Tenable Announces Third Quarter 2023 Financial Results

• Added 386 new enterprise platform customers and 58 net new six-figure customers.
• Revenue of $201.5 million, up 15% year-over-year.
• Calculated current billings of $224.7 million, up 8% year-over-year.
• Net cash provided by operating activities of $42.4 million; Unlevered free cash flow of $48.2 million.

COLUMBIA, Md., Nov. 01, 2023 (GLOBE NEWSWIRE) -- Tenable Holdings, Inc. ("Tenable") (Nasdaq: TENB), the Exposure Management company, today announced financial results for the quarter ended September 30, 2023.

"We are pleased with our execution in the quarter, which included better-than-expected earnings and unlevered free cash flow," said Amit Yoran, Chairman and CEO of Tenable. "We also saw significant outperformance in the public sector, which had minimal benefit to CCB in the quarter. Specifically, we experienced increasing strength in the U.S. federal market evidenced by several strategic seven-figure deals that are reflected in our current remaining performance obligations (RPO) growth of 15%.

"We continue to see momentum with Tenable One, and the integration of Ermetic's cloud-native application protection platform will further augment our existing products, enhancing our ability to identify cyber risks and secure cloud and hybrid environments for our customers."

Third Quarter 2023 Financial Highlights

• Revenue was $201.5 million, a 15% increase year-over-year.
• Calculated current billings was $224.7 million, an 8% increase year-over-year.
• GAAP loss from operations was $7.9 million, compared to a loss of $13.0 million in the third quarter of 2022.
• Non-GAAP income from operations was $36.6 million, compared to $23.1 million in the third quarter of 2022.
• GAAP net loss was $15.6 million, compared to a loss of $18.7 million in the third quarter of 2022.
• GAAP net loss per share was $0.13, compared to a loss per share of $0.17 in the third quarter of 2022.
• Non-GAAP net income was $27.7 million, compared to $17.2 million in the third quarter of 2022.
• Non-GAAP diluted earnings per share was $0.23, compared to $0.15 in the third quarter of 2022.
• Cash and cash equivalents and short-term investments were $693.0 million at September 30, 2023, compared to $567.4 million at December 31, 2022.
• Net cash provided by operating activities was $42.4 million, compared to $35.9 million in the third quarter of 2022.
• Unlevered free cash flow was $48.2 million, compared to $34.8 million in the third quarter of 2022.

Recent Business Highlights

• Added 386 new enterprise platform customers and 58 net new six-figure customers.
• Acquired Ermetic Ltd. on October 2, 2023, an integrated cloud-native application protection platform (CNAPP) company with industry leading cloud infrastructure entitlement management (CIEM), to deliver market-leading contextual risk visibility, prioritization and remediation across infrastructure and identities.
• Launched new generative AI capabilities and services across Tenable One to deliver faster, more intuitive insights.
• Added new features to Tenable OT Security, including increased visibility of Building Management Systems (BMS) — covering devices such as security cameras, HVAC systems, badge scanners and entrance security systems, lighting control, programming systems and other assets.
• Upgraded Tenable Nessus Expert to include web application and API scanning to provide simple and comprehensive vulnerability scanning to quickly and accurately identify web vulnerabilities.
• Recognized as a "Leader" in both the GigaOm Radar for Operational Technology (OT) Security and “The Forrester Wave™: Vulnerability Risk Management," and named Best Security Company and Best Risk/Policy Management Solution of the Year (for Tenable One) in the 2023 SC Awards.

Financial Outlook

For the fourth quarter of 2023, we currently expect:

• Revenue in the range of $204.0 million to $208.0 million.
• Non-GAAP income from operations in the range of $23.0 million to $24.0 million.
• Non-GAAP net income in the range of $16.0 million to $17.0 million, assuming interest expense of $8.3 million, interest income of $4.9 million and a provision for income taxes of $3.0 million.
• Non-GAAP diluted earnings per share in the range of $0.13 to $0.14.
• 123.5 million diluted weighted average shares outstanding.

For the year ending December 31, 2023, we currently expect:

• Calculated current billings in the range of $862.0 million to $870.0 million.
• Revenue in the range of $789.4 million to $793.4 million.
• Non-GAAP income from operations in the range of $107.9 million to $108.9 million.
• Non-GAAP net income in the range of $83.0 million to $84.0 million, assuming interest expense of $31.5 million, interest income of $24.2 million and a provision for income taxes of $9.1 million.
• Non-GAAP diluted earnings per share in the range of $0.68 to $0.69.
• 121.0 million diluted weighted average shares outstanding.
• Unlevered free cash flow in the range of $168.0 million to $173.0 million.

Conference Call Information

Tenable will host a conference call on November 1, 2023 at 4:30 p.m. Eastern Time to discuss its financial results. The conference call can be accessed at 877-407-9716 (U.S.) and 201-493-6779 (international). A live webcast of the event will be available on the Tenable Investor Relations website at https://investors.tenable.com. An archived replay of the live broadcast will be available on the Investor Relations page of the website following the call.

About Tenable

Tenable® is the Exposure Management company. Approximately 43,000 organizations around the globe rely on Tenable to understand and reduce cyber risk. As the creator of Nessus®, Tenable extended its expertise in vulnerabilities to deliver the world’s first platform to see and secure any digital asset on any computing platform. Tenable customers include approximately 60 percent of the Fortune 500, approximately 40 percent of the Global 2000, and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations[email protected]

Media Relations[email protected]

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans and objectives for future operations, are forward-looking statements and represent our views as of the date of this press release. The words “anticipate,” "believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of assumptions and risks and uncertainties, many of which involve factors or circumstances that are beyond our control that could affect our financial results. These risks and uncertainties are detailed in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as well as other filings that we make from time to time with the SEC, which are available on the SEC's website at sec.gov. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in any forward-looking statements. Except as required by law, we are under no obligation to update these forward-looking statements subsequent to the date of this press release, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance the overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making. We include these non-GAAP financial measures to present our financial performance using a management view and because we believe that these measures provide an additional comparison of our core financial performance over multiple periods with other companies in our industry.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.

Calculated Current Billings: We define calculated current billings, a non-GAAP financial measure, as total revenue recognized in a period plus the change in current deferred revenue in the corresponding period. We believe that calculated current billings is a key metric to measure our periodic performance. Given that most of our customers pay in advance (including multi-year contracts), but we generally recognize the related revenue ratably over time, we use calculated current billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers. We believe that calculated current billings, which excludes deferred revenue for periods beyond twelve months in a customer’s contractual term, more closely correlates with annual contract value and that the variability in total billings, depending on the timing of large multi-year contracts and the preference for annual billing versus multi-year upfront billing, may distort growth in one period over another.

Free Cash Flow and Unlevered Free Cash Flow: We define free cash flow, a non-GAAP financial measure, as net cash provided by operating activities less purchases of property and equipment and capitalized software development costs. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment and capitalized software development costs, for investment in our business and to make acquisitions. We believe that free cash flow is useful as a liquidity measure because it measures our ability to generate or use cash. We define unlevered free cash flow as free cash flow plus cash paid for interest and other financing costs. We believe unlevered free cash flow is useful as a liquidity measure as it measures the cash that is available to invest in our business and meet our current debt obligations and future financing needs. However, given our debt obligations, non-cancelable commitments and other contractual obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

Non-GAAP Income from Operations and Non-GAAP Operating Margin: We define these non-GAAP financial measures as their respective GAAP measures, excluding the effect of stock-based compensation, acquisition-related expenses, costs related to the intra-entity asset transfers resulting from the internal restructuring of legal entities and amortization of acquired intangible assets. Acquisition-related expenses include transaction and integration expenses, as well as costs related to the intercompany transfer of acquired intellectual property.

Non-GAAP Net Income and Non-GAAP Earnings Per Share: We define non-GAAP net income as GAAP net loss, excluding the effect of stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets, including the applicable tax impacts. In addition, we exclude the tax impact and related costs of intra-entity asset transfers resulting from the internal restructuring of legal entities as well as deferred income tax benefits recognized in connection with acquisitions. We use non-GAAP net income to calculate non-GAAP earnings per share.

Non-GAAP Gross Profit and Non-GAAP Gross Margin: We define non-GAAP gross profit as GAAP gross profit, excluding the effect of stock-based compensation and amortization of acquired intangible assets. Non-GAAP gross margin is defined as non-GAAP gross profit as a percentage of revenue.

Non-GAAP Sales and Marketing Expense, Non-GAAP Research and Development Expense and Non-GAAP General and Administrative Expense: We define these non-GAAP measures as their respective GAAP measures, excluding stock-based compensation, acquisition-related expenses and costs related to intra-entity asset transfers resulting from the internal restructuring of legal entities.

TENABLE HOLDINGS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

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(1) Includes stock-based compensation as follows:

TENABLE HOLDINGS, INC.CONSOLIDATED BALANCE SHEETS

TENABLE HOLDINGS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

TENABLE HOLDINGS, INC.REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(unaudited)

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(1) Recurring revenue, which includes revenue from subscription arrangements for software (both recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% of revenue in the three and nine months ended September 30, 2023 and 2022.

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(1) Deferred revenue (current), beginning of period for the nine months ended September 30, 2022 includes $0.9 million related to acquired deferred revenue.

________________

(1) Capitalized software development costs were previously included in purchases of property and equipment.

(2) Free cash flow and unlevered free cash flow for the periods presented were impacted by:

Free cash flow and unlevered free cash flow for the nine months ended September 30, 2022 were benefited by approximately $8 million from prepayments of software subscription costs, insurance and rent in prior quarters.

________________

(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.(2) The tax impact of acquisition-related expenses is not material.(3) The costs related to the intra-entity asset transfers resulted from our internal restructuring of Cymptom.(4) The tax impact of the amortization of acquired intangible assets is included in the tax impact of acquisitions.(5) The tax impact of acquisitions for all periods presented includes the deferred tax benefits of the Alsid acquisition. Additionally, the tax impact of acquisitions for the nine months ended September 30, 2022 includes a reversal of the $2.5 million income tax benefit recognized for GAAP purposes related to the partial release of our valuation allowance associated with the Bit Discovery acquisition.(6) The tax impact of the intra-entity transfers is related to current tax expense based on the applicable Israeli tax rates resulting from our internal restructuring of Cymptom.(7) An adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.

The following adjustments to reconcile forecasted non-GAAP income from operations, non-GAAP net income, non-GAAP earnings per share, free cash flow and unlevered free cash flow are subject to a number of uncertainties and assumptions, each of which are inherently difficult to forecast. As a result, actual adjustments and GAAP results may differ materially.

________________(1) Forecast assumes an estimate of approximately $66 million of acquired intangible assets from Ermetic amortized over seven years. This estimate is preliminary, as we have not completed our purchase price allocation, and the valuation of acquired intangible assets and the estimated useful life are subject to change.

(2) The forecasted GAAP net loss assumes income tax expense of $4.0 million and $10.9 million in the three months and year ending December 31, 2023, respectively.

(3) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.