UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): October 26, 2021
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(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||||||
(Address of principal executive offices, including zip code)
(410 ) 872-0555
(Registrant’s telephone number, including area code)
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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 | ||||||
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 October 26, 2021, Tenable Holdings, Inc. (the "Company") reported financial results for the quarter ended September 30, 2021. 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.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 October 26, 2021, 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: | October 26, 2021 | By: | /s/ Stephen A. Riddick | ||||||||
| Stephen A. Riddick | |||||||||||
| General Counsel and Corporate Secretary | |||||||||||
Tenable Announces Third Quarter 2021 Financial Results
•Added 499 new enterprise platform customers and 62 net new six-figure customers
•Revenue of $138.7 million, up 23% year-over-year
•GAAP loss from operations of $11.2 million; Non-GAAP income from operations of $13.7 million
•Net cash provided by operating activities of $19.6 million; Free cash flow of $18.5 million
COLUMBIA, Maryland, October 26, 2021 — Tenable (Nasdaq: TENB), the Cyber Exposure company, today announced financial results for the quarter ended September 30, 2021.
"We delivered outstanding top- and bottom-line results driven by unprecedented demand for our enterprise offerings, as we added a record number of new enterprise platform customers in the quarter," said Amit Yoran, Chairman and CEO of Tenable. "As the ongoing shift to the cloud and understanding cyber risk more broadly continue to be top priorities for enterprises, so does demand for our security solutions. Our recent acquisition of Accurics, coupled with our existing capabilities around cloud, Active Directory and operational technologies provide our customers with a holistic view of risk across their attack surface."
Third Quarter 2021 Financial Highlights
•Revenue was $138.7 million, a 23% increase year-over-year.
•Calculated current billings was $166.9 million, a 25% increase year-over-year.
•GAAP loss from operations was $11.2 million, compared to a loss of $3.5 million in the third quarter of 2020.
•Non-GAAP income from operations was $13.7 million, compared to $12.4 million in the third quarter of 2020.
•GAAP net loss was $16.2 million, compared to a loss of $5.9 million in the third quarter of 2020.
•GAAP net loss per share was $0.15, compared to a loss per share of $0.06 in the third quarter of 2020.
•Non-GAAP net income was $8.1 million, compared to $10.5 million in the third quarter of 2020.
•Non-GAAP diluted earnings per share was $0.07, compared to $0.09 in the third quarter of 2020.
•Cash and cash equivalents and short-term investments were $651.9 million at September 30, 2021, which included $365.7 million of net proceeds from our credit facility, compared to $291.8 million at December 31, 2020.
•Net cash provided by operating activities was $19.6 million, compared to $24.8 million in the third quarter of 2020.
•Free cash flow was $18.5 million, compared to $16.7 million in the third quarter of 2020.
Recent Business Highlights
•Added 499 new enterprise platform customers and 62 net new six-figure customers.
•Achieved FedRAMP authorization for Tenable.io® and Tenable.io Web App Scanning, allowing the U.S. federal government to deploy both products across various departments and agencies.
•Completed the acquisition of cloud-native security company Accurics, Inc. in October to introduce a complete lifecycle approach to modern risk management, leveraging Infrastructure as Code (IaC) to fix problems for any cloud environment.
•Launched 10 foundational configuration checks within Tenable’s solutions to help customers detect commonly exploited weaknesses in Active Directory, protecting credentials and preventing privilege escalation.
•Expanded our global strategic partnership with Splunk Inc. to secure Active Directory and converged operational technology (OT) environments.
Financial Outlook
For the fourth quarter of 2021, we currently expect:
•Revenue in the range of $143.0 million to $145.0 million.
•Non-GAAP income from operations in the range of $7.0 million to $8.0 million.
•Non-GAAP net income in the range of $2.0 million to $3.0 million, assuming a provision for income taxes of $1.9 million.
•Non-GAAP diluted earnings per share in the range of $0.02 to $0.03.
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•116.5 million diluted weighted average shares outstanding.
For the year ending December 31, 2021, we currently expect:
•Calculated current billings in the range of $602.0 million to $605.0 million.
•Revenue in the range of $535.1 million to $537.1 million.
•Non-GAAP income from operations in the range of $46.1 million to $47.1 million.
•Non-GAAP net income in the range of $35.0 million to $36.0 million, assuming a provision for income taxes of $3.1 million.
•Non-GAAP diluted earnings per share in the range of $0.30 to $0.31.
•115.0 million diluted weighted average shares outstanding.
Conference Call Information
Tenable will host a conference call today, October 26, 2021, 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. An archived replay of the live broadcast will be available on the Investor Relations page of the website following the call.
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
investors@tenable.com
Media Relations
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, 2020, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and other filings that we make from time to time with the SEC, which are available on the SEC's website at sec.gov. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. 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
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statements subsequent to the date of this press release, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.
Non-GAAP Financial Measures and Other Key Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making. We present these non-GAAP financial measures to assist investors in seeing our financial performance using a management view and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.
Calculated Current Billings: We define calculated current billings, a non-GAAP financial measure, as total revenue recognized in a period plus the change in current deferred revenue in the corresponding period. We believe that calculated current billings is a key metric to measure our periodic performance. Given that most of our customers pay in advance (including multi-year contracts), but we generally recognize the related revenue ratably over time, we use calculated current billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers. We believe that calculated current billings, which excludes deferred revenue for periods beyond twelve months in a customer’s contractual term, more closely correlates with annual contract value and that the variability in total billings, depending on the timing of large multi-year contracts and the preference for annual billing versus multi-year upfront billing, may distort growth in one period over another.
Free Cash Flow and Unlevered Free Cash Flow: We define free cash flow, a non-GAAP financial measure, as net cash 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. We define unlevered free cash flow as free cash flow plus cash paid for interest and other financing costs. We believe unlevered free cash flow is useful as a liquidity measure as it measures the cash that is available to invest in our business and meet our current and future financing needs.
Non-GAAP Income from Operations and Non-GAAP Operating Margin: We define these non-GAAP financial measures as their respective GAAP measures, excluding the effect of stock-based compensation, 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 Income and Non-GAAP Earnings Per Share: We define non-GAAP net income as GAAP net loss, excluding the effect of stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets, including the applicable tax impact. In addition, we exclude the tax impact of intra-entity asset transfers resulting from the internal restructuring of legal entities. We use non-GAAP net income to calculate non-GAAP earnings per share.
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.
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TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue | $ | 138,664 | $ | 112,282 | $ | 392,112 | $ | 322,139 | |||||||||||||||
Cost of revenue(1) | 27,062 | 19,394 | 75,560 | 57,237 | |||||||||||||||||||
| Gross profit | 111,602 | 92,888 | 316,552 | 264,902 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
Sales and marketing(1) | 68,360 | 53,045 | 192,673 | 168,343 | |||||||||||||||||||
Research and development(1) | 30,675 | 25,128 | 85,714 | 77,269 | |||||||||||||||||||
General and administrative(1) | 23,785 | 18,180 | 67,066 | 54,992 | |||||||||||||||||||
| Total operating expenses | 122,820 | 96,353 | 345,453 | 300,604 | |||||||||||||||||||
| Loss from operations | (11,218) | (3,465) | (28,901) | (35,702) | |||||||||||||||||||
| Interest (expense) income, net | (3,479) | (12) | (3,549) | 1,177 | |||||||||||||||||||
| Other expense, net | (823) | (561) | (1,360) | (1,819) | |||||||||||||||||||
| Loss before income taxes | (15,520) | (4,038) | (33,810) | (36,344) | |||||||||||||||||||
| Provision for income taxes | 726 | 1,820 | 1,822 | 4,451 | |||||||||||||||||||
| Net loss | $ | (16,246) | $ | (5,858) | $ | (35,632) | $ | (40,795) | |||||||||||||||
Net loss per share, basic and diluted | $ | (0.15) | $ | (0.06) | $ | (0.34) | $ | (0.41) | |||||||||||||||
Weighted-average shares used to compute net loss per share, basic and diluted | 106,869 | 101,736 | 105,765 | 100,272 | |||||||||||||||||||
_______________
(1) Includes stock-based compensation as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cost of revenue | $ | 1,197 | $ | 826 | $ | 3,336 | $ | 2,403 | |||||||||||||||
| Sales and marketing | 7,629 | 4,806 | 21,502 | 14,677 | |||||||||||||||||||
| Research and development | 5,587 | 3,953 | 14,919 | 10,794 | |||||||||||||||||||
| General and administrative | 6,499 | 5,715 | 18,576 | 16,127 | |||||||||||||||||||
| Total stock-based compensation | $ | 20,912 | $ | 15,300 | $ | 58,333 | $ | 44,001 | |||||||||||||||
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TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | ||||||||||
| (in thousands, except per share data) | (unaudited) | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 435,854 | $ | 178,223 | |||||||
Short-term investments | 216,041 | 113,623 | |||||||||
Accounts receivable (net of allowance for doubtful accounts of $293 and $261 at September 30, 2021 and December 31, 2020, respectively) | 115,421 | 115,342 | |||||||||
| Deferred commissions | 34,248 | 32,143 | |||||||||
| Prepaid expenses and other current assets | 45,194 | 44,462 | |||||||||
| Total current assets | 846,758 | 483,793 | |||||||||
| Property and equipment, net | 36,055 | 38,920 | |||||||||
| Deferred commissions (net of current portion) | 46,990 | 46,733 | |||||||||
| Operating lease right-of-use assets | 38,694 | 39,426 | |||||||||
| Acquired intangible assets, net | 40,889 | 13,193 | |||||||||
| Goodwill | 126,705 | 54,414 | |||||||||
| Other assets | 22,399 | 14,110 | |||||||||
| Total assets | $ | 1,158,490 | $ | 690,589 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 16,011 | $ | 5,731 | |||||||
| Accrued compensation | 33,299 | 35,509 | |||||||||
| Deferred revenue | 362,308 | 328,819 | |||||||||
| Operating lease liabilities | 6,857 | 3,815 | |||||||||
| Other current liabilities | 1,883 | 1,028 | |||||||||
| Total current liabilities | 420,358 | 374,902 | |||||||||
| Deferred revenue (net of current portion) | 114,649 | 105,691 | |||||||||
| Term loan, net of issuance costs (net of current portion) | 365,387 | — | |||||||||
| Operating lease liabilities (net of current portion) | 52,881 | 54,529 | |||||||||
| Other liabilities | 7,158 | 4,802 | |||||||||
| Total liabilities | 960,433 | 539,924 | |||||||||
| Stockholders’ equity: | |||||||||||
Common stock (par value: $0.01; 500,000 shares authorized; 107,360 and 103,715 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively) | 1,074 | 1,037 | |||||||||
| Additional paid-in capital | 840,482 | 757,470 | |||||||||
| Accumulated other comprehensive (loss) income | (15) | 10 | |||||||||
| Accumulated deficit | (643,484) | (607,852) | |||||||||
| Total stockholders’ equity | 198,057 | 150,665 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,158,490 | $ | 690,589 | |||||||
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TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (35,632) | $ | (40,795) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 11,123 | 7,980 | |||||||||
| Stock-based compensation | 58,333 | 44,001 | |||||||||
| Other | 832 | 1,009 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 3,993 | 7,774 | |||||||||
| Prepaid expenses and other assets | (5,284) | (1,386) | |||||||||
| Accounts payable, accrued expenses and accrued compensation | 4,023 | (12,263) | |||||||||
| Deferred revenue | 38,747 | 27,075 | |||||||||
| Other current and noncurrent liabilities | (1,342) | 12,903 | |||||||||
| Net cash provided by operating activities | 74,793 | 46,298 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (3,769) | (19,073) | |||||||||
| Purchases of short-term investments | (211,755) | (157,557) | |||||||||
| Sales and maturities of short-term investments | 109,000 | 168,175 | |||||||||
| Business combination, net of cash acquired | (98,489) | — | |||||||||
| Net cash used in investing activities | (205,013) | (8,455) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from term loan | 375,000 | — | |||||||||
| Credit facility issuance costs | (9,348) | (333) | |||||||||
| Proceeds from loan agreement | — | 2,000 | |||||||||
| Proceeds from stock issued in connection with the employee stock purchase plan | 13,736 | 13,040 | |||||||||
| Proceeds from the exercise of stock options | 10,919 | 15,782 | |||||||||
| Other financing activities | (8) | (11) | |||||||||
| Net cash provided by financing activities | 390,299 | 30,478 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (2,418) | (1,359) | |||||||||
| Net increase in cash and cash equivalents and restricted cash | 257,661 | 66,962 | |||||||||
| Cash and cash equivalents and restricted cash at beginning of period | 178,463 | 74,665 | |||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 436,124 | $ | 141,627 | |||||||
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TENABLE HOLDINGS, INC.
REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
| Revenue | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Subscription revenue | $ | 122,156 | $ | 96,792 | $ | 343,725 | $ | 275,192 | |||||||||||||||
| Perpetual license and maintenance revenue | 12,749 | 12,448 | 37,721 | 38,046 | |||||||||||||||||||
| Professional services and other revenue | 3,759 | 3,042 | 10,666 | 8,901 | |||||||||||||||||||
Revenue(1) | $ | 138,664 | $ | 112,282 | $ | 392,112 | $ | 322,139 | |||||||||||||||
_______________
(1) Recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses, represented 95%, 94%, 94% and 93% of revenue in the three months ended September 30, 2021 and 2020 and the nine months ended September 30, 2021 and 2020, respectively.
| Calculated Current Billings | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue | $ | 138,664 | $ | 112,282 | $ | 392,112 | $ | 322,139 | |||||||||||||||
| Add: Deferred revenue (current), end of period | 362,308 | 296,360 | 362,308 | 296,360 | |||||||||||||||||||
Less: Deferred revenue (current), beginning of period(1) | (334,106) | (274,953) | (331,275) | (274,348) | |||||||||||||||||||
| Calculated current billings | $ | 166,866 | $ | 133,689 | $ | 423,145 | $ | 344,151 | |||||||||||||||
_______________
(1) Deferred revenue (current), beginning of period for the nine months ended September 30, 2021 includes $2.5 million related to Alsid's deferred revenue at the acquisition date, which is not included in deferred revenue (current) balance at December 31, 2020.
| Free Cash Flow and Unlevered Free Cash Flow | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 19,633 | $ | 24,807 | $ | 74,793 | $ | 46,298 | |||||||||||||||
| Purchases of property and equipment | (1,174) | (8,069) | (3,769) | (19,073) | |||||||||||||||||||
Free cash flow(1) | 18,459 | 16,738 | 71,024 | 27,225 | |||||||||||||||||||
| Cash paid for interest and other | 1,614 | 239 | 1,764 | 254 | |||||||||||||||||||
Unlevered free cash flow(1) | $ | 20,073 | $ | 16,977 | $ | 72,788 | $ | 27,479 | |||||||||||||||
________________
(1) Free cash flow and unlevered free cash flow for the periods presented were impacted by:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Employee stock purchase plan activity | $ | (2.8) | $ | (2.3) | $ | (4.7) | $ | (2.7) | |||||||||||||||
| Acquisition-related expenses | (0.3) | — | (3.6) | (0.7) | |||||||||||||||||||
| Tax payment on intra-entity asset transfer | — | — | 2.8 | — | |||||||||||||||||||
| Proceeds from lease incentives | — | 5.6 | — | 14.2 | |||||||||||||||||||
| Capital expenditures related to new headquarters | (0.1) | (6.8) | (0.9) | (16.6) | |||||||||||||||||||
Free cash flow and unlevered free cash flow for the three and nine months ended September 30, 2021 were benefited by approximately $1 million and $11 million, respectively, as a result of the accelerated timing of payments for insurance, professional fees and rent in the three months ended December 31, 2020.
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| Non-GAAP Income from Operations and Non-GAAP Operating Margin | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Loss from operations | $ | (11,218) | $ | (3,465) | $ | (28,901) | $ | (35,702) | |||||||||||||||
| Stock-based compensation | 20,912 | 15,300 | 58,333 | 44,001 | |||||||||||||||||||
| Acquisition-related expenses | 2,270 | — | 5,970 | 339 | |||||||||||||||||||
| Amortization of acquired intangible assets | 1,721 | 579 | 3,704 | 1,736 | |||||||||||||||||||
| Non-GAAP income from operations | $ | 13,685 | $ | 12,414 | $ | 39,106 | $ | 10,374 | |||||||||||||||
| Operating margin | (8) | % | (3) | % | (7) | % | (11) | % | |||||||||||||||
| Non-GAAP operating margin | 10 | % | 11 | % | 10 | % | 3 | % | |||||||||||||||
| Non-GAAP Net Income and Non-GAAP Earnings Per Share | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (in thousands, except for per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net loss | $ | (16,246) | $ | (5,858) | $ | (35,632) | $ | (40,795) | |||||||||||||||
| Stock-based compensation | 20,912 | 15,300 | 58,333 | 44,001 | |||||||||||||||||||
Tax impact of stock-based compensation(1) | (15) | 497 | (499) | 1,132 | |||||||||||||||||||
Acquisition-related expenses(2) | 2,270 | — | 5,970 | 339 | |||||||||||||||||||
Tax impact of acquisition(3) | (546) | — | (1,683) | — | |||||||||||||||||||
Amortization of acquired intangible assets(2) | 1,721 | 579 | 3,704 | 1,736 | |||||||||||||||||||
Tax impact of intra-entity asset transfer(4) | — | — | 2,808 | — | |||||||||||||||||||
| Non-GAAP net income | $ | 8,096 | $ | 10,518 | $ | 33,001 | $ | 6,413 | |||||||||||||||
Net loss per share, diluted | $ | (0.15) | $ | (0.06) | $ | (0.34) | $ | (0.41) | |||||||||||||||
| Stock-based compensation | 0.20 | 0.15 | 0.55 | 0.44 | |||||||||||||||||||
Tax impact of stock-based compensation(1) | — | — | — | 0.01 | |||||||||||||||||||
Acquisition-related expenses(2) | 0.02 | — | 0.06 | — | |||||||||||||||||||
Tax impact of acquisition(3) | (0.01) | — | (0.02) | — | |||||||||||||||||||
Amortization of acquired intangible assets(2) | 0.02 | 0.01 | 0.04 | 0.02 | |||||||||||||||||||
Tax impact of intra-entity asset transfer(4) | — | — | 0.02 | — | |||||||||||||||||||
Adjustment to diluted earnings per share(5) | (0.01) | (0.01) | (0.02) | — | |||||||||||||||||||
| Non-GAAP earnings per share, diluted | $ | 0.07 | $ | 0.09 | $ | 0.29 | $ | 0.06 | |||||||||||||||
Weighted-average shares used to compute GAAP net loss per share, diluted | 106,869 | 101,736 | 105,765 | 100,272 | |||||||||||||||||||
| Weighted-average shares used to compute non-GAAP earnings per share, diluted | 114,983 | 111,224 | 114,271 | 109,046 | |||||||||||||||||||
________________
(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.
(2) The tax impact of acquisition-related expenses and the amortization of acquired intangible assets is not material.
(3) The tax impact of the Alsid acquisition includes $0.5 million and $1.7 million of deferred tax benefits in the three and nine months ended September 30, 2021, respectively.
(4) The tax impact of the intra-entity asset transfer is related to the internal restructuring of Indegy, resulting in a current tax payment based on the applicable Israeli tax rate.
(5) An adjustment may be necessary to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.
8
| Non-GAAP Gross Profit and Non-GAAP Gross Margin | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Gross profit | $ | 111,602 | $ | 92,888 | $ | 316,552 | $ | 264,902 | |||||||||||||||
| Stock-based compensation | 1,197 | 826 | 3,336 | 2,403 | |||||||||||||||||||
| Amortization of acquired intangible assets | 1,721 | 579 | 3,704 | 1,736 | |||||||||||||||||||
| Non-GAAP gross profit | $ | 114,520 | $ | 94,293 | $ | 323,592 | $ | 269,041 | |||||||||||||||
| Gross margin | 80 | % | 83 | % | 81 | % | 82 | % | |||||||||||||||
| Non-GAAP gross margin | 83 | % | 84 | % | 83 | % | 84 | % | |||||||||||||||
| Non-GAAP Sales and Marketing Expense | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Sales and marketing expense | $ | 68,360 | $ | 53,045 | $ | 192,673 | $ | 168,343 | |||||||||||||||
| Less: Stock-based compensation | 7,629 | 4,806 | 21,502 | 14,677 | |||||||||||||||||||
| Non-GAAP sales and marketing expense | $ | 60,731 | $ | 48,239 | $ | 171,171 | $ | 153,666 | |||||||||||||||
| Non-GAAP sales and marketing expense as % of revenue | 44 | % | 43 | % | 44 | % | 48 | % | |||||||||||||||
| Non-GAAP Research and Development Expense | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Research and development expense | $ | 30,675 | $ | 25,128 | $ | 85,714 | $ | 77,269 | |||||||||||||||
| Less: Stock-based compensation | 5,587 | 3,953 | 14,919 | 10,794 | |||||||||||||||||||
| Non-GAAP research and development expense | $ | 25,088 | $ | 21,175 | $ | 70,795 | $ | 66,475 | |||||||||||||||
| Non-GAAP research and development expense as % of revenue | 18 | % | 19 | % | 18 | % | 21 | % | |||||||||||||||
| Non-GAAP General and Administrative Expense | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| General and administrative expense | $ | 23,785 | $ | 18,180 | $ | 67,066 | $ | 54,992 | |||||||||||||||
| Less: Stock-based compensation | 6,499 | 5,715 | 18,576 | 16,127 | |||||||||||||||||||
| Less: Acquisition-related expenses | 2,270 | — | 5,970 | 339 | |||||||||||||||||||
| Non-GAAP general and administrative expense | $ | 15,016 | $ | 12,465 | $ | 42,520 | $ | 38,526 | |||||||||||||||
| Non-GAAP general and administrative expense as % of revenue | 11 | % | 11 | % | 11 | % | 12 | % | |||||||||||||||
9
The following adjustments to reconcile forecasted non-GAAP income from operations, non-GAAP net income and non-GAAP earnings per share are subject to a number of uncertainties and assumptions, each of which are inherently difficult to forecast. As a result, actual adjustments and GAAP results may differ materially.
| Forecasted Non-GAAP Income from Operations | Three Months Ending December 31, 2021 | Year Ending December 31, 2021 | |||||||||||||||||||||
| (in millions) | Low | High | Low | High | |||||||||||||||||||
| Forecasted loss from operations | $ | (18.8) | $ | (17.8) | $ | (47.7) | $ | (46.7) | |||||||||||||||
| Forecasted stock-based compensation | 21.9 | 21.9 | 80.2 | 80.2 | |||||||||||||||||||
| Forecasted acquisition-related expenses | 1.0 | 1.0 | 7.0 | 7.0 | |||||||||||||||||||
Forecasted amortization of acquired intangible assets(1) | 2.9 | 2.9 | 6.6 | 6.6 | |||||||||||||||||||
| Forecasted non-GAAP income from operations | $ | 7.0 | $ | 8.0 | $ | 46.1 | $ | 47.1 | |||||||||||||||
________________
(1) The forecasted amortization of acquired intangible assets assumes $32 million of acquired intangible assets from Accurics that is estimated to be amortized over seven years. These assumptions are preliminary, as the purchase accounting for Accurics is not complete. Any changes to the valuation of intangible assets would impact the forecasted amortization of acquired intangible assets.
| Forecasted Non-GAAP Net Income and Non-GAAP Earnings Per Share | Three Months Ending December 31, 2021 | Year Ending December 31, 2021 | |||||||||||||||||||||
| (in millions, except per share data) | Low | High | Low | High | |||||||||||||||||||
Forecasted net loss(1) | $ | (15.1) | $ | (14.1) | $ | (50.7) | $ | (49.7) | |||||||||||||||
| Forecasted stock-based compensation | 21.9 | 21.9 | 80.2 | 80.2 | |||||||||||||||||||
| Forecasted tax impact of stock-based compensation | 1.4 | 1.4 | 0.9 | 0.9 | |||||||||||||||||||
| Forecasted acquisition-related expenses | 1.0 | 1.0 | 7.0 | 7.0 | |||||||||||||||||||
| Forecasted tax impact of acquisition | (10.1) | (10.1) | (11.8) | (11.8) | |||||||||||||||||||
Forecasted amortization of acquired intangible assets(2) | 2.9 | 2.9 | 6.6 | 6.6 | |||||||||||||||||||
| Forecasted tax impact of intra-entity asset transfer | — | — | 2.8 | 2.8 | |||||||||||||||||||
| Forecasted non-GAAP net income | $ | 2.0 | $ | 3.0 | $ | 35.0 | $ | 36.0 | |||||||||||||||
Forecasted net loss per share, diluted(1) | $ | (0.14) | $ | (0.13) | $ | (0.48) | $ | (0.47) | |||||||||||||||
| Forecasted stock-based compensation | 0.20 | 0.20 | 0.75 | 0.75 | |||||||||||||||||||
| Forecasted tax impact of stock-based compensation | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||||||||||
| Forecasted acquisition-related expenses | 0.01 | 0.01 | 0.07 | 0.07 | |||||||||||||||||||
| Forecasted tax impact of acquisition | (0.09) | (0.09) | (0.11) | (0.11) | |||||||||||||||||||
Forecasted amortization of acquired intangible assets(2) | 0.03 | 0.03 | 0.06 | 0.06 | |||||||||||||||||||
| Forecasted tax impact of intra-entity asset transfer | — | — | 0.03 | 0.03 | |||||||||||||||||||
Adjustment to diluted earnings per share(3) | — | — | (0.03) | (0.03) | |||||||||||||||||||
| Forecasted non-GAAP earnings per share, diluted | $ | 0.02 | $ | 0.03 | $ | 0.30 | $ | 0.31 | |||||||||||||||
Forecasted weighted-average shares used to compute net loss per share, diluted | 108.0 | 108.0 | 106.5 | 106.5 | |||||||||||||||||||
Forecasted weighted-average shares used to compute non-GAAP earnings per share, diluted | 116.5 | 116.5 | 115.0 | 115.0 | |||||||||||||||||||
________________
(1) The forecasted GAAP net loss assumes an income tax benefit of $6.8 million and $5.0 million in the three months and year ending December 31, 2021, respectively.
(2) The forecasted amortization of acquired intangible assets assumes $32 million of acquired intangible assets from Accurics that is estimated to be amortized over seven years. These assumptions are preliminary, as the purchase accounting for Accurics is not complete. Any changes to the valuation of intangible assets would impact the forecasted amortization of acquired intangible assets and the tax impact of acquisitions.
(3) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.
10