Stockholders' Equity

12 Months Ended

Dec. 31, 2021

STOCKHOLDERS’ EQUITY


a.			Composition of common stock capital:


	Authorized		Issued and outstanding
	Number of shares
	December 31,		December 31,
	2021	2020	2021	2020
Stock of $0.001 par value:
Common stock	200,000,000	200,000,000	107,509,096	95,456,862


b.			Common stock rights:

The Company’s Amended and Restated Certificate of Incorporation authorizes the Company to issue 200,000,000 shares of common stock, par value $0.001 per share.

The common stock confers upon its holders the right to participate in the general meetings of the Company, to vote at such meetings (each share represents one vote), to elect board members and to participate in any distribution of dividends or any other distribution of the Company’s property, including the distribution of surplus assets upon liquidation.

On February 8, 2021, the Company announced a three-for-one split of its common stock to stockholders of record as of the close of business on March 12, 2021. Trading of the Company’s common stock began on a split-adjusted basis on March 15, 2021. Common stock and per share data in this Annual Report on Form 10-K have been adjusted for the impact of the split.


c.			Stock option plans:

On December 30, 2005, the Company’s board of directors adopted the Varonis Systems, Inc. 2005 Stock Plan (the “2005 Plan”). As of December 31, 2013, the Company had reserved 14,139,957 shares of common stock available for issuance to employees, directors, officers and consultants of the Company and its subsidiaries. The awards generally vest over four years. No awards were granted under the 2005 Plan subsequent to December 31, 2013, and no further awards will be granted under the 2005 Plan.

On November 14, 2013, the Company’s board of directors adopted the Varonis Systems, Inc. 2013 Omnibus Equity Incentive Plan (the “2013 Plan”) which was subsequently approved by the Company’s stockholders. The Company initially reserved 5,713,899 shares of common stock for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2013 Plan was increased on January 1, 2016 and has been, and will be, increased on each January 1 thereafter by four percent (4%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase (rounded down to the nearest whole share), but the amount of each 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 grant and issuance under the 2013 Plan to five percent (5%) of the number of shares of common stock issued and outstanding on each December 31. Since January 1, 2016, the share reserve under the 2013 Plan has been automatically increased by an aggregate of 24,217,741 shares. Awards granted under the 2013 Plan generally vest over four years. Any award that is forfeited or canceled before expiration becomes available for future grants under the 2013 Plan.

On October 22, 2020, and as part of the acquisition, the Company’s board of directors approved the assumption of a certain portion of Polyrize Options pursuant to the terms and conditions of the Polyrize 2019 Share Incentive (“Polyrize Plan”) as part of the acquisition.

A summary of employees’ stock options activities during the year ended December 31, 2021 is as follows:


	Year ended
	December 31, 2021
	Number	Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted average remaining contractual life (years)
Options outstanding at the beginning of the year	1,022,763	$	6.862	$	47,417	3.452
Granted	—	$	—
Exercised	(215,893)	$	6.128
Forfeited	(3,000)	$	2.077
Options outstanding at the end of the period	803,870	$	7.077	$	33,524	2.747
Options exercisable at the end of the period	787,775	$	7.106	$	32,830	2.638

There were no options granted in 2021 pursuant to our 2005 Stock Plan, 2013 Plan or Polyrize Plan (collectively "Stock Plans").

The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders exercised their options on the last date of the period. Total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was $13,153, $9,922 and $12,453, respectively. As of December 31, 2021 and 2020, there was $496 and $810, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our Stock Plans. This cost is expected to be recognized over a weighted-average period of approximately 1.802 and 2.721 years, respectively.

The options outstanding as of December 31, 2021 have been separated into ranges of exercise price as follows:


Range of exercise price					Options outstanding as of December 31, 2021	Weighted average remaining contractual life (years)	Weighted average exercise price		Options exercisable as of December 31, 2021	Weighted average remaining contractual life (years)	Weighted average exercise price of options exercisable
$	4.157	—		5.682	224,661	2.959	$	4.883	208,566	2.561	$	4.808
$	6.503	—		8.077	433,307	2.559	$	7.111	433,307	2.559	$	7.111
		$	9.960		120,180	3.142	$	9.960	120,180	3.142	$	9.960
		$	13.287		25,722	2.222	$	13.287	25,722	2.222	$	13.287
					803,870	2.747	$	7.077	787,775	2.638	$	7.106


d.			Options issued to consultants:

The Company’s outstanding options granted to consultants for services as of December 31, 2021 were as follows:


Issuance date	Number of options outstanding and exercisable	Exercise price per share		Exercisable through
August 2013	6,000	$	7.047	August 2023
March 2014	4,950	$	13.287	March 2024
May 2014	3,000	$	7.337	May 2024
November 2014	9,300	$	7.220	November 2024
February 2016	3,000	$	5.623	February 2026
	26,250

There were no options granted in 2021 pursuant to our Stock Plans.


e.			Restricted stock units and performance stock units:

A summary of restricted stock units and performance stock units for employees, consultants and non-employee directors of the Company for the year ended December 31, 2021 is as follows:


	Number of Shares Underlying Outstanding Restricted Stock Units and Performance Stock Units	Weighted- Average Grant Date Fair Value
Outstanding as of January 1, 2021	8,388,963	$	23.00
Granted	3,542,175	$	65.25
Vested	(3,615,077)	$	20.10
Forfeited	(589,936)	$	38.10
Unvested as of December 31, 2021	7,726,125	$	42.53

As of December 31, 2021 and 2020, there was $265,345 and $141,408, respectively, of total unrecognized compensation cost related to employees and non-employees unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of 2.078 and 2.120 years, respectively.

The Company grants performance stock units to certain employees under the 2013 Plan. The number of performance stock units earned and eligible to vest are generally determined after a one-year performance period, based on achievement of certain Company financial performance measures and the recipient’s continued service. The Company recognizes share-based compensation expense for the performance stock units on a straight-line basis over the requisite service period for each separately vesting portion of the award when it is probable that the performance conditions will be achieved. Compensation expense for performance stock units with financial performance measures is measured using the fair value at the date of grant and recorded over the three-year vesting period, and may be adjusted over the vesting period based on interim estimates of performance against the pre-set objectives.


f.			2015 Employee Stock Purchase Plan

On May 5, 2015, the Company’s stockholders approved the Varonis Systems, Inc. 2015 Employee Stock Purchase Plan (the “ESPP”), which the 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 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 Company’s common stock on the first day or last trading day in the offering period, subject to any plan limitations. The 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. Since January 1, 2016, the share reserve under the ESPP has been automatically increased by an aggregate of 3,004,765 shares. 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.


g.			Stock-based compensation expense for employees and consultants:

The Company recognized stock-based compensation expense in the consolidated statements of operations as follows (in thousands):


	Year ended
	December 31,
	2021		2020		2019
Cost of revenues	$	8,995	$	5,013	$	2,561
Research and development	36,033		21,979		13,188
Sales and marketing	39,684		25,578		14,782
General and administrative	25,067		16,015		15,608
Total	$	109,779	$	68,585	$	46,139


h.			Follow-on offering:

On February 16, 2021, the Company completed a registered public offering of 7,961,538 shares of the Company's common stock, which included 1,038,459 additional optional shares, at a price of $65.00 per share, before underwriting discounts and commissions. The common stock offering generated net proceeds to the Company of approximately $500,034, after deducting $17,466 in underwriting discounts and commissions and offering costs, which have been recorded against the proceeds received from the offering.