During the third quarter, Greenvale Capital, a London-based investment firm, enhanced its exposure to cybersecurity company Varonis by purchasing 1.28 million additional shares. Official disclosure filed with the Securities and Exchange Commission (SEC) on November 14 revealed that these shares increased the fund’s total stake in Varonis to 1.73 million shares, valued at $99.14 million as of September 30.
Greenvale Capital manages a total of $1.27 billion in U.S. equities distributed across 16 holdings. The $99.14 million investment in Varonis now constitutes roughly 7.93% of the firm’s reported assets under management (AUM), positioning the cybersecurity software provider among the fund’s top five equity holdings.
When examining Greenvale Capital's portfolio allocations as of the filing, the largest positions included:
- Runnings (NASDAQ: RUN) at $231.83 million, comprising 18.54% of AUM
- Roblox (NYSE: RBLX) at $148.91 million, representing 11.91% of AUM
- Zeta (NYSE: ZETA) at $144.06 million, or 11.52% of AUM
- Sensient Technologies (NYSE: SN) at $129.92 million, equaling 10.39% of AUM
- Varonis (NASDAQ: VRNS) at $99.14 million, making up 7.93% of AUM
As of the most recent price close on Monday, Varonis shares traded at $33.34, reflecting a 26% decrease over the previous year. This decline stands in contrast to the broader market, as indicated by the S&P 500 index, which experienced a gain of approximately 16% during the same period.
Company Profile and Business Operations
Varonis specializes in data security software and analytics. Its product portfolio includes offerings such as DatAdvantage, DatAlert, Data Classification Engine, DataPrivilege, Data Transport Engine, and DatAnswers. These solutions serve functions spanning data security, management, real-time alerting, and compliance analytics.
The company primarily generates revenue through licensing of its proprietary software, complemented by associated support and services tailored to enterprise customers. Its client base comprises organizations across North America and internationally, with end users typically involved in IT, security, and business units.
The firm’s competitive strength stems from delivering an integrated platform designed to monitor, alert, and automate governance across complex data environments, including both on-premises installations and cloud infrastructures.
Financial Performance Highlights and Operational Analysis
While Varonis reported a net operating loss of $114.54 million over the trailing twelve months, the underlying operating performance reveals a more complex dynamic. The company achieved an 18% year-over-year increase in annual recurring revenue (ARR), reaching $718.6 million by the third quarter.
In terms of revenue composition, subscription-based Software-as-a-Service (SaaS) now accounts for approximately 76% of total ARR. This growing SaaS mix has contributed to wider reported operating losses, mainly due to margin shifts inherent in the subscription conversion process, even as overall cash flow metrics have improved.
Specifically, in the year to date period referenced, Varonis generated $122.7 million in operating cash flow, up from $90.9 million during the same timeframe the prior year. Free cash flow totaled $111.6 million, signaling strong cash generation relative to reported accounting losses.
Additionally, the company announced a $150 million share repurchase authorization. This strategic move may provide shareholder value support in a portfolio environment where other significant holdings feature higher beta growth profiles and geopolitically linked equities.
Market Context and Investment Considerations
Varonis operates at the nexus of enterprise security, cloud migration, and AI-driven data governance. These factors collectively define the company’s risk profile as distinct from conventional growth companies tied to emerging markets or volatile tech sectors.
The stock’s negative performance over the previous year likely mirrors investor reservations related to near-term margin pressures and softened contract renewals within legacy on-premises segments, as noted in the company’s earnings disclosures.
Nonetheless, the firm’s long-term investment thesis centers on its recurring, SaaS-dominant security platform with strengthening cash flow and ample liquidity exceeding $1 billion. Such attributes could position Varonis favorably in the years ahead as the business continues its transition and scales cash generation.
Key Points
- Greenvale Capital increased its Varonis holdings by 1.28 million shares in Q3, valuing its overall stake at approximately $99 million.
- Varonis’ SaaS subscription revenue rose to 76% of its annual recurring revenue, driving a mix shift despite increased reported operating losses.
- The company demonstrated a significant rise in cash flow generation, with operating cash flow totaling $122.7 million year to date.
Risks and Uncertainties
- Varonis reported a net operating loss, which could impact near-term profitability metrics and investor sentiment.
- Recent share price performance reflects challenges related to margin pressure and softness in legacy on-premises renewals.
- The ongoing transition to a SaaS-heavy model entails risks associated with revenue recognition timing and customer adoption rates.
Disclosure
The information provided is based on publicly filed documents and market data as of the stated period. It is intended solely for informational purposes and does not constitute investment advice.