What happened

Shares of Varonis Systems (VRNS 0.14%) gained 19.7% in October, according to data from S&P Global Market Intelligence. The stock bounced back from a 12.5% decline in September, posting small gains in conjunction with market momentum and then seeing a more pronounced jump at the end of the month following the release of the company's third-quarter results.

VRNS Chart

VRNS data by YCharts.

The security-software specialist published third-quarter earnings after the market closed on Oct. 28 and delivered results that topped the market's expectations. The company's losses for the period came in at $0.56 per share, topping the average analyst estimate's target for a per-share loss of $0.74. Sales for the period also beat expectations, coming in at $65.6 million, while the average analyst target had called for revenue of roughly $61.6 million.

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So what

Varonis Systems stock posted roughly 14% gains in the day of trading following its earnings release. Sales for the quarter ending in September actually declined from the $67.1 million in revenue that the company posted in the third quarter of 2018, but the drop was primarily due to the transition to a subscription-focused business model.

Subscription revenue for the period came in at $23.3 million -- up substantially from the $2.5 million in subscription revenue that the company recorded in the prior-year quarter. The business recorded $178.9 million in recurring revenue over the trailing-12-month period, up 52% year over year.

Now what

The company's third-quarter report was also accompanied by new full-year revenue, earnings, and subscription-sales mix targets. Varonis now expects that full-year sales will come in between $252 million and $255 million, down from the target for sales between $255.5 million and $259.5 million it issued with its second-quarter report. The company's non-GAAP (adjusted) loss for the year is now projected to be between $26.5 million and $28.5 million, expanding from previous guidance for a loss between $25 million and $27 million. However, the business's transition to a subscription-based model seems to be proceeding quickly, and Varonis now expects that subscription sales will account for 62% of full-year revenue -- up from its previous target of 45%.

The company is valued at roughly 8.5 times this year's expected sales.