Tenable Announces Second Quarter 2019 Financial Results

July 30, 2019 at 4:05 PM EDT

Added 352 new enterprise platform customers and 44 net new six figure customers
Revenue of $85.4 million, up 34% year-over-year
GAAP net loss per share of $0.23; Pro forma non-GAAP net loss of $0.10, a 44% decrease year-over-year

COLUMBIA, Md., July 30, 2019 (GLOBE NEWSWIRE) -- Tenable (Nasdaq: TENB), the Cyber Exposure company, today announced financial results for the quarter ended June 30, 2019.

“The market opportunity for Cyber Exposure remains attractive as evidenced by the continued expansion of our enterprise customer base and six figure relationships," said Amit Yoran, Chairman and CEO of Tenable. “Our revenue for the second quarter grew 34% year-over-year and we remain excited about our opportunity to capitalize on the growing demand for holistic risk-based vulnerability management."

Second Quarter 2019 Financial Highlights

Revenue was $85.4 million, representing a 34% increase year-over-year.
Calculated current billings was $98.1 million, representing a 27% increase year-over-year.
GAAP loss from operations was $22.2 million, compared to a loss of $16.4 million in the second quarter of 2018.
Non-GAAP loss from operations was $10.7 million, compared to a loss of $13.3 million in the second quarter of 2018.
GAAP net loss was $21.6 million, compared to a loss of $17.2 million in the second quarter of 2018.
GAAP net loss per share was $0.23, compared to a loss per share of $0.73 in the second quarter of 2018.
Non-GAAP net loss was $10.0 million, compared to a loss of $14.0 million in the second quarter of 2018.
Pro forma non-GAAP net loss per share was $0.10, compared to a loss per share of $0.18 in the second quarter of 2018.
Cash and cash equivalents and short-term investments were $297.0 million at June 30, 2019, compared to $283.2 million at December 31, 2018.
Net cash used in operating activities was $2.1 million, compared to $0.2 million provided by operating activities in the second quarter of 2018. Free cash flow was $(5.2) million, compared to $(1.1) million in the second quarter of 2018. Both net cash used in operating activities and free cash flow in the second quarter of 2019 included a $3.9 million benefit related to employee stock purchase plan activity.

Second Quarter 2019 and Recent Business Highlights

Added 352 new enterprise platform customers and 44 net new six figure customers.
Unveiled new innovations to our Cyber Exposure analytics capabilities in Tenable Lumin™ at Edge 2019, our annual user conference. These innovations include a Cyber Exposure score, which is an objective measure of risk that combines data from Predictive Prioritization with asset criticality. Tenable also unveiled Cyber Exposure Benchmarking and Remediation Guidance Workflow.
Integrated Tenable.io^® with Google Cloud Security Command Center. This integration provides organizations with enhanced visibility into their cloud assets, both public and private, delivered via a single dashboard. This builds on Tenable’s existing integrations with AWS, allowing customers to more effectively manage and reduce cyber risk across multiple public cloud environments.
Launched Nessus^® Essentials, an enhanced free version of our market-defining vulnerability assessment solution (formerly Nessus Home). Nessus Essentials is designed to train the next generation of cyber professionals.
Tenable Research discovered several high-priority vulnerabilities, including exploits impacting vendors in the industrial controls/critical infrastructure, network controls and enterprise software spaces.

Financial Outlook

For the third quarter of 2019, we currently expect:

Revenue in the range of $88.0 million to $89.0 million.
Non-GAAP loss from operations in the range of $12.0 million to $11.0 million.
Non-GAAP net loss in the range of $11.5 million to $10.5 million.
Non-GAAP net loss per share in the range of $0.12 to $0.11, assuming 96.7 million weighted average shares outstanding.

For the year ending December 31, 2019, we currently expect:

Revenue in the range of $346.0 million to $349.0 million.
Calculated current billings in the range of $407.0 million to $417.0 million.
Non-GAAP loss from operations in the range of $50.0 million to $48.0 million.
Non-GAAP net loss in the range of $48.0 million to $46.0 million, assuming a provision for income taxes between $4.1 million and $3.7 million.
Non-GAAP net loss per share in the range of $0.50 to $0.48, assuming 96.1 million weighted average shares outstanding.

Conference Call Information

Tenable will host a conference call 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. A replay of the webcast will be available until August 13, 2019.

About Tenable

Tenable^® is the Cyber Exposure company. Over 27,000 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 more than 50 percent of the Fortune 500, more than 25 percent of the Global 2000, and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations
Andrea DiMarco
investors@tenable.com

Media Relations
Cayla Baker
tenablepr@tenable.com

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, 2018, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 and 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 and Other Key Metrics

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 investors’ 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 present these non-GAAP financial measures to assist investors in seeing our financial performance using a management view and because we believe that these measures provide an additional tool for investors to use in comparing 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: We define free cash flow, a non-GAAP financial measure, as net cash (used in) provided by operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment, for investment in our business and to make acquisitions. We believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash.

Non-GAAP Loss 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 and amortization of intangible assets.

Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and Pro Forma Non-GAAP Net Loss Per Share: We define non-GAAP net loss as GAAP net loss attributable to common stockholders, excluding the effect of the accretion of Series A and B redeemable convertible preferred stock, stock-based compensation and amortization of intangible assets, including the applicable tax impact. We use non-GAAP net loss to calculate non-GAAP net loss per share and pro forma non-GAAP net loss per share. Pro forma non-GAAP net loss per share is calculated by giving effect to the conversion of our redeemable convertible preferred stock into common stock as though the conversion occurred at the beginning of each period presented prior to 2019.

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 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.

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

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2019			2018			2019			2018
Revenue	$	85,384		$	63,592		$	165,685		$	122,699
Cost of revenue⁽¹⁾	13,918			9,879			27,144			18,607
Gross profit	71,466			53,713			138,541			104,092
Operating expenses:
Sales and marketing⁽¹⁾	56,015			41,826			108,704			81,414
Research and development⁽¹⁾	21,698			17,791			43,633			34,976
General and administrative⁽¹⁾	15,987			10,541			31,123			19,596
Total operating expenses	93,700			70,158			183,460			135,986
Loss from operations	(22,234		)	(16,445		)	(44,919		)	(31,894		)
Interest income (expense), net	1,594			(23		)	3,150			(49		)
Other expense, net	(122		)	(438		)	(336		)	(420		)
Loss before income taxes	(20,762		)	(16,906		)	(42,105		)	(32,363		)
Provision for income taxes	866			244			963			675
Net loss	(21,628		)	(17,150		)	(43,068		)	(33,038		)
Accretion of Series A and B redeemable convertible preferred stock	—			(191		)	—			(379		)
Net loss attributable to common stockholders	$	(21,628	)	$	(17,341	)	$	(43,068	)	$	(33,417	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.23	)	$	(0.73	)	$	(0.45	)	$	(1.41	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	95,820			23,750			94,785			23,623

_______________

⁽¹⁾ Includes stock-based compensation as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Cost of revenue	$	742	$	114	$	1,394	$	191
Sales and marketing	4,215		675		7,581		1,277
Research and development	2,441		640		4,471		1,167
General and administrative	3,975		1,595		7,246		2,788
Total stock-based compensation	$	11,373	$	3,024	$	20,692	$	5,423

TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

	June 30, 2019			December 31, 2018
(in thousands, except per share data)	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	185,663		$	165,116
Short-term investments	111,301			118,119
Accounts receivable (net of allowance for doubtful accounts of $125 and $188 at June 30, 2019 and December 31, 2018, respectively)	68,983			68,261
Deferred commissions	24,867			23,272
Prepaid expenses and other current assets	20,316			22,020
Total current assets	411,130			396,788
Property and equipment, net	14,949			11,348
Deferred commissions (net of current portion)	36,999			36,162
Operating lease right-of-use assets	9,201			8,504
Other assets	8,490			7,810
Total assets	$	480,769		$	460,612

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,207		$	171
Accrued expenses	9,770			5,554
Accrued compensation	26,502			29,594
Deferred revenue	227,227			213,644
Operating lease liabilities	3,961			4,262
Other current liabilities	538			1,079
Total current liabilities	270,205			254,304
Deferred revenue (net of current portion)	80,106			76,259
Operating lease liabilities (net of current portion)	6,559			6,055
Other liabilities	2,940			2,231
Total liabilities	359,810			338,849

Stockholders’ equity:
Common stock (par value: $0.01; 500,000 shares authorized; 96,808 and 93,126 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively)	968			931
Additional paid-in capital	629,087			586,940
Accumulated other comprehensive income	80			—
Accumulated deficit	(509,176		)	(466,108		)
Total stockholders’ equity	120,959			121,763
Total liabilities and stockholders’ equity	$	480,769		$	460,612

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

	Six Months Ended June 30,
(in thousands)	2019			2018
Cash flows from operating activities:
Net loss	$	(43,068	)	$	(33,038	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	3,089			2,994
Stock-based compensation	20,692			5,423
Other	(1,022		)	664
Changes in operating assets and liabilities:
Accounts receivable	(658		)	850
Prepaid expenses and other current assets	1,673			2,339
Deferred commissions	(2,432		)	(629		)
Other assets	(1,209		)	1,195
Accounts payable and accrued expenses	5,646			2,326
Accrued compensation	(3,092		)	(2,620		)
Deferred revenue	17,430			21,319
Other current liabilities	(487		)	(30		)
Other liabilities	441			(47		)
Net cash (used in) provided by operating activities	(2,997		)	746

Cash flows from investing activities:
Purchases of property and equipment	(5,335		)	(2,978		)
Purchases of short-term investments	(102,453		)	—
Sales and maturities of short-term investments	110,750			—
Net cash provided by (used in) investing activities	2,962			(2,978		)

Cash flows from financing activities:
Principal payments under finance lease obligations	(8		)	(252		)
Payments of deferred offering costs	—			(1,515		)
Proceeds from stock issued in connection with the employee stock purchase plan	8,579			—
Proceeds from the exercise of stock options	12,727			1,010
Repurchases of common stock	—			(75		)
Net cash provided by (used in) financing activities	21,298			(832		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(716		)	(491		)
Net increase (decrease) in cash and cash equivalents and restricted cash	20,547			(3,555		)
Cash and cash equivalents and restricted cash at beginning of period	165,378			27,472
Cash and cash equivalents and restricted cash at end of period	$	185,925		$	23,917

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

Revenue	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Subscription revenue	$	69,370	$	48,725	$	134,107	$	93,057
Perpetual license and maintenance revenue	13,553		13,412		27,080		26,889
Professional services and other revenue	2,461		1,455		4,498		2,753
Revenue⁽¹⁾	$	85,384	$	63,592	$	165,685	$	122,699

_______________

⁽¹⁾Recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses, represented 91% of revenue for the three and six months ended June 30, 2019 and 89% of revenue for the three and six months ended June 30, 2018, respectively.

Calculated Current Billings	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
Revenue	$	85,384		$	63,592		$	165,685		$	122,699
Add: Deferred revenue (current), end of period	227,227			174,277			227,227			174,277
Less: Deferred revenue (current), beginning of period	(214,508		)	(160,503		)	(213,644		)	(154,898		)
Calculated current billings	$	98,103		$	77,366		$	179,268		$	142,078

Free Cash Flow	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
Net cash (used in) provided by operating activities	$	(2,123	)	$	242		$	(2,997	)	$	746
Purchases of property and equipment	(3,029		)	(1,382		)	(5,335		)	(2,978		)
Free cash flow⁽¹⁾	$	(5,152	)	$	(1,140	)	$	(8,332	)	$	(2,232	)

________________

⁽¹⁾ Free cash flow included a $3.9 million benefit and a $1.0 million reduction related to employee stock purchase plan activity in the three and six months ended June 30, 2019, respectively.

Non-GAAP Loss from Operations and Non-GAAP Operating Margin	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2019			2018			2019			2018
Loss from operations	$	(22,234	)	$	(16,445	)	$	(44,919	)	$	(31,894	)
Stock-based compensation	11,373			3,024			20,692			5,423
Amortization of intangible assets	151			151			302			302
Non-GAAP loss from operations	$	(10,710	)	$	(13,270	)	$	(23,925	)	$	(26,169	)
Operating margin	(26		)%	(26		)%	(27		)%	(26		)%
Non-GAAP operating margin	(13		)%	(21		)%	(14		)%	(21		)%

Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and Pro forma Non-GAAP Net Loss Per Share	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2019			2018			2019			2018
Net loss attributable to common stockholders	$	(21,628	)	$	(17,341	)	$	(43,068	)	$	(33,417	)
Accretion of Series A and B redeemable convertible preferred stock	—			191			—			379
Stock-based compensation	11,373			3,024			20,692			5,423
Tax impact of stock-based compensation⁽¹⁾	121			(25		)	(528		)	(48		)
Amortization of intangible assets⁽¹⁾	151			151			302			302
Non-GAAP net loss	$	(9,983	)	$	(14,000	)	$	(22,602	)	$	(27,361	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.23	)	$	(0.73	)	$	(0.45	)	$	(1.41	)
Accretion of Series A and B redeemable convertible preferred stock	—			0.01			—			0.02
Stock-based compensation	0.13			0.12			0.22			0.22
Tax impact of stock-based compensation⁽¹⁾	—			—			(0.01		)	—
Amortization of intangible assets⁽¹⁾	—			0.01			—			0.01
Non-GAAP net loss per share, basic and diluted	$	(0.10	)	$	(0.59	)	$	(0.24	)	$	(1.16	)

Weighted-average shares used to compute net loss per share attributable to common stockholders and non-GAAP net loss per share, basic and diluted	95,820			23,750			94,785			23,623
Pro forma adjustment to reflect the assumed conversion of our convertible redeemable preferred stock as of the beginning of the period	—			55,386			—			55,386
Weighted-average shares used to compute pro forma non-GAAP net loss per share, basic and diluted	95,820			79,136			94,785			79,009

Pro forma non-GAAP net loss per share, basic and diluted	$	(0.10	)	$	(0.18	)	$	(0.24	)	$	(0.35	)

________________

(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions. There was no tax impact related to the amortization of intangible assets as it was incurred in the United States in periods in which we maintained a full valuation allowance.

Non-GAAP Gross Profit and Non-GAAP Gross Margin	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2019			2018			2019			2018
Gross profit	$	71,466		$	53,713		$	138,541		$	104,092
Stock-based compensation	742			114			1,394			191
Amortization of intangible assets	151			151			302			302
Non-GAAP gross profit	$	72,359		$	53,978		$	140,237		$	104,585
Gross margin	84		%	84		%	84		%	85		%
Non-GAAP gross margin	85		%	85		%	85		%	85		%

Non-GAAP Sales and Marketing Expense	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2019			2018			2019			2018
Sales and marketing expense	$	56,015		$	41,826		$	108,704		$	81,414
Less: Stock-based compensation	4,215			675			7,581			1,277
Non-GAAP sales and marketing expense	$	51,800		$	41,151		$	101,123		$	80,137
Non-GAAP sales and marketing expense % of revenue	61		%	65		%	61		%	65		%

Non-GAAP Research and Development Expense	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2019			2018			2019			2018
Research and development expense	$	21,698		$	17,791		$	43,633		$	34,976
Less: Stock-based compensation	2,441			640			4,471			1,167
Non-GAAP research and development expense	$	19,257		$	17,151		$	39,162		$	33,809
Non-GAAP research and development expense % of revenue	23		%	27		%	24		%	28		%

Non-GAAP General and Administrative Expense	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2019			2018			2019			2018
General and administrative expense	$	15,987		$	10,541		$	31,123		$	19,596
Less: Stock-based compensation	3,975			1,595			7,246			2,788
Non-GAAP general and administrative expense	$	12,012		$	8,946		$	23,877		$	16,808
Non-GAAP general and administrative expense % of revenue	14		%	14		%	14		%	14		%

Forecasted Non-GAAP Loss from Operations	Three Months Ending September 30, 2019						Year Ending December 31, 2019
(in millions)	Low			High			Low			High
Forecasted loss from operations	$	(22.6	)	$	(21.6	)	$	(92.0	)	$	(90.0	)
Forecasted stock-based compensation	10.5			10.5			41.6			41.6
Forecasted amortization of intangible assets	0.1			0.1			0.4			0.4
Forecasted non-GAAP loss from operations	$	(12.0	)	$	(11.0	)	$	(50.0	)	$	(48.0	)

Forecasted Non-GAAP Net Loss and Non-GAAP Net Loss Per Share	Three Months Ending September 30, 2019						Year Ending December 31, 2019
(in millions, except per share data)	Low			High			Low			High
Forecasted net loss	$	(22.1	)	$	(21.1	)	$	(90.0	)	$	(88.0	)
Forecasted stock-based compensation⁽¹⁾	10.5			10.5			41.6			41.6
Forecasted amortization of intangible assets	0.1			0.1			0.4			0.4
Forecasted non-GAAP net loss	$	(11.5	)	$	(10.5	)	$	(48.0	)	$	(46.0	)

Forecasted net loss per share, basic and diluted	$	(0.23	)	$	(0.22	)	$	(0.94	)	$	(0.92	)
Forecasted stock-based compensation⁽¹⁾	0.11			0.11			0.44			0.44
Forecasted amortization of intangible assets	—			—			—			—
Forecasted Non-GAAP net loss per share, basic and diluted	$	(0.12	)	$	(0.11	)	$	(0.50	)	$	(0.48	)

Forecasted weighted-average shares used to compute net loss per share, basic and diluted	96.7			96.7			96.1			96.1

________________

(1) The tax impact of stock-based compensation is immaterial for purposes of this reconciliation.

Source: Tenable Holdings, Inc.

News Release

Tenable Announces Second Quarter 2019 Financial Results