Yakov Faitelson
VARONIS SYSTEMSAbout Yakov Faitelson
- Chief Executive Officer, President, Co‑founder, and Chairman of the Board of Directors of Varonis Systems, Inc. (VRNS); has served in these roles since 2004 . Age 49 .
- Prior roles included leadership positions at NetVision, Inc. and NetApp, Inc. before co‑founding Varonis (co‑conceived MetaData Framework) .
- Governance: Non‑independent director; Board employs an independent Lead Director to mitigate CEO/Chair duality .
- Performance context: Company emphasizes ARR growth and free cash flow during multi‑year SaaS transition; 2024 free cash flow reached $108.5m driving 300% PSU payout on the FCF metric . Pay‑versus‑performance panel shows TSR and ARR trajectory (see “Performance & Track Record”) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| NetVision, Inc. | Leadership roles | Not disclosed (pre-2004) | Professional services/systems integration experience applied to Varonis’ founding and execution |
| NetApp, Inc. | Leadership roles | Not disclosed (pre-2004) | Storage and operating systems background shaped Varonis’ MetaData Framework and platform direction |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| None | — | — | Proxy discloses no other current/past public directorships for Mr. Faitelson |
Fixed Compensation
| Year | Base Salary ($) | Target Bonus ($) | Target Bonus (% of Salary) | Actual Cash Incentive ($) | All Other Compensation ($) | Total ($) |
|---|---|---|---|---|---|---|
| 2024 | 560,000 | 440,000 | 78.6% | 880,000 (200% of target) | 62,281 (incl. 401k match $13,800; car allowance $22,093) | 14,502,288 |
| 2023 | 560,000 | 440,000 (unchanged since 2018) | 78.6% | 528,000 | 24,924 | 14,112,979 |
| 2022 | 560,000 | 440,000 (unchanged since 2018) | 78.6% | 241,331 | 29,471 | 9,618,355 |
Notes
- Base salaries for all NEOs have not been increased since 2018 (ex-FX), indicating limited fixed pay creep .
- Employee perqs are modest; no unusual perquisites disclosed; no tax gross‑ups; 401k match and car allowance disclosed above .
Performance Compensation
2024 Annual Cash Incentive Plan (CEO)
| Metric | Weighting | Quarterly Targets (Illustrative) | 2024 Actual Outcome | Payout |
|---|---|---|---|---|
| Annual Recurring Revenue (ARR) | 50% | Q4 Target ARR $625.0m; Threshold $621.0m; Stretch $629.0m | Exceeded; actual quarterly ARR achieved each quarter (e.g., Q4 $641.9m) | 200% total (part attributable to ARR) |
| Trailing‑Twelve‑Month Margin (TTM Margin) | 50% | Q4 Target TTM Margin $93.8m; Threshold $89.8m; Stretch $97.8m | Exceeded; actual TTM Margin achieved each quarter (e.g., Q4 $106.0m) | 200% total (part attributable to TTM Margin) |
- Plan mechanics: payout scales 90% at threshold, 125% at both targets met, up to 200% if both metrics ≥ stretch; applied quarterly; CEO target $440,000 .
Long‑Term Equity (2024 grants and results)
| Element | Grant | Performance Metrics | 2024 Result | Vesting Terms |
|---|---|---|---|---|
| RSUs | 134,159 units | Time‑based | N/A | 4 annual installments starting Feb 28, 2025 |
| PSUs | 134,159 target units | 50% Free Cash Flow (1‑yr); 50% SaaS transition (3‑yr to 75% ARR SaaS) | FCF earned at 300% on $108.5m 2024 FCF → 201,239 PSUs earned for FCF component | CEO’s earned FCF PSUs cliff‑vest Feb 28, 2027; SaaS‑metric PSUs (if any) vest Feb 28, 2027 (post 2026 performance) |
- CEO equity mix is highly at‑risk; company notes ~93% of CEO target direct comp in equity in 2024 .
- 2025 PSUs tie to Net New SaaS (50%) and Free Cash Flow (50%), aligning to transition pace and liquidity .
Pay‑for‑Performance Program Features
- Clawback policy covers cash and equity incentive comp (vested and unvested) in restatement scenarios per Nasdaq rule; lookback 3 years .
- Hedging and pledging of company stock prohibited for all directors and employees (no exceptions) .
- Minimum 1‑year vesting, no option/SAR repricing without shareholder approval; no excise tax gross‑ups under equity plan .
Equity Ownership & Alignment
Beneficial Ownership (as of April 10, 2025)
| Holder | Direct/Indirect Holdings | Right to Acquire <60 days | Total Beneficial Shares | % Outstanding |
|---|---|---|---|---|
| Yakov Faitelson | 446,847 direct; 4,941 spouse; 253,384 in trust | — | 705,172 | * (<1%) |
- ESPP participation historically: 5,979 shares purchased under 2015 ESPP through 12/31/2024 .
- Stock ownership guidelines: CEO required to hold ≥6x salary; all executives and directors compliant as of 12/31/2024 (CEO in compliance) .
- Hedging/pledging: prohibited (alignment positive; no pledged shares) .
Outstanding Equity Awards (12/31/2024 snapshot)
| Award | Quantity | Market Value ($) | Notes |
|---|---|---|---|
| Unvested RSUs (various grants) | 16,872; 53,858; 170,694; 134,159 | 749,623; 2,392,911; 7,583,934; 5,960,684 | Time‑based vesting schedules disclosed (annual February tranches) |
| PSUs (earned – FCF 2024) | 201,239 | 8,941,027 | Vests Feb 28, 2027 (CEO must be employed) |
| PSUs (potential – SaaS metric, max) | 201,239 (max) | 8,941,027 (max value) | Earn-out through 12/31/2026; vests Feb 28, 2027 if earned |
- 2024 exercises/vesting activity: CEO exercised 420,000 options in 2024 (value realized $15,792,445) and had 310,513 shares vest (value realized $15,774,060), indicating sizable monetization/settlement activity in the year .
Employment Terms
Severance & Change‑in‑Control (Severance Plan; CEO)
| Scenario | Cash Severance | Pro Rata Bonus | Equity Acceleration |
|---|---|---|---|
| Termination without Cause / Good Reason (non‑CIC) | 150% of base + target bonus; $1,500,000 shown as of 12/31/2024 | None (prior‑year earned if any) | Pro‑rata acceleration since last vest date; performance awards at ≥ target or actual |
| CIC + Qualifying Termination (6 months prior to 24 months post‑CIC) | 250% of base + target bonus; $2,500,000 plus pro rata target bonus $440,000 → $2,940,000 total cash illustrated | Yes (target, pro‑rated) | Full acceleration; performance awards at ≥ target or actual |
Other terms
- Restrictive covenants: standard 12‑month post‑termination non‑compete and non‑solicit; breach leads to forfeiture/repayment of severance .
- No 280G excise tax gross‑ups; “best‑net” cutback applies .
- Employment agreement effective May 15, 2024 (severance terms governed by plan) .
- Equity plan CIC treatment: if unassumed, or if terminated without cause within 12 months post‑CIC, unvested awards vest; performance deemed at ≥ target or actual .
Estimated equity acceleration values (12/31/2024 price basis $44.43)
- Non‑CIC qualifying termination: 872,912 shares accelerated; $38,783,470 value .
- CIC qualifying termination: 1,368,347 shares accelerated; $60,795,657 value .
Board Governance
- Roles: CEO, President, Chairman; non‑independent .
- Lead Independent Director: John J. Gavin, Jr.; responsibilities include agenda approval, executive sessions, shareholder outreach, and succession discussions .
- Committee memberships: CEO serves on Technology Committee (not independent); other committees (Audit, Compensation, Nominating & Corporate Governance) are fully independent .
- Board/committee attendance: Each director attended at least 75% of meetings in 2024 .
- Director compensation: Employee directors (incl. CEO) receive no additional director pay .
Say‑on‑Pay & Shareholder Feedback
- 2024 say‑on‑pay support: 95% “for,” and the company has conducted extensive outreach (95% of shares contacted) .
- Design refinements reflecting feedback: implementation of PSUs (multi‑year SaaS transition and FCF metrics), clawback policy, stock ownership guidelines, anti‑hedging/pledging .
Compensation Peer Group and Process
- Comp Committee: Independent; chaired by Avrohom J. Kess; uses independent consultant Compensia .
- 2024 peer additions: MongoDB, Paylocity, SentinelOne; Coupa removed due to acquisition .
- No fixed percentile targeting; pays are set to be fair/competitive relative to scope and performance .
Performance & Track Record
TSR, ARR, and Profitability Context (Pay‑vs‑Performance panel)
| Year | TSR (Value of $100) | Peer TSR (Value of $100) | Net Loss ($000s) | ARR ($000s) |
|---|---|---|---|---|
| 2020 | 210.54 | 149.98 | (94,010) | 287,300 |
| 2021 | 188.32 | 206.76 | (116,861) | 387,100 |
| 2022 | 92.42 | 132.79 | (124,518) | 465,100 |
| 2023 | 174.80 | 221.06 | (100,916) | 543,000 |
| 2024 | 171.52 | 301.44 | (95,765) | 641,900 |
- Execution focus: Multi‑year SaaS transition with KPIs embedded in incentives (ARR, TTM Margin, Net New SaaS, and FCF) .
- 2024 free cash flow of $108.5m triggered max 300% FCF PSU payout, signaling strong cash generation amid the transition .
Director‑Specific Compensation (for context)
- Non‑employee director program: $30k cash retainer, committee/lead director retainers, and ~$190k annual RSU grant; CEO receives no director compensation .
- Director stock ownership guideline: 5x cash retainer; directors compliant as of 12/31/2024 .
Related Party Transactions and Compliance
- No related‑party transactions involving Mr. Faitelson disclosed; policy requires Audit Committee approval for such transactions .
- Section 16(a) compliance: Company reports on late filings for others; no issues cited for Mr. Faitelson .
Risk Indicators & Red Flags
- CEO/Chair duality: mitigated by Lead Independent Director and fully independent key committees .
- Large CIC acceleration value ($60.8m at 12/31/2024 price) could be a takeover consideration; however, no tax gross‑ups and best‑net cutback reduce shareholder‑unfriendly optics .
- 2024 option exercise of 420,000 options and significant value realized may indicate periodic monetization; monitor future Form 4s for sustained selling pressure .
- Repricing of underwater options prohibited; governance features (clawback, ownership guidelines, anti‑hedging/pledging) are strong .
Investment Implications
- Alignment: High proportion of at‑risk, equity‑based pay with rigorous, transition‑aligned metrics (ARR/TTM Margin/Net New SaaS/FCF) supports pay‑for‑performance and cash discipline; 2024 FCF max payout confirms execution momentum .
- Retention and overhang: CEO’s 2024/2025 awards cliff‑vesting in 2027 (and a retirement‑vesting provision in 2025 grants) create strong near‑term retention but could reduce post‑eligibility forfeiture risk; watch equity overhang (13.6% post‑increase assumption) and annual burn (3‑4%) .
- Governance checks vs dual role: Lead Director structure, independent committees, clawback, anti‑hedging/pledging and ownership guidelines mitigate key governance risks tied to CEO/Chair consolidation .
- M&A lens: Cash severance and full equity acceleration on CIC termination ($60.8m illustrative) are notable but standard for founder‑CEOs; best‑net 280G treatment limits gross‑up risk .
- Trading signals: 2024 option exercises and large vesting realizations warrant monitoring for ongoing liquidity events; however, policy bars hedging/pledging, and ownership compliance is strong .