Tenable Holdings, Inc. Q3 FY2024 earnings call

• Delivered strong results for the quarter, surpassing top and bottom line expectations with a record unlevered free cash flow quarter. - Tenable One and Cloud Security were top spending priorities for customers, with Tenable One growing well above the overall rate and accounting for ~30% of new sales in Q3. - Public sector and mid-market showed strength, with Q3 being a strong year-end for Fed business and the first 7-figure mid-market deal closed in Q3. - Underlying transformation from VM-focused to broader exposure management, with exposure solutions making up over 50% of new sales and over 35% of total sales. - Cloud and identity are primary growth drivers, growing at healthy rates and becoming meaningful portions of the business.

Tenable One and Cloud Security continued to drive strong demand. Tenable One accounted for approximately 30% of new sales in Q3. Non-VM exposure solutions represent 20% of total licensed assets and are growing at nearly 30%, with PATH Security growing at approximately 100%. Cloud security was a major growth area with year-over-year growth, and VM stabilized in the quarter with outperformance in the mid-market.

• Fourth quarter guidance: Revenue expected to be $229 million to $233 million, non-GAAP income from operations $47 million to $49 million, etc. - Full year 2024 guidance: Calculated Current Billings $957 million to $967 million, revenue $893.3 million to $897.3 million, etc. - Board approved an additional $200 million to the share buyback program. Expectations for 2025 include continued growth and achieving unlevered free cash flow targets.

• Longer sales cycles with additional scrutiny in new business and large VM deals. - Macro uncertainties and potential impacts on customer security budgets and deal discussions. - Competitive landscape and market dynamics affecting growth and pricing.

Q: Saket Kalia asked about the growth of exposure management and how to think about future growth.

A: Steve Vintz responded that exposure solutions make up over 50% of new sales and over 35% of total sales, with non-VM solutions growing 30% and representing 20% of total sales, and discussed the breakdown of asset licensing.

Q: Hamza Fodderwala inquired about guidance philosophy and pipeline.

A: Steve Vintz said full year CCB guide implies 8%-9% growth, expects exposure solutions to continue outsized growth, and pipeline is healthy with many large late-stage opportunities.

Q: Brian Essex asked about federal business execution.

A: Amit Yoran stated Q3 was seasonally strong in U.S. Federal as expected with no unusual twists like last year.

Q: Joel Fishbein asked about pricing and competition for AI Aware.

A: Amit Yoran said monetization is through increased usage and asset counts, and competition is limited with few others having similar AI Security Posture Management.

Q: Michael Cikos asked about pricing and competition for Enclave Security.

A: Amit Yoran said it's licensed per IP address similar to other on-prem offerings.

Q: Gary Powell asked about U.S. election impact on deals.

A: Amit Yoran said no significant discussion with commercial or international clients about election impacts on security budgets.

Q: Shaul Eyal asked about seasonal budget flush.

A: Steve Vintz said no significant seasonal flush expected, but mid-market is an area of outperformance.

Q: Shrenik Kothari asked about net dollar expansion rate.

A: Steve Vintz said expansion rate can fluctuate, attributed to timing and budgets on large deals, but focusing on landing higher price points and broader offering.

Q: Kingsley Crane asked about growth in price per asset and asset counting for Tenable One.

A: Amit Yoran said there's room to expand along both dimensions, with enhanced analytics and expansion of asset types contributing to ASP growth.

Q: Roger Boyd asked about cyclical headwinds for VM.

A: Amit Yoran said VM is foundational, and improvement would be seen in asset count expansion and customers procuring VM through Tenable One platform with enhanced analytics.