Summary
Tenable posted FY2023 third-quarter revenue of $201.5 million, up 15% from the prior-year quarter. Gross profit was $155.8 million, up 14.3%. Operating loss narrowed to $7.9 million from $13.0 million. Net loss narrowed to $15.6 million from $18.7 million. Diluted net loss per share was $0.13, compared with $0.17 a year earlier. Operating cash flow was $42.4 million, up from $35.9 million. Capital expenditures were $0.2 million, down from $1.9 million.
Margins gave a mixed picture. Gross margin was 77.3%, down from 77.9%. Operating margin was negative 3.9%, up from negative 7.4%. Deferred revenue was $518.4 million, up 15.7% from the prior-year quarter. Remaining performance obligations were $697.2 million, up 13.8%. Recurring revenue represented 95% of revenue. Management pointed to significant outperformance in the public sector, though it said that strength had minimal benefit to calculated current billings in the quarter.
Non-GAAP results and billings were stronger than GAAP profitability. Calculated current billings were $224.7 million, up 8%. Non-GAAP income from operations was $36.6 million, compared with $23.1 million in the prior-year quarter. Non-GAAP net income was $27.7 million, compared with $17.2 million. Non-GAAP diluted earnings per share were $0.23, compared with $0.15. Non-GAAP operating margin was 18%, up from 13%. Unlevered free cash flow was $48.2 million, compared with $34.8 million. Free cash flow was $40.3 million. Customer metrics were mixed. Tenable added 386 new enterprise platform customers and 58 net new six-figure customers. The number of customers with $100,000 and greater in annual contract value at the end of the period was 1,565, up 22% from 1,280. Dollar-based net expansion rate was 111%, down from 118%.
Guidance for the fourth quarter of 2023 puts revenue in the range of $204.0 million to $208.0 million. Non-GAAP income from operations is expected in the range of $23.0 million to $24.0 million. Non-GAAP net income is expected in the range of $16.0 million to $17.0 million. Non-GAAP diluted earnings per share is expected in the range of $0.13 to $0.14. The fourth-quarter outlook assumes interest expense, interest income and a provision for income taxes, along with 123.5 million diluted weighted average shares outstanding. For the full year ending December 31, 2023, revenue guidance is $789.4 million to $793.4 million. Calculated current billings guidance is $862.0 million to $870.0 million. Non-GAAP income from operations guidance is $107.9 million to $108.9 million. Non-GAAP net income guidance is $83.0 million to $84.0 million. Non-GAAP diluted earnings per share guidance is $0.68 to $0.69. Unlevered free cash flow guidance is $168.0 million to $173.0 million. The full-year outlook assumes interest expense, interest income and a provision for income taxes, along with 121.0 million diluted weighted average shares outstanding.
Risks remain visible. Tenable said at the end of the first quarter of 2023 it experienced longer sales cycle times in the purchasing and approval phases, and that trend continued during 2023 and may continue into 2024. The dollar-based net expansion rate fell to 111% from 118%, and new enterprise platform customer additions dropped 24% to 386 from 508. Gross margin declined to 77.3% from 77.9%. In October 2023, after the quarter closed, Tenable acquired Ermetic for approximately $244 million in cash, which adds integration and execution risk. Management said Tenable continues to see momentum with Tenable One, and the integration of Ermetic's cloud-native application protection platform will augment existing products. The company expects to continue incurring operating losses in the near term and may need additional equity or debt financing. The combination of slower customer adds, a lower expansion rate, and acquisition integration will test operating discipline.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $201.5M | $195.0M | +3.3% | $174.9M | +15.3% |
| Gross profit | $155.8M | $151.5M | +2.8% | $136.3M | +14.3% |
| Gross margin | 77.3% | 77.7% | -0.4 pp | 77.9% | -0.6 pp |
| Research & development | $37.1M | $37.8M | -2.1% | $36.1M | +2.5% |
| Sales & marketing | $94.8M | $97.8M | -3.1% | $88.1M | +7.5% |
| General & administrative | $31.9M | $26.6M | +19.7% | $25.0M | +27.6% |
| Total operating expenses | $163.7M | $162.3M | +0.9% | $149.2M | +9.7% |
| Operating income (loss) | -$7.9M | -$10.7M | +26.4% | -$13.0M | +38.9% |
| Operating margin | -3.9% | -5.5% | +1.6 pp | -7.4% | +3.5 pp |
| Net income (loss) | -$15.6M | -$16.0M | +2.6% | -$18.7M | +16.9% |
| Net margin | -7.7% | -8.2% | +0.5 pp | -10.7% | +3.0 pp |
| Diluted EPS | -$0.13 | -$0.14 | +$0.01 | -$0.17 | +$0.04 |
| Customers | 498,560 | 323,709 | +54.0% | 392,112 | +27.1% |
Risks
The company's research and development teams for Tenable OT Security and Ermetic are located in Tel Aviv, Israel, and ongoing hostilities in the region may materially impact its ability to deliver on product roadmaps for these solutions. The conflict in Israel and the ongoing Ukraine-Russia conflict could also cause market disruptions, energy supply interruptions and capital markets volatility.
In October 2023 the company acquired Ermetic for approximately $244 million in cash and expects to pursue more acquisitions. Integration, unforeseen liabilities, use of cash, potential dilution or debt, and cybersecurity vulnerabilities from less mature acquired systems could adversely affect operations and results, with Ermetic's Israel operations heightening the risk.
At the end of Q1 2023 the company experienced longer sales cycle times in the purchasing and approval phases, a trend that continued during 2023 and may continue into 2024. New enterprise platform customers added in the three months ended September 30, 2023 were 386, down 24% from 508 in the prior-year period.
The dollar-based net expansion rate was 111% at September 30, 2023, compared with 118% at September 30, 2022. A lower expansion rate can pressure future revenue growth because it reflects retention and additional sales to existing customers.
In July 2023 the SEC adopted rules requiring disclosure of a material cybersecurity incident on Form 8-K within four business days and disclosures about cybersecurity risk processes, management's role and board oversight. These requirements increase compliance costs and regulatory scrutiny for the company.
Complex accounting rules and estimates, including the estimated economic life of perpetual licenses, period of benefit for deferred commissions, stock-based compensation valuation and deferred tax asset valuation, could require policy changes or restatements. If assumptions prove incorrect, results could fall below expectations and compliance costs could rise.
Interest expense increased $3.0 million in the quarter and $11.0 million year to date due to a higher variable rate on the Term Loan. Rates were between 7.16% and 8.20% from January to September 2023 and were 8.18% and 8.19% in October and November 2023, respectively.
Gross margin was 77% in the three and nine months ended September 30, 2023, compared with 78% in the prior-year periods, as cost of revenue rose 19% in the quarter and 23% year to date partly due to cloud infrastructure costs. The company expects gross margin to fluctuate as cloud-based subscriptions become a larger share of revenue.
Summary, forecast, risks and KPIs are extracted from Tenable Holdings, Inc.'s SEC filings for Q3 FY2023 (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.