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Tufin Announces Second Quarter 2020 Results

08/12/2020

Second quarter revenue of $23.0 million decreased 8% year-over-year

GAAP operating loss of $8.2 million and non-GAAP operating loss of $4.5 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 second quarter ended June 30, 2020.

“I am pleased with the progress we made in the second quarter, despite the challenging environment,” said Ruvi Kitov, CEO and co-founder of Tufin. “Our business improved compared to the acute disruptions due to COVID-19 that we experienced at the end of the first quarter and we are confident that our company is on the path to recovery. Customers are recognizing the critical value of increased security and efficiency that Tufin delivers in an environment where security professionals must do more with less. However, general business conditions remain challenging and uncertainty high. Our leadership position in the market, competitive advantages, strong cash position and experienced management team, positions us well to return to growth as the environment improves.”

Financial Highlights for the Second Quarter Ended June 30, 2020

Revenue:

  • Total revenue was $23.0 million, down 8% compared with the second quarter of 2019.
  • Product revenue was $7.9 million, down 27% compared with the second quarter of 2019.
  • Maintenance and professional services revenue was $15.1 million, up 7% compared with the second quarter of 2019.

Gross Profit:

  • GAAP gross profit was $18.3 million, or 79% of total revenue, compared to $20.2 million in the second quarter of 2019, or 80% of total revenue.
  • Non-GAAP gross profit was $18.7 million, or 81% of total revenue, compared to $20.5 million in the second quarter of 2019, or 82% of total revenue.

Operating Loss:

  • GAAP operating loss was $8.2 million, compared to $7.7 million in the second quarter of 2019.
  • Non-GAAP operating loss was $4.5 million, compared to $5.1 million in the second quarter of 2019.

Net Loss:

  • GAAP net loss was $8.8 million, or a loss of $0.25 per share, compared to a GAAP net loss of $8.2 million, or a loss of $0.26 per share, in the second quarter of 2019.
  • Non-GAAP net loss was $5.2 million, or a loss of $0.15 per share, compared to a loss of $5.6 million, or a loss of $0.18 per share, in the second quarter of 2019.

Balance Sheet and Cash Flow:

  • Cash flow used for operating activities during the six months ended June 30, 2020 was $11.2 million, compared to cash flow generated from operating activities of $1.5 million during the six months ended June 30, 2019.
  • Total cash, cash equivalents, restricted cash and marketable securities as of June 30, 2020 were $108.5 million, compared to $121.7 million as of December 31, 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, 2020 and 2019. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights

  • Launched the Tufin Marketplace, a digital platform where customers can find and deploy apps and extensions that enhance the overall value of their security policy management implementations by integrating security policy data with other security technologies and practices.
  • Launched the Tufin Vulnerability Mitigation App. The app allows organizations to ensure effective remediation and automated mitigation using a risk-based approach and is integrated with leading vulnerability management solutions to enrich vulnerability intelligence with real-time network insights
  • Named Mitch DeBerdt as Country manager for Japan. In this role, Mitch will establish and execute sales strategies to grow Tufin’s business across the region. Mitch brings more than 17 years of sales experience across several leadership roles in both software and hardware, including recent leadership roles at Varonis Systems and Digital Guardian.

Business Outlook

“I’m encouraged by the overall sequential business improvement we saw in the second quarter,” said Jack Wakileh, CFO. “Our pipeline remains healthy and is higher year over year. However, due to continued uncertainty associated with COVID-19 we will not be providing specific financial guidance for Q3 or the full year at this time. We intend to resume providing guidance as soon as we have enough visibility to do so and we will evaluate this on a quarter to quarter basis.”

Conference Call Information

To participate in Tufin’s second quarter earnings conference call, please use this link: http://www.directeventreg.com/registration/event/5267864. After registering, a confirmation will be sent through email, including dial in details and unique conference call codes for entry. Registration is open through the live call. 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 (U.S.) or (416) 621-4642 (international). The replay passcode is 5267864. An archive of the webcast will also be available on the investor relations section of the company website two hours after the live call ends.

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

We believe that providing non-GAAP financial measures that exclude, as applicable, share-based compensation expense and certain non-recurring costs, as well as, the tax effect of these non-GAAP adjustments, 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, shelf registration costs and one-time expenses associated with the reorganization of one of our subsidiaries.
  • We define non-GAAP net income (loss) as net income (loss) excluding share-based compensation expense, shelf registration costs, one-time expenses associated with the reorganization of one of our subsidiaries and the tax effect of these non-GAAP adjustments.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments 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 allow for more meaningful comparisons between our operating results from period to period. In addition, we believe that providing non-GAAP financial measures that exclude shelf registration costs and one-time expenses associated with the reorganization of one of our subsidiaries allows for more meaningful comparisons between our operating results from period to period since these non-recurring costs are not representative or indicative of our ongoing operations. We also believe that the tax effects related to the non-GAAP adjustments set forth above do not reflect the performance of our core business and would impact period-to-period comparability.

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.

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: the impact of COVID-19 on the budgets of our clients and on economic conditions generally; 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 Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on March 18, 2020. 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,

 

 

June 30,

 

 

 

2019

 

 

2020

 

Assets

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

118,661

 

 

94,818

 

Restricted bank deposits

 

224

 

 

224

 

Accounts receivable (net of allowance for doubtful accounts of $77 and $51 at December 31, 2019

and June 30, 2020, respectively)

 

16,222

 

 

10,753

 

Prepaid expenses and other current assets

 

4,773

 

 

7,846

 

Total current assets

 

139,880

 

 

113,641

 

NON CURRENT ASSETS:

 

 

 

 

 

 

Long-term restricted bank deposits

 

2,844

 

 

2,839

 

Marketable Securities - long term

 

-

 

 

10,627

 

Property and equipment, net

 

4,177

 

 

4,810

 

Deferred costs

 

5,640

 

 

5,467

 

Deferred tax assets

 

1,659

 

 

1,559

 

Operating lease assets

 

20,958

 

 

19,882

 

Other non-current assets

 

1,574

 

 

1,537

 

Total non-current assets

 

36,852

 

 

46,721

 

Total assets

 

176,732

 

 

160,362

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 

 

 

December 31,

 

 

June 30,

 

 

 

2019

 

 

2020

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Trade payables

 

4,394

 

 

4,265

 

Employee and payroll accrued expenses

 

15,422

 

 

13,662

 

Other accounts payables

 

1,568

 

 

1,291

 

Operating lease liabilities – current

 

2,533

 

 

2,935

 

Deferred revenues

 

22,725

 

 

27,126

 

Total current liabilities

 

46,642

 

 

49,279

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

Long-term deferred revenues

 

12,838

 

 

13,425

 

Non-current operating lease liabilities

 

22,000

 

 

20,280

 

Other non-current liabilities

 

930

 

 

996

 

Total non-current liabilities

 

35,768

 

 

34,701

 

Total liabilities

 

82,410

 

 

83,980

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Ordinary shares of NIS 0.015 par value; 150,000,000 shares authorized at December 31, 2019 and June 30, 2020, respectively; 35,230,253 and 35,714,399 shares issued and outstanding at December 31, 2019 and June 30, 2020;

 

145

 

 

147

 

Additional paid-in capital

 

162,609

 

 

170,534

 

Accumulated other comprehensive loss

 

-

 

 

(10)

 

Accumulated deficit

 

(68,432)

 

 

(94,289)

 

TOTAL SHAREHOLDERS’ EQUITY

 

94,322

 

 

76,382

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

176,732

 

 

160,362

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Product

10,897

 

 

7,901

 

 

21,520

 

 

13,705

 

Maintenance and professional services

14,204

 

 

15,131

 

 

26,035

 

 

30,571

 

Total revenues

25,101

 

 

23,032

 

 

47,555

 

 

44,276

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Product

1,001

 

 

660

 

 

1,530

 

 

1,213

 

Maintenance and professional services

3,902

 

 

4,096

 

 

7,411

 

 

9,113

 

Total cost of revenues

4,903

 

 

4,756

 

 

8,941

 

 

10,326

 

Gross profit

20,198

 

 

18,276

 

 

38,614

 

 

33,950

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

7,464

 

 

8,033

 

 

13,967

 

 

18,211

 

Sales and marketing

17,152

 

 

13,636

 

 

30,752

 

 

31,465

 

General and administrative

3,289

 

 

4,793

 

 

5,877

 

 

9,724

 

Total operating expenses

27,905

 

 

26,462

 

 

50,596

 

 

59,400

 

Operating loss

(7,707)

 

 

(8,186)

 

 

(11,982)

 

 

(25,450)

 

Financial income (expense), net

(277)

 

 

(127)

 

 

(237)

 

 

436

 

Loss before taxes on income

(7,984)

 

 

(8,313)

 

 

(12,219)

 

 

(25,014)

 

Taxes on income

(230)

 

 

(500)

 

 

(443)

 

 

(843)

 

Net loss

(8,214)

 

 

(8,813)

 

 

(12,662)

 

 

(25,857)

 

Basic and diluted net loss per ordinary share

(0.26)

 

 

(0.25)

 

 

(0.64)

 

 

(0.73)

 

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

31,164

 

 

35,650

 

 

19,723

 

 

35,552

 

Share-based Compensation Expense:

 

Three Months Ended

 

 

 

 

Six Months Ended

 

June 30,

 

 

June 30,

 

 

 

 

June 30,

 

 

June 30,

 

2019

 

 

2020

 

 

 

 

2019

 

 

2020

Cost of revenues

311

 

 

467

 

 

546

 

 

962

Research and development

477

 

 

1,113

 

 

615

 

 

2,183

Sales and marketing

1,511

 

 

1,022

 

 

2,000

 

 

2,209

General and administrative

344

 

 

935

 

 

574

 

 

1,838

Total share-based compensation expense

2,643

 

 

3,537

 

 

3,735

 

 

7,192

TUFIN SOFTWARE TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

U.S. dollars in thousands

 

(Unaudited)

 
   

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

 

(12,662)

 

 

 

(25,857)

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

587

 

 

 

694

 

Bad debt expense

 

 

31

 

 

 

51

 

Share-based compensation

 

 

3,735

 

 

 

7,192

 

Exchange rate differences on cash, cash equivalents and restricted cash

 

 

(262)

 

 

 

127

 

Other

 

 

7

 

 

 

2

 

Change in operating assets and liability items:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,560

 

 

 

5,418

 

Prepaid expenses and other current assets

 

 

468

 

 

 

(3,349)

 

Deferred costs

 

 

424

 

 

 

230

 

Deferred taxes and other non-current assets

 

 

(1,522)

 

 

 

137

 

Trade payables

 

 

1,556

 

 

 

(129)

 

Employee and payroll accrued expenses

 

 

(521)

 

 

 

(534)

 

Other accounts payable and non-current liabilities

 

 

(2,233)

 

 

 

60

 

Operating lease

 

 

1,860

 

 

 

(242)

 

Deferred revenues

 

 

8,507

 

 

 

4,988

 

Net cash provided by (used in) operating activities

 

 

1,535

 

 

 

(11,212)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(1,584)

 

 

 

(1,598)

 

Investment in marketable securities

 

 

-

 

 

 

(10,638)

 

Other investing activities

 

 

(21)

 

 

 

-

 

Net cash used in investing activities

 

 

(1,605)

 

 

 

(12,236)

 

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

 

 

201

 

 

 

954

 

Changes in withholding tax related to employee stock plans

 

 

-

 

 

 

(1,227)

 

Payment of long-term loan

 

 

(222)

 

 

 

-

 

Net cash provided by (used in) financing activities

 

 

112,949

 

 

 

(273)

 

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

 

 

262

 

 

 

(127)

 

 

 

 

 

 

 

 

 

 

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

 

 

113,141

 

 

 

(23,848)

 

 

 

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

 

17,598

 

 

 

121,729

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

 

130,739

 

 

 

97,881

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

 

278

 

 

 

-

 

Unpaid offering costs

 

 

382

 

 

 

-

 

Exercise of share options

 

 

-

 

 

 

8

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

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

(Unaudited)

 

Reconciliation of Gross Profit to Non-GAAP Gross Profit:

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Gross profit

20,198

 

 

18,276

 

 

38,614

 

 

33,950

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

311

 

 

467

 

 

546

 

 

962

 

Non-GAAP gross profit

20,509

 

 

18,743

 

 

39,160

 

 

34,912

 

 

 

 

Reconciliation of Operating loss to Non-GAAP Operating loss:

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Operating loss

(7,707)

 

 

(8,186)

 

 

(11,982)

 

 

(25,450)

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

2,643

 

 

3,537

 

 

3,735

 

 

7,192

 

Shelf registration costs

-

 

 

126

 

 

-

 

 

126

 

One-time reorganization charges

-

 

 

-

 

 

-

 

 

322

 

Non-GAAP Operating loss

(5,064)

 

 

(4,523)

 

 

(8,247)

 

 

(17,810)

 

 

 

 

Reconciliation of Net loss to Non-GAAP Net loss:

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Net loss

(8,214)

 

 

(8,813)

 

 

(12,662)

 

 

(25,857)

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

2,643

 

 

3,537

 

 

3,735

 

 

7,192

 

Shelf registration costs

-

 

 

126

 

 

-

 

 

126

 

One-time reorganization charges

-

 

 

-

 

 

-

 

 

322

 

Taxes on income related to non-GAAP adjustments

-

 

 

(95)

 

 

-

 

 

(267)

 

Non-GAAP Net loss

(5,571)

 

 

(5,245)

 

 

(8,927)

 

 

(18,484)

 

Non-GAAP net loss per share

Basic and diluted

(0.18)

 

 

(0.15)

 

 

(0.45)

 

 

(0.52)

 

Weighted average number of shares

31,164

 

 

35,650

 

 

19,723

 

 

35,552

 

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.

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:
Susan Rivera
Corporate Communications, Tufin
susan.rivera@tufin.com

Source: Tufin

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