10-Q: Tenable Holdings Reports Third Quarter 2024 Results, Revenue Up 13%

Tenable Holdings, a cybersecurity firm, announced its third quarter 2024 results, showing a 13% increase in revenue compared to the same period last year.

Summary

• Tenable Holdings reported a net loss of $9.2 million for the third quarter of 2024, compared to a net loss of $15.6 million in the same quarter of 2023.
• The company's revenue for the third quarter of 2024 was $227.1 million, a 13% increase from $201.5 million in the third quarter of 2023.
• Subscription revenue increased by 14% to $208.6 million, while perpetual license and maintenance revenue decreased by 4% to $11.8 million.
• Professional services and other revenue saw a 12% increase, reaching $6.8 million.
• For the first nine months of 2024, Tenable's net loss was $38.2 million, compared to $56.6 million for the same period in 2023.
• The company's total revenue for the first nine months of 2024 was $664.3 million, a 13% increase from $585.4 million in the first nine months of 2023.
• Tenable's calculated current billings for the third quarter of 2024 were $248.4 million, compared to $224.7 million in the same period of 2023.
• The company's free cash flow for the first nine months of 2024 was $128.5 million, compared to $105.3 million for the same period in 2023.
• Tenable added 386 new enterprise platform customers in the third quarter of 2024, the same number as in the third quarter of 2023.
• The dollar-based net expansion rate was 108% at the end of September 2024, compared to 111% at the end of September 2023.

Sentiment

Score: 6

Explanation: The document shows positive revenue growth and improved net loss, but the company is still not profitable and there are some concerns about the dollar-based net expansion rate. The company is making progress, but there are still risks and challenges ahead.

Positives

• Revenue increased by 13% year-over-year, indicating strong sales performance.
• Subscription revenue saw a significant increase of 14%, highlighting the success of the company's subscription model.
• The net loss improved compared to the same quarter last year, suggesting better cost management or increased profitability.
• Calculated current billings increased, indicating a healthy pipeline and future revenue potential.
• Free cash flow for the first nine months of 2024 was $128.5 million, demonstrating the company's ability to generate cash.
• The company maintained the same number of new enterprise platform customers as the previous year, showing consistent customer acquisition.

Negatives

• The company still reported a net loss of $9.2 million for the quarter, indicating ongoing challenges with profitability.
• Perpetual license and maintenance revenue decreased by 4%, suggesting a shift away from this revenue stream.
• The dollar-based net expansion rate decreased from 111% to 108%, indicating a slight reduction in the ability to drive additional sales from existing customers.
• Operating expenses increased, which may be a concern if not offset by revenue growth.

Risks

• The company's reliance on a two-tiered channel model, with a significant portion of revenue coming from a single distributor, poses a risk if those relationships change.
• The company is subject to various cybersecurity risks, including potential attacks on its systems and those of its third-party providers.
• The company's solutions may fail to detect all vulnerabilities or threats, or may falsely detect vulnerabilities, which could lead to customer dissatisfaction and liability.
• The company's use of AI technologies in its products and services may lead to challenges, concerns and risks that are significant or that the company may not be able to predict.
• The company is subject to complex accounting rules and regulations, and changes in these rules or interpretations could adversely affect its financial statements.
• The company's reliance on third-party service providers and technologies to operate critical business systems poses a risk if those providers experience security incidents or other interruptions.
• The company may be subject to mandatory Term Loan prepayments related to the excess cash flow provisions if its first lien net leverage ratio exceeds 3.5.

Future Outlook

The company expects longer purchasing and approval phases of its sales cycle to continue throughout 2024. The company believes that its existing cash and cash equivalents and short-term investments will be sufficient to fund its operating and capital needs for at least the next 12 months and for the foreseeable future.

Management Comments

• The company is focused on expanding sales of its enterprise platform offerings.
• The company intends to continue to invest additional resources in its cloud-based platform and customer support team as it grows its business.
• The company expects its sales and marketing expense to decrease as a percentage of its revenue over the long term.
• The company expects its research and development expense to decrease as a percentage of its revenue over the long term.
• The company expects its general and administrative expense to decrease as a percentage of its revenue over the long term.

Industry Context

The cybersecurity industry is experiencing rapid growth, driven by increasing cyber threats and the need for robust security solutions. Tenable's focus on exposure management aligns with the industry's shift towards proactive risk mitigation. The acquisition of Eureka Security, Inc. demonstrates the company's commitment to expanding its capabilities in cloud data security.

Comparison to Industry Standards

• Tenable's revenue growth of 13% is comparable to other mid-sized cybersecurity companies, but lags behind some of the larger players in the industry.
• The company's dollar-based net expansion rate of 108% is a good result, but is lower than some of the industry leaders who are seeing rates above 110%.
• Tenable's focus on subscription revenue is in line with industry trends, as more companies move towards SaaS models.
• The company's investment in research and development is consistent with the need to stay ahead of evolving cyber threats.
• Compared to companies like Rapid7 and Qualys, Tenable is showing similar growth in revenue, but is still working towards profitability.
• The acquisition of Eureka is similar to moves by other companies to expand their product offerings and address emerging security needs.

Stakeholder Impact

• Shareholders may be encouraged by the revenue growth and improved net loss, but may be concerned about the ongoing lack of profitability.
• Employees may benefit from the company's continued investment in its cloud-based platform and customer support team.
• Customers may benefit from the company's expanded product offerings and enhanced security capabilities.
• Suppliers may benefit from the company's continued growth and investment in its business.
• Creditors may be encouraged by the company's improved financial performance and ability to generate cash.

Next Steps

• The company will continue to invest in its cloud-based platform and customer support team.
• The company will continue to make investments in its sales and marketing teams to increase revenue.
• The company will continue to invest in research and development efforts to enhance the functionality of its cloud-based platform.
• The company will continue to monitor its compliance with applicable financial reporting standards and SEC and applicable listing standard requirements.

Key Dates

Keywords

cybersecurity, exposure management, vulnerability management, subscription revenue, cloud security, SaaS, enterprise platform, net loss, revenue, free cash flow