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Tufin Announces Second Quarter 2019 Results

09/03/2019

Second quarter revenue of $25.1 million increases 36% year-over-year
GAAP operating loss of $7.7 million and non-GAAP operating loss of $5.1 million
The Company raised net proceeds of $112.5 million in its initial public offering completed in April, 2019

BOSTON & TEL AVIV, Israel--(BUSINESS WIRE)-- Tufin® (NYSE: TUFN), a company pioneering a policy-centric approach to security and IT operations, today announced financial results for the second quarter ended June 30, 2019.

“We had a strong second quarter, and I’m very pleased with our results. We continue to see strong demand across all verticals and geographies,” said Ruvi Kitov, Co-founder and CEO. “We landed notable new logos, while at the same time expanding within our existing customer base. The need for network security policy automation is becoming more and more pressing as network complexity increases and digital transformation accelerates.”

Financial Highlights for the Second Quarter Ended June 30, 2019

Revenue:

  • Total revenue was $25.1 million, up 36% compared with the second quarter of 2018.
  • Product revenue was $10.9 million, up 31% compared with the second quarter of 2018.
  • Maintenance and professional services revenue was $14.2 million, up 39% compared with the second quarter of 2018.

Gross Profit:

  • GAAP gross profit was $20.2 million, or 80% of total revenue, compared to $15.7 million in the second quarter of 2018, or 85% of total revenue.
  • Non-GAAP gross profit was $20.5 million, or 82% of total revenue, compared to $15.8 million in the second quarter of 2018, or 86% of total revenue.

Operating Loss:

  • GAAP operating loss was $7.7 million, compared to $2.4 million in the second quarter of 2018.
  • Non-GAAP operating loss was $5.1 million, compared to $1.6 million in the second quarter of 2018.

Net Loss:

  • GAAP net loss was $8.2 million, or a loss of $0.26 per share, compared to a GAAP net loss of $3.1 million, or a loss of $0.38 per share, in the second quarter of 2018.
  • Non-GAAP net loss was $5.6 million, or a loss of $0.18 per share, compared to a loss of $2.2 million, or a loss of $0.28 per share, in the second quarter of 2018.

Balance Sheet and Cash Flow:

  • Cash flow generated from operating activities during the six months ended June 30, 2019 was $1.5 million, compared to cash flow generated from operating activities of $5.7 million during the six months ended June 30, 2018.
  • Total cash, cash equivalents and restricted cash as of June 30, 2019 were $130.7 million, compared to $17.6 million as of December 31, 2018. The Company raised net proceeds of $112.5 million in its initial public offering completed in April, 2019.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP gross profit, operating income and net income for the three and six months ended June 30, 2019 and 2018. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights

  • We recently announced the general availability of Tufin Orchestration Suite R19-2, with extended capabilities, enhanced visibility and policy control. This will enable us to support a wider range of network devices, as customer networks become more and more complex.
  • We announced the appointment of Larry Alston as General Manager of Cloud. Alston previously held senior and executive management roles at Teradata, Altisource, FuseSource, IONA, and Excelon. As Tufin champions the adoption of security policy management in the cloud, Alston will be responsible for all aspects of Tufin’s cloud-native business.
  • We successfully hosted Tufinnovate Americas, our annual user event for the Americas, in Boston in July. The event was co-sponsored by some of our large partners, including Cisco, VMware and Fortinet. Our European user event, Tufinnovate EMEA, will be held in Lisbon on September 10 – 12.

Third Quarter and Full Year 2019 Outlook

Based on information available as of September 3, 2019, Tufin is issuing guidance as indicated below:

Third Quarter 2019:

  • Total revenue between $24 million and $26 million.
  • Non-GAAP operating loss between $4.8 million and $6.3 million

Full Year 2019:

  • Total revenue between $106 million and $111 million
  • Non-GAAP operating loss between $10.7 million and $12.7 million

Conference Call Information

To participate in Tufin’s second quarter earnings conference call, please dial (866) 211-3126 in the U.S. or (647) 689-6579 for international participants and enter Conference ID# 9586608. The call will also be webcast live on Tufin’s Investor Relations website at investors.tufin.com. Following the conference call, a replay will be available at (800) 585-8367 (domestic) or (416) 621-4642 (international). The replay passcode is 9586608. An archived webcast of this conference call will be available on the investor relations section of the company website.

About Tufin

Tufin (NYSE: TUFN) simplifies management of some of the largest, most complex networks in the world, consisting of thousands of firewall and network devices and emerging hybrid cloud infrastructures. Enterprises select the company’s Tufin Orchestration Suite™ to increase agility in the face of ever-changing business demands while maintaining a robust security posture. The Suite reduces the attack surface and meets the need for greater visibility into secure and reliable application connectivity. With over 2,000 customers since its inception, Tufin’s network security automation enables enterprises to implement changes in minutes instead of days, while improving their security posture and business agility.

Non-GAAP Financial Measures

Because of varying available valuation methodologies, subjective assumptions that can impact a company’s non-cash expense, we believe that providing non-GAAP financial measures that exclude non-cash share-based compensation expense allows for more meaningful comparisons between our operating results from period to period. These non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our operating results over different periods:

  • We define non-GAAP gross profit as gross profit excluding share-based compensation expense.
  • We define non-GAAP operating profit (loss) as operating profit excluding share-based compensation expense.
  • We define non-GAAP net income as net income excluding share-based compensation expense.

Other companies, including companies in our industry, may calculate non-GAAP gross profit, non-GAAP operating profit (loss) and non-GAAP net income differently or not at all, which reduces the usefulness these non-GAAP financial measures for comparison. You should consider these non-GAAP financial measures along with other financial performance measures, including gross profit, operating profit and net income, and our financial results presented in accordance with U.S. GAAP. Tufin urges investors to review the reconciliation of its non-GAAP financial measures to the comparable U.S. GAAP financial measures included below, and not to rely on any single financial measure to evaluate its business.

Guidance for non-GAAP financial measures excludes, as applicable, share-based compensation expense. A reconciliation of the non-GAAP financial measures guidance to the corresponding GAAP measures is not available on a forward-looking basis due to the uncertainty regarding, and the potential variability and significance of, the amounts of share-based compensation expense that are excluded from the guidance. Accordingly, a reconciliation of the non-GAAP financial measures guidance to the corresponding GAAP measures for future periods is not available without unreasonable effort.

Cautionary Language Concerning Forward-Looking Statements

This release contains forward-looking statements, which express the current beliefs and expectations of Tufin’s (the “Company”) management. In some cases, forward-looking statements may be identified by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential” or the negative of these terms or other similar expressions. Such statements involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: changes in the rapidly evolving enterprise network landscape; failure to effectively manage growth; potential near-term declines in our operating and net profit margins and our revenue growth rate; real or perceived shortcomings, defects or vulnerabilities in the Company’s solutions or internal network system, or the failure of the Company’s customers or channel partners to correctly implement the Company’s solutions; fluctuations in quarterly results of operations; the inability to acquire new customers or sell additional products and services to existing customers; competition from a wide variety of competitive vendors; the Company’s ability to successfully integrate potential future acquisitions; and other factors discussed under the heading “Risk Factors” in the final prospectus for the Company’s initial public offering filed with the Securities and Exchange Commission on April 11, 2019. Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, U.S. dollars in thousands)

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2019

 

Assets

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

 

15,248

 

 

 

127,491

 

Restricted bank deposits

 

 

561

 

 

 

552

 

Accounts receivable (net of allowance for doubtful accounts of $97 and $128 at December 31, 2018

and June 30, 2019, respectively)

 

 

14,716

 

 

 

13,125

 

Prepaid expenses and other current assets

 

 

5,440

 

 

 

5,343

 

Total current assets

 

 

35,965

 

 

 

146,511

 

NON CURRENT ASSETS:

 

 

 

 

 

 

 

 

Long-term restricted bank deposits

 

 

1,789

 

 

 

2,696

 

Property and equipment, net

 

 

2,563

 

 

 

3,838

 

Deferred costs

 

 

5,025

 

 

 

4,713

 

Deferred tax assets

 

 

689

 

 

 

1,364

 

Deferred offering costs

 

 

730

 

 

 

-

 

Operating lease assets

 

 

-

 

 

 

19,186

 

Other non-current assets

 

 

372

 

 

 

1,240

 

Total non-current assets

 

 

11,168

 

 

 

33,037

 

Total assets

 

 

47,133

 

 

 

179,548

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, U.S. dollars in thousands)

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2019

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current maturities of long-term loan

 

 

222

 

 

 

-

 

 

Trade payables

 

 

3,096

 

 

 

4,930

 

 

Employee and payroll accrued expenses

 

 

9,976

 

 

 

9,455

 

 

Other accounts payables

 

 

4,890

 

 

 

1,680

 

 

Operating lease liabilities – current

 

 

-

 

 

 

1,661

 

 

Deferred revenues

 

 

18,172

 

 

 

24,340

 

 

Total current liabilities

 

 

36,356

 

 

 

42,066

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Long-term deferred revenues

 

 

13,292

 

 

 

15,631

 

 

Non-current operating lease liabilities

 

 

-

 

 

 

20,084

 

 

Other non-current liabilities

 

 

732

 

 

 

800

 

 

Total non-current liabilities

 

 

14,024

 

 

 

36,515

 

 

Total liabilities

 

 

50,380

 

 

 

78,581

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

REDEEMABLE CONVERTIBLE PREFERRED SHARES:

 

 

 

 

 

 

 

 

Series A preferred shares of NIS 0.015 par value: 10,000,000 preferred shares authorized at December 31, 2018 and zero at June 30, 2019; 7,592,803 preferred shares issued and outstanding at December 31, 2018 and zero at June 30, 2019;

 

 

5,073

 

 

 

-

 

 

Series B preferred shares of NIS 0.015 par value: 3,333,333 preferred shares authorized at December 31, 2018 and zero at June 30, 2019; 2,668,333 preferred shares issued and outstanding at December 31, 2018 and zero at June 30, 2019;

 

 

4,310

 

 

 

-

 

 

Series C preferred shares of NIS 0.015 par value: 4,666,667 preferred shares authorized at December 31, 2018 and zero at June 30, 2019; 4,621,592 preferred shares issued and outstanding at December 31, 2018 and zero at June 30, 2019;

 

 

12,416

 

 

 

-

 

 

Series D preferred shares of NIS 0.015 par value: 1,534,021 preferred shares authorized at December 31, 2018 and zero at June 30, 2019; 1,534,021 preferred shares issued and outstanding at December 31, 2018 and zero at June 30, 2019

 

 

4,900

 

 

 

-

 

 

TOTAL REDEEMABLE CONVERTIBLE PREFERRED SHARES

 

 

26,699

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ DEFICIT:

 

 

 

 

 

 

 

 

Ordinary shares of NIS 0.015 par value; 52,666,712 and 150,000,000 shares authorized at December 31, 2018 and June 30, 2019, respectively; 8,265,988 and 34,039,741 shares issued and outstanding at December 31, 2018 and June 30, 2019;

 

 

30

 

 

 

140

 

 

Additional paid-in capital

 

 

10,337

 

 

 

153,802

 

 

Accumulated deficit

 

 

(40,313

)

 

 

(52,975

)

 

TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

(29,946

)

 

 

100,967

 

 

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY

 

 

47,133

 

 

 

179,548

 

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, U.S. dollars in thousands, except per share amounts)

 

Three Months Ended

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2018

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Product

 

8,308

 

 

 

10,897

 

 

 

16,730

 

 

 

 

21,520

 

 

Maintenance and professional services

 

10,214

 

 

 

14,204

 

 

 

19,692

 

 

 

 

26,035

 

 

Total revenues

 

18,522

 

 

 

25,101

 

 

 

36,422

 

 

 

 

47,555

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

344

 

 

 

1,001

 

 

 

1,001

 

 

 

 

1,530

 

 

Maintenance and professional services

 

2,526

 

 

 

3,902

 

 

 

5,101

 

 

 

 

7,411

 

 

Total cost of revenues

 

2,870

 

 

 

4,903

 

 

 

6,102

 

 

 

 

8,941

 

 

Gross profit

 

15,652

 

 

 

20,198

 

 

 

30,320

 

 

 

 

38,614

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

5,004

 

 

 

7,464

 

 

 

9,674

 

 

 

 

13,967

 

 

Sales and marketing

 

11,896

 

 

 

17,152

 

 

 

21,043

 

 

 

 

30,752

 

 

General and administrative

 

1,201

 

 

 

3,289

 

 

 

2,298

 

 

 

 

5,877

 

 

Total operating expenses

 

18,101

 

 

 

27,905

 

 

 

33,015

 

 

 

 

50,596

 

 

Operating loss

 

(2,449

)

 

 

(7,707

)

 

 

(2,695

)

 

 

 

(11,982

)

 

Financial expense, net

 

(244

)

 

 

(277

)

 

 

(356

)

 

 

 

(237

)

 

Loss before taxes on income

 

(2,693

)

 

 

(7,984

)

 

 

(3,051

)

 

 

 

(12,219

)

 

Taxes on income

 

(366

)

 

 

(230

)

 

 

(734

)

 

 

 

(443

)

 

Net loss

 

(3,059

)

 

 

(8,214

)

 

 

(3,785

)

 

 

 

(12,662

)

 

Basic and diluted net loss per ordinary share

 

(0.38

)

 

 

(0.26

)

 

 

(0.47

)

 

 

 

(0.64

)

 

Weighted average number of shares used in computing net loss per ordinary share, basic and diluted

 

8,039

 

 

 

31,164

 

 

 

8,019

 

 

 

 

19,723

 

 

Share-based Compensation Expense:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

2018

 

 

2019

 

 

2018

 

 

2019

Cost of revenues

194

 

 

311

 

 

305

 

 

546

Research and development

 

225

 

 

477

 

 

316

 

 

 

615

Sales and marketing

 

350

 

 

1,511

 

 

517

 

 

 

2,000

General and administrative

 

50

 

 

344

 

 

103

 

 

 

574

Total share-based compensation expense

 

819

 

 

2,643

 

 

1,241

 

 

 

3,735

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, U.S. dollars in thousands)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2018

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

 

(3,785

)

 

 

(12,662

)

Adjustment to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

272

 

 

 

587

 

Bad debt expense

 

 

-

 

 

 

31

 

Compensation related to options granted to employees

 

 

1,241

 

 

 

3,735

 

Other

 

 

259

 

 

 

(255

)

Change in operating assets and liability items:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,905

(

 

 

1,560

 

Prepaid expenses and other current assets

 

 

(550

)

 

 

468

 

Deferred costs

 

 

(148

)

 

 

424

 

Deferred taxes and other non-current assets

 

 

(31

)

 

 

(1,522

)

Trade payables

 

 

413

 

 

 

1,556

 

Employee and payroll accrued expenses

 

 

(2,294

)

 

 

(521)

 

Other accounts payable and non-current liabilities

 

 

(628

)

 

 

(2,233)

 

Operating lease

 

 

-

 

 

 

1,860

 

Deferred revenues

 

 

14,867

 

 

 

8,507

 

Net cash provided by operating activities

 

 

5,711

 

 

 

1,535

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(629

)

 

 

(1,584

)

Other investing activities

 

 

7

 

 

 

(21

)

Net cash used in investing activities

 

 

(622

)

 

 

(1,605

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from initial public offering, net of underwriters' discounts

 

 

-

 

 

 

115,292

 

Payments of offering costs related to initial public offering

 

 

-

 

 

 

(2,322

)

Proceeds from exercise of stock options

 

 

119

 

 

 

201

 

Payment of long-term loan

 

 

(333

)

 

 

(222

)

Net cash provided by (used in) financing activities

 

 

(214

)

 

 

112,949

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(275)

 

 

 

262

 

 

 

 

 

 

 

 

 

 

INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

4,602

 

 

 

113,141

 

 

 

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

 

15,620

 

 

 

17,598

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

 

20,222

 

 

 

130,739

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

 

120

 

 

 

278

 

Unpaid offering costs

 

 

-

 

 

 

382

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, U.S. dollars in thousands)

 

Reconciliation of Gross Profit to Non-GAAP Gross Profit:

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

June 30,

June 30,

 

2018

2019

 

2018

2019

Gross profit

15,652

20,198

 

30,320

38,614

Plus:

 

 

 

 

 

Share-based compensation

194

311

 

305

546

Non-GAAP gross profit

15,846

20,509

 

30,625

39,160

 

Reconciliation of Operating loss to Non-GAAP Operating loss:

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

June 30,

June 30,

 

2018

2019

 

2018

2019

Operating loss

(2,449)

(7,707)

 

(2,695)

(11,982)

Plus:

 

 

 

 

 

Share-based compensation

819

2,643

 

1,241

3,735

Non-GAAP Operating loss

(1,630)

(5,064)

 

(1,454)

(8,247)

 

Reconciliation of Net loss to Non-GAAP Net loss:

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

June 30,

June 30,

 

2018

2019

 

2018

2019

Net loss

(3,059)

(8,214)

 

(3,785)

(12,662)

Plus:

 

 

 

 

 

Share-based compensation

819

2,643

 

1,241

3,735

Non-GAAP Net loss

(2,240)

(5,571)

 

(2,544)

(8,927)

 

 

 

 

 

 

Non-GAAP net income per share

Basic and diluted

(0.28)

(0.18)

 

(0.32)

(0.45)

 

Weighted average number of shares

8,039

31,164

 

8,019

19,723

About Tufin

Tufin (NYSE: TUFN) simplifies management of some of the largest, most complex networks in the world, consisting of thousands of firewall and network devices and emerging hybrid cloud infrastructures. Enterprises select the company’s Tufin Orchestration Suite™ to increase agility in the face of ever-changing business demands while maintaining a robust security posture. The Suite reduces the attack surface and meets the need for greater visibility into secure and reliable application connectivity. With over 2000 customers since its inception, Tufin’s network security automation enables enterprises to implement changes in minutes instead of days, while improving their security posture and business agility.

Find out more at: www.tufin.com

Follow Tufin on Twitter: @TufinTech

Read more on Tufin’s blog: Suite Talk

Investor Relations:
Ryan Burkart
investors@tufin.com

Media:
Dan Gaffney
fama PR for Tufin
(617) 986-5036
tufin@famapr.com

Source: Tufin

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