Varonis Systems, Inc. (VRNS) Cash Flow Statement

The consistently negative ratio of operating cash flow to net income, with OCF/NI running between -0.5 and -1.9 across the ten quarters, suggests that reported losses overstate the cash drain of the business. Stock-based compensation appears to be the primary non-cash add-back, which means the economic cost of employee pay is being transferred to shareholders through dilution rather than appearing in the cash line. Investors should monitor whether the gap narrows as SBC intensity declines, since the current cash picture may flatter the true cost structure.

The wide swing in quarterly FCF margins, with the 2025Q1 spike at 47.9% followed by a more modest 12.0% in 2025Q4, points toward working capital and billing seasonality as major drivers rather than a linear trend. Trailing levels in the low-to-mid teens suggest a more representative underlying margin than the peak quarters indicate. Positive free cash flow in a GAAP-loss-making company may warrant further investigation into how much of the cash generation depends on deferred revenue build.

CapEx intensity this low implies the business is largely asset-light, so the relevant reinvestment burden sits in operating expenses such as capitalized development and go-to-market spend rather than in property or equipment. D&A of $6.4M in 3Q26 against CapEx of $2.5M suggests the depreciable base is not being actively replenished at the pace of its amortization, which is a modest point to monitor. The capital needs of the business appear manageable from internal cash flow.

These large swings are consistent with the lumpy renewal cycle of multi-year subscription contracts and the Q4 and Q1 billing concentration noted in company disclosures, so single-quarter FCF should not be extrapolated. The sharp reversal between adjacent quarters suggests that the reported operating cash line is sensitive to the timing of deferred revenue and receivables. Analysts should look at trailing-twelve-month working capital movements to separate durable cash generation from seasonal noise.

Cash returned through buybacks while the company remains GAAP unprofitable raises the question of whether repurchases are offsetting SBC-driven dilution rather than returning surplus capital, a distinction that warrants further investigation. The lack of dividends is consistent with a growth-oriented posture, but the combination of sizable acquisitions and buybacks suggests capital is being deployed faster than free cash flow alone can fund. Investors should monitor whether this deployment is being financed from balance sheet liquidity over time.