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What changed in VARONIS SYSTEMS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VARONIS SYSTEMS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+395 added−401 removedSource: 10-K (2025-02-06) vs 10-K (2024-02-06)

Top changes in VARONIS SYSTEMS INC's 2024 10-K

395 paragraphs added · 401 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

93 edited+16 added−12 removed55 unchanged
Biggest changeSeasonality See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Seasonality and Quarterly Trends.” 9 Competition While there are some companies which offer certain features similar to those embedded in our solutions, as well as others with which we compete in certain use cases, we believe that we do not currently compete with a company that offers the same breadth of functionalities on the number of data stores and application that we cover.
Biggest changeWhile we have generally been able to obtain such licenses on commercially reasonable terms in the past, such third parties may not continue to maintain such software or continue to make it available to us. 9 Seasonality See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Seasonality and Quarterly Trends.” Competition While there are some companies which offer features similar to those embedded in our platform, we believe that we do not currently compete with a company that offers comparable depth of functionality, scalability, or support for the number of data stores, applications and infrastructure environments that we cover.
Varonis software enables enterprises of all sizes and industries to protect data stored on-premises and in the cloud, including: sensitive files, emails and databases; confidential personal data belonging to customers, patients and employees; financial records; source code, strategic and product plans; and other intellectual property.
Varonis software enables enterprises of all sizes and industries to protect data stored in the cloud and on-premises, including: sensitive files, emails and databases; confidential personal data belonging to customers, patients and employees; financial records; source code, strategic and product plans; and other intellectual property.
Our belief in our technological advantage stems from our having developed a way to do each of the following: • analyze the relationships between users and data with sophisticated algorithms, including cluster analyses and machine learning; • visualize and depict the analyses in an intuitive manner, including simulating contemplated changes and automatically executing tasks that are becoming increasingly more complex for IT and business personnel; • identify and automatically classify data as sensitive, critical, private or regulated, to help organizations ensure compliance with regulations, including the General Data Protection Regulation ("GDPR") and the California Consumer Privacy Act ("CCPA"); • automate remediation of excessive access to sensitive information across large data stores and cloud applications to safely ensure a Zero Trust or least privilege model; • profile users, devices and data to detect suspicious account behavior and unusual file and email activity using deep analysis of metadata, machine learning and user behavior analytics; • profile cloud configurations and interconnectivity to identify potential exposure and abuse; • generate meaningful, actionable alerts when security-related incidents are detected; • enable security teams to investigate and respond to cyber threats more quickly and conclusively with the help of Gen AI; • automatically respond to severe incidents, such as ransomware, to limit the potential impact and reduce recovery times; • provide customers Live Updates to our platform, which address the rapidly evolving threats they face; • determine relevant metadata and security information to capture without impacting the enterprise's computing and network infrastructure; • modify and enrich that metadata in a way that makes it comparable and analyzable despite it having originated from disparate IT systems, and create supplemental metadata, as needed, when the existing IT infrastructure’s activity logs are insufficient; • decipher the key functional relationships of metadata, the underlying data, and its creators; and • use those functional relationships to create a graphical depiction, or map, of the data that will endure as enterprises continuously add large volumes of data to their network and storage resources.
Our belief in our technological advantage stems from having developed a way to do each of the following: • analyze the relationships between users and data with sophisticated algorithms, including cluster analyses and machine learning; • visualize and depict the analyses in an intuitive manner, including simulating contemplated changes and automatically executing tasks that are becoming increasingly more complex for IT and business personnel; • identify and automatically classify data as sensitive, critical, private or regulated, to help organizations ensure compliance with regulations, including the General Data Protection Regulation ("GDPR") and the California Consumer Privacy Act ("CCPA"); • automate remediation of excessive access to sensitive information across large data stores and cloud applications to safely ensure a Zero Trust or least privilege model; • profile users, devices and data to detect suspicious account behavior and unusual file and email activity using deep analysis of metadata, machine learning and user behavior analytics; • profile cloud configurations and interconnectivity to identify potential exposure and abuse; • generate meaningful, actionable alerts when security-related incidents are detected; • enable security teams to investigate and respond to cyber threats more quickly and conclusively with the help of Gen AI; • automatically respond to severe incidents, such as ransomware, to limit the potential impact and reduce recovery times; • provide customers live updates to our platform, which address the rapidly evolving threats they face; • determine relevant metadata and security information to capture without impacting the enterprise's computing and network infrastructure; • modify and enrich that metadata in a way that makes it comparable and analyzable despite it having originated from disparate IT systems, and create supplemental metadata, as needed, when the existing IT infrastructure’s activity logs are insufficient; • decipher the key functional relationships of metadata, the underlying data, and its creators; and • use those functional relationships to create a graphical depiction, or map, of the data that will endure as enterprises continuously add large volumes of data to their network and storage resources.
Visibility and Data Monitoring Capabilities All in One Place. Our solution combines analysis from disparate on-premises and cloud stores, applications and infrastructure and presents them in a single view, even as data storage and user access become more dispersed and complex in hybrid environments. Fast Time-to-Value and Low Total Cost of Ownership.
Visibility and Data Monitoring Capabilities All in One Place. Our solution combines analysis from disparate on-premises and cloud stores, applications and infrastructure environments and presents them in a single view, even as data storage and user access become more dispersed and complex in hybrid environments. Fast Time-to-Value and Low Total Cost of Ownership.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, technology, energy and utilities, consumer and retail, education and construction and engineering sectors. We also believe our existing customers represent significant future revenue opportunities for us.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, technology, consumer and retail, education and construction and engineering sectors. We also believe our existing customers represent significant future revenue opportunities for us.
Our customers include leading firms in the financial services, public, healthcare, industrial, insurance, technology, energy and utilities, consumer and retail, education and construction and engineering sectors, with hundreds of thousands of employees and petabytes of data.
Our customers include leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, technology, consumer and retail, education and construction and engineering sectors, with hundreds of thousands of employees and petabytes of data.
These use cases include: automatic discovery and classification of high-risk, sensitive data; data security posture management; SaaS security posture management; automated remediation of over-exposed data; centralized visibility and risk analysis of enterprise data and monitoring of user behavior and file activity; security monitoring and risk reduction; data breach, insider threat, malware and ransomware detection; automatic response to ransomware and other severe incidents to limit exposure and reduce recovery times; data ownership identification, assignment, and automatic involvement; forensics, reporting and auditing with searchable logs; meeting security policy and compliance regulation; automatic data migration; cloud migration; 2 automation of retention and disposition policies; automatic data quarantine; intelligent archiving; and automated indexing for data subject requests related to privacy and compliance requirements.
These use cases include: automatic discovery and classification of high-risk, sensitive data; data security posture management; SaaS security posture management; automated remediation of over-exposed data; centralized visibility and risk analysis of enterprise data and monitoring of user behavior and file activity; security monitoring and risk reduction; data breach, insider threat, malware and ransomware detection with MDDR; automatic response to ransomware and other severe incidents to limit exposure and reduce recovery times; data ownership identification, assignment, and automatic involvement; forensics, reporting 2 and auditing with searchable logs; meeting security policy and compliance regulation; automatic data migration; cloud migration; automation of retention and disposition policies; automatic data quarantine; intelligent archiving; and automated indexing for data subject requests related to privacy and compliance requirements.
Customers can easily find relevant files, pinpoint who has access and enforce policies to move and quarantine regulated data. 4 Our Growth Strategy Our objective is to be the primary vendor that enterprises turn to protect their data. The following are key elements of our growth strategy. Extend Our Technological Capabilities Through Innovation and Strategic Transactions.
Customers can easily find relevant files, pinpoint who has access and enforce policies to move and quarantine regulated data. Our Growth Strategy Our objective is to be the primary vendor that enterprises turn to protect their data. The following are key elements of our growth strategy. Extend Our Technological Capabilities Through Innovation and Strategic Transactions.
In addition, we maintain a highly trained professional sales force that is responsible for overall market development, including the management of the relationships with our channel partners and supporting channel partners in winning customers through operating demonstrations and risk assessments. Our channel partners identify potential sales targets, maintain relationships with customers and introduce new products to existing customers.
In addition, we maintain a highly trained professional sales force that is responsible for overall market development, including the management of the relationships with our channel partners and supporting channel partners in winning customers through operating demonstrations and risk assessments. Our channel partners identify potential sales targets, maintain relationships with 8 customers and introduce new products to existing customers.
As we continue to innovate by addressing more use cases, adding more data coverage, and providing automated data security outcomes to customers, we expect to see broader and stickier adoption of our platform. In addition, our transition to a predominately SaaS delivery model provides us with a unique opportunity to convert existing customers to our SaaS offering.
As we continue to innovate by addressing more use cases, adding more data coverage, and providing automated data security outcomes to customers, we expect to see broader and stickier adoption of our platform. In addition, our transition to a SaaS delivery model provides us with a unique opportunity to convert existing customers to our SaaS offering.
Automatically and continuously scans the contents of files, folders, and other objects to determine sensitivity with a high degree of accuracy and precision. ◦ Discovery policy library . A frequently updated library for identifying and classifying personal information specific to GDPR, CCPA, and US federal controlled unclassified information (CUI). ◦ Least privilege automation .
Automatically and continuously scans the contents of files, folders, and other objects to determine sensitivity with a high degree of accuracy and precision. ◦ Discovery policy library . A frequently updated library for identifying and classifying personal information specific to GDPR, CCPA, and US federal controlled unclassified information (CUI). 6 ◦ Least privilege automation .
We strive to ensure that our employees receive competitive and fair compensation and innovative benefit offerings, tying incentive compensation to both business and individual performance, offering competitive maternal and paternal leave policies, providing meaningful retirement and health benefits and maintaining an employee stock purchase plan. • Support Employee Well-being and Engagement .
We strive to ensure that our employees receive competitive and fair compensation and innovative benefit offerings, tying incentive compensation to both business and individual performance, offering competitive maternal and paternal leave policies, providing meaningful retirement and health benefits and maintaining an employee stock purchase plan. 10 • Support Employee Well-being and Engagement .
DatAdvantage, our flagship product, captures, aggregates, normalizes and analyzes every data access event for every user on Windows and UNIX/Linux servers, storage devices, email systems, Intranet servers, cloud applications and data stores, without requiring native operating system auditing functionalities or impacting performance or storage on file systems. • DatAlert.
DatAdvantage, our flagship product, captures, aggregates, normalizes and analyzes every data access event for every user on Windows and UNIX/Linux servers, storage devices, email systems, Intranet servers, cloud applications and data stores, without requiring native operating system auditing functionalities or impacting performance or storage on file systems. 7 • DatAlert.
By ensuring the least privilege, monitoring all access and alerting on potential misuse, Varonis enables privacy by design on data stores containing sensitive and regulated information. Fulfill Data Subject Access Requests ("DSARs") and Protect Consumer Data. Our solutions help fulfill DSARs from file systems on-premises and in the cloud.
By 4 ensuring the least privilege, monitoring all access and alerting on potential misuse, Varonis enables privacy by design on data stores containing sensitive and regulated information. Fulfill Data Subject Access Requests ("DSARs") and Protect Consumer Data. Our solutions help fulfill DSARs from file systems on-premises and in the cloud.
This architecture gives our clients the ability to select the features they require for their business needs and the flexibility to expand their usage simply by adding a license, and the fully integrated nature of our products allows individual products to enhanc e the functionality of the others.
This architecture gives our clients the ability to select the features they require for their business needs and the flexibility to expand their usage simply by adding a license, and the fully integrated nature of our products allows individual products to enhanc e the functionality of the others. • DatAdvantage.
Item 1. Business We were incorporated under the laws of the State of Delaware on November 3, 2004 and commenced operations on January 1, 2005. Our principal executive offices are located at 1250 Broadway, 28th Floor, New York, NY 10001.
Item 1. Business We were incorporated under the laws of the State of Delaware on November 3, 2004 and commenced operations on January 1, 2005. Our principal offices are located at 1250 Broadway, 28th Floor, New York, NY 10001.
We conduct the majority of our research and development activities in Israel, and we believe this provides us with access to world-class engineering talent. In addition, we continue to seek opportunities to extend our technological capabilities and grow our business from strategic technological tuck-in acquisitions.
We conduct the majority of our research and development activities in Israel, and we believe this provides us with access to world-class engineering talent. In addition, we continue to seek opportunities to extend our technological capabilities and grow our business from strategic technological acquisitions.
The initial functionality provided by Athena AI includes (i) an AI-powered security operations center (SOC) analyst that combines large language models (LLMs) with Varonis' unique context about an organization's data, identities, devices and previous alerts to instantly generate tailored alert response playbooks and recommendations and (ii) a natural language search interface that lets users run reports, perform risk analysis and conduct security investigations without any domain-specific knowledge or product expertise.
The initial functionality provided by Athena AI includes (i) an AI-powered security operations center (SOC) analyst that combines LLMs with Varonis' unique context about an organization's data, identities, devices and previous alerts to instantly generate tailored alert response playbooks and recommendations and (ii) a natural language search interface that lets users run reports, perform risk analysis and conduct security investigations without any domain-specific knowledge or product expertise.
We believe the adoption of generative artificial intelligence (“Gen AI”) tools in the enterprise will dramatically compound data growth and introduce new data security challenges that can only be addressed with automation. Gen AI-powered productivity features, commonly called “copilots,” are now embedded within applications such as Microsoft 365, Salesforce, Google Workspace, and Box.
We believe the adoption of generative artificial intelligence (“Gen AI”) tools will dramatically compound data growth and introduce new data security challenges that can only be addressed with automation. Gen AI-powered productivity features, commonly called “copilots,” are now embedded within applications such as Microsoft 365, Salesforce, Google Workspace, and Box.
Our renewal rate for the year ended December 31, 2023 continued to be over 90%. Our key strategies to ensure a high renewal rate for our products include focusing on the quality and reliability of our customer service and support teams and providing software upgrades and enhancements when available. Grow Sales from Our New Products and Functionality.
Our renewal rate for the year ended December 31, 2024 continued to be over 90%. Our key strategies to ensure a high renewal rate for our products include focusing on the quality and reliability of our customer service and support teams and providing software upgrades and enhancements when available. Grow Sales from Our New Products and Functionality.
As we continue to augment our functionality with insider threat detection and user behavior analytics and as we expand our classification capabilities to better serve compliance needs with new regulations, and as these functionalities continue to be recognized as critical to protect enterprise data, we may face increased perceived and real competition from other security and classification technologies.
As we continue to augment our functionality with AI security, insider threat detection and user behavior analytics and as we expand our classification capabilities to better serve compliance needs with new regulations, and as these functionalities continue to be recognized as critical to protect enterprise data, we may face increased perceived and real competition from other data security and privacy technologies.
These tools typically leverage existing data security controls to determine which sensitive information can be used by artificial intelligence ("AI"); if an organization’s data security controls are not optimized, they face an increased risk of unintentional data exposure and potential abuse by malicious actors.
These tools typically leverage existing data security controls to determine which sensitive information can be used by AI; if an organization’s data security controls are not optimized, they face an increased risk of unintentional data exposure and potential abuse by malicious actors.
While the significant increase of software-as-service (“SaaS”) and infrastructure-as-service (“IaaS”) usage has accelerated workforce collaboration and IT operations, it has also created unprecedented data sprawl and complexity that have contributed to a growing number of catastrophic data breaches.
While the significant increase of software-as-service (“SaaS”) and infrastructure-as-service (“IaaS”) usage has accelerated workforce collaboration and information technology ("IT") operations, it has also created unprecedented data sprawl and complexity that have contributed to a growing number of catastrophic data breaches.
Our technology enables enterprises to analyze data, account activity and user behavior to help detect and prevent attacks.
Our technology enables enterprises to analyze data, application and account activity and user behavior to help detect and prevent attacks.
The success of our license bundles under the OPS model demonstrated that customers want to utilize and benefit from the majority of Varonis’ core functionality from the start. We know that customers who utilize a higher number of licenses see more value upfront through automation and synergy between modules.
The success of our license bundles under the on-premises subscription ("OPS") model demonstrated that customers want to utilize and benefit from the majority of Varonis’ core functionality from the start. We know that customers who utilize a higher number of licenses see more value upfront through automation and synergy between modules.
Our Metadata Framework technology has been architected to process large volumes of enterprise data and related metadata at a massive scale with minimal demands on the existing IT infrastructure. On October 31, 2022, Varonis announced the availability of our flagship Varonis Data Security Platform as a SaaS.
Our Metadata Framework technology has been architected to process large volumes of enterprise data and related metadata at a massive scale with minimal demands on the existing IT infrastructure. At the end of 2022, Varonis announced the availability of our flagship Varonis Data Security Platform as a SaaS.
We believe that we generally compete favorably in each of these categories. We also believe that we distinguish ourselves from others by delivering a single, integrated solution and sophisticated automation to address our customers’ needs regarding data security, threat detection and response, data privacy and retention.
We believe that we generally compete favorably in each of these categories. We also believe that we distinguish ourselves from others by delivering an integrated solution and sophisticated automation to address our customers’ needs regarding data security, threat detection and response, data privacy and retention.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, technology, energy and utilities, consumer and retail, education and construction and engineering sectors. We believe our existing customer base is a strong source of incremental revenues given our broad data coverage, the growing volumes and complexity of their enterprise data and the associated security concerns.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, technology, consumer and retail, education and construction and engineering sectors. We believe our existing customer base is a strong source of future incremental revenues given our broad platform of products, the growing volumes and complexity of their enterprise data and the associated security concerns.
That data will include both structured and unstructured data, but unstructured data overwhelmingly dominates, accounting for more than 90% of the data created each year. We expect this significant growth to continue creating a need for automation technologies to protect and manage data.
That data will include both structured and unstructured data, but unstructured data overwhelmingly dominates, accounting for approximately 90% of the data created each year. We expect this significant growth to continue creating a need for automation technologies to protect and manage data.
We also regularly seek input from employees, including through broad employee satisfaction and pulse surveys on 10 specific issues, intended to assess our degree of success in promoting an environment where employees are engaged, satisfied, productive and possess a strong understanding of our business goals. • Promote Sense of Belonging through Diversity and Inclusion Initiatives .
We also regularly seek input from employees, including through broad employee satisfaction and pulse surveys on specific issues, intended to assess our degree of success in promoting an environment where employees are engaged, satisfied, productive and possess a strong understanding of our business goals. • Promote Sense of Belonging .
Services Maintenance and Support of Subscription and Perpetual Licenses Maintenance and support associated with a subscription license is included in the Subscriptions revenue line of the statement of operations. Maintenance and support associated with perpetual licenses is included in the Maintenance and services line of the statement of operations.
Services Maintenance and Support of Subscription and Perpetual Licenses Maintenance and support associated with a term license subscription is included in the Term license subscriptions revenue line of the statement of operations. Maintenance and support associated with past perpetual licenses is included in the Maintenance and services line of the statement of operations.
Our solutions combine classification and data access governance with User and Entity Behavior Analytics ("UEBA") on data stores, cloud applications, directory services and perimeter devices, including Domain Name System ("DNS"), Virtual Private Network ("VPN") and web proxy, for accurate detection and risk reduction.
Our solutions combine classification and data access governance with User and Entity Behavior Analytics ("UEBA") on data stores, cloud applications, identity repositories and perimeter devices, including Domain Name System ("DNS"), Virtual Private Network ("VPN") and web proxy, for accurate detection and risk reduction.
The nature and extent of legal protection of our intellectual property rights depends on, among other things, its type and the jurisdiction in which it arises. As of December 31, 2023, we had 88 issued patents and 16 pending patent applications in the United States. Our issued U.S. patents expire between 2025 and 2042.
The nature and extent of legal protection of our intellectual property rights depends on, among other things, its type and the jurisdiction in which it arises. As of December 31, 2024, we had 89 issued patents and 31 pending patent applications in the United States. Our issued U.S. patents expire between 2025 and 2042.
We intend to increase, in absolute dollars, our current level of investment in product development to enhance existing products to address new use cases and continue to deliver new products.
We intend to increase, in absolute dollars, our current level of investment in product development to enhance existing products to address new use cases and continue to deliver new products, including through acquisitions.
We believe that our sales model, which combines the leverage of a channel sales model with our highly trained and professional sales force to efficiently identify leads, perform risk assessments and convert them to satisfied customers, has and will continue to play a major role in our ability to grow and to successfully deliver our unique value proposition for enterprise data. 5 Establish Our Data Security Platform as the Industry Standard.
We believe that our sales model, which combines the leverage of a channel sales model with our highly trained and 5 professional sales force to efficiently identify leads, perform risk assessments and convert them to satisfied customers, has and will continue to play a major role in our ability to grow and to successfully deliver our unique value proposition for enterprise data.
Software-as-a-Service ("SaaS") Our SaaS product portfolio currently includes two product lines: (1) our flagship Varonis Data Security Platform, which protects Microsoft 365, Windows file shares, Active Directory, Edge devices (VPN, DNS, proxy), UNIX/Linux and hybrid NAS storage, and (2) DatAdvantage Cloud, which protects SaaS and IaaS environments such as Salesforce, AWS, Azure, Google Drive, Box, GitHub, Zoom, Slack, Jira and Okta. • Varonis Data Security Platform .
Software-as-a-Service ("SaaS") Our SaaS product portfolio currently includes two product lines: (1) our flagship Varonis Data Security Platform, which protects Microsoft 365, Windows file shares, Active Directory, Edge devices (VPN, DNS, proxy), UNIX/Linux and hybrid NAS storage, and (2) DatAdvantage Cloud, which protects IaaS environments and SaaS applications such as Salesforce, AWS, Azure, Google Cloud, Google Workspace, Databricks, ServiceNow, Snowflake, Slack, GitHub, Okta and Box, Jira, Zoom and databases. • Varonis Data Security Platform .
Data continues to grow in new and existing data stores both in the cloud and on-premises, a trend we have seen accelerate as companies worldwide undergo a wave of digital transformation initiatives that have significantly impacted how they must approach data security.
Data continues to grow in new and existing data stores both in the cloud and on-premises, a trend we have seen accelerate as companies worldwide undergo waves of digital transformation and artificial intelligence ("AI") initiatives that have significantly impacted how they must approach data security.
We believe that these trends provide us with a long-term opportunity to fulfill our mission of protecting sensitive data for our customers and alleviating the resource pressure and skills shortage that companies face through our automation capabilities.
We believe that these trends provide us with a long-term opportunity to fulfill our mission of protecting sensitive data for our customers and alleviating the resource pressure and skills shortage that companies face through our automation capabilities and Managed Data Detection and Response ("MDDR") offering.
We also had 67 patents issued and 31 applications pending for examination in non-U.S. jurisdictions, and seven pending Patent Cooperation Treaty (“PCT”) patent applications, all of which are counterparts of our U.S. patent applications. The claims for which we have sought patent protection relate primarily to inventions we have developed for incorporation into our products.
We also had 76 patents issued and 34 applications pending for examination in non-U.S. jurisdictions, and 18 pending Patent Cooperation Treaty (“PCT”) patent applications, all of which are counterparts of our U.S. patent applications. The claims for which we have sought patent protection relate primarily to inventions we have developed for incorporation into our products.
Varonis Data Security Platform SaaS customers can decide which data stores, applications, and infrastructure they want to protect by purchasing “Protection Packages.” Our SaaS platform supports virtually every resource covered by our self-hosted version, and we believe our SaaS architecture will allow us to add support for new resources faster than ever.
Varonis Data Security Platform SaaS customers can decide which data stores, applications, and infrastructure environments they want to protect by purchasing “Protection Packages.” Our SaaS platform supports every resource covered by our self-hosted version, and we believe our SaaS architecture will allow us to move quickly to add support for new resources.
Key Benefits of Our Technology We believe our transition to SaaS enhances many of the below benefits and will allow us to deliver additional benefits to customers that our cloud technology unlocks.
Key Benefits of Our Technology We believe our transition to SaaS enhances many of the benefits described below and allows us to deliver additional benefits to customers that our cloud technology unlocks.
Enterprises now use many different combinations of data stores and applications, making it difficult to holistically visualize, quantify and control data breach risk without a unified data security platform. We believe our offering's comprehensive data coverage allows organizations to keep pace with the relentless data growth, sprawl and complexity. We started in 2005 with coverage for Windows file shares.
Enterprises now use many different combinations of data stores and applications, making it difficult to holistically visualize, quantify and control data breach risk without a unified data security platform. We believe our offering's comprehensive data coverage and automation allows organizations to keep pace with the relentless data growth, sprawl and complexity.
Our customers that purchase maintenance and support services receive guaranteed response times, direct telephonic support and access to online support portals. Our customer support organization has global capabilities with expertise in both our software and complex IT environments and associated third-party infrastructure.
We maintain a customer support organization that provides all levels of support to our customers. Our customers that purchase maintenance and support services receive guaranteed response times, direct telephonic support and access to online support portals. Our customer support organization has global capabilities with expertise in both our software and complex IT environments and associated third-party infrastructure.
While our products serve customers of all sizes, in all industries and all geographies, the marketing focus and majority of our sales focus is on targeting organizations with 1,000 users or more who can make larger initial purchases with us and, over time, have a greater potential lifetime value.
While our products serve customers of all sizes, across all industries and all geographies, the marketing focus and majority of our sales focus is on targeting larger organizations who can make sizable initial purchases with us and, over time, have a greater potential lifetime value.
While our products serve customers of all sizes, in all industries and all geographies, the marketing focus and majority of our sales focus is on targeting organizations with 1,000 users or more who can make larger initial purchases with us and, over time, generate a greater potential lifetime value.
While our products serve customers of all sizes, across all industries and all geographies, the marketing focus and majority of our sales focus is on targeting larger organizations who can make sizable initial purchases with us and, over time, generate a greater potential lifetime value.
We believe that the (i) Varonis Data Security Platform technology, (ii) coverage of more than 40 of the most mission-critical cloud and on-premises data stores, applications and infrastructure and (iii) technical experts within the Company who continue to expand and improve our offering are our primary, hard to replicate competitive advantages.
We believe that the (i) Varonis Data Security Platform technology, (ii) coverage for most mission-critical cloud and on-premises data stores and cloud infrastructure environments, identity repositories and many critical SaaS applications and (iii) technical experts within the Company who continue to expand and improve our offering are our primary, hard to replicate competitive advantages.
Employees and Human Capital Resources As of December 31, 2023, we had 2,233 employees and independent contractors who developed, marketed, sold and supported our technology solutions, including 989 in the United States, 775 in Israel and 469 in other countries. We understand that our innovation leadership is ultimately rooted in our people.
Employees and Human Capital Resources As of December 31, 2024, we had 2,406 employees and independent contractors who developed, marketed, sold and supported our technology solutions, including 1,081 in the United States, 844 in Israel and 481 in other countries. We understand that our innovation leadership is ultimately rooted in our people.
Moreover, our solution is applicable across most major enterprise data stores and SaaS applications (Windows, UNIX/Linux, Intranets, email systems, Microsoft 365, including SharePoint Online, Teams and OneDrive for Business, Salesforce, AWS, Azure, Slack, GitHub, Okta, Google Drive and Box). 3 Actionable Insight and Automation.
Moreover, our solution is applicable across most major enterprise data stores, cloud infrastructure environments and SaaS applications (Windows, UNIX/Linux, Intranets, email systems, Microsoft 365, including SharePoint Online, Teams and OneDrive for Business, Salesforce, AWS, Azure, Google Cloud, Google Workspace, Databricks, ServiceNow, Snowflake, Slack, GitHub, Okta, Box, Jira, Zoom and databases). Actionable Insight and Automation.
DatAlert profiles users and devices and their associated behaviors with respect to systems and data, detects and alerts on meaningful deviations that indicate compromise, provides a web-based dashboard and investigative interface and seamlessly integrates with security information and event management systems (SIEM).
DatAlert profiles users and devices and their associated behaviors with respect to systems and data, detects and alerts on meaningful deviations that indicate compromise and seamlessly integrates with security information and event management systems (SIEM). • Data Classification Engine.
Sales to our channel partners are generally subject to our standard, non-exclusive channel partner agreement. These agreements are generally for a term of one year with a one-year renewal term and can be terminated by us or the channel partner for any reason upon 30 days’ notice. A termination of the agreement has no effect on orders already placed.
Sales to our channel partners are generally subject to our standard, non-exclusive channel partner agreement. These agreements are generally for a term of one year with an automatic renewal of successive one-year periods and can be terminated by us or the channel partner for any reason upon 30 days’ notice.
DatAdvantage Cloud is a SaaS platform that helps organizations protect data across SaaS applications and IaaS environments. DatAdvantage Cloud offers functionality similar to our flagship Varonis Data Security Platform including, but not limited to, data security posture management, SaaS security posture management, data classification, data access intelligence, data activity monitoring, data detection and response, and least privilege automation.
DatAdvantage Cloud offers functionality similar to our flagship Varonis Data Security Platform including, but not limited to, data security posture management, SaaS security posture management, data classification, data access intelligence, data activity monitoring, data detection and response, and least privilege automation.
We have worked with several of the leading providers of NAS and hybrid cloud storage, including Dell/EMC, IBM and NetApp, as well as the major cloud service providers such as Microsoft, Amazon, Google and Salesforce to expand our market reach and deliver enhanced functionality to our customers. We have worked with these vendors to ensure compatibility with their product lines.
Establish Our Data Security Platform as the Industry Standard. We have worked with several of the leading providers of NAS and hybrid cloud storage, including Dell/EMC, IBM and NetApp, as well as the major cloud service providers such as Microsoft, Amazon, Google and Salesforce to expand our market reach and deliver enhanced functionality to our customers.
Our metadata analysis technology is built to be highly scalable, allowing our customers to analyze vast amounts of enterprise data. Moreover, our proprietary platform is built with a flexible, modern cloud architecture, allowing customers to expand their data coverage seamlessly and transparently without impacting performance. Threat Detection and Response Threat Detection and Response with User, Data and System Context.
Moreover, our proprietary platform is built with a flexible, modern cloud architecture, allowing customers to expand their data coverage seamlessly and transparently without impacting performance. Threat Detection and Response Threat Detection and Response with User, Data and System Context.
Automated Data Security Comprehensive Solution for Managing and Protecting Enterprise Data. Our products enable a broad range of functionality, including data governance, least privilege and Zero Trust, as well as intelligent retention.
Our products enable a broad range of functionality, including AI security, data governance, least privilege and Zero Trust, as well as intelligent retention.
Varonis will have better visibility into customer usage, issues, and behaviors that will better inform our innovation; customers will seamlessly benefit from continual threat model updates that will help them stay ahead of evolving threats; and the SaaS model will allow us to deliver additional features and functionality to customers more efficiently.
Varonis has better visibility into customer usage, issues, and behaviors that better inform our innovation; customers seamlessly benefit from continual threat model updates that help them stay ahead of evolving threats; and the SaaS model allows us to deliver additional features and functionality to customers more efficiently. Automated Data Security 3 Comprehensive Solution for Managing and Protecting Enterprise Data.
("Polyrize"), whose technology was used for the launch of the DatAdvantage Cloud and Data Classification Cloud licenses which provide support for cloud applications and infrastructure, including AWS, Box, GitHub, Google Drive, Jira, Okta, Salesforce, Slack and Zoom.
("Polyrize"), whose technology was used for the launch of DatAdvantage Cloud which provides support for cloud applications and infrastructure, including Salesforce, AWS, Azure, Google Cloud, Google Workspace, Databricks, ServiceNow, Snowflake, Slack, GitHub, Okta, Box, Jira, Zoom and databases.
Today, we offer coverage for more than 40 of the most mission-critical cloud and on-premises data stores, SaaS applications and cloud infrastructures. In 2022, we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which offers simpler deployment, faster time-to-value, and groundbreaking automation capabilities that help customers prevent data breaches.
In 2022, we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which offers simpler deployment, faster time-to-value, and groundbreaking automation capabilities that help customers prevent data breaches.
On November 14, 2023, we announced an expansion of our AI and machine learning capabilities with the launch of Athena AI, a new Gen AI layer within the Varonis Data Security Platform.
Our MDDR offering is only available for our SaaS customers because of the automation and visibility that’s built into our SaaS platform. On November 14, 2023, we announced an expansion of our AI and machine learning capabilities with the launch of Athena AI, a new Gen AI layer within the Varonis Data Security Platform.
We work with diversity focused candidate application platforms to increase access to diverse talent. Our customers are located in over 90 countries and our global workforce operates across cultures, functions, language barriers and time zones to provide them dedicated and ongoing support. • Provide Programs for Employee Recognition .
Our customers are located in over 95 countries and our global workforce operates across cultures, functions, language barriers and time zones to provide them dedicated and ongoing support. • Provide Programs for Employee Recognition .
Varonis prevents or restricts unauthorized use of sensitive information, detects and stops potential cyberattacks and limits potential damage by automatically locking down data, allowing access to only those who need it, and automating the removal of stale data when it is no longer useful. 1 The Varonis Data Security Platform is driven by a proprietary technology, our Metadata Framework, that extracts critical metadata, or data about data, from an enterprise’s information technology ("IT") infrastructure.
Varonis prevents or limits unauthorized use of sensitive information, detects and prevents potential 1 cyberattacks and limits potential damage by automatically locking down data, allowing access to only those who need it, and automating the removal of stale data when it is no longer useful.
Our platform uses this contextual information to map functional relationships among employees, data objects, systems, content and usage. In doing so, our platform provides real-time intelligence about an enterprise’s massive volumes of data, making it more secure, accessible and manageable.
In doing so, our platform provides real-time intelligence about an enterprise’s massive volumes of data, making it more secure, accessible and manageable.
Overview Varonis is a leader in data security as, since we started operations in 2005, we recognized that an enterprise's capacity to create and share data far exceeded its capacity to protect it. We believed that rapid data growth combined with increasing information dependence would change the global economy and the risk profiles of corporations and governments.
Overview Varonis is a leader in data security as, since we started operations in 2005, we recognized that an enterprise's capacity to create and share data far exceeded its capacity to protect it.
Our solutions do not require custom implementations or long deployment cycles. Our software can be deployed in under an hour and allows customers to realize real value with minimal effort. The availability of our platform as a SaaS is expected to further reduce the total cost of ownership and accelerate the time-to-value for our customers. Ease of Use.
Our solutions do not require custom implementations or long deployment cycles. Our software can be deployed in under an hour and allows customers to realize real value with minimal effort.
We expect to continue to drive incremental sales from our existing customers through the increased use of our software within our installed base by expanding our footprint and usage. We believe our existing customer base is a strong source of incremental revenues given our broad product functionality, the growing volume and complexity of enterprise data and the associated security concerns.
We believe our existing customer base is a strong source of future incremental revenues given our broad product functionality, the growing volume and complexity of enterprise data and the associated security concerns.
Our approach to in-house development of sales representatives through the Varonis Academy have been key to our successful growth in the past and will be central to our growth plan in the future.
Continuing to expand our sales force will be essential to achieving our customer base expansion goals. Our approach to in-house development of sales representatives has been key to our successful growth in the past and will be central to our growth plan in the future.
We believe that the diverse functionalities offered by our platform position us well to capitalize on this powerful trend in the digital universe. Our Technology Our proprietary technology extracts critical information about an enterprise’s data and its supporting infrastructure, and uses this contextual information, or metadata, to create a functional map of an enterprise’s data and underlying file systems.
Our Technology Our proprietary technology extracts critical information about an enterprise’s data and its supporting infrastructure, and uses this contextual information, or metadata, to create a functional map of an enterprise’s data and underlying file systems.
Our focus has been on using innovation to address the cyber-implications of these trends, creating software that provides new ways to track, alert and protect data wherever it is stored.
We believed that rapid data growth combined with increasing information dependence would change the global economy and the risk profiles of all organizations - from corporations to governmental agencies. Our focus has been on using innovation to address the cyber-implications of these trends, creating software that provides new ways to track, alert and protect data wherever it is stored.
We host in-person or virtual Varonis Connect! customer events across sales regions, as well as free, online technical webinars across multiple regions.
We provide one-on-one and community education and awareness and promote the expanded use of our software. We host in-person or virtual Varonis Connect! customer events across sales regions, as well as free, online technical webinars across multiple regions.
Lastly, we believe the availability of our flagship Varonis Data Security Platform as a SaaS will mutually benefit us and our customers. We will continue to seek additional opportunities to extend our technological capabilities and grow our business, from continued organic investments in our research and development efforts to technological tuck-in acquisitions. Grow Our Customer Base.
We will continue to seek additional opportunities to extend our technological capabilities and grow our business, from continued organic investments in our research and development efforts to technological acquisitions. Grow Our Customer Base.
These maintenance agreements provide customers the right to receive support and unspecified upgrades and enhancements when and if they become available during the maintenance period and access to our technical support services. We maintain a customer support organization that provides all levels of support to our customers.
These maintenance agreements provide customers the right to receive support and unspecified upgrades and enhancements when and if they become available during the maintenance period and access to our technical support services. Our renewal rate for 2024 continued to be over 90%.
Includes support for Windows/CIFS-based file shares and NAS storage such as NetApp and Dell EMC. Customers can purchase add-on support for on-premises Active Directory, UNIX/Linux and Edge devices (VPN, DNS, proxy). ◦ Hybrid . Combined support for the protected resources in the Microsoft 365 and Windows & NAS packages. • Varonis DatAdvantage Cloud.
Customers can purchase add-on support for on-premises Active Directory, UNIX/Linux and Edge devices (VPN, DNS, proxy). ◦ Hybrid . Combined support for the protected resources in the Microsoft 365 and Windows & NAS packages. • Varonis DatAdvantage Cloud. DatAdvantage Cloud is a SaaS platform that helps organizations protect data across SaaS applications and IaaS environments.
Proactive Incident Response. Under a SaaS delivery model, the Varonis incident response and forensics teams can review, triage, and proactively notify customers of any incidents that require their attention. Because Varonis centrally monitors a wide array of customer environments, we can spot patterns across tenants and take action to prevent data breaches.
Managed Data Detection and Response. Under a SaaS delivery model, the Varonis incident response and forensics teams can review, triage, and proactively notify customers of any incidents that require their attention.
On October 31, 2022, we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which was previously only sold as a self-hosted solution. Expand Our Sales Force. Continuing to expand our sales force will be essential to achieving our customer base expansion goals.
At the end of 2022, we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which was previously only sold as a self-hosted solution.
Profiles users and devices and their associated behaviors with respect to systems and data, detects and alerts on meaningful deviations that indicate compromise. New UEBA threat models are automatically delivered to customers to guard against evolving tactics used by cybercriminals, insiders and advanced persistent threats (APTs).
New UEBA threat models are automatically delivered to customers to guard against evolving tactics used by cybercriminals, insiders and advanced persistent threats (APTs).
The protected resources currently available for DatAdvantage Cloud are Salesforce, Google Drive, Box, AWS (including S3), GitHub, Slack, Zoom, Okta, and Jira. Our Customers We currently have customers in over 90 countries. Our customers span numerous industries and vary greatly in size, ranging from small and medium businesses to large multinational enterprises and government agencies.
Our Customers We currently have customers in over 95 countries. Our customers span numerous industries and vary greatly in size, ranging from small and medium businesses to large multinational enterprises and government agencies.
Size of Our Market Opportunity The International Data Corporation’s Global DataSphere Forecast, 2023-2027, predicts that over the next five years, data will grow at a compound annual growth rate of 28.2% to reach more than 291 zettabytes (or 291 trillion Gigabytes) by 2027.
Size of Our Market Opportunity The International Data Corporation’s Global DataSphere Forecast, 2024-2028, predicts that over the next five years, data will reach approximately 394 zettabytes (or 394 trillion Gigabytes) by 2028, representing a nearly 10x increase compared to 2018.
DatAnswers provides a secure, relevant and timely search functionality for enterprise data and helps companies comply with data privacy regulations, eDiscovery requests and to facilitate data subject access requests.
Data Transport Engine provides an execution engine that unifies the manipulation of data and metadata, translating business decisions and instructions into commands, such as data migration or archiving. • DatAnswers. DatAnswers provides a secure, relevant and timely search functionality for enterprise data and helps companies comply with data privacy regulations, eDiscovery requests and to facilitate data subject access requests.
Our marketing organization is responsible for branding, content creation, demand generation, field marketing and product marketing, and works with our business operations team to support channel marketing and sales support programs. We provide one-on-one and community education and awareness and promote the expanded use of our software.
We execute our marketing strategy by leveraging a combination of internal marketing professionals, external marketing partners and a network of regional and global channel partners. Our marketing organization is responsible for branding, content creation, demand generation, field marketing and product marketing, and works with our business operations team to support channel marketing and sales support programs.
Details are provided in the sections below. On-Premises Subscription ("OPS") Our self-hosted product licenses utilize our core technology to deliver features and functionality that allow enterprises to fully understand, secure and benefit from the value of their data.
The protected resources currently available for DatAdvantage Cloud are Salesforce, AWS, Azure, Google Cloud, Google Worskpace, Databricks, ServiceNow, Snowflake, Slack, GitHub, Okta, Box, Jira, Zoom and databases. On-Premises Subscription Our self-hosted product licenses utilize our core technology to deliver features and functionality that allow enterprises to fully understand, secure and benefit from the value of their data.
Using application programming interfaces (APIs), and other integration work, our solutions also integrate with many providers of solutions in the ecosystem. We will continue to pursue such collaborations wherever they advance our strategic goals, thereby expanding our reach and establishing our platform as the de facto industry standard for enterprise data. Continue International Expansion.
We will continue to pursue such collaborations wherever they advance our strategic goals, thereby expanding our reach and establishing our platform as the de facto industry standard for enterprise data. Continue International Expansion. We believe there is a significant opportunity for our platform to address the need for data protection and threat detection and response in international markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOverall economic uncertainty has resulted in, and may in the future give rise to, a number of risks, including, but not limited to, the following: • reduced economic activity could lead to a prolonged recession, which could negatively impact spending by our customers or the ability of consumers to pay for our services and in return could severely impact our business operations, financial condition and liquidity; • an impairment of our ability to continue to show the positive trends at the levels we have shown in the last several quarters for certain key performance metrics, such as renewal rates and annual recurring revenues; • a negative effect on our customer success efforts, our ability to enter into new markets and our ability to acquire new customers, in part due to potentially lower conversion rates on risk assessments and delay and lengthen our sales cycles; • a reduction in the number of users as customers terminate and furlough employees; • an increase in bad debt reserves as customers face economic hardship and collectability becomes more uncertain, including the risk of bankruptcies; • variability with forward-looking guidance and financial results, including management’s accounting estimates and assumptions; and • our ability to raise capital.
Biggest changeOverall economic uncertainty may in the future give rise to a number of risks, including, but not limited to, the following: 12 • reduced economic activity could lead to a prolonged recession, which could negatively impact spending by our customers or the ability of customers to pay for our services; • not meeting expectations with respect to certain key performance metrics, such as renewal rates and annual recurring revenues; • our ability to enter into new markets and to acquire new customers; • an increase in bad debt reserves as customers face economic hardship and collectability becomes more uncertain, including the risk of bankruptcies; • variability with forward-looking guidance and financial results, including management’s accounting estimates and assumptions; and • our ability to raise capital.
If we are unable to timely attract, retain or train qualified employees, particularly our engineers, salespeople and key managers, our ability to innovate, introduce new products and compete would be adversely impacted, and our financial condition and results of operations may suffer. Lastly, equity grants are a critical component of our current compensation programs.
If we are unable to timely attract, train or retain qualified employees, particularly our engineers, salespeople and key managers, our ability to innovate, introduce new products and compete would be adversely impacted, and our financial condition and results of operations may suffer. Lastly, equity grants are a critical component of our current compensation programs.
If our technical support, customer success or professional services are not satisfactory to our customers, they may not renew their agreements or not buy additional products in the future, which could adversely affect our future results of operations. Our business relies on our customers’ satisfaction with the technical support and professional services we provide to support our products.
If our technical support, customer success or professional services are not satisfactory to our customers, they may not renew their agreements or not buy additional products in the future, which could adversely affect our future results of operations. Our business relies on our customers’ satisfaction with the technical support, customer success and professional services we provide to support our products.
Acquisitions involve many risks, including the following: • an acquisition may negatively affect our results of operations, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, including potential write-downs of deferred revenues, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • challenges inherent in effectively managing an increased number of employees in diverse locations; • the potential strain on our financial and managerial controls and reporting systems and procedures; • potential known and unknown liabilities or deficiencies associated with an acquired company that were not identified in advance; • our use of cash to pay for acquisitions would limit other potential uses for our cash and affect our liquidity; • if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; • the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; • to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and • managing the varying intellectual property protection strategies and other activities of an acquired company.
Acquisitions involve many risks, including the following: • an acquisition may negatively affect our results of operations, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, including potential write-downs of deferred revenues, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; 22 • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • challenges inherent in effectively managing an increased number of employees in diverse locations; • the potential strain on our financial and managerial controls and reporting systems and procedures; • potential known and unknown liabilities or deficiencies associated with an acquired company that were not identified in advance; • our use of cash to pay for acquisitions would limit other potential uses for our cash and affect our liquidity; • if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; • the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; • to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and • managing the varying intellectual property protection strategies and other activities of an acquired company.
These provisions include: • authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock, which would increase the number of outstanding shares and could thwart a takeover attempt; • a classified board of directors whose members can only be dismissed for cause; • the prohibition on actions by written consent of our stockholders; • the limitation on who may call a special meeting of stockholders; • the establishment of advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings; and • the requirement of at least 75% of the outstanding capital stock to amend any of the foregoing second through fifth provisions.
These provisions include: 32 • authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock, which would increase the number of outstanding shares and could thwart a takeover attempt; • a classified board of directors whose members can only be dismissed for cause; • the prohibition on actions by written consent of our stockholders; • the limitation on who may call a special meeting of stockholders; • the establishment of advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings; and • the requirement of at least 75% of the outstanding capital stock to amend any of the foregoing second through fifth provisions.
Bribery Act of 2010 (the “UK Bribery Act”), import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software in certain foreign markets, and the risks and costs of non-compliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements; • reduced protection for intellectual property rights in certain countries and practical difficulties and costs of enforcing rights abroad; and • compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes and digital tax imposed on our operations in foreign taxing jurisdictions.
Bribery Act of 2010 (the “UK Bribery Act”), import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software in certain foreign markets, and the risks and costs of non-compliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements; • reduced protection for intellectual property rights in certain countries and practical difficulties and costs of enforcing rights abroad; and 19 • compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes and digital tax imposed on our operations in foreign taxing jurisdictions.
Factors that could impede our ability to maintain or increase the amount of revenues derived from public sector contracts include: • changes in public sector fiscal or contracting policies; • decreases or elimination of available public sector funding; • non-compliance with or an inability to attain the proper certification to conduct business in the public sector; • changes in public sector programs or applicable requirements; • the adoption of new laws or regulations or changes to existing laws or regulations; • potential delays or changes in the public sector appropriations or other funding authorization processes; • the requirement of contractual terms that are unfavorable to us, such as most-favored-nation pricing provisions; and 21 • delays in the payment of our invoices by public sector payment offices.
Factors that could impede our ability to maintain or increase the amount of revenues derived from public sector contracts include: • changes in public sector fiscal or contracting policies; • decreases or elimination of available public sector funding; • non-compliance with or an inability to attain the proper certification to conduct business in the public sector; • changes in public sector programs or applicable requirements; • the adoption of new laws or regulations or changes to existing laws or regulations; • potential delays or changes in the public sector appropriations or other funding authorization processes; • the requirement of contractual terms that are unfavorable to us, such as most-favored-nation pricing provisions; and • delays in the payment of our invoices by public sector payment offices.
Our brand recognition and reputation are dependent upon: • our ability to continue to offer high quality, innovative and error- and bug-free products; • our ability to maintain customer satisfaction with our products; • our ability to be responsive to customer concerns and provide high quality customer support, training and professional services; • our marketing efforts; • any misuse or perceived misuse of our products; • positive or negative publicity; • our ability to prevent or quickly react to any cyberattack on our IT systems or security breach of or related to our software; • interruptions, delays or attacks on our website; and • litigation or regulatory-related developments.
Our brand recognition and reputation are dependent upon: • our ability to continue to offer high quality, innovative and error- and bug-free products; • our ability to maintain customer satisfaction with our products; • our ability to be responsive to customer concerns and provide high quality customer support, training and professional services; • our marketing efforts; • any misuse or perceived misuse of our products; • positive or negative publicity; • our ability to prevent or quickly react to any cyberattack on our IT systems or security breach of or related to our software; • interruptions, delays or attacks on our website; and 20 • litigation or regulatory-related developments.
The market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot predict or control, including the factors listed below and other factors described in this “Risk Factors” section: • actual or anticipated fluctuations in our results or those of other companies in our industry; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or other companies in our industry; • new announcements that affect investor perception of our industry, including reports related to the discovery of significant cyberattacks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; 32 • price and volume fluctuations in certain categories of companies or the overall stock market, including as a result of trends in the global economy; • the trading volume of our common stock; • investor confusion with respect to the Company's results of operation during the SaaS transition; • changes in accounting principles; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • additions or departures of any of our key personnel; • lawsuits threatened or filed against us; • short sales, hedging and other derivative transactions involving our capital stock; • general economic conditions in the United States and abroad, including inflationary pressures and higher interest rates; • changing legal or regulatory developments in the United States and other countries; • conversion of the 2025 Notes; and • other events or factors, including those resulting from war, incidents of terrorism, pandemics, natural disasters or responses to these events.
The market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot predict or control, including the factors listed below and other factors described in this “Risk Factors” section: 31 • actual or anticipated fluctuations in our results or those of other companies in our industry; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or other companies in our industry; • new announcements that affect investor perception of our industry, including reports related to the discovery of significant cyberattacks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • price and volume fluctuations in certain categories of companies or the overall stock market, including as a result of trends in the global economy; • the trading volume of our common stock; • investor confusion with respect to the Company's results of operation during the SaaS transition; • changes in accounting principles; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • additions or departures of any of our key personnel; • lawsuits threatened or filed against us; • short sales, hedging and other derivative transactions involving our capital stock; • general economic conditions in the United States and abroad, including inflationary pressures and higher interest rates; • changing legal or regulatory developments in the United States and other countries; • conversion of the Notes; and • other events or factors, including those resulting from war, incidents of terrorism, pandemics, natural disasters or responses to these events.
Although our subscription solutions are designed to increase the number of customers that purchase our solutions and the number of products purchased by existing and new customers to create a recurring revenue stream that increases and is more predictable over time, our customers are not required to renew their subscriptions for our solutions and they may elect not to renew when, or as we expect, or they may elect to reduce the scope of their original purchases or delay their purchase.
Although our solutions are designed to increase the number of customers that purchase our products and the number of products purchased by existing and new customers to create a recurring revenue stream that increases and is more predictable over time, our customers are not required to renew their subscriptions for our solutions and they may elect not to renew when, or as we expect, or they may elect to reduce the scope of their original purchases or delay their purchase.
In addition, if such fundamental change also constitutes a “make-whole fundamental change,” the conversion rate for the 2025 Notes may be increased upon conversion of the 2025 Notes in connection with such “make-whole fundamental change.” Any increase in the conversion rate will be determined based on the date on which the “make-whole fundamental change” occurs or becomes effective and the price paid (or deemed paid) per share of our common stock in such transaction.
In addition, if such fundamental change also constitutes a “make-whole fundamental change,” the conversion rate for the Notes may be increased upon conversion of the Notes in connection with such “make-whole fundamental change.” Any increase in the conversion rate will be determined based on the date on which the “make-whole fundamental change” occurs or becomes effective and the price paid (or deemed paid) per share of our common stock in such transaction.
While we have taken steps to protect the confidential information that we have access to, including confidential information we may obtain through our customer 25 support services or customer usage of our products, we have no direct control over the substance of the content. Security measures might be breached as a result of third-party action, employee error, malfeasance or otherwise.
While we have taken steps to protect the confidential information that we have access to, including confidential information we may obtain through our customer support services or customer usage of our products, we have no direct control over the substance of the content. Security measures might be breached as a result of third-party action, employee error, malfeasance or otherwise.
False detection of security breaches, false identification of malicious sources or misidentification of sensitive or regulated information could adversely affect our business. 26 Our cybersecurity products may falsely detect threats that do not actually exist. For example, our DatAlert product may enrich metadata collected by our products with information from external sources and third-party data providers.
False detection of security breaches, false identification of malicious sources or misidentification of sensitive or regulated information could adversely affect our business. Our cybersecurity products may falsely detect threats that do not actually exist. For example, our DatAlert product may enrich metadata collected by our products with information from external sources and third-party data providers.
From time to time, certain financial institutions (with which we entered into the Capped Call Transactions) or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2025 Notes.
From time to time, certain financial institutions (with which we entered into the Capped Call Transactions) or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes.
We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets. We incorporate certain encryption technology into certain of our products and, as a result, are required to comply with U.S. export control laws and regulations, including the Export Administration Regulations administered by the U.S.
We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets. 21 We incorporate certain encryption technology into certain of our products and, as a result, are required to comply with U.S. export control laws and regulations, including the Export Administration Regulations administered by the U.S.
Significant judgment is required to determine the recognition and measurement attributes prescribed in Accounting Standards Codification 740-10-25 (“ASC 28 740-10-25”). ASC 740-10-25 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes.
Significant judgment is required to determine the recognition and measurement attributes prescribed in Accounting Standards Codification 740-10-25 (“ASC 740-10-25”). ASC 740-10-25 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes.
Sales of a substantial number of shares of our common stock into the public market, or the perception that these sales might occur, for whatever reason, including as a result of the conversion of the outstanding 2025 Notes or future public equity offerings, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.
Sales of a substantial number of shares of our common stock into the public market, or the perception that these sales might occur, for whatever reason, including as a result of the conversion of the outstanding Notes or future public equity offerings, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.
The Capped Call Transactions are expected generally to reduce or offset the potential dilution upon conversion of the 2025 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction and/or offset subject to the Cap Price, subject to certain adjustments under the terms of the Capped Call Transactions.
The Capped Call Transactions are expected generally to reduce or offset the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to the Cap Price, subject to certain adjustments under the terms of the Capped Call Transactions.
Until such time that we pay a dividend, stockholders, including holders of our 2025 Notes who receive shares of our common stock upon conversion of the 2025 Notes, must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Until such time that we pay a dividend, stockholders, including holders of our Notes who receive shares of our common stock upon conversion of the Notes, must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Our debt obligations may adversely affect our ability to raise additional capital and will be a burden on our future cash resources, particularly if we elect to settle these obligations in cash upon conversion or upon maturity or required repurchase. Our ability to meet our payment obligations under the 2025 Notes depends on our future cash flow performance.
Our debt obligations may adversely affect our ability to raise additional capital and will be a burden on our future cash resources, particularly if we elect to settle these obligations in cash upon conversion or upon maturity or required repurchase. Our ability to meet our payment obligations under the Notes depends on our future cash flow performance.
If the Company undergoes a “fundamental change,” subject to certain conditions, holders may require the Company to repurchase for cash all or part of their 2025 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
If the Company undergoes a “fundamental change,” subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Our policy is to require our employees (and our consultants and service providers that develop intellectual property included in our products) to execute written agreements in which they assign to us their rights in potential inventions and other intellectual property created within the scope of their employment (or, with respect to consultants and service providers, their engagement to develop such intellectual property).
Our policy is to require our employees (and our consultants and 26 service providers that develop intellectual property included in our products) to execute written agreements in which they assign to us their rights in potential inventions and other intellectual property created within the scope of their employment (or, with respect to consultants and service providers, their engagement to develop such intellectual property).
Additionally, the United Kingdom has enacted legislation that substantially implements the GDPR, but the United Kingdom’s exit from the EU (which formally occurred on January 31, 2020), commonly referred to as “Brexit,” has created uncertainty with regard to the regulation of data protection in the United Kingdom.
Additionally, the United Kingdom ("UK") has enacted legislation that substantially implements the GDPR, but the United Kingdom’s exit from the EU (which formally occurred on January 31, 2020), commonly referred to as “Brexit,” has created uncertainty with regard to the regulation of data protection in the United Kingdom.
In addition, it is possible that our product innovations, including our recently announced Managed Data Detection and Response and cloud-based solutions, may not provide satisfactory results to 24 our customers. Accordingly, our business, results of operations and financial condition could be materially and adversely affected.
In addition, it is possible that our product innovations, including our recently announced Managed Data Detection and Response and cloud-based solutions, may not provide satisfactory results to our customers. Accordingly, our business, results of operations and financial condition could be materially and adversely affected.
Customer renewal rates may decline or fluctuate due to a number of factors, including offering pricing, competitive offerings, customer satisfaction and reductions in customer spending levels or customer activity due to economic downturns, the adverse impact of import tariffs, inflation, the pandemic or other market uncertainty.
Customer renewal rates may decline or fluctuate due to a number of factors, including offering pricing, competitive offerings, customer satisfaction and reductions in customer spending levels or customer activity due to economic downturns, the adverse impact of import tariffs, inflation or other market uncertainty.
If we are unable to attract new customers and expand sales to existing customers, both domestically and internationally, our growth could be slower than we expect, and our business may be harmed. 18 Our success will depend, in part, on our ability to support new and existing customer growth and maintain customer satisfaction.
If we are unable to attract new customers and expand sales to existing customers, both domestically and internationally, our growth could be slower than we expect, and our business may be harmed. Our success will depend, in part, on our ability to support new and existing customer growth and maintain customer satisfaction.
Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to 33 negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders.
Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders.
However, this strategy might not eliminate our exposure to foreign exchange rate fluctuations and involves 20 costs and risks of its own, such as cash expenditures, ongoing management time and expertise, external costs to implement the strategy and potential accounting implications.
However, this strategy might not eliminate our exposure to foreign exchange rate fluctuations and involves costs and risks of its own, such as cash expenditures, ongoing management time and expertise, external costs to implement the strategy and potential accounting implications.
To the extent purchases of our software are perceived by customers and potential customers to be discretionary, our revenues may be disproportionately affected by delays or reductions in general IT spending. In addition, consolidation in certain industries may result in reduced 12 spending on our software.
To the extent purchases of our software are perceived by customers and potential customers to be discretionary, our revenues may be disproportionately affected by delays or reductions in general IT spending. In addition, consolidation in certain industries may result in reduced spending on our software.
If we reduce, modify or eliminate our equity compensation programs or if there is a decline in our stock price, which will result in the value of our equity compensation being lower, we may have difficulty attracting and retaining employees.
If we 23 reduce, modify or eliminate our equity compensation programs or if there is a decline in our stock price, which will result in the value of our equity compensation being lower, we may have difficulty attracting and retaining employees.
Given our 34 typical concentration of sales at each quarter end, any disruption in the business of our channel partners or customers that impacts sales at the end of our quarter could have a significant adverse impact on our quarterly results.
Given our typical concentration of sales at each quarter end, any disruption in the business of our channel partners or customers that impacts sales at the end of our quarter could have a significant adverse impact on our quarterly results.
Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary 27 technology or intellectual property rights.
Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights.
In addition, if a “fundamental change” occurs prior to the maturity date of the 2025 Notes, holders of the 2025 Notes will have the right, at their option, to require us to repurchase all or a portion of their Convertible Notes.
In addition, if a “fundamental change” occurs prior to the maturity date of the Notes, holders of the Notes will have the right, at their option, to require us to repurchase all or a portion of their Convertible Notes.
In addition, the anticipated conversion of the 2025 Notes could depress the market price of our common stock. The fundamental change provisions of the 2025 Notes may delay or prevent an otherwise beneficial takeover attempt of us.
In addition, the anticipated conversion of the Notes could depress the market price of our common stock. The fundamental change provisions of the Notes may delay or prevent an otherwise beneficial takeover attempt of us.
These factors, as well as the volatility of our common stock, could affect the price at which our convertible noteholders could sell the common stock received upon conversion of the 2025 Notes and could also impact the trading price of the 2025 Notes.
These factors, as well as the volatility of our common stock, could affect the price at which our convertible noteholders could sell the common stock received upon conversion of the Notes and could also impact the trading price of the Notes.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline. 34 Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders.
Risks Related to our Tax Regime Our tax rate may vary significantly depending on our stock price. The tax effects of the accounting for stock-based compensation may significantly impact our effective tax rate from period to period.
Risks Related to our Tax Regime 27 Our tax rate may vary significantly depending on our stock price. The tax effects of the accounting for stock-based compensation may significantly impact our effective tax rate from period to period.
We may issue additional shares of our common stock in connection with conversions of the 2025 Notes, and thereby dilute our existing stockholders and potentially adversely affect the market price of our common stock.
We may issue additional shares of our common stock in connection with conversions of the Notes, and thereby dilute our existing stockholders and potentially adversely affect the market price of our common stock.
This SaaS strategy may give rise to a number of risks, including the following: • our revenues and operating margins may fluctuate more than anticipated over the short-term as a result of this strategy; • if new or current customers desire only self-hosted licenses our SaaS sales may lag behind our expectations; • the shift to a SaaS strategy may raise concerns among our customer base, including concerns regarding changes to pricing over time and access to data once a subscription has expired; • we may be unsuccessful in maintaining or implementing our target pricing or new pricing models, product adoption and projected renewal rates, or we may select a target price or new pricing model that is not optimal and could negatively affect our sales or earnings; • our shift to a SaaS business model may result in confusion among new or existing customers (which can slow adoption rates), resellers and investors; • if our customers do not renew their subscriptions or do not renew them on a timely basis, our revenues may decline and our business may suffer; • we may incur hosting costs at a higher than forecasted rate or our SaaS platform can operate less efficiently than anticipated; • we may incur sales compensation costs at a higher than forecasted rate if the pace of our subscription transition is faster than anticipated; and • our sales force may struggle with the transition which may lead to increased turnover rates and lower headcount.
This SaaS strategy may give rise to a number of risks, including the following: • our revenues and operating margins may fluctuate more than anticipated over the short-term as a result of this strategy; • if current customers desire only self-hosted licenses our SaaS sales may lag behind our expectations; • the shift to a SaaS strategy may raise concerns among our customer base, including concerns regarding changes to pricing over time and access to data once a subscription has expired; • we may be unsuccessful in maintaining or implementing our target pricing or new pricing models, product adoption and projected renewal rates, or we may select a target price or new pricing model that is not optimal and could negatively affect our sales or earnings; • if our customers do not renew their subscriptions or do not renew them on a timely basis, our revenues may decline and our business may suffer; • we may incur hosting costs at a higher than forecasted rate or our SaaS platform can operate less efficiently than anticipated; • we may incur sales compensation costs at a higher than forecasted rate if the pace of our subscription transition is faster than anticipated; and • our sales force may struggle with the transition which may lead to increased turnover rates and lower headcount.
We cannot accurately predict renewal rates given our varied customer base of enterprise and small and medium size business customers and the number of multiyear subscription contracts.
We cannot accurately predict renewal rates given our varied customer base of enterprise and small and medium size business customers and the number of multiyear contracts.
Our use of open source software could negatively affect our ability to sell our software and subject us to possible litigation. We use open source software and expect to continue to use open source software in the future.
Our use of open source software could negatively affect our ability to sell our software and subject us to possible litigation. 25 We use open source software and expect to continue to use open source software in the future.
While there are some companies which offer certain features similar to those embedded in our solutions, as well as others with whom we compete in certain tactical use cases, we believe that we do not currently compete with a company that offers the same breadth of functionalities on the number of platforms and application that we cover.
While there are some companies which offer certain features similar to those embedded in our solutions, as well as others with whom we compete in certain tactical use cases, we believe that we do not currently compete with a company that offers the same breadth of functionalities on the number of platforms and applications that we cover.
If a “make-whole fundamental change” (as defined in the Indenture) occurs prior the maturity date, we will in some cases be required to increase the conversion rate of the 2025 Notes for a holder that elects to convert its 2025 Notes in connection with such “make-whole fundamental change.” These features of the 2025 Notes may make a potential acquisition more expensive for a potential acquiror, which may in turn make it less likely for a potential acquiror to offer to purchase our company, or reduce the amount of consideration offered for each share of our common stock in a potential acquisition.
If a “make-whole fundamental change” (as defined in the Indentures) occurs prior the maturity date, we will in some cases be required to increase the conversion rate of the Notes for a holder that elects to convert its Notes in connection with such “make-whole fundamental change.” These features of the Notes may make a potential acquisition more expensive for a potential acquiror, which may in turn make it less likely for a potential acquiror to offer to purchase our company, or reduce the amount of consideration offered for each share of our common stock in a potential acquisition.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. 30 The potential effect, if any, of these transactions and activities on the price of our common stock or 2025 Notes will depend in part on market conditions and cannot be ascertained at this time.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. The potential effect, if any, of these transactions and activities on the price of our common stock or Notes will depend in part on market conditions and cannot be ascertained at this time.
In the event that the 2025 Notes are converted and we elect to deliver shares of common stock, the ownership interests of existing stockholders will be diluted, and any sales in the public market of any shares of our common stock issuable upon such conversion could adversely affect the prevailing market price of our common stock.
In the event that the remaining Notes are converted and we elect to deliver shares of common stock, the ownership interests of existing stockholders will be diluted, and any sales in the public market of any shares of our common stock issuable upon such conversion could adversely affect the prevailing market price of our common stock.
Our Israeli subsidiary has benefited from a status of a “Beneficiary Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law, since its incorporation. As of December 31, 2023, the tax benefit that we have been utilizing for our Israeli subsidiary terminated.
Our Israeli subsidiary has benefited from a status of a “Beneficiary Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law, since its incorporation. As of December 31, 2024, the tax benefit that we have been utilizing for our Israeli subsidiary terminated.
To the extent that this provision is not deferred, modified or repealed, and once our available NOLs or tax credits are fully utilized, we would incur a significant increase in our tax expenses and a decrease in our cash flows provided by operations.
To the extent that this provision is not modified or repealed, and once our 28 available NOLs or tax credits are fully utilized, we would incur a significant increase in our tax expenses and a decrease in our cash flows provided by operations.
If our customers do not purchase additional licenses or capabilities, our revenues may grow more slowly than expected, may not grow at all or may decline. Our efforts may not result in increased sales to existing customers (“upsells”) and additional revenues. If our efforts to upsell to our customers are not successful, our business would suffer.
If our customers do not purchase additional products or capabilities, our revenues may grow more slowly than expected, may not grow at all or may decline. Our efforts may not result in increased sales to existing customers (“upsells”) and additional revenues. If our efforts to upsell to our customers are not successful, our business would suffer.
As of December 31, 2023, we do not have any employees or contractors in Russia. We have no way to predict the progress or outcome of the situation, including any impact on the rest of the world, as the conflict and government reactions are rapidly developing.
As of December 31, 2024, we do not have any employees or contractors in Russia. We have no way to predict the progress or outcome of the situation, including any impact on the rest of the world, as the conflict and government reactions are rapidly developing.
Negative conditions in the general economy both in the United States and abroad, including inflationary pressure, recession, currency fluctuations and a higher interest rate environment, changes in gross domestic product growth, instability in connection with the upcoming presidential election in the United States, potential future government shutdowns, the federal government’s failure to raise the debt ceiling, financial and credit market fluctuations, the imposition of trade barriers and restrictions such as tariffs, political deadlock, restrictions on travel, natural catastrophes, warfare and terrorist attacks, could cause a decrease in business investments, including corporate spending on enterprise software in general and negatively affect the rate of growth of our business.
Negative conditions in the general economy both in the United States and abroad, including inflationary pressure, currency fluctuations and a higher interest rate environment, changes in gross domestic product growth, instability in connection with political elections, potential future government shutdowns, the federal government’s failure to raise the debt ceiling, financial and credit market fluctuations, the imposition of trade barriers and restrictions such as tariffs, political deadlock, restrictions on travel, natural catastrophes, warfare and terrorist attacks, could cause a decrease in business investments, including corporate spending on enterprise software in general and negatively affect the rate of growth of our business.
The further expansion of our international operations will subject us to a variety of risks and challenges, including: • sales and customer service challenges associated with operating in different countries; • increased management travel, infrastructure and legal compliance costs associated with having multiple international operations and a lack of travel due to pandemics; 19 • difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds or collecting accounts receivable, especially in emerging markets; • variations in economic or political conditions between each country or region; • economic uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions; • the uncertainty around the effects of global pandemics on our business and results of operations; • uncertainty around a potential reverse or renegotiation of international trade agreements and partnerships; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • ability to hire, retain and train local employees and the ability to comply with foreign labor laws and local labor requirements, such as representations by an internal labor committee in France which is affiliated with an external trade union and the applicability of collective bargaining arrangements at the national level in certain European countries; • compliance with laws and regulations for foreign operations, including the U.S.
The further expansion of our international operations will subject us to a variety of risks and challenges, including: • sales and customer service challenges associated with operating in different countries; • increased management travel, infrastructure and legal compliance costs associated with having multiple international operations; • difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds or collecting accounts receivable, especially in emerging markets; • variations in economic or political conditions between each country or region; • economic uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions; • uncertainty around a potential reverse or renegotiation of international trade agreements and partnerships; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • ability to hire, retain and train local employees and the ability to comply with foreign labor laws and local labor requirements, such as representations by an internal labor committee in France which is affiliated with an external trade union and the applicability of collective bargaining arrangements at the national level in certain European countries; • compliance with laws and regulations for foreign operations, including the U.S.
We incorporate machine learning and artificial intelligence (“AI”) solutions into parts of our platform, offerings, services and features, and these applications may become more important in our operations over time. AI technologies, including generative AI, are complex and rapidly evolving, and we face competition from other companies as well as an evolving regulatory landscape.
We incorporate machine learning and AI solutions into parts of our platform, offerings, services and features, and these applications may become more important in our operations over time. AI technologies, including generative AI, are complex and rapidly evolving, and we face competition from other companies as well as an evolving regulatory landscape.
Anti-takeover provisions in our charter documents and under Delaware law and provisions in the indenture for our 2025 Notes could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management, thereby depressing the trading price of our common stock and 2025 Notes.
Anti-takeover provisions in our charter documents and under Delaware law and provisions in the indentures for our Notes could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management, thereby depressing the trading price of our common stock and Notes.
Furthermore, we must comply with laws and regulations relating to public sector contracting, which affect how we and our channel partners do business in both the United States and abroad.
In addition, we must comply with laws and regulations relating to public sector contracting, which affect how we and our channel partners do business in both the United States and abroad.
Nevertheless, we do compete against a select group of software vendors that provide standalone solutions, similar to those found in our comprehensive software suite, in the specific markets in which we operate. We also face direct competition with respect to certain use cases, specifically data migration, data subject access requests and Active Directory security.
Nevertheless, we do compete against a select group of software vendors that provide standalone solutions, similar to those found in our comprehensive software suite, in the specific markets in which we operate. We also face direct competition with respect to certain use cases, specifically DSPM, data discovery and classification, privacy, data migration, data subject access requests and Active Directory security.
Accordingly, our failure to provide satisfactory technical support or professional services could lead our customers not to renew their agreements with us or renew on terms less favorable to us, and therefore have a material and adverse effect on our business and results of operations.
Accordingly, our failure to provide satisfactory technical support, 24 customer success or professional services could lead our customers not to renew their agreements with us or renew on terms less favorable to us, and therefore have a material and adverse effect on our business and results of operations.
We use forward foreign exchange contracts to hedge or mitigate the effect of changes in foreign exchange rates on our operating expenses denominated in certain foreign currencies.
We use forward foreign exchange contracts to hedge or mitigate the effect of changes in foreign exchange rates on our revenues and operating expenses denominated in certain foreign currencies.
Our revenues depend in part on the conversion of enterprises that have undergone risk assessments, which can be performed remotely, into paying customers; however, these risk assessments may not be converted at the same historical rates. At the same time, the majority of our sales are typically made during the last three weeks of every quarter.
Our revenues depend in part on the conversion of enterprises that have undergone risk assessments into paying customers; however, these risk assessments may not be converted at the same historical rates. At the same time, the majority of our sales are typically made during the last three weeks of every quarter.
We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of December 31, 2023, we had options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding that, if fully vested and exercised, would result in the issuance of approximately 8.8 million shares of our common stock.
We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of December 31, 2024, we had options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding that, if fully vested and exercised, would result in the issuance of approximately 7.6 million shares of our common stock.
Furthermore, the Indenture prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the 2025 Notes. General Risks Factors Real or perceived errors, failures or bugs in our software could adversely affect our growth prospects. Because our software uses complex technology, undetected errors, failures or bugs may occur.
Furthermore, the Indentures prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. General Risks Factors Real or perceived errors, failures or bugs in our software could adversely affect our growth prospects. Because our software uses complex technology, undetected errors, failures or bugs may occur.
If our customers do not renew their subscriptions when or as we expect, or if they choose to renew for fewer subscriptions (in quantity or products) or renew for shorter contract lengths or if they renew on less favorable terms, our revenues and earnings may decline, and our business may suffer.
If our customers do not renew their contracts when or as we expect, or if they choose to renew for fewer products or renew for shorter contract lengths or if they renew on less favorable terms, our revenues and earnings may decline, and our business may suffer.
We operate on a global basis and political, social, economic and security conditions in countries in which we operate may limit our ability to develop and sell our products. Specifically, we do business and have operations in Israel, Brazil and Ukraine.
We operate on a global basis and political, social, economic and security conditions in countries in which we operate may limit our ability to develop and sell our products. Specifically, we have operations and do business in Israel, the United Kingdom, France, Brazil and Ukraine.
The adoption of the U.S. tax reform and the enactment of additional legislation changes could materially impact our financial position and results of operations. On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") that significantly reforms the Code was enacted.
The adoption of the U.S. tax reform and the enactment of additional legislation changes could materially impact our financial position and results of operations. On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted.
Risks Related to the 2025 Notes 29 We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results. In May 2020 we issued the 2025 Notes.
Risks Related to the Notes We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results.
Violations of the FCPA or other anti-corruption laws may result in severe criminal or civil sanctions, including suspension or debarment from government contracting, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
Violations of the FCPA or other anti-corruption laws may result in severe criminal or civil sanctions, including suspension or debarment from government contracting, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. Acquisitions could disrupt our business and adversely affect our results of operations, financial condition and cash flows.
Our sales and marketing teams host in-person events and have, and in the future may continue to engage with customers online and through other communications channels, including virtual meetings. Our sales and marketing teams may not be as successful or effective in building relationships.
Our sales and marketing teams host in-person events and engage with customers online and through other communications channels, including virtual meetings. Our sales and marketing teams may not be as successful or effective in building relationships.
Acquisitions could disrupt our business and adversely affect our results of operations, financial condition and cash flows. 22 As we continue to pursue business opportunities, we may make acquisitions that could be material to our business, results of operations, financial condition and cash flows.
As we continue to pursue business opportunities, we may make acquisitions that could be material to our business, results of operations, financial condition and cash flows.
We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
Moreover, governments may investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our products, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal activities.
Moreover, governments may investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our products, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit uncovers improper or illegal activities. Furthermore, on January 20, 2025, President Donald J.
As we continue to augment our functionality with insider threat detection and user behavior analytics and as we expand our classification capabilities to better serve compliance needs, such as GDPR, CCPA and other data privacy laws, we may face increased perceived and real competition from other security and classification technologies.
As we continue to augment our functionality with AI security, insider threat detection and user behavior analytics and as we expand our classification capabilities to better serve compliance needs, such as General Data Protection Regulation ("GDPR"), the California Consumer Privacy Act ("CCPA") and other data privacy laws, we may face increased perceived and real competition from other security and classification technologies.
Item 1A. Risk Factors Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained herein, including our consolidated financial statements and the related notes thereto, before investing in our common stock. The risks and uncertainties described below are not the only ones we face.
Item 1A. Risk Factors Investing in our securities involves risk. You should carefully consider the following risks and all other information contained herein, including our consolidated financial statements and the related notes thereto. The risks and uncertainties described below are not the only ones we face.
It is possible that demand for our cloud offerings will not be as strong as anticipated. Moreover, expansion of our cloud offerings may cause a decline in revenue of our existing products and services that is not offset by revenue from the new products or services.
It is possible that demand for our cloud offerings may not continue to be as strong as it has been to date. Moreover, expansion of our cloud offerings may cause a decline in revenue of our existing products and services that is not offset by revenue from the new products or services.
As a result, comparing our revenues and results of operations on a period-to-period basis may not be meaningful, and should not be relied on for any particular period.
As a result, we may present reduced revenues as compared to prior periods, and comparing our revenues and results of operations on a period-to-period basis may not be meaningful, and should not be relied on for any particular period.
While we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes from these regular examinations will not have a material adverse effect on our results of operations and cash flows.
While we believe that we are currently in material compliance with our obligations under applicable taxing regimes, and regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes from these regular examinations will not have a material adverse effect on our results of operations and cash flows.
In order for us to market and sell our products, we must successfully demonstrate to enterprise IT, security and business personnel the potential value of their data and the risk of that data getting compromised or stolen.
In order for us to market and sell our products, we must successfully demonstrate to enterprise IT, security and business personnel the risk of their valuable data getting compromised or stolen and the effectiveness of our products to mitigate these risks.
Although our business has experienced significant growth in the past, we may not be able to continue to grow at the same rate, or at all. 17 Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to do the following: • satisfy existing customers and attract new customers; • adequately and timely recruit, train, motivate and integrate new employees, including our sales force and engineers, while retaining existing employees, maintaining the beneficial aspects of our corporate culture and effectively executing our business plan; • successfully introduce new products and enhancements; • effectively manage existing channel partnerships and expand to new ones; • improve our key business applications and processes to support our business needs; • enhance information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing customer base; • enhance our internal controls to ensure timely and accurate reporting of all of our operations and financial results; • protect and further develop our strategic assets, including our intellectual property rights; • continue to capitalize on the transition to a subscription-based business model and manage our introduction of cloud-based solutions; and • successfully manage and integrate any future acquisitions of businesses, including without limitation, the amount and timing of expenses and potential future charges for impairment of goodwill from acquired companies.
Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to do the following: • satisfy existing customers and attract new customers; • adequately and timely recruit, train, motivate and integrate new employees, including our sales force and engineers, while retaining existing employees, maintaining the beneficial aspects of our corporate culture and effectively executing our business plan; • successfully introduce new products and enhancements; • effectively manage existing channel partnerships and expand to new ones; • improve our key business applications and processes to support our business needs; • enhance information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing customer base; • enhance our internal controls to ensure timely and accurate reporting of all of our operations and financial results; • protect and further develop our strategic assets, including our intellectual property rights; • continue to capitalize on the transition to a SaaS delivery model; and • successfully manage and integrate any future acquisitions of businesses, including without limitation, the amount and timing of expenses and potential future charges for impairment of goodwill from acquired companies. 17 These activities will require significant investments and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure.
As of December 31, 2023, we had 88 issued patents in the United States and 16 pending U.S. patent applications. We also had 67 patents issued and 31 applications pending for examination in non-U.S. jurisdictions, and seven pending PCT patent applications, all of which are counterparts of our U.S. patent applications. We may file additional patent applications in the future.
As of December 31, 2024, we had 89 issued patents in the United States and 31 pending U.S. patent applications. We also had 76 patents issued and 34 applications pending for examination in non-U.S. jurisdictions, and 18 pending PCT patent applications, all of which are counterparts of our U.S. patent applications. We may file additional patent applications in the future.
We rely on channel partners, such as distribution partners and resellers, to sell licenses and support and maintenance agreements for our software. In 2023, our channel partners fulfilled substantially all of our sales, and we expect that sales to channel partners will continue to account for substantially all of our revenues for the foreseeable future.
We rely on channel partners, such as distribution partners and resellers, to sell the Varonis Data Security Platform. In 2023 and 2024, our channel partners fulfilled substantially all of our sales, and we expect that sales to channel partners will continue to account for substantially all of our revenues for the foreseeable future.
As a result, there has been some budgetary tightening and we have started to see longer sales cycles in the region which may negatively impact our results of operations.
As a result, there has been, and may in the future be, budgetary tightening and longer sales cycles in the region which may negatively impact our results of operations.
We have legal and contractual obligations to protect the confidentiality and appropriate use of customer data. As a leader in the cyber industry, we may be an attractive target for cyber attackers or other data thieves.
In addition, our software involves transmission and processing of our customers’ confidential, proprietary and sensitive information. We have legal and contractual obligations to protect the confidentiality and appropriate use of customer data. As a leader in the cyber industry, we may be an attractive target for cyber attackers or other data thieves.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe CISO and the information security team identify and assess risks from cybersecurity threats by monitoring and evaluating our networks, data and our risk profile using various methods including, among other things, manual tools, automated tools, analyzing reports of threats and actors, conducting scans of the computer networks, internal and/or external audits (including compliance audits with respect to ISO (27001, 27017, 27018, and 27701) for our corporate and cloud based software solutions and SOC 2, PCI DSS and HIPAA with respect to our cloud based software solutions), conducting assessments for potential internal and external threats, third-party-conducted risk assessments, conducting vulnerability assessments, third-party-conducted red/blue team testing and tabletop incident response exercises and subscribing to reports and services providing cybersecurity threat intelligence.
Biggest changeThe CISO and the information security team identify and assess risks from cybersecurity threats by monitoring and evaluating our networks, data and our risk profile using various methods including, among other things, manual tools, automated tools, analyzing reports of threats and actors, conducting scans of the computer networks, internal and/or external audits (including compliance audits with respect to ISO (27001, 27017, 27018, and 27701), SOC 2, PCI DSS and HIPAA for our corporate and cloud based software solutions), conducting assessments for potential internal and external threats, third-party-conducted risk assessments, conducting vulnerability assessments, third-party-conducted red/blue team testing and tabletop incident response exercises and subscribing to reports and services providing cybersecurity threat intelligence.
Depending on the nature of the services provided, the sensitivity of the information systems and data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity and privacy on the provider.
Depending on the nature of the 35 services provided, the sensitivity of the information systems and data at issue, and the identity of the provider, our vendor management process may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity and privacy on the provider.
Cybersecurity Risk management and strategy 35 We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third-party hosted services, communications systems, hardware and software and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, sensitive financial information and personal identifiable information (“Information Systems and Data”).
Cybersecurity Risk management and strategy We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third-party hosted services, communications systems, hardware and software and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, customer's data, sensitive financial information and personal identifiable information (“Information Systems and Data”).
The technology committee is responsible for overseeing our cybersecurity risk management processes, including oversight and mitigation of 36 risks from cybersecurity threats.
The technology committee is responsible for overseeing our cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.
Guy Shamilov, our CISO for the last seven years, has been a chief information security officer for eight years and is certified by Certified Information Systems Security Professional (CISSP), among other technical certifications he holds with respect to cybersecurity.
Guy Shamilov, our CISO for the last eight years, has been a chief information security officer for nine years and is certified by Certified Information Systems Security Professional (CISSP), among other technical certifications he holds with respect to cybersecurity.
For a description of the risks from cybersecurity threats that may have a material affect on us, see our risk factors under Part 1. Item 1A.
For a description of the risks from cybersecurity threats that may have a material effect on us, see our risk factors under Part 1. Item 1A.
The technology committee meets quarterly with members of management, including our CISO, Chief Information Officer ("CIO"), Chief Technology Officer or Senior Vice President of Engineering, as applicable, to discuss cybersecurity developments, significant cybersecurity threats and risks and the processes we have implemented to address them.
The technology committee meets quarterly with members of management, including our CISO, Chief Information Officer ("CIO"), Chief Technology Officer or VP of Cybersecurity Engineering, as applicable, to discuss cybersecurity developments, significant cybersecurity threats and risks and the processes we have implemented to address them.
The program includes risk assessments for vendors security questionnaires, review of the vendor’s written security program, review of security assessments and reports, audits, and vulnerability scans related to the vendor and imposition of information contractual obligations on the vendor.
The program includes risk assessments for vendors, security questionnaires, review of the vendor’s written security program, review of security assessments and reports, audits, and external attack surface scans related to the vendor and imposition of information contractual obligations on the vendor.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, we have an office in New York City and smaller offices in Arizona, France, the United Kingdom, Oregon, Australia, Germany, Virginia, the Netherlands, Singapore and Luxembourg which serve as regional sales offices and some of which are customer support centers. Our office space is primarily leased, the majority of which is under long-term leases with varying expiration dates.
Biggest changeAdditionally, we have offices in New York and Florida and smaller offices in Arizona, France, the United Kingdom, Oregon, Australia, Germany, the Netherlands, Singapore and Luxembourg which serve as regional sales offices and some of which are customer support centers. Our office space is primarily leased, the majority of which is under long-term leases with varying expiration dates.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSuch shares were issued in reliance upon the exemption from registration available under Regulation S as the issuance of our securities was to individuals that were non-U.S. persons. 38 STOCK PERFORMANCE GRAPH The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act, except to the extent we specifically incorporate it by reference into such filing.
Biggest changeStockholders As of January 12, 2025 there were five stockholders of record of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners. 38 STOCK PERFORMANCE GRAPH The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act, except to the extent we specifically incorporate it by reference into such filing.
This chart compares the cumulative total return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Computer Index. The chart assumes $100 was invested at the close of market on December 31, 2018 in our common stock, the NASDAQ Composite Index and the NASDAQ Computer Index, and assumes the reinvestment of any dividends.
This chart compares the cumulative total return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Computer Index. The chart assumes $100 was invested at the close of market on December 31, 2019 in our common stock, the NASDAQ Composite Index and the NASDAQ Computer Index, and assumes the reinvestment of any dividends.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. The closing price of our common stock on December 29, 2023, the last trading day of our 2023 fiscal year, was $45.28 per share.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. The closing price of our common stock on December 31, 2024, the last trading day of our 2024 fiscal year, was $44.43 per share.
Removed
Stockholders As of January 24, 2024 there were six stockholders of record of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners. Issuance of Unregistered Securities On October 30, 2023, we issued 34,401 shares of our Common Stock to a founder of Polyrize.
Added
Company/Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Varonis Systems, Inc. $ 100.00 $ 210.54 $ 188.32 $ 92.42 $ 174.80 $ 171.52 NASDAQ Composite $ 100.00 $ 143.64 $ 174.36 $ 116.65 $ 167.30 $ 215.22 NASDAQ Computer $ 100.00 $ 149.98 $ 206.76 $ 132.79 $ 221.06 $ 301.44 39
Removed
Such issuance was a portion of the consideration paid to the founder in connection with the acquisition, and it was in lieu of a cash payment that otherwise would have been paid to him.
Removed
Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Varonis Systems, Inc. $ 100.00 $ 146.90 $ 309.28 $ 276.64 $ 135.77 $ 256.79 NASDAQ Composite $ 100.00 $ 135.23 $ 194.24 $ 235.78 $ 157.74 $ 226.24 NASDAQ Computer $ 100.00 $ 150.34 $ 225.48 $ 310.84 $ 199.64 $ 332.34 Purchase of Equity Securities by Issuer and Affiliated Purchasers In October 2022, our board of directors authorized a share repurchase program of up to $100.0 million of our common stock (the “Share Repurchase Program”).
Removed
Under the Share Repurchase Program, we were authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The Share Repurchase Program 39 expired on October 31, 2023.
Removed
We completed our intended repurchases under the Share Repurchase Program as of September 30, 2023 and, therefore, do not have any share repurchase activity during the quarter ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Statement of Operations Data: Revenues: Subscriptions $ 400,907 $ 366,144 $ 270,832 Maintenance and services 98,253 107,490 119,302 Total revenues 499,160 473,634 390,134 Cost of revenues 71,751 69,836 59,399 Gross profit 427,409 403,798 330,735 Operating expenses: Research and development 183,838 177,881 137,882 Sales and marketing 277,893 275,090 230,314 General and administrative 82,901 72,055 61,233 Total operating expenses 544,632 525,026 429,429 Operating loss (117,223) (121,228) (98,694) Financial income (expense), net 30,305 10,413 (12,145) Loss before income taxes (86,918) (110,815) (110,839) Income taxes (13,998) (13,703) (6,022) Net loss $ (100,916) $ (124,518) $ (116,861) 44 Year Ended December 31, 2023 2022 2021 (as a percentage of total revenues) Statement of Operations Data: Revenues: Subscriptions 80.3 % 77.3 % 69.4 % Maintenance and services 19.7 22.7 30.6 Total revenues 100.0 100.0 100.0 Cost of revenues 14.4 14.7 15.2 Gross profit 85.6 85.3 84.8 Operating expenses: Research and development 36.8 37.6 35.4 Sales and marketing 55.7 58.1 59.0 General and administrative 16.6 15.2 15.7 Total operating expenses 109.1 110.9 110.1 Operating loss (23.5) (25.6) (25.3) Financial income (expense), net 6.1 2.2 (3.1) Loss before income taxes (17.4) (23.4) (28.4) Income taxes (2.8) (2.9) (1.6) Net loss (20.2) % (26.3) % (30.0) % Comparison of Years Ended December 31, 2023 and 2022 Revenues Year Ended December 31, 2023 2022 % Change (in thousands) Revenues: Subscriptions $ 400,907 $ 366,144 9.5 % Maintenance and services 98,253 107,490 (8.6) % Total revenues $ 499,160 $ 473,634 5.4 % Year Ended December 31, 2023 2022 (as a percentage of total revenues) Revenues: Subscriptions 80.3 % 77.3 % Maintenance and services 19.7 % 22.7 % Total revenues 100.0 % 100.0 % 45 For the year ended December 31, 2023, our revenues increased 5% compared to the year ended December 31, 2022 despite the positive trend of increased SaaS mix and existing customer conversions to SaaS which cause headwinds due to accounting treatment differences in revenue recognition.
Biggest changeYear Ended December 31, 2024 2023 2022 (in thousands) Statement of Operations Data: Revenues: Term license subscriptions $ 254,241 $ 356,490 $ 363,898 SaaS 208,781 44,417 2,246 Maintenance and services 87,928 98,253 107,490 Total revenues 550,950 499,160 473,634 Cost of revenues 93,847 71,751 69,836 Gross profit 457,103 427,409 403,798 Operating expenses: Research and development 196,765 183,838 177,881 Sales and marketing 288,769 277,893 275,090 General and administrative 89,220 82,901 72,055 Total operating expenses 574,754 544,632 525,026 Operating loss (117,651) (117,223) (121,228) Financial income, net 34,644 30,305 10,413 Loss before income taxes (83,007) (86,918) (110,815) Income taxes (12,758) (13,998) (13,703) Net loss $ (95,765) $ (100,916) $ (124,518) 45 Year Ended December 31, 2024 2023 2022 (as a percentage of total revenues) Statement of Operations Data: Revenues: Term license subscriptions 46.1 % 71.4 % 76.8 % SaaS 37.9 8.9 0.5 Maintenance and services 16.0 19.7 22.7 Total revenues 100.0 100.0 100.0 Cost of revenues 17.0 14.4 14.7 Gross profit 83.0 85.6 85.3 Operating expenses: Research and development 35.8 36.8 37.6 Sales and marketing 52.4 55.7 58.1 General and administrative 16.2 16.6 15.2 Total operating expenses 104.4 109.1 110.9 Operating loss (21.4) (23.5) (25.6) Financial income, net 6.3 6.1 2.2 Loss before income taxes (15.1) (17.4) (23.4) Income taxes (2.3) (2.8) (2.9) Net loss (17.4) % (20.2) % (26.3) % Comparison of Years Ended December 31, 2024 and 2023 Revenues Year Ended December 31, 2024 2023 % Change (in thousands) Revenues: Term license subscriptions $ 254,241 $ 356,490 (28.7) % SaaS 208,781 44,417 370.0 % Maintenance and services 87,928 98,253 (10.5) % Total revenues $ 550,950 $ 499,160 10.4 % Year Ended December 31, 2024 2023 (as a percentage of total revenues) Revenues: Term license subscriptions 46.1 % 71.4 % SaaS 37.9 8.9 Maintenance and services 16.0 19.7 Total revenues 100.0 % 100.0 % 46 For the year ended December 31, 2024, our revenues increased 10% compared to the year ended December 31, 2023 despite increased SaaS sales and existing customer conversions to SaaS which cause variations due to accounting treatment differences in revenue recognition for sales within the respective periods.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, technology, energy and utilities, consumer and retail, education and construction and engineering sectors. We believe our existing customer base serves as a strong source of incremental future revenues given our broad platform of products, their growing volumes and complexity of enterprise data and related security concerns.
Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, technology, consumer and retail, education and construction and engineering sectors. We believe our existing customer base serves as a strong source of future incremental revenues given our broad platform of products, their growing volumes and complexity of enterprise data and related security concerns.
Key Performance Indicators and Recent Business Highlights Annual Recurring Revenues Annual recurring revenues is a key performance indicator defined as the annualized value of active term-based subscription license contracts, SaaS contracts and maintenance contracts in effect at the end of that period.
Key Performance Indicators and Recent Business Highlights Annual Recurring Revenues Annual recurring revenues is a key performance indicator defined as the annualized value of active SaaS contracts, term-based subscription license contracts and maintenance contracts in effect at the end of that period.
Cost of Revenues, Gross Profit and Gross Margin Cost of revenues consist primarily of salaries (including payroll tax expense related to stock-based compensation), employee benefits (including commissions and bonuses) and stock-based compensation for our customer support, customer success and services employees; third-party hosting fees; amortization of acquired intangible assets; travel expenses; and allocated overhead costs for facilities, IT and depreciation.
Cost of Revenues, Gross Profit and Gross Margin Cost of revenues consist primarily of salaries (including payroll tax expense related to stock-based compensation), employee benefits (including commissions and bonuses) and stock-based compensation for our customer support, customer success, MDDR and services employees; third-party hosting fees; amortization of acquired intangible assets; travel expenses; and allocated overhead costs for facilities, IT and depreciation.
We recognize expenses related to these costs as they are incurred and expect that these costs will increase in absolute dollars as we continue to invest in our customer success and support teams, move to a SaaS delivery model and support the underlying programs that play a critical role in maintaining our high renewal rate.
We recognize expenses related to these costs as they are incurred and expect that these costs will increase in absolute dollars as we continue to invest in our customer success, support and MDDR teams, move to a SaaS delivery model and support the underlying programs that play a critical role in maintaining our high renewal rate.
While the expansion of our domestic operations is focused primarily on our underpenetrated territories, the expansion of our international operations depends in particular on our ability to hire, integrate and retain local sales personnel in these international markets, acquire new channel partners and implement an effective marketing strategy.
While the expansion of our domestic operations is focused primarily on our underpenetrated territories, the expansion of our international operations depends in particular on our ability to hire, integrate and retain local sales leadership and personnel in these international markets, acquire new channel partners and implement an effective marketing strategy.
Our expenses, which do not vary directly with revenues, and the seasonal pattern described above have an impact on the cost of revenues, research and development expenses, sales and marketing expenses and general and administrative expenses as a percentage of revenues in each calendar quarter during the year.
Our expenses, which do not vary directly with revenues, and the seasonal pattern described above have an impact on the cost of revenues, research and development expenses, sales and marketing expenses and general and administrative expenses as a percentage of revenues in 48 each calendar quarter during the year.
Revenue Recognition: We generate revenues primarily in the form of subscription licenses, SaaS revenues and maintenance and services fees. Subscription license revenues are sold on-premises and are comprised of time-based licenses whereby customers use our software (including support and unspecified upgrades and enhancements when and if they are available) for a specified period.
Revenue Recognition: We generate revenues primarily in the form of term license subscriptions, SaaS revenues and maintenance and services fees. Term license subscription revenues are sold on-premises and are comprised of time-based licenses whereby customers use our software (including support and unspecified upgrades and enhancements when and if they are available) for a specified period.
Consequently, we end the fourth quarter with our highest accounts receivable balance of any quarter which in turn generates the greatest amount of collections in the following quarter. In addition, there is negative sequential revenue in the first quarter, which results in a relatively lower amount collected during the second quarter.
Consequently, we end the fourth quarter with our highest accounts receivable balance of any quarter which in turn generates the greatest amount of collections in the following quarter. In addition, there is negative sequential sales in the first quarter, which results in a relatively lower amount collected during the second quarter.
We measure the renewal rate for our customers over a 12-month period, based on a dollar renewal rate for contracts expiring during that time period. Our renewal rate for each of the years ended December 31, 2023, 2022 and 2021 continued to be over 90%.
We measure the renewal rate for our customers over a 12-month period, based on a dollar renewal rate for contracts expiring during that time period. Our renewal rate for each of the years ended December 31, 2024, 2023 and 2022 continued to be over 90%.
The annualized value of contracts is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of maintenance contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period.
The annualized value of contracts is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of these contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period.
Our inability or failure to do so could harm our business, financial condition and results of operations. Comparison of Years Ended December 31, 2022 and 2021 For a comparison of our results of operations for the years ended December 31, 2022 and 2021, see “ Part II, Item 7.
Our inability or failure to do so could harm our business, financial condition and results of operations. Comparison of Years Ended December 31, 2023 and 2022 For a comparison of our results of operations for the years ended December 31, 2023 and 2022, see “ Part II, Item 7.
Overview Varonis is a leader in data security as, since we started operations in 2005, we recognized that an enterprise's capacity to create and share data far exceeded its capacity to protect it. We believed that rapid data growth combined with increasing information dependence would change the global economy and the risk profiles of corporations and governments.
Overview Varonis is a leader in data security as, since we started operations in 2005, we recognized that an enterprise's capacity to create and share data far exceeded its capacity to protect it. We believed that rapid data growth combined with increasing information dependence would change the global economy and the risk profiles of corporations and governmental agencies.
Recently Issued Accounting Pronouncements Not Yet Adopted 51 In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses on an interim and annual basis.
Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses on an interim and annual basis.
For a discussion of our liquidity and capital resources and our cash flow activities for the fiscal year ended December 31, 2021, see “ Part II, Item 7.
For a discussion of our liquidity and capital resources and our cash flow activities for the fiscal year ended December 31, 2022, see “ Part II, Item 7.
This transition is driven by the increased importance of a data-centric approach to security and the demand for comprehensive protection in the face of heightened cyber risks, collaboration across multiple platforms, the adoption of generative AI tools and the necessity for compliance.
This transition is driven by the increased importance of an automated, data-centric approach to security and the demand for comprehensive protection in the face of heightened cyber risks, collaboration across multiple platforms, the adoption of generative AI tools and the necessity for compliance.
Enterprises now use many different combinations of on-premises and cloud data stores, SaaS applications and IaaS environments and this complexity requires a greater level of automated protection. We believe our offering provides comprehensive data coverage and our ability to address this demand will become key driver of our growth.
Enterprises now use many different combinations of on-premises and cloud data stores, SaaS applications and IaaS environments and this complexity requires a greater level of automated protection. We believe our offering provides comprehensive data coverage and our ability to address this demand has and will continue to be a key driver of our growth.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 7, 2023, which comparative information is herein incorporated by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 6, 2024, which comparative information is herein incorporated by reference.
We are also focused on maintaining a high renewal rate by focusing on the quality and reliability of our customer service and support to ensure our customers receive value from our products and providing software upgrades and enhancements when and if they are available.
We are also focused on maintaining a high renewal rate by investing in the quality and reliability of our customer service and support teams to ensure our customers receive value from our products and providing software upgrades and enhancements when and if they are available.
Operating Activities Our operating activities are driven by sales of our products less costs and expenses, primarily payroll and related expenses, and adjusted for certain non-cash items, mainly depreciation and amortization, stock-based compensation, amortization of deferred commissions, noncash operating lease costs, amortization of debt discount and issuance costs and amortization of premium and accretion of discount on marketable securities, and changes in operating assets and liabilities.
Operating Activities Our operating activities are driven by sales of our products less costs and expenses, primarily payroll and related expenses, and adjusted for certain non-cash items, mainly depreciation and amortization, stock-based compensation, amortization of deferred commissions, non-cash operating lease costs, amortization of debt issuance costs, amortization of premium and accretion of discount on marketable securities, acquired in-process research and development costs, and changes in operating assets and liabilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 7, 2023, which discussion is herein incorporated by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 6, 2024, which discussion is herein incorporated by reference.
The benefits of SaaS delivery are widely established for both customers and providers, and we believe this evolution of a SaaS delivery option for the Varonis Data Security Platform will be transformational.
The benefits of SaaS delivery are widely established for both customers and providers, and we believe this evolution of a SaaS delivery option for the Varonis Data Security Platform is transformational.
Our customers span a broad array of industries and are located in over 90 countries.
Our customers span a broad array of industries and are located in over 95 countries.
Since inception, we have continued to scale our business and execute on strategic initiatives which we believe have positioned us for durable long-term growth. During 2023, we have continued to grow our revenues despite revenue recognition accounting treatment headwinds associated with the increase in SaaS mix and existing customer conversions to SaaS.
Since inception, we have continued to scale our business and execute on strategic initiatives which we believe have positioned us for durable long-term growth. During 2024, we have continued to grow our revenues despite revenue recognition accounting treatment variations associated with the increase in SaaS sales and existing customer conversions to SaaS.
Conversions from a license sold on-premises to our SaaS offering are accounted for on a pro-rata prospective basis. Due to the transition to a predominately SaaS business model, the timing of renewals and renewal rates, we could produce significant variation in the revenues we recognize in a given period. Maintenance and Services Revenues.
Conversions from a license sold on-premises to our SaaS offering during the original subscription period are accounted for on a prospective basis. Due to the transition to a SaaS business model, the timing of renewals and renewal rates, we could produce significant variation in the revenues we recognize in a given period. Maintenance and Services Revenues.
Research and development expenses primarily consist of personnel costs attributable to our research and development personnel, as well as allocated overhead costs. We expense research and development costs as incurred.
Research and development expenses primarily consist of personnel costs attributable to our research and development personnel, as well as allocated overhead costs and acquired in-process research and development. We expense research and development costs as incurred.
While our products serve customers of all sizes, across industries and across geographies, the marketing focus and majority of our sales focus is on targeting organizations with 1,000 users or more who can make larger initial purchases with us and, over time, have a greater potential lifetime value.
While our products serve customers of all sizes, across industries and across geographies, the marketing focus and majority of our sales focus is on targeting larger organizations who can make sizable initial purchases with us and, over time, have a greater potential lifetime value.
The number of performance stock units earned and eligible to vest are generally determined after a one-year performance period, based on achievement of certain Company financial performance measures and the recipient’s continued service.
In addition, we grant performance stock units to certain employees. The number of performance stock units earned and eligible to vest are generally determined after a one-year performance period, based on achievement of certain Company financial performance measures and the recipient’s continued service.
In the second half of 2021, we launched our first SaaS offering, introducing new products and support for several cloud applications and infrastructure. On October 31, 2022 we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which was previously only sold as a self-hosted solution.
In the second half of 2021, we launched our first SaaS offering, introducing new products and support for cloud infrastructure environments and applications. At the end of 2022, we announced the availability of our flagship Varonis Data Security Platform as a SaaS, which was previously only sold as a self-hosted solution.
Conversely, the fourth quarter typically results in the highest gross margin as our fourth quarter revenues have historically been the highest for the year. As we transition to a predominately SaaS-based company, we expect this seasonality to decrease due to differences in the revenue recognition accounting treatment.
Conversely, the fourth quarter typically results in the highest gross margin as our fourth quarter revenues have historically been the highest for the year. As we complete the transition to a SaaS delivery model, we expect this seasonality to decrease due to differences in the revenue recognition accounting treatment.
Over the last two years, the Company began to offer SaaS solutions to its customers, including its (i) flagship Data Security Platform as a SaaS that was previously only sold as a self-hosted solution, (ii) DatAdvantage Cloud hosted solution and (iii) Data Classification Cloud.
Over the last three years, the Company began to offer SaaS solutions to its customers, including its (i) flagship Data Security Platform as a SaaS that was previously only sold as a self-hosted solution and (ii) DatAdvantage Cloud product lines.
For 2023, cash provided by operating activities were $59.4 million. We have observed two seasonal patterns that impact our net cash provided by operating activities. First, a majority of our sales are made during the last three weeks of the quarter. Second, the highest dollar amount of sales of our products and services occurs in the fourth quarter.
For 2024, cash inflows from our operating activities were $115.2 million. We have observed two seasonal patterns that impact our net cash provided by operating activities. First, a majority of our sales are made during the last three weeks of the quarter. Second, the highest dollar amount of sales of our products and services occurs in the fourth quarter.
Subscription license contracts, SaaS contracts and maintenance contracts are annualized by dividing the total contract value by the number of days in the term and multiplying the result by 365. As of December 31, 2023, 2022 and 2021, ARR was $543.0 million, $465.1 million and $387.1 million, respectively, an increase of 17% and 20% period over period.
SaaS contracts, term-based subscription license contracts and maintenance contracts are annualized by dividing the total contract value by the number of days in the term and multiplying the result by 365. As of December 31, 2024, 2023 and 2022, ARR was $641.9 million, $543.0 million and $465.1 million, respectively, an increase of 18% and 17% period over period, respectively.
During 2023, net cash used in investing activities of $143.1 million was primarily attributable to net investments of $216.6 million in marketable securities and $5.1 million in capital expenditures to support our growth during the period including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space.
This was partially offset by net proceeds of $10.5 million in deposits. During 2023, net cash used in investing activities of $143.1 million was primarily attributable to net investments of $216.6 million in marketable securities and $5.1 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space.
Additionally, despite the revenue recognition headwinds from the accounting treatment associated with the positive trend of our increase in SaaS mix and existing customer conversions to SaaS, total revenues still grew approximately 5% for the year ended December 31, 2023 compared with the year ended December 31, 2022.
Additionally, despite the revenue recognition variations from the accounting treatment associated with the positive trend of our increase in SaaS sales and existing customer conversions to SaaS, total revenues still grew approximately 10% for the year ended December 31, 2024 compared with the year ended December 31, 2023.
For the years ended December 31, 2023, 2022 and 2021, we had operating losses $117.2 million, $121.2 million and $98.7 million and net losses of $100.9 million, $124.5 million and $116.9 million, respectively.
For the years ended December 31, 2024, 2023 and 2022, we had operating losses of $117.7 million, $117.2 million and $121.2 million and net losses of $95.8 million, $100.9 million and $124.5 million, respectively.
The increase in general and administrative expenses was primarily related to an increase of $10.9 million in salaries and benefits and stock-based compensation expense primarily due to increased headcount to support the overall growth of our business.
The increase in general and administrative expenses was primarily related to an increase of $4.9 million in salaries and benefits and stock-based compensation expense primarily due to increased headcount to support the overall growth of our business and an increase of $0.5 million in facilities and allocated overhead costs.
Financing Activities In 2023, net cash used in financing activities of $53.4 million was attributable to $43.5 million of repurchases of common stock and $21.4 million in taxes paid related to net share settlement of equity awards, partially offset by $11.5 million of proceeds from employee stock plans.
In 2023, net cash used in financing activities of $53.4 million was attributable to $43.5 million of repurchases of common stock and $21.4 million in taxes paid related to net share settlement of equity awards, partially offset by $11.5 million of proceeds from employee stock plans. Convertible Notes On September 10, 2024, we issued the 2029 Notes.
Maintenance and services primarily consist of fees for maintenance of past perpetual license sales (including support and unspecified upgrades and enhancements when and if they are available) and to a lesser extent professional services, which focus on both operationalizing the software and training our customers to fully leverage the use of our products, although the user can benefit from the software without our assistance.
Maintenance and services primarily consist of fees for maintenance of past perpetual license sales (including support and unspecified upgrades and enhancements when and if they are available) and to a lesser extent professional services, although the user can benefit from the software without our assistance.
The Transition to a SaaS Delivery Model In response to the evolving needs of our customers and the growing threat landscape, we have begun our strategic transition to a SaaS delivery model.
The Transition to a SaaS Delivery Model In response to the evolving needs of our customers and the growing threat landscape, we are strategically transitioning to a SaaS delivery model.
Additional sources of cash inflows were from changes in our working capital, including a $5.3 million increase in deferred revenues, a $1.4 million increase in other long-term liabilities and a $0.5 million decrease in other long-term assets.
Additional sources of cash inflows were from changes in our working capital, including a $110.4 million increase in deferred revenues, a $17.3 million increase in accrued expenses and other liabilities, a $3.6 million increase in trade payables, a $0.3 million decrease in other long-term assets and a $0.3 million increase in other long-term liabilities.
Instability in the Middle East Due to the war that began on October 7, 2023, a portion of our employees in Israel have been called to active reserve duty and additional employees may be called in the future, if needed. The Company has a business continuity plan and will remain aware and responsive to the evolving situation.
Instability in the Middle East Due to the war that began on October 7, 2023, a portion of our employees in Israel have been called to active reserve duty and additional employees may be called in the future, if needed.
Subscription licenses are sold on-premises and are recognized at the point in time when the software license has been delivered and the benefit of the asset has transferred. Maintenance associated with subscription licenses is recognized ratably over the term of the agreement.
Term license subscription software sold on-premises is recognized at the point in time when the software license has been delivered and the benefit of the asset has transferred.
We will continue our focus on targeting 40 organizations with 1,000 users or more who can make larger purchases with us initially and over time.
We will continue our focus on targeting larger organizations who can make sizable purchases with us initially and over time.
Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States.
We expect to fund these obligations with cash flows from operations and cash on our balance sheet. Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States.
All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for the fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted.
All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for the fiscal years beginning after December 15, 2024.
The term of the maintenance contract is usually one year. Renewals of maintenance contracts create new performance obligations that are satisfied over the new term with the revenues recognized ratably over the contract period. Revenues from professional services consist mostly of time and material services.
Renewals of maintenance contracts create new performance obligations that are satisfied over the new term with the revenues recognized ratably over the contract period. Revenues from professional services consist mostly of time and material services. The performance obligations are satisfied, and revenues are recognized, when the services are provided or once the service term has expired.
We recognize share-based compensation expense for the performance stock units on a straight-line basis over the requisite service period for each separately vesting portion of the award when it is probable that the performance conditions will be achieved.
We recognize stock-based compensation expense for performance stock units using the graded vesting method over the requisite service period for each separately-vesting tranche of the award when it is probable that the performance conditions will be achieved.
We believe that our existing cash and cash equivalents, short-term marketable securities, short-term deposits and cash flow from operations will be sufficient to fund our operations and capital expenditures for at least the next 12 months.
We believe that our existing cash and cash equivalents, short-term marketable securities, short-term deposits and cash flow from operations will be sufficient to fund our operations and capital expenditures for at least the next 12 months. Additionally, as of December 31, 2024, we held $658.9 million in long-term marketable securities.
Contract Costs: We pay sales commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales goals. Sales commissions earned by employees are considered incremental and recoverable costs of obtaining a contract with a customer.
For information regarding disaggregated revenues, refer to Note 13 to our consolidated financial statements. Contract Costs: We pay sales commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined sales goals. Sales commissions earned by employees are considered incremental and recoverable costs of obtaining a contract with a customer.
Aggregate minimum rental commitments under non-cancelable leases as of December 31, 2023 for the upcoming years were as follows: Payments Due by Period 2024 2025 2026 2027 2028 Thereafter Total (in thousands) Operating lease obligations $ 11,839 $ 11,276 $ 9,956 $ 9,844 $ 9,791 $ 14,057 $ 66,763 49 We have obligations related to unrecognized tax benefit liabilities totaling $23.7 million and others related to severance pay, which have been excluded from the table above as we do not believe it is practicable to make reliable estimates of the periods in which payments for these obligations will be made.
Aggregate minimum rental commitments under non-cancelable leases as of December 31, 2024 for the upcoming years were as follows: Payments Due by Period 2025 2026 2027 2028 2029 Thereafter Total (in thousands) Operating lease obligations $ 12,305 $ 12,029 $ 12,084 $ 12,088 $ 8,015 $ 10,012 $ 66,533 50 We have obligations related to unrecognized tax benefit liabilities totaling $33.3 million and others related to severance pay, which have been excluded from the table above as we do not believe it is practicable to make reliable estimates of the periods in which payments for these obligations will be made.
General and administrative expenses primarily consist of personnel and facility-related costs for our executive, finance, legal, human resources and administrative personnel. Other expenses are comprised of legal, accounting and other consultant fees and other corporate expenses and allocated overhead. We expect that general and administrative expenses will increase in absolute dollars as we expand our operations.
General and administrative expenses primarily consist of personnel and facility-related costs for our executive, finance, legal, human resources and administrative personnel. Other expenses are comprised of legal, accounting and other consultant fees and other corporate expenses and allocated overhead.
As of December 31, 2023, SaaS as a percentage of total ARR was approximately 23% and we expect this percentage to increase as we continue the transition to a SaaS delivery model. Remaining Performance Obligations Remaining performance obligations ("RPO") represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable amounts that will be invoiced.
Remaining Performance Obligations Remaining performance obligations ("RPO") represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable amounts that will be invoiced in the future. Our RPO was $729.7 million as of December 31, 2024. We expect RPO to increase in absolute dollars as we continue to transition to a SaaS delivery model.
Our product offering currently contains coverage for more than 40 of the most critical on-premises and cloud data stores and applications and our renewal rate continued to be over 90% for the year ended December 31, 2023.
Our product offering 41 currently contains coverage for most mission-critical cloud and on-premises data stores and cloud infrastructure environments, and many critical SaaS applications. Our renewal rate continued to be over 90% for the year ended December 31, 2024.
Income Taxes Year Ended December 31, 2023 2022 % Change (in thousands) Income taxes $ (13,998) $ (13,703) (2.2) % Income taxes for the year ended December 31, 2023, including the increase in income taxes, were comprised of foreign and U.S. income taxes.
Income Taxes Year Ended December 31, 2024 2023 % Change (in thousands) Income taxes $ (12,758) $ (13,998) (8.9) % Income taxes for the year ended December 31, 2024, including the decrease in income taxes, were comprised of foreign and U.S. income taxes.
During 2022, net cash used in investing activities of $374.3 million was primarily attributable to net investments of $236.3 million in marketable securities, $126.6 million in net deposits and $11.4 million in capital expenditures to support our growth during the period including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space.
During 2024, net cash used in investing activities of $532.3 million was primarily attributable to net investments of $529.4 million in marketable securities, $6.7 million for in-process research and development and $6.7 million in capital expenditures to support our growth including hardware, office equipment and leasehold improvements mainly in connection with existing office space.
Each of these products allow customers to use hosted software, and the related revenue from these products is recognized ratably over the associated contract period. Over the next several years, we expect SaaS revenues to grow considerably and become the primary driver of our revenues.
Each of these products allow customers to use hosted software, and the related revenue from these products is recognized ratably over the associated contract period. We expect SaaS revenues to continue to grow considerably and become the primary driver of our revenues in 2025, which is when we believe our transition to a SaaS delivery model will be complete.
Financial Income, Net Year Ended December 31, 2023 2022 % Change (in thousands) Financial income, net $ 30,305 $ 10,413 191.0 % The increase in financial income, net was primarily due to higher interest income, partially offset by less foreign currency gains.
Financial Income, Net Year Ended December 31, 2024 2023 % Change (in thousands) Financial income, net $ 34,644 $ 30,305 14.3 % The increase in financial income, net was primarily due to higher interest income, partially offset by foreign currency losses.
During this transition, we expect our revenues to be negatively impacted due to revenue recognition accounting treatment headwinds associated with the increase in SaaS sales and existing customer conversions to SaaS. These revenue headwinds will be dependent on the pace of the transition.
During this transition, we expect our revenues to be negatively impacted due to revenue recognition accounting treatment variations associated with the increase in SaaS sales and existing customer conversions to SaaS. We expect these revenue variations to persist throughout the transition to a SaaS delivery model, which we believe will be complete by the end of 2025.
Due to differences in the revenue recognition accounting treatment, an increase in SaaS mix and existing customer conversions to SaaS produce revenue headwinds which may cause significant variation in the reported revenues for a given period compared to the same period in the previous year.
Due to differences in the revenue recognition accounting treatment, the transition to a SaaS delivery model may cause significant variation in the reported revenues for a given period compared to the same period in the previous year.
The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. We are currently evaluating the effect of adopting the ASU on our disclosures.
Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis.
Foreign exchange gains or losses relate to our business activities in foreign countries with different operational reporting currencies. As a result of our business activities in foreign countries, we expect that foreign exchange gains or losses will continue to occur due to fluctuations in exchange rates in the countries where we do business.
As a result of our business activities in foreign countries, we expect that foreign exchange gains or losses will continue to occur due to fluctuations in exchange rates in the countries where we do business. Amortization of debt issuance costs relate to the Notes we issued in May 2020 and September 2024.
Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 59,416 $ 11,871 Net cash used in investing activities (143,076) (374,251) Net cash used in financing activities (53,400) (75,581) Decrease in cash and cash equivalents $ (137,060) $ (437,961) On December 31, 2023, our cash and cash equivalents, short-term marketable securities and short-term deposits of $533.7 million were held for working capital purposes.
Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 115,200 $ 59,416 Net cash used in investing activities (532,255) (143,076) Net cash provided by (used in) financing activities 371,900 (53,400) Decrease in cash and cash equivalents $ (45,155) $ (137,060) As of December 31, 2024, our cash and cash equivalents, short-term marketable securities and short-term deposits of $568.4 million were held for working capital purposes.
This was partially offset by a $28.2 million 48 increase in prepaid expenses and other current assets (including deferred commissions) and a $18.8 million increase in accounts receivable. Our DSO for the three months and year ended December 31, 2022 was 79 and 70, respectively.
This was partially offset by a $75.0 million increase in prepaid expenses and other short-term assets (including deferred commissions) and a $33.1 million increase in accounts receivable. Our DSO for the three months and year ended December 31, 2023 was 82 and 72, respectively.
Convertible Notes On May 11, 2020, we issued $253.0 million aggregate principal amount of the 2025 Notes. The net proceeds from the offering, after deducting initial purchaser discount and issuance costs, were approximately $245.2 million. In connection with the issuance of the 2025 Notes, we entered into the Capped Call Transactions.
The net proceeds from the offering, after deducting issuance costs, were approximately $449.6 million. In connection with the issuance of the 2029 Notes, we used $55.5 million of the net proceeds to enter into Capped Call Transactions. On May 11, 2020, we issued the 2025 Notes. The net proceeds from the offering, after deducting issuance costs, were approximately $245.2 million.
Financial Income (Expenses), Net Financial income (expenses), net consists primarily of interest income, foreign exchange gains or losses, amortization of debt discount and issuance costs and interest expense. Interest income represents interest received on our cash, cash equivalents, marketable securities, deposits and amortization of premiums and accretion of discounts related to our investment in available for sale marketable securities.
Interest income represents interest received on our cash, cash equivalents, marketable securities, deposits and amortization of premiums and accretion of discounts related to our investment in available for sale marketable securities. Foreign exchange gains or losses relate to our business activities in foreign countries with different operational reporting currencies.
The anticipated decrease in maintenance and services revenues was due to churn and the conversion of existing customers to subscription licenses despite our renewal rate continuing to be over 90% for each of the years ended December 31, 2023 and 2022, as well as newer solutions providing remediation in more automated ways, requiring less professional services.
The anticipated decrease in maintenance and services revenues was due to churn and the conversion of existing customers to SaaS despite our renewal rate continuing to be over 90% for each of the years ended December 31, 2024 and 2023. We continue to expect less associated maintenance and services revenues in the future.
The increase is also due to a $2.1 million increase in third-party hosting costs associated with our transition to a SaaS delivery model and a $1.3 million increase in facilities and allocated overhead costs. 46 The increase in sales and marketing expenses was primarily related to a $3.3 million increase in third-party hosting costs associated with our transition to a SaaS delivery model and a $1.5 million increase related to general sales and marketing expenses, including increased travel and marketing events.
The increase in sales and marketing expenses was primarily related to an increase of $9.7 million in general sales and marketing expenses, including increased travel, marketing events and third-party hosting costs associated with our transition to a SaaS delivery model and a $1.8 million increase in salaries and benefits and stock-based compensation expense primarily due to increased headcount.
For the year ended December 31, 2023, approximately 75% of our revenues were derived from North America, while approximately 22% of our revenues were derived from EMEA and approximately 3% from ROW.
For the year ended December 31, 2024, approximately 73% of our revenues were derived from the United States, while approximately 21% of our revenues were derived from EMEA and approximately 6% from ROW.
Our days’ sales outstanding (“DSO”) for the three months and year ended December 31, 2023 was 82 and 72, respectively. Other sources of cash outflows were from a $5.3 million decrease in accrued expenses and other liabilities, a $2.3 million decrease in trade payables and a $0.6 million decrease in other long-term assets.
Other sources of cash outflows were from a $5.3 million decrease in accrued expenses and other liabilities, a $2.3 million decrease in trade payables and a $0.6 million decrease in other long-term assets.
Amortization of debt discount and issuance costs relate to the 2025 Notes we issued in May 2020. Interest expense consists of the contractual interest expenses associated with the 2025 Notes. 43 Income Taxes We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business.
Interest expense consists of the contractual interest expenses associated with the Notes. Income Taxes We operate in the U.S. and in foreign jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax.
Our SaaS offerings allow customers to use hosted software, and our revenue is recognized ratably over the associated contract period. Conversions from a license sold on-premises to our SaaS offering are accounted for on a pro-rata prospective basis. We recognize revenues from maintenance agreements ratably over the term of the underlying maintenance contract.
Conversions from a license sold on-premises to the Company’s SaaS offering during the original subscription period are accounted for on a prospective basis. 51 We recognize revenues from maintenance agreements ratably over the term of the underlying maintenance contract. The term of the maintenance contract is usually one year.
ARR is not a forecast 41 of future revenues and can be impacted by contract start and end dates and renewal rates. We expect ARR to continue to increase in absolute dollars. Transition to SaaS Delivery Model and SaaS as a Percentage of ARR Over the last two years, we have strategically expanded our offering to include SaaS solutions.
ARR 42 is not a forecast of future revenues and can be impacted by contract start and end dates and renewal rates. We expect ARR to continue to increase in absolute dollars.
For the years ended December 31, 2023, 2022 and 2021, our subscription revenues were $400.9 million, $366.1 million and $270.8 million, respectively. For the years ended December 31, 2023, 2022 and 2021, our total revenues were $499.2 million, $473.6 million and $390.1 million, respectively.
For the years ended December 31, 2024, 2023 and 2022, SaaS revenues were $208.8 million, $44.4 million and $2.2 million, respectively. For the years ended December 31, 2024, 2023 and 2022, our total revenues were $551.0 million, $499.2 million and $473.6 million, respectively.
Our income tax provision could be significantly impacted by estimates surrounding our uncertain tax positions and changes to our valuation allowance in future periods. We reevaluate the judgments surrounding our estimates and make adjustments as appropriate each reporting period. In addition, we are subject to the regular examinations of our income tax returns by different tax authorities.
We reevaluate the judgments surrounding our estimates and make adjustments as appropriate each reporting period. In addition, we are subject to the regular examinations of our income tax returns by different tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
These seasonal trends also impact our operating loss because the majority of our expenses are relatively fixed in the short-term. For 2023, sources of cash inflows were $73.8 million, which included our net loss of $100.9 million, offset by non-cash charges of $174.7 million.
These seasonal trends also impact our operating loss because the majority of our expenses are relatively fixed in the short-term. For 2024, cash inflows were $102.1 million from our net loss excluding non-cash and acquired in-process research and development charges.
As a result, we have not experienced significant seasonal fluctuations in the timing of expenses from period to period. Liquidity and Capital Resources The following table shows our liquidity and capital resources and our cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2023 and 2022.
Liquidity and Capital Resources The following table shows our liquidity and capital resources and our cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2024 and 2023.
Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax. Because of our history of operating losses, we have established a full valuation allowance against potential future benefits for deferred tax assets, including loss carryforwards.
Because of our history of operating losses, we have established a full valuation allowance against potential future benefits for deferred tax assets, including loss carryforwards. Our income tax provision could be significantly impacted by estimates surrounding our uncertain tax positions and changes to our valuation allowance in future periods.
The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid.
Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold.
Additional sources of cash inflows were from changes in our working capital, including a $69.9 million increase in deferred revenues and a $0.5 million increase in other long-term liabilities. This was partially offset by a $43.4 million increase in prepaid expenses and other current assets (including deferred commissions) and a $33.1 million increase in accounts receivable.
Sources of cash inflows were $105.3 million, which included our net loss of $100.9 million, offset by non-cash charges of $206.2 million. Additional sources of cash inflows were from changes in our working capital, including a $69.9 million increase in deferred revenues and a $0.5 million increase in other long-term liabilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+4 added−0 removed6 unchanged
Biggest changeHistorically, we have used derivative financial instruments, specifically foreign currency forward contracts, to manage exposure to foreign currency risks, by hedging a portion of our forecasted expenses denominated in NIS generally expected to occur within 12 months. Over the last several quarters, we have closed forward foreign exchange contracts beyond 12 months to capitalize on more favorable rates.
Biggest changeWe use derivative financial instruments, specifically foreign currency forward contracts, to manage exposure to foreign currency risks, by hedging a portion of our forecasted revenues and expenses generally expected to occur within 12 to 24 months.
The fair value of the 2025 Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. Additionally, we carry the 2025 Notes at face value less unamortized costs on our balance sheet, and we present the fair value for required disclosure purposes only.
The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. Additionally, we carry the Notes at face value less unamortized costs on our balance sheet, and we present the fair value for required disclosure purposes only.
Generally, the fair market value of our fixed interest rate 2025 Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair values of the 2025 Notes are affected by our stock price.
Generally, the fair market value of our fixed interest rate Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair values of the Notes are affected by our stock price.
To the extent we enter into other long-term debt arrangements in the future, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operation. 53
To the extent we enter into other long-term debt arrangements in the future, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operation. 55
Foreign Currency Exchange Risk Approximately one quarter of our revenues for the years ended December 31, 2023 and 2022 were earned in non-U.S. dollar denominated currencies, mainly in the Euro and Pound Sterling.
Foreign Currency Exchange Risk Approximately one quarter of our revenues for the years ended December 31, 2024 and 2023 were earned in non-U.S. dollar denominated currencies, mainly in the Euro and Pound Sterling.
During 2023, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business, after considering foreign currency hedges, would not have had a material impact on our consolidated financial statements.
During 2024, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business, after considering foreign currency hedges, would not have had a material impact on our consolidated financial statements.
We also enter into forward contracts to hedge a portion of our monetary items in the balance sheet, such as trade receivables and payables, denominated in Pound Sterling and Euro for short-term periods to protect the fair value of the monetary assets and liabilities from foreign exchange rate fluctuations.
We have also previously entered into forward contracts to hedge a portion of our monetary items in the balance sheet, such as trade receivables and payables, denominated in Pound Sterling and Euro for short-term periods to protect the fair value of the monetary assets and liabilities from foreign exchange rate fluctuations.
Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar and NIS, and to a lesser extent the Euro, Pound Sterling, Canadian dollar, Australian dollar and Singapore dollar. Our expenses denominated in foreign currencies consist primarily of personnel and overhead costs from our international operations.
Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar and New Israeli Shekel, and to a lesser extent the Euro, Pound Sterling, Canadian dollar, Australian dollar and Singapore dollar. Our expenses denominated in foreign currencies consist primarily of personnel and overhead costs from our international operations.
The 2025 Notes have fixed annual interest rates at 1.25% and, therefore, we do not have economic interest rate exposure on our 2025 Notes. However, the values of the 2025 Notes are exposed to interest rate risk.
In May 2020 we issued the 2025 Notes and in September 2024 we issued the 2029 Notes, which have fixed annual interest rates at 1.25% and 1.00%, respectively, and therefore, we do not have economic interest rate exposure on the Notes. However, the values of the Notes are exposed to interest rate risk.
The effect of exchange rate changes on foreign currency forward contracts is expected to offset the effect of exchange rate changes in the underlying hedged item which impacts financial income (expenses), net.
The effect of exchange rate changes on foreign currency forward contracts is expected to offset the effect of exchange rate changes in the underlying hedged item which impacts financial income, net. We do not use derivative financial instruments for trading or speculative purposes.
Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce our future interest income.
Due to the liquid and short-term nature of our cash and cash equivalents, short-term marketable securities and short-term deposit instruments, we believe that we do not have any material exposure to changes in the fair value of these instruments as a result of changes in interest rates.
We do not use derivative financial instruments for trading or speculative purposes. 52 Interest Rate Risk We had cash and cash equivalents, short-term marketable securities and short-term deposits of $533.7 million as of December 31, 2023. We hold our cash and cash equivalents, short-term marketable securities and short-term deposits for working capital purposes.
Interest Rate Risk As of December 31, 2024, we had cash and cash equivalents, short-term marketable securities and short-term deposits of $568.4 million and investments in long-term marketable securities of $658.9 million. We hold our cash and cash equivalents, short-term marketable securities and short-term deposits for working capital purposes.
The effect of a hypothetical 100 basis point increase in interest rates would not have a material impact on our consolidated financial statements. In May 2020, we issued $253.0 million aggregate principal amount of 1.25% convertible senior notes due in 2025.
The effect of a hypothetical 100 basis point change in interest rates would not have a material impact on our consolidated financial statements.
Added
A majority of our revenues and operating expenditures are transacted in U.S. dollars; however, certain revenues and operating expenditures are incurred in or exposed to other currencies, specifically, Euro and Pound Sterling for revenues, and the New Israeli Shekel, Euro and Pound Sterling for operating expenses.
Added
We do not enter into marketable security investments for trading or speculative purposes. 54 Our cash and cash equivalents, marketable securities and short-term deposits are subject to market risk due to changes in interest rates, which may affect our interest income and the fair value of our marketable securities.
Added
Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
Added
Additionally, because we classify our marketable securities as available-for-sale securities, no gains or losses are recognized in the consolidated statements of operations due to the changes in interest rates, unless securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

Other VRNS 10-K year-over-year comparisons