Tenable Holdings, Inc. Q4 FY2024 earnings call

• Gratitude was expressed for condolences on late CEO Amit Yoran. - Strong Q4 results with 11% CCB growth, 25% operating margin, and $86M unlevered free cash flow. - Momentum in Exposure Management, with Tenable One at 40% of new business sales and Cloud Security sales doubling. - Motivation behind acquiring Vulcan Cyber: enhances data aggregation, remediation capabilities, and accelerates AI strategy. - Customer examples: telecom provider using Tenable One to unify risk findings, financial services company expanding with Tenable One, healthcare agency winning with unified platform approach. - Focus on product development and go-to-market investment in 2025 to expand operating and free cash flow margins.

Tenable's Fourth Quarter 2024 showed strong financial performance. Revenue was $235.7 million, up 11% year-over-year, with recurring revenue at 95%. Gross margin was 82% for the quarter, up from 81% last quarter, and 81% for the full year. Sales and marketing expense was 34% of revenue for the quarter, down from 37% last quarter. R&D expense was 14% of revenue for the quarter, down from 16% last quarter. G&A expense was 9% of revenue for the quarter. Operating margin was 25% for the quarter, 20% for the full year. Unlevered free cash flow was $86 million for the quarter, with $238 million generated for the full year 2024. Exposure Management, including Tenable One, saw strong demand with Tenable One reaching 40% of new business sales. Cloud Security sales more than doubled, with wins in public and private sectors.

For Q1 2025, revenue is expected to be in the range of $232 million to $234 million, non-GAAP income from operations $42 million to $44 million, non-GAAP net income $35 million to $37 million, and non-GAAP diluted EPS $0.28 to $0.30. For the full year 2025, calculated current billing is expected to be $1.4 billion to $1.5 billion, revenue $971 million to $981 million, non-GAAP income from operations $213 million to $223 million, non-GAAP net income $189 million to $199 million, non-GAAP diluted EPS $1.52 to $1.60, and unlevered free cash flow $285 million to $295 million. Vulcan Cyber acquisition contributes ~0.5% to CCB and revenue full year, de minimis in Q1, more impact in second half, adds $11M-$13M operating expenses, reduces unlevered free cash flow by $20M.

• Uncertainty in U.S. Federal government due to new administration transition, causing caution in guidance. - Integration risks with Vulcan Cyber, including product integration and go-to-market challenges.

Q: Saket Kalia from Barclays asked about competitiveness in VM and Exposure Management.

A: Steve and Mark discussed strong VM momentum, competitive displacements, and differentiation.

Q: Brian Essex from JPMorgan asked about U.S. Federal caution in guidance.

A: Mark Thurmond discussed new administration transition causing timing uncertainty in Federal deals.

Q: Hamza Fodderwala from Morgan Stanley asked about Cloud Security sales origin.

A: Mark Thurmond discussed new customers joining Tenable One and consolidation in hybrid environments.

Q: Gary Powell from BTIG asked about billing guidance linearity.

A: Steve Vintz discussed cautious outlook for U.S. Federal and Vulcan acquisition impact on back half.

Q: Roger Boyd from UBS asked about customer adds.

A: Steve and Mark discussed large deals, competitive displacements, and mid-market growth.

Q: Joe Vandrick from Scotiabank asked about Vulcan Cyber.

A: Steve Vintz discussed data integration, remediation capabilities, and AI strategy.

Q: Jonathan Ho from William Blair asked about executive search.

A: Steve Vintz discussed Board leading search, no timeline, focus on right leadership.

Q: Mike Cikos from Needham & Co. asked about U.S. Federal caution and capacity.

A: Steve Vintz discussed incremental caution due to Federal transition and capacity for future growth.

Q: Shrenik Kotari from Robert Baird asked about public sector.

A: Steve Vintz mentioned Board running search, no immediate timeline.