Summary
Tenable closed the third quarter of fiscal 2022 with revenue of $174.9 million, up 26.1% from the prior-year quarter, and year-to-date revenue of $498.6 million, up 27.1%. Calculated current billings, a non-GAAP metric that tracks upfront customer payments, was $207.3 million for the quarter, up 24% year over year. Recurring revenue represented 95% of total revenue in the quarter. Gross profit was $136.3 million, up 22.1%, while gross margin fell to 77.9%, down 2.5 percentage points, as cloud infrastructure and personnel costs grew faster than sales. Non-GAAP gross margin was 81%, down from 83%.
The bottom line stayed deeply negative. GAAP operating loss was $13.0 million for the quarter, wider than the $11.2 million loss a year earlier, and $53.7 million for the first nine months, wider than $28.9 million. Net loss was $18.7 million in the quarter and $70.7 million year to date, both wider than the prior-year figures of $16.2 million and $35.6 million. Diluted loss per share was $0.17 for the quarter, versus $0.15 a year ago, and $0.64 for the nine months, versus $0.34. On a non-GAAP basis, income from operations was $23.1 million, up from $13.7 million, non-GAAP net income was $17.2 million, up from $8.1 million, and non-GAAP diluted earnings per share was $0.15, up from $0.07. Operating margin was negative 7.4%, up 0.7 percentage points, and non-GAAP operating margin was 13%, up from 10%.
Cash flow improved materially. Net cash provided by operating activities was $35.9 million in the quarter, up 82.6%, and $99.2 million for the nine months, up 32.7%. Capital expenditures were $4.3 million in the quarter, up 270.3%, and $13.9 million year to date, up 269.1%, mostly for infrastructure and capitalized software. Free cash flow, a non-GAAP measure, was $31.5 million, and unlevered free cash flow was $34.8 million, compared with $20.1 million a year earlier. Current deferred revenue reached $447.9 million at September 30, 2022, up 23.6%, and remaining performance obligations were $612.8 million, up 24.6%.
Customer momentum held up. Tenable added 712 new enterprise platform customers in the quarter, compared with 499 a year earlier, and 89 net new six-figure customers. Customers spending $100,000 or more in annual contract value totaled 1,280 at September 30, 2022, a 29% increase from a year earlier. The dollar-based net expansion rate was 118%, compared with 113%, and the company expects that metric to range from 110% to 120%. Product news centered on Tenable One, the Exposure Management Platform released in October 2022, along with enhancements to Tenable Cloud Security and an AWS Security Competency distinction for cloud-native vulnerability management.
Management's outlook covers the December quarter and the full year. For the fourth quarter of 2022, Tenable guides to non-GAAP income from operations of $15.0 million to $16.0 million, non-GAAP net income of $7.5 million to $8.5 million, and non-GAAP diluted earnings per share of $0.06 to $0.07. For the full 2022 fiscal year, it guides to calculated current billings of $768.0 million to $776.0 million, non-GAAP income from operations of $62.7 million to $63.7 million, non-GAAP net income of $37.6 million to $38.6 million, non-GAAP diluted earnings per share of $0.32 to $0.33, unlevered free cash flow of $120.0 million to $125.0 million, and free cash flow of $103.9 million to $108.9 million.
Risks include a strong U.S. dollar, which could make international products more expensive and lower international sales, and a competitive, fast-changing security market. Tenable noted that inflation, the COVID-19 pandemic, and the Russian invasion of Ukraine had not had a significant adverse impact on the business as of September 30, 2022. The company expects to keep incurring operating losses in the near term, and its Term Loan rate rises to 7.16% from October 31, 2022 through January 30, 2023. Tenable typically signs a higher share of new and renewal agreements in the third and fourth quarters, with U.S. government buying lifting the third quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $174.9M | $164.3M | +6.4% | $138.7M | +26.1% |
| Gross profit | $136.3M | $128.3M | +6.2% | $111.6M | +22.1% |
| Gross margin | 77.9% | 78.1% | -0.1 pp | 80.5% | -2.5 pp |
| Research & development | $36.1M | $36.2M | -0.3% | $30.7M | +17.8% |
| Sales & marketing | $88.1M | $88.4M | -0.3% | $68.4M | +28.9% |
| General & administrative | $25.0M | $26.9M | -7.1% | $23.8M | +5.0% |
| Total operating expenses | $149.2M | $151.5M | -1.5% | $122.8M | +21.5% |
| Operating income (loss) | -$13.0M | -$23.2M | +44.2% | -$11.2M | -15.5% |
| Operating margin | -7.4% | -14.1% | +6.7 pp | -8.1% | +0.7 pp |
| Net income (loss) | -$18.7M | -$27.5M | +31.9% | -$16.2M | -15.3% |
| Net margin | -10.7% | -16.7% | +6.0 pp | -11.7% | +1.0 pp |
| Diluted EPS | -$0.17 | -$0.25 | +$0.08 | -$0.15 | -$0.02 |
| Customers | 392,112 | 253,448 | +54.7% | 322,139 | +21.7% |
Risks
Tenable has a history of losses, with net loss of $70.7 million in the nine months ended September 30, 2022, and the loss widened from $35.6 million in the prior-year period; accumulated deficit was $725.3 million at September 30, 2022. The company expects costs to increase and may not achieve or maintain profitability if revenue growth does not outpace expenses.
The cybersecurity market is fragmented and intensely competitive, with competitors including Qualys, Rapid7, CrowdStrike, Palo Alto Networks and Microsoft. Larger competitors can bundle competing products, may price lower, and Microsoft has a vulnerability management offering and continues to acquire security solutions, which could pressure Tenable's pricing and market position.
Tenable's public cloud exposure assessment depends on cloud providers allowing its solutions to access their cloud offerings. If one or more cloud providers offered exclusively their own cloud security product or eliminated Tenable's access, its business and financial results could be harmed; Tenable.io is hosted on AWS, whose agreement permits termination with two years' notice and temporary access restrictions.
Tenable may not sustain its revenue growth rate. Revenue was up 27.1% year over year to $498.6 million in the nine months ended September 30, 2022, but future growth depends on renewals, new customers, expansion within existing customers and macroeconomic conditions.
A stronger U.S. dollar, inflation, and macroeconomic uncertainty could reduce international sales because products are mostly denominated in U.S. dollars, and customers have added expenditure controls and approvals. The company also reported that foreign exchange rate fluctuations and decades-high inflation could lead to decreased customer spending.
Tenable derived 92% of revenue in the nine months ended September 30, 2022 from subscriptions and perpetual licenses sold through channel partners, and Ingram Micro accounted for 38% of revenue and 38% of accounts receivable at September 30, 2022. The Ingram Micro agreement can be terminated at their discretion on 30 days' written notice.
As a cybersecurity vendor, Tenable may be at increased risk of attacks designed to penetrate its platform or internal systems, and a compromise could affect many customers simultaneously. The company also notes that its solutions may fail to detect vulnerabilities, falsely detect vulnerabilities, or contain defects, leading to liability, reputational harm and customer losses.
A majority of subscription contracts are one year in duration, and future results depend on customers renewing and expanding assets or IP addresses under subscription. Many customers, including certain top customers, can terminate agreements for convenience, and retention may decline due to economic conditions, inflation and competing solutions.
Tenable's sales cycle is long and unpredictable, with an average enterprise sales cycle of approximately four months. Macroeconomic uncertainty, foreign exchange rates and inflation could lengthen the average sales cycle and delay customer purchasing decisions.
Tenable is subject to stringent and changing data privacy and security laws. The CCPA allows statutory fines up to $7,500 per violation, the EU GDPR permits fines up to €20 million or 4% of annual global revenue, and cross-border data transfer restrictions could interrupt or require relocation of data processing activities.
A portion of revenue comes from U.S. government entities and highly regulated organizations, which can terminate contracts for convenience and impose FAR compliance, audits, preferential pricing and certification requirements. Failure to comply could lead to contract termination, price adjustments, penalties or debarment.
Tenable expects gross profit to increase in absolute dollars but gross margin to decrease over time as cloud-based subscriptions increase as a percentage of revenue. Gross margin was down 2.5 percentage points in the quarter ended September 30, 2022 and down 2.7 percentage points in the nine months ended September 30, 2022.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Calculated Current Billings
New Enterprise Platform Customers Added
Unlevered Free Cash Flow
Free Cash Flow
Net New Six-Figure Customers
Non-GAAP Gross Margin
Dollar-Based Net Expansion Rate
Recurring Revenue % of Revenue
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from Tenable Holdings, Inc.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.