Tenable Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Tenable provides exposure-management cybersecurity solutions, including the Tenable One platform. Results are unaudited and presented under U.S. GAAP.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $216.0 million | $188.8 million | +14% |
| Subscription revenue | $197.6 million | $171.1 million | +16% |
| Gross profit / margin | $167.0 million / 77% | $143.3 million / 76% | Margin +1 percentage point |
| Operating loss / margin | $(8.9) million / (4)% | $(19.2) million / (10)% | Improved |
| Net loss | $(14.4) million | $(25.1) million | Improved |
| GAAP diluted loss per share | $(0.12) | $(0.22) | Improved |
| Operating cash flow | $50.3 million | $38.7 million | +30% |
| Free cash flow (non-GAAP) | $47.1 million | $37.3 million | +26% |
| Calculated current billings (non-GAAP) | $197.8 million | $176.8 million | +12% |
Recurring revenue was 96% of revenue, compared with 95% a year earlier. Non-GAAP operating income was $37.0 million, with a 17% margin, versus $18.1 million and 10%. Non-GAAP diluted EPS was $0.25 versus $0.11; these measures exclude, among other items, stock-based compensation, which was $39.7 million in Q1 2024.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $260.0 million and short-term investments were $250.8 million at March 31, 2024, totaling $510.8 million in cash and investments.
- Term-loan carrying value was $361.3 million, net of issuance costs; the revolving facility had no reported borrowings, with $0.2 million of letters of credit outstanding. Cash and investments less the loan’s carrying value were approximately $149.5 million.
- Current assets were $782.8 million and current liabilities were $634.8 million. Deferred revenue totaled $722.7 million. Remaining performance obligations were $742.4 million, of which $572.9 million was expected to be recognized within 12 months.
- Operating cash flow benefited from working-capital movements, including a $63.4 million decrease in accounts receivable; deferred revenue decreased $27.8 million during the quarter.
- The company repurchased 525,773 shares for $25.0 million. Approximately $60.1 million remained available under the $100 million authorization at quarter-end.
Changes, outlook and risks
- Revenue growth was driven by existing customers, which contributed a net $29.3 million increase; revenue from new customers decreased $2.2 million. International revenue grew 18%, versus 11% growth in the U.S.
- Dollar-based net expansion rate declined to 109% from 113%. Customers with annual contract value of at least $100,000 rose 19% to 1,717; 410 new enterprise platform customers were added, up 8%.
- Operating expenses increased 8% overall and included $1.4 million of restructuring costs, reflecting changes to go-to-market operations. Management said sales cycles improved in Q1 but still expected longer purchasing and approval phases during 2024.
- Management expects near-term operating losses to continue, but believes cash and short-term investments will fund operating and capital needs for at least 12 months and the foreseeable future. The filing provides no specific revenue or earnings guidance.
- The company is negotiating to sublease part of its headquarters; this could result in a non-cash impairment charge of $6 million to $7 million in Q2 2024.
- Debt is exposed to variable interest rates: the term-loan rate was 8.19%–8.22% during Q1, and a one-percentage-point increase would increase 2024 interest expense by $2.1 million. The company reported covenant compliance and a first-lien net leverage ratio of 1.14.
- Cloud-service commitments include €28.5 million with Microsoft through January 2027 and an AWS commitment through July 2024; failure to meet applicable minimum spending commitments may require payment of the shortfall. A major distributor generated 34% of Q1 revenue and represented 32% of accounts receivable at quarter-end.
- Newly highlighted risks include generative-AI output accuracy, security, data-rights and regulatory risks. The company also cited potential cost inflation, foreign-exchange exposure, and risks and expenses associated with complex financial-reporting requirements. No current legal proceedings were identified as material.
Important facts for investors to verify
- Whether subscription growth, calculated current billings and the lower net expansion rate persist in subsequent quarters.
- How much operating cash flow reflects sustainable customer collections versus quarterly working-capital timing.
- Progress toward Microsoft and AWS cloud commitments and any effect on cloud costs or margins.
- Whether the proposed headquarters sublease proceeds and whether the potential Q2 impairment charge is recorded.
- Interest-rate and debt-service exposure, and continued compliance with credit-agreement covenants.
- Future share repurchases, stock-based compensation and their effects on cash and per-share results.