Tufin Announces Third Quarter 2020 Results

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.

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

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