Shares of Varonis Systems (NASDAQ:VRNS) rose on Tuesday following a mixed second-quarter report from the data security and analytics company. While subscription revenue soared, overall revenue declined as Varonis transitions away from perpetual licenses. The stock was up about 4.8% at 11:40 a.m. EDT; it was up as much as 15.3% earlier in the day.
Varonis reported second-quarter revenue of $59.6 million, down 4.1% year over year and about $2.7 million below the average analyst estimate. Subscription revenue was $14.8 million, up from just $1.3 million in the prior-year period, while perpetual license revenue was $11.5 million, down from $32.3 million. Maintenance and services revenue rose 12.7% year over year to $32.3 million.
"Our subscription transition has been both rapid and impressive, as 56% of our license revenues were from subscription products in the second quarter, compared with our guidance of 25%," said Varonis CEO Yaki Faitelson in prepared remarks included in the earnings release.
Non-GAAP (adjusted) earnings per share came in at a loss of $0.30, compared to a loss of $0.04 in the prior-year period and $0.02 higher than analysts were expecting. A lower gross profit and higher operating costs pushed down the bottom line.
Varonis now expects subscription revenue as a percentage of license revenue to be 45% in 2019, up from previous guidance of 25%. For the third quarter, the company expects revenue of $61.0 million to $62.5 million, along with a non-GAAP loss per share of $0.34 to $0.36.
For the full year, Varonis sees revenue of $255.5 million to $259.5 million, and a non-GAAP loss per share of $0.90 to $0.93.
Varonis' transition to subscriptions is putting pressure on revenue and earnings, but subscription revenue is growing quickly. That was enough to overshadow a mixed quarter and push the stock higher.