Thank you, operator. Good afternoon. Thank you for joining us today to review Varonis' second quarter financial results. With me on the call today are Yakov Faitelson, Chief Executive Officer; and Guy Melamed, Chief Financial Officer and Chief Operating Officer of Varonis. After preliminary remarks, we will open 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 third quarter and full year ending December 31, 2025. Due to a number of factors, actual results may differ materially from those set forth in such statements. These factors are set forth 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 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 to the most directly comparable GAAP financial measures is also available in our second quarter 2025 earnings press release and our investor presentation which can be found at varonis.com in the Investor Relations section. Lastly, please note that our webcast of today's call is available on our website in the Investor Relations section. With that, I'd like to turn the call over to our Chief Executive Officer, Yakov Faitelson. Yaki?

Thanks, Tim, and good afternoon, everyone. We appreciate you joining us to review our second quarter results and the progress of our SaaS transition. Our Q2 performance reflects our continued strong ARR growth and cash flow generation as we accelerate towards the completion of our SaaS transitions and make investments to capture our growing market opportunity. Today, I want to remind you of what sets Varonis apart as the leader in data security. In today's ever-changing environment, one thing remains constant. Data will continue to be created and shared, and usage of AI has only accelerated this trend. At the same time, attackers do not break in; they log in, and they need to secure data, and the challenges involved are greater than ever. Varonis takes a data-first approach and helps companies locate their sensitive data, visualize who has access to it, automatically lock it down, and then automatically detect and respond to threats on it. Performing only one or two of these tasks is insufficient to protect data, and what sets Varonis apart is our ability to successfully do all three of these tasks on data everywhere. In the second quarter, this approach contributed to an ARR growth of 19% to $693.2 million as we advance toward completing our SaaS transition. With SaaS ARR now representing about 69% of total ARR. Year-to-date, we generated $82.7 million of free cash flow, up from $67.3 million at the same point last year. Gary will review our results and our updated guidance in more detail shortly. We continue to experience strong demand for our SaaS platform for both new and existing customers, primarily due to the superior experience that Varonis SaaS and MDDR offers by enabling automatic data security with minimal effort. Additionally, I'm also proud to announce that we achieved the FedRAMP Authorization, enabling us to offer our entire SaaS platform to the federal sector. Demand from both new and existing customers looking to protect cloud environments with Varonis continues to positively inflect and is becoming a material contributor to our business. This is driven by the investments we have made in our platform to expand our use cases, going wider and deeper and entering new markets, including DSPM, our ability to protect cloud data represents a significant untapped growth opportunity for us, and transitioning our customers to our SaaS delivery model is helping us unlock this market's potential. The data security market is rapidly expanding because of many factors, including AI usage, the proliferation of data, and evolving compliance. As a result, data security markets, like DSPM, are receiving new investments and focus, which is creating more budgeted line items and increasing our opportunity. Looking at the DSPM market, others we see usually focused on discovery and classification in cloud databases because it has the lowest barrier to entry and they don't address more challenging problems, like securing the data by automatically fixing risks and detecting threats or scaling to analyze large unstructured data sets. With that as a backdrop, it's important to note that seeing a problem does not solve a problem. Discovery and classification may find sensitive data, but they do not secure it. This generates potential exposure without providing a solution. Varonis has made significant investments to expand our coverage wider to both find and secure the data everywhere it lives, by providing more complete and up-to-date visibility than typical DSPM technologies. As a result, customers are consolidating their data security budgets with Varonis. I would like to dive deeper into why we win in competitive deals within the DSPM space. Our edge lies in the breadth and depth of our platform, following a three-step approach for find, fix, alert. All three critical components are needed to secure data, while DSPM point tools focus on discovering sensitive data; Varonis is the only data security vendor that does more, not just finding sensitive data but also finding where it is unprotected, fixing the risks by locking down sensitive data automatically and continuously monitoring and alerting on unusual data activity. I will talk about the first step, find. Varonis not only discovers and classifies all of our customers' data, but also marks all the controls that lock it down, analyzing permissions, identities, entitlements, masking, and labeling, which creates a complete point inventory of choice. We know exactly where sensitive data lives, how it is exposed, who has access, and how that access was granted. We also watch data usage, tracking every time a user accesses, modifies, or deletes data. To use a simple example, Varonis watches in the bank vault, compiling an inventory of everything inside, every person that can access the vault, including everything they touch and can access inside, while logging all activity in and around the vault. And all this happens without impacting the customer's experience. Now I will talk about step 2, fix. The holy grail of security is ensuring identities have access to the right data, and this is very hard to do because you need all the right ingredients which we provide. Varonis understands how data is being used and where it is unnecessarily exposed because we watch all data activity and connect identities to data. Our policies developed through extensive experience with thousands of large customers are designed to intelligently and automatically mitigate risks such as access to data that identities should not have or no longer need. To continue the example, because Varonis knows who can access the vault, what the role is, and what they regularly access, we can remove unneeded access like stale access from a former intern that works at a competitor or a bank employee that has moved to another branch but still has the keys to the vault. Finally, let's talk about step 3, which is alert. Since Varonis sees every touch of data, we can baseline user behavior and detect threats or abnormal behavior in real time. Because we watch data directly, we generate alerts with very little delay. This enables our MDDR team, which is powered by AI, to efficiently watch customer data and investigate, validate, and prevent breaches with a 30-minute SLA on ransomware and without customer effort. To wrap up our example, Varonis watches the vault and can sound an alarm when a receptionist tries to access it after hours or when a bank manager starts going in and out of the vault more often than normal and with more cash. I would like to contrast our approach to what we see from DSPM providers. Starting with step 1, the first key difference is that most DSPM providers schedule scans and use sampling as opposed to viewing all the data to discover and classify sensitive data because they cannot do it any other way. They do not track data activity so they don't know when data is added or changed. So their information is immediately stale, and they lack the scalability to view everything. Sampling allows them to scan quickly, but this also means that a significant amount of potentially exposed data is never found, and they cannot deliver a full picture of risk or compliance. And because the scans are scheduled, their picture is always out of date. As a result of these shortcomings, they try to avoid risk assessment. Would you be willing to store your money at a bank that does not have security cameras and tries to protect it using a lease that only includes 10% of its inventory and is only reviewed on Friday at 5:00 p.m.? Moving to step 2, because DSPM providers don't map or track access to sensitive data, there is no viable safe way to fix risks that they find. As a result, these providers just generate service tickets, leaving overall security teams to manually address them. We hear from prospects that this approach leads to time-consuming busy work and often, followed by a data breach. Finishing with step 3, DSPM point tools cannot detect threats or perform any meaningful forensics in the event of a suspect or actual breach because they don't track data usage. There is no activity monitoring and no user behavior analytics. Going back to our example using DSPM point tools is like trying to understand how a bank was robbed and what was taken with no security cameras or footage, no record of who had access to the vault, and an outdated and incomplete record of what was in the vault. To wrap up, DSPM tools focus on discovery and classification mostly in the cloud. They are compliance mandates and not security solutions. Varonis not only discovers and classifies data but also intelligently and automatically locks it down everywhere and watches it for threats. Our approach results in vastly reduced risk and a much lower likelihood for a data breach compared to alternatives. Customers understand that our ability to showcase these outcomes automatically at scale is why we are winning. Another key driver of our recent success has been the secular trend of AI usage. This quarter, we expanded our coverage to protect OpenAI ChatGPT enterprise. We are also excited to announce an update to our strategic partnership with Microsoft. This update is focused on joint feature development, which builds on our existing innovations to help organizations adapt Microsoft Copilot security. While deepening our integration with them together, we are addressing one of the most critical challenges, which is ensuring AI tools and LLM do not expose data. By aligning our engineering efforts, we are accelerating our ability to drive secure AI adoption at scale. With that, I would like to briefly discuss a couple of key customer wins from Q2. The first one I would like to talk about is a large healthcare organization of over 20,000 employees that was concerned about their ability to respond to ransomware and comply with SEC disclosure requirements for their AWS environment. They were evaluating Varonis against the DSPM point tools, and it became clear that only Varonis would meet their success criteria, our ability to cover petabyte-scale cloud environments and provide customers with the tools to avoid breaches and find without effort, where capabilities this point solution could not match. In contrast, the DSPM tools scanned a small sample of data that quickly became stale and could not provide any meaningful outcomes as a result. This decision was an easy one to choose Varonis. We again saw strong demand from existing customers looking to convert to our SaaS platform. One example was a defense contractor with over 25,000 employees. Their new CISO, who was undergoing a digital transformation project, needed to modernize the data security strategy. Their CISO stated the future of cybersecurity is data security and was quickly on board with Varonis SaaS, understanding the need for automated protection. This is also a key example of our Microsoft better-together partnership since they will use Varonis to automate their Purview labeling program and automatically reduce exposed data and proactively stop threats. They purchased Varonis SaaS with MDDR for hybrid environments, Copilot, and Azure. In summary, we are excited by the many tailwinds we are seeing in our business. The simplicity and automated outcomes of our SaaS platform, the adoption of AI, and growing awareness of data-centric cloud security are driving increased momentum in our business. We remain focused on executing on this tailwind as we capture our massive and growing market opportunity. With that, let me turn the call over to Guy.

Thanks, Yaki. Good afternoon, everyone. Thank you for joining us today. Our second quarter performance represents a continuation of our solid start to the year. We again saw strong ARR growth and free cash flow generation as well as continued progress towards the completion of our SaaS transition. This performance allows us to raise our full-year ARR guidance while we also continue to keep an eye on the uncertain macro backdrop. We remain confident in our outlook because of the underlying drivers of our business and are well-positioned to execute on the growing need to secure data everywhere. We continue to see broad-based strength from new and existing customers looking for Varonis to secure this data. The simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customers looking to secure Copilot, continue to be key drivers. As a result of this momentum, we ended Q2 with 69% of total company ARR coming from SaaS or approximately $475 million. This represents an 8-point increase in our SaaS mix from the 61% we reported in Q1. We continue to see SaaS NRR trends at very healthy levels, which is being driven by our customers coming back and buying protection for additional cloud platforms. Once we complete the SaaS transition, we can allocate even more focus on this upselling motion. We believe that this additional time spent on upselling existing customers, combined with a healthy new customer momentum that we are continuing to see, will allow us to drive towards our goal of growing ARR more than 20%. Furthermore, we are prudently and thoughtfully increasing investments in our business because of the growing demand for our solution, and we see a clear path to drive durable growth post transition. In the second quarter, ARR was $693.2 million, increasing 19% year-over-year. And year-to-date, we generated $82.7 million of free cash flow, up from $67.3 million in the same period last year. In the second quarter, total revenues were $152.2 million, up 17% year-over-year. During the quarter, as compared to the same quarter last year, we had approximately a 7% headwind to our year-over-year revenue growth rate as a result of having increased SaaS sales in our booking mix, which are recognized ratably versus the upfront recognition of our on-prem subscription products. SaaS revenues were $105.9 million. Term license subscription revenues were $32.4 million, and maintenance and services revenues were $13.9 million, as our renewal rates were again over 90%. As we are getting closer to the completion of our SaaS transition, we expect the positive trend of maintenance and services revenues to continue to decline. Moving down the income statement, I'll be discussing non-GAAP results going forward. Gross profit for the second quarter was $122.6 million, representing a gross margin of 80.6% compared to 84.1% in the second quarter of 2024. Our gross margin continues to track ahead of our expectations, and we feel very confident in our long-term targets set at our Investor Day. Operating expenses in the second quarter totaled $124.5 million. As a result, second quarter operating loss was negative $1.9 million, or an operating margin of negative 1.2%. This compares to an operating income of $2.1 million, or an operating margin of 1.6% in the same period last year. During the quarter, as compared to the same quarter last year, we had approximately a 6% headwind to our operating margin as a result of having increased SaaS sales in our booking mix, which are recognized fully ratably versus the upfront recognition of our on-prem subscription products. Second quarter ARR contribution margin was 16.5%, up from 14.9% last year. The significant leverage improvement reflects our ability to drive strong incremental margins while growing ARR, transitioning to SaaS, and investing in our business to capture our growing market opportunity. During the quarter, we had financial income of approximately $10 million, driven primarily by interest income on our cash deposits and investments in marketable securities. Net income for the second quarter of 2025 was $3.8 million or net income of $0.03 per diluted share compared to a net income of $6.8 million or net income of $0.05 per diluted share for the second quarter of 2024. This is based on 135.2 million diluted shares outstanding and 128 million diluted shares outstanding for Q2 2025 and Q2 2024, respectively. As of June 30, 2025, we had $1.2 billion in cash, cash equivalents, short-term deposits, and marketable securities. For the 6 months ended June 30, 2025, we generated $89.3 million of cash from operations compared to $68.4 million generated in the same period last year, and CapEx was $5.7 million compared to $1.1 million in the same period last year. During the second quarter, we repurchased 1 million shares at an average purchase price of $38.59 for a total of $38.7 million. Over the course of the program, we repurchased 2.5 million shares at an average purchase price of $40.32 for a total consideration of $100 million. Turning now to our updated 2025 guidance in more detail. For the third quarter of 2025, we expect total revenues of $163 million to $168 million, representing growth of 10% to 13%. Non-GAAP operating income of $4 million to $7 million and non-GAAP net income per diluted share in the range of $0.07 to $0.08. This assumes 134 million diluted shares outstanding. For the full year 2025, we now expect ARR of $748 million to $754 million, representing growth of 17%. Free cash flow of $120 million to $125 million, total revenues of $616 million to $628 million, representing growth of 12% to 14%. Non-GAAP operating income of breakeven to $6 million, non-GAAP net income per diluted share in the range of $0.16 to $0.18. This assumes 134.7 million diluted shares outstanding. In summary, our second quarter performance demonstrates the growing demand for Varonis evidenced by the strong ARR growth and cash flow generation. This demand is driven by the simplicity and automated outcomes of Varonis SaaS and MDDR, as well as the security challenges created by the usage of AI and the growing awareness for data security. We look forward to completing our SaaS transition, which will position us to even better execute on these tailwinds and drive additional value for our customers, company, and shareholders. With that, we would be happy to take questions.

Our first question is from Saket Kalia with Barclays.

Yaki, maybe for you. The numbers here are pretty straightforward. So I'd love to ask a market question here, if I could. We all saw one of your privately held competitors, Cyera, raised money recently. I was wondering, since we're all on the call, can you just talk about how you compete against them? How you win? And maybe how your move to SaaS is changing that competitive backdrop? Does that make sense?

Yes, completely. Primarily, it's the same for all these DSPM vendors. What they are doing for us more than anything else is expanding our total available market and generating awareness that you need to protect data on cloud repositories. Essentially, these are very small pieces of the data security platform. We don't provide outcomes. Like we just explained, you need to understand that the DSPM, what they are doing data discovery and very partially, a lot of it is based on sampling, but they don't do any remediation and any prediction; essentially, if you have a compromised account or insider, they will not see it. You're starting to have a normal behavior to the data; they can't identify it. They can't remediate the excessive access control. And then after you notice that something happened, they can't even do forensics. Fundamentally, it's something that is completely different. Our thought is primarily about scalability and about automated outcomes. We are doing everything for the customers to secure data with Varonis is as easy as having a credit card from a top bank in terms of just all the automation and everything we do. The other thing is that data is a massive problem at scale, and there is something that is common with all these DSPM vendors; they're avoiding POC like a plague, POCs and production data. This is the cornerstone of our sales motion. We are coming to you, and we're starting to deploy very fast, taking all the data, finding it automatically, classifying it, labeling it, reducing excessive access control, making sure that your Copilot and AI can see only what it needs to see, looking at Active Directory, and with the MDDR, we save dozens of these customers on a week-to-week basis. So primarily, what it does is just creating awareness for data security with a very small part of data security from a data security platform. So by and large, this is something that is doing very well for us and for the awareness of the market.

Our next question is from Matt Hedberg with RBC Capital Markets.

Congrats on the results. Yaki, it's great to hear about the updates to your expanded Microsoft partnership. I'm wondering, is there a way that you can help us size the opportunity in terms of revenue contribution today? And additionally, how should we think about go-to-market initiatives to drive even more success? It sounds like you talked about a lot of integration work, but curious about some of the go-to-market initiatives as well.

Thank you for the question, Matt. Ultimately, the AI security challenge is fundamentally a data security challenge. We've established significant synergies with Microsoft. They recognized that one of the main barriers to deploying Copilot, which is crucial for their strategy and success, is security. When we started the proof of concept, it was their Copilot, an impressive productivity tool, that gathered all the permissions they had. This raised questions about deployment, and Varonis is very effective in addressing those concerns. Additionally, we have substantial synergy with various security tools, from Defender to MCAS to alerting Sentinel, and we've observed customers utilizing Purview for labeling within our integration efforts. We've identified many easy wins through overall technical integration. We decided to elevate our partnership further. Although it's still early, Copilot plays a significant role in their productivity goals, and we are ensuring security for it, which complements each other effectively. They are rewarding the regular sellers, and we are beginning to develop pipeline efforts together. So far, our collaboration is going well, and we are quite enthusiastic about the partnership and the potential ahead.

Our next question is from Joseph Gallo with Jefferies.

Are there any metrics or data you can share that just instill confidence in over 20% ARR growth? I imagine that means SaaS ARR without conversion tailwinds is growing healthily above that currently. But just anything on new logos or NRR that kind of helps us see what you guys see and are so positive on?

So when you look at the Q2 results, they were driven by strong new customers again, and we talked a lot about how SaaS opens up the opportunity to sell to additional customers. We saw that continue in Q2. We also saw the conversions and existing customers contributing nicely. But what's actually more interesting is that the NRR for SaaS is higher than the reported NRR that we gave at the end of Q4. And when you look at our ARR number being 19%, if we can continue to sell to new customers the way we have done so far, and actually move away from the conversions and just focus on the upsell within the SaaS customers, then the difference between 19% ARR and 20% is not that large. So there are a lot of moving parts that are working in our favor, and we feel very good about the opportunity of going back to that 20-plus percent.

In addition, we feel very good about our investments in R&D. So we see very strong adoption of everything that's related to the other cloud platforms. And we believe that we have good visibility in the way that our investments in R&D and the new product will work. And we're just very excited about the opportunity. If you want to be serious about security, you need to protect the data, and your best bet to protect the data is Varonis.

Our next question is from Joshua Tilton with Wolfe Research.

I have a two-parter. I guess the first part is just in the prepared remarks, I think you mentioned that the macro environment is still kind of challenging. I don't think that's a surprise to anyone, but maybe could you just compare how the macro this quarter compared to last quarter? What direction is that macro trending? And then just maybe on the conversion piece specifically, you guys said it contributed nicely to the quarter. But can you just maybe give us an update on how the accelerated conversion is going relative to your plan? Are you tracking in line ahead or maybe behind? Just an update on both of those would be very helpful.

I'll begin with the second part. Regarding conversions, we are increasing our SaaS mix from 80% to 82%, having started the year with a full-year guidance of 78%, which indicates that things are progressing well. We anticipated improvements in the conversion aspect for 2025 and learned valuable lessons from 2024 that we've integrated into our 2025 strategy. We're pleased with these developments. While it's not a surprise to us how well things are going, we are satisfied and expected to perform better than in 2024. In terms of the macro environment, Q2 resembled Q1, with not much difference. There is increased scrutiny around deals, which we've been discussing for a while now. However, when considering data security and the spotlight that Copilot has placed on a long-standing issue, we're positioned to take advantage of this opportunity.

Our next question is from Jason Ader with William Blair.

I have a two-parter as well. Just first on the comment that you guys have made historically that you only see competition in one out of twenty deals. I was hoping you can update us on that? And then the second part is kind of related, but we've seen some of the backup vendors move into the DSPM market through acquisition like Rubrik with Laminar and then Commvault most recently with Satori. I don't know, maybe you can comment on the convergence between traditional backup and data security, data governance. Do you feel like that's a long-term trend? I don't know, just any interpretation of what's happening there with the backup vendors?

The infrastructure and backup vendors are rarely seen in any of the proof of concepts, as they follow a completely different sales approach. Generally, we notice that the DSPM companies that have been acquired by larger firms are not very prominent. Data security tends to be an ancillary focus for them. From what we observe, the DSPM companies receiving funding experience a competitive landscape where the on-premises solutions remain unchanged, with a slight increase of about 10% in cloud infrastructure. It's crucial to highlight that proof of concept is fundamental to our operations. We continue to address the problem, which scales effectively. There is significantly more data, including clinical data, in both cloud and on-premises environments, and we are engaged with various platforms like Snowflake and Databricks. In contrast, our competitors often shy away from conducting proof of concepts. While we sometimes hear initial discussions about their capabilities, they generally avoid executing these POCs. When customers methodically pursue data security solutions, the effective sales process relies heavily on proof of concepts. Our competitors often resist this and may attempt it with limited data sets. Some of them face genuine scalability issues.

Our next question is from Roger Boyd with UBS.

Can you expand on the trend of customers consolidating their data security budgets to Varonis? And when you look at the trends around consolidating around data stores like database or around functional areas like DSPM and DLP, are there particular trends within those that are looking stronger than others? And is this something that you're seeing today, the general brownfield consolidation opportunity? Or is this more of a pipeline opportunity you think out over the next year?

I think it's both. The way that budget works, you have budget for security, compliance, insider threat, everything that's related to labeling, the ability to understand abnormal behavior as part of it is DLP and all the prerequisites for the work that you made; we are doing all of it, and the customers understand that they need to do it. In terms of security, you need to understand that bad actors are not breaking in; they are logging in. If I'm not mistaken, Sam Altman did a testimony to Congress, and he talks about the phishing that we can have with AI. This is something that we are starting to see. I can take your voice, and I can be you. And then if I have your information, many times, we can get your credentials. So what we see is that just the way that everything works is that once I get your credentials, we are what we call the only game in town. So a lot of the security that's related to insider threats, everything that is related to user behavior analytics is really consolidating around us. And these bad actors, what they are doing in order to elevate credentials these days, most of the time, they are not reading through memory and doing all this jazz. What they are doing is going from one data repository to the other. So we want to cover everything in order to be secure. And this is also something that worked very well for us. We start with something, and then people just naturally expand. And this is because of our SaaS platform that is scaling so easily and provides automated outcomes. We just need to buy, and we will provide security.

Our next question is from Brian Essex with JPMorgan.

It's Brian from JPMorgan, operator, trying to demote me. But thank you for taking the question. Yaki, maybe a question for you. Great to see the FedRAMP Authorization. I would love to get your sense of how you feel positioned ahead of the stronger third quarter for fed spending how much visibility you might have into that Fed business? And what's your sense of the preparedness on the Fed side to adopt data security versus what you're seeing on the enterprise side?

So I'll start, and then Yaki can add some stuff. Obviously, we were very excited to receive the FedRAMP Authorization this quarter. It really is a great milestone for us. We can now offer the SaaS platform to the federal sector, and that's really a big deal from our end. Our team put a lot of time, effort, and investment into this achievement. We know there's a significant white space for us in the federal vertical. But I do want to remind everyone, the federal is still about 5% of our total company ARR. It really is still too early to say if we can have any benefits from the FedRAMP in our Q3 results this year. But from a guidance perspective, we assumed a similar contribution to last year. On the longer-term side, we see a huge opportunity in this vertical.

It's very easy. There is a lot of critical information. We show a lot of critical information about you as well. And the way that it works is you see a lot of bad actors and state actors many times. So this is data that they need to protect. You just know what happened with the SharePoint vulnerability and so forth. It's all about data. And I want to say another thing; FedRAMP is not only important for federal customers. When you are a data security company, even though we don't take critical data to our SaaS, it was very important to demonstrate it for many customers on the commercial side; FedRAMP is critical. It is a certificate that it takes security very seriously, that you are under the right audits, that you have the right controls, and it was very important for us to do this exercise. We are taking the security of our platform extremely, extremely seriously. We want to make sure that once we are protecting your data, we are always secured. And definitely, in the data security field these days, from all the DSPM space, we are the only one with FedRAMP.

Our next question is from Shaul Eyal with TD Cowen.

Congrats on the beat and raise. Yaki, I was listening carefully to your market and products commentary. Specifically on that healthcare-related win with 25,000 seats. Can you provide us with more color about how many subscription services or modules would such a customer be utilizing through Varonis?

Yes, it was a big AWS swing with everything that was there, databases, Azure Blob, and other services, including 365 and on-prem, mostly Copilot. This is something, Shaul, that we see now, like a lot of our deals are just mixed. People understand where they have critical data. They want to start sometimes with data that people are collaborating on more; they want to start first and almost always protect the identity side that we are doing extremely well.

Our next question is from Mike Cikos with Needham & Company.

I just wanted to cycle back to Joe's question at the top of the Q&A. Just because that 20% plus ARR growth that you guys are citing is probably one of the most frequent inbounds we get from clients. So could you just provide some more commentary on the new logos that you guys are addressing as far as size of those initial lands and what you're seeing? Is there actually an acceleration taking place in new logo acquisition?

So we have seen the new logos actually accelerate in terms of the number and also in our ability to land in a larger number. The SaaS platform and the MDDR together with the Copilot is extremely appealing to many of our customers. The opportunity to sell to customers and actually go to them and the value proposition is that we would do everything for you. All you need to do is pay us; with this environment that is becoming so complex from a cybersecurity perspective and a risk perspective is extremely appealing for customers. And I think that's part of the reason we're seeing our new customers adopt so well. We've seen very healthy contributions from our new customers. We feel very good with the ASPs over time that have increased significantly from the levels we saw in the past. But even with the higher land, there is so much more meat on the bone in terms of selling additional platforms. So we feel very good with the ability to show value to those customers and then go back to them and sell them additional platforms.

What is very interesting is after we are converting to SaaS and customers are realizing these automated values of find, fix, alert, they naturally expand to other platforms. So once we are moving there, which is much easier to do the upsells. And as we said before, it's a tale of two companies and just the SaaS company is tremendous. And as you can see, we're just moving very fast to SaaS and after that, definitely reducing friction.

And just to add, that's part of the reason we talked about the SaaS NRR being significantly higher than the reported NRR. There are so many additional platforms to sell once you show that value and the automation and the MDDR.

Our next question is from Andy Nowinski with Wells Fargo.

I would like to ask about your SaaS revenue. You've recently outperformed the consensus estimate for two consecutive quarters, indicating that analysts may not be accurately predicting that conversion. While I understand you don't provide specific guidance on SaaS revenue, if we take your reported SaaS ARR of $478 million this quarter, divide it by 4, it implies that subscription or SaaS revenue could be around $120 million in Q3. My question is whether there is any reason that calculation or proxy might not be accurate. Is there any reason we shouldn't rely on that approach?

I've said really since the Investor Day in 2023 that there are three north stars that we're focusing on during the transition. There's a lot of noise during a transition, and the three north stars that we have talked about are ARR, ARR contribution margin, and free cash flow. The one thing I really want to avoid is noise on the conversion on the revenue side and specifically on the SaaS revenue component. The right metric to focus on to identify the strength of the business is the ARR. When we look at revenue as a whole, we're thinking of 2025 as the trough where the P&L is still kind of very noisy. From a numbers perspective, 2026, as we kind of complete the transition, the actual numbers should become more straightforward. The percentages will still move around because on the comparable side, you'll have that noise from 2025. And then 2027 is really kind of a year where you can look at the P&L in a more straightforward way. So the focus right now on the conversion year, and I can't emphasize this enough. It's kind of focusing on the three north stars, where the top-line number that should be focused on is the ARR.

Our next question is from Shrenik Kothari with Robert W. Baird.

Yes. And echoing congrats on the quarter. So beyond the new logos, right, you reiterated strong SaaS conversion execution, of course, tracking ahead of plan. But specifically, Yaki and Guy, you just made comments that past these conversions and the tailwinds, the SaaS NRR, right, the customers are realizing value faster post transaction, about the expansion, upsell, and cross-sell. So just what specific new workload ramping or multi-cloud expansion signals are giving you the most confidence here? And if you can just help unpack that SaaS NRR a little bit more among MDDR, Copilot, OpenAI, greenfield SaaS, unstructured data, as you mentioned, Snowflake, Databricks. I just wanted to understand like if you can unpack that a little bit more?

All of them are performing well. Data stores in Azure, AWS, GCP, Snowflake, Databricks, Salesforce, and GitHub are all handling critical data effectively. As time progresses, more platforms are showing positive results. There is a significant amount of critical data in the cloud, as well as on-premises. Customers are beginning to understand the necessity of protecting all of this data, as it is all at risk. Fortunately, we are excelling across the board.

Our next question is from Rudy Kessinger with D.A. Davidson.

Similar question as the last one. I am curious, you mentioned in the prepared remarks that the contribution mix of protecting the cloud and SaaS environment continues to increase. Any data points you can share on what percent of SaaS net new ARR from new logos and expansion, not the conversions you're doing, but new logos and expansion is coming from protecting cloud environment and SaaS applications?

So in Q2, we started to see some meaningful contributions from the additional cloud platforms. I can tell you that we were extremely happy with the performance coming from that spectrum. We don't really break it out in terms of dollar terms. We're trying to sell more and more of the platforms, and we're seeing very good adoption by our customers, and we're actually seeing the salesforce focusing on that type of sale, understanding the benefit it can provide to our customers. So I can say that it's kind of improving from quarter to quarter. And this quarter, we really started to see some meaningful contribution. We expect that trend to continue.

Our next question is from Jonathan Ruykhaver with Cantor Fitzgerald.

So regarding the recent introduction of your next-gen DAM offering, Database Activity Monitoring, I'm curious how should we view that in terms of just an enhancement over traditional DAMs to drive a replacement cycle versus positioning around a broader data security strategy? When you look at the revenue opportunity, it would seem the replacement opportunity relative to some legacy vendors like Imperva and Guardium would be quite compelling near-term. So how are you positioning that in terms of the go-to-market?

With our cloud data repository, we started to do very well with databases, primarily with admin activities and with the classification. So many customers came and told us, please come and replace the incumbents. They said what's going on, and they said we needed to get into the queries, whatever we need for compliance, but we also need user behavior analytics. The current solutions are not really security solutions, and many times, a lot of these companies didn't innovate and haven't done it in the right way, and they wanted part of one coherent data security platform. This is when we bought Cyral, and we just understood that this is a market that is prime for disruption, and it's just part of our overall data security because a lot of the most critical data in the world resides within databases. We are very excited about the opportunity. You build a very robust infrastructure. The way that this really state-of-the-art card architecture that we are working in can take a massive amount of loads. And we want to make sure that everything that's related to data, Varonis will solve for you for data security. And database is part of it, and we definitely feel that we can go to new customers, but also we can benefit from a big replacement cycle of the incumbents. So we are very bullish about the opportunity, and we believe that we can execute very well against the potential of this opportunity.

Our next question is from Junaid Siddiqui with Truist Securities.

Just wanted to ask about your identity protection suite that you launched last month. We're seeing more and more convergence between data and identity security. Could you just talk a bit about some of the differentiating aspects? What this does compare to what some of the other identity vendors are able to offer their customers?

Yes. It's not a new model. It's already built into our platform. It's very important to understand that Varonis is not managing identity access. We understand identity from a threat perspective. So what are we doing? We're identifying who you are, what your configuration is, how you behave, and if you are doing anything that is abnormal and enriching the identity with a lot of data streams. As we said before, attackers are not breaking in; they are logging in, and the beginning is the identity. Once that identity is compromised, there is no perimeter any sophisticated data security platform like Varonis can protect your data from.

Our next question is from Fatima Balani with Citi.

This is Mark on for Fatima. Maybe just to dig a little bit more into the comments on SaaS continues to create opportunities to sell additional customers. Within this cohort, should we think about this as selling more into new industries or end markets that SaaS has allowed you to enter? Or your ability with SaaS to capture new budgets within the IT environment? And relatedly, are these greenfield opportunities? Or are you displacing incumbents?

We are definitely seeing that SaaS is opening up additional opportunities. It is essentially expanding our total addressable market and enhancing our ability to provide protection to customers who might not have considered us without the SaaS offering. When we examine various verticals and company sizes, we have clearly observed our total addressable market increase threefold compared to before we introduced the additional cloud protection. In assessing our total addressable market and the opportunities it presents, I can confirm that there are new prospects. There are also chances to replace existing offerings, but primarily, it is creating new pathways, new verticals, and attracting new customers who otherwise might not consider us.

There are no further questions at this time. I'd like to hand the floor back over to Tim Perz.

Thanks for the interest in Varonis. We look forward to meeting everybody at conferences this quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.