VARONIS SYSTEMS INC
For the period ended Sep 30, 2026. Filed Nov 4, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 4, 2026
VRNS$48.80+0.1%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-07-29.
0001628280-26-050630
Item 1A. Risk FactorsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-04.
0001628280-26-070185
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 306 previous paragraphs and 328 current paragraphs.
296 unchanged; 10 reworded; 22 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
•failure to complete, or delays in completing, the Merger could materially and adversely affect our business, financial condition, results of operations, and stock price;
Current report
•uncertainty about the Merger may adversely affect relationships with our customers, partners, suppliers, and employees, whether or not the Merger is completed;
Current report
Failure to complete, or delays in completing, the Merger could materially and adversely affect our business, financial condition, results of operations, and stock price.
Current report
On October 15, 2026, we entered into the Merger Agreement with Parent and Merger Sub. Completion of the Merger is subject to approval by our stockholders, receipt of required regulatory approvals and the satisfaction of other customary closing conditions in the Merger Agreement. The parties to the Merger Agreement may not receive the necessary approvals for the transaction or receive them within the expected timeframe. In addition, the Merger may fail to close for other reasons, and either we or Parent may terminate the Merger Agreement if the Merger is not consummated by July 15, 2027, subject to an automatic three-month extension under specified circumstances relating to required regulatory approvals. If the proposed Merger is delayed or not completed, we are subject to a number of risks, including:
Current report
•our management will have devoted significant attention and resources to the Merger;
Current report
•if the Merger Agreement is terminated, under some circumstances, we may be required to pay a termination fee of $211.7 million;
Current report
•if the Merger Agreement is terminated under circumstances in which Parent is required to pay us a reverse termination fee of $423.3 million, such fee, together with certain limited expense reimbursement and enforcement costs, generally will be our sole and exclusive monetary remedy against Parent and its related parties and may not be sufficient to compensate us for our losses;
Current report
•the price of our common stock may decline, including to the extent that the current market price of our common stock reflects an assumption that the Merger and the other transactions contemplated by the Merger Agreement will be consummated without delays, which could have a material adverse effect on our business, results of operations, and financial condition.
Current report
If any of these effects were to occur, it could adversely impact our business, results of operations, financial condition or cash flow, as well as the market price of our common stock and our perceived value, regardless of whether the Merger is completed.
Current report
Uncertainty about the Merger may adversely affect relationships with our employees, customers, partners and suppliers, whether or not the Merger is completed.
Current report
Uncertainty about the Merger and the effect of the Merger on customers, partners, suppliers, employees and other third parties who deal with us may have a material adverse effect on our business, results of operations, and financial condition. Such uncertainties may impair our ability to attract, retain, and motivate key personnel pending the consummation of the Merger, as such personnel may experience uncertainty about their future roles following the consummation of the Merger, creating distractions and thus resulting in a decline in their productivity.
Current report
These uncertainties could also lead current and prospective customers and partners to purchase products and services from other providers or delay purchasing from us, which could have a material adverse effect on our business, results of operations, financial condition, and market price of our common stock. The Merger may also generate negative publicity and a negative impression of us in the financial markets, and may lead to litigation against us and our directors and officers.
Current report
The pursuit of the Merger may place a significant burden on management and internal resources, which may have a negative impact on our ongoing business. It may also divert management’s time and attention from the day-to-day operation of our remaining businesses and the execution of our other strategic initiatives. This could adversely affect our financial results.
Current report
Any of the foregoing, individually or in combination, could materially and adversely affect our business, our financial condition and our results of operations.
Current report
While the Merger is pending, we are subject to contractual restrictions and interim covenants that could harm our business relationships, financial condition, results of operations, and business.
Current report
The Merger Agreement generally requires us to operate our business in the ordinary course in all material respects, subject to certain exceptions, pending consummation of the Merger, and subjects us to customary interim operating covenants that restrict us from taking certain specified actions without Parent's approval until the Merger is consummated or the Merger Agreement is terminated in accordance with its terms, including, among other things, issuing or repurchasing equity securities; incurring debt; entering into, establishing, adopting, amending, modifying or terminating any employee benefit plan or certain contracts; increasing the compensation or employee benefits of certain employees, contractors or service providers or hiring or terminating certain employees, contractors or service providers; settling, releasing, waiving or compromising certain legal proceedings; materially changing our methods, principles or practices of financial accounting; and incurring certain capital expenditures. These restrictions could prevent us from pursuing certain business opportunities that may arise prior to the consummation of the Merger and may affect our ability to execute our business strategies and attain financial and other goals and may impact our financial condition, results of operations and cash flows.
Current report
Under the Merger Agreement, we are restricted from soliciting or engaging in discussions or negotiations with respect to any alternative acquisition proposal, subject to customary fiduciary exceptions. In addition, under certain circumstances, including if we terminate the Merger Agreement to enter into an agreement providing for a superior proposal or if Parent terminates the Merger Agreement because our board of directors adversely changes its recommendation in favor of the Merger, we would be required to pay Parent a termination fee of $211.7 million. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of our business from considering or proposing an acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the consideration provided for in the Merger Agreement.
Current report
The Company and Parent have incurred, and expect to continue to incur, a number of non-recurring costs associated with the proposed Merger, a substantial majority of which will consist of transaction and regulatory costs.
Current report
Lawsuits may be filed against us and the members of our board of directors arising out of the Merger, which may delay or prevent the Merger.
Current report
Stockholder complaints and other complaints may be filed against us, our board of directors, Parent, Parent's board of directors, and others in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is uncertain, and we may not be successful in defending against any such claims. Such lawsuits could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business, result in substantial costs to us, and otherwise adversely affect our business, results of operations, and financial condition.
Reworded paragraphs (10)
Previous wording
Certain U.S. and international laws also require companies to notify individuals of security breaches involving personal information, whether caused by us or our service providers. Despite contractual protections, a breach could harm our reputation, erode customer trust, reduce sales, lead to customer loss, and expose us to liability or significant remediation costs. Beyond government regulation, privacy advocates and industry groups may introduce new self‑regulatory standards that could apply to us. We also anticipate continued legislative and regulatory developments in privacy, data protection, and information security, the impact of which remains uncertain. New laws, amendments, or reinterpretations of existing requirements—as well as evolving industry standards and contractual obligations—may increase compliance costs and restrict our operations. Because interpretation and enforcement of these requirements are uncertain, they may conflict with our current practices or product features. If so, we could face fines, litigation, or be required to make fundamental changes to our business or software, which may not be commercially feasible and could limit our ability to innovate. Failure to adequately address privacy concerns—whether valid or perceived—or to comply with applicable requirements could result in additional costs, liability, reputational harm, inhibited sales, and other adverse effects on our business.
Current wording
Certain U.S. and international laws also require companies to notify individuals of security breaches involving personal information, whether caused by us or our service providers. Despite contractual protections, a breach could harm our reputation, erode customer trust, reduce sales, lead to customer loss, and expose us to liability or significant remediation costs. Beyond government regulation, privacy advocates and industry groups may introduce new self‑regulatory standards that could apply to us. We also anticipate continued legislative and regulatory developments in privacy, data protection, and information security, the impact of which remains uncertain. In addition, regulatory frameworks governing artificial intelligence, automated decision-making, and the use of data in connection with AI systems are rapidly evolving in the United States, Europe, the United Kingdom, and other jurisdictions. These requirements may impose additional compliance obligations, restrict certain product functionality, increase costs, or result in regulatory investigations, enforcement actions or litigation. New laws, amendments, or reinterpretations of existing requirements—as well as evolving industry standards and contractual obligations—may increase compliance costs and restrict our operations. Because interpretation and enforcement of these requirements are uncertain, they may conflict with our current practices or product features. If so, we could face fines, litigation, or be required to make fundamental changes to our business or software, which may not be commercially feasible and could limit our ability to innovate. Failure to adequately address privacy concerns—whether valid or perceived—or to comply with applicable requirements could result in additional costs, liability, reputational harm, inhibited sales, and other adverse effects on our business.
Previous wording
We have incurred net losses in each year since our inception, including a net loss of $83.7 million for the six months ended June 30, 2026 and net losses of $129.3 million and $95.8 million in each of the years ended December 31, 2025 and 2024, respectively. Because the market for our software is rapidly evolving and has still not yet reached widespread adoption, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase over the next several years as we hire additional personnel, expand and improve the effectiveness of our distribution channels, and continue to develop features and applications for our software.
Current wording
We have incurred net losses in each year since our inception, including a net loss of $125.3 million for the nine months ended September 30, 2026 and net losses of $129.3 million and $95.8 million in each of the years ended December 31, 2025 and 2024, respectively. Because the market for our software is rapidly evolving and has still not yet reached widespread adoption, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase over the next several years as we hire additional personnel, expand and improve the effectiveness of our distribution channels, and continue to develop features and applications for our software.
Previous wording
We rely on channel partners, such as distribution partners and resellers, to sell the Varonis Data Security Platform. In 2025 and for the six months ended June 30, 2026, 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. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners.
Current wording
We rely on channel partners, such as distribution partners and resellers, to sell the Varonis Data Security Platform. In 2025 and for the nine months ended September 30, 2026, 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. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners.
Previous wording
Historically, we have generated the majority of our revenues from customers in the United States. For the year ended December 31, 2025 and for the six months ended June 30, 2026, approximately 71% and 72%, respectively, of our total revenues were derived from sales in the United States. Nevertheless, we have operations across the globe, and we plan to continue to expand our international operations as part of our long-term growth strategy. The further expansion of our international operations will subject us to a variety of risks and challenges, including:
Current wording
Historically, we have generated the majority of our revenues from customers in the United States. For the year ended December 31, 2025 and for the nine months ended September 30, 2026, approximately 71% and 72%, respectively, of our total revenues were derived from sales in the United States. Nevertheless, we have operations across the globe, and we plan to continue to expand our international operations as part of our long-term growth strategy. The further expansion of our international operations will subject us to a variety of risks and challenges, including:
Previous wording
Our business relies on our customers’ satisfaction with the technical support, customer success and professional services we provide to support our products. Our customers have no obligation to renew their agreements with us after the initial terms have expired. Our customers have an option to renew their agreements and, for us to maintain and improve our results of operations, it is important that our existing customers renew their agreements, if applicable, when the existing contract term expires. For example, our SaaS renewal rate for the six months ended June 30, 2026 and 2025 is over 90%.
Current wording
Our business relies on our customers’ satisfaction with the technical support, customer success and professional services we provide to support our products. Our customers have no obligation to renew their agreements with us after the initial terms have expired. Our customers have an option to renew their agreements and, for us to maintain and improve our results of operations, it is important that our existing customers renew their agreements, if applicable, when the existing contract term expires. For example, our SaaS renewal rate for the nine months ended September 30, 2026 and 2025 is over 90%.
Previous wording
As of June 30, 2026, we have 130 issued patents in the United States and 68 pending U.S. patent applications. We also have 58 patents issued and 97 applications pending for examination in non-U.S. jurisdictions, and 30 pending PCT patent applications, all of which are counterparts of our U.S. patent applications. We may file additional patent applications in the future. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner all the way through to the successful issuance of a patent. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Furthermore, it is possible that our patent applications may not issue as granted patents, that the scope of our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. In addition, issuance of a patent does not guarantee that we have an absolute right to practice the patented invention. 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). However, we may not be able to adequately protect our rights in every such agreement or execute an agreement with every such party. Finally, in order to benefit from patent and other intellectual property protection, we must monitor, detect and pursue infringement claims in certain circumstances in relevant jurisdictions, all of which is costly and time-consuming. As a result, we may not be able to obtain adequate protection or to enforce our issued patents or other intellectual property effectively.
Current wording
As of September 30, 2026, we have 134 issued patents in the United States and 70 pending U.S. patent applications. We also have 58 patents issued and 123 applications pending for examination in non-U.S. jurisdictions, and 25 pending PCT patent applications, all of which are counterparts of our U.S. patent applications. We may file additional patent applications in the future. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner all the way through to the successful issuance of a patent. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Furthermore, it is possible that our patent applications may not issue as granted patents, that the scope of our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. In addition, issuance of a patent does not guarantee that we have an absolute right to practice the patented invention. 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). However, we may not be able to adequately protect our rights in every such agreement or execute an agreement with every such party. Finally, in order to benefit from patent and other intellectual property protection, we must monitor, detect and pursue infringement claims in certain circumstances in relevant jurisdictions, all of which is costly and time-consuming. As a result, we may not be able to obtain adequate protection or to enforce our issued patents or other intellectual property effectively.
Previous wording
We are also subject to the regular examination of our income tax returns by the U.S. Internal Revenue Services and other tax authorities in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing, IP structure or other matters and assess additional taxes. 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.
Current wording
We are also subject to the regular examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing, IP structure or other matters and assess additional taxes. 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.
Previous wording
On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted. The TCJA remains unclear in some respects and has been, and may continue to be, subject to amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could lessen or increase certain adverse impacts of TCJA. Effective in July 2025, the TCJA, as revised by the OBBBA, requires all U.S. companies to capitalize and subsequently amortize research and development expenses that fall within the scope of Section 174 over fifteen years for research and development activities conducted outside of the U.S. As of the second quarter of 2026, we have accounted for an estimate of the effects of the research and development capitalization, based on interpretation of the law as currently enacted. Once our available NOLs or tax credits are fully utilized, then, due to the capitalization of research and development expenses for those activities conducted outside of the U.S., we would incur a significant increase in our tax expenses and a decrease in our cash flows provided by operations.
Current wording
On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted. The TCJA remains unclear in some respects and has been, and may continue to be, subject to amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could lessen or increase certain adverse impacts of TCJA. Effective in July 2025, the TCJA, as revised by the OBBBA, requires all U.S. companies to capitalize and subsequently amortize research and development expenses that fall within the scope of Section 174 over fifteen years for research and development activities conducted outside of the U.S. As of the third quarter of 2026, we have accounted for an estimate of the effects of the research and development capitalization, based on interpretation of the law as currently enacted. Once our available NOLs or tax credits are fully utilized, then, due to the capitalization of research and development expenses for those activities conducted outside of the U.S., we would incur a significant increase in our tax expenses and a decrease in our cash flows provided by operations.
Previous wording
As of June 30, 2026, we have options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding that, if fully vested and exercised, would result in the issuance of approximately 9.2 million shares of our common stock. All of the shares of our common stock issuable upon exercise of options and vesting of RSUs and PSUs have been registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.
Current wording
As of September 30, 2026, we have options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding that, if fully vested and exercised, would result in the issuance of approximately 9.0 million shares of our common stock. All of the shares of our common stock issuable upon exercise of options and vesting of RSUs and PSUs have been registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.
Previous wording
In addition, if a “fundamental change” occurs prior to the maturity date of the 2029 Notes, holders of the 2029 Notes will have the right, at their option, to require us to repurchase all or a portion of their Convertible Notes. 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 2029 Notes for a holder that elects to convert its Notes in connection with such “make-whole fundamental change.” These features of the 2029 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. Furthermore, the indentures prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the 2029 Notes.
Current wording
In addition, if a “fundamental change” occurs prior to the maturity date of the 2029 Notes, holders of the 2029 Notes will have the right, at their option, to require us to repurchase all or a portion of their Convertible Notes. If a “make-whole fundamental change” (as defined in the indentures) occurs prior to the maturity date, we will in some cases be required to increase the conversion rate of the 2029 Notes for a holder that elects to convert its Notes in connection with such “make-whole fundamental change.” These features of the 2029 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. Furthermore, the indentures prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the 2029 Notes.