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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2019
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission file number 001-38600
__________________
TENABLE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
__________________
Delaware
 
47-5580846
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
7021 Columbia Gateway Drive, Suite 500, Columbia, Maryland, 21046
(Address of principal executive offices, including zip code)
(410) 872-0555
(Registrant’s telephone number, including area code)
__________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý      No      ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ý     No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
ý
 
 
 
Emerging growth company
ý
 
Smaller reporting company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    ¨      No    ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
TENB
The Nasdaq Stock Market LLC
The number of shares of the Registrant's common stock outstanding as of May 3, 2019 was 96,473,350.



TENABLE HOLDINGS, INC.
TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements
TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
 
March 31, 2019
 
December 31, 2018
(in thousands, except per share data)
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
167,966

 
$
165,116

Short-term investments
131,014

 
118,119

Accounts receivable (net of allowance for doubtful accounts of $370 and $188 at March 31, 2019 and December 31, 2018, respectively)
56,975

 
68,261

Deferred commissions
23,838

 
23,272

Prepaid expenses and other current assets
20,636

 
22,020

Total current assets
400,429

 
396,788

Property and equipment, net
12,714

 
11,348

Deferred commissions (net of current portion)
35,973

 
36,162

Operating lease right-of-use assets
9,829

 
8,504

Other assets
7,446

 
7,810

Total assets
$
466,391

 
$
460,612

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,287

 
$
171

Accrued expenses
7,994

 
5,554

Accrued compensation
22,360

 
29,594

Deferred revenue
214,508

 
213,644

Operating lease liabilities
3,981

 
4,262

Other current liabilities
653

 
1,079

Total current liabilities
250,783

 
254,304

Deferred revenue (net of current portion)
77,397

 
76,259

Operating lease liabilities (net of current portion)
7,466

 
6,055

Other liabilities
2,536

 
2,231

Total liabilities
338,182

 
338,849

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock (par value: $0.01; 500,000 shares authorized; 96,203 and 93,126 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively)
962

 
931

Additional paid-in capital
614,774

 
586,940

Accumulated other comprehensive income
21

 

Accumulated deficit
(487,548
)
 
(466,108
)
Total stockholders’ equity
128,209

 
121,763

Total liabilities and stockholders’ equity
$
466,391

 
$
460,612

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended March 31,
(in thousands, except per share data)
2019
 
2018
Revenue
$
80,301

 
$
59,107

Cost of revenue
13,226

 
8,728

Gross profit
67,075

 
50,379

Operating expenses:
 
 
 
Sales and marketing
52,689

 
39,588

Research and development
21,935

 
17,185

General and administrative
15,136

 
9,055

Total operating expenses
89,760

 
65,828

Loss from operations
(22,685
)
 
(15,449
)
Interest income (expense), net
1,556

 
(26
)
Other (expense) income, net
(214
)
 
18

Loss before income taxes
(21,343
)
 
(15,457
)
Provision for income taxes
97

 
431

Net loss
(21,440
)
 
(15,888
)
Accretion of Series A and B redeemable convertible preferred stock

 
(188
)
Net loss attributable to common stockholders
$
(21,440
)
 
$
(16,076
)
 
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
$
(0.23
)
 
$
(0.68
)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
93,738

 
23,495

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Net loss
$
(21,440
)
 
$
(15,888
)
Other comprehensive income, net of tax:
 
 
 
Unrealized gains on available-for-sale securities
21

 

Other comprehensive income
21

 

Comprehensive loss
$
(21,419
)
 
$
(15,888
)


5

Table of Contents

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
 
Redeemable Convertible Preferred Stock
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
Series A
 
Series B
 
 
Common Stock
 
Additional
 
Other
 
 
 
Total
(in thousands)
Shares
 
Amount
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Paid-in
Capital
 
Comprehensive
Income
 
Accumulated Deficit
 
Stockholders’
Equity (Deficit)
Balance at December 31, 2018

 
$

 

 
$

 
 
93,126
 
$
931

 
$
586,940

 
$

 
$
(466,108
)
 
$
121,763

Exercise of stock options

 

 

 

 
 
2,638

 
26

 
9,852

 

 

 
9,878

Issuance of common stock under employee stock purchase plan

 

 

 

 
 
439

 
5

 
8,574

 

 

 
8,579

Stock-based compensation

 

 

 

 
 

 

 
9,408

 

 

 
9,408

Other comprehensive income

 

 

 

 
 

 

 

 
21

 

 
21

Net loss

 

 

 

 
 

 

 

 

 
(21,440
)
 
(21,440
)
Balance at March 31, 2019

 
$

 

 
$

 
 
96,203

 
$
962

 
$
614,774

 
$
21

 
$
(487,548
)
 
$
128,209

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
15,848
 
$
49,935

 
39,538
 
$
227,800

 
 
24,472
 
$
246

 
$
20,676

 
$

 
$
(392,587
)
 
$
(371,665
)
Accretion of Series A and B redeemable convertible preferred stock

 
5

 

 
183

 
 

 

 
(188
)
 

 

 
(188
)
Exercise of stock options

 

 

 

 
 
322

 
3

 
476

 

 

 
479

Stock-based compensation

 

 

 

 
 

 

 
2,399

 

 

 
2,399

Net loss

 

 

 

 
 

 

 

 

 
(15,888
)
 
(15,888
)
Balance at March 31, 2018
15,848

 
$
49,940

 
39,538

 
$
227,983

 
 
24,794

 
$
249

 
$
23,363

 
$

 
$
(408,475
)
 
$
(384,863
)
The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net loss
$
(21,440
)
 
$
(15,888
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
1,622

 
1,454

Stock-based compensation
9,319

 
2,399

Other
(284
)
 
80

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
11,104

 
7,792

Prepaid expenses and other current assets
1,374

 
974

Deferred commissions
(377
)
 
(276
)
Other assets
54

 
779

Accounts payable and accrued expenses
3,372

 
2,612

Accrued compensation
(7,233
)
 
(4,303
)
Deferred revenue
2,002

 
4,797

Other current liabilities
(429
)
 
72

Other liabilities
42

 
12

Net cash (used in) provided by operating activities
(874
)
 
504

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(2,306
)
 
(1,596
)
Purchases of short-term investments
(53,915
)
 

Sales and maturities of short-term investments
41,750

 

Net cash used in investing activities
(14,471
)
 
(1,596
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Principal payments under finance lease obligations
(4
)
 
(116
)
Proceeds from stock issued in connection with the employee stock purchase plan
8,579

 

Proceeds from the exercise of stock options
9,878

 
479

Net cash provided by financing activities
18,453

 
363

Effect of exchange rate changes on cash and cash equivalents and restricted cash
(258
)
 
(57
)
Net increase (decrease) in cash and cash equivalents and restricted cash
2,850

 
(786
)
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
$
168,228

 
$
26,686

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
24

 
$
27

Cash paid for income taxes
416

 
197

Supplemental cash flow information related to leases:
 
 
 
Operating cash payments for operating leases
$
1,195

 
$
1,079

Operating cash payments for finance leases
2

 
9

Financing cash payments for finance leases
4

 
116

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Asset retirement obligations
$
250

 
$

The accompanying notes are an integral part of these consolidated financial statements.

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TENABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Summary of Significant Accounting Policies
Business Description
Tenable Holdings, Inc. (the “Company,” “we,” "us," or “our”) is a provider of Cyber Exposure solutions, which is a discipline for managing and measuring cybersecurity risk in the digital era. Our enterprise software platform enables broad visibility into an organization’s cyber exposure across the modern attack surface and deep insights that help organizations translate technical data into business insights to understand and reduce their cybersecurity risk.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Tenable Holdings, Inc. and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“GAAP”) for interim financial information. The consolidated statements are unaudited and should be read in conjunction with the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K ("10-K") filed with the Securities and Exchange Commission on March 1, 2019. The consolidated financial statements have been prepared on a basis consistent with the audited annual consolidated financial statements included in the 10-K and, in the opinion of management, include all adjustments of a normal recurring nature necessary to fairly state our financial position, our results of operations, and cash flows.
The results for the three months ended March 31, 2019 are not necessarily indicative of the operating results expected for the year ending December 31, 2019 or any other future period.
Initial Public Offering
On July 30, 2018, we completed our initial public offering ("IPO"), in which we issued and sold 12,535,000 shares of common stock at a price to the public of $23.00 per share, including 1,635,000 shares of common stock purchased by our underwriters from the full exercise of their over-allotment option. All of the shares sold in the IPO were sold by the Company. We received net proceeds of $264.6 million after deducting underwriting discounts and commissions and other offering expenses.
Upon the completion of our IPO, all 15,847,500 shares of our Series A Redeemable Convertible Preferred Stock ("Series A") and 39,538,354 shares of our Series B Redeemable Convertible Preferred Stock ("Series B") automatically converted into an aggregate of 55,385,854 shares of our common stock. Our newly adopted Amended and Restated Certificate of Incorporation authorizes a total of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates include, but are not limited to, the determination of the estimated economic life of perpetual licenses for revenue recognition, the estimated period of benefit for deferred commissions, useful lives of long-lived assets, the valuation of stock-based compensation, including the estimated underlying fair value of our common stock prior to our IPO, the incremental borrowing rate for operating leases, and the valuation of deferred tax assets. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable. Actual results could differ significantly from these estimates.

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Revenue Recognition
We recognize revenue in order to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve this, we apply the following steps:
Identify the contract with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognize revenue when or as performance obligations are satisfied
We generate revenue from subscription arrangements for software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses, and professional services and other revenue. We begin to recognize revenue when control of our software or services is transferred to the customer, which for sales made through distributors is concurrent with the transfer to the end user.
The following table presents a summary of revenue:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Subscription revenue
$
64,737

 
$
44,332

Perpetual license and maintenance revenue
13,527

 
13,477

Professional services and other revenue
2,037

 
1,298

Revenue
$
80,301

 
$
59,107


Subscription Revenue
Subscription arrangements generally have annual or multi-year contractual terms and allow customers to use our software or cloud solutions, including ongoing software updates and the ability to identify the latest cybersecurity vulnerabilities. Revenue is recognized ratably over the subscription term given the critical utility provided by the ongoing updates that are released throughout the contract period.
Perpetual License and Maintenance Revenue
Our perpetual licenses are generally sold with one or more years of maintenance, which include ongoing software updates and the ongoing ability to identify the latest cybersecurity vulnerabilities. Given the critical utility provided by the ongoing software updates and updated ability to identify network vulnerabilities included in maintenance, we combine the perpetual license and the maintenance into a single performance obligation. Perpetual license arrangements generally contain a material right related to the customer’s ability to renew maintenance at a price that is less than the initial license fee. We apply a practical alternative to allocating a portion of the transaction price to the material right performance obligation and estimate a hypothetical transaction price which includes fees for expected maintenance renewals based on the estimated economic life of the perpetual license contracts. We allocate the transaction price between the cybersecurity subscription provided in the initial contract and the material right related to expected contract renewals based on the hypothetical transaction price. We recognize the amount allocated to the combined license and maintenance performance obligation over the initial contractual period, which is generally one year. We recognize the amount allocated to the material right over the expected maintenance renewal period, which begins at the end of the initial contractual term and is generally four years. We have estimated the five-year economic life of perpetual license contracts based on historical contract attrition, expected renewal periods, the lifecycle of the our technology and other factors. While we believe that the estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.

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Professional Services and Other Revenue
Professional services and other revenue is primarily comprised of advisory services and training related to the deployment and optimization of our products. These services do not result in significant customization of our products. Professional services and other revenue is recognized as the services are performed.
Contracts with Multiple Performance Obligations
In cases where our contracts with customers contain multiple performance obligations, the contract transaction price is allocated on a relative standalone selling price basis. We typically determine standalone selling price based on observable selling prices of our products and services.
Variable Consideration
We record revenue from sales at the net sales price, which is the transaction price, including estimates of variable consideration when applicable. Certain of our customers may be entitled to receive credits and in certain circumstances, refunds, if service level commitments are not met. We have not historically experienced significant incidents affecting the ability to meet these service level commitments and any estimated refunds related to these agreements have not been material.
Sales through our channel network of distributors and resellers are generally discounted as compared to the price that we would sell to an end user. Revenue for sales through our channel network is recorded net of any distributor or reseller margin.
Concentrations
We sell our products and services through a channel network of distributors and resellers, along with our own sales teams. We derived 90% and 86% of revenue through our channel network in the three months ended March 31, 2019 and 2018, respectively. One of our distributors accounted for 44% and 45% of revenue in the three months ended March 31, 2019 and 2018, respectively. That same distributor accounted for 45% and 46% of accounts receivable at March 31, 2019 and December 31, 2018, respectively.
Contract Balances
We generally bill our customers in advance and accounts receivable are recorded when we have the right to invoice the customer. Contract liabilities consist of deferred revenue and include customer billings and payments received in advance of performance under the contract. In the three months ended March 31, 2019 and 2018, we recognized revenue of $74.6 million and $54.2 million, respectively, that was included in the deferred revenue balance at the beginning of each of the respective periods.
Remaining Performance Obligations
At March 31, 2019, the future estimated revenue related to unsatisfied performance obligations was $295.3 million, with 73% expected to be recognized as revenue over the succeeding twelve months, and the remainder expected to be recognized over the four years thereafter.
Investments
We currently invest in commercial paper, corporate bonds and U.S. treasury and agency obligations. Our investments are classified as available-for-sale and recorded at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss) within stockholders’ equity (deficit). We periodically review our investment portfolio to determine whether investments have indicators of possible impairment.

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Deferred Commissions
Sales commissions, including related incremental fringe benefit costs, are considered to be incremental costs of obtaining a contract. Sales commissions on initial sales are not commensurate with sales commissions on contract renewals and therefore are recognized over an estimated period of benefit, which ranges between three and four years for subscription arrangements and five years for perpetual license arrangements. We estimate the period of benefit based on the expected contract term including renewal periods, the lifecycle of our technology, and other factors. Sales commissions on contract renewals are capitalized and amortized ratably over the contract term, with the exception of contracts with renewal periods that are one year or less, in which case the incremental costs are expensed as incurred.
The following summarizes the activity of deferred incremental costs of obtaining a contract in the periods presented:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Beginning balance
$
59,434

 
$
50,176

Capitalization of contract acquisition costs
6,626

 
5,147

Amortization of deferred contract acquisition costs
(6,249
)
 
(4,872
)
Ending balance
$
59,811

 
$
50,451


Amortization of deferred contract acquisition costs is included in sales and marketing expense in the consolidated statements of operations.
Leases
We early adopted ASC Topic 842, Leases ("ASC 842"), as of January 1, 2018 using the modified retrospective method. We elected the package of practical expedients as permitted under the transition guidance, which allowed us to not reassess whether arrangements contain leases, not reassess lease classification, and not reassess initial direct costs.
The impact of the adoption of ASC 842 on previously reported interim financial statements included the recognition of right-of-use ("ROU") assets and lease liabilities, as well as the derecognition of the construction-in-progress and construction financing obligation. There was no material impact to previously reported results of operations for any interim period.
We determine if an arrangement contains a lease and the classification of that lease, if applicable, at inception. We have elected to not recognize a lease liability or ROU asset for short-term leases (leases with a term of twelve months or less). For contracts with lease and non-lease components, we have elected to not allocate the contract consideration, and account for the lease and non-lease components as a single lease component. Additionally, we enter into arrangements to use shared office spaces and other facilities, and have determined that these arrangements do not contain leases as we do not have the right to use an identified asset. Operating leases are included in operating lease ROU assets, operating lease liabilities and operating lease liabilities (net of current portion) in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities and other liabilities in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments under the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within our operating leases is generally not determinable and we use our incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment. We determine our incremental borrowing rate for each lease using our current borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The operating lease ROU asset also includes any lease prepayments, offset by lease incentives. Certain of our leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option. An option to terminate is considered unless it is reasonably certain we will not exercise the option.

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Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities to require that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down. The measurement of credit losses for newly recognized financial assets and subsequent changes in the allowance for credit losses are recorded in the statements of operations. This guidance is effective for us beginning January 1, 2020, with early adoption permitted, and will be adopted using the modified-retrospective method. We are currently evaluating the potential impact of this standard on our consolidated financial statements.
2. Cash and Cash Equivalents and Short-Term Investments
At March 31, 2019 and December 31, 2018, cash and cash equivalents excluded $0.3 million of restricted cash, which is related to an account established as collateral for a lease arrangement and was included in other assets on the consolidated balance sheets.
The following tables summarize the amortized cost, unrealized gain and loss and estimated fair value of cash equivalents and short term investments:
 
March 31, 2019
(in thousands)
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Estimated Fair Value
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
20,732

 
$

 
$

 
$
20,732

Commercial paper
4,489

 

 

 
4,489

Total cash equivalents
$
25,221

 
$

 
$

 
$
25,221

 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
Commercial paper
$
66,166

 
$

 
$

 
$
66,166

Corporate bonds
12,667

 
11

 

 
12,678

U.S. Treasury and agency obligations
52,160

 
10

 

 
52,170

Total short-term investments
$
130,993

 
$
21

 
$

 
$
131,014

 
December 31, 2018
(in thousands)
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Estimated Fair Value
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
38,022

 
$

 
$

 
$
38,022

Total cash equivalents
$
38,022

 
$

 
$

 
$
38,022

 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
Commercial paper
$
79,634

 
$

 
$

 
$
79,634

Corporate bonds
16,119

 

 

 
16,119

U.S. Treasury and agency obligations
22,366

 

 

 
22,366

Total short-term investments
$
118,119

 
$

 
$

 
$
118,119



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At March 31, 2019 and December 31, 2018, all of our short-term investments had maturities within the next twelve months, and none of our short-term investments were in an unrealized loss position.
3. Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. In the hierarchy, assets are classified based on the lowest level inputs used in valuation into the following categories:
Level 1 — Quoted prices in active markets for identical assets and liabilities;
Level 2 — Observable inputs including quoted market prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, or inputs that are corroborated by observable market data; and
Level 3 — Unobservable inputs.
The following tables summarize assets that are measured at fair value on a recurring basis:
 
March 31, 2019
(in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Cash and cash equivalents
 
 
 
 
 
 
 
Money market funds
$
20,732

 
$

 
$

 
$
20,732

Commercial paper

 
4,489

 

 
4,489

 
$
20,732

 
$
4,489

 
$

 
$
25,221

 
 
 
 
 
 
 
 
Short-term investments
 
 
 
 
 
 
 
Commercial paper
$

 
$
66,166

 
$

 
$
66,166

Corporate bonds

 
12,678

 

 
12,678

U.S. Treasury and agency obligations

 
52,170

 

 
52,170

 
$

 
$
131,014

 
$

 
$
131,014

 
December 31, 2018
(in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Cash and cash equivalents
 
 
 
 
 
 
 
Money market funds
$
38,022

 
$

 
$

 
$
38,022

 
$
38,022

 
$

 
$

 
$
38,022

 
 
 
 
 
 
 
 
Short-term investments
 
 
 
 
 
 
 
Commercial paper
$

 
$
79,634

 
$

 
$
79,634

Corporate bonds

 
16,119

 

 
16,119

U.S. Treasury and agency obligations

 
22,366

 

 
22,366

 
$

 
$
118,119

 
$

 
$
118,119


We did not have any liabilities measured and recorded at fair value at March 31, 2019, and December 31, 2018.

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4. Property and Equipment, Net
Property and equipment, net consisted of the following:
(in thousands)
March 31, 2019
 
December 31, 2018
Computer software and equipment
$
15,474

 
$
13,038

Furniture and fixtures
2,378

 
2,376

Leasehold improvements
7,646

 
7,266

Right-of-use assets under finance leases
1,866

 
1,854

Total
27,364

 
24,534

Less: accumulated depreciation and amortization
(14,650
)
 
(13,186
)
Property and equipment, net
$
12,714

 
$
11,348


Depreciation and amortization related to property and equipment was $1.5 million and $1.3 million in the three months ended March 31, 2019 and 2018, respectively.
5. Leases
We have operating leases for office facilities and finance leases for computer and office equipment. Our leases have remaining terms of less than one year to 8.3 years, some of which include one or more options to renew, with renewal terms up to five years and some of which include options to terminate the leases within the next three to six years. The ROU assets and liabilities as of March 31, 2019 assume the option to early terminate one of our leases in 2021 and one of our leases in 2025.
The components of lease expense were as follows:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Operating lease cost
$
981

 
$
853

 
 
 
 
Finance lease cost
 
 
 
Amortization of ROU assets
$
153

 
$
152

Interest on lease liabilities
2

 
9

Total finance lease cost
$
155

 
$
161


Rent expense for short-term leases in the three months ended March 31, 2019 and 2018 was not material.
Supplemental information related to leases was as follows:
 
March 31, 2019
 
December 31, 2018
Operating leases
 
 
 
Weighted average remaining lease term
3.5 years
 
3.1 years
Weighted average discount rate
6.9%
 
7.1%
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
ROU assets obtained in exchange for lease obligations
 
 
 
Operating leases
$
2,198

 
$

Finance leases
11

 



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Maturities of operating lease liabilities at March 31, 2019 were as follows:
(in thousands)
 
Year ending December 31,
 
2019(1)
$
3,225

2020
4,159

2021
2,299

2022
1,021

2023
857

Thereafter
1,576

Total lease payments
13,137

Less: imputed interest
(1,690
)
Total
$
11,447

_______________
(1)    Represents the nine months ending December 31, 2019.
As of March 31, 2019, the operating lease for our future headquarters had not commenced and we did not have control of the space to be leased. We plan to take possession of the leased office space in mid-2019, at which time we will record a right-of-use asset and corresponding lease liability, and begin to record rent expense. Future lease payments related to this lease are $68.2 million and the lease payments are expected to commence in the first quarter of 2021.
6. Debt
On May 4, 2017, we entered into a $25.0 million revolving credit facility (“Credit Facility”) with Silicon Valley Bank, which is available for use until May 4, 2020. The Credit Facility is intended to be used to fund working capital and to provide increased liquidity and financial flexibility and bears interest at either LIBOR plus 2%, or the lender's prime rate plus 1%. In addition, we pay quarterly in arrears 0.25% of the average unused portion. The Credit Facility is secured by a first priority security interest in all of our assets, with a negative pledge on our Intellectual Property, as defined in the credit agreement.
The Credit Facility contains certain restrictive covenants customary for facilities of this type including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. If, as of the last day of any quarter, the outstanding balance of the Credit Facility exceeds $5.0 million, there are financial covenants that require us to maintain a minimum level of earnings before income taxes, interest, depreciation and amortization (“EBITDA”) adjusted to add changes in deferred revenue in the period, and a minimum current ratio level. There were no borrowings under the Credit Facility during the three months ended March 31, 2019 or in 2018.
7. Redeemable Convertible Preferred Stock and Common Stock
Redeemable Convertible Preferred Stock
In October 2012, Tenable, Inc. (now a wholly owned subsidiary of Tenable Holdings, Inc.) issued 15,847,500 shares of Series A redeemable convertible preferred stock. In December 2015, we issued 15,847,500 shares, par value of $0.01, of Series A redeemable convertible preferred stock ("Series A") in exchange for Series A redeemable convertible preferred stock of Tenable, Inc. in connection with a recapitalization. This exchange was made on a one for one basis. In addition, we authorized 42,000,000 shares and issued 39,538,354 shares, par value of $0.01, of Series B redeemable convertible preferred stock ("Series B"). Upon completion of our IPO, Series A and Series B (together, the “Redeemable Convertible Preferred Stock”) automatically converted into an aggregate of 55,385,854 shares of our common stock.
We accreted the Redeemable Convertible Preferred Stock to the redemption price at the redemption date using the effective interest method. Upon completion of our IPO, the accretion rights of the Redeemable Convertible Preferred Stock were terminated.

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Table of Contents

Upon the completion of our IPO, we filed an Amended and Restated Certificate of Incorporation, authorizing a total of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. There were no shares of preferred stock issued or outstanding at March 31, 2019 or December 31, 2018.
Common Stock
The voting, dividend, and liquidation rights of common stockholders are subject to, and qualified by, the rights of preferred stockholders. The common stockholders are entitled to receive dividends when, as and if, declared by the Board of Directors, subject to preferential dividend rights of preferred stockholders. Upon dissolution or liquidation, our common stockholders will be entitled to receive all assets available for distribution to stockholders, subject to any preferential rights of preferred stockholders.
8. Stock-Based Compensation
In 2018, our board of directors adopted, and our stockholders approved, our 2018 Equity Incentive Plan ("2018 Plan"), which became effective upon the execution of the underwriting agreement related to our IPO, and no further grants were made under our 2016 Stock Incentive Plan ("2016 Plan"). Any shares subject to stock options or other stock awards granted under our 2016 Plan, 2012 Stock Incentive Plan or 2002 Stock Incentive Plan that would have otherwise returned to such plan (such as upon the expiration or termination of a stock award prior to vesting) were added to, and are available for issuance under, our 2018 Plan. In addition, the number of shares of our common stock reserved for issuance under our 2018 Plan automatically increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. There were 14,708,178 shares available for grant under the 2018 Plan at March 31, 2019.
Stock options granted under our stock incentive plans have a maximum term of ten years, generally vest over a period of three to four years, and the exercise price cannot be less than the fair market value on the date of grant. Restricted stock units ("RSUs") granted under our stock incentive plans generally vest over a period of two to four years.
Stock-based compensation expense included in the consolidated statements of operations was as follows:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Cost of revenue
$
652

 
$
77

Sales and marketing
3,366

 
602

Research and development
2,030

 
527

General and administrative
3,271

 
1,193

Total stock-based compensation expense
$
9,319

 
$
2,399


At March 31, 2019, the total unrecognized stock-based compensation expense related to outstanding stock options was $40.1 million, which is expected to be recognized over an estimated remaining weighted average period of 2.8 years.
At March 31, 2019, the unrecognized stock-based compensation expense related to unvested awards of restricted stock was $2.9 million, which is expected to be recognized over an estimated remaining period of 1.8 years.
At March 31, 2019, the unrecognized stock-based compensation expense related to unvested restricted stock units was $64.6 million, which is expected to be recognized over an estimated remaining period of 3.6 years.

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Table of Contents

Stock Options
A summary of our stock option activity is presented below:
(in thousands, except for per share data and years)
Number
of Shares
 
Weighted
Average
Exercise Price
 
Weighted-Average Remaining Contractual Term (in years)
 

Aggregate Intrinsic Value
Outstanding at December 31, 2018
19,219

 
$
7.78

 
8.0
 
$
277,114

Granted

 

 

 


Exercised
(2,638)

 
3.74

 

 


Forfeited/canceled
(949)

 
10.15

 

 


Outstanding at March 31, 2019
15,632

 
8.32

 
7.9
 
364,919

Exercisable at March 31, 2019
5,403

 
4.24

 
6.7
 
148,143


At March 31, 2019, there were 15.6 million stock options that were vested and expected to vest.
Restricted Stock and Restricted Stock Units
A summary of our restricted stock and restricted stock units activity is presented below:
 
Restricted Stock
 
Restricted Stock Units
(in thousands, except for per share data)
Number
of Shares
 
Weighted
Average
Grant Date Fair Value
 
Number
of Shares
 
Weighted
Average
Grant Date Fair Value
Unvested balance at December 31, 2018
890

 
$
4.25

 
1,129

 
$
18.90

Granted

 

 
1,870

 
29.05

Vested
(99
)
 
4.25

 

 

Forfeited

 

 
(65)

 
20.80

Unvested balance at March 31, 2019
791

 
4.25

 
2,934

 
25.33


The grant date fair value was based on the estimated fair value of our common stock on the date of grant. RSUs granted before July 30, 2018 vest upon the satisfaction of both service-based and performance-based vesting conditions. The performance-based condition was satisfied upon the completion of our IPO. RSUs granted after July 30, 2018 vest upon the satisfaction of a service-based vesting condition.
Compensation expense for restricted stock and RSUs is recognized on a straight-line basis over the requisite service period, with the exception of RSUs that include performance-based vesting conditions, which are expensed using the accelerated attribution method.
2018 Employee Stock Purchase Plan
In 2018, our board of directors adopted, and our stockholders approved, our 2018 Employee Stock Purchase Plan ("2018 ESPP"). Our 2018 ESPP became effective upon the execution of the underwriting agreement related to our IPO. The number of shares of our common stock reserved for issuance under our 2018 ESPP automatically increases on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by the lesser of (1) 1.5% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, (2) 8,000,000 shares of our common stock or (3) such lesser number of shares of common stock as determined by our board of directors. There were 4,958,092 shares reserved for issuance under the 2018 ESPP at March 31, 2019.

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Table of Contents

Under our 2018 ESPP, employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common stock at a discounted price, which is calculated at 85% of the lower of the fair market value of our common stock on the first day of an offering or on the date of purchase. The 2018 ESPP permits offerings up to 27 months in duration, with one or more purchase periods in each offering. The initial offering period began on July 25, 2018 and is scheduled to end on September 1, 2020, with purchase periods ending on March 1, 2019, September 1, 2019, March 1, 2020 and September 1, 2020. A second offering period began on March 1, 2019 and is scheduled to end on March 1, 2021, with four six-month purchase periods.
In the three months ended March 31, 2019, employees purchased 438,804 shares of our common stock at a price of $19.55 per share, resulting in cash proceeds of $8.6 million.
At March 31, 2019, there was $1.3 million of employee contributions to the 2018 ESPP included in accrued compensation. The unrecognized stock-based compensation expense related to our 2018 ESPP was $8.7 million, which is expected to be recognized over the remaining weighted average period of 1.5 years.
The fair value of the 2018 ESPP purchase rights for the initial and second offering periods was estimated on the grant date using a Black-Scholes option-pricing model and the following assumptions:
Expected term (in years)
0.5 — 2.1
Expected volatility
31.9% — 44.6%
Risk-free interest rate
2.3% — 2.7%
Expected dividend yield

9. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:
 
Three Months Ended March 31,
(in thousands, except per share data)
2019
 
2018
Net loss attributable to common stockholders
$
(21,440
)
 
$
(16,076
)
 
 
 
 
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
93,738

 
23,495

Net loss per share attributable to common stockholders, basic and diluted
$
(0.23
)
 
$
(0.68
)

The following potentially dilutive securities have been excluded from the diluted per share calculations because they would have been antidilutive:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Stock options
15,632

 
15,217

Restricted stock units
2,934

 

Restricted shares
791

 
1,187

Shares to be issued under ESPP
65

 

Redeemable convertible preferred stock

 
55,386

Total
19,422

 
71,790



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10. Geographic Information
We operate as one operating segment. Our chief executive officer, who is our chief operating decision maker, reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
Revenue by region, based on the address of the end user as specified in our subscription, license or service agreements, was as follows:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Americas
$
56,091

 
$
42,762

Europe, Middle East and Africa
17,307

 
11,666

Asia Pacific
6,903

 
4,679

Revenue
$
80,301

 
$
59,107


Customers located in the United States accounted for 65% and 67% of revenue in the three months ended March 31, 2019 and 2018, respectively. No other country accounted for 10% or more of revenue in the periods presented.
Our property and equipment, net by geographic area is summarized as follows:
(in thousands)
March 31, 2019
 
December 31, 2018
United States
$
8,616

 
$
6,487

International
4,098

 
4,861

Property and equipment, net
$
12,714

 
$
11,348



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Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, or this Form 10-Q, and (2) our consolidated financial statements, related notes 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, or the 10-K, filed with the Securities and Exchange Commission on March 1, 2019. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other filings with the SEC. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are the first and only provider of solutions for a new category of cybersecurity that we call Cyber Exposure. Cyber Exposure is a discipline for managing and measuring cybersecurity risk in the digital era. Our enterprise platform enables broad visibility into an organization’s cyber exposure across the modern attack surface and deep insights that help organizations translate vulnerability data into business insights to understand and reduce their cybersecurity risk.
Our enterprise platform offerings, including Tenable.io, Tenable.sc and Industrial Security, are built to provide organizations with the breadth of visibility to accurately understand both traditional and modern attack surfaces and the depth of insight that stems from risk-based analytics, prioritization and benchmarking. Our Cyber Exposure platform automatically discovers assets, including those in cloud environments, and assesses these assets for the presence of vulnerabilities, internal and regulatory compliance violations, misconfigurations and other cybersecurity issues, analyzes and prioritizes cybersecurity risks based on the likelihood of a vulnerability being exploited and the business criticality of the asset, and provides an objective way to measure an organization’s cyber exposure.
Our enterprise platform offerings are primarily sold on a subscription basis with terms ranging from one to three years, primarily one year. These offerings are typically prepaid in advance. To a lesser extent, we generate ratably recognizable revenue from perpetual licenses and from the related ongoing maintenance.
Many of our enterprise platform customers initially use either our free or paid version of Nessus, one of the industry’s most widely deployed vulnerability assessment solutions. Nessus, which is the technology that underpins our enterprise platform offerings, is designed to quickly and accurately identify vulnerabilities, configuration and compliance issues and malware. Our free version of Nessus, Nessus Home, allows for vulnerability assessment over a limited number of IP addresses. We believe many of our Nessus customers begin with Nessus Home and subsequently upgrade to Nessus Professional, the paid version of Nessus; however, we expect many users to continue to use Nessus Home. 
We have experienced rapid growth in recent years. Revenue in the three months ended March 31, 2019 and 2018 was $80.3 million and $59.1 million, respectively, representing year-over-year growth of 36%. Our net loss in the three months ended March 31, 2019 and 2018 was $21.4 million and $15.9 million, respectively, as we continue to invest in our business and market opportunity.

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Financial Highlights
Below are our key financial results:
 
Three Months Ended March 31,
(in thousands, except per share data)
2019
 
2018
Revenue
$
80,301

 
$
59,107

Loss from operations
(22,685
)
 
(15,449
)
Net loss
(21,440
)
 
(15,888
)
Net loss per share attributable to common stockholders, basic and diluted
(0.23
)
 
(0.68
)
Net cash (used in) provided by operating activities
(874
)
 
504

Purchases of property and equipment
(2,306
)
 
(1,596
)
Factors Affecting Our Performance
Product Leadership
We offer the first and only Cyber Exposure platform to provide visibility into the broadest range of traditional and modern IT assets across cloud and on-premises environments. We are intensely focused on continued innovation that empowers organizations to understand and reduce their cyber exposure. This includes ongoing development of our enterprise platform offerings. In February 2017, we released Tenable.io, our SaaS offering that is designed to provide broad visibility and insights across a broad range of traditional and modern IT assets and cloud environments.
We continue to expand the capabilities of our enterprise platform offerings, as well as our Nessus products, specifically as it relates to the ability to scan for and detect the rapidly expanding volume of vulnerabilities.
We intend to continue to invest in our engineering capabilities and marketing activities to maintain our position in the highly-competitive market for cybersecurity solutions. Our results of operations may fluctuate as we make these investments to drive increased customer adoption and usage.
New Enterprise Platform Customer Acquisition
We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings and that our ability to continue to grow our enterprise platform customers will increase future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share.
We expect to grow our enterprise platform customers by continuing to expand our sales organization and leveraging our channel partner network, which we believe will allow us to identify new enterprise customers, enter new markets, including internationally, as well as to convert more of our existing Nessus Professional customers to enterprise platform customers.
We have increased our sales and marketing headcount in recent years and we will continue to invest significantly in our partner network and sales and marketing capability in order to grow domestically and internationally.
Retaining and Expanding Revenue from Existing Customers
Our enterprise platform offerings utilize IT asset-based or IP address-based pricing models. Once enterprise customers have licensed our platform offerings, they typically seek broader coverage over their traditional IT assets, including networking infrastructure, desktops and on-premises servers. As customers launch new applications or migrate existing applications to the cloud and deploy web applications, containers, internet of things, or IoT, and operational technology, or OT, they often increase the scope of their subscriptions and/or add additional perpetual licenses to our enterprise platforms.

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We are also focused on upselling customers from Nessus Professional to our enterprise platform offerings. Nessus customers are typically organizations or independent security consultants that use Nessus for a single vulnerability assessment at a point in time. We seek to convert our Nessus Professional users to customers of our enterprise platform offerings, which provide continuous visibility and insights into their attack surface.
Further, we plan to expand existing platform capabilities and launch new products, such as Tenable.io Lumin, which we believe will drive new product purchases and follow-on purchases over time, thereby contributing to customer renewals. We believe that there is a significant opportunity to drive additional sales to existing customers, and we expect to invest in sales and marketing and customer success personnel and activities to achieve additional revenue growth from existing customers.
Our ability to increase sales to existing customers will depend on a number of factors, including satisfaction or dissatisfaction with our products and services, competition, pricing, economic conditions or overall changes in our spending levels.
Investing in Business Growth
Since our founding, we have invested significantly in growing our business. We intend to continue to invest in sales and marketing to grow our sales team, expand brand and Cyber Exposure awareness and optimize our channel partner network. We also intend to continue to invest in our research and development team to further our technological leadership position in Cyber Exposure and enhance the functionality of our solutions. Any investments we make in our sales and marketing and research and development teams will occur in advance of experiencing the benefits from such investments, so it may be difficult for us to determine if we are efficiently allocating resources in those areas. These investment activities could increase our net losses over the short term if our revenue growth does not increase at higher rates. However, we expect that these investments will ultimately benefit our results of operations.
Key Operating and Financial Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain operating metrics and non-GAAP financial measures, as described below, to understand and evaluate our core operating and financial 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 operating metrics and non-GAAP financial measures provide useful information about our operating and 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 operating metrics and non-GAAP financial measures to assist investors in seeing our operating and 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 operating and financial performance over multiple periods with other companies in our industry.
Calculated Current Billings
We use the non-GAAP measure of calculated current billings, which we believe is a key metric to measure our periodic performance. Given that most of our customers pay in advance, we typically recognize a majority of 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.
Calculated current billings consists of revenue recognized in a period plus the change in current deferred revenue in the corresponding period. 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. While we believe that calculated current billings provides valuable insight into the cash that will be generated from sales of our subscriptions, this metric may vary from period-to-period for a number of reasons, and therefore has a number of limitations as a quarter-to-quarter or year-over-year comparative measure. For example, calculated current billings include amounts that have not yet been recognized as

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revenue; an increasing number of large sales transactions, for which the timing has and will continue to vary, may occur in quarters subsequent to or in advance of those that we anticipate; and our calculation of current billings may be different from other companies that report similar financial measures. Additionally, calculated current billings in any one period may be impacted by the timing of customer renewals, including early renewals, which could favorably or unfavorably impact year-over-year comparisons. Because of these and other limitations, you should consider calculated current billings along with revenue and our other GAAP financial results.
The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to calculated current billings:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Revenue
$
80,301

 
$
59,107

Add: Deferred revenue (current), end of period
214,508

 
160,503

Less: Deferred revenue (current), beginning of period
(213,644
)
 
(154,898
)
Calculated current billings
$
81,165

 
$
64,712

Free Cash Flow
We use the non-GAAP measure of free cash flow, which we define as GAAP net cash flows from operating activities reduced by 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.
Our use of free cash flow has limitations as an analytical tool and you should not consider it in isolation or as a substitute for an analysis of our results under GAAP. First, free cash flow is not a substitute for net cash flows from operating activities. Second, other companies may calculate free cash flow or similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison. Additionally, the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, you should consider free cash flow along with our GAAP financial measures.
The following table presents a reconciliation of net cash (used in) provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow:
 
Three Months Ended March 31,
(in thousands)
2019
 
2018
Net cash (used in) provided by operating activities
$
(874
)
 
$
504

Purchases of property and equipment
(2,306
)
 
(1,596
)
Free cash flow(1)
$
(3,180
)
 
$
(1,092
)
_______________
(1)    Free cash flow for the three months ended March 31, 2019 was reduced by $4.9 million related to employee stock purchase plan activity.

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Enterprise Platform Customers
We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings. The following tables summarize key components of our customer base:
 
Three Months Ended March 31, 2019
 
2019
 
2018
 
Change (%)
Number of new enterprise platform customers added in period(1)
311
 
301
 
3%
_______________
(1)    We define an enterprise platform customer as a customer that has licensed Tenable.io or SecurityCenter for an annual amount of $5,000 or greater. New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Nessus Professional to enterprise platforms.
 
At March 31,
 
2019
 
2018
 
Change (%)
Number of customers with $100,000 and greater in annual contract value at end of period
494
 
307
 
61%
Non-GAAP Loss from Operations and Non-GAAP Operating Margin
We use non-GAAP loss from operations, which excludes the effect of stock-based compensation and amortization of intangible assets, as a key indicator of our financial performance, along with non-GAAP operating margin, which is calculated as non-GAAP loss from operations divided by our revenue in the period. We believe that these non-GAAP financial measures provide useful information about our core operating results over multiple periods. There are a number of limitations related to the use of the non-GAAP financial measures as compared to GAAP loss from operations and operating margin, including that non-GAAP loss from operations and non-GAAP operating margin exclude stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.
The following table presents a reconciliation of loss from operations, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP loss from operations, and operating margin, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP operating margin:
 
Three Months Ended March 31,
(dollars in thousands)
2019
 
2018
Loss from operations
$
(22,685
)
 
$
(15,449
)
Stock-based compensation
9,319

 
2,399

Amortization of intangible assets
151

 
151

Non-GAAP loss from operations
$
(13,215
)
 
$
(12,899
)
 
 
 
 
Operating margin
(28
)%
 
(26
)%
Non-GAAP operating margin
(16
)%
 
(22
)%
Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and Pro Forma Non-GAAP Net Loss Per Share
We use non-GAAP net loss, which excludes the effect of the accretion of Series A and B redeemable convertible preferred stock, stock-based compensation and amortization of intangible assets, as well as the related tax impact, 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. We believe that these non-GAAP measures provide important information to management and investors because they facilitate comparisons of our core operating results over multiple periods.

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The following table presents a reconciliation of net loss, and net loss per share attributable to common stockholders, the most comparable financial measures calculated in accordance with GAAP, to non-GAAP net loss, non-GAAP net loss per share and pro forma non-GAAP net loss per share:
 
Three Months Ended March 31,
(in thousands, except for per share amounts)
2019
 
2018
Net loss attributable to common stockholders
$
(21,440
)
 
$
(16,076
)
Accretion of Series A and B redeemable convertible preferred stock

 
188