Tenable Holdings, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; this is an annual filing, not a standalone Q4 report. Tenable provides cybersecurity exposure-management and vulnerability-management products, including its Tenable One platform, launched in October 2022. Revenue is primarily recurring subscription revenue, generally recognized over subscription terms.
Financial results and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $683.2 million | $541.1 million | +26% |
| Gross profit / margin | $528.4 million / 77% | $434.7 million / 80% | Margin down 3 percentage points |
| Operating loss | $67.8 million | $41.8 million | Loss widened |
| Net loss | $92.2 million | $46.7 million | Loss widened |
| Operating cash flow | $131.2 million | $96.8 million | Increased |
| Free cash flow (non-GAAP) | $112.0 million | $90.2 million | Increased |
- Subscription revenue rose 29% to $612.5 million; perpetual-license and maintenance revenue was nearly flat at $50.7 million, while professional services and other revenue increased 35% to $20.0 million.
- Recurring revenue represented 95% of revenue, unchanged from 2021. Calculated current billings, a non-GAAP operating metric, increased to $776.9 million from $617.2 million.
- Operating expenses increased 25% to $596.2 million. Stock-based compensation increased to $120.6 million from $79.4 million; the company reported non-GAAP operating income of $67.7 million and a 10% non-GAAP operating margin, versus $51.0 million and 9% in 2021.
- Cash and cash equivalents were $300.9 million and short-term investments were $266.6 million at year-end. Working capital was $273.0 million; deferred revenue was $664.6 million.
- Term-loan carrying value was approximately $364.7 million, with a $50 million revolving facility and $0.2 million of letters of credit drawn under it. The term loan matures in July 2028; its variable rate reached 7.16% in late 2022. The company reported covenant compliance and a first-lien net leverage ratio below the threshold for excess-cash mandatory prepayments.
Material changes versus the prior comparable period
- Revenue growth accelerated to 26% in 2022 from 23% in 2021, driven mainly by subscriptions and expansion among existing customers. Of the $142.1 million revenue increase, $132.8 million came from customers already present at the start of 2022.
- Gross margin declined from 80% to 77%, primarily reflecting higher cloud infrastructure costs, personnel costs, and acquired-intangible amortization. Cloud infrastructure costs rose $24.1 million.
- The net loss nearly doubled, with operating expenses and interest expense both increasing; interest expense rose to $19.0 million from $7.5 million, primarily due to the variable-rate term loan.
- Operating cash flow and free cash flow increased, while cash used in investing declined substantially as acquisition spending fell to $66.8 million from $258.5 million. The company acquired Bit Discovery and Cymptom in 2022.
- Dollar-based net expansion rate was 117%, unchanged from 2021; customers with at least $100,000 in annual contract value increased to 1,420 from 1,095.
Outlook, management commentary, risks and unusual items
- Management expects continued investment in cloud infrastructure, research and development, sales and marketing, and international expansion. It expects operating losses in the near term, while stating existing cash, cash equivalents, and short-term investments should fund operating and capital needs for at least 12 months and the foreseeable future. The filing does not provide numerical revenue or earnings guidance.
- Management generally expects dollar-based net expansion to range from 110% to 120%. Substantially all of year-end backlog of $14.7 million was expected to be invoiced within 12 months; backlog was $27.7 million a year earlier.
- Key risks include intense competition and the need to sustain innovation; subscription renewal and expansion dependence; reliance on channel partners; cybersecurity, product reliability, and third-party cloud-provider risks; privacy and data-security regulation; macroeconomic and foreign-exchange pressures; and variable-rate debt and related covenants.
- Channel partners generated 92% of revenue. One distributor accounted for 38% of revenue and 36% of year-end accounts receivable, creating concentration exposure.
- Free cash flow benefited by approximately $10 million from timing of prepayments made in 2021 and 2020. The company also reported $120.6 million of stock-based compensation, acquisition spending, and acquisition-related intangible amortization. These items affect comparisons of reported and adjusted performance.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. No legal proceedings were reported that management believed would have a material adverse effect.
Important facts for investors to verify
- Whether subscription growth, renewals, and the 117% net expansion rate remain resilient, particularly amid economic uncertainty and longer sales cycles.
- Whether cloud costs and gross-margin pressure stabilize as cloud-based revenue grows, and how much reported operating performance depends on stock-based compensation exclusions.
- The interest-rate exposure, future refinancing or benchmark-rate transition terms, and covenant headroom on the term loan.
- The durability of the distributor relationship and the effect of channel concentration on revenue collection and sales execution.
- Acquisition integration, purchase-price allocation, and the expected returns from Bit Discovery, Cymptom, and prior acquisitions.