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Tufin Announces Third Quarter 2020 Results

11/12/2020

Third quarter revenue of $25.6 million remained relatively flat year-over-year

GAAP operating loss of $5.0 million and non-GAAP operating loss of $1.0 million represent year-over-year improvement

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, 2020.

“Our business improved meaningfully in the third quarter, relative to first half year results that were significantly impacted by the COVID-19 pandemic,” said Ruvi Kitov, CEO and co-founder of Tufin. “We are seeing positive signs in the marketplace as demand for our core products is growing, driven by the accelerating trends of automation and Zero-Trust. At the same time, SecureCloud, which we launched in the first quarter this year, is gaining traction as large enterprises move into the cloud. Due to actions taken earlier in the year, our costs are lower, and our balance sheet is strong. While uncertainty remains higher than normal, we believe that Tufin is well positioned to achieve our long-term growth objectives, addressing a large and expanding market.”

Financial Highlights for the Third Quarter Ended September 30, 2020

Revenue:

  • Total revenue was $25.6 million, relatively flat compared with the third quarter of 2019.
  • Product revenue was $10.0 million, down 13.1% compared with the third quarter of 2019.
  • Maintenance and professional services revenue was $15.6 million, up 10.8% compared with the third quarter of 2019.

Gross Profit:

  • GAAP gross profit was $21.0 million, or 82% of total revenue, compared to $20.7 million in the third quarter of 2019, or 81% of total revenue.
  • Non-GAAP gross profit was $21.6 million, or 84% of total revenue, compared to $21.0 million in the third quarter of 2019, or 82% of total revenue.

Operating Loss:

  • GAAP operating loss was $5.0 million, compared to $7.7 million in the third quarter of 2019.
  • Non-GAAP operating loss was $1.0 million, compared to $5.1 million in the third quarter of 2019.

Net Loss:

  • GAAP net loss was $5.1 million, or a loss of $0.14 per share, compared to a GAAP net loss of $8.3 million, or a loss of $0.24 per share, in the third quarter of 2019.
  • Non-GAAP net loss was $1.2 million, or a loss of $0.03 per share, compared to a loss of $5.7 million, or a loss of $0.17 per share, in the third quarter of 2019.

Balance Sheet and Cash Flow:

  • Cash flow used for operating activities during the nine months ended September 30, 2020 was $15.7 million, compared to cash flow used for operating activities of $3.0 million during the nine months ended September 30, 2019.
  • Total cash, cash equivalents, restricted cash and marketable securities as of September 30, 2020 were $103.6 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 nine months ended September 30, 2020 and 2019. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights

  • Announced the release of the Tufin IPAM Security Policy (ISP) App, the latest addition to the Tufin Marketplace. The ISP App provides out-of-the-box integration with leading IPAM solutions and ensures that network changes made through IPAM are visible to network security teams and are consistent with established network security policies.
  • Held Tufinnovate annual user event in September 2020, attracting a record number of customers and prospects.

2020 Outlook

Based on information available as of November 12, 2020, Tufin is issuing guidance as indicated below:

For the fourth quarter 2020:

  • Total revenue between $24 million and $29 million.
  • Non-GAAP operating loss between $5.9 million and $1.6 million.

For the full year 2020:

  • Total revenue between $93.9 million and $98.9 million.
  • Non-GAAP operating loss between $24.7 million and $20.4 million.

Guidance does not contemplate a further deterioration in global economic conditions related to the COVID-19 pandemic. Should macro-economic conditions deteriorate significantly during the remainder of the quarter, either due to government-imposed lockdowns or otherwise, our results could be impacted.

Conference Call Information

To participate in Tufin’s third quarter earnings conference call, please dial (866) 211-3126 (United States) or (647) 689-6579 (international) and enter Conference ID# 5285381. 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 (United States) or (416) 621-4642 (international). The replay passcode is 5285381. 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

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 (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 and certain non-recurring costs. 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 and certain non-recurring costs, as applicable, 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: 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,

 

 

September 30,

 

 

 

2019

 

 

2020

 

Assets

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

 

118,661

 

 

 

74,380

 

Restricted bank deposits

 

 

224

 

 

 

234

 

Marketable Securities - short term

 

 

-

 

 

 

10,045

 

Accounts receivable (net of allowance for doubtful accounts of $77 and $51 at December 31, 2019 and September 30, 2020, respectively)

 

 

16,222

 

 

 

11,642

 

Prepaid expenses and other current assets

 

 

4,773

 

 

 

7,550

 

Total current assets

 

 

139,880

 

 

 

103,851

 

NON CURRENT ASSETS:

 

 

 

 

 

 

 

 

Long-term restricted bank deposits

 

 

2,844

 

 

 

2,853

 

Marketable Securities - long term

 

 

-

 

 

 

16,133

 

Property and equipment, net

 

 

4,177

 

 

 

4,803

 

Deferred costs

 

 

5,640

 

 

 

5,516

 

Deferred tax assets

 

 

1,659

 

 

 

1,502

 

Operating lease assets

 

 

20,958

 

 

 

19,363

 

Other non-current assets

 

 

1,574

 

 

 

1,476

 

Total non-current assets

 

 

36,852

 

 

 

51,646

 

Total assets

 

 

176,732

 

 

 

155,497

 

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 

 

 

December 31,

 

 

September 30,

 

 

 

2019

 

 

2020

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Trade payables

 

 

4,394

 

 

 

4,513

 

Employee and payroll accrued expenses

 

 

15,422

 

 

 

14,373

 

Other accounts payables

 

 

1,568

 

 

 

661

 

Operating lease liabilities – current

 

 

2,533

 

 

 

2,996

 

Deferred revenues

 

 

22,725

 

 

 

24,733

 

Total current liabilities

 

 

46,642

 

 

 

47,276

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Long-term deferred revenues

 

 

12,838

 

 

 

12,088

 

Non-current operating lease liabilities

 

 

22,000

 

 

 

19,722

 

Other non-current liabilities

 

 

930

 

 

 

1,038

 

Total non-current liabilities

 

 

35,768

 

 

 

32,848

 

Total liabilities

 

 

82,410

 

 

 

80,124

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Ordinary shares of NIS 0.015 par value; 150,000,000 shares authorized at December 31, 2019 and September 30, 2020, respectively; 35,230,253 and 35,796,817 shares issued and outstanding at December 31, 2019 and September 30, 2020, respectively;

 

 

145

 

 

 

147

 

Additional paid-in capital

 

 

162,609

 

 

 

174,652

 

Accumulated other comprehensive income

 

 

-

 

 

 

10

 

Accumulated deficit

 

 

(68,432)

 

 

 

(99,436)

 

TOTAL SHAREHOLDERS’ EQUITY

 

 

94,322

 

 

 

75,373

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

176,732

 

 

 

155,497

 

         

TUFIN SOFTWARE TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

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

 

(Unaudited)

 
         

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

September 30,

 

 

2019

 

 

2020

 

 

2019

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

Product

11,510

 

 

10,000

 

 

33,030

 

23,705

 

Maintenance and professional services

14,090

 

 

15,606

 

 

40,125

 

46,177

 

Total revenues

25,600

 

 

25,606

 

 

73,155

 

69,882

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

Product

608

 

 

523

 

 

2,138

 

1,736

 

Maintenance and professional services

4,317

 

 

4,044

 

 

11,728

 

13,157

 

Total cost of revenues

4,925

 

 

4,567

 

 

13,866

 

14,893

 

Gross profit

20,675

 

 

21,039

 

 

59,289

 

54,989

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Research and development

8,331

 

 

8,071

 

 

22,298

 

26,282

 

Sales and marketing

16,161

 

 

12,988

 

 

46,913

 

44,453

 

General and administrative

3,844

 

 

4,994

 

 

9,721

 

14,718

 

Total operating expenses

28,336

 

 

26,053

 

 

78,932

 

85,453

 

Operating loss

(7,661)

 

 

(5,014)

 

 

(19,643)

 

(30,464)

 

Financial income (expense), net

(342)

 

 

240

 

 

(579)

 

676

 

Loss before taxes on income

(8,003)

 

 

(4,774)

 

 

(20,222)

 

(29,788)

 

Taxes on income

(279)

 

 

(373)

 

 

(722)

 

(1,216)

 

Net loss

(8,282)

 

 

(5,147)

 

 

(20,944)

 

(31,004)

 

Basic and diluted net loss per ordinary share

(0.24)

 

 

(0.14)

 

 

(0.85)

 

(0.87)

 

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

34,145

 

 

35,758

 

 

24,721

 

35,621

 

 

Share-based Compensation Expense:

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

2019

 

2020

 

2019

 

2020

Cost of revenues

 

341

 

574

 

887

 

1,536

Research and development

 

505

 

1,244

 

1,120

 

3,427

Sales and marketing

 

1,083

 

1,118

 

3,083

 

3,327

General and administrative

 

671

 

1,056

 

1,245

 

2,894

Total share-based compensation expense

 

2,600

 

3,992

 

6,335

 

11,184

 

TUFIN SOFTWARE TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

 

(20,944)

 

 

 

(31,004)

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

881

 

 

 

1,068

 

Bad debt expense

 

 

31

 

 

 

51

 

Share-based compensation

 

 

6,335

 

 

 

11,184

 

Amortization of premium on marketable securities

 

 

-

 

 

 

35

 

Exchange rate differences on cash, cash equivalents and restricted cash

 

 

(314)

 

 

 

276

 

 

 

 

 

 

 

 

 

 

Change in operating assets and liabilities items:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,856

 

 

 

4,529

 

Prepaid expenses and other current assets

 

 

(23)

 

 

 

(3,126)

 

Deferred costs

 

 

(7)

 

 

 

232

 

Deferred taxes and other non-current assets

 

 

(2,059)

 

 

 

255

 

Trade payables

 

 

1,134

 

 

 

119

 

Employee and payroll accrued expenses

 

 

2,247

 

 

 

184

 

Other accounts payable and non-current liabilities

 

 

(1,872)

 

 

 

(533)

 

Operating lease

 

 

2,587

 

 

 

(220)

 

Deferred revenues

 

 

6,140

 

 

 

1,258

 

Net cash used in operating activities

 

 

(3,008)

 

 

 

(15,692)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(2,168)

 

 

 

(1,960)

 

Investment in marketable securities

 

 

-

 

 

 

(26,182)

 

Other investing activities

 

 

(172)

 

 

 

-

 

Net cash used in investing activities

 

 

(2,340)

 

 

 

(28,142)

 

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

 

 

840

 

 

 

1,081

 

Changes in withholding tax related to employee stock plans

 

 

-

 

 

 

(1,233)

 

Payment of long-term loan

 

 

(222)

 

 

 

-

 

Net cash provided by (used in) financing activities

 

 

113,265

 

 

 

(152)

 

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

 

 

337

 

 

 

(276)

 

 

 

 

 

 

 

 

 

 

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

 

 

108,254

 

 

 

(44,262)

 

 

 

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

 

17,598

 

 

 

121,729

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

 

125,852

 

 

 

77,467

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

 

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 data)

(Unaudited)

 

Reconciliation of Gross Profit to Non-GAAP Gross Profit:

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Gross profit

20,675

 

 

21,039

 

 

59,289

 

 

54,989

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

341

 

 

574

 

 

887

 

 

1,536

 

Non-GAAP gross profit

21,016

 

 

21,613

 

 

60,176

 

 

56,525

 

 

 

Reconciliation of Operating Loss to Non-GAAP Operating Loss:

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Operating loss

(7,661)

 

 

(5,014)

 

 

(19,643)

 

 

(30,464)

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

2,600

 

 

3,992

 

 

6,335

 

 

 

11,184

 

Shelf registration costs

 

 

 

 

 

 

 

 

 

 

 

126

 

One-time reorganization charges

 

 

 

 

 

 

 

 

 

322

 

Non-GAAP operating loss

(5,061)

 

 

(1,022)

 

 

(13,308)

 

 

(18,832)

 

 

 

Reconciliation of Net Loss to Non-GAAP Net Loss:

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

September
30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

Net loss

(8,282)

 

 

(5,147)

 

 

(20,944)

 

 

(31,004)

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

2,600

 

 

3,992

 

 

6,335

 

 

 

11,184

 

Shelf registration costs

 

-

 

 

-

 

 

-

 

 

 

126

 

One-time reorganization charges

 

-

 

 

-

 

 

-

 

 

 

322

 

Taxes on income related to non-GAAP adjustments

-

 

 

(18)

 

 

-

 

 

(285)

 

Non-GAAP net loss

(5,682)

 

 

(1,173)

 

 

(14,609)

 

 

(19,657)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share - basic and diluted

 

(0.17)

 

 

(0.03)

 

 

(0.59)

 

 

 

(0.55)

 

Weighted average number of shares

34,145

 

 

35,758

 

 

24,721

 

 

35,621

 

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 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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