Tenable Holdings, Inc. Q3 FY2024 earnings

Tenable Holdings reported third quarter revenue of $227.1 million, up 12.7% from the prior year quarter. For the first nine months of 2024, revenue was $664.3 million, up 13.5% from the prior year period. Calculated current billings, a non-GAAP measure, rose 11% year over year to $248.4 million. Gross profit was $176.6 million, up 13.4%. Gross margin improved to 77.8% from 77.3%. For the year to date, gross profit was $516.1 million, up 14.5%, and gross margin was 77.7%, up 0.7 percentage points. The company narrowed its GAAP operating loss to $2.1 million from $7.9 million in the third quarter of 2023. Operating margin improved to -0.9% from -3.9%.

On the bottom line, GAAP net loss narrowed to $9.2 million from $15.6 million a year ago. GAAP diluted loss per share improved to $0.08 from $0.13. For the nine months, net loss was $38.2 million, down from $56.6 million. Non-GAAP income from operations totaled $45.0 million, up from $36.6 million. Non-GAAP net income was $39.3 million, or $0.32 per diluted share, compared with $27.7 million, or $0.23 per diluted share, in the prior year quarter. Operating cash flow rose 28.8% to $54.6 million from $42.4 million. Year to date, operating cash flow was $136.4 million, up 22.5% from $111.4 million. Unlevered free cash flow reached $60.8 million, compared with $48.2 million, and free cash flow was $52.7 million versus $40.3 million. Capital expenditures were $0.7 million, up from $0.2 million.

Customer metrics showed mixed signals. Tenable added 386 new enterprise platform customers, flat year over year, and 60 net new six-figure customers. The number of customers with $100,000 or more in annual contract value grew 18% to 1,853. The dollar-based net expansion rate slipped to 108% from 111%. Remaining performance obligations were $771.6 million, up 10.7% from $697.2 million. Deferred revenue increased 12.6% to $583.9 million. Tenable sells its platform offerings primarily on a subscription basis, with a one-year term. The company typically uses a two-tiered channel model, selling to distributors who then sell to resellers and end users. During the quarter, Tenable released AI Aware, Vulnerability Intelligence, Exposure Response, and new data security posture management and artificial intelligence security posture management capabilities for Tenable Cloud Security. It also launched Tenable Enclave Security. The board approved a $200 million expansion of the stock repurchase program.

For the fourth quarter of 2024, Tenable guided non-GAAP income from operations to a range of $47.0 million to $49.0 million. Non-GAAP net income is expected between $42.0 million and $44.0 million, with non-GAAP diluted earnings per share of $0.33 to $0.35. The company assumes 125.5 million diluted weighted average shares outstanding. For the full year 2024, guidance includes calculated current billings of $957.0 million to $967.0 million. Full year non-GAAP income from operations is projected at $171.8 million to $173.8 million, non-GAAP net income at $149.9 million to $151.9 million, and non-GAAP diluted earnings per share at $1.21 to $1.23. Unlevered free cash flow for the year is forecast at $225.0 million to $235.0 million. Management noted that it expects to continue incurring operating losses in the near term and that longer purchasing and approval phases of the sales cycle are expected to continue throughout 2024. The company also flagged potential needs for additional equity or debt financing. Tenable operates in a highly competitive and rapidly changing environment. It expects sales and marketing expense to remain its largest operating expense category for the foreseeable future, and research and development expense to continue to increase annually in absolute dollars. The company also expects its gross margin to fluctuate from period to period depending on the mix of revenue.