With that, I'd like to turn the call over to our Chief Executive Officer, Yaki Faitelson. Yaki?

Thanks, Stacy, and good afternoon, everyone. This was a strong quarter for Varonis with total revenues increasing 38% year-over-year to $25.6 million and exceeding the high-end of our prior guidance. We continue to execute well against our stated strategy of driving meaningful level of revenue growth, leveraging our go-to-market investments, expanding our product offerings, and increasing the use cases for our solutions. With the increasing number of data breaches, we are also benefiting from C-level imperative to better manage and protect data. Gili will walk you through the financial details in a moment, but I wanted to provide you with additional business highlights that illustrate the success we are having in driving strong license growth and increasing market demand. It is becoming increasingly clear that the explosion of human-generated data presents both opportunity and risk to organizations. Companies need to keep pace with the data to manage accessing tight demand efficiently and effectively or with access to every file and email, identify and work data, and find and classify sensitive and business critical data. But organizations can't afford to sacrifice efficiency and productivity for security and compliance and with Varonis, they don't have to. Our customers are realizing that it doesn't cost more to have the right people making decisions about data, in fact it costs less and reduces risk and employees are more productive. They can get access to what they need more quickly, [Indiscernible] with little value to organizations, and creates unnecessary risk by identifying and allocating data that is stale and unused. Organizations reduce storage costs, make it easier for their employees to find the data they really need, and reduce the amount of information that can fall into the wrong hands. These are just some examples of how Varonis can reduce risk, save money, and drastically…

Thank you, Yaki. Our third quarter results came in above expectations and we continued to see strong momentum in demand in the marketplace. Total revenue increased 38% to $25.6 million. Growth was very balanced driven by new customer wins, the success we have seen with our land-and-expand strategy, and consistently high maintenance renewal rates at over 90%. License revenue was $14.2 million. This represents a 39% increase from the third quarter of 2013. Our maintenance and services revenues were $11.3 million increasing 37% compared to the third quarter of 2013. Looking at the business geographically, we saw broad-based growth. US revenues increased 42% to $15.1 million or 59% of total revenue, EMEA increased 33% to $8.5 million or 33% of total revenue, and rest of world increased 32% to $1.9 million or 8% of total revenue. For the third quarter, existing customer license and first year maintenance revenue contribution increased to 36% versus 35% in the third quarter of 2013 and it is at 36% year-to-date versus 32% in the same period last year. Our land-and-expand model is delivering results and we will continue making investments to broaden our relationship with existing customers as well as increase new customers addition. Before moving on to the profit and loss items, I would like to point out that we'll be discussing non-GAAP results going forward unless otherwise stated, which for the third quarter of 2014 excludes a total of $1.2 million in stock-based compensation expense. Please note that the detailed GAAP to non-GAAP reconciliation can be found in the tables of our press release, which is available on our website. Gross profit for the third quarter was $23 million representing a gross margin of 90.1% compared to a 91.1% gross margin in the third quarter of 2013. This was in line with…

Thank you. [Operator Instructions] And our first question will come from Raimo Lenschow with Barclays. Go ahead, sir. Your line is open. Raimo Lenschow – Barclays Capital: Thank you. Thank you for taking my question. So can I first start with a question, Yaki, for the environment. Obviously like we see all the security breaches that are happening at the moment as a greater focus. Can you talk a little bit about how that's impacting you in the revenue number, but also in terms of pipeline generation? That would be my first one.

Overall we see that the breaches make data security a C-level imperative in just management and Boards of these many companies in many industries. It's an information economy and in order to conduct business, you want to be protected and no one wants to end up with a big story in the media so it's definitely driving awareness. But overall, there is just a lot of [onus] for the platform. The data is growing, you need to protect it and you need to manage it and you need to extract value from it. So in terms of the use cases so security is one of them and everything that's related to Big Data and productivity is another one so everything that's related to risk reduction in quantifiable away and increasing productivity and cost reduction works very well. So, all the use cases and all the holistic value the platform provides works very well and customers are very receptive for everything. Raimo Lenschow – Barclays Capital: Okay, perfect. And then the next question I had is like if you look at the newer modules like DatAnywhere et cetera, can you kind of help us a little bit understand how the rollout is going and how the customer acceptance is going there? What are kind of the areas that you're most happy about?

DatAnywhere is one of the only products that can take terabytes of data and instantly create a secure private cloud out of it. And with the explosion of mobile devices and remote workforce, this data is really not going anywhere. The customer need to be able to access it and be productive. So, we are hitting a critical mass with DatAnywhere and customers are really starting to use it in a big way. And we also have positive feedback from our customer base and we are generating more functionality that makes it more usable, more secure, and easy to configure and install. Raimo Lenschow – Barclays Capital: Okay, perfect. And then Gili, one question for you. You're obviously kind of in the budgeting phase for now if you think about 2015 and obviously you also kind of noticed that the market is kind of looking at growth versus kind of profitability slightly differently than six, nine months ago. Where are you coming out if you look at -- like I don't want guidance from you for 2015, that's not coming yet. But as you go through that process, I mean what are the puts and takes that you're considering at the moment here?

As you said, we're not going to comment on 2015 right now, but we do see that we have a lot of earning power in our model. We have very high gross margin and we continue to see productivity improvements across our sales force. And if you look at our tenured sales people, the renewals, the upsales; these are all very high margin revenues with strong earning power. We ran the Company at close to breakeven and generated positive cash flow from operations for several years so we know how to run the Company in a profitable way. But we do plan to continue our investment strategy and invest the revenue outperformance back into the business. We see that the investments pay off. We see that we are benefiting from the investments that we've been making in sales and marketing and R&D and our goal is to be profitable at a greater scale. So right now, we are focusing on making the necessary upfront investment for future sustainable growth. Raimo Lenschow – Barclays Capital: Perfect. Thank you. Well done.

[Operator Instructions] Up next, we’ll take Keith Weiss with Morgan Stanley. Keith Weiss – Morgan Stanley: Very nice quarter. You guys have been sustaining high 30%s license revenue growth rate really consistently, it's almost going on like two years now. Can you talk a little bit about sales productivity and sort of how you guys are ramping, sort of where you guys are seeing the new opportunities to be able to sustain this well for this long in terms of that high 30%s growth?

I'm not going to talk about to put a percentage around it. But what I will say is that in mid-2012 we started to invest much more aggressively in sales capacity and the sales teams that are here for two years are extremely productive and gaining productivity. And relative to the tenure of the new sales people, they are productive and even though we are slicing and dicing and injecting a lot of sales capacity into the marketplace, but there is a tremendous market opportunity. Almost every customer in the world is a potential Varonis customer for most of our products. So, what we are doing here is just building a company that is in order of magnitude bigger than what we have now. As Gili said, we have a lot of earning power in our models. And in all the markets that we have a presence, after all we are doing the right things of building the pipeline, doing the evaluation, recruiting the right channel partners. We see a constant increase in productivity and once we get a critical mass of customers, we just buy them. The land-and-expand is working very well. So, what you can expect from us is just a doable consistent goal for many years and its scale is going to translate to very strong earnings. Keith Weiss – Morgan Stanley: Got it. And then if we look at the investments that you guys are making this year, which again I'm assuming sort of will yield dividends on a go-forward basis into next year and beyond. But year-to-date you guys have been growing sales and marketing pretty aggressively, the most recent quarter almost 60%. Is it just expanding capacity in the current programs that you have going forward or is there sort of new programs, new initiatives that you guys are putting out there with this additional investment in new geographies? Can you just give us a little bit of color of where this increased growth in investment is being pointed towards?

It's all of that. So we put more investment on the channels, strong investment on inside sales, very strong investment on marketing, and investment in new markets so it's everything. So, it's primarily sales capacity. We need feet on the street in order to sell our products, but the whole ecosystem to make sure that the reps can be more productive and we can capture the market opportunity in front of us in the most efficient way. Keith Weiss – Morgan Stanley: Got it. And then one more question for me just in terms of US growth versus international growth. You guys actually have seen US growth in the most recent quarter outpacing international growth. Maybe you can help us explain that in terms of is that a macroeconomic factor or just that the market is just much more healthy in the US or is it just a maturation factor that people are sort of more clued into your solution and the evangelical sale is heavier in international markets that it is in the US? Can you help us understand why kind of going against the law of large numbers that the US continues to outgrow international regions?

So, 33% growth in Europe we believe that it's very strong growth and it's still relatively small number so several deals on a percentage basis can take it here or there. So we are very happy with the European business and outside of Europe in international markets, it's still early stages for us and as I said in prior calls, it usually takes two years to establish something that can be consistent. Regarding the rule of large numbers, what happened with [Indiscernible] with the land-and-expand and the capacity many times once a market is established for us, it's even easier for us to grow faster because the base is buying more, the channel partners are starting to create good margins and they are pushing more the products. So, we feel very comfortable with the performance in all the market. Keith Weiss – Morgan Stanley: Very nice quarter, guys. Thank you.

[Operator Instructions] We’ll go next to Matt Hedberg with RBC Capital Markets. Matt Hedberg – RBC Capital Markets: Yes. Thanks for taking my questions, guys. It sounds like you're having a lot of success on upsells here. Now I believe you ended last year with I think it was 39% of customers who purchased more than one product and maybe you won't update that until year end. But I'm wondering if you could sort of quantitatively give us a sense for the level of upsell within the base?

We measure the upsells with two parameters. First is the one that we mentioned in the script, the revenue from license and first year maintenance from our existing customer base grew from 35% in Q3 last year to 36% in Q3 this year and year-to-date it grew from 32% last year to 36% this year. At the end of Q3, the percentage of customers that have purchased two or more products increased to 41%, it's up from 38% at the end of Q3 last year so you can see from that that our land-and-expand strategy is working very well for us. Matt Hedberg – RBC Capital Markets: That's helpful, Gili. And then when looking DatAnswers, I know it's still early. It sounds like it's going to go into GA here in the back half this year, but I'm wondering if you could give us some early or updated beta feedback there and perhaps what the competitive landscape looks like for that product?

So regarding DatAnswers, search is the most basic aspect in extracting value from human-generated data. You need to find the data that you need and there is also a lot of intellectual capital continuity to make sure that people do not create the same data over and over, but you need to give it in the [right] economics so it needs to scale well and also it needs to be secure. If you will get data that you shouldn't get, it's a big problem. So from the beta, we just see that the value proposition is working as advertised and customers are very receptive to the products. It works very well and very complementary to the other products on top of the Metadata Framework and also it's a very good product for us. We have this productivity segment, business productivity with DatAnswers and DatAnywhere that works very well for us. And funny enough, search is an established markets but most of our customers don't have search for their file system because just with the current technologies, they don't time to work on flex files. So in most organizations that we installed the product, they don't have any search engine, but they thought about search before and to realize value, it's something that is very basic. I'm sure that you went today to Google 20 times, it's the same for them. To give them a Google product for the file shares at the right cost without compromising data security. So, so far so good, but as you said; it's going to GA now and usually takes us a good year before we see material revenue contribution from a new product. Matt Hedberg – RBC Capital Markets: Got it. That's helpful. It sounds like you had a good new customers add quarter, I was wondering if you had any $1 million plus deals?

We didn't have any very large deals. Q3 was strong on many levels, no concentration, it was very balanced and healthy. We had meaningfully increase in new customers and we also saw increasing contribution from the base. Overall, it was very strong and balanced. Matt Hedberg – RBC Capital Markets: That's great. And then maybe if I could squeeze one last in for Yaki. You mentioned version 6 of you Metadata Framework is going to rolling out here and obviously your different applications sit on top of that. Is there anything unique to the platform with this version that you could call out for us?

Yes, there are many. So, one thing is the visibility for permission on objects in Active Directory. So as you know, Active Directory is one of the most important assets for every organization what we sell with our customers. Now, we sell many regulation and compliance requirements. One of the first things that people want to protect is your Active Directory. So, visualizing who can access the object on Active Directory is huge for a customer. This is one aspect. The other aspect is we find a lot of success with DatAlert so the ability to alert on any abnormal behavior and we are doing this based on thresholds. And another thing is that DatAnswers is becoming GA and we're also building API for DatAnswers because we see that customers want to extract value from DatAnswers in many different ways and one of them is just writing applications that can use content, they want that BI tools will use DatAnswers and sometimes e-discovery. So what we are doing is really making sure that they extract value in a secure way in any way that they want. So, what we are starting to see both in DatAnswers and in DatAnywhere is that people are using the APIs to start an [IT] application. Matt Hedberg – RBC Capital Markets: Great. Thanks, Yaki.

And up next we’ll take Scott Zeller with Needham. Scott Zeller – Needham & Company: Could you tell us about where you're investing in the sales and marketing organization? We heard that you're aggressively hiring, but where geographically are you investing?

A lot in North America and in Europe, we are doing a lot behind the good momentum that we have. We're also investing in the US federal market, we believe that it's just a big market for us and also in Asia-Pac. But in terms of number not percentage, in terms of total number and total dollars, multiple dollars are going to North America and to Europe. Scott Zeller – Needham & Company: And can you talk broadly about trends in ASPs? You mentioned that land-and-expand is working well, just directionally how ASPs are behaving?

We are not disclosing the ASP on a quarterly basis. We will update this metric on an annual basis, but we can say that the ASP this quarter was within the range of our expectation. We do believe that providing it on an annual basis is a better representation of the overall trend line because there can be some fluctuation quarter-to-quarter due to seasonality and large deals. But we continue to see strong adoption across new customers and also upsell sometimes are even larger than initial because we work with the customers on additional use cases. Scott Zeller – Needham & Company: Thank you.

And we’ll take Michael Kim with Imperial Capital. Go ahead, sir. Your line is open. Michael Kim – Imperial Capital, LLC: Hi. Good afternoon, guys. Regarding the new customer adds, are you seeing an increasing contribution from the Global 2000 and can you comment briefly on what you're seeing in terms of pipeline for large deal activity? I think you mentioned in 3Q it was more diversified, but curious if you're starting to see some of the larger enterprises take on larger deals.

It depends. This quarter we didn't have any very large deal more than $1 million, but we see we have good adoption and good penetration from Global 2000. But the bulk of our business coming from organization between 500 to 5,000 users, but everybody can be a potential customer and sometimes we have a full enterprise license with a large customer and sometimes a division of large customers are buying. But overall we see very strong adoption in Global 2000, sometimes in piecemeal more than they have been doing full-blown deals and then throughout the year as they're covering all the infrastructure. Michael Kim – Imperial Capital, LLC: Great. And then regarding the cross sell or increased momentum there and the expansion in the multi-percentage, multi-product customers; where are you seeing the most frequent adoption or what's the strongest opportunities that you're seeing for cross-selling?

It's all of our products. If you have unstructured data; you want to protect it, you want to be able to access it easily from anywhere in any device, and you want to find the data that you need, and then you also need to make sure that it's stored in the right places. Each one of our customers, they have the same problems. They have different adoption curves. Some buying one license and two, three years after they're starting to buy more; some like the Swiss bank that I just talked early in the conversation came a quarter later and bought many more products. But overall, we just see that it's just an acquisition play. If you have one of our products, you will not buy all of them, but there is good chances that with time you will buy most of them. Michael Kim – Imperial Capital, LLC: Great. Thank you very much.

[Operator Instructions] We’ll take our next question from Greg McDowell with JMP Securities. Rishi Jaluria – JMP Securities: This is Rishi Jaluria dialing in for Greg McDowell. Congratulations on a good quarter. First in terms of your new customers, you mentioned 223 in the quarter. In terms of the actual sales process, are you typically going through and convincing customers of the need for products to analyze unstructured data and then you're selling unopposed or are you actually running into any competition? And then second in terms of the 41% of customers you mentioned purchasing two or more products and upselling to those existing customers. Is it typically the second product is DatAdvantage for a new platform [Indiscernible] Windows and move to SharePoint or are they expanding to some of your other products out there like DataPrivilege and DTE? Thank you.

So regarding the first question, relatively three years ago more customers were coming to us, we're starting to see more RFPs in human-generated data for protection, for productivity, and just cost reduction initiative or becoming to C-level objectives. But many times we are coming in and we show a demo of the product and we are doing evaluations. Once we evaluate our products, we are selling it based on ROI and we show you how much you are exposed and how you are going to reduce risk in this quantifiable way by automating tasks that you're already doing today, making sure that you can find and access the data from anywhere, and you can also migrate the data and archive it to the right places. So, we see more initiatives. In terms of competition on a percentage basis of the total evaluations that we are doing, I can say at this stage we see less competition. It's just something that is very hard to do. We're almost 10 years into it. We started it when the data volumes were very small and we built the right architecture and we're a moving target. We are just there, it is moving at 100 miles an hour and it's an iterative process. And each one of the 223 customers who bought in the third quarter are going to make us just so much better. So at this point, we don't see competition and it's a very hard gating factor, but it's very hard to compete with Varonis. And regarding the second sale, it can be any one of our products honestly, it just can be any one of them. So usually they start with one of the DataAdvantage products and then they buy one of the other products; it can be DTE, it can be DCS, it can be DatAnywhere. Just as I said, it depends on the personal need that they have; it's to classify data and how to share this data, to access data from anywhere and any device, or just self service. There are many initiatives for self service in organization and it's working also very well, self service is bring your own device. So, you see many times DataPrivilege together with DatAnywhere so it can be each one of our products because we're just embracing so many projects for the enterprise. Rishi Jaluria – JMP Securities: Okay, great. Thanks, Yaki.

Thank you. And it appears there are no further questions at this time. I'd like to turn the conference back to you for any additional or closing remarks.

Before we end the call, I would like to thank all of our employees for their contribution to our success this quarter and all of our customers for their continuing support. Thank you for joining us today and we look forward to speaking to you again soon. Thank you.

This does conclude today's conference. Thank you for your participation. You may now disconnect.