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Tufin Announces Third Quarter 2019 Results

11/14/2019

Third quarter revenue of $25.6 million increases 32% year-over-year

GAAP operating loss of $7.7 million and non-GAAP operating loss of $5.1 million

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 third quarter ended September 30, 2019.

“We had a strong quarter of growth and saw continued momentum with large enterprises” said Ruvi Kitov, co-founder and CEO. “Our automation capabilities, scalability, and integrations continue to resonate with customers looking to increase business agility and security at the same time.”

Financial Highlights for the Third Quarter Ended September 30, 2019

Revenue:

  • Total revenue was $25.6 million, up 32% compared with the third quarter of 2018.
  • Product revenue was $11.5 million, up 32% compared with the third quarter of 2018.
  • Maintenance and professional services revenue was $14.1 million, up 33% compared with the third quarter of 2018.

Gross Profit:

  • GAAP gross profit was $20.7 million, or 81% of total revenue, compared to $16 million in the third quarter of 2018, or 83% of total revenue.
  • Non-GAAP gross profit was $21.0 million, or 82% of total revenue, compared to $16.2 million in the third quarter of 2018, or 84% of total revenue.

Operating Loss:

  • GAAP operating loss was $7.7 million, compared to $2.7 million in the third quarter of 2018.
  • Non-GAAP operating loss was $5.1 million, compared to $1.8 million in the third quarter of 2018.

Net Loss:

  • GAAP net loss was $8.3 million, or a loss of $0.24 per share, compared to a GAAP net loss of $3.3 million, or a loss of $0.41 per share, in the third quarter of 2018.
  • Non-GAAP net loss was $5.7 million, or a loss of $0.17 per share, compared to a loss of $2.4 million, or a loss of $0.29 per share, in the third quarter of 2018.

Balance Sheet and Cash Flow:

  • Cash flow used for operating activities during the nine months ended September 30, 2019 was $3.0 million, compared to cash flow used for operating activities of $2.0 million during the nine months ended September 30, 2018.
  • Total cash, cash equivalents and restricted cash as of September 30, 2019 were $125.9 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 nine months ended September 30, 2019 and 2018. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights

  • We announced a partnership agreement in the U.S. federal market with Network Runners, Inc., a trusted and proven IT Systems Integrator, established to support its customers’ mission spaces in both the public and private sectors.
  • We announced our support for Zero Touch Automation for VMware NSX-T. This is the next generation of VMware’s Software Defined Data Center and with this capability, we will help customers migrate their applications from VMware NSX-V to NSX-T environments and support end-to-end connectivity for applications across their hybrid cloud environment.

Fourth Quarter and Full Year 2019 Outlook

Based on information available as of November 14, 2019, Tufin is issuing guidance as indicated below:

Fourth Quarter 2019:

  • Total revenue between $34 million and $38 million.
  • Non-GAAP operating profit between $0.0 million and $3.0 million.

Full Year 2019:

  • Total revenue between $107 million and $111 million.
  • Non-GAAP operating loss between $10.3 million and $13.3 million.

Conference Call Information

To participate in Tufin’s third quarter earnings conference call, please dial (866) 211-3126 in the U.S. or (647) 689-6579 for international participants and enter Conference ID# 3367749. 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 3367749. 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 (loss) excluding share-based compensation expense.
  • We define non-GAAP net income (loss) as net income (loss) 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 (loss) 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 (loss) and net income (loss), 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

U.S. dollars in thousands

(Unaudited)

 

December 31,

September 30,

 

2018

2019

Assets

 

 

CURRENT ASSETS:

 

 

Cash and cash equivalents

15,248

122,702

Restricted bank deposits

561

319

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

and September 30, 2019, respectively)

14,716

11,829

Prepaid expenses and other current assets

5,440

5,567

Total current assets

35,965

140,417

NON CURRENT ASSETS:

 

 

Long-term restricted bank deposits

1,789

2,831

Property and equipment, net

2,563

4,052

Deferred costs

5,025

5,132

Deferred tax assets

689

1,745

Deferred offering costs

730

-

Operating lease assets

-

21,483

Other non-current assets

372

1,551

Total non-current assets

11,168

36,794

Total assets

47,133

177,211

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share data)

(Unaudited)

 

December 31,

 

September 30,

 

2018

 

2019

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Current maturities of long-term loan

222

 

-

Trade payables

3,096

 

4,432

Employee and payroll accrued expenses

9,976

 

12,223

Other accounts payables

4,890

 

1,679

Operating lease liabilities – current

-

 

2,333

Deferred revenues

18,172

 

23,353

Total current liabilities

36,356

 

44,020

NON-CURRENT LIABILITIES:

 

 

 

Long-term deferred revenues

13,292

 

14,251

Non-current operating lease liabilities

-

 

22,436

Other non-current liabilities

732

 

857

Total non-current liabilities

14,024

 

37,544

Total liabilities

50,380

 

81,564

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 September 30, 2019; 7,592,803 preferred shares issued and outstanding at December 31, 2018 and zero at September 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 September 30, 2019; 2,668,333 preferred shares issued and outstanding at December 31, 2018 and zero at September 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 September 30, 2019; 4,621,592 preferred shares issued and outstanding at December 31, 2018 and zero at September 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 September 30, 2019; 1,534,021 preferred shares issued and outstanding at December 31, 2018 and zero at September 30, 2019

4,900

 

-

TOTAL REDEEMABLE CONVERTIBLE PREFERRED SHARES

26,699

 

-

 

 

 

 

SHAREHOLDERS’ EQUITY (DEFICIT):

 

 

 

Ordinary shares of NIS 0.015 par value; 52,666,712 and 150,000,000 shares authorized at December 31, 2018 and September 30, 2019, respectively; 8,265,988 and 34,295,394 shares issued and outstanding at December 31, 2018 and September 30, 2019;

30

 

141

Additional paid-in capital

10,337

 

156,763

Accumulated deficit

(40,313

)

(61,257)

TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)

(29,946

)

95,647

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS’ EQUITY (DEFICIT)

47,133

 

177,211

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

Three Months Ended

Nine Months Ended

 

September 30,

 

September 30,

September 30,

 

September 30,

 

2018

 

2019

2018

 

2019

Revenues:

 

 

 

 

 

 

Product

8,723

 

11,510

25,453

 

33,030

Maintenance and professional services

10,615

 

14,090

30,307

 

40,125

Total revenues

19,338

 

25,600

55,760

 

73,155

Cost of revenues:

 

 

 

 

 

 

Product

462

 

608

1,463

 

2,138

Maintenance and professional services

2,829

 

4,317

7,930

 

11,728

Total cost of revenues

3,291

 

4,925

9,393

 

13,866

Gross profit

16,047

 

20,675

46,367

 

59,289

Operating expenses:

 

 

 

 

 

 

Research and development

5,284

 

8,331

14,958

 

22,298

Sales and marketing

12,035

 

16,161

33,078

 

46,913

General and administrative

1,432

 

3,844

3,730

 

9,721

Total operating expenses

18,751

 

28,336

51,766

 

78,932

Operating loss

(2,704)

 

(7,661)

(5,399)

 

(19,643)

Financial loss, net

(231)

 

(342)

(587)

 

(579)

Loss before taxes on income

(2,935)

 

(8,003)

(5,986)

 

(20,222)

Taxes on income

(343)

 

(279)

(1,077)

 

(722)

Net loss

(3,278)

 

(8,282)

(7,063)

 

(20,944)

Basic and diluted net loss per ordinary share

(0.41)

 

(0.24)

(0.88)

 

(0.85)

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

8,078

 

34,145

8,040

 

24,721

     

Share-based Compensation Expense:

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

September 30,

 

September 30,

September 30,

 

September 30,

 

2018

 

2019

2018

 

2019

Cost of revenues

144

 

341

449

 

887

Research and development

193

 

505

509

 

1,120

Sales and marketing

456

 

1,083

973

 

3,083

General and administrative

113

 

671

216

 

1,245

Total share-based compensation expense

906

 

2,600

2,147

 

6,335

 

     

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(Unaudited)

 

 

Nine Months Ended

 

 

September 30,

 

 

2018

 

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

(7,063

)

(20,944)

Adjustment to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation

 

630

 

881

Bad debt expense

 

-

 

31

Share-based compensation

 

2,147

 

6,335

Other

 

237

 

(314)

Change in operating assets and liabilities items:

 

 

 

 

Accounts receivable

 

604

 

2,856

Prepaid expenses and other current assets

 

(1,157

)

(23)

Deferred costs

 

(271

)

(7)

Deferred taxes and other non-current assets

 

(58

)

(2,059)

Trade payables

 

544

 

1,134

Employee and payroll accrued expenses

 

(893

)

2,247

Other accounts payable and non-current liabilities

 

(80

)

(1,872)

Operating lease

 

-

 

2,587

Deferred revenues

 

3,402

 

6,140

Net cash used in operating activities

 

(1,958)

 

(3,008)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Purchase of fixed assets

 

(887

)

(2,168)

Other investing activities

 

3

 

(172)

Net cash used in investing activities

 

(884

)

(2,340)

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

 

-

 

(2,645)

Proceeds from exercise of share options

 

157

 

840

Payment of long-term loan

 

(500)

 

(222)

Net cash provided by (used in) financing activities

 

(343)

 

113,265

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

 

(247)

 

337

 

 

 

 

 

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(3,432)

 

108,254

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

15,620

 

17,598

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

12,188

 

125,852

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

Property and equipment purchased but not yet paid

 

28

 

202

Unpaid offering costs

 

-

 

58

TUFIN SOFTWARE TECHNOLOGIES LTD.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

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

(Unaudited)

Reconciliation of Gross Profit to Non-GAAP Gross Profit:

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

September
30,

September
30,

September
30,

September
30,

 

2018

2019

2018

2019

Gross profit

16,047

20,675

46,367

59,289

Plus:

 

 

 

 

Share-based compensation

144

341

449

887

Non-GAAP gross profit

16,191

21,016

46,816

60,176

 

Reconciliation of Operating loss to Non-GAAP Operating loss:

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

September
30,

September
30,

September
30,

September
30,

 

2018

2019

2018

2019

Operating loss

(2,704)

(7,661)

(5,399)

(19,643)

Plus:

 

 

 

 

Share-based compensation

906

2,600

2,147

6,335

Non-GAAP Operating loss

(1,798)

(5,061)

(3,252)

(13,308)

 

Reconciliation of Net loss to Non-GAAP Net loss:

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

September
30,

September
30,

September
30,

September
30,

 

2018

2019

2018

2019

Net loss

(3,278)

(8,282)

(7,063)

(20,944)

Plus:

 

 

 

 

Share-based compensation

906

2,600

2,147

6,335

Non-GAAP Net loss

(2,372)

(5,682)

(4,916)

(14,609)

 

 

 

 

 

Non-GAAP net income per share

Basic and diluted

(0.29)

(0.17)

(0.61)

(0.59)

Weighted average number of shares

8,078

34,145

8,040

24,721

 

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 Contact:
Ryan Burkart
investors@tufin.com

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

Source: Tufin

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