Bay Street News

Tenable Announces Fourth Quarter and Full Year 2018 Financial Results

COLUMBIA, Md., Feb. 05, 2019 (GLOBE NEWSWIRE) — Tenable Holdings, Inc. (“Tenable”) (Nasdaq: TENB), the Cyber Exposure company, today announced financial results for the quarter and year ended December 31, 2018.

“The fourth quarter was a great finish to 2018, with full year revenue growth of 42% year-over-year,” said Amit Yoran, Chairman and CEO of Tenable. “Digital transformation continues to elevate the importance of and investment in Cyber Exposure. Understanding and reducing Cyber Exposure remains a strategic C-suite and Board level issue and enterprise organizations are increasingly recognizing Tenable as a strategic and foundational component of this effort.”

Fourth Quarter 2018 Financial Highlights

Full Year 2018 Financial Highlights

Fourth Quarter 2018 and Recent Business Highlights

Financial Outlook

For the first quarter of 2019, we currently expect:

For the year ending December 31, 2019, we currently expect:

Conference Call Information

Tenable will host a conference call 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. A replay of the webcast will be available until February 19, 2019.

About Tenable

Tenable® is the Cyber Exposure company. Over 27,000 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 25 percent of the Global 2000 and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations
Andrea DiMarco
investors@tenable.com

Media Relations
Cayla Baker
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 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 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 metrics 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: We define free cash flow, a non-GAAP financial measure, as net cash used in 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.

Non-GAAP Loss 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 and amortization of intangible assets.

Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and Pro Forma Non-GAAP Net Loss Per Share: We define non-GAAP net loss as GAAP net loss attributable to common stockholders, excluding the effect of the accretion of Series A and B redeemable convertible preferred stock, stock-based compensation and amortization of intangible assets, including the applicable tax impact. We use non-GAAP net loss to calculate non-GAAP net loss per share and pro forma non-GAAP net loss per share. Pro forma non-GAAP net loss per share is calculated by giving effect to the conversion of our redeemable convertible preferred stock into common stock as though the conversion occurred at the beginning of each period presented.

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 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.

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

  Three Months Ended
December 31,
  Year Ended
 December 31,
(in thousands, except per share data) 2018   2017   2018   2017
Revenue $ 75,221     $ 54,117     $ 267,360     $ 187,727  
Cost of revenue(1) 12,399     8,378     43,167     25,588  
Gross profit 62,822     45,739     224,193     162,139  
Operating expenses:              
Sales and marketing(1) 47,380     32,784     173,344     116,299  
Research and development(1) 21,169     15,633     76,698     57,673  
General and administrative(1) 13,864     8,945     46,732     28,927  
Total operating expenses 82,413     57,362     296,774     202,899  
Loss from operations (19,591 )   (11,623 )   (72,581 )   (40,760 )
Other income (expense), net 1,184     (26 )   1,424     (91 )
Loss before income taxes (18,407 )   (11,649 )   (71,157 )   (40,851 )
Provision for income taxes 1,207     20     2,364     171  
Net loss and comprehensive loss (19,614 )   (11,669 )   (73,521 )   (41,022 )
Accretion of Series A and B redeemable convertible
preferred stock
    (193 )   (434 )   (763 )
Net loss attributable to common stockholders $ (19,614 )   $ (11,862 )   $ (73,955 )   $ (41,785 )
               
Net loss per share attributable to common stockholders,
basic and diluted
$ (0.21 )   $ (0.52 )   $ (1.38 )   $ (1.88 )
Weighted-average shares used to compute net loss per
share attributable to common stockholders, basic and
diluted
92,187     22,827     53,669     22,211  

_______________

(1) Includes stock-based compensation as follows:

 
  Three Months Ended
December 31,
  Year Ended
 December 31,
  2018   2017   2018   2017
Cost of revenue $ 824     $ 114     $ 1,707     $ 281  
Sales and marketing 2,927     542     6,911     1,579  
Research and development 2,210     426     5,804     1,782  
General and administrative 2,708     1,175     8,453     4,118  
Total stock-based compensation $ 8,669     $ 2,257     $ 22,875     $ 7,760  
                               
                               

TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

  December 31,
(in thousands, except per share data) 2018   2017
Assets      
Current assets:      
Cash and cash equivalents $ 165,116     $ 27,210  
Short-term investments 118,119      
Accounts receivable (net of allowance for doubtful accounts of $188 and $160 at
December 31, 2018 and 2017, respectively)
68,261     50,881  
Deferred commissions 23,272     17,170  
Prepaid expenses and other current assets 22,020     15,994  
Total current assets 396,788     111,255  
Property and equipment, net 11,348     10,754  
Construction in progress     2,252  
Deferred commissions (net of current portion) 36,162     33,006  
Operating lease right-of-use assets 8,504      
Other assets 7,810     7,070  
Total assets $ 460,612     $ 164,337  
       
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)      
Current liabilities:      
Accounts payable $ 171     $ 338  
Accrued expenses 5,554     4,878  
Accrued compensation 29,594     18,482  
Deferred revenue 213,644     154,898  
Operating lease liabilities 4,262      
Other current liabilities 1,079     1,750  
Total current liabilities 254,304     180,346  
Deferred revenue (net of current portion) 76,259     70,920  
Operating lease liabilities (net of current portion) 6,055      
Financing obligation     1,802  
Other liabilities 2,231     5,199  
Total liabilities 338,849     258,267  
       
Redeemable convertible Series A preferred stock (par value: $0.01; no shares and
15,848 shares authorized, issued and outstanding at December 31, 2018 and 2017,
respectively, with liquidation preference of $50,000 at December 31, 2017)
    49,935  
Redeemable convertible Series B preferred stock (par value: $0.01; no shares and
42,000 shares authorized, 39,538 issued and outstanding at December 31, 2018 and
2017, respectively, with liquidation preference of $230,008 at December 31, 2017)
    227,800  
Stockholders’ equity (deficit):      
Common stock (par value: $0.01; 500,000 and 93,855 shares authorized, 93,126 and
24,472 shares issued and outstanding at December 31, 2018 and 2017, respectively)
931     246  
Additional paid-in capital 586,940     20,676  
Accumulated deficit (466,108 )   (392,587 )
Total stockholders’ equity (deficit) 121,763     (371,665 )
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 460,612     $ 164,337  
               
               

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

  Year Ended December 31,
(in thousands) 2018   2017
Cash flows from operating activities:      
Net loss $ (73,521 )   $ (41,022 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 6,192     4,692  
Stock-based compensation 22,875     7,760  
Other 533     (748 )
Changes in operating assets and liabilities:      
Accounts receivable (17,408 )   (14,769 )
Prepaid expenses and other current assets (6,105 )   (8,345 )
Deferred commissions (9,258 )   (20,058 )
Other assets (1,876 )   (3,267 )
Accounts payable and accrued expenses 294     1,922  
Accrued compensation 11,112     4,298  
Deferred revenue 64,085     63,404  
Other current liabilities 408     421  
Other liabilities 110     (554 )
Net cash used in operating activities (2,559 )   (6,266 )
       
Cash flows from investing activities:      
Purchases of property and equipment (5,733 )   (2,755 )
Purchases of short-term investments (117,488 )    
Net cash used in investing activities (123,221 )   (2,755 )
       
Cash flows from financing activities:      
Proceeds from initial public offering, net of underwriting discounts and commissions 268,531      
Payments of costs related to initial public offering (3,932 )    
Principal payments under financing lease obligations (1,443 )   (306 )
Credit facility issuance costs     (238 )
Proceeds from the exercise of stock options 1,668     3,020  
Repurchases of common stock (75 )   (385 )
Net cash provided by financing activities 264,749     2,091  
Effect of exchange rate changes on cash and cash equivalents and restricted cash (1,063 )   (68 )
Net increase (decrease) in cash and cash equivalents and restricted cash 137,906     (6,998 )
Cash and cash equivalents and restricted cash at beginning of year 27,472     34,470  
Cash and cash equivalents and restricted cash at end of year $ 165,378     $ 27,472  
               
               

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

 
Revenue Three Months Ended
December 31,
  Year Ended
 December 31,
(in thousands) 2018   2017   2018   2017
Subscription revenue $ 59,259     $ 39,395     $ 205,827     $ 132,873  
Perpetual license and maintenance revenue 13,869     13,208     54,622     50,337  
Professional services and other revenue 2,093     1,514     6,911     4,517  
Revenue(1) $ 75,221     $ 54,117     $ 267,360     $ 187,727  

_______________

(1) Recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses represented 90%, 87%, 89% and 86% of revenue for the three months ended December 31, 2018 and 2017 and the year ended December 31, 2018 and 2017, respectively.

Calculated Current Billings Three Months Ended
December 31,
  Year Ended
 December 31,
(in thousands) 2018   2017   2018   2017
Revenue $ 75,221     $ 54,117     $ 267,360     $ 187,727  
Deferred revenue (current), end of period 213,644     154,898     213,644     154,898  
Deferred revenue (current), beginning of period(1) (191,578 )   (137,521 )   (154,898 )   (107,006 )
Calculated current billings $ 97,287     $ 71,494     $ 326,106     $ 235,619  

________________

(1) In connection with adopting ASC 606, we recorded $19.0 million of current deferred revenue on January 1, 2017 related to perpetual license revenue recognized in prior periods.

Free Cash Flow Three Months Ended
December 31,
  Year Ended
 December 31,
(in thousands) 2018   2017   2018   2017
Net cash used in operating activities $ (1,554 )   $ (5,452 )   $ (2,559 )   $ (6,266 )
Purchases of property and equipment (1,593 )   (1,127 )   (5,733 )   (2,755 )
Free cash flow(1) $ (3,147 )   $ (6,579 )   $ (8,292 )   $ (9,021 )

________________

(1) Contributions to our employee stock purchase plan during the three months and year ended December 31, 2018 contributed $4.0 million and $6.3 million, respectively, to free cash flow.

Non-GAAP Loss from Operations and Non-GAAP Operating
Margin
Three Months Ended
December 31,
  Year Ended
 December 31,
(dollars in thousands) 2018   2017   2018   2017
Loss from operations $ (19,591 )   $ (11,623 )   $ (72,581 )   $ (40,760 )
Stock-based compensation 8,669     2,257     22,875     7,760  
Amortization of intangible assets 150     150     603     603  
Non-GAAP loss from operations $ (10,772 )   $ (9,216 )   $ (49,103 )   $ (32,397 )
Operating margin (26 )%   (21 )%   (27 )%   (22 )%
Non-GAAP operating margin (14 )%   (17 )%   (18 )%   (17 )%
                       

Non-GAAP Net Loss, Non-GAAP Net Loss Per Share and
Pro forma Non-GAAP Net Loss Per Share
Three Months Ended
December 31,
  Year Ended
 December 31,
(in thousands, except per share data) 2018   2017   2018   2017
Net loss attributable to common stockholders $ (19,614 )   $ (11,862 )   $ (73,955 )   $ (41,785 )
Accretion of Series A and B redeemable convertible preferred stock     193     434     763  
Stock-based compensation 8,669     2,257     22,875     7,760  
Tax impact of stock-based compensation(1) (80 )   (19 )   (218 )   (54 )
Amortization of intangible assets(1) 150     150     603     603  
Non-GAAP net loss $ (10,875 )   $ (9,281 )   $ (50,261 )   $ (32,713 )
               
Net loss per share attributable to common stockholders,
basic and diluted
$ (0.21 )   $ (0.52 )   $ (1.38 )   $ (1.88 )
Accretion of Series A and B redeemable convertible
preferred stock
    0.01     0.01     0.03  
Stock-based compensation 0.09     0.10     0.42     0.35  
Tax impact of stock-based compensation(1)              
Amortization of intangible assets(1)         0.01     0.03  
Non-GAAP net loss per share, basic and diluted $ (0.12 )   $ (0.41 )   $ (0.94 )   $ (1.47 )
               
Weighted-average shares used to compute net loss per
share attributable to common stockholders, basic and
diluted
92,187   22,827   53,669   22,211
Pro forma adjustment to reflect the assumed conversion of
our convertible redeemable preferred stock as of the
beginning of the period
    55,386   31,107   55,386
Weighted-average shares used to compute pro forma non-
GAAP net loss per share, basic and diluted
92,187   78,213   84,776   77,597
               
Pro forma non-GAAP net loss per share, basic and diluted $ (0.12 )   $ (0.12 )   $ (0.59 )   $ (0.42 )

________________

(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions. There was no tax impact related to the amortization of intangible assets as it was incurred in the United States in periods in which we maintained a full valuation allowance.

Non-GAAP Gross Profit and Non-GAAP Gross Margin Three Months Ended
December 31,
  Year Ended
 December 31,
(dollars in thousands) 2018   2017   2018   2017
Gross profit $ 62,822     $ 45,739     $ 224,193     $ 162,139  
Stock-based compensation 824     114     1,707     281  
Amortization of intangible assets 150     150     603     603  
Non-GAAP gross profit $ 63,796     $ 46,003     $ 226,503     $ 163,023  
Gross margin 84 %   85 %   84 %   86 %
Non-GAAP gross margin 85 %   85 %   85 %   87 %
                       

Non-GAAP Sales and Marketing Expense Three Months Ended
December 31,
  Year Ended
 December 31,
(dollars in thousands) 2018   2017   2018   2017
Sales and marketing expense $ 47,380     $ 32,784     $ 173,344     $ 116,299  
Less: Stock-based compensation 2,927     542     6,911     1,579  
Non-GAAP sales and marketing expense $ 44,453     $ 32,242     $ 166,433     $ 114,720  
Non-GAAP sales and marketing expense % of revenue 59 %   60 %   62 %   61 %
                       

Non-GAAP Research and Development Expense Three Months Ended
December 31,
  Year Ended
 December 31,
(dollars in thousands) 2018   2017   2018   2017
Research and development expense $ 21,169     $ 15,633     $ 76,698     $ 57,673  
Less: Stock-based compensation 2,210     426     5,804     1,782  
Non-GAAP research and development expense $ 18,959     $ 15,207     $ 70,894     $ 55,891  
Non-GAAP research and development expense % of
revenue
25 %   28 %   27 %   30 %
                       

Non-GAAP General and Administrative Expense Three Months Ended
December 31,
  Year Ended
 December 31,
(dollars in thousands) 2018   2017   2018   2017
General and administrative expense $ 13,864     $ 8,945     $ 46,732     $ 28,927  
Less: Stock-based compensation 2,708     1,175     8,453     4,118  
Non-GAAP general and administrative expense $ 11,156     $ 7,770     $ 38,279     $ 24,809  
Non-GAAP general and administrative expense % of
revenue
15 %   14 %   14 %   13 %
                       

Forecasted Non-GAAP Loss from Operations Three Months Ended
March 31, 2019
  Year Ended
 December 31, 2019
(in millions) Low   High   Low   High
Forecasted loss from operations $ (27.2 )   $ (26.2 )   $ (108.4 )   $ (103.4 )
Forecasted stock-based compensation 10.0     10.0     48.0     48.0  
Forecasted amortization of intangible assets 0.2     0.2     0.4     0.4  
Forecasted non-GAAP loss from operations $ (17.0 )   $ (16.0 )   $ (60.0 )   $ (55.0 )
                               

Forecasted Non-GAAP Net Loss and Non-GAAP Net Loss Per
Share
Three Months Ended
March 31, 2019
  Year Ended
 December 31, 2019
(in millions, except per share data) Low   High   Low   High
Forecasted net loss $ (28.2 )   $ (27.2 )   $ (107.4 )   $ (102.4 )
Forecasted stock-based compensation(1) 10.0     10.0     48.0     48.0  
Forecasted amortization of intangible assets 0.2     0.2     0.4     0.4  
Forecasted non-GAAP net loss $ (18.0 )   $ (17.0 )   $ (59.0 )   $ (54.0 )
               
Forecasted net loss per share, basic and diluted $ (0.30 )   $ (0.29 )   $ (1.13 )   $ (1.08 )
Forecasted stock-based compensation(1) 0.11     0.11     0.51     0.51  
Forecasted amortization of intangible assets              
Forecasted Non-GAAP net loss per share, basic and
diluted
$ (0.19 )   $ (0.18 )   $ (0.62 )   $ (0.57 )
               
Forecasted weighted-average shares used to compute net
loss per share, basic and diluted
93.2   93.2   95.1   95.1

________________

(1) The tax impact of stock-based compensation is immaterial for purposes of this reconciliation