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REGISTERED NUMBER: 06159129 (England and Wales)




















Strategic Report,

Report of the Directors and

Financial Statements

FOR THE YEAR ENDED

31 December 2023

for

VARONIS (UK) LIMITED

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Contents of the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2023










Page

Company Information 1

Strategic Report 2

Report of the Directors 5

Report of the Independent Auditors 6

Profit and Loss Account 10

Balance Sheet 11

Statement of Changes in Equity 12

Notes to the Financial Statements 13


VARONIS (UK) LIMITED

Company Information
FOR THE YEAR ENDED 31 DECEMBER 2023







DIRECTORS: M Barreiros
D M Gottlieb





SECRETARY: D M Gottlieb





REGISTERED OFFICE: Salisbury House
29 Finsbury Circus
London
EC2M 7AQ





REGISTERED NUMBER: 06159129 (England and Wales)





AUDITORS: Melinek Fine LLP
Chartered Accountants
First Floor, Winston House
349 Regents Park Road
London
N3 1DH

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2023


Business overview

Varonis is a leader in data security and 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. 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.

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. 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.

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. 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.

In addition to data growth, companies face an environment where threat actors continue to refine their strategies to monetize sensitive data and the risk of substantial fines for noncompliance with data-centric regulations continues to grow. At the same time, organizations are seeing a global scarcity of in-house technical expertise, as the demand for cybersecurity professionals significantly outpaces supply, and IT and security experts are under pressure to solve growing problems with fewer resources. 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.

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. 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. We expect SaaS deployments to grow significantly over the next several years and become the primary sales driver as we transition our business to a predominately SaaS delivery model.

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. Recognizing the challenge of protecting data with growing volume, velocity and variety, we have built an integrated platform to simplify and streamline data security, threat detection and response and data privacy and compliance.

The Varonis Data Security Platform helps enterprises protect data against cyberattacks from both external and internal threats. Our technology enables enterprises to analyze data, account activity and user behavior to help detect and prevent attacks. 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.

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. 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.


VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2023

Turnover increased in the year by 1% to £24,680,191 and 66% since 2019. This increase is driven by a change in business strategy initiated in 2019. Prior to 2019, the company sold perpetual licenses for its software with a significant upfront amount. During 2019, the company moved to an annual subscription model for its software. Subscriptions sales decreased slightly in 2023 compared to 2022, while, maintenance and services sales increase slightly. During the period the company began to carry out R&D services in UK to support the parent company under the cost plus agreement. Total sales under the cost plus agreement in 2023 are £373,477. Varonis added 36 new customers, compared to 35 new customers added in 2022. Saas revenues increased from £94,020 in 2022 to £3,091,898 in 2023. There has also been a change in staff numbers with a small increase in average employees to 109 from 106 in the prior year and an increase in staff costs to £13,608,353 compared to £13,345,856 in the prior year. There continue to be an investment in IT equipment.

GOING CONCERN
At 31 December 2023 the company had net liabilities of £1,671,958 but had generated a profit for the year of £560,055. The deficit on shareholder's funds arises because of the significant charge back for share based compensation that was received in the year. The company continues to be profitable and cash generative. In addition, the company is able to draw upon the support of its parent company (Varonis System Inc, "the Parent Company") if required.

PRINCIPAL RISKS AND UNCERTAINTIES
Market Risk
The parent company bears the majority of any non-routine market risks associated with fluctuations in costs, demand, and pricing in respect of the group's products. The company is directly engaged in the sale of these products as a distributor, its associated market risks are limited to those of a routine distributor.

Research & Development/Technology Risk
Any research & development activities relate to the parent company, and therefore the company is not exposed to any associated R&D risk.

Warranty Risk
The company does not bear any warranty related risks associated with the distribution of the group's products as this is borne by the parent company.

Product Liability Risk
The parent company bears the product liability risk, accordingly, the company is not exposed to product liability risk.

Credit and Collection Risk
The company extends terms of payment to its customers and is therefore tasked with handling all credit and collection activities with respect to its accounts. Accordingly, it bears the credit and collection risk with respect to the sale of the parent company's products to its customers, which may include the risk of late or non-payment. A material non-payment by a customer would hinder the company's ability to pay the parent company for the purchased group's products.

Currency Risk
The company's exposure to currency risk is limited to foreign exchange fluctuations on foreign denominated bank accounts.


VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2023

FINANCIAL KEY PERFORMANCE INDICATORS
The results for the year and the financial position at the year end showed solid performance with an increase in customer numbers and the director remains positive about the future trading prospects of the company. The company uses two key performance indicators (KPIs), these are as follows:

a) Revenue
b) Days' sales outstanding

The movement in revenue has been discussed above. Debtor days increased over the course of the year but this did not translate into an increase in bad debts.

ON BEHALF OF THE BOARD:




M Barreiros - Director


12 August 2024

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Report of the Directors
FOR THE YEAR ENDED 31 DECEMBER 2023


The directors present their report with the financial statements of the company for the year ended 31 December 2023.

DIVIDENDS
The profit for the year, after taxation, amounted to £560,055 (2022 - £672,862).

The directors do not recommend a dividend.

DIRECTORS
The directors who have held office during the period from 1 January 2023 to the date of this report are as follows:

M Barreiros - appointed 3 January 2023
D M Gottlieb - appointed 3 January 2023
G Melamed - resigned 3 January 2023
A Nitsav - resigned 3 January 2023

MATTERS COVERED IN THE STRATEGIC REPORT
As permitted by s414c(11) of the Companies Act 2006, the directors have elected to disclose' information, required to be in the directors' report by Schedule 7 of the 'Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008'; in the strategic report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-select suitable accounting policies and then apply them consistently;
-make judgements and accounting estimates that are reasonable and prudent;
-prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS
The auditors, Melinek Fine LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:





M Barreiros - Director


12 August 2024

Report of the Independent Auditors to the Members of
Varonis (Uk) Limited


Opinion
We have audited the financial statements of Varonis (Uk) Limited (the 'company') for the year ended 31 December 2023 which comprise the Profit and Loss Account, Balance Sheet, Statement of Changes in Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:
-give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its profit for the year then ended;
-have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information
The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Report of the Independent Auditors to the Members of
Varonis (Uk) Limited


Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors' remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities set out on page five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Report of the Independent Auditors to the Members of
Varonis (Uk) Limited


Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience; through verbal and written communications with those charged with governance and other management; and via inspection of the company's regulatory and legal correspondence.

We discussed with those charged with governance and other management the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations to our team and remained alert to any indicators of non-compliance throughout the audit, we also specifically considered where and how fraud may occur within the company.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the company is subject to laws and regulations that directly affect the financial statements, including: the company's constitution, relevant financial reporting standards; company law; tax legislation and distributable profits legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly the company is subject to other laws and regulations such as environmental regulations, health and safety regulations, and data protection regulations, where the consequences of non-compliance could have a material effect on the amounts or disclosures in the financial statements, for instance through the imposition of fines and penalties, or through losses arising from litigation.

International Standards on Auditing (UK) (ISAs (UK)) limit the required procedures to identify non-compliance with these laws and regulations, and no procedures over and above those already noted are required. These limited procedures did not identify any actual or suspected non-compliance with laws and regulations that could have a material impact on the financial statements.

In relation to fraud, we performed the following specific procedures in addition to those already noted:

- Challenging assumptions made by management in its significant accounting estimates;
- Identifying and testing journal entries, in particular any entries posted with unusual nominal ledger account combinations, journal entries crediting cash or any revenue account;
- Performing analytical procedures to identify unexpected movements in account balances which may be indicative of fraud;
- Ensuring that testing undertaken on both the performance statements and the Balance Sheet includes a number of items selected on a random basis

These procedures did not identify any actual or suspected fraudulent irregularity that could have a material impact on the financial statements.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with International Standards on Auditing (UK)(ISAs (UK)). For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the procedures that we are required to undertake would identify it. In addition, as with any audit, there remains a high risk of non-detection of irregularities, as these might involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls. We are not responsible for preventing non-compliance with laws and regulations or fraud, and cannot be expected to detect non-compliance with all laws and regulations or every incidence of fraud.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Report of the Independent Auditors to the Members of
Varonis (Uk) Limited


Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.




Aryeh Melinek (Senior Statutory Auditor)
for and on behalf of Melinek Fine LLP
Chartered Accountants
First Floor, Winston House
349 Regents Park Road
London
N3 1DH

5 September 2024

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Profit and Loss Account
FOR THE YEAR ENDED 31 DECEMBER 2023

2023 2022
Notes £    £   

TURNOVER 3 24,680,191 24,387,103

Cost of sales 3,871,683 3,427,652
GROSS PROFIT 20,808,508 20,959,451

Administrative expenses 20,252,781 20,252,225
OPERATING PROFIT 6 555,727 707,226

Interest receivable and similar income 7 58,240 4,406
613,967 711,632

Interest payable and similar expenses 8 53,912 38,770
PROFIT BEFORE TAXATION 560,055 672,862

Tax on profit 9 - -
PROFIT FOR THE FINANCIAL YEAR 560,055 672,862

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Balance Sheet
31 DECEMBER 2023

2023 2022
Notes £    £    £    £   
FIXED ASSETS
Tangible assets 10 181,788 193,155

CURRENT ASSETS
Debtors 11 9,263,308 8,496,797
Cash at bank 4,329,587 1,650,659
13,592,895 10,147,456
CREDITORS
Amounts falling due within one year 12 15,235,217 13,122,996
NET CURRENT LIABILITIES (1,642,322 ) (2,975,540 )
TOTAL ASSETS LESS CURRENT
LIABILITIES

(1,460,534

)

(2,782,385

)

CREDITORS
Amounts falling due after more than one
year

13

211,424

27,753
NET LIABILITIES (1,671,958 ) (2,810,138 )

CAPITAL AND RESERVES
Called up share capital 15 100 100
Other reserves 16 (4,521,737 ) (5,099,862 )
Profit and loss account 16 2,849,679 2,289,624
SHAREHOLDERS' FUNDS (1,671,958 ) (2,810,138 )

The financial statements were approved by the Board of Directors and authorised for issue on 12 August 2024 and were signed on its behalf by:





M Barreiros - Director


VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2023

Called up Profit
share and loss Other Total
capital account reserves equity
£    £    £    £   
Balance at 1 January 2022 100 1,616,762 (6,290,199 ) (4,673,337 )

Changes in equity
Profit for the year - 672,862 - 672,862
Total comprehensive income - 672,862 - 672,862
Share based comp expense - - 3,825,865 3,825,865
Share based comp charge back - - (2,635,528 ) (2,635,528 )
Balance at 31 December 2022 100 2,289,624 (5,099,862 ) (2,810,138 )

Changes in equity
Profit for the year - 560,055 - 560,055
Total comprehensive income - 560,055 - 560,055
Share based comp expense - - 3,174,273 3,174,273
Share based comp charge back - - (2,596,148 ) (2,596,148 )
Balance at 31 December 2023 100 2,849,679 (4,521,737 ) (1,671,958 )

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2023


1. GENERAL INFORMATION

Varonis (Uk) Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The company's software specializes in data security, threat detection and response and data privacy and compliance. Varonis software enables enterprises of all sizes and industries to protect data stored in the cloud and on-premises including: sensitive files and emails; confidential personal data belonging to customers, patients and employees; financial records; source code, strategic and product plans; and other intellectual property. Recognizing the challenge of protecting data with growing volume, velocity, and variety, the Company has built an integrated platform to simplify and streamline data security, threat detection and response, and data privacy and compliance.

The company offers coverage for more than 40 of the most mission-critical cloud and on-premises data stores, SaaS applications and cloud infrastructures. In 2022, Varonis announced the availability of its flagship Varonis Data Security Platform as a SaaS, which offers simpler deployment, faster time-to-value, and groundbreaking new automation capabilities that help customers prevent data breaches.

The Varonis Data Security Platform helps enterprises protect data against cyberattacks from both external and internal threats. The company's products enable enterprises to analyze data, application and account activity and user behavior to detect and prevent attacks. Its software platform prevents or limits unauthorized use of sensitive information, detects and prevents 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.

The broad applicability of the company's technology has resulted in its customers deploying its software for numerous use cases. 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; automation of retention and disposition policies; automatic data quarantine; intelligent archiving; and automated indexing for data subject requests related to privacy and compliance requirements.

The financial statements are presented in Sterling (£), which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

2. ACCOUNTING POLICIES

Basis of preparing the financial statements
These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in compliance with FRS102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

the requirements of Section 7 Statement of Cash Flows;
the requirement of paragraph 3.17(d);
the requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and
11.48(c);
the requirements of paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
the requirement of paragraph 33.7.

This information is included in the consolidated financial statements of Varonis Systems Inc as at 31 December 2023 and these financial statements may be obtained from www.varonis.com.

The following principal acocunting policies have been applied:

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued

Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

The company generates 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 the Company's software (including support and unspecified upgrades and enhancements when and if they are available) for a specified period. In the second half of 2021, the Company launched its first SaaS offering, introducing new products and support for cloud applications and infrastructure. On October 31, 2022, the Company announced the availability of the Varonis Data Security Platform as a SaaS, which was previously only sold as a self- hosted solution. 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 its customers to fully leverage the use of the Company's products, although the user can benefit from the software without its assistance. The Company sells its products to a network of distributors and value-added resellers, and payment is typically due within 30 to 60 calendar days of the invoice date.

The company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the company satisfies a performance obligation.

Subscription software that is 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. Maintenance associated with subscription licenses is recognized ratably over the term of the agreement and is included within the subscriptions line of income. The company's SaaS offerings allow customers to use hosted software, and its revenue is recognized ratably over the associated contract period. Conversions from a license sold on-premises to the company’s SaaS offering are accounted for on a pro-rata prospective basis.

The company recognizes revenues from maintenance agreements ratably over the term of the underlying maintenance contract. 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. The performance obligations are satisfied, and revenues are recognized, when the services are provided or once the service term has expired.

The company enters into contracts that can include combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The license is distinct upon delivery as the customer can derive the economic benefit of the software without any professional services, updates or technical support. The Company allocates the transaction price to each performance obligation based on its relative standalone selling price out of the total consideration of the contract. For maintenance included in subscription licenses, the Company determines the standalone selling prices based on the price at which the Company separately sells a renewal contract. For professional Services, the Company determines the standalone selling prices based on the price at which the Company separately sells those services. For software licenses included in subscription licenses, the Company uses the residual approach to determine the standalone selling prices due to the lack of history of selling software license on a standalone basis and the highly variable sales price.

Trade receivables are generally recorded at the invoice amount mostly for a one year period.

Deferred revenues represent mostly unrecognised fees billed or collected for SaaS and maintenance. Deferred revenues are recognized as (or when) the company performs under the contract. Pursuant to these contracts, customers are generally not invoiced for subsequent years until the annual renewal occurs. Revenues allocated to remaining performance obligations represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable amounts that will be invoiced.

The company has received £373,477 of revenue from the provision of R&D services during the year to 31.12.2023.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued

Tangible fixed assets
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following basis:


Short-term leasehold property - in line with the length of the lease
Fixtures and fittings - 15% straight line
Computer equipment - 33% straight line

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued

Financial instruments
The company has elected to apply Sections 11 and 12 of FRS 102 in respect of financial instruments.

Financial assets and financial liabilities are recognised when the company becomes party to the contractual provisions of the instrument.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

The company's policies for its major classes of financial assets and financial liabilities are set out below.

Financial assets
Basic financial assets, including trade and other debtors, cash and bank balances, intercompany working capital balances, and intercompany financing are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest for a similar debt instrument. Financing transactions are those in which payment is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate.

Such assets are subsequently carried at amortised cost using the effective interest method, less any impairment.

Financial liabilities
Basic financial liabilities, including trade and other creditors, bank loans and loans from fellow group companies are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Financing transactions are those in which payment is deferred beyond normal business terms or is financed at a rate of interest that is not a market rate.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Impairment of financial assets
Financial assets measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the profit and loss account.

For financial assets measured at cost less impairment, the impairment loss is measured as the difference between the asset's carrying amount and the best estimate of the amount the company would receive for the asset if it were to be sold at the reporting date.

For financial assets measured at amortised cost, the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If the financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets and financial liabilities
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) despite "having retained some significant" risks and rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

Offsetting of financial assets and financial liabilities

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Taxation
The tax expense comprises current and deferred tax. Tax is recognised in the profit and loss account, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

Current tax is the amount of income tax payable in respect of taxable profit for the year or prior years.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.

Deferred tax
Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:

- The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
- Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets are not recognised as they are not expected to be utilised based on assessment of the directors in a foreseeable future.

Foreign currency translation

Functional and presentation currency

The company's functional and presentational currency is GBP.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the profit and loss account within 'administrative expenses'. All other foreign exchange gains and losses are presented in profit or loss within 'administrative expenses'.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


2. ACCOUNTING POLICIES - continued

Hire purchase and leasing commitments
Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.

Interest income
Interest income is recognised in profit or loss using the effective interest method.

Finance costs
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Pension costs and other post-retirement benefits
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations.

The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the balance sheet. The assets of the plan are held separately from the company in independently administered funds.

Share-based payments
The company accounts for share-based compensation which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option-Pricing Model ("OPM").

The value of the portion of the award that is ultimately expected to vest is recognised as an expense over the requisite service periods.

The company recognises compensation expenses for the value of the equity awards granted based on the straight-line method over the requisite service period of each of the awards. Any change in the expense takes account of forfeitures.as they occur.

Share capital
Ordinary shares are classified as equity.

Cash at bank
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.

Going concern
At 31 December 2023, the company had net liabilities of £1,671,958 but had generated a profit for the year of £560,055. The deficit on shareholder's funds arises because of the significant charge back for share based compensation that was charged in the year. The company continues to be profitable and cash generative.

The company has received a letter of financial support from its ultimate parent undertaking and the directors have considered post year end trading and cash reserves of the group and company. As a result, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence and meet its liabilities as they fall due for the foreseeable future, being a period of at least twelve months from the date the financial statements were approved. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


3. TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2023 2022
£    £   
Subscriptions 19,477,457 19,569,218
Maintenance and services 4,829,257 4,817,885
Cost plus revenue 373,477 -
24,680,191 24,387,103

An analysis of turnover by geographical market is given below:

2023 2022
£    £   
United Kingdom 23,425,196 22,158,825
Rest of Europe 34,102 1,559,100
Rest of the world 1,220,893 669,178
24,680,191 24,387,103

Cost Plus revenues are inter-company recharges of £373,477 relating to research and development costs incurred by the company.

4. EMPLOYEES AND DIRECTORS
2023 2022
£    £   
Wages and salaries 11,566,397 11,207,259
Social security costs 1,820,359 1,931,306
Other pension costs 221,597 207,291
13,608,353 13,345,856

The average number of employees during the year was as follows:
2023 2022

Sales and marketing 104 101
Administrative 3 3
Management 2 2
109 106

5. DIRECTORS' REMUNERATION

The directors do not receive any remuneration from the company in respect of their services to the company. Instead they are employed and paid by other related entities. Due to the nature of the services provided and the number of entities to which it relates, it is not possible to meaningfully allocate the directors' remuneration in respect of qualifying services to the company.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


6. OPERATING PROFIT

The operating profit is stated after charging:

20232022
Depreciation of tangible fixed assets122,883147,370
Fees payable to the company's auditor and its associates for the audit of the
company's financial statements

20,417

26,755
Exchange differences(56,351)111,509
Other operating lease rentals340,475341,852
Employer's pension costs221,597207,291

7. INTEREST RECEIVABLE AND SIMILAR INCOME
2023 2022
£    £   
Deposit account interest 58,240 4,406

8. INTEREST PAYABLE AND SIMILAR EXPENSES
2023 2022
£    £   
Other interest 53,912 38,770

Interest payable includes an amount of £53,297 (2022: £38,770) payable to group undertakings.

9. TAXATION

Analysis of the tax charge
No liability to UK corporation tax arose for the year ended 31 December 2023 nor for the year ended 31 December 2022.

Reconciliation of total tax charge included in profit and loss
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

2023 2022
£    £   
Profit before tax 560,055 672,862
Profit multiplied by the standard rate of corporation tax in the UK of
23.520% (2022 - 19%)

131,725

127,844

Effects of:
Expenses not deductible for tax purposes 39,307 6,276
Depreciation in excess of capital allowances 578 3,326
Non-tax deductible amortisation of commissions asset - 288,072
Share scheme deductions 135,975 226,164
Unrelieved tax losses carried forward (307,585 ) (651,682 )
Total tax charge - -

Due to the changes in corporation tax rates effective from 01/04/2023, the corporation tax rate of 23.52% has been calculated based on the rate of 19% up until 31/03/2023 and 25% from 01/04/2023.

The company has a potential deferred tax asset of £317,435 but has not recognised the asset as the directors are uncertain of the timescale of its recovery.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


10. TANGIBLE FIXED ASSETS
Fixtures
Short and Computer
leasehold fittings equipment Totals
£    £    £    £   
COST
At 1 January 2023 222,177 126,773 808,094 1,157,044
Additions - - 111,515 111,515
Disposals - - (168,780 ) (168,780 )
At 31 December 2023 222,177 126,773 750,829 1,099,779
DEPRECIATION
At 1 January 2023 194,661 95,697 673,531 963,889
Charge for year 8,672 19,015 95,195 122,882
Eliminated on disposal - - (168,780 ) (168,780 )
At 31 December 2023 203,333 114,712 599,946 917,991
NET BOOK VALUE
At 31 December 2023 18,844 12,061 150,883 181,788
At 31 December 2022 27,516 31,076 134,563 193,155

11. DEBTORS
2023 2022
£    £   
Amounts falling due within one year:
Trade debtors 8,881,093 8,155,094
Other debtors 45,005 40,730
Tax 11,614 10,405
Prepayments and accrued income 210,075 175,047
9,147,787 8,381,276

Amounts falling due after more than one year:
Other debtors 115,521 115,521

Aggregate amounts 9,263,308 8,496,797

Trade debtors are stated after a provision for bad debts of £51,636 (2022: £69,499).

12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2023 2022
£    £   
Trade creditors 2,687 5,821
Amounts owed to group undertakings 2,776,916 4,718,591
VAT 1,387,940 1,092,424
Other creditors 181,920 159,889
Accruals and deferred income 10,885,754 7,146,271
15,235,217 13,122,996

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


13. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2023 2022
£    £   
Deferred income 211,424 27,753

14. LEASING AGREEMENTS

Minimum lease payments under non-cancellable operating leases fall due as follows:
2023 2022
£    £   
Within one year 329,531 344,870
Between one and five years 345,493 -
675,024 344,870

15. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:
Number: Class: Nominal 2023 2022
value: £    £   
100 Ordinary 1 100 100

There is a single class of ordinary shares. There are no restrictions on the distribution of dividends and the repayment of capital.

16. RESERVES

The other reserve includes share based compensation chargebacks for share based compensation exercised in prior periods.

Profit and loss account

The profit and loss account includes all current and prior period retained profits and losses.

17. PENSION COMMITMENTS

The company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents Contributions payable by the company to the fund and amounted to £221,597 (2022: £207,291). Contributions totalling £50,088 (2022: £49,369) were payable to the fund at the balance sheet date and are included in creditors.

18. RELATED PARTY DISCLOSURES

The company has taken advantage of the exemption contained in FRS 102 section 33 "Related Party Disclosures" from disclosing transactions with entities which are a wholly owned part of the group.

VARONIS (UK) LIMITED (REGISTERED NUMBER: 06159129)

Notes to the Financial Statements - continued
FOR THE YEAR ENDED 31 DECEMBER 2023


19. SHARE BASED COMPENSATION

On November 14, 2013, the Parent Company’s board of directors adopted the Varonis Systems, Inc. 2013 Omnibus Equity Incentive Plan (the '2013 Plan') which was subsequently approved by the Parent Company’s stockholders. 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 April 20, 2023, the the Parent Company’s board of directors adopted the Varonis Systems, Inc. 2023 Omnibus Equity Incentive Plan (the "2023 Plan"), subject to approval by the Parent Company’s stockholders. On June 5, 2023, the Parent Company’s stockholders approved the 2023 Plan which became effective and replaced the 2013 Plan.

2015 Employee Stock Purchase Plan

On May 5, 2015, the Parent Company's stockholders approved the Varonis Systems, Inc. 2015 Employee Stock Purchase Plan (the "ESPP"), which the Parent Company's board of directors had adopted on March 19, 2015. The ESPP became effective as of June 30, 2015. The ESPP allows eligible employees to purchase shares of the Parent Company's common stock at a discount through payroll deductions of up to 15% of their eligible compensation, at not less than 85% of the fair market value of the Parent Company's common stock on the first day or last trading day in the offering period, subject to any plan limitations. The Parent Company initially reserved 1,500,000 shares of common stock for issuance under the ESPP. The number of shares available for issuance under the ESPP was increased on January 1, 2016 and has been, and will be, increased each January 1 thereafter, by an amount equal to the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase, except that the amount of each such increase will be limited to the number of shares of common stock necessary to bring the total number of shares of common stock available for issuance under the ESPP to two percent (2%) of the number of shares of common stock issued and outstanding on each such December 31, or (ii) 1,200,000 shares of common stock. The ESPP will continue in effect until the earlier of (i) the date when no shares of common stock are available for issuance thereunder or (ii) June 30, 2025; unless terminated prior thereto by the Company's board of directors or compensation committee, each of which has the right to terminate the ESPP at any time.

The non-cash compensation expenses related to employees during the year was £3,174,273 (2022: £3,825,865).

20. CONTROLLING PARTY

The parent undertaking of the smallest group of undertakings for which group financial statements are drawn up and of which the company is a member is Varonis Systems Inc., whose registered office is at 1250 Broadway, 28th Floor, New York, NY 10001, United States. Copies of these group financial statements are available to the public from www.varonis.com.

In the opinion of the directors the ultimate parent company is Varonis Systems, Inc.