Document
false0001660280 0001660280 2020-02-04 2020-02-04



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
__________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): February 4, 2020

__________________
TENABLE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
__________________
Delaware
001-38600
47-5580846
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(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)
__________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company 
 
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. 






Item 2.02    Results of Operations and Financial Condition.
On February 4, 2020, Tenable Holdings, Inc. (the "Company") reported financial results for the quarter ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference.
The information in this Item 2.02 of this Current Report on 8-K (including Exhibit 99.1) is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company, whether made before or after today’s date, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific references in such filing.
Item 9.01    Financial Statements and Exhibits.
(d)     Exhibits
Exhibit Number
 
Description
99.1
 
101.SCH
 
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
 
The cover page from Tenable's 8-K filed on February 4, 2020, formatted in Inline XBRL.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
TENABLE HOLDINGS, INC.
 
 
 
Date:
February 4, 2020
By:
/s/ Stephen A. Riddick
 
 
 
Stephen A. Riddick
 
 
 
General Counsel and Corporate Secretary


Exhibit


Tenable Announces Fourth Quarter and Full Year 2019 Financial Results
Fourth quarter revenue of $97.0 million, up 29% year-over-year.
Fourth quarter calculated current billings was $125.0 million, representing a 28% increase year-over-year.
Added 461 new enterprise platform customers and 52 net new six-figure enterprise platform customers in the fourth quarter.
Full year revenue of $354.6 million, up 33% year-over-year.
COLUMBIA, Maryland, February 4, 2020 — Tenable Holdings, Inc. (“Tenable”) (Nasdaq: TENB), the Cyber Exposure company, today announced financial results for the quarter and year ended December 31, 2019.
“Q4 marked an end to a successful year,” said Amit Yoran, Chairman and CEO of Tenable. "We made great progress in the execution of our broader Cyber Exposure strategy with enhancements across our product portfolio and the launch of Lumin. We believe our investments in breadth of coverage, depth of analytics, prioritization and data science provide momentum heading into 2020 and will help us continue to transform how organizations manage and measure cyber risk."
Fourth Quarter 2019 Financial Highlights
Revenue was $97.0 million, representing a 29% increase year-over-year.
Calculated current billings was $125.0 million, representing a 28% increase year-over-year.
GAAP loss from operations was $27.6 million, compared to a loss of $19.6 million in the fourth quarter of 2018.
Non-GAAP loss from operations was $11.1 million, compared to a loss of $10.8 million in the fourth quarter of 2018.
GAAP net loss was $38.3 million, compared to a loss of $19.6 million in the fourth quarter of 2018.
GAAP net loss per share was $0.39, compared to a loss of $0.21 in the fourth quarter of 2018.
Non-GAAP net loss was $11.1 million, compared to a loss of $10.9 million in the fourth quarter of 2018.
Pro forma non-GAAP net loss per share was $0.11, compared to a loss per share of $0.12 in the fourth quarter of 2018.
Net cash used in operating activities was $3.1 million, compared to $1.6 million in the fourth quarter of 2018.
Free cash flow was $(13.5) million, compared to $(3.1) million in the fourth quarter of 2018. Free cash flow in the fourth quarter of 2019 included $13.1 million of non-recurring payments related to the Indegy acquisition, $9.0 million of capital expenditures for our new headquarters, and a $3.8 million benefit related to employee stock purchase plan activity. Free cash flow in the fourth quarter of 2018 included a $4.0 million benefit related to employee stock purchase plan activity.
Full Year 2019 Financial Highlights
Revenue was $354.6 million, representing a 33% increase year-over-year.
Calculated current billings was $414.9 million, representing a 27% increase year-over-year.
GAAP loss from operations was $90.8 million, compared to a loss of $72.6 million in 2018.
Non-GAAP loss from operations was $42.8 million, compared to a loss of $49.1 million in 2018.
GAAP net loss was $99.0 million, compared to a loss of $73.5 million in 2018.
GAAP net loss per share was $1.03, compared to a loss of $1.38 in 2018.
Non-GAAP net loss was $40.5 million, compared to a loss of $50.3 million in 2018.
Pro forma non-GAAP net loss per share was $0.42, compared to a loss per share of $0.59 in 2018.
Cash and cash equivalents and short-term investments were $212.3 million at December 31, 2019, compared to $283.2 million at December 31, 2018. The decrease in cash was primarily related to our acquisition of Indegy.
Net cash used in operating activities was $10.7 million, compared to $2.6 million used in 2018.
Free cash flow was $(31.4) million, compared to $(8.3) million in 2018. Free cash flow in 2019 included $13.1 million of non-recurring payments related to the Indegy acquisition, $11.4 million of capital expenditures for our new headquarters, and a $0.9 million reduction related to employee stock purchase plan activity. Free cash flow in 2018 included a $6.3 million benefit related to employee stock purchase plan activity.

1



Fourth Quarter 2019 and Recent Business Highlights
Added 461 new enterprise platform customers and 52 net new six-figure customers.
Extended depth of operational technology (OT) expertise with the acquisition of Indegy to deliver a unified, risk-based platform for IT and OT security.
Expanded LuminTM analytic capabilities with an assessment maturity score, which helps organizations move beyond vulnerability prioritization to actionable metrics and recommended actions based on security program maturity.
Broadened cloud security capabilities with Microsoft Azure Security Center API integration and a new, integrated offering to secure cloud workloads with Golden Amazon Machine Images (AMIs) pipeline. Both integrations represent a critical step in ensuring that organizations of all sizes can build cybersecurity best practices directly into their multi or hybrid cloud strategies.
Selected as the preferred vulnerability management partner for BeyondTrust Enterprise Vulnerability Management customers as it exits the vulnerability management market.
Financial Outlook
For the first quarter of 2020, we currently expect:
Revenue in the range of $100.0 million to $101.0 million.
Non-GAAP loss from operations in the range of $18.0 million to $17.0 million.
Non-GAAP net loss in the range of $19.0 million to $18.0 million.
Non-GAAP net loss per share in the range of $0.19 to $0.18, assuming 98.7 million weighted average shares outstanding.
For the year ending December 31, 2020, we currently expect:
Revenue in the range of $435.0 million to $440.0 million.
Calculated current billings in the range of $500.0 million to $510.0 million.
Non-GAAP loss from operations in the range of $38.0 million to $33.0 million.
Non-GAAP net loss in the range of $41.0 million to $36.0 million, assuming a provision for income taxes of $6.5 million.
Non-GAAP net loss per share in the range of $0.41 to $0.36, assuming 100.1 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 February 18, 2020.
About Tenable
Tenable® is the Cyber Exposure company. Over 30,000 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 30 percent of the Global 2000, and large government agencies. Learn more at tenable.com.
Contact Information
Investor Relations
Andrea DiMarco
investors@tenable.com

2



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 September 30, 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.

3



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 effects of stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets. Acquisition-related expenses include transaction expenses and costs related to the transfer of acquired intellectual property.
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, acquisition-related expenses and amortization of acquired 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 acquired intangible assets. Non-GAAP gross margin is defined as non-GAAP gross profit as a percentage of revenue.
Non-GAAP Sales and Marketing Expense, Non-GAAP Research and Development Expense and Non-GAAP General and Administrative Expense: We define these non-GAAP measures as their respective GAAP measures, excluding stock-based compensation and acquisition-related expenses.



4



TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Three Months Ended
December 31,
 
Year Ended
December 31,
(in thousands, except per share data)
2019
 
2018
 
2019
 
2018
Revenue
$
97,049

 
$
75,221

 
$
354,586

 
$
267,360

Cost of revenue(1)
18,429

 
12,399

 
60,818

 
43,167

Gross profit
78,620

 
62,822

 
293,768

 
224,193

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing(1)
62,632

 
47,380

 
228,035

 
173,344

Research and development(1)
22,668

 
21,169

 
87,064

 
76,698

General and administrative(1)
20,873

 
13,864

 
69,468

 
46,732

Total operating expenses
106,173

 
82,413

 
384,567

 
296,774

Loss from operations
(27,553
)
 
(19,591
)
 
(90,799
)
 
(72,581
)
Interest income, net
1,153

 
1,510

 
5,830

 
2,355

Other expense, net
(104
)
 
(326
)
 
(680
)
 
(931
)
Loss before income taxes
(26,504
)

(18,407
)

(85,649
)

(71,157
)
Provision for income taxes
11,801

 
1,207

 
13,364

 
2,364

Net loss
(38,305
)
 
(19,614
)
 
(99,013
)
 
(73,521
)
Accretion of Series A and B redeemable convertible preferred stock

 

 

 
(434
)
Net loss attributable to common stockholders
$
(38,305
)
 
$
(19,614
)
 
$
(99,013
)
 
$
(73,955
)
 
 
 
 
 
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
$
(0.39
)
 
$
(0.21
)
 
$
(1.03
)
 
$
(1.38
)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
97,738

 
92,187

 
96,014

 
53,669

_______________
(1)    Includes stock-based compensation as follows:
 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2019
 
2018
 
2019
 
2018
Cost of revenue
$
729

 
$
824

 
$
2,817

 
$
1,707

Sales and marketing
4,930

 
2,927

 
16,032

 
6,911

Research and development
2,316

 
2,210

 
8,911

 
5,804

General and administrative
4,277

 
2,708

 
15,683

 
8,453

Total stock-based compensation
$
12,252

 
$
8,669

 
$
43,443

 
$
22,875


5



TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
December 31,
(in thousands, except per share data)
2019
 
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
74,363

 
$
165,116

Short-term investments
137,904

 
118,119

Accounts receivable (net of allowance for doubtful accounts of $764 and $188 at December 31, 2019 and 2018, respectively)
94,827

 
68,261

Deferred commissions
28,499

 
23,272

Prepaid expenses and other current assets
27,369

 
22,020

Total current assets
362,962

 
396,788

Property and equipment, net
26,847

 
11,348

Deferred commissions (net of current portion)
43,766

 
36,162

Operating lease right-of-use assets
42,847

 
8,504

Intangible assets, net
15,508


427

Goodwill
54,138

 
265

Other assets
12,544

 
7,118

Total assets
$
558,612

 
$
460,612

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,732

 
$
171

Accrued expenses
8,436

 
5,554

Accrued compensation
36,634

 
29,594

Deferred revenue
274,348

 
213,644

Operating lease liabilities
5,209

 
4,262

Other current liabilities
1,284

 
1,079

Total current liabilities
327,643

 
254,304

Deferred revenue (net of current portion)
88,779

 
76,259

Operating lease liabilities (net of current portion)
40,663

 
6,055

Other liabilities
2,622

 
2,231

Total liabilities
459,707

 
338,849

Stockholders’ equity:
 
 
 
Common stock (par value: $0.01; 500,000 shares authorized, 98,587 and 93,126 shares issued and outstanding at December 31, 2019 and 2018, respectively)
986

 
931

Additional paid-in capital
662,990

 
586,940

Accumulated other comprehensive income
50

 

Accumulated deficit
(565,121
)
 
(466,108
)
Total stockholders’ equity
98,905

 
121,763

Total liabilities and stockholders' equity
$
558,612

 
$
460,612


6



TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Year Ended December 31,
(in thousands)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net loss
$
(99,013
)
 
$
(73,521
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
6,880

 
6,192

Stock-based compensation
41,610

 
22,875

Other
3,459

 
533

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(25,941
)
 
(17,408
)
Prepaid expenses and other current assets
(5,188
)
 
(6,105
)
Deferred commissions
(12,831
)
 
(9,258
)
Other assets
(3,336
)
 
(1,876
)
Accounts payable and accrued expenses
4,244

 
294

Accrued compensation
6,269

 
11,112

Deferred revenue
72,799

 
64,085

Other current liabilities
255

 
408

Other liabilities
49

 
110

Net cash used in operating activities
(10,744
)
 
(2,559
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(20,674
)
 
(5,733
)
Purchases of investments
(242,059
)
 
(117,488
)
Sales and maturities of investments
224,594

 

Business combination, net of cash acquired
(74,911
)
 

Net cash used in investing activities
(113,050
)
 
(123,221
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from initial public offering, net of underwriting discounts and commissions

 
268,531

Payments of costs related to initial public offering

 
(3,932
)
Principal payments under finance lease obligations
(16
)
 
(1,443
)
Proceeds from stock issued in connection with the employee stock purchase plan
15,129

 

Proceeds from the exercise of stock options
19,048

 
1,668

Repurchases of common stock

 
(75
)
Net cash provided by financing activities
34,161

 
264,749

Effect of exchange rate changes on cash and cash equivalents and restricted cash
(1,080
)
 
(1,063
)
Net (decrease) increase in cash and cash equivalents and restricted cash
(90,713
)
 
137,906

Cash and cash equivalents and restricted cash at beginning of year
165,378

 
27,472

Cash and cash equivalents and restricted cash at end of year
$
74,665

 
$
165,378



7



TENABLE HOLDINGS, INC.
REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
Revenue
Three Months Ended
December 31,
 
Year Ended
December 31,
(in thousands)
2019
 
2018
 
2019
 
2018
Subscription revenue
$
80,939

 
$
59,259

 
$
290,549

 
$
205,827

Perpetual license and maintenance revenue
13,296

 
13,869

 
54,173

 
54,622

Professional services and other revenue
2,814

 
2,093

 
9,864

 
6,911

Revenue(1)
$
97,049

 
$
75,221

 
$
354,586

 
$
267,360

_______________
(1)    Recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses represented 93%, 90%, 92% and 89% of revenue for the three months ended December 31, 2019 and 2018 and the year ended December 31, 2019 and 2018, respectively.
Calculated Current Billings
Three Months Ended
December 31,
 
Year Ended
December 31,
(in thousands)
2019
 
2018
 
2019
 
2018
Revenue
$
97,049

 
$
75,221

 
$
354,586

 
$
267,360

Deferred revenue (current), end of period
274,348

 
213,644

 
274,348

 
213,644

Deferred revenue (current), beginning of period(1)
(246,410
)
 
(191,578
)
 
(214,069
)
 
(154,898
)
Calculated current billings
$
124,987

 
$
97,287

 
$
414,865

 
$
326,106

_______________
(1)    Deferred revenue (current), beginning of period for the three months and year ended December 31, 2019 includes $0.4 million related to Indegy's deferred revenue at the acquisition date.

Free Cash Flow
Three Months Ended
December 31,
 
Year Ended
December 31,
(in thousands)
2019
 
2018
 
2019
 
2018
Net cash used in operating activities
$
(3,072
)
 
$
(1,554
)
 
$
(10,744
)
 
$
(2,559
)
Purchases of property and equipment
(10,412
)
 
(1,593
)
 
(20,674
)
 
(5,733
)
Free cash flow(1)
$
(13,484
)
 
$
(3,147
)
 
$
(31,418
)
 
$
(8,292
)
________________
(1)    Free cash flow in the three months and year ended December 31, 2019 included non-recurring cash payments totaling $13.1 million associated with the Indegy acquisition, including $6.7 million for income taxes on the transfer of acquired intellectual property, $3.1 million for other costs related to the intellectual property transfer, $1.8 million for the settlement of unvested acquiree equity awards, and $1.5 million for acquisition-related expenses. Capital expenditures related to our new headquarters in the three months and year ended December 31, 2019 were $9.0 million and $11.4 million, respectively. Contributions to our employee stock purchase plan during the three months ended December 31, 2019 and 2018 and year ended December 31, 2019 and 2018 impacted free cash flow by $3.8 million, $4.0 million, $(0.9) million and $6.3 million, respectively.
Non-GAAP Loss from Operations and Non-GAAP Operating Margin
Three Months Ended
December 31,
 
Year Ended
December 31,
(dollars in thousands)
2019
 
2018
 
2019
 
2018
Loss from operations
$
(27,553
)
 
$
(19,591
)
 
$
(90,799
)
 
$
(72,581
)
Stock-based compensation
12,252

 
8,669

 
43,443

 
22,875

Acquisition-related expenses
3,970

 

 
3,970

 

Amortization of acquired intangible assets
193

 
150

 
620

 
603

Non-GAAP loss from operations
$
(11,138
)
 
$
(10,772
)
 
$
(42,766
)
 
$
(49,103
)
Operating margin
(28
)%
 
(26
)%
 
(26
)%
 
(27
)%
Non-GAAP operating margin
(11
)%
 
(14
)%
 
(12
)%
 
(18
)%

8



Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and Pro forma Non-GAAP Net Loss Per Share
Three Months Ended
December 31,
 
Year Ended
December 31,
(in thousands, except per share data)
2019
 
2018
 
2019
 
2018
Net loss attributable to common stockholders
$
(38,305
)
 
$
(19,614
)
 
$
(99,013
)
 
$
(73,955
)
Accretion of Series A and B redeemable convertible preferred stock

 

 

 
434

Acquisition-related expenses
3,970

 

 
3,970

 

Tax impact of acquisition(1)
10,582

 

 
10,582

 

Stock-based compensation
12,252

 
8,669

 
43,443

 
22,875

Tax impact of stock-based compensation(2)
160

 
(80
)
 
(95
)
 
(218
)
Amortization of acquired intangible assets(3)
193

 
150

 
620

 
603

Non-GAAP net loss
$
(11,148
)
 
$
(10,875
)
 
$
(40,493
)
 
$
(50,261
)
 
 
 
 
 
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
$
(0.39
)
 
$
(0.21
)
 
$
(1.03
)
 
$
(1.38
)
Accretion of Series A and B redeemable convertible preferred stock

 

 

 
0.01

Acquisition-related expenses
0.04

 

 
0.04

 

Tax impact of acquisition(1)
0.11

 

 
0.11

 

Stock-based compensation
0.13

 
0.09

 
0.45

 
0.42

Tax impact of stock-based compensation(2)

 

 

 

Amortization of acquired intangible assets(3)

 

 
0.01

 
0.01

Non-GAAP net loss per share, basic and diluted
$
(0.11
)
 
$
(0.12
)
 
$
(0.42
)
 
$
(0.94
)
 
 
 
 
 
 
 
 
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
97,738
 
92,187
 
96,014
 
53,669
Pro forma adjustment to reflect the assumed conversion of our convertible redeemable preferred stock as of the beginning of the period

 

 

 
31,107
Weighted-average shares used to compute pro forma non-GAAP net loss per share, basic and diluted
97,738
 
92,187
 
96,014
 
84,776
 
 
 
 
 
 
 
 
Pro forma non-GAAP net loss per share, basic and diluted
$
(0.11
)
 
$
(0.12
)
 
$
(0.42
)
 
$
(0.59
)
________________
(1)    The tax impact of the acquisition includes $6.3 million of current tax expense and $4.3 million of deferred tax expense related to the transfer of acquired intellectual property.
(2)    The tax impact of stock-based compensation is based on the tax treatment for applicable tax jurisdictions.
(3)    The tax impact of amortization of acquired intangible assets is not material.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
Three Months Ended
December 31,
 
Year Ended
December 31,
(dollars in thousands)
2019
 
2018
 
2019
 
2018
Gross profit
$
78,620

 
$
62,822

 
$
293,768

 
$
224,193

Stock-based compensation
729

 
824

 
2,817

 
1,707

Amortization of acquired intangible assets
193

 
150

 
620

 
603

Non-GAAP gross profit
$
79,542

 
$
63,796

 
$
297,205

 
$
226,503

Gross margin
81
%
 
84
%
 
83
%
 
84
%
Non-GAAP gross margin
82
%
 
85
%
 
84
%
 
85
%

9



Non-GAAP Sales and Marketing Expense
Three Months Ended
December 31,
 
Year Ended
December 31,
(dollars in thousands)
2019
 
2018
 
2019
 
2018
Sales and marketing expense
$
62,632

 
$
47,380

 
$
228,035

 
$
173,344

Less: Stock-based compensation
4,930

 
2,927

 
16,032

 
6,911

Non-GAAP sales and marketing expense
$
57,702

 
$
44,453

 
$
212,003

 
$
166,433

Non-GAAP sales and marketing expense % of revenue
59
%
 
59
%
 
60
%
 
62
%
Non-GAAP Research and Development Expense
Three Months Ended
December 31,
 
Year Ended
December 31,
(dollars in thousands)
2019
 
2018
 
2019
 
2018
Research and development expense
$
22,668

 
$
21,169

 
$
87,064

 
$
76,698

Less: Stock-based compensation
2,316

 
2,210

 
8,911

 
5,804

Non-GAAP research and development expense
$
20,352

 
$
18,959

 
$
78,153

 
$
70,894

Non-GAAP research and development expense % of revenue
21
%
 
25
%
 
22
%
 
27
%
Non-GAAP General and Administrative Expense
Three Months Ended
December 31,
 
Year Ended
December 31,
(dollars in thousands)
2019
 
2018
 
2019
 
2018
General and administrative expense
$
20,873

 
$
13,864

 
$
69,468

 
$
46,732

Less: Stock-based compensation
4,277

 
2,708

 
15,683

 
8,453

Less: Acquisition-related expenses
3,970

 

 
3,970

 

Non-GAAP general and administrative expense
$
12,626

 
$
11,156

 
$
49,815

 
$
38,279

Non-GAAP general and administrative expense % of revenue
13
%
 
15
%
 
14
%
 
14
%
Forecasted Non-GAAP Loss from Operations
Three Months Ended
March 31, 2020
 
Year Ended
December 31, 2020
(in millions)
Low
 
High
 
Low
 
High
Forecasted loss from operations
$
(31.6
)
 
$
(30.6
)
 
$
(100.3
)
 
$
(95.3
)
Forecasted stock-based compensation
13.0

 
13.0

 
60.0

 
60.0

Forecasted amortization of acquired intangible assets
0.6

 
0.6

 
2.3

 
2.3

Forecasted non-GAAP loss from operations
$
(18.0
)
 
$
(17.0
)
 
$
(38.0
)
 
$
(33.0
)

10



Forecasted Non-GAAP Net Loss and Non-GAAP Net Loss Per Share
Three Months Ended
March 31, 2020
 
Year Ended
December 31, 2020
(in millions, except per share data)
Low
 
High
 
Low
 
High
Forecasted net loss
$
(32.9
)
 
$
(31.9
)
 
$
(104.3
)
 
$
(99.3
)
Forecasted stock-based compensation
13.0

 
13.0

 
60.0

 
60.0

Tax impact of stock-based compensation
0.3

 
0.3

 
1.0

 
1.0

Forecasted amortization of acquired intangible assets
0.6

 
0.6

 
2.3

 
2.3

Forecasted non-GAAP net loss
$
(19.0
)
 
$
(18.0
)

$
(41.0
)

$
(36.0
)
 
 
 
 
 
 
 
 
Forecasted net loss per share, basic and diluted
$
(0.33
)
 
$
(0.32
)
 
$
(1.04
)
 
$
(0.99
)
Forecasted stock-based compensation
0.13

 
0.13

 
0.60

 
0.60

Tax impact of stock-based compensation

 

 
0.01

 
0.01

Forecasted amortization of acquired intangible assets
0.01

 
0.01

 
0.02

 
0.02

Forecasted Non-GAAP net loss per share, basic and diluted
$
(0.19
)
 
$
(0.18
)
 
$
(0.41
)
 
$
(0.36
)
 
 
 
 
 
 
 
 
Forecasted weighted-average shares used to compute net loss per share, basic and diluted
98.7
 
98.7
 
100.1
 
100.1


11