10-K: Tenable Holdings Reports FY2024 Results: Revenue Climbs to $900 Million, Focus Remains on Exposure Management

Tenable Holdings' FY2024 revenue reached $900 million, marking a 13% increase, as the company continues to focus on expanding its exposure management solutions.

Summary

• Tenable Holdings reported a revenue of $900 million for the year ended December 31, 2024, up from $798.7 million in 2023.
• The company experienced net losses of $36.3 million in 2024, $78.3 million in 2023 and $92.2 million in 2022.
• Recurring revenue accounted for 96% of the total revenue in 2024.
• Calculated current billings amounted to $969.5 million in 2024, compared to $873.3 million in 2023.
• Free cash flow was $206.8 million in 2024, an increase from $141.1 million in 2023.
• The company added 1,689 new enterprise platform customers in 2024.
• The dollar-based net expansion rate was 108% at the end of 2024.
• Research and development expenses increased to $181.6 million in 2024.
• At the end of 2024, the company had 47 issued patents and 22 patent applications pending in the United States.
• The company acquired Eureka Security, Inc. in June 2024 and Ermetic, Ltd. in October 2023 to enhance its platform offerings.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While revenue growth and recurring revenue are positive, the net loss and competitive landscape temper the overall outlook. The strategic acquisitions are a positive sign for future growth.

Positives

• Revenue increased by 13% year-over-year, reaching $900 million.
• Recurring revenue remains strong, representing 96% of total revenue.
• Free cash flow increased significantly, indicating improved financial health.
• The company continues to acquire new enterprise platform customers.
• Dollar-based net expansion rate remains above 100%, showing strong customer retention and expansion.
• Strategic acquisitions like Eureka Security and Ermetic enhance the company's product offerings.

Negatives

• The company experienced net losses of $36.3 million in 2024.
• The company has an accumulated deficit of $861.3 million at December 31, 2024.

Risks

• The cybersecurity market is intensely competitive and constantly evolving.
• The company may not be able to sustain its revenue growth rate in the future.
• The company's future quarterly results of operations are likely to fluctuate significantly due to a wide range of factors.
• The company's business and results of operations depend substantially on customers renewing their subscriptions.
• The company relies on third parties to maintain and operate certain elements of its network infrastructure.
• The company is subject to stringent and changing laws, regulations, rules, contractual obligations, policies, and other obligations related to data privacy and security.
• The company relies on its third-party channel partner network of distributors and resellers to generate a substantial amount of its revenue.
• The company relies on the performance of highly skilled personnel, including senior management and its engineering, professional services, sales and technology professionals, and its ability to increase its customer base will depend to a significant extent on its ability to expand its sales and marketing operations.
• Recent and future acquisitions could disrupt the company's business and adversely affect its business operations and financial results.
• The company is subject to risks associated with its investments in private companies, including partial or complete loss of invested capital, and significant changes in the fair value of this portfolio could adversely impact its financial results.
• The company may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
• If the company does not generate sufficient cash flows, it may be unable to service all of its indebtedness.
• Covenants under the company's Credit Agreement may restrict its business and operations in many ways, and if it does not effectively manage its covenants, its financial conditions and results of operations could be adversely affected.
• The company's variable rate debt subjects it to interest rate risk that could cause its debt service obligations to increase significantly.
• The nature of the company's business requires the application of complex accounting rules and regulations and public reporting and corporate governance requirements.
• Unstable market and economic conditions may have material adverse consequences on the company's business, financial condition and share price.
• Catastrophic events may disrupt the company's business.
• The company's business, financial condition and results of operations could be materially adversely affected by the recent conflict in the Middle East and subsequent hostilities in the region, as well as any negative impact on the regional or global economies and capital markets resulting therefrom or from the ongoing conflict between Ukraine and Russia and any other geopolitical tensions.
• The company's business could be adversely affected if its employees cannot obtain and maintain required security clearances or it cannot establish and maintain a required facility security clearance.
• Any failure to protect the company's proprietary technology and intellectual property rights could substantially harm its business and operating results.
• The company may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require it to pay significant damages and could limit its ability to use certain technologies.
• Portions of the company's solutions utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect its business.
• The company is subject to anti-corruption laws, anti-bribery and similar laws with respect to its domestic and international operations, and non-compliance with such laws can subject it to criminal and/or civil liability and materially harm its business and reputation.
• The company is subject to governmental export and import controls and economic and trade sanctions that could impair its ability to conduct business in international markets and subject it to liability if it is not in compliance with applicable laws and regulations.
• Changes to and uncertainties in the interpretation and application of tax laws and regulations could materially affect the company's tax obligations and effective tax rate.
• The company's operating results may be negatively affected if it is required to pay additional taxes, including sales and use tax, value added tax, or other transaction taxes, and it could be subject to liability with respect to all or a portion of past or future sales.
• The company's ability to use net operating losses to offset future taxable income may be subject to certain limitations.
• The company is obligated to maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in its company and, as a result, the value of its common stock.

Future Outlook

The company aims to expand its market leadership in exposure management and scale its business by capturing market opportunities in cloud, identity, and OT, while expanding operating and free cash flow margins.

Industry Context

Tenable is operating in the fragmented and intensely competitive cybersecurity market, competing with both established and emerging vendors, as well as internally-developed solutions. The company is focused on expanding its exposure management capabilities to address the growing complexity of modern attack surfaces, including cloud environments, AI, and IoT devices.

Comparison to Industry Standards

• Tenable competes with vulnerability management and assessment vendors like Qualys and Rapid7.
• The company also competes with diversified security software and services vendors, endpoint security vendors with vulnerability assessment capabilities like CrowdStrike, and public cloud vendors like Palo Alto Networks and Wiz.
• Tenable's suite of solutions generally competes favorably with respect to product functionality, breadth and depth of offerings, flexibility of delivery models, ease of deployment and use, integration capabilities such as open APIs and scalability, uptime and performance.

Stakeholder Impact

• Shareholders may be concerned about the net losses, but encouraged by the revenue growth and strategic acquisitions.
• Employees may benefit from the company's continued investment in research and development and expansion of its product offerings.
• Customers can expect enhanced capabilities and improved security solutions through the company's acquisitions and platform development.

Next Steps

• Continue to acquire new enterprise platform customers.
• Expand asset coverage within the customer base.
• Invest in the technology platform.
• Explore acquisition opportunities.

Key Dates