Varonis Systems (VRNS) risk factors, FY2025 10-K

Risks Related to the Industry in which we Operate

1. 01The market for software that analyzes, secures, governs, manages and migrates enterprise data may not continue to grow or grow at the same pace
2. 02Prolonged economic uncertainties or downturns could materially adversely affect our business
3. 03We may face increased competition in our market81% rewritten

Risks Related to Our Operations

1. 04Security breaches, cyberattacks or other cyber-risks of our IT and production systems could expose us to significant liability and cause our business and reputation to suffer and harm our competitive position
2. 05The expansion of cloud-delivered services introduces a number of risks and uncertainties, which could adversely affect our business, results of operations and financial condition68% rewritten
3. 06We may not be able to predict renewal or conversion rates and their impact on our future revenues and operating results40% rewritten
4. 07Our quarterly results of operations have fluctuated and may fluctuate significantly due to variability in our revenues which could adversely impact our stock price
5. 08If we do not successfully optimize and manage our predominantly SaaS‑based business model, or if the remaining transition away from self‑hosted products fails to progress as expected, our results of operations could be negatively impactedNew
6. 09Our results of operations could be negatively affected by foreign currency exposuresNew
7. 10We have been growing and expect to continue to invest in our growth for the foreseeable future. If we fail to manage this growth effectively, our business and results of operations will be adversely affected
8. 11We have a limited operating history at our current scale, which makes it difficult to evaluate and predict our future prospects and may increase the risk that we will not be successful
9. 12If 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
10. 13We have a history of losses, and we may not be profitable in the future35% rewritten
11. 14If we are unable to maintain successful relationships with our channel partners, our business could be adversely affected
12. 15Our long-term growth depends, in part, on being able to continue to expand internationally on a profitable basis, which subjects us to risks associated with conducting international operations
13. 16We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets
14. 17Our business in countries with a history of corruption and transactions with foreign governments increase the risks associated with our international activities
15. 18Acquisitions could disrupt our business and adversely affect our results of operations, financial condition and cash flows
16. 19We are exposed to collection and credit risks, which could impact our operating results
17. 20Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation may adversely affect our business
18. 21Our success depends in part on maintaining, converting to SaaS and increasing our sales to customers in the public sector

Risks Related to Human Capital

1. 22Talent acquisition and retention challenges could adversely affect our growth and operational performanceNew
2. 23We are dependent on the continued services and performance of our co-founder, Chief Executive Officer and President, the loss of whom could adversely affect our business

Risks Related to our Technology, Products, Services and Intellectual Property

1. 24Our failure to continually enhance and improve our technology could adversely affect sales of our products
2. 25If 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
3. 26Interruptions or performance problems, including associated with our website or support website or any caused by cyberattacks, may adversely affect our business
4. 27If our software is perceived as not being secure, customers may reduce the use of or stop using our software, and we may incur significant liabilities
5. 28Our use of open source software could negatively affect our ability to sell our software and subject us to possible litigation
6. 29False detection of security breaches, false identification of malicious sources or misidentification of sensitive or regulated information could adversely affect our business
7. 30Failure to protect our proprietary technology and intellectual property rights could substantially harm our business37% rewritten
8. 31United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United StatesNew
9. 32Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business and operating results

Risks Related to our Tax Regime

1. 33Our tax rate may vary significantly depending on our stock price
2. 34Multiple factors may adversely affect our ability to fully utilize our net operating loss carryforwards24% rewritten
3. 35Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results
4. 36The adoption of the U.S. tax reform and the enactment of additional legislation changes could materially impact our financial position and results of operations80% rewritten

Risks Related to the 2029 Notes

1. 37We 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 results42% rewritten
2. 38Our 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
3. 39We may issue additional shares of our common stock in connection with conversions of the 2029 Notes, and thereby dilute our existing stockholders and potentially adversely affect the market price of our common stock23% rewritten
4. 40The fundamental change provisions of the 2029 Notes may delay or prevent an otherwise beneficial takeover attempt of us22% rewritten
5. 41The Capped Call Transactions may affect the value of the 2029 Notes and our common stock56% rewritten
6. 42and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Notes. This activity could also cause or avoid an increase or a decrease in the market price of our common stockNew
7. 43We are subject to counterparty risk with respect to the Capped Call Transactions

Risks Related to our International Operations

1. 44We face risks associated with operating in international markets that may limit our ability to develop and sell our products, which could result in a decrease of our revenues20% rewritten
2. 45the situation further deteriorates, including, among other things, an expansion of the war to other countries, damage to critical infrastructure and general unrest, which could harm our businessNew
3. 46The tax benefits available to our Israeli subsidiary terminated in 2020 and we expect our Israeli subsidiary to become subject to an increase in taxes

Risks Related to the Ownership of our Common Stock

1. 47Substantial future sales of shares of our common stock could cause the market price of our common stock to decline
2. 48Our stock price has been and will likely continue to be volatile26% rewritten
3. 49We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock
4. 50Real or perceived errors, failures or bugs in our software could adversely affect our growth prospects
5. 51We may require additional capital to support our business growth, and this capital might not be available on acceptable terms, or at all
6. 52Our business is subject to the risks of fire, power outages, floods, earthquakes, pandemics and other catastrophic events, and to interruption by manmade problems such as terrorism and war
7. 53Changes in financial accounting standards may adversely impact our reported results of operations
8. 54If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline
9. 55We are obligated to develop and maintain proper and effective internal control over financial reporting. These internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock
10. 56Future 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