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Tenable Announces Second Quarter 2022 Financial Results

July 26, 2022 4:06 PM

COLUMBIA, Md., July 26, 2022 (GLOBE NEWSWIRE) -- Tenable Holdings, Inc. ("Tenable") (Nasdaq: TENB), the Cyber Exposure Management company, today announced financial results for the quarter ended June 30, 2022.

"We are very pleased with results this quarter despite a difficult macro environment,” said Amit Yoran, Chairman and CEO of Tenable. “During the quarter, we saw strong customer demand through higher levels of new enterprise platform customer adds and an increasing number of net new six-figure customers. Our momentum in the first half of the year positions us well for continued success."

Second Quarter 2022 Financial Highlights

Recent Business Highlights

Financial Outlook

For the third quarter of 2022, we currently expect:

For the year ending December 31, 2022, we currently expect:

Conference Call Information

Tenable will host a conference call today, July 26, 2022, 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 Management company. Approximately 40,000 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 approximately 60 percent of the Fortune 500, approximately 40 percent of the Global 2000, and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations
[email protected]

Media Relations
[email protected]

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, 2021, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 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 the 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 include these non-GAAP financial measures to present our financial performance using a management view and because we believe that these measures provide an additional comparison of 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, which includes capitalized internal use software. 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 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, however, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

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, costs related to the intra-entity asset transfers resulting from the internal restructuring of legal entities and amortization of acquired intangible assets. Acquisition-related expenses include transaction expenses and costs related to the intercompany 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 impacts. In addition, we exclude the tax impact and related costs of intra-entity asset transfers resulting from the internal restructuring of legal entities as well as deferred income tax benefits recognized in connection with acquisitions. 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, acquisition-related expenses and costs related to intra-entity asset transfers resulting from the internal restructuring of legal entities.


TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2022 2021 2022 2021
Revenue$164,341 $130,259 $323,709 $253,448
Cost of revenue(1) 36,037 26,425 70,967 48,498
Gross profit 128,304 103,834 252,742 204,950
Operating expenses:
Sales and marketing(1) 88,426 65,678 169,996 124,313
Research and development(1) 36,228 28,201 70,518 55,039
General and administrative(1) 26,870 21,836 52,996 43,281
Total operating expenses 151,524 115,715 293,510 222,633
Loss from operations (23,220) (11,881) (40,768) (17,683)
Interest expense, net (2,895) (42) (6,221) (70)
Other expense, net (1,863) (471) (2,807) (537)
Loss before income taxes (27,978) (12,394) (49,796) (18,290)
(Benefit) provision for income taxes (479) (756) 2,209 1,096
Net loss$(27,499) $(11,638) $(52,005) $(19,386)
Net loss per share, basic and diluted$(0.25) $(0.11) $(0.47) $(0.18)
Weighted-average shares used to compute net loss per share, basic and diluted 111,041 105,869 110,287 105,203

_______________

(1) Includes stock-based compensation as follows:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cost of revenue$2,114 $1,202 $3,627 $2,139
Sales and marketing 12,766 7,577 22,831 13,873
Research and development 8,077 5,176 14,540 9,332
General and administrative 8,956 6,514 16,313 12,077
Total stock-based compensation$31,913 $20,469 $57,311 $37,421



TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

June 30,
2022		 December 31,
2021
(in thousands, except per share data)(unaudited)
Assets
Current assets:
Cash and cash equivalents$267,859 $278,000
Short-term investments 243,047 234,292
Accounts receivable (net of allowance for doubtful accounts of $467 and $524 at June 30, 2022 and December 31, 2021, respectively) 109,354 136,601
Deferred commissions 40,670 40,311
Prepaid expenses and other current assets 49,444 60,234
Total current assets 710,374 749,438
Property and equipment, net 43,372 36,833
Deferred commissions (net of current portion) 59,330 59,638
Operating lease right-of-use assets 36,906 38,530
Acquired intangible assets, net 81,536 71,536
Goodwill 316,787 261,614
Other assets 26,737 31,230
Total assets$1,275,042 $1,248,819
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses$16,882 $16,254
Accrued compensation 41,199 54,051
Deferred revenue 415,378 407,498
Operating lease liabilities 5,014 2,320
Other current liabilities 4,592 3,759
Total current liabilities 483,065 483,882
Deferred revenue (net of current portion) 132,677 123,387
Term loan, net of issuance costs (net of current portion) 363,404 364,728
Operating lease liabilities (net of current portion) 52,158 55,046
Other liabilities 6,213 6,463
Total liabilities 1,037,517 1,033,506
Stockholders’ equity:
Common stock (par value: $0.01; 500,000 shares authorized; 111,574 and 108,929 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively) 1,116 1,089
Additional paid-in capital 944,799 869,059
Accumulated other comprehensive loss (1,856) (306)
Accumulated deficit (706,534) (654,529)
Total stockholders’ equity 237,525 215,313
Total liabilities and stockholders’ equity$1,275,042 $1,248,819



TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Six Months Ended June 30,
(in thousands) 2022 2021
Cash flows from operating activities:
Net loss$(52,005) $(19,386)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 10,141 6,807
Stock-based compensation 57,311 37,421
Other 665 (268)
Changes in operating assets and liabilities:
Accounts receivable 27,664 18,985
Prepaid expenses and other assets 16,765 5,077
Accounts payable, accrued expenses and accrued compensation (14,250) 985
Deferred revenue 16,075 6,665
Other current and noncurrent liabilities 1,014 (1,126)
Net cash provided by operating activities 63,380 55,160
Cash flows from investing activities:
Purchases of property and equipment (9,563) (2,595)
Purchases of short-term investments (119,619) (87,624)
Sales and maturities of short-term investments 108,858 76,000
Business combinations, net of cash acquired (66,993) (98,489)
Net cash used in investing activities (87,317) (112,708)
Cash flows from financing activities:
Payments on term loan (1,875) —
Proceeds from stock issued in connection with the employee stock purchase plan 8,882 8,046
Proceeds from the exercise of stock options 8,676 8,704
Other financing activities 566 (5)
Net cash provided by financing activities 16,249 16,745
Effect of exchange rate changes on cash and cash equivalents and restricted cash (2,471) (1,463)
Net decrease in cash and cash equivalents and restricted cash (10,159) (42,266)
Cash and cash equivalents and restricted cash at beginning of period 278,271 178,463
Cash and cash equivalents and restricted cash at end of period$268,112 $136,197



TENABLE HOLDINGS, INC.
REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)

RevenueThree Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Subscription revenue$146,806 $114,167 $289,493 $221,569
Perpetual license and maintenance revenue 12,683 12,567 25,556 24,972
Professional services and other revenue 4,852 3,525 8,660 6,907
Revenue(1)$164,341 $130,259 $323,709 $253,448

_______________

(1) Recurring revenue, which includes revenue from subscription arrangements for software (both revenue recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% of revenue in the three and six months ended June 30, 2022 and 94% of revenue in the three and six months ended June 30, 2021.

Calculated Current BillingsThree Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Revenue$164,341 $130,259 $323,709 $253,448
Add: Deferred revenue (current), end of period 415,378 334,106 415,378 334,106
Less: Deferred revenue (current), beginning of period(1) (405,594) (327,569) (408,443) (331,275)
Calculated current billings$174,125 $136,796 $330,644 $256,279

_______________

(1) Deferred revenue (current), beginning of period for the three and six months ended June 30, 2022 includes $0.8 million and $0.9 million, respectively, related to acquired deferred revenue. Deferred revenue (current), beginning of period for the three and six months ended June 30, 2021 includes $2.5 million related to acquired deferred revenue.

Free Cash Flow and Unlevered Free Cash FlowThree Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Net cash provided by operating activities$30,518 $16,535 $63,380 $55,160
Purchases of property and equipment (4,752) (1,534) (9,563) (2,595)
Free cash flow(1) 25,766 15,001 53,817 52,565
Cash paid for interest and other financing costs 3,315 79 7,366 150
Unlevered free cash flow(1)$29,081 $15,080 $61,183 $52,715

_______________

(1) Free cash flow and unlevered free cash flow for the periods presented were impacted by:

Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2022 2021 2022 2021
Employee stock purchase plan activity$4.3 $3.1 $0.3 $(1.9)
Acquisition-related expenses (2.5) (1.6) (3.2) (3.3)
Costs related to intra-entity asset transfers — — (0.8) —
Tax payment on intra-entity asset transfers — — (2.7) (2.8)

Free cash flow and unlevered free cash flow for the three months ended June 30, 2022 and 2021 and the six months ended June 30, 2022 and 2021 were benefited by approximately $2 million, $5 million, $8 million and $10 million, respectively, as a result of the accelerated timing of payments for insurance, professional fees and rent in prior quarters.

Non-GAAP Income from Operations and Non-GAAP Operating MarginThree Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 2022 2021
Loss from operations$(23,220) $(11,881) $(40,768) $(17,683)
Stock-based compensation 31,913 20,469 57,311 37,421
Acquisition-related expenses 713 1,542 2,054 3,700
Costs related to intra-entity asset transfers — — 838 —
Amortization of acquired intangible assets 2,785 1,404 5,212 1,983
Non-GAAP income from operations$12,191 $11,534 $24,647 $25,421
Operating margin (14)% (9)% (13)% (7)%
Non-GAAP operating margin 7 % 9 % 8 % 10 %


Non-GAAP Net Income and Non-GAAP Earnings Per ShareThree Months Ended June 30, Six Months Ended June 30,
(in thousands, except for per share amounts) 2022 2021 2022 2021
Net loss$(27,499) $(11,638) $(52,005) $(19,386)
Stock-based compensation 31,913 20,469 57,311 37,421
Tax impact of stock-based compensation(1) 188 (480) 1,254 (484)
Acquisition-related expenses(2) 713 1,542 2,054 3,700
Costs related to intra-entity asset transfers(3) — — 838 —
Amortization of acquired intangible assets(4) 2,785 1,404 5,212 1,983
Tax impact of acquisitions(5) (2,907) (1,137) (3,349) (1,137)
Tax impact of intra-entity asset transfers(6) 770 — 1,613 2,808
Non-GAAP net income$5,963 $10,160 $12,928 $24,905
Net loss per share, diluted$(0.25) $(0.11) $(0.47) $(0.18)
Stock-based compensation 0.29 0.19 0.52 0.36
Tax impact of stock-based compensation(1) — — 0.01 —
Acquisition-related expenses(2) 0.01 0.02 0.02 0.03
Costs related to intra-entity asset transfers(3) — — 0.01 —
Amortization of acquired intangible assets(4) 0.02 0.01 0.05 0.02
Tax impact of acquisitions(5) (0.03) (0.01) (0.03) (0.01)
Tax impact of intra-entity asset transfers(6) 0.01 — 0.01 0.02
Adjustment to diluted earnings per share(7) — (0.01) (0.01) (0.02)
Non-GAAP earnings per share, diluted$0.05 $0.09 $0.11 $0.22
Weighted-average shares used to compute GAAP net loss per share, diluted 111,041 105,869 110,287 105,203
Weighted-average shares used to compute non-GAAP earnings per share, diluted 118,057 113,869 117,610 113,905

_______________

(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 is not material.
(3) The costs related to the intra-entity asset transfer resulted from our internal restructuring of Cymptom.
(4) The tax impact of the amortization of acquired intangible assets is included in the tax impact of acquisitions.
(5) The tax impact of acquisitions is related to the deferred tax benefits of the Alsid acquisition.
(6) The tax impact of the intra-entity asset transfers are related to current tax payments based on the applicable Israeli tax rates resulting from our internal restructuring of Cymptom in the three and six months ended June 30, 2022 and Indegy in the six months ended June 30, 2021.
(7) An adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.

Non-GAAP Gross Profit and Non-GAAP Gross MarginThree Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 2022 2021
Gross profit$128,304 $103,834 $252,742 $204,950
Stock-based compensation 2,114 1,202 3,627 2,139
Amortization of acquired intangible assets 2,785 1,404 5,212 1,983
Non-GAAP gross profit$133,203 $106,440 $261,581 $209,072
Gross margin 78% 80% 78% 81%
Non-GAAP gross margin 81% 82% 81% 82%


Non-GAAP Sales and Marketing ExpenseThree Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 2022 2021
Sales and marketing expense$88,426 $65,678 $169,996 $124,313
Less: Stock-based compensation 12,766 7,577 22,831 13,873
Less: Acquisition-related expenses 15 — 15 —
Non-GAAP sales and marketing expense$75,645 $58,101 $147,150 $110,440
Non-GAAP sales and marketing expense as % of revenue 46% 45% 45% 44%


Non-GAAP Research and Development ExpenseThree Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 2022 2021
Research and development expense$36,228 $28,201 $70,518 $55,039
Less: Stock-based compensation 8,077 5,176 14,540 9,332
Less: Acquisition-related expenses 46 — 46 —
Non-GAAP research and development expense$28,105 $23,025 $55,932 $45,707
Non-GAAP research and development expense as % of revenue 17% 18% 17% 18%


Non-GAAP General and Administrative ExpenseThree Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 2022 2021
General and administrative expense$26,870 $21,836 $52,996 $43,281
Less: Stock-based compensation 8,956 6,514 16,313 12,077
Less: Acquisition-related expenses 652 1,542 1,993 3,700
Less: Costs related to intra-entity asset transfer — — 838 —
Non-GAAP general and administrative expense$17,262 $13,780 $33,852 $27,504
Non-GAAP general and administrative expense as % of revenue 11% 11% 10% 11%

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 OperationsThree Months Ending September 30, 2022 Year Ending December 31, 2022
(in millions)Low High Low High
Forecasted loss from operations$(26.3) $(25.3) $(90.9) $(86.9)
Forecasted stock-based compensation 31.8 31.8 121.2 121.2
Forecasted acquisition-related expenses 0.4 0.4 2.5 2.5
Forecasted costs related to intra-entity asset transfers — — 0.8 0.8
Forecasted amortization of acquired intangible assets 3.1 3.1 11.4 11.4
Forecasted non-GAAP income from operations$9.0 $10.0 $45.0 $49.0


Forecasted Non-GAAP Net Income and Non-GAAP Earnings Per ShareThree Months Ending September 30, 2022 Year Ending December 31, 2022
(in millions, except per share data)Low High Low High
Forecasted net loss(1)$(32.2) $(31.2) $(117.0) $(113.0)
Forecasted stock-based compensation 31.8 31.8 121.2 121.2
Forecasted tax impact of stock-based compensation (0.1) (0.1) 1.9 1.9
Forecasted acquisition-related expenses 0.4 0.4 2.5 2.5
Forecasted costs related to intra-entity asset transfers — — 0.8 0.8
Forecasted amortization of acquired intangible assets 3.1 3.1 11.4 11.4
Forecasted tax impact of acquisitions (0.3) (0.3) (4.0) (4.0)
Forecasted tax impact of intra-entity asset transfers 0.5 0.5 2.9 2.9
Forecasted non-GAAP net income$3.2 $4.2 $19.7 $23.7
Forecasted net loss per share, diluted(1)$(0.29) $(0.28) $(1.05) $(1.01)
Forecasted stock-based compensation 0.29 0.29 1.09 1.09
Forecasted tax impact of stock-based compensation — — 0.02 0.02
Forecasted acquisition-related expenses — — 0.02 0.02
Forecasted costs related to intra-entity asset transfers — — 0.01 0.01
Forecasted amortization of acquired intangible assets 0.03 0.03 0.10 0.10
Forecasted tax impact of acquisitions — — (0.04) (0.04)
Forecasted tax impact of intra-entity asset transfers — — 0.03 0.03
Adjustment to diluted earnings per share(2) — — (0.01) (0.02)
Forecasted non-GAAP earnings per share, diluted$0.03 $0.04 $0.17 $0.20
Forecasted weighted-average shares used to compute net loss per share, diluted 112.0 112.0 111.5 111.5
Forecasted weighted-average shares used to compute non-GAAP earnings per share, diluted 119.5 119.5 119.0 119.0

_______________

(1) The forecasted GAAP net loss assumes income tax expense of $2.4 million and $8.4 million in the three months ending September 30, 2022 and the year ending December 31, 2022, respectively.

(2) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.



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