Financial Analysis

"BUSINESS COMBINATIONS 2026 Business Combinations AllTrue.ai, Inc. (""AllTrue.ai"") On February 6, 2026, the Company completed the acquisition of the share capital of AllTrue.ai, a provider of AI system security software that delivers real-time visibility and control over AI agents, models, and the data they access across the enterprise. Since the acquisition, the Company has launched Varonis Atlas, which is powered by AllTrue.ai, and is continuing to further integrate the technology into its platform. The acquisition was accounted for as a business combination in accordance with ASC No. 805, ""Business Combinations."" The transaction price was for $180,276 in cash and comprised of the fair value of total consideration transferred of $114,505 and aggregate conditional consideration consisting of an amount up to $40,000 that is conditional on the satisfaction of certain performance targets and employee service periods and an additional $25,771 that is primarily conditional on employee service. The conditional consideration is primarily recorded as research and development compensation expense within the condensed consolidated statements of operations. The total purchase price was preliminarily allocated using information currently available to the Company and may be subject to change as additional information is received during the respective measurement period, up to one year from the acquisition date. During the three months ended June 30, 2026, measurement period adjustment …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"CONVERTIBLE SENIOR NOTES AND CAPPED CALL TRANSACTIONS 2025 Notes The Company issued the 2025 Notes in an aggregate principal amount of $253,000 pursuant to an indenture dated May 11, 2020 (the 2025 Indenture). The net proceeds to the Company after issuance costs were approximately $245,158. The Company used $29,348 of the net proceeds from the offering to pay the cost of the capped call transactions described below. The 2025 Notes were settled prior to or on their maturity date of August 15, 2025 in accordance with the terms of the 2025 Indenture. The unconverted principal of the 2025 Notes and the accrued interest due at maturity were settled in cash. 2029 Notes The Company issued the 2029 Notes pursuant to an indenture dated September 10, 2024 (the 2029 Indenture). The offering totaled $460,000 aggregate principal amount. The net proceeds to the Company after issuance costs were approximately $449,649. The Company used $55,522 of the net proceeds from the offering to pay the cost of the capped call transactions described below. The 2029 Notes will mature on September 15, 2029, unless earlier converted, redeemed or repurchased. Interest will be payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025, at a rate of 1.00% per year. The initial conversion rate for the 2029 Notes is 14.7419 shares of the Companys common stock for each $1,000 principal amount of the 2029 Notes, which is equivalent to an initial conversion price of a …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"STOCKHOLDERS EQUITY Stock Plans On November 14, 2013, the Companys board of directors adopted the Varonis Systems, Inc. 2013 Omnibus Equity Incentive Plan (the 2013 Plan) which was subsequently approved by the Companys stockholders. The Company initially reserved 5,713,899 shares of common stock for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. Since January 1, 2016, the share reserve under the 2013 Plan has been automatically increased by an aggregate of 27,579,672 shares. Awards granted under the 2013 Plan generally vest over four years. No awards were granted under the 2013 Plan subsequent to June 5, 2023, and no further awards will be granted under the 2013 Plan. On October 22, 2020, and as part of the Polyrize Security Ltd. (""Polyrize"") acquisition, the Companys board of directors approved the assumption of a certain portion of Polyrize Options pursuant to the terms and conditions of the Polyrize 2019 Share Incentive (Polyrize Plan). No further awards were or will be granted under the Polyrize Plan. On April 20, 2023, the Companys board of directors adopted the Varonis Systems, Inc. 2023 Omnibus Equity Incentive Plan (the 2023 Plan), subject to approval by the Company's stockholders. On June 5, 2023, the Companys stockholders approved the 2023 Plan which became effective and replaced the 2013 Plan. The Company initially reserved 5,500,000 shares of common stock for issuance under the 2023 Plan to em …

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"FAIR VALUE MEASUREMENTS The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurement levels during the periods presented. The carrying amounts of cash and cash equivalents, accounts receivable, short-term deposits and trade payables approximate their fair value due to the short-term maturity of such instruments. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis, whereby inputs used in valuation techniques are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2: Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3: Unobservable inputs reflecting the Companys own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consisten …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

"GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired less liabilities assumed arising from business combinations. The Company believes the goodwill represents the synergies expected from expanded market opportunities when integrating with its offerings. The change in the carrying amount of goodwill during the six months ended June 30, 2026 is related to the AllTrue.ai and SlashNext acquisitions. For additional information regarding the acquisitions, see Note 4, ""Business Combinations."" The following table reflects goodwill activity for the six months ended June 30, 2026 (in thousands): Amount (unaudited) Balance at December 31, 2025 $ 135,276 Goodwill acquired 79,806 Balance at June 30, 2026 $ 215,082 Intangible Assets, net The total cost and amortization of the Company's intangible assets for the period ended June 30, 2026 is comprised of the following (in thousands): June 30, 2026 (unaudited) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology $ 57,571 $ (5,292) $ 52,279 Customer relationship 4,136 (432) 3,704 Non-compete 40 (17) 23 Total $ 61,747 $ (5,741) $ 56,006 Intangible assets are expensed on a straight-line basis over the useful life of the asset. The Company recorded amortization expense of $2,876 and $4,688 for the three and six months ended June 30, 2026, respectively, and $170 and $196 for the three and six months ended Jun …

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LEASES The Company has various operating leases for office space and vehicles that expire through 2035. The lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. Some leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's sole discretion; therefore, the majority of renewals to extend the lease terms are not included in the Company's right-of-use assets and lease liabilities, as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. Below is a summary of the Company's operating right-of-use assets and operating lease liabilities (in thousands): June 30, 2026 (unaudited) Operating lease right-of-use assets $ 61,826 Operating lease liabilities, current $ 12,242 Operating lease liabilities, long-term 62,854 Total operating lease liabilities $ 75,096 Operating lease liabilities, current are included within accrued expenses and other short-term liabilities in the condensed consolidated balance sheets. Minimum lease payments for the Company's right-of-use assets over the remaining lease periods as of June 30, 2026, are as follows (in thousands): June 30, 2026 (unaudited) 2026 $ 7,856 2027 15,280 2028 11,550 2029 13,321 2030 12,345 Thereafter 27,532 Total undiscounted lease payments $ 87,884 Less: Imputed interest $ (12,788 …

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Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses . The ASU requires, among other items, additional disaggregated disclosures in the notes to the financial statements for certain categories of expenses that are included in the consolidated statements of operations. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the effect of adopting the ASU on its disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) - Targeted Improvements to the Accounting for Internal-Use Software . The ASU was updated to consider different methods of software development and requires internal use software costs to be capitalized when management has authorized and committed to funding the software project and when significant uncertainty associated with the development of the software has been resolved. The amendments in this ASU are required to be adopted for annual and interim reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either through a pr …

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"GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA ASC No. 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (""CODM"") in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment and unit and derives revenues mainly from SaaS revenues, term license subscriptions and maintenance and services fees (see Note 1, ""General,"" for a brief description of the Companys business and revenue recognition). The CODM of the Company is the Chief Executive Officer. The CODM assesses the performance of the Company and decides how to allocate resources based upon consolidated net loss that is also reported within the condensed consolidated statements of operations. The measure of segment assets that is reviewed by the CODM is reported within the condensed consolidated balance sheets as consolidated total assets. The CODM uses consolidated net loss to monitor period-over-period results and decides where to allocate and invest additional resources within the business to continue growth. The following is a summary of the significant expense categories and consolidated net loss details provided to the CODM (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 202 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing