Tenable Holdings, Inc. (NASDAQ:TENB) is a leading provider of exposure management solutions, helping organizations measure, compare, and reduce cybersecurity risk in their complex IT environments. The company's Tenable One Exposure Management Platform unifies data sources to provide broad visibility into security issues, vulnerabilities, misconfigurations, and compliance violations across IT infrastructure, cloud environments, Active Directory, and industrial internet of things.

Business Overview

Tenable has established itself as a dominant player in the vulnerability management (VM) market, with its solutions being a foundational tool for CISOs and security teams. The company has also successfully expanded into adjacent areas, including cloud security, identity exposure, and operational technology security, driving diversification and growth.

Financials

In the latest quarter, Tenable reported mixed results, with revenue of $215.9 million, up 14% year-over-year, but lower-than-expected calculated current billings (CCB) of $197.8 million, up 10% year-over-year. The company's annual revenue for 2023 reached $798.7 million, while annual net income was -$78.3 million. Operating cash flow for the year was $149.9 million, and free cash flow was $141.1 million.

Recent Developments

The quarter was marked by a challenging macro environment, with customers scrutinizing their spending and prioritizing investments more rigorously. This was particularly evident in Tenable's vulnerability management business, where the company saw longer sales cycles and more modest growth, especially in North America and the large enterprise segment.

However, Tenable's exposure management and cloud security solutions continued to gain traction, with Tenable One representing 30% of new business in the quarter and exposure solutions, including cloud security, accounting for over 50% of total new sales. The company's cloud security offerings, including its CNAPP (Cloud-Native Application Protection Platform) solution, saw strong growth, with several large six-figure wins in the quarter.

Geographically, Tenable's revenue growth was driven by a 11% increase in the U.S. and an 18% increase in international markets. Customers located in the United States accounted for 54% of revenue in the latest quarter, down from 56% in the same period last year.

Outlook

Looking ahead, Tenable has provided guidance for the third quarter, expecting revenue in the range of $222 million to $224 million and non-GAAP income from operations between $42 million and $44 million. For the full year 2024, the company expects calculated current billings to be in the range of $957 million to $967 million and revenue between $889 million and $895 million.

Notably, Tenable has also introduced a new unlevered free cash flow target of $280 million to $290 million for the full year 2025, representing a 24% increase at the midpoint compared to the company's updated long-term target of 35% unlevered free cash flow margin.

Risks and Challenges

The company's focus on exposure management and cloud security solutions, coupled with its strong market position in vulnerability management, positions Tenable well to navigate the current macro challenges and capitalize on the growing demand for comprehensive cybersecurity solutions. However, the cyclical nature of the vulnerability management market and the potential impact of macroeconomic conditions on customer spending remain key risks to monitor.

Conclusion

Overall, Tenable's diversified product portfolio, strong customer relationships, and commitment to driving operational efficiency and cash flow growth make it a compelling player in the cybersecurity landscape. As the company continues to execute on its strategic initiatives, investors will be closely watching its ability to navigate the current market environment and deliver sustainable long-term growth.