Tenable Holdings, Inc. — Q1 2021 Form 10-Q
Business context and reporting period
Tenable provides cybersecurity and vulnerability-management products, including cloud, on-premises and operational-technology solutions. This unaudited report covers the three months ended March 31, 2021; comparisons are with Q1 2020. Results are not necessarily indicative of full-year performance.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $123.2 million | $102.6 million |
| Gross profit / margin | $101.1 million / 82% | $83.9 million / 82% |
| Operating loss / margin | $5.8 million / (5%) | $21.7 million / (21%) |
| Net loss | $7.7 million | $23.0 million |
| GAAP diluted loss per share | $0.07 | $0.23 |
| Cash provided by operating activities | $38.6 million | $4.5 million |
| Free cash flow (non-GAAP) | $37.6 million | $3.9 million |
Revenue grew 20% year over year. Subscription revenue rose 24% to $107.4 million; perpetual license and maintenance revenue declined 8% to $12.4 million; professional services and other revenue increased 19% to $3.4 million. Recurring revenue was 94% of total revenue, versus 93% a year earlier.
Operating expenses were $106.9 million, up 1% year over year. Sales and marketing declined 2% to $58.6 million, research and development was essentially unchanged at $26.8 million, and general and administrative expense increased 13% to $21.4 million, principally reflecting higher acquisition-related and personnel costs. Non-GAAP operating income was $13.9 million, compared with a $7.7 million loss in Q1 2020; this measure excludes stock-based compensation, acquisition-related expenses and acquired-intangible amortization.
Liquidity, debt and other key metrics
At March 31, 2021, cash and cash equivalents were $228.4 million and short-term investments were $111.9 million. Current assets were $497.7 million and current liabilities were $366.9 million. Deferred revenue totaled $428.9 million. The company reported an accumulated deficit of $615.6 million.
Operating cash flow improved substantially, supported in part by customer collections and a $32.5 million decrease in accounts receivable. Management also said Q1 free cash flow benefited by approximately $5 million from accelerated timing of insurance and professional-fee payments in Q4 2020; free cash flow additionally reflects working-capital timing and other items. Capital expenditures were $1.1 million.
No amounts were outstanding under the $45 million senior secured credit facility. The facility expires July 24, 2022; $5.5 million of borrowing capacity was reserved for standby letters of credit. Tenable reported compliance with its minimum quick-ratio covenant. Operating lease liabilities totaled $57.5 million.
Material changes, outlook and risks
- Dollar-based net expansion rate exceeded 110% on an LTM basis, but declined from the prior-year comparable period; management attributed this partly to a more moderate pace of customer IT-asset and IP-address expansion.
- Remaining performance obligations were $441.1 million; approximately 75% was expected to be recognized over the succeeding 12 months. Calculated current billings were $119.5 million, up from $99.2 million.
- In April 2021, after quarter-end, Tenable acquired Alsid SAS for $98 million in cash, subject to customary purchase-price adjustments.
- Management expects continued near-term operating losses and says existing cash, cash equivalents and short-term investments should fund operating and capital needs for at least 12 months. The filing provides no specific revenue or earnings guidance.
- COVID-19 effects remained uncertain. Management noted potential pressure on billing and revenue growth, customer spending and sales activity, as well as future costs when travel and office attendance resume. It reported no significant adverse financial impact from the pandemic through March 31, 2021.
- Key risks include competition and the ability to sustain growth and profitability; customer renewals and expansion; dependence on channel partners (92% of Q1 revenue) and one distributor (41%); cybersecurity product performance and third-party infrastructure; and privacy, regulatory, acquisition and execution risks.
- Income-tax expense included discrete items, including $2.8 million of current expense associated with restructuring R&D operations in Israel, partly offset by $2.6 million of discrete benefits primarily related to an Indian court decision.
Important facts for investors to verify
- Whether subscription growth and customer expansion rates hold up, particularly given the year-over-year decline in the reported net expansion rate.
- How much of the reported operating cash flow and free cash flow improvement is repeatable versus attributable to collections and payment timing.
- The integration, purchase accounting and cash impact of the Alsid acquisition.
- Distributor concentration and the extent to which channel or customer concentration could affect revenue and receivables.
- Progress toward sustained GAAP profitability, alongside recurring stock-based compensation and the company’s stated investment plans.